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					      EQUITY RESEARCH                                                                                                                                                                                                                                                       GAMING


                                                                                                                                                                                                                                                          Athens, 15th September, 2005


      INTRALOT                                                                                                                                                                                                                                           OUTPERFORM
      MEDIUM RISK
      SHARE PRICE: €12.82                                                                                                                                                                                                                                  PETROS TSOURTIS
      TARGET PRICE: €19.70                                                                                                                                                                                                                                 Tel: 210-36.70.716
                                                                                                                                                                                                                                                     ptsourtis@pegasusaxe.gr

        Basic Figures
        M. Cap (€m.):
        Shares o/s:
                                                                                                                                              996.7
                                                                                                                                               77.7                                                                                  “AROUND THE WORLD”
        Free Float:                                                                                                                           65.3%
        Av.Trading Volume (000):                                                                                                               229
        52 wk: High- Low                                                                                                                   €14.16-€9.06                                                                   We     initiate coverage    with    an   outperform
        Index:                                                                                                                             FTSE ASE 40                                                                    recommendation and a target price of €19.70,
        Reuters:                                                                                                                             INLr.AT                                                                      offering a 53.7% upside potential from current price
        Bloomberg:                                                                                                                          INLOT GA
                                                                                                                                                                                                                          levels. We view the recent weakness of the stock, as
                                                                                                                                                                                                                          a good entry point for medium- term investors.

E ates an Fu am tal ratio
 stim    d nd en         s                                                                                                                                                                                                NEW GROWTH OPPORTUNITIES AHEAD. Intralot is
                                                                                                                            2004                                 0e
                                                                                                                                                              20 5                           2 6
                                                                                                                                                                                              00 e                0 e
                                                                                                                                                                                                                 2 07     poised to benefit from potential opportunities in the sector.
Revenues                                                                                                                    325.8                              543.9                         704.5               635.5
                                                                                                                                                                                                                          The imminent liberalisation of the betting markets in
%(Increase/ Decrease):                                                                                                         -                              66.9%                          29.5%               -9.8%
EPS (€):                                                                                                                     0.76                                 0.97                       1.24                 0.83
                                                                                                                                                                                                                          European Union, the low penetration of sports betting and
%(Increase/Decrease):                                                                                                          -                              27.8%                          27.9%               -32.8%   video- lottery worldwide, the introduction of Greek
P/E (x):                                                                                                                     16.9                                13.2                         10.3                15.4    championship and new athletic and non- athletic events in
EBITD A                                                                                                                     112.6                               187.8                        227.4               193.6    “Pame Stihima”, and the imminent Mundial next year will
%(Increase/D  ecrease):                                                                                                  -   66.8% 21.1% -14.9%                                                                           increase the growth rates of the Group in the coming years.
EV/ EBITD A                                                                                                             8.0    4.9    4.2    4.9
CFPS                                                                                                                    1.5    1.4    0.9    1.0                                                                          GREAT EXPECTATIONS FROM ABROAD. The company
P/CF (x)                                                                                                                8.4    9.3   15.0   13.1                                                                          enhances its portfolio with new contracts throughout the
 PS
D (€):                                                                                                                  0.4    0.5    0.6    0.8                                                                          world. We expect international revenues to account for
Dividend yield(% ):                                                                                                    3.5%   3.7%  4.8%   6.1%
                                                                                                                                                                                                                          68.0% of total revenues in 2005, to advance to 75.0% in
   AE ):
RO (%                                                                                                                 71.2% 101.3% 119.4% 62.4%
RO (%
   AA ):                                                                                                              20.5% 22.5% 25.9% 15.9%
                                                                                                                                                                                                                          2006 and to reach 100.0% in 2007. We also anticipate EBT
D Equity
 ebt/                                                                                                                 38.1% 43.4% 27.4% 21.8%                                                                             from international operations to account for 53.0% of the
N D Equity
 et ebt/                                                                                                            N Cash N Cash N Cash N Cash
                                                                                                                     et     et     et     et                                                                              Group’s earnings in 2005 and to advance to 73.3% in 2006.

                                                                                                                                                                                                                          WHAT ABOUT GREECE? In our view, Greece is the great
      3400

      3350
                                        Intralot S.A. (CR) Prl (12.9600, 12.9800, 12.7600, 12.8200, -0.18000), IDX General ASE (3,242.79, 3,248.58, 3,229.50, 3,237.75, -9.85010)
                                                                                                                                                                                                          15.0


                                                                                                                                                                                                          14.5
                                                                                                                                                                                                                          enigma. We are cautious about the renewal of the contract
      3300

      3250
                                                                                                                                                                                                          14.0


                                                                                                                                                                                                          13.5
                                                                                                                                                                                                                          with OPAP. In our scenario analysis, we took under
                                                                                                                                                                                                                          consideration the worst- case scenario, in which Intralot will
      3200
                                                                                                                                                                                                          13.0
      3150

      3100                                                                                                                                                                                                12.5

      3050

      3000
                                                                                                                                                                                                          12.0


                                                                                                                                                                                                          11.5
                                                                                                                                                                                                                          not extend its contract with OPAP post 2007. We view,
                                                                                                                                                                                                                          however, the potential loss of “Pame Stihima” as a short-
      2950
                                                                                                                                                                                                          11.0
      2900

                                                                                                                                                                                                          10.5
      2850

      2800

      2750
                                                                                                                                                                                                          10.0


