Table of Contents

Introduction......................................................................1
AB BANK.........................................................................1
British American Tobacco Bangladesh............................5
Bata Shoe Bangladesh....................................................8
Padma Oil.....................................................................12
Square pharmaceuticals...............................................15
Findings And Analysis.....................................................18
Conclusion:.....................................................................23

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 calculated their
average daily return over the last 10 years and correlation and coefficient of our selected
companies with each other and also with the market. We also calculated the beta of each stock
through regression analysis and compared with the beta which is available already in the market.
We used Markowitz model to calculate portfolio risk and return through this we have generated
efficient set of frontier and indicated efficient set of portfolios and calculated the required rate of
return using CAPM model (assuming the risk rate 3% and risk premium of 7%)

AB BANK
AB Bank is known as one of leading banks of the country since its commencement 32 years ago.
During last three decades AB Bank has been extending services at home and abroad. Currently
AB Bank has 86 local branches, one foreign branch in Mumbai, India; 6 subsidiary companies
including one exchange company in UK, Off-shore Banking Unit and Custodial services. The
Bank re-opened its Representative Office at Yangon, Myanmar and at London, UK extending its
foreign operations.
From the banking industry we have chosen AB Bank to invest. The company has authorized
capital of 6000 (mn) and paid-up-capital of 5325 (mn) in BDT. The face value of the share is
Taka 10 per share and the stock is currently trading at Taka 30 per share which is 3 times the face
value. The amount of market capitalization is 16,399.742 (mn) BDT which shows the strength
of the company.

Page | 1

Stock Price Trend

Highest value: 34.4

Lowest value: 22.2
During the last 12 months the price of the stock didnt fall below 22.2 BDT and is currently
trading at 30 BDT per share which is quite satisfactory and profitable.
The net profit after tax for the last 3 years 2011, 2012,2013 are 1394.74, 1466.95, 1093.7
(mn) BDT Which shows consistency to some extent and can be considered for investment. The

Reserve and Surplus for the company is 11,984.1 (mn) BDT in 2014 and also TK 1,326,815,807
Revaluation Reserve has been added to Reserve & Surplus.
The total no. of securities is 532,459,152 and there are also additional bonus issues as dividends.
The figures are 7% 2013, 12.50% 2012, 20% 2011, 15% 2010, 25% 2009, 15% 2008, 200%
2007, 30% 2006, 10% 2005, 5% 2003 & 2004, 15% 2002, 1B:10 99, 1B:10 97, 1B:10 96, 1B:6
95, 1B:10 94, 1B:6 93, 1B:6 92.

Page | 2

Basic EPS
300
256.1

250
200
150
100
50 38.75

93.08

133.26
103.18

64.22

31.26
18.19
12.45 3.78 3.32 2.2
5.78 3.63
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

After the inception of the company it has high EPS but recently the EPS has declined due to
economic instability and increased competition.

Net Asset Value Per Share

900
807
800
700
600
500
481.74
400
399
303.76
301.49
300
261.09234.46234.25251.22
200 221.07
100
44.14 40.74 36.67 34.78
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Due to decrease in profits the net asset value per share declined but it is good enough compared
to other banks.

Page | 3

Year End P/E

120
106.11

100
80
60
40
20

38.64
20.01 17.61

30.54
11.04 14.6

21.68

11.42 12.78
6.88 4.67
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
10

9.16

The P/E ratio has increased from the last year which shows higher earnings per share compared
to market price.

% Dividend Yield
9
8.33
8
7 6.75
6
5
4
3
2
1.91
1.82 1.7
1
0.63 0.73
0
0
0
0
0
0
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

The % dividend yield increased to 1.91% which is the highest compared to the last 10 years data.
So we chose to invest for the return from the dividend which is good now.
The shares of the AB Bank are categorized as A class and it has also electronic share trading
facilities. AB Banks stock is currently among the Top 20 shares trading in Dhaka Stock
exchange.

