Currency in EUR
Last close As at 08/06/2023
EUR16.00
▲ 0.25 (1.59%)
Market capitalisation
EUR5,723m
Research: Consumer
OPAP’s Q123 results demonstrated continued strong growth in revenue, helped by improvements to both the retail and online product offering, and profits, with the support of a more favourable macroeconomic background as inflation has declined. The ongoing rejuvenation of the gaming offer is leading to growing player engagement and frequency of use. Management’s unchanged guidance for FY23 looks well-supported. The valuation and dividend yield (9.1%) look attractive relative to the peers.
OPAP |
Revenue growth and margin leverage in Q123 |
Q123 results |
Travel and leisure |
26 May 2023 |
Share price performance
Business description
Next events
Analysts
OPAP is a research client of Edison Investment Research Limited |
OPAP’s Q123 results demonstrated continued strong growth in revenue, helped by improvements to both the retail and online product offering, and profits, with the support of a more favourable macroeconomic background as inflation has declined. The ongoing rejuvenation of the gaming offer is leading to growing player engagement and frequency of use. Management’s unchanged guidance for FY23 looks well-supported. The valuation and dividend yield (9.1%) look attractive relative to the peers.
Year end |
GGR* |
EBITDA** |
EPS** |
DPS |
P/E |
Yield |
12/21 |
1,538.8 |
551.2 |
0.82 |
1.50 |
19.8 |
9.2 |
12/22 |
1,939.0 |
722.6 |
1.22 |
1.45 |
13.3 |
8.9 |
12/23e |
2,063.5 |
742.8 |
1.24 |
1.48 |
13.1 |
9.1 |
12/24e |
2,110.2 |
746.8 |
1.26 |
1.51 |
12.9 |
9.3 |
Note: *Gross gaming revenue. **EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Record Q1 results
OPAP’s Q123 gross gaming revenue (GGR) grew by c 15% y-o-y to €527.4m, and EBITDA (company’s definition, which includes one-off expenses of €0.2m) by over 16% to €196.5m. The revenue growth was broad-based; the outperforming verticals versus the group average were Instant & Passives (+30%), Video Lottery Terminals (+22%) and online betting and casino (+23%). The online betting and casino's comparative Q122 trading was negatively affected by post-COVID re-openings of the retail estate. The growth in EBITDA margin (37.2% from Q122’s 36.9%) included a flat gross margin from gaming and lower (relative to GGR) payroll and other operating costs, offset by no Kaizen’s associate income following its disposal and a very marginal increase in advertising to support revenue growth. The net cash position by period end and consequent lower financial expense meant the higher margin translated to even higher underlying net income growth of 26%. Free cash flow generation of €140.4m was lower year-on-year in absolute and relative terms (to GGR) than Q122 due mainly to working capital and tax payments.
FY23 guidance and our estimates unchanged
Management’s unchanged financial guidance for FY23 looks well underpinned, as Q123’s achieved EBITDA represents 26–27% of the indicated range, with further benefits from more recent product launches, for example online sports book and iLottery launch, anticipated to come through. Our forecasts are unchanged.
Valuation: Dividend yield of 9.1%
OPAP’s P/E multiple for FY23 of 13.1x is at a significant discount to its European-listed gaming peers (average 19.3x (source: Refinitiv)). The peers are growing revenue at a faster rate (average 14% y-o-y in FY23) than OPAP (we forecast 6%), but OPAP is significantly more profitable (we forecast an operating margin of 29.3%) than the peers (average 14.5%). OPAP’s conservative balance sheet and higher profitability supports a more attractive dividend yield of 9.1% versus the peer average of 1.1%, which includes a number of companies that do not pay dividends.
Exhibit 1: Financial summary
€m |
2020 |
2021 |
2022 |
2023e |
2024e |
||
Year end 31 December |
ISA |
ISA |
ISA |
ISA |
ISA |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
1,129.8 |
1,538.8 |
1,939.0 |
2,063.5 |
2,110.2 |
NGR |
|
|
737.3 |
1,043.9 |
1,333.4 |
1,419.2 |
1,451.3 |
Cost of Sales |
(672.7) |
(883.7) |
(1,082.8) |
(1,175.8) |
(1,200.8) |
||
Gross Profit |
457.1 |
655.2 |
856.2 |
887.8 |
909.4 |
||
Other Income |
42.5 |
217.4 |
230.2 |
238.0 |
