*PANTELAKIS SECURITIES* (https://www.pantelakis.gr/)
OPAP (Overweight): Q4 beat, higher shareholder reward and in-line 2024 outlook
* Q4 beat on stronger casino and betting payout normalisation; FY23 EBITDA flat yoy at €745m, exceeding latest €720-740m guidance
* Guided FY24 EBITDA (€750-770m, +1-3% yoy), at par with consensus, leaves the stock trading on 8.2x forward EV/EBITDA and 9.5% FCFY
* Fortress balance sheet (0.3x gearing) allows €0.85/sh extra payout (on top of €1/sh interim DPS) and ongoing €150m share buyback
Sector Headlines
Total and international passenger traffic up in February (Fraport Greece)
According to Fraport Greece (operator of the 14 regional Greek airports) total passenger traffic in Greek airports in February 2024 rose by 13.4% y-o-y, with international passenger traffic standing also 9.5% higher.
Company Headlines
OPAP || BUY | CP: EUR 16.80 | TP: EUR 19.30
4Q23 results: High record 4th quarter, slightly above our EBITDA call, driven by both channels; additional shareholders remuneration of EUR 0.85/share on top of EUR 1.00/share distributed in Nov23.
Facts: OPAP released solid 4Q23 results, slightly above our EBITDA estimates. In particular, revenues came in at EUR 581.2m (slightly above Optima, +7.5% YoY), EBITDA reached EUR 210.2m (10.6% above our call, +3.7% YoY), recurring net profits of EUR 109.7m vs. 127.6m last year or down by 14% and net profits of EUR 100.6m down by 67.2%, vs. EUR 306.5m in 4Q22 with the extra profits from the BETANO sale last year. Supported by another strong year’s performance, OPAP declared total final distributions at EUR 0.85/share (of which EUR 0.60 DPS and 0.25 capital return), below our call for an extra amount of EUR 1.00 per share. Note that total distributions for FY23 amount to EUR 1.85/share (DY: 11%) The company will hold a conference call today at 16:00 Athens time (14:00 UK time).
Analysis: Turning to segmental performance, the strong results were driven by growth in all revenue categories except Instant & Passives, which showed a general weakness in the 2nd half of the year. Betting and Online Casino were the main drivers of the 4Q23 performance with 12.4% and 25.7% growth accordingly, while VLTs also expanded its revenues by 7% y-o-y. Additionally, both sales channels increased their GGR contribution, with the digital channel accounting for c.27% of total GGR in 4Q23 (from 22.9% in 4Q22). OPAP generated free cash flows of EUR 106.4m in 4Q23 compared to FCF of EUR 259.5m in 4Q22 while net debt remained at very low levels with net/debt to EBITDA at 0.23x
Comment: Overall, OPAP delivered another strong set of 4Q23 and FY23 results, leveraging on both channels (land-based and online), aided by solid online gaming performance and retail growth. Consequently, the company managed to exceed the latest management’s EBITDA guidance on the recurring basis of EUR 720-740m, aided by the one-off de recognition of the Markopoulos Park lease liability of EUR 13.4m in 4Q23, which allowed the management to declare a hefty final distribution to the shareholders of EUR 0.85/share. Also, management posted a quick FY24 outlook with GGR up by 5% y-o-y to EUR 2.150-2.200m and EBITDA up by 5.5% y-o-y to EUR 750-770m. We remain positive on the stock, and we keep our buying rating.
OPAP Financial Calendar 2024 update
The company announced that the stock will trade ex-dividend (EUR 0.60/share) on 29 April and ex-capital return (EUR 0.25/share) on 25 June.
Titan Cement || BUY | CP EUR 25.45 | TP EUR 33.90
4Q/FY23 results – Record performance in terms of EBITDA driven by higher volumes and strong pricing as well as better energy cost performance. Declared 42% higher y-o-y dividend at EUR 0.85/share. Positive outlook for 2024.
