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Currency in EUR
Last close As at 26/05/2023
EUR16.10
▲ −0.13 (−0.80%)
Market capitalisation
EUR5,850m
Research: Consumer
OPAP’s Q222 results highlighted a continued strong recovery in revenue, profitability, helped by cost containment, and cash generation following the disruption caused by COVID-19-related lockdowns and restrictions. The growth was driven by its land-based activities (easier comparative), while its online revenues normalised (tougher comparative). A more cautious macroeconomic outlook led management to trim its FY22 EBITDA guidance by 4%. The company’s strong financial position means it is well placed to fund its attractive dividend profile.
OPAP |
‘Hefty’ retail recovery |
H122 results |
Travel and leisure |
15 September 2022 |
Share price performance
Business description
Next events
Analysts
OPAP is a research client of Edison Investment Research Limited |
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OPAP’s Q222 results highlighted a continued strong recovery in revenue, profitability, helped by cost containment, and cash generation following the disruption caused by COVID-19-related lockdowns and restrictions. The growth was driven by its land-based activities (easier comparative), while its online revenues normalised (tougher comparative). A more cautious macroeconomic outlook led management to trim its FY22 EBITDA guidance by 4%. The company’s strong financial position means it is well placed to fund its attractive dividend profile.
Year |
GGR* |
EBITDA** |
EPS** |
DPS |
P/E |
Yield |
12/20 |
1,129.8 |
263.9 |
0.32 |
0.55 |
41.7 |
4.1 |
12/21 |
1,538.8 |
551.2 |
0.82 |
1.50 |
16.1 |
11.3 |
12/22e |
2,000.5 |
697.0 |
1.19 |
1.19 |
11.2 |
8.9 |
12/23e |
2,039.4 |
700.2 |
1.14 |
1.14 |
11.6 |
8.6 |
12/24e |
2,079.4 |
708.8 |
1.17 |
1.17 |
11.3 |
8.8 |
Note: *GGR = gross gaming revenue. **EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Revenue growth and operational gearing
OPAP’s Q222 revenue growth of 12% y-o-y to €442m with operational leverage, mainly due to cost control, led to a more significant 16% growth in EBITDA to €167m, a margin of 37.7% versus 36.2% in Q221. On a like-for-like basis, EBITDA increased by c 19%. This followed the strong recovery that began in Q122. The strong profit growth fed through to higher free cash flow generation in absolute terms and relative to net gaming revenue (NGR). The resulting low net debt at the period end of €26m pre IFRS 16 liabilities enabled the declaration of a 10-year high interim dividend of €0.30/share (€0.1/share H121).
Management trims FY22 EBITDA guidance by c 4%
Increased macroeconomic uncertainty led management to reduce is revenue and EBITDA expectations for FY22 versus its guidance from the start of the year. The new FY22 guidance for EBITDA of approximately €700m (€720–740m previously) on GGR of approximately €2bn (€2.175–2.215bn previously) implies a higher margin of 35% (33% previously), recognising the good cost control to date. It includes the assumption of a typical seasonally stronger H2, which should benefit from the FIFA World Cup. Our new FY22 estimates are in line with management’s new guidance.
Valuation: Prospective dividend yield of 8.9%
Our DCF-based valuation reduces to €15.9/share (€18.3 previously) as we incorporate a higher estimated WACC of 8.0% (7.5% previously) due to higher bond yields of 4.2% (3% previously), the modest reduction in our estimates and a higher number of shares following the scrip dividend. Despite being one of the few gaming companies to generate a positive share price return over the last 12 months, OPAP continues to trade at a significant discount to its peers while offering a superior prospective dividend yield of 8.9%.
