Lottomatica soars as the market celebrates the new post-merger forecasts following the deal with Cirsa

(Il Sole 24 Ore Radiocor) - Shares are rising sharply Lottomatica Group is trading sharply higher; on the Milan Stock Exchange, it has gained over five points, taking the top spot on the FTSE MIB . The share is benefiting from further information and supporting documentation provided by the company regarding the Spanish market and other markets in the rest of the world, following the major merger announced on 2 September with the Spanish firm Cirsa (+4.75% in Madrid compared to IBEX 35, which is down slightly).

Specifically, management estimates that, by the third year following the closing of the transaction with Cirsa, it will be able to achieve incremental online EBITDA at full capacity of between approximately €200 million and €300 million. This amount is not included in the synergies previously announced as part of the transaction. “The additional information highlights a further opportunity for value creation in the online sector, not included in the initial synergy target of 101 million,” explain the analysts at Intermonte, who emphasise that “the incremental contribution to online EBITDA at full capacity, ranging between 200 and 300 million, would take pro forma EBITDA from around 2 billion to 2.2–2.3 billion”.

Furthermore, according to brokers, the incremental synergies “would be driven primarily by Lottomatica’s technology and omnichannel presence, combined with Cirsa’s customer base and local presence in the fastest-growing markets, supporting higher margins and cash generation”. The analysts, who have an ‘Outperform’ rating on the share and a target price of €31.2, point out that, during the conference call announcing the deal, management had already identified the online sector as a potential further lever for value creation, without, however, quantifying its impact.

Cirsa’s online business is, in fact, considered to be at a stage of development similar to that of Lottomatica a few years ago, suggesting significant potential for further value creation for the combined group. “Including the announced cost synergies once fully implemented, management expects the transaction to deliver double-digit earnings per share (EPS) growth by 2028”. Analysts at Banca Akros highlight the fact that “the company also believes there is a tangible opportunity to leverage Lottomatica’s technology, product capabilities and proven omnichannel expertise, alongside Cirsa’s geographical presence, customer base and local footprint, to generate significant growth in the online business of the combined company”.

According to the brokers, who have reaffirmed their ‘Buy’ rating on the share and a target price of 32 euros, “it is clear that there are execution risks in achieving these targets. However, if the figures were confirmed and deemed credible, they would support our view that the growth period characterised by ‘low execution risk’ could extend from the current 2–3 years to 5–7 years”.