fin 440 final copy

Final ProjectSinger Bangladesh Ltd.

30.7.2011

Course: Fin 440

Sec: 5

SUBMITTED BY

Quazi Sharmina Sabrin 071 0156 030Md. Kaderi Kibria 091 0727 030Jyoti Jiban Khisha 091 0849 030Navila Nowshin 092 0136 030

INSTRUCTED BY

Riyashad Ahmed (RYA) Faculty

School of Business Department of BBA

NORTH SOUTH UNIVERSITY

30th July, 2011

Mr. Riyashad Ahmed

Lecturer

School of Business

North South University

Bashundhara, Dhaka-1213

Subject: Letter of Transmittal

Dear Sir,

With due respect, we the students of your course FIN-440, section- 5, had great pleasure doing

this course with you. Here is the final project report of FIN-440 (Corporate Finance) on Singer

Bangladesh Ltd. that we have analyzed.

Here we have tried to apply different applications of Corporate Finance that you thought us in

the class throughout the semester. We collected the data from DSE and analyzed it and made

comparisons for the years from 2006 to 2010 as you instructed. We tried our level best to make

this paper flawless, but due to our limit there may be mistakes which you believe will consider

for us.

We are thankful to you for giving us the opportunity to prepare this project report. We assure that

any material reproduced in this assignment has been fully acknowledged. We look forward for

your acceptance of this report.

Sincerely Yours,

_________________________________

Md. Kaderi Kibria (ID: 0910727030)

_________________________________ ______________________________

Jyoti Jiban Khisha (ID: 0910849030) Nabila Nowshin (ID: 0920136030)

Acknowledgement

At first, we would like to express our gratitude to Almighty Allah who has given us the

opportunity to do the report as an integral part of our BBA program and provided us the strength

to complete the report within the stipulated time.

We would like to show our gratitude to our respective instructor, Mr. Riyashad Ahmed (RyA),

Lecturer, School of Business, North South University for his whole-hearted supervision during

the period. It is a great honor for us to submit this report to him. His suggestion and comments

were really a great source of spirit to make the report a good one. His enthusiastic support and

guidance has inspired us to complete this task successfully. It would not be possible for us to

complete the paper, but for his help. His continuous and enthusiastic monitoring has motivated

us to reach to our goal on time and with efficiency.

Where this report succeeds we share the credit, where it errors we alone accept the responsibility.

Financial Analysis on Singer Bangladesh Ltd and it’s respective Industry:1) Horizontal balance sheet Analysis

2006 2007 2008 2009 2010Assets:

Non-current Assets:Property, Plant and Equipment: 100% 107% 159% 155% 215%Investments 100% 99% 401% 382% 5%intangible assets 100% 102% 0% 0% 0%deferred tax 100% 75% 0% 0% 0%Total non-current assets 100% 104% 194% 187% 154%Current Assets:Investment( short term) 100%Inventories 100% 142% 163% 98% 133%Trade & other receivables 100% 138% 176% 119% 142%Advances, Deposits and prepaid 100% 86% 100% 99% 125%Advance Income tax 100% 242% 175% 0% 0%Cash and bank balances 100% 120% 87% 80% 1701%Total Current Assets 100% 135% 156% 102% 254%Total Assets 100% 128% 165% 122% 230%

equity and liabilities:shareholder's equity:share capital 100% 100% 135% 135% 135%reserves 100% 100% 296% 296% 612%retained earning 100% 138% 451% 620% 2276%total equity 100% 113% 269% 328% 954%Non current liabilities:other liabilities 100% 104%term loan 100% 147% 240% 151% 0%Deffered Tax liabilities 100% 128% 823%retirement benefits obligation 100% 113% 105% 93% 99%due to Singer Bhold B.V.- BM 100% 104% 104% 0% 0%total non-current liabilities 100% 111% 126% 123% 114%Current Liabilities:income tax payable,net 100% -15790%Trade and other payables 100% 203% 232% 232% 280%short-term borrowings 100% 124% 129% 26% 0%total current liabilities 100% 138% 147% 61% 52%total liabilities 100% 131% 142% 76% 67%total equity and liabilities 100% 128% 165% 122% 230%

Horizontal Income Statement Analysis

2006 2007 2008 2009 2010Turnover 100% 140% 174% 172% 190%sales 100% 3028% 3794% 3776% 4159%earned carrying charges 100% 6% 6% 5% 6%

Less: cost of sales 100% 143% 179% 172% 188%gross profit 100% 129% 160% 173% 193%less: operating expense 100% 129% 151% 157% 168%operating profit 100% 127% 178% 206% 248%less: interest expense 100% 148% 162% 131% 2%

add: non-operating income 100% 108% 51% 204% 1799%

other income 100% 91% 14% 0% 0%100% 104% 0% 0% 0%

profit for the yearcontribution to (WPPF)

less: allocation to WPPF 100% 104% 0% 0% 0%

profit before taxation 100% 104% 181% 359% 1694%

less: provisions for taxation 100% 218% -366% -484% -1710%

profit after taxation 100% 87% 154% 340% 1692%

2) vertical balance sheet analysis2006 2007 2008 2009 2010

Assets:Non-current Assets:

