Stock investment returns lift Sonali Paper profits to record high

Sonali Paper and Board Mills – a manufacturer of paper-based packaging boards and writing papers – reported record growth in profit for the first half of the current fiscal year, riding on robust returns from their stock market investments.

The concern of Younus Group of Industries earned Tk17.75 crore from its core business, while it made a capital gain of Tk17.84 crore by trading shares on the Dhaka Stock Exchange (DSE).

Thus the company reported a six times higher profit of Tk25.64 crore from a year earlier.

And its earnings per share stood at Tk11.67.

It relisted on the mainboard 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 mainboard.

Analysts observe that a growth depending on share returns is not sustainable and investors should remain cautious about putting funds in such stocks.

In seven months through January this year, Sonali's share price jumped 76% to Tk957.7 based on a rumour that the company was going to declare a higher profit for the first six months of fiscal 2021-22.

A stockbroker, who spoke on condition of anonymity, said, "The movement of the company's share price indicates insider trading. Some investors already knew that the company would have good growth in profits. So after a financial disclosure on Tuesday, its share prices fell 1.20%."

It had earlier paid a 20% cash and 20% stock dividend for FY2021, compared to 5% cash and 10% stock dividends in the previous year.

As per the securities law, a company should specify the reasons in the case of any significant profit growth.

In this case, the company had notified the shareholders through the stock exchanges that their profit grew due to increased revenue and other incomes. But it did not specify the source of 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 Tk45.37 crore.

In the last year, those shares prices increased considerably. And the company has made a huge return by selling those shares.

This correspondent phone called the company officials for comments but they did not answer.

In January, the Bangladesh Securities and Exchange Commission (BSEC) decided to appoint a special auditor for Sonali Paper to look into its assets that were revalued in 2016.

The company revalued its assets through SH Khan and Co Chartered Accountants in 2016.

The value of 1,150 decimal land of the company was Tk1.13 crore, bought in the Tarabo area of Rupganj upazila, Narayanganj several years ago.

The company revalued this Tk1.13 crore land to Tk517.50 crore.

A source in the market regulator said a special auditor will try to review the fact of asset revaluation of the company.

If any irregularity is found, the commission will take legal action against the company, he added.

Sonali Paper and 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 its shares in 2006.