This document analyzes the fuel and power industry in Bangladesh from an investment perspective. It examines 5 companies in the industry - Summit Power, Titas Gas, Padma Oil, Meghna Petroleum, and Desco. The objectives are to determine if the industry is profitable for investment and understand potential and marginal investors. The scope includes regulation, education, production, distribution and profiles of the 5 companies. Methodology uses secondary data from websites, research papers, and a quantitative approach. Limitations include lack of perfect analysis due to time constraints. Company, industry, economic and ratio analyses are conducted to determine if companies are under or overvalued for investment. The industry faces risks from competition and new entrants. Overall, all 5

1. An analysis of the
Fuel and power industry of Bangladesh
Sub: Portfolio Management

2. 1. Abstract
This paper makes an analysis of the fuel and power industry of Bangladesh from investment
perspective. There are 18 companies under fuel and power industry in Bangladesh. We
analyze the companies, the industry and the economic condition of our country. We want
to find the potential and marginal investors whether the industry is investible or not. For
the purpose of our study, we have set the boundary of our analysis to these 5 companies
namely
1. SUMITPOWER (SUMMIT POWER LTD.)
2. TITASGAS (TITAS GAS TRANSMISSION & DIST. CO. LTD.)
3. PADMAOIL (PADMA OIL COMPANY LIMITED)
4. MPETROLEUM (MEGHNA PETROLEUMLIMITED)
5. DESCO (Dhaka Electric Supply Company Ltd.)
2. Objectives of the study
- To take investmentdecisionwhethertoinvestinfuel andpowerindustryisprofitable or
not.
- To understandwhoare the potential andmarginal investorsinthe companiesunderthat
industry.
- To understandthe riskprofile of the companies,estimate riskparametersandthe hurdle
ratesfor the firm.
3. Scope of the study
Fuel andpowerindustry isone of the largestindustriesinBangladesh.Itisa complex,global
collective of diverse businessesthatsupplymuchof the fuel andpowerenergyconsumedbythe

3. worldpopulation. The providerof the fuel &energyandthe investorsof these companiesare
takenintothe scope of that modernindustry.
The fuel & powerindustryincludes:
1. Regulation:Local,regional,national andinternationalrules&regulationsforfuel &power
energyproductionanddistributionandindustrylobbying activities.
2. Education:academic,consultancy, expertise&engineering
3. Sources:windflowgeneration,waterflow generation,biogas,small scale hydropower
generation,natural gas& oil,coal etc.
4. Production:electricity,gas,petrol,diesel, kerosene,petroleumetc.
5. Distribution:domestichouses,businesssectors,Agricultural sectors& above all sectors.
For the purpose of our study, we have set the boundary of fuel & power industryonly to the 5
listedcompaniesunderDSE & CSE. The profile of5 companiesis as follows:
Companyname Share category Listingyear Authorized
capital(MN)
Paidup
capital(MN)
1.SUMITPOWER A 2005 10000 8264.2
2.TITASGAS A 2008 20000 9892
3.PADMAOIL A 1976 1000 982.3
4.MPETROLEUM A 2007 4000 1082.2
5.DESCO A 2006 5000 3975.7
4. Methodology
Thisreportis primarilybasedonsecondarydata.Primarydatawas not necessaryforpreparing
thisreportas secondarydata has alreadyfulfilledourpurposes.Forsecondarydatacollection
we have taken the helpof variouswebsites,blogsof fuel &powerindustry&some of the
informationcollectedfromvariousresearchpapers.We have alsousedaquantitative approach
for preparingthisreport.
Limitations of the study
The limitationsof the studyare definedbythe extensive of the factscoveredbythe studyand
those that leftout.However,the limitations are:
-Lack of intellectualthought&analytical abilitytomake itthe most perfectone.
-Fortime constraint,we have to offsetwiththe quality.
-Difficulttodrawa complete figureorconclusionbecause of complicateddata.

