REPORT ON BEXIMCO & APPLE

Submitted to
Taskin Shakib (TKS)

Lecturer, Department of Accounting & Finance (DAF)

School of Business & Economics (SBE)

North South University

Submitted by
FIN 410 | Section: 07 | Group 03

Name ID
Mohammad Safwan Zaman Araf 2021615630
Shouvo Kumar Kundu 2012347030
Hasan Md. Saqline 1912222630
Sumaya Tashfia 2012892030

Date of Submission: June 25, 2023

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Letter of Transmittal

Group 3
FIN410, Section 07
North South University

Date: June 25, 2023

Taskin Shakib
Lecturer,
Department of Accounting and Finance (DAF),
School of Business and Economics (SBE),
North South University

Subject: Submission of Report on Beximco and Apple.

Dear Sir,

With due respect sir, we are hereby submitting our group project for the course FIN410 after
exercising maximum effort and learning considerable knowledge. The main purpose of the report
was to ratio analyze of one Bangladeshi company and valuation of one company of the United
States of America. Using the online resource, we collected the financial statements of these two
companies from the year 2020 and 2021. We tried our best to analyze the financial situation of
these two organizations from a different point of view with different several ratios.

We want to express our gratitude for giving us this wonderful chance to expand our knowledge.
We truly hope that you will find this report interesting to read. We appreciate all of your
cooperation during this semester.

Yours sincerely,

Mohammad Safwan Zaman Araf - 2021615630

Shuovo Kumar Kundu - 2012347030
Hasan Md. Saqline -1912222630
Sumaya Tashfia - 2012892030

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Acknowledgement

First of all, we would want to thank Allah, the Almighty, for giving us the patience, energy,
commitment, and faith needed to finish this magnificent report. Because of everyone's cooperation
and willingness to finish the report as a team, it was a pleasure to work on it. We would want to
thank our respected professor, Taskin Shakib sir, for his assistance in helping us complete this
report flawlessly. His suggestions, counsel, and direction were all very beneficial to our work.

This report taught us a lot, including how to perform ratio analyses, value businesses, and
determine a company's free cash flow. This research has helped us to better understand how crucial
it is to appraise and forecast a firm in order to predict its position and success in the future. Before
investing in any company, we learnt how an investor makes a decision. The process of creating
this report was entertaining and memorable. We believe it will benefit us in the future and be a
reward for our efforts.

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Executive Summary

This report is consisting of a ratio analysis of a Bangladeshi company Beximco Ltd which is
enlisted in the Dhaka Stock Exchange (DSE) and the valuation of Apple Inc. a company of the
United States of America enlisted in the National Association of Securities Dealers Automated
Quotations (NASDAQ). We have gone through the ratio analysis for the fiscal year of 2020 and
2021. Through financial ratios, we have tried to determine the company’s present market position
and also the liquidity situation of short-term loans, leverage ratios, profitability ratios and market
position ratio. In this research, we've highlighted Beximco's profit margins, fixed asset value,
return on assets, and return on equity. Additionally, we have showed how much they borrow from
other companies and invest in equity. By calculating the financial risk ratio, we have attempted to
determine the level of risk posed by Beximco and estimate the market. Additionally, we estimated
market and leverage ratios. We have ultimately calculated Apple Inc.'s current market position
based on all of these computations.

We have provided Apple Inc.'s valuation in the second portion of this report. In this section, we've
determined the retention rate as well as the sustainable growth rate of the two businesses. In order
to determine the cost of capital, we calculated the Weighted Average Cost of Capital (WACC).
Following that, we computed the PVs of potential FCF through 2026 as well as the terminal value.
After performing all of these calculations, we determined Beximco’s fair value per share and then
compared the price to the share's market value. In light of this, we can determine if both of these
companies are overvalued or undervalued.

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Table of Contents

Company Background .................................................................................................................... 6

Beximco Ltd................................................................................................................................ 6
Apple Inc. .................................................................................................................................... 6
Ratio Analysis of BEXIMCO Ltd................................................................................................... 7
Leverage Ratios .......................................................................................................................... 7
Profitability Ratios ...................................................................................................................... 9
Market Ratio ............................................................................................................................. 14
Statement of Cash Flow of BEXIMCO ........................................................................................ 16
Company Valuation of Apple ....................................................................................................... 17
Intrinsic Value and Forecasting ................................................................................................ 17
Appendix ....................................................................................................................................... 23

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Company Background

Beximco Ltd

The largest private sector organization in Bangladesh at the moment is the BEXIMCO Group
("BEXIMCO" or the "Group"). Two brothers, Ahmed Sohail Fasihur Rahman and Salman Fazlur
Rahman, created BEXIMCO in the 1970s. BEXIMCO's flagship platform now has operations and
investments in a wide range of industries, including textiles, pharmaceuticals, personal protective
equipment (PPE), ceramics, real estate development, construction, trading, marine food,
information and communication technologies, media, DTH, financial services, and energy.
The Group provides its products and services in both the domestic and foreign markets. BEXIMCO
has now become one of Bangladesh's most recognizable brand names which are associated with
creativity, trust, and excellent quality.

