Finance Report

Prepared ForHasanat KarimIntroduction to Financial ManagementFin254, Spring2010Section: 12

Prepared ByA.K.M. Shafiqur Rahman

0910393030Badhan Shaha

0910612030Sohan Haidear

071814030

AcknowledgementAny work such as this must owe credit to a multiple of people. This is our humble effort to present gratitude in submitting this report which we have truly drawn upon own experience as students of BBA. First and foremost, we are indebted to Hasanat Karim, our course instructor, for his generous guidance throughout our work. His unstinting support, faith in us, and inspiration for this project, was a tower of strength in putting the pieces together and an unfailing source of cheer and encouragement. We would also like to thank our class mates for being helpful and cooperative.

IntroductionIn our finance report of analyzing Earning per Share (EPS) and Price Earning (PE) ratio we have chosen two prominent business sectors from Bangladesh. These are: The banking sector and the pharmaceutical sector. We have chosen five banks from the banking sector and five pharmaceutical companies. The list of these companies is:

Bank: Pharmaceutical:

Eastern Bank Limited Square Pharmaceutical Ltd. National Bank Limited Beximco Pharmaceutical Ltd. Mercantile Bank Limited The IBN SINA Pharmaceutical Ltd. South East Bank Limited ACI Limited Prime Bank Limited Orion Infusion Ltd.

In Our report we have tried to see the performance of these companies by calculating EPS and PE Ratio.

1. Method of Calculation

Earnings per Ratio (EPS): EPS is one of the criteria for measuring the performance of a company. If EPS increases, the possibility of a higher dividend paid by the company increases. EPS is used as a tool-indicator of a firm's performance. It measures performance from the perspective of investors and potential investors. Additionally, it shows the amount of earnings available to each ordinary shareholder, so that it indicates the potential return on individual investments. EPS is calculated in the following way:

EarningsPer Share= Net IncomeSharesOutstanding

Price Earnings (PE) Ratio : PE multiples measures how much investors are willing to pay per dollar of current earnings, higher PE ratios means that the firm has positive prospects of future growth. PE ratio is calculated in the following way:

PE ratio= Price per shareEarnings per Share

2. Data Collection

All the data required for the calculation of EPS and PE ratios of the above mentioned companies are collected from their latest Annual Reports which we have collected from Dhaka Stock Exchange. We tried to provide the most relevant and possible data within our possible limit. The all figures we have used is taken from the Auditors’ Report to the shareholders.

3. EPS Calculation (Banking Sector)

1. Eastern Bank Ltd:

Outstanding Shares: 24,852,093 Net Profit : Tk 1,454,541,675Price per Share : Tk 100

EarningsPer Share=Tk1,454,541,67524,852,093

= Tk 58.53

PERatio= Tk 100Tk 58.53

¿1.71׿

2. National Bank Ltd:

Outstanding Shares: 28,464,363 Net Profit : Tk 2,070,470,464Price per Share : Tk 100

EarningsPer Share=Tk2,070,470,46428,464,363

= Tk 72.74

PERatio= Tk100Tk 72.74

¿1.37׿

3. Mercantile Bank Ltd:

Outstanding Shares: 21,584,134 Net Profit : Tk 807,516,869 Price per Share : Tk 100

EarningsPer Share=Tk 807,516,86921,584,134

= Tk 37.41

PERatio= Tk 100Tk 37.41

¿2.67׿

4. South East Bank Ltd:

Outstanding Shares: 34,226,373 Net Profit : Tk 1,870,185,240Price per Share : Tk 100

EarningsPer Share=Tk1,870,185,24034,226,373

= Tk 54.56

PERatio= Tk 100Tk 54.56

¿1.83׿

5. Prime Bank Ltd:

Outstanding Shares: 35,546,875 Net Profit : Tk 2,823,473,302Price Per Share : Tk 100

