Curious trading makes Yusuf Flour most pricey stock

Yusuf Flour Mills, a little known SME stock, exceeded Tk 5,000 on the Dhaka Stock Exchange's SME platform on Wednesday, becoming the most-expensive share in the stock market. The stock more than doubled to Tk 5,183.5 per share in the month to Wednesday, leaving behind many well-performing stocks in the main market. While the stock price escalated at a remarkable pace, the number of trades and trade volumes involved during the daily sessions were insignificant. That caused market analysts to suspect price manipulation. In many cases, it took an exchange of less than 5 shares for a significant jump in the stock price. For example, only three shares traded in three transactions on Wednesday, but the stock price jumped 10 per cent, hitting the upper circuit breaker. Yusuf Flour soared on the Dhaka bourse at a time when many stocks, with excellent reputation, healthy earnings, and handsome dividend records, have been enduring price erosion in the main market. Renata, BAT Bangladesh, Grameenphone and Robi saw price decline by 10 per cent to 37 per cent since the withdrawal of floor price. The small volume of trade indicates that the stock price of Yusuf Flour was increased artificially as no fundamental changes took place, which could push the stock up on the bourse, said Prof Abu Ahmed, a former chairman of the economics department of the University of Dhaka. "Without manipulation, such a kind of price elevation is not possible," said Prof Ahmed, adding that general investors usually do not trade one or two shares. The total number of shares of Yusuf Flour is only 0.60 million, of which 53.88 per cent is held by its sponsors, according to the DSE data. Prof Ahmed explained that a certain group of people might have purchased a majority of its shares. They have traded shares within the group to create a demand for the stock. When general investors will join the rally, the fraudsters will offload their holdings. Those, who drove the price up by buying a few shares, will extract profits through selloffs of overvalued shares in hundreds or, maybe, thousands. The rapid price surge took the company's market value to Tk 2.88 billion whereas its paid-up capital is a mere Tk 6.07 million. "Small-cap companies created scope for manipulators to make unprecedented gains at a time when the main market is in distress," said Md Ashequr Rahman, managing director of Midway Securities. Mr Rahman suspected that sponsor-directors might also be involved in boosting the company's stock price so that they could secure a large amount of loans from banks in the future, showing the company's market value. Company secretary Md Shahedul Islam, however, expressed shock at the inexplicable price surge. "We do not have any undisclosed price sensitive information," he said. Yusuf Flour's dividend yield, meaning how much the company paid in dividends for a year relative to its share price, stood at only 0.04 per cent for FY23. That shows the money injected into the stock would hardly have any scope of creating value for investors. The dividend yield also shows how much an investor can expect as future income from the investment made in Yusuf Flour at the latest price. At the end of Wednesday's trading, the price-to-earnings (PE) ratio of Yusuf Flour stood at 942, when latest quarterly earnings are taken into consideration. The overall DSE market's P/E ratio is around 11, which indicates that the stock of Yusuf Flour is highly overpriced. A high P/E ratio poses high risk to investors. Yusuf Flour saw an unusual price hike after the dividend declaration in December 2022. Its stock skyrocketed almost 23 times in a single day to Tk 594.40 per share as there was no circuit breaker for the stock that day due to the corporate deceleration. Yousuf Flour's net profit more than doubled year-on-year to Tk 4.70 million for July-December 2023. The auditor of the company cast serious doubts on its "closing inventories" worth Tk 472 million in FY23 and cash in hand of Tk 28.86 million, which they believed to have been overstated. Meanwhile, another SME stock, Himadri also saw an abnormal price rise of 21 per cent in the month to Tk 2861.8 per share, becoming the third most expensive stock. Yousuf Flour and Himadri stocks have been rising too fast and the regulator should look into it, said Prof Ahmed. A top official of the Bangladesh Securities and Exchange Commission (BSEC) said the abnormal spikes in the share prices of small-cap companies had drawn the attention of the securities regulator. "We are keeping a close watch on the stocks to see if there is any malpractice," he added. [email protected]
Published on: 2024-04-03 20:45:37.636546 +0200 CEST