Final Assignment

Submitted to:

Najifa Teesha
Lecturer on Principal of Finance
BBA Program Southeast University

Submitted By:
ID :
Section :
 FINANCIAL ANALYSIS OF: BRITISH AMERICAN
TOBACCO BANGALDESH LIMITED

Table of Contents
List of Tables ................................................................................................................................................. v
List of Figures ................................................................................................................................................ v
....................................................................................................................................... 1
CHAPTER 1: INTRODUCTION ..................................................................................................................... 2
1.1 Introduction to the study ................................................................................................................... 3
1.2 Significance of the Study .................................................................................................................... 3
1.3 Literature Review ............................................................................................................................... 3
1.4 Limitation of the Study ...................................................................................................................... 4
1.5 Methodology ...................................................................................................................................... 5
Chapter 2: Organizational Overview ........................................................................................................... 6
2.1 Introduction to British American Tobacco Group ............................................................................. 7
2.2 Introduction to British American Tobacco Bangladesh .................................................................... 8
Chapter 3: Job Description ......................................................................................................................... 10
3.1 Responsibilities ................................................................................................................................. 11
3.2 Limitations for the Study ................................................................................................................. 11
Chapter 4: Report Overview ....................................................................................................................... 12
4.1 Common Size Financial Statements ................................................................................................. 13
4.2 Ratio Analysis ................................................................................................................................... 13
4.3 Risk and Return ................................................................................................................................ 14
4.4 Weighted Average Cost of Capital ................................................................................................... 14
4.5 Stock Valuation ................................................................................................................................ 14
Non-Constant Dividend Model ........................................................................................................... 14
Corporation Valuation Model ............................................................................................................. 15
Chapter 5: COMMON SIZE STATEMENTS ................................................................................................... 16
5.1 Vertical Balance Sheet ..................................................................................................................... 17
5.2 Vertical Income Statement .............................................................................................................. 18
5.3 Horizontal Balance Sheet ................................................................................................................. 20
5.4 Horizontal Income Statement .......................................................................................................... 21
Chapter 6: RATIO ANALYSIS ....................................................................................................................... 22
6.1 Liquidity Ratio...................................................................................................................................
23 Exe cutive Summary iv
6.2 Asset Management Ratios ............................................................................................................... 25
6.3 Debt Management Ratio .................................................................................................................. 29
6.4 Profitability Ratio ............................................................................................................................. 31
6.5 Stock Market Ratio ........................................................................................................................... 36
6.6 Overall Findings and Recommendations ......................................................................................... 38
Chapter 7: RISK AND RETURN .................................................................................................................... 39
7.1 Returns of BATBC ............................................................................................................................. 40
7.2 Returns of DSE INDEX ...................................................................................................................... 41
7.3 CAPM Model and Required Rate of Return..................................................................................... 43
7.4 Risk Analysis ..................................................................................................................................... 43

Continued of Content

Chapter 8: Weighted Average Cost of

Capital ..........................................................................................
. 44
8.1 Cost of
Capital ..........................................................................................
........................................ 45
Chapter 9: STOCK
VALUATION ...............................................................................
.................................... 46
 9.1 Non-constant Dividend Growth
Model ...........................................................................................
47
9.2 Corporate Valuation
Model ............................................................................................
...

List of Tables
Table 1: Vertical Statement of Financial
Position ....................................................................................... 18
Table 2: Vertical Statement of Profit or Loss and Other Comprehensive
Income ...................................... 19
Table 3: Horizontal Statement of Financial
Position ................................................................................... 21
Table 4: Horizontal Statement of Profit or Loss and Other Comprehensive
Income ................................. 21
Table 5: Liquidity
Ratio........................................................................................................................... 23
Table 6: Asset Management
Ratio .............................................................................................................. 26
Table 7: Debt Management
Ratio ............................................................................................................... 29
Table 8: Profitability
Ratio .......................................................................................................................... 32
Table 9: Stock Market
Ratio ........................................................................................................................ 36
Table 10: Returns of British American Tobacco
Bangladesh ...................................................................... 40
Table 11: Returns of DSE
Index ................................................................................................................... 41
Table 12: Weighted Average Cost of
Capital………………………………………………………………………………………….4
5
Table 13: Dividend per
Share ...................................................................................................................... 47
Table 14: Growth
Rate ................................................................................................................................ 47
Table 15: Future
Dividend ........................................................................................................................... 47
Table 16: Present Value of Future
Dividend ............................................................................................... 47
Table 17: Free Cash Flow and Growth
Rate ................................................................................................ 48
Table 18: Future Free Cash
Flows ............................................................................................................... 49
Table 19: Present Value of Future Free Cash
Flows.................................................................................... 49
Table 20: Value of per Common
Share ....................................................................................................... 49
List of Figures
Figure 1: Current
Ratio ................................................................................................................................ 24
Figure 2: Acid Test Ratio/ Quick
Ratio ........................................................................................................ 24
Figure 3: Inventory Turnover
Ratio ............................................................................................................. 26
Figure 4: Total Assets Turnover
Ratio ......................................................................................................... 27
Figure 5: Fixed Assets Turnover
Ratio ......................................................................................................... 27
Figure 6: Day's Sales
Outstanding ............................................................................................................... 28
Figure 7: Average Payment
Period.............................................................................................................. 28
Figure 8: Debt
Ratio .................................................................................................................................... 30
Figure 9: Times Interest
Earned .................................................................................................................. 30
Figure 10: Gross Profit
Margin .................................................................................................................... 33
Figure 11: Net Profit
Margin ....................................................................................................................... 33
Figure 12: Operating Profit
Margin ............................................................................................................. 34
Figure 13: Return on
Assets ........................................................................................................................ 34
Figure 14: Return on
Equity ........................................................................................................................ 35
Figure 15: Earnings per
Share ..................................................................................................................... 37
Figure 16: Price Earnings
Ratio ................................................................................................................... 37
Figure 17: Regression
Analysis .................................................................................................................... 42
Figure 18: Scatter Diagram of BATB ................................................................. 42 1

Executive Summary

• The report provides the background and the financial position of the BRITISH
AMERICAN TOBACCO BANGLADESH. At first, I have started with introduction
where I discussed about background of the organization, its product portfolio.
Moreover, I have done analysis on the common size statement of BATB; it is mainly the
vertical and horizontal balance sheet and income statement. After that I have focused on
ratio analysis. I have done ratio analysis of BATB of last 5 years from 2012 to 2016. In
calculating the ratio analysis, I have used the information of balance sheet and income
statement from the annual report of those years. In ratio analysis I have interpreted only
time series analysis. Furthermore, I have analyzed the risk and return of the company.
Here I have used the information about the company’s price of the stock, the market
price of the stock and the risk free rate. After that I have also discussed and analyzed the
cost of capital. The main part of the cost of capital was calculating the WACC. In
addition, I have analyzed the value of common stock by using non-constant dividend
growth model and corporation stock valuation model. I have also included a brief
description about the ongoing project for which I was recruited. Lastly, in the appendix
part I have given the formulas and equations with which I have done the whole analysis.
2
 CHAPTER 1: INTRODUCTION
1.1 Introduction to the study
British American Tobacco Bangladesh is one of the biggest MNC as well as
company in Bangladesh. It is well known for selling best quality cigarettes and
covering maximum share among the smokers in our country. But as cigarettes is a
controversial product, BATB has to maintain a lot of strict rules and regulations
from paying the highest tax to the government for conducting massive CSR
Activities to maintain its Corporate Image.
My report consists of a rigorous financial analysis of British American Tobacco
across five year from 2012 to 2016 to determine how they have performed through
the years and to forecast how they might perform in the future. The report also
determines what may be the value of the organization through the price of their
share or stock.
1.2 Significance of the Study
My research will help an individual understand:
Ø How BATB have significantly been able to improve their Net Turnover and Net
Profit across the years
Ø How they have performed in terms of liquidity, asset management, debt
management, profitability and stock market
Ø How much risk they are able to take and how much return they expect to
receive for it
Ø What is the structure of BATB’s capital and the cost of it
Ø What could be the future value of BATB’s stock
1.3 Literature Review
Financial analysis is an aspect of the overall business finance function that
involves examining historical data to gain information about the current and future
financial health of a company. Financial analysis can be applied in a wide variety
of situations to give business managers the information they need to make critical
decisions. The ability to understand financial data is 4
 1.1 Introduction to the study