Property, Plant and Equipment: 17% 14% 16% 22% 16%Investments 5% 4% 12% 15% 0%intangible assets 1% 1% 0% 0% 0%deferred tax 1% 0% 0% 0% 0%Total non-current assets 24% 19% 28% 37% 16%Current Assets:Investment(short term ) 6%Inventories 42% 47% 42% 34% 25%Trade & other receivables 21% 23% 23% 21% 13%Advances, Deposits and prepaid 7% 5% 4% 6% 4%Advance Income tax 1% 1% 1%Cash and bank balances 5% 5% 3% 3% 36%Total Current Assets 76% 81% 72% 63% 84%Total Assets 100% 100% 100% 100% 100%

equity and liabilities:shareholder's equity:share capital 9% 7% 8% 10% 5%reserves 3% 2% 5% 6% 7%retained earning 6% 7% 18% 33% 64%total equity 18% 16% 30% 49% 76%Non current liabilities:other liabilities 14% 8%term loan 3% 3% 4% 4%Deffered Tax liabilities 0% 0% 1%retirement benefits obligations 2% 2% 2% 2% 1%due to Singer Bhold B.V.- BM 14% 12% 9% 0%total non-current liabilities 20% 17% 15% 20% 10%Current Liabilities:income tax payable,net 0% 1%Trade and other payables 11% 17% 15% 20% 13%short-term borrowings (secured) 51% 50% 40% 11% 0%total current liabilities 62% 67% 55% 31% 14%total liabilities 82% 84% 70% 51% 24%total equity and liabilities 100% 100% 100% 100% 100%

Vertical Income Statement analysis2006 2007 2008 2009 2010

Turnover 100.00% 100.00%100.00

%100.00

%100.00

%sales 4.43% 96.08% 96.51% 97.04% 97.20%earned carrying charges 95.57% 3.92% 3.49% 2.96% 2.80%

Less: cost of sales 74.97% 76.92% 77.06% 74.92% 74.50%gross profit 25.03% 23.08% 22.94% 25.08% 25.50%less: operating expense 17.16% 15.90% 14.88% 15.64% 15.19%operating profit 7.88% 7.19% 8.06% 9.43% 10.32%less: interest expense 3.78% 4.00% 3.52% 2.87% 0.05%

add: non-operating income 4.12% 3.19% 1.19% 4.87% 39.06%share of income of assosiate company 0.00% 0.00% 1.08% 0.00% 0.00%other income 1.43% 0.93% 0.12% 0.00% 0.00%

5.53% 4.12% 0.00% 0.00%profit for the year 0.00% 0.00% 5.73% 11.43% 49.42%contribution to (WPPF) 0.00% 0.00% -0.26% 0.51% 2.47%

less: allocation to WPPF 0.28% 0.21% 0.21% 0.00% 0.00%

profit before taxation 5.25% 3.91% 5.47% 10.93% 46.95%

less: provisions for taxation 0.67% 1.05% 1.42% 1.89% 6.08%

profit after taxation 4.58% 2.86% 4.06% 9.04% 40.87%

other comprehensive income:gain on revaluation of plant and equipment 0.00% 0.00% 0.00% 0.00% 3.17%

total comprehensive income 4.58% 2.86% 4.06% 48.44% 44.05%

Income statrement forecasted

2010 % of sales pro forma 2011 pro forma2012sales 4,829,017,641 100.00% 9032277473 16894126802Less: cost of good sold 3597485580 74.50% 6728798770 12585660703

gross profit 1231532061 25.50% 2303478703 4308466099less: operating expense 733357461 15.19% 1371684381 2565622008operating profit 498174600 10.32% 931794321.7 1742844091less: interest income -2181148 -0.05% -2181148 -2181148add: non-operating income 1886310272 39.06% 1886310272 1886310272profit for the year 2382303724 49.33% 2820285742 3626973215contribution (WPPF) 119333301 2.47% 223203054.2 417482823.4profit before taxation 2267332719 46.95% 2597082687 3209490392less: provisions for taxation 293572361 6.08% 336268113.6 415562155.5profit after taxation 1973760358 40.87% 2260814574 2793928236

g= 87.04%

Balance sheet forecasting

2010 % of sales pro forma 2011 pro forma2012Assets:

Total non-current assets 660304192 14% 660304192 660304192Total Current Assets 3458768235 72% 3458768235 8287785876Total Assets 4119072427 85% 4119072427 8948090068

equity and liabilities:

shareholder's equity:share capital 224386200 5% 224386200 224386200reserves 292851005 6% 292851005 292851005retained earning 2623280510 54% 944208532.9 -4453436042total equity 3140517715 65% 1461445738 -3936198837

total current liabilities 574225960 12% 574225960 1074042091Non current liability 404328752 8% 404328752 404328752total liabilities 978554712 20% 978554712 1478370843total equity and liabilities 4119072427 85% 1922763245 -2457827994

deficit 2196309182 11405918062

Common size statements and forecasting:

a. Vertical Balance Sheet:

To calculate items of assets of vertical balance sheet, we divided all asset items figures by Total

Assets in every year and expressed as a percentage (%).

To calculated items of liabilities and owners equity of vertical balance sheet, we divided all

liabilities and owners equity items figures by Total Liabilities and Owners Equity in every year

and expressed as a percentage (%). Then we calculated the average and standard deviation of the

vertical income statements (2006-2010) using the function formula of Average and Standard

deviation in Microsoft Excel.

