OPAP — Revenue growth and margin leverage in Q123

OPAP (ASE: OPAP)

Last close As at 17/05/2024

EUR15.54

0.00 (0.00%)

Market capitalisation

EUR5,751m

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Research: Consumer

OPAP — Revenue growth and margin leverage in Q123

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.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

Consumer

OPAP

Revenue growth and margin leverage in Q123

Q123 results

Travel and leisure

26 May 2023

Price

€16.26

Market cap

€5,908m

Net cash (€m) at 31 March 2023 post IFRS 16 and excluding investments (net cash pre IFRS 16 €70.5m)

19.9

Shares in issue

363.3m

Free float

50.2

Code

OPAP

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.3

9.2

21.9

Rel (local)

(4.5)

1.1

(11.5)

52-week high/low

€16.44

€12.01

Business description

OPAP is the exclusive licensed operator of all numerical lotteries, sports betting, instant & passives, VLTs and horse racing in Greece. It is investing organically and has undertaken M&A to grow its online presence. Allwyn has a 49.8% stake and significant board representation.

Next events

H123 results

4 September 2023

Q323 results

21 November 2023

Analysts

Russell Pointon

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 30775700

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*
(€m)

EBITDA**
(€m)

EPS**
(€)

DPS
(€)

P/E
(x)

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

General disclaimer and copyright

This report has been commissioned by OPAP and prepared and issued by Edison, in consideration of a fee payable by OPAP. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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United Kingdom

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by OPAP and prepared and issued by Edison, in consideration of a fee payable by OPAP. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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