Yusuf Flour emerges as second-most expensive stock riding on abnormal price surge
FE REPORT | Monday, 26 December 2022
Yusuf Flour Mills, which returned to the SME Platform of Dhaka Stock Exchange (DSE) five months back after remaining in the over-the-counter market for a decade, became the second highest-priced stock in the capital market.
The little-known company's share reached a peak of Tk 2,884 last week following an unprecedented price hike it witnessed since it declared dividend for fiscal year 2021-22 on November 13. However, the volume of shares traded during the period is unusually very low.
Its share jumped almost 23 times in a single day to Tk 594.40 from Tk 26.10 after the corporate declaration as there was no circuit breaker for the share on the day.
The company declared a 10 per cent cash dividend for the year ended June 30, 2022.
Since then, Yousuf Flour has been flying high abnormally, bucking the downtrend in other SME stocks, much to the surprise of investors.
Its stock price increased a whopping 110 times to Tk 2,857.90 each in the past six weeks since November 10.
On the other hand, most big companies in the main market with excellent reputation, strong earnings and handsome dividend records, failed to attract investors amid the gloomy economic outlook.
The abnormal price surge of Yousuf Flour is raising questions among analysts about whether manipulation is behind such a phenomenon.
The continuous price surge also prompted the DSE to serve show-cause notice on the company last week seeking an explanation whether there is any undisclosed price sensitive information. But the company came up with a knee-jerk response, saying there was no such information.
Analysts said such a tendency is not a good sign for the market because institutional and big investors are trading on the SME platform and they usually make investment decisions based on analysis.
The stock market has now been going through a difficult time due to adversities on the macroeconomic front, said Mostaque Ahmed Sadeque, former president of the DSE Brokers Association of Bangladesh.
This SME company's share price surge is unusual considering its fundamentals, he pointed out.
He also noted that the rise of low-performing stocks has been a common trend for many years, and now many institutional investors are betting on them, which would not bode well for the market.
Meanwhile, Yousuf Flour's net profit dropped 41 per cent year-on-year to Tk 3.36 million for the year ended June 2022. The company informed that profit dropped due to 84 per cent lower supply bill this year.
The auditors of the company have a significant doubt about its "closing inventories" of Tk 461 million in the financial statements, which covers 90.97 per cent of the total assets, which they believe a significant overstatement of current assets.
A merchant banker, requesting anonymity, said a small volume of shares is behind the artificial crisis, which led to the price manipulation.
"The company's paid-up capital is also very low, making it a target for gamblers seeking to manipulate trading," he said.
Yousuf Flour's paid-up capital stands at Tk 6.07 million and the total number of securities is 606,800.
Some companies with low performance records also made their way to the top gainers' list frequently, riding on rumour that investors are putting money in the securities.
The retail investors then chase these stocks without conducting any proper analysis, as they see continuous rise in values.
Yousuf Flour's stock price is rising too fast and the regulator should investigate whether there are any wrongdoings by manipulators, the merchant banker said.
The surveillance team of the regulator was keeping an eye on trading every day, said an official of Bangladesh Securities and Exchange Commission (BSEC).
Sponsor-directors own 53.88 per cent stake in the company while the government owns 0.07 per cent and the general public 46.05 per cent as on June 2021 (year-end).