Vertical Income Statement:

Here we divided all figures of Income statement by Net Sales (turnover = sales + earned carrying

charges) in every year and expressed as a percentage (%).Then we calculated the average and

standard deviation of the vertical income statements (2006-2010) using the function formula of

Average and Standard deviation in Microsoft Excel.

b. Horizontal Balance Sheet :

To prepare Horizontal Balance Sheet, we used 2006 as the base year. Each base year item’s

amount was divided by itself and is expressed in percentage. Then the 2007, 2008, 2009 and

2010 year’s respective item is divided by that items base year figure and is expressed in

percentage. However, we consider 2010 as the base year while calculating Investments in short

term deposits since this item hasn’t appeared in the previous years (2006 to 2009), and we

consider 2009 as the base year while calculating other liabilities as this item hasn’t appeared in

the previous years (2006 to 2008). We also calculate 2008 as the base year for deferred tax and

2009 as the base year for income tax payable as these items haven’t appeared in the previous

years. Here all base year items are 100%.

Horizontal Income Statement :

To prepare Horizontal Income Statement, we used 2006 as the base year. Each base year item’s

amount then divided by itself and is expressed in percentage. Then the 2007, 2008, 2009 and

2010 year’s respective items are divided by that items base year figure and are expressed in

percentage. However, we consider 2008 as the base year while calculating contribution to

worker’s profit participation fund (WPPF) and 2010 for the base year for gain on revaluation of

property, plant and equipment since these two items hasn’t appeared in the previous years. Here

all base year items are 100%.

c)Forecasting of 2011 & 2012 :

To forecast Income Statement and Balance Sheet for 2011 and 2012, we have calculated the

growth rate of total sales from 2006 to 2007, growth rate from 2007 to 2008, growth rate from

2008 to 2009 and growth rate from 2009 to 2010 to find out the average growth rate and then

also find the compounded growth from 2006 to 2010. The average of this two growth rate is our

actual growth rate. Then we use the percentage of sales method to forecasted the COGS,

operating expense. For non operating income and interest expenses we assume that there is no

significant change in long term debt.

For pro forma balance sheet we take the percentage of sales for current asset and current liability.

We also assume that there is no change in fixed asset and long term liability. For dividend we

take the forecasted dividend for 2011 and 2012 which calculated in part 7. To calculate the

retained earning we add forecasted net income with beginning retained earning and lessen the

forecasted dividend. In two year they have a Deficit which is the difference of total asset and

total equity &liability.

Calculation of growth rate (g):

Growth rate

Growth rate 2007Growth Rate 2008

Growth Rate 2009

Growth Rate 2010

Turnover(sales) 39.58% 24.74% -1.01% 9.97%

Average Growth Rate, g1 18.32%

compounding growth rate

FV=PV (1+g)n

FV(= sales 2010) 4829017641 PV(sales 2006) 112,849,500 n= 4

g2= 155.76%

g=(g1+g2/2) 87.04%

Liquidity Ratio:

i. Current Ratio : Current Assets / Current Liabilities

=3,458,768,235/574,225,960

=6.023:1

2006 2007 2008 2009 20100

1

2

3

4

5

6

7

current ratio

2006 2007 2008 2009 2010

SINGER

AFTAB AUTOMOBILES BD LA

MPS BSRM

NAVANA CNG

INDUSTRY A

VERAGE

0

1

2

3

4

5

6

7

Current ratio

Current ratio

Industry Average=3.586:1

Interpretation: Singer BD’s Current Assets are 6.023 times greater than their Current

Liabilities in the year of 2010. From the time series analysis we can see that the Current

Ratio is almost stable from 2006 to 2009. But in 2010, it has increased drastically due to

the massive decrease in short term borrowing. That’s why current liabilities decreased by

a huge amount which lead to a great increase in current ratio. According to cross

sectional analysis, the current ratio is almost similar to industry average from 2006 to

2009. But it has been significantly high in 2010 the reason of which has been mentioned

earlier. It is good for the company as they have acquired the ability to pay their debt.

ii. Quick Ratio : (Current Assets – Inventory) / Current Liabilities

= (3,458,768,235-1,009,211,317)/574,225,960

=4.266:1

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Quick Ratio

Quick Ratio

SINGER

AFTAB AUTO

MOBILESBD LA

MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

0

1

2

3

4

5

6

Quick Ratio

Quick Ratio

Industry Average=2.633:1

Interpretation: Singer BD’s Current Assets less inventories are 4.27 times compared to

their Current Liabilities in the year 2010. It is much less than their current ratio the reason

of which is a large stock of inventories. The company has a large amount of inventories

which should be reduced in order to improve the company’s condition. From the time

series analysis, we can see that the company’s condition concerning quick ratio has a

huge improved in 2010 due to the drastic reduction in long term borrowing. From the

cross sectional analysis, we derive that the company’s quick ratio is above the industry

average which is good for the company. But the company needs to reduce its inventory in

order to improve their financial condition in near future.

