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OPAP | Q4 likely to be a positive catalyst; >10% EBITDA growth and shareholder remuneration near €0.8-€1.0

Strong Q4 thanks to recycling – OPAP is due to release its Q4 on 15th March. We anticipate quite a robust quarter with GGR +9% yoy (new quarterly record) and +9% qoq underpinned by the World Cup, which ought to have propelled recycling (rather than significantly boosting sports betting net revenues per se). Our numbers envisage retail revenues c9% lower than pre-COVID levels more than offset by the strong online (+23% yoy), especially for OPAP’s own digital book (primarily online casino). Assuming net opex +5% due to increased marketing spending, we estimate EBITDA of €195m, +14% yoy. Coupled with lower financial costs, this will filter through to a >100% yoy increase in net profit, which will settle at €173m on our numbers including the capital gain from the sale of Betano stake. On the cash flow front, we expect OPAP to deliver c€120m of FCF including the receipt from the aforementioned disposal. This will lead net debt to c€122m from €244m in end Sep 2022. On a full year basis, mgt looks set to deliver on the guidance for EBITDA in excess of €720m, with our recalibrated numbers at €728m, higher than consensus (closer to €720m).

Yielding sweet returns – Focus at the results will be on shareholder remuneration. We believe it is reasonable to expect management to continue to please investors – as minority interests are aligned with those of the main shareholder on that front – with the final remuneration likely to shape near €0.80-1.0 per share, we reckon. We believe management may opt to distribute the final returns in two forms, namely a dividend (€0.70-0.80) and a capital return (€0.20-0.30), as was the case at the same time last year (due to technical reasons). Taking into account the €0.30 interim dividend already paid, shareholder remuneration for FY22 looks to shape near €1.10-€1.30, indicating a compelling c9-10% yield. This validates our thesis for high and sustainable cash returns near double digit levels.

Lifting EBITDA c1%; envisaging c6% EBITDA growth in 2023 – We have fine-tuned our model edging estimates slightly higher in the light of quite resilient macro. We remind that base effects will be tailwinds for OPAP in Q1’23 but one should expect moderating group revenue growth rates as the year progresses. Our numbers pencil in 6%/4% growth in 2023-24e group GGR predicated on 2-digit growth in online and 5%/2% growth in land based. This will filter through to 6% 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.

Valuation: top pick, renewal optionality – We have lifted slightly our PT to €16.6 rolling forward our valuation to end March 2024 (SOTP-based valuation of OPAP’s concessions at 7.5% WACC, ex-div) reiterating OPAP as a top pick. Besides fundamentals, we recently initiated a debate on licence renewal optionality estimating that