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AN ASSIGNMENT

ON

FINANCIAL MANAGEMENT
C-620
Calculating Beta and Standard Deviation for a DSE Listed Company
A Case Study on Advance Chemical Industries (ACI) Limited

SUBMITTED TO

Mr. Md. Shariful Islam


Fellow (Assistant Professor)
Institute of Business Administration
University of Rajshahi

SUBMITTED BY

Debasis Dutta
Roll no. B-030003
Batch-03; Semester-1st
Institute of Business Administration
University of Rajshahi

Date of Submission: 07 December, 2010

Investment Analysis into Advanced Chemical Industries (ACI) Limited Page 1


A CASE STUDY ON ACI LTD.

Advanced Chemical Industries (ACI) Limited


Address: ACI Centre, 245 Tejgaon I/A Dhaka 1208
Industry: Consumer Products / FMCG

Company Profile1

Advanced Chemical Industries (ACI) Limited is one of the leading conglomerates in


Bangladesh, with a multinational heritage. ACI was established as the subsidiary of Imperial
Chemical Industries (ICI) in the then East Pakistan in 1968. After independence the company has
been incorporated in Bangladesh on the 24th of January 1973 as ICI Bangladesh Manufacturers
Limited and also as Public Limited Company. This Company also obtained listing with Dhaka
Stock Exchange on 28 December, 1976 and its first trading of shares took place on 9 March,
1994. Later on 5 May, 1992, ICI plc divested 70% of its shareholding to local management.
Subsequently the company was registered in the name of Advanced Chemical Industries
Limited. Listing with Chittagong Stock Exchange was made on 22 October 1995.

Basic Information:2

Advanced Chemical Industries (ACI) has an authorized capital of BDT 500.0 mn and the paid up
capital is BDT 194.0 mn. The face value of the company’s stock is BDT 10.0. The lot market lot
is consisting of 50 units. ACI is a Pharmaceuticals & Chemicals concerned business. The
company is publicly owned where Sponsor/Director occupies 36.77, Govt. possesses 0,
Institute holds 30.54 and Public have 32.69 of Share Percentage. The company has issued right at
1997 only and it was 1 right per share.

Market information2

The last trade was at BDT 376.00 on Dec 6, 2010. The market condition of ACI was at boom at
January and February of this year now a day it is going more or less stable. The trade range for
December 06, 2010 was BDT 372.0 - 380.0. The following figure could reveal the trend of
market price of ACI from February.
3

1
www.aci-bd.com
2
www.dsebd.org
3
www.stockbangladesh.com

Investment Analysis into Advanced Chemical Industries (ACI) Limited Page 2


In response to a DSE query, the Company has informed that there is no undisclosed price
sensitive information of the Company for such unusual price hike at February.

Interim Financial Performance: 20104

Unaudited / Audited
Particulars Q1 Q2 Q3 Q4
(3 months) (6 Months) (9 Months) (12 Months)
Turn Over in BDT* (mn) 3886.1 7030.84 10300.47 n/a
Net Profit After Tax in BDT *(mn)
76.43 45.35 114.16 n/a
(Continuing Operations)
Basic EPS in BDT*
3.42 2.34 5.88 n/a
(Based on continuing operations)
Net Asset Value(NAV) per share in BDT 0.00 113.07 116.62 n/a

The current Price Earning Ratio (P/E) Based on continuing operation of ACI is 48.1. But the
Price Earning Ratio (P/E) Based on Last audited financial is 12.31.
Yearly Financial Performance
Year Basic EPS Net Asset Value Per Share Net Profit After Tax (mn)
2008 57.69 154.85 932.91
2009 30.64 151.62 594.48
All figures in BDT (Bangladeshi Taka)

Price sensitive information:

The Board of Directors has recommended cash dividend @ 105% (i.e. Tk. 10.50 per share of Tk.
10.00 each) for the year 2009 on June 16, 2010. The company has also reported consolidated net
profit of Tk. 594.00 mn. with consolidated EPS of Tk. 30.64 for the year on 31.12.09 as against
Tk. 918.00 mn. and Tk. 47.30 respectively as on 31.12.08. The Company has also reported net
profit of Tk. 987.00 mn. EPS of Tk. 50. 85, and Net Asset Value per share of Tk. 156.16.
As per un-audited quarterly accounts for the 3rd quarter ended on 30th September 2010 (July'10
to Sep'10), the company has reported consolidated profit after tax and minority interest of Tk.
68.81 million with consolidated EPS of Tk. 3.55 as against Tk. 14.30 million (with capital gain
on sale of shares of Tk. 63.51 million) and Tk. 0.74 respectively for the same period of the
previous year. Whereas consolidated profit after tax and minority interest was Tk. 114.16 million
with consolidated EPS of Tk. 5.88 for the period of 9 months (Jan'10 to Sep'10) ended on
30.09.10 as against Tk. 437.40 million (with capital gain on sale of shares of Tk. 437.40 million)
and Tk. 22.54 respectively for the same period of the previous year. Again, as per un-audited
quarterly accounts for the 3rd quarter ended on 30th September 2010 (July'10 to Sep'10), the
company has also reported profit after tax of Tk. 151.32 million with EPS of Tk. 7.80 as against
Tk. 142.60 million (with capital gain on sale of shares of Tk. 74.69 million) and Tk. 7.35
respectively for the same period of the previous year. Whereas profit after tax of the company

4
www.dsebd.org

Investment Analysis into Advanced Chemical Industries (ACI) Limited Page 3


was Tk. 435.74 million with EPS of Tk. 22.46 for the period of 9 months (Jan' 10 to Sep' 10)
ended on 30.09.10 as against Tk. 655.18 million (with capital gain on sale of shares of Tk.
512.80 million) and Tk. 33.77 respectively for the same period of the previous year.

