Performance AnalysisPaper & Board sector

Performance analysis: Packages Ltd. & B.P. Board

Salman Ahmad E07MBA002 Abid Ali E07MBA007 Ali Raza E07MBA104

Listed Companies of Paper and Board Sector

SYMBOL COMPANY

 ABSON Abson Ind. BPBL B.P.Board CEFP Central Forest CEPB Century Paper CPSL Cherat Paper Ltd DBSL Dadabhoy Sack MERIT Merit Pack PKGS Packages Limited PPP Pak Pap.Prod SEPL Security Paper

MARKET VALUE OF SHARES OF LISTED COMPANIES OF SECTOR

YearPackages

B.P Board

Dadabhoy Sack

Century Paper

Cherat Paper

Merit Packaging

Central Forest

Pak PaperProd

Security Paper

Abson Ind.

Jun-04 198.00 4.15 5.50 94.00 88.00 74.00 3.25 57.25 125.00 2.90Jun-05 140.00 2.00 10.50 82.95 70.25 58.70 3.25 53.00 140.00 2.00Jun-06 209.35 1.90 10.75 48.45 50.00 77.00 4.25 72.35 118.00 1.60Jun-07 319.05 2.20 14.00 62.55 154.50 132.90 4.00 104.00 113.95 2.00Jun-08 251.89 5.64 26.00 50.00 126.64 91.88 5.00 130.00 76.66 3.05

STOCK RETURN & MARKET RETURN OF THE SECTOR

YEARPackages

B.P Board

Dadabhoy Sack

Century Paper

Cherat Paper

Merit Packaging

Central Forest

Pak PaperProd

Security Paper

Abson Ind.

MARKET RETURN

2004-05 -29% -52% 91% -12% -20% -21% 0% -7% 12% -31% -7%2005-06 50% -5% 2% -42% -29% 31% 31% 37% -16% -20% 4%2006-07 52% 16% 30% 29% 209% 73% -6% 44% -3% 25% 47%2007-08 -21% 156% 86% -20% -18% -31% 25% 25% -33% 53% 22%

Market Value = Average of Stock Return of the Sector.

PERFORMANCE ANALYSIS

We are going to conduct performance analysis of:

PACKAGES LTD. B.P. BOARD

Both the companies are listed on KSE (Karachi Stock Exchange) and claim to be successful during the last years.Data related to both the companies is as under:Packages Ltd..

INDICATORS Jun-05 Jun-06 Jun-07 Jun-08TURNOVER 8,163,000 9,028,000 10,540,000 14,301,000EAT 1,015,364 6,100,780 4,325,948 195,825SHARE PRICE 140.00 209.35 319.05 251.89EPS 16.24 87.30 58.96 (2.32)

B.P. Board

INDICATORS Jun-05 Jun-06 Jun-07 Jun-08TURNOVER 1,574,000 1,833,000 2,012,000 2,196,000EAT (273) 226 484 613SHARE PRICE 2.00 1.90 2.20 5.64EPS (0.05) 0.04 0.08 0.10

Other Economic Indicators of Pakistan are as under:INDICATORS Jun-05 Jun-06 Jun-07 Jun-08 CPI 9.28% 7.92% 7.77% 12.00% RISK FREE RATE (Rf) 7.96% 8.49% 8.90% 11.47% STOCK MARKET INDEX 7,450 9,989 13,772 12,289

BETA CALCULATION

First of all, we have to calculate the BETA (Risk Coefficient) of above companiesWe are going to calculate the BETA of Packages Ltd. using REGRESION LINE METHOD.

Where:M = Risk Premium = Rm - RfK = Stock Premium = Rj - Rf

BETA CALCULATION OF PACKAGES LTD:

YEAR Rj Rm Rf Risk Premium (M)

Stock Premium (K) MK M2

2005 (0.293) (0.069) 0.080 (0.149) (0.373) 0.055 0.0222006 0.495 0.039 0.085 (0.046) 0.410 (0.019) 0.0022007 0.524 0.469 0.089 0.380 0.435 0.165 0.1442008 (0.210) 0.222 0.115 0.107 (0.325) (0.035) 0.012

0.073 0.037 0.167 0.180

β = 0.981

BETA CALCULATION OF B.P. BOARD:

YEAR Rj Rm Rf Risk Premium (M)

Stock Premium (K) MK M2

2005 (0.518) (0.069) 0.080 (0.149) (0.598) 0.089 0.0222006 (0.050) 0.039 0.085 (0.046) (0.135) 0.006 0.0022007 0.158 0.469 0.089 0.380 0.069 0.026 0.1442008 1.564 0.222 0.115 0.107 1.449 0.156 0.012

0.073 0.196 0.277 0.180

β = 1.377

Now, we have to analyze the performance of the two companies by the following strategies:

Return for Diversified Investor. Alpha Strategy Growth Index Model Index Trend Model

We have to calculate the Index Trend Model & Growth Index Model as under:

Packages Ltd..

