OPAP — Steady progress towards FY24 guidance

OPAP (ASE: OPAP)

Last close As at 19/07/2024

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Research: Consumer

OPAP — Steady progress towards FY24 guidance

OPAP delivered good revenue growth in Q124 while profitability declined, mainly due to the upfront investment to support a major new product launch, which should boost revenue as the year progresses and provide better leverage on the higher cost base. The broad message is of strong online growth with resilience in its land-based activities, which gives management confidence to reiterate its guidance for the year.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

Consumer

OPAP

Steady progress towards FY24 guidance

Q124 results

Travel and leisure

4 June 2024

Price

€14.88

Market cap

€5,386m

Net debt (€m) at 31 March 2024 (including IFRS 16 and excluding investments)

136

Shares in issue

362m

Free float

49.8%

Code

OPAP

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.0)

(13.0)

(7.0)

Rel (local)

(3.7)

(14.5)

(21.8)

52-week high/low

€17.31

€14.50

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 50.2% stake and significant board representation.

Next events

H124 results

3 September 2024

Q324 results

20 November 2024

Analysts

Russell Pointon

+44 (0)20 3077 5700

Milo Bussell

+44 (0)20 3077 5700

OPAP is a research client of Edison Investment Research Limited

OPAP delivered good revenue growth in Q124 while profitability declined, mainly due to the upfront investment to support a major new product launch, which should boost revenue as the year progresses and provide better leverage on the higher cost base. The broad message is of strong online growth with resilience in its land-based activities, which gives management confidence to reiterate its guidance for the year.

Year end

GGR*

(€m)

EBITDA**
(€m)

EPS**
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/22

1,939

733

1.27

1.45

11.7

9.7

12/23

2,088

745

1.25

1.80

11.9

12.1

12/24e

2,185

763

1.26

1.26

11.8

8.5

12/25e

2,248

782

1.33

1.33

11.2

8.9

Note: *GGR, gross gaming revenue. **EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Good revenue growth against tough comparative

Against a very strong Q123 comparative, OPAP’s gross gaming revenue (GGR) grew by c 4% y-o-y to €550m, with growth in four revenue streams partially offset by declines in two revenue streams, Instant and Passives and Online Betting, which both demonstrated strong growth in Q123. The lower reported EBITDA of €190m (Q123: €196m) resulted from a flat gross margin versus the prior year and deleveraging (ie increased relative to GGR) of the three major operating cost lines: marketing (to support the launch of Eurojackpot); payroll (for cost-of-living increases and redundancy costs related to a business cessation); and other operating expenses (general investment to support growth). Free cash generation was negatively affected versus Q123 by the lower profitability, higher cash tax payments and working capital outflows. The latter can be variable between the quarters. The free cash generation helped to fund the ongoing share buyback, while reducing the net debt position to €136m (€199m at end-FY23).

On track to deliver FY24 guidance

While OPAP’s Q124 profitability was marginally lower than the comparative period, management is confident the company is on track to deliver the existing FY24 guidance. The reported Q124 results, which represent c 25% of our FY24 estimates for GGR and EBITDA, are consistent with the quarterly trends seen in FY23, suggesting the confidence is well founded, with comparatives easing as the year progresses, the occurrence of major sporting events including the UEFA European Football Championship and the expected ongoing boost from the launch of Eurojackpot. Our FY24 forecasts, which are towards the middle of the guided range, are unchanged.

Valuation: Discount to peers

OPAP continues to trade at a discount to its European peers (20% using EV/EBIT multiples, 13% using P/E multiples) for FY24, and it offers a more attractive dividend yield of 8.5% (peer average 2.8%).

Exhibit 1: Financial summary

€m

2022

2023

2024e

2025e

2026e

31-December

ISA

ISA

ISA

ISA

ISA

INCOME STATEMENT

Revenue

 

 

1,939

2,088

2,185

2,248

2,311

NGR

 

 

1,333

1,436

1,503

1,547

1,590

Cost of Sales

(1,083)

(1,190)

(1,249)

(1,284)

(1,318)

Gross Profit

856

898

936

964

992

Other Income

230

233

242

244

245

EBITDA

 

 

733

745

763

782

802

Operating profit (before amort. and excepts.)

