Assignment 4

Course and Section: FIN 440.
Semester: FALL 2013
Date of Submission: 3rd January, 2014

ID#
1120212030
1120240030
1120083030
1130047030
Assignment #4 Company Valuation
Bangladesh cement industry is the 40th largest market in the world. There are as many as
130 cement companies in the country and daily production capacity is about 16.687 million MT.
Average revenue per year from this industry is almost 9060/- million. For the purpose of this
assignment, we have chosen cement industry. Among the multinational cement companies
Heidelberg Cement Ltd. and Lafarge Surma Cement Ltd. are mentionable whereas Crown
Cement and Meghna Cement Ltd. are some big cement companies in Bangladesh. The main
purpose of this assignment is to calculate the valuation of the selected companies. We have
chosen 3 years time period e.g. 2010, 2011 and 2012 for all the four companies. Different ratios
have been calculated based on the companies financial statement data. Book value, true value
and market value of each company have been calculated. Also WACC of each company has been
calculated. Risk based on returns for each company has been analyzed over the periods through
variance, standard deviation, and coefficient of variance. Finally industry average has been
calculated and performance of each company has been analyzed based on industry average
values.
HEIDELBERG CEMENT BANGLADESH LTD.

Heidelberg Cement Bangladesh Ltd. is a member of Heidelberg Cement Group,
Germany. Ruby Cement and Scan Cement are two reputed brands of the company. The
production plants of the company are located in Dhaka and Chittagong. In Bangladesh this
company is one of the largest foreign investors having an investment of about US$ 100 million.
More than 300 employees are working round the clock to materialize the mission of this great
global company. The company was listed in Dhaka Stock Exchange (DSE) in year 2003.
RATIOS
Fiscal Years
2010
Liquidity Ratio
NWC = CA
2,597,842,00
CL (In BDT)
0
Productivity Ratio
2011
2,421,622,00
0
2012
3,506,526,000
Average
2,841,996,667
Standard
Deviation =
( x ix )2
i=1
Coefficient of
Variance, CV =
n1
582,205,117
0.20
Page | 1
FATOR
TATOR
Leverage Ratio
TIE Ratio
Efficiency Ratio
ROA
ROE
Operating
Margin
Valuation Ratios
Dividend
Payout
Ratio
Plowback
Ratio (PBR)
3.08
1.16
2.45
1.06
3.08
1.18
2.87
1.13
0.36
0.06
0.12
0.05
5%
2.9%
5.2%
4.37%
1.27%
0.29
0.14
0.22
0.09
0.14
0.14
0.20
0.12
0.19
0.03
0.04
0.24
0.22
18%
10.2%
14.3%
14.17%
3.90%
0.27
18.00%
28.20%
17.20%
21.13%
6.13%
0.29
82.00%
71.80%
82.80%
78.87%
6.13%
0.07
Cash Conversion Cycle (CCC)

Inventory Turnover Period (ITP) (Days)
Days Sales Outstanding (DSO) (Days)
Days Payable Outstanding (DPO) (Days)
CCC =[ ITP + DSO DPO] (Days)
2010
2011
2012
68.58
25.49
88.11
5.96
56.27
33.87
97.58
(7.44)
48.61
30.36
77.65
1.32
Average
57.82
29.91
87.78
(0.05)
So it can be seen that, Heidelberg Cement Ltd. keeps cash on hand for at least some hours
due to its average Cash conversion cycle of -0.05 days.
WACC Calculation
Cost of Debt
Cost
Kd
of
2010
2011
2012
53.56%
45.02%
37.28%
45.29%
27.50%
38.83%
27.50%
32.64%
27.50%
27.03%
27.50%
32.83%
Average
Calculation
Debt,
Kd
Total Interest Payment

Total Interest Bearing Libility
Marginal Tax Rate T (27.50%)
After tax cost of debt K d (1T )
Weight of Debt
Wd
Calculation
Page | 2
Total Liability
Total Invested Capital
10.53%
11.23%
11.32%
11.03%
22.76%
43.17%
5.57%
23.83%
Weight of Equity We Calculation:

