Performance Analysis
Paper & Board sector
Performance analysis:
Packages Ltd. &
B.P. Board
Salman Ahmad E07MBA002
Abid Ali E07MBA007
Ali Raza E07MBA104
Listed Companies of Paper and Board Sector
SYMBOL COMPANY
ABSON Abson Ind.
BPBL [Link]
CEFP Central Forest
CEPB Century Paper
CPSL Cherat Paper Ltd
DBSL Dadabhoy Sack
MERIT Merit Pack
PKGS Packages Limited
PPP Pak [Link]
SEPL Security Paper
MARKET VALUE OF SHARES OF LISTED COMPANIES OF SECTOR
Pak
Package B.P Dadabho Century Cherat Merit Central PaperPro Security Abson
Year s Board y Sack Paper Paper Packaging Forest d Paper Ind.
Jun-04 198.00 4.15 5.50 94.00 88.00 74.00 3.25 57.25 125.00 2.90
Jun-05 140.00 2.00 10.50 82.95 70.25 58.70 3.25 53.00 140.00 2.00
Jun-06 209.35 1.90 10.75 48.45 50.00 77.00 4.25 72.35 118.00 1.60
Jun-07 319.05 2.20 14.00 62.55 154.50 132.90 4.00 104.00 113.95 2.00
Jun-08 251.89 5.64 26.00 50.00 126.64 91.88 5.00 130.00 76.66 3.05
STOCK RETURN & MARKET RETURN OF THE SECTOR
Merit
Package B.P Dadabhoy Century Cherat Packagin Central Pak Security Abson MARKET
YEAR s Board Sack Paper Paper g Forest PaperProd Paper Ind. RETURN
2004-05 -29% -52% 91% -12% -20% -21% 0% -7% 12% -31% -7%
2005-06 50% -5% 2% -42% -29% 31% 31% 37% -16% -20% 4%
2006-07 52% 16% 30% 29% 209% 73% -6% 44% -3% 25% 47%
2007-08 -21% 156% 86% -20% -18% -31% 25% 25% -33% 53% 22%
Market Value = Average of Stock Return of the Sector.
PERFORMANCE ANALYSIS
We are going to conduct performance analysis of:
PACKAGES LTD.
B.P. BOARD
Both the companies are listed on KSE (Karachi Stock Exchange) and claim to be successful
during the last years.
Data related to both the companies is as under:
Packages Ltd..
INDICATORS Jun-05 Jun-06 Jun-07 Jun-08
TURNOVER 8,163,000 9,028,000 10,540,000 14,301,000
EAT 1,015,364 6,100,780 4,325,948 195,825
SHARE PRICE 140.00 209.35 319.05 251.89
EPS 16.24 87.30 58.96 (2.32)
B.P. Board
INDICATORS Jun-05 Jun-06 Jun-07 Jun-08
TURNOVER 1,574,000 1,833,000 2,012,000 2,196,000
EAT (273) 226 484 613
SHARE PRICE 2.00 1.90 2.20 5.64
EPS (0.05) 0.04 0.08 0.10
Other Economic Indicators of Pakistan are as under:
INDICATORS Jun-05 Jun-06 Jun-07 Jun-08
CPI 9.28% 7.92% 7.77% 12.00%
RISK FREE RATE (Rf) 7.96% 8.49% 8.90% 11.47%
STOCK MARKET INDEX 7,450 9,989 13,772 12,289
BETA CALCULATION
First of all, we have to calculate the BETA (Risk Coefficient) of above companies
We are going to calculate the BETA of Packages Ltd. using REGRESION LINE METHOD.
Where:
M = Risk Premium = Rm - Rf
K = Stock Premium = Rj - Rf
BETA CALCULATION OF PACKAGES LTD:
Risk Premium Stock
YEAR Rj Rm Rf (M) Premium (K) MK M2
2005 (0.293) (0.069) 0.080 (0.149) (0.373) 0.055 0.022
(0.019
2006 0.495 0.039 0.085 (0.046) 0.410 ) 0.002
2007 0.524 0.469 0.089 0.380 0.435 0.165 0.144
(0.035
2008 (0.210) 0.222 0.115 0.107 (0.325) ) 0.012
0.073 0.037 0.167 0.180
β = 0.981
BETA CALCULATION OF B.P. BOARD:
Risk Premium Stock
YEAR Rj Rm Rf (M) Premium (K) MK M2
2005 (0.518) (0.069) 0.080 (0.149) (0.598) 0.089 0.022
2006 (0.050) 0.039 0.085 (0.046) (0.135) 0.006 0.002
2007 0.158 0.469 0.089 0.380 0.069 0.026 0.144
2008 1.564 0.222 0.115 0.107 1.449 0.156 0.012
0.073 0.196 0.277 0.180
β = 1.377
Now, we have to analyze the performance of the two companies by the following strategies:
Return for Diversified Investor.
