Final Report

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About the Company

Ocean Containers Limited (OCL) is the pioneer for Inland Container Depot (ICD) and Container Freight Stations (CFS) and is the largest privately owned land container port (Off-dock) in Bangladesh. It is located at Patenga Industrial Area of Chittagong on the International Airport road, which is only 6 km from the country’s largest seaport, Chittagong Port.

OCL owns 15 acres of Custom bonded free hold land. Since inception as an Off-dock in the year 1987, our activities comprises of stuffing and un-stuffing of 8,000+ Containers on monthly basis and a daily empty storage of 5,000 Containers (TEUs).

With the logistic support of its surface transport subsidiary company Ocean Transport Company, OCL can deliver containers anywhere in Bangladesh. The company currently operates a fleet of 30 prime movers with 60 trailers.

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Balance SheetOCEAN CONTAINERS LIMITED

Balance ShetAs At Decembers 31, 2010

As At Dec. 31 As At Dec. 31 As At Dec. 31 As At Dec. 312010 Taka 2009 Taka 2008 Taka 2007 Taka

ASSETSPROPERTY, PLANT & EQUIPMENT 1,392,872,346 1,358,065,000 1,326,649,410 684,266,099

CURRENT ASSETSAccounts Receivable 39,483,259 43,094,419 47,146,278 18,123,359Inventories 2,664,616 1,886,589 1,722,166 304,641Inter-Company Receivables 4,951,589 6,371,681 203,206,825 0Short-Term Investment 37,140,658 0 0 0Advance, Deposits and Prepayments 26,400,708 27,543,702 49,706,408 34,296,293Other Receivables 1,214,100 206,880Cash and Cash Equivalents 18,568,363 4,777,045 20,483,228 139,427,575

130,423,293 83,880,316 322,264,905 192,151,868

Total Assets 1,523,295,639 1,441,945,316 1,648,914,315 876,417,967

SHAREHOLDERS’ EQUITY & LIABILITIESSHAREHOLDERS’ EQUITYIssued, Subscribed and Paid-up Capital 261,800,000 238,000,000 70,000,000 70,000,000Revaluation Surplus 951,462,780 971,178,519 993,381,552 451,150,105Tax Holiday Reserve 0 0 0 36,495,657Retained Earnings 82,797,736 89,920,973 1,183,160 22,776,994Proposed Stock Dividend 0 0 168,000,000 7,000,000Share Money Deposit 0 0 0 150,000,000Total 1,296,060,516 1,299,099,492 1,232,564,712 737,422,756

LONG TERM LIABILITIESMaersk Bangladesh Limited 0 26,550,000IDLC for Lease Finance 338,481 1,323,035 2,701,595 0Staff Gratuity Fund 6,906,050 5,433,700 2,291,050 3,351,542Total 7,244,531 6,756,735 4,992,645 29,901,542

CURRENT LIABILITIES & PROVISIONSBank Overdraft 166,348,258 108,799,550 281,467,288 0Accounts Payable 15,916,774 11,837,686 21,415,140 36,149,455Provision for Taxation 19,237,879 9,024,957 96,742,065 60,726,844Other Payables 18,487,681 6,426,896 11,732,465 8,163,340Short Term Borrowing 0 0 0 4,054,030Total 219,990,592 136,089,089 411,356,958 109,093,669

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Income Statement

OCEAN CONTAINERS LIMITEDINCOME STATEMENT

For the year ended December 31, 2010

As At Dec. 31 As At Dec. 31 As At Dec. 31 As At Dec. 312010 Taka 2009 Taka 2008 Taka 2007 Taka

Revenues 290,716,166 344,435,613 447,805,190 256,315,886Operating Expenses 152,068,028 160,640,354 196,432,513 172,421,575Administrative Expenses 49,192,372 53,858,010 53,598,702 33,373,844Advertisement and Sales Promotion Expenses 755,832 2,336,711 5,531,910 468,010Financial Cost 4,132,635 7,159,167 19,766,278 4,380,750Total Expenses 206,148,867 223,994,242 275,329,403 210,644,179

Operating Profit 84,567,299 120,441,371 172,475,787 45,671,707Dividend on Investments 605,000 0 0 0Other Income 177,595 1,955,613 3,381,028 1,928,078Profit from Sale of Short-Term Investment 9,152,731 0 0 0

