2. 2
Introduction
The report was all about security selection through fundamental and technical analysis, then
creating a five stocks portfolio. Fundamental analysis have done by using different valuation
models. Among the five stocks are analyzed by DDM model, Market multiplier model, FCF
model. After doing the Fundamental analysis, technical analysis was conducted to support the
hypothesis of Fundamental analysis.
By using recent 6 months price, returns was calculated for every 5 stocks and then returns
distribution curve has been constructed to show the characteristics of individual stock return.
After that we calculate annualized return and risk for every 5 stocks. To show the relationship
between these 5 stocks we calculated covariance matrix.
In the 2nd part we created 20 different combinations by using these 5 stocks. To identify the
most efficient portfolio, we graphed the efficient frontier. And after that we showed the beta
relationship between these 5 stocks. And from the graph we choose the most efficient portfolio
in which we can invest.
5. 5
Stock 1: AMCL(Pran)
PRAN’ stands for Program for Rural Advancement Nationally. PRAN GROUP was born in 1980.
Since then, over the years, they have diversified our activities. Today they are the largest
processors of fruits vegetables in Bangladesh. They have shown the way of contract farming in
Bangladesh for the first time and procure raw material directly from the farmers and processes
through high-tech machinery at their several factories into hygienically packed food and drink
products. As they are the largest contract manufacturer, they promote contract farmers and
help them produce quality crops with increased yields and to obtain fair prices.
The head offices are located at Dhaka. Their management is trendy and able to be tailored to
their environmental cultural change. Their largest asset is our competent team of hands-on
mangers dedicated employees.
The principle activities of the company are processing & marketing of agro products i.e. fruit
juices, mango bar etc., and processing & marketing of non-agro products i.e. mineral water, tea,
drinks etc. Production capacity of the company is 67110000 pcs/pkt juice and drinks,
18820000pcs of mineral water, 16650000pcs/pkt of soft drinks, 11580000pcs/pkt of rice,
mango bar, tea, and others, and 70000000pcs/pkt. of export of juice, drinks, rice and others.
7. 7
Fundamental Analysis
AMCL is a leading company in Food And Allied sector in Bangladesh. To calculate the intrinsic
value of this stock we chose 4 other companies – BATBC, Olympic, Finef foods, Ghail. Then we
calculated industry average P-E ratio(29.168) also the EPS(7.52). We multiply the EPS with the
average P-E ratio. We got the intrinsic value (219.34) which is more than the last market
price(211.7). So, we can see that this share is undervalued. So we are going to invest in this
share.
Technical Analysis
To support the hypothesis of our fundamental analysis we conducted technical analysis.
P/E Ratio P/B ratio P/s Ratio Revenue Growth Operating growth ROA ROE
AMCL(Pran) 31.98 10.87% -0.61% 3.57% 9.99%
BATBC 25.47 11.93% 14.44% 20.73% 45.06%
Olympic 34.07 21.89% 47.81% 24.27% 41.04%
FINEF foods 30.41 2.41% 48.38% 0.09% 0.62%
GHAIL 26.16 83.81% 140.44% 3.89% 8.88%
Average 29.618 26.18% 50.09% 10.51% 21.12%
AMCL has higher P/E ratio than industry average but Lower ROA and ROE compared to the industry average.
Industry P/E ratio 29.168
EPS 7.52
Intrinsic value 219.3434
Market price 211.7
The market price is higher than the intrinsic value , so it's undervalued.
As an investor we will buy the stocks.
10. 10
Skewness and Kurtosis
Here the skewness shows negative value that means the negative return return exceeds that of
positive return. So the chances of getting negative return is higher.
The kurtosis shows the extent to which the value of the variable fall above or below the mean
and manifest itself as a fat tail. Here the AMCL’s kurtosis is 3.731698 that means chances of
getting negative return is higher than the positive return.
Regression Line by using trend line and scatterplot
count 123
max 2.90%
min -4.33%
range 7.23%
bin 19
per bin 0.003805
Skew -0.02608
Kurtosis 3.731698
y = -0.003021x + 0.001642
R² = 0.000023
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-5.00% -4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00%
DSEX vs. AMCL
11. 11
Stock 2: Jamuna Bank
Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 of
Bangladesh with its Head Office currently at Hadi Mansion, 2, Dilkusha C/A, Dhaka-1000,
Bangladesh. The Bank started its operation from 3rd June 2001.
