full & final report fin 435

7/23/2019 Full & Final Report Fin 435

1/26

Table of ContentsIntroduction......................................................................1

AB BANK.........................................................................1

British American Tobacco Bangladesh............................5

Bata Shoe Bangladesh....................................................8

Padma Oil.....................................................................12

Suare !harmaceuticals...............................................15

"indings And Anal#sis.....................................................18

$onclusion%.....................................................................2&


2/26

Introduction

We were assigned to create a portfolio of 5 different companies which are enlisted in the Dhaka

Stock Exchange and in trading for more than 10 years. After choosing we have calclated their

average daily retrn over the last 10 years and correlation and coefficient of or selected

companies with each other and also with the market. We also calclated the !eta of each stock

throgh regression analysis and compared with the !eta which is availa!le already in the market.

We sed "arkowit# model to calclate portfolio risk and retrn throgh this we have generated

efficient set of frontier and indicated efficient set of portfolios and calclated the re$ired rate of

retrn sing %A&" model 'assming the risk rate () and risk premim of *)+

AB BANKA, ,ank is known as one of leading !anks of the contry since its commencement (- years ago.

Dring last three decades A, ,ank has !een extending services at home and a!road. %rrently

A, ,ank has / local !ranches one foreign !ranch in "m!ai ndia2 / s!sidiary companies

inclding one exchange company in 34 ff6shore ,anking 3nit and %stodial services. 7he

,ank re6opened its 8epresentative ffice at 9angon "yanmar and at :ondon 34 extending its

foreign operations.

;rom the !anking indstry we have chosen A, ,ank to invest. 7he company has athori#ed

capital of /000 'mn+ and paid6p6capital of 5(-5 'mn+ in ,D7. 7he face vale of the share is

7aka 10 per share and the stock is crrently trading at 7aka (0 per share which is ( times the face

vale. 7he amont of market capitali#ation is 1/(


3/26

Stock Price Trend

Highest value:(=.=

Lowest value:--.-

Dring the last 1- months the price of the stock didn>t fall !elow --.- ,D7 and is crrently

trading at (0 ,D7 per share which is $ite satisfactory and profita!le.

7he net profit after tax for the last ( years -011 -01--01( are 1394.74, 1466.95, 1093.7

(mn) BDT Which shows consistency to some extent and can !e considered for investment. 7he

8eserve and Srpls for the company is 11


4/26

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

5(

1((

15(

2((

25(

&((

&8.+5

*).22

5.+8 &.*& 18.1,

&1.2*

,&.(8

25*.1

1(&.18

1&&.2*

12.)5 &.+8 &.&2 2.2

Basic EPS

After the inception of the company it has high E&S !t recently the E&S has declined de to

economic insta!ility and increased competition.

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

1((

2((

&((

)((

5((

*((

+((

8((

,((

221.(+2*1.(,2&).)*2&).25251.22

&(&.+*

)81.+)

8(+

&(1.),

&,,

)).1) )(.+) &*.*+ &).

Net Asset Value Per Share

De to decrease in profits the net asset vale per share declined !t it is good enogh compared

to other !anks.

Page ' &


5/26

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

2(

)(

*(

8(

1((

12(

*.88 ).*+

&8.*)

1(*.11

2(.(1 1+.*1

&(.5)

1( ,.1* 11.() 1).*

21.*8

11.)2 12.+8

Year End P/E

7he &E ratio has increased from the last year which shows higher earnings per share compared

to market price.

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

1

2

&

)

5

*

+

8

,

*.+5

8.&&

( ( ( ( ( (

1.82 1.+

(.*& (.+&(

1.,

% Diidend Yield

7he ) dividend yield increased to 1.s stock is crrently among the 7op -0 shares trading in Dhaka Stock

exchange.

Page ' )


6/26

British A"erican Tobacco Ban#ladesh,ritish American 7o!acco ,angladesh is one of the largest mltinational companies in the

contry and has !een operating for over 100 years.7he company is part of the ,ritish American

7o!acco Brop the worldCs most international to!acco grop with !rands sold in more than 10markets.

