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Snapshot
By virtue of possessing three out of the six issued offshore
gaming licenses in the state of Goa, Delta Corp Limited (Delta
Corp) is the largest casino operator and only listed company in
the gaming and hospitality segment in India. The company is
rapidly expanding its gaming positions in Goa, and is currently
setting up a casino in Daman with full benefits to accrue from
FY’14E.
Investment Rationale
Gaming positions set to grow five-fold: The total gaming
positions of the company is set to grow five-fold over the
next 12-15 months with the addition of a third casino, and
the commencement of an upcoming gaming and
entertainment facility in Daman.
Fixed-cost business model, leading to significant
improvement in earnings: The company’s business model is
fixed in nature with salaries and administrative expenses
amounting to roughly 50 per cent of the total cost. Taking
the fixed-cost business model into consideration, earnings
are set to improve at a much higher pace compared to
revenues.
Geographical expansion: In addition to Goa, the company is
commencing its gaming and hospitality business in Daman,
and is also exploring possible avenues for expansion in new
markets within the region.
Real estate business in Kenya: Through a joint venture with a
wholly-owned subsidiary of RIL, the company is on track to
develop 1.2mn square feet on 10 prime plots in Nairobi.
Valuation & Recommendation
The complete benefits of the expanded facilities would be visible
in FY’14E. We expect revenues of the company for FY’14E to the
extent of Rs.709 crore and EBITDA of Rs.364 crore. The net profit
for the year should be around Rs.189 crore, translating into an
EPS of Rs.8.3. Owing to its niche business model with
strong entry barriers, robust expansion plans and a
focused management team, we expect Delta Corp’s
stock to quote at 12x FY’14E earnings to arrive at a
price target of Rs.100. This highlights an upside of 85
percent over the next 12 to 15 months.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Snapshot
By virtue of possessing three out of the six issued offshore
gaming licenses in the state of Goa, Delta Corp Limited (Delta
Corp) is the largest casino operator and only listed company in
the gaming and hospitality segment in India. The company is
rapidly expanding its gaming positions in Goa, and is currently
setting up a casino in Daman with full benefits to accrue from
FY’14E.
Investment Rationale
Gaming positions set to grow five-fold: The total gaming
positions of the company is set to grow five-fold over the
next 12-15 months with the addition of a third casino, and
the commencement of an upcoming gaming and
entertainment facility in Daman.
Fixed-cost business model, leading to significant
improvement in earnings: The company’s business model is
fixed in nature with salaries and administrative expenses
amounting to roughly 50 per cent of the total cost. Taking
the fixed-cost business model into consideration, earnings
are set to improve at a much higher pace compared to
revenues.
Geographical expansion: In addition to Goa, the company is
commencing its gaming and hospitality business in Daman,
and is also exploring possible avenues for expansion in new
markets within the region.
Real estate business in Kenya: Through a joint venture with a
wholly-owned subsidiary of RIL, the company is on track to
develop 1.2mn square feet on 10 prime plots in Nairobi.
Valuation & Recommendation
The complete benefits of the expanded facilities would be visible
in FY’14E. We expect revenues of the company for FY’14E to the
extent of Rs.709 crore and EBITDA of Rs.364 crore. The net profit
for the year should be around Rs.189 crore, translating into an
EPS of Rs.8.3. Owing to its niche business model with
strong entry barriers, robust expansion plans and a
focused management team, we expect Delta Corp’s
stock to quote at 12x FY’14E earnings to arrive at a
price target of Rs.100. This highlights an upside of 85
percent over the next 12 to 15 months.
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