Q222 results: ‘Hefty’ improvement in retail activities
Income statement: Revenue recovery and operational gearing
OPAP’s GGR increased by c 12% y-o-y to €442m in Q222, which led to a slightly higher increase in NGR of +13% y-o-y to €304m, and EBITDA of +16% y-o-y to €167m, a margin of 37.7% versus 36.2% in Q221. On a like-for-like basis, EBITDA increased by c 19%. Note that our definition of EBITDA differs slightly to that of the company’s as we exclude the associate contribution (a loss of €0.4m) and one-off costs of €0.2m. There was a modest increase in the net finance charge, mainly due to the remeasurement of the discounting of interest receivable on the licence extension income. The effective tax rate reduced to 24.6% (from 27.1% in Q221) as a result of the phasing of profitability and varying tax rates of the different jurisdictions in which OPAP’s businesses are registered (Greece, Cyprus and Malta).
The above follows the very strong recovery in Q122, which enjoyed a much easier comparative due to COVID-19-related restrictions, to give H122 GGR growth of 58% to €899m, NGR growth of 65% to €617m, and EBITDA growth of 64% to €336m. On a like-for-like basis, EBITDA grew by c 64%. OPAP has demonstrated good operating leverage through the recovery to date, with good cost control. The strong profit performance and improved financial position (see below) enabled a significant, ie threefold, increase in the declared interim dividend to a 10-year high of €0.30/share.
Exhibit 1: Summary income statement
€m |
Q121 |
Q221 |
H121 |
Q122 |
Q222 |
H122 |
Gross gaming revenue (GGR) |
174.2 |
395.9 |
570.1 |
457.2 |
442.1 |
899.3 |
Growth y-o-y |
(46.9%) |
120.4% |
12.2% |
162.5% |
11.7% |
57.7% |
GGR contribution and levies |
(68.6) |
(127.8) |
(196.4) |
(144.6) |
(138.1) |
(282.7) |
As % of GGR |
39.4% |
32.3% |
34.5% |
31.6% |
31.2% |
31.4% |
Net gaming revenue (NGR) |
105.6 |
268.0 |
373.7 |
312.6 |
304.0 |
616.7 |
Growth y-o-y |
(51.4%) |
127.4% |
11.5% |
195.9% |
13.4% |
65.0% |
As % of GGR |
60.6% |
67.7% |
65.5% |
68.4% |
68.8% |
68.6% |
Payroll expense |
(18.6) |
(17.9) |
(36.5) |
(20.2) |
(19.9) |
(40.1) |
Growth y-o-y |
(6.0%) |
0.6% |
(2.7%) |
8.5% |
11.1% |
9.8% |
As % of GGR |
10.7% |
4.5% |
6.4% |
4.4% |
4.5% |
4.5% |
Marketing |
(16.0) |
(28.3) |
(44.4) |
(23.3) |
(22.6) |
(45.9) |
Growth y-o-y |
27.2% |
162.3% |
89.5% |
45.2% |
(20.1%) |
3.5% |
As % of GGR |
9.2% |
7.2% |
7.8% |
5.1% |
5.1% |
5.1% |
Other operating expenses |
(29.8) |
(40.5) |
(70.3) |
(45.0) |
(40.5) |
(85.5) |
Growth y-o-y |
N/A |
N/A |
N/A |
51.0% |
(0.1%) |
21.6% |
As % of GGR |
17.1% |
10.2% |
12.3% |
9.8% |
9.2% |
9.5% |
Operating income - licence extension |
45.5 |
55.3 |
100.8 |
56.6 |
56.4 |
113.0 |
EBITDA (Edison) |
60.7 |
143.5 |
204.3 |
166.3 |
167.5 |
333.8 |
Margin |
34.9% |
36.3% |
35.8% |
36.4% |
37.9% |
37.1% |
Growth y-o-y |
(25.9%) |
557.4% |
96.9% |
173.9% |
16.7% |
63.4% |
Associates |
0.1 |
0.7 |
0.8 |
2.7 |
(0.4) |
2.3 |
One-offs |
0.6 |
(0.8) |
(0.2) |
(0.1) |
(0.2) |
(0.4) |
EBITDA (OPAP) |
61.3 |
143.5 |
204.8 |
168.8 |
166.9 |
335.7 |
Margin |
35.2% |
36.2% |
35.9% |
36.9% |
37.7% |
