FIN301: FINANCIAL MANAGEMENT

TERM PAPER

Group Members
Name and student ID

Tanha Khair 22104023

Samiha Zaman Maisha 22104039
Kaniz Fatema 22104061
MD ashraful uddin khan 21304106
MD.Rafi Noor Bin Huda 20104153

Submitted by: Group 7 Section 3

To: Abu Saad Md. Masnun Al Mahi

BRAC Business School (BBS)
BRAC University

Submission Date: 4/30/2024

 1

Table of Contents
1. EXECUTIVE SUMMARY.................................................................................................................
2. Comparative Performance of Crown Cement PLC Against the DSEX Index ...............................
3. Comparative Performance of Crown Cement PLC Against the DS30 Index................................

4. STOCK valuation ..............................................................................................................................

5. Stock market performance..................................................................................................................
6. Crown Cement as a Lucrative Option:..............................................................................................
7. Part B....................................................................................................................................................
8. Conclusion..........................................................................................................................................
9. Reference ..........................................................................................................................................

Individual Contribution
Name:
ID:

Tanha Khair(22104023) Part A except the Graphs

Samiha Zaman Maisha (22104039) Part B task 2 & 3

Kaniz Fatema (22104061) Part B task 1 & 3

Executive Summary,Graphs, report except the

MD ashraful uddin khan (21304106) stock undervalue overvalue part

MD.Rafi Noor Bin Huda (20104153) Part A(b) and the stock undervalue overvalue
part
 2

Executive Summary
This report is a comprehensive analysis of the stock market, including the valuation of stocks and the
comparative performance of the benchmark company, drawing on data from the Dhaka Stock Exchange.
It emphasizes the significance of grasping a company’s market behavior and examines various
unsystematic risks that could influence it. Additionally, the document guides investors in assessing the
profitability of a company and explores the elements that contribute to the fluctuations in a company’s
share price. The focus of this analysis is on Crown Cement PLC. using DSEX and DSE30 as the
reference standard.
 3

Comparative Performance of Crown Cement PLC Against the DSEX Index:

The DSEX is the main index of the Dhaka Stock Exchange, representing approximately 97% of the
exchange’s total market capitalization. It accurately reflects the price changes of the listed companies.To
be eligible for inclusion in the DSEX, a company must have a float-adjusted market capitalization of no
less than BDT 500 million by the rebalancing reference date. In addition, the company should maintain a
six-month average daily trading volume (ADVT) of at least BDT 1 million by the same date.During the
annual index rebalancing, a company already in the index that sees its ADVT drop below BDT 1 million
but stay above BDT 0.7 million will remain in the index, as long as it meets the other required criteria.
It’s important to note that the DSE Broad Index does not require stocks to be diversified across different
sectors to qualify for inclusion.

To assess Crown Cement’s performance relative to the DSEX index, we examined the risks linked to
daily returns and the abnormal rate of return. Crown Cement experienced both positive and negative
returns in April 2022, with daily returns showing volatility over the year. A notable spike was observed at
the beginning of 2023. Conversely, there was a marked decrease in July and again in August 2023.
Currently, in 2024, the company’s performance is characterized by a series of peaks and troughs.
 4

The DSEX index serves as a more precise benchmark for evaluating Crown Cement’s performance
compared to its own share price. The graph illustrates the comparison between Crown Cement’s returns
and those of the DSEX index. Over the past two years, the DSEX index has significantly outperformed
Crown Cement.

While Crown Cement’s returns were not notably affected, the company did experience a robust
performance in the fourth quarter of 2022. Despite this, Crown Cement’s overall performance remains
well below the DSEX index standard. From August 2022 to April 2023, Crown Cement did not achieve
any significant returns, whereas the DSEX index exhibited a mix of positive and negative returns during
the same timeframe. Consequently, Crown Cement’s performance is deemed subpar when measured
against the DSEX index.

Comparative Performance of Crown Cement PLC Against the DS30 Index:

 5

The DS30 index is a market-capitalization-weighted index that represents the 30 largest and most liquid
stocks on the Dhaka Stock Exchange (DSE). This index is recalibrated biannually, selecting constituents
based on criteria such as market capitalization, liquidity, and profitability. It’s noteworthy that the DS30
index constitutes about 51% of the DSE equity market’s total capitalization.Eligibility Criteria for
Inclusion For a stock to be considered for inclusion in the DS30 index, it must meet specific
requirements. A primary condition is a float-adjusted market capitalization of at least BDT 100 million. In
addition, these stocks are expected to maintain an average daily traded value (ADVT) of no less than
BDT 5 million over the preceding three months. Even if a stock’s market capitalization falls below the
BDT 100 million threshold, it may still be included in the index, provided it fulfills all other eligibility
criteria.
Over the past year, both the DSEX index and the DS30 index have produced similar rates of return.
However, it’s evident that the DS30 index has surpassed Crown Cement’s performance in comparison to
its own share price. The DS30 index’s peak return exceeded 7% over the last year, demonstrating a
relatively stable performance.