EarningsPer Share=Tk2,823,473,30235,546,875

= Tk 79.43

PERatio= Tk 100Tk 79.43

¿1.26׿

Banking Industry Average

Average EPS=58.53+72.74+37.41+54.64+79.435

¿Tk 60.53

Average PE Ratio=1.72+1.37+2.67+1.83+1.265

¿1.77׿

4. Financial Analysis (Banking Sector)

Bank Price per Share

Shares Outstanding

Net Profit EPS PE Ratio

Eastern Bank Ltd

Tk 100 24,852,093 Tk 1,454,541,675 Tk 58.53 1.71׿

National Bank Ltd

Tk 100 28,464,363 Tk 2,070,470,464 Tk 72.74 1.37׿

Mercantile Bank Ltd

Tk 100 21,584,134 Tk 807,516,869 Tk 37.41 2.67׿

South East Bank Ltd

Tk 100 34,226,373 Tk 1,870,185,240 Tk 54.56 1.83׿

Prime Bank Ltd

Tk 100 35,546,875 Tk 2,823,473,302 Tk 79.43 1.26׿

EPS Analysis

The above data shows that Prime Bank Ltd. has the highest EPS. Prime Bank Ltd. has the highest shares outstanding but due to its high net profit amount it has

the highest EPS than the other banks. Mercantile Bank Ltd. has lowest net profit and share outstanding than the other banks thus it has the lowest EPS.

National Bank Ltd. has the second highest as it has the second highest net profit and a low share outstanding.

Eastern Bank Ltd. and South East Bank Ltd. has moderate EPS among the banks selected as they have low net profit than Prime Bank Ltd. and National Bank Ltd. and they have a high net profit than Mercantile Bank Ltd.

As Prime Bank Ltd. has the highest EPS it has the best performance among all the banks selected and provides the highest return on individual investment to its each ordinary shareholder. The bank with the second best performance and return on investment to each shareholder is National Bank Ltd. which is followed by Eastern Bank Ltd. , South East Bank Ltd. and Mercantile Bank Ltd.

Thus Prime Bank Ltd., National Bank Ltd. will be the most attractive investment opportunities for investors and the least attractive opportunity will be Mercantile Bank Ltd.

PE Ratio Analysis

Mercantile Bank Ltd. has a high PE ratio as it has the lowest EPS. Prime Bank Ltd. has a low PE ratio as it has the highest EPS.

Among all the banks Mercantile Bank Ltd. has the highest positive prospect of future growth due to its high PE ratio. It is followed by South East Bank Ltd., Eastern Bank Ltd., National Bank Ltd. and Prime Bank Ltd.

Contents

SL. NO

1. Method of Calculation

2. Data Collection

3. EPS Calculation (Banking Sector)

4. Financial Analysis (Banking Sector)

5. EPS Calculation (Pharmaceutical Sector)

6. Financial Analysis (Pharmaceutical Sector)

7. Banking Industry Vs Pharmaceutical Industry

5. EPS Calculation (Pharmaceutical Sector)

1. Square Pharmaceutical Ltd :

Outstanding Shares: 12,072,240 Net Profit : Tk 1,890,052,929Price per Share : Tk 100

EarningsPer Share=Tk1,890,052,92912,072,240

= Tk 156.56

PERatio= Tk 100Tk 156.56

¿0.639׿

2. Beximco Pharmaceutical Ltd:

Outstanding Shares: 125,957,747 Net Profit : Tk 545,341,273Price per Share : Tk 10

EarningsPer Share=Tk545,341,273125,957,747

= Tk 4.33

PERatio= Tk10Tk 4.33

¿2.31׿

3. The IBN SINA Pharmaceutical Ltd:

Outstanding Shares: 900,000 Net Profit : Tk 43,285,209Price per Share : Tk 100

EarningsPer Share=Tk 43,285,209900,000

= Tk 48.09

PERatio= Tk100Tk 48.09

¿2.08׿

4. ACI Limited:

Outstanding Shares: 16,170,000 Net Profit : Tk 1,075,666,883Price per Share : Tk 10

