This risky Greek lottery stock is a gamble worth taking

Not bad for a company operating in the depths of political, economic and financial crisis.

OPAP has been battling the Greek meltdown by launching new games and cutting costs. It successfully launched a scratch-card game last year and is rolling out more than 16,000 new video-lotto machines across the country this year. Its legal monopoly on lotteries in Greece has been under fire from foreign rivals, but was upheld by a Greek court last year.

OPAP stock is available to U.S. investors through American Depositary Receipts and naturally should be considered high-risk. That said, it has to be among the most intriguing bets available in the midst of the current Greek fire sale.

OPAP stock has been dragged down along with the rest of the Greek stock market as the country’s crisis has deepened. The Greek government is in danger of running out of cash in the next few weeks, unless it can strike a last minute deal with international lenders, led by the International Monetary Fund and the European Central Bank. Greek government bonds are trading at a steep discount to face value on the risk of a possible default, or exit from the euro.

The Greek stock market

All of which helps explain why Greek stocks have fallen so far. The Greek stock market has fallen about 85% in price since the peak at the end of 2007, and about 30% in the past year.

This is the sort of situation where those managing their own money have an advantage over professionals managing other peoples’.

Financial intermediaries dare not touch Greek stocks. If they do, and things turn out well, they’ll get little thanks from the clients. If things turn out badly, they’ll get sued from here to Hades.

I’ve already written about the appeal in this situation of the Greek exchange-traded fund, Global X FTSE Greece 20 ETF GREK, +2.88%   available to U.S. investors. That lets you bet on a broad index of Greek stocks.

But even though picking individual stocks in this environment is an incredibly high-risk proposition, I was nonetheless curious about the securities available to investors outside Greece. And OPAP is the most obvious. Its stock price has fallen about 75% from the peak.

Over the past 10 years, OPAP has reported operating cash flows averaging about $560 million a year.

In 2008, at the peak, cash flows hit $930 million. Last year they were $310 million. Yet at today’s stock prices the entire company is valued at about $2.8 billion.

That said, nobody would buy stocks in Greece today based upon current business conditions. The reason to buy would be because you believed that sooner or later the Greek economy will rebound — and when it does, the businesses that have stayed alive will begin coining money, and their stocks will shoot skywards. According to financial data compiled by Reuters, OPAP has a solid balance sheet with modest debt and good liquidity.

Yes, all sorts of things can go wrong. OPAP may face a loss of its legal monopolies, more competition, a profit squeeze from higher taxes, and plenty else. The EU may force open the Greek gambling market to foreign competitors. In Greece, there are no riskless businesses.

Yet there are plenty of things which can go right — including economic recovery, or a takeover, either by a foreign rival or a private equity buyer.

Nowadays OPAP stock trades in Athens for around 8.56 euros. Analysts surveyed by Thomson Reuters expect 63 European cents in dividends per share this year, and 74 cents next, making dividend yields of 7.4% in 2015 and 8.6% in 2016. The ADRs traded at $4.63 on Monday.

All things considered, it’s better to be a bookmaker than a customer. As a wise person once said, the house always wins. I’d rather own the Greek national lottery than play it.