EUR 150.00 For Business Accounts Only

OPAP | Q3’20 preview: Resilient quarter but the going gets tougher

Flattish EBITDA, resilient performance given the circumstances – OPAP will announce Q3 results on 25th Nov post market close. Management has already alluded to a positive performance in July followed by a 2% decline in Aug and a further modest drop in September, as a result of the limitations/restrictions in the light of the spike in COVID cases. We thus anticipate a c1% decline in Q3 group GGR, which is quite a resilient performance in the context of the challenging backdrop. Factoring in unchanged yoy opex, we end up with a marginal drop in EBITDA to €102m (-1%). We expect net profit to shape near €49m, namely -3% yoy. Given the latest round of restrictive measures (2-week lockdown in N. Greece), we believe it is reasonable to expect OPAP not to pay an interim dividend, building war chest to navigate lockdown hurdles. Cashflow-wise, we anticipate healthy operating cash flow to be absorbed by the payment related to the Stoiximan transaction and the outlay related to the final FY19 dividend, thereby leading to a €54m increase in net debt qoq (to €572m).

State of play and estimate read-across – The ministerial decision specifying the restrictions in areas affected by the new lockdowns was published yesterday and stipulates that OPAP’s shops will remain open even in the high-risk areas under partial lockdown (with some restrictions regarding sitting capacity, footfall etc.). Overall, we estimate that as things stand c11% of OPAP’s network (c500 shops) will be closed for the next 2 weeks in areas where there is full lockdown. That being said, with cases sweeping across Greece, govt officials have left open the possibility of more areas joining a full shutdown, most notably Attica (c40% of OPAP’s network). With these in mind, we note that our FY20e EBITDA of €286m incorporates c€27m lower adj. EBITDA yoy in Q4 (-25% yoy). With each month of full lockdown (for 100% of the network) costing c€50m at EBITDA level, we reckon that our numbers already include the impact of a partial lockdown in November, but there is clearly downside risk if a full shutdown is implemented.

Gaming duty hidden value: final countdown – The new concession period started on 13th Oct. Since that day OPAP faces a lower gaming duty (5%) on the over-the-counter games (c€1bn of revenues in “normal” times). This means that, on a monthly basis, OPAP will be facing c€25m lower duty than under the previous regime. Of course this “benefit” will be smaller during the lockdown, given the lower revenue base. The issue is not 100% straightforward (as the contractual terms envisage a settlement between OPAP and the state at the end of the 10-year period, depending on the prepaid amount and the actual revenue stream), it will soon come to the fore. We expect negotiation for some sort of settlement between OPAP and the state (potentially incorporating an extension of the current concession) to start soon. As we have repeatedly flagged, the aforementioned prepayment is worth c€2/share.