CHAPTER-01

INTRODUCTION

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Introduction:
1.1 Origin of the Report
To complete the course of Corporate Finance (FIN 6150), it is necessary to prepare a report based
on corporate finance analysis of Meghna Cement. This report is prepared by Imtiaz Ahmed &
Md. Abu Faysal on Corporate finance analysis of Meghna Cement, under the guidance of Syed
A. Al Mamun, Associate Professor, South East University.

1.2 Objectives:

To find out the ownership structure of the company.

To measure the extent of asset structure.
To identify capital structure of the company.
Dividend policy analysis
Cash flow & profitability analysis of the company.
Overall market performance of different years.

1.3 Methodology:
Sources of information:
In order to collect the above-mentioned information following potential sources has been used:
o Annual Report of the company
o Websites
o Different texts books

1.4 Limitations
The limitation of the study was collecting information because the organization is reluctant to
give the required information. Research methodology or Questionnaire is not taken to prepare
this report.

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CHAPTER-02

Organization

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2.0 Literature Review

2.1 Company Overview

Meghna Cement Mills Ltd. is an enterprise of Bashundhara Group. King Brand cement of MCML
is well-known throughout Bangladesh. MCML is the largest cement production industry in
Bangladesh which started its commercial activities from 15th January, 1996. The factory is situated
beside the river of Pashur at Mongla, Bagerhat. The production capacity is 15 Lac MT per year.
The weight of each marketed bag is always perfect of 50 kg due to the adoption of an automated
packaging system. There is a laboratory, equipped with modern equipment within the mill
premises to conduct tests at each hour for every shift covering every stage of the production
process. It has its own cement bag factory in Meghna Ghat. It can meet the most demand of cement
bag in Bangladesh which uses the modern technologies and imported paper from Sweden.
The Company has been awarded the coveted ISO-9001-2000 Certification in the year 2000 by the
National Quality Assurance (NQA), registered by the National Accreditation of Certificate Boards,
UK. The factorys environmental standards are high
The Meghna Cement Mills Limited (MCML) was the first undertaking Bashundhara Group in the
manufacturing sector. This enterprise produces world-class cement and, as a testimony to this,
stands the fact that the concern has been awarded the ISO-9001 certification for sustained quality
control effort. The Company markets its cement under the registered trademark of King Brand
Cement. The factory of this Company is located in the southwestern part of Bangladesh at Mongla
Port Industrial Area, in Mongla, Bagerhat under the Khulna Division.
At present MCML is producing three types of cement. One is Ordinary Portland Cement (OPC)
and another two types are Portland Composite Cement (PCC) { CEM-II/B-M (S-V-L) and CEMII/A-M(S-V-L) }. In Bangladesh many high-rise building, road, bridge, culvert, hospital, shopping
mall etc. have made by King Brand Cement. The Company has been awarded the coveted ISO9001-2000 Certification in the year 2000 by the National Quality Assurance (NQA), registered by
the National Accreditation of Certificate Boards, UK. The factorys environmental standards are
high.
Any company is not fully independent and can not 100% to their customers. Meghna Cement Mills
Limited is not different from them. They have some limitations in production, distribution,
promotion and others. But King Brand Cement has very good image in the market for their quality
and already captured 9% share of the market (3rd position). Now it can not capture more market
share because of some constraints inside and out side of the organization. They should be suited
with the out side constraints of the organization. But it can be remove the inside constraints. For
this I tried to give some recommendations to the organization.

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The promotional activities must be increase and proper way like TV commercial need to moderate
for gaining attention of customers. On the other hand print media should be attractive toward
customer. Consumer scheme is more attractive other than other promotional activities. The quality
of King Brand Cement is so good but price is high. It should be price competitive and reasonable.
To provide well advantage toward the dealers for fulfilled their objectives and will be created
smooth distribution Mechanism.
Since the starting of the operation King Brand Cement confident that they are quite capable of
challenging others and positioning themselves in the highest rank by increasing the sales per day,
introduction of the consistence quality blended cement, with integrating supply and distribution
chains and logistics, securing an exclusive distribution network and buildings strong relationship
all over the country segmented on the basis of consumers use. Though King Brand Cement is in
good position in the market, it should think critically to generate new ideas for existing and
potential consumers to hold the consistent growth in the market.

