I am buying OPAP


Basic characteristics

  • Dividend yield of 8%
  • 2017 PE of 12.4
  • No debt, positive cash balance of 100 mln E
  • ROE of 15%
  • EV/EBITDA of 7
  • Not in the price: further significant potential from VLT – the investment was made, OPAP waiting for the licence. Plan B – OPAP already lunched BIT arbitration against Greece

From Morgan Stanley:

A new chief gambling regulator in Greece raises the prospect of OPAP finally launching VLTs. These are not included in our forecasts or valuation, and we see it as a free option worth €1.8-4 per share

Greece will appoint a new president of the Hellenic Gaming Commission, who will replace Mr Stergiotis, whose term ends on June 19.

A new chief regulator raises the prospect of launching VLTs. OPAP and the regulator have been in a stand-off, with OPAP stating that regulatory restrictions made the project not economically viable. We expect that resolving this stand-off could well be one of the key issues to be addressed by the new regulator. Tax revenues from VLTs formed part of last July’s third memorandum with the European Stability Mechanism to secure additional funding, suggesting that launching will be important for State financing.

We estimate that the VLT project could be worth €1.8 to €4 per share. We do not include VLTs in our forecasts or valuation, and see this as a free option, as we outlined in this note. If launched with commercially acceptable terms, we expect that VLTs could generate c.€170m of EBITDA and €0.21 of EPS at maturity in 2010. OPAP paid €560m for the licence, equivalent to €1.8 per share, and our bull case values VLTs at 7.4x EV/EBITDA, broadly in-line with international comparables and transactions.

€12 per share bull case becoming more realistic? Our bull case assumes VLTs ramp up in 2017, reaching maturity at €172m of EBITDA in 2020. We assume modest cannibalisation, with Retail EBITDA dropping from €315m in 2016e to €279m in 2019e. Our bull case values the shares at a P/E of 16x in 2018e, at the higher end of their historical range, reflecting the strong cash generation, recovery potential in Greece, and strong growth driven by VLTs. We estimate that the company could return nearly €6 per share to shareholders in the next 4 years in our bull case.

Higher duties and a weaker macro environment would make us more cautious. We see VLTs as a free option, as these are not included in our forecasts or valuation. The main downside risks are that duties increase beyond the planned 35% rate, or that the bond yield moves upwards again


  1. banjomano says:

    Why is this better than just buying GREK?
    They seem well correlated….

    Also what is your evaluation of management? Fair/Greedy/Shareholder friendly?


    1. The management is quite good. Mr. Ziegler is an experience banker, who was CEO of Sazka, the major betting house in Czech Republic.
      Why is it better than GREK? I believe that the upside is higher. It is still Greece, so you have the upside potential from Greece recovery, but on the top of it you have the VLT situation, high dividend yield (the majority owner is highly leveraged and needs the dividends to cover interest).


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