British American Tobacco Bangladesh is one of the biggest

MNC as well as company in Bangladesh. It is well known for
selling best quality cigarettes and covering maximum share
among the smokers in our country. But as cigarettes is a
controversial product, BATB has to maintain a lot of strict
rules and regulations from paying the highest tax to the
government for conducting massive CSR Activities to
maintain its Corporate Image.
My report consists of a rigorous financial analysis of British
American Tobacco across five year from 2012 to 2016 to
determine how they have performed through the years and to
forecast how they might perform in the future. The report also
determines what may be the value of the organization through
the price of their share or stock

1.2 Significance of the Study

My research will help an individual understand: .How

BATB have significantly been able to improve their Net
Turnover and Net Profit across the years .How they have
performed in terms of liquidity, asset management, debt
management, profitability and stock market How much
risk they are able to take and how much return they expect
to receive for it What is the structure of BATB’s capital
and the cost of it What could be the future value of
BATB’s stock

1.3 Literature Review

• Financial analysis is an aspect of the overall business finance function that
involves examining historical data to gain information about the current and
future financial health of a company. Financial analysis can be applied in a wide
variety of situations to give business managers the information they need to make
critical decisions. The ability to understand financial data is 4 essential for any
business manager. Finance is the language of business. Business goals and
objectives are set in financial terms and their outcomes are measured in financial
terms. Among the skills required to understand and manage a business is fluency
in the language of finance—the ability to read and understand financial data as
well as present information in the form of financial reports
• Financial ratios are the principle tools of financial analysis. Sometimes referred to
simply as benchmarks, ratios standardized financial information so that
comparisons can be between a firms past and present performance.
 • Risk and Return analysis is important because it is necessary to understand how
rates of return for investments are explicitly tied to risk. The greater the risk, the
greater the required rate of return needed to attract investors. This concept mostly
presented from the perspective of investors it holds equal importance for a
financial manager considering an investment to develop a new product line.
• Stock valuation is an important process in financial management. An
understanding of valuation, both the concepts and procedures, supports the
financial officer’s objectives of maximizing the value of the firm.
• The importance and usefulness of weighted average cost of capital (WACC) as a
financial tool for both investors and the companies are well accepted among the
financial analysts. It is important for companies to make their investment
decisions and evaluate projects with similar and dissimilar risks. Calculation of
important metrics like net present values and economic value added requires
WACC. It is equally important for investors for arriving at valuations of
companies.

1.3 Limitation of the Study

Due to the constraint of time and confidentially of

financial information, this report will only
concentrate on the financial information of BATB
available to the public at large for complete
transparency. In this report an overall financial
analysis will present BATB’s past performance 5
 1.4 Limitation of the Study

Due to the constraint of time and confidentially of

financial information, this report will only concentrate on
the financial information of BATB available to the public
at large for complete transparency. In this report an
overall financial analysis will present BATB’s past
performance 5
 1.4 Methodology

• Type of Date: For this report both Primary and

Secondary data was collected and used
 Chapter 2: Organizational Overview

2.1 Introduction to British American Tobacco Group

The British American Tobacco Group is one of the world’s leading international
manufacturers of cigarettes, marketing its products in almost every country worldwide.
It is clear leader in a competitive and fast moving business. British American Tobacco,
the second largest Tobacco Company in the world is also the world’s most global
tobacco company. Based in London, UK, it operates in more than 50 countries with
85,000 employees selling more than 300 brands in more than 180 markets worldwide.
Tracing its heritage back to a joint venture formed by the Imperial Tobacco Company of
the United Kingdom and The American Tobacco Company of the United States in 1902,
today's British American Tobacco Company was born on the world stage. Extent of
operation of British American Tobacco Company is given below:
Ø America-Pacific (USA, Japan, South Korea)
Ø Asia-Pacific (China, Indo-China, Taiwan, South-East Asia, Australasia)
Ø Europe (50 countries including Russia)
Ø Latin America (Central & South America, Mexico, Caribbean)
Ø Africa (More than 50 countries)
Ø MESCA (Middle East, South & Central Asia)
British American Tobacco, better known as BAT, is the mother-company of, at present,
around 56 companies worldwide. British American Tobacco BAT) is the world’s most
international tobacco group. With a market share of 15 per cent, they make the cigarette
chosen by one in seven of the world’s one billion adult smokers and make nearly two
billion cigarettes worldwide every day. BAT holds strong market positions in each of its
regions and has a leadership in more than 50 markets of the 180 markets where they
have an active business presence. In total BAT employs nearly 90,000 people
worldwide and has over 80 factories in 64 countries.
In order to support the company's business goals, the merger of British American
Tobacco with Rothmans International had been announced on 11 January 1999. This
global merger was completed on 7th June 1999. This brought together the number 2 and
4 players which together 8 will boost a combined volume exceeding 900 billion
cigarettes around the world with some 120,000 employees and a worldwide market
share of 16 percent Phillip Morris has a 17 percent share). The merger is a major step
forward in British American Tobacco’s vision of becoming the world’s leading
International Tobacco Company. (British American Tobacco, 2013)
2.2 Introduction to British American Tobacco
Bangladesh

The presence of British American Tobacco in this part of the world can be traced
back to 1910. Beginning the journey as Imperial Tobacco 106 years ago, the
Company set up its first sales depot at Armanitola in Dhaka. After the partition of
India in 1947, Pakistan Tobacco Company was established in 1949. The first
factory in Bangladesh (the then East Pakistan) was set up in 1949 in Fauzdarhat,
Chittagong. In 1965, the second factory of Pakistan Tobacco Company went into
production in Mohakhali, Dhaka. It became Bangladesh Tobacco Company
Limited in 1972 immediately after Bangladesh's independence. In 1998, the
Company changed its name and identity to British American Tobacco Bangladesh
(BAT Bangladesh or BATB) aligning the corporate identity with other operating
companies in the British American Tobacco Group. BAT Bangladesh is a part of
BAT plc, world's leading tobacco group, with brands sold in 200 markets around
the world. We make high quality tobacco products for the diverse preferences of
consumers, spanning the business 'from crop to consumer', and we are committed
to embedding the principles of corporate social responsibility through our
responsible business operation.
Vision
World’s best at satisfying consumer moments in tobacco and beyond.
Mission
Delivering our commitments to society, while championing informed consumer
choice.
Our Shareholders
We were among the first companies to be listed on the Dhaka and Chittagong
Stock Exchanges and currently rank 3rd in terms of market capitalization. British
American Tobacco Group holds 9

Our Contributions

We continue to contribute approximately two-thirds

of the revenue derived from the cigarette industry.
In 2016 calendar year, BAT Bangladesh contributed
over BDT 13,631 crore as taxes to the National
Exchequer, which makes us the highest taxpayers to
 the Government. The Company will continue to
support Government proposals that establish a
sustainable level of tax contribution to the National
Exchequer while ensuring sustainability for the
industry.

Our Portfolio of Products

Our success comes from satisfying

informed adult smokers. We
manufacture and market high quality
and well established international
cigarette brands as well as local brands.
The brand portfolio of BAT
Bangladesh currently consists of
Benson & Hedges, John Player Gold
Leaf, Pall Mall, Capstan, Star, Derby,
Pilot and Hollywood.

