Waberer’s majority shareholder to quit - What can small investors expect?

CEE Transport, the fund managed by Mid Europa Partners, is considering selling all or part of its shares in Waberer’s, it was confirmed by the transportation company itself in a statement to the Budapest Stock Exchange (BÉT).

Unfulfilled promises

The exit of a 72 percent shareholder can be a very negative message (i.e. there is big trouble) and a positive opportunity at the same time (for example, if a new owner makes an offer to buy the company).

But first, let’s look at what led to the company, which went public and listed its shares at BÉT three years ago (in July 2017), to lose 80 percent of its stock value during its stock exchange career.

Its shares started at 5,100 forints, while today the price is barely above 1,000, and it has been even lower in the past. To put a long story short, there were a lot of promises, but they were never fulfilled, the company underperformed in almost everything it promised when it became listed.

If we look at the figures, in 2018 the company was still solidly profitable, but in 2019 its profit was already negative, and although there have been changes that give cause for optimism, this year also started in the red.

Turnover has been declining and the shipping business is not doing well. Although all this could be attributed to the decline in demand due to the pandemic, the company’s troubles had definitely started earlier; the virus simply made the situation worse.

It wasn’t worth the price

It is easy to say in retrospect, but Waberer’s was’t worth the 5,100 forint share price.

This was raised by some analysts at that time, too, because growth expectations seemed to be too optimistic. Some analysts thought that it was unrealistic for the price of fuel, which is the main cost element of road transportation) to remain low.

Others were of the opinion that the intensive growth of wages could drive payroll costs too high; in addition, European states started introducing rules on drivers' mandatory resting time and minimum remuneration.

All of these may have been true, but all ordinary observers saw was that communication between the company’s former dominant owner - György Wáberer, who gave his name to the company and who has recently become a wine commissioner - and the fund was not smooth, for example on the use of the company name; and fewer and fewer trucks with the company logo seemed to be travelling on the roads.

Skeletons in the closet

Very soon it became clear that something must have gone wrong about an important acquisition.
When the company went public and sold a lot of shares, it had to offer some kind of explanation to new investors about what they needed the money for.

There were several goals, one of them, however, stood out: the acquisition of a Polish rival called Link. It was all the sadder when, a year later, it could be read that the Hungarian company was suing the previous owners of Link because it turned out to be a pig in a poke. The seller had withheld “skeletons”, i.e. had not passed important information to the buyer.

The structure also began to crack

This was the time when numbers started to become worse and worse. Of course, it happens that a company can’t meet the numbers forecast in forever optimistic business planning, but it already causes disappointment if the numbers start going down, meaning that the turnover is falling and profits turn negative.

The share price started a free fall. Then came other setbacks: there was a substantial increase in tolls and it proved to be true that it was no longer possible to gain a competitive advantage in Europe by taking orders from the whole of the continent (even from the West) while only paying eastern wages to their workers.

Seeing this, brokerage firms have also become pessimistic; in their forecasts they no longer recommended the stock to buy, so many investors decided to get rid of their shares.

The situation today

It has been a pretty bad story so far, but it’s very important to see that Waberer’s is actually of great value even today.

Anyone who had previously passed by the company's countless unused trucks in Budaörs had the impression that the company was lacking orders. That is not true, though, because there are orders, but far fewer than before. The insurance company, on the other hand, is doing really well; it represents great value and the firm also has a lot of real estate.

The reorganization has begun, and if Mid Europa quits, a new owner could whip the company into shape.

In other words, there seems to be a turning point now, as1000 forints looks good value for money, and Mid Europa will either struggle with the sale (their consultant is the renowned Rothschild company), or it will get out quickly and successfully.

In the former case, the price will fall, in the latter it will rise. Maybe now chances for the latter are better.