Mir Akhter Hossain IPO: Key things to know before investing

Mir Akhter Hossain’s Tk125 crore initial public offering (IPO) will open for subscription on Thursday. Here are the key things you should know before investing in the issue.

The country’s construction and engineering giant has over 50 years of experience with a proven track record in the construction industry of Bangladesh. It has 3,590 employees including around 450 highly skilled engineers. The company has experienced civil, electrical and mechanical engineers, management personnel and skilled technicians to complete any types of projects, according to its prospectus.

It has implemented many projects including Mirpur-Airport connecting flyover, Tongi flyover, Karnaphuli Bridge connecting four-lane road, Bangabandhu Bridge four-lane road, Radisson Blu Dhaka, Hatirjheel Project bridges, Mugda 500-bed Hospital, Ashuganj 400megawatt power plant etc.

The growth comparison in terms of revenue shows that the industry grew a bit faster than Mir Akhter Hossain since couple of years referring an underperformance of the company in comparison to the construction sector as a whole, according to Royal Capital.

Its strengths are highly experienced professional engineering personnel, great track record of contract wins and project innovation by cutting-edge technology while its weaknesses are debt-based capital structure and lower profitability, high default risk due to high level of debt obligation.

Among risk factors, it may be difficult for the company to maintain its growth and to gain competitive advantage over the competitors due to very strong competition in the construction industry and drive overnight financial efficiency due to its high finance costs. Timely project implementation within budget is a difficult task for the company.

Its major competitors are Abdul Monem, Max Infrastructure, Toma Group, Spectra Construction and Monico Ltd.

The higher debt to equity ratio indicates that it carries higher degree of financial risk, Return on Invested Capital remains at a dissatisfactory level compared to opportunity cost of capital, cash flows in the past years are moderate. The company generated handsome shareholders' returns in terms of return on equity in the past couple of years. The company's equity growth is less than its asset growth, reflecting increase liabilities over time, said the Royal Capital.

The company's has good cash balance to meet the current obligation as per the cash ratio of 2018 and 2019. The revaluation reserve to total reserve and surplus accounts significantly which is a concern for the investors.

It got IPO approval from the Bangladesh Securities and Exchange Commission on November 5. Its offer value is Tk 60 per share. The company will use the raised fund for purchasing construction equipment and machinery, bank loan repayments and IPO-related expenses.

As of June 30, 2019, the company’s earnings per share was Tk 6.32, net asset value per share Tk 34.71, including re-evaluated reserve and Tk 33.63 excluding re-evaluated reserve.