FINANCIAL STATEMENT ANALYISIS

Of
Titas Gas Transmission and Distribution Company

Submission Date: October 20, 2021

Submitted to:
DR. MOHAMMED KAMRUL HASAN
Associate Professor, Dept. of Finance
Faculty of Business Administration, AIUB

Submitted by: BOISHAKH, NADIM HAYDER

ID: 21-91933-1
 Company Profile
The Titas Gas Transmission and Distribution Company is the natural gas distributor
in Bangladesh, with an 80% market share. As of 2020, they employed 2,100 staff and served
2.8 million domestic customers, 12,000 commercial customers, and 5,300 industrial
customers. It is responsible for gas distribution in Dhaka, capital of Bangladesh, and
Mymensingh. Titas Gas Transmission and Distribution Company was established on 20
November 1964 following the discovery of gas in Titas in 1962. On 28 April 1968, commercial
activities started with the supply of gas to Siddhirganj Thermal Power Station through the
Titas-Demra gas pipeline. The pipeline was constructed by East Pakistan Industrial
Development Corporation. On 9 June 2008, the company was listed on the Dhaka Stock
Exchange and on 19 June 2008 it was listed on the Chittagong Stock Exchange. The Gas field
is located some 100 km away to the direction of northern-east from capital city of Bangladesh,
Dhaka. It lies at the outskirts of Brahmanbaria town. This field was discovered by Pakistan
Shell Oil Company in 1962. The structure is an elongate north–south asymmetrical anticline
measuring about 19x10 square km with a vertical closure of 500 m. As per latest official re-
estimation, total recoverable gas reserve of Titas gas field is 4,740 billion cubic feet (134 km3).
Commercial gas production from this field was commenced in 1968 and till 31 August 2006
total 2,581.162 billion cubic feet (7.30904×1010 m3) gas has been produced.

Current Ratio
An indication of a company's ability to meet short-term debt obligations, the higher the ratio,
the more liquid the company is. Current ratio is calculated by dividing firm’s current asset by
current liability.

Current Ratio = Current Asset ÷ Current Liability

Year Current Assets Current Liabilities Ratio

2015 39,444,517,063 28,235,133,096 1.39

2016 48,181,982,754 37,811,114,604 1.27

2017 75,433,983,046 60,229,612,333 1.25

2018 77,370,445,556 64,050,340,820 1.20

2019 93,089,346,017 71,184,147,388 1.30

Table: Current ratios of Titas Gas in different years.

 Current Ratio
1.45

1.4
1.39
1.35

1.3
1.3
1.25 1.27
1.25
1.2
1.2
1.15

1.1
2015 2016 2017 2018 2019

Figure: Graph shows the change of Current ratio.

The above graph shows that, in 2015 the current ratio of Titas Gas was 1.39; it means Titas
Gas has 1 taka of current liabilities against 1.39 taka of current assets. It indicates Titas Gas
may have the ability to pay off its current liabilities with its current assets.

Net Profit Margin Ratio

Net Profit Margin tells you the net profit that the business is earning per taka of sales. Net Profit
Margin is the ratio measures net income per taka of sales and is calculated as net income
divided by revenues, or net profits divided by sales. It measures how much out of every taka
of sales a company keeps in earnings. Profit margin is very useful when comparing companies
in similar industries.

𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 𝐚𝐟𝐭𝐞𝐫 𝐓𝐚𝐱

𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭 𝐌𝐚𝐫𝐠𝐢𝐧 =
𝐍𝐞𝐭 𝐫𝐞𝐯𝐞𝐧𝐮𝐞(𝐒𝐚𝐥𝐞𝐬)

Year Net Income Net revenue (sales) Ratio Percentage

2015 8,886,114,424 82,711,068,934 0.107 10.74%

2016 7,293,915,408 113,799,805,813 0.064 6.41%

2017 5,064,816,586 125,705,663,110 0.040 4.03%

2018 3,389,996,886 142,160,635,355 0.023 2.38%

2019 4,644,660,803 141,644,770,670 0.032 3.28%

Table: The Gross Profit Margin of Titas Gas in different years.

 Net Profit Margin Ratio
0.1200 0.1074
0.1000

0.0800
0.0641
Ratio

0.0600
0.0403
0.0400 0.0328
0.0238
0.0200

0.0000
2015 2016 2017 2018 2019
Year

Figure: Graph shows the change of Net Profit Margin ratio.