So we have selected this renowned company to invest in the Food and Allied!sinesssegment.

theAuthorized Capita in BDT! (mn) i" 600 and the #aid$up Capita in BDT! (mn) i" a"o

600. The %ar&et 'apitaization i" 147,34.000 (mn) hi'h "ho" the "tron* +inan'ia

'ondition o+ the 'ompan. The -e"ere / urpu" +or the 'ompan i" 6,43.9 in BDT! (mn)

Stock Price Trend

Highest value:2647.7- Lowest value:871

7he price of the stock dring the last 1- months is in the increasing trend and has reached the

highest of -/=*.* ,D7 which shows the crrent good condition of the market. 7he stock has a

very strong position in the market and can !e predicted to contine like this which shows the

potential for capital gain.

7he et &rofit after 7ax are -*.5


7/26

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12(

1(

2(

&(

)(

5(

*(

+(

Basic EPS

7he E&S of the company shows a very lcrative scenario which is mostly in the increasing trend

and at the highest of ,D7 /5./< dring -01-. So it is a strong indication to invest in the stock.

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12(

2(

)(

*(

8(

1((

12(

1)(


7he graph shows that net asset vale per share has also increased dring the last 10 years and is

following an increasing trend with the highest in -01- of 11*.-- ,D7 'mn+.

Page ' *


8/26

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12(

2

)

*

8

1(

12

1)1*

18

2(

Year End P/E

7he 9ear End &E of the stock is $ite satisfactory and can !e considered as sta!le for the last

few years. So as an investor we will !e to invest as the price is high compared to earnings which

may lead to capital gain.

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12(

2

)

*

8

1(

12

1)

% Diidend Yield

7his is one of the most important aspect we are going to look for which shows that ) Dividend

9ield is $ite satisfactory for the last few years gives good retrn on investment.

Page ' +


9/26

;inally from the overall scenario we can say that ,A7 is performing consistently over the last

few years. t has shown consistent and increasing trend of retrn. Also the company has very

goodwill and reptation in the market. 7he company has also maintained its performance dring

the togh economic conditions which mainly inflenced s to invest. 7he stock of the company

has !een listed as A category with electronic trading option and rated as top among the shares

traded in Dhaka Stock Exchange.

Bata Shoe Ban#ladesh

,ata started its operation in 1


10/26

Stock Price Trend

&rice of ,ata has !een rising at an increasing rate over the last few months with the highest

vale of ,D7 10s stocks as this is an indication of how well the company is performing. n the ftre

stocks of ,ata may rise frther as the trend is seen to !e rising.

Basic EPS

Page ' ,


11/26

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

1(

2(

&(

)(

5(

*(

Basic EPS

E&S is a strong indicator of a stock>s profita!ility. ,ata>s E&S has !een on the rise since -00=

which is a strong reason to invest in its stocks. However withot data for its last trading year>s

E&S it is not possi!le to say the exact E&S the stocks earned !t the focs is the increasing

trend of the E&S.

Net Asset Value per Share

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

2(

)(

*(

8(

1((

12(

1)(1*(


Again the increasing trend of the et Asset Gale per Share provides reason to prchase ,ata

shares. 7he highest et Asset Gale per Share was ,D7 1(/ in -01- and a sharp and consistent

rise in the figres can !e seen from -00/. With no data availa!le for last year>s et Asset Gale

per Share the most recent performance in this area cold not !e shown.

Page ' 1(


12/26

ear end P!E

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

2(

)(

*(

8(

1((

12(

Year End P/E

With the latest data availa!le &E ratio of ,ata stocks are positive which shows ftre

possi!ilities of capital gain from ac$iring its shares.

" #ividend ield

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

5

1(

15

2(

25

% Diidend Yield

3p to -01- the latest information availa!le the ) Dividend 9ield has !een very satisfactory

which is another reason to inclde ,ata in or portfolio.

