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OPAP | Impeccable Q4: 19% EBITDA growth, €1.15 shareholder return, both way above expectations. Buy

Impressive Q4 – OPAP has reported very strong results significantly above both the market and our expectations delivering 8.5% yoy growth in Q4 gaming revenues (€541m) and c19% in EBITDA (at €203m). As a result, FY22 EBITDA shot up to €736m, above mgt’s most recent guidance (€720m), consensus and our estimate (€728m). Q4 GGR set a new quarterly record coming in +8% qoq underpinned by the World Cup, which ought to have propelled recycling. Q4 retail revenues shaped 6% lower than pre-COVID levels, sequentially worse than in Q3 (-4%) but better than our numbers, further underpinned by c9% growth in online, with online casino up by an impressive 29%. Non-variable opex were +9% yoy due to increased marketing spending, but this only party diluted the impressive EBITDA growth of 19%. Coupled with lower financial costs (due to lower debt) and a €181m capital gain related to the sale of the Betano stake (incl. provisions for earnouts), this filtered through to 3x growth in net profit, which settled at €306.5m, or +48% on an adjusted basis. Cash flow generation was also quite impressive (yet again), with OPAP delivering c€180m adj. FCF in Q4 (and >€600m in FY22, >80% EBITDA conversion) and finishing with net debt of just €60m from €244m in end Sep 2022.

€1.15/share shareholder remuneration, €1.45 in total for FY22 – Mgt has proposed a final remuneration of €1.15 per share, consisting of a €0.70 dividend and a €0.45 capital return, similar to the case last year (with the remuneration split between a dividend and a capital return due to technical reasons). Taking into account the €0.30 interim dividend already paid, shareholder remuneration for FY22 has shaped at €1.45, indicating a compelling 10% yield and reaffirming our long-standing view about a cash avalanche in the post COVID period. OPAP is a unique case of high cash flow generation and sustainable returns pointing to a 2-digit yield, with the stock remaining among our top picks in Greece.

2023 outlook; envisaging c5% EBITDA growth, Jan data points to a strong start – Recent gaming data indicates c16% yoy growth for OPAP’s retail business in Jan 2023. Although the 2-digit growth rate is flattered by the easy comp, it still points to solid execution. Our numbers pencil in 6%/4% growth in 2023-24e group GGR predicated on 2-digit growth in online and 4%/2% growth in land based. This will filter through to 5% and 3% growth in group EBITDA over 2023-24e, which will underpin shareholder returns near €1.5 per share during both years, namely quite a compelling c10% yield. We remind that 2023 returns will be further underpinned by potential earnouts related to the Betano stake sale.

Valuation: top pick, renewal optionality – Our PT is predicated on a SOTP-based valuation of OPAP’s concessions at 7.5% WACC. Besides fundamentals, we recently initiated a debate on licence renewal optionality estimating that