Owners ' Equity
We = Total Invested Capital
89.47%
88.77%
88.68%
88.97%
WACC = W d K d (1T ) + WeKe
24.45%
41.98%
8.00%
24.81%
Cost of Equity Ke Calculation:

Ke
Calculation of Book Values:

2010
7,182,699,000
(669,000)
(2,881,486,000)
4,300,544,000
Total Assets
Less: Intangible Asset
Less: Total Liabilities
Book Value of Company (In BDT)
2011
8,010,817,000
(979,000)
(2,747,620,000)
5,262,218,000
2012
9,181,511,000
(2,251,000)
(2,426,198,000)
6,753,062,000
Calculation of Market Values:

2010
2,426,198,000
Market Value of (total interest bearing) debt(a)

Market Value of equity = Stock price
20,676,112,763
Shareholders Outstanding Shares ...(b)
Market value of Company (In BDT).[(a) + (b)] 23,102,310,76
3
2011
2,747,620,000
2012
2,881,486,000
14,459,294,271
14,956,526,743
17,206,914,271
17,838,012,743
Calculation of True Value

EBIT PE Ratio
True Value (In BDT)
2010
1,491,991,000
20.70
30,884,213,700
Comparison Between True Value & Market Price

2010
True Value (In BDT)
30,884,213,700
Share Outstanding (In BDT)
56,503,690
True value/share (In BDT)
546.59
Market price/share (In BDT)
365.93
Comment
Undervalued
2011
866,910,000 19.29
2012
1,556,574,000 11.58
16,722,693,900
18,025,126,920
2011
16,722,693,900
56,503,690
295.96
255.90
Undervalued
2012
18,025,126,920
56,503,690
319.00
264.70
Undervalued
Page | 3
From the above table it is seen that, Heidelberg Cement Limiteds stock price is
undervalued in all the three years. Hence it will be profitable to buy more of them.
LAFARGE SURMA CEMENT LTD.

Lafarge Surma Cement Ltd. (LSC) was incorporated on 11th November, 1997 as a private
limited company in Bangladesh under the Companies Act 1994 having its registered office in
Dhaka. On 20th January, 2003 Lafarge Surma Cement Ltd. was made into a public limited
company. The Company is listed in Dhaka and Chittagong Stock Exchange. Today, Lafarge
Surma Cement Ltd. has more than 20,000 shareholders. The Company is already meeting about
8% of the total market need for cement and 10% of total clinker requirements of Bangladesh
market whereas they continue to enjoy strong growth rates. By supplying clinker to other cement
producers in the market, they contribute some US$ 50~60 million per annum worth of foreign
currency savings for the country. They contribute around BDT 1 (one) billion per annum as
government revenue to the national exchequer of Bangladesh. About 5,000 people depend on
their business directly or indirectly for their livelihood.
RATIOS
Fiscal
Years
2010
Liquidity Ratio
NWC =
(7,886,006,000.00
CA CL
(In BDT)
Productivity Ratio
FATOR
0.36
TATOR
0.32
Leverage Ratio
TIE Ratio
(167.48%)
Efficiency Ratio
ROA
(0.05 )
ROE
(0.59 )
Operatin
(19.73%)
g Margin
Valuation Ratios
Dividend
Payout
0%
Ratio
2011
2012
Average
Standard
Deviation =
Coefficient
of
Variance,
n
2
( x ix ) CV =
i=1
n1
(4,657,891,000.00
)
(4,477,112,000.00)
(5,673,669,666.67
)
1,918,070,46
3
(0.34)
0.40
0.33
0.73
0.57
0.50
0.41
0.20
0.14
0.41
0.35
55.71%
402.29%
96.84%
287.10%
2.96
(0.10 )
(0.34 )
(0.10 )
0.22
(0.08 )
(0.23 )
0.03
0.42
(0.31)
(1.78)
3.39%
31.35%
5.00%
25.58 %
5.11
0%
0%
0%
0%
Page | 4
Plowback
Ratio
(PBR)
100%
100%
100%
100%
0%