Chapter 4: Report Overview

. For a complete overview and a clear

picture of the financial performance of
British American Tobacco a number of
steps and rigorous analysis was
performed compiling the information of
five years from 2015 to 2019. The steps
are as follows:
• 4.1 Common Size Financial Statements
• Ø Vertical Balance Sheets- Where all the figures
are expresses as a percentage of total assets for each
respective year. Doing so shows the size of each
different account relative to the total assets.
• Ø Vertical Income Statement- Where all the figures
are expresses as a percentage of Sales/ Gross
Turnover for each respective year. Doing so shows
the size of each different account relative to the
Sales/ Gross Turnover
• Ø Horizontal Balance Sheet and Income Statement-
Here the figures are expressed as percentage of the
base year, in this case report 2015 to 2019,
respective of each item or entry in the statements.
Doing so helps determine how each value has
increased or decreased across the years compared to
the base year.
Ratio Analysis
In this report only a time series or tread analysis is
performed for BATB across the five years. BATB listed
under the Food & Allied industry in Dhaka and
Chittagong Stock Exchange and is the only tobacco
company listed in the stock exchanges. As a result no
cross sectional analysis was performed for comparison
with any other company within the industry due to their
particular product and services provided and their
unique operations. The ratios calculated where in the
areas of liquidity, asset management, debt management,
profitability and stock market. Each individual ratio was
calculated and an interpretation and graphical
representation is provided. More details of each ratio
are provided in the respective ratio analysis chapter

Risk and Return

• In this section, the monthly return for both BATB’s

stock and the DSE Index was conducted for five
years to determine the expected monthly return
(average return) for the five years and an expected
 annual report. Also it was conducted to determine
the standard deviation and coefficient of variance
for both BATB and DSE Index to find the risk
associated with both. In addition a regression
analysis was conducted to find the value of beta for
the market (DSE Index). All of this was performed
to find the required rate of return of BATB using
the CAPM model

Weighted Average Cost of Capital

• This part of the report is small compared to the rest.

It only determines BATB’s capital and the cost of
each respective to the total available. To find the
weighted average cost of capital it is necessary to
calculate the required rate of return which was
calculated in the previous chapter of Risk and
Return.
 Stock Valuation

In this step, the future stock price of BATB is to

be determined using two different models.
Ø Non-Constant Dividend Model: In the non-
constant dividend model, each respective year’s
dividend per share is calculated to find out the growth
rate of each year and finally determine an average
growth rate. Next, future dividends are calculated and
a terminal year is assumed, for this report it is the
year 2019, from which a different growth rate is
considered to use to calculate the dividend. Present
value of each future dividend is calculated and the
present value of the terminal year is also determined.
The non-constant dividend model is also dependent
on the CAPM model. The summation gives us the
value of the stock.

Interpretation: Debt Ratio In 2016, 47%% of the total

assets were financed by debt. Debt ratio decreased from the
last year. In 2015, above 50% of total assets was financed by
debt. Even though it decreased in 2016 have 47% of their
total assets being financed by debt is not a good decision and
it is unwise to take that much of debt.

Interpretation: Times Earned Interest Ratio In 2016, the

company had covered their interest expense 275.79 times
which was a lot higher than 2015. In 2016, the net interest
expense was low and thus it resulted in a higher figure. So
the performance of BATB was satisfactory in 2016.
 REPORTS & FINANCIAL
STATEMENTS

British American Tobacco Bangladesh Company Limited

STATEMENT OF FINANCIAL POSITION
As at 31 December 2019

2019 2018
Particular Notes
BDT (000) BDT (000)
Assets
Non-current assets
Property, plant and equipment 8 (a) 29,531,965 26,483,587

Right of use assets (ROU) 8 (b) 1,672,223 -

Total non-current assets 31,204,188 26,483,587
Current assets
Inventories 9 16,537,884 19,429,201
Trade and other receivables 10 2,609,916 4,174,125
Advances, deposits and prepayments 11 3,684,485 4,822,711

Cash and cash equivalents 12 5,393,764 1,633,605

Total Current assets 28,226,049 30,059,642
Total assets 59,430,237 56,543,229

Equity and liabilities

Equity
Share capital 13 1,800,000 600,000
Capital reserve 14 64,896 64,896

Retained earnings 15 33,928,559 28,863,958

Total equity attributable to owners of the Company 35,793,455 29,528,854
Non-current liabilities
Net defined benefit plans 16 951,616 978,538
Deferred tax 17 4,258,548 3,112,979

Lease liabilities 8 (b) 1,412,243 -

Total non-current liabilities 6,622,407 4,091,517
Current liabilities
Bank overdrafts 18 - 799,880
Short term bank loans 19 - 4,380,000
Trade and other payables 20 12,237,053 11,757,219
Lease liabilities 8 (b) 390,698 -
Current tax liabilities 21 4,022,936 5,918,997

Provisions 22 363,690 66,762

Total current liabilities 17,014,375 22,922,858
Total liabilities 23,636,782 27,014,375
Total equity and liabilities 59,430,237 56,543,229

British American Tobacco Bangladesh Company Limited

STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2019

2019 2018
Notes
BDT (000) BDT (000)
Gross revenue 269,854,574 233,118,187
Supplementary duty and VAT (213,033,244) (178,478,420)
Net revenue from contracts with customers 23 56,821,330 54,639,767
Cost of sales 24 (29,972,780) (27,096,297)
Gross profit 26,848,550 27,543,470
Operating expenses 25 (8,081,557) (6,723,690)
Operating profit 18,766,993 20,819,780
Net finance income/(expenses) 26 (471,367) (473,916)
Non-operating income/(expenses) 27 24,296 (14,996)
Profit before contribution to WPPF 18,319,923 20,330,867
Contribution to WPPF (915,996) (1,016,543)
Profit before tax 17,403,927 19,314,324
Income tax expense
Current tax 28 (7,028,523) (8,985,069)
Deferred tax 29 (1,129,055) (317,221)

(8,157,578) (9,302,290)
Profit for the year 9,246,349 10,012,034
Other comprehensive income
Other comprehensive income that will not be reclassified to profit or loss
in subsequent periods (net of tax):
Remeasurement on defined benefit plans 30 34,766 (35,430)
Deferred tax impact on defined benefit plans 30 (16,514) 39,811
Other comprehensive loss for the year, net of tax 18,252 4,382

Total comprehensive income for the year, net of tax 9,264,601 10,016,416
BDT BDT
Earnings per share 31 51.37 55.62
31

The notes annexed 1 to 45 are an integral part of these financial statements.

British American Tobacco Bangladesh Company Limited

STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019

Share Capital Retained Total

capital reserve earnings equity
BDT (000) BDT (000) BDT (000) BDT (000)
Balance at 01 January 2018 600,000 64,896 22,447,542 23,112,438
Profit for the year - - 10,012,034 10,012,034
Other comprehensive income for the year - - 4,382 4,382
Total comprehensive income for the year - - 10,016,416 10,016,416

Dividends for the year 2017 (3,600,000) (3,600,000)

Total transactions with owners of the Company (3,600,000) (3,600,000)
Balance at 31 December 2018 600,000 64,896 28,863,958 29,528,854
Balance at 01 January 2019 600,000 64,896 28,863,958 29,528,854
Profit for the year - - 9,246,349 9,246,349
Other comprehensive income for the year - - 18,252 18,252
Total comprehensive income for the year - - 9,264,601 9,264,601
Dividends for the year 2018
Stock Dividend 1,200,000 - (1,200,000) -
Cash Dividend - - (3,000,000) (3,000,000)
Balance at 31 December 2019 1,800,000 64,896 33,928,559 35,793,455

The notes annexed 1 to 45 are an integral part of these financial statements.