The Bank provides all types of support to trade, commerce, industry and overall business of the
country. JBL's finances are also available for the entrepreneurs to set up promising new
ventures and BMRE of existing industrial units. Jamuna Bank Ltd., the only Bengali named 3rd
generation private commercial bank, was established by a group of local entrepreneurs who are
well reputed in the field of trade, commerce, industry and business of the country.
The Bank offers both conventional and Islamic banking through designated branches. The Bank
is being managed and operated by a group of highly educated and professional team with
diversified experience in finance and banking. The Management of the bank constantly focuses
on understanding and anticipating customers' needs. Since the need of customers is changing
day by day with the changes of time, the bank endeavors its best to device strategies and
introduce new products to cope with the change. Jamuna Bank Ltd. has already achieved
tremendous progress within its past 15 years of operation. The bank has already built up
reputation as one of quality service providers of the country.
12. 12
Fundamental Analysis
To analyze the stock value of Jamuna Bank limited we chose dividend Growth Rate model as the
firm paying dividend to its stockholder every year.
The bank’s stocks’ intrinsic value(20.7043) higher than the market price(12.005). So we will buy
the stock as investors, because the stock is underpriced.
2015 2014 2013 2012 2011
Revenue Growth 13.79% 4.27% -6.01% 12.75% 15.73%
Operating profit growth 13.79% 4.27% -6.01% 12.75% 15.73%
Net profit growth 17.66% 15.40% 9.10% -29.94% 21.16%
ROE 0.10 0.12 0.13 0.12 0.19
ROA 0.011 0.010 0.010 0.010 0.016
Debt to equity 10.936 12.116 12.000 11.916 8.119
13. 13
Technical Analysis:
To support our fundamental analysis, we conducted technical analysis which is showing upward
trend and it’s showing that the price of Jamuna is increasing day by day.
Jamuna bank
Year EPS Dividend Div Payout EPS growth PE ratio
2010 2.92 2.2 75.34% 18.82
2011 3.65 2.3 63.01% 25.00% 9.46
2012 2.32 1.4 60.34% -36.44% 9.34
2013 2.54 1.5 59.06% 9.48% 6.44
2014 2.61 1.9 72.80% 2.76% 5.71
2015 3.67 1.95 53.13% 40.61% 5.52
Div payout 63.95%
Growth 8.28%
average PE ratio of last 5 years 7.294
Using constant growth model Year Eps Div PV
D1 2.111512 1 2016 3.973974 2.541267 2.029766
G 8.28% 2 2017 4.303125 2.751752 1.755499
R 25.20% 3 2018 4.659538 2.97967 1.518292
V0 12.48135 4 2019 5.045472 3.226467 1.313136
5 2020 5.463372 3.493704 1.135702
Terminal price for year 5
5 Price 39.84984 12.95403
Intrinsic Value 20.70643
Market Price 12.005
As the stock is underpriced we will buy the stock
15. 15
Return Distribution Curve
Skewness andKurtosis:
Here the skewness is 0.702064, that means Jamuna’ s positive return exceeds than negative
return. So the chances of getting positive return is higher.
And the kurtosis is 9.594988, which indicates chances of getting more positive return is higher.
-500.00%
0.00%
500.00%
1000.00%
1500.00%
2000.00%
2500.00%
3000.00%
3500.00%
Return dsitribution of Jamuna
count 123
max 9.43%
Min -7.39%
Range 16.82%
Bin 19
Per bin 0.008854
skewness 0.702064
kurtosis 9.594988
16. 16
Regeression line using the trend Line and Scatterplot
y = 0.1542x + 0.0013
R² = 0.3027
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-10.00% -5.00% 0.00% 5.00% 10.00% 15.00%
Dsex Vs. Jamuna
17. 17
Stock 3: IDLC Finance Limited
IDLC was initially established in Bangladesh in 1985 through the collaboration of International
Finance Corporation (IFC) of the World Bank, German Investment and Development Company
(DEG), Kookmin Bank and Korean Development Leasing Corporation of South Korea, the Aga
Khan Fund for Economic Development, the City Bank Limited, IPDC of Bangladesh Limited, and
Sadharan Bima Corporation. As the company evolved, initial foreign shareholding of 49% was
gradually withdrawn and the last foreign shareholding was bought out by local sponsors in
2009.