Page ' 11


13/26

ver the years of trading in the stock exchange ,ata shares have performed promisingly getting

itself listed as a category A share. Despite tr!lent economic times trends in the stocks exhi!it

the company>s resilience and $ick recovery from market shocks. With increasing trends in

profits share price E&S and et Asset vale per share ,ata shares seem profita!le

Page ' 12


14/26

Pad"a $il&adma il is the !iggest and oldest petrolem company esta!lished in ,angladesh. t has !een

listed in DSE since 1


15/26

Basic EPS

2((( 2((1 2((2 2((& 2(() 2((5 2((* 2((+ 2((8 2((, 2(1( 2(11 2(12 2(1&(

1(

2(

&(

)(

5(

*(

Basic EPS

Basic EPS

E&S of &adma il has !een rising over the last three years with the highest E&S recorded in the

last 1= years !eing ,D7=*. in -00.


2(((

2((1

2((2

2((&

2(()

2((5

2((*

2((+

2((8

2((,

2(1(

2(11

2(12

2(1&

(

5(

1((

15(

2((

25(

&((


Net Asset Value P

er Share

et Asset Gale per Share has !een increasing over the last two years despite !eing significantly

lower than in the years !efore -010. 7he sharp decline is typical in the indstry !t &adma il

has !een performing well in that respect.

Page ' 1)


16/26

ear End P!E

2((( 2((12((22((&2(()2((52((*2((+ 2((82((,2(1(2(112(122(1&(

1(

2(

&(

)(

5(

*(

+(

Year End P/E

Year End P/E

Althogh 9ear End &E has declined it is still !etter in a!solte terms compared to competitors.

#ividend ield

2(((

2((1

2((2

2((&

2(()

2((5

2((*

2((+

2((8

2((,

2(1(

2(11

2(12

2(1&

(

(.5

1

1.5

2

2.5

&

&.5

% Diidend Yield

% Diidend Yield

&adma il has paid dividends in each of the last 1= years and percentage dividend yield has risen

very sharply from -01- hitting almost all time high in -01(.

Page ' 15


17/26

Suare &har"aceuticals

S$are &harmaceticals :imited has held a strong leadership position in the pharmacetical

indstry of ,angladesh since 1


18/26

S$are &harmacetical>s share price trend is recent months has !een following an impressive

pward trend reaching one6year high recently in "arch with shares selling at ,D7 -


19/26

2(((

2((1

2((2

2((&

2(()

2((5

2((*

2((+

2((8

2((,

2(1(

2(11

2(12

2(1&

(

2((

)((

*((

8((

1(((

12((

1)((


Net Asset Value Per share

7he trend is similar to ,asic E&S which shows that the et Asset Gale per Share has declined

drastically after -010. et asset vale per share stood at ,D7 /0 in -01( and exhi!its a

downward trend over the last three years. Again this is attri!ted to poor market condition as all

other companies of the indstry have !ehaved similarly.

ear End P!E

2(((2((12((22((&2(()2((52((*2((+2((82((,2(1(2(112(122(1&(

1(

2(

&(

)(Year End P/E

Year End P/E

At the end of -01( S$are &harmaceticals had &E of -0.


20/26

2(((

2((1

2((2

2((&

2(()

2((5

2((*

2((+

2((8

2((,

2(1(

2(11

2(12

2(1&

(

1

2

&

)

5

*

+

8

% Diidend Yield

% Diidend Yield

Dividend 9ield shows an increasing trend from -01-6-01( of 1.=) in -01(. verall stocks show

satisfactory performance and good retrn on investment.

'indin#s And Anal(sis

We have recorded the daily price index of or selected stocks 'A, ,ank ,ritish American

7o!acco ,A7A &adma oil and S$are &harmaceticals+ and as well as DSEI'index+ for 1-0

months staring form Janary -00- to Decem!er -01- and we have calclated the daily holdingperiod retrn !ased on the closing price . 7he details of the calclation are given in the appendix

and also in the soft copy of the report.

