Acknowledgment

Almighty ALLAH is the entire source of knowledge and wisdom endowed to mankind,
and his dearest Hazrat MUHAMMAD (PBUH) is a torch of guidance and knowledge for
humanity.

Everyone has a long list of individuals to whom he is indebted. We firstly, with humble
gratitude bow our heads before Almighty ALLAH for giving me strength, courage,
patience and inspiration, and enabling us to complete FM project. We acknowledge our
dependence with thanks and admiration on all my teachers for their co-operation. We feel
great pleasure and honors to express our gratitude from the citadel of hearts to our respected
and dignified instructor

Dr Imran Omer

Without his guidance it would have been difficult for us to achieve our objectives He
provided us, his in-depth approach of the subject.

And taught us a lot of financial analysis techniques which we have applied during this
project. His sympathetic behavior has an ever-lasting impression on the page of our
memory.

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 Abstract

In this financial management project, we took 3 listed companies (Aisha Still Mills, ADOS
Pakistan, AHTM) in Pakistan Stock Exchange from different sectors. We have calculated
its total return, average return, Standard deviation, coefficient of variation, beta, Sharpe
ratio and portfolio analysis. By applying formulas, we found that investing in AHTM is
suitable because it's return is high as compared to Aisha Textile Mills and ADOS Pakistan.
Portfolio 1 could be more fruitful as compared to portfolio 2. Even though portfolio 1 risk
is high, but its return is also high 10% as compared to portfolio 2 whose return is only
1.5%. So, we must choose Ahmad Hassan Textile Mills

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 Table of Content

Contents
Introduction ............................................................................................................................................ 4
1. Aisha Steel Mills................................................................................................................4
2. Ahmad Hussain Textile Mill ....................................................................................................... 5
3. ADOS Pakistan ........................................................................................................................... 6
A. Objective: .......................................................................................................................................... 7
B. Analysis ............................................................................................................................................... 8
Risk & Return of Individual Stock ...................................................................................... 10
Risk & Return Of Portfolio. ............................................................................................... 11
Calculations .......................................................................................................................................... 13
References ............................................................................................................................................ 15

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 Introduction
1. Aisha Steel Mills

Aisha Steel Mills Limited (ASML) is a Group Company of Arif Habib. ASML was
incorporated in 2005 and started its commercial operation in 2012 and its one of the largest
manufacturers of Flat Rolled Steel – Cold Rolled and Hot Dipped Galvanized coils located
in Port Qasim, Karachi- the most suitable plant location for export market.

It is a state-of-the-art Cold Rolling and Hot dipped Galvanized Rolling Complex with a
capacity of 700,000 metric tons per year

ASML is one of the largest private sector investments in the value added flat-rolled steel
industry in Pakistan.

It is the only Cold Rolled Coil (CRC) and Galvanized Coil (GI) manufacturer which is
using brand new Japanese, Germany and Austrian machinery for CRC, and SMS
equipment for GI production, ensuring best quality of CRC & GI for its customer

Vision: To be a world class manufacturer in Flat-Rolled Steel Industry.

Mission: To become an efficient producer of flat steel while serving interests of all
stakeholders

Core Values

Our People

We are an equal opportunity employer. Discrimination on any grounds is fundamentally

unacceptable.

Health, Safety & Environment

The Company strongly endorses and emphasizes on managing resources ensuring safety
within and beyond its own facilities. ASML stands committed to carry out its business in
a sustainable manner to promote preservation of the environment.

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Regulatory Compliance & Corporate Governance

The Company remains committed to high standards of corporate governance, while

adhering to the applicable laws and regulations.

Integrity

Key success for any business fosters in a transparent environment based on ethical values.

Our values are based on highest integrity, which determines the way we work, leading to
our well-founded reputation.

Excellence & Efficiency

Efficiencies, appropriate risk management measures and pricing strategies should enable
profitable operations and good shareholder returns in all market scenarios.

At ASML, our conviction for excellence emerges with a passion to provide our customers
with Flat Rolled Steel products comparable with international standards.

2. Ahmad Hussain Textile Mill

Hussain Textiles has the capability to handle large quantities of textile items with assurance
of constant availability of the same specification on regular basis. We have the skills &
resources to manage the quantity needs of varying levels including sizeable changes. We
can assure quality control and regular supply on time because of our vertical intergraded
structure.

Hussain Textiles specializes in wide range of bedding products ranging from complete bed
ensembles to blankets & bed sheets. Our focus is to ensure that our customers get most
value for their money and therefore we offer beautiful vibrant designs that are alluring and
affordable. Our innovative and creative patterns can brighten up any home. For our

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products we use the finest quality fabric made from both 100% cotton & cotton blends to
offer the desired combination of luxury and comfort.

Our Company logo is our identity in the field of Home Textile Business, to provide the
best quality Home Textile Products to our valued customers. The outstanding quality
products produced by us give our customers great value and satisfaction.