                                                                                                                                                                                                           9.5
                                                                                                                                                                                                                          term weakness for the company.
      2700
                                                                                                                                                                                                           9.0
      2650
                                                                                                                                                                                                           8.5
      2600

                                                                                                                                                                                                           8.0
      2550

      2500                                                                                                                                                                                                 7.5

      2450
                                                                                                                                                                                                           7.0

      2400
                                                                                                                                                                                                           6.5
      2350
                                                                                                                                                                                                           6.0
      2300

      2250                                                                                                                                                                                                 5.5

             ber   October   November       December            2005            February         March           April            May              June              July           August    September
INVESTMENT THESIS
We believe Intralot is an attractive investment story as earnings momentum and
geographical expansion will continue to be strong in the coming years. The
company is a cash cow and combines high rates of growth with attractive valuation.

We initiate coverage with a target price of €19.70 per share, a 53.7% upside
potential from current price levels. Intralot is currently trading at a 26.7% discount
relative to international peers, which is magnified to 39.8% in 2006. We believe its
rating is due to historical perception about the loss of the “Pame Stihima” contract.
The rationale for the discount, logical as it may have been, does not exist any
more.

We are impressed by the management’s ability to expand rapidly in the global
market. Within a decade, Intralot has managed to transform from a domestic
player into a multinational company. The Group now consists of 33 subsidiaries in
all over the world. Intralot has a dominant position in Europe, a strong position in
South America and has established a foothold in North America, Africa and S.E.
Asia. Intralot has also established a strategic partnership with Hilton’s Group
subsidiary, Ladbrokes.

In our view, Greece is the great enigma. We are cautious about the renewal of the
contract with OPAP. In our scenario analysis, we took under consideration the
worst- case scenario, in which Intralot will not extend its contract with OPAP post
2007. We view the potential loss of “Pame Stihima” as a short- term weakness for
the company. We believe Intralot is in a position to offset the potential loss of
“Pame Stihima” in Greece. The Group is now operating in the five continents of the
world. We expect international revenues to account for 68.0% in 2005, to advance
to 75.0% in 2006 and to reach 100.0% in 2007. We also anticipate EBT from
international operations to account for 53.0% of the Group’s earnings in 2005 and
to advance to 73.3% in 2006. We should note that we did not take into account the
operations in Colombia, Russia, Philippines, Egypt and Israel.

Intralot is set to benefit from potential opportunities in the sector. The imminent
liberalisation of the betting markets in European Union is a significant growth
opportunity for Intralot. Private sector’s companies are also moving gradually into
operations, a trend that also benefits Intralot. Moreover, new projects are in the
pipeline every year. The target of the company is to sign three to four contracts per
year. The strategic alliance with Hilton Group will give higher prestige to Intralot in
order to win new contracts, especially in Central Europe, where the company has
no significant presence. The low penetration of sports betting and video- lottery,
which have 15.0% and 10.0% global market share respectively creates an
opportunity for Intralot since it covers all the range of games offered worldwide.
The introduction of Greek championship and new athletic and non- athletic events
are expected to boost “Pame Stihima” sales for the next couple of years. In
particular, we expect sales to grow by 10.0% in 2005 and by 30.0% in 2006. We
believe 2006 will be a “full” year for the Group due to the imminent Mundial which
will take place next June.

We believe that the major growth markets of the Group will be Malta, Bulgaria,
Romania, Turkey, Peru and Poland. In addition, we feel that Colombia and Russia
will also boost sales and profitability post 2006.

We gauge that consolidated revenues will post a 5.4% CAGR increase in the 2005-
2007 period. The slow-growth in revenues is attributed to the loss of “Pame
Stihima”. Hence, we forecast consolidated revenues to surge by 66.9% in 2005, to
boost by 29.5% in 2006 and to decline by 9.7% in 2007. We estimate earnings
after tax and minorities to grow by 1.1% CAGR in the 2005-2007 period. Net
income will surge by 27.8% in 2005 and a further 27.9% in 2006. We expect,
however, to decline by 32.6% in 2007.




                                2
VALUATION
Our target price is derived by the average of two valuation methods using PER
benchmarks and the discount cash flow approach.

Our DCF model suggests €19.7 per share fair value, based on the existing contracts
(no new contract wins) and assuming Intralot will not extend its agreement with
OPAP nor enters the Greek market or any others upon EU gaming liberalisation. In
addition, we do not include potential litigation wins from the ongoing dispute with
OPAP. We do, however, anticipate in our forecasts the impact of Greek football
betting.

Our assumptions conservative, we feel, with an equity risk premium of 5.5% and
risk- free rate of 3.3%. Hence, our valuation, is sensitive to the equity risk
premium, which we believe should be above the market average, considering both
the loss of the contract in Greece as well as the exposure to emerging markets. We
believe that a 5.5% equity risk premium adequately reflects this, compared with
the 5.0% we use for the average Greek company. Our terminal growth rate of 0%
implies negative growth rate of inflation. Our WACC stands at 8.30%.