Mission
To be the leader in the cement sector of the country by rendering quality products and services
through maintaining high standards in business operations and to bring fullest satisfaction to our
valued shareholders, customers and employees.

Vision
To significantly contribute to the sustainable development and growth of our country towards its
journey for a better and prosperous future.

Company in Brief
Registered Office

125/A, Block - A, Bashundhara P/A, Baridhara, Dhaka-1229

Factory Mongla Port I/A, Mongla, Bagerhat

Year of Incorporation

1992

Year of Commercial Production

1996

Year of Listing

DSE 1995
CSE 1996

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Products

Portland Composite Cement (PCC)

Ordinary Portland Cement (OPC)

Authorized Capital

Tk. 500 Crore

Paid-up Capital

Tk. 225,004,000

Face Value

Tk. 10 per share

Capacity

1 million MT per year.

Board of Directors

Chairman

Ahmed Akbar Sobhan

Managing Director

Sayem Sobhan

Directors

Afroza Begum
Sadat Sobhan
Shafiat Sobhan
Safwan Sobhan

Independent Director

Khawaja Ahmedur Rahman

Zeaur Rahman

Audit Committee

Khawaja Ahmedur Rahman

Zeaur Rahman
Safwan Sobhan
M. Naseemul Hye FCS

Company Secretary

M. Naseemul Hye FCS

Statutory Auditors

KM Alam & Co.

Chartered Accountants

Governance Compliance Auditors

Itrat Husain & Associates

Chartered Secretaries

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2.1.1 Establishment by King Brand Cement

In Bangladesh many high-rise building, road, bridge, culvert, hospital, shopping mall etc. have
made by King Brand Cement. For exampleo Bashundhara City
o Suvastu Nagar valley
o Shahid Ziaur Rahman Medical college Hospital
o Rupsha Bridge
o Mobile Companys Network Towers
o Baropukuria Coal Mine
o Testa Bridge is going on etc.

2.1.2 Social Contribution

Bangladesh being one of the densely populated countries in the world, our standard of life,
communication, industrial and agricultural growth etc. has not been remarkably developed. As
such employment opportunity has not been satisfactorily improved. Bashundhara Group is playing
significant role by creating employment opportunity for hundreds of young generation through
Industrialization. The main objective is efficient customer services, ensure quality product. As a
result these products also reached to their doorstep within short time. On the basis of priority
MCML also produces various types of quality cement as per customers desire want and needs.
We are able to produce any type of quality cement and maintain proper standardization, using
modern equipment for laboratory testing which ensure the quality. Since inception we are actively
contributing to the national as well as global economy by way of effective utilization of human
resource using raw materials, producing and marking high quality product at most competitively
prices and creating employment opportunities. We mark all endeavors to utilize our financial
resources efficiently and the right opportunities arise, we invest in fruitful areas with strong market
position and high growth potential for realization of a better future. We continue our efforts to
improve performance and increase contribution towards socio economic development of this
beloved earth. Meghna Cement Mills Ltd. do lot of charity activities for the betterment of people
as well as society. MCML is running/patronizing a Madrasha cum School for about 250 nos. Under
privileged students of Apa Bari, Digraj, Mongla, Bagerhat area. In case of natural disaster like
Cidor/Aila, MCML bestowed significant volume of warm clothes, medicine, dry food, removing
saline water from pond and financial assistances. On the different national memorable day like
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Victory Day, 21st February, Independent Day, May Day etc. MCML donated sewing machine,
financial assistance to freedom fighter and others through Thana & District administration. Cement
sacks and cash payment are also bestowed for construction of different Mosque, School, Mondir,
Madrasha etc.

