Tuesday, May 07, 2024
Profits of Web Coats PLC, which is in the early stages of listing on the capital market's SME platform, have been declining for the past five years.
After its listing on the SME board, the company cannot pay any bonus dividend for the next three years as per the listing rules, even though it has paid bonus dividend consistently.
In this situation, doubts have arisen as to whether the company can give cash dividend or not after its listing on the SME platform, although its profits have decreased.
EBL Securities recently reviewed the overall financial condition of the company. It said that the company has been paying bonus dividend consistently from FY19 to FY22. In FY22, the company paid a 779 per cent bonus dividend.
But after listing on the SME board, the company cannot issue bonus shares for next three years as per law.
According to the financial report of the company, net profit of the company was Tk 4.60 crore in FY19 while it was Tk 4.16 crore in FY23. Its net profit in FY21 was Tk 2.92 crore.
Web Coats PLC is a manufacturer and deemed exporter of different kinds of paper such as self-adhesive paper, price tag, hang tag, size tag, backboard, neck board etc used in local export-oriented garment industries.
In this regard, capital market analyst Abu Ahmed told The Business Post that SME platform companies do not directly affect ordinary investors. “Since a minimum investment is required to transact here, no company should be allowed to do so, which will also harm large investors.”
He also said that profit of the company is decreasing and there is no record of paying cash dividend. Its listing is a challenge to retain profits and pay cash dividend. “The regulatory body, BSEC, should also take legal action if the company fails to pay cash dividend after listing.”
EBL Securities said that readymade garment exports from Bangladesh are expected to rebound from May 2024 as exporters are receiving numerous inquiries from global buyers as the global economy is recovering from the severe consequences of Covid-19 pandemic and Russia- Ukraine war.
It is expected that the company may experience a recovery in revenue and earnings growth rate owing to the potential upturn in readymade garment exports.
On the other hand, EBL Securities said that though the company passed on higher production to the clients by increasing prices to protect its gross profit margin, it led to significant decline in quantity sold and revenue growth for the period of FY23.
As the demand for the products of the company is highly elastic, the company may face difficulty in maintaining stability in its gross profit margin if the cost of production increases further in the upcoming years.
Web Coats PLC started qualified investor offer (QIO) on February 13 and will continue until May 19 this year under fixed-price method.
The Bangladesh Securities and Exchange Commission (BSEC) in December last year allowed Web Coats to raise Tk 5 crore from the stock market by issuing 50 lakh shares and it will be listed on the small capital platforms of local stock exchanges.
According to BSEC, Web Coats will utilise Tk 2.22 crore of the raised funds for machinery, Tk 1.08 crore as working capital, Tk 1.43 crore for loan repayment, and the rest for QIO expenses.
In 2022-23, its revenue was Tk 50 crore, and its earnings per share (EPS) was Tk 1.50.
The net asset value per share with revaluation is Tk 15.92, and net asset value per share without revaluation is Tk 13.
The company was incorporated in 2013, and started commercial production since 2014.
