Group Mates

Sagar Kumar Sainani

Muhammad Taimur
Muhammad Raza
Muhammad Ihsaan (Withdraw)

Outline

Introduction
Forecasted Financial Statements
Free Cash Flows
Dividend Policy
Optimal Capital Structure
Working Capital Management
CCC

OGDCL
OGDCL is a Pakistani multinational oil and
gas company.
It has primary listing on Karachi Stock
Exchange, and secondary listings on
London, Lahore and Islamabad stock
exchanges.
Established in 1961 by the Government of
Pakistan, it was turned into a public listed
company on 23 October 1997.
Today it is involved in exploring, drilling,
refining and selling oil and gas in Pakistan.

OGDCL (Cont:)
It is the market leader in terms of
reserves, production and acreage.
It is based on Jinnah Avenue, Blue
Area in Islamabad.
Government of Pakistan holding
about 74% stake in the company,
rest are held by private investors.

Forecasted Income
Statement

Historical data 2010-2014

Growth=(S1-S0)/S0
Trend Analysis (Sales)
Formula:

TREND($D$57:$H$57,$D$56:$H$56,J
56:N56)
Forecast 5 years sales 2015-2019

GROWTH
Calculated different growth rates
Formula: =(S1-S0)/S0
Growth rates are,
10.60% 10.43% 9.45% 8.63% 7.95%

Tax
Tax of previous years
33.17% 30.18% 27.18% 37.75%
28.10%
Tax rate
34.65%

FORECASTED BALANCE
SHEET
All assets and Current liabilities grow
with different growth rates.
Calculated AFN
Formula: Change in total assetsIncrease in current liabilities-Add: to
retained earnings
Negative amount of AFN for three
years

FREE CASH FLOWS

NOPAT (Net operating Profit After Taxes)
NOWC (NET OPERATING WORKING
CAPITAL)
Change in Plant and Equipment
FCF=NOPAT-(NOWC+PE)
Or
FCF=EBIT(1-T)-{(Change in assetsChange in liabilities)-PPE)

Weighted Average Cost of Capital

WACC = Wd*rd(1-t)+ We*re
Wd & We

Required Rate of Return

Capital Asset Pricing Model (CAPM)
re= rf+(Rpm)
Risk free Rate (Rf)
Market Premium (Rpm)
Beta ()
Rate of debt (Rd)

CAPM

Re=rf+(rm-rf)*b
Rf= 9%
Re= 14.22%
Beta is 0.745716608
Calculated by taking market price and
Market index of current year

WACC

Debt ratio 23.45%

Equity Ratio 76.55%
Rate on debt (rd) 10.00%
Rate on Equity (rs) 14.22%
Tax 34.65%
WACC=wd*rd*(1-t)+We*Re
WACC=12.42%

Value of firm, Value of Equity,

Share Price
Value of Operation
2441581509
+ Non-operating Assets
37537297
=Value Of Firm 2479118806
-Debt
46021283
-Preferred Stock 0
=Value of Equity 2433097523
Share price = Value of Equity/No: of
outstanding Shares PKR 565.71

Intrinsic Value (Decision)

Share price is PKR 565.71

Current market price PKR 220
Share (Intrinsic) price>Market Price
Undervalued
Decision:
Buy the Stock

OPTIMAL CAPITAL
STRUCTURE

Working Capital
Management

 CCC = CCP + ICP PDP

CCP = AR / Sales per day
ICP = Inventory / COGS per day
PDP = AP / Sales per day

Accounts used in
calculating CCC
Sales per day
Cogs per day
Stocks in Trade
Inventory
trade debts
Receivables
Payables
NOWC

Assumptions

Growth (s1-s0)/s0
Tax Rate is 34.65% for the forecasted years
Risk free rate is 9% as from treasury bills
Market premium is kept 6%
Market rate is (rd) 10%
Market index from opendoors.com