4. -Lack of intellectual&experiencedopinion
-Time consuming
6.1 Company Analysis
A. Calculationof intrinsicvalue of shares
Companyname ROE Dividend
Payout
Ratio
B(retention
ratio)
Beta g=ROE
.b
Ke = Rf +𝛽(𝑅𝑚 − 𝑅𝑓)
1.SUMITPOWER 13.72% 30.675 % 69.325% 1.24914264228 9.51% -0.0124571321142
2.TITASGAS 15.39% 16.704 % 83.296% 1.29050374951 12.82% -0.0145251874756
3.PADMAOIL 23.41% 50.942 % 49.058% 1.21568707835 11.48% -0.0107843539173
4.MPETROLEUM 25.23% 55.851 % 44.149% 1.37303386013 11.14% -0.0186516930064
5.DESCO 12.64% 23.148 % 76.852% 1.36771553564 9.71% -0.018385776782
Companyname Do(tk.
)
D1=Do(1+
g)(tk.)
Po=(Do(1+g))/
(Ke-g)(tk.)
Pm(market
price)(tk.)
P/E*EPS
(2015)
Under valued
or over
valued(tk.)
Investm
ent
decision
1.SUMITPOWER 1 1.0951 -10.18 42.71 overvalued No
2.TITASGAS 1.50 1.6923 -11.86 44.27 overvalued No
3.PADMAOIL 10 11.148 -88.77 162.54 overvalued No
4.MPETROLEUM 10.50 11.6697 -89.73 136.11 overvalued No
5.DESCO 1 1.0971 -9.50 46.79 overvalued No
B. Financial RatioAnalysis:
Summit Power:

5. Titas Gas:
Padma oil:

6. MPetroleum:
DESCO:
C) Trend Analysis:
Summit Power:

7. Titas Gas:

8. Padma Oil:
Meghna Petroleum:
Desco:

9. 6.2 Industry Analysis:
a. Risk Profile:
The purpose of the sectionistounderstandthe riskprofile of the companiesunderfuel &power
industry:
Companyname Beta coefficient Co variance variance
1.SUMITPOWER 1.24914264228 4.37522345013 3.50258113208
2.TITASGAS 1.29050374951 4.51165335121 3.49604048257
3.PADMAOIL 1.21568707835 2.89333229167 2.37999756944
4.MPETROLEUM 1.37303386013 4.80998010753 3.5031766129
5.DESCO 1.36771553564 4.77734932976 3.49294075067
For companyof
desco
Date Stock Daily Price
(Close)
Index Daily Price
(Close)
Excess Stock
Returns
Excess
Market
Returns
31-07-2013 185.98 4,342.31 5.04% 0.72%
30-07-2013 177.05 4,311.14 2.01% -0.42%

10. 29-07-2013 173.56 4,329.39 10.04% 1.61%
28-07-2013 157.73 4,260.67 -4.19% -1.20%
25-07-2013 164.62 4,312.21 -4.98% -2.19%
24-07-2013 173.25 4,408.79 10.21% 4.37%
23-07-2013 157.20 4,224.36 -9.55% -3.08%
22-07-2013 173.79 4,358.65 -5.60% -1.06%
21-07-2013 184.09 4,405.16 -9.87% -3.57%
18-07-2013 204.25 4,568.47 -4.26% -3.91%
17-07-2013 213.34 4,754.12 3.34% -0.44%
16-07-2013 206.44 4,775.21 2.91% 0.83%
15-07-2013 200.61 4,736.04 9.97% 2.88%
14-07-2013 182.43 4,603.46 1.01% -1.73%
11-07-2013 180.61 4,684.48 -1.69% -1.80%
10-07-2013 183.71 4,770.49 -1.66% 1.85%
09-07-2013 186.82 4,683.76 8.30% 2.73%
08-07-2013 172.50 4,559.39 7.36% 0.02%
07-07-2013 160.68 4,558.67 1.92% 0.36%
04-07-2013 157.65 4,542.32 -2.40% 0.87%
03-07-2013 161.52 4,503.27 0.71% -0.05%
02-07-2013 160.38 4,505.37 4.29% 2.73%
LIST OF SECTOR BETA:
INDUSTRY NAME SECTOR BETA
BANK 0.977096602606
CEMENT 1.28360512949
FUEL ANDPOWER 0.966485627164
FINANCIALINSTITUTIONS 1.16778378878
PHARMACEUTICALSAND
CHEMICALS
0.835036416332
FOOD ANDALLIED 0.810053976067
TEXTILE 0.809015339352
INSURANCE 0.981222945654
TELECOMMUNICATION 1.2370005529
MUTUAL FUNDS 0.88512356892
ENGINEERING 0.744631122112
SERVICESANDREAL STATE 0.882190422561
COMPETITIVEANALYSIS OF FUEL AND POWER INDUSTRY:
Porter's five forces analysis is a framework that attempts to analyze the level of competition
within an industry and business strategy development. It draws upon industrial organization

