From their concall notes and some digging around.
Pros:
- Mgmt repeatedly mentioning that margins are likely to improve in coming quarters.
- Capacity utilization is at optimal level. The problem seems to be on overcrowding, which indicates that the company would benefit by increasing capacity.
- Not much competition on land based casino. They are planning a 150k sqft casino which will be the largest land based one in Goa.
- Their online game is rated 4.8/5 which is quite good, inspite of a money making business. This will likely be IPOed as Deltatech as and when approvals come in.
- Daman hospitality merger is also awaiting court approval. Mgmt indicates big positive if it happens and mentioned that Daman could be as big or bigger than Goa in terms of opportunity.
- Overall, it appears that the company can have more stable performance if they expand their capacity.
Sector tail winds:
- Indian market is not yet mature and busy days are only from Friday till Sunday and that too in evenings. This will improve more as the market becomes more mature (like Singapore). This would augur well for capacity utilization. But, this is a slow and long term scenario.
- Better air / road connectivity push from govt will bring in more tourism.
- Sector is moving more towards regulated regime which makes it easier for companies to scale without uncertainties.
Concerns:
- Recent reviews of deltin royale indicate that it is too crowded and is not good for kids. However, it seems like a hit with people who go for casinos.
- The mgmt commented (before budget was released) that they had reviewed the rules and are almost 100% compliant to those. But not sure if they also are commenting on the revised TDS of 30%. Some uncertainty prevails.
- Recent profits were down as they spent more on customer acquisition. Expect some pressure in next quarter as well as the vessel goes for dry docking.
- The mgmt didn’t give a clear response as of why the profits were down this quarter compared to last quarter which was hit by COVID.
Disc: Invested and might be biased.
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