Wednesday 7, June 2023

Fortune Shoes nets more profit from risky stock investment

Fortune Shoes earned more money from its stock market investment than its core business of footwear selling in the first half of the current financial year.

What is more, most of the investment it made was in risky stocks, which already doubled or tripled in recent months.

This led financial analysts to warn investors that they should be cautious before investing in the listed shoemaker as its profits may plunge anytime with the fall of the shares where the company has poured its funds.

In the July to December period of 2021-22, the profit of Fortune Shoes more than tripled to Tk 32 crore, year-on-year.

It logged in profit before tax of Tk 18 crore from its shoe operation whereas Tk 19.39 crore came from the stock market investment, according to its financial statements.

The income from the investment was zero in the first half of the previous year.

A merchant banker says when listed companies were involved in share business in the past, many of them collapsed, so they should focus on their own business.

The portfolio of Fortune Shoes seems it has the intention of participating in manipulation, he said. "Otherwise, why such a big amount of fund was invested in the shares that see ups and downs frequently?

"Most of these shares have risen abnormally in the recent past."

Fortune Shoes has pumped more than Tk 44 crore in the stock market. Almost all of the fund was invested in Sonali Paper, Genex Infosys, Bangladesh National Insurance, and Asia Insurance.

In the last eight months, stocks of Sonali Paper surged 267 per cent to Tk 724, Genex Infosys climbed 160 per cent to Tk 159, Bangladesh National Insurance rocketed 529 per cent to Tk 106, and Asia Insurance rose 464 per cent to Tk 97, DSE data showed.

"If listed companies invest in the stock market, sometimes they may get involved in insider trading, so the Bangladesh Securities and Exchange Commission (BSEC) should look into it," the merchant banker added.

"We are doing well in our shoe operation. And, we have invested in the stock market to get a good return," said Riaz Uddin Bhuiya, company secretary of Fortune Shoes.

The company's operating profits from shoe operation rose 54 per cent to Tk 18 crore in the first half compared to the same period a year ago, financial statements showed.

"If we can generate a good return by investing in the stock market, our shareholders will surely be happy," he said.

Answering the risky share choice, Bhuiya says a separate department looks after it and has made the investment decision considering them good picks.

"Banks and non-banking financial institutions also invest in such stocks. The stocks have got approval from the BSEC. What is the problem if an investment is made into these stocks?"

A senior official of the BSEC says any listed company can invest in the stock market.

"We will keep our eye on seeing whether it involves any insider trading or manipulation."

Fortune Shoes closed 3.65 per cent lower at Tk 134.50 on the Dhaka Stock Exchange on Thursday.

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