We also have calclated the Arithmetic mean and standard deviation of each stock and DSEI are

as follows

$o%pan& Na%e Arith%etic %ean Standard deviation

AB Bank '(''')'*+,- '('.-/0''/)

BAT '(''+..-'0. '('/1+/0'-1

BATA '(',.)*)--) /(/+1'/101*

Pad%a 2il '('''+,++0/ '('.+.0),+

Page ' 1,


21/26

S3uare Phar%aceuticals '('''+,++0/ '(')**,..11

#SE4 )*+,,-.+ ,,*..+0

Page ' 2(


22/26

We have calclated correlation coefficient and covariance of or selected stocks with each other

and also with the market which are as follows@

$o%pan& Na%e $orrelation $oe55icient $ovarianceAB Bank with BAT *.+.),1 2*1)0-0

AB Bank with BATA 2*),.0+.3 2*+),3+

AB Bank with Pad%a oil 2*+11,0,-+ 2*+1130-

AB Bank with S3uare

Phar%aceuticals

2*304,4) 2*.,)-

BAT with BATA 2*,30004+ 2*03.03

BAT with Pad%a 2il 2*,30004+ 2*1,.1-1

BAT with S3uare

Phar%aceuticals

*+.0+4, 2*)0--.

BATA with Pad%a oil *.)0, *++03+4

BATA with s3uare

Phar%aceuticals

*-0..1)) 2*041))0

Pad%a with S3uare

Phar%aceuticals

*)-+4,. 2*,34+

AB Bank with 6arket *0))3+3.- 2*++3)-

BAT with 6arket 2*),+3))-0 2*-3)4.+

BATA with 6arket 2*1.040 2*)..4

Pad%a oil with 6arket 2*,.4.- 2*3+03.,S3uare Phar%aceuticals

with 6arket

*,1+-- *),4+10

Page ' 21


23/26

We have calclated portfolio risk and retrn !y sing different com!ination of or selected five

stock following "arkowit# model and the reslts are as follows@

$o%pan& Na%e 7isk 7eturnAB Bank with BAT *,- *))4

AB Bank with BATA *,0- *.))

AB Bank with Pad%a oil *-+ *,-

AB Bank with S3uare

Phar%aceuticals *,40 *)1

BAT with BATA *,330 *.3

BAT with Pad%a 2il *)01+ *03

BAT with S3uare

Phar%aceuticals *),4 *)1-BATA with Pad%a oil *-+) *--

BATA with s3uare

Phar%aceuticals *,31 *)0+0

Pad%a with S3uare

Phar%aceuticals *,1. *)40

E55icient Frontier

( (.(5 (.1 (.15 (.2 (.25 (.& (.&5(

(

(

(

(

(.(1

(.(1

(.(1

(.(1

(

E5cient 'rontier

6is7

6eturn

Page ' 22


24/26

#escription

7he efficient frontier shows the set of optimal portfolios that offers the highest expected retrn

for a defined level of risk or the lowest risk for a given level of expected retrn.

According the figre a!ove the most efficient com!inations of stocks are the ones closest to the

frontier. Whereas shares of A, !ank with ,ata and ,A7 with ,ata show the highest risk earning

the highest retrn and stocks held in com!inations of ,A7 and &adma il ,A7 and S$are A,

!ank and S$are are the ones showing the lowest retrn possi!le to earn with the lowest level of

risk.

However the com!ination of A, !ank with ,A7 !eing farthest away from the efficient frontier

seems to !e the least efficient com!ination in this portfolio.

We have calclated the !eta of each stock !y sing regression analysis and the

calclated !eta are as followings

$o%pan& Na%e $alculated Beta

AB Bank '(''''*0,,-*'**+/.,01

BAT '('''').''01.0**,'/+*

BATA 8'('''+'.1//+0),/*)*0

Pad%a 2il '('''',*,0--+/*'+)+'.

