The stock price of Khan Brothers PP Woven Bag Industries Ltd has kept soaring on the Dhaka Stock Exchange (DSE), despite there being no clear reason for investors to show strong interest in the stock.
The company is currently facing a severe working capital crisis, which has forced it to rely on subcontract work for survival. still, the stock has frequently appeared on the top gainers' lists in the last one month, raising questions about the underlying factors driving its rise.
After suffering a loss of Tk 48 million in the past four straight years until FY23, the company has reported 0.86 million profit in FY24.
Despite the company's poor financial performance, which led to no dividend distribution in FY23 and only a 1 per cent cash dividend for FY24, the stock has continued to climb. It has remained in the 'B' category for several years.
This week, the company's share price jumped 23.8 per cent, reaching Tk 161.1 on Thursday, making it the second highest gainer of the week.
The stock had surged an astounding 35 per cent in 2024, despite the absence of any price-sensitive announcements while the overall market plunged 16.5 per cent during the same period.
Such an unusual price movement in recent times prompted the prime bourse to serve show-cause notices several times to the company authority, enquiring about the reasons behind that.
The company replied with a knee-jerk response every time, saying there was no undisclosed price-sensitive information.
Company Secretary Tapan Kumar Sarker himself expressed shock at the inexplicable price surge, saying they do not have any undisclosed price sensitive information which might influence the stock price movements.
He said the business had been seriously affected by the pandemic for a lack of orders from foreign buyers. The management has been trying to continue operations partially to supply local businesses.
Market analysts suspect that manipulation is the reason behind the "abnormal price" surge as non-performing stocks are dominating the market nowadays.
Khan Brothers had experienced rallies many times, not supported by its fundamental strength, but only rumors that its values will increase further, said a leading stockbroker.
Abnormal stock prices which are not supported by company fundamentals do not sustain and investors must be cautious, he said.
Junk stocks are significantly beating their industry peers who are in regular business operation, posting profits and giving dividends to their shareholders.
The 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.
Auditor of Khan Brothers also found a number of irregularities in the financial statements for FY24, including mismatch in raw materials and inventories and doubt about land ownership.
Khan Brothers showed raw materials and finished goods worth Tk 597.46 million at the end of June 2024, which have been carried forward in the last couple of years, but could not be confirmed due to lack of proper documents.
A similar sister concern is also operating on the same premises and the company is operating under sub-contract agreement with the sister concern so the ownership of the inventory could not be identified, said the auditor.
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