Page | 4

British American Tobacco Bangladesh

British American Tobacco Bangladesh is one of the largest multinational companies in the
country and has been operating for over 100 years. The company is part of the British American
Tobacco Group, the world's most international tobacco group with brands sold in more than 180
markets.
So we have selected this renowned company to invest in the Food and Allied business segment.
the Authorized Capital in BDT* (mn) is 600 and the Paid-up Capital in BDT* (mn) is also
600. The Market capitalization is 147,342.000 (mn) which shows the strong financial
condition of the company. The Reserve & Surplus for the company is 6,432.9 in BDT* (mn)

Stock Price Trend

Highest value: 2647.7; Lowest value: 871

The price of the stock during the last 12 months is in the increasing trend and has reached the
highest of 2647.7 BDT which shows the current good condition of the market. The stock has a
very strong position in the market and can be predicted to continue like this which shows the
potential for capital gain.
The Net Profit after Tax are 2878.59, 2550.59, 3941.64 BDT (mn) for the last 3 years 2010, 2011
and 2012 respectively.

Page | 5

Basic EPS
70
60
50
40
30
20
10
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

The EPS of the company shows a very lucrative scenario which is mostly in the increasing trend
and at the highest of BDT 65.69 during 2012. So it is a strong indication to invest in the stock.

Net Asset Value Per Share

140
120
100
80
60
40
20
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

The graph shows that net asset value per share has also increased during the last 10 years and is
following an increasing trend with the highest in 2012 of 117.22 BDT (mn).

Page | 6

Year End P/E

20
18
16
14
12
10
8
6
4
2
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

The Year End P/E of the stock is quite satisfactory and can be considered as stable for the last
few years. So as an investor we will be to invest as the price is high compared to earnings which
may lead to capital gain.

% Dividend Yield
14
12
10
8
6
4
2
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

This is one of the most important aspect we are going to look for which shows that % Dividend
Yield is quite satisfactory for the last few years gives good return on investment.

Page | 7

Finally, from the overall scenario we can say that BAT is performing consistently over the last
few years. It has shown consistent and increasing trend of return. Also the company has very
goodwill and reputation in the market. The company has also maintained its performance during
the tough economic conditions which mainly influenced us to invest. The stock of the company
has been listed as A category with electronic trading option and rated as top among the shares
traded in Dhaka Stock Exchange.

Bata Shoe Bangladesh

Bata started its operation in 1962 in Bangladesh. The company is one of the largest taxpaying
corporate bodies contributing Tk. 1.2 billion (year 2009) which represents approximately 70% of
tax paid by the entire footwear sector of Bangladesh. Currently Bata Shoe Company
(Bangladesh) Limited operates two manufacturing facilities one in Tongi and the other in
Dhamrai. With a production capacity of 110,000 pairs of shoes daily, the company also has a
modern tannery facility with an output of 5 million square feet of leather annually. Annual shoe
sales currently stand at slightly more than 30 million pairs with a turnover for the year 2009 of
Tk 5 billion.
The company got listed in DSE in 1985 under Tannery Industries business segment and because
of its strong financial position we have included it in our portfolio. Stocks of Bata are rated in A
category and has electronic trading option. Authorized capital* of Bata amounts to BDT 200m
with BDT 137m in Paid-up Capital*. Each share of Bata has a Face Value of BDT 10, but is
selling currently at BDT 1097 per share. With Market Capitalization* of BDT 15011m and
Reserve & Surplus* of BDT 1717m, the footwear company exhibits strong financial position.

Page | 8

Stock Price Trend

Price of Bata has been rising at an increasing rate over the last few months, with the highest
value of BDT 1097.3 per share recorded at present. This is the best time to invest in the
companys stocks as this is an indication of how well the company is performing. In the future,
stocks of Bata may rise further as the trend is seen to be rising.
Basic EPS

Page | 9

Basic EPS
60
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EPS is a strong indicator of a stocks profitability. Batas EPS has been on the rise since 2004
which is a strong reason to invest in its stocks. However, without data for its last trading years
EPS, it is not possible to say the exact EPS the stocks earned, but the focus is the increasing
trend of the EPS.
Net Asset Value per Share

Net Asset Value Per Share

160
140
120
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Again, the increasing trend of the Net Asset Value per Share provides reason to purchase Bata
shares. The highest Net Asset Value per Share was BDT 136 in 2012 and a sharp and consistent
rise in the figures can be seen from 2006. With no data available for last years Net Asset Value
per Share, the most recent performance in this area could not be shown.
Page | 10

Year end P/E

Year End P/E

120
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

With the latest data available, P/E ratio of Bata stocks are positive, which shows future
possibilities of capital gain from acquiring its shares.
% Dividend Yield

% Dividend Yield
25
20
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Up to 2012, the latest information available, the % Dividend Yield has been very satisfactory,
which is another reason to include Bata in our portfolio.