iii. Working Capital : Current Assets - Current Liabilities

= 3,458,768,235-574,225,960

=2,884,542,275

2006 2007 2008 2009 20100

500000000

1000000000

1500000000

2000000000

2500000000

3000000000

3500000000

Working Capital

Working Capital

SINGER

AFTAB AUTOMOBILES BD LAMPS BSRM

NAVANA CNG

INDUSTRY A

VERAGE

-1500000000

-1000000000

-500000000

0

500000000

1000000000

1500000000

2000000000

2500000000

3000000000

3500000000

Working Capital

Working Capital

Industry Average=924,832,102

Interpretation: In the year 2010, the company has exceeded its Current Assets over its

Current Liabilities by $2,884,542,275. This is good news for the company as because the

working capital has been increasing over the years for the past 5 years from $255,848,825 in

2006 to $2,884,542,275 in 2010, as stated from the Time-series analysis. This is because of

lowering their current liabilities in 2010 from 673,992,418 to 574,225,960 and their current

assets which led to a substantial working capital. From the cross-sectional analysis, the working

capital of Singer has been higher than the industry average of $924,831,102 which means that

Singer is doing better off than the other companies in the industry.

Asset Management Ratio:

i. Inventory Turnover Ratio = Sales / Inventory

=4,693,875,115 / 1,009,211,317

= 4.651 times

2006 2007 2008 2009 20100

1

2

3

4

5

6

7

Inventory turn-over ratio


SINGER


NAVANA CNG

INDUSTRY AVERAGE

0

1

2

3

4

5

6



Industry Average= 3.718 times

Interpretation: Singer BD’s inventory turnover ratio implies that in the year 2010, the

company has sold out and restocked its inventory level 4.651 times. From the time series

analysis we can see that the ratio has increased from the previous years’ which is a good

sign. From the cross sectional analysis we can derive that the ratio is just higher than the

industry average which is ok. But still, 4.651 times is not a very satisfactory inventory

turnover ratio for a reputed company like Singer. They need to sell their inventories more

competently if they want to continue their good work in the long run.

ii. Days in inventory Ratio= 365 / inventory turnover ratio

=365 / 4.651

=78.477 days

2006 2007 2008 2009 20100

20

40

60

80

100

120

140

Day's in inventory

Day's in inventory

SINGER


NAVANA CNG

INDUSTRY A

VERAGE

0102030405060708090

100

Day's in inventory

Day's in inventory

Industry Average= 63.325 days

Interpretation:

In the year 2010, Singer BD’s needs 63.325 days to turn its inventory once. We can see

from the time series analysis that it has gradually declining for the past few years which it is

not a good sign for the company. From the cross sectional analysis, it’s seen that the ratio is

very close to the industry average.

iii. Total Asset Turnover Ratio = Sales / Total Asset

=4,693,875,115 / 4,119,072,427

=1.14 times

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

Total asset turn-over ratio


SINGER


NAVANA CNG

INDUSTRY A

VERAGE

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6



Industry Average= 0.899 times

Interpretation: In the year 2010, Singer BD’s every $1 worth of asset is generating $1.14

worth of sales. We can see from the time series analysis that it has not actually been

improving for the past few years. Surely it is not a good sign for the company. From the

cross sectional analysis, it’s evident that the ratio is higher than the industry average. Singer

needs to improve this ratio which will be very helpful for the betterment of their company.

iv. Fixed Asset Turnover Ratio = Sales / Fixed Asset

=4,693,875,115 / 660,304,192

=7.109 times

2006 2007 2008 2009 20100

1

2

3

4

5

6

7

8

9

Fixed asset ratio

Fixed asset ratio

SINGER


MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

0

1

2

3

4

5

6

7

8

Fixed asset ratio

Fixed asset ratio

Industry Average: 3.84:1

Interpretation: In the year 2010, Singer BD’s every $1 worth of fixed asset is generating

$7.109 worth of sales. We can see from the time series analysis that this ratio is quiet

unstable for the past few years. The reason behind this is the massive investment in the

fixed asset in the year 2008. That’s why the ratio has gone down in 2008 and stayed

stable in 2009 but again increase in 2010 as the company increases its sales and the

company is also maintaining a very good fixed asset turnover ratio compared to the

industry average.

v. Average Collection Period = Accounts Receivable

Sales

365

= 542,510,110/ (4,693,875,115 / 365)

= 42.186 days

2006 2007 2008 2009 20100

10

20

30

40

50

60

70

Day's sales outstanding


SINGER


NAVANA CNG

INDUSTRY A

VERAGE

0

20

40

60

80

100

120

140

160



Industry Average=51.478 days

Interpretation: Singer BD’s average collection period is 42.186 days which implies that

on an average, in the year 2010, the company took 42.186 days to convert it’s accounts

receivable into cash. From the time series analysis, we can observe that the company’s average

collection period is increased from 2009 to 2010 which is not a good sign at all. The reason

behind this is the substantial increase in accounts receivable. But the company is performing well

considering collection of A/R as it is not increase at a very high rate. Meanwhile it has also not

been accurately able to increase their sales revenue. That’s why the ratio has come up. If we look

at the cross sectional point of view, then we can see that the ratio is way below the industry

average which is excellent.

vi. Average Payment Period = Accounts Payable

Cost of Goods Sold

365

= 529,974,431 / (3,597,485,580 / 365)

