Gamblers having field day with off colour Central Pharma stocks

Stocks of Central Pharmaceuticals almost doubled in the last one month even though its production of few drugs have been on pause in the last three months.

On the other hand, earnings per share (EPS) of the company is also deteriorating. Its EPS dropped 75 per cent to Tk 0.11 in the first half of the current financial year.

In response to a notice from the Dhaka Stock Exchange the drug maker yesterday informed that its production has been suspended since December 5 last year as the Directorate General of Drug Administration temporarily scrapped its licence of production of few drugs.

However, no bad news was able to stop the curious abnormal rise of the drug maker's stock price.

In the span of one month it rose 97.67 per cent to Tk 17. Yesterday, it advanced 9.68 per cent despite the notice posted on the DSE website.

The increase is just because of gambling by some people, said a stock broker preferring anonymity.

People are buying the stocks in order to create an artificial demand and price hike so that general investors are drawn in.

"When the general investors will buy the stocks the gamblers will sell," he said, adding that the Bangladesh Securities and Exchange Commission (BSEC) and the Dhaka Stock Exchange have surveillance software separately that can detect everything.

This begs the question why the two bodies are not forbidding the big buyers from jumping into a profit declining company, he added.

According to the DSE data, the drug maker's profits and revenue has been waning since its listing in 2013.

The drug makers' turnover dropped 53.47 per cent to Tk 30.74 crore in the 2018-19 financial year compared with the 2014-15 financial year.

Its profits declined at the same rate and so did its stock price.

"We cannot ask an investor why they are buying the stock of a company whose profits are shrinking," said a top official of the BSEC requesting not to be named.

Investors should be cautious about what they are buying and what returns they will get them.

A merchant banker said when a company rises abnormally and some people buy the stocks it is definitely because of bad intentions.

"So, the BSEC should find them and punish them to stop the gambling. Otherwise, stock investors' confidence will not return to the market," he added.

Mansur Ahmed, managing director of Central Pharmaceuticals, did not answer to calls from The Daily Star.