Surprised to see this much high conviction. They have not said anything on Sikkim, Nepal. I was hopeful on Sikkim as this is land based.
Also business did not grow much quarter on quarter.
Anyway, it convinces the unfolding story quarter by quarter.
3 Likes
Operating leverage is clearly visible in the core offline gaming biz⌠46cr of additional revenue yoy in the gaming ops results in 22cr of additional EBIT and with no working capital involvement. Headline nos. impacted by higher tax rates and softer margin in online segment yoy. Need to understand why gaming sales are flat qoq. This was supposed to be a blowout quarter with Sikkim contribution coming in. I guess 6th offshore casino (Maharaja) in Goa is taking away some incremental customers. Overall an inline set of nos as core EBIT is up 28% yoy while bigger triggers are Daman litigation and Goa onshore casino policy which are lined up over the next few months.
Disc: Invested with 15% allocation.
6th Casino Maharaja ? Sorry I am not aware. Is this a new license allotted ?
There are 6 offshore casino licenses of which 3 owned by Delta, 2 by Pride group and one which opened recently by a Haryana politician.
The performance of the online business was quite decent. During the quarter they increased the rakes (commission) and also the promotions have reduced. I have seen a tremendous surge in participation on the platform in the last six months. It continues to be the preferred destination for most professional poker players. I was expecting better performance from casino business as sikkim was expected to contribute. Still overall a decent performance.
Regards
SJ
Delta Corp Q3FY19 few questions & answers
On competition for online skill gaming division - Everyone is in a way trying to do the same thing. What we are differentiating in terms is by organising more tournaments on the online platform to create barriers. Given our history constituting 60-70% of the industry, we can organize more tournaments online. It wonât be easy for others to do that. Delta also has a strong backing in the Adda group to support them.
On shifting to offshore casinos in Goa and on the court case they have filed for Daman Licence - The Chief Minister of Goa has already given verbal approval to the proposal in the house. But, right now he is recovering from his illness. Expect that he will sign the bill once he comes back. They have filed a writ for Daman licence in order to get a faster resolution.
On the traction in Sikkim business, given that the airport has opened up now and the potential & timeline for Nepal casino - It is not the right season for aviation currently in Sikkim, as there is a lot of fog and less visibility. Only after Feb/March, one can see the benefits of it. Yet the Sikkim operations are running successfully.
Nepal-Delay on operational licence, next financial year it will start. The licence fees have been paid for it is negligible.
Other key take away-
⢠They consider themselves at an infancy stage in the gaming industry
⢠Online business had subdued EBITDA Margin last quarter due to more marketing spends, which did not yield the results as expected and rationalized the marketing spends
⢠Rummy and fantasy has been growing and doing reasonably well, they are being cautious in terms of spending on those businesses
⢠Land based casinos in Goa have consolidated in two ways, either by reducing their size or shutting down the business.
⢠Despite the multi-fold growth fees in licence this year (beginning), despite this, business has grown.
⢠In Q2-100,000 visitation. This has risen by 18% to 118,000 visitations to the casino in Q3.
⢠Aiming to bring gaming margins to 15-20%
⢠In 2019, World cup+ IPL can lead to growth in fantasy. Recovered 22% EBITDA levels in online on the back of cost rationalization in marketing.
⢠Visitor addition in online-
Added 100,000 in Fantasy
Total Registered Users-
1.5 million- Poker (100,000 active)
400,000- Rumi
400,000- Fantasy
⢠Gross Gaming revenue in casinos- 14.5-15K.
⢠Ebitda is 40% in the casino business, compression is due to GST FEES+ LICENCE.
⢠On Breakeven in Hospitality-
o Goa: making money
o Daman- Almost broken even, but wonât make money anytime soon post depreciation. Will make money operationally.
7 Likes
1 Like
This truly shows the increasing acceptance of casino gambling by the Indian masses. No govt can ever resist it as long as the society accepts it. After all, the society elects the govts! Betting on this industry is like betting on the inherent nature of human beings!
http://www.theshillongtimes.com/2019/01/19/bingo-meghalaya-could-have-a-casino/
2 Likes
Not to ignore the flip side of this equation.