2.1.3 Cement Industry in Bangladesh

Cement Industry a relatively fast growing industry, is developing in pace with increasing building
and construction activities. Cement has long been used as a bonding agent to unite particles or to
cause one surface to adhere to another. The most common form of cement, Portland cement, is a
powder obtained from burning together a mixture of lime and clay, which when mixed with water
and sand or gravel, turns into mortar or concrete. The amount of cement now annually consumed
in the country is about 5 million metric tons. The production however, falls short by about 3 million
tons per year. This shortage is met through imports. Per capita consumption of cement in the
country (38 kg) is fairly low compared to India (89 kg), Indonesia (127kg), Malaysia (582 kg) and
Thailand (642 kg).
Private enterprises dominate production and import of cement to cater to the local market. The
manufacturing of cement is based on both locally available raw materials and imported clinker.
The two cement plants of the first type, one at chhatak and the other at Ayeenpur, have a total
installed capacity of 260,000 tons a year. They produce cement from local limestone and use
natural gas as fuel. The mills that produce cement from imported clinker are located mostly around
dhaka, chittagong and mongla. There were 62 registered cement factories in the country in 1999,
but only 13 of them were in production. The total installed production capacity of these factories
is about 3.8 million tons a year. Their actual production, however, is much lower. A 50-kg bag of
cement produced locally sells at Tk 250-260, while a bag of imported cement is priced at Tk 230250. Local raw material based cement production depends on limestone deposits that lie in st
Martins island, joypurhat and sylhet areas. The deposits in Sylhet support the production of
Chhatak and Ayeenpur cement factories.

2.2 Corporate Finance and Corporate Finance Decisions

2.2.1 Corporate Finance

Corporate finance is concerned with the duties of the financial manager working in a business.
Financial managers administer the financial affairs of all types of businessesprivate and public,
large and small, profit seeking and not for profit. They perform such varied tasks as developing a
financial plan or budget, extending credit to customers, evaluating proposed large expenditures,
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and raising money to fund the firms operations. In recent years, a number of factors have increased
the importance and complexity of the financial managers duties. These factors include the recent
global financial crisis and subsequent responses by regulators, increased competition, and
technological change. For example, globalization has led U.S. corporations to increase their
transactions in other countries, and foreign corporations have done likewise in the United States.
These changes increase demand for financial experts who can manage cash flows in different
currencies and protect against the risks that arise from international transactions. These changes
increase the finance functions complexity, but they also create opportunities for a more rewarding
career. The increasing complexity of the financial managers duties has increased the popularity
of a variety of professional certification programs outlined in the Focus on Practice box below.
Financial managers today actively develop and implement corporate strategies aimed at helping
the firm grow and improving its competitive position. As a result, many corporate presidents and
chief executive officers (CEOs) rose to the top of their organizations by first demonstrating
excellence in the finance function.

2.2.2 The Agency Issue

We know that the duty of the financial manager is to maximize the wealth of the firms owners.
Shareholders give managers decision-making authority over the firm; thus managers can be
viewed as the agents of the firms shareholders. Technically, any manager who owns less than 100
percent of the firm is an agent acting on behalf of other owners. In general, a contract is used to
specify the terms of a principalagent relationship. This arrangement works well when the agent
makes decisions that are in the principals best interest but doesnt work well when the interests
of the principal and agent differ. In theory, most financial managers would agree with the goal of
shareholder wealth maximization. In reality, however, managers are also concerned with their
personal wealth, job security, and fringe benefits. Such concerns may cause managers to make
decisions that are not consistent with shareholder wealth maximization. For example, financial
managers may be reluctant or unwilling to take more than moderate risk if they perceive that taking
too much risk might jeopardize their job or reduce their personal wealth.

The Agency Problem

An important theme of corporate governance is to ensure the accountability of managers in an
organization through mechanisms that try to reduce or eliminate the principalagent problem;
however, when these mechanisms fail agency problems arise. Agency problems arise when
managers deviate from the goal of maximization of shareholder wealth by placing their personal
goals ahead of the goals of shareholders. These problems in turn give rise to agency costs. Agency
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costs are costs borne by shareholders due to the presence or avoidance of agency problems, and in
either case represent a loss of shareholder wealth. For example, shareholders incur agency costs
when managers fail to make the best investment decision or when managers have to be monitored
to ensure that the best investment decision is made, because either situation is likely to result in a
lower stock price.

