OPAP | Die is cast, time to believe
We gave investors nearly 3 years to act on the post-2020 gaming duty regime, being the first that sought to assess the potential tax-related hidden value as early as January 2018. The issue has finally come to the fore, with the resulting annual net cash flow boost relative to the previous regime being sizeable, in the €190-210m range on our estimates, translating to >6% extra yield.Tax-related “hidden value” recalculated at >€4 per share – In this note, we have recalibrated our assessment for the “tax-related hidden value”, in order to more accurately reflect two aspects of the post-2020 gaming duty regime that were clarified at the recent conference call: 1) the “net zero” corporate tax effect shielding OPAP from incremental taxation related to the pre-paid amount; and 2) the drop in the nominal (P&L) duty rate for legacy games to 30% (from 35% previously) over the next decade. Taken together these two add another €1.6 per share to the tax-related hidden value vs our previous assumption, largely explaining the increase in our PT (from €10.1 to €11.8). Overall, we estimate that the pre-payment by OPAP of the €1.8bn nominal duty amount over 2020-2030 is worth >€4 per share.
Our report also seeks to address the most common questions asked by investors, running through ways in which the duty regime will affect P&L and cash flow. We also show how the settlement that will take place in 2030 will work, estimating OPAP will be liable for a payment 13% yield). Notwithstanding the short-term effect from the lockdown, we view OPAP as the most attractive name to play the re-opening theme, thereby adding the stock to our top picks list.
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.
Research is the backbone of Eurobank Equities' platform, with a team of 4 professionals committed to generating actionable investment ideas by providing timely research products. We are committed to offering value-added services to clients by filtering market noise and providing insights on the multiple sectors that we cover. Our universe includes 26 - large, medium and small cap - companies whose market capitalization amounts to 80-85% of the total market capitalization of the Athens Stock Exchange. Our research team also maintains the capacity to generate ad-hoc research for micro-cap listed companies.
Our team has consistently gained recognition among institutional investors for its quality research, having ranked No. 1 team in Greece at the Extel Surveys of 2013-2016 and 2018. We have also been named Leading Brokerage Firm in Greece over 2014-2016 and in 2018.
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