Delta Corp Ltd. – Complete Stock Analysis

Detailed Analysis of Delta Corp Ltd. as of April, 2019

Introduction

Delta Corp Ltd (“Delta Corp”) is the only listed company engaged in the casino (live, electronic and online) gaming industry in India. It has been engaged in the business of textiles and real estate development/ consultancy. The Q4 results of Delta Corp Ltd were released / declared on 8^th April 2019. The results were very promising.

Delta Corp Ltd Stock Analysis

Company Overview

• Delta Corp Limited was previously known as Arrow Webtex Ltd. It is an Indian real estate, gaming & hospitality corporation that owns and operates casinos and hotels under several brands. The company was founded as Creole Holdings Company Pvt Ltd on 5 November 1985.
• Delta Corp Ld. is a small cap company. It has a market capitalization of Rs. 7,000 Cr. As it is a small cap stock, it has a lot of volatility.

Company Business Verticals

Delta Corp has 2 main verticals, namely Gaming and Hospitality.

1. Gaming means the company is engaged in the casino (live, electronic and online) gaming industry. Online gaming segment is experiencing a boom as there the regulations relating to casino gaming industry are different. But live casinos are still the majority contributor to the revenue. The company has 2 on-shore casinos (on land, one in Goa and one in Sikkim) and 3 off-shore casinos (on boats anchored in Mandovi river in Goa).
2. Under the hospitality vertical, the company has 2 hotels, one in Goa and one in Daman.

Revenue Share

• 87% of the revenue of Delta Corp Ltd comes from their Gaming vertical. And the remaining 13% of the revenue is earned from the hospitality vertical.
• In 2017-18, 89% of the gross revenue came from gaming and the rest 11% of gross revenue was from hospitality. Hospitality is a capital-intensive industry which is why its share to the revenue is on the lower side.

Gaming Industry – India

• In India, the whole gaming industry, which includes lottery, horse racing, casinos, online gaming, is worth US$60 Bn. But the industry is still scattered with very less organizing.
• Delta Corp Ltd has taken the early mover advantage in the organizing the gaming industry. No one has given any focus towards gaming. There is not a single company in India, which is listed in gaming apart from Delta Corp Ltd. This is a very great advantage the company has. There is a possibility that there may be more players in the unlisted space, as for listed space there’s only Delta Corp available for investors to invest in.
• In the whole gaming industry in India, from start and till now as well, the lottery business has had a majority share. Lottery has a market of $12-$14 Bn. Horse racing has market of $250-$400 Mn. And Casinos have a market of $100-$125 Mn.
• The Casinos business has a lot of scope to grow. Entries of new players in casino business might be slow because of rules & regulations. Even after getting all the permissions and then making investments in infrastructure and the gaming equipments, it can be a lengthy process. Thus, Delta Corp has a very big advantage or has a very big opportunity and is in a nice position to grab that opportunity.

Weaknesses of the Company

• The company is involved in the gaming business, so there’s always speculation around the gaming industry. Also, the gaming industry is still looked at as a bad thing and hasn’t been accepted positively yet, which can have a negative impact on the company.
• Not all states would give permissions to set up a casino business in their states. So, Delta Corp doesn’t have a Pan India scope to increase or grow their gaming business.

Real Estate Business of Delta Corp Ltd.

• The company had also taken some wrong negative real investments call, that too in the Kenya market. But the company has completed exited that business segment in 2013-14.
• The real estate involved in hotels is considered under the hospitality business. But, the company is no more involved in core real estate activities.
• This can be considered as a positive thing as the company knew from which business segment should they exit and from which not.

Online Gaming Segment of Delta Corp Ltd.

Online Gaming segment of their business is not restricted by the above. Which is why, the company acquired an online gaming portal called ‘Adda52’. The company has developed a lot of plans for this online gaming platform and their online gaming business as a whole.

Shareholders of Delta Corp Ltd.

1. Promoters : The promoter holding in the company is of 32.77%. Mr Jaydev Mody, his family and his companies are amongst the promoter holding the stake in the company.
2. Non-Institution : Majority Shareholders are Non Institution with 40.64% holding.
3. FIIs : Shareholding by FIIs is 23.4%. There is 0.36% increase in FIIs holding in Q3 (from Sept-18 to Dec-18).
4. Mutual Funds : Total Mutual Funds’ holding is 2.65% held in 5 schemes, out of which Aditya Birla Sun Life and HDFC AMC have invested healthy amounts in the company.
5. Others : Delta Corp has a major notable shareholder to it. Mr. Rakesh Jhunjhunwala and his wife have a combined stake of 7.38% in the company. This is a very positive thing about the company.

Financial Numbers

• The GST on gaming business is 28%.
• Compared to last year’s numbers, there have been very healthy growths in all the numbers.

Stock Performance of Delta Corp Ltd.

1. The stock has experienced a continued sluggishness. In the last 3-4 years the share price of Delta Corp Ltd. started from Rs. 80 and went up till almost Rs. 350.
2. From that position the stock got corrected, and is now trading at Rs. 260 level.
3. But the only problem with the stock of Delta Corp is that it has a become a speculative stock. The stock of Delta Corp also gives some wide swings owing to different factors such as changes in rules & regulations.

Summary

• There is definitely a lot of scope to the company as it is involved in an under penetrated industry.
• The gaming industry has a mere 1% penetration in India. So, the company will definitely has an early mover advantage.
• The financial numbers of the company look very strong. YoY growth of Net Profit is 98%.
• The stock performance is decent.

Notes: –

• The numbers that are used are approximate and have been rounded for presentation purposes.
• We are not in any way saying that this is a bad company, or the stock of this company is bad.
• We are also not suggesting anyone to immediately go and this stock or invest in the stock markets.
• Only an analysis has been presented here. No judgments or final statements are being made here.