Currency in EUR
Last close As at 09/06/2023
EUR16.00
▲ 0.25 (1.59%)
Market capitalisation
EUR5,723m
Research: Consumer
OPAP’s strategy of greater product innovation, and the resilience of retail revenue despite increased pressures on consumer spending, drove solid revenue growth in Q322. Ongoing cost control led to an impressive improvement in profitability, enabling management to increase its FY22 EBITDA guidance back towards prior guidance from the start of the year (€720m). Despite the relatively strong share price performance in the last 12 months, the prospective FY23 P/E multiple of 10.9x is a 15% discount to its peers, and the dividend yield of 9.2% remains very attractive.
OPAP |
Resilience prompts FY22 EBITDA upgrade |
Q322 results |
Travel and leisure |
28 November 2022 |
Share price performance
Business description
Next events
Analysts
OPAP is a research client of Edison Investment Research Limited |
OPAP’s strategy of greater product innovation, and the resilience of retail revenue despite increased pressures on consumer spending, drove solid revenue growth in Q322. Ongoing cost control led to an impressive improvement in profitability, enabling management to increase its FY22 EBITDA guidance back towards prior guidance from the start of the year (€720m). Despite the relatively strong share price performance in the last 12 months, the prospective FY23 P/E multiple of 10.9x is a 15% discount to its peers, and the dividend yield of 9.2% remains very attractive.
Year end |
GGR* |
EBITDA** |
EPS** |
DPS |
P/E |
Yield |
12/20 |
1,129.8 |
263.9 |
0.32 |
0.55 |
40.5 |
4.3 |
12/21 |
1,538.8 |
551.2 |
0.82 |
1.50 |
15.7 |
11.6 |
12/22e |
2,030.9 |
716.1 |
1.20 |
1.20 |
10.8 |
9.3 |
12/23e |
2,100.6 |
729.4 |
1.19 |
1.18 |
10.9 |
9.2 |
12/24e |
2.145.4 |
740.1 |
1.22 |
1.21 |
10.6 |
9.4 |
Note: *GGR = gross gaming revenue. **EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Revenue growth, better profitability and cash flow
OPAP’s Q322 revenue grew by c 6% y-o-y to €499m and recurring EBITDA by c 13% to €198m. Online (+29% y-o-y) was the primary driver of revenue growth, as higher marketing supported new product initiatives (for both online and offline), which drove impressive growth in the number of active online players (+21% y-o-y), implying higher spend per online player. Relative to revenue, lower commissions (product mix) and other operating expenses more than offset higher GGR contribution (product mix) and marketing spend to drive the EBITDA margin to 39.6% (37.2% in Q321). Free cash generation improved significantly on an absolute basis (to €181m from €130m in Q321), and relative to revenue due to the profitability and more positive working capital. Distributions to shareholders (€394m) led to higher period end net debt (€244m versus €26m at end H122), remaining at a low 0.35x of OPAP’s last 12 months EBITDA.
FY22: Guidance back towards prior levels
The stronger-than-expected Q322 results, management’s greater confidence in OPAP’s resilience, no expected COVID-19 disruption and the FIFA World Cup led management to return FY22e EBITDA guidance to €720m, back to that at the start of the year (€720–740m), following the H122 trim (to c €700m). The guidance implies Q422 EBITDA of €187m, c 9% growth versus Q422’s €171m. We increase our FY22 EBITDA forecast (from €697m), in line with guidance. Our new revenue estimate of €2.03bn is broadly unchanged and lower than the guidance from the start of year (€2.175–2.215bn) as it reflects the softer economic environment.
Valuation: Discount to peers despite outperformance
OPAP has been one of the few European gaming companies to generate a positive share price return in the last 12 months. Despite the outperformance, its FY23 P/E multiple of 10.9x remains at a discount to its peers (median 12.8x). Our DCF-based valuation is unchanged at €15.9/share.
Exhibit 1: Financial summary
2020 |
2021 |
2022e |
2023e |
2024e |
|||
Year end 31 December |
(€m) |
ISA |
ISA |
ISA |
ISA |
ISA |
|
INCOME STATEMENT |
|||||||
Revenue |
|
|
1,129.8 |
1,538.8 |
2,030.9 |
2,100.6 |
2,145.4 |
NGR |
|
|
737.3 |
1,043.9 |
1,379.6 |
1,425.3 |
1,453.4 |
Cost of Sales |
(672.7) |
(883.7) |
(1,183.4) |
(1,226.7) |
(1,249.6) |
||
Gross Profit |
457.1 |
655.2 |
847.5 |
873.9 |
895.9 |
||
Other Income |
42.5 |
217.4 |
238.5 |
237.9 |
237.4 |
||
EBITDA |
|
|
263.9 |
551.2 |
716.1 |
729.4 |
740.1 |
Operating profit (before amort. and excepts.) |
|
147.2 |