2.2.3 Corporate Governance

Corporate governance refers to the rules, processes, and laws by which companies are operated,
controlled, and regulated. It defines the rights and responsibilities of the corporate participants
such as the shareholders, board of directors, officers and managers, and other stakeholders, as well
as the rules and procedures for making corporate decisions. A well-defined corporate governance
structure is intended to benefit all corporate stakeholders by ensuring that the firm is run in a lawful
and ethical fashion, in accordance with best practices, and subject to all corporate regulations.A
firms corporate governance is influenced by both internal factors such as the shareholders, board
of directors, and officers as well as external forces such as clients, creditors, suppliers, competitors,
and government regulations. The corporate organization, depicted in Figure 1.1 on page 8, helps
to shape a firms corporate governance structure. In particular, the stockholders elect a board of
directors, who in turn hire officers or managers to operate the firm in a manner consistent with the
goals, plans, and policies established and monitored by the board on behalf of the shareholders.
Individual versus Institutional Investors
To better understand the role that shareholders play in shaping a firms corporate governance, it is
helpful to differentiate between the two broad classes of ownersindividuals and institutions.
Generally, individual investors own relatively small quantities of shares and as a result do not
typically have sufficient means to directly influence a firms corporate governance. In order to
influence the firm, individual investors often find it necessary to act as a group by voting
collectively on corporate matters. The most important corporate matter individual investors vote
on is the election of the firms board of directors. The corporate boards first responsibility is to
the shareholders. The board not only sets policies that specify ethical practices and provide for the
protection of stakeholder interests, but it also monitors corporate decision making on behalf of
investors. Although they also benefit from the presence of the board of directors, institutional
investors have advantages over individual investors when it comes to influencing the corporate
governance of a firm. Institutional investors are investment professionals that are paid to manage
and hold large quantities of securities on behalf of individuals, businesses, and governments.
Institutional investors include banks, insurance companies, mutual funds, and pension funds.
Unlike individual investors, institutional investors often monitor and directly influence a firms
corporate governance by exerting pressure on management to perform or communicating their
concerns to the firms board. These large investors can also threaten to exercise their voting rights
or liquidate their holdings if the board does not respond positively to their concerns. Because
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individual and institutional investors share the same goal, individual investors benefit from the
shareholder activism of institutional investors.

2.2.4 Different Corporate Finance Decisions

Investment Decision
In general, each project's value will be estimated using a discounted cash flow (DCF) valuation,
and the opportunity with the highest value, as measured by the resultant net present value (NPV)
.This requires estimating the size and timing of all of the incremental cash flows resulting from
the project. These present values are then summed, and this sum net of the initial investment outlay
is the NPV.

The NPV is greatly affected by the discount rate. Thus, identifying the proper discount rate often
termed, the project "hurdle rate" is critical to choosing good projects and investments for the
firm. The hurdle rate is the minimum acceptable return on an investment i.e., the project
appropriate discount rate. The hurdle rate should reflect the riskiness of the investment, typically
measured by volatility of cash flows, and must take into account the project-relevant financing
mix. Managers use models such as the CAPM or the APT to estimate a discount rate appropriate
for a particular project, and use the weighted average cost of capital (WACC) to reflect the
financing mix selected. (A common error in choosing a discount rate for a project is to apply a
WACC that applies to the entire firm. Such an approach may not be appropriate where the risk of
a particular project differs markedly from that of the firm's existing portfolio of assets.)

In conjunction with NPV, there are several other measures used as (secondary) selection criteria
in corporate finance. These are visible from the DCF and include discounted payback period, IRR,
Modified IRR, equivalent annuity, capital efficiency, and ROI.

