DELTA is India's first listed pure-play gaming company. It owns three of the six licenses for offshore casinos in Goa and enjoys a dominant share of India's offshore casino market. In 2HFY15, it will be launching (subject to approvals) a casino housed in Daman's only five-star hotel; this will be Daman's first landbased casino. Daman is likely to be much larger footfall market than Goa, attracting huge crowds from Mumbai and Gujarat. We expect DELTA to replicate its success in Goa's offshore casino market in the land-based casino market in Daman. Also, given that the Goa government is unlikely to issue new licenses and that landbased casinos are allowed only in five-star hotels, DELTA's competitive advantage should sustain.
Launch of Daman casino to be key trigger
DELTA is by far the largest casino operator in India, with ~2,000 gaming positions. The launch of its casino in Daman (subject to approval) and commencement of its offshore property, Deltin Caravela in Goa will take its capacity to ~3,400 gaming positions. With near doubling of its gaming capacity, DELTA will be in a better position to exploit the potential that the nascent industry offers. Further, we believe DELTA is at an inflection point, currently. The investment phase is behind and the launch of the Daman casino could trigger significant cash generation as well as RoCE / RoE improvement, beginning FY16
Well placed to capture strong growth
DELTA trades at 49.7x FY15E, 21.4x FY16E, and 14.4x FY17E earnings. We do not have a rating on the stock. However, given the significant growth potential for India's gaming industry, DELTA's dominant position, and strong earnings outlook for its gaming business, we believe it is well placed.
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