37.3% |
Growth y-o-y |
(29.0%) |
787.9% |
99.8% |
175.2% |
16.3% |
63.9% |
Net finance costs |
(11.0) |
(10.5) |
(21.5) |
(15.5) |
(11.9) |
(27.4) |
Reported profit before tax |
14.2 |
97.1 |
111.0 |
119.5 |
102.6 |
222.1 |
Tax |
(5.0) |
(26.3) |
(31.3) |
(29.6) |
(25.2) |
(54.8) |
Effective rate |
34.9% |
27.1% |
28.2% |
24.8% |
24.6% |
24.7% |
Reported profit after tax |
9.2 |
70.7 |
79.8 |
89.9 |
77.4 |
167.2 |
Growth y-o-y |
N/A |
N/A |
N/A |
874.7% |
9.4% |
109.7% |
Dividend per share (€) |
0.10 |
0.30 |
Source: OPAP
OPAP’s revenue growth was driven by the ‘hefty’ and ongoing recovery in OPAP’s retail, ie land-based activities, which increased GGR by over 20% y-o-y to €347m from €289m, as all COVID-19-related operating restrictions in Greece were removed by the end of the period. Having been a key beneficiary of the operating restrictions that negatively affected the retail-based activities to varying degrees in H120 and H121, OPAP’s online revenue declined by 10% to €96m, a trend that is consistent with other gaming companies that have a mix of online and offline activities. OPAP and Stoiximan both increased the number of active players in Q222 versus the comparative period.
|
Exhibit 2: Online GGR by brand (€m) |
Exhibit 3: Active monthly online players (‘000s) |
|
|
|
Source: OPAP |
Source: OPAP |
|
Exhibit 2: Online GGR by brand (€m) |
|
|
Source: OPAP |
|
Exhibit 3: Active monthly online players (‘000s) |
|
|
Source: OPAP |
By the end of H122, OPAP’s total GGR of €899m was 15% ahead of pre-COVID-19 levels, ie H119. Its new online revenues, primarily following the consolidation of Stoiximan, are greater than the decline experienced by the majority of the retail-focused activities, Lottery, Sports Betting and Instant & Passives, over this period.
Exhibit 4: OPAP’s gross gaming revenue
€m |
H119 |
H120 |
H121 |
H122 |
H122 v H119 |
Gross gaming revenue |
779.6 |
507.9 |
570.1 |
899.3 |
15% |
Growth y-o-y |
(35%) |
12% |
58% |
||
Lottery |
379.3 |
257.5 |
186.9 |
335.1 |
(12%) |
Growth y-o-y |
(32%) |
(27%) |
79% |
||
% of total |
49% |
51% |
33% |
37% |
|
Sports Betting |
191.9 |
128.4 |
89.7 |
177.4 |
(8%) |
Growth y-o-y |
(33%) |
(30%) |
98% |
||
% of total |
25% |
25% |
16% |
20% |
|
Instant & Passives |
68.5 |
33.6 |
37.1 |
50.0 |
(27%) |
Growth y-o-y |
(51%) |
10% |
35% |
||
% of total |
9% |
7% |
7% |
6% |
|
VLTs |
139.9 |
88.4 |
36.1 |
143.9 |
3% |
Growth y-o-y |
(37%) |
(59%) |
N/A |
||
% of total |
18% |
17% |
6% |
16% |
|
Online Betting |
0.0 |
0.0 |
124.2 |
109.2 |
N/A |
Growth y-o-y |
N/A |
N/A |
(12%) |
||
% of total |
0% |
0% |
22% |
12% |
|
Other Online Games |
0.0 |
0.0 |
96.0 |
83.7 |
N/A |
Growth y-o-y |
N/A |
N/A |
(13%) |
||
% of total |
0% |
0% |
17% |
9% |
Source: OPAP
The sole land-based revenue source that is ahead of pre-COVID-19 levels is Video Lottery Terminals (VLTs), which has benefitted from the addition of new machines with more games, and management expects it to be a good source of future growth. VLTs have continued to demonstrate sequential month-on-month growth from June through August despite the more challenging macroeconomic conditions.
