FIN421- Corporate Finance I--term paper

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Term Paper reporting the overall financial position of Bangladesh Lamps Philips as a part of our coursework for Corporate Finance I.
Disclaimer: All data shown were collected from the DSE.

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FIN421- Corporate Finance I--term paper

  1. 1. TERM PROJECT FIN421, SEC 02 APRIL 16, 2014 SUBMITTED TO RIYASHAD AHMED ASSISTANT PROFESSOR BRAC BUSINESS SCHOOL
  2. 2. Page | 1 Group Members Serial Name ID Email 1 Arif Hossain 11204034 arif-hossain@live.ca 2 Ishtiaque Sikder (Emon) 11304061 ishtiaquesikder@yahoo.com 3 Mahbub Ahmed 11204006 m.ahmed6964@gmail.com 4 Ummeh Habiba Rahman 11104100 Sleepingbeauty272@gmail.com 5 Shohel Rana 11104104 Ranasohel.21@gmail.com 6 Samiya Yesmin 11304043 Samiya.yesmin@gmail.com 7 Md. Mehedee Zaman 10204050 Mehedee.zaman@gmail.com Contact number: Arif Hossain: 01782440474 Mahbub Ahmed: 01674897780
  3. 3. Page | 2 Letter of Transmittal April 16, 2014 Riyashad Ahmed Lecturer, BRAC Business School BRAC University Subject: Submission of Fin- 421 “Term Project”. Dear Sir, As a part of the course Corporate Finance I, we have completed the semester long assigned Term Project. As instructed, the report discusses the overall financial position of Bangladesh Lamps PHILIPS. The report is an outcome of a group work assigned where every participant has put his/her eminent effort to provide the best possible. We have tried to put a straight and non-biased conclusion to all matters and all disclosures and interpretations were made on available materials (Financial reports, Market Index and Secondary research over the DSO Index). Please do enlighten us for any miscalculation and queries found in the report. Sincerely, Arif Hossain Ishtiaque Sikder Emon Mahbub Ahmed Ummeh Habiba Rahman Sohel Rana Samiya Yesmin Md. Mehedee Zaman
  4. 4. Page | 3 Table of Content Executive Summary 4 Overview of BD Lamps PHILIPS 5 Common Size Statement 6-12 Ratio Analysis 13-46 Market Return for the period 47-48 Cost of Capital 49-50 Stock Valuation 51-52 Appendix 53
  5. 5. Page | 4 Executive Summary The report enumerates the financial position of BD Lamps Philips for a period of 5 years (2008-2012). In order to better analyze the position of the company a comparison is done with 6 other companies in the same industries. The other companies include Atlas Bangladesh, Bangladesh Autocars, BSRM, GPH Ishpat, Navana CNG and Singer BD. The report begins with the common sized financial statements (Vertical, Horizontal Income and Balance Sheets) and is carried on with Financial Ration analysis of BD Lamps for 5 years and the other companies (Atlas Bangladesh, Bangladesh Autocars, BSRM, GPH Ishpat, Navana CNG and Singer BD) for the year 2012. An Industry average is found and that average is compared to the ratios of BD Lamps. In the later part of the report market Return for the period, Cost of Capital and Stock Valuation is carried out.
  6. 6. Page | 5 Overview of Bangladesh Lamps PHILIPS Bangladesh Lamps Limited (BLL) is the pre-eminent manufacturer of electric light bulbs in the country. The company has an exclusive licensing agreement with PHILIPS Electronics N.V. Holland, under which it manufacturers PHILIPS lighting products. BLL was incorporated in 1960 as a subsidiary of PHILIPS, Holland. In March 1993, PHILIPS sold its entire shares to TRANSCOM (Bangladesh Lamps Limited 2014).
  7. 7. Page | 6 2: Common Size Statements Vertical Balance sheet: All figures of the balance sheet of a particular year were divided by that year’s total asset and expressed in percentage (%). Also, the averages and standard deviations were calculated. Vertical Income statement: All the figures of the Income Statement were divided by Sales of that year and expressed in percentage (%). Also, the averages and standard deviations were calculated. Horizontal Balance sheet: 2008 is taken to be the base year, each base year item’s quantity is divided by itself and is articulated in percentage form, so eventually all the base year items come up to be 100%. Horizontal Income statement: 2008 is taken to be the base year, each base year item’s quantity is divided by itself and is articulated in percentage form, so eventually all the base year items come up to be 100%. Then all the other items of the income statement for rest of the years of BD Lamps are divided by the base year’s amount. We have also calculated the average here as per instructions.