11. (IO) economics to derive five forces that determine the competitive intensity and therefore
attractiveness of an Industry. Attractiveness in this context refers to the overall industry
profitability. An "unattractive" industry is one in which the combination of these five forces acts
to drive down overall profitability. A very unattractive industry would be one approaching "pure
competition", in which available profits for all firms are driven to normal profit. This analysis is
associated with its principal innovator Michael E. Porter of Harvard University
Figure. Porter’s5forcesModel
1. Competitive pressuresamong rival sellers inindustry:
a) Competition among fuel and electricity, gas are very intense and thus profit margin is low
compare to other industry.
b) Price competition is very low in fuel and power industry due to govt. regulation.
2. Competitive pressuresassociatedwiththreat of newentrants intothe
market:
a) Threat of new entrants is very high in gas and electric sector due to large scale capital
investment requirement to set up new industry
b) Complex legal and regulatory requirement to establish industry in this sector thus threat of
new entrants is high.
c) Fuel and power industry requires high investment in latest technology.
3) Competitive pressurescoming fromthe attempts of companies in other
industries towinbuyers over their ownsubstituteservice:

12. A.Threat of substitute for service sector is very high.
4. Competitive pressurescoming fromsuppliers bargaining power:
A) Suppliers bargaining power is comparatively high compared to other sector.
b) This is due to low importation of oil, gas, fuel at higher and competitive price.
5. Competitive pressuresstemming frombuyer bargaining power:
a) Bargaining power of buyer in service sector is very low due to limited substitute.
b) Bargaining power in fuel and power sector is lower because there are many players in the
market.
Life cycle of Fuel & power industry:

13. 1. Startup stage
2. Rapid accelerating growth
3. Maturity stage
4. Stabilization & Market maturity
5. Decoration of growth and decline
6.3 Economic analysis of Bangladesh:
A.Business cycle & industry sector

14. The business cycle is the four phases of economic growth and subsequent decline. It's more
commonly called the boom and bust cycle.
The goal of economic policy is to keep the economy in a healthy growth rate -- fast enough to
create jobs for everyone who wants one, but slow enough to avoid inflation. Unfortunately, life
is not so simple. Many factors can cause an economy to spin out of control, or settle into
depression. The most important, over-riding factor is confidence -- of investors, consumers,
businesses and politicians. The economy grows when there is confidence in the future and in
policymakers, and does the opposite when confidence drops.
The 4 Stages of the Business Cycle
There are four phases that describe the business cycle. At any point in time you are in one of
these stages:
1. Contraction - When the economy starts slowing down. It's usually accompanied by a bear
market.

