Delta Corp Stock near 5 Year low – 3 Point Analysis

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Why Delta Corp Stock Is Falling? Delta Corp Ltd has seen a sharp fall in its stock price mainly due to the impact of the COVID-19 pandemic. Here is the 3 point analysis of Delta Corp Ltd.

Why Delta Corp Stock Is Falling?

Introduction

Why Delta Corp Stock Is Falling? Delta Corp Ltd has seen a sharp correction in its stock price mainly due to the impact of the COVID-19 pandemic. Here is the 3 point analysis of Delta Corp including the revenue mix, shareholding pattern and key positives and negatives of the company.

Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya

Delta Corp Ltd – 3 Point Analysis

Delta Corp Ltd
3 Point Analysis of Delta Corp

Company Overview

  • Business Overview
    • Delta Corp Limited is an Indian corporation which is engaged in Gaming and Hospitality business.
    • The company operates its gaming and hospitality businesses under the Deltin brand. It is India’s only listed company engaged in casino (live, electronic and online) gaming.
    • The company owns a number of casinos in Goa – namely Deltin Royale, Deltin JAQK, Deltin Caravela and Deltin Suites. Also, the company has a temporary license to operate casinos in Gangtok, Sikkim.
  • Current Statistics
    • Market Capitalization of the company is around Rs.1,900 Cr.
    • Current Price to Earnings Ratio (PE Ratio) is hovering in the range 9-10. If we check the historical valuation of the company, the average high PE ratio is around 40. The correction seen in the PE ratio is almost 80% from its peak PE ratio.
    • Why Delta Corp Ltd stock has undergone through a sharp correction?
    • The company is almost debt-free, with Debt to Equity Ratio (D/E ratio) of 0.00 and with a healthy Interest Coverage Ratio of 81.84. Then also the stock is going through a free fall.

Why Delta Corp Stock is Falling – Impact of COVID-19 Pandemic on Casino & Hospitality Business

  • Amid the total lockdown announced by the Indian government to address Coronavirus spread, Goa and Sikkim government ordered shutdown of all casinos for the lockdown period to prevent the COVID-19 spread.
  • When which businesses are prone towards more negativity due to the impact of Coronavirus outbreak?
  • When we analyse the severity of the Coronavirus on the economic activities and thereby on the businesses, 2 cases comes into the picture :
    1. Deferment of Demand
    2. Destruction of Demand
  • In the first case, your demands are deferred for the time being due to the current lockdown situation.
  • However, in the second case, destruction of demands occurs. In the businesses like Casinos or Hospitality, demands are seen to be destructed amidst the fear of Coronavirus spread across the world.
  • That is the reason, the company has seen a sharp fall in its stock price over the past one month due to the destruction of demand amid current COVID-19 pandemic.

1. Revenue Mix

Delta Corp – Revenue Mix
Delta Corp – Revenue Mix
  • As shown in the above chart, around 80% of the total revenue comes from Casino business. Whereas, the revenue contribution from the Online Gaming and Hospitality business are 14% and 6% respectively.
  • All the Casinos are shutdown by the respective state governments in Goa and Sikkim due to the nationwide lockdown amid Coronavirus spread.
  • Thus the major revenue contributor of the company has been stopped its operations, taking a big hit on the company’s sales and earnings. The actual impact on this business segment may last for 3-6 months. It would wipe out at least 6-months of revenue of the company from Casino business.

2. Shareholding Pattern – Top Stakeholders

Shareholding Pattern of Delta Corp
Shareholding Pattern of Delta Corp
  • Promoters hold around 32.77% stake in the company.
  • While the institutional holding is 27.33% which includes :
    1. Foreign Institutional Investors (FIIs) holding is 19.94%, Since Casino business is much under penetrated in Indian market and Delta Corp is the only listed player in India, FIIs hold a substantial stake in the company.
    2. Mutual Funds : 5.74% (HDFC Small Cap Fund holds 5.17% stake)
    3. Other DIIs : 1.65%
      • Insurance Companies : 0.99%
      • Alternative Investment Funds (AIF) : 0.36%
      • Financial Institutions / Banks : 0.30%
  • The Non Institution or public holding is 39.97%.
  • As we can see public holding (39.97%) in much greater than long-term institutional investors (27.33%).
  • This is the reason, why the stock has gone through a significant correction due to the negative outlook (though for short-term) amid COVID-19 pandemic.
Delta Corp – HNI’s Holding
  • Jhunjhunwala Family (Mr. Rakesh Jhunjhunwala and his wife Mrs. Rekha junjhunwala togetherly) holds stake of almost 7.32%.
  • Mr. Radhakishan Damani holds 1.32% stake in the company as on Dec-2019.
    • Mr. Damani has increased exposure to the company and bought 15.5 Lakh shares at Rs.65.25 apiece from Derive Investments on Tuesday, March 31, 2020.
    • Thus, 0.57% stake raised by Mr. Radhakishan Damani, shows the confidence he holds in the growth story of the company over the longer horizon.
  • While, Mr. Viral Parikh holds stake of around 1.17% in the company as on Dec-2019.

3. Positives & Negatives of Delta Corp Ltd

Delta Corp Ltd – Key Positives & Negatives
Delta Corp – Key Positives & Negatives
Buyback Offer Announced by Delta Corp (March 28, 2020)
  • The Board of Directors of Delta Corp Limited has approved a plan to buy-back shares of the company at the company meeting held on March 28, 2020.
  • Buyback proposal is to buy-back the shares up to 1.25 Crore shares of the company (representing 4.61% of the total paid-up capital of the company)
  • The board mentioned the buyback price would be maximum up to Rs.100 per share. This buyback is going to be done through the open market route.

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