S3uare Phar%aceuticals '(''''+.*/0),),11*+)

The 9eta we have calculated and the 9eta is alread& given in the %arket are shown in the

5ollowing ta9le:

$o%pan& Na%e $alculated Beta Beta availa9le in

the %arket

AB Bank '(''''*0,,-*'**+/.,01 +(',)**1/+1-0

BAT '('''').''01.0**,'/+* '(0,/--1,1/0'0

BATA 8'('''+'.1//+0),/*)*0 '(*0)+/)00.''0

Pad%a 2il '('''',*,0--+/*'+)+'. +(/+.-0+0,/

S3uare Phar%aceuticals '(''''+.*/0),),11*+) '(*+/'.,'-+0*0

Page ' 2&


25/26

Why the differenceK

:et>s !egin !y looking at the time frame chosen for calclating !eta. 7he availa!le !etas are

calclated with time frames nknown to s. 7his poses a ni$e pro!lem to s as well as any end

sers who need this measrement to measre portfolio risk. :ong6term investors will certainly

want to assess the risk over a longer time period than a trader who changes his or her portfolio

every few months. We sed 1-0 months> data to calclate or !eta. 7his might accont for the

difference !etween the availa!le !eta and or calclated !eta.

Another pro!lem cold !e the indexsed to calclate !eta. "ost provided !etas se the

American standard of theS?& 500 ndex. However or portfolio contains e$ities that extend

!eyond 3.S. !orders companies that is !ased and operated in ,angladesh2 ths the S?& 500 is

not the !est measre of the market.

Another nknown factor of pre6made availa!le !etas is the method sed to calclate them. 7here

are two ways to calclate !etas@ regressionand thecapital asset pricing model'%A&"+. %A&"

is sed more commonlyin academic finance2 however it is more accrate to se the regression

techni$e. 7he availa!le !etas may have !een calclated sing a different method from what we

have sed which might explain the differences.

We have calclated re$ired the retrn of each stock !ased on %A&" where we assmed the risk

rate of () and risk premim of *) and the reslts are as follows@

8 AB Bank +*),13)

8BAT +*3.348 BATA +*.3-3448S3uare phar%aceuticals +*0.33

8Pad%a 2il +*)1-0

Page ' 2)
http://www.investopedia.com/terms/i/index.asphttp://www.investopedia.com/terms/s/sp500.asphttp://www.investopedia.com/terms/r/regression.asphttp://www.investopedia.com/terms/c/capm.asphttp://www.investopedia.com/articles/06/CAPM.asphttp://www.investopedia.com/articles/06/CAPM.asphttp://www.investopedia.com/terms/i/index.asphttp://www.investopedia.com/terms/s/sp500.asphttp://www.investopedia.com/terms/r/regression.asphttp://www.investopedia.com/terms/c/capm.asphttp://www.investopedia.com/articles/06/CAPM.asphttp://www.investopedia.com/articles/06/CAPM.asp


26/26

Conclusion8

7he 56stock portfolio consisting of A, !ank ,ata ,at S$are &harmaceticals and &adma il

shares have !een sed to calclate the efficient frontier and identified the com!ination of stocks

which wold prove to !e the most efficient. 7he reslts are sch that any asset com!ination other

than ,A7 and A, !ank stocks held together yield efficient set of portfolios. Hence while

prchasing shares of these companies in the market these relationships wold come in handy.

Also the correlation coefficient and covariance !etween the shares and the market shold !e

stdied !efore investing in the stocks !ecase these figres reveal the direction in which the

retrn from each stock wold move with changing market conditions. An astte investor wold

want to inclde stocks in his portfolio which compensates the additional risk of holding onestock with additional retrn from the other stock.

7he expected retrns from each stock have !een calclated to show that all the stocks have

similar figres. 7hese help an investor to decide which stock to invest in when additional risk is

assmed for a given secrity.

However the market !eta calclated in this report differs from the availa!le !eta in the market.

;or reasons explained in the report the differences have arisen which might also !e reflected in

other calclations. evertheless the general conclsion to !e made from the portfolio analysis

of these particlar stocks reveal the nderlying expected retrn to !e gained from each and theinterrelationships among these stocks when held in a -6secrities model exhi!it the efficient

com!inations of stocks which is the prpose of this proLect.

full & final report fin 435

Documents