  8. 8. Page | 7 Vertical Balance Sheet: Details 2008 2009 2010 2011 2012 Average Standard Deviation Assets Property, plant and equipment 15.11% 9.94% 6.73% 12.54% 13.11% 11.48% 3.24% Fixed Assets under Construction ─ ─ 1.40% 1.58% 1.11% 1.36% 0.24% Intangible assets 0.02% 0.01% 0.01% 0.14% 0.11% 0.06% 0.06% Investments: At Cost 4.67% 3.55% 2.73% 2.82% 2.89% 3.33% 0.82% Fair Value Adjustment 13.02% 39.68% 51.02% 33.37% 22.32% 31.88% 14.81% 17.69% 43.23% 53.75% 36.19% 25.21% 35.21% 14.29% Loans and Deposits 0.24% 0.21% 0.13% 0.22% 0.26% 0.21% 0.05% Total non-current Assets 33.05% 53.39% 62.02% 50.66% 39.94% 47.81% 11.41% Inventories 11.42% 11.89% 8.43% 14.27% 24.62% 14.13% 6.22% Trade and other debtors 33.95% 23.51% 15.47% 21.12% 17.80% 22% 7.17% Advance, deposits and Prepayments 0.61% 0.46% 0.59% 0.46% 0.59% 0.54% 0.07% Advance Income Tax 5.08% 2.39% 3.18% 5.54% 7.49% 4.73% 2.02% Cash and cash equivalents 15.89% 8.35% 10.32% 7.94% 9.56% 10.41% 3.20% Total Current Assets 66.95% 46.61% 37.98% 49.34% 60.06% 52.19% 11.41% Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% Equity Share Capital 8.80% 6.70% 4.72% 5.23% 6.97% 6.485% 1.61% Reserves and Surplus 37.49% 61.39% 68.74% 54.59% 38.74% 52.19% 13.80% Total Equity 46.29% 68.09% 73.46% 59.82% 45.71% 58.67% 12.55% Liabilities Long term loan ─ 3.39% 2.62% 5.56% 3.72% 3.82% 1.24% Deferred liability - gratuity payable 2.60% 2.04% 1.65% 2.02% 2.30% 2.12% 0.35% Deferred tax - liability 2.90% 1.81% 1.01% 1.47% 1.35% 1.71% 0.73% Total non- current liabilities 5.50% 7.24% 5.28% 9.04% 7.37% 6.89% 1.54% Current portion of long term loan ─ 1.16% 0.95% 2.43% 2.39% 1.73% 0.78% Short term finance 29.34% 8.58% 9.69% 13.97% 26.32% 17.58% 9.63% Trade and other Creditors 4.04% 5.66% 2.58% 5.18% 7.31% 4.96% 1.77% Accrued Expenses 0.88% 0.69% 0.44% 0.59% 0.55% 0.63% 0.16% Other liabilities 3.05% 1.51% 1.60% 1.39% 1.47% 1.80% 0.70%
  9. 9. Page | 8 Provision for Tax 8.10% 4.52% 4.76% 6.22% 6.72% 6.06% 1.48% Provision for Royalty 2.79% 2.55% 1.23% 0.14% 2.15% 1.77% 1.09% Total Current liabilities and provisions 48.21% 24.67% 21.26% 31.14% 46.92% 34.44% 12.50% Total Liabilities 53.71% 0.03% 26.54% 40.18% 54.29% 34.95% 22.60% Total Equity and liabilities 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00%
  10. 10. Page | 9 Vertical Income Statement: Details 2008 2009 2010 2011 2012 Average Standard Deviation Sales (net of VAT and SD) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% Cost of goods sold -79.90% -81.71% -76.51% -75.07% -78.09% -78.26% 2.64% Gross Profit 20.10% 18.29% 23.49% 24.93% 21.91% 21.74% 2.64% Other Income 1.42% 1.80% 1.98% 1.66% 1.50% 1.67% 0.22% Operating Expenses -5.21% -4.84% -10.46% -15.70% -25.13% -12.27% 8.45% Profit from Operation 16.32% 15.25% 15.01% 10.90% -1.71% 11.15% 7.48% Finance Expenses -5.72% -5.46% -4.55% -5.87% -6.55% -5.63% 0.73% Finance Income 3.37% 3.52% 3.31% 4.99% 3.33% 3.70% 0.72% Net Finance Expenses -2.35% -1.94% -1.24% -0.89% -3.22% -1.93% 0.92% Profit Before Contribution Of WPPF 13.96% 13.31% 13.77% 10.01% -4.93% 9.22% 8.08% Contribution to WPPF -0.66% -0.63% -0.65% -0.48% -0.61% 0.09% Profit Befote Income Tax 13.30% 12.68% 13.11% 9.53% -4.93% 8.74% 7.79% Income Tax: -4.29% -3.88% -3.85% -4.00% 0.25% 1.28% 0.71% 0.65% 0.88% 0.35% -3.02% -3.17% -3.20% -2.62% -0.29% -2.46% 1.23% Net Profit For the Year 10.28% 9.51% 9.92% 6.92% -5.22% 6.28% 6.56% Other Comprehensive income Changes in fair value of available-for-sale- financial assets 52.09% 56.42% -46.77% -16.72% 11.25% 51.18% Total Comprehensive Income 61.60% 66.34% -39.86% -21.95% 16.53% 55.29%
