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Corporate Update

BATA SHOE COMPANY (BANGLADESH) LTD


BDT : 317.00
BATASHOE PRICE / VOLUME GRAPH
500

250,000

Volume
Price

450

400

200,000

350

300

150,000

Financial Revenue
PAT
Year
(BDT. Mn) (BDT.mn)
(Dec)
2005
3,062
207
2006
3,865
277
2007
4,550
325
2008E
5,510
393
2009E
6,059
455
2010E
7,045
546
2011E
8,192
655

EPS
EPS
PER (x)
(BDT) Growth %
15.11
16.43 20.99
20.25
34.06 15.65
23.75
17.26 13.35
28.74
21.05 11.03
33.27
15.74
9.53
39.93
20.03
7.94
47.88
19.91
6.62

P/BV

5.81
5.30
5.27
4.96
4.39
3.64
2.88

Gross
NAV Per
Margin % Share
37.31
54.60
39.70
59.85
41.50
60.13
42.00
63.88
44.00
72.14
44.00
87.08
44.00
109.96

250

200

PROFILE

100,000

150

100

50,000

50

05-Jan-06
05-Mar-06
05-May-06
05-Jul-06
05-Sep-06
05-Nov-06
05-Jan-07
05-Mar-07
05-May-07
05-Jul-07
05-Sep-07
05-Nov-07
05-Jan-08
05-Mar-08
05-May-08
05-Jul-08
05-Sep-08
05-Nov-08
05-Jan-09

BATA SHOE COMPANY (BANGLADESH) LIMITED


317.00

Share Price BDT


Issued Share Capital (Shares)

13,680,000

Ordinary Voting Shares


Free Float

30%
441.7 / 218.7

12 mth High/Low (BDT.)


Average Daily Volume (Shares)

35,394

Market Capitalisation (Voting) BDT. mn

4,337

Bata Shoe Company (Bangladesh) Limited is a 70% owned subsidiary of


the Bata Shoe Company, the worlds largest footwear manufacturing and
marketing organization. Operations began in Bangladesh in 1962 prior to
independence with the company being incorporated in Bangladesh in 1972.
The company operates two manufacturing plants in Tongi and Dhamrai in
the outer regions of the Dhaka Division. The company produces
approximately 110,000 pairs of shoes per day and also has a modern
Tannery processing 5 million square feet of leather each year. The company
continues to be backed by sound management sourced from an experienced
pool of professionals within Bata Shoe Companys global network.

An LBSL / JKSB Research Publication

Bangladesh Equities

MARKET PROFILE

Price Performance (%)


1 mth

6 mth

12 mth

DSI

(1.03)

(9.06)

(11.19)

BATASHOE LIMITED

(6.05)

(18.03)

48.06

Yolan Seimon
yolan@lbsbd.com
yolan@jkstock.keells.com
LankaBangla Securities Ltd
DSE Annex building (1st Floor)
9/E, Motijheel C/A, Dhaka-1000
Bangladesh.
Tel:

880 29561868, 880 27174256


880 27174315, 880 29570496
Fax: 880 29555384
Email: lbsldhk@accesstel.net

The footwear market in Bangladesh s estimated to be around BDT 18bn


growing at approximately 18% to 20% each year with branded shoes among
the fastest growing segments. The demographics of the country present
obvious potential for sustained long ter m growth for footwear
manufacturers. Bata Shoe Company (Bangladesh) Ltd, the single largest
player in the sector has a market share of approximately 25.3% in terms
of value. The companys largest organized competitor operating at the
upper end of the market is Apex Tannery, a listed local manufacturer with
75 stores producing high quality footwear exported to Italy with 25% of
its output sold locally. While Apex tannery is almost exclusively in leather,
Apex Adelchi and a few other Indian brands also compete in the same
space for share in both branded footwear as well as basic functional footwear.