Financing Decision

Achieving the goals of corporate finance requires that any corporate investment be financed
appropriately. The sources of financing are, generically, capital self-generated by the firm and
capital from external funders, obtained by issuing new debt and equity (and hybrid- or convertible
securities). As above, since both hurdle rate and cash flows (and hence the riskiness of the firm)
will be affected, the financing mix will impact the valuation of the firm. There are two interrelated
considerations here:
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Management must identify the "optimal mix" of financing the capital structure that results
in maximum firm value but must also take other factors into account (trade-off theory). Financing
a project through debt results in a liability or obligation that must be serviced, thus entailing cash
flow implications independent of the project's degree of success. Equity financing is less risky with
respect to cash flow commitments, but results in a dilution of share ownership, control and
earnings. The cost of equity is also typically higher than the cost of debt - which is, additionally, a
deductible expense and so equity financing may result in an increased hurdle rate which may
offset any reduction in cash flow risk.

Management must attempt to match the long-term financing mix to the assets being
financed as closely as possible, in terms of both timing and cash flows. Managing any potential
asset liability mismatch or duration gap entails matching the assets and liabilities respectively
according to maturity pattern ("Cashflow matching") or duration ("immunization"); managing this
relationship in the short-term is a major function of working capital management.

Dividend policy

Dividend policy is concerned with financial policies regarding the payment of a cash dividend in
the present or paying an increased dividend at a later stage. Whether to issue dividends and what
amount, is determined mainly on the basis of the company's unappropriated profit (excess cash)
and influenced by the company's long-term earning power. When cash surplus exists and is not
needed by the firm, then management is expected to pay out some or all of those surplus earnings
in the form of cash dividends or to repurchase the company's stock through a share buyback
program.

If there are no NPV positive opportunities, i.e. projects where returns exceed the hurdle rate, and
excess cash surplus is not needed, then finance theory suggests management should return
some or all of the excess cash to shareholders as dividends. This is the general case, however there
are exceptions. For example, shareholders of a "growth stock", expect that the company will,
almost by definition, retain most of the excess cash surplus so as to fund future projects internally
to help increase the value of the firm.

Management must also choose the form of the dividend distribution, generally as cash dividends
or via a share buyback. Various factors may be taken into consideration: where shareholders must
pay tax on dividends, firms may elect to retain earnings or to perform a stock buyback, in both
cases increasing the value of shares outstanding. Alternatively, some companies will pay
"dividends" from stock rather than in cash. Financial theory suggests that the dividend policy
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should be set based upon the type of company and what management determines is the best use of
those dividend resources for the firm to its shareholders. As a general rule, shareholders of growth
companies would prefer managers to retain earnings and pay no dividends (use excess cash to
reinvest into the company's operations), whereas shareholders of value or secondary stocks would
prefer the management of these companies to payout surplus earnings in the form of cash dividends
when a positive return cannot be earned through the reinvestment of undistributed earnings. A
share buyback program may be accepted when the value of the stock is greater than the returns to
be realized from the reinvestment of undistributed profits. In all instances, the appropriate dividend
policy is usually directed by that which maximizes long-term shareholder value.

Working capital management

Working capital is the amount of funds which are necessary to an organization to continue its
ongoing business operations, until the firm is reimbursed through payments for the goods or
services it has delivered to its customers. Working capital is measured through the difference
between resources in cash or readily convertible into cash (Current Assets), and cash requirements
(Current Liabilities). As a result, capital resource allocations relating to working capital are always
current, i.e. short term. In addition to time horizon, working capital management differs from
capital budgeting in terms of discounting and profitability considerations; they are also
"reversible" to some extent.
The (short term) goals of working capital are therefore not approached on the same basis as (long
term) profitability, and working capital management applies different criteria in allocating
resources: the main considerations are (1) cash flow / liquidity and (2) profitability / return on
capital (of which cash flow is probably the most important).