British American Tobacco Bangladesh Company Limited

STATEMENT OF CASH FLOWS
For the year ended 31 December 2019

2019 2018
BDT (000) BDT (000)
Operating activities
Collection from distributors, leaf export and others 271,431,599 231,202,535
Payment for costs and expenses (38,440,015) (36,613,162)
Supplementary duty and VAT paid (208,171,085) (176,779,610)
Cash generated from operating activities 24,820,499 17,809,762
Income tax paid (8,924,585) (8,430,769)
Interest paid (306,674) (453,734)
Net cash flows from operating activities 15,589,240 8,925,259
Investing activities
Purchase of property, plant and equipment (3,215,508) (6,978,665)
Proceeds from sale of property, plant and equipment 29,548 100,836
Net cash flows used in investing activities (3,185,959) (6,877,829)
Financing activities
Proceeds from short term loan 15,880,000 9,800,000
Repayment of short term loan (20,260,000) (5,420,000)
Payment of lease liabilities (479,691) -
Dividend paid (2,996,565) (3,596,316)
Net cash flows used in financing activities (7,856,256) 783,684
Net Increase/(decrease) in cash and cash equivalents 4,547,025 2,831,114
Cash and cash equivalents at 01 January* 833,725 (2,079,741)
Effect of exchange rate fluctuations on cash held 13,013 82,351
Cash and cash equivalents at 31 December* 5,393,764 833,725
*Cash and cash equivalents include bank overdrafts that are payable on demand and form an integral part of the Company's cash
management.

The notes annexed 1 to 45 are an integral part of these financial statements.

(iii) Depreciation

All items of property, plant and equipment have been depreciated on straight line basis. Depreciation on additions are
charged from the month of acquisition. On disposal of an asset, depreciation is charged up to the month prior to the
disposal. No depreciation is charged for land and assets under construction. The Company is following this policy
consistently from past years.
The estimated useful lives and the rates of residual value of property, plant and equipment for the current and comparative
years are as follows:

Useful life in years Residual value

Categories
2019 2018 2019 2018
Freehold building 40 40 1% 1%
Leasehold building Maximum 40 years, Maximum 40 years,
depreciation rates based on a depreciation rates based on 0% 0%
case by case basis a case by case basis
Plant and machinery 5/10/20* 5/10/20* 0%/1% 0%/1%
Laboratory equipment 10 10 0% 0%
Office equipment 5/10 5/10 0% 0%
Furniture and fixtures 3/5/10 3/5/10 0% 0%
Vehicles 4/5 4/5 1% 1%
IT equipment 3/5 3/5 0% 0%

Depreciation method, useful lives and residual values are reviewed at each reporting date and adjusted as appropriate. No
significant adjustment in respect of items of property, plant and equipment was done in the twelve-month period ended 31
December 2019.

(iv) Assets under construction

Assets under construction represent the cost incurred for acquisition and/or construction of items of property, plant and
equipment that are not ready for use at reporting date and these are stated at cost, net of accumulated impairment losses, if
any.

(v) Impairment

The carrying amount of the entity’s non-financial assets, other than inventories and deferred tax assets (considered as disclosed
separately under respective accounting standards), are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. However, no such
conditions that might be suggestive of a heightened risk of impairment of assets existed at the reporting date.

An impairment loss is recognised through the statement of comprehensive income whenever the carrying amount of an
asset exceeds its recoverable amount.

The recoverable amount of an asset is calculated as the present value of estimated future cash flows, that will be
generated by the use of that asset, discounted at an appropriate rate.

Impairment indicators comprise:

- reduced earnings compared to expected future outcome;

 - material negative development trends in the sector or the economy in which the Company operates;

- damage to the asset or changed use of asset;

(vi) Retirement and disposals

An asset is derecognised on disposal or when no further economic benefits are expected from its use. Gain or loss on
disposal of an asset is determined as the difference of net disposal proceeds and the carrying amount of the asset and is
recognised as gain or loss from disposal of asset under other income/expense in the statement of profit or loss and other
comprehensive income.

Impact analysis of adopting IFRS 16

Impact on the statement of financial position
For the year ended 31 December 2019

Amounts without
As reported Adjustment
Notes adoption of IFRS 16
BDT (000) BDT (000) BDT (000)
Assets
Non-current assets
Property, plant and equipment 29,531,965 - 29,531,965
Right of use of assets 8.b (ii) 1,672,223 (1,672,223) -
Total non-current assets 31,204,188 (1,672,223) 29,531,965
Current assets
Inventories 16,537,884 - 16,537,884
Trade and other receivables 2,609,916 - 2,609,916
Advances, deposits and prepayments 3,684,485 - 3,684,485
Cash and cash equivalents 5,393,764 - 5,393,764
Total current assets 28,226,049 - 28,226,049
Total assets 59,430,237 (1,672,223) 57,758,014
Equity and liabilities
Equity
Share capital 1,800,000 - 1,800,000
Capital reserve 64,896 - 64,896
Retained earnings 33,928,559 65,925 33,994,484
Total equity attributable to owners of 35,793,455 65,925 35,859,380
the Company
Non-current liabilities
Net defined benefit plans 951,616 - 951,616
Deferred tax 17.1 4,258,548 62,091 4,320,639
Lease liabilities 8.b (ii) 1,412,243 (1,412,243) -
Total non-current liabilities 6,622,407 (1,350,152) 5,272,255
Current liabilities
Bank overdrafts - - -
Short term bank loans - - -
Trade and other payables 12,237,053 2,701 12,239,754
Lease liabilities 390,698 (390,698) -
Current tax liabilities 4,022,936 - 4,022,936
Provisions 363,688 - 363,688
Total current liabilities 17,014,375 (387,997 ) 16,626,378
Total liabilities 23,636,782 (1,738,149) 21,898,633
Total equity and liabilities 59,430,237 (1,672,224) 57,758,014
Impact on the statement of profit or
loss and other comprehensive income
For the year ended 31 December 2019

Amounts without
As reported Adjustment
Notes adoption of IFRS 16
BDT (000) BDT (000) BDT (000)
Gross revenue 269,854,574 - 269,854,574
Supplementary duty and VAT (213,033,244) - (213,033,244)
Net revenue from contracts with 56,821,330 - 56,821,330
customers

Cost of sales (29,972,780) (69,821) (30,042,601)

Gross profit 26,848,550 (69,821) 26,778,729

Operating expenses (8,081,557) 35,911 (8,045,646)

Operating profit 18,766,993 (33,910) 18,733,083

Net finance income/(expenses) 26 (471,367) 164,693 (306,674)

Non-operating income/(expenses) 24,296 3,971 28,267

Profit before contribution to WPPF 18,319,923 134,753 18,454,676

Contribution to WPPF (915,996) (6,738) (922,733)
Profit before tax 17,403,927 128,016 17,531,943

Income tax expense

Current tax (7,028,523) - (7,028,523)
Deferred tax 17.1 (1,129,055) (62,091) (1,191,146)

(8,157,578) (62,091) (8,219,669)

Profit for the year 9,246,349 65,925 9,312,274

Total comprehensive income for the

year 9,264,601 65,925 9,312,274
 Impact on the statement of cash flows
For the year ended 31 December 2019

Amounts without
As reported Adjustment
adoption of IFRS 16
BDT (000) BDT (000) BDT (000)
Operating activities
Collection from distributors, leaf export and others 271,431,599 - 271,431,599
Payment for costs and expenses (38,440,015) (524,440) (38,964,455)
Supplementary duty and VAT paid (208,171,085) - (208,171,085)
Cash generated from operating activities 24,820,499 (524,440) 24,296,059

Income tax paid (8,924,585) - (8,924,585)

Interest paid (306,674) - (306,674)
Net cash flows from operating activities 15,589,240 - 15,064,800

Investing activities
Purchase of property, plant and equipment (3,215,508) - (3,215,508)
Proceeds from sale of property, plant and 74,298 - 74,298
equipment
Net cash flows used in investing activities (3,141,210) - (3,141,210)

