Paper-based packaging board manufacturing company Sonali Paper and Board Mills Limited, a concern of Younus Group of Industries, reported higher profit in the last fiscal year and it maintains growth in the first quarter of this fiscal year thanks to higher return from share business.
It relisted in the main board of the stock exchanges from the over-the-counter market (OTC) in 2020. OTC is a platform for non-performing companies after being delisted from the main board.
Analysts observe that growth depending on share returns is not sustainable and the investors should remain cautious about investing in such cases.
Between July and October, Sonali's share price jumped 245% to Tk679 based on its higher profit growth and it is going to issue right share and recommend handsome dividends, said a stock broker seeking anonymity.
It declared a 20% cash and 20% stock for FY2021, which was 5% cash and 10% stock in the previous year.
In FY2021, riding on the share business, the company reported a 235% growth in net profit to Tk8.94 crore, while it earned Tk5 crore from the capital market. But the company achieved only 3% growth in its core business.
The same thing happened in the July-September period of the fiscal year 2021-22. During this quarter, they earned Tk12 crore from the share business, while it earned only Tk3.7 crore by selling paper-based packaging board. During this period, it posted 967% growth in net profit to Tk12.18 crore.
As per securities law, in the case of any significant growth in profit, a relevant company should specify the reasons.
In this case, the company notified the shareholders through the stock exchanges that their profit grew due to increased revenue and other incomes. But they did not specify the other incomes.
Sonali Paper has bought Asia Insurance, Bangladesh National Insurance, Eastern Insurance, Fortune Shoes, NRB Commercial Bank, Genex Infosys and Northern Insurance shares by investing Tk55.54 crore.
In the last one year those shares price increased heavily. And the company has made a huge return by selling those shares.
Despite several attempts, the company officials did not respond to phone calls.
In May this year, the company disclosed that they are going to install a new plant to produce aluminum foil paper boxes.
Sonali Paper & Board Mills was incorporated in 1977 and got listed on the Dhaka Stock Exchange in 1985 and on the Chittagong Stock Exchange in 1996.
Under the previous management, the company had incurred huge losses and failed to provide financial statements and hold annual general meetings for years from 1998 to 2006.
Younus Group took over the company after buying all shares in 2006.