Management has been active in developing its product offering and technology/interfaces to improve the number of customer interactions and add incremental revenue.
The expansion in OPAP’s EBITDA margin to 37.7% in Q222 reflects a combination of lower GGR contribution and other levies and duties (110bp), marketing expenses (210bp) and other operating expenses (110bp), all relative to GGR. These were offset by a lower contribution from other operating income that derives from the licence extension (120bp). The relative reduction in GGR contribution and other levies and duties was a function of changes in revenue mix – each source of revenue is subject to differing levels of levies and commissions. Marketing expenses reduced by 30% like-for-like as the prior year included extra spend to support the reopening of retail locations post COVID-19 lockdowns and the UEFA Euro competition. Operating income from the licence extension increased by 2% in absolute terms from €55m in Q221 to €56m in Q222. Its lower relative contribution reflects the growth in revenue from sources outside the scope of the licence which covers Lottery and Sports Betting.
Cash flow and balance sheet: Limited net debt at period end
OPAP’s free cash flow generation improved on an absolute basis (€271m in H122 vs €128m in H121) and relative to OPAP’s NGR (44% in H122 vs 34% in H121), due to its higher profitability and a more favourable, ie less negative, working capital outflow. The free cash flow helped to fund an earnout payment for Stoiximan (€106m) and the repayment of borrowings excluding leases (€210m) with a resulting lower period-end cash balance of €810m (€860m end-FY21). With lower gross debt of €887m at the period end (€1,098m end-FY21), OPAP’s net debt (excluding IFRS 16 liabilities of €47m) was minimal at €26m at the end of H122.
Management’s FY22 guidance trimmed: More cautious macroeconomic outlook
In recognition of the more uncertain economic outlook, management trimmed its FY22 EBITDA guidance by c 4% to approximately €700m from the mid-point of the prior range of €720–740m. The new guidance implies a higher EBITDA margin (35%) on reduced revenue expectations (approximately €2bn) versus the previously guided margin (c 33%) on higher revenue expectations (€2.175–2.215bn). The new guidance implies y-o-y revenue growth of c 30% and EBITDA growth of c 27% versus FY21. It includes the assumption of a typical seasonally stronger H2, which should benefit from the FIFA World Cup.
We reduce our FY22 estimates to be in line with management’s new guidance and maintain our prior estimates for revenue growth rates for FY23 and FY24. Further down the income statement, we have adjusted the number of shares to incorporate those issued (7.4m shares) in August 2022 for the scrip alternative for the H221 dividend.
Valuation
Our lower DCF-based valuation of €15.9/share (€18.3 previously) reflects an increase in our estimated WACC to 8.0% from 7.5% previously to reflect a higher Greek 10-year bond yield of 4.2% (3% previously), as well as the c 3% reduction in our FY22 EBITDA estimates and subsequent reductions beyond FY22, and the higher number of shares. The sensitivity of the valuation to changes in WACC and terminal growth rate assumptions is shown below.
Exhibit 5: DCF sensitivity (€/share)
Terminal growth rate |
||||||
0.5% |
1.0% |
1.5% |
2.0% |
2.5% |
||
WACC |
10.50% |
11.6 |
11.8 |
12.1 |
12.4 |
12.7 |
10.00% |
12.1 |
12.4 |
12.7 |
13.0 |
13.4 |
|
9.50% |
12.7 |
13.0 |
13.3 |
13.7 |
14.2 |
|
9.00% |
13.3 |
13.7 |
14.1 |
14.6 |
15.1 |
|
8.50% |
14.0 |
14.4 |
14.9 |
15.5 |
16.2 |
|
8.00% |
14.8 |
15.3 |
15.9 |
16.6 |
17.4 |
|
7.50% |
15.7 |
16.3 |
17.1 |
17.9 |
19.0 |
|
7.00% |
16.8 |
17.5 |
18.4 |
19.5 |
20.8 |
|
6.50% |
18.0 |
19.0 |
20.1 |
21.4 |
23.1 |
|
6.00% |
19.5 |
20.7 |
22.1 |
23.8 |
26.1 |
|
Source: : Edison Investment Research
OPAP’s share price has performed very well versus its peers during the last 12 months, as they have suffered from slowing rates of growth and/or increasing regulation uncertainty. Despite the outperformance, OPAP’s share price continues to trade at a discount to peers on most valuation measures and offers a superior dividend yield.