Apple Inc.

Apple is an American global technology firm by Steve Jobs, Steve Wozniak, and Ronald Wayne.
Apple founded in 1976 at Los Altos, California, USA. Apple is currently the world's largest
technology corporation and the most valuable company, and it leads the industry. Apple began its
journey by establishing itself as a computer software and hardware company. The company had
numerous ups and downs, but after Steve Jobs became CEO, he altered the fortunes of Apple Inc.
The company extended its operations and began manufacturing. They manufacture cellphones,
computers, tablets, television items, and wearable devices. Apple has never been the first to market,
and they rarely release new items. Instead, they act as a second mover, producing things such as
telephones, computers, tablets, television devices, and so on. Apple is now huge popular for
iPhone.

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Ratio Analysis of BEXIMCO Ltd

Cash Conversion Cycle

Cash Conversion Cycle = Receivable Days + Inventory Days – Payable Days

Year Receivables days Inventory days Payable days Cash conversion cycle

2020 380.35 190.96 345.20 226.12

2021 240.06 129.001 167.32 201.74

The Cash Conversion Cycle (CCC) is a metric that shows the amount of time it takes a company
to convert its investments in inventory to cash. Cash conversion cycle of 2020 was to 226.12 and
for 2021 it was 201.74. It means the CCC for 2021 is better than 2020.

Leverage Ratios

Operating Leverage
Operating Leverage Formula = % change in EBIT / % change in Sales

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 Year % change in EBIT % change in sales Operating leverage

2021 1.06 1.12 1.05 1.06 1.05

Operating leverage shows how a change in the company's sales will affect its operating income.
Beximco’s operating leverage is 1.05 which indicates that it’s a safe company with less potential
profits.

Financial Leverage

Financial Leverage = % change in Net Income / % change in EBIT

Year % change in Net income % change in EBIT Financial leverage

2021 12.88 1.06 12.11

Financial leverage ratio measures the

ability of the business to meet its long-term (one year or longer) debt obligations. The ratio in
2021 is high (12.11) meaning that it’s a risky company.

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Profitability Ratios

Gross Profit Margin

Year Gross Profit Sales Gross Profit Margin (%)

2020 21,035,688,558 7,144,526,355 33.96

2021 14,251,725,881 43,403,790.011 32.84

Gross Profit Margin

0.345
0.34
0.335
0.33
0.325
0.32
2020 2021

The gross profit margin is a profitability metric that measures gross profit as a percentage of total
sales. A bigger gross profit margin is generally preferred. A high gross profit margin implies that
the corporation controlled its cost of sales well. In 2020, the gross profit margin was 33.96%, but
it fell to 32.84% in 2021. This demonstrates that the company is performing quite poor then
previous year.

Operating Profit Margin

Operation Profit or EBIT Sales Profit Margin (%)

Year

2020 6,237,220,360 21035688558 29.65

2021 42,373,455,469 43,403,790.011 30.46

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 Operating Profit Margin
120
100
80
60
40
20
0
2020 2021

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The operating profit margin ratio measures a company's profit after removing variable production
costs. A bigger operating profit margin is often preferred. A high operating profit margin shows
that the corporation accomplished an excellent job of cost control. Beximco’s operational profit
margin was 29.65% in 2020, but it increases by 30.46% in 2021.This shows that either Beximco
is efficiently regulating operating costs or that they have decreased their operating costs.

Net Profit Margin

Year Net Profit Sales Profit Margin (%)

2020 477,774,380 21035688558 2.27

2021 35,784,356,425 43,403,790.011 15.28

Net Profit Margin

100

80

60

40

20

0
2020 2021

The net profit margin is a profit ratio that compares net income to sales. In general, the greater the
NPM is better. To assess whether the company is doing better or worse, compare it to previous
performance and/or industry benchmarks. Beximco’s net profit margin has fallen to 2.27% in 2020
and 15.28% in 2021, in 2021; Net profit margin a little bit increased in 2021.As a result, the
organization did well in 2021.

