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I L S L R e s e a r c h [email protected]
1 April 26, 2015
BANGLADESH STEEL RE-ROLLING MILLS LIMITED
Company Overview
Bangladesh Steel Re-Rolling Mills Limited (BSRM) was
established in 1952. In 1984 BSRM was closed the chapter of
old plant and commissioned with fully automatic machinery
from UK. In 2011, BSRM amalgamated with Meghna
Engineering Works Limited (MEW), another concern of BSRM
group which is engaged in billet making. The two companies
works together to produce 60 grade and 40 grade MS bars ,
angles, channels, I -beam, great-beam etc.
BSRM has two associates and does not have any subsidiary or
holding company. BSRM holds 31.19% share of BSRM Steels
Limited, a MS rod manufacturer which was established in 2002
that has been listed with Dhaka & Chittagong Stock Exchanges
in 2009. BSRM also holds 21.76% share of BSRM Steel Mills
Limited, which will be a s teel melting and billet casting plant
with a total installed production capaci ty of 862,000 MT of
billets per annum. The billets produced by the new plant will be
consumed by the two rolling mills of the BSRM group.
Abul Khair Steels Mills, Kabir Steel Re -Rolling Mills, Seema Steel
Re-Rolling Mills, Rahim Steel Mills, GPH Ispat, Ratanpur Steels,
Baizid Steel and Anwar Ispat are the major competi tors of
BSRM who are producing about 30% of total s teel demanded in
Bangladesh. BSRM is the market leader in the steel market of
Bangladesh. As per prospectus , BSRM occupy 26% of the total
s teels market in Bangladesh.
The main raw material for re -rolling mills is billet which is
sourced from India, Korea and Singapore. The main raw
material for billet making is scrap which is sourced through
import as well as local suppliers . The scrap is imported from
Hong Kong, Germany, USA, Netherlands , United Kingdom,
Singapore and India. In 2013 the plant produced 106,810 MT
which is 89.01% of installed capaci ty of 120,000 MT which is
13.47% more than 2012.
In February 2015, BSRM has raised its fund to BDT 612,500,000
(17,500,000 shares * BDT 35.00 including BDT 25.00 premium)
through Ini tial Public Offering (IPO). Alliance Financial Services
Limited was Issue manager. Rahman Rahman Huq was the
auditor. Mr. Alihussain Akberali, FCA (Managing Director) holds
about 12.672% of i ts Post-IPO paid up capital.
Use of Proceeds %Fund Implementation Schedule
Payment of retention money(For Machinery)
35.95% Implementation is completed in two phases - April 2015 & September 2015
Finished goods storage shed 27.32% Within December 2015
Loan Repayment 33.31% When the IPO fund is available
IPO Expenses(approx.) 3.43% As and when required
Investment Positives
BSRM has taken an expansion (BMRE) project of BDT 5,863.70 million to enhance the capaci ty from 120,000 MT to 450,000 MT to cater the growing demand of quali ty
s teel in the country. The project is financed by BDT 3,385.78 million (57.74%) term loans , BDT 1,886.41 million
(32.17%) from own source and BDT 591.51 million (10.09%) from IPO fund.
To minimize the dependency on import of raw materials,
BSRM Group will establish the largest billet making plant in the country.
Investment Negatives
The two syndicate loan by United Commercial bank
Limited and One bank limited of BDT 2785.78 million and BDT 600 million respectively for the expansion projects will incur interest expense and the leverage ratio will also go
up. Non-operating income of the company is heavily
fluctuating in nature over the years.
IPO Details
No. of Shares (Post-IPO) in mn 173.4 Authorized Capital (BDT mn) 5000.0 Pre-IPO Paid-up Capital (BDT mn) 1558.5
Post-IPO Paid-up Capital (BDT mn) 1733.5 IPO s ize in shares (mn) 17.5
Face va lue per share (BDT) 10.0
Offer price per share (BDT) 35.0 Market Lot 200
NAVPS (BDT) (Dec 2013) (Pre-IPO) 52.1
Annualized EPS (Post-IPO) (BDT) 1.58
2011 2012 2013
Financial Information (BDT mn) :
Sales 12,644 14,043 8,602
PAT 1,151 454 789
Assets 14,855 16,840 21,144
LT Debt 332 1,228 1,406
Equity 4,405 7,526 8,119
Margin:
Gross Profit 8.5% 5.0% 5.8%
Operating Profit 6.8% 3.5% 3.3%
Pretax Profi t 14.5% 4.7% 13.3%
Net Profi t 9.1% 3.2% 9.2%
Growth:
Sales 65.9% 10.9% -38.7%
Gross Profit 135.3% -35.2% -28.3%
Operating Profit 122.5% 122.5% -43.9%
Net Profi t 340.6% -60.6% 73.8%
Profitability:
ROA 10.2% 2.9% 4.2%
ROE 33.7% 7.6% 10.1%
Leverage:
Debt Ratio 25.9% 30.1% 23.8%
Debt-Equity 87.3% 67.4% 62.0%
Interest Coverage. Coverage
2.1 1.7 1.1
I L S L R e s e a r c h [email protected]
2 April 26, 2015
Valuation
Pricing Based on Peer Group Relative Valuation:
Sector
Multiples
BSRM’s
Fundamentals
Value/
Share
Sector Forward P/E 20.4 1.58 (Annu EPS) 32.3
Market Forward P/E 14.7
23.3
Sector P/NAV 52.1 (NAVPS) 52.1
Latest Declaration: As per i ts latest 9-month (Jan-Sep, 2015)
performance declaration, the company has reported profi t after tax of BDT 207.06 mn. The company demonstrated 65% negative growth in i ts 9-month annualized profi t after tax over
last year and i ts annualized EPS (Post-IPO) for the year Dec 2015 s tood at BDT 1.58.
ILSL Research Team:
Name Designation Rezwana Nasreen Head of Research
Towhidul Islam Research Analyst Md. Tanvir Islam Research Analyst
Mohammad Asrarul Haque Jr. Research Analyst
For any Queries: [email protected]
83.66 261.19
1,150.80
453.92
788.70
276.08
2009 2010 2011 2012 2013 2014 (9MAnnu)
Profit After Tax (BDT mn)
Disclaimer: This document has been prepared by Internation al Leasing Secu rities Limited (ILSL) for information only of its clients on the basis of the publicly available
information in the market and o wn research. This document has b een prepared for information purpose only and do es not solicit any action b ased on the material
contained herein and should not be construed as an offer or solicitat ion to buy or sell or subscribe to any security. N either ILSL nor any of its directors, sharehold ers,
member of th e man agement or emplo yee represents or warran ts exp ressly o r impliedly that the information o r d ata of th e sourc es used in th e documents are genuin e,
accurate, complete, auth entic and correct. However all reasonable care has been taken to ensure th e accuracy of the contents of this document. ILSL wi ll not take any
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