Net Profit before tax 94,502,625 122,396,984 175,856,815 47,599,785 Provision for Income [email protected]% -24,237,879 -33,659,171 -65,946,306 -36,882,901

Net Profit after tax 70,264,746 88,737,813 109,910,509 10,716,884 Transfer from/(to) Tax Holiday Reserve 0 0 36,495,657 -834,344Proposed Stock (2007: Cash) Dividend 0 0 -168,000,000 -7,000,000Intangible Benefit 0 0 0 13,474,817Balance brought forward from last account 0 0 22,776,994 6,419,637

RETAINED EARNING 70,264,746 88,737,813 1,183,160 22,776,994

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Analysis of Important Ratios

Liquidity Ratios

Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations. This is done by comparing a company's most liquid assets (or, those that can be easily converted to cash), its short-term liabilities.

In general, the greater the coverage of liquid assets to short-term liabilities the better as it is a clear signal that a company can pay its debts that are coming due in the near future and still fund its ongoing operations. On the other hand, a company with a low coverage rate should raise a red flag for investors as it may be a sign that the company will have difficulty meeting running its operations, as well as meeting its obligations.

Current Ratio:The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities.

The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). In theory, the higher the current ratio, the better.

Current Ratio = Total Current Asset/ Total Current Liability


Net Profit after tax 70,264,746 88,737,813 109,910,509 10,716,884 Transfer from/(to) Tax Holiday Reserve 0 0 36,495,657 -834,344

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For our company we see that as the time passes the ratio is going down. This not necessarily is a bad thing. Contrary to the popular view the figures can be misleading. A low ratio might not necessarily always bad. Contrary to popular perception, the ubiquitous current ratio, as an indicator of liquidity, is flawed because it's conceptually based on the liquidation of all of a company's current assets to meet all of its current liabilities. In reality, this is not likely to occur. Investors have to look at a company as a going concern.

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Quick Ratio:

The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. The quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position.

Quick Ratio = (Total Current Asset - Inventory) / Total Current Liabilities


Net Profit after tax 70,264,746 88,737,813 109,910,509 10,716,884 Transfer from/(to) Tax Holiday Reserve 0 0 36,495,657 -834,344

For Ocean Containers we see that the curve is going down proportionately in line same as the current ratio.

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Asset Utilization Ratio

Asset turnover ratios indicate of how efficiently the firm utilizes its assets. They sometimes are referred to as efficiency ratios, asset utilization ratios, or asset management ratios.

Accounts Receivable Turnover Ratio:

Receivables turnover is an indication of how quickly the firm collects its accounts receivables. The receivables turnover often is reported in terms of the number of days that credit sales remain in accounts receivable before they are collected. This number is known as the collection period and is defined as follows.

Accounts Receivable Turnover Ratio = Net Credit Sale / Avg. Account Receivable

Quick Ratio/ Acid Test Ratio (Total Current Asset - Inventory) / Total Current Liabilities

2010 2009 2008 2007Total Current Asset 127,758,677 81,993,727 320,542,739 191,847,227

Here for Ocean Containers Ltd (Assuming the total sales amount is on credit) we can see that the ratio is gradually declining and the table shows that the receivable figure is increasing year on year, this does not necessarily is as alarming as it looks due to the fact that sales is increasing year on year. But the figure definitely needs to be looked after. Also the credit sales figure has been assumed here in lack of credit sales amount. A proper figure will help to dig down and identify the root of the issue.

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Average Collection Period:

Due to the size of transactions, most businesses allow customers to purchase goods or services via credit, but one of the problems with extending credit is not knowing when the customer will make cash payments. Therefore, possessing a lower average collection period is seen as optimal, because this means that it does not take a company very long to turn its receivables into cash. Ultimately, every business needs cash to pay off its own expenses (such as operating and administrative expenses).

Average Collection Period = 365 Days / Accounts Receivable Turnover



The ratio showing an upward trend clearly indicates that the collection period is increasing this is due to it is directly connected to the Accounts receivable turnover ratio. As explained earlier even more detail data will help to identify the root of the problem.

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Inventory Turnover Ratio:

A ratio showing how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.