 

 

606

614

631

651

670

Impairments

(20)

(6)

0

0

0

Exceptionals

170

(15)

0

0

0

Share-based payments

(2)

(2)

(2)

(2)

(2)

Reported operating profit

753

590

629

649

668

Net Interest

(40)

(20)

(5)

(1)

(1)

Joint ventures & associates (post tax)

15

0

0

0

0

Profit Before Tax (norm)

 

 

581

593

626

650

670

Profit Before Tax (reported)

 

 

728

570

624

648

668

Reported tax

(127)

(156)

(153)

(159)

(164)

Profit After Tax (norm)

453

463

473

490

506

Profit After Tax (reported)

601

414

471

489

504

Minority interests

(4)

(6)

(12)

(13)

(14)

Net income (normalised)

449

457

461

478

492

Net income (reported)

597

408

459

476

490

Average Number of Shares Outstanding (m)

354

365

364

361

361

EPS - normalised (c)

 

 

126.70

125.33

126.45

132.51

136.46

EPS - normalised fully diluted (c)

 

 

126.70

125.33

126.45

132.51

136.46

EPS - basic reported (€)

 

 

1.68

1.12

1.26

1.32

1.36

Dividend (€)

1.45

1.80

1.26

1.33

1.36

Revenue growth (%)

26.0

7.7

4.6

2.9

2.8

Gross Margin (%)

44.2

43.0

42.8

42.9

42.9

EBITDA Margin (%)

37.8

35.7

34.9

34.8

34.7

Normalised Operating Margin

31.2

29.4

28.9

28.9

29.0

BALANCE SHEET

Fixed Assets

 

 

1,553

1,420

1,312

1,203

1,095

Intangible Assets

1,364

1,273

1,185

1,096

1,008

Tangible Assets

89

70

50

30

10

Investments & other

100

77

77

77

77

Current Assets

 

 

1,018

680

491

355

211

Stocks

6

5

5

5

6

Debtors

102

104

109

112

115

Cash & cash equivalents

724

487

293

154

7

Other

186

83

83

83

83

Current Liabilities

 

 

(809)

(578)

(617)

(624)

(631)

Creditors

(182)

(202)

(240)

(247)

(254)

Tax and social security

(117)

(119)

(119)

(119)

(119)

Short term borrowings

(289)

(80)

(80)

(80)

(80)

Other

(220)

(177)

(177)

(177)

(177)

Long Term Liabilities

 

 

(676)

(735)

(778)

(577)

(383)

Long term borrowings

(546)

(606)

(596)

(336)

(76)

Other long term liabilities

(130)

(129)

(182)

(241)

(307)

Net Assets

 

 

1,086

787

408

357

292

Minority interests

(33)

(34)

(35)

(36)

(37)

Shareholders' equity

 

 

1,054

753

373

321

255

CASH FLOW

Operating Cash Flow

740

747

764

784

804

Working capital

41

(17)

34

4

4

Exceptional & other

(13)

(27)

(2)

(2)

(2)

Tax

(80)

(151)

(153)

(159)

(164)

net Operating Cash Flow

 

 

687

552

643

627

642

Net interest

(27)

(14)

(5)

(1)

(1)

Capex

(23)

(28)

(25)

(25)

(25)

Acquisitions/disposals

(32)

109

0

0

0

Equity financing

(2)

(29)

(120)

0

0

Dividends

(141)

(515)

(666)

(468)

(490)

Net new borrowings

(262)

(130)

0

(250)

(250)

Other

(335)

(183)

(21)

(22)

(23)

Net Cash Flow

(136)

(237)

(194)

(139)

(147)

Opening cash

 

 

860

724

487

293

154

Closing net debt/(cash)

 

 

724

487

293

154

7

Closing net debt/(cash) incl IFRS 16, excl investments

 

 

111

199

383

262

150

Source: Company accounts, 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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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 2024 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


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 2024 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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