                  Table 1. DCF assumptions and forecasts (€m)
       NPV of FCF to 2007                                           413.1
       NPV of FCF to Perpetuity                                    1201.1
       Current Net Cash                                             -81.5
       Terminal Growth Rate                                         0.0%
       Equity value of firm (€m)                                   1532.7
       Target Price                                                 19.7
       Risk free rate                                              3.30%
       Equity Risk premium                                         5.50%
       Target Debt to Entity Value                                 30.3%
       Target Equity to Entity Value                               69.7%
       beta                                                          1.0
       Cost of Equity                                              9.00%
       After- tax cost of debt                                     5.70%
       WACC                                                        8.30%
      Source: Pegasus Securities Research estimates

In addition, Intralot is trading on 13.2x 2005 earnings, a 26.7% discount relative to
international peers. The sharp earnings growth leads to a PER of 10.3x in 2006
where the discount magnifies to 39.8%. The company, however, has entered in a
period of higher growth rate, improving earnings mix and strengthening its
“contract portfolio”. We believe its rating is due to historical perception about the
loss of the “Pame Stihima” contract. Intralot, on the other hand, expands rapidly in
the five continents and we expect to be in a position to offset this loss by 2007.
The rationale for the discount, logical as it may have been, does not exist any
more.


HISTORICAL BACKGROUND
Intralot was established in 1992. It started its business in Greece with the
introduction of Instant Lottery and as the organiser of the Greek Football
Prognostics Organisation (OPAP) regarding the fixed odds game “Pame Stihima”.
After a decade, Intralot has transformed into a multinational company which ranks
third on revenues and second on profits among gambling companies worldwide.

Intralot is a global provider of integrated gaming and transaction processing
systems, innovative game designs and value added services to state- licensed
gaming organisations and financial services providers worldwide. Intralot takes over
the management or operation of various games (Lottery, Keno, Instant Ticket,




                                3
Video- Lottery and fixed-dds Sports Betting Games) and also acts as a system
supplier. Moreover, the company offers value added services such as marketing,
promotion, game design and risk management to its clients.

The Group now consists of 33 subsidiaries in all over the world. Intralot has a
dominant position in Europe, a strong position in South America and has
established a foothold in North America, Africa and S.E. Asia.

Intralot also entered into a strategic partnership with Hilton’s Group subsidiary,
Ladbrokes. The two groups will cooperate on projects concerning state lottery
privatisations, participate in tenders issued by state and private lotteries and
negotiate directly with potential clients.


GREECE: THE GREAT ENIGMA
The contract between Intralot and state- controlled Greek Football Prognostics
Organisation (OPAP) regarding sports betting game “Pame Stihima” expires in
January 2007. Intralot is the organizer of the game, through its subsidiary “Betting
Company”. “Pame Stihima” is the largest sports betting game in the world with
sales of €1.6bn in 2004. The game has showed a downward trend within 2005 due
to cannibalisation of KENO as well as to the increased market share of illegal
internet betting companies. Intralot and OPAP undertook new measures in order to
attract more players to the game. “Pame Stihima” will include both Greek and
foreign championships, new athletic events such as tennis, volley, water polo,
handball, motor events as well as non- athletic events. The game will also include
live match betting and over/ under betting for sum of goals, cards and penalties.
For all that, we expect sales of “Pame Stihima” to advance by 10.0% in 2005 and
to surge by 30.0% in 2006. We believe that the low growth rate in 2005 is
attributed to the slow impact of new changes that will take place in Q305. We
believe, however, that next year will be an excellent year for the game as the new
changes will be effective and the Mundial will boost sales and profits. We anticipate
domestic sales to account for 32.0% of the Group’s sales in 2005 and to recoil to
25.0% in 2006.

The new changes have increased the payout by 6.0% for the period 2005-2007.
OPAP will participate by 90.0% in the payout differential (i.e. the 6% difference)
and INTRALOT will participate by 10.0%. With the introduction of Greek game
betting, starting in the 2005-2006 championship period, OPAP will participate by
82.0% in the increased payout, while Intralot will participate by 18.0%. Intralot will
also provide to OPAP free-of-charge 2.000 terminals to support the game. In our
view, the new measures are in the right direction to rejuvenate the game. The
introduction of new events (athletic or not) and the new betting methods are
expected to attract more players that used to play by the internet. Intralot is also
the main beneficiary of the agreement as it participates with lower share.

We are cautious about the renewal of the contract with OPAP. In our scenario
analysis, we took under consideration the worst- case scenario in which Intralot will
not continue its cooperation with OPAP post 2007.

Intralot also provides system maintenance and support services to the Greek Horse
Racing Organisation (ODIE). In 2005, following an agreement with ODIE, Intralot
will proceed with the conversion of 150 on- track terminals to off- track, allowing
the organisation to further expand its off- track sales network.


FOREIGN MARKETS: GREAT EXPECTATIONS
Intralot is now operating in the five continents of the world. The Group has a
dominant position in Europe, a strong position in Latin America and has established
a foothold in North America, Africa and S.E. Asia. With 33 subsidiaries and 7
regional offices in 28 countries, Intralot ranks 2nd in profits worldwide. And the
expansion will carry on…



                               4
International revenues as shown from the following graph accounted for 42.2% of
total group’s sales in 2004. We expect to account for 68.0% in 2005, to advance to
75.0% in 2006 and to reach 100.0% in 2007. We anticipate EBT from international
operations to acocunt for 53.0% of the Group’s earnings in 2005 and to advance to
73.3% in 2006. We should note that we did not take into account the operations in
Colombia, Russia, Phillipines, Egypt and Israel.