Although we initially started with Lease Financing as our core product, IDLC has grown to
become the largest multi-product Non-Bank Financial Institution of Bangladesh, with almost
equal focus in Corporate, Retail and SME sectors. Moreover, IDLC has a significant presence in
the Capital Markets. Our merchant banking arm, IDLC Investments Limited, a wholly-owned
subsidiary of IDLC is a premier brand for investment banking in the country. Our stock
brokerage arm, IDLC Securities Limited, another wholly-owned subsidiary of IDLC is also
amongst the top five brokers in the country.
Over the years, IDLC has attained a significant presence in the corporate sector of Bangladesh.
IDLC is highly respected by our clients, peers, employees and regulators for our strong
corporate governance, statutory compliance, high ethical standards, a progressive and enabling
working environment, and strong commitment to environmental and social development.
IDLC continues to play a pioneering role in introducing and popularizing a variety of financial
instruments suiting ever-changing requirements of its fast-growing clients. We are continuously
expanding our presence to ensure the best quality of service to our clients at all times.
18. 18
Fundamental Analysis:
To calculate the intrinsic value of fundamental analysis we choose other 4 companies to
calculate the industry average and also found out the EPS of the company. Then we just
multiplied the EPS(5.82) with the industry average P-E ratio(26.56). The intrinsic value(154.57)
is higher than the current market price(59.5), so as investor we will invest in the stock.
2015 2014 2013 2012 2011
Revenue Growth 15.48% 28.06% 15.75% 9.89% 19.97%
Operating profit growth25% 31% 11% 7% -67%
Net profit growth 15% 46% -6% 30% -165%
ROE 0.19 0.19 0.12 0.15 0.13
ROA 0.020 0.021 0.013 0.019 0.016
Debt to equity 6.829 7.051 8.404 8.027 8.432
19. 19
Technical Analysis:
IDLC
P/E ratio P/S P/B Revenue growthOperating growth ProfitROA ROE
IDLC 10.15 21.32% 35.38% 1.99% 18.74%
DBH 17.2 16.48% -42% 1.92% 21.61%
IPDC 22.26 37% -17.42% 2.93% 3.71%
MIDASIFIN 56.83 -15.81% -36.97% 0.67% 4.80%
NHFL 26.36 13% -16.06% 3.06% 13.95%
Average 26.56 14.40% 2.11% 12.56%
IDLC is trading at a lower PE ratio than industry average but has a higher ROE % average ROA than industry average. Then we think it is chearper compared to industry.
Industry PE 26.56
EPS 5.82
Intrinsic value 154.5792
Market price 59.5
Since the Stock is under valuued , we will buy the stock
21. 21
Return distribution Curve:
Skewness and Kurtosis:
Here the skewness ais -0.77932, which indicates that negative return exceeds the positive
returns is more.
The kurtosis is showing that the negative outlier is most than the Positive outlier.
-1000.00%
0.00%
1000.00%
2000.00%
3000.00%
4000.00%
5000.00%
6000.00%
Return Distribution of IDLC
Count 123
max 9.79%
min -14.73%
range 24.52%
Bin 19
Per bin 0.012905
Skewness -0.77932
Kurtosis 10.4253
22. 22
Regression line using Trend line and Scatterplot
y = 0.0468x + 0.0015
R² = 0.0391
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%
DSEX vs. IDLC
23. 23
Stock 4: EXIM Bank
Export Import Bank of Bangladesh Limited was established in the year 02 June 1999 as Banking
company under the companies act 1994.The bank converted its banking operation into Islamic
banking based on Islamic Shariah from traditional banking operation on 01 July 2004.The
commercial banking activities of the Bank consists of mobilizing deposits, Providing Islamic
investment facilities, discounting bills, conducting money transfer, foreign exchange transaction
etc.