  11. 11. Page | 10 Horizontal Balance Sheet: Details 2008 2009 2010 2011 2012 Assets Property, plant and equipment 100% 86.40% 82.93% 139.49% 143.99% Fixed Assets under Construction 100.00% 102.14% 69.95% Intangible assets 100.00% 79.66% 59.32% 1309.27% 1001% Investments: At Cost 100.00% 100.00% 108.93% 101.49% 101.49% Fair Value Adjustment 100.00% 400.68% 730.22% 431.14% 281.54% 100.00% 321.28% 566.15% 344.09% 233.99% Loans and Deposits 100.00% 116.16% 106.22% 154.88% 182.69% Total non-current Assets 100.00% 212.29% 349.53% 257.76% 198.40% Inventories 100.00% 137.29% 137.47% 210.00% 353.86% Trade and other debtors 100.00% 91.02% 84.87% 104.62% 86.08% Advance, deposits and Prepayments 100.00% 100.28% 179.95% 128.35% 158.56% Advance Income Tax 100.00% 61.96% 116.54% 183.50% 242.14% Cash and cash equivalents 100.00% 69.10% 120.93% 84.07% 98.80% Total Current Assets 100.00% 91.51% 105.67% 123.92% 147.28% Total Assets 100.00% 131.43% 186.39% 168.16% 164.18% Equity Share Capital 100.00% 100.00% 100.00% 100.00% 130.00% Reserves and Surplus 100.00% 215.22% 341.52% 244.83% 169.64% Total Equity 100.00% 193.32% 295.60% 217.30% 162.10% Liabilities Long term loan 100.00% 109.81% 209.89% 137.32% deferred liability - gratuity payable 100.00% 103.52% 118.16% 130.66% 145.26% differed tax - liability 100.00% 81.71% 64.69% 84.86% 76.42% Total non- current liabilities 100.00% 172.89% 178.75% 276.27% 219.98% Current portion of long term loan 100.00% 116.08% 267.21% 256.88% Short term finance 100.00% 38.41% 61.52% 80.04% 147.27% Trade and other Creditors 100.00% 184.15% 118.98% 215.63% 296.81% Accrued Expenses 100.00% 103.84% 93.84% 112.29% 103.57% Other liabilities 100.00% 64.98% 98.09% 76.62% 79.34%
  12. 12. Page | 11 Provision for Tax 100.00% 73.32% 109.40% 129.05% 160.40% Provision for Royalty 100.00% 120.08% 81.71% 82.52% 126.54% Total Current liabilities and provisions 100.00% 67.27% 82.13% 108.62% 160.00% Total Liabilities 100.00% 78.09% 92.03% 12.58% 165.97% Total Equity and liabilities 100.00% 173.90% 246.62% 222.49% 217.22%
  13. 13. Page | 12 Horizontal Income Statement: Details 2008 2009 2010 2011 2012 Sales (net of VAT and SD) 100.00% 114.38% 115.73% 126.69% 177.24% Cost of goods sold 100.00% -116.98% -110.82% -119.03% -173.24% Gross Profit 100.00% 104.04% 137.06% 157.15% 193.15% Other Income 100.00% 145.13% 160.99% 148.27% 187.61% Operating Expenses 100.00% -106.36% -232.42% -381.97% -855.36% Profit from Operation 100.00% 106.88% 106.44% 84.64% -18.62% Finance Expenses 100.00% -109.03% -92.05% -130.05% -202.79% Finance Income 100.00% 119.41% 113.76% 187.39% 175.08% Net Finance Expenses 100.00% -94.17% -60.94% -47.90% -242.48% Profit Before Contribution Of WPPF 100.00% 109.02% 114.11% 90.82% -62.61% Contribution to WPPF 100.00% -109.02% -114.11% -90.82% 0.00% Profit Before Income Tax 100.00% 109.02% 114.11% 90.82% -65.74% Income Tax: Current Tax 100.00% -103.28% -103.69% deferred Tax 100.00% 63.41% 59.02% 100.00% -120.13% -122.57% -109.91% -17.00% Net Profit For the Year 100.00% 105.77% 111.62% 85.22% -90.02% Other Comprehensive income Changes in fair value of available-for-sale-financial assets 0.00% 100.00% 109.60% -99.47% -49.75% Total Comprehensive Income 0.00% 100.00% 108.97% -71.67% -55.21%
