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Citi upgrades target price for OPAP to 6.80

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New products/channels  could drive significant operational growth but OPAP operates in a high risk environment from both a macro and micro perspective, Citi says in a report.

The bank expects further uncertainty from potential management changes once the Governments 33% stake is sold.

As the Greek government is in the process of selling its 33% stake, OPAP has released detailed forecasts for the next 10 years. Post full year results and on the basis of these forecasts, Citi downgrades the near-term EBIT forecasts by -5% in FY13E and -21% in FY14E due to a later-than-expected roll-out of VLTs. However, its FY15/FY16E numbers increase by 28%/45% to reflect stronger growth from VLTs and Lotteries, which drives TP upgrade to €6.80.

The company is expanding into on-line gaming with a partner and into VLTs, Citi explains. “We expect the roll-out of VLTs to drive most of the near-term growth (€128m EBIT in FY15 – 44% of group) although this is likely to cannibalise some land based operations.

According to the report, the macro economy remains weak and a potential Euro exit for Greece looms on the horizon. Meanwhile the EU is challenging the recent agreement protecting OPAPs monopoly status, and given potential tax revenues, Citi doesn’t  not rule out liberalisation.
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