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Return on Total Asset

Year EBIT Total Assets ROA (%)

2020 6,237,220,360 131,143,531,488 5.00

2021 42,373,455,469 140,012,948,087 9.00

Return On Total Asset

0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2020 2021

Return on Assets (ROA) Beximco Inc.'s net profit climbed from 2020 to 2021. ROA indicates how
effective a company's management is at leveraging its assets to generate earnings for every
investment spent. Beximco's ROA improved from 5% to 9% in 2020 to 2021 indicating that the
corporation is producing earnings from its assets and that they are improving.

Return on Total Equity

Year Net Profit Total Equity ROE (%)

2020 477,774,380 64,412,764,649 0.74

2021 35,784,356,425 70,957,215,721 9.35

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 Return on Equity
0.6

0.5

0.4

0.3

0.2

0.1

0
2020 2021

The ability of management to create income from equity is closely related to ROE. Additionally,
sales and expenses might have an impact on the change in ROE. Apple's ROE increased
dramatically from 2020 to 2021, reaching 9%. The rise in ROE indicates that the shareholders'
return on investment is rising. It will have a good influence because it signifies Beximco was able
to maximize the wealth of their shareholders.

Earnings per Share

Net Profit Outstanding Shares EPS

Year

2020 477,774,380 64,412,764,649 3.25

2021 35,784,356,425 70,957,215,721 45.13

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 Earnings per Share
300
250
200
150
100
50
0
2020 2021

The largest amount a shareholder earned per share from their investment in a year is referred to as
EPS. According to this graph, EPS was 1.00 in 2020 and 50.00 in 2021. Earnings per share climbed
from 2020 due to the introduction of new equities into the market, while net income improved
from previous years. As a result, the ratio would indicate that Beximco’ shareholders earned the
most money per share in 2021.

Market Ratio

Price Earnings

Ratio

Price Earnings Ratio = Share price/ Earnings per share

Year Share Price Earnings Per Share P/E Ratio

2020 10 3.25 3.08

2021 10 45.13 0.22

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 Price Earnings Ratio
2500

2000

1500

1000

500

0
1 2

The price-earnings ratio is also known as P/E. ratio. It is the relationship between a company’s
share price and its earnings per share. The measure is used to determine if a company is overvalued
or undervalued and to value it accordingly. In 2020, P/E ratio was 3.08 and it has decreased at 0.22
in 2021. The lower the P/E ratio the better it is for both the business and potential investors.

Du-pont Analysis

Du-Pont Analysis

ROA (Net Profit/Revenue)*(Revenue/Total Assets) 4.74% 0.36%

ROE (Net Profit/Revenue)*(Revenue/Total Assets)*(Total Assets/Equity) 9.35% 0.74%

Unlevered Beta

Unlevered Beta of BEXIMCO LTD.

Beta 1.43
Tax Rate 14.3%
Debt/Equity 0.97

Formula Levered beta / 1 + (1 - tax rate) x (Debt/

equity)

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Unlevered Beta of Beximco 0.78

Unlevered beta (or ungeared beta) takes only equity in its capital structure and then compares the
risk of a firm to the risk of the market. Unlevered beta is useful when comparing companies with
different capital structures as it focuses on the equity risk and is also referred to as the “Asset
Beta” since its value is determined by the assets (or businesses) owned by the firm, however,
levering the beta removes beneficial effects gained by adding debt to the firm’s capital structure.
As unlevered beta is positive, investors would need to invest in the company's stock when prices
are expected to rise. A negative unlevered beta will prompt investors to invest in the stock when
prices are expected to decline.

Statement of Cash Flow of BEXIMCO

Beximco LTD.
Statement of Cash Flows
Indirect Method (BDT Million)
Cash Flow From Operation: 2021 2020
Net Profit 6,609 462
Add Depreciation EXP 2,024 1,481
Less/Add: Increase/ Decrease in A/R -455 23,637
Less/Add: Increase/ Decrease inventory -3035 -4486
Less/Add: Increase/ Decrease in prepaid expense -265 105
Less/Add: Increase/ Decrease in other current assets -6433 10428
Increase/decrease in A/P 516 3,282
Increase/decrease in Income tax payable 496 19
Less/Add: Increase/ Decrease in other current liability -768 -17
Net CFO - 1,311 34,911

Cash Flow From Investment:

Increase in PPE 171 31,248
Increase in other PPE 17 305
Net CFI 188 31,553

Cash Flow From Financing:

Dividend Paid 438 453
Increase/Decrease in Long term Debt 13,679 -8,027

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 ST Debt & Current Portion LT Debt -11,729 7,433
Net CFF 2,388 -141

