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DBH shares skyrocket 1450pc on first day

Buying spree underlines need for quality shares, say experts Sarwar A Chowdhury
Shares in Delta Brae Housing Finance Corporation (DBH) rocketed by more than 1450 percent on their debut on the Dhaka Stock Exchange (DSE) yesterday, as retail investors scrambled to purchase stakes in the company.
Experts said the desperate buying spree once again underline the need for quality shares on the market.
The DBH is not the first company, whose shares skyrocketed on the debut day. Same thing happened when Brae Bank and Trust Bank made their debut on the stock exchanges.
Shares in Trust Bank rocketed by more than 700 percent on their debut on the DSE on October 1 last year, while the Brae Bank shares jumped by more than 400 percent on their debut on January 31 last year.
Some market analyst said the trend was the evidence of poor listing procedures that failed to value companies correctly. However, others said nothing could be done when investors become desperate for quality shares.
"I was surprised when I saw the DBH shares price reached Tk 1680. I don't think buyers analyse the fundamentals of a company,” said Abu Ahmed, professor of economics at Dhaka University.
Demand and supply mismatch of shares is also a reason for such skyrocketing, he said, adding that the supply of shares should be increased anyhow.
For a DBH share the investors in some cases paidTkl680 whose value is Tk 210 including a premium ofTk 110.
Delta Brae Housing floated 5 lakh shares through initial public offering (IPO) to raise a total ofTk 10.50 crore including a premium ofTk 5.50 crore.
However, the shares opened at Tk 1000 yesterday
and rose as high as Tk 1680 before closing at Tk 1563.25. On the Chittagong Stock Exchange, starting with Tk 999, the DBH shares rose as high as Tk 1650 before closing atTk 1596.25.
A total of 1,51,250 shares worth Tk 22.81 crore were traded on the DSE, while a totd of 33,200 shares worth Tk 15 crore were traded on the CSE.
Market insiders described the yesterday's buying spree as 'madness' pointing to the earning per share (EPS) and price earning ration (PER) of DBH.
At present, DBH's EPS is around Tk 50 and PER is 30 that do not match the yester-day's price, they said.
There is no doubt that DBH is a good company having a bright prospectus. But, the shares were overpriced, said Arif Khan, general manager of IDLC Finance.
"In case of Jamuna Oil and Meghna Petroleum shares we saw that the shares were traded with high prices with an average price ofTk 500 toTk 600. But, later the prices came down toTk 300,” he said.
The DBH shares also pushed the benchmark index of the Dhaka bourse to close higher, although most of the issues closed down.
The DSE General Index rose by 26.02 points, or 0.85 percent, to 3079.34 points. Of the issues traded on the premier bourse, 87 advanced and 158 declined with six unchanged.
A total of 1,54,54,561 shares worth Tk 302.59 crore changed hands on the DSE.
sarwar@thedailystar.net