The document presents a comprehensive valuation analysis of Bata Shoe Company (Bangladesh) Limited, covering its historical performance, dividend discount model (DDM), and relative valuation techniques. It concludes that based on various valuation methods, the company's stock is generally overvalued compared to its intrinsic value, with the current market price at BDT 1158.7. Recommendations include placing a sell order at the BDT 1150 area with profit and stop-loss suggestions.

1. 1
WELCOME

2. 2
“VALUATION OF BATA SHOE
COMPANY (BANGLADESH)
LIMITED”

3. Road
Map
3
Introduction
Company
Overview
Findings
AnalysisConclusion

4. Road
Map
4
Valuation
DDM OFCF
Analysis
Relative
valuation
Fundamental Technical

5. “
Is the Intrinsic Value of Bata Shoe (Bangladesh) Limited Overvalued
or Undervalued on the basis of its Market Stock Price?
5
Research Question

6. Company
Overview
Bata Origination
▪ Bata Shoe Company was founded by the famous
entrepreneur Mr. Tomas Bata in 1894
▪ Bata worldwide headquarter is situated in
Switzerland which was recently situated at
Toronto, in Canada.
6

7. Company
Overview
Bata in Bangladesh
▪ Bata Shoe Organization began its operation in
Bangladesh in 1962 and
▪ incorporated in 1972.
▪ It has 2 production units in Tongi and Dhamrai.
▪ In 1985, Bata Shoe listed in capital of Bangladesh stock
market.
7

8. Mission
Vision
 Introduction of a strong shoe line targeted to various
market segments to maintain leadership through
increased market share
8
 To provide good quality shoes at an affordable price by
keeping in mind the comfort that needs to be there and
providing new designs with it

9. Quality and
Premium
Collection
9
Bata has been delivering hand-crafted quality footwear over 100
years to maintain and build on heritage of creating high quality,
comfortable and stylish shoes
Ambassador Bata B’First Babby Bubble
Bata Light and
Easy
Hush Puppies Weinbrenner Marie Claire
Bata Industrial Bata and I Nike Power
North-Star Bata Comfit Sandak Bubble Gummers

10. Corporate
Governance
10
Incorporated as a Public Limited
Company
1972
Date of Commercial Operation 1962
Listed in Capital Market 1985
BODs Chairman :Mr .Rajeev Gopalakrishnan
Director: Mr .Shaibal Sinha, Mr .Chitpkan
Kanhasri, Mr .K .J .Rezaul Hasnath,
Mrs .Rupali Chowdury
Authorized Capital Tk .200 Million
Paid-up Capital Tk .163.80 Million
Number of Employees 1500 regular efficient employees

11. “
1111
Historical Growth
-40
-20
0
20
40
60
80
100
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Historical Growth Rate
Sales Net Income EPS Dividend Cash Flow

12. Dividend Discounting Model
12

13. 13
What Is DDM?
This model is based on the theory that the stock price of a
company is equal to the sum of all of its future dividend
payments, discounted to their present value
Formula
𝑃 =
𝐷1
1 + 𝑘
+
𝐷2
1 + 𝑘 2
+
𝐷3
1 + 𝑘 3
+ ⋯ … … … … … … …

14. 14
Calculation of growth rate
After analyzing their
last 18 years of
accumulated dividend
payment per share and
doing the point to point
analysis the next year
(2019) dividend growth
rate found to be at 4%.

15. Calculation
of
RRR
15
.The required rate of return (𝑟) will be estimated with the help of
Capital Asset Pricing Model (CAPM)
Formula
𝑟 = 𝑅𝐹 +𝛽(𝑅𝑀 −𝑅𝐹)
Where,
r: Required rate of return by investors
RF: Risk free rate (interest rate of 5-year Treasury bond)
RM: Market return
β: Systematic risk

16. Calculation
of
RRR
16
. Cost of equity
Risk free rate 2.79%
beta 0.43
market risk premium 5.08%
CAPM 4.974400%
country risk premium 5.12%
adjusted CAPM 10.09%
So, The RRR is 10.09%

17. Calculation
of
DDM
17
.

18. “
18
Analysis with Dividend Discounting Model:
Overvalued
1000
1020
1040
1060
1080
1100
1120
1140
1160
1180
Intrinsic Value Stock Price
DDM

19. 19
Present Value of Operating
Free Cash Flow

20. “
₪ To discount the firm’s operating free cash flow to the firm
at the firm’s weighted average cost of capital
₪ OFCF is the cash flow generated by a company’s operations
and available to all who have provided capital to the firm
20
Procedure

21. “
21
₪ As it is the cash flow available to all capital suppliers, it is
discounted at the firm’s WACC.
₪ Before getting the present value, we required the Weighted
Average Cost of Capital, WACC

22. WACC
Calculation
22
The formula that we have used to calculate WACC:
𝑊𝐴𝐶𝐶 =
𝐸
𝐸+𝐷
(𝑘) +
𝐷
𝐸+𝐷
(1 − 𝑇)(𝑟d)
E = Market Value of the firm’s Equity
D = Market Value of the firm’s Debt
k = Cost of Equity
rd = Cost of Debt
T = Tax rate

23. “
23
The WACC of Bata Shoe Ltd = 9.18%
Calculation of WACC of Bata Shoe Company (Bangladesh) Ltd.

