OPAP | Follow the cash – Hidden value v3.0
Our new OPAP note “Follow the cash – Hidden value v3.0” is a must-read for investors involved in Greek equities as we deep-dive in 2 pillars of value creation, one short-term (related to the tax status for Stoiximan and earnouts from Betano) and one medium-term (renewal value optionality). These add up to €5 per share corresponding to >30% upside vs current levels.In particular, following hidden value v1.0 (gaming duty pre-payment) in early 2018, we revisit the debate we recently initiated on the hidden value v2.0 stemming from the licence renewal optionality of OPAP’s concessions, something that will be a focal point in the coming years and is set to catalyze c€4 value creation on our estimates (c25% upside). In this report, we also focus on a source of value creation which has gone unnoticed by the market, namely the low effective tax rate for Stoiximan due to the tax refund system in effect in Malta along with the potential earnouts related to OPAP’s sold stake in Betano. These add up to c€1.3/share on our numbers, corresponding to c8% upside.
Besides the above, we run through the details of each concession, explain the uniqueness of the business model (franchise-based, low capital intensity, high cash conversion) arguing that the high FCF conversion (>80% of EBITDA) along with the sustainable and visible dividends in the coming years (10-11% yield) warrant higher valuation.
We have lifted our PT to €17.9 mainly as a result of the reduction in our Stoiximan effective tax rate and the higher earnouts assumed from Betano and reiterate OPAP as one of our top picks in Greece.
OPAP is engaged in the operating and management of numerical lottery and sports betting games as well as lottery games. Co. holds concession to operate and manage new sports betting games in Greece as well as a right of first refusal to operate and manage any new lottery games permitted by the Hellenic Republic. Co. operates six numerical lottery games, including Joker, Lotto, Proto, Extra 5, Super 3, and Kino; and three sports betting games consisting of Stihima, Propo, and Propo-goal. Co. is also engaged in designing new lottery games, including Bingo and Super 4. Co. distributes its games through an extensive on-line network of agents.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
Eurobank Equities S.A. offers a comprehensive suite of investment products—including equities, derivatives, bonds, and mutual funds—serving over 15,000 private, corporate, and institutional clients in Greece and internationally.
The firm maintains a dominant position in the Greek capital markets, consistently ranking among the top brokers in terms of market share and is repeatedly recognised in major institutional investor surveys as one of the leading brokers and top Equity Research Providers for Greece.
Its multi-awarded Research Division delivers timely insights and fundamental coverage on almost 40 listed companies—representing over 90% of the ATHEX’s market capitalisation and traded value.
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