OPAP || BUY | CP: EUR 14.42 | TP: EUR 17.10
Strong 4Q22 performance | OPAP will release its 4Q22 results tomorrow, after market close, while it will hold a cc the following day (16:00 Athens time).
We expect a strong quarter, the strongest in FY22 and also following the reopening of its physical stores, marked by:
a) the rich sports calendar, due to the world soccer event in November-December 2022,
b) the increased traffic in the physical stores as a results of the soccer event, which had a positive impact also on the lottery and casino games and
c) the solid performance of online products, also due to the soccer event. Note that the last covid-19 related restrictions (mainly compulsory use of masks) were lift back in 2Q22.
4Q/FY22e Group Key P&L Estimates
EUR m | 2021 | 2022e | y-o-y | 4Q21 | 4Q22e | y-o-y | Consensus | Consensus vs. Optima |
Betting (Retail+Stoiximan +Online OPAP) | 521.4 | 601.2 | 15.3% | 166.0 | 159.4 | -4.0% |
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Lottery (Retail + Online Tzoker) | 549.2 | 743.4 | 35.4% | 183.8 | 197.9 | 7.6% |
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Instant & Passives | 88.8 | 102.0 | 14.8% | 27.6 | 30.0 | 8.5% |
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VLTs | 194.6 | 314.7 | 61.7% | 74.1 | 89.7 | 21.1% |
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Online casino (Online OPAP + Stoiximan) | 184.8 | 186.5 | 0.9% | 46.9 | 57.7 | 23.0% |
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Group GGR | 1538.8 | 1947.9 | 26.6% | 498.5 | 534.8 | 7.3% | 573.4 | 7.2% |
EBITDA | 550.3 | 728.3 | 32.3% | 170.4 | 195.0 | 14.4% | 194.8 | -0.1% |
EAT ex-minorities | 259.4 | 456.5 | 76.0% | 81.2 | 173.3 | 113.5% | 173.0 | -0.2% |
Source: Optima bank, the Company, Factset, Bloomberg
4Q22 P&L forecasts | In this context, we forecast quarterly revenues (GGR) of EUR 534.8m (vs. EUR 498.5m in 4Q21), EBITDA of EUR 195m (vs. EUR 170.4m in 4Q21) and “comparable” net profits of EUR 109.8m vs. comp. net profit of EUR 86m in 4Q21 (note that OPAP is expected to report the one-off revaluation gain of c.63.5m from the BETANO sale).
On the opex side, variable costs (GGR contribution, agents’ fees, direct costs) are seen shaping at EUR 315.5m, accounting for 59% (-170bps y-o-y) of total GGR, while fixed costs (personnel, marketing, other) are estimated at EUR 95m (+2% y-o-y; 17.8% of total GGR.
Consequently, group’s EBITDA margin is estimated at 37.4% (+320bps y-o-y). We note that we have assumed an income of EUR 60m, resulting from the new 10-year lottery/betting license, as well as other operating income/costs (net) from non-gaming operations of EUR 10.6m (vs. EUR 10.9m last year) in the quarter.
Analysis per segment | Per product category, we see sports betting GGR (retail & online) at EUR 159.4m (down by 4% y-o-y), on tough comparables, out of which EUR 55m is the total on-line contribution.
Lottery revenues are estimated at EUR 197.9m (up by 7.6% y-o-y), while VLTs GGR is seen at EUR 89.7m, 21.1% up YoY following the full lift of covid-19 restrictions, assuming a net daily drop of EUR 43 per machine.
In respect to Instant & Passives, we forecast GGR of EUR 30m vs. EUR 27.6m in 4Q21. Finally, the Online Casino operation is expected to record GGR of EUR 57.7m in 4Q22 (+23% y-o-y). All in all, we forecast online GGR of EUR 121m (+5.9% y-o-y; Stoiximan/OPAP Online GGR: EUR 105m/16m).
Optima view | Overall, we expect the solid 4Q22 results to continue in 1Q23e, with the further enhancement of the land based operations and the healthy on-line growth.
That said, taking also into account the launch of the world soccer event in November, we expect OPAP to slightly exceed the latest management’s guidance for an EBITDA of EUR 720m, close to our yearly EBITDA forecasts of EUR 733m and slightly exceed.
With respect to the dividend, following the distribution of an interim DPS of 0.30 last October, we expect OPAP to distribute final DPS of EUR 0.80/share (partially through in the form of capital return), raising total distributions for the FY22 to EUR 1.10, offering a 8.5% dividend yield.
We maintain our ‘Buy’ rating on valuation grounds (26% upside potential from current price levels) and a very attractive investment case (generous dividend, strong FCF, unlevered position).