Company Overview

Factory:

Dhaka (Nabinagar) & Chittagong (Kalurghat) Subsidiary Company: Jenson & Nicholson (Bangladesh) Limited Date of Incorporation: 6th July, 1973 Business Line: Manufacturing & Marketing of high quality paints Status: Public Limited Company Position in the industry: 1st

Company Overview

1950 Started operation in Bangladesh by importing Paint from Berger UK 1970 - Establishment of Chittagong Factory 1980 Named as Berger Paints (BD) Ltd. from Jenson & Nicholson (J&N) 1991 BMRE in Chittagong Factory 1995 Establishment of Double Tight Can Manufacturing Plant 1999 Establishment of Most Modern Sate-of-the-Art Paint Production Plant in Dhaka 2002 - Construction of own building for the Corporate Office in Dhaka 2004 Establishment of Powder Coating Plant 2005-2006 Issued 5% shares to the public and listed in DSE & CSE.

DuPont Analysis
ROE = Net Profit Margin Total Asset Turnover Equity Multiplier Significant factor is TAT due to increase in sales

Cash Flow Analysis

Net Income is gradually increasing In 2006, OCF fall due to high CFI Generally OCF>NI (ceteris paribus). In 2005 & 2008, NI exceeded OCF, which indicates poor accounts receivables collection or faster accounts payables payments or both.

Market Performance Analysis (Beta)

Industry Average beta is 0.547. Berger Paints BD LTD has 0.566. A rational investor should demand slightly higher return than the industry.

Market Performance Analysis (Yearly Return)

Period Price Berger Yearly Return DSGEN DSGEN Yearly Return

Jan-06 Dec-06 Dec-07 Dec-08 Dec-09

139.70 159.20 273.70 282.30 630.40 13.96% 71.92% 3.14% 123.31%

1683.60 1582.64 2942.32 2795.34 4519.36 -6.00% 85.91% -5.00% 61.68%

Berger has been giving consistently higher return than the market except in 2007 Holding this stock in the portfolio would give superior return than the market.

Market Performance Analysis (Volatility of Return)

Berger stock has higher volatility based on daily return. Hence good for risk neutral investors portfolio.
DSGEN Range Standard Deviation Minimum Maximum 8.658 1.218 -3.921 4.737 Berger 32.575 2.459 -16.791 15.784

Assumptions (FCF MODEL)

Sales

will grow on an average of 29%. This growth rate is an average of past 4 years historical growth rates. This will continue for 3 years. Cost of goods sold, Gross margin and all the categories of operating expense are shown as a percentage of sales It is assuming that depreciation is recorded under selling and administrative cost Depreciation rate is 8.45%. Which is an average of past 4 years depreciation rate. Capital Expenditure is the average of past 4 years change in capital expenditure. Net working Capital is 5.74% of sales The cost of equity is 15.23%.

Valuation with Free Cash Flow Method

Assumptions (DDM Method)

Dividend

has been forecast based on the historical dividend payout ratio. In this case also we have taken a average. Terminal growth rate has been assumed as 2%, We used two stage valuation model for this purpose

Valuation with DDM Method