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Σοφοκλέους 10 Τοις Μετρητοίς

HSBC:A second lockdown in Greece adds pressure on near-term earnings for Jumbo and OPAP

u We are positive on the 2020-22e recovery and growth outlook on strong execution capabilities and inbuilt resilience to crisis

 u We upgrade Jumbo and OPAP to Buy (from Hold), with TPs of EUR18.50 (EUR18.00) and EUR10.50 (EUR8.00), respectively

Second lockdown impact should be softer than the first one: Greece is currently under a second lockdown, until the end of November 2020, with only food stores and supermarkets allowed to function.

Compared to first lockdown of 6 weeks, we think the overall impact on business is likely to be softer as it runs for only 3 weeks, and both consumers and businesses appear to be better prepared now. The lockdown (and/or any future ones), are definitely negative for OPAP and Jumbo; however, we take a positive view of the resilience these companies have shown post the first lockdown, with better than expected top-line recovery and cost savings.

 Jumbo holds strong consumer pull: Jumbo has been able to quickly recover and even grow its sales strongly post May 2020, thanks to pent up consumer demand and its unique low-price propositions. We see greater challenges from current lockdown in Greece (if extended to December) on Christmas sales (c28% of group sales); however, we are more positive on Jumbo’s capabilities to return to its growth path much more quickly than our previous considerations.

We now estimate 2020e-22e revenue CAGR of c10% and EBITDA CAGR of 11%, supported by a lower base, faster recovery in sales, and continued expansion plans. OPAP looking to Stoiximan: OPAP also recovered quite strongly post May 2020, despite being limited by a lower number of sports event and weaker tourism activities in Greece.

We expect the negative outlook on business to continue in the short term, while the recovery in sports events and diversifying of operations across its online business offer certain support. OPAP is in the final stages of acquiring control of Stoiximan (market leader in online gaming in Greece), which we think is the key growth driver for the medium term.

We estimate 2020e-22e revenue CAGR of c21% and EBITDA CAGR of c25%, supported by Stoiximan acquisition, maturing VLTs (video lottery terminal), and recovery across legacy games. We upgrade both Jumbo (TP EUR18.50 from EUR18.00) and OPAP (TP EUR10.50 from EUR8.00) to Buy (from Hold) on their stronger execution capabilities and greater resilience to the current crisis.

 A second lockdown for Greek stores is negative for 4Q earnings, while uncertainty related to future lockdowns could possibly keep 1Q21 under pressure as well. However, we believe both OPAP and Jumbo are well prepared; with set strategies to survive the crisis and quickly recovery post lockdown. In our view, growth should start in 2021 and the current valuation levels are attractive considering our 2020e22e CAGR expectations, even though the economic recovery may be more gradual.

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