John Keells Stock Brokers (Pvt) Ltd

Tel:
Fax:

941 244 6694/5,


941 234 2066/7,
941 2342 068

Email: jkstock@keells.com

March 2009

We expect sustained growth in urban areas with demand for branded shoes
growing. Bata Shoe Bangladesh is the exclusive distributor for several brands
including Nike and Reebok sold at selected stores. Sales from these brands
amount to less than 5% of total sales but is recording strong growth.
Advertising campaigns have focused on increasing demand particularly in

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MARKETING AND DISTRIBUTION


Company No. PV 89
130, Glennie Street, Col. 2 Sri Lanka.

the promotional campaigns for seasonal and festival products. Action taken
along with government authorities has also been successful in curtailing
the distribution of counterfeit products. Legal action has also been initiated
against offenders of Trade Marks, Copyrights and Designs. While focusing
on increasing volumes in traditional product lines consisting of Thongs,
Sandals and Summer Lines, the perception of the Bata brand has also
been elevated, with the introduction of a number of designer collections
for men, women and children. Internationally renowned brands such as
Claire, Hush Puppies, Schol, Bubble gummers, Sandak, Weinbrenner, Island,
Power and Bfirst have been introduced into Bangladesh.

The companys distribution network includes both retail and wholesale


channels. The company has 240 retail sales outlets, as well as 420 wholesale
dealers and 566 Dealer Support program stores. The retail outlets are
segmented according to the profile of the different market segments and
include modern Bata City Stores along with other outlets such as Bata
Bazaar, Bata Super Stores and Bata Family Stores. The company is expected
to add an additional 22 retail stores in 2009 with a greater emphasis being
paid to the higher margin retail segment.

REVENUE GROWTH

Volume growth in 2008 was stagnant affected partially by a slowdown in


business in the run up to the December general elections as well as a drop
in volumes due to a transition of wholesale dealers from credit to cash
only, which resulted in some wholesalers holding back on purchases. Revenue
growth was driven almost entirely by an increase in prices by an average
of 20% across its range of products. This resulted in a 2% increase in the
companys market share in terms of value in 2008. Volumes among
wholesalers have picked up at the start of the year with revenue growth
expected at approximately 10% for 2009 with growth arising predominantly
from its retail segment.

The increase in volumes of designer footwear in the companys product


mix has resulted in a gradual increase in gross margins. Furthermore a
reduction in raw materials including PVC resin and chemicals is expected
to result in a further widening of gross margins to 44.0% in 2009. We
expect gross margins of 44% continue into 2010 and 2011 with the gradual
shift in the companys product mix toward higher margin designer footwear
expected to continue. offsetting a rise in raw material costs.

The company has also managed to improve its working capital cycle with
all wholesale sales being carried on a cash only basis. The company suffered
a modest drop in volumes in 2008 with the change in policy, but volumes
have now picked up to normal levels. Therefore issues faced with receivables
are no longer present. The company does sell to the government, particularly
to the Navy, on a 45 day credit term amounting to approximately 10% of

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MARGINS

its revenue. The company has not experienced any delays to date in receiving
funds from the government.

Valuations
Modest earnings growth of 16% is expected in 2009 amid tighter economic
condition revenue expected to be driven by a 4.5% increase in volume
and an expected average price increase of 6.5% across its product range.
Expected earnings per share of BDT 15.74 and BDT 20.03 for FY 09E
and FY10E correspond to a P/E ratio of 9.53x and 7.94x respectively.
The counter currently trades at a 31.3% discount to the market and a
47.9% discount to the sector.

