Dominage stocks’ unprecedented rally looks irresistible

Dominage Steel Building Systems has witnessed an unprecedented rise since its debut, ignoring its declining earnings. Its share prices skyrocketed more than 170 percent in four trading days.

Every day, its stock price halted and no sellers were found on the trading floor while buyers waited on the other side in thousands.

On Monday—the fourth trading day—, its stock prices surged 9.77 percent to over Tk 27 a share, as investors continued to bet on the new stocks irrationally.

The company started its first trading day on Wednesday with a jump of 50 percent -- the highest permissible limit on debut-- to close at Tk 15 per share on the offer value of Tk 10 each.

“Investors put their funds on the stocks without any reason. They might burn their fingers at the end,” said an analyst at a top brokerage firm.

“Look at some recent debutants. Their share prices dropped to the close of their offer values,” he said.

According to the securities rules, any new issue can rise to 50 percent on its offer value on the debut day and the following day, it will be allowed to surge 50 percent on the closing price. The circuit breaker is applicable from the third trading session for the newly listed stocks.

The company posted a profit of over Tk 9.22 crore for the year ended on 30 June 2020, down from Tk 9.67 crore in the same period a year earlier. It raised Tk 30 crore from the capital market by issuing 3 crore ordinary shares with an offer price of Tk 10 each using the fixed price method.

Of the IPO fund, it was expected to spend 55.77 percent for the acquisition of new plant machinery, 30.14 percent for building and other construction works, 7.56 percent for power installation, and 6.53 percent the IPO related expenses.

It recommended 2 percent cash and 8 percent stock in the dividend to its shareholders for the year ended on June 30, 2020.

Setting out its operation in 2007, the steelmaker is engaged in manufacturing of various pre-engineered steel buildings and providing architectural and consultancy services.

The sponsor-directors hold 30.20 percent stake, institutional investors 24.50 percent, and the general public 45.30 percent as of November 30, 2020.