Facts: Titan Cement International (TCI) reported that 4Q23 turnover rose by 5.5% YoY to EUR 654.8m, while EBITDA advanced by 44% YoY to EUR 143.6m (recall that the company has already released in February preliminary, unaudited Group revenues and EBITDA at > EUR 2.54bm and EUR >535m). Consequently, reported net income more than doubled YoY to EUR 71m (vs. EUR 20.6m in 4Q22 and our EUR 37.4m estimate).
Greece: Greece closed the year with sales advancing in double-digits up both for the year and the last quarter thanks to higher global prices in seaborne traded cement across all export markets from Greek plants and reduced CO2 emissions. Consequently, 4Q23 turnover rose by 19.2% YoY to 108.8m, resulting in EBITDA of EUR 12.7m from EUR 4.9m in 4Q22.
US: The US market delivered a year of robust growth in 2023 as well as in 4Q23, and also with improved profitability, aided by increased public spending and price increases across most of Titan America’s main products. In this context, US sales and EBITDA advanced by 6.0% and 33.0% YoY to EUR 372m and EUR 76.9m respectively.
SE Europe: The year marked a historic high in terms of sales volume across all markets and reached the 10m tones mark, aided by infrastructure programs with the backing of European funding, driving turnover up by 0.4% YoY to EUR 107.9m in 4Q22, while the easing on the cost front from the energy prices, drove segmental EBITDA expansion by 32.7% YoY to EUR 39.0m.
EMED: Egypt and Turkey encountered challenging policy decisions as the energy crisis -stemming from the war in Ukraine and the recent turmoil in the Middle East exacerbated macroeconomic imbalances. The situation further deteriorated by a spike in external borrowing costs and the depreciation of local currencies against the dollar. In Turkey, the real estate sector is booming as a safe haven against inflation and large investment projects have been fuelled by the reconstruction process following the earthquake in February 2023. Thanks to robust demand, prices increased which offsetting the elevated production costs and the direct effect of higher inflation, turnover recorded a small decrease by 6.7% YoY to EUR 65.9m, while EBITDA jumped to EUR 15.1m compared to EUR 4.6m in 4Q22.
Operational figures: In FY23 the group (including Brazil) sold cement equal to 17.5m tons, up 2%, ready mix of 5.9m m3, up 5%, and aggregates of 19.9m tons, up 4%.
Dividend front: The BoD proposed increased by 42% dividend distribution, at EUR 0.85/share.
Aegean Airlines 2023 conference call highlights
Management described 2023 as an excellent year in terms of growth, profitability, network expansion, repayment of loans, cash flow generation and the purchase of warrants from the Greek state. The key highlights for the year ahead are: a) the company’s training centre is already accepting third parties for training while the new MRO will be commercially operational in the next couple of months, b) the target of the airline is to keep a sustainable manner of revenues increase and the good cost control with a balance in RASK and CASK as achieved in FY23, c) management’s intentions is to distribute at least 40% of net profits as a dividend in the years to come, d) management has provided updated guidance for 7% ASK growth in 2024 from the two main bases of Athens and Thessaloniki, adding +1.1m available seat from last year (note that 18.5m seats offered in FY23), e) Aegean Airlines and Pratt & Whitney reached an agreement for a compensation that will cover a substantial cost of the damage the airline will face (including increased fuel burn, increase leasing costs and the maintenance costs of the excess fleet). f) Management will cover Neos maintenance by returning 2 aircrafts from Anima Wing’s disposal and by reduction the charter activity to increase core business activity of schedule activities, while management estimate that the Neo problem will be completely resolved in the summer of 2026.
OTE to reduce wholesale prices in FTTH-Press
Reportedly, (Bloomberg), OTE submitted a proposal for approval to the National Telecommunications & Posts Commission to increase the penetration of FTTH to the households by providing mutual discounts that could reach up to 28% between providers at wholesale prices, with connection volume commitments.