High inventory levels are unhealthy because they represent an investment with a rate of return of zero.

Inventory Turnover Ratio = Cost of Goods Sold/ Avg. Inventory



Here the graph indicates the inventory turnover has clearly come down. One of the reasons can be is the inventory has been taken as a whole at the end of the year instead of the average amount inventory the company keeps due to availability of data. More accurate inventory figures will help in determining and solving the problem at hand.

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Asset Turnover Ratio:

This ratio is useful to determine the amount of sales that are generated from assets.

Companies with low profit margins tend to have high asset turnover, those with high

profit margins have low asset turnover.

Total Asset Turnover = Net Sales / Avg. Total Asset

* Assuming the Total sales is on Credit

Average Collection Period: 365 Days / Accounts Receiveable Turnover

The figure is declining year to year. To my understanding the problem is in the sales figure itself. The figures are going down from year to year. Even though it seems the company is trying to maintain efficiency by adjusting the asset amount.

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Solvency Ratios

Solvency ratios are the methods used to find out the firm’s ability to meet its long-term requirement obligations and thus remain solvent and avoid insolvency or bankruptcy.

Debt Leverage Ratios

Compares the total long term debt against fixed assets. This may vary from company to company and from industry to industry. Extremely high ratio makes the firm prone to insolvency in dire economic times and an extremely low ratio indicates the firm avoids taking advantage of low cost debt financing.

Debt / Leverage Ratio = Total Long term Liabilities/ Total Asset

Total Asset Turnover Net Sales / Avg. Total Asset

2010 2009 2008 2007Net Sales 290,716,166 344,435,613 447,805,190

Here the graph indicates that the firm initially had a bit high ratio in this but as time went by they became more stable and started maintaining it in a level.

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Debt Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.

Debt Equity Ratio = Total Long term Liabilities/ Stockholders equity or net worth

Debt / Leverage Ratio Total Long term Liabilities/ Total Asset

2010 2009 2008 2007Total Long term Liabilities 7,244,531 6,756,735 4,992,645 29,901,542

After the initial high level the company has stabled and maintained the ratio. No significant

change in the timeline is observed.

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Times Interest Earned

Ensuring interest payments to debt holders and preventing bankruptcy depends mainly on a company's ability to sustain earnings. However, a high ratio can indicate that a company has an undesirable lack of debt or is paying down too much debt with earnings that could be used for other projects. The rationale is that a company would yield greater returns by investing its earnings into other projects and borrowing at a lower cost of capital than what it is currently paying to meet its debt obligations.

Times Interest Earned (TIE Ratio) = Income before Interest and Taxes/ Interest Expenses

Debt / Leverage Ratio Total Long term Liabilities/ Total Asset

2010 2009 2008 2007Total Long term Liabilities 7,244,531 6,756,735 4,992,645 29,901,542

Ocean Container’s TIE ratio is increasing indicating the financial strength. But maybe the company is losing out the opportunity of low cost debt.

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Profitability Ratios

Some examples of profitability ratios are profit margin, return on assets and return on equity. It is important to note that a little bit of background knowledge is necessary in order to make relevant comparisons when analyzing these ratios.

Gross Profit Margin

The gross margin is not an exact estimate of the company's pricing strategy but it does give a good indication of financial health. Without an adequate gross margin, a company will be unable to pay its operating and other expenses and build for the future. In general, a company's gross profit margin should be stable. It should not fluctuate much from one period to another, unless the industry it is in has been undergoing drastic changes which will affect the costs of goods sold or pricing policies.

Gross Profit Margin = Gross Profit / Net Sales

Times Interest Earned (TIE Rati Income before Interest and Taxes/ Interest Expenses

2010 2009 2008Income before Interest and Tax 94,502,625 122,396,984 175,856,815

Ocean Containers is observing Gross Profit hike in the beginning but gradual decline is being observed. Here we can observe slow decrease in sales this phenomenon may be a contributing reason. To comment more we need industry specific data and details of Ocean’s transaction data.

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Net Profit Margin

More pure form of the gross profit margin. This takes into consideration the interest and tax also. This ratio is not useful for companies losing money, since they have no profit.