Page | 11

Over the years of trading in the stock exchange, Bata shares have performed promisingly, getting
itself listed as a category A share. Despite turbulent economic times, trends in the stocks exhibit
the companys resilience and quick recovery from market shocks. With increasing trends in
profits, share price, EPS, and Net Asset value per share, Bata shares seem profitable

Page | 12

Padma Oil
Padma Oil is the biggest and oldest petroleum company established in Bangladesh. It has been
listed in DSE since 1976 under the Fuel & Power business segment.
Face Value of the share is BDT 10 per share and is currently trading 30 times more than its face
value BDT 348.4 per share.
Stock Price Trend

Over the past one year, BDT 168 is the lowest price at which each share was sold and highest
was BDT 459.6. The stock exhibits an average trading price currently.
The companys Authorized Capital* is BDT 1000m and Paid-up Capital is BDT 982m. Market
Capitalization* is BDT 34,008.178m, which indicates very strong financial position within the
industry and Reserve & Surplus* for the company amounts to BDT 4,985.1m.
The Net Profit After Tax over the last 3 three years amounted to 876.6, 1462.82 and 2066.99, all
in BDT (m), in 2011, 2012, and 2013 respectively.
The total number of securities is 98,232,750 along with additional bonus issues.
Page | 13

Basic EPS

Basic EPS
60
50
40
Basic EPS

30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EPS of Padma Oil has been rising over the last three years with the highest EPS recorded in the
last 14 years being BDT47.8 in 2008.
Net Asset Value Per Share

Net Asset Value Per Share

300
250
200
Net Asset Value P
er Share

150
100
50
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13

Net Asset Value per Share has been increasing over the last two years, despite being significantly
lower than in the years before 2010. The sharp decline is typical in the industry, but Padma Oil
has been performing well in that respect.
Page | 14

Year End P/E

Year End P/E

70
60
50
40
Year End P/E

30
20
10
0
20002001200220032004200520062007200820092010201120122013

Although Year End P/E has declined, it is still better in absolute terms compared to competitors.

Dividend Yield

% Dividend Yield
3.5
3
2.5
2
% Dividend Yield

1.5
1
0.5
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13

Padma Oil has paid dividends in each of the last 14 years and percentage dividend yield has risen
very sharply from 2012, hitting almost all time high in 2013.

Page | 15

Square pharmaceuticals
Square Pharmaceuticals Limited has held a strong leadership position in the pharmaceutical
industry of Bangladesh since 1985 and is now on its way to becoming a high performance global
player.
The company got listed in DSE in the year 1995. Currently each stock of Square Pharma is
selling at BDT 279.8 per share with a Face Value of BDT 10 per share. We have chosen this high
performing company in the Pharmaceuticals & Chemicals segment in our portfolio.
The company has Authorized Capital* of BDT 5000m and Paid-up in Capital* of BDT 4820m,
reflecting strong financial holding within the industry. Market Capitalization* of the company is
BDT 134863.394m with BDT 15,514.8m added to Reserve & Surplus.
Net Profit After Tax of the company was 3257.48, 3618.57, and 4127.79 in BDT (m) in 2011,
2012, and 2013 respectively.
Total number of securities of Square Pharmaceuticals is 481,999,263 with additional bonus
shares issued in the manner 30% 2013, 40% 2012, 35% 2011, 30% 2010, 25% 2009, 35% 2008,
50% 2007, 20% 2006, 15% 2005, 20% 2004, 20% 2003, 20% 2002, 25% 1996.
Share Price Trend

Page | 16

Square Pharmaceuticals share price trend is recent months has been following an impressive
upward trend reaching one-year high recently in March with shares selling at BDT 289.6 per
share. From there the curve seems to be going up, which is very desirable for the company.
Basic EPS

Basic EPS
350
300
250
200
Basic EPS

150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Basic EPS of square Pharma has fallen sharply after 2010, but the over the last two years the
trend seems to have stabilized. Volatile market and economic condition can be attributed to this
falling pattern, which is prevalent in companies within the industry.