24. 24
Operating Free Cash Flow
OFCF represents the amount of cash flow from operations available for distribution
after depreciation expenses, taxes, working capital, and investments are paid.
A measurement of a company's
profitability after all expenses and
reinvestments
One of the many benchmarks used
to compare and analyze financial
health

25. 25
𝑷𝑽 =
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝟏
(𝟏 + 𝑾𝑨𝑪𝑪)
+
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝟐
(𝟏 + 𝑾𝑨𝑪𝑪) 𝟐
+
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝟑
(𝟏 + 𝑾𝑨𝑪𝑪) 𝟑
+ ⋯ … … … … . +
𝑶𝑭𝑪𝑭 𝟎(𝟏 + 𝒈) 𝒏
(𝟏 + 𝑾𝑨𝑪𝑪) 𝒏
𝑂𝐹𝐶𝐹0 = Operating Free Cash Flow for the current year
𝑔= Growth rate
𝑊𝐴𝐶𝐶 = Weighted average cost of capital for the firm
n = Number of years
Calculation of Present Value of OFCF

26. “
26
Calculation of Present Value of OFCF

27. “
27
Analysis with Operating Free Cash flow:
Overvalued
980
1000
1020
1040
1060
1080
1100
1120
1140
1160
1180
Intrinsic
Value
Stock Price
OFCF

28. Relative Valuation Techniques
28

29. Relative
Valuation
Techniques
29
 The current share prices of 6 companies
 The last year EPS, Cash Flow, Sales of these 6
Companies.
The average of these data to obtain the industry average
EPS, Cash Flow, & Sales.

30. The Price/
Earing Ratio
30
₪ The Price/ Earing Ratio=Price/EPS
= 302.2166667/16.106667 = 18.76345199
₪ So the Industry P/E Ratio is 18.76
₪ The EPS of Bata Shoe at (2017)= 82.34.
₪ The historical Growth rate average of EPS=
10.28%.

31. The Price/
Earing Ratio
31
 Estimated growth of 5% this year (2018) =
82.34(1+0.05) = 86.457
 Intrinsic value of its share, which is
=Industry P/E Ratio × EPS of BATA Shoe BD on 2018
= 18.77 × 86.457 = 1622.569511

32. The Price/
Cash Flow
Ratio
32
 The Price/ Cash Flow Ratio= Price/CF
= 302.2166667/ 310,394,712.8
= 0.000000973653
So the Industry P/CF Ratio is 0.000000973653
 The Cash Flow of BATA Shoe BD at the year (2017)
was 839,291,033
 The historical Growth rate average of CF was
14.90%

33. The Price/
Cash Flow
Ratio
33
Intrinsic value of its share
=Industry P/CF Ratio × CF of BATA Shoe BD on 2018
= (0.000000973653 × 1,007,149,240) = 980.6136302

34. The Price/
Sales Ratio
34
 The Price/ Sales Ratio=Price/Sales
= 302.2166667/4,521,825,166
= 0.0000000980896
So, the Industry P/Sales Ratio is 0.0000000980896
 The Sales of BATA Shoe BD at the year (2017) was
9,040,558,355
 The historical Growth rate average of Sales was
7.05%.

35. The Price/
Sales Ratio
35
۞With estimated growth of 5% this year (2018), the Sales
this year = 9,040,558,355 (1+ 0.05) = 9,492,586,273
The intrinsic Value of Stock
=Industry P/Sales Ratio × Sales of BATA Shoe BD on 2018
= (0.0000000980896 × 9,492,586,273) = 931.1244235

36. “
 If Estimated Intrinsic Value > Market Price, Buy or Hold it if you Own It.
 If Estimated Intrinsic Value < Market Price, Don’t Buy or Sell it if you Own It.
 Based on DSE stock Index the current market price of Bata Shoe Company
(Bangladesh) Limited is BDT 1158.7
36
Formula Says

37. Comparison of
stock intrinsic
value with
today’s Market
Share Price.
37
Used Relative
Valuation
Techniques
Stock’s
Intrinsic Values
Today’s Share
Price in DSE
(01/04/19)
Decision
P/E Ratio 1622.569511 1158.7 Undervalued
P/CF Ratio 980.6136302 1158.7 Overvalued
P/Sales Ratio 931.1244235 1158.7 Overvalued

38. Overall
Valuation
38
0 500 1000 1500 2000
P/Sales Ratio
P/CF Ratio
P/E Ratio
OFCF
DDM
Current Market Price
Stock Price

39. 39
TECHNICAL
ANALYSIS

40. 40

41. 41

42. 42

43. Conclusion
Place a sell order at 1150tk area
Take profit 1040tk area
Stop loss at 1206tk area
43

44. 44
THANK YOU