New York, NY – Greece’s largest listed gaming company and the third largest company listed on the Athens Exchange with a market capitalization of EUR 6.5 billion, remains constantly in the focus of Greek and global investors.
It is one of the most successful and profitable companies listed in the Athens Exchange with 2004 revenues of EUR 3.1 billion and adjusted EBITDA of EUR 659m. The company announced solid earnings for the first quarter of 2005 with an Adjusted Net Profit increase of 38.2% from Q1 2004, which combined with the upcoming placement of an additional stake of the Greek Government’s ownership, keeps investors focused on its stock.
OPAP commands 49% of the total Greek gaming market, which includes casinos, national lotteries and horserace betting, and its games are sold through a distribution network of over 5,300 agents — the largest online retail network in Greece.
Dominant market position
The company was founded in 1958 and today is the leading gaming company in Greece and one of the largest in Europe. It currently holds the sole concession to operate and manage eight existing numerical lottery and sports betting games, as well as three new numerical lottery games. In addition, OPAP holds the sole concession to operate and manage any new sports betting games in Greece as well as the right of first refusal to operate and manage any new games permitted by the Hellenic Republic.
OPAP was listed on the Athens Exchange in April 2001, with the Greek State placing 5.36% at 5.5. Euros per share. Two more tranches were placed in July 2002 (18.9% at 8.4 Euros per share) and July 2003 (24.45% at 9.44 Euros per share). On Thursday, May 12th, OPAP’s shares closed at 20.40 Euros on the Athens Exchange. In a recent note of May 11th, 2005, Citigroup Smith Barney reiterates its Buy rating for OPAP’s shares with a target price of 25.20 Euros. Egnatia Finance, a leading Greek brokerage firm, upgraded its rating on OPAP to “Accumulate” from “Hold” with a target price of Euro 22.50.
Today, OPAP’s free float is 49% with the Greek State holding 51%. However, as of May 2005, the Government will be allowed to further reduce its stake in OPAP, from 51% to 34%. The placement is expected to take place sooner rather than later.
OPAP disposes the largest online retail network in Greece, constituting a unique and cost-effective means of distributing its games. OPAP has a consistent track record of strong cash flow generation. It is not particularly sensitive to the economic cycle. This consistent free cash flow gives OPAP considerable flexibility to invest, particularly with regard to new games.
Additionally OPAP benefits from positive market fundamentals. The legal Greek gaming market has grown rapidly in recent years reflecting the introduction of new gaming licenses, the growth in disposable income and the measures taken by the Hellenic Republic to counter illegal gaming. OPAP’s strong brand recognition and the transparent regulation of its games instill player confidence and help drive revenue growth.
Finally, the successful introduction of Stihima in 2000, Super 3 & Extra 5 in 2002 and Kino in October 2004 demonstrates OPAP’s ability to bring new games with broad appeal to the market when the time is right.
Strong first quarter 2005
OPAP had a robust financial performance for the period 2000-2004. Revenues grew by over 22% annually (from EUR 1.45 billion to EUR 3.2 billion); EBITDA grew by 17.5% annually (from to EUR 346.3m to EUR 659.6m) while Profits After Tax grew by 13% (from EUR 314.8m to EUR 506.7m in 2004).
The results for the first quarter of 2005 further indicate OPAP’s outstanding performance with adjusted Net Profit amounting to EUR 120.9m, up 38.2% compared to EUR 87.5m in Q104, while adjusted EBITDA for the period amounted to EUR 182.3m, up 26.1%, excluding income from the release of provisions of EUR 148.0m in Q104 relating to potential damage claims of Intralot.
Revenues for the first quarter 2005 period grew to EUR 880.8m, up 26.7% from Q1 last year. Sports betting games generated 37.1% of the total revenue, with numerical games accounting for 62.9%. This indicates a shift towards numerical games, as the breakdown last year was almost in reverse order.
Revenues from sports betting were down 26.4% to Euro 326.4 million (from Euro 443.2 million), reflecting mainly the weaker performance of Stihima, the Company’s largest sports betting game. This was mainly due to the introduction of KINO — a new numerical game by OPAP — in the greater Athens area in October 2004, increased competition from illegal betting, fewer football matches played (due to overlapping of the World Cup qualifying matches and the Catholic Easter holidays) and to a lesser extent a lower pay-out ratio in the quarter. On the other hand, revenues from OPAP’s numerical games amounted to EUR 554.4m (Q104: EUR 252.0m), up 120.0%, largely due to the strong performance of KINO (EUR 445.5m).
During the conference call held with analysts and investors, the CEO stressed that management is putting increased focus on improving the profitability of Stihima, and new measures are expected to be announced shortly, possibly before the end of the month, as the company’s General Assembly is scheduled for May 31st. Consequently, analysts expressed the opinion that Stihima’s weak performance for one quarter may not be indicative of its performance on an annual basis for 2005.
CEO focused on growth and new products:
In late March, OPAP went through a management reshuffle. Basile Neiadas was elected as the new Managing Director. Sotirios Kostakos, the former Managing Director, became Executive Chairman of the Board. The new CEO has been positively received by investors, analysts and the business community in general, given his strong academic and corporate background in the private sector.
Commenting on the first three month results for 2005, Mr. Basile Neiadas, OPAP’s Managing Director, noted: “We are very pleased to report a strong set of financial results for the first quarter of this year driven by KINO. We are continuing our internal review of strategic opportunities that will underpin our future growth and we expect to make further announcements on our strategic direction, including in relation to Stihima, in the near future.”
“Our goal is to take full advantage of the opportunities to increase our revenues from our distribution networks, beyond lottery, such as from advertising, ticket sales for cultural or athletic events, as well as from services such as the payment of bills,” said Mr. Neiadas.
Tough stance against illegal betting:
As Mr. Neiadas states, “Betting through the Internet, the telephone or digital TV are not currently allowed in Greece. Therefore, there is today an extensive illegal market that develops through these channels, and our goal is to go after it. In the short term, we will achieve this objective through strategic advertising as well as by inducing the Hellenic Republic to take measures against illegal gaming. In the medium term, we will introduce new attractive games, while in the long term, we will ensure our presence in the market of electronic gaming, once these become legal.”
Indeed, over the last nine months, OPAP has intensified its efforts to combat illegal betting in Greece through the creation of a task force, which monitors illegal betting activity and proposes appropriate measures to management and the competent authorities. As part of this effort, OPAP recently filed for restrictive measures against certain Internet betting operators and media, companies for advertising illegal betting services. It won one temporary injunction against one Internet betting operator with two more hearings scheduled within the month. Also, OPAP will not advertise on the media, which accepts advertising for illegal betting.
****Provided by Capital Link Capital Link is an Investor Relations and Financial Communications firm servicing several listed companies including OPAP S.A.