Financing activities
Proceeds from short term loan 15,880,000
Repayment of short term loan (20,260,000) 15,880,000
Payment of lease liabilities (524,440) 524,440 (20,260,000)
Dividend paid (2,996,565) (2,996,565)
Net cash flows used in financing activities (7,901,005) 524,440 (7,376,565)

Net Increase/(decrease) in cash and cash 4,547,025 524,440 4,547,025

equivalents

Cash and cash equivalents at 01 January* 833,725 833,725

Effect of exchange rate fluctuations on cash held 13,013 13,013
Cash and cash equivalents at 31 December* 5,393,763 5,393,763
 Amounts without
As reported Adjustment
Notes adoption of IFRS 16
BDT (000) BDT (000) BDT (000)
Assets
Non-current assets
Property, plant and equipment 29,531,965 - 29,531,965
Right of use of assets 8.b (ii) 1,672,223 (1,672,223) -
Total non-current assets 31,204,188 (1,672,223) 29,531,965
Current assets
Inventories 16,537,884 - 16,537,884
Trade and other receivables 2,609,916 - 2,609,916
Advances, deposits and prepayments 3,684,485 - 3,684,485
Cash and cash equivalents 5,393,764 - 5,393,764
Total current assets 28,226,049 - 28,226,049
Total assets 59,430,237 (1,672,223) 57,758,014
Equity and liabilities
Equity
Share capital 1,800,000 - 1,800,000
Capital reserve 64,896 - 64,896
Retained earnings 33,928,559 65,925 33,994,484
Total equity attributable to owners of 35,793,455 65,925 35,859,380
the Company
Non-current liabilities
Net defined benefit plans 951,616 - 951,616
Deferred tax 17.1 4,258,548 62,091 4,320,639
Lease liabilities 8.b (ii) 1,412,243 (1,412,243) -
Total non-current liabilities 6,622,407 (1,350,152) 5,272,255
Current liabilities
Bank overdrafts - - -
Short term bank loans - - -
Trade and other payables 12,237,053 2,701 12,239,754
Lease liabilities 390,698 (390,698) -
Current tax liabilities 4,022,936 - 4,022,936
Provisions 363,688 - 363,688
Total current liabilities 17,014,375 (387,997 ) 16,626,378
Total liabilities 23,636,782 (1,738,149) 21,898,633
Total equity and liabilities 59,430,237 (1,672,224) 57,758,014
 BRITISH AMERICAN TOBACCO BANGLADESH
COMPANY LIMITED
Statement of Financial Position
As at 31 December 2018
2018 2017
Notes BDT (000) BDT (000)

Assets

Non-current assets

Property, plant and equipment 8 26,483,587 20,915,160

Total non-current assets 26,483,587 20,915,160
Current assets

Inventories 9 19,429,201 17,469,089

Trade and other receivables 10 4,174,125 2,315,457

Advances, deposits and prepayments 11 4,822,711 4,736,633

Cash and cash equivalents 12 1,633,605 978,169

Current assets 30,059,642 25,499,348

Total assets 56,543,229 46,414,508

Equity and liabilities

Equity

Share capital 13 600,000 600,000

Capital reserve 14 64,896 64,896

Retained earnings 15 28,863,958 22,447,542

Total equity attributable to owners of the
Company 29,528,854 23,112,438
Non-current liabilities

Net defined benefit plans 16 978,538 869,114

Deferred tax 17 3,112,979 2,835,570

Total non-current liabilities 4,091,517 3,704,684

 Current liabilities

Bank overdrafts 18 799,880 3,057,910

Short term bank loans 19 4,380,000 -

Trade and other payables 20 10,518,444 10,101,621

Current tax liabilities 21 5,918,997 5,364,697

Provisions 22 1,305,537 1,073,158

Current liabilities 22,922,858 19,597,386

Total liabilities 27,014,375 23,302,070

Total equity and liabilities 56,543,229 46,414,508

The notes on pages 217 to 259 are an integral part of these financial statements

BRITISH AMERICAN TOBACCO BANGLADESH

COMPANY LIMITED
Statement of profit or loss and other comprehensive income
For the year ended 31 December 2018

2018 2017
Notes
BDT (000) BDT (000)

Gross revenue 233,118,187 204,139,715

Supplementary duty and VAT (178,478,420) (152,175,972)

Net revenue from contracts with customers 23 54,639,767 51,963,743

Cost of sales 24 (27,096,297) (27,180,742)

Gross profit 27,543,470 24,783,001

Operating expenses 25 (6,723,690) (6,980,580)

Operating profit 20,819,780 17,802,421

Net finance income/(expenses) 26 (473,916) (185,291)

Non-operating income/(expenses) 27 (14,996) 24,469

Profit before contribution to WPPF 20,330,867 17,641,599

 Contribution to WPPF (1,016,543) (882,080)

Profit before tax 19,314,324 16,759,519

Income tax expense

Current tax 28 (8,985,069) (8,121,466)

Deferred tax 29 (317,221) (808,197)

(9,302,290) (8,929,663)

Profit for the year 10,012,034 7,829,856

Other comprehensive income

Other comprehensive income that will not be profit or
reclassified to loss in
subsequent periods (net of tax):

Remeasurement loss on defined benefit plans 30 4,382 -

Other comprehensive loss for the year, net of tax 4,382 -

Total comprehensive income for the year, net of tax 10,016,416 7,829,856
BDT BDT

Earnings per share 31 166.87 130.50

BRITISH AMERICAN TOBACCO BANGLADESH

COMPANY LIMITED
Profit for the year - - 10,012,034 10,012,034

Other comprehensive income for the year - - 4,382 4,382

Total comprehensive income for the year - - 10,016,416 10,016,416

Dividends for the year 2017 - - (3,600,000) (3,600,000)

Balance
at 31 December 2018 600,000 64,896 28,863,958 29,528,854

Balance
at 01 January 2017 600,000 64,896 18,217,686 18,882,582

Profit for the year - - 7,829,856 7,829,856

Other comprehensive income for the year - - - -

Total comprehensive income for the year - - 7,829,856 7,829,856

Dividends for the year 2016 - - (3,600,000) (3,600,000)

Total transactions with owners of the Company - - (3,600,000) (3,600,000)

Balance
at 31 December 2017 600,000 64,896 22,447,542 23,112,438

The notes on pages 217 to 259 are an integral part of these financial statements.
 BRITISH AMERICAN TOBACCO BANGLADESH
COMPANY LIMITED
Statement of cash flows
For the year ended 31 December 2018
2018 2017
BDT
BDT (000) (000)
Operating activities

Collection from distributors, leaf export and others 231,284,886 202,936,614

Payment for costs and expenses (36,613,162) (33,797,266)

(153,963,81
Supplementary duty and VAT paid (176,779,610) 2)

Cash generated from operating activities 17,892,113 15,175,536

Income tax paid (8,430,769) (5,256,038)

Interest paid (453,734) (186,124)

Net cash flows from operating activities 9,007,610 9,733,374

Investing activities

Purchase of property, plant and equipment (6,978,665) (8,030,294)

Proceeds from sale of property, plant and equipment 100,836 39,470

Net cash flows used in investing activities (6,877,829) (7,990,824)

Financing activities

Proceeds from short term loan 9,800,000 8,800,000

Repayment of short term loan (5,420,000) (10,300,000)

Dividend paid (3,596,316) (3,597,319)

Net cash flows used in financing activities 783,684 (5,097,319)

Net Increase/(decrease) in cash and cash equivalents 2,913,465 (3,354,769)

Cash and cash equivalents at 01 January* (2,079,741) 1,275,028

Cash and cash equivalents at 31 December* 833,724 (2,079,741)

*Cash and cash equivalents include bank overdrafts that are payable on demand and form an integral part of the
Company’s cash management.

