Bangladesh Presentation Dec 06

8/9/2019 Bangladesh Presentation Dec 06

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AGENDA

Introduction to Bangladesh

Investing in Bangladesh

Stock Exchanges in Bangladesh

Equity Partners Limited


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OVERVIEW OF BANGLADESH

Population: 140-150 million (slightly larger than Russia - 7th

largest in the World)

Land Area: 147,570 sq.km. (about the same size as Greece 101st largest in the World)

Main Towns: Dhaka (9.9 million), Chittagong (3.2 m), Khulna(1.2 m) and Rajshahi (0.6 m)

Geography: Flat fertile alluvial land, 147,570 sq km

Languages: 95% Bangla and 5% other dialects. Englishwidely spoken

Religions: Muslim 88.3%, Hindu 10.5%, Buddhist 0.3%,Christian 0.3%, others 0.6%

Bangladesh is the worlds 7th most populous country, locatedbetweenBurmaandIndia

LOCATION

Bangladesh

KEY STATISTICS


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A VICTIM OF PERCEPTION

Lookingbeneath the surface of public perception, Bangladeshs recent performance andfundamentals far exceeds its reputation

Since democracy was restored in 1990, all 3 elections have been free and fair

Primary education is now compulsory and free, with equal gender participation

Literacy is rapidly improving, and projected to reach 95% by 2010

Average annual GDP growth exceeded 5% for 16 consecutive years and is forecast to exceed 6.6% in 2006

Bangladesh is credit worthy, having never defaulted on its debt obligations, and has low foreign debt: USD 21 bill ion in2005; with 2005 exports at USD 9.3 billion

Government and opposition firmly pro-business, pro-FDI, having never annulled treaties, concessions, or agreementswith the private sector or foreign investors

It has two modern and efficiently managed stock markets, the oldest founded in 1954, the second in 1995

Such perception overshadows consistent and impressive socioeconomic developments


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AGENDA

Background on Bangladesh





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6

0

20

40

60

1990 1992 1994 1996 1998 2000 2002 2004

0

2

4

6

8

10

1990 1993 1996 1999 2002 2005

SUSTAINED HISTORICAL GROWTH

Historicalgrowth has been high andconsistent, fuelled in part bya move away from anagricultural toan industrialeconomy

Floods and corruption notwithstanding, Bangladesh

consistently manages economic growth exceeding 5percent

Of 151 countries the World Bank reviewed, the GDP of

Bangladesh has expanded with the least volatility

Growth increasingly fuelled by change from agricultural to

industrial economy

Despite expiry of multi-fibre agreement, export growth

continues to be high in 2006

Bangladesh has had little difficulty competing on price, and

has recently benefited from the up-market move of

Chinese products

Export Receipts

(1990-2005, USD B in FY starting)

Source: World Bank Ease of Doing Business Study, Economist Intelligence Unit

GDP at current market prices

(1990-2004, USD B in FY starting)

6

52

26 21

21 25 2

1

5 1

5 2005

GDP Composition(1985-2005, % of total GDP)

Industry

Agriculture

Services

8.4%

CAGR

11.3%

CAGR


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WORLD BANK INVESTOR PROTECTION RANKING

FAVOURABLE INVESTMENT CLIMATE

Stronginvestor protection combinedwith favourable public policy climate has significantly increased the

number of foreign entrants over the pastnumber of years

EXAMPLES OF RECENT ENTRANTS

Energy

Consumerproducts

Telecoms

Cement

100% foreign ownership of companies with no exit restrictions

100% repatriation of capital plus dividend and investment profits

Reinvestment of repatriable dividend treated as new investment

No capital gains tax

5%+ shareholder of listed company gets a board seat

Strong policy encouraging companies to become public; if a companylists and pays at least 10% (of par value) dividend, its tax burdendecreases from 40% to 30% if it gives dividends above 20%, thecompany receives an additional 10% tax rebate

FAVOURABLE INVESTMENT CLIMATE

Source: World Bank Ease of Doing Business Study

New Zealand 1United Kingdom 9

Norway 16Bangladesh 17

India 29

Taiwan 65

Italy 86

Korea 87

Philippines 132

Vietnam 143


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STRONG GROWTH PROSPECTS

Proactive reforms are enablingBangladesh to capitalize on strongfundamentals andgain recognitionas

a keygrowth market from both Economists andInvestmentBanks

Donor agencies and development partners exerting

strong pressure to expedite reforms in every sector of

government

The independent Anti Corruption Commission working on

separating the judiciary from administration

Bangladesh has substantial gas reserves

Large exports of gas and coal are within our investment

horizon

Overseas Bangladeshis remit over $4 billion annually

through official channels and another $2 billion

unofficially.

