Delta Corp Limited's consolidated revenue for the quarter came in at Rs205.81cr, up 26.9% yoy. EBITDA for Q3FY19 came in at Rs84.02cr, up 22.3% yoy. However, the EBITDA margin contracted by ~154bps yoy to 40.8% during the quarter. The adjusted net profit (attributable to the shareholders) increased by 12.9% yoy to Rs50.53cr during Q3FY19. The revenue, EBITDA and net profit are in-line with the consensus estimates.
• Delta Corp witnessed strong traction in revenue during the quarter, which is seasonally a favourable period for the company. The revenue increased significantly by 26.9% yoy despite a large base during corresponding period of the previous year.
• However, the EBITDA margin declined by ~154bps yoy to 40.8% during Q3FY19 on account of increase in offshore and onshore casino license fees payable to the Government of Goa. The license fees (including offshore and onshore casinos) has increased to Rs65cr in FY19 vs. Rs26cr in FY18.
• The effective tax rate of the company has increased to 37% in Q3FY19 vs. 34% in Q3FY18. Further, the other income also declined to Rs5.51cr during the quarter (Rs7.93cr in Q3FY18). All these factors led to lower growth in the adjusted net profit as against the operating profit of the company during the quarter.
• The board declared an interim dividend of Rs0.6 per share.
• In terms of operating segments,
o casino gaming division continues to witness traction with increase in revenue by 29.6% yoy to Rs202.12cr and EBIT by 39.9% yoy to Rs76.02cr;
o online skill gaming division reported higher revenue (up 33.1% yoy) but EBIT declined (down 38.1% yoy) on account of likely increase in promotional activities and discount charges;
o hospitality division continues to remain sluggish with decline in the revenue (down 16.8% yoy) and EBIT loss of Rs5.93cr during the quarter.
• Gaming business – Recorded ~1,18,000 visitations during the quarter, up 18% yoy.
• Online business – The EBITDA in the previous period (Q2FY19) was subdued due to marketing and sales promotion. However, with the rationalization of costs and revisited strategies, the EBIT margin improved qoq to 18.5% in Q3FY19 (2.3% in Q2FY19). The month of December 2019 gained strong traction under this segment. The margin is expected to be brought back to the 15-20% range going ahead as the company is very focused in this segment and conservative in cost spends. The company has ~15 lakh users (~1 lakh active) under poker and ~4lakh under fantasy sports.
• Drydocking is expected to take place next year. This is required to be done every 3 years, however, the company has sought an extension.
• The company is awaiting a response from the Goa state government for the setting up of on-shore casinos during the upcoming winter assembly session in January 2019.
• Operations in Sikkim remained subdued during the current quarter considering weather conditions and delayed aviation operations. The company anticipates a recovery of operations in Sikkim from February 2019.
• Hospitality segment – Daman property is marginally breaking-even at the operating profit level. However, it will take a long time to breakeven at net profit-level considering the absorption of high depreciation charge.
Overall, we expect the stock to remain on the positive trend post the strong rally witnessed in the stock price (up ~25% from three-months low). We retain our positive stance on the company as it is poised to benefit from increased penetration in online gaming and casinos. The awaited license approval for the company's casino in Daman (at a 5-star property ‘The Deltin’) will be a re-rating factor for the stock.
Delta Corp Ltd ended at Rs. 262.05, down by 1.5 points or 0.57% from its previous closing of Rs. 263.55 on the BSE.
The scrip opened at Rs. 266 and touched a high and low of Rs. 272.90 and Rs. 259.25 respectively. A total of 57,17,404 (NSE+BSE) shares were traded on the counter. The stock traded below its 200 DMA.
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