= 53.771 days

2006 2007 2008 2009 20100

10

20

30

40

50

60

Average payment period


SINGER


MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

0

10

20

30

40

50

60



Industry Average= 23.243 days

Interpretation: In the year 2010, on an average, the company took 53.771 days to make

their payments to the creditors. It is quiet stable in the recent years but it is not below

than the industry average which is bad. Now if we compare it with the average collection

period, we can see that, it is higher than the average collection period. Now, it is good for

the company on the financial perspective that they are holding money longer than

collecting it. But the company needs to be careful about the creditors’ mindset that they

should not lose their trust on the company.

vii. Cash Conversion Cycle: Days in inventory + Average Collection Period – Average

Payment Period

= (365 / Inventory Turnover Ratio) + (Accounts Receivable/ Sales/365) – (Accounts

Payable / Cost of Goods Sold/ 365)

= (365/4.651) + 42.186 – 53.771

= 66.893 days

2006 2007 2008 2009 20100

20

40

60

80

100

120

140

160

Cash conversion cycle


SINGER


MPS BSRM

NAVANA CNG

INDUSTRY A

VERAGE

020406080

100120140160180200



Industry Average=91.56 days

Interpretation: In the year 2010, Singer’s ratio was 66.892 days which increase from

2009 bt decrease from other past years. This means that Singer takes just a little over 66

days to convert their invested capital to cash. When taking into observation the cross-

sectional analysis, Singer is doing better than the industry average which is an

outstanding figure of over 91.56 days. This stated that Singer is doing well in this sector

then the other companies in the industry and they have a bright future in the day-to-day

cash conversion part if they can manage this efficiency with their customers and suppliers

payback periods.

Debt Management Ratio:

i. Debt-to-Asset Ratio= Total Debt

Total Assets

=978,554,712 / 3,458,768,235

=0.238 %

2006 2007 2008 2009 20100

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Debt-to-asset ratio

Debt-to-asset ratio

SINGER


MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

00.10.20.30.40.50.60.70.80.9

Debt-to-asset ratio

Debt-to-asset ratio

Industry Average= 0.352%

Interpretation: Singer BD’s debt ratio is 0.238 which implies that in the year 2010, the

company’s 24% of total assets were financed by the debt. From the time series analysis,

we can see that the company’s debt ratio has substantially decreased in the year 2010

compared to the previous years. The reason behind this is that the company has paid a

huge amount of short term borrowings. This huge payment to creditors has resulted in

substantial decrease in total debt amount. The company’s debt ratio is below the industry

average. So, we can say that this phenomenon is good but as the company is gaining

strength by their increased sales revenue, they are reducing their risk factor by decreasing

debt.

ii. Debt-Equity Ratio = Total Debt

Total Equity

=978,554,712 / 3,140,517,715

0.238 %

2006 2007 2008 2009 20100

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Debt-to-equity ratio


SINGER


NAVANA CNG

INDUSTRY A

VERAGE

00.10.20.30.40.50.60.70.80.9




Interpretation: In the year 2010, the company had 0.238. From the time series analysis,

we can see that the debt-equity ratio is decreasing continuously. The reason behind this is

the fact that the company is going more for equity financing and paying their previous

debts. From the cross sectional analysis, we can observe that the ratio is just below the

industry average.

iii. Times Interest Earned = Operating Profits

Interest Expense

= 498,174,600 / 0

= N/A

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

3

3.5

Times interest earned


0

2

4

6

8

10

12



Interpretation: In the year 2010, Singer BD’s has no interest expense but they have an

interest income of $2,181,148. So it is not possible to calculate their TIE ratio.

Profitability Ratio:

i. Gross Profit Margin = Gross Profit * 100

Sales

= (1,231,532,061 / 4,693,875,115) * 100

= 26.237%

2006 2007 2008 2009 201022.5

23

23.5

24

24.5

25

25.5

26

26.5

Gross profit margin

Gross profit margin

SINGER


NAVANA CNG

INDUSTRY A

VERAGE

05

101520253035404550

Gross profit margin

Gross profit margin


Interpretation: In the year 2010, the company has made Gross Profit of $ 26.237 for

every $ 100 of sales. From the time series analysis, we can see that the ratio has improved

consistently, although it got reduced some percentage in 2007 and 2008. However when

compared with the industry average, it is slightly high. Still they need to improve their

GPM.

ii. Operating Profit Margin = Operating Profits * 100

Sales

= (498,174,600 / 4,693,875,115) * 100

= 10.613%

2006 2007 2008 2009 20100

2

4

6

8

10

12

Operating profit margin


SINGER


NAVANA CNG

INDUSTRY A

VERAGE

0

5

10

15

20

25

30

35




Interpretation: In the year 2010, the company has earned $ 10.613 worth of operating

profit for every $ 100 worth of sales. From the time series analysis, we can see that it is

increasing year by year. The reason is behind this that the operating profit is increasing

continuously. The ratio is just below the industry average which is ok for now. But they

need to improve on this for future benefit. For this, they need to improve their operating

profit. For that the company need to decrease it’s operating expense so that they can

improve their EBIT.