                      Graph 1. International Revenues

                                                                                      100.0%
  100.0%

   90.0%

   80.0%
                                                                            75.0%
   70.0%
                                                                68.0%
   60.0%

   50.0%

   40.0%                                        42.2%

   30.0%

   20.0%
              21.2%        22.2%
   10.0%

     0.0%
               2002         2003         2004           2005e           2006e       2007e

Source: Intralot, Pegasus Securities Research


NEW EUROPE
Bulgaria
Intralot controls 49.0% in “Eurofootball”, Bulgaria’s fixed odds betting operator
through Bilot EOOD, a 100.0% subsidiary of Intralot. Fixed odds- betting sales grew
by 83.0% in 2004, while we expect to advance by 17.5% CAGR in the 2005-2007
period. In particular, we estimate sales to post a 80.0% increase in 2005, a 40.0%
rise in 2006 and to recoil to 15.0% in 2007. We anticipate EBITDA margin to stand
at 20.7% in 2005, to recoil by 100 basis points to 19.7% due to Mundial in 2006
and to advance to 21.0% in 2007.

The company operates 420 points-of-sale throughout the country. “Eurofootball”
has well established its position in the Bulgarian market and holds a market share
of over 50.0%. The contract between Intralot and the Bulgarian State expires in
2009.

Romania
Intralot operates in Romania through its 60.0% subsidiary, “Lotrom”. “Lotrom” is
the sole provider of Lotto and Video Lottery games in Romania. The company
proceeded in 2004 with the installment of 2000 VLTs (Video Lotteries) at 600 retail
agencies. In addition, “Lotrom” has successfully launched the fixed odds betting
game on behalf of the Romanian National Lottery Organisation. The company has
1.800 points-of-sale. The contract expires in 2012.




                                   5
We forecast sales to post a 17.2% CAGR rise in the 2005-2007 period. We expect
sales to boost by 80.0% in 2005, 40.0% in 2006 and 15.0% in 2007. We estimate
EBITDA to margin to stand at 34.0% in 2005, to retreat to 32.5% in 2006 and to
rebound to 34.0% in 2007.

Poland
“Pollot”, a 100.0% subsidiary of Intralot has signed a 10- year agreement with the
Polish State lottery organisation regarding the development, organisation and
management of instant lottery games. “Pollot” has a strong sales network that
ranges from mini- markets, tobacconist shops, post offices, café- bars to the Ruch
retail chain with over 2.000 kiosks and newsstands. The contract expires in 2013.

Moreover, “Pollot” and Intralot International acquired the control of fixed odds-
sports betting company Totoltek. The company posted sales in Q105 of €10.2m
and EBT of €350.000. Totoltek has a network of about 400 agencies. The company
owns half of them and agents manage the rest. Intralot’s target is to expand
gradually the company’s network.

Annual sales of the liberalised Polish Betting market amount to €150m. Three
betting companies operate with equal market shares (approximately 33.0% each).
The Polish market has 40m people population and low per capita spending in
betting games.

The acquisition of Teletek will boost “Pollot’s” sales and profitability in the near
future. We gauge that sales will rise by 14.0% CAGR in the 2005-2007 period. We
expect EBITDA margin to stand at 4.0% in 2005 and to advance to 5.0% in 2007.

Serbia & Montenegro
Intralot operates in Serbia & Montenegro via its 100.0% subsidiary, “Yugolot”.
“Yugolot” has supplied BEOLOT with an integrated lottery system. Furthermore,
“Yugolot” has restructured the services provided to BEOLOT regarding fixed odds
betting games. The contract with BEOLOT expires in 2008.

We do not expect significant growth from the operations in Serbia. In fact, we
forecast flat sales by 2007.

Turkey
Intralot participates in the “Inteltek” consortium with a 25.0% stake. “Inteltek”
successfully launched IDAA, a sports betting game, on behalf of SPORTOTO,
Turkey’s National Football Prognostics Organisation and the General Secretariat for
Athletics and Youth. The “Inteltek” consortium is a joint venture between Intralot
and the Turkcell, the country’s leading mobile telecom provider. The sports betting
game was launched in September 2004. The company has a network of 2.900
points-of-sale and its target is to reach 4.000 by the end of the year.

Furthermore, “Libero SA”, Intralot’s second subsidiary in Turkey, launched its sports
betting operations in cooperation with Turkcell. Utilising Turkcell’s mobile network,
“Libero” has installed and is operating a system that supports player participation
through fixed and mobile telephony, the Internet and interactive digital TV. “Libero”
has already more than 30.000 subscribers, achieving a monthly growth rate of
15.0%.

We anticipate sales to advance by 17.4% CAGR in the 2005-2007 period and
EBITDA margin to stand at 50.0% in the next couple of years.

Moldova
Intralot operates in Moldova through its 47.9% subsidiary “Loteria Moldovei”. Lotto
sales doubled compared to 2003. 2004 sales boosted by 229.7% on the back of



                               6
strong Lotto sales growth and the introduction of fixed odds betting and Video
Lottery.

We expect sales to boost by 19.9% CAGR in 2005-2007 on the back of strong
growth in sports betting sales. We anticipate EBITDA margin to stand at 16.9% in
2005 and to 18.0% in 2007.

