Company extended closure of its factory for the third time
Ring Shine Textiles on Tuesday announced the closure of its factory for one more month until December 24 for want of orders, in yet another spot of bad news for its retail investors.
Earlier on September 27, the company had announced that its textile manufacturing plant in Savar’s Dhaka Export Processing Zone would be on recess until October 25, which was later extended by a month to November 25.
The move comes in the face of shrinking orders from foreign buyers and a shortage of imported raw materials for the global coronavirus pandemic, Ashraf Ali, company secretary of Ring Shine Textile, told Dhaka Tribune.
The decision was taken in line with section-11 of the Bangladesh EPZ Labour Law, 2019, he added.
A factory layoff within a year of listing, when all the other listed textile manufacturers are running their plants in full steam, is a bad omen, a handful of stock brokerage houses told Dhaka Tribune requesting not to go on record for the report.
This isn’t the only spot of mystery surrounding the company: on November 15 the company announced the postponement of the board meeting to review the financial statement for the first quarter for its 2020-21 financial year for no specific reason. A new date was not announced either.
To add to the concern of its retail investors is the disclosure in its 2019-20 financial year report that the company has a negative cash flow per share.
Cash flow per share is calculated as a ratio, indicating the amount of cash a business generates based on a company’s net income with the costs of depreciation and amortisation added back.
Since the expenses related to depreciation and amortisation are not actually cash expenses, adding them back keeps the company’s cash flow numbers from being artificially deflated.
Because cash flow per share represents the net cash a company produces, some financial analysts view it as a more accurate measurement of a company's financial health.
Ring Shine Textiles posted a negative net operating cash flow per share of Tk 0.76 for the 2019-20 financial year that wrapped up on June 30, in contrast to Tk 1.83 a year earlier.
The company logged in a profit of about Tk 14.5 crore for the year that ended on June 30, down 70.5 per cent year-on-year.
Its retail investors have been hit by one bad news after another ever since the company got listed in December last year.
A month later, rumours surfaced that Ring Shine Textile’s foreign staff, including its directors, were abandoning their posts and leaving the country for good. The exit en masse had been prompted by either loan defaults or an anonymous death threat issued to the managing director.
This precipitated the slide of the stock, which made its debut just at Tk 15, and at one point went below its face value of Tk 10.
Then later in January, the securities regulator asked the Bangladesh Bank to freeze the initial public offering (IPO) account of the textile maker citing irregular cash disbursement.
The company had raised Tk 150 crore from the public for purchasing machinery and repayment of bank loans and instantly withdrew Tk 50 crore from the account to pay off loans taken from different banks before the public share issuance.
Then in February, a key sponsor offloaded holding: Universe Knitting Garments, whose owner Sung Wey Min is the sponsor and MD of Ring Shine Textile, sold 36.9 lakh shares.
This only led to an increase in the supply of Rung Shine shares in the market, forcing the stock price to plummet even more.
According to market analysts, when a company's sponsor sells his or her shares just after being listed, it gives a bad signal to general shareholders.
A sponsor can sell his or her shares as they wish but when they do so under a stock's face value, then it raises questions about the company's potential, they added.
When Universe Knitting offloaded the Ring Shine shares, the stock price was languishing at around Tk 8, which is less than the face value.
Shares of Ring Shine closed at Tk 6.4 yesterday, which is the same as the previous day.
As per its 2019-20 annual report, the company has failed to utilise the IPO funds for the main reason that it got the amount for: for the acquisition of machinery and equipment.
It has so far spent Tk 53.5 crore: Tk 50 crore to pay off the bank loans and Tk 3.5 crore for IPO expenses.
The company has announced a 1 per cent cash and 1 per cent stock dividend for the 2019-20 financial year.
Ring Shine’s issue managers, AFC Capital and CAPM Advisory, declined to comment for the report.