Sea Pearl Beach Resort and Spa has been flying high on the Dhaka Stock Exchange (DSE) as news has been circling around that it would get a big amount of interest waived by state-owned Investment Corporation of Bangladesh (ICB).
The stock started climbing up six months back, and by Tuesday it leapt 400 per cent to Tk 230 from just Tk 46 on July 17 last year.
The owning company, luxury hotel Royal Tulip in Cox's Bazar sought the waiver when tourists disappeared from the beach town at the onset of the Covid pandemic and so hotel business collapsed.
Sea Pearl Beach Resort, which began operation in 2015, was built with a bank loan. The owner then issued bonds worth Tk 3.25 billion offering 10 per cent interest rate so it could pay off the bank loan.
At present, Sea Pearl owes more than Tk 4 billion to the ICB that fully subscribed its bonds issued in October 2017, the tenure of which was eight years with a two-year moratorium period.
The owning company was supposed to begin semi-annual repayments from April 2020.
Company Secretary Md Azaharul Mamun said they had applied for the waiver of the entire interest.
Sea Pearl also went to the court last year to keep itself from being listed as a defaulter. It said the pandemic was the reason why it could not do business and repay the ICB.
ICB Managing Director Abul Hossain said he was yet to get the final court order. The ICB will decide in favour of or against the waiver depending on instructions from the court.
Mr Hossain, however, said his company would not be able to waive the full interest amount as there was cost of funds. "As it is a state-owned investment bank, it has to maintain some procedure for interest waiver."
Though the matter is still hanging, the stock price soared based on the rumour that the resort's profits will increase substantially after the interest waiver.
The company Secretary said they did not have any undisclosed price sensitive information which might influence the share price movement.
Mr Hossain said the hotel business was going well now and the company extended its business into running two cruise ships on the Khulna-Sundarbans-Khulna route with an investment of Tk 85 million.
The new business added around Tk 16 million in revenue in the FY22, he said.
"This year we have opened two more restaurants in the resort to offer a variety of Bengali and Indian foods," said Mr Hossain, adding that they were striving to attract more corporate customers who would hold annual meetings and functions at the resort.
The management is also diversifying its portfolio by establishing a resort in Bandarban on a 35-acre land, the company secretary said.
In 2019, Tk 150 million had been raised through an IPO for business expansion of the company.
Financial Performance
Sea Pearl Resort's profit surged more than 118 per cent year-on-year to Tk 161.34 million in the FY22 with social restrictions gone and people going on vacations that had been pending for long.
The hotel in Cox's Bazar reported its earnings per share of Tk 1.34 in the FY22, increased from Tk 0.61 a year ago.
The company also reported a profit of Tk 153 million in the first quarter of the FY23 through September 2022, a turnaround from the loss of Tk 10.52 million in the same quarter of the previous fiscal year.
The profit growth, however, does not justify the 400 per cent jump in the stock price.
A stockbroker preferring anonymity said the stock market is dominated by selective stocks against the depressed outlook, which are mainly bought and sold over speculations by general investors who want quick profits.
BSEC Executive Director & spokesperson Mohammad Rezaul Karim said the regulator is trying to contain rumours by deploying technology.
The regulator has already taken legal steps against some people, he said, adding that investors should also take caution.
Auditor's Concern
Auditor Kazi Zahir Khan and Co, Chartered Accountants said Sea Pearl's total debt stood at Tk 4.88 billion including bank loans and bonds, which constituted 75.52 per cent of the assets.
The company has failed to pay regular installments against bonds since April 2020. For this, the company's liabilities have increased by 5.62 per cent in the year through June 2022.
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