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OPAP results:Surprising extraordinary dividend for Q120- EDISON

OPAP’s Q319 results saw similar trends to H119 and were in line with our estimates. Gross gaming revenues (GGR) increased 6.7% to €393.6m,

driven by a 43.2% increase in video lottery terminals (VLT) GGR and a stronger lottery performance. Alongside revenue growth, OPAP is successfully containing costs, which led to a 25.8% EBITDA margin and a 24.5% increase in net profit. OPAP has announced that it will pay an extraordinary dividend in Q120 (rather than an interim dividend) – on our estimates this equates to an 11.9% dividend yield for FY19. For FY20, OPAP trades at 8.6x EV/EBITDA and 15.2x P/E with an 8.9% dividend yield.

Continuing trends from H119 Q319 GGR grew 6.7% to €393.6m, driven by a 43.2% increase in VLT GGR to

€72.8m and good progress in lottery (up 4.1% to €197.4m), as well as a recovery in Instants and Passives. Sports betting declined by 5.7% to €91.9m, with difficult comparatives from the previous year (World Cup in FY18). Alongside the revenue growth, cost containment remains a key focus and the Q319 EBITDA margin was a solid 25.8% (up 220bps). Our FY20 and FY21 EPS are raised by c 4.5% and 2.8% largely due to lower future corporation tax (the effective rate goes from 29% to 24% from FY20).

Online regulation and Stoiximan poised for FY20

OPAP’s acquisition of Stoiximan (online sports) has recently been approved by the Hellenic Competition Commission and the final closing of the transaction is

expected in the near term. As detailed in our September update, our forecasts assume full consolidation from January 2020. Online regulation in Greece is still pending, with legislation expected in FY20 and we expect OPAP will seek to apply for one of the new licences once proper regulation is in place.

Valuation: 11.9% dividend yield for FY19e

OPAP reported Q319 net debt of €485m (€550m post IFRS 16) and the net

debt/LTM EBITDA was 1.2x. OPAP has announced that it will pay an extraordinary dividend in Q120 of no less than the FY19 net profit. Together with the final dividend, we estimate a total FY19 dividend of €1.24/share, which equates to an 11.9% dividend yield for FY19. For FY20, the stock trades at 8.6x EV/EBITDA and 15.2x P/E with a very attractive dividend (excluding exceptionals) of 8.9%.

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