Delta Corp: My 2 cents. Some facts and some fancies, some overthinking and some unproductive thinking. Request to allay my fears.
- Let the dust settle, industry has to evolve. there are somany moving parts.
- Value will be unlocked once the online IPO comes because there is a lot of spending on advertising 50 crores per qtr – 200cr yr
- Daman writ is likely to win, as we know how it is in general, first, it is delayed, deliberated, and lastly favored. Because business has a life and life finds its way. If not HC, then SC. But remember time overruns are always there.
- People may not want to play/gamble on the record, so cash likely coming into play, likely underreporting cannot be overlooked.
- Also it is an excessively competitive space, Poker is something that is an intelligent game, and Rummy is a mass market game, but their presence is not great in rummy. Junglee rummy, rummy circle, etc. will not let them have an easy walk.
- Essentially they are shrugging off the poorer business, as I feel.
- Suppose, in the future, this industry is viewed as normal and licensing become easy and accessible, less regulated (which I strongly feel is gonna happen). In that case, what are the entry barriers? – First mover, an established player are some obvious ones. But there will be some ‘xyz’ new player, or say an international player with an even better model may come up. So how will Delta defend the turf? To begin with- do customers have a loyalty to Delta? I don’t think so, they are likely to switch.
- Gambling as a profession (or addiction) v/s gambling as a tourism, there is a big difference. Now tell me, once you have gone to Deltin last year, how likely is it that you wanna go again? Repeat customers / sticky clientele/ loyal gamblers are far from expectations.
- Goa is a lovely tourist spot, it has flamboyancy, carefree breeze, and people tend to have a yolo attitude (temporary for tourists), it is far more conducive than Daman. Daman is not a favorite tourist place, far from it (Personal experience). So, the management should be looking at a mediocre destination, as I feel. Not las vegas for sure, as portrayed.
- 35% operating margins sustainable? I doubt. Because it’s not scalable beyond that. They say it’s a very high operating leverage business but I think, even if it is, it is already 35%. It’s factored in. Trees not gonna grow to the sky.
- Surely doubt scalability, the gambling market is a cultural thing. The reason why there are only a few race courses in India, lottery, betting do not go well culturally.
- Currently betting suffering after the GST regime came into being as it is heavily taxed by the Indian Govt. Regulatory overhang.
- They need to crack rich locations e.g. Mumbai, to really scale meaningfully.
- Tax structure today is biased both on the player as well as Delta. Delta pays 28% of GGR (Gross Gaming Revue) as GST, whereas the winner straight 30% without a loss set-off or credit. In such a scenario, you know, cash is prevalent. Also, it’s not a tax structure that is conducive for industry to prosper.
- Advani Hotel shares, Sri Lanka land they want to sell off. Land in Goa, no buyer, now building 250 odd apartments and want to sell-off. This is a half-hearted project, we know. Hope they get sold off at cost, let alone at a premium. How long will it take to materialise?
- This real estate project is an unwanted incident and adds one more layer to non-core business in addition to hospitality. Misallocation of capital.
- MOPA Airport: Integrated resort 2500cr plus plan may be a good game changer. Expect by 2027. Q2 FY22 Conference Call: Deltin Entertainment plans to be ready shortly. Will take 42-48 months from the date of commencement for the project to complete. Project to cost 1500-1700 Cr. Q4 FY 23: Not even spent a rupee, just a minimal digging will start in monsoon. cost 2500-2700Cr. 4 years time frame.
- Big cash on the balance sheet is the biggest pro. But just think about it, it can be viewed as otherwise also, it is sitting there for the last 2 years or more.
- Some Pessimism around the company and stock price exists, no doubt. Growth plans are in place, but the industry by nature is very sensitive.
Please correct me wherever I am wrong. All rights are reserved to be wrong and stupid, multiple times.
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