Exhibit 6: Peer group valuation table
Company |
Year end |
Share price (local ccy) |
Ccy |
Market cap (€m) |
Share price change 1 year % |
Sales growth CY22 (%) |
Sales growth CY23 (%) |
EBIT mgn CY22 (%) |
EBIT mgn CY23 (%) |
EV/ EBIT CY22 (x) |
EV/ EBIT CY23 (x) |
P/E CY22 (x) |
P/E CY23 (x) |
Div yield CY22 (%) |
Div yield CY23 (%) |
888 Holdings |
Dec |
126.3 |
GBP |
645 |
(68) |
116 |
4 |
9.9 |
12.4 |
1.8 |
1.4 |
7.6 |
5.4 |
0.0 |
0.7 |
bet-at-home.com |
Dec |
6.5 |
EUR |
45 |
(75) |
N/A |
(5) |
0.4 |
2.5 |
24.9 |
3.8 |
215.0 |
40.3 |
0.0 |
0.0 |
Betsson |
Dec |
68.4 |
SEK |
768 |
(10) |
13 |
10 |
14.1 |
14.0 |
7.5 |
6.8 |
9.6 |
9.0 |
5.3 |
5.6 |
Entain |
Dec |
1,258 |
GBP |
8,479 |
(34) |
11 |
8 |
13.9 |
17.4 |
15.9 |
11.9 |
20.7 |
13.7 |
1.4 |
1.8 |
Flutter Entertainment |
Dec |
10,710 |
GBP |
21,568 |
(26) |
21 |
17 |
10.7 |
14.3 |
28.3 |
18.0 |
40.6 |
22.8 |
0.4 |
1.7 |
La Francaise des Jeux |
Dec |
33.1 |
EUR |
6,271 |
(25) |
6 |
4 |
18.4 |
18.8 |
14.0 |
13.2 |
19.6 |
18.3 |
4.2 |
4.5 |
Kindred Group |
Dec |
94.3 |
GBP |
1,986 |
(40) |
(15) |
20 |
7.7 |
13.3 |
21.2 |
10.1 |
25.1 |
11.8 |
2.9 |
4.5 |
LeoVegas (publ) |
Dec |
60.9 |
SEK |
553 |
70 |
10 |
11 |
8.5 |
9.7 |
16.6 |
13.2 |
16.9 |
13.7 |
3.1 |
3.6 |
Rank Group |
Jun |
80.5 |
GBP |
432 |
(52) |
43 |
11 |
9.2 |
10.3 |
10.9 |
7.5 |
6.9 |
5.6 |
4.5 |
5.5 |
Average excluding bet-at-home.com |
26 |
11 |
11.6 |
13.8 |
14.5 |
10.3 |
18.4 |
12.5 |
2.7 |
3.5 |
|||||
OPAP |
Dec |
13.4 |
EUR |
4,828 |
9 |
30 |
2 |
28.8 |
27.5 |
8.5 |
8.7 |
11.3 |
11.7 |
8.9 |
8.5 |
OPAP premium/(discount) to average |
17% |
(82%) |
150% |
100% |
(41%) |
(15%) |
(39%) |
(6%) |
224% |
143% |
Source: Refinitiv, Edison Investment Research. Note: Priced 12 September 2022.