EarningsPer Share=Tk1,075,666,88316,170,000

= Tk 66.52

PERatio= Tk 10Tk 66.52

¿0.15׿

5. Orion Infusion Ltd:

Outstanding Shares: 2,035,976 Net Profit : Tk 26,204,926Price per Share : Tk 100

EarningsPer Share=Tk26,204,9262,035,976

= Tk 12.87

PERatio= Tk 100Tk 12.87

¿7.77׿

Pharmaceutical Industry Average

Average EPS=156.56+4.33+48.09+66.52+12.875

¿Tk 57.67

Average PE Ratio=0.639+2.31+2.08+0.15+7.775

¿2.59׿

6. Financial Analysis (Pharmaceutical Sector)

Company Price per Share Shares Outstanding

Net Profit EPS PE Ratio

Square Pharmaceutical Ltd

Tk 100 12,072,240 Tk 1,890,052,929 Tk 156.56 0.639׿

Beximco Pharmaceutical Ltd

Tk 10 125,957,747 Tk 125,957,747 Tk 4.33 2.31׿

The IBN SINA Pharmaceutical Ltd

Tk 100 900,000 Tk 43,285,209 Tk 48.09 2.08׿

ACI Limited Tk 10 16,170,000 Tk 1,075,666,883 Tk 66.52 0.15׿

Orion Infusion Ltd

Tk 100 2,035,976 Tk 26,204,926 Tk 12.87 7.77׿

EPS Analysis

The above data shows that Square Pharmaceutical Ltd. has the highest EPS. Square Pharmaceutical Ltd. has the high shares outstanding but as it has the highest net profit

amount as aresult it has the highest EPS than the other companies. Beximco Pharmaceutical Ltd. has high net profit but still has the lowest EPS because it has the highest shares outstanding.

ACI Limited has the second highest EPS as it has the second highest net profit. The IBN SINA Pharmaceutical Ltd. has moderate EPS among the companies selected as it has

a low net profit but is has the lowest shares outstanding. Orion Infusion Ltd. has 2nd lowest EPS. It has a net profit lower than Beximco

Pharmaceutical Ltd. but still has a high EPS than Beximco Pharmaceutical Ltd. because it has low shares outstanding than Beximco Pharmaceutical Ltd.

As Square Pharmaceutical Ltd. has the highest EPS it has the best performance among all the companies selected and provides the highest return on individual investment to its each ordinary shareholder. The company with the second best performance and return on investment to each shareholder is ACI Limited which is followed by The IBN SINA Pharmaceutical Ltd., Orion Infusion Ltd. and Beximco Pharmaceutical Ltd.

Thus Square Pharmaceutical Ltd., ACI Limited will be the most attractive investment opportunities for investors.

PE Ratio Analysis

Orion Infusion Ltd. has a highest PE ratio. ACI Limited has a low PE ratio than Square Pharmaceutical Ltd. as it has a low EPS and

share price than Square Pharmaceutical Ltd.

Among all the companies Orion Infusion Ltd. has the highest positive prospect of future growth due to its high PE ratio.

7. Banking Industry Vs Pharmaceutical Industry

Industry Average EPS Average PE RatioBanking Tk 60.53 1.77 Times

Pharmaceutical Tk 57.67 2.59 Times

The above data shows us that banking industry has a fairly high industry average EPS than pharmaceutical industry. It means the banking industry is performing fairly better than the pharmaceutical industry and it generates more revenue than the pharmaceutical industry. The amount of earnings available to each ordinary shareholder in the banking industry is slightly higher than in the pharmaceutical industry.

PE Ratio of the pharmaceutical industry is higher than that of the banking industry thus pharmaceutical industry has more positive growth prospect in the future than banking industry.

In conclusion we can say that both these industries are important for Bangladeshi economy among them pharmaceutical industry promises more future growth than the banking industry.