The notes on pages 217 to 259 are an integral part of these financial statements.
 Chapter 7:
RISK AND RETURN
 7.1 Returns of BATBC
For Years of 2015-2016

2015 2016

January
10.2743% 9.1488%
February
4.3509% -7.1677%
March
2.6269% -4.9993%
April
0.3969% 1.9485%
May
-7.4915% -2.7852%
June
3.5081% 0.9233%
July
0.9864% -1.2822%
August
2.7057% -7.0473%
September
1.0266% 2.8288%
October
-0.4465% 0.7379%
November
-1.1146% -0.3337%
December
1.0411% -2.6465%
Expected Return 2.87%
Standard Deviation (risk) 7.57%
Expected Annual Return (Percentage) 34.48%

CV 2.64
Table 10: Returns of British American Tobacco Bangladesh

7.2 Returns of DSE INDEX

For Years of 2015-2016

2015 2016

January
-4.4008% -1.7977%
February
2.3257% -1.0626%
March
-4.4132% -2.8211%
April
-10.3215% -4.1910%
May
15.8398% 5.9449%
June
-0.8764% 1.9401%
July
4.8052% 0.6709%
August
-0.6946% -0.1573%
September
2.7000% 3.2127%
October
-6.0218% -2.1052%
November
1.4651% 4.4461%
December
0.1724% 4.4169%

Expected Return 0.68%

Standard Deviation (risk) 7.06%

Expected Annual Return (Percentage) 8.18%

CV 10.36
Table 11: Returns of DSE Index

Figure 17: Regression Analysis

Scatter Diagram of BATBC

40.0000%
35.0000% y = 0.2306x + 0.0272
30.0000%
25.0000%
20.0000%
Scatter
Diagram of
BATBC
15.0000%
10.0000% Linear
 (Scatter
Diagram of
BATBC)
5.0000%
0.0000%

-30.0000% -20.0000% -10.0000% 10.0000 20.0000

0.0000% % %30.0000%
-5.0000%
-10.0000%
-15.0000%
Figure 18: Scatter Diagram of BATB
Beta or the Market Risk is 0.2306. This means, 1% change (positive or negative) in market
return will lead to a 0.2306 %( positive or negative) change in BATB’s return.

Risk free rate is 2.96%

Source: Bangladesh Bank official website (cut off yield, August, 2017)

We have considered the monthly T-bill’s cut off yield as the risk free rate because Government
Treasury Bills are risk free short term debt.

7.3 CAPM Model and Required Rate of Return

Required rate of return,

Ҡe = Rf+ (Rm-Rf) β

Ke= 2.96% + (8.18%-2.96%) 0.2306

=4.163%

So, the required rate of return is 4.163%

7.4 Risk Analysis

The standard deviation of British American Tobacco Bangladesh is 7.57%, which is a bit higher
than the market index’s standard of deviation of 7.06%. On the other hand, the market’s
Coefficient of Variance (CV) is 10.36 is quite high than the coefficient of variance of British
American Tobacco Bangladesh which is 2.64. This shows that investors have to take risk in
order to invest in British American Tobacco Bangladesh. However British American Tobacco
Bangladesh’s current scenario indicates that BATB holds up a very favorable and considerable
situation for investors to invest. As they take more risk while investing in BATB, this will not
only help BATB get benefits but also the investors will be benefited as they prefers higher return
on their per investment. Also, we can see that the expected rate of return (34.48%) is quite higher
than the required rate of return (8.18%). So, investors will be very much interested to buy share
of British American Tobacco Bangladesh.
 Chapter 8:
Weighted Average
Cost of Capital
 8.1 Cost of Capital

Sources Amount (tk) Weight

Common Stock 600,000,000 3.19%

Retained Earnings 18,217,686,000 96.81%

Total 18,817,686,000 100.00%

Table 12: Weighted Average Cost of Capital

BATBC has no Bank Loans or bonds. They only consist of Common Stock and Retained
Earnings. So it can be said that BATBC’s capital structure has no debt but only consists of
equity. Common Stock taking by 3.19% and Retained Earning taking up to 96.81%.

Weighted Average Cost of Capital Calculation:

Wcs= 3.19%

Wre= 96.81%

Ke= 4.16%

Weighted Average Cost of Capital, WACC= (Wcs x Ke) + (Wre x Ke)

WACC= 4.16%

45
 Chapter 9:
STOCK VALUATION
 9.1 Non-constant Dividend Growth Model

Year 2015 2016

Dividend paid 2,693,756 3,301,747

Number of common stockholders 60,000 60,000

Dividend per Share 44.90 55.03

Table13: Dividend per Share

Growth Rate calculation

g1= 6.54%
g2= 24.01%
g3= -27.54%

g4= 22.57%
Average growth rate 6.40%
Table 14: Growth Rate

Dividend Calculation:

Div2016= 55.03 BDT Div2017= Div2016(1+g) = 58.55

Average Growth Rate, g= 6.40% Div2018= Div2017(1+g) = 62.30
Terminal Year, 2019 Div2019= Div2018(1+g) = 66.29
Let Assume, Constant growth from
terminal year will be 4%(gc) Div2020 = Div2019(1+gc)= 68.61
Required Rate of Return, Ke=4.163%
Table15: Future Dividend

Terminal value (2019) 10348.42

Present value of Dividend(2017) 56.21
Present value of Dividend(2018) 57.42
Present value of Dividend(2019) 58.66
Present Value of Terminal Value 9156.58
Table 16: Present Value of Future Dividend

Value of the Stock= 9328.87

 9.2 Corporate Valuation Model

Details: Formula 2015 2016

Current Asset-
Working
current 3,475,530 6,298,745
capital
liabilities
change in
working 2,521,923 2,823,215
capital
1-(After tax
Tax Rate profit/Before 52.86% 42.43%
tax Profit)
Depreciation
961,076 1,262,062
Expense:
Initial
Capital 0 0
Spending
operating
EBIT: profit+interest 13,343,088 14,114,699
expense
EBIT(1-T)+
Depreciation
expense -
FCF change in 4729741.05 6564973.11
capital- initial
capital
spending
(Ending FcF -
beginning FcF
Growth rate: -43.36% 38.80%
)/beginning
FcF
Average
19.06%
growth rate :

Table17: Free Cash Flow and Growth

Rate
 Free Cash Flow Calculation
Free Cash Flow of 2017 7816256.99
Free Cash Flow of 2018 9306035.57
Free Cash Flow of 2019 11079765.95
Free Cash Flow of 2020 11467557.75

Terminal Value 1729646720

Table18: Future Free Cash Flows

Present Value of Free Cash Flows

PVFCF2017 7503870.84

PVFCF2018 8577046.19

PVFCF2019 9803703.04

PV of Terminal value 1530442330

Table 19: Present Value of Future Free Cash Flows

Total Value of Corporation 1556326949.70

Total Long Term Debt 0
Total Common Equity 1556326949.70

Number of common stockholders 60,000,000

Value of Per Common Share 25.9387825

Table 20: Value of per Common Share
Chapter 10:
Project Brief
&
Conclusion
 British American Tobacco Bangladesh is the leading company in the tobacco market.
Even so they do not have the optimum control over the market volume. Currently BATB has
coverage or 738 thousand outlets all around the nation. They require the coverage of 870
thousand outlets to gain 80% volume control in the market to give them the optimum results they
want to achieve. To do so they have to reach outlets they are unable to reach but using the most
efficient and effective of ways to keep costs to a minimum. For this very purpose they have come
with a project named ―Route to Market‖. This project is implemented whenever BATB realizes
they have to change their strategy due to the always changing market, for sustainable growth and
performance. One of the major step in the Route to Market project to make their performance
better is known as Multi-Category Distributor, where BATB hired third parties to help them
reach the area of the market they cannot reach or would be too costly for them to reach. Using
the Multi-Category, it provides more control and decreases cost significantly.