Exhibit 7: Financial summary
€m |
2020 |
2021 |
2022e |
2023e |
2024e |
||
31-December |
ISA |
ISA |
ISA |
ISA |
ISA |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
1,129.8 |
1,538.8 |
2,000.5 |
2,039.4 |
2,079.4 |
NGR |
|
|
737.3 |
1,043.9 |
1,360.6 |
1,385.0 |
1,409.9 |
Cost of Sales |
(672.7) |
(883.7) |
(1,170.1) |
(1,192.7) |
(1,212.9) |
||
Gross Profit |
457.1 |
655.2 |
830.4 |
846.8 |
866.6 |
||
Other Income |
42.5 |
217.4 |
237.9 |
237.4 |
236.8 |
||
EBITDA |
|
|
263.9 |
551.2 |
697.0 |
700.2 |
708.8 |
Operating profit (before amort. and excepts.) |
|
147.2 |
408.6 |
576.6 |
561.0 |
569.6 |
|
Impairments |
(36.8) |
(4.7) |
(18.8) |
0.0 |
0.0 |
||
Exceptionals |
121.2 |
(0.5) |
41.8 |
0.0 |
0.0 |
||
Share-based payments |
0.0 |
(2.2) |
(2.2) |
(2.2) |
(2.2) |
||
Reported operating profit |
231.6 |
401.3 |
597.4 |
558.9 |
567.4 |
||
Net Interest |
(33.5) |
(43.6) |
(28.5) |
(24.0) |
(19.0) |
||
Joint ventures & associates (post tax) |
18.3 |
(0.4) |
4.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
132.0 |
364.6 |
552.1 |
537.0 |
550.6 |
Profit Before Tax (reported) |
|
|
216.4 |
357.3 |
572.9 |
534.9 |
548.4 |
Reported tax |
(17.3) |
(96.4) |
(121.5) |
(118.1) |
(121.1) |
||
Profit After Tax (norm) |
100.3 |
284.4 |
430.7 |
418.9 |
429.5 |
||
Profit After Tax (reported) |
199.1 |
260.9 |
451.5 |
416.7 |
427.3 |
||
Minority interests |
6.1 |
(1.4) |
(7.5) |
(8.4) |
(9.7) |
||
Net income (normalised) |
106.4 |
282.9 |
423.2 |
411.5 |
421.8 |
||
Net income (reported) |
205.2 |
259.4 |
444.0 |
408.3 |
417.6 |
||
Average Number of Shares Outstanding (m) |
334 |
344 |
357 |
360 |
360 |
||
EPS - normalised (c) |
|
|
31.83 |
82.28 |
118.68 |
114.21 |
117.06 |
EPS - normalised fully diluted (c) |
|
|
31.83 |
82.28 |
118.68 |
114.21 |
117.06 |
EPS - basic reported (€) |
|
|
0.61 |
0.75 |
1.25 |
1.13 |
1.16 |
Dividend (€) |
0.55 |
1.50 |
1.19 |
1.14 |
1.17 |
||
Revenue growth (%) |
(30.3) |
36.2 |
30.0 |
1.9 |
2.0 |
||
Gross Margin (%) |
40.5 |
42.6 |
41.5 |
41.5 |
41.7 |
||
EBITDA Margin (%) |
23.4 |
35.8 |
34.8 |
34.3 |
34.1 |
||
Normalised Operating Margin |
13.0 |
26.6 |
28.8 |
27.5 |
27.4 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
1,806.4 |
1,695.0 |
1,685.4 |
1,569.1 |
1,452.7 |
Intangible Assets |
1,578.9 |
1,476.0 |
1,491.3 |
1,391.6 |
1,292.0 |
||
Tangible Assets |
127.5 |
105.6 |
88.9 |
72.2 |
55.5 |
||
Investments & other |
100.0 |
113.4 |
105.2 |
105.2 |
105.2 |
||
Current Assets |
|
|
629.1 |
1,007.5 |
830.8 |
829.7 |
845.5 |
Stocks |
6.2 |
4.7 |
6.1 |
6.2 |
6.3 |
||
Debtors |
68.5 |
90.9 |
120.0 |
122.4 |
124.8 |
||
Cash & cash equivalents |
506.9 |
860.4 |
653.1 |
649.6 |
662.8 |
||
Other |
47.6 |
51.6 |
51.6 |
51.6 |
51.6 |
||
Current Liabilities |
|
|
(366.1) |
(571.5) |
(623.3) |
(627.6) |
(632.0) |