iii. Net Profit Margin (NPM) = Net Profit After Taxes * 100

Sales

= (1,973,760,358 / 4,693,875,115) *100

= 42.05%

2006 2007 2008 2009 20100

5

10

15

20

25

30

35

40

45

Net profit margin

Net profit margin

SINGER

AFTAB AUTO

MOBILESBD LA

MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

05

101520253035404550

Net profit margin

Net profit margin


Interpretation: In the year 2010, the company has generated Net Profit of $42.05 out of

every $100 in sales which is drastically higher than the previous years. This is just

because of a massive change in net profit from last few years to this year. This is good

news for the company’s bright future as this will lead to increasing Net Profits for the

future years to come. From the cross sectional however, we have observed that the

company’s NPM is higher from the industry average of 24.594%. This means that the

other companies in the industry are not doing better comparing with Singer. So they

should continue the process of increase in their NP in future as well.

iv. Return on Assets (ROA) = Net Profit After Taxes * 100

Total Assets

= (1,973,760,358 / 4,693,875,115) * 100

= 47.918%

2006 2007 2008 2009 20100

10

20

30

40

50

60

ROA

ROA

SINGER

AFTAB AUTOMOBILES

BD LAMPS

BSRM

NAVANA CNG

INDUSTRY A

VERAGE

0

10

20

30

40

50

60

ROA

ROA

Industry Average= 19.824 %

Interpretation: In the year 2010, the company has generated a net income of $42.918 for

every $100 in total assets. From the time-series analysis, the ROA have been increased

significantly from year 2006 to year 2010. This means they have earned a significant amount of

revenue from utilizing their total assets. From the cross-sectional analysis, the ROA of Singer

has been incredibly above the industry average of 19.824%. This means that Singer is doing

much better than the other companies.

v. Return on Equity (ROE) = Earnings Available for Common Stockholders * 100

Total Stockholders’ Equity

= (1,973,760,358 / 3,140,517,715)* 100

= 62.848 %

2006 2007 2008 2009 20100

10

20

30

40

50

60

70

ROE

ROE

SINGER

AFTAB AUTO

MOBILESBD LA

MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

0

10

20

30

40

50

60

70

ROE

ROE


Interpretation: In the year 2010, the company has generated a net income of $62.848

for every $100 in total equity. This means that the common shareholders earned $62.848

out of $100 investment. From the time-series analysis, they have improved their ROE

significantly in 2010 as it was being reduced up till 2008. This is because of the fact that

they have improved their net profit a substantial amount in 2009 and a significant amount

in 2010. From the cross-sectional analysis, they are above by the industry average by a

large amount.

Stock Market Ratio:

vi. Earnings per Share = Earnings Available for Common Stockholders

Total Number of Common Shares Outstanding

= 876.63

SINGER


MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

0100200300400500600700800900

1000

EPS

EPS

Industry Average= 209.244

Interpretation: In the year 2010, the shareholders have earned Taka 876.63 for every

share holding. From the time series analysis, we can observe that it is raised in a huge

2006 2007 2008 2009 20100

100

200

300

400

500

600

700

800

900

1000

EPS

EPS

volume from last few years to 2010. The reason behind is that the net profit after tax has

been increasing from 2005 and hugely increased in 2010. That’s why the EPS has risen

so significantly. From the cross sectional analysis, we observe that the ratio is highly

above then the industry average which is very good for the company.

vii. Market Value-to-Book Value Ratio (M/B ratio) = Market Value per Share

Book Value per Share

Where,

Book Value per Share = Total Stockholders’ Equity

Total Number of Common Shares Outstanding

= 3,140,517,715 / 2251531

= 1,394.84

M/B Ratio= 7,169 / 1,394.84

= 5.14

2006 2007 2008 2009 20100

1

2

3

4

5

6

7

8

9

Market-to-book value ratio


SINGER

AFTAB AUTO

MOBILESBD LA

MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

02468

1012141618



Industry Average= 7.382

Interpretation: In 2010, the company’s market share price was 5.14 times higher than the book

value of the share price. From the time series analysis, we can see that, the ratio is very much

unbalanced in the recent years. The reason behind this is the unpredictable stock market price

which keeps turning up and down. In the year 2009, the ratio is rising to some extent but again in

fall down in year 2010. From the cross sectional analysis, we observe that it is lower than the

industry average which is also a bad sign.

viii. Price-to-Earnings Ratio (P/E Ratio) = Market Price per Share

Earnings per Share

= 7169 / 873.63

=8.2

2006 2007 2008 2009 20100

5

10

15

20

25

30

35

P/E ratio

P/E ratio

SINGER

AFTAB AUTO

MOBILESBD LA

MPSBSRM

NAVANA CNG

INDUSTRY A

VERAGE

0

5

10

15

20

25

30

35

40

P/E ratio

P/E ratio

Industry Average=25.42

Interpretation: In the year 2010, the company’s shareholders are willing to pay Taka

8.2 for each taka of reported earnings. Compared to the previous years’ ratio, Singer’s

P/E ratio is pretty lower. Too much or too less P/E ratio both are bad for the company. the

ratio is also very lower than the industry average,. So it is not good at all. It means the

market price is not reflecting the actual earnings of the company. The company’s price

should have been improved.

