Delta Corp is a multibagger stock in the portfolio of Rakesh Jhunjhunwala. He has been holding the stock of Delta Corp for a long time now.
Jhunjhunwala first bought the stock in April 2015. After that, he and his wife Rekha Jhunjhunwala have been buying the stock whenever there has been a dip in the stock price.
The present holding of Rakesh Jhunjhunwala in the casino company is 5 percent stake while that of Rekha Jhunjhunwala is 4.76 percent.
Why is Delta Corp a multibagger?
There are several reasons why the casino company can be a multibagger stock.
(i) The first is that Delta Corp is at an inflection point. The investment phase is behind and approval of the Daman casino and M&A opportunities in online gaming (like Adda52.com) could trigger significant growth and cash generation as well as return on capital employed / return on equity improvement.
(ii) The ROE (return on equity) will improve from 9 percent to 17 percent over FY17-19.
(iii) The company is awaiting regulatory approval for a casino housed in Daman’s only five-star hotel. The approval of the Daman casino has the potential to nearly double the gaming capacity to 3,000 from 1,700 currently.
(iv) After the approval of the Daman casino, the company would be in a better position to exploit the potential that the nascent industry offers.
(v) The situation of the casino in Daman offers the company a location advantage. Daman caters to a population of 35 million people from Mumbai and Gujarat.
(vi) Delta Corp already has a successful business model in the Goa offshore casino market. This model will be replicated in Daman, which is a land-based casino.
(viii) A dominant share of India’s offshore casino market is controlled by Delta Corp. It has six offshore casino licenses in Goa. Of these, five are operational.
(ix) The company also has around 1,700 gaming positions in Goa. It also has a casino in Sikkim.
(x) The biggest advantage to Delta Corp is the fact that it has a monopoly competitive advantage in Goa. This is because the Goa government is unlikely to issue new licenses to competitors.
(xi) The size of the gaming industry in India is huge. At present, the size of the gaming and casino industry is only USD 150 million. This is paltry bearing in mind the size of the Country and the growth potential is huge.
(xii) Delta Corp is likely to report 35 percent revenue CAGR, 45 percent EBITDA CAGR and 62 percent PAT CAGR over FY17-19.
(xiii) Online gaming is another big avenue for gains for the casino company. It recently acquired Gauss Network, which owns Adda52.com (online poker), for Rs 210 crore.
Sonia Shenoy refers to Delta Corp buy recommendation by Motilal Oswal
Sonia Shenoy of CNBC TV18 has referred to the fact that Motilal Oswal has recommended a buy of Delta Corp for the target price of Rs. 229.
Sonia Shenoy made the following tweet.
Motilal Oswal on Delta Corp
Initiates Coverage,target price at 229(36% upside)
Expect 35% rev CAGR,45% EBITDA CAGR,62% PAT CAGR over FY17-19
— Sonia Shenoy (@_soniashenoy) March 22, 2017