2010
2011
2012
Average

81.27
102.24
92.61
8.48
31.49
24.08
103.69
116.25
108.57
CCC = [ITP + DSO DPO] (Days)
(13.94)
17.48
8.12
So it can be said that, Lafarge Surma Cement Ltd. is out of cash for 3.89 days on an average.
92.04
21.35
109.50
3.89
WACC Calculation
Cost of Debt
Cost
Kd
of
2010
2011
2012
5.20%
11.47%
11.62%
9.43%
27.50%
3.77%
27.50%
8.32%
27.50%
8.43%
27.50%
6.84%
82.50%
47.89%
46.72%
59.04%
22.83%
26.41%
4.25%
17.83%
17.50%
52.11%
53.28%
40.96%
7.11%
17.74%
6.20%
10.35%
Average
Calculation
Debt,
Kd

Weight of Debt
W
Wd
Calculation
Total Liability

Ke
Owners ' Equity
Total Assets
2010
17,914,804,000
(1,219,360,000)
2011
18,559,381,000
(1,293,051,000)
2012
18,523,368,000
(1,185,810,000)
Page | 5

(15,146,325,000)
1,549,119,000
(12,107,398,000)
5,158,932,000
(7,134,806,000)
10,202,752,000
Calculation of Market Value:

Market Value of (total interest bearing)
debt.(a)
Shareholders Outstanding Shares .(b)
Market value of Company (In BDT)...[(a) + (b)]
2010
2011
2012
13,045,189,000
8,282,622,000
7,134,806,000
327,362,183,50
0
340,407,372,50
0
15,446,268,880
19,104,595,720
23,728,890,880
26,239,401,720

2010
(1,115,871,000) (199.80)
222,951,025,800
EBIT PE Ratio
True Value (In BDT)
2011
206,884,000 (7.06)
1,460,601,040
2012
3,336,088,000 10.51
35,062,284,880

2010
2011
2012
True Value (In BDT)
(22,295,1025,800)
1,460,601,040
35,066,284,880
Share Outstanding
580,686,800
580,686,800
580,686,800
(383.94)
2.51
60.39
563.75
26.60
32.90
Comment
Overvalued
Overvalued
Undervalued
From the investors standpoint, it is not profitable to buy the shares of the company when
they are overvalued, but they can make some profit when they are undervalued
MEGHNA CEMENT LTD.

Meghna Cement Ltd. (MCL) is the first manufacturing unit of Bashundhara Group and it
is one of the largest cement industries in the country producing nearly 1 MT a year. The Meghna
Cement Mills Ltd. is an International Standard Organization (ISO 9001: 2008) certified company
having accreditation of manufacturing products for domestic and international markets. The
company is listed in both Dhaka and Chittagong Stock Exchange, the two bourses of the country
since 1995 and 1996 respectively. The company markets its product under the registered
trademark King Brand Cement.
RATIOS
Fiscal Years
2010
2011
2012
Average
Standard
Deviation =
Coefficient of
Variance, CV =
Page | 6

Liquidity Ratio
NWC = CA 439,465,000
CL (In BDT)
( x ix )2
i=1
n1
477,137,000
527,210,000
481,270,666.7
44,018,310.4
7
0.09
3.68
1.28
4.62
1.18
3.97
1.22
0.57
0.05
0.14
0.04
270%
191%
290.33%
1.11%
0.38
0.03
0.14
0.03
0.16
0.03
0.16
0.003
0.02
0.09
0.13
2.82%
2.68%
3.10%
0.006%
0.20
56.28%
48.06%
50.21 %
0.05%
0.11
43.72%
51.94%
49.79%
5.33%
0.11
Productivity Ratio
FATOR
3.60
TATOR
1.22
Leverage Ratio
TIE Ratio
410%
Efficiency Ratio
ROA
0.03
ROE
0.18
Operating
3.80%
Margin
Valuation Ratios
Dividend
Payout
46.30%
Ratio
Plowback
Ratio (PBR)
53.70%

