Dhaka Stock Exchange has opened an investigation into the “unusual price hike” of Meghna Condensed Milk Industries, a junk stock.
Yesterday, the company’s share price rose 5% to close at Tk13.6 a share and in the last two weeks it continued to rally and surged 70%. Its offer value is Tk10 each.
“DSE has formed an enquiry committee to investigate the unusual price movement of shares of Meghna Condensed Milk Industries Ltd,” DSE said in a statement yesterday.
According to its third quarter unaudited statement, the company has incurred losses of Tk1.84 crore from Tk1.27 crore in the same period a year ago. The figure shows the losses increased by 45% due to extremely high administrative and financing costs, according to the company’s balance sheet.
The excessive administrative costs are due to higher depreciations as seen in the annual report of the year 2012.
The financing costs increased as the company took loans in 2001 for financing a project and to maintain the business operation.
The financing cost was growing as the company failed to pay its loan interest because of the poor performance.
It borrowed Tk27.4 crore from Sonali Bank at 8% interest per annum in 2001 to finance the project, mortgaging its land, buildings, plant, machinery, finished goods and also personal guarantees of the directors. Currently, the amount of loan accumulated Tk63.6 crore as of March 31, 2013.
The company’s nine months (January-September) losses stood at Tk102.6 crore, a sharp increase of 158% from the losses of Tk39.8 crore it made in the same period a year earlier.
The accumulated losses are increasing despite rising sales because the management has to cope up with its annual financing cost, said an analyst.
On November 18 last year, the company’s auditor Ahmed Zaker & Co said the company is still to be regarded “Going Concern matters” and thus it is assumed that the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operation.
“Going Concern” is a term for a company that has the resources needed in order to continue to operate indefinitely.
Established in 2001, Meghna Condensed Milk is a concern of Meghna Group of Industries. Fresh is the company’s brand.