Income Statement
For the year ended 31st December
Turnover
Cost of Sales
Gross Profit
Admin. Selling and Distribution Expenses
Other Income
WPPF
Profit Before Tax
Tax Expense
Deferred Tax
Profit After Tax
Balance Sheet
As at 31st December
Property, Plant and Equipment
Capital Work in Progress
Deferred Tax Assets
Current Assets
Inventories
Accounts Receivable
Advances, deposits and prepayments
Cash and cash equivalents
Total Assets
Current Liabilities and Provisions
Bank overdraft
Creditors for goods
Creditors for expenses
Creditors for other finance
Provision for tax
Unpaid Dividend
Non Current Liabilities
Deferred Tax
Deferred Liability
Finance Lease
Total Liabilities
Share Capital and Reserves
Share Capital
Reserves and Surplus
Total Capital and Liabilities
Cashflow Statement
As at 31st December
Cashflow from Operating activities
Cashflow from Investing activities
Acquistion of property, plant and equip.
Sale of property, plant & equip.
Interest received
Cashflow from Financing activities
Bank Over Draft
Interest received
Repayment of finance lease
Dividend distribution tax paid
Dividend paid
Net Cash during the year
Operating net cash & cash equivalents
Effect of changes in forex rate
Closing net cash & cash equivalents

2004
2005
2006
2007
2008E
2009E
2010E
2011E
BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn
2,599
3,062
3,865
4,550
5,510
6,059
7,045
8,192
(1,557)
(1,920)
(2,331)
(2,662)
(3,196)
(3,393)
(3,945)
(4,588)
1,042
1,143
1,534
1,888
2,314
2,666
3,100
3,605
(756)
(814)
(1,138)
(1,398)
(1,768)
(2,033)
(2,338)
(2,689)
286
329
396
491
546
633
762
916
6
9
34
29
32
35
39
43
(15)
(17)
(21)
(26)
(29)
(33)
(40)
(48)
277
321
408
494
549
635
760
910
(103)
(120)
(134)
(157)
(151)
(175)
(209)
(250)
3
5
3
(13)
(5)
(5)
(5)
(5)
177
207
277
325
393
455
546
655
2004
2005
2006
2007
2008E
2009E
2010E
2011E
BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn
356
342
369
416
453
497
514
511
1
6
0
1
12
15
3
357
360
384
420
453
497
514
511
1,100
271
101
122
1,594
1,951

901
190
100
317
1,507
1,867

989
116
156
402
1,663
2,047

1,312
40
181
300
1,832
2,252

1,352
48
219
474
2,093
2,545

1,492
53
241
495
2,281
2,777

1,745
62
280
592
2,679
3,192

2,025
72
325
841
3,263
3,774

102
331
216
79
328
64
1,120

218
249
88
360
64
979

199
308
108
392
73
1,080

346
337
105
411
90
1,289

496
408
127
406
90
1,526

545
449
139
429
90
1,653

634
522
162
464
90
1,872

737
607
188
505
90
2,127

(7)
128
4
125
1,245

138
2
140
1,120

148
0
148
1,228

140
140
1,429

145

138

130

142

145
1,671

138
1,791

130
2,002

142
2,269

137
570
707
1,951

137
610
747
1,867

137
682
819
2,047

137
686
823
2,252

137
737
874
2,545

137
850
987
2,777

137
1,054
1,191
3,193

137
1,367
1,504
3,774

2004
2005
2006
2007
2008E
2009E
2010E
2011E
BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn BDT' mn
277
321
408
306
606
480
537
654
(29)
0

(26)
4

(96)
2
15
(78)

(95)

(110)

(90)

(75)

(22)

(64)
2
20
(42)

(28)

(95)

(110)

(90)

(75)

102
4
(1)
(18)
(167)
(81)
(149)
269
3
122

(102)
4
(6)

(2)

(2)

(7)

(8)

12

(164)
(268)
190
122
5
317

(197)
(199)
83
317
2
402

(325)
(326)
(102)
402
(0)
300

(342)
(337)
173
300
474

(342)
(349)
21
474
495

(342)
(350)
97
495
592

(342)
(330)
249
592
841

This document is published by LankaBangla Securities Ltd and John Keells Stock Brokers (Pvt) Ltd for the exclusive use of their clients. All information has been compiled
from available documentation and LBSL's and JKSBs own research material. Whilst all reasonable care has been taken to ensure the accuracy of the contents of this
document, neither LBSL or JKSB nor its employees can accept responsibility for any decisions made by investors based on information herein.

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