No dividend from Express Insurance frustrates investors

Investors have expressed their disappointment in the recently-listed company Express Insurance Limited because the company has decided it will not pay a dividend to its shareholders for the year that ended on December 31, 2019. 

The recommendation came at a board meeting of the company, held on Monday, that took the investors' community by surprise. 

The company's stock price took a beating on Tuesday, falling as low as Tk26.5 per share from the previous day's closing price of Tk31.3 on the Dhaka Stock Exchange. Finally, the stock closed at Tk29.8 per share after registering a drop of 4.8% following the dividend announcement. 

Md Abdul Mannan, a general investor who trades at Sheltech Brokerage Ltd told The Business Standard, "Express Insurance did not recommend any dividend in the first year of its listing with the stock exchange. But it had the ability to pay dividends. It seems that the board and management of the company are cheating us."

"Generally, an investor invests money in a stock by analysing the dividend policy and earnings growth of the particular company. Therefore, by not recommending any dividend, Express Insurance has set a bad example here," he added.

In the 2019 financial year which ended on December 31, earnings per share of the company increased by 17% to Tk1.31 and its net asset value per share stood at Tk18.04. The company also has a healthy net operating cash flow.

The Bangladesh Securities and Exchange Commission (BSEC) summoned the company on Tuesday morning after the news of its non-payment of dividends was published.

At the meeting, BSEC asked the company to review its decision.

Md Rezaul Karim, spokesperson and executive director of BSEC told The Business Standard, "Express Insurance was called in because such an announcement by the company has led to investors' criticism."

He added, "The commission has instructed them on what to do in this regard."

KM Saidur Rahman, managing director of Express Insurance said, the commission called and expressed its frustration over the declaration that there be no dividend in the first year of enrollment.

"We did not recommend any dividend in order to strengthen our financial health against the effect of the [novel] coronavirus pandemic," he added.

"However, BSEC has instructed us to review the decision. Following this instruction, we hope to give investors good news soon," he added.

Earlier, BSEC approved Express Insurance to go public on condition that it invest at least 20% of its initial public offering (IPO) funds in the capital market. The company would deposit 74% of its IPO funds in banks.

The company debuted at the stock market on August 24 this year. 

As per the approval, Express Insurance has raised Tk26 crore capital by releasing 2.6 crore in ordinary shares at an offer price of Tk10 each under the fixed-price method.

The company will invest Tk2 crore in treasury bonds, Tk1 crore in mutual funds and Tk2.21 crore in the secondary market of the stock exchange from the IPO fund. It will keep Tk19.36 crore in fixed deposit receipts in banks. 

Express Insurance was set up in 2000. Its authorised and paid-up capital are Tk75 crore and Tk39.11 crore, respectively.

Md Abdul Awal is the chairman of Express Insurance and also the managing director of Synthia Securities–a brokerage firm.

AAA Finance and Investment, IIDFC Capital and BLI Capital were issue managers of the company's IPO.