Bangladesh Submarine Cable

Investment summary
 Internet Penetration is increasing in Bangladesh
Year Internet User(000) Population (%) Penetration Country Internet Penetration (%)

Bangladesh 60.7%
2000 100 134,824 0.10% India 50.0%
2007 450 137,494 0.30% Nepal 55.6%
2009 556 156,051 0.40%
Indonesia 64.1%
2010 617 158,066 0.40%
Japan 93.5%
2011 5,502 158,571 3.50%
Vietnam 70.4%
2012 8,054 161,084 5.00%
South Korea 95.9%
2015 53,941 168,958 31.90%
Malaysia 81.4%
2020 111,134 164,689 60.70%

Source: Internet World Stat, IMF, BTRC

Digital Transformation in Bangladesh

Bangladesh
31.9% 61% 5% 37% 136 1600 Import every year
GBPS GBPS around USD 240
Million PC and
USD 860 Million
FY’15 Oct’20 FY’15 FY’20 FY’15 FY’20 phone devices.
Internet Penetration Smart phone Penetration Bandwidth Consumption

350 1637
Crore Crore

Jan’15 Sep’20 2.5 Million 39 Million

MFS Daily Avg. Transaction Social Media User Expanding internet based Media
Future core digital sector

• Financial services
• Education
• Jobs & Skills
• Logistics
• Retail
• Agriculture
• Health Care
BSCCL’s revenue increased 4.5 times in last five years

BSCCL REVENUE and REVENUE GROWTH

3,000.00 80.0%

67.6%
2,500.00 60.0%
2,499

39.2%
2,000.00 40.0%
35.5% 1,956
27.76%
1,500.00 20.0%
14.4% 1,405

1,000.00 0.0%
1,037

500.00 619 -20.0%

541
-28.3%
- -40.0%
FY15 FY16 FY17 FY18 FY19 FY20

Revenue (BDT In Mn) Revenue Growth

BSCCL’s Bandwidth sales increased by 32.41 times in Last
5 Years.

Bandwidth Sales
Bandwidth Share Market Share 1200 350%

1000 294% 1,102 300%

250%
800
200%
598, 35% 600 686
150%
1102, 65% 400 87%
446 100%
81%
200 49% 54% 61% 50%
247
34 132
0 0%
FY15 FY16 FY17 FY18 FY19 FY20
BSCCL ITC
Bandwidth Sales (Gbps) Volume Growth
BSCCL’s average bandwidth selling price declined by 85%
in Last 5 Years
25.00 0.0%
Bandwidth Price
-10.0%
20.00 -15%
19.30 -19% -20.0%
-21.6%
-27% -26%
15.00
-30.0%

-40.0%
10.00

-50.0%
7.47
5.00
5.47 -60.0%
-61% 4.05 3.45
2.795
- -70.0%
FY15 FY16 FY17 FY18 FY19 FY20

Avg. Selling Price Per GBPS (In Mn) Price Growth

There is no change in cost of operation Direct cost of operation
in last three financial years.
612.77 621 604

Core operating cost increased by 11%

(avg.) in last three FY years. 354.05
310.54
261.38
235.92
188.77
Provision for bad & doubtful 162.72

receivables increase to 14.9 Crore

FY’20. FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Operating cost (Except provision for

Provision for bad & doubtful Receivables receivables)
200.00
149
150.00

100.00 76
369.64 409.26 428.05
50.00 26.18 35.76 27.22 282.27
23.68 23.80 13.43 9.36
132.67 185.92 182.31 155.25
117.85
-
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Operating expenses (Except provision for receivables)

Profit Margins are improving as there is no additional cost except
fixed depreciation for incremental sales

Gross Profit & Gross Profit Margin Operating Profit & Operating Profit Margin
52.7%
2,000.00 75.8% 80.0% 1,400.00 60.0%

1,800.00 1,894.48 70.0%

68.3% 1,200.00
65.8% 50.0%
1,600.00
60.0%
1,400.00 56.4% 1,000.00 43.4% 1,317.73
40.0%
51.7% 49.8% 50.0%
1,200.00 1,334.91
800.00 35.2%
849.39
1,000.00 40.0% 30.0%
28.1%
800.00 600.00
30.0% 23.2%
792.27 20.0%
600.00 682.68
20.0% 400.00
400.00 13.1% 364.64 395.40
10.0% 10.0%
200.00 200.00
279.30 308.11
70.81 143.50
- 0.0%
- 0.0%
FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20

Gross profit (BDT in Mn) Gross Profit Margin Operating Profit (BDT in Mn) Operating Profit Margin
Net Profit increased by 63% in FY’20
Net profit margin increased to 44% Q1’FY21