  14. 14. Page | 13 3: Ratio Analysis Liquidity Ratio TITLE 2008 2009 2010 2011 2012 INDUSRY AVERAGE Current Ratio 1.39 times 1.46 times 1.78 times 1.58 times 1.28 times 2.02 Acid-test Ratio 1.152 times 1.088 times 1.39 times 1.13 times .755 times 1.08 Current Ratio: Current Assets / Current Liabilities Measures the ability to meet current obligations in a timely manner. A healthy current ratio is greater than 2. Interpretation In 2012 the company’s Current Assets were 1.28 times higher than their current liabilities. The current ratio has declined from 2011 and is below the Industry Average. This is an unsatisfactory situation for the firm. The firm must try reducing their Current liabilities or increase their current assets. Current Liabilities has gone up since last year and the amount of current assets has declined and hence the current ratio has fallen in comparison to the previous year.
  15. 15. Page | 14 Time Series Analysis Cross Section Analysis 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 2008 2009 2010 2011 2012 Current Ratios Current Ratios 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Current Ratio Comparison Current Ratio Comparison
  16. 16. Page | 15 Acid-test Ratio: Current Asset-Inventories/ Current Liabilities An indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. Interpretation In 2012, the company’s Current assets excluding inventories were .755 times more than that of current liabilities. Quick Ratio has declined from 2011 and firm’s ratio is below the Industry average. This is an unsatisfactory fact since the company’s ability to pay off its short and daily expenses has declined and this may prove to be risky for the company. Purchases of inventory rose and current liability has increased leading to the decline in the quick ratio. Time Series Analysis 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 2008 2009 2010 2011 2012 Acid Test Ratio Acid Test Ratio
  17. 17. Page | 16 Cross Section Analysis 0 0.5 1 1.5 2 2.5 3 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Acid Test Ratio Comparison Acid Test Ratio Comparison
  18. 18. Page | 17 Assets Management Ratio TITLE 2008 2009 2010 2011 2012 INDUSRY AVERAGE Inventory turnover ratio 1.351 times 3.928 times 3.704 times 3.14 times 2.82 times 4.97 Total Asset turnover ratio 0.755 times 0.948 times 0.408 times 0.49 times .709 times 1.03 Fixed Asset turnover ratio 3.278 times 4.17 times .658 times .97 times 1.77 times 3.04 Days sales Outstanding (DSO) 188.65 days 150.12 days 136.466 days 155.8 days 91.61 days 41.49 Average Payment Period 28.11 days 44.25 days 111.746 days 50.92 days 48.16 days 39.12 Inventory turnover ratio: Cost Of Goods Sold/Average Inventory Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. Interpretation In 2012 the company has sold out its inventory and restocked it 2.82 times The ratio has declined from the previous year and is quiet below the Industry average. The ratio is almost half that of Industry average, putting the firm in a very poor situation in the stock holders eyes.Proportionate change in cost of goods sold was lower than the proportionate change in inventory from the previous year and hence the ratio has fallen over the year.
