Rumours push up stock prices despite poor dividend

Two companies -- Fine Foods and Khan Brothers PP Woven Bag Industries -- saw their stocks surge by around 50 per cent over the past month even though both firms had informed that there is no undisclosed reason for such a rise.

What's more, stocks of both companies took top spot among the highest gainers yesterday even though the firms themselves are still incurring losses.

Stocks of Fine Foods rose by about 43 per cent while that of Khan Brothers PP Woven Bag Industries soared by around 52 per cent in the last two weeks, according to the Dhaka Stock Exchange (DSE).

Earnings per share of Fine Foods stood at Tk 0.02 in the first nine months of fiscal 2022-23 while it was Tk 0.01 in the negative during the same period of the previous year.

The company has remained in the "B" category for several years now as it failed to pay dividends of more than 5 per cent since 2013.

Sponsors of Fine Foods hold 9.08 per cent of its shares while about 80 per cent is held by general investors and 10 per cent by institutional investors. The company has paid-up capital of Tk 13.9 crore.

The companies' stocks are rising mainly due to some rumours that their values will increase further, said a senior official of a leading stockbrokerage.

A vested group that does not care about the companies' actual performance is targeting these firms as they have a low number of stocks, making them easy to manipulate, he added.

In the July-March period of the outgoing fiscal, earnings of Khan Brothers PP Woven Bag Industries stood at Tk 0.03 in the negative while it was Tk 0.16 in the negative during the corresponding period of the year prior.

Additionally, this company has long remained in the "B" category for failing to disburse dividends exceeding 5 per cent in the last few years.

So, considering their very low dividend pay-out, the surge in stock prices of these two companies is not a good sign, said a merchant banker.

Stocks of Fine Foods and Khan Brothers each rose by more than 9 per cent yesterday.

Sonali Aanash, another company with low paid-up capital of just Tk 5 crore, saw its stocks rise by 8.18 per cent to feature on the list of top gainers as well.

Similarly, Olympic Accessories and Simtex Industries are two "B" category stocks for their low dividend pay-out that still managed to advance by around 7 per cent to place on the list of top gainers.