ML Dyeing Limited, the listed yarn dyeing company of Far Group, witnessed a 150 percent hike in its stock price in the last five months when share prices of almost all companies were dipping down.
Thanks to its increased revenue, net profit and very importantly, net profit margin.
Yet, there had been questions among analysts whether the improved figures are enough to justify the stock price hike or the gains are merely a result of market speculation, or it involves any price manipulation attempt.
The mystery kind of unfolded on Wednesday when the company announced that it had entered a sales or export contract with Kolkata's AMJ Narrow Fabrics Private Limited to supply them with 50 lakh pounds of dyed yarns. If delivered, the one-off sale alone will help the company's revenue grow by more than one-fourth this fiscal year.
When contacted for details of the contract, AKM Atiqur Rahman, company secretary of ML Dyeing, told The Business Standard, "Pricing depends on market scenario. We will buy yarns from the market and dye those at our facilities and later export those to AMJ Narrow Fabrics. For sure, it will add to our revenues and hopefully, profits too."
He declined to share further details and financial implications of the contract.
The contract was signed on February 17 last year. The company's share price at the Dhaka Stock Exchange jumped from Tk33 to Tk58 in the last one month.
General investors, like always, believe that insiders and a quarter of market players have been aware of such a positive development and have enjoyed the price hike too.
"Without insiders' information, it is impossible to smell what is going on inside the company. The disclosed data of sale, profit and profitability improvement did not support the recent stock price hike, and we did not buy its shares," said an equity analyst at a top brokerage firm.
"There is a serious lack of equity in the flow of price sensitive information in our market. Such unethical phenomena deprive general investors," said the analyst, who is also a Chartered Financial Analyst.
"The regulator has the power to check all the fishy transactions and investigate whether there are any links between insiders and market actors."
Third Far Group company at DSE
The yarn dyeing entity entered the stock market in 2018 as the third company of Far Group. RN Spinning and Far Chemical Industries are the two other listed companies.
Of those, RN Spinning's production was suspended following a fire incident at the factory. The April 2019 fire damaged the factory and inventories worth over Tk600 crore and the company is still dealing with the insurer for compensation.
The company was listed on the DSE in 2010, and has grown to a Tk392 crore enterprise in terms of paid-up capital through bonus and right share issuance. But now it is posting losses. Its share price is Tk4 at present.
On the other hand, Far Chemical Industries was listed in 2014, and has increased its paid-up capital to Tk218 crore through issuance of bonus share each year.
It is now posting moderate earnings per share – around Tk1 against face value of Tk10 per share. Stock price is also hovering around the face value.
Sponsors and directors now hold nearly one-third shares – which is mandatory – in each of the three listed companies.
ML Dyeing's performance
The company mainly earns money by dyeing yarns for textile manufacturers.
Its net profit margin – net profit as a percentage of revenue – in 2018-19 fiscal year was eight percent, which jumped to 14.48 percent in the first half of the current financial year.
Its annual revenue in the last fiscal year was Tk247 crore – posting a four percent year-on-year growth. In that year, it dyed 1.8 crore pounds of yarns. In the first six months of the current fiscal year, its revenue increased by 18 percent compared to the same period of the previous year, and reached Tk144 crore.
Last year, its annual net profit grew by 0.75 percent to reach Tk19.65 crore. The company disbursed five percent cash dividend alongside issuing 15 percent bonus shares for the year. The diluted earnings per share stood at Tk0.98.
Later, in the first half of the current fiscal year, the company's net profit jumped by 65 percent to reach Tk20.8 crore from Tk12.62 crore during the same period of the previous year.
"Though the industry was in pressure, our customers increased their orders over the period. Besides, we managed to increase recovery from receivables. The two helped increase our revenue and profit," said Atiqur Rahman.
The company is yet to recover receivables worth around Tk100 crore as of December last.
The Tk221 crore paid-up capital company posted earnings per share of Tk0.94 in the first half of the current fiscal year against Tk0.7 a year ago.
On the other hand, the company is yet to utilise Tk12.54 crore from its Tk20 crore fund raised through the initial public offering in 2018.
"We opened letter of credit to import machinery with this money. We took some time to match capacity growth with demand", said the company secretary.