INTRODUCTION

This term paper is prepared with an intention to meet the partial requirement of the course
Investment Analysis (F-). I have chosen Square Textiles, ASKML & HR Textiles Ltd. for this
purpose. Then I have figured out the intrinsic value of these organizations through constant growth
model and matched it with the market price of its shares. Later on, I have discussed and internally
compared the reasons for which the market price of these organizations shares are higher than
our calculated intrinsic value.

OBJECTIVE OF THE STUDY

The objective of this term paper is to get familiarize with the real market situation and compare it
with the theoretical concepts. The main objective of this term paper is to evaluate the valuation
of the stocks of Square Textiles, ASKML and HR Textiles Ltd. In addition, the term paper seeks
to achieve the following objectives:

1. To find out the intrinsic value of the shares of the organizations.

2. To compare the intrinsic value with the market price of the shares of the organizations.
3. To find out the reasons behind higher market price in comparison to the intrinsic value.

METHODOLOGY

Mostly we have collected data from secondary sources to conduct the analysis of this term paper.

Some of the secondary sources that we have used is give below:

1. Annual Report of Square Textiles for the year 2009 and 2012.

2. Annual Report of ASKML for the year 2009, 2012 and 2013.

3. Annual Report of HR Textiles for the year 2009 and 2012.

4. Different articles and journals.

Different websites which includes the Dhaka Stock Exchange (DSE) and Stock Bangladesh website
SCOPE OF THE STUDY

1. We were able to know the market price of the shares of Square Textiles, ASKML and HR

Textiles Ltd.

2. We were able to know the amount of dividends that Square Textiles, ASKML and HR
Textiles Ltd. share with their stockholders.
3. We were able to know how to evaluate the intrinsic value in real life of large companies
like Square Textiles, ASKML and HR Textiles Ltd.
4. We were able to know the reasons behind the higher market price Square Textiles, ASKML
and HR Textiles Ltd. in comparison to our calculated intrinsic value.
We were able to know different rules and regulations of Dhaka Stock Exchange.

LIMITATIONS

1. The insufficiency of information is the main constraint of the study.

2. Inexperience and time limitations created some obstacles.

Regular class schedule, assignments and examinations of other courses created some problems.

BACKGROUND OF THE COMPANIES

SQUARE TEXTILES LTD.

Square Textiles Ltd was established as a public limited company in 1994 as a group company in

Square group with a business line of manufacturing and marketing of yarn. The company started

its operation on 1997 and was listed at both Dhaka Stock Exchange and in Chittagong Stock

Exchange in 2004. At the end of 2009, paid-up capital of the company was TK.705.84 million

with 70,584,053 shares outstanding. The company is very profitable and doing very good in terms

of share price also. Dividend payout in both cash and bonus share has also been very consistent

through the last few years. Square Textiles Ltd got Oeko-Tex standard 100 and ISO-9002
certification in 2000. At the end of 2009, the production capacity of the company stands at

11,582,899 Kg Ring yarn and 12,329,688 Kg of O/E yarn

APEX SPINNING & KNITTING MILLS LTD.

APEX Spinning and Knitting Mills Ltd. (ASKML) was incorporated in 1990 as a public limited

company and listed in Dhaka Stock Exchange and in Chittagong Stock Exchange. The company

was initially formed for processing and export of knit garments but now ASKML is a leading

manufacturer and exporter of all kinds of textiles knitting garments.

ASKML is 100% export oriented, vertically integrated knitting, dyeing, finishing and garment

manufacturing company with production capacity of about 15 million pieces of garments per

year. ASKML exports to North America, EU countries and to South East Asia.

ASKML has a desirable reputation as an international garment manufacturer based on a simple but

unwavering philosophy of producing high quality products. All fabrics produced in ASKML's

own factory are tested in its own laboratory for wet & dry-rub fastness, wash fastness,

dimensional stability, required fabric density, yarn count and composition before making finished

garments.

ASKML has permission to put OKO Tex label on all its garments and currently in the middle of

attaining ISO 9001:2000 certification from the accreditation body of UKAS.

HR TEXTILES LTD.

Pride Group is among the large Bangladesh private sector manufacturing based enterprises, and

H.R. Textile is one of the sister concern of Pride group. H.R. Textile Mills Limited is a vertical

public limited company, engaged in manufacturing of knitwear products. H.R. Textile Mills

Limited is a Lycra assured factory. It is one of the pioneering composite knitwear factories in
Bangladesh. It has a complete North American and European state-of-the-art setup, thoroughly

engineered and is capable of manufacturing a whole range of knit fabrics and garments.

The group started modestly in 1960 as Dacca Textile Ltd and with prudent entrepreneurship of its

Founder Chairman Alhaz Md. Halimur Rahman. He started Dacca Textile Ltd as a several types

of semi-mechanized industry that means larger types of cottage industry. That time their activities

were only printing Sarees. In 1986, they started their journey with dyeing and design Sarees for

local market. In 1990, they bought knitting machine. Today H.R. Textile is a renowned vertical

textile setup engaged in the manufacture of knitwear products with a goal to export to the European

Union, the USA and Canada. The organization is also engaged in production and marketing of

sarees, kids wear, ladies wear, home furnishing and other textiles products through a chain retail

outlets spread all over Bangladesh. It has a total employee of around 5000 people. Name of the

current chairman of H.R. Textiles is Dr. Muhammad Abdul Moyeen.

VALUATION & ANALYSIS OF THE SHARES OF THE COMPANIES

In this part, we have calculated the intrinsic value of Square Textiles, ASKML and HR Textiles Ltd.

Afterwards, we have calculated the market price by averaging the market price of these companies for last

1 year. Lastly, we discussed about the possible reasons behind the higher market price of these companies

in comparison to our calculated intrinsic value. We have also compared some of the reasons with our

selected companies as assessment between companies of same industry is more viable and to make our

report more authentic.

Constant values

Market Return
(Rm)

Formula P0 P1 Calculation Value

Rm = {(P1/P0) - 4058.65986 4684.07065 Rm = {(4684.07065/4058.65986) -1} Rm =

1} 15.41%

P0 = Stock Index of

P1 = Stock Index of

Comparison
Intrinsic Value
Growth Rate (g)

Formula PV (2009 FV (2013 Calculation Value

Dividend) Dividend)
FV = PV TK TK 1.85 = i = 3%
(1+i)5 1.6 1.8 1.60(1+i)5
0 5
 Required Rate of
Return (Ke)
Formula Rf Rm Calculation Value

Ke = Rf + (Rm-Rf) 5 15.41 1.09 Ke = 0.05 + (0.1541 0.05) * Ke =

* % % 1.09 16.35%

Intrinsic
Value (V)

Formula D0 (2013 Dividend) g K Calculation Value

e
V = [{D0(1+g)}/(Ke- TK 1.85 3% 16.35% V = [{1.85 (1+0.03)}/(0.1635 V = TK
g)] 0.03)] 14.29