  19. 19. Page | 18 Time Series Analysis Cross Section Analysis 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 2008 2009 2010 2011 2012 Inventory Turnover Ratio Inventory Turnover Ratio 0 2 4 6 8 10 12 14 16 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Inventory Turnover Comparison Inventory Turnover Comparison
  20. 20. Page | 19 Total Asset turnover ratio: Sales/Total Assets The amount of sales or revenues generated per dollar of assets. The Asset Turnover ratio is an indicator of the efficiency with which a company is deploying its assets. Interpretation In 2012, every 1 Taka worth of Asset has generated .709 Taka of sales. Total Asset turnover ratio has increased from the previous year but is below the Industry average. This is a poor situation for the firm and sales aren’t generating as equivalent to the value of assets. Percentage change in sales was higher than the percentage change in total assets. I.e. % Increase in asset was lower then % increase in Sales and thus the ratio increased from last year. Time Series Analysis 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 2008 2009 2010 2011 2012 Asset Turnover Ratio Asset Turnover Ratio
  21. 21. Page | 20 Cross Sectional Analysis 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Total Asset Turnover Comparison Total Asset Turnover Comparison
  22. 22. Page | 21 Fixed Asset turnover ratio: Sales/Fixed Assets The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. Interpretation In 2012, every 1 Taka worth of fixed asset generated 1.77 taka worth of Sales. Fixed asset turnover ratio has increased from the previous year but is below the industry average. This is an unsatisfactory condition since other firms in the industry are earning way more in comparison to this firm. Proportion of change in Sales was higher than the change in fixed assets and hence the ratio increased from last year. Time Series Analysis 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 2008 2009 2010 2011 2012 Fixed Asset Turnover Ratio Fixed Asset Turnover Ratio
  23. 23. Page | 22 Cross Sectional Analysis 0 1 2 3 4 5 6 7 8 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Fixed Asset Turnover Ratio Comparison Fixed Asset Turnover Ratio Comparison
  24. 24. Page | 23 Days Sales Outstanding: Accounts Receivable/ (Sales/365) A measure of the average number of days that a company takes to collect revenue after a sale has been made. A low DSO number means that it takes a company fewer days to collect its accounts receivable. A high DSO number shows that a company is selling its product to customers on credit and taking longer to collect money. Interpretation In 2012, on an average it took 91.61 days to collect receivables from debtors. DSO ratio improved but is below the industry average. It’s twice the DSO rate that of Industry Average which is a real long time. Accounts receivable has declined, average sales per day has increased and hence the collection period has reduced. Time Series Analysis 0 20 40 60 80 100 120 140 160 180 200 2008 2009 2010 2011 2012 Days Sales Outstanding Days Sales Outstanding
  25. 25. Page | 24 Cross Section Analysis 0 10 20 30 40 50 60 70 80 90 100 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Days Sales outstanding Comparison Days Sales outstanding Comparison