FYROM
As part of a 6-year agreement, Intralot and Lotarija Makedonija continued their
successful partnership involving the development, management and operation of
instant lottery games. Lotto sales posted a 63.0% growth y-o-y in 2004. Currently,
Intralot and Lotarija na Makedonija are looking into expanding their cooperation
through the introduction of new games and the further expansion of the lottery’s
sales network.

Russia
At the end of 2004, Intralot in cooperation with Malay Tanjong Group, undertook
the operation of lottery games in the Greater Moscow area, the most developed
region in Eastern Europe with a population of 15m. The two Groups will jointly
manage the project, acquiring a 49.0% share in Yuvenga, the exclusive operating
licensee for Moscow Olympic Lottery. The majority stake will be held by leading
Russian business interests in the high tech and aerospace sectors.

The company plans to operate 3.000 points-of-sale. The license expires in 2013 and
is exclusive until the end of 2008. The project is expected to be launched during
the second half of 2005.


CENTRAL EUROPE
Malta
Intralot holds a 73.0% majority stake in “Maltco Lotteries”. “Maltco Lotteries” was
granted an 8- year exclusive license for the operation and management of all state-
sponsored lottery games.

The state- sanctioned gaming market in Malta was estimated at €50m annually and
included Lotto and Instant Lottery. In November 2004, Intralot introduced fixed
odds sports betting, expanding the range of games offered. In 2005, the company
plans to offer KENO and other numerical lotteries. The contract expires in 2012.

We consider Malta as one of the most important markets for Intralot, as we expect
to be one of the major growth drivers of the company in the future. In particular,
we anticipate revenues to increase by 21.6% CAGR in the 2005-2007 period.
EBITDA margin is expected to remain stable at 7.5% in the next couple of years
and to advance by 100 basis points to 8.5% in 2007.

Germany
Following an international tender, a 5-year agreement was signed in February 2004
with the Schleswig- Holstein State Lottery for the supply, maintenance and
technical support of 200-400 advanced CORONIS TC terminals.

This contract is of great importance since it is the first step of entering the largest
market in Europe with sales of around €8bn.

Cyprus
Intralot acquired a majority stake of 55.66% in Cypriot company “Royal Highgate
Ltd”. “Royal Highgate” is the second largest sports betting operator in the island.



                                7
Intralot started to computerise the company’s fixed odds betting system from the
beginning of the month. The Cypriot government plans to reduce or to eliminate

taxes on gaming proceeds. If this possibility eventually takes place, it will boost the
company’s profitability significantly in the following years.


AMERICAS
LATIN AMERICA
Chile
Intralot has established a 99.99% subsidiary, “Intralot de Chile”, which provides
system services in support of all gaming operations in Chile. In 2004, the first state-
sanctioned fixed odds betting game in Latin America was successfully launched as
part of a 6-year agreement with 2-year extension option with Polla Chilena de
Beneficencia, Chile’s only licensed sports betting operator. The agreement covers
the provision of marketing, advertising, sales network and game management
services.

We expect sales to firm up by 6.5% CAGR in the 2005-2007 period and EBITDA
margin to stand at 25.0% in 2005, to recoil to 23.0% in 2006 owing to the Mundial
and to stand again at 25.0% in 2007.

Colombia
In mid-2004, Intralot signed a 5 year agreement with a 2.5 years renewal option
with ETESA regarding the full operation of sports betting games. The on-line
gaming system will be installed and commissioned within the second half of 2005
as well as the deployment of a nationwide network with 5.000 points-of-sale, is
expected to boost market penetration and increase the public’s participation in
gaming.

Peru
“Intralot de Peru”, a 99.98% subsidiary of Intralot has established a nationwide on
line sales network, offering a broad range of games especially designed for the
rapidly growing Peruvian market.

Peru is one of the most important markets for Intralot. Sales boosted by 43.0% in
2004, while we estimate to increase by 15.9% CAGR in the 2005-2007 period.
EBITDA margin is expected to be stable at 10.0% in 2005 and 2006 and to advance
to 12.0% in 2007.

Other countries
As part of its further expansion in the Latin American market, Intralot has
established three subsidiaries in Uruguay, Argentina and Brazil to monitor local
market developments and participate in state gaming organisation tenders.

NORTH AMERICA
USA
Intralot controls a 85.0% stake in “Intralot Inc”. The company supplied an on- line
management system to Nebraska’s state lottery. Intralot, thus, became the first
and only non-US provider to penetrate the very lucrative North American market.




                                8
We anticipate sales to firm up by 10.0% CAGR in the 2005-2007 period and
EBITDA margin to remain flat at 10.8%.

ASIA
Phillipines
Intralot holds a majority stake in Total Gaming Technologies (TGTI) has signed an
exclusive 10-year agreement with the state gaming organisation Phillipine Charity
Sweepstakes Office for the supply of an on- line gaming system and the
organisation of the FAST KENO game in a nationwide basis. The game will be
distributed through a sales network expected to encompass over 1.000 points-of-
sale during the initial phase of development. Project implementation has been
delayed by bureaucratic complications that are expected to be resolved till the end
of the year.


AFRICA
Intralot signed a cooperation agreement with ORION Technologies Nigeria Limited,
the only company licensed by the regional government of Lagos for the operation
and management of the local lottery over the next 10 years. The project is
expected to start operations within the second half of the year.


AUSTRALASIA
New Zealand
The Group expanded its presence in the Australasian market as a preffered bidder
regarding the supply and operation of an integrated on- line VLT monitoring
system. The project has a duration of 5 years with a 1-year renewal option.