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2.2.5 Valuation of a Corporate

Discounted Cash Flow Method

This method estimates the value of an asset based on its expected future cash flows, which are
discounted to the present (i.e., the present value). This concept of discounting future money is
commonly known as the time value of money. The size of the discount is based on an opportunity
cost of capital and it is expressed as a percentage or discount rate.
In finance theory, the amount of the opportunity cost is based on a relation between the risk and
return of some sort of investment. Classic economic theory maintains that people are rational and
averse to risk. They, therefore, need an incentive to accept risk. The incentive in finance comes in
the form of higher expected returns after buying a risky asset. In other words, the more risky the
investment, the more return investors want from that investment. For a valuation using the
discounted cash flow method, one first estimates the future cash flows from the investment and
then estimates a reasonable discount rate after considering the riskiness of those cash flows and
interest rates in the capital markets. Next, one makes a calculation to compute the present value of
the future cash flows.

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CHAPTER-03

Findings & Analysis

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3.1 Shareholder Analysis & Ownership Structure

Year
2010
2011
2012
2013
2014

Type of Shareholders & % of Shareholdings

Directors (%)
Institutional (%)
Public (%)
52.30
13.61
34.09
52.30
14.30
33.40
52.34
22.83
24.83
50.12
23.27
26.61
50.12
10.42
39.46

The management of the company is not fully separate from ownership.

The chairman hold 12.70% of shares of the firm.
Board of directors holds (50-53)% ownership of the firm.
The company communicate with its shareholders through annual general meeting.

52.3

52.34

Public (%)

2010

2011

26.61

23.27

24.83

10.42

14.3

22.83

33.4

39.46

50.12

Institutional (%)
50.12

Directors (%)

34.09

52.3

SHAREHOLDING STATUS

13.61

No. Of
Shareholders
16,861
13,846
11,794
12,029
9,875

2012

2013

2014

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3.2 Board of Director and Top Management Analysis

Year

No. of Board Members

No. of independent
directors(ID)

% ID to total
members

No. of Board
Meetinngs

2010
2011
2012
2013
2014

09
09
08
08
08

01
01
02
02
02

11%
11%
25%
25%
25%

07
06
07
13
12

3.3 Investment Portfolio Analysis

Year

2010
2011
2012
2013
2014

Current Assets

Non-Current Assets

2,305,163,660
2,886,387,943
3,054,920,138
3,230,991,441
3,034,958,636

Property, Plant &

Equipment
1,305,602,458
1,221,277,71
1,116,514,072
1,005,277,693
896,238,388

Total Assets

Capital workin-progress

1,836,914

3,610,766,118
4,107,665,653
4,171,434,210
4,236,269,134
3,933,033,938

Company has invested in different projects like Land, building, plant and machinery,
furniture, Motor Vehicle, Sundry Assets, Factory apparatus and Loose Tools, fixtures and
equipments, held for use in the production or supply of goods and services, or for
administrative purpose.

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3.4 Capital Structure Analysis

Year

Total Assets

Total
Liabilities

Current
Liabilities

Long Term
Liabilities

Total Equity

Short
Long
Weight Weight
Term
Term
of
of
Structure Structure Debt
Equity

2010 3,610,766,118 2,939,389,169 1,915,455,122 1,023,934,047 671,376,949 0.53

0.28

0.81

0.19

2011 4,107,665,653 3,432,052,132 2,418,739,804 1,013,312,325 675,613,521 0.59

0.25

0.84

0.16

2012 4,171,434,210 3,410,713,539 2,446,568,774 964,144,765

760,720,671 0.59

0.23

0.82

0.18

2013 4,236,269,134 3,414,149,978 2,503,653,618 910,496,360

822,119,156 0.59

0.22

0.81

0.19

2014 3,933,033,938 3,120,797,089 2,532,498,043 588,299,046

812,236,849 0.64

0.15

0.79

0.21

Company take short term loan from bank to meet the working capital Requirements, retire
the import document and Importation of raw material. It takes long term borrowings from
leasing company.

3.5 Dividend Policy Analysis

Year

Cash Dividend

2010
2011
2012
2013
2014

78,751,400
56,251,000
117,649,485
33,750,600
39,750,600

Stock Dividend

Dividend Payout
Ratio
58%
85%
83%
29%
34%

Meghna cement pays cash dividend in every year. In 2011 & 2012 it paid highest dividend
and later years it becomes low. However dividend payout ratio is good for the company.
Company did not pay any stock dividend during the years.