238.7 |
||
EBITDA |
|
|
263.9 |
551.2 |
722.6 |
742.8 |
746.8 |
Operating profit (before amort. and excepts.) |
|
|
147.2 |
408.6 |
591.2 |
606.6 |
610.7 |
Impairments |
(36.8) |
(4.7) |
(20.2) |
0.0 |
0.0 |
||
Exceptionals |
121.2 |
(0.5) |
179.9 |
0.0 |
0.0 |
||
Share-based payments |
0.0 |
(2.2) |
(2.3) |
(2.3) |
(2.3) |
||
Reported operating profit |
231.6 |
401.3 |
748.6 |
604.3 |
608.3 |
||
Net Interest |
(33.5) |
(43.6) |
(40.1) |
(15.3) |
(10.3) |
||
Joint ventures & associates (post tax) |
18.3 |
(0.4) |
14.8 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
132.0 |
364.6 |
565.9 |
591.3 |
600.4 |
Profit Before Tax (reported) |
|
|
216.4 |
357.3 |
723.3 |
589.0 |
598.1 |
Reported tax |
(17.3) |
(96.4) |
(127.2) |
(130.1) |
(132.1) |
||
Profit After Tax (norm) |
100.3 |
284.4 |
441.4 |
461.2 |
468.3 |
||
Profit After Tax (reported) |
199.1 |
260.9 |
596.0 |
458.9 |
466.0 |
||
Minority interests |
6.1 |
(1.4) |
(3.7) |
(12.0) |
(12.5) |
||
Net income (normalised) |
106.4 |
282.9 |
437.7 |
450.3 |
457.8 |
||
Net income (reported) |
205.2 |
259.4 |
592.3 |
446.9 |
453.5 |
||
Average Number of Shares Outstanding (m) |
334 |
344 |
358 |
363 |
363 |
||
EPS - normalised (c) |
|
|
31.83 |
82.28 |
122.22 |
123.92 |
126.01 |
EPS - normalised fully diluted (c) |
|
|
31.83 |
82.28 |
122.22 |
123.92 |
126.01 |
EPS - basic reported (€) |
|
|
0.61 |
0.75 |
1.65 |
1.23 |
1.25 |
Dividend (€) |
0.55 |
1.50 |
1.45 |
1.48 |
1.51 |
||
Revenue growth (%) |
(30.3) |
36.2 |
26.0 |
6.4 |
2.3 |
||
Gross Margin (%) |
40.5 |
42.6 |
44.2 |
43.0 |
43.1 |
||
EBITDA Margin (%) |
23.4 |
35.8 |
37.3 |
36.0 |
35.4 |
||
Normalised Operating Margin |
13.0 |
26.6 |
30.5 |
29.4 |
28.9 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
1,806.4 |
1,695.0 |
1,553.2 |
1,439.7 |
1,326.2 |
Intangible Assets |
1,578.9 |
1,476.0 |
1,364.0 |
1,269.3 |
1,174.6 |
||
Tangible Assets |
127.5 |
105.6 |
88.9 |
70.1 |
51.4 |
||
Investments & other |
100.0 |
113.4 |
100.3 |
100.3 |
100.3 |
||
Current Assets |
|
|
629.1 |
1,007.5 |
1,018.0 |
900.0 |
833.7 |
Stocks |
6.2 |
4.7 |
5.6 |
5.9 |
6.0 |
||
Debtors |
68.5 |
90.9 |
102.1 |
108.7 |
111.1 |
||
Cash & cash equivalents |
506.9 |
860.4 |
724.4 |
729.5 |
660.6 |
||
Other |
47.6 |
51.6 |
185.9 |
55.9 |
55.9 |
||
Current Liabilities |
|
|
(366.1) |
(571.5) |
(808.6) |
(853.9) |
(859.0) |
Creditors |
(149.4) |
(168.2) |
(181.7) |
(227.0) |
(232.1) |
||
Tax and social security |
(27.8) |
(60.7) |
(117.2) |
(117.2) |
(117.2) |
||
Short term borrowings |
(40.7) |
(62.5) |
(289.5) |
(289.5) |
(289.5) |
||
Other |
(148.2) |
(280.2) |
(220.2) |
(220.2) |
(220.2) |
||
Long Term Liabilities |
|
|
(1,286.7) |
(1,181.7) |
(676.4) |
(463.5) |
(363.3) |
Long term borrowings |
(1,057.9) |
(1,035.2) |
(546.0) |
(296.0) |
(156.0) |
||
Other long term liabilities |
(228.8) |
(146.5) |
(130.4) |
(167.5) |
(207.2) |
||
Net Assets |
|
|
782.7 |
949.4 |
1,086.3 |
1,022.4 |
937.6 |
Minority interests |
(41.1) |
(38.5) |
(32.7) |
(40.9) |
(41.8) |
||
Shareholders' equity |
|
|
741.6 |
910.9 |
1,053.6 |
981.5 |
895.9 |
CASH FLOW |
|||||||
Operating Cash Flow |
263.9 |
553.4 |
724.9 |
745.1 |
749.2 |
||
Working capital |
(34.8) |
21.1 |
40.7 |
38.4 |
2.5 |
||
Exceptional & other |
4.5 |
(4.5) |
1.3 |
34.7 |
37.5 |
||
Tax |
(12.1) |
(46.1) |
(80.4) |
(130.1) |
(132.1) |
||
net Operating Cash Flow |
|
|
221.4 |
523.9 |
686.6 |
688.1 |
657.1 |
Net interest |
(32.5) |
(30.1) |
(26.6) |
(15.3) |
(10.3) |
||
Capex |
(18.9) |
(24.2) |
(22.8) |
(25.0) |
(25.0) |
||
Acquisitions/disposals |
(90.2) |
(19.0) |
(106.4) |
0.0 |
0.0 |
||
Equity financing |
(0.1) |
(0.2) |
(2.0) |
0.0 |
0.0 |
||
Dividends |
(214.7) |
(91.0) |
(141.4) |
(511.6) |
(539.1) |
||
Net new borrowings |
(12.1) |
0.5 |
(262.3) |
(250.0) |
(140.0) |
||
Other |
20.0 |
(6.3) |
(261.0) |
118.9 |
(11.6) |
||
Net Cash Flow |
(126.9) |
353.5 |
(135.9) |
5.1 |
(68.9) |
||
Opening cash |
|
|
633.8 |
506.9 |
860.4 |
724.5 |
729.5 |
Closing net debt/(cash) |
|
|
506.9 |
860.4 |
724.5 |
729.5 |
660.6 |
Closing net debt/(cash) incl IFRS 16, excl investments |
|
591.7 |
237.3 |
111.1 |
(144.0) |
(215.1) |
Source: OPAP, Edison Investment Research
|
|
Research: Consumer
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