Rising footfalls, improving gaming revenue set to aid Delta Corp's FY20 earnings, say analysts

Delta Corp, the country’s largest casino business, reported a double-digit rise in fourth-quarter profit, and most brokerages have reiterated their bullish stance on the stock following stellar earnings.

In the quarter ended March 31, Delta Corp's revenue rose 19 percent to Rs 209.29 crore while its net profit was up 26 percent to Rs 57.32 crore on a year-on-year basis.

The company's casino business saw a 21 percent rise in quarterly revenue while the hospitality and online gaming business saw a growth of 8 percent and 11 percent, respectively. Visitations or footfalls to its casinos and hotels jumped 40 percent to 1,20,000 in the three months ended March 31.

Let's take a look at what brokerages are saying following Delta Corp's results:

“The company’s investment in the cruise gaming, online fantasy game and Nepal’s casino businesses will contribute to the revenue in FY20", said the brokerage in a report.

Emkay added that the company’s FY20 revenue/EPS will improve to 27/34 percent respectively as the momentum is expected to continue in Goa.

The brokerage remained confident on the business on the back of rising footfalls and improving gaming revenue.

Motilal Oswal said, “The investment in Jalesh Cruises is ideal, as Delta has the right to operate casinos in all its cruises. Expect revenue of Rs 20-25 million/month. Jalesh plans to add 3-4 new cruises over the next 18-24 months.”

Delta Corp last month said it signed an agreement to acquire Essel Group-backed Jalesh Cruises Mauritius for $10 million.

Source: Motilal Oswal Research Report

The brokerage added that Delta Corp's investment in Halaplay, a Mumbai-based fantasy sports company, is paying well as the platform has already grown three times, given the ongoing T20 cricket series. Sporting events like IPL, the Cricket World Cup and thereafter the T20 Cricket World Cup should lead to revenue of Rs 1,000 million in FY20.

“Expect sales/PAT to grow at a CAGR of 18/26 percent over FY19-21. Investments in Jalesh and Halaplay will accrue benefits over the long term”, the brokerage added.