Verdalite Limited controls 87.31% of Entersoft, to submit mandatory tender offer
Entersoft announced that Verdalite Limited, which is controlled by Olympia Group and Rucio Investment S.à.r.l (50/50) has increased its stake to 33.58% and now holds 87.31% in the company and according to the law, it will submit a mandatory tender offer for the remaining of the shares (12.69%).
Athens printed marginal gains yesterday (+29bps) with another day of strong volumes (EUR 177m) centred around the banks (Piraeus at EUR 42m). From the non-banks, Sarantis printed gains of 4.2% (management hosting an investor day later today) with gains of over 1% for GEK Terna and Terna Energy (press reports over a potential closing of the deal). Titan Cement dropped by 1.2% due to the weaker than anticipated DPS.
MACRO – CORPORATE NEWS
OPAP <OPAP GA, OW>
OPAP reported FY23numbers in line with guidance and our expectations. GGR came in at EUR 2,087m, 7.7% higher yoy and in line with our estimates. In terms of segmental breakdown, online casino stood out, up 26% yoy, contributing EUR 252m, while betting and lotteries GGR increased 6.9% and 2.9% respectively. VLTs GGR rose 8.2% yoy. In terms of profitability, adj. EBITDA remained broadly flat yoy (-0.2%) to EUR 744m, in line with guidance and our expectations (EBITDA adjusted for EUR 13.4m one off for derecognition of a lease liability). Net profit for the year stood at EUR 439m, +0.7% yoy fully in line with our expectations (EUR 440m). On shareholders remuneration, BoD decided to propose final DPS of EUR 0.60 (interim EUR 1.0/share already paid) as well as a capital return of EUR 0.25, resulting in a yield of 11% as of yesterday’s close (EUR 16.8/share ). Guidance for FY2024 includes GGR EUR 2,150-2,200m and EBITDA of EUR 750-770m. A conference call is scheduled for today, Thursday, March 14th at 16:00 GR time. Dial ins: UK: +44 (0) 800 368 1063, GR: +20 311 180 2000, US: +1 516 447 5632, INTL: +44 (0) 203 0595 872.
Performance came in line with updated guidance, with 4Q23 reversing a softer 3Q23 in terms of payout. Growth was evident on all fronts, with strong KINO performance on lotteries and solid growth in online space (betting + casino). Shareholders remuneration continues to stand out, across our Greek coverage universe. We remain overweight.
TITAN CEMENT <TITC GA, OW>
Highlights from yesterday’s conference call: 1/ positive outlook for the group with non-residential and infrastructure growth in the US (driven by federal funds) and across the board recovery in Greece; 2/ moderate growth in the Southeast Europe; 3/ recent news in Egypt (devaluation & IMF loan) could point to a more optimistic scenario; 4/ cap ex for 2024E will range from EUR 200m to EUR 250m (most likely closer to the upper band); 5/ EBITDA margins (21.2% in 2023) can by sustainable and the early part of 2024 confirms this positive trend; and 6/ dividend payment increased by 42% yoy (below the +63% rise in EBITDA) as management wants to maintain buffers in case of acquisition opportunities.
We retain BUYers on Titan Cement with the stock trading at an inexpensive 4.7x EV/EBITDA on 2024E and a clear upside risk to our estimates (our EBITDA forecast for 2024E stands at EUR 553m, a growth of just 2.4% vs. 2023 with the EBITDA margin at 20.6% vs. a 21.2% delivery). Non-US cement peers trade at 6.0x EV/EBITDA on 2024E with Holcim at 7.8x and US peers at 12-14x. We think that such deep discounts are not deserved and retain our positive view and PT of EUR 36.0/share. Shares dropped yesterday by 1.2% potentially due to the lower than anticipated DPS. We highlight that despite the lower DPS, the yield on yesterday’s close is 3.4%, similar to Holcim and above the average in the sector (2.2%).