  26. 26. Page | 25 Average payment period: Account payable /( Cost of goods sold/ 365). Average payment period measures how much time a company is getting to pay back to its creditors. Interpretation: In 2012, it takes an average to 48 days to pay back its creditors. In 2012, the average payment period ratio decreased from the previous year except in 2010 which was very high. However it is below the industry average. The average payment period decreased from the last year, because the proportionate change of cost of goods sold was higher than the payables. If we compare the Days Sales Outstanding (DSO) with the Average payment Period, we can see that the DSO is much higher than Average payment period. That means in this company they receives money in 91 days however the pay back to its creditors in an average within 48 days, so the company is not in a good shape. And they should improve their credit policies for the debtors. Times Series Analysis Cross Section Analysis 0 20 40 60 80 100 120 2008 2009 2010 2011 2012 Average Payment Period Average Payment Period
  27. 27. Page | 26 0 20 40 60 80 100 120 Average payment period Average payment period
  28. 28. Page | 27 Debt Management Ratio TITLE 2008 2009 2010 2011 2012 INDUSTRY AVERAGE Debt to Asset Ratio 61.74% 52.9% 26.536% 40.18% 54.29% 50.37% Times interest earned (TIE) 2.85 times 7.87 times 7.510 times 6.22 times -1.53 times 23.67 Debt to Asset Ratio: Total Debt / Total Asset *100 Measures the percentage of total Assets provided by the creditors. Interpretation: In 2012, 54.29% of the total Assets were financed by the total Debts. The decision was not favorable for the company. Time Series Analysis: 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 2008 2009 2010 2011 2012 Debt to Asset Ratio Debt to Asset Ratio
  29. 29. Page | 28 Cross Section Analysis 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% Debt to Asset Ratio Debt to Asset Ratio
  30. 30. Page | 29 Times Interest Earned: Earnings Before Interest And Tax/ Interest Expenses. Times interest Earned measures ability to meet interest payments as they come due. Interpretation: In 2012, the company’s profit from the operation (EBIT) was -1.53 times lower than its interest expenses. In 2012, the times interest earned ratio of this company has decreased over the last five years. However, it is also below the industry average and it is also very poor for the company. The Earnings before interest and tax was less and the interest expenses were higher and that’s why the ratio has declined. Time Series Analysis: -2 0 2 4 6 8 10 2008 2009 2010 2011 2012 Times Interest Earned Times Interest Earned
  31. 31. Page | 30 Cross Section Analysis: -20 0 20 40 60 80 100 120 140 Bangladesh Lamps Atlas Bangaldeh Bangladesh Auto Cars Bsrm GPH Isphat Navana CNG Singer Bd IA Times Interest Earned
  32. 32. Page | 31 Profitability Ratio TITLE 2008 2009 2010 2011 2012 INDUSTRY AVERAGE Gross Profit Margin 20.1.% 18.2% 23.49% 24.93% 21.90% 19.06% Operating Profit Margin 16.317% 15.247% 15.01% 10.9% -1.71% 9.77% Net Profit Margin 10.28% 9.508% 13.11% 6.917% -5.22% 5.30% Return on Asset (ROA) 7.765% 9.01% 5.352% 3.423% -3.703% 1.14% Return on Equity (ROE) 20.297% 14.78% 7.285% 5.722% -6.044% -3.48% Gross Profit margin: Gross profit/Sales Gross profit margin measures margin performance strictly on cost of goods sold. Interpretation In the year 2012, the company has earned 21.90 taka for every 100 taka of sale. Gross profit has decreased from previous year but is above the industry average. To say the company is in a good position since its GP is higher than the Industry Average but it has decreased from previous year which is a bad sign for the company. Gross profit has increase and so has sales but amount of increase in Gross profit is lower than that of sales and hence Gross profit ratio has decreased.