Net asset value per share

Page | 17

Net Asset Value Per Share

1400
1200
1000
800
Net Asset Value Per share

600
400
200
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13

The trend is similar to Basic EPS, which shows that the Net Asset Value per Share has declined
drastically after 2010. Net asset value per share stood at BDT 60 in 2013 and exhibits a
downward trend over the last three years. Again, this is attributed to poor market condition as all
other companies of the industry have behaved similarly.
Year End P/E

Year End P/E

40
30
Year End P/E

20
10
0
20002001200220032004200520062007200820092010201120122013

At the end of 2013, Square Pharmaceuticals had P/E of 20.9, which has fallen from previous
years. Despite the downward trend, Square has been performing satisfactorily in the market.
Dividend Yield

Page | 18

% Dividend Yield
8
7
6
5
4
3
2
1
0
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13

% Dividend Yield

Dividend Yield shows an increasing trend from 2012-2013 of 1.4% in 2013. Overall stocks show
satisfactory performance and good return on investment.

Findings And Analysis

We have recorded the daily price index of our selected stocks (AB Bank, British American
Tobacco, BATA, Padma oil and Square Pharmaceuticals) and as well as DSEX(index) for 120
months staring form January 2002 to December 2012 and we have calculated the daily holding
period return based on the closing price . The details of the calculation are given in the appendix
and also in the soft copy of the report.

We also have calculated the Arithmetic mean and standard deviation of each stock and DSEX are
as follows

Company Name
AB Bank
BAT
BATA
Padma Oil

Arithmetic mean
0.000506149
0.001339073
0.043565995
0.000141172

Standard deviation
0.039270025
0.028127098
2.218028786
0.03137541
Page | 19

Square Pharmaceuticals
DSEX

0.000141172
1.322463

0.056643388
22.66039

Page | 20

We have calculated correlation coefficient and covariance of our selected stocks with each other
and also with the market which are as follows:

Company Name

AB Bank with BAT

AB Bank with BATA
AB Bank with Padma oil
AB Bank with Square
Pharmaceuticals
BAT with BATA
BAT with Padma Oil
BAT with Square
Pharmaceuticals
BATA with Padma oil
BATA with square
Pharmaceuticals
Padma with Square
Pharmaceuticals
AB Bank with Market
BAT with Market
BATA with Market
Padma oil with Market
Square Pharmaceuticals
with Market

Correlation Coefficient
0.006361207
-0.001269368
-0.037729243
-0.008095251

Covariance
-0.00000701949
-0.0000312803
-0.0000377894
-0.000620014

-0.020899953
-0.020899953
0.036093052

-0.00000986908
-0.0000726747
-0.000109446

0.000601092
0.004966711

0.000339835
-0.0000957119

0.014352006

-0.0000208053

0.091183864
-0.123811409
-0.00769509
-0.020600564
0.02007344

-0.00000303814
-0.000481563
-0.0000160605
-0.00000839862
0.00000125379

Page | 21

We have calculated portfolio risk and return by using different combination of our selected five
stock following Markowitz model and the results are as follows:

Company Name

AB Bank with BAT

AB Bank with BATA
AB Bank with Padma oil
AB Bank with Square
Pharmaceuticals
BAT with BATA
BAT with Padma Oil
BAT with Square
Pharmaceuticals
BATA with Padma oil
BATA with square
Pharmaceuticals
Padma with Square
Pharmaceuticals