AEGEAN AIRLINES <AEGEAN GA, OW>
Highlights from yesterday’s conference call: 1/ scheduled will continue to grow at regular pace (1.1m scheduled more, mainly in Athens) with a reduction in charter by 250k seats; 2/ ASK growth in schedule at c.7% yoy; 3/ hedging for fuel in 2024E at 50% (at 5% lower levels than current spot) with 50% hedged for USD/EUR at a bit over 1.1; 3/ compensation from Pratt & Whitney with regards to the GTF engine issue will be substantial and cover large part of the cost (but cannot be disclosed at this stage); minimum payout ratio of 40% is a reasonable assumption going forward.
We expect another strong year in 2024E for Aegean despite the challenges from the engine issues. Results and conference call feedback confirm our net profit estimates for 2024E (EUR 138m).
Market Comment // Despite the persistent risk-on mood across EU markets, the ASE benchmark index posted tepid gains for a second consecutive session on Wednesday, ending at 1,399 points (+0.29%). Turnover remained near recent elevated levels, totaling €176m by the close (vs. the 100-day MA of €136m). Kri Kri (+4.82%) and Sarantis (+4.19%) led the way for gainers, followed by Cenergy, Alpha Bank, Fourlis, Intralot, Terna Energy, AIA, Lamda Development and GEK Terna, all of which booked >1% gains. On the flipside, Austriacard (-2.04%) and Motor Oil (-1.95%) stood out among laggards, followed by Quest Holdings and Titan Cement, both on >1% losses. The market looks headed for a flat-to-positive opening today as the impetus from expected rate cuts in June continues to fuel investor sentiment.
OPAP // Underlying profitability largely in sync with our forecasts, with FY23 adj. EBITDA at €744.9m (vs EEe €741m). Reported numbers weighed down by several one-offs, thus leading to net profit of €408m for FY23. Shareholder remuneration was much better than expected, with €0.6 final DPS and €0.25 capital return (adding up to c5% yield). Guidance for FY24e EBITDA €750-770m indicates 1-3.5%growth this year (with consensus at the high end).
Aegean // In the conference call yesterday, Aegean mgt echoed a positive message for FY24 given solid booking trends while pointing to c7% scheduled ASK growth. It also suggested that an agreement has been reached regarding the GTF engine issue for compensation of a substantial part of the additional costs, which is comforting as it seems that the grounding issues will last at least two years. Lastly mgt indicated that it aims for a sustainable 40% payout ratio.
Economy // Moody’s to provide its rating update on Greece tomorrow after market close. The agency is the only one still placing Greece in non-IG territory (Ba1 with stable outlook).
Entersoft // Olympia affiliate Verdalite has increased its stake to 33.6%, and as such, the consortium seems to control c87.3% of Entersoft’s share capital, thus being set to submit a mandatory tender offer.
Titan Cement // Audited FY 2023 results landed broadly in-line with the Group’s preliminary estimates. FY’23 Revenue settled at €2.55bn (+12% yoy), with EBITDA reaching €540mn (+63% yoy and +1% vs preliminary est.). Profitability step-up filtered through to net profit of €269mn (+145% yoy), or €3.6/per share, beating early the respective 2026e target. Mgmt proposed a dividend of €0.85/share (c24% payout ratio), implying a div yield of c3.3%. On the outlook, management painted a positive picture for FY’24 but remained conservative, opting not to provide guidance for FY’24 or update profitability targets.
FTSE-Piraeus // As a reminder, PB’s investability weighting change in the FTSE indices becomes effective from the start of trading on Monday 18th March (flow tomorrow). Following the divestment of HFSF from Piraeus Bank and the increase in the latter’s free float, PB’s investability weighting in the FTSE indices (FTSE All-World Index, FTSE Global Large Cap Index, the FTSE Emerging Index and the FTSE MPF All-World Index) will be increased to 81.4% from 54.4% previously.
IDEAL Holdings // Attica Department stores BoD decided the reduction of its share capital by 5m shares, returning c€2.5m to its shareholders, namely IDEAL Holdings, which holds 100% of Attica Department stores.
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