MIDDLE EAST
Israel
Intralot signed a contract with the Israel National Lottery regarding the design,
development, supply and maintenance of their new interactive system “E-Pais”. The
new “E-Pais System” will provide access to Lottery’s customers, through alternative
channels, for participating in On-Line games. The new system will support 5 main
games, Chance, 777, Keno, 123 and Lotto, including its variations (Regular,
Subscriber, Group) and will support four (4) languages, Hebrew, Russian, Arabic
and English. The project is expected to start operations in the first quarter of 2006.

Egypt
Intralot has signed a contract with the Egyptin Post Officel in order to deploy a new
national network of betting games. The initial cost of the investment is 10m Euro
and the management and operation will be held through a new subsidiary, called
Intralot Egypt, in which Intralot controls a majority stake of 85.0%. The project is
expected to begin within the first quarter of 2006. We did not take into account this
project in our assumptions.


INDUSTRY ANALYSIS
Total worldwide lottery sales rose by 17.0% in 2004 to $187bn versus $160bn a
year ago. The markets with the highest growth rates were Europe and Asia, posting
an increase of 24.0% and 17.0% respectively. A new trend in the industry is the
introduction of multi-jurisdictional lottery games in an extended market
encompassing a number of countries, which attract new players and distributes
enormous prizes. These games are already being offered in



                               9
the USA, Australia and the Scandinavian countries, while the “Euro Millions” lottery
game was launched in 9 European countries within 2004.

Technology is also an important factor in the industry. Therefore, new games over
alternative distribution networks, such as the Internet and digital TV, are being
offered. According to UK’s Betting Office Licensees Association global gambling
sales are estimated about $1.0bn. The traditional methods of gambling such as
casino gaming, betting on sports events and playing lottery games are increasingly
being augmented with electronic forms of gambling, most notably using the
Internet, where casino services and betting services are already generating
substantial revenues. The next progression in this process is to transfer these and
similar services to the mobile handset. It is estimated that more than 90.0% of the
population of the UK and United States have at sometime played a lottery at least
once, with in the order of 80.0% playing regularly. We believe that lottery services
will explode across all regions of the world within the next five years and will
generate vast revenues.


STRATEGY: NEW OPPORTUNITIES AHEAD
First of all, we are impressed by the management’s ability to expand rapidly in the
global market. Within a decade, Intralot has managed to transform from a domestic
player into a multinational company.

GROWTH OPPORTUNITIES
Intralot will continue to pursue business opportunities throughout the world. New
projects are in the pipeline every year. The target of the company is to sign three
to four contracts per year. Moreover, the strategic alliance with Hilton Group will
give higher prestige to Intralot in order to win new contracts, especially in Central
Europe, where the company has no significant presence.

Intralot is set to benefit from the imminent liberalisation of the betting markets in
the European Union. This is a significant growth opportunity for the company. The
company can either set up an Internet site or can deploy a retail network in
cooperation with Ladbrokes. Private sector’s companies are also moving gradually
into operations, a trend that also benefits Intralot.

The low penetration of sports betting and video- lottery, which have 15.0% and
10.0% global market share respectively creates an opportunity for Intralot since it
covers all the range of games offered worldwide.

The introduction of Greek championship and new athletic and non- athletic events
are expected to boost “Pame Stihima” sales for the next couple of years. In
particular, we expect sales to grow by 10.0% in 2005 and by 30.0% in 2006. We
believe 2006 will be a “full” year for the Group due to the imminent Mundial which
will take place next June.

We believe that the major growth markets of the Group will be Malta, Bulgaria,
Romania, Turkey, Peru and Poland. In addition, we feel that Colombia and Russia
will also boost sales and profitability post 2006.

Global competition, on the other hand, becomes fierce and it might be a threat to
Intralot’s expansion in the coming years. Intralot has lost the advantage of the
“first move”. We believe, however, that it would be difficult for competitors to
challenge Intralot since it has established strong relationships with state- controlled
organisations worldwide.




                               10
COMPETITIVE ADVANTAGES
Intralot possess significant competitive advantages over its competitors. Intralot is
the only company that provides integrated solutions to its customers and covers all
the portfolio of betting games (Lottery, Video Lottery, KENO, Sports betting).
Intralot has the advantage of the “first mover” since it has presence throughout the
world. It has, therefore, great chances to renew existing or win new contracts,
since it has established strong relations with state- organisations and has more
experience than its competitors. In our opinion, Intralot has a 50.0%-50.0%
chance to renew existing contracts. Moreover, the geographical diversification of
the company is in the right direction since the Group is not dependent upon a
particular country (e.g. Greece) or region.

We view the potential loss of “Pame Stihima” as a short- term weakness for the
company. Albeit this would create a short term weakness for the company, we
believe that Intralot has taken all the appropriate action to eliminate this risk in the
medium term. We expect international sales to account for 68.0% of total sales in
2005 and to advance to 75.0% in 2006.


INVESTMENT CAVEATS
1.   We believe that Intralot will not extend its contract with OPAP that expires in
     2007. Albeit we are not in position to support our argument by 100.0%, we
     took into account the worst- case scenario. We feel, however, that the
     company will offset this loss as it wins more and more contracts abroad.

2.   Change in global macroeconomic conditions. A change in global
     macroeconomic conditions will also affect the performance of the company
     worldwide.