Risk
0.024
0.2904
0.043

Return
0.00115
0.00611
0.00024

0.0259
0.2889
0.1973

0.0017
0.0068
0.00098

0.0125
0.0431

0.00174
0.00044

0.0287

0.001939

0.0276

0.00159

Efficient Frontier

Efficient Frontier
0.01
0.01
0.01
0.01

Return

0
0
0
0
0
0

0
0.05

0.1

0.15

0.2

0.25

0.3

0.35

Risk

Page | 22

Description
The efficient frontier shows the set of optimal portfolios that offers the highest expected return
for a defined level of risk or the lowest risk for a given level of expected return.
According the figure above, the most efficient combinations of stocks are the ones closest to the
frontier. Whereas shares of AB bank with Bata and BAT with Bata show the highest risk earning
the highest return, and stocks held in combinations of BAT and Padma Oil, BAT and Square, AB
bank and Square are the ones showing the lowest return possible to earn with the lowest level of
risk.
However, the combination of AB bank with BAT, being farthest away from the efficient frontier
seems to be the least efficient combination in this portfolio.

We have calculated the beta of each stock by using regression analysis and the
calculated beta are as followings
Company Name
AB Bank
BAT
BATA
Padma Oil
Square Pharmaceuticals

Calculated Beta
0.0000674496066123478
0.0000530078376640216
-0.000103822175426567
0.0000464799126015103
0.000013627545488615

The beta we have calculated and the beta is already given in the market are shown in the
following table:

Company Name

Calculated Beta

AB Bank
BAT
BATA
Padma Oil
Square Pharmaceuticals

0.0000674496066123478
0.0000530078376640216
-0.000103822175426567
0.0000464799126015103
0.000013627545488615

Beta available in
the market
1.04566821897
0.742998482707
0.675125773007
1.213971742
0.612034091767
Page | 23

Why the difference?

Lets begin by looking at the time frame chosen for calculating beta. The available betas are
calculated with time frames unknown to us. This poses a unique problem to us as well as any end
users, who need this measurement to measure portfolio risk. Long-term 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 used 120 months data to calculate our beta. This might account for the
difference between the available beta and our calculated beta.

Another problem could be the index used to calculate beta. Most provided betas use the
American standard of the S&P 500 Index. However, our portfolio contains equities that extend
beyond U.S. borders, companies that is based and operated in Bangladesh; thus the S&P 500 is
not the best measure of the market.
Another unknown factor of pre-made available betas is the method used to calculate them. There
are two ways to calculate betas: regression and the capital asset pricing model (CAPM). CAPM
is used more commonly in academic finance; however it is more accurate to use the regression
technique. The available betas may have been calculated using a different method from what we
have used, which might explain the differences.

We have calculated required the return of each stock based on CAPM where we assumed the risk
rate of 3% and risk premium of 7% and the results are as follows:

R AB Bank
R BAT
R BATA

3.120781

R Square pharmaceuticals
R Padma Oil

3.009688

3.008685
3.684855
3.01749

Page | 24

Conclusion:
The 5-stock portfolio consisting of AB bank, Bata, Bat, Square Pharmaceuticals, and Padma Oil
shares have been used to calculate the efficient frontier and identified the combination of stocks
which would prove to be the most efficient. The results are such that any asset combination other
than BAT and AB bank stocks held together, yield efficient set of portfolios. Hence, while
purchasing shares of these companies in the market, these relationships would come in handy.
Also, the correlation coefficient and covariance between the shares, and the market should be
studied before investing in the stocks because these figures reveal the direction in which the
return from each stock would move with changing market conditions. An astute investor would
want to include stocks in his portfolio which compensates the additional risk of holding one
stock with additional return from the other stock.
The expected returns from each stock have been calculated to show that all the stocks have
similar figures. These help an investor to decide which stock to invest in when additional risk is
assumed for a given security.
However, the market beta calculated in this report differs from the available beta in the market.
For reasons explained in the report, the differences have arisen which might also be reflected in
other calculations. Nevertheless, the general conclusion to be made from the portfolio analysis
of these particular stocks reveal the underlying expected return to be gained from each and the
interrelationships among these stocks when held in a 2-securities model, exhibit the efficient
combinations of stocks, which is the purpose of this project.

Page | 25