In contrast, Crown Cement has not been able to keep pace with the index’s performance. When the index
reached its highest returns, Crown Cement’s returns were nearly negligible, and this pattern persisted
throughout Years . Moreover, Crown Cement’s returns have been modest, with the highest return being
less than 4%. Consequently, Crown Cement’s performance falls short of the benchmark established by
the DS30 index.

Stock market performance:

In the first few months of 2022, the share price of CROWN CEMENT was relatively stable, ranging from
66 to 70 taka. However, the following months saw a period of instability. The price recovered and
reached a fairly stable point at 74 taka in the last quarter of 2022.Unfortunately, this stability was short-
lived. Starting in June 2023, the share price became volatile again and began a rapid decline that lasted
for a few months. September 2023 saw a drastic increase, but this was followed by another period of up
and down trends.As of today, CROWN CEMENT is facing its lowest share price point so far in 2024.
This instability highlights the company's struggle to maintain a consistent share price.
 6

Crown Cement as a Lucrative Option:

The Bangladesh Cement Manufacturers’ Association (BCMA) reports that Crown Cement holds the
fourth position in the market, commanding an 8.26% share
Crown Cement’s financial and operational achievements position it as an attractive investment option.
The company has outperformed the Basic Materials industry with an average annual earnings growth rate
of 19.4%, compared to the industry’s 4.2%. Revenue growth has been consistent at 13.8% per year, and
profitability metrics like a 15% return on equity and 4.7% net margins underscore its financial health. The
recent financial performance is equally impressive, with an EPS of Tk. 2.44 for October-December 2023,
up from Tk. 0.99 year-over-year, and a half-year EPS of Tk. 4.76, marking a substantial increase from Tk.
0.63. The operational expansion with a new production facility in Munshiganj reflects the company’s
growth ambitions and is likely to boost capacity and market share. After recovering from a previous
year’s loss to a profit of Tk61 crore in FY23, Crown Cement’s trajectory suggests a promising investment
opportunity that aligns with positive market trends and investor expectations.

Key consideration for investors

The value of a company’s shares in the market is a key consideration for investors when deciding where
to allocate their funds. Nonetheless, the prices of these shares can experience significant variation. Here
are several elements that can influence the movement of share prices:

Economic Factors The economic health of a country is a primary determinant of stock price movements.
During a recession, for instance, corporate earnings typically decline, and consumer demand for goods
and services decreases. This contraction in economic activity can lead to a fall in stock prices as investors
anticipate lower profits.

Political Factors Political events and stability play a crucial role in the stock market. Uncertainties such
as elections or governmental changes can make investors wary, often resulting in selling pressure on
stocks. The anticipation of policy changes can cause significant fluctuations in stock prices.

Global Factors International incidents, including wars and natural disasters, can have far-reaching effects
on stock markets. Wars, for example, can disrupt global supply chains and contribute to inflationary
pressures, making stocks less appealing to investors due to the potential impact on corporate profits.

Industry Factors The condition of the specific industry to which a company belongs can influence its
stock price. A downturn in industry demand can lead to a reduction in stock prices, as it may reflect a
decrease in revenue and profit potential for the companies within that industry.

Firm-Specific Factors Individual company circumstances are also critical in determining stock prices.
Factors such as financial performance, management decisions, and even product recalls can significantly
impact a company’s stock price, either positively or negatively.

It’s important to remember that these factors are part of a broader spectrum that can influence stock
prices. The extent of their impact can vary based on the context and time. Investors are advised to
consider these factors holistically when making investment decisions.
 7

Part B:
Format and contents of the Application –

Chairman

Securities and Exchange Commission

1. Name of the issuer: Crown Cement PLC

2. Legal status of the issuer: Certified Company From Government

3. Registered address and telephone numbers of the issuer: Delta Life Tower (3rd & 6th floor), Plot-37

Road-45 (South) & 90 (North), Gulshan-2

Dhaka-1212, Bangladesh.

Phone : +880 22 22263631,+880 22 22263633-4

+880 22 22263636,+880 22 22290641

Fax : +88-02-222263643

Email: info@crowncement.com

4. Name, address and telephone number of the contact person:

Md. Ahsan Ullah

Delta life tower (3rd and 6th floor)

Phone: 01730399988

Email: ahasan.ullah@crowncement.com

5. Date of incorporation (in case of companies): December 31, 1994

6. Date of commencement of business: 13 october, 2000

 8

7. Authorized capital (in case of companies):

5000(Mio)

8. Paid-up capital (in case of companies):

1485(Mio)

9. Total equity of the issuer:

7,754,709,341

11. Total amount of debt due from the issuer:

15,095,872,017

13. Type of debt instruments to be issued:

Fixed rate bond

14. Face value, issue price and number of securities being offered and

the total issue amount:

Face Value: 100000

Issue Price: 85000

Number of security : 500

Total issue amount :50000000

15. Coupon rate/discount rate and YTM:10%

16. Tenor/Maturity: From 1 year to 5 year

17. Mode of redemption: Annually

18. Rate of return: 5.45%

19. Applicable tax rate: As Applicable

20. Period within which securities to be issued: 6 Months from thc date of BSEC approval

21. Name of the trustee: BRAC Bank

22. Paid-up capital of the trustee: BDT 14,030,000

 9

Sd/-

Chief Executive Officer

Name of the issuer: Md. Ahsan Ullah

Rate Of Return

Face Value : BDT 100000

Coupon rate : 10%

Maturity :5 years

Market Price : BDT 120000

Coupon Price : 100000*10% =10000

YTM =C+F-Pn F+P2

=10000+100000-1200005 100000+1200002

=5.45%

Crown Cement wants to issue taka 5 crore to increase their business and also to pay their liabilities ,they
need to think about different financial factors such as issue price,face value, total number of bonds issued
etc. The financial factors are discussed below:

Determining the importance of Capital Need: Capital need is settled down with 5 crore Crown Cement
wants to increase the amount by issuing fixed rate bonds.

Market Condition: Given YTM of 10%,which shows the interest rate in the market, and the issue price of
85000 tk, which shows the bonds are priced below their face value. The Rate Return of 5.45% is what
investors

Face Value: Face Value Given 100000 TK. Since the coupon rate is not given directly ,we can calculate it
using YTM and the current market price of the bond .It is important to note that the face value remain
same even in prevailing market conditions.

Analysis on Company’s Financial health:

 10

Analyzing the company’s Return on assets Which was -40% in 2022 and -1.2% in 2023 which indicates
that company generates loss for 100 assets in 2022 and 2023. According to financial reports ROA Values
are negative , which means the company failed to generate assets properly and generates loss. To make a
profit, a company needs to focus on efficient asset management.

Erom the annual report of crown cement it was found that 59% of total assets was funded by the
company’s investors in 2022 and the percentage of DTA increased in 2023 that was 66% .Moreover, as
the percentage of DTA increased company going through a burden of liabilities or debt for creditors.

So it can be said negative ROA Value and a higher percentage of DTA indicate that companies are not
producing enough profits to cover the interest payment this can lead to higher financial leverage which
can affect the company in both negative and positive ways.it's crucial for investors to find out both ROA
and DTA levels and monitors properly to increase profit and to improve financial company. If companies
issue their bond to increase their business it can increase their burden of debt .

Ability of Crown Cement to issue the bonds :

To issue bonds a company should have financial leverage 50% and ROA should be at least 10% in the
latest year of analysis.

To find out the company's financial leverage we must know the debt ratio which specifies the loan that
company used. Higher debt indicates higher leverage. Moreover, ROA shows the efficiency of a company
in producing profit and generating assets of a company.

In the latest year 2023 Crown Cement Debt was 66% and ROA was -1.2%. So in comparison with SEC's
given percentage, the percentage of crown cement is higher than SEC. So it can be said crown cement
Couldn't fulfill the requirement of the SEC. Crown cement has a burden of debt and they have a higher
percentage of leverage that exceeds expectations of SEC So it will be problematic for crown cement to
issue bonds.

So to get the permission to issue bonds they have to pay bondholders yet they will get a risky bond which
has a higher possibility of non-payment.

However, According to SEC ROA should be atleast 10% but in the latest year 2023 the ROA of crown
cement was -1.2% which indicates crown cement can't generate profit and utilize their assets efficiently.
 11

Due to the negative value of ROA they might get less return than investment also creating risk for
bondholders. They might have to pay bondholders with interest.

To conclude, Crown cement failed to meet the expectations of SEC. As SEC requires a financially stable
company to give permission to issue bonds and is eligible to decrease risk and generate profit. So Crown
Cement isn’t eligible to issue bonds as they Couldn't fulfill the requirements of SEC.To get the
permission the company needs to improve their situation.

Conclusion:
In summary, investors on the Dhaka Stock Exchange can learn a lot from the examination of Crown
Cement PLC's performance in comparison to the DSEX and DS30 indices. Despite its share price
volatility, Crown Cement remains a desirable investment due to its operational triumphs. Nonetheless,
investors need to be on the lookout for a variety of factors that can affect the behavior of the stock market,
such as firm-specific, industry-specific, global, political, and economic issues. Although Crown Cement's
expansion goals and increasing financial performance seem promising, wise decision-making calls for
constant observation and in-depth research given the dynamic nature of the stock market.

Reference:
Khan, M. (2024). Insights into Bangladesh’s Cement Industry Decline. The Business Standard. Retrieved
from 'Small cement companies will find it difficult to absorb the shock' | The Business Standard
(tbsnews.net)
Crown Cement. (2024). Crown Cement to start commercial operation of new production facility in
Munshiganj. Retrieved April 29, 2024, from Crown Cement to start new factory from this month | The
Business Standard (tbsnews.net)