  33. 33. Page | 32 Time Series Analysis Cross Section Analysis 0 5 10 15 20 25 30 2008 2009 2010 2011 2012 Gross Profit margin Gross Profit margin 0 5 10 15 20 25 30 35 40 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Gross Profit Margin Comparison Gross Profit Margin Comparison
  34. 34. Page | 33 Operating Profit Margin: Operating Profit/Sales Operating income earned for amount of sales. Interpretation In 2012 the company had an operating loss of (1.71) taka for every 100 taka sale. Operating profit has decreased from last year and is way below the industry average. The company’s operating profit appears to be negative which states that they are incurring operating loss for sales. Operating loss has occurred and increase in sales has occurred and hence the ratio appears to be negative. Time Series Analysis -4 -2 0 2 4 6 8 10 12 14 16 18 2008 2009 2010 2011 2012 Operating Profit Margin Operating Profit Margin
  35. 35. Page | 34 Cross Section Analysis -5 0 5 10 15 20 25 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Operating Profit Margin Comparison Operating Profit Margin Comparison
  36. 36. Page | 35 Net Profit Margin: Net profit/Sales Net profit margin shows the overall profit earned and retained by the company on the total sales made within a year. Interpretation For the year 2012, the net loss is (5.22) taka for every 100 taka of sales made. Net Profit has decreased from previous year and is also quiet below the Industry average. This is a real bad condition for the firm since it has made a loss in this year and this will affect the firms share price adversely. Net loss has occurred during this period and hence the net profit ratio appears negative this period. Time Series Analysis -10 -5 0 5 10 15 2008 2009 2010 2011 2012 Net Profit margin Net Profit margin
  37. 37. Page | 36 Cross Section Analysis -10 -5 0 5 10 15 20 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Net Profit amrgin Comarison Net Profit amrgin Comarison
  38. 38. Page | 37 Return on Assets: Net Profit/Total Assets Return on assets ratio shows how much of net profit the company has earned on the total assets of the firm. Interpretation For the year 2012, the company had a net loss of (3.703) taka for every 100 taka of assets. Return on assets ratio has declined and is below the industry average. The company seems to make a loss on all the value of its assets. I.e. it seems to make no profit during the period, incurring a total loss for this period. The company incurred a net loss and hence the answer turned out to be negative. Time Series Analysis -6 -4 -2 0 2 4 6 8 10 2008 2009 2010 2011 2012 Return On Asset Return On Asset
  39. 39. Page | 38 Cross Section Analysis -50 -40 -30 -20 -10 0 10 20 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD Industry Average Return on Asset Comparison Return on Asset Comparison
  40. 40. Page | 39 Return on Equity: Net Profit/Total Common Equity Return on equity shows how much the owner has earned on his investment. Interpretation In 2012, the company’s shareholders had a loss of (6.044) taka on every 100 taka of their equity. Return on equity has fallen from the previous year and is below the Industry average. The company seems to have done really badly buy incurring loss on shareholders equity. Since net loss was occurred the ratio turned out to be negative. Time Series Analysis -10 -5 0 5 10 15 20 25 2008 2009 2010 2011 2012 Return on Equity Return on Equity
  41. 41. Page | 40 Stock Market Ratio TITLE 2008 2009 2010 2011 2012 INDUSTRY AVERAGE Earnings per share (EPS) Tk 76.74 Tk 81.17 Tk 8.567 Tk 6.54 Tk -5.31 3.107 Market to book value ratio 2.9 times 4.36 times 1.037 times 1.67 times 1.83 times 2.64 P/E ratio 14.29 22.78 13.835 29.21 -22.54 8.15 Earnings per share: Earnings per share are the ratio which measures the net income earned on each common stock. In 2012 the common shareholders have earned Tk. 5.31 per share for the Bangladesh Lamps. In the above graph it shows that the earning in 2012 was much lower than the previous years and it started to fall from 2010 to 2012. So EPS has declined though it’s above Industry Average. And also due to fall in Net Profit the EPS has gone down.
