Find below my notes from today’s conference call. Feel free to get back incase of queries. I might have missed/misheard some points. Please independently verify before taking an investment call on this information
Delta Corp Q2 FY22 Conference Call notes.
From the CFO’s address:
• In this Quarter, Goa was operational for 10 days and generated a revenue of 22 Cr. Nepal was operational for 22 days and generated revenue of 4 Cr. Sikkim was operational for 40 days and generated a revenue of 16 Cr (FY 19-10 annual revenue from Sikkim was 16-20 Cr). Sikkim trend expected to normalise as it was the only casino open in India and hence the spike in revenue
• Daman-Back to contributing at the EBIDTA level. On the court case, Daman UT was to respond by 30th Sept which hasn’t happened. Continue to be positive on legal standing
• Online- First lockdown numbers were abnormally high. Tapering observed for the industry and adda52 post reopening. Used Covid time to build backend systems and Human Capital
Re-did Rummy vertical & launched multi gaming platform Adda Games. Multi Gaming platform will act as a funnel to bring users to poker
• Investments-Large new Vessel being built to replace small vessel Deltin Caravella . Should be ready by Dec’22-Mar’23. New vessel will be a bit bigger than all the 3 current vessels combined. Will cost 250-270 Cr
Deltin Entertainment plans to be ready shortly. Will take 42-48 months from the date of commencement for the project to complete. Project to cost 1500-1700 Cr
From Q&A
• Long term margins will go back to the pre covid times.
• Currently have 400 Cr cash, internal accruals over next 4 years should be enough for the investments. Currently net debt free and will continue to be so
• Monetisation- Started getting enquiries for land in Srilanka. Market there is picking up, expect to fetch 35-40 Cr.
Property in Goa should fetch around 130-140 Cr
Investment in Adani hotels should fetch 120-130 Cr
In all should get around 300 Cr from monetisation
• On equity dilution- May go for equity dilution only in the online gaming subsidiary
• Stagnation in online business can also be attributed to top management churn (in online subsidiary )
• License fee for last year has been accounted for in last year’s P&L. For current year 24 cr remains unpaid but accounted for. In total (last 2 years) 80 Cr of license fee has been unpaid but accounted for. Company has made a stance to the govt for waiver of license fees corresponding to the time the operations were shut due to lockdown
• Current gross gaming revenue per person stands at Rs 14000. Has increase to 3 times 2008 GGR
• Payback period for the new vessel to be 12-14 months
• Competitors haven’t yet bought land parcels for onshore gaming casinos
Good results for the quarter gone by-Consolidated revenue up 2.5X YoY, consolidated net profit at 61.58 Cr.
Area of worry- drop in revenue from digital gaming
Things to watch out for in tomorrow’s conference call- Clarity on GNPL listing & comments on commissioning of the new vessel (which was to happen by Jan 22)
Edit- New vessel to be commissioned in Jan 23 (sorry, in my head I always thought it’s 22 even though I have noted it down as 23). Thanks @vireshsangwan for correcting it
New vessel will be commissioned by Jan 23 (not 22)
As on date the stock will be fairly valued in the range of 300 – 350 – given that Omicron is here, chances of lockdown due to state elections (nobody will want to take risk at this stage) and due to delay in permission in pernem as their local MLA has denied permission and now it can happen after election results only.
Having said all above negatives, here are the positives:
80% increase in capacity (gaming positions) after one year. expect the numbers in Q1 FY24
Another 100% increase in capacity on top of above, in FY28 due to pernem gaming zone. All expenses will be met by internal accruals and OFS of online business.
Liquidation of Advani hotels
Liquidation of land in Sri Lanka
So, expect revenues to double in 2 years. And then quadruple in next 6 years.
Even today it looks fairly valued at 280 odd. Q3 EPS is 2.47 in an environment where it was operating with restrictions. There are no foreigners flying in. So, even if you assume yearly eps of 9-10 when things become normal. It’s valued at 28-29 PE which seems fair given the barriers to entry. Also, CAPEX coming up with internal accruals. Daman license as management said is a question of when not if.
Nazara is same market cap as Delta and have same revenues as adda52. adda is profitable except this quarter.
Its gross margin is 90+%, such business are trading at 50 - 100 PE.
Let this corona subside and then comes new vessel, Daman, New gaming city,… 300+ is fair price. Stay invested, cheers.
On integrated resorts: Management said at multiple forums and also in the concall attached above.
“So once we get the final approval from the government written we will then be able to start break ground that should happen in this next 15 days to a month’s time.”
Any one having any lead on this? I hope this doesn’t become like another Daman License.
Also, they talked about the IPO for Gaussian networks around March/April. Don’t see any development on that side either.
This is already known to market – plan is to make it operational either in Q4 this year or Q2 next year.
Few things to watch:
Online gaming IPO, prospectus expected by Q2 this year
Daman license court case : Fast track hearing to begin June 23rd
Pernem license for 100 acre land parcel – will take 48 months with 1500+cr investments after approvals
New vessel by Q2 next year which will double up the current gaming positions. Above all, it will become the biggest vessel in river (currently Big Daddy is biggest and attracting footfalls)
