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Dramatic rise of Gemini Sea Food on DSE falls short of justification

Babul Barman | April 26, 2023 00:00:00

Gemini Sea Food's stock price almost doubled in a month after it signed a deal with German-based global frozen food trader Lenk.

The business deal to supply processed shrimps from Bangladesh is expected to boost income.

The perceived future business growth led to a jump in the share price on the Dhaka Stock Exchange from just Tk 462 to Tk 855.90 in the last one month through Tuesday.

A rumour has spread on the trading floor that the stock will go further up, prompting a section of investors to keep chasing it to make capital gains overnight.

Market experts suspect that the stock price might have been manipulated because it rose too much, too fast.

"Investors' over enthusiasm caused the company's stock price to escalate within a short time," said Prof Abu Ahmed, a former chairman of the economics department of the University of Dhaka.

Many investors were chasing low-cap stocks in recent months in anticipation of quick gains as investments in big firms were not giving them quick capital gains in the current market situation, he said.

"If the stock price rises based on fundamental factors, that is fine, but in many cases dishonest traders were behind abnormal price surges."

So, investors should be careful while "buying overvalued stocks" in order to avert any misfortune, Mr Ahmed added.

Gemini Sea Food's paid-up capital is only Tk 61.05 million. Currently, its price-to-earnings (PE) ratio is 42.

The recent unusual price movement prompted the prime bourse to serve a show-cause notice twice early this month to the company authority, enquiring about the reasons behind that.

Company secretary AFM Nazrul Islam said there was no undisclosed price sensitive information that might influence the share price movements.

"Investors are showing interest in the company's shares considering its business growth," he said.

The company's sales revenue jumped 93 per cent year-on-year to Tk 261 million in the January-March quarter of FY23 while profit leapt 205 times to Tk 50 million.

The deal to supply processed shrimps to Lenk is expected to generate Tk 500 million more revenue.

It has broadened the scope of business and penetrating non-traditional global markets, Mr Islam said. "Lenk will support Gemini in exporting to markets yet to be reached by the local seafood exporter," he added.

Gemini has been the pioneer in exporting certified organic shrimp to EU retailers since 2008. The company also exports products to Canada, the USA and Japan.

The Khulna-based shrimp exporter saw its profit jump more than 17 times year-on-year to Tk 58.66 million in FY22.

The stronger dollar against the taka and the government's cash incentives against exports helped attain the high profit growth.

Bolstered by the stunning business growth, the company declared 10 per cent cash and 30 per cent stock dividends, the highest in the five years since 2017.

Despite the high dividend, the dividend yield was only 0.29 per cent for FY22, according to the DSE website. Dividend yield gives an estimate of the dividend-only return from a stock investment. It shows how much the company has paid its shareholders for the year, relative to the share price.

"We are getting new export orders amid a growing demand for shrimp in the post-pandemic period," the company secretary said.

To expand business, the company is focused on the EU market where the export contribution of Bangladeshi shrimps is around 85 per cent, he said.

Gemini Sea Food's export turnover stood at Tk 726.50 million in FY22. Of it, 58 per cent involved the EU market, 18 per cent Canada, 13 per cent the USA and 11 per cent Japan.

Gemini accounted for 56 per cent of the country's total shrimp exports in FY22. Overall, shrimp exports increased 24 per cent year-on-year to $407 million in FY22, according to data from the Export Promotion Bureau (EPB).

"We exported the highest number of consignments to Japan in the history of Gemini in the last fiscal year," the company secretary said.

Gemini is also working to expand its business in the growing local frozen food market, he said.

The company will add a new production line to produce frozen chicken nuggets, sausage, meatballs, fish-balls, shrimp balls, fish fingers, paratha and other items to penetrate the local market.

Meanwhile, when attention was drawn to the abnormal share price hike, an official of the Bangladesh Securities and Exchange Commission (BSEC) said the regulator's surveillance team was keeping an eye on daily trading.

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