Proactive reforms combined with strongfundamentals

"Next Eleven" is a Goldman Sachs term coined to

describe economies with high growth potential, such as

the "BRICs" economies (Brazil, Russia, India, and China)

Asserts that Bangladesh will grow faster than earlier

predicted when comparing the 22 economies of the G7,BRICs and Next Eleven

Criteria for Next Eleven include macroeconomic stability,

political maturity, openness of trade and investment

policies and quality of education

Bangladesh promoted as a key growth prospect in Jeffrey

Sachs End of Poverty; Bangladesh today is far from a

basket case

has lead Goldman Sachs and others to identifyBangladesh as a key growth market


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KEY ECONOMIC RATIOS AND LONG-TERM INDICATORS

Economygrowingsteadily

1985 1995 2004 2005

GDP(US$ billions) 21.6 37.9 56.6 60.0

Gross capitalformation/GDP 16.3 19.1 24.0 24.4

Exports ofgoods andservices/GDP 5.6 10.9 15.5 16.1

Gross domestic savings/GDP 8.6 12.6 18.7 17.9

Gross nationalsavings/GDP 13.4 18.6 24.6 29.7

Currentaccount balance/GDP -2.8 -1.8 0.3 -0.5

Interest payments/GDP 0.6 0.5 0.3 0.4

Totaldebt/GDP 30.8 42.0 35.4 35.3

Totaldebt service/exports 21.0 14.2 8.0 8.3


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STRUCTURE OF THE ECONOMY

Movingaway from anagriculturaleconomy..

1985 1995 2004 2005

(% of GDP)

Agriculture 32.8 26.4 21.0 20.5

Industry 21.4 24.6 26.6 2 8.0

Manufacturing 14.2 15.3 16.1 17.0

Services 45.8 49.1 52.4 51.5

Household f

ina

lco

nsumptio

nexpe

nditure

87.2

82.7 7

5.8

76.6Generalgov'tfinalconsumption expenditure 4.2 4.6 5.5. 5.5

Importsofgoods andservices 13.2 17.3 20.8 22.6


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AGENDA






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STOCK EXCHANGES IN BANGLADESH

Bangladesh has two stock exchanges, the Dhaka Stock Exchange (DSE) founded in 1954, andtheChittagongStock Exchange (CSE) founded in 1995

Two exchanges - Dhaka Stock Exchange (DSE), founded in 1954 which grew to 230 members, and the

Chittagong Stock Exchange (CSE), founded in 1995 now with 157 members

Clearance is T +6 for D.V.P and T+3 for Non-D.V.P. and international custodians operate in the local

markets

Supervision is exercised by the SEC which was set up in 1993 to regulate the development of the market

and enhance investors protection. Investor protection is ranked in the top 10% of the world by the World

Bank

Main institutional investors in the stock market are local insurance companies, commercial banks,

provident funds, trusts, and pension funds. Very few foreign institutional investors or funds have apresence in the market


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DHAKA STOCK EXCHANGE (DSE)

Dhaka Stock Exchange is a modern stock exchange with 303listedsecurities anda market capitalizationof over $4 billion

OperationalInformation

Dhaka Stock Exchange has automated screen-basedtrading facilities for its members

Previously an open outcry system, now a moderncomputer based matching system, facili tating traders toconduct online trading from their office

The central trading engine operates on TANDEM, a 24hour, 7 days a week system, popular worldwide for itsfault tolerance reliability.

Shares are bought and sold through stockbrokerslicensed by the DSE

The TESA system matches the best buy or sell order

and automatically confirms the deal. After the trade,both the buying and selling broker send a contract noteproviding details of the transaction

Trading sessions at the DSE are Saturday to Thursdaybeginning at 10:00 a.m. and ending at 2:00 p.m.