The company had informed on November 02, 2010 that the Board of Directors of the company
has approved the formation of a new subsidiary in the name of 'ACI Edible Oils' Limited. The
new subsidiary company will be involved in processing, marketing and selling of quality edible
oils already being marketed by ACI in the brand name 'Pure'.
The Board of Directors in its Meeting on 20 April 2010 approved the proposal to set-up second
plant of ACI Salt at an approximate cost of Taka 500 million. The plant will provide additional
15 MT finished salt per hour.

Calculation of Beta coefficient and Standard deviation of ACI5


Market Index Stock Price 2
XY X² (Y - Y)
X Y
8,771.41 377.10 3,307,698.71 76,937,633.39 253.45
8,838.10 382.20 3,377,921.82 78,112,011.61 117.07
8,721.09 392.50 3,423,027.83 76,057,410.79 0.27
8,443.35 381.60 3,221,982.36 71,290,159.22 130.42
8,187.33 378.50 3,098,904.41 67,032,372.53 210.83
7,986.92 383.70 3,064,581.20 63,790,891.09 86.86
7,937.05 402.20 3,192,281.51 62,996,762.70 84.27
7,615.37 382.50 2,912,879.03 57,993,860.24 110.67
7,492.83 386.70 2,897,477.36 56,142,501.41 39.94
7,480.34 393.40 2,942,765.76 55,955,486.52 0.14
7,097.38 392.20 2,783,592.44 50,372,802.86 0.67
6,904.08 396.30 2,736,086.90 47,666,320.65 10.76
6,797.47 395.30 2,687,039.89 46,205,598.40 5.20
6,807.24 394.10 2,682,733.28 46,338,516.42 1.17
6,774.87 397.90 2,695,720.77 45,898,863.52 23.81
6,653.29 399.60 2,658,654.68 44,266,267.82 43.30
6,743.21 400.00 2,697,284.00 45,470,881.10 48.72
6,672.97 404.70 2,700,550.96 44,528,528.62 136.42
6,575.59 405.80 2,668,374.42 43,238,383.85 163.33
6,342.76 414.00 2,625,902.64 40,230,604.42 440.16
58,375,459.9 1,120,525,857.1
Total 148,842.65 7,860.30 1,907.47
7 5

N ∑XY - (∑X)( ∑Y) 20 × 58,375,459 .97 - 148,842.65 × 7,860.3


β= β= = (0.0095)
N ∑X − (∑X )
2 2
20 ×1,120,525, 857.15 - (148,842.6 5) 2

∑(Y - Y)
2

σY = 19074 .47
N -1
σY = =10 .02
19
5
www.stockbangladesh.com

Investment Analysis into Advanced Chemical Industries (ACI) Limited Page 4


Beta Coefficient of ACI is (0.0095) and Standard Deviation is 10.02%

Comment: The Beta and Standard Deviation calculated in case of ACI is very much congruent
to each other. The standard deviation of ACI is showing that the firm is less risky and only a
level of 10.02%, whether the firms systematic risk which is measured by ß is also showing a
negative correlation with market but at a substantially low rate. This is indicating that the firm is
behaving negatively with the market movement.

As a risk averse investor one should invest in this firm, and if so the investment decision is
highly motivated through low risk level of the firm.

As a speculator one will not invest in these sorts of stock as the market of ACI is more or less
stable and somewhere it is going down. In the earlier stages we have mentioned a lot of
information which help guide ones investing decisions. There are some sorts of price sensitive
decisions, which could turn the market of ACI again at a hike as January 2010. As the firm is a
‘A’ category firm and declaring regular dividend and arranging regular AGM the firm is
undoubtedly doing well. But having the trend of downward EPS one may become confused, but
if we look at the interim financial report we could see an upward trending of turnover. The
unaudited P/E of this period of ACI is beyond the limit of SEC and it is around to 48, which is
seems to be a difficulty to borrow, but it is based on only quarterly data. As a long term investor
one can invest into it. As the firm has declared the dividend this year so there is no way to be
influenced by dividend declaration. But as the price of ACI is much lower someone can invest
into it.

Investment Analysis into Advanced Chemical Industries (ACI) Limited Page 5


Normal P-P Plot of Regression Standardized Residual
Dependent Variable: VAR00001
1.00

.75
Expected Cum Prob

.50

.25

0.00
0.00 .25 .50 .75 1.00

Observed Cum Prob

Investment Analysis into Advanced Chemical Industries (ACI) Limited Page 6