3.   According to a decision of Arbitration Court, OPAP has to pay €37m per annum
     to Intralot. The decision, however, was cancelled and the Supreme Court will
     decide in the future.


FORECASTS
Revenues
We anticipate Intralot to grow its top line growth by 5.4% CAGR in the 2005-2007
period. The slow-growth in revenues is attributed to the loss of “Pame Stihima” as
we took into account the worst- case scenario for Intralot. Hence, we forecast
consolidated sales to boost by 66.9% in 2005 and to reach €543.9m, to surge by
29.5% in 2006 and to stand at €704.5m and finally to decline by 9.7% in 2007 and
to reach €636.4m.

Margins
We expect gross margin to increase by 100 basis points and to stand at 42.0% in
2005, but to erode by 200 basis points in 2006 due to higher payouts because of
the Mundial that will take place in June 2006. We expect gross margin to recoil
further by 200 basis points in 2007 due to the loss of “Pame Stihima”. EBITDA
margin is expected to remain stable at 34.5% in 2005 and to retreat by 220 basis
points in 2006 and a further 180 basis points in 2007.

Operating costs
We forecast operating expenses to grow by 6.6% CAGR in the 2005-2007 period.
Administrative expenses are expected to grow by 7.7% CAGR, while selling and
distribution expenses are expected to increase by 7.8% CAGR. Research and




                               11
development expenses will increase by 4.1% CAGR. We anticipate EBITDA to
increase marginally by 1.1% CAGR owing to the loss of “Pame Stihima”.

Profitability
We estimate earnings after tax and minorities to decrease by 4.8% CAGR in the
2005-2007 period. Net income will surge by 27.8% in 2005 and a further 27.9% in
2006. In particular, net income will reach €75.3m in 2005 and €96.3m in 2006. We
expect, however, to decline by 32.6% in 2007 and to stand at €64.9m.

Cashflow & Investments
Intralot is a cash cow. It generates sufficient cash to finance its investment
programme without using debt. We estimate Free Cash Flow to increase year by
year despite higher capex. Over 2005-2007 total investment expenditure will
amount to €50m, on possible acquisitions of small or medium enterprises
throughout the world and of course for the setup of new subsidiaries.




                             12
FINANCIAL MODEL




      13
Intralot Group- Income Statement (€ in millions, except per share data)
                                     2003           2004     2005e        2006e     2007e
Net Revenue                          320.4          325.8     543.9        704.5     635.5
Cost of goods sold                  (206.2)        (191.9)   (315.4)      (422.7)   (394.0)
Gross profit                         114.2          133.9     228.4        281.8     241.5
Gross margin                         36%            41%       42%          40%       38%

Other income                         0.1            0.2       0.3          0.4       0.3
Total                               114.4          134.1     228.7        282.1     241.8

Operating Expenses:
Administrative expenses             (13.1)         (22.1)    (32.6)       (45.1)    (40.7)
Selling and distribution expenses    (3.0)          (3.4)     (3.8)        (4.2)     (4.8)
R & D expenses                       (9.1)         (13.5)    (15.8)       (19.7)    (17.8)
                                    (25.2)         (39.0)    (52.2)       (69.0)    (63.2)
EBIT                                 89.2           95.1     176.5        213.1     178.6

EBITDA                              102.7          112.6     187.8        227.4     193.6
EBITDA margin                        32%            35%       35%          32%       30%

Interest income                       2.0            1.1       1.0          0.6       0.7
Income from securities                0.0            0.2       0.0          0.0       0.0
Income from participations            0.0            0.0       0.0          0.0       0.0
Interest expense                     (1.4)          (2.4)     (2.4)        (2.0)     (2.0)
Losses from participations            0.0           (0.3)      0.0          0.0       0.0
Provisions                           (0.1)           0.0       0.0          0.0       0.0
Total                                89.7           93.7     175.1        211.7     177.3

Depreciation                        (13.5)         (17.5)    (11.3)       (14.3)    (15.1)
Charged to op. cost                  13.1           17.1      11.0         14.0      14.8
Extraordinary income                  4.6            6.3      0.0          0.0       0.0
Extraordinary expense                (5.2)          (5.3)     0.0          0.0       0.0

EBT                                  88.8           94.3     174.7        211.4     177.0
Minoriy interests                    (5.2)          (8.1)    (48.8)       (58.0)    (68.0)
Tax                                 (26.6)         (27.3)    (50.7)       (57.1)    (44.2)
Net profit                           56.9           58.9      75.3         96.3      64.7




                                              14
Intralot Group- Balance Sheet (€ in millions, except per share data)
                                                         2003    2004       2005e      2006e   2007e

ASSETS
Net Tangible Assets                                       16.2    32.3       45.9       45.5    45.5
Cash                                                     118.4   119.3      107.6       66.4    76.1
Current assets                                            85.0    97.1      110.7      133.3   107.3
Other assets                                              39.0    68.6       89.1      143.8   196.4
TOTAL ASSETS                                             258.6   317.3      353.4      389.1   425.3