Net Profit Quarterly Net Profit Margin

1,200.00 800% 60.00%

700% 700%
1,000.00
600% 50.00%

500% 44.41%
800.00
40.00%
400%
33.69%
600.00 300%
30.00%
200%
400.00
92% 63% 100% 20.00%
28% 0%
200.00 -28% -77% 10.00%
-100%
129.06 165.53 318.23 73.26 585.76 956.00
- -200%
0.00% 1.35%
FY15 FY16 FY17 FY18 FY19 FY20
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Net Profit (BDT in Mn) Net Profit Growth FY21 FY20 FY19 FY18 FY17 FY16 FY15
Return on Equity increased to 16.1%

ROE
18.0%
16.1%
16.0%

14.0%

12.0%
10.1%
10.0%
7.9%
8.0%

6.0%
4.1%
3.5%
4.0%

2.0% 1.5%

0.0%
FY15 FY16 FY17 FY18 FY19 FY20

ROE
Quarterly Revenue increased to BDT 770.76 million in Q1’FY21
as against BDT 339.41 million in Q1’FY18
Quarterly Revenue (BDT In Mn)
900

800 770.76

700 683.61 683.92

593.05
600
538.08 534.43
510.84
500 471.89
438.51

400 383.37
350.49 340.77
330.41
295.83
300 277.09
241.37
222.44 210.57
200 158.16 148.14
131.19 118.73 123.71 125.74 143.10

100

0
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
FY21 FY20 FY19 FY18 FY17 FY16 FY15
Quarterly Net Profit increased to BDT 330.91 million in Q1’FY21 as
against BDT 4.45 million in Q1’FY18

Quarterly Profits (BDT in Mn)

350
330.91

303.57
300 284.13

250

200.50
200
177.51 171.88
171.70
158.97
150 142.16

100 86.37
77.05
66.23
59.55 56.58
50.18 50.29
50 37.14 36.07
19.31 22.70 21.16
13.35 15.26
5.28 4.45
0
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
FY21 FY20 FY19 FY18 FY17 FY16 FY15
Cash balance increased to BDT 2794.80 million, which was only
BDT 671.69 million

Cash and cash equivalents

2,794.80

2,418.54

2,023.14

1,522.10
1,451.39 1,447.40

1,131.14

779.19
671.69

51.37

Q1' FY'21 FY20 FY19 FY18 FY17 FY16 FY15 FY14 FY13 FY12
 Projections
Historical Period Projected Period
Particulars FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
Bandwidth Capacity (Gbps) 200 200 1800 1800 2700 2700 2700 2700 3500 15500 15500
Bandwidth Sales (Gbps) 33.52 132.16 246.98 446.48 686.00 1,102.00 1,763.20 2,644.80 3,491.14 5,585.82 8,378.73
Volume Growth 49% 294% 87% 81% 54% 61% 60% 50% 32% 60% 50%
Capacity Utilization (%) 16.76% 66.08% 13.72% 24.80% 25.41% 40.81% 65.30% 97.96% 99.75% 36.04% 54.06%
Revenue (BDT In Mn) 540.68 618.64 1,036.73 1,405.04 1,955.67 2,498.64 3,403.38 4,502.93 5,641.28 7,093.42 9,276.01
Revenue Increase (213.06) 77.96 418.08 368.31 550.63 542.98 904.74 1,099.55 1,138.34 1,452.14 2,182.59
Revenue Growth -28.3% 14.4% 67.6% 35.5% 39.2% 27.76% 36.2% 32.3% 25.3% 25.7% 30.8%
Avg. Selling Price Per GBPS (In Mn) 19.30 7.47 5.47 4.05 3.45 2.795 2.38 2.04 1.84 1.56 1.33
Bandwidth Price Growth -21.6% -61% -27% -26% -15% -19% -15% -14% -10% -15% -15%
Revenue Growth -28.3% 14.4% 35.5% 39.2% 27.8% 30.0% 32.3% 25.3% 25.7% 30.8%
Net Profit (BDT in Mn) 129.06 165.53 318.23 73.26 585.76 956.00 1,589.31 2,413.98 3,267.74 3,993.81 5,521.62
Profit increase (50.86) 36.47 152.70 (244.97) 512.50 370.24 633.32 824.67 853.76 726.07 1,527.81
Incremental profit as % of Incremental Revenue 46.8% 36.5% -66.5% 93.1% 68.2% 70% 75% 75% 50% 70%
Net Profit Growth -28% 28% 92% -77% 700% 63% 66% 52% 35% 22% 38%
Net Profit Margin 23.9% 26.8% 30.7% 5.2% 30.0% 38.3% 46.7% 53.6% 57.9% 56.3% 59.5%
EPS 0.78 1.00 1.93 0.44 3.55 5.79 9.64 14.64 19.82 24.22 33.48
P/E 110.2 62.24 231.62 37.16 14.96 25.00 25.00 25.00 20.00 20.00
Expected Price 240.95 365.98 495.41 484.39 669.69