HSBC acts as the Funds custodian and trades DVP

Market Capitalization

0

100

1

0

200

2

0

00

01/04 0

/04 0

/04 01/0

0

/0

0

/0

01/0

0

/0

0

/0

($B Tk, 01/2004-0 /200 )

Market capitalization has grown steady over past two

years, and currently stands at USD$ 4.1 B However, DSE remains considerably smaller than

regional comparatives, reflecting the current low levels

of foreign investment in market


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RECENT PERFORMANCE

The DSE has avoided the substantive run up in emergingmarkets over the past two years, remainingundervalued, with considerable future growth prospects

Context

In contrast to the huge run up in Emerging Markets over

the last two years, the Bangladesh market has declined

sharply since its 2004 peak

In 2004 Bangladesh was one of the best performing

markets in Asia rising by 104%. In 2005 it declined by 16%

and it has continued to decline so that as of May 18, 2006,

the DSE General index was down 30% from the its peak in

2004

Fall primarily attributed to over-subscriptions of the few

IPOs which removed liquidity, speculative trading by the

general public, increase of interest rates on fixed income

and savings instruments, political turmoil and sale of stocks

by those who availed themselves of the opportunity to

clean undeclared income by paying a one-off 7.5% tax.

The forthcoming general election and expectation of lower

dividends also contributed to the decline. This is expected

to reverse shortly

Avg. DailyTurnover

100

200

300

400

500

600

01/04 05/04 0

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($M Tk, 01/2004-0 /2006)

DSE-20

(Month-end value, 01/2004-0 /2006)

1000

1200

1400

1600

1800

20002200

2400

01/04 05/04 0

/04 01/05 05/05 0

/05 01/06 05/06 0

/06


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POTENTIAL GROWTH

Buildingon its current strongbase, the localmarkets are poised for substantive growth in the medium tolongterm

Most of the remaining third generation banks and 17 finance companies will be listed in 2006/7 in line withCentral Bank requirements

Double regulatory supervision (Central Bank and the SEC), quality auditors, separation of Board andManagement, inclusion of outside directors (mandatory for newly listed companies), and continuousdividend payouts, make the banking / finance sector very attractive to both local and international

investors

The S.E.C. has drafted regulations requiring companies in operation for three years with paid up capital ofBDT 500.00 million or more to list

Foreign energy and infrastructure development companies are interested to float their shares, indicating asupply of quality stocks coming to market

The Central Bank forecasts real GDP growth for FY06 of between 6.3% to 6.8%


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SOME CAUTIONARY NOTES

The main impediments to unbridled growth in Bangladesh remain:

its political system

corruption

poor external liquidity

high dependence on multilateral/bilateral grants and soft loans

infrastructure problems, particularly in power generation and continued supply disruption,

transportation, and telecommunication.

On the other hand, the IMF praises it for following prudent macroeconomic policies. Quantitative targets and

performance criteria under a three-year fund facility are met or exceeded and it has a sustainable

medium-term fiscal path

The country seems to work despite, rather than because of, its politicians.

Elections are due early 2007 and the run up may buffet the market. We view any decline as a potential

buying opportunity.


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AGENDA






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DIRECTORS AND OFFICERS OF EPL

EPL brings togetheran experienced, dedicatedandinternationalteam ofDirectors andadvisors,ensuringthatglobalknowledge is brought together with localunderstanding to best serve its partners

The Honorable Andrew Fraser, Chairman

Highly experienced in transit ion economies and Asia.Previously with Kleinwort Benson; Vickers Da Costa; Sun Hung Kai Securities; Henderson Crosswaithe; Barings Securities.Eton and Oxford educated founding Chairman of EPL.

Dr. Marc Faber, Director

Well respected strategist, lecturer, and market commentator.Author of iconic monthly Gloom Boom & Doom Report.Best-selling author and contributor to leading financial publications.

Mark Reinecke, Managing Director

Former Managing Director of Indosuez W.I. Carr Securities for Thailand, Indonesia, and the Philippines.Extensive Asian experience with Baring Securities and then ING Barings, followed by Asset Plus Securities, the leading localmerchant bank in Thailand.Educated in law at the London School of Economics, with a specialty in Islamic Jurisprudence.

Saiful Islam, Director and Head of Office

Former executive in custody department at Standard Chartered Bank.Founding member of Peregrines Dhaka office.

