Wata Chemicals' stock price jumped more than 44 per cent in a month on the Dhaka Stock Exchange (DSE) without any reason for investors to be keen on betting on the stock.
The chemicals producer's net profit fell gradually in the past five years to FY'23. And in the past nine months of FY'24, its profit slumped further by 32 per cent to Tk 15 million while sales plummeted 31 per cent.
Despite dismal business performance, the company's stock price gradually increased to Tk 159.8 on Tuesday last from Tk 110 on May 30. Even, there was no recent disclosure of price sensitive information.
At the end of Tuesday's trading, the price-earning (P/E) ratio of Wata Chemicals stock stood at over 118, based on its latest un-audited financial statements, much higher than overall market P/E of 10.35.
Even the stock made it to the top gainers' list and top turnover list frequently in recent times although no fundamental changes took place.
Such an abnormal price movement prompted the prime bourse to serve a show-cause notice to the company authority on Tuesday, enquiring about the reasons behind that.
The company, however, returned a knee-jerk response, saying there was no undisclosed price-sensitive information which might influence the stock price movements.
Following the show-case notice, the stock price dropped 3.6 per cent in the next two trading days to close at Tk 154 on Thursday, the last day of the trading week.
In absence of any valid reason behind the price appreciation of the company's stock, analysts suspect that manipulation acted as a short-term catalyst.
A hike in the share price is unusual considering the current status of the company and its stock is rising mainly due to some rumours that their values will increase in the future, said a stockbroker.
Nowadays, the non-performing stocks are significantly beating their industry peers who are in regular business operation, posting profits and giving dividends to their shareholders, he added.
The general investors keep chasing these stocks as they fly on the bourses to make capital gains overnight, a tendency that manipulators cash in on by selling off overvalued stocks to general investors.
The investors need to be cautious while putting money in such speculative stocks, he added.
Wata Chemicals was re-listed on the DSE in 2014. Before the re-listing, the company remained on the OTC (over-the-counter) market for four and a half years due to its non-compliance.
However, the chemicals maker's profit gradually declined to Tk 45 million in FY23, from Tk 138 million in FY19.
Wata Chemicals produces and sells alum and zinc sulphate, magnesium sulphate, sulphuric acid, basic chrome powder, and linear alkyl benzene sulphonic acid.
Sulfuric acid is mostly used in production of fertiliser, in refining water and petroleum and in manufacturing other chemicals such as hydrochloric acid, nitric acid, sulfate salts, synthetic detergents, and dyes and pigments.
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