***We didn’t consider dilution of shares for share money deposit.

 Income Statement

Income Statement (BDT in Mn) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Trend
Revenue 1,214.53 1,248.38 753.74 540.68 618.64 1,036.73 1,405.04 1,956 2,499
Direct cost of operation 162.72 188.77 235.92 261.38 310.54 354.05 612.77 621 604
Gross profit 1,051.81 1,059.61 517.83 279.30 308.11 682.68 792.27 1,335 1,894
Operating expenses 141.53 156.48 199.35 208.49 164.60 318.04 396.86 486 577
Operating profit 910.28 903.13 318.48 70.81 143.50 364.64 395.40 849 1,318
Non-operating income (78.99) 192.80 194.07 75.13 44.12 44.35 (86.84) (31) (3)
Profit before WPPF & WF 831.29 1,095.93 512.55 145.94 187.63 408.99 308.56 818 1,315
Profit before taxation 831.29 1,095.93 488.15 138.99 178.69 389.51 293.87 779 1,252
Tax 86.53 223.82 125.80 9.94 13.16 71.28 220.61 193 296
Net profit after tax 744.76 872.11 362.35 129.06 165.53 318.23 73.26 586 956
A revolutionary expansion to follow

The country is now preparing for the third submarine cable with an enormous capacity of 12,000 Gbps (each
6,000 Gbps from Singapore and Egypt, source: https://bit.ly/3fYLR18). Ecnec has already approved the project
worth BDT 693.2 crore (USD 81.7 Mn) of investment. The government is to fund 56.6% (BDT 392.3 Crore, USD
46.3 Mn) of the investment, and BSCCL would cover the remaining 43.4% (BDT 300.83 crore, USD 35.48 Mn).
BSCCL targets to complete the project by June 2024, when the total capacity would stand at 14,700 Gbps.
Within 2025, the first cable would expire, leaving the capacity down at 14,400 Gbps. This would enable a large
excess capacity for the company, hence, would enrich the scope to export. The domestic supply has a 5-year
CAGR of 15.6%, leveraging on the rising internet penetration rate, which grew from 31.9% in 2015 to 60.70% in
2020. The company is planning to export 100 Gbps to Nepal. Meanwhile, Saudi Arabia has proposed to
purchase 600 Gbps of bandwidth from Bangladesh, giving a vast opportunity for the company’s topline to
thrive by large multiple.
 Comparison among the submarine cable in Bangladesh

Particulars Cable 1 (SEA-ME-WE-4) Cable 2 (SEA-ME-WE-5) Cable 3 (SEA-ME-WE-6)

Year of Inauguration 2006 2017 2024 (expected)

End of lifespan within 2025 within 2037-42 Not specified
Achievable capacity by BSCCL 400 Gbps 2,200 Gbps 12,000 Gbps
Lit-up capacity 200 Gbps 1,500 Gbps Not specified
Length of the core cable ~ 18,800 Km ~ 20,000 Km ~ 13,275 Km
Local landing station locations Cox’s Bazar Kuakata Cox’s Bazar
Project cost USD 35.2 Mn USD 72.5 Mn USD 81.7 Mn
Source: Annual Report, Submarine cable network website, and News articles
Valuation

Adjusted close price (DSE) of BSCCL

Trade Code (DSE) BSCCL
176
175.0
Closing Price (2nd Dec’20) 141.5
Trailing P/E 17.6 150.0 143
Dividend Yield 1.5%
125.0
YTD 41.7% 112 114

100.0
107

75.0 84
76
72
50.0
28-Mar-18

28-Mar-19

28-Mar-20
28-Dec-17

28-Dec-18

28-Dec-19
28-Jun-18

28-Jun-19

28-Jun-20
28-Sep-18

28-Sep-19

28-Sep-20
FRC circular on Diluted EPS
Investment Concern

• BSCCL Balance sheet has BDT 1,660 Mn share money deposit received from Scenario Terminology Conversion Dilution
government as equity money for implementing (SMW5) second submarine cable of Price
the country. BDT 1,400 Mn was issued in FY’16 rest are in FY’17. Worse Scenario Face Value 10 100%

• New share will be issued in favour of existing sponsor Ministry of Posts,

Moderate NAV FY20 40 25%
Telecommunication and IT against the equity money received from government. Scenario

• Conversion mechanism not defined in the agreement. Best Scenario Market Price 132 7.6%
3M Average
• The Board of Directors of BSCCL has appointed ICB Capital Management Limited as
Issue Manager and a Chartered Accountants Firm as a valuer of assets and liabilities as
IPO offer price BDT 35
a process to issue shares in favour of sponsor against equity money received from the
Government. Price when equity money injected BDT 110

• We expect share conversion likely to happen at NAV (Net asset value per share) or Three year average price BDT 105
above. If NAV mechanism followed while converting share money deposit the
company capital will be diluted by 25%. Considering dilution at NAV, our forecasted
EPS of BSCCL stood at BDT 8.01 in FY’21. The share currently trading at forward PE
multiple of 17.5.