  42. 42. Page | 41 Time Series Analysis: 0 10 20 30 40 50 60 70 80 90 2008 2009 2010 2011 2012 Earning Per Share(EPS) Earning Per Share(EPS)
  43. 43. Page | 42 Cross Sectional Analysis: -10 -5 0 5 10 15 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD IA Earnigs Per Share(EPS) Earnigs Per Share(EPS)
  44. 44. Page | 43 Market to book value: Market to book value is the deference between the relation of the Market price and the Book value. In 2012 the Market of Bangladesh Lamps was 1.83 times higher than its Book value. M/B ratio has declined and at the same time it has fluctuated. BV ratio was higher and that’s why the M/B ratio has fallen and also it’s below the IA too. Time Series Analysis: 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 2008 2009 2010 2011 2012 Market to book value ratio(M/B) Market to book value ratio(M/B)
  45. 45. Page | 44 Cross Sectional Analysis: 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD IA Maket to book value ratio(M/B) Maket to book value ratio(M/B)
  46. 46. Page | 45 Price-to-Earnings Ratio: Price-to-Earnings Ratio it measures the ratio of the market price per share to earnings per shares. In 2012 the common shareholders of Bangladesh Lamps were reluctant to pay -22.54 times for each Taka of reported earnings. It’s very low compared to IA and is also very bad for the company to keep P/E ratio very high or low than the IA. This might happen due overvalue of shares which stated high market price but earnings per shares was not up to the investors’ interest. Time Series Analysis: -30 -20 -10 0 10 20 30 40 2008 2009 2010 2011 2012 Price-to-Earnings Ratio Price-to-Earnings Ratio
  47. 47. Page | 46 Cross Sectional Analysis: -30 -20 -10 0 10 20 30 Bangladesh Lamps Atlas Bangladesh Bangladesh Autocars BSRM GPH Ishpat Navana CNG Singer BD IA Price-to-Earnings Ratio Price-to-Earnings Ratio
  48. 48. Page | 47 4: Calculation of Market Return for the Period Bangladesh Lamps Market Average Monthly Returns 1.79% 0.66% Standard Deviation 13.81% 9.32% Annual Returns 21.48% 7.92% Beta Calculation Using Scatter Diagram & Regression Analysis y = 0.823x + 0.012 -40.00% -30.00% -20.00% -10.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% -40.00% -30.00% -20.00% -10.00% 0.00% 10.00% 20.00% 30.00% 40.00% BDLAMPS Market Return BETA CALCUATION BD Lamps Linear (BD Lamps)
  49. 49. Page | 48 Market Return for the period CALCULATION OF Ke: Rf = 7.65% (Yield from Treasury Stock) Rm = 7.92% (.66*12 Months) β = 0.8234714 CAMP, Ke = Rf + (Rm - Rf)*β = 0.07872337 The Market Return for the period is 0.07872337
  50. 50. Page | 49 5: Cost of Capital The Long term loan of the Company Accounts for 50,063,367 Weight of Long Term Debt Long term Loan 3.72% Total Asset Cost of Loan (before tax) Interest paid 0.647199818 Long term liabilities Corporate Tax Rate (Profit Before Tax-Profit After tax) 5.87% Profit Before Tax
  51. 51. Page | 50 Weighted Average Cost of Capital (WACC) WACC= WD*KD(1-T)+WCS*KCS+WRE+KRE Total Debt 50,063,367 Total Common Equity 863,537,568 Net Worth 1,344,606,957 Weight of Debt 3.72% Weight of Equity 64.22% Before Tax Cost of Debt 64.72% Cost of Equity & Retained Earning 7.87% Tax Rate 5.87% Retained Earning 0 WACC 7.32% Interpretation of WACC: For collecting every TK. 100, BD Lamps Philips has to incur a cost of 7.32Tk on an average.
  52. 52. Page | 51 6: Stock Valuation Dividends Paid over the 5 years period are as follows Year 2008 2009 2010 2011 2012 Dividend 20945349 33572839 34615086 13591615 144826 g Outstanding Shares 7208160 7208160 7208160 7208160 7208160 Dividend Paid Per Share 2.905783029 4.657615674 4.802208331 1.885587307 0.020091951 Growth Rate 60.3% 3.1% -60.7% -98.9% -24.07% Present Value n=4 Future Value -71.16% Average g -47.6% Po for 2012 136805 Ke= 0.078723373 2012 2013 2014 2015 Dividend paid 144826 75888.824 39765.312 40162.96512 Dividend Paid Per Share 0.020091951 0.010528183 0.005516708 0.005571875
  53. 53. Page | 52 Terminal Year is 2015 g = 1% g = -47.6% 2013 2014 2015 Terminal Value 2015 0.005571875 0.08110444 (.0787-.01) PV of Terminal Value 0.08110444 0.064616376 PV of 0.005516708 0.00474111 PV of 0.010528183 0.009760066 Intrinsic Value of the share in the year 2012 .064616+.00474111+.009760066 Tk 0.079117176 (𝟏+. 𝟎𝟕𝟖𝟕) 𝟑 𝐃 𝟐𝟎𝟏𝟒 𝐃 𝟐𝟎𝟏𝟑 (𝟏+. 𝟎𝟕𝟖𝟕) 𝟐 (𝟏+. 𝟎𝟕𝟖𝟕) 𝟏
  54. 54. Page | 53 Attached Appendix

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