2015 2014 2013 2012 2011
Revenue Growth 14.86% 11.96% 4.53% 29.19% 27.70%
Operating profit growth 17.25% 13.91% -13.57% 8.18% -22.89%
Net profit growth 26.94% 9.33% -15.66% 6.88% -60.38%
ROE 0.18 0.15 0.16 0.21 0.24
ROA 0.01 0.01 0.01 0.01 0.02
Debt to equity 12.79 13.36 13.68 13.88 13.57
24. 24
Fundamental Analysis:
To calculate the intrinsic value of Exim Bank we chose FCFE model.
We calculate the intrinsic value(48.01248677) which is higher than the current market price(11.1)
So this share is undervalued. We will buy the stock.
Exim bank
BDT mn Capex Net borrowing FCF Growth Year PE ratio
Year CFO 2011 15.93
2011 8664 1048 0 7616 2012 16.37
2012 25006 9714 0 15292 101% 2013 12.78
2013 13367 5687 1780 9460 -38% 2014 18.38
2014 54610 45930 1,680 10360 10% 2015 25.31
2015 42928 37511 -255 5162 -50%
average 17.754
average growth rate 5%
r 25.20%
Forecast FCF PV
1 2016 5445.783837 4349.667602
2 2017 5745.16885 3665.170137
3 2018 6061.012721 3088.390507
4 2019 6394.220286 2602.377399
5 2020 6745.746123 2192.847086
Terminal Value in millions calculated using last 5years PE
5 2020 119763.9767 38931.80716
total 54830.25989
no. of share 1142
intrinsic value 48.01248677
market price 11.1
25. 25
Technical Analysis:
To support the hypothesis we conducted technical analysis. It is supporting our hypothesis
because the graph is showing upward trend.
Price Volume chart
Technical Analysis
Recent candlestick chart of the company shows an upward trend
Chart from lankabd.com
0
5000000
10000000
15000000
20000000
25000000
0
2
4
6
8
10
12
14
16
18
Price Volume Chart of EXIM Bank
Volume
Price
26. 26
Return Distribution
Skewness and Kurtosis
Here the skewness is 0.697829 which shows positive return exceeds the negative returns and
chances of getting positive return is more.
Here the kurtosis is 2.087379 which implies that negative kurt is higher.
-500.00%
0.00%
500.00%
1000.00%
1500.00%
2000.00%
2500.00%
3000.00%
3500.00%
Return Distribution of EXIM
Count 123
Max 8.87%
Min -6.49%
Range 15.36%
Per Bin 19
Bin 0.008087
skewness 0.697829
Kurtosis 2.087379
27. 27
Regressionline by using Trendline and Scatter:
y = 0.1832x + 0.0011
R² = 0.4768
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-10.00% -5.00% 0.00% 5.00% 10.00%
DSEX vs. EXIM
28. 28
Stock 5: BEXIMCO Pharma Ltd.
Beximco Pharmaceuticals Ltd (Beximco Pharma) is a leading manufacturer and exporter of
medicines in Bangladesh. Incorporated in the late 70s, Beximco Pharma began as a distributor,
importing products from global MNCs like Bayer, Germany and Upjohn, USA and selling them in
the local market, which were later manufactured and distributed under licensing arrangement.
Since then, the journey continued, and today, Beximco Pharma is one of the largest exporters
of medicines in Bangladesh, winning National Export Trophy (Gold) a record five times.
The company continues to adhere to the global standards and its manufacturing facilities have
been already certified by the regulatory authorities of USA, Europe, Australia, Canada, Latin
America and South Africa. Over the last three decades Beximco Pharma has grown from
strength to strength but the simple principle on which it was founded remains the same:
producing high quality generics and making them affordable. Ensuring access to quality
medicines is the powerful aspiration that motivates more than 3,000 employees of the
company, and each of them is guided by the same moral and social responsibilities the
company values most.
29. 29
Fundamental Analysis:
To calculate the intrinsic value of BEXIMCO Pharma we chose market multiplier model.