CCC = [ITP + DSO DPO] (Days)
2010
2011
2012
61.48
35.18
46.54
50.12
45.98
8.07
37.80
52.78
38.09
56.97
36.81
58.25
Average
48.52
33.40
40.38
53.72
From the above table it is seen that, Meghna Cement Ltd. is out of cash for more than 53
days on an average.
WACC Calculation
Cost of Debt
Cost
Kd
of
2010
2011
2012
2.65%
3.62%
6.60%
Average
Calculation
Debt,
Kd
4.29%
Page | 7

Weight of Debt
W
Wd
27.50%
1.92%
27.50%
2.62%
27.50%
4.78%
27.50%
3.10%
87.40%
93.60%
93.50%
91.5%
9.71%
6.12%
8.27%
8.03%
12.60%
6.70%
6.50%
8.60%
2.90%
2.86%
5.00%
3.58%
Calculation
Total Liability

Ke
Owners ' Equity
2010
3,610,766,000
(0)
(2,563,431,000)
1,047,335,000
Total Assets
2011
3,550,277,000
(0)
(2,835,214,000)
715,060,000
2012
4,171,434,000
(0)
(3,104,511,000)
1,066,923,000

Market Value of (total interest bearing) debt(a)
Shareholders Outstanding Shares ...(b)
Market value of Company (In BDT) .[(a) + (b)]
2010
2,045,545,000
2011
2,606,781,000
2012
2,492,577,000
7,596,135,040
3,141,055,840
2,358,041,920
9,641,680,040
5,747,836,840
4,850,618,920

EBIT PE Ratio
True Value (In BDT)
2010
203,518,000 31.43
6,396,570,740

2010
True Value (In BDT)
6,396,570,740
2011
222,980,000 62.51
1,3938,479,800
2011
1,3938,479,800
2012
295,124,000 20.15
5,946,748,600
2012
5,946,748,600
Page | 8
Share Outstanding
Comment
22,500,400
284.29
337.60
Overvalued
22,500,400
619.48
139.60
Undervalued
22,500,400
264.30
104.80
Undervalued
From the investors standpoint, it is not profitable to buy the shares of the company when
they are overvalued, but they can make some profit when they are undervalued
CROWN CEMENT LTD.

M. I. Cement (CROWN) Factory Ltd. is a public limited company and one of the
leading manufacturers of cement in Bangladesh. On December 31, 1994 it started its journey
with the commitment for providing high quality cement to the country. With the passing of
time the demand of Crown Cement increased. Therefore the sponsors expanded the project
thrice. By dint of quality Crown Cement soon gained acceptability both at home and abroad
which raised the necessity for expanding the plant.
RATIOS
Fiscal Years
2010
2011
2012
Average
Standard
Deviation =
Liquidity Ratio
NWC = CA
253,440,971
CL (In BDT)
Productivity Ratio
FATOR
2.73
TATOR
Leverage Ratio
TIE Ratio
Efficiency Ratio
ROA
ROE
Operating
Margin
Valuation Ratio
Dividend
Payout
Ratio
( x ix )
Coefficient of
Variance, CV =
2
i=1
n1
3,383,041,300
245,195,296
1,293,892,522
1,809,260,611
1.39
1.80
1.36
1.96
0.70
0.35
1.37
0.57
0.57
0.83
0.46
0.55
12.18%
6.37%
3.23%
7.26%
4.54%
0.62
0.14
0.25
0.06
0.08
0.05
0.10
0.08
0.14
0.05
0.09
0.62
0.64
15%
11%
18%
14%
4%
0.28
0%
0%
26.00%
8.66%
15.01%
1.73
Page | 9
Plowback
Ratio (PBR)
100.00%
100.00%
74.00%
91.33%
15.01%
0.16