Du Pont Analysis:

ROA = Net Profit Margin * Total Asset Turnover

= (Net Profit / Sales) * (Sales/ Total Assets)

= (1,973,760,358 / 4,693,875,115) * (4,693,875,115 / 4,119,072,427)

= 0.4205 * 1.14

= 47.918%

Modified Du Pont Analysis:

ROE = Net Profit Margin X Total Asset Turnover X Equity Multiplier

= (Net Profit / Sales) X (Sales/ Total Assets) X (Total Assets / Total Equity)

= (1,973,760,358 / 4,693,875,115) * (4,693,875,115 / 4,119,072,427) *

(4,119,072,427/3,140,517,715)

= 0.4205 * 1.14 * 1.312

=62.848%

4) Calculating Standard Deviation

Monthly Average rate of return of Singer=3.68%

Standard deviation of Singer = 16.15%

Market Average return=2.95%

Standard deviation of Market=8.89%

We calculate the return based on the capital gain and the dividend yield for the month. Dividend

is taken as company recorded the list of dividend receivers before the one month of actual cash

disbursement. The standard deviation of this return is 16.15% which refers that the fluctuation of

rate of return or deviation from the mean is 16.15%. The standard deviation for the market is

8.89% which is lower than the Singer and the expected or monthly average return is also higher

for the Singer (=3.68%) than the Market (=2.95%)

5) Return and Beta

a)

Average monthly market return for last five year,

In Analysis of Variance (ANOVA), the coefficient of market return (X variable) is considered as

Beta of the Singer which is also the slope of characteristic line or SML curve. It refers the risk of

Singer’s return related with the market risk.

CoefficientsStandard

Error t Stat P-valueIntercept 0.012155776 0.019204125 0.632977 0.529236X Variable 1 0.823028487 0.206510924 3.985399 0.000191

(0.400000) (0.200000) - 0.200000 0.400000

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

f(x) = 0.812514591255209 x + 0.0128304000128872R² = 0.200114408552075

singer

singerLinear (singer)

DSI return

singe

r ret

urn

Risk free rate taken from the 91 days Treasury bill as 28 days T bills are not available in the

market. In may 2011, the cut of yield for the 91 days T bill was 7.02%. So the monthly risk free

rate is .585% (=7.02%/12)

b) Cost of Equity and Cost of Debt

The cost of capital is calculated by the CAPM (capital asset pricing model)

After tax monthly cost of capital, Ke= rf+ β (Rm-rf)

rf = .585%

β= .823

Rm=2.95%

Monthly,Ke=.00585+.823(.0295-.00585)

=2.5356%

Annual, Ke=2.5356*12

=30.427%

Singer has no interest expense for the year 2010 so we can take the average interest rate of 2009

which ranges 9% to 13.5%. The Tax rate for Singer is 27.5% which from 10% is rebate for more

than 20% dividend.

Before Tax Cost of Debt= 11.5%

After Tax cost of Debt=11.5 %( 1-17.5%) =9.281%

c) Weighted Average Cost of Capital:

Weight of debt 5.734%Before tax Cost of debt 11.250%Tax rate 17.500%After tax cost of Debt 9.281%

Weight of capital 94.266%Cost of capital 30.427%WACC 29.214%

*The weight is taken as the weight of market value of equity and the market value of Debt

Market value per of the Equity =market price*(Total Equity/Book value per Share)

SINGERDebt (short term) 978554712Market value of equity 16086246678

market value of total asset 17064801390

Weight of Debt 0.057343457Weight of equity 0.942656543

6) Optimum Debt Ratio:

Wacc for different ratio of Maket value of Equity and Debt Ratio:

Optimum capital structure

Wieght of Debt Weieght of EquityAfter tax cost of Debt

Cost of capial WACC

5.734% 94.266% 9.281% 30.427% 29.214%2.735% 97.265% 9.281% 30.427% 29.849%

17.688% 82.312% 9.281% 30.427% 26.687%18.104% 81.896% 9.281% 30.427% 26.599%

3.033% 96.967% 9.281% 30.427% 29.786%

Value of the company using those WACC:

EBIT Tax rate EBIT(1-Tr) Wacc Value357480102 17.50% 294921084.2 29.214% 1009505380357480102 17.50% 294921084.2 29.849% 988052177.6357480102 17.50% 294921084.2 26.687% 1105119874.0357480102 17.50% 294921084.2 26.599% 1108775965.0357480102 17.50% 294921084.2 29.786% 990147583.2

To calculate the optimum or best WACC whih maximize the value of the firm we take different

ratio which are imiler to the other companies in this industry and calculate the Value of the firm.

The highest value of the fir is tk. 1108775965 which is for lowest WACC (=26.599%)

*the Weight of Debt and Weight of Equity is taken as the market value of total Equity and the

Debt.

Calculation of Weight of Debt and Equity in this Industy:

SINGER AFTAB AUTO BD LAMPS BSRMNAVANA CNG

Debt 978554712 556,620,383404,816,47

9 12702162597 317,495,329

Market value of equity1608624667

8 19798221777188387636

3 574607279981014946599

7

Market value of total asset

17064801390 20354842160

2288692842 70162890595

10466961326

Wieght of Debt 0.057343457 0.027345846 0.17687672 0.181038188 0.030333095Weight of equity 0.942656543 0.972654154 0.82312328 0.818961812 0.969666905

7) Intrinsic price:

Singer Bangladesh Ltd. gave dividends in each and every year from 2006 to 2010. They did not

pay cash dividend each year. Rather they paid cash dividend in the year 2006, 2008 and 2009.