3. ADOS Pakistan

ADOS Pakistan Limited is an enterprise based in Pakistan. Its main office is in Islamabad.
The company operates in the Oil and Gas Field Machinery and Equipment Manufacturing
industry. It was first established on 1986. There are currently 52 (2019) people employed
by ADOS Pakistan Limited. From the latest financial highlights, ADOS Pakistan Limited
reported a net sales revenue increase of 77.75% in Q3C2020. A negative growth of 7.88%
was recorded in its total assets. ADOS Pakistan Limited’s net profit margin increased by
87.33% in 2020.

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A. Objective:

1. How to calculate;
a. Return of a single stock.

I. Find the initial cost of the investment.

II. Find total amount of dividends or interest paid during investment period.
III. Find the closing sales price of the investment.
IV. Add sum of dividends and/or interest to the closing price.
V. Divide this number by the initial investment cost and subtract 1.

b. Return of a portfolio of financial securities.

I. To calculate the expected return of a portfolio, you need to know the

expected return and weight of each asset in a portfolio.
II. The figure is found by multiplying each asset's weight with its expected return, and
then adding up all those figures at the end.

c. Risk of a single stock.

The market risk is calculated by multiplying beta by standard deviation of the Sensex
which equals 4.39% (4.89% x 0.9). The third and final step is to calculate the unsystematic
or internal risk by subtracting the market risk from the total risk.

d. Risk of a portfolio of financial securities.

To calculate the risk of a two-stock portfolio, first take the square of the weight of asset A
and multiply it by square of standard deviation of asset A. Repeat the calculation for asset
B.

2. How to apply the Sharpe Ratio for portfolio construction?

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 i. Subtract the risk-free rate from the return of the portfolio. The risk free rate could
be a U.S. Treasury rate or yield, such as the one-year or two-year Treasury yield.
ii. Divide the result by the standard deviation of the portfolio's excess return.

3. How to construct an optimal portfolio?

i. In order to determine the cutoff point (Table 20), first let us rank the companies based on the
decreasing value of the decreasing order of (Ri-Rf)/βi
ii. The companies are rearranged according to their ranks with decreasing excess return to beta
ratios
iii. value for each fund is calculated using the formula.

4. How to maximize returns by minimizing the risk associated with the equity market.

If we need higher returns, including some potential for growth, then we will need to look
for assets that provide a comfortable balance of high return and low risk. Low risk means
that there is a reduced chance of losing principal, but one that may be offset by a higher
return than we will get from investments that are completely risk-free.

Fortunately, there are more than a few worthwhile investments that qualify as high return
and low risk and we can get even higher returns on some of these investments if you hold
them in a Roth IRA. Not only will that enable investments to grow on a tax-deferred basis,
but when the time comes to begin making withdrawals, receive them on a tax-free basis.

• Dividend-Paying Stocks
• Preferred Stocks
• Peer-to-Peer Lending
• Annuities
• Real Estate Investment Trusts (REITs)

B. Analysis

1. Three companies listed in PSX

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 I. Ahmad Hassan Textile Milles Limited
II. Aisha Steel Milles
III. ADOS Pakistan Limited

2. Give the rationale for the selection of each company from three different sectors.

i. Textile sector

Textile is a term that comes from “texture” which is a Latin word that means “to weave”.
A cloth is manufactured by weaving or knitting forms a fabric.

The textile industry is often considered a backbone of the Islamic Republic of Pakistan’s
economy. Pakistan’s textile Industry is the fourth Largest Cotton Producer, sixth largest
importer of raw cotton and the third largest Consumer.

ii. Steel Miles

Iron ore and steel industry is one of the basic industries of the country and plays an important
role in strengthening the economy. The role of iron and steel industry in India is very important
for the development of the country. Iron and steel are among the most important components
required for the infrastructure development in the country.

iii. Oil & Gas Sector

Pakistan economy is growing steadily. This growth demands higher energy consumption
and consequently putting high pressure on countries economy. Pakistan mainly depends
upon oil and gas resources to fulfil energy requirements. Indigenous resources of Oil are
not enough to quench energy thirst of the growing economy. As a result, Pakistan has to
import large quantity of oil and oil-based products from Middle East countries. Gas
reserves in the country are enough for current gas requirements. So natural gas is playing
a key role in power sector. Currently in oil upstream and downstream sector there are some
local and international companies involved and government of Pakistan is establishing such
policies that it can attract more international investors in this sector but the rapid pace of

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change, high degree of uncertainty and unstable political situation of the country present
significant challenges and risk to foreign investment .Objective of this paper to highlight
the present status of petroleum industry in Pakistan and its future prospects keeping in view
the internal fluid situation and geopolitical condition of the region.

3. Specify which companies would have the lowest and highest risk accordingly and
give rationale of it

✓ If we compare the companies given above, we can see that Ahmad Hassan Textile
Mills Standard Deviation is low so investing in AHTM is less risky as compared to
Aisha Steel Mills and ADOS Pakistan because their Standard deviation is high.
✓ Investing in Aisha Still Mills and ADOS Pakistan is risky because their share price
is fluctuating and that’s why return will also fluctuate so the investor might face
loss.
✓ In my opinion investing in AHTM is preferable because their share price is stable
in the market and that’s the reason the return will be high.

