The Greek Organization of Football Prognostics (OPAP)

Article on Seeking Alpha (May, 2011): OPAP: A Special Situation in the Sports Industry

The Greek Organisation of Football Prognostics (OPAP)

The Greek Organization of Football Prognostics is one of the companies that is being put up for privatization by the Greek Special Secretariat for Asset Restructuring and Privatisations (SSARP). So an investment thesis for OPAP would generally be categorized as a Special Situation as the SSARP will try to maximize the value of its 34% stake in OPAP before the privatization.

The privatization scheeme is layed out in a Letter of Intent from the Greek Government to the IMF (available here). There are three critical events in the case of OPAP:

Date         % to be sold     Type                 Intermediate steps
3Q2011      100.0%               Concession
3Q2011      100.0%               New games     Gaming law enacted by end-August
4Q2011         34.0%               Share sale

Write-up

You can find a more detailed write-up in a Seeking Alpha article of mine published in May 2011, along with some references. But to sum it up:

  1. The operations of OPAP have some very appealing characteristics:
    1. Its operating in a monopolistic environment (through a license which it holds until 2020 at least)
    2. It has very low capital requirements
    3. It distributes nearly all of its earnings to shareholders
    4. 90% of costs are variable and move in line with revenue
    5. No inventories
    6. Average life of accounts receivable is 3 days
  2. An investment in OPAP combines the following factors:
    1. Depressed market prices: Currently OPAP shares are being priced in the market as a 10 annuity with no continuing value.
    2. Quality operations: For the reasons stated above, the company operates a high quality business and is likely to distribute a large quantity of its earnings back to shareholders on a regular basis (you’ll get paid for waiting).
    3. Evidence of resource conversion: The controlling shareholder (the Greek Government) has publicly announced a planned asset disposal in 2012 but at the same time it is in a position to significantly increase the value (compared to current market prices) of these assets before the disposal.

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