Inventory Turnover Period (Days)
Days Sales Outstanding (Days)
Days Payable Outstanding (Days)
CCC = ITP + DSO DPO (Days)
2010
2011
2012
52
36
53
35
65
30
12
83
33
48
11
70
Average
50
38
25.33
62.67
Cash Conversion Cycle on an average is 63 days for CROWN cement which means that,
the company does not have the money in hand for 63 days in a year.
WACC Calculation
Cost of Debt
Cost
Kd
of
2010
2011
2012
20.41%
7.32%
6.02%
11.25%
27.50%
14.8%
27.50%
4.65%
27.50%
3.82%
27.50%
7.76%
20.18%
58.06%
77.00%
51.70%
27.33%
30.53%
1.68%
19.8%
79.82%
41.90%
23.00%
48.28%
24.8%
15.49%
3.33%
14.54%
Average
Calculation
Debt,
Kd

Weight of Debt
W
Wd
Calculation
Total interest bearing Liability

Total Liability

Ke
Owners ' Equity
Total Assets
2010
2,282,435,892
(0)
2011
7,004,458,502
(0)
2012
9,915,183,783
(0)
Page | 10

(946,438,009)
1,335,997,883
Market value of (total interest bearing) debt...(a)

Market value of equity = Stock price
Shareholders Outstanding Shares..(b)
Market value of company (In BDT)..[(a)+(b)]
(1,975,964,799)
5,028,493,703
(4,477,224,213)
5,437,959,570
2010
996,438,009
2011
1,975,964,799
2012
4,477,224,213
16,580,025,00
0
17,576,463,00
9
10,297,556,200
13,176,000,000
12,273,520,999
17,653,224,213

2010
570,930,007 49.92
28,500,825,950
EBIT PE Ratio
True Value (In BDT)
2011
60,6013,786 43.13
26,137,274,590
2012
574,892,238 25.7
14,774,730,520
Comparison Between True Value & Market Value

2010
2011
2012
True Value (In BDT)
28,500,825,950
26,137,274,590
14,774,730,520
Share Outstanding
100,000,000
100,000,000
135,000,000
285.00
261.37
109.44
101.6
126.6
97.10
Undervalued
Undervalued
Undervalued
Comment
Stocks of three years are undervalued. So its better to buy more of it.
INDUSTRY ANALYSIS
Heidelberg
Companie
Cement Ltd.
s
Liquidity Ratio
NWC
=
2,841,996,667
CA CL
(In BDT)
Productivity Ratio
FATOR
2.87
TATOR
1.13
Leverage Ratio
Lafarge Surma
Cement Ltd.
Meghna Cement Ltd.
Crown Cement
Bangladesh Ltd.
Average
(5,673,669,666.67
)
481,270,666.7
1,293,892,522
93,725,297.58
0.50
0.41
3.97
1.22
1.96
0.83
2.32
0.90
Page | 11
TIE Ratio
Efficiency Ratio
ROA
ROE
Operating
Margin
Valuation Ratio
Dividend
Payout
Ratio
Plowback
Ratio
(PBR)
4.37%
96.84%
290.33%
7.26%
99.70%
0.12
0.19
(0.08 )
(0.23 )
0.0307
0.1598
0.08
0.14
0.04
0.06
14.17%
5.00%
3.1%
14%
21.13%
0%
50.21 %
8.66%
20%
78.87%
100%
178.33%
91.34%
80%
9.1%
Inventory Turnover
Period (Days)
Days Sales Outstanding
(Days)
Days Payable
Outstanding (Days)
CCC = ITP + DSO
DPO (Days)
Heidelberg Cement
Ltd.
Lafarge Surma
Cement Ltd.
Meghna
Cement Ltd.
Crown Cement
Bangladesh Ltd.
57.82
92.04
48.52
29.91
21.35
33.40
38
30.66
87.78
109.50
40.38
25.33
65.75
(0.05)
3.89
53.72
62.67
30.06
50
Average
62.095
Comparison between book value, market value and true value of each company:
Book values of all the companies have been calculated by deducting intangible assets and
total liabilities from total assets. Market value of each of the four companies is the summation of
market value of both debt and equity where market value of equity is the product of total number
of shares outstanding and market price of that particular company. The True Value of a company
is product of operating income (EBIT) and PE ratio. As different methods were applied to
calculate the values, there exist differences between book value, market value and true value of
each of the four companies.
Company performance Analysis based on industry averages:
Heidelberg Cement Ltd.:
Page | 12
From the above table of Industry Analysis, it is apparent that Heidelberg Cement Ltd. is
in a better position than its competitors. According to its negative average cash conversion cycle,
it is the only company among the four companies which is keeping cash in hand. The companys
FATOR and TATOR values are substantially higher than industry average. The companys
efficiency ratios are also higher than industry averages. Its only weakness is significantly low
value of TIE ratio, which depicts the companys too much dependency on debt financing.
Valuation ratios are almost similar to industry averages.
Lafarge Surma Cement Ltd.:

From the above table of Industry Analysis, it is apparent that Lafarge Surma Cement Ltd.
is a company with negative NWC. It resulted due to their slow collection and inadequate increase
in inventory. As the company owns up a significant amount of assets, the companys FATOR and
TATOR values are substantially lower than industry average. The companys efficiency ratios are
also negative which resulted from the net loss of the company. One positive thing is that the
companys value of TIE ratio; it is significantly high as the company has less debt financing.
Meghna Cement Ltd.:

Meghna Cement Limiteds main positive point is its TIE ratio. Its TIE ratio is better than
the other companies. This means the companys EBIT is way more than the interest expense on
an average. Its CCC is on the higher side, 54 days, which means it does not have cash in hand for
54 days. Its FATOR is higher than other three companies which mean the companys fixed assets
are turned into sales in a quicker succession than its competitors.
Crown Cement Ltd.

Well it s clearly seen that Heidelberg is in better position than its competitors. On the
other hand, Crown Cement Limiteds condition is worse than the other three companies. It has
the highest CCC of 62.67 days which means it does not have cash in hand for almost 63 days.
Moreover its FATOR is less than the other three companies whereas only TATOR ratio is higher
than Lafarge Surma Cement Ltd. So on an average the company is in need of more concentration
to get on to the profit.
Page | 13

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Course and Section: FIN 440.

Semester: FALL 2013

Date of Submission: 3rd January, 2014

HEIDELBERG CEMENT BANGLADESH LTD.

Cash Conversion Cycle (CCC)

Total Interest Payment

Weight of Equity We Calculation:

WACC = W d K d (1T ) + WeKe

Cost of Equity Ke Calculation:

Calculation of Book Values:

Calculation of Market Values:

Market Value of (total interest bearing) debt(a)

Calculation of True Value

Comparison Between True Value & Market Price

LAFARGE SURMA CEMENT LTD.

Cash Conversion Cycle (CCC)

Inventory Turnover Period (ITP) (Days)

Total Interest Payment

Cost of Equity Ke Calculation:

Less: Total Liabilities

Calculation of Market Value:

Calculation of True Value

Comparison Between True Value & Market Price

MEGHNA CEMENT LTD.

Cash Conversion Cycle (CCC)

Total Interest Payment

Cost of Equity Ke Calculation:

Calculation of Market Values:

Calculation of True Value

Comparison Between True Value & Market Price

CROWN CEMENT LTD.

Cash Conversion Cycle (CCC)

Total Interest Payment

Total interest bearing Liability

Cost of Equity Ke Calculation:

Less: Total Liabilities

Market value of (total interest bearing) debt...(a)

Calculation of True Value

Comparison Between True Value & Market Value

True Value (In BDT)

True value/share (In BDT)

Market price/share (In BDT)

Meghna Cement Ltd.

Cash Conversion Cycle (CCC)

Lafarge Surma Cement Ltd.:

Meghna Cement Ltd.:

Crown Cement Ltd.

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