Index Trend Model

INDICATORS Jun-05 Jun-06 Jun-07 Jun-08

TURNOVER 100.00% 110.60% 129.12% 175.19%

EAT 100.00% 600.85% 426.05% 19.29%

CPI 100.00% 85.34% 83.73% 129.31%

SHARE PRICE 100.00% 149.54% 227.89% 179.92%

STOCK MARKET INDEX 100.00% 134.08% 184.86% 164.95%

EPS 100.00% 537.56% 363.05% -14.29%

CPI is on the increasing trend, but Turnover has increased more rapidly but at the same time EAT has increased to a high trend but at the end of period EAT has not responded accordingly. Stock Market Index has increased and Share Price has also increased with increasing trend but EPS increased during the start of period and ended at negative value due to loss.

Growth Index Model

INDICATORS 2005-06 2006-07 2007-08

TURNOVER 10.60% 16.75% 35.68%

EAT 500.85% -29.09% -95.47%

CPI -14.66% -1.89% 54.44%

SHARE PRICE 49.54% 52.40% -21.05%

STOCK MARKET INDEX 34.08% 37.87% -10.77%

EPS 437.56% -32.46% -103.93%

CPI is showing an increasing trend and Turnover is constantly showing increasing trend but EAT is decreasing very rapidly after a tremendous growth. Stock Market Index growth is decreasing and Share Price has also responded to this trend. EPS is showing extremely negative growth and it seems that in future this trend will continue.

Investment Return = (49.52+52.40-21.05)/3= 26.96%

Market Return = (3.90+46.90+22.20)/3= 24.33%

Average Risk Free return = (7.96+8.49+8.90+11.47)/4= 9.21%

Return for Diversified Investor.

=

= 18.04 %

Alpha Strategy

= 9.21 + 0.981( 24.33 – 9.21)= 24.04%

Company Risk Free (Rf) CAPM Expected Return Alpha Status Packages Ltd. 9.21% 24.04% 26.96% 2.92% Acceptable

____________________

B.P. Board..

Index Trend Model

INDICATORS Jun-05 Jun-06 Jun-07 Jun-08

TURNOVER 100.00% 116.45% 127.83% 139.52%

EAT 100.00% -82.78% -177.29% -224.54%

CPI 100.00% 85.34% 83.73% 129.31%

SHARE PRICE 100.00% 95.00% 110.00% 282.00%

STOCK MARKET INDEX 100.00% 134.08% 184.86% 164.95%

EPS 100.00% -80.00% -160.00% -200.00%

CPI is on the increasing trend, but Turnover has increased more rapidly and at the same time EAT has decreased rapidly and decreased 224%. Stock Market Index has increased and Share Price has also increased with increasing trend but EPS decreased extremely rapidly and showing negative value due to loss.

Growth Index Model

INDICATORS 2005-06 2006-07 2007-08

TURNOVER 16.45% 9.77% 9.15%

EAT -182.78% 114.16% 26.65%

CPI -14.66% -1.89% 54.44%

SHARE PRICE -5.00% 15.79% 156.36%

STOCK MARKET INDEX 34.08% 37.87% -10.77%

EPS -180.00% 100.00% 25.00%

CPI is showing an increasing trend and Turnover is showing increasing trend at the start of period but afterwards showing constant trend. EAT has increased after a tremendous growth. Stock Market Index growth is decreasing but Share Price has shown tremendous increase as compared to market. EPS is showing a good growth and it seems that in future this trend will continue.

Investment Return = (-5.0+15.80+156.40)/3= 55.73%

Market Return = (3.90+46.90+22.20)/3= 24.33%

Average Risk Free return = (7.96+8.49+8.90+11.47)/4= 9.21%

Return for Diversified Investor.

=

= 33.78 %Alpha Strategy

= 9.21 + 1.377( 24.33 – 9.21)= 30.03%

Company Risk Free (Rf) CAPM Expected Return Alpha Status Packages Ltd. 9.21% 30.03% 55.73% 25.7% Acceptable

PERFORMANCE ANALYSIS

STRATEGY Packages Ltd. B.P. Board Decision R.F.D.I 18.04% 33.78% B.P. Board Alpha 2.92% 25.70% B.P. Board Growth Index Model Favorable B.P. Board Index Trend Model Favorable Packages Ltd.

Result:Keeping in view the results from above strategies, we should invest in B.P. Board.

Referenceswww.khistocks.com

www.statpak.gov.pk

www.kse.com.pk

www.sbp.org.pk

www. packages .com.pk

www.bpbl.net