15. 2. Trough - When the economy hits bottom, usually in a recession.
3. Expansion - When the economy starts growing again. It's usually signaled by a bull market.
4. Peak - When the economy is overheated, and is in a state of "irrational exuberance." This is
when inflation rears its ugly head.
The National Bureau of Economic Research (NBER) analyzes economic indicators to determine
the phases of the business cycle. The Business Cycle Dating Committee uses quarterly GDP
growth rates as the primary indicator of economic activity. The Bureau also uses monthly
figures, such as employment, real personal income, industrial production and retail sales.
b. Inflation:
Inflation in Bangladesh and other countries is usually calculated as the percent change in the
Consumer Price Index (CPI) from one year to the next. The CPI represents the prices paid by the
average urban consumer in each respective country. Inflation can also be calculated with other
price indexes such as the Produce Price Index or the so-called GDP deflator.
Most countries try to keep inflation somewhere around 2-3 percent per year. That is too low to
cause any problems for the businesses and households. At the same time, it is comfortably
away from negative inflation, i.e. from deflation. Of course, this target is often missed. Inflation
rankings around the world.

16. c. Technology:
*Degree of technology stability: Whether it will be a highly regulated market or not
determines by the technological changes. Well technological innovations ensure preference to
the better processing, utilization & preservation of the fuel & energy resources.
*Research and development outlays: Many research based organizations & activities are
carried by security & exchange commission, central for policy dialogue, Bangladesh bank etc.
that provides time to time updated information and suggestions on the stability, growth, and
implementation of new laws and regulations, process & procedures.
d. politics &Regulation: Political stability is one of the major problem for any industry in
our country. Labor market, money market, capital market players are become politicized & it’s
not a good sign for our industry. Recent stock market crash is one of the great failures of
regulatory institutions of Bangladesh. This crash with global financial crisis cause a decline in
the financial market industry in the year 2008. But we recovering the adverse situation
gradually & we are in a good position now. Political instability creates more doubt & fear in
investing capital in the share market.

17. e. Balance of trade/payment:

18. f. Macroeconomic trend:
Thisis a chart of trendof gross domesticproductof Bangladeshatmarketpricesestimatedbythe
International MonetaryFundwithfiguresinmillionsof Bangladeshi Taka.However,thisreflectsonlythe
formal sectorof the economy.
g. GDP in Bangladesh:
currency
Bangladeshi Taka(৳) (BDT)
৳1 = 100 poisha
Fiscal year 1 July - 30 June
Trade
organizations
SAFTA,BIMSTEC
Statistics
GDP
$572 billion(PPP) 33th;(2015 est.)
$209 billion(nominal) 44th;(2015 est.)
GDP rank 44th (nominal)
GDP growth 6.5% (2015 est.)
GDP per capita
$3,385 (PPP);(2014 est.)
$1,314 (nominal;2015)

19. GDP by sector
Agriculture:19%;industry:30%;
services:51%(2013 est.)
Inflation(CPI) 6.2% (2012)
Population
belowpoverty
line
22% (2015)
Gini coefficient 32.1 (2007)
Labour force 87.9 million(2013)
Labour force by
occupation
agriculture:40%,industry:30%,
services:30%(2013)
Unemployment 4.5% (2013 est.)
Main industries
textiles,foodprocessing,steel,pulp
and paper,jute,shipbuilding,
pharmaceuticals,electronics,
automotive parts,ceramics,fertilizer,
constructionmaterials,leather,natural
gas, renewableenergy
Ease-of-doing-
businessrank
117th
External
Exports $30.77 billion(FY2014-15)
Export goods
textiles,leathergoods,processedand
frozenfood, jute,jute products
Main export
partners
(2014 est.)
UnitedStates 14.3%
Germany 13.6%
UnitedKingdom 7.9%
France 5.2%
Spain4.3%
Italy 4.1%
Imports $40.69 billion(FY2014-15)
Import goods
cotton,petroleum,machineryand
equipment,palmoil,foodstuffs,iron
and steel, automobiles

20. Main import
partners
(2014 est.)
China18.8%
India14.8%
Singapore 5.8%
Malaysia4.2%
Grossexternal
debt
$36.21 billion(31December2012 est.)
Publicfinances
Publicdebt 22.8% of GDP (2013 est.)
Revenues $14.67 billion(2013.)
Expenses $22.15 billion(2013.)
Creditrating
BB- (domestic)
BB- (foreign)
BB- (T&C assessment)
Outlook:Stable
(Standard& Poor's)
Foreignreserves $27.4 billion(December2015)