The project had started from 2016 and now under pilot launch in many parts of the country. The
pilot launches has brought up positive results and steps are taken to make improvements in areas
where required. The project will be put into full force by 2019. It is of great regret that due to
confidential reasons, the financial results that show this project will bring about great
improvement in the company as a whole cannot be presented.

As a result, only the financial information available to the public at large has been used for the
financial analysis of the organization. From the analysis part of this report, we can get a clear
idea that BATB has a few areas where improvement is required. With the help and
implementation of this project hopefully BATB can perform at their best.
 Reference

British American Tobacco Bangladesh website- http://www.batbangladesh.com/

British American Tobacco Bangladesh 2012- ―British American Tobacco Bangladesh Annual
Report 2012‖

British American Tobacco Bangladesh 2013- ―British American Tobacco Bangladesh Annual
Report 2013‖

British American Tobacco Bangladesh 2014- ―British American Tobacco Bangladesh Annual
Report 2014‖

British American Tobacco Bangladesh 2015- ―British American Tobacco Bangladesh Annual
Report 2015‖

British American Tobacco Bangladesh 2016- ―British American Tobacco Bangladesh Annual
Report 2016‖

British American Tobacco Background:

http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO52ADGE

Keown, A. J., Martin, J. D., Petty, J.W., Scott, D. F. (2013-2014) Financial Management:
Principles and Applications, Tenth Edition

Importance and Use of Weighted Average Cost of Capital-

https://efinancemanagement.com/investment-decisions/importance-and-use-of-
weighted-average-cost-of-capital-wacc

Inc. 5000, Financial Analysis- https://www.inc.com/encyclopedia/financial-analysis.html

Appendix
 British American Tobacco Bangladesh Company Limited
Statement of Financial Position (In thousands of BDT)
Year 2016 2015
Assets
Property, Plant and Equipment 15,411,873 13,665,015
Non-Current Asset 15,411,873 13,665,015

Inventories 13,979,180 8,553,377

Trade and Other Receivables 1,062,450 940,758
Advance, deposit and pre-payments 3,329,480 4,074,679
Cash and Cash Equivalent 1,564,600 2,357,002
Current Assets 19,935,710 15,925,816
Total Assets 35,347,583 29,590,831

Equity
Share Capital 600,000 600,000
Capital Reserve 64,896 64,896
Retained Earnings 18,217,686 13,944,623
Total equity attributable to owners of the
company 18,882,582 14,609,519

Liabilities
Gratuity
Net defined benefit plans 800,663 461,230
Deferred tax liabilities 2,027,373 2,069,796
Obligation under finance lease (due within
one year)
Non-current liabilities 2,828,036 2,531,026

Bank overdraft 289,572

Short term bank loans 1,500,000
Provision for Expenses
Trade and other payables 8,218,406 7,842,726
Current tax liabilities 2,499,269 3,500,379
Provisions and accruals 1,129,718 1,107,181
Obligation under finance lease (due within
one year)
Current liabilities 13,636,965 12,450,286
Total liabilities 16,465,001 14,981,312
Total equity and liabilities 35,347,583 29,590,831

54
 British American Tobacco Bangladesh Company Limited
Statement of Profit or Loss and Other Comprehensive Income
Year 2016 2015
Gross turnover 165,633,760 143,711,664
Supplementary duty & VAT (121,879,985) (103,816,770)
Net turnover 43,753,775 39,894,894
Cost of Sales (23,890,895) (21,212,511)
Gross profit 19,862,880 18,682,383
Operating expenses (5,936,146) (5,481,856)
Operating profit 13,926,734 13,200,527
Net financial Income/ (expenses) (36,468) (122,828)
Non-operating Income/ (expenses) (26,708) 37,680
Profit before contribution to WPPF 13,863,558 13,115,379
Contribution to WPPF (693,178) (655,767)
Profit before tax 13,170,380 12,459,612
Income tax expense
Current Tax (5,622,651) (5,633,340)
Deferred Tax 34,733 (952,198)
(5,587,918) (6,585,538)
Net Profit for the Year 7,582,462 5,874,074
Actuarial revaluation for employee
benefit
Deferred tax arising from actuarial
revaluation
Other comprehensive income (9,399) (28,066)
Total comprehensive income 7,573,063 5,846,008
Earnings Per Share (BDT) 126.37 97.90
 Vertical Statement of Financial Position

Year 2016 2015

Assets

Property, Plant and 15411873 13665015

Equipment 35347583 29590831
15411873 13665015
Non-Current Asset
35347583 29590831
13979180 8553377
Inventories
35347583 29590831
Trade and Other 1062450 940758
Receivables 35347583 29590831
Advance, deposit 3329480 4074679
and pre-payments 35347583 29590831
Cash and Cash 1564600 2357002
Equivalent 35347583 29590831
19935710 15925816
Current Assets
35347583 29590831
35347583 29590831
Total Assets
35347583 29590831
Equity
600000 600000
Share Capital
35347583 29590831
64896 64896
Capital Reserve
35347583 29590831
18217686 13944623
Retained Earnings
35347583 29590831
Total equity
attributable to 18882582 14609519
owners of the 35347583 29590831
company
Liabilities

Gratuity

Net defined benefit 800663 461230

plans 35347583 29590831
Deferred tax 2027373 2069796
liabilities 35347583 29590831
Obligation under
7541
finance lease (due
15034493
within one year)

Non-current 2828036 2531026 1508672 1247439 971776

liabilities 35347583 29590831 27075019 18463798 15034493
289572 347610
Bank overdraft
35347583 27075019
Short term bank 1500000 2800000
loans 35347583 27075019
Provision for 2338056 2188035
Expenses 18463798 15034493
Trade and other 8218406 7842726 7152166 3701889 3245676
payables 35347583 29590831 27075019 18463798 15034493
Current tax 2499269 3500379 2729914 2267283 1585731
liabilities 35347583 29590831 27075019 18463798 15034493
Provisions and 1129718 1107181 1073146
accruals 35347583 29590831 27075019
Obligation under
7541 10335
finance lease (due
18463798 15034493
within one year)
13636965 12450286 14102836 8314769 7029777
Current liabilities
35347583 29590831 27075019 18463798 15034493
16465001 14981312 15611508 9,562,208 8,001,553
Total liabilities
35347583 29590831 27075019 18463798 15034493
Total equity and 35347583 29590831 27075019 18463798 15034493
liabilities 35347583 29590831 27075019 18463798 15034493
 Vertical Statement of Profit or Loss and Other Comprehensive Income

Year 2016 2015

165633760 143711664
Gross turnover
165633760 143711664
Supplementary duty & -121879985 -103816770
VAT 165633760 143711664
43753775 39894894
Net turnover
165633760 143711664
-23890895 -21212511
Cost of Sales
165633760 143711664
19862880 18682383
Gross profit
165633760 143711664
-5936146 -5481856
Operating expenses
165633760 143711664
13926734 13200527
Operating profit
165633760 143711664
Net financial Income/ -36468 -122828
(expenses) 165633760 143711664
Non-operating -26708 37680
Income/ (expenses) 165633760 143711664
Profit before 13863558 13115379
contribution to WPPF 165633760 143711664
-693178 -655767
Contribution to WPPF
165633760 143711664
13170380 12459612
Profit before tax
165633760 143711664
Income tax expense
-5622651 -5633340
Current Tax
165633760 143711664
34733 -952198
Deferred Tax
165633760 143711664
-5587918 -6585538
165633760 143711664
7582462 5874074
Net Profit for the Year
165633760 143711664
Actuarial revaluation
for employee benefit
Deferred tax arising
from actuarial
revaluation
Other comprehensive -9399 -28066 -55478
income 165633760 143711664 109581710
Total comprehensive 7573063 5846008 6281922 4868649 3941640
income 165633760 143711664 126725499 109581710 90174080

