The value of Indian gaming leader Delta Corp’s online gaming business could exceed the current market cap of the entire company within the next two years, according to Union Gaming analyst John DeCree.
In a Wednesday note following publication of Delta Corp’s 2Q20 financial results, DeCree forecast revenue in the company’s online segment to reach Rs 230 crore (US$30.5 million) in sales in FY22, which based on valuations of between 10x and 15x of sales for US online gaming businesses would imply a valuation of Rs 2,300 crore (US$305 million) to RS 3,450 crore (US$458 million).
“This would suggest the online gaming business is worth more than the current market cap of the entire company today,” DeCree said.
His comments come as Delta Corp, which fell to a loss of Rs 28.2 crore (US$3.8 million), for the quarter, revealed it would have recorded positive EBITDA in 2Q20 but for an Rs 236.8 million (US$3.1 million) casino license fee, despite recording zero casino revenue for the quarter due to the COVID-19 shutdown.
Group-wide revenue declined 68.5% for the quarter to Rs61.31 crore (US$8.1 million), of which RS 57.07 crore came from online skill gaming operations, representing a 60% year-on-year increase for the segment. Delta Corp’s online gaming assets include online poker site Adda52.com, online rummy site Adda52rummy.com and online fantasy sports site LeagueAdda.com.
“Similar to trends seen in the US and around the globe, Indian consumers have flocked to digital and online entertainment channels during the lock down,” said DeCree.
He added that Delta Corp deserves similar valuation to US companies due to its “leading position in India, the country’s high barriers to entry, and the massive addressable market in India.
“The online gaming segment is already a high-growth business for Delta Corp but the lock down has accelerated consumer acceptance and customer acquisition. This segment has long been an undervalued and underappreciated component of the company’s business and growth profile that can no longer be ignored.”
