Malek Spinning’s stocks soar on expansion news
Stocks of Malek Spinning jumped 9.72 per cent after news broke that the company is going to invest Tk 213 crore to expand its production capacity in order to meet the growing demand for yarn.
The listed spinning company's stocks closed at Tk 31.60 yesterday while it was Tk 28.80 a day earlier at the Dhaka Stock Exchange (DSE).
Even before its plans were announced, the company's stocks rose 54 per cent during the last one month, which raises questions among market analysts about whether some people had access to this information beforehand.
Considering this possibility, the DSE sent a query to Malek Spinning.
In a response to DSE's query dated June 22, 2021, regarding undisclosed price sensitive information, if any, for recent unusual price and volume hike, the company informed the DSE that a board meeting of the company was held on June 22, 2021, which approved a proposal of the expansion of the company's existing project.
"They also informed that before holding the board meeting on June 22, they did not have any material information for disclosure to the shareholders and regulatory agencies," Malek Spinning said in a disclosure published on the DSE website yesterday.
Other than the balancing, modernisation, rehabilitation and expansion (BMRE) of the existing project, the board meeting also decided to install a new plant in Bhaluka, Mymensingh with an estimated total investment of Tk 213.19 crore. The project will involve land and factory development, civil construction and so on.
The company's existing production capacity is 35,000 kilogrammes of yarn per day or 1.26 crore kilogrammes per annum with 63,624 spindles, the disclosure said.
After the BMRE, it is expected that there will be 79,464 spindles, 2,000 of which will be rotor open-ended, so that production and sales revenue will increase by 60 per cent and profitability will also increase substantially.
This BMRE will create value addition due to the improvement of product quality, enabling the company to sell its products at higher prices and retain better margins.
The proposed BMRE may be implemented by funds from internal generations as well as bank loans and other sources. "We produce a single product, yarn, whose production would be increased now with the expansion," said Syed Saiful Haque, company secretary of Malek Spinning.
"The demand for this product has definitely increased, which was assessed by our team so the board decided to go for expansion," he added.
Regarding impacts of Covid-19, Haque said that since their production was interrupted due to the pandemic, it did not provide any dividends last year.
"But now the situation has improved," he added.
The company informed its stock investors last month that JM Fabrics and Knit Asia will procure yarn from Malek Spinning in bulk.
JM Fabrics will procure yarn ranging from 150,000 to 180,000 kilogrammes every month, amounting to about Tk 3.15 crore to Tk 6.80 crore.
Meanwhile, Knit Asia will procure around 250,000 to 300,000 kilogrammes of yarn every month amounting to Tk 5.25 crore or Tk 11.34 crore per month from Malek spinning Mills based on current prices.
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