Horizontal Statement of Financial Position

Year 2016 2015
Assets
15411873 13665015
Property, Plant and Equipment
5861627 5861627
15411873 13665015
Non-Current Asset
5861627 5861627

13979180 8553377
Inventories
4956887 4956887
1062450 940758
Trade and Other Receivables
937873 937873
Advance, deposit and pre- 3329480 4074679
payments 999016 999016
1564600 2357002
Cash and Cash Equivalent
2279090 2279090
19935710 15925816
Current Assets
9172866 9172866
35347583 29590831
Total Assets
15034493 15034493

Equity
600000 600000
Share Capital
600000 600000
64896 64896
Capital Reserve
64896 64896
18217686 13944623
Retained Earnings
6368044 6368044
Total equity attributable to owners 18882582 14609519
of the company 7032940 7032940

Liabilities
Gratuity
 240592 240592 240592
Net defined benefit plans
2027373 2069796 1140562 883376 723643
Deferred tax liabilities
723643 723643 723643 723643 723643
Obligation under finance lease 7541
(due within one year) 7541
2828036 2531026 1508672 1247439 971776
Non-current liabilities
971776 971776 971776 971776 971776

Bank overdraft
Short term bank loans
2338056 2188035
Provision for Expenses
2188035 2188035
8218406 7842726 7152166 3701889 3245676
Trade and other payables
3245676 3245676 3245676 3245676 3245676
2499269 3500379 2729914 2267283 1585731
Current tax liabilities
1585731 1585731 1585731 1585731 1585731
Provisions and accruals
Obligation under finance lease 7541 10335
(due within one year) 10335 10335
13636965 12450286 14102836 8314769 7029777
Current liabilities
7029777 7029777 7029777 7029777 7029777
16465001 14981312 15611508 9,562,208 8,001,553
Total liabilities
8,001,553 8,001,553 8,001,553 8,001,553 8,001,553
35347583 29590831 27075019 18463798 15034493
Total equity and liabilities
15034493 15034493 15034493 15034493 15034493

Horizontal Statement of Profit or Loss and Other Comprehensive Income

 Year 2016 2015
165633760 143711664
Gross turnover
90174080 90174080
-121879985 -103816770
Supplementary duty & VAT
-62702736 -62702736
43753775 39894894
Net turnover
27471344 27471344
-23890895 -21212511
Cost of Sales
-15946224 -15946224
19862880 18682383
Gross profit
11525120 11525120
-5936146 -5481856
Operating expenses
-4612418 -4612418
13926734 13200527
Operating profit
6912702 6912702
Net financial Income/ -36468 -122828
(expenses) -119878 -119878
Non-operating Income/ -26708 37680
(expenses) 50820 50820
Profit before contribution to 13863558 13115379
WPPF 6843644 6843644
-693178 -655767
Contribution to WPPF
-342182 -342182
13170380 12459612
Profit before tax
6501462 6501462
Income tax expense
-5622651 -5633340
Current Tax
-2505258 -2505258
34733 -952198
Deferred Tax
-54564 -54564
-5587918 -6585538
-2559822 -2559822
7582462 5874074
Net Profit for the Year
3941640 3941640
Acturial revaluation for
employee benefit
Deferred tax araising from
acturial revaluation
Other comprehensive income
7573063 5846008
Total comprehensive income
3941640 3941640
 Liquidity Ratio:

Year Current Ratio Acid Test Ratio

2012

2013

2014

2015

2016

Asset Management Ratio:

Inventory Total Asset Fixed Asset Day’s Average

Turnov Sales
Year Turnover Turnover er Outstandi Payment
ng
Ratio Ratio Ratio Period

940758 7842726

2015
16940236/3
60

2016

62
 Debt Management Ratio:

Year Debt Management Ratio Times interest earned (TIE)

1 553
2012 1
15 344 3
9504368
2013 *100
88796

11535203
2014 *100
187965

2015 *100

2016

Profitability Ratio

Return
Gross Profit Net Profit Operating on
Year Return On Equity
Margin Margin Profit Margin Assets

2012

*100
2013 *100 *100 *100
*100

63
2014

*100 *100 *100 *100

*100

*100

2015 *100 *100 *100

*100

2016

Stock Market Ratio

Earnings per Share

Year Price-to-Earnings Ratio (P/E)
(EPS)

2015

2016
 EXPECTED RETURN CALCULATION:

Monthly Return of BATBC =

Expected Annual Return = Average Monthly Return

Monthly Return of DSEX =

Expected Annual Return = Average Monthly Return

Required rate of return, Ҡe = Rf+ (Rm-Rf) β

WACC CALCULATION:

Wcs= 600,000,000 / 18,817,686,000

Wre= 18,217,686,000 / 18,817,686,000
(Wcs x Ke) + (Wre x Ke) = (3.19%* 4.163%)+ (96.81%* 4.163%)
 STOCK VALUATION CALCULATION

Non Consistent Dividend Growth Model:

Dividend Paid Per Share

Div2012 = 2,813,690/ 60,000
Div2013 = 2,997,835/ 60,000
Div2014 = 3,717,525/ 60,000
Div2015 = 2,693,756/ 60,000
Div2016 = 3,301,747/ 60,000

Growth Calculation
g1= =(49.96-46.89)/ 46.89
g2= =(61.96-49.96)/ 49.96
g3= =(44.90-61.96)/ 61.96
g4= =(55.03-44.90)/ 44.90

Average Growth Rate, g = (6.54% + 24.01% - 27.54% + 22.57%) / 4

Dividend Calculation:

Div2017= Div2016(1+g) = 58.55*(1+0.064)

Div2018= Div2017(1+g) = 62.30*(1+0.064)
Div2019= Div2018(1+g) = 66.29*(1+0.064)
Div2020 = Div2019(1+gc)= 68.61*(1+0.035)
Div'2019= Div2020/Ke-g= 68.61/(0.04163-0.035)

Present Value of Future Dividend Calculation:

PV2016
Div2017= = 58.55/(0.04163+1)
PV2017
Div2018= = =62.3/(1+0.04163)^2
PV2018
Div2019= = =66.29/(1+0.04163)^3

Div'2019= PV2018 =10348.42/(1+0.04163)^3

Present Value of the Stock in 2017= 56.21 + 57.42 + 58.66 + 9156.58

 Corporation Valuation Model

Details: 2015 2016

15,925,816- 19,935,710-

Working capital

12,450,286 13,636,965

Change in 3,475,530- 6,298,745-

working capital 953,607 3,475,530

1-(7,582,462

1-(5,874,074/

Tax Rate /13,170,380

12,459,612)

Depreciation

961,076 1,262,062

Expense:

Initial Spending 0 0

13,200,527+142,5 13,926,734

EBIT: 61 +187,965

14,114,699(
13,343,088(1- 1-
 FCF 52.86%)+961,076- 42.43%)+1,2

3,475,530-0 62,062-

6,298,745-0

(6564973.11

(4729741.05- -

Growth rate: 8350543.96)/8350 4729741.05)

543.96 /4729741.0

Average Growth Rate= (51.23% + 29.59% -43.36% + 38.80%) / 4

Free Cash Flow Calculation

Free Cash Flow of 2017 6564973.11*(1+0.1906)

Free Cash Flow of 2018 7816256.99*(1+0.1906)
Free Cash Flow of 2019 9306035.57(1+0.1906)
Free Cash Flow of 2020 11079765.95(1+0.035)

Terminal Value 11467557.75/(0.04163-0.035)

 Present Value of Free Cash Flows

PVFCF2017 7816256.99/(1+0.04163)
PVFCF2018 9306035.57/(1+0.04163)^2
PVFCF2019 11079765.95/(1+0.04163)^3
PV of Terminal
value 1729646720/(1+0.04163)^3

Total Value of 7503870.84+8577046.19+9803703.04+1530442330

Corporation

Value of Per
Common Share 1556326949.70/60,000,000