Sonali Aansh Industries has been flying high on the Dhaka Stock Exchange (DSE) in the last two weeks but the company representatives say no undisclosed price-sensitive information is behind it.
The export-oriented jute goods manufacturer's stock price climbed 37 per cent during the period to Tk 333.6 per share by Monday.
The prime bourse served a show-cause notice to the company, enquiring about the reasons behind the quick price surge. The company claimed it was unaware of anything that could drive up the price and volume of shares traded.
Market analysts, however, say the interim government has taken a move to revive the jute sector. Moreover, Sonali Aansh reported a steady profit growth in the past three quarters, which might have increased expectations of better dividends.
The company posted a staggering 12 times year-on-year growth in profit to Tk 170 million in the nine months through March this year, higher than previous annual profits since its listing in 1985.
Meanwhile, the government announced a ban on polythene and polypropylene shopping bags in all superstores, effective from October 1. At the same time, it has decided to promote jute and other eco-friendly bags as alternatives.
A detailed action plan has been formulated to enforce the ban, including steps to raise public awareness through a nationwide media campaign.
"Investors expect that the consumption of jute products [jute bags] will go up in the future," said Akramul Alam, head of research at Royal Capital.
Anticipation of good dividends following the better annual financial performance might be another reason for increased appetite for the stock, said Mr Alam.
A 100 per cent stock dividend for two immediate past financial years boosted hope for a high dividend for FY24. In FY23, shareholders received a 10 per cent cash dividend in addition.
The company issued bonus shares to expand its paid-up capital, a requirement set by the securities regulator. Despite the dividend payout, its paid-up remained far below the minimum regulatory requirement of Tk 300 million.
Sonali Aansh was among the 64 companies that the Bangladesh Securities and Exchange Commission (BSEC) in 2021 asked to increase paid-up capital to at least 300 million.
Presently, the company's paid-up capital is Tk 108.48 million.
Wishing not to be named, a leading stock broker said investors were buying the shares amid high speculation that Sonali Aansh would declare bonus shares again to increase the paid-up capital. The surge in the stock price and trade volume happened ahead of the dividend announcement, he added.
"We are more focused on diversifying products by producing value-added jute goods, including jute-made shoes, bags, and accessories to expand our business," said company secretary Md Habibur Rahman Khan.
Meanwhile, the company reported a staggering 97 per cent profit growth year-on-year to Tk 20.92 million for FY23.
The price-to-earnings (PE) ratio of Sonali Aansh is 16, based on the latest un-audited financial statements. The P/E ratio does not indicate that the stock is overvalued as the overall DSE market's P/E ratio is around 11.
The PE ratio is an important indicator to better understand what happens in the market after a large gain or decline. It is also one of the best gauges to know how expensive or cheap the stock is at a certain period.
Sonali Aash was listed in the stock market in 1985 when Beximco Group was its owner. Later, the business conglomerate exited the company's board.
Having started commercial production in 1982, Sonali Aansh is the leading export-oriented industry of jute yarn and other jute products in Bangladesh.
The company exports jute yarn & fabrics and jute products to Turkey, Egypt, Spain, France, Belgium, Germany, Italy, Saudi Arabia, Iran, Algeria, China, Japan, Korea, Russia, Singapore etc.
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