Net Profit margin = Net Profit / Net Sales

Total Long term Liabilities 7,244,531 6,756,735 4,992,645Stockholders equity or net wort 1,296,060,516 1,299,099,492 1,232,564,712Debt Equity Ratio 0.006 0.005 0.004

After the initial hiccup the margin seems to have stabled and the company is able maintain it quite successfully.

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Return on Assets Ratio

ROA tells about what earnings were generated from invested capital (assets). ROA for companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure; it is suggested to compare it against a company's previous ROA numbers or the ROA of a similar company.

Return on Total Asset = Net Profit / Average Total Asset

Profitibality Ratios:

Gross Profit Margin Gross Profit / Net Sales

While proportion to net profit with sales has remained roughly same the actual figure has declined while assets has roughly remained the same. So, the ratio is declining year to year rather than selling off their assets to increase the ratio the firm should go into aggressive marketing to generate more revenue.

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Return on Equity

Sometimes ROE is referred to as Stockholder's return on investment, it tells the rate that shareholders are earning on their shares. Companies that generate high returns relative to their shareholder's equity are companies that pay their shareholders off handsomely, creating substantial assets for each dollar invested. These businesses are more than likely self-funding companies that require no additional debt or equity investments.

Return on Equity = Net Income for common Shares / Average Shareholder’s Equity

Profitibality Ratios:

Gross Profit Margin Gross Profit / Net Sales

Return of the company in all aspects is decreasing. The problem most probably lies with the Net income figure. If it can be increased shareholders will get more return on their equity.

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Market Value Ratios

Any ratio that compares a security's current market price (or average market price over a period of time) to any item on its financial statement.

Earnings per Share

The earnings per share ratio is mainly useful for companies with publicly traded shares. Most companies will quote the earnings per share in their financial statements. By itself, EPS doesn't really tell a whole lot. But if compared to the EPS from a previous quarter or year it indicates the rate of growth a companies’ earnings are growing (on a per share basis).

Earnings Per Share (EPS) = Net Income Available to common shares/ Outstanding Common Share

2010 2009 2008 2007Net Income for common Shares 70,264,746 88,737,813 109,910,509 10,716,884Average Shareholders Equity 1,296,060,516 1,299,099,492 1,232,564,712 737,422,756Return on Equity 5% 7% 9% 1%

After the initial jump it is in a declining trend. In the latest year the situation was worsened especially due to additional share issue.

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Price Earnings Ratio

The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by investment professionals and the investing public. The financial reporting of both companies and investment research services use a basic earnings per share (EPS) figure divided into the current stock price to calculate the P/E multiple (i.e. how many times a stock is trading (its price) per each dollar of EPS).

It's not surprising that estimated EPS figures are often very optimistic during bull markets, while reflecting pessimism during bear markets.

Price Earnings Ratio (PE Multiple) = Market price per share / Earning per share


Here we can observe a sharp decline in 2008. No doubt the share prices quoted here form the financial statement is responsible. Due to volatile nature of the share markets we can observe sharp decline and increases in this ratio.

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Book Value per Share

For the most part the book value really doesn't tell us a whole lot. BV is considered to be the accounting value of each share, drastically different than what the market is valuing the stock at. And the truth is that market and book value have nothing in common. Market value is what the investment community's expectations are and book value is based on costs and retained earnings. One situation where BV can be useful is if the market value is trading below the book value, this rarely happens, but if it does it could mean that the company is undervalued and might be an attractive buy.

Book Value per share = Total Common Shareholders Equity / Common shares outstanding


The Book value per share for Ocean is more or less constant

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Dividend Yield Ratio

A stock's dividend yield is expressed as an annual percentage and is calculated as the company's annual cash dividend per share divided by the current price of the stock. The dividend yield is found in the stock quotes of dividend-paying companies.

Income investors value a dividend-paying stock, while growth investors have little interest in dividends, preferring to capture large capital gains.

Dividend Yield Ratio = Dividend per share / market price per share


We can see that the dividend was paid in 2007 and 2008 the results vary a lot due to dividend per share value and fluctuating market price.

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ConclusionOcean Containers Ltd. Is performing important role in the sector of container shipment and storing. Although some figures are a little bit on the negative side the company seems to be in a strong financial position. Aggressive marketing campaigns might address the economic slump they are experiencing at this point but the overall financial strength of the company seems to be satisfactory.

Documents

Final Report