FIN421- Corporate Finance I--term paper

TERM PROJECT

FIN421, SEC 02

APRIL 16, 2014

SUBMITTED TO

RIYASHAD AHMED

ASSISTANT PROFESSOR

BRAC BUSINESS SCHOOL

Page | 1

Group Members

Serial Name ID Email

1 Arif Hossain 11204034 [email protected]

2 Ishtiaque Sikder (Emon) 11304061 [email protected]

3 Mahbub Ahmed 11204006 [email protected]

4 Ummeh Habiba Rahman 11104100 [email protected]

5 Shohel Rana 11104104 [email protected]

6 Samiya Yesmin 11304043 [email protected]

7 Md. Mehedee Zaman 10204050 [email protected]

Contact number:

Arif Hossain: 01782440474

Mahbub Ahmed: 01674897780

mailto:[email protected]







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

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

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.

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).

http://bll.com.bd/

http://transcombd.com/

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.

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%

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%

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%

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%

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%

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%

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.

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

BangladeshLamps

AtlasBangladesh

BangladeshAutocars

BSRM GPH Ishpat Navana CNG Singer BD IndustryAverage

Current Ratio Comparison

Current Ratio Comparison

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.


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

Page | 16


0

0.5

1

1.5

2

2.5

3

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Acid Test Ratio Comparison

Acid Test Ratio Comparison

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.

Page | 18



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

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Inventory Turnover Comparison

Inventory Turnover Comparison

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.


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

Page | 20

Cross Sectional Analysis

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Total Asset Turnover Comparison

Total Asset Turnover Comparison

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.


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

Page | 22

Cross Sectional Analysis

0

1

2

3

4

5

6

7

8

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Fixed Asset Turnover Ratio Comparison

Fixed Asset Turnover Ratio Comparison

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.


0

20

40

60

80

100

120

140

160

180

200

2008 2009 2010 2011 2012

Days Sales Outstanding

Days Sales Outstanding

Page | 24


0

10

20

30

40

50

60

70

80

90

100

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Days Sales outstanding Comparison

Days Sales outstanding Comparison

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


0

20

40

60

80

100

120

2008 2009 2010 2011 2012

Average Payment Period

Average Payment Period

Page | 26

0

20

40

60

80

100

120

Average payment period

Average payment period

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

Page | 28


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

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.


-2

0

2

4

6

8

10

2008 2009 2010 2011 2012

Times Interest Earned


Page | 30

Cross Section Analysis:

-20

0

20

40

60

80

100

120

140

BangladeshLamps

AtlasBangaldeh

BangladeshAuto Cars

Bsrm GPH Isphat Navana CNG Singer Bd IA


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.

Page | 32



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

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Gross Profit Margin Comparison

Gross Profit Margin Comparison

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.


-4

-2

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011 2012

Operating Profit Margin

Operating Profit Margin

Page | 34


-5

0

5

10

15

20

25

BangladeshLamps

AtlasBangladesh

BangladeshAutocars

BSRM GPH Ishpat NavanaCNG

Singer BD IndustryAverage

Operating Profit Margin Comparison

Operating Profit Margin Comparison

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.


-10

-5

0

5

10

15

2008 2009 2010 2011 2012

Net Profit margin

Net Profit margin

Page | 36


-10

-5

0

5

10

15

20

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Net Profit amrgin Comarison

Net Profit amrgin Comarison

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.


-6

-4

-2

0

2

4

6

8

10

2008 2009 2010 2011 2012

Return On Asset

Return On Asset

Page | 38


-50

-40

-30

-20

-10

0

10

20

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Return on Asset Comparison

Return on Asset Comparison

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.


-10

-5

0

5

10

15

20

25

2008 2009 2010 2011 2012

Return on Equity

Return on Equity

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.

Page | 41


0

10

20

30

40

50

60

70

80

90

2008 2009 2010 2011 2012

Earning Per Share(EPS)

Earning Per Share(EPS)

Page | 42

Cross Sectional Analysis:

-10

-5

0

5

10

15

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Singer BD IA

Earnigs Per Share(EPS)

Earnigs Per Share(EPS)

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.


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 valueratio(M/B)

Page | 44


0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Singer BD IA

Maket to book value ratio(M/B)

Maket to book value ratio(M/B)

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.


-30

-20

-10

0

10

20

30

40

2008 2009 2010 2011 2012

Price-to-Earnings Ratio


Page | 46


-30

-20

-10

0

10

20

30

BangladeshLamps

AtlasBangladesh

BangladeshAutocars


Singer BD IA



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%

BD

LA

MP

S

Market Return

BETA CALCUATION

BD Lamps

Linear (BD Lamps)

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

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

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

863,537,568

Net Worth 1,344,606,957

Weight of Debt 3.72%

Weight of Equity 64.22%

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%

7.32%

Interpretation of WACC: For collecting every TK. 100, BD Lamps Philips has to incur a cost

of 7.32Tk on an average.

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

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

𝐃𝟐𝟎𝟏𝟒

𝐃𝟐𝟎𝟏𝟑

(𝟏+. 𝟎𝟕𝟖𝟕)𝟐

(𝟏+. 𝟎𝟕𝟖𝟕)𝟏

Page | 53

Attached

Appendix

FIN421- Corporate Finance I--term paper

Education

Transcript of FIN421- Corporate Finance I--term paper