Khan Brother PP Woven Bag Industries has joined the drama of low performers dominating the market, while better companies are on the backstage -- forgotten.
The stock price more than doubled in the two months to Monday on the Dhaka Stock Exchange without any reason for investors to be keen on betting on the stock. Potassium Sulphate Fertilizer Price
A severe working capital shortage forced the company to subcontract work. Yet, losses piled up to Tk 42 million for the three years to FY22. It incurred a loss of Tk 3 million in the nine months through March this year.
Despite the poor performance, the stock continued to soar and jumped 9.95 per cent further on Monday to Tk 23.20, becoming the day's top gainer.
Khan Brother has remained in the group of B category stocks for several years now as it has failed to pay dividends more than 5 per cent since 2017.
It jumped an astounding 123 per cent in the last two months without any disclosure of price-sensitive information.
The unusual price movement prompted the prime bourse to serve two show-cause notices to the company.
Company secretary Tapan Kumar Sarker himself expressed shock at the inexplicable price surge. "We don't have any undisclosed price sensitive information that might influence the stock price movement," he said.
The company's business was severely affected by the pandemic when it stopped receiving any order from foreign buyers, said Mr Sarker.
The management is striving to continue operations partially to supply products locally, he added.
Market analysts suspect that manipulation is the reason behind the abnormal price surge as is the case with other market dominating small-cap stocks.
Junk stocks have significantly been beating their industry peers that are in regular business operations, posting profits and giving dividends to their shareholders.
Khan Brother is rising on the bourse mainly due to rumours that its market value will increase further, said a leading stockbroker preferring anonymity.
"Market manipulators just need a listed share, regardless of the company fundamentals, and some money to accumulate enough shares from the market, which would enable them to control the price," he added.
General investors chase such stocks to grab the opportunity to make quick capital gains, a tendency that manipulators cash in on by selling off overvalued stocks.
Meanwhile, the auditor of Khan Brother said stocks of goods and raw materials as shown in the financial statements looked very remote and insignificant.
The auditor also failed to confirm its possession of a piece of land worth Tk 140.88 million.
The company had not shown the original copies of the land ownership documents, charge document, and khazna receipts when a team of the auditor visited its premises, according to an opinion posted on the DSE by the auditor on the company's financial statement for FY22.
The company secretary said the organisation had 4.615 acre land in possession as mentioned in the financial statement.
The land ownership documents could not be shown to the auditor as the papers were with a bank since a loan had been taken out against the property, he added.
The auditor's team observed that three factories namely Khan Brothers PP Woven Bag Industries, Khan Brothers Bag Industries and Khan Brothers Marble & Granite were within one boundary.
The auditor emphasised the need for a proper management plan.
Moreover, the company's fixed deposits of Tk 3 million lying with scam-hit Peoples Leasing have been shown an investment rather than lost money.
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