Malek Spinning shares soar on Tk213cr investment plan

All the indices of the stock exchanges nosedived on Wednesday, Malek Spinning Mills' shares soared 9.72% riding on a new investment plan of Tk213.19 crore for boosting the high-valued yarn production capacity.

But its share price had already jumped 145% in the last two months before the investment news was published on the websites of local stock exchanges.

On 22 June, the Dhaka Stock Exchange (DSE) sent a letter to know the reason for the unusual price hike of the company. 

In reply to the query, Malek Spinning informed the country's premier bourse that the company's board at a meeting on 22 June evening decided to invest in the new project.

"We decided on a new investment on Tuesday afternoon. And the same day the letter from DSE arrived. So in response to the letter, the price-sensitive information has been reported, which has been published on the DSE website today," A Matin Chowdhury, managing director of the company, told The Business Standard. 

"The share price of listed companies in the textile sector has been rising for the past two months. As part of this, the share price of our company has risen. We have nothing to do with this price increase."

Rezaul Karim, executive director of the Bangladesh Securities and Exchange Commission (BSEC), said, "We are looking into the unusual price hike of the shares. In case of any violation of laws, action will be taken against the company as per the rules."

As per the investment plan, the company will install new machines for producing high-valued yarn to meet the buyer requirement. This new project will create value addition due to the improvement of product quality which will enable the company to sell its products at higher prices and retain better margins. The proposed investment will be implemented by funds from internal generations as well as loans from banks and other sources.

"Our yarn has a lot of demand from buyers because we import cotton from America and make yarn using modern technology. We do not charge a premium for this," said the managing director of the company. 

"Along with the advancement of technology worldwide, the quality of yarn has also changed. So we are investing heavily in producing better yarn."

He said currently, the business is in a negative state due to the Covid-19 pandemic. 

"But, the situation will not last long. Moreover, the business will not stop for this. So we are getting ready to meet the growing demand for cotton-based yarn," he added.

Malek Spinning, a sister concern of New Asia Group, has three subsidiary companies – Salek Textile Limited, JM Fabrics Limited, and Newasia Synthetics Limited.

But the Newasia Synthetics Limited, a project promoted for setting up a polyester staple fibre and chips plant, could not be implemented due to the non-availability of gas connection from Titas Gas.

A Matin Chowdhury said, "When we took this project 20 years ago, there was a demand for polyester staple fibre. But due to a lack of gas connection, the project could not be started on time. And at present, there is no demand for this product. So, we moved away from this project."

In the first three quarters of this fiscal year, the company reported a 30% growth in revenue to reach Tk1,078.36 crore and its net profit jumped eight times to stand at Tk38.53 crore.

But in the fiscal 2019-20, the company could not pay any dividend to its shareholders due to a loss for the Covid-19 pandemic. In that year, the company posted a loss of Tk32.61 crore.

Till May this year, sponsors and directors hold 47.34%, institutional investors 32.95%, and general investors 19.71% shares of the company.