Change In cash - 3,887 3,499

NWCI = Ending W/C-Beg W/C 21,391 -40,349

NFAI = Enging Gross Fixed Asset-Beg Gross Fixed Asset 171 31,248
FCFF = NP+DEP.EXP+INT*(1-T)-NFAI-NWCI (8,545.58) 14,224.69
New Borrowing 13,679 -8,027
FCFE = NP+DEP-NFAI-NWCI+New Borrowing 750 3,017

Company Valuation of Apple

Intrinsic Value and Forecasting

ROE 2.17

DIVIDEND PAYOUT 3.00%

RR 97%

SGR 7.80%

The SGR is highest growth rate that company can achieve without any external equity and debt.
The SGR was calculated by taking return on equity and retention rate. We have calculated dividend
pay-out ratio to calculate the retention rate. We assume in Beximco will grow 18.92%. They will
not be affected if they take these loans below this rate.

Cost of Debt
The cost of debt of a business refers to the cost of borrowing for the organization. It is an integral
part of the capital structure of the company. Here, firstly, the short term and long term debts of
accompany were identified at 9613 million and 109,106 million separately. Then they were
accumulated to find the value of total debt present in the company at 118719 million. The interest
paid by the company was then expressed as a percentage of the total debt to illustrate the real cost

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of debt present. The interest paid was $258.00 million in interest bringing their cost of debt to
4.25%.

Cost of Debt

Total Interest Expense 258

Total Debt 287,912

Cost of Debt 0.09%

CAPM of Apple

Risk Free Rate 5.19%

Expected market Premium 5.50%

Beta 1.22

Cost of Equity 11.90%

Cost of Equity
The CAPM represents the expected returns an investor can get from investing in one security.
Here to calculate the CAPM, we considered our risk free rate at 5.19% which is the 5-year T- bill.
The market return here was calculated at 5.50 % after annualizing the average of three year's
monthly returns of the NASDAQ index. The beta was considered to be 1.22. After application of
the formula, we received our CAPM at 11.90% which is our expected return from Apple.

Weighted Average Cost of Capital

The WACC represents the cost of doing business. Firstly, to calculate the WACC, the weight of
the debt was calculated at 0.82 and the weight of the equity was calculated at 0.18. Next, the cost

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of debt and cost of equity are respectively multiplied with their respective weights. Then it was
adjusted for taxes at 13.30 %to receive the WACC of 2.20%.

WACC

Total Liabilities 287,912.00

Total Equity Total Liabilities & 63,090.00

Equity 351,002.00
Weight of Debt 82%
Weight of Equity 18%
Cost of Equity 11.90%
Cost of Debt 0.09%
Tax Rate 13.30%
WACC 2.20%

Firstly, we will multiply the free cash flow (FCF) with the Sustainable Growth Rate (SGR)
calculated to get the forecasted free cash flow. We then derive the terminal value from the formula.
The discounted FCF was then discounted with WACC. The terminal value was also then
discounted with WACC. We add both to receive the intrinsic value of the company. When we
subtract the outstanding debt, we receive the fair value of the company. When we divide it by
shares outstanding, you receive the par value of the stock.

APPLE Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except number of shares which are reflected in thousands and per share amounts)
2021(Base) 2022 2023 2024 2025 2026
Net Sales
$ $ $ $ $ $
Products 297,392.00 320,588.58 345,594.48 372,550.85 401,609.82 432,935.39
$ $ $ $ $ $
Services 68,425.00 73,762.15 79,515.60 85,717.81 92,403.80 99,611.30
$ $ $ $ $ $
Total Net Sales 365,817.00 394,350.73 425,110.08 458,268.67 494,013.63 532,546.69

Cost of Sales
$ $ $ $ $ $
Products 192,266.00 207,262.75 223,429.24 240,856.72 259,643.55 279,895.74
$ $ $ $ $ $
Services 20,715.00 22,330.77 24,072.57 25,950.23 27,974.35 30,156.35

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 $ $ $ $ $ $
Total Cost of Sales 212,981.00 229,593.52 247,501.81 266,806.95 287,617.90 310,052.09
$ $ $ $ $ $
Gross Margin 152,836.00 164,757.21 177,608.27 191,461.72 206,395.73 222,494.60

operating Expenses:
$ $ $ $ $ $
R&D 21,914.00 23,623.29 25,465.91 27,452.25 29,593.53 31,901.82
$ $ $ $ $ $
Selling & Administration 21,973.00 23,686.89 25,534.47 27,526.16 29,673.20 31,987.71
$ $ $ $ $ $
Total operating Expenses 43,887.00 47,310.19 51,000.38 54,978.41 59,266.73 63,889.53

