Investing in Stock Market: A Mighty Investment Opportunity

MOHAMMAD ASRARUL HAQUEJr. Research Analyst

International Leasing Securities LimitedBBA (Major in Finance)University of Dhaka

Bangladesh Economic Review

BD has been classified as one of the next eleven emerging nation by Goldman Sachs.

Worlds 44th Largest economy according to IMF and the WB

Forex reserve reached a record high of USD 24bn in April 2015 from 22.8 bn in March.

BD had a GDP of USD 205 bn for FY 2015 which was USD

185bn in FY 2014.

GDP is expected to grow by 6.4% by the ADB, 6.3% by the WB and 7% by the BD govt.

Motivation for Investing in Capital Market

Corporate tax on income of banks, insurance companies and non-bank financial institutions by 2.5 %

Corporate tax on income of publicly listed companies has been cut down by 2.5%

The tax-free threshold of cash profit from publicly listed companies was raised from Tk 20,000 to Tk 25,000

 Income up to Tk 25,000 from investment in Fixed Income Mutual Fund was also brought under tax waiver. 

Budgetary Incentive

Reduction of interest rate on national savings certificate

Expectation of extended tenure for limiting Bank’s exposure to the capital market

Other Motivation

Sectors- That might Bet The Economy!

Textiles

Global apparel market on the riseCheap labor forceLosing of China’s apparel realm Fiscal Incentive

Engineering

Large Govt. Infrastructural Plans Reduction of Raw Material Price In

International Market Increasing Local and International Demand

Increasing Purchasing Power of People

CementImplementation of large ADP ProjectsIncreasing Demand

Fuel and Power

Pharma & Chemical

Global crude oil price dropHigh demand

High profit margin

Market dominanceAccess to global market

Facets of Industry Competitiveness

  Engineering Cement Textiles Pharma Fuel and Power

Competition in the industry

High to Moderate High Low High Very Low

Potential of new entrants into industry Low Moderate High High Low

Power of suppliers Moderate to high Moderate Moderate Low High

Power of customers Moderate Moderate High Low Low

Threat of substitute products Very Low Very Low Very Low Very Low Low

A Snapshot on Few Prospective StocksSector Ticker Market Price Forward P/E Profit Growth

(annualized)Q-to-Q Profit

GrowthAvailable Quarter

EngineeringBSRMSTEEL 73.2 20.6 -2% -25% Q 1RSRMSTEEL 53 13.5 66% 56% Q 3

Cement CONFIDCEM 84 13.43 17% -27% Q1

Textile

ENVOYTEX 47.2 9.7 121% 250% Q 2

SHASHADNIM 37.1 9.0 166% 2178% Q 1

SQUARETEXT 72.4 14.5 50% -17% Q 1

GENNEXT 11.9 6.6 18% 39% Q 1CNATEX 17.2 7.0 36% 21% Q 3MHSML 35.4 12.7 64% 107% Q 3

Financial Institutions IDLC 51.6 22.0 -53% 427% Q 1

Food & AlliedEMERALDOIL 35.8 12.4 70% 57% Q 3

OLYMPIC 231.7 37.1 14% 17% Q 3

Fuel & Power

TITASGAS 69.9 8.5 -20% 0% Q 3JAMUNAOIL 193.2 11.2 -18% 14% Q 3

BARKAPOWER 31.9 10.6 84% 100% Q 3

Pharma. & ChemicalsACTIVEFINE 56.5 13.9 15% 32% Q 1

SQURPHARMA 252.3 24.9 21% 3% Q 3

Telecommunication GP 323.5 22.1 35% 4% Q 1

So, which stock to invest ???

BSRM Steels Limited Market leader in the local steel sector Capacity enhancement to 7.0 lac MT Full capacity utilization in the year 2013 

& 2014. Initiation of the commercial production 

of world’s largest induction furnace based billet casting project-“BSRM Steel Mills Limited” by September.

Superior brand equity- Xtreme500W Projects using the Xtreme500W:

Padma Multipurpose Bridge Maghbazar Mouchak Flyover Boirab Railway Bridge Boirob Asugonj Power Plant, etc.

Particulars 2009 2010 2011 2012 2013 2014

Installed Capacity (MT) 375,000 550,000 550,000 600,000 600,000600,00

0

Production Qty. (MT) 350,326 433,823 523,624 580,148 630,305623,91

8

Sale Qty. (MT) 356,190 442,707 517,887 579,376 601,935 679803

Capacity Utilization (%) 93.4% 78.9% 95.2% 96.7% 105.05% 104.0%

Fiscal Incentives:

Increased import duties on billet and ingot from BDT 5,000 per MT to BDT 7,000 per MT (proposed in the

national budget 2015-16) Increased import duty on Bar and

Rods from 10% to 25% (budget 2014-15)

Financial Performance

Year 2011 Year 2012 Year 2013 Year 20140.00%5.00%10.00%15.00%20.00%25.00%30.00%35.00%40.00%

Profitability MeasuresReturn on Total Assets (ROA)Return on Equity (ROE)

Year 2010 Year 2011 Year 2012 Year 2013 Year 2014

 0.88   0.94   0.91   0.94   0.99 

 0.47   0.56  0.39 

 0.53  0.37 

Liquidity MeasuresCurrent Ratio Quick Ratio

Year 2010 Year 2011 Year 2012 Year 2013 Year 20140.001.002.003.004.005.006.007.00 Leverage

Total Debt to EquityDebt to Total Assets

Year 2010 Year 2011 Year 2012 Year 2013 Year 2014

2.60 2.29 2.573.39 2.92

Coverage RatioTimes Interest Earned (TIE)

2009 2010 2011 2012 2013 2014

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%Dividend Trend

stock cash2010 2011 2012 2013 2014

0.001.002.003.004.005.00

-20.00%0.00%20.00%40.00%60.00%80.00%100.00%

Last 5 Year's Restated EPS (BDT) EPS (restated) EPS Gorwth