First we chose another 4 company , by which we calculated industry average P-E ratio and find
out the EPS. By multiplting this two we get intrinsic value of 126.1824. The intrinsic value is higher
than the market value of 118.6. So this share is undervalued and we will buy the share.
2015 2014 2013 2012 2011
Revenue Growth 8.08% 6.08% 2.88% 17.99%
Operating profit growth 3.88% 5.01% 9.94% 17.74%
Net profit growth 21.80% 8.08% 6.08% 2.80% 17.99%
ROE 0.08 0.07 0.07 0.07 0.07
ROA 0.06 0.05 0.05 0.05 0.06
Debt to equity 1.34 1.34 1.39 1.39 1.35
30. 30
Technical Analysis:
To support our hypothesis in fundamental analysis we conducted technical analysis.
In the first graph this is showing the industry average of pharmaceuticals. This is supporting our
finding in industry average P-E ratio.
BEXIMCO
P/E ratio p/b ratio' Revenue Growth Operating Growth ROA ROE
BEXIMCO 21.62 6.83% 4.04% 45.550% 21.58%
ACI 19.51 16.49% 28.84% 31.180% 9.19%
IBNSINA 21.5 18.06% 33.93% 40.030% 7.31%
Square 16.7 14.68% 17.31% 44.000% 27.01%
GHCL 22.43 -8.22% -8.65% 40.270% 34.57%
Average 20.352 9.57% 40.206% 19.93%
Industry average 20.352
Eps 6.2
Intrinsic value 126.1824
Market price 118.6
Since the market price is lower than the intrinsic value, the stock price is undervalued.
As investor we will buy the stock.
31. 31
In the second graph this is showing that the price is changing in upward trend. Per year the
price of Beximco is increasing.
Price Volume Chart:
0
5000000
10000000
15000000
20000000
25000000
30000000
0
5
10
15
20
25
30
35
40
Price Volume Chart of BEXIMCO
Volume
Price
32. 32
Return Distribution Curve
Skewness and kurtosis
Here the skewness is 0.587121, that means the positive returns than negative returns. That
means chances of getting higher positive returns is more.
Here the kurtosis is 1.74 that means there are no exceed return.
-500.00%
0.00%
500.00%
1000.00%
1500.00%
2000.00%
2500.00%
3000.00%
3500.00%
4000.00%
Return Distribution of BEXIMCO
Count 123
Max 8.43%
Min -7.58%
Range 16.01%
Bin 19
Per bin 0.008427
Skewness 0.587121
kurtosis 1.741256
33. 33
Regression line using Scatters and Trend Line:
y = 0.1174x + 0.0011
R² = 0.2116
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-10.00% -5.00% 0.00% 5.00% 10.00%
DSEX vs. BEXIMCO
37. 37
Efficient Frontiere Curve
So our portfolio weight will be- 10% of AMCL(Pran),15% of jamuna, 15% of IDLC, 15% of EXIM
and 40% of BEXIMCO. Our portfolio return and risk will be respective 78.38% and 1.04%.
So, our portfolio in which we are going to invest is Combination 19. This combination has ghiger
return compare to the risk that it’s associated. And this hypothesis is backed by the efficient
frontier that we have drawn.
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
0.000% 0.200% 0.400% 0.600% 0.800% 1.000% 1.200% 1.400%
Return
Risk
Efficient Frontiere
D
D
A
CML
Minimum Variance
Portfolio
Optimu portfolio
38. 38
Table 4: Beta of each 5 stock
Here it is spontaneously showing that AMCL has higher unsystematic risk total risk as well as
market risk and IDlC has higher unsystematic risk and total risk as well as market risk. Same
relationship are showing by the other companies as well. So the total risk and market risk of all
the company are showing direct relationship.
Conclusion:
After all the analysis, we can see that there is only one combination or portfolio of five stocks
which is dominating all the other portfolios. And this portfolio has the highest return compare
to the risk. And investors will want to have this portfolio.
AMCL(Pran) Jamuna IDLC EXIM Bank Beximco
Annualized Standard Deviation 15.11% 34.47% 40.82% 36.42% 37.72%
Beta 0.967746943 1.174184062 1.368380352 1.142123174 1.564825664