                                                         2003    2004       2005e      2006e   2007e

LIABILITIES
Long- term bank debt                                       0.0    22.3       22.3       17.3    17.3
Other long term liabilities                                0.4     0.5        0.5        0.5     0.5
Total Long term Liabilities                                0.4    22.7       22.7       17.7    17.7
Current Liabilities                                       94.8   135.7      152.6      160.9   163.4
Other liabilities                                         65.8    58.6       58.6       58.6    58.6
Equity                                                    97.7   100.2      119.5      151.9   185.6
TOTAL SH.EQUITY & LIABILITIES                            258.6   317.3      353.4      389.1   425.3
Source: Company reports, Pegasus Securities estimates.
Intralot Group- Cash Flow Statement (€ in millions, except per share data)
                                                                  2005e         2006e          2007e
Cash flow from operations
Net profit                                                         75.3             96.3       64.7
Depreciation                                                        11.3             14.3       15.1
Provisions                                                           0.0              0.0        0.0
Interest paid                                                       (2.4)            (2.0)      (2.0)
(Increase)/ Decrease in inventories                                 (2.1)            (5.9)       7.0
(Increase)/ Decrease in debtors                                    (11.4)           (16.8)      19.1
(Increase)/ Decrease in accruals                                     0.0              0.0        0.0
Increase/ (Decrease) in creditors                                   29.6              1.9       15.3
Income tax paid                                                    (50.7)           (57.1)     (44.2)
Net Cash Flow from Operations                                       49.6             30.9       75.0

Cash Flow from Investing
Purchases of tangible and intangible assets                        (25.0)           (20.0)     (5.0)
Purchases of subsidiaries                                            0.0              0.0       0.0
Proceeds from sales of tangible and intangible assets                0.0              0.0       0.0
Interest received                                                    1.0              0.6       0.7
Dividends received                                                   0.0              0.0       0.0
Net Cash Flow from Investing                                       (24.0)           (19.4)     (4.3)

Cash flow from Financing
Increase/ (Decrease) in long term loans                              0.0             (5.0)       0.0
Increase/ (Decrease) in short term loans                             0.0              0.0        0.0
Repurchase of Capital                                                0.0              0.0        0.0
Cash Dividend paid                                                 (37.3)           (47.7)     (61.0)
Share capital                                                        0.0              0.0        0.0
Net Cash Flow from Financing                                       (37.3)           (52.7)     (61.0)

Cash- Beg.Bal.                                                     119.3            107.6      66.4
Net increase (Decrease) in Cash                                   (11.7)        (41.2)          9.7
Cash-End. Bal.                                                     107.6            66.4       76.1

Source: Company reports, Pegasus Securities estimates.




                                                 15
General Disclosure
Although the information in this report has been obtained from sources that Pegasus
Securities believes to be reliable, we do not guarantee its accuracy or fairness, and such
information may be incomplete or condensed. All opinions and estimates included in this
report constitute our judgment as of this date and are subject to change without notice.
Pegasus Securities, or its clients, employees and directors may have a position, make
markets, or engage in any of the securities mentioned herein. This report is for information
purposes only and is not intended as an offer or a solicitation to the purchase or sale of any
security. It is intended for professional investors only and may not be reproduced or
provided to any other person.

Pegasus Securities does and seeks to do business with companies covered in its research
reports. As a result, investors should be aware that the firm may have a conflict of interest
that could affect the objectivity of this report. Investors should consider this report as only
a single factor in making their investment decision. Pegasus Securities is regulated in
Greece by Hellenic Capital Market Commission.


Important Analyst Disclosures
The analysts identified in this report each certify, with respect to the companies or securities
that the individual analyzes, that (1) the views expressed in this report accurately reflect his
or her personal views about all of the subject companies and securities and (2) no part of his
or her compensation was, is or will be directly or indirectly related to the specific
recommendations or views expressed in this report. The analyst(s) responsible for preparing
this research report received compensation that is based upon various factors including
Pegasus’s total revenues, a portion of which are generated by Pegasus’s investment banking
activities.

Analysts’ stock ratings are defined as follows:
   Outperform: The stock’s total return is expected to exceed the industry average by at
   least 10-15% (or more, depending on perceived risk) over the next 12 months.
   Neutral: The stock’s total return is expected to be in line with the industry average*
   (range of ±10%) over the next 12 months.
   Underperform: The stock’s total return is expected to underperform the industry
   average* by 10-15% or more over the next 12 months. The industry average refers to
   the average total return of the analyst's industry coverage universe


Previous Analysis for Intralot

Date                      Rating                   Price Target




                                              16
Research                                       Asset Managment           Investment Strategy
Petros Tsourtis (Banks, Gambling)              Lila Kadinopoulou         Manos Chatzidakis
2310–222.593                                   2310-222.593              210-36.70.765
kstamatogiannis@pegasusaxe.gr                  edimika@pegasusaxe.gr     mhatzidakis@pegasusaxe.gr

                                                                         Corporate Finance
Panagiotis Glaroudis (Industrial, Utilities)   Chrysoula Memtsa          Nikitas Harhalakis
2310-222.593                                   210-36.70.740             210-36.70.747
pglaroudis@pegasusaxe.gr                       xmemtsa@pegasusaxe.gr     nharhalakis@pegasusaxe.gr


Derivatives
Thanos Chaniotis
210-36.70.710
ahaniotis@pegasusaxe.gr




Pegasus Securities
Member of the Athens Stock Exchange
Foreign Exchanges, Corporate Advisory, On Line Trading


     Central Offices: Valaoritou 17 & Amerikis, 106 71, Αthens, Τel. 210 36.70.700
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http://www.pegsec.gr




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