Profit margin at the year 2015, 2016, 2017, 2018 and 2019 is displayed as a percentage;
10.74%, 6.41%, 4.03%, 2.38 and 3.28% profit margin. The profit margin was high at first then
steadily went down in 2016 to 2018.For example, the profit margin of 0.107 means the firm
has a net income of Tk. 0.107 for Tk. 1 of sales. A higher profit margin indicates a more
profitable company that has better control over its costs compared to its competitors and do
possess some brand value. The main reason that the profit margin declined is high cost. High
cost, in turn, generally occurs due to inefficient operations. Profit margin also declined because
in 2016 to 2019, Titas Gas used a lot of long-term debt. This invariably resulted in more interest
charges, which has brought the Net Income down.

Debt to Asset Ratio

The debt to asset ratio measures how efficiently a firm manages its debt. It shows the
percentage of the claim of the creditor on the asset of the company.

Total Debt to Asset Ratio = Total Debts ÷ Total Assets

 Year Total Debt Total Assets Ratio

2015 40,628,447,450.00 98,361,902,782 0.41

2016 52,540,614,529.00 113,209,972,945 0.46

2017 75,675,268,311.00 140,654,917,269 0.54

2018 83,515,995,735.00 150,075,771,998 0.56

2019 95,099,743,477.00 164,423,258,271 0.58

Table: The Debt ratios of Titas Gas in different years

Debt to Asset Ratio/Debt Ratio

0.70
0.56 0.58
0.60 0.54
0.50 0.46
0.41
0.40
Ratio

0.30
0.20
0.10
-
2015 2016 2017 2018 2019
Year

Figure: Graph shows the change of Debt-to-Equity ratios.

The above graph shows that from the year 2015 to 2019 the ratios were 0.41, 0.46, 0.54, 0.56
and 0.58 which have increased year after year considerably which is not a good sign for the
company, lower debt ratio may decrease the financial risk of Titas Gas. Debt ratio of 0.433553
in 2016 means that this amount of the company's assets is financed through debts.

Debt to Equity Ratio

The debt to asset ratio measures how efficiently a firm manages its debt. It shows the
percentage of the claim of the creditor on the asset of the company.

Total Debt to Equity Ratio = Total Debts ÷ Total Equity

 Year Total Debt Total Equity Ratio

2015 40,628,447,450.00 57,733,455,330 0.70

2016 52,540,614,529.00 60,669,358,416 0.87

2017 75,675,268,311.00 64,979,648,955 1.16

2018 83,515,995,735.00 66,559,776,264 1.25

2019 95,099,743,477.00 69,323,514,794 1.37

Table: The Debt-to-Equity ratios of Titas Gas in in different years.

Debt to Equity Ratio

1.60
1.37
1.40 1.25
1.16
1.20

1.00 0.87
Ratio

0.80 0.70

0.60

0.40

0.20

-
2015 2016 2017 2018 2019
Year

Figure: Graph shows the change of Debt-to-Equity ratios.

The above graph shows that from the year 2015 to 2019 the ratios were 0.70, 0.87, 1.16, 1.25
and 1.37. The debt-to-equity (D/E) ratio is used to evaluate a company's financial leverage and
is calculated by dividing a company’s total liabilities by its shareholder equity.

Return on Asset

Return on assets is the ratio of annual net income to average total assets of a business during a
financial year. It measures efficiency of the business in using its assets to generate net income.
It is a profitability ratio. Return on Asset (ROA) is an indicator of a company which deals with
profit relative to its total assets. It gives an idea as to how efficient management is at using its
assets to generate earnings. It is calculated by dividing a company's annual earnings by its total
assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on
investment".
 𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
𝐑𝐞𝐭𝐮𝐫𝐧 𝐨𝐧 𝐀𝐬𝐬𝐞𝐭 =
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
Year Net Income Total Assets Ratio

2015 8,886,114,424 98,361,902,782 0.0903

2016 7,293,915,408 113,209,972,945 0.0644

2017 5,064,816,586 140,654,917,269 0.0360

2018 3,389,996,886 150,075,771,998 0.0226

2019 4,644,660,803 164,423,258,271 0.0282

Table: The Return on Total Assets of Titas Gas in different years

Return on Asset
0.1000 0.0903
0.0900
0.0800
0.0700 0.0644
0.0600
Ratio

0.0500
0.0400 0.0360
0.0282
0.0300 0.0226
0.0200
0.0100
0.0000
2015 2016 2017 2018 2019
Year

Figure: Graph shows the change of Return on Asset ratio.