4. Collect closing stock prices of the last 3 months of all three selected companies and
calculate the return and risk of all three selected companies individually.
Risk & Return of Individual Stock

Aisha Steel Mill

Share
Months P Return (r-R) (r-R)*2
Jan-20 9.16
Feb-20 8.82 -0.03712 -0.04399 0.001935
Mar-20 7.6 -0.13832 -0.14519 0.021081
Apr-20 9.09 0.196053 0.189182 0.03579
0.378363 0.058806

Expected Return 0.006871 1%

Risk
Variance 0.029403
S.D 0.171473 17%

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 Ahmad Hassan Textile Mill
Share
Months P Return (r-R) (r-R)*2
Jan-20 49.61
Feb-20 50 0.007861 -0.00793 6.28951E-05
Mar-20 51.5 0.03 0.014208 0.000201868
Apr-20 51.99 0.009515 -0.00628 3.94057E-05
0.028416 0.000304169

Expected Return 0.015792 2%

Risk
Variance 0.000152
S.D 0.012332 1%

ADOS Pakistan
Share
Months P Return (r-R) (r-R)*2
Jan-20 25.5
Feb-20 22 -0.13725 0.039351 0.001549
Mar-20 12.85 -0.41591 -0.2393 0.057266
Apr-20 13.15 0.023346 0.199952 0.039981
0.478606 0.098795

Expected Return -0.17661 18%

Risk
Variance 0.049398
S.D 0.222256 22%

5. Develop two different equally weighted portfolios (containing two companies)

for the risk-averse investor from the above three companies.
Portfolio no 1
Ahmad Hussain textile & ADOS Pakistan
Return
Return = Weight * Expected return + Weight * Expected return

Return = 10

Risk
Risk = 1.24

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 Portfolio no 2
Ahmad Hussain textile & Aisha Steel Mill
Return
Return = Weight * Expected return + Weight * Expected return

Return = 1.5

Risk
Risk = 0.7

6. Identify an optimal portfolio from the above two equally weighted portfolios for the
risk-averse investor.

✓ The return of portfolio 1 is 10% and its risk is 1.24. And the return of portfolio 2 is 1.5%
and its risk is 0.7.
✓ In portfolio 1 we took portfolio of AHTM and ADOS Pakistan whereas in portfolio 2 we
too portfolio of AHTM and Aisha Steel Mill.
✓ Portfolio 1 could be more fruitful as compared to portfolio 2.
✓ Even though portfolio 1 is risky, but its return is high 10% as compared to portfolio 2
whose return is only 1.5%.

7. Explain the analysis and give suggestions to the risk-averse investor.

From this project we conclude that:

✓ Ahmad Hassan Textile Mills Standard Deviation is low and its return is 10% so investing
in AHTM is less risky.
✓ Investing in Aisha Still Mills and ADOS Pakistan is risky because the return is 1.5% and
the share price is fluctuating and that’s why return will also fluctuate so the investor
might face loss.
✓ In my opinion investing in AHTM is preferable because their share price is stable in the
market and that’s the reason the return will be high.
✓ The return of portfolio 1 is 10% and its risk is 1.24. And the return of portfolio 2 is 1.5%
and its risk is 0.7.
✓ Portfolio 1 could be more fruitful as compared to portfolio 2.

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 ✓ Even though portfolio 1 risk is high, but its return is also high 10% as compared to
portfolio 2 whose return is only 1.5%

Calculations

∑n ̅ ̅
i=1(kAi − KA ) (kBi − KB )
• Covariance = 𝐶𝑜𝑣𝐴𝐵 = n−1

Portfolio 01
∑ni=1(0.028416) (0.478606)
2−1
= 0.0136
Portfolio 02
∑ni=1(0.028416) (0.378363)
2−1
= 0.0108
𝐶𝑜𝑣𝐴𝐵
• Correlation Coefficient = 𝑟𝐴𝐵 =
δ𝐴 δ𝐵

Portfolio 01
0.0136
𝑟𝐴𝐵 = 0.22

= 0.061818
Portfolio 02
0.0108
𝑟𝐴𝐵 = 0.17

= 0.058871

δ
• Coefficient of Variation = CV = ̅
K

Portfolio 01
1.24
CV = 10

= 0.124
Portfolio 02
0.7
CV =
1.5

= 0.466667

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• Sharpe Ratio = (Mean portfolio return − Risk-free rate)/Standard deviation of
portfolio return

Portfolio 01
Sharpe Ratio = (10 – 9.5)/ 1.24

= 2.33871

Portfolio 02
Sharpe Ratio = (1.5− 12.44)/ 0.7

= -16.2714

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 References

https://www.investing.com/equities/aisha-steel-mills-ltd

www.psx.com.pk

http://www.scstrade.com/MarketStatistics/MS_HistoricalPrices.aspx

http://www.ksestocks.com/QuotationsData

https://finance.yahoo.com/

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