They paid only stock dividend in the year 2007. In 2010 they paid 600% cash and 75% stock

dividend. Comparative to other years, in 2010 they paid a big amount of dividends.

Dividend Year growth

2006 352007 35 02008 30 -0.142862009 90 22010 675 6.5

Average Growth rate: g1 =2.089285714 =2.089

Dividend growth rate according to the Dividend discount model g2 = 1.095603

Taking both dividends we get, expected growth rate (g1+g2)/2 = 1.592444

Here we calculated the growth rates of the dividends from 2006 to 2010 and found an avg.

growth rate of 2.089. Again according to the dividend discount model we found the growth rate

of 1.095. Taking the avg. of both growths, the expected growth rate becomes 1.592.

We found that the growth rate of the dividend paid in 2010 is 6.5 times. Thus we assumed 159%,

37% and 37% in the year 2011, 12& 13. Then from 2014, we assumed the dividend will grow at

a rate of 5% continuously. We calculated the terminal value at year 2014. Then by calculating

the discounted dividend for the year of 2013, 12, 11 and that of Terminal Value and found the

intrinsic price of the Singer at 2010.

Ke= 29% TV3= 14242D0= 675at D1 g = 159% in 2011 D1= 1749.87 Discounted P1= 1354.241800424at D2 g = 37% in 2012 D2= 2397.322 Discounted P2= 1435.843845544at D3 g= 37% in 2013 D3= 3284.331 Discounted P3= 1522.362954784at D4 g(constant) 5% in 2014 D4= 3448.548 Discounted TV3= 6601.474777086

Intrinsic Price= 10913.9234

share price = 7,169.50

undervalued = 3,744.42

Analysis:

In 30.12.2010, it was observed that Singer Bangladesh Ltd. Closing price was TK 7169.50. As

our Intrinsic Price is TK 10913.92 and the traded value of Singer is lower than that of the

Intrinsic Price, we can say that the price of the share of Singer was undervalued. And it was

undervalued by (10913.92 – 7169.50) = TK 3733.42. As the Shareholders are rational they will

come to know about the information that the share price of Singer Bangladesh Ltd. is

undervalued. So, it can be said that the share price of Singer will increase in future.

8) Dividend Policy:

Generally there are three main views based on which an organization pay its dividend. Each of

these three views is related to the amount of giving the dividend to the company’s shareholders.

These views are as follows:

View one – Dividend policy is absolutely irrelevant: We know that the required rate of return of

any investor consists in two forms. One is the capital gain yield and that of the second one is the

dividend yield (Ke = Capital Gain Yield +Dividend Yield). This view assumes that perfect

capital market exists and the investors have made their decision of purchasing shares and they

only care about the total required rate of return. So firm’s dividend policy is unimportant as the

investor use the same req. rate of return whether income comes through capital gain yield or

dividend yield.

Views two - High Dividend increase the Stock Value: We all know that, as an investor we are

more certain about the income from dividend than that of capital gain. As an investor we prefer

the things which are certain. So a high dividend will be more valuable than that of high return of

capital gain as capital gain includes risk and uncertainty. Thus high dividend increases the stock

value.

View three – Low dividend increase the Share price: in general we always try to maximize the

after tax income. As the dividends are subjected to double taxation (at corporation level and at

personal level) the final return is less. Rather on the other hand, the capital Gain Yield is not

subjected to tax so whatever the return, it belongs to the investor. Thus low dividend increases

the share price.

There are three dividend policies which are as follows:

Constant dividend payout ratio: In this policy the percentage of earning paid out in

dividend is held constant. Here due to change in profit the dividend paid varies from year

to year.

Stable dollar dividend per share payout: in this policy, relatively a stable dollar dividend

is maintained over time, until the management is convinced or decides to give higher or

lower dividend basing on the forecast.

Small, regular dividend plus year end extra dividend payout: In this policy a corporation

pays small dividends regularly plus a year – end extra dividend in prosperous years.

Recommendation:

From 2006 to 2010, Singer Bangladesh Ltd paid dividend of TK 35, 35, 30, 90 and 675

respectively. We can see that the yearend closing share price of the company was TK 774 in

2006; TK 1880.25 in 2007; TK1982.25 in 2008; TK 2793 in 2009 and TK 7169.50 in 2010. So

from the trend we can say that the as the dividend increased gradually, the share price of Singer

Bangladesh Ltd. Increased. Here in 2006 and 2007 they followed the policy to give Stable dollar

dividend per share pay out. Again in 2008 the price of the stock increased even the dividend was

low, which, is similar with the view of low dividend high stock price. But in 2009 and 2010;

especially in 2010 they followed the policy of small regular dividend plus year-end extra

dividend payout policy. Asa result we can see that the price of share increased a lot which is

similar to the view that states: High Dividend increases the Stock Price.

As a manager of Finance, it’s our duty to increase the shareholders equity, i.e share price. So the

Dividend policy that Singer Bangladesh Ltd should follow is: Small, regular dividend plus year-

end extra dividend payout.

fin 440 final copy

Documents

item hasnt

vertical balance

vertical income

gross profit

time series

interest expense

cross sectional

net profit