Return on total assets indicates the number of praises earned on each taka of assets. Thus,
higher values of return on assets show that business is more profitable. An increasing trend of
ROA indicates that the profitability of the company is improving. Conversely, a decreasing
trend means that profitability is deteriorating. This may have occurred in 2019 because it had
used more debt financing in 2019 compared to 2015 which resulted in more interest expenses
and brought the net income down.
 Return on Equity

Return on Equity (ROE) measures the rate of return on common stockholders’ equity. It
measures a company's profitability by revealing how much profit a company generates with
the money shareholders have invested. Return on Equity measures the amount of Net Income
earned by utilizing each taka of Total common equity. It is the most important of the “Bottom
line” ratio. By this, you can find out how much the shareholders are going to get for their shares.
Return on Equity (ROE) is equal to net income divided by common equity. Stockholders invest
to get a return on their money, and this ratio tells how well they are doing in an accounting sense.

Net Income
Return on Equity =
Shareholders′ Equity

Year Net Income Total Shareholder’s Equity Ratio Percentage

2015 8,886,114,424 57,733,455,330 0.1539 15.39%

2016 7,293,915,408 60,669,358,416 0.1202 12.02%

2017 5,064,816,586 64,979,648,955 0.0779 7.79%

2018 3,389,996,886 66,559,776,264 0.0509 5.09%

2019 4,644,660,803 69,323,514,794 0.0670 6.70%

Table: The Return on Total Equity of Titas Gas in different years.

Return on Total Equity

0.1800
0.1539
0.1600
0.1400 0.1202
0.1200
Ratio

0.1000
0.0779
0.0800 0.0670
0.0600 0.0509
0.0400
0.0200
0.0000
2015 2016 2017 2018 2019

Year

Figure: Graph shows the change of Return on Equity (ROE) ratio.

After analyzing Titas Gas financial statements it is shown in the years 2015 to 2019, the return
from 100 takas invested by the shareholders was respectively 15.39%, 12.02%, 7.79%, 5.09%,
and 6.70%. The higher the percentage is the better for the company as well as for shareholders
it also means that the company is efficient in generating income on new investment. Titas Gas
had higher ROE in 2015, after 2015 their ROE gradually decreased which is not good and
investors always want for a higher return.

Earnings per share (EPS)

Earnings per Share (EPS) are the portion of a company's profit allocated to each outstanding
share of common stock. It serves as an indicator of a company's profitability. It is generally
considered to be the single most important variable in determining a share's price. It is also a
major component used to calculate the price-to-earnings valuation ratio.

Earnings per share = Net Income ÷ Total number of shares

Year Net Income Number of shares EPS

2015 8,886,114,424 989,221,831 8.98

2016 7,293,915,408 989,221,831 7.37

2017 5,064,816,586 989,221,831 5.12

2018 3,389,996,886 989,221,831 3.42

2019 4,644,660,803 989,221,831 4.69

Table: Earnings per share of Titas Gas in different years.

EPS
10 8.98
9
8 7.37
7
6 5.12
4.69
5
4 3.42
3
2
1
0
2015 2016 2017 2018 2019

Figure: Graph shows the change of EPS.

In the graph above, we can see that the EPS gradually decreased from 8.98 in 2015 to 4.69 in
2019. Net income decreased each year and the number of shares remained the same. Earnings
earned per share were 8.98 in 2015 and in 2019 it stands at 4.69 per share.

Price-Earnings (P/E) ratio

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its
current share price relative to its EPS. The price-to-earnings ratio is also sometimes known as
the price multiple or the earnings multiple/E ratios are used by investors and analysts to
determine the relative value of a company's shares in an apples-to-apples comparison. It can
also be used to compare a company against its historical record or to compare aggregate
markets against one another or over time.

P/E ratio = Share price ÷ Earnings per share

Year Share price EPS P/E ratio

2015 10 8.98 1.11

2016 10 7.37 1.35

2017 10 5.12 1.95

2018 10 3.42 2.95

2019 10 4.69 2.13

Table: The P/E ratio of Titas Gas in different years.

P/E ratio
3.5
2.95
3

2.5
2.13
1.95
2

1.5 1.35
1.11
1

0.5

0
2015 2016 2017 2018 2019

Figure: Graph shows the change of P/E ratio.

Even though the price of the share remained unchanged, the EPS changed every year and
gradually increased. the P/E ratio increased each year. P/E ratio went from 1.11in 2015 to
2.13 in 2019.