Given that there is no governance / policy around gambling, government is likely to have a knee jerk action / reaction for any political gains / publicity.
Even if not a complete ban, hiking license fees without any warning can be equally damaging.
Casinos are like cigarettes⌠these are sin stocks. Addictive products⌠worse govt policies can impact anytime but there is a limit to what govt can do⌠casinos mainly attract foreign tourists. States will loose a lot of revenue to other states if industry dies. Even in Goa locals are not allowed.
It is not about acceptance, it is about the easy-money, unaccountable-cash that is falling in the lap of many people. People always had vices but it is the chance to participate that has emerged and will evolve. The more such kind of money, the more will be the urge to seek thrills. I know some people are interested in testing their luck with their hard-earned money, I might but we are few in number.
Just my thoughts.
Delta Corp continues to be on inorganic route for expansion of online gaming business.
They are paying 15.5cr for acquiring 15.5% valuing it at 100cr and also transferring their own fantasy assets for another 4% stake to their online subsidiary. This company had less than 3cr sales in FY18 so this becomes a VC type investment rather than an acquisition. Also, effectively transferring capital burn to a startup. This will help online numbers look good.
2 Likes
See the revenue jump:
Halaplay is a company incorporated in India on August 31, 2016, and had gross turnover of Rs. 298.13 lakhs and Rs. 0.571akhs in the financial years 2017-18 and 2016-17 respectively.
This KPMG report shows the online gaming industry in India generated Rs. 4,400 crores in revenues in the financial year 2018. The industry is expected to grow at a CAGR of 22% and would be able to achieve revenues of around Rs. 11,900 crores by the FY 2023.
The report also estimates that the total size of the illegal gambling industry in India would be worth around US$130 billion as of 2018 as compared to $122 billion in the year 2017.
Now one may wonder if at least a few more Indian states legalize gambling and some of this 130 billion dollars worth of revenue is tapped by the industry players (Delta being the leading player with near monopoly and first mover advantage), then sky is the limit for growth. I personally feel that societal acceptance of gambling in India is on the rise with every passing day. India remains a hugely untapped market for casino gambling and the graph may only go up from here ( I feel I am biased ).
The regulatory uncertainties come up only when election manifestos are prepared by political parties only to be dumped after elections are over.
Disc.: Delta Corp is my biggest ever investment bet till date, and hence views are biased.
3 Likes
Deltaâs subsidiary commits to acquire 25% stake in Jalesh Cruises Mauritius Ltd. JCML proposes to acquire cruise ships and operate cruise services to various destinations from India and the Middle East. As a part of the investment, Delta Corp has also obtained the right to be the preferred partner to manage and operate the casinos and similar gaming centres on such cruise ships through its group companies.
This is Deltaâs reach to take the business global and not be confined to Goa and Sikkim. Geographical diversification?
Wonder why the press release mention Amit Goenka when Jalesh Cruises is promoted by Subash Chandra, i.e. Essel Group. Seems like a good move to hedge onshore casino regulation
Very interesting development! Now Goa will have competition from these cruises since it will have similar customer profile as typical Goa visitors. Good thing is that Delta wonât have to pay exorbitant fees/taxes and other charges. State govts. will think twice before taxing them more as any hike in taxes for offshore casinos would need to be passed on to the customers. Hopefully, they would expedite transition to onshore ones to improve their potential tax collections.
1 Like
CM Manohar Parrikar passed away yesterday.
Will there be any kind of impact on the industry in Goa as the policies are yet to be cleared?
Very sad news for sure! The new govt. is already in so nothing great to worry as such. Political chaos should not be bad for the casino industry. All these folks would require dry powder to protect the govt and only casino owners could provide the same to govt as taxes and to the political parties as âdonationsâ. I am not expecting any big decision before elections get over due to election code of conduct.
1 Like