Investors swooped on Lafarge Surma Cement at the Dhaka Stock Exchange (DSE) after the company announced that it will merge with the Holcim.
Yesterday, Lafarge emerged as the top traded stocks with shares valued at Tk77.5 crore, making up 14.4% of the total trade of the premier bourse.
Its stocks prices surged by 3.8% to close at Tk59.50 before rising as high as Tk63 each. It rose around 10% a day before.
Analysts say such buying euphoria about the stocks might fade away, if investors take timing of merger, valuation of the company and rate of return at prices what they are paying now.
“Even if the merger brings unbelievable gains for Lafarge, it might not yield higher return for the investors, if they (investors) compare with the price currently they are paying,” said an analyst asking not to be named.
Moreover, he said, the value addition of the company will come after at least a couple of years and many investors are perhaps ignoring the timing, which is unfortunate and irrational.
Holcim and Lafarge, the world’s cement giants, on April 8 announced outline for their proposed merger. In a joint statement, they said the companies are aiming to complete the deal by the first quarter of 2015.
According to the latest disclosure on financial statements as of last year, the company has a consolidated net asset value of Tk9.51 per share and an annual earning of Tk2.19 per share.
Considering the company’s financial scenario, investors who are buying the stock are paying six times the price of assets held by the company and annual earning for each stock is slightly above Tk2 against the stock price Tk60.
Some brokers were seen warning retailers to be careful before buying the stock. “It is just irrational speculation from retailers who are buying stocks without analysing the merger issue,” said a broker.
Lafarge of France have stake of only 29.435% of the Lafarge Surma Cement listed with the DSE.