What’s new? OPAP released Q4/FY results, surprised us positively with an overall E1.5/share (11% yield) payment to shareholders (o/w E0.10 interim DPS already paid) and provided GGR/EBITDA guidance for 2022 pointing to c.40% growth yoy. Conclusion: We are happy with our OI rating. Q4 results came in above our estimates by 15%-20% on stronger on-line contribution (betting and casino). Shareholders’ remuneration is also above our E1.0 (E0.9 excl. interim) estimate. Notwithstanding any war escalation to the RoW, we reiterate our conviction on cash flow generation and dividend payments.

What’s new? We consider OPAP a solid pick for risk averse investors, not least thanks to its dividend policy. Notwithstanding the UKR-RUS war conflict impact, we believe late speculation on the government’s intention to raise winning taxes has been weighing negatively on the stock. The reason this matters is because it affects the recycling of winnings and therefore GGR numbers. Not to mention incentivizing illegal gaming migration. We were not aware of government’s intentions when we tried to decipher the reasons behind OPAP’s unexciting share price performance in our previous note (Feb 14).

What’s new? With Covid lockdowns -hopefully- done, favorable base effect growth in 2022 and the rich dividend policy well communicated (min E1.0 DPS /+7.3% yield p.a.), we try to understand what is weighing down on the stock, currently trading 12.6x EPS and 7.6x EBITDA 2022E. Conclusion. We conclude it is the combination of a) small -if any- terminal value for land-based games and VLTs post their license expiration (2030 and 2035) and b) partial migration from the high margin offline business to the low margin online business (see appendix at the end of this note).

This note is about investing, not trading or event-driven ideas. We believe our OI rated stocks will outperform the market on a risk-adjusted basis in the next 12-18 months. We recommend you own OPAP, Jumbo, PPC, Alpha Bank and ADMIE. We downgrade OTE given it is trading at our target price. We assume the pandemic will be less of a risk; we consider the end of free money and elevated costs and reiterate cash flow conversion as our #1 criterion.

Our investment thesis on OPAP remains unchanged. It is hard to compare business performance yoy given the different lockdown days caused by the pandemic and the full consolidation of Stoiximan. Retail shops were open for most of this quarter, unlike Q2 last year. On a H1 basis, EBITDA stood at E205m and cash flow at E109m. Management felt confident enough to announce E0.10 interim DPS. We are not revising our estimates. Assuming no further lockdowns we expect FY 2021 EBITDA at E500m and E320m cash flow while FY DPS should reach E1.0 (including the interim). Stoiximan acquisition proved to be a wise move, more so during the lockdown, contributing 20% of EBITDA, 30% of net income and cash flow in H1. The run rate of Stoiximan is stronger than our FY numbers, but if retail shops do not close again, the trend could shift a bit towards shops. Either way, a nice headache to have.