Opus Gets Reality Check as Politics-Fueled Investor Craze Abates

Opus Global Nyrt., the Hungarian conglomerate controlled by Prime Minister Viktor Orban’s closest business ally, plans to shore up its image among investors, which the company’s chief executive said may help its share price recover.

Opus snapped a 10 day-drop on Thursday, its longest losing streak, after reporting narrowing losses for 2020. The stock is still down 13% this year, the worst performance on the 16-member Budapest BUX index, which rose 2% in the period.

The company’s plunging shares -- it’s down by two-thirds from a 2017 peak -- contrast with its soaring revenue since Lorinc Meszaros, a boyhood friend of Orban’s and a former mayor of the premier’s hometown, took control over the company in 2017. Since then, Opus, by now the fifth-largest on the Budapest exchange by market capitalization, has become one of the biggest investors in construction, agriculture, tourism and energy.

Yet Meszaros’s proximity to Orban has had its downside. While the company has been lavished with government-distributed European Union funds and state subsidies, helping fuel a dizzying pace of acquisitions, it’s also politicized Opus’s image, with opposition parties regularly calling Meszaros’s holdings a front for Orban’s personal wealth, a charge both deny. Few analysts cover the company, citing a lack of transparency.

“We’re working to improve the market perception of Opus and its shares,” Chief Executive Officer Attila Dzsubak, a former equity analyst and investment banker who took the reins of the company last year, said in an interview. “I remember well from my time as an analyst that the share price generally doesn’t reflect fundamentals.”

Opus Gets Reality Check as Politics-Fueled Investor Craze Abates

Part of the solution for Opus has been to streamline its organizational structure, especially after incorporating in 2018 another of Meszaros’s conglomerates, Konzum Nyrt., which posted one of the world’s top stock returns a year earlier.

A “simplified” corporate structure, currently comprising 35 units, will help investors better understand the company, Dzsubak said. Opus also plans to obtain an ESG score. He called it a “new strategy that’s still in an early phase.”

The coronavirus crisis has especially hit Opus’s hotel holdings but the company expects revenue and profit lines to improve across the business this year, as long as a broader economic recovery from the pandemic materializes.

An expected rebound in tourism as well as rising demand for the products of Opus’s food industry companies underpin management optimism, Dzsubak said. He also expects the recent acquisition of eastern Hungarian gas and electricity distributors to contribute to growth while construction is benefiting from state subsidies for home purchases and renovations.

No Dividend

Opus, which has sold debt under the Hungarian central bank’s corporate bond program, is unlikely to pay a dividend to shareholders in the near term as the company needs liquidity to cover repayments, Dzsubak said.

Looking ahead, investors may focus on the fallout from parliamentary elections next year, which is shaping up to be the tightest race since Orban returned to power in 2010. Opposition parties, which have united for the first time, have called for probes into the vast accumulation of wealth among those close to Orban.

“I don’t want to get into whether the 2022 election will influence our revenues, that’s a political question,” Dzsubak said. “We’re focusing on running the holding.”

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