Latterly a Director of the Dhaka Stock Exchange.

Shafqat Ahmed, Senior Investment Analyst

Mohammad Menhaz Uddin, Manager-Institutional Sales


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EPL Top Picks

SQUARE PHARMACEUTICALS LIMITED

Mkt. Cap BDT 13,681 m / US$ 195 m*

Free float 37%

BEXIMCO PHARMACEUTICALS LIMITED

Mkt. Cap BDT 5,528 m / US$ 79 m*

Free float 41%

*Price as on 23 November 2006

Y/E 31 Dec FY04A FY05A FY06E FY07E

Net Sales 2,402.70 3,327.02 4,158.78 5,198.47

Net Profit 329.38 489.26 540.25 690.16

EPS 5.88 5.10 5.63 7.20

P/E (x) 9.02 10.41 9.43 7.38

EV/EBITDA (x) 10.67 10.79 10.66 10.49

P/Bv (x) 0.61 0.75 0.61 0.58

ROA 3.80% 4.47% 3.70% 3.77%

ROE 6.81% 7.17% 6.79% 8.19%

Y/E 31 Mar FY04A FY05A FY06E FY07E

Net Sales 5,708.48 6 ,369.23 7,256.04 8,245.37

Net Profit 1,007.82 1 ,311.34 1,354.53 1,392.45

EPS 279.95 303.55 272.65 233.57

P/E (x) 8.20 7.56 8.42 9.83

EV/EBITDA (x) 6.74 6.91 7.20 7.45

P/Bv (x) 1.61 1.61 1.59 1.54

ROA 14.75% 14.63% 12.38% 11.70%

ROE 19.62% 21.25% 18.83% 15.62%

Key Financials (In Mn BDT) Key Financials (In Mn BDT)


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EPL Top Picks contd.

DHAKA ELECTRIC SUPPLY COMPANY LIMITED (DESCO)


Free float 25%


Key Financials (In Mn BDT)

Y/E 30 June FY04A FY05A FY06E FY07E

Net Sales 4,955.04 5,475.90 6,590.84 8,642.77

Net Profit 338.00 540.39 565.68 1,026.73

EPS 26.59 42.51 44.50 80.77

P/E (x) 14.59 9.13 8.72 4.80

EV/EBITDA (x) 9.08 6.44 4.66

P/Bv (x) 3.64 2.60 2.23

ROA (%) 3.83% 5.24% 4.52% 6.89%

ROE (%) 24.98% 28.47% 25.60% 34.43%


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EPL Top Picks contd.

PRIME BANK LIMITED

Mkt. Cap BDT 7,932 m / US$ 113 m*

Free float 43%

DHAKA BANK LIMITED


Free float 25%


Key Financials (In Mn BDT) Key Financials (In Mn BDT)


Interest Income 2,640.91 3,445.52 4,326.63 5,700.63

Non Int. Income 946 1,232 1,520 1,900

Net Int. Income 1,024.73 1,174.51 1,107.33 1,482.16

PAT 611.94 568.20 671.82 892.83

ROA (%) 1.89% 1.37% 1.30% 1.39%

ROE (%) 27.32% 20.23% 20.66% 25.03%

NIM (%) 4.50% 3.94% 2.86% 2.95%

EPS 61.19 40.59 38.39 51.02

P/E (x) 7.41 11.17 11.81 8.88

P/Bv (x) 2.02 2.26 2.44 2.22

DivY 8.83% 5.52% 4.41% 4.41%


Interest Income 2,010.92 2,897.12 3,719.88 4,824.22

Non Int. Income 648.09 738.87 929.97 988.09

Net Int. Income 621.75 748.21 1,012.23 1,520.88

PAT 357.57 462.56 561.02 728.01

ROA (%) 1.27% 1.40% 1.32% 1.41%

ROE (%) 24.03% 20.87% 22.59% 25.48%

NIM (%) 2.95% 2.81% 3.09% 3.64%

EPS 53.86 37.66 43.51 56.46

P/E (x) 7.58 10.84 9.38 7.23

P/Bv (x) 1.82 2.26 2.12 1.84

DivY 11.02% 6.12% 6.12% 6.12%


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Bangladesh Presentation Dec 06

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Transcript of Bangladesh Presentation Dec 06