The stock price of newly listed Information Technology Consultants (ITC) has skyrocketed despite the company’s negative first quarter financial results, which surprised many, including the company itself.
On Dhaka Stock Exchange, its share prices witnessed a dramatic rise of 680% to over Tk78 a share on its offer value of Tk10 at a stretch until Tuesday from its debut on January 10. However, yesterday, the IT firm suffered a sharp sell-off and slumped almost 10%.
Rumours about an influential person having investment in the company and speculation of its EPS (earning per share) to be healthier in future have worked like a magic for ballooning stock price of the ITC, market sources said.
Asked about the rumour, a top company official said on condition of anonymity: “It is totally baseless. Moreover, we are surprised about the company’s price behaviour.”
VIPB Asset Management Company CEO Shahidul Islam said: “It was just a speculative rally, which finally failed to sustain.”
A financial analyst at a top brokerage firm said considering the company’s growth history, ITC stock price is overvalued.
Stock prices of other listed IT firms – Aamra Technologies, Agni System, ISN, Intech, and Daffoldil Computers – were currently between Tk12 and Tk28 a share and many of which have large investment in the IT sector. “So, it is clear like daylight what price should be for the new comer,” said the analyst.
In response to a DSE query, the company said it has no undisclosed price sensitive information for recent unusual price hike.
Before the market opened, the ITC reported negative earnings for the first quarter (July-September) of this fiscal year. Its losses stood at Tk41.4 lakh in the first quarter, which was over Tk3 crore a year earlier, showing that its earnings improved but remained in the negative. During the period, the EPS of the company was Tk0.06 against Tk0.05.
The ITC provides IT services for banks and its 100% revenue comes from local sales, according to the company’s prospectus.
After analysing its financial performance, it was found that the company failed to generate returns for its shareholders in comparison to its peer companies. In addition, the return of earning of the ITC fluctuated mostly from 2011 to 2014, which indicated a higher risk for the shareholders.
About the profitability ratios, the company’s cost efficiency is worse than its peers as the gross and operating margin is materially lower than its peers despite the net
margin that stood better than sector average.
In its analysis, Royal Capital said the strength of the company in demand for IT services is very high nowadays, and bank loan and other finances are available. The weaknesses are: the company has no dividend history and cash flow appears to be volatile over the last five years.