408.6 |
595.7 |
590.2 |
600.9 |
|
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 |
616.5 |
588.1 |
598.8 |
||
Net Interest |
(33.5) |
(43.6) |
(39.0) |
(26.0) |
(21.0) |
||
Joint ventures & associates (post tax) |
18.3 |
(0.4) |
4.2 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
132.0 |
364.6 |
560.9 |
564.2 |
579.9 |
Profit Before Tax (reported) |
|
|
216.4 |
357.3 |
581.7 |
562.1 |
577.8 |
Reported tax |
(17.3) |
(96.4) |
(123.4) |
(124.1) |
(127.6) |
||
Profit After Tax (norm) |
100.3 |
284.4 |
437.5 |
440.1 |
452.4 |
||
Profit After Tax (reported) |
199.1 |
260.9 |
458.3 |
437.9 |
450.2 |
||
Minority interests |
6.1 |
(1.4) |
(9.2) |
(10.3) |
(11.8) |
||
Net income (normalised) |
106.4 |
282.9 |
428.2 |
430.8 |
442.5 |
||
Net income (reported) |
205.2 |
259.4 |
449.1 |
427.6 |
438.4 |
||
Average Number of Shares Outstanding (m) |
334 |
344 |
358 |
363 |
363 |
||
EPS - normalised (c) |
|
|
31.83 |
82.28 |
119.59 |
118.56 |
121.80 |
EPS - normalised fully diluted (c) |
|
|
31.83 |
82.28 |
119.59 |
118.56 |
121.80 |
EPS - basic reported (€) |
|
|
0.61 |
0.75 |
1.25 |
1.18 |
1.21 |
Dividend (€) |
0.55 |
1.50 |
1.20 |
1.18 |
1.21 |
||
Revenue growth (%) |
(30.3) |
36.2 |
32.0 |
3.4 |
2.1 |
||
Gross Margin (%) |
40.5 |
42.6 |
41.7 |
41.6 |
41.8 |
||
EBITDA Margin (%) |
23.4 |
35.8 |
35.3 |
34.7 |
34.5 |
||
Normalised Operating Margin (%) |
13.0 |
26.6 |
29.3 |
28.1 |
28.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
1,806.4 |
1,695.0 |
1,687.4 |
1,571.1 |
1,454.7 |
Intangible Assets |
1,578.9 |
1,476.0 |
1,495.8 |
1,396.1 |
1,296.5 |
||
Tangible Assets |
127.5 |
105.6 |
86.4 |
69.7 |
53.0 |
||
Investments & other |
100.0 |
113.4 |
105.2 |
105.2 |
105.2 |
||
Current Assets |
|
|
629.1 |
1,007.5 |
841.3 |
864.0 |
886.3 |
Stocks |
6.2 |
4.7 |
6.2 |
6.4 |
6.5 |
||
Debtors |
68.5 |
90.9 |
121.9 |
126.0 |
128.7 |
||
Cash & cash equivalents |
506.9 |
860.4 |
661.7 |
680.0 |
699.4 |
||
Other |
47.6 |
51.6 |
51.6 |
51.6 |
51.6 |
||
Current Liabilities |
|
|
(366.1) |
(571.5) |
(626.7) |
(634.3) |
(639.3) |
Creditors |
(149.4) |
(168.2) |
(223.4) |
(231.1) |
(236.0) |
||
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) |
(1,010.6) |
(897.4) |
(782.0) |
Long term borrowings |
(1,057.9) |
(1,035.2) |
(825.1) |
(675.1) |
(525.1) |
||
Other long term liabilities |
(228.8) |
(146.5) |
(185.5) |
(222.3) |
(256.8) |
||
Net Assets |
|
|
782.7 |
949.4 |
891.5 |
903.4 |
919.7 |
Minority interests |
(41.1) |
(38.5) |
(43.7) |
(50.0) |
(57.7) |
||
Shareholders' equity |
|
|
741.6 |
910.9 |
847.8 |
853.4 |
862.0 |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
263.9 |
553.4 |
718.2 |
731.6 |
742.3 |
||
Working capital |
(34.8) |
21.1 |
22.7 |
3.3 |
2.1 |
||
Exceptional & other |
4.5 |
(4.5) |
36.8 |
34.6 |
32.4 |
||
Tax |
(12.1) |
(46.1) |
(123.4) |
(124.1) |
(127.6) |
||
Operating Cash Flow |
|
|
221.4 |
523.9 |
654.4 |
645.4 |
649.2 |
Net interest |
(32.5) |
(30.1) |
(39.0) |
(26.0) |
(21.0) |
||
Capex |
(18.9) |
(24.2) |
(20.0) |
(25.0) |
(25.0) |
||
Acquisitions/disposals |
(90.2) |
(19.0) |
(122.0) |
0.0 |
0.0 |
||
Equity financing |
(0.1) |
(0.2) |
0.0 |
0.0 |
0.0 |
||
Dividends |
(214.7) |
(91.0) |
(512.1) |
(422.0) |
(429.8) |
||
Net new borrowings |
(12.1) |
0.5 |
(210.1) |
(150.0) |
(150.0) |
||
Other |
20.0 |
(6.3) |
50.1 |
(4.1) |
(4.1) |
||
Net Cash Flow |
(126.9) |
353.5 |
(198.7) |
18.3 |
19.4 |
||
Opening cash |
|
|
633.8 |
506.9 |
860.4 |
661.7 |
680.0 |
Closing cash |
|
|
506.9 |
860.4 |
661.7 |
680.0 |
699.4 |
Closing net debt/(cash) |
|
|
591.7 |
237.3 |
225.9 |
57.6 |
(111.8) |
Source: OPAP, Edison Investment Research. Note: Our definition of EBITDA differs to OPAP’s; we exclude associate income and one-offs.
|
|
Research: TMT
Vection Technologies (ASX:VR1) is an Australia-based company that operates in the field of extended reality (XR). Through its immersive solutions suite, IntegratedXR, Vection Technologies provides the foundation that clients need to engage with the metaverse, and focuses on completely integrating client systems, operations and technologies. We see the company building on its recent growth (FY22 revenue up more than 440% over FY21) and growing FY23 sales to A$26.1m, driven by Vection Technologies’ entry into new verticals, geographic expansion and several recent acquisitions. FY23 could mark an inflection point for the company and we will be watching the XR space closely.
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