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3.6 Profitability Analysis

Year

ROA (%)

ROE (%)

Asset Turnover

Profit Margin (%)

EPS

2010
2011
2012
2013
2014
Average

1.39
1.62
3.39
2.78
2.56
2.35%

7.47
9.85
18.58
14.31
12.41
12.53%

1.58
1.48
1.59
1.18
0.95
1.36

0.88
1.09
2.14
2.35
2.69
1.83%

2.23
2.96
6.28
5.23
4.48
4.24

ROA measures the firms overall effectiveness in generating profits with its available
assets. Meghna cement earn average 2.35% return on assets during the years.
ROE measures the return earned on the owners investment in the firm. This ratio of this
company on average 12.53%
Total asset turnover indicates the efficiency with which the firm uses its assets to generate
sales. The company therefore turns an amount equal to its total assets on average 1.36 times
during the years.
The net profit margin measures of the firm success with respect to earnings on sales. The
company net profit margin on average 1.83% during the years.
The Company presents its basic earnings per share (EPS) data for its ordinary shares. Basic
EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares outstanding during the year.

3.7 Cash Flow Analysis

Year

Net operating cash flow

Free cash flow

2010
2011
2012
2013
2014

293,139,418
(451,169,652)
204,890,615
152,238,077
145,873,453

(90,725,521)
30,856,027
62,632,531
39,441,768
(44,681,652)

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FREE CASH FLOW

80,000,000
60,000,000
40,000,000
20,000,000
0
-20,000,000

2010

2011

2012

2013

2014

-40,000,000
-60,000,000
-80,000,000
-100,000,000

In 2010 & 2014 Meghna cement has negative free cash flow owing to acquisition of fixed
assets.
In 2011, net operating cash flow negative because the company made payment purchase of
raw materials. During the year, company recovered it by taking short term loan and shows
positive free cash flow.

3.8 Valuation and Market Performance Analysis

3.8.1 Market Performance

Year

2010
2011
2012
2013
2014

Total Market
Capitalization
No. of Share*average
market price
Tk. 225,004,000
Tk. 225,004,000
Tk. 225,004,000
Tk. 225,004,000
Tk. 225,004,000

Tobins Q
( total liability + total market
capitalization / total assets)
0.88
0.89
0.87
0.85
0.85

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3.8.2 Valuation under DCF method

Step 1: Cost of equity for 2014 using CAPM

Required (or expected) Return = RF Rate + (Market Return - RF Rate)*Beta

=10.40%+1.21(22.08-10.40) %
=24.53%

Step 2: Cost of debt

Interest rate of borrowing Kd= 15%
Tax rate= 27.5%
After tax cost of debt =15 %( 1-27.5%)
=10.88%

Step 3: Calculation of WACC

WACC= (We*Ke) + (Wd*Kd)
= [(0.21*24.53%) + (0.79*10.88%)]
=13.75%

Step 4: Calculation the growth rate (g)

g=ROE* RR
=12.41%*0.66
=8.19%

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CHAPTER-04

Conclusion

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Cement Industry relatively fast growing industry, is developing in pace with increasing building
and construction activities. Cement has long been used as a bonding agent to unite particles or to
cause one surface to adhere to another. The growth of cement market in Bangladesh was not in
satisfied. There was a critical competition in the market. In that critical time King Brand Cement
of Meghna Cement Mills Limited start its operation in the country. Availability and awareness of
this brand is very good. Most of the people prefer quality cement and they are willing to pay a little
bit higher prices for that. As King Brand Cement has a reputation about its quality it has a good
market response.

The company uses more debt in total capital structure and also paid yearly cash dividend. It has
potential growth rate in the cement industry. Average profitability ratio during the years become
satisfied its shareholders and stakeholders.

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CHAPTER-05

References

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1. Annual Reports 2010-2014

2. http://www.meghnacement.com/
3. http://www.dsebd.org/
4. Corporate Finance, (Stephen A. Ross, Randolph W. Westerfield, Jeffrey Jaffe) 10th edition.

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