Creditors |
(149.4) |
(168.2) |
(220.1) |
(224.3) |
(228.7) |
||
Tax and social security |
(27.8) |
(60.7) |
(60.7) |
(60.7) |
(60.7) |
||
Short term borrowings |
(40.7) |
(62.5) |
(62.5) |
(62.5) |
(62.5) |
||
Other |
(148.2) |
(280.2) |
(280.2) |
(280.2) |
(280.2) |
||
Long Term Liabilities |
|
|
(1,286.7) |
(1,181.7) |
(1,008.3) |
(892.7) |
(774.9) |
Long term borrowings |
(1,057.9) |
(1,035.2) |
(825.2) |
(675.2) |
(525.2) |
||
Other long-term liabilities |
(228.8) |
(146.5) |
(183.1) |
(217.5) |
(249.7) |
||
Net Assets |
|
|
782.7 |
949.4 |
884.6 |
878.5 |
891.3 |
Minority interests |
(41.1) |
(38.5) |
(41.9) |
(46.3) |
(51.9) |
||
Shareholders' equity |
|
|
741.6 |
910.9 |
842.7 |
832.3 |
839.4 |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
263.9 |
553.4 |
699.1 |
702.4 |
711.0 |
||
Working capital |
(34.8) |
21.1 |
21.3 |
1.8 |
1.9 |
||
Exceptional & other |
4.5 |
(4.5) |
34.4 |
32.2 |
30.1 |
||
Tax |
(12.1) |
(46.1) |
(121.5) |
(118.1) |
(121.1) |
||
Operating Cash Flow |
|
|
221.4 |
523.9 |
633.4 |
618.3 |
621.8 |
Net interest |
(32.5) |
(30.1) |
(28.5) |
(24.0) |
(19.0) |
||
Capex |
(18.9) |
(24.2) |
(25.0) |
(25.0) |
(25.0) |
||
Acquisitions/disposals |
(90.2) |
(19.0) |
(115.0) |
0.0 |
0.0 |
||
Equity financing |
(0.1) |
(0.2) |
0.0 |
0.0 |
0.0 |
||
Dividends |
(214.7) |
(91.0) |
(512.1) |
(418.8) |
(410.5) |
||
Net new borrowings |
(12.1) |
0.5 |
(210.0) |
(150.0) |
(150.0) |
||
Other |
20.0 |
(6.3) |
49.9 |
(4.1) |
(4.1) |
||
Net Cash Flow |
(126.9) |
353.5 |
(207.3) |
(3.5) |
13.2 |
||
Opening cash |
|
|
633.8 |
506.9 |
860.4 |
653.1 |
649.6 |
Closing cash |
|
|
506.9 |
860.4 |
653.1 |
649.6 |
662.8 |
Closing net debt/(cash) |
|
|
591.7 |
237.3 |
234.6 |
88.1 |
(75.2) |
Source: OPAP, Edison Investment Research
|
|
Research: Industrials
Loop Energy’s patented PEM fuel cell technology has a leading combination of fuel efficiency, power density and durability, resulting in an attractive total cost of ownership (TCO), providing the company with a competitive advantage. This is supported by a recent transformational commercial order with electric truck maker Tevva, won via a competitive tender process. Loop Energy is targeting disruptors and early movers in electrification of the return-to-base fleet segment of road transport, which should help it to ramp up sales and drive down costs relatively quickly. We consider only the truck and bus markets, which are a portion of the company’s total addressable market, and estimate a US$4bn market in 2030 and a c US$60bn market by 2050. Our DCF valuation for Loop Energy implies C$4.5/share at a 15% cost of capital, which is more than double the current share price. This increases sharply as the investment case de-risks.
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