$ $ $ $ $ $
Operating Income 108,949.00 117,447.02 126,607.89 136,483.31 147,129.00 158,605.07
$ $ $ $ $ $
Finance Expense 258.00 258.00 258.00 258.00 258.00 258.00
$ $ $ $ $ $
Income before taxes 109,207.00 117,189.02 126,349.89 136,225.31 146,871.00 158,347.07
$ $ $ $ $ $
Income Taxes 14,527.00 15,588.79 16,807.39 18,121.05 19,537.16 21,063.74
$ $ $ $ $ $
Net Income 94,680.00 101,600.23 109,542.50 118,104.26 127,333.84 137,283.33

$ $ $ $ $ $
EPS 5.67 6.08 6.56 7.07 7.63 8.22
$ $ $ $ $ $
Dividebd Paid 2,843.00 3,050.80 3,289.28 3,543.13 3,820.02 4,118.50
$ $ $ $ $ $
Retained Earnings 91,837.00 98,549.44 106,253.21 114,561.13 123,513.82 133,164.83

Sustainable Growth Rate

Year 2021 2022 2023 2024 2025 2026

Net Income 94,680 98,549 106,253 114,561 123,514 133,165

Tax Rate 13.30% 13.30% 13.30% 13.30% 13.30% 13.30%
ROE 150.07% 161.04% 173.63% 187.20% 201.83% 217.60%

Dividend 2,843 3,051 3,289 3,543 3,820 4,118

Dividend Payout 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%
Retention Rate 97.00% 97.00% 97.00% 97.00% 97.00% 97.00%
Average Sales
Growth 7.80% 7.80% 7.80% 7.80% 7.80% 7.80%

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 Net Working Capital
Year 2021 2022 2023 2024 2025 2026
Current Asset 134,836 145,353 156,691 168,913 182,088 196,291
Current Liability 125,481 135,269 145,819 157,193 169,454 182,672
NWC 9,355 10,085 10,871 11,719 12,633 13,619

Free Cash Flow To Firm Calculation

Year 2022 2023 2024 2025 2026

Operating Cash Flow

Net Income 94,680 101,600 109,542 118,104 127,334
Change in NWC ( - ) 9,355 10,085 10,871 11,719 12,633
OCF 85,325 91,516 98,671 106,385 114,700
$ $ $ $
Interest ( 1 - T ) ( + ) 258.87 258.87 258.87 $ 258.87 258.87
Net Fixed Asset
Ending Fixed Asset 233,027 251,203 270,797 291,919 314,689
Beginning Fixed Asset ( -
) 216,166 233,027 251,203 270,797 291,919
NFA 16,861 18,176 19,594 21,122 22,770
FCFF 68,723 73,598 79,336 85,522 92,190

Present value of FCFF

Year 2022 2023 2024 2025 2026

FCFF 68,723 73,598 79,336 85,522 92,190
PV of Future Cash Flow 67244 70464 74322 78392 82685

As we can see from our calculations, the fair value per stock of Apple is $180.31 and the market
price of their share is $157.77. So, we can definitely say that Apple is undervalued. Apple is the
leader in the smartphone industry. They are performing extremely well despite the global
pandemic. t. But, when making an investment decision, investors need to look at other factors as
well. The most important factor they need to be aware of is the industry trend. Competitor’s
performance, company's operational efficiency, upcoming risks should be factored into the
investing decision. The economy of the country as well as that of the global economy will play an

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important part in the investment decision. There may be a disruption in the supply chain of the
company, be it for political reasons or environmental causes.

Terminal Cash Flow

Perpetual Growth Rate 5.19%
FCFF of 2026 92,189.7
WACC 2%
Terminal Value 3246180.445

Outcome

Company Fair Value 3246180.445

Equity Fair Value 2,958,268.44
Number of Outstanding
Shares 16,406.00

Outcome
Company Fair Value 3246180.445
Equity Fair Value 2,958,268.44
Number of Outstanding Shares 16,406.00
Fair Value of Each Share 180.3162529
Current Stock Price 177.57
Result Undervalued

According to our calculations, Apple's stocks should be a buy call. We recommend that investors
purchase the shares. As the shares are undervalued and the company is showing great performance
in the market, investors will gain in value for each share when the share prices rise making it a
profitable investment.

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 Appendix

Income Statement of Beximco Ltd

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Balance Sheet of Beximco

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Income Statement of Apple Inc.

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Balance Sheet of Apple Inc.

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