Rakesh Jhunjhunwala buys 25 lac shares of Delta corp today!

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Dellta Corp Liimiited “Earniings poiised to grow exponentiialllly” :Nirmal Bang

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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.

Delta Corp (Rs 61.5): BUY :Business Line

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We recommend a buy in the stock of Delta Corp from a short-term perspective. It is evident from the charts of the stock that following a medium-term downtrend from its February 2012 peak of Rs 87, the stock took support at its long-term base level around Rs 53 in the previous week. This base level cushioned the stock from declining further. However, the stock changed its direction, triggered by positive divergence in daily relative strength index and daily price rate of change indicator.

The stock has been moving higher for the past three trading sessions. On Thursday, the stock jumped five per cent penetrating its medium-term downtrend-line as well as 21-day moving average conclusively. The daily RSI is inching higher in the neutral region towards bullish zone and weekly RSI has entered into the neutral region from the bearish zone.

Further, daily price rate of change indicator has entered into the positive terrain implying buying interest. We are bullish on the stock from a short-term perspective. We anticipate its up move to continue and touch our price target of Rs 63.5 or Rs 65.5 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 59.5.

Stock Strategy: Negative bias seen in Delta Corp, S. Kumars Nationwide:: Business Line,

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Delta Corp (Rs 103.1): The outlook for Delta Corp remains negative. After making a smart recovery from August low , the stock faced stiff resistance at Rs 115.

Only a close above this level would change the outlook to positive for the stock. In that event, it could chart a new high.

According to Fibonacci projections, Delta Corp could touch 165-175, if it is able to break through Rs 115 emphatically.

The stock is now heading towards its support level, which is placed at Rs 95. A conclusive close below this level has the potential to shave off about another Rs 30 for the stock, as the stock finds next support at Rs 67.

F&O pointers: The Delta Corp futures witnessed a rollover of about 13 per cent in open interests to the October series.

Options are not that active. However, a little cue available from that indicates a negative bias, as puts witnessed fall in open interest. Also calls added open interest.

Strategy: Traders could consider going short on Delta Corp with a stop-loss at Rs 115 for an initial target of Rs 95.

Traders with a penchant for risk could even consider holding for long period with a target of Rs 67.

In that event, they could shift the stop-loss to Rs 95, once it dips below that level conclusively. Market lot of the counter is 2,000.

S. Kumars Nationwide (Rs 44.8): The long as well as short-term outlook turned negative for S. Kumars Nationwide.

The stock finds an immediate support at Rs 39 and the next one at Rs 27. If the bearish trend sustains, the stock could even decline to Rs 18-19 level.

The immediate resistance appears at Rs 50.5 and the crucial one at Rs 75. Only a close above Rs 75 would change the outlook to positive for S. Kumars Nationwide.

F&O pointers: While the September futures closed at Rs 44.85, the October futures at Rs 45.

The S. Kumars Nationwide futures witnessed rollover of short positions to October series.

The rollover stood at just 14 per cent. This indicates traders were having negative view on the stock. Option trading did not see much activity.

Strategy: Consider going short on S. Kumars Nationwide October futures with a tight stop-loss at Rs 51 (spot price on a closing day basis) for an initial target of Rs 27.

Shift the stop-loss to Rs 39 should the spot price of S. Kumars Nationwide dip below that level. Market lot of the counter is 4,000.

Follow-up: Last week, we had advised a short on IFCI futures.

The stock has moved on expected lines.

As mentioned, traders could shift the stop-loss to Rs 33 and hold it for the recommended target.

We had also recommended a short strangle using 32.5 put and 37.5 call. The position is in-the-money.

On the other hand, India Cements moved positively last week.

We still believe the outlook is negative for the counter.

Traders with high risk taking capability can consider holding on to it with a stop-loss of Rs 77 (spot price on a closing day basis).

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Delta Corp, DELTA IN, Buy, TP Rs89 (+23%) — A play on the emerging Indian casino story

Delta Corp is the first aggressive and quality casino gaming operator in India, a country with very low casino gaming penetration, but enormous potential. It is the largest operator in the Goa casino market (has three of six offshore licences), where a combination of limited offshore gaming licences, low gaming tax rates and low capital requirements guarantee high returns. The company is well capitalised to pursue exciting growth opportunities in Sri Lanka and Daman.
Delta Corp’s first mover advantage in this high operating leverage business has the potential to yield disproportionate returns for investors over the long term. We initiate with a Buy and a 12-month price target of `89.

Indians have high proclivity to gambling, so low awareness of casinos an opportunity

In India, while enormous amounts are wagered in other forms of gambling like lottery tickets (Industry valued at $12.5bn), cricket ($1.5bn wagered in a single world cup match!) and horse racing (annual turnover of >$250mn), the annual turnover of casinos in Goa was just `1.6bn (or $35mn) in FY10. We believe that with higher advertisement & marketing spends, and changing demographics (higher exposure of the younger generation to casino gaming), the penetration of casino gaming in India will rise rapidly.

First mover advantage and operating leverage to drive cash flows and returns

Delta Corp made an aggressive foray into the offshore Goa casino market with its flagship Casino Royale vessel two to three times the size of the competition’s. In ten months, the Horseshoe boat will be operational and will be three times the size of Casino Royale. Our visits to offshore casinos in Goa convinced us that quality developments see higher visits and we estimate that limited supply of quality developments will be a constraint in the future. As close to 80% of a casino’s costs are fixed, we expect a higher number of visits to result in cash flows from operations of ~`3bn over the next two years and casinos to recover the capital employed within two to three years of starting operations.‎‎

Horseshoe and Daman casino openings, key catalysts for gaming growth

We estimate FY12 and FY13 gaming revenue growth of 88% and 69%, respectively, primarily driven by the opening of two casinos in Goa, Caravela and Horseshoe, and the Daman casino. FY13 EBITDA growth is estimated at 92%, further driven by operating leverage.

Valuation and risk to thesis

Our SoTP-based valuation values the Goa casino gaming business using a13x multiple on FY13E gaming EBITDA (see Exhibit 10 for details). Our 12-month price target is `89 and we initiate with a Buy. We see possible changes in regulations like gaming tax rates, licence fees, entry taxes, etc, as key risks. Also, we note that casino gaming will always be a politically sensitive issue for the Goa government.

Stock Baba - tip of the week- Oct 25th: Shree Ganesh Jewelry and Delta Corp

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Stock Baba - tip of the week- Oct 25th: 

Shree Ganesh Jewelry and

Delta Corp

Stock Baba Weekly tip: Buy Delta Corp; DCM: Sept 30

Stock Baba Weekly Tip Sept 30th

Buy stock... Sell at 5% profit (part) and 10% (rest)

1. Delta Corp
2. DCM


Strict stop loss of 5%
At your own risk