Alpha Strategy
Growth Index Model
Index Trend Model
We have to calculate the Index Trend Model & Growth Index Model as under:
Packages Ltd..
Index Trend Model
INDICATORS Jun-05 Jun-06 Jun-07 Jun-08
100.00% 110.60% 129.12% 175.19%
TURNOVER
100.00% 600.85% 426.05% 19.29%
EAT
100.00% 85.34% 83.73% 129.31%
CPI
100.00% 149.54% 227.89% 179.92%
SHARE PRICE
100.00% 134.08% 184.86% 164.95%
STOCK MARKET INDEX
100.00% 537.56% 363.05% -14.29%
EPS
CPI is on the increasing trend, but Turnover has increased more rapidly but at the same time
EAT has increased to a high trend but at the end of period EAT has not responded accordingly.
Stock Market Index has increased and Share Price has also increased with increasing trend but
EPS increased during the start of period and ended at negative value due to loss.
Growth Index Model
INDICATORS 2005-06 2006-07 2007-08
10.60% 16.75% 35.68%
TURNOVER
500.85% -29.09% -95.47%
EAT
-14.66% -1.89% 54.44%
CPI
49.54% 52.40% -21.05%
SHARE PRICE
34.08% 37.87% -10.77%
STOCK MARKET INDEX
437.56% -32.46% -103.93%
EPS
CPI is showing an increasing trend and Turnover is constantly showing increasing trend but EAT
is decreasing very rapidly after a tremendous growth. Stock Market Index growth is decreasing
and Share Price has also responded to this trend. EPS is showing extremely negative growth and
it seems that in future this trend will continue.
Investment Return = (49.52+52.40-21.05)/3
= 26.96%
Market Return = (3.90+46.90+22.20)/3
= 24.33%
Average Risk Free return = (7.96+8.49+8.90+11.47)/4
= 9.21%
Return for Diversified Investor.
=
= 18.04 %
Alpha Strategy
= 9.21 + 0.981( 24.33 – 9.21)
= 24.04%
Company Risk Free (Rf) CAPM Expected Return Alpha Status
Packages Ltd. 9.21% 24.04% 26.96% 2.92% Acceptable
____________________
B.P. Board..
Index Trend Model
INDICATORS Jun-05 Jun-06 Jun-07 Jun-08
100.00% 116.45% 127.83% 139.52%
TURNOVER
100.00% -82.78% -177.29% -224.54%
EAT
100.00% 85.34% 83.73% 129.31%
CPI
100.00% 95.00% 110.00% 282.00%
SHARE PRICE
100.00% 134.08% 184.86% 164.95%
STOCK MARKET INDEX
100.00% -80.00% -160.00% -200.00%
EPS
CPI is on the increasing trend, but Turnover has increased more rapidly and at the same time
EAT has decreased rapidly and decreased 224%. Stock Market Index has increased and Share
Price has also increased with increasing trend but EPS decreased extremely rapidly and showing
negative value due to loss.
Growth Index Model
INDICATORS 2005-06 2006-07 2007-08
16.45% 9.77% 9.15%
TURNOVER
-182.78% 114.16% 26.65%
EAT
-14.66% -1.89% 54.44%
CPI
-5.00% 15.79% 156.36%
SHARE PRICE
34.08% 37.87% -10.77%
STOCK MARKET INDEX
-180.00% 100.00% 25.00%
EPS
CPI is showing an increasing trend and Turnover is showing increasing trend at the start of
period but afterwards showing constant trend. EAT has increased after a tremendous growth.
Stock Market Index growth is decreasing but Share Price has shown tremendous increase as
compared to market. EPS is showing a good growth and it seems that in future this trend will
continue.
Investment Return = (-5.0+15.80+156.40)/3
= 55.73%
Market Return = (3.90+46.90+22.20)/3
= 24.33%
Average Risk Free return = (7.96+8.49+8.90+11.47)/4
= 9.21%
Return for Diversified Investor.
=
= 33.78 %
Alpha Strategy
= 9.21 + 1.377( 24.33 – 9.21)
= 30.03%
Company Risk Free (Rf) CAPM Expected Return Alpha Status
Packages Ltd. 9.21% 30.03% 55.73% 25.7% Acceptable
PERFORMANCE ANALYSIS
STRATEGY Packages Ltd. B.P. Board Decision
R.F.D.I 18.04% 33.78% B.P. Board
Alpha 2.92% 25.70% B.P. Board
Growth Index Model Favorable B.P. Board
Index Trend Model Favorable Packages Ltd.
Result:
Keeping in view the results from above strategies, we should invest in B.P. Board .
References
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