Investment Decision on CSE Listed Company

Chapter-1 :

Introduction

The Chittagong  Stock Exchange is the prime bourse of the country. Through its nonstop highly fault tolerant screen based automated trading system the exchange has been offering facilities for transparent and highly efficient provisions for secondary market activities of securities.

Origin of the topic

This term paper originated as an academic requirement of BBA Program. This is authorized and organized by the department of BBA. After completion of the program period a student must submit the term paper on the assigned topic to the Supervisor and to the department. The program is three months duration. I was assigned to Chittagong  Stock Exchange Limited, to complete the program.

Objective of the study

Objectives of this study are as follows-

– To present an overview of Chittagong  Stock Exchange.

-To identify the trend line of CSE and that of those securities incorporated in CSE.

-To identify the strength and performance of CSE 5 Banks. .

-To compare among CSE 5  Banks. .

-To develop the practical knowledge by the practical orientation of Work.

Scope of the Study

Scope of the study could be to understand contribution of stock exchange in economic development of a country. The economy of Ban in gaining in confidence and scope for development of capital market is gaining ground. If we can educate the investors regarding risk in management and adopt suitable legal measure to protect the investor’s interest, a substantial volume of saving of masses will flow into capital markets economic growth leads to increase national incomes and thus savings, which in turn are often channeled into the capital market.

Limitation of the Study

I have been provided with all necessary information at Chittagong  Stock Exchange Ltd as my level best; but, all required information and data are not elaborated as a guideline of the report.. Some problems may be terms as limitations of my study which are given below-

• Relevant papers and documents were not available sufficiently
• In some cases  , up to date information or data are not published.
• Due some, up to date information or data are not published. reason, the study limits only on the available published data and certain degree of formal and inform interview.

Part Two: Conceptual Issues

CHAPTER-2: concept issue

 Investment

Generally investment means to invest money any profitable sector. Investment is an activity that is engaged in by who have saving.

In general sense, investment means the sacrifice of current dollars of future dollars.

In the financial sense, Investment the commitment of a person’s fund to derive future income in the form of interest, dividend, premiums, pension benefit.

According to C.P.JONES, “Investment means commitment of the fund to one or more assets will beheld over some future time period.”

According to Reilly &Brown “An investment is the current commitment of dollars for a period of the time order to derive future payment that will compensate the investor for i)the time the fund is the commitment ii)the expected rate of inflation and iii)the uncertainty of the future payment”.

In the end we can say that investment is a commitment of fund made in the  expectation of some positive rate of return  over the future time period .

 Investment making process

Investment making is the part of investment. Investing has a logical and making process for successful implementation. Using a defined process when tackling complicated tasks helps us keep our focus and improves our chances of success. The following illustration of the investment decision making process has been simplified, however it provides a great foundation for starting your quest for investing knowledge.

Investment making process the foundation in making investment decision. The making processes are the trade-off between expected return and risk. But numerous separate must be made for organizational purposes. traditionally making process two step.

Security Analysis for investment decision

Security analysis involves the valuation and analysis of individual securities within the broad categories of financial assets. Professional analysts are employed by institutional investor. A security analyst must be in a position to understand the various financial statements, as the financial statement is an important source of information. This way of analyzing the security takes place from an investor point of view.

 Economic analysis

A systematic approach to determining the optimum use of scarce resources, involving comparison of two or more alternatives in achieving a specific objective under the given assumptions and constraints. Economic analysis takes into account the opportunity costs of resources employed and to measure in monetary terms the private and social costs and benefits of a project to the community or economy.

Company Analysis

Company Analysis or corporate analysis, refers to actions undertaken for an in-depth evaluation and to gain an understanding of a particular company’s.

Investors conduct company analysis to evaluate securities, gathering information about the company’s profile, products or services and profitability. It is also called fundamental analysis.

Industry Analysis

An industry analysis is a business function completed by business owners and other individuals to assess the current business environment. This analysis helps businesses understand various economic pieces of the marketplace and how these various pieces may be used to gain a competitive advantage. Although business owners may conduct an industry analysis according to their specific needs, a few basic standards exist for conducting this important business function.

 Technical Analysis

Technical analysis is a method in which the analyst never cares about the value of the security. They decide upon the price movement of the security based on the price movement of the security in the market. The main factor that a technical analyst studies is the supply and demand factor.

Part Three: Database

Chapeter-3: Database

 Source of information

Different data and information are required to meet the goal of this report. Those data and information were collected from various sources, such as, primary and secondary which is showed below:

 Primary Sources of Data

• Personal observation.
• Face to face conversation of the officers.
• Face to face conversation of the clients.
• Working at different desks of the R&D.

 Secondary Sources of Data

• Annual term paper of Chittagong  Stock Exchange
• Monthly Review of Chittagong  Stock Exchange
• Several kinds of Academic test-book.
• Different publications regarding Stock Exchange function
• Website of CSE

Method of collection Data

The collect data are two kind are qualitative and quantitative. Qualitative data are quality, mistake and good things. Quantitative data are power and usage etc.

 Reliability of Data

This data are reliable because this data are source of primary and secondary data. All  data are collect website and phsicially. And all data collect reliable  source .So all data trust and reliable.

 Method used in the study

We used qualitative and quantitative both data. the theory part use qualitative data and the math part we use quantitative data. Both data are use for this term paper.

Part-4 : Finding of the Study

Chapter-4: Economic Analysis

Global Economy

Now 2013 the global economy is going to start recover. This  time  the global

Economic climate is much better this year than last year, but the recovery is fragile and timid. The International Monetary Fund forecasts 3.5% GDP growth for the global economy in 2013. The recovery as “fragile and timid” because the Euro zone is prone to political crisis and slow decision-making processes. Some good policy decisions have been made in the various corners of the world, including by central banks “In 2013, they have to keep the momentum. Europe to operational  the new tools policy-makers have recently devised, including Europe’s banking union..

Bangladesh Economy

Now Bangladesh economic position is not good but  last year economic is soso. The economic position bad cause political situation. But  GDP of Bangladesh grew by 6.3% in Fiscal Year 2012. While export growth slowed sharply, private consumption held up well, supported by a recovery in remittance growth and healthy credit flows. Agricultural growth slowed to only 2.5% because of higher production costs, mainly from higher power, fuel, and fertilizer prices. Industry grew robustly by 9.5%, boosted by construction and small-scale manufacturing for the domestic market. Service sector growth stood at 6.1%.

PESTEL Analysis

The mission of Pestel-Analysis.com is to provide access to the top international risk analysis information available online. Brought to you by Communication 18 Ventures, we aggregate data that assists you in your PESTEL research. One must use accurate and relevant information when analyzing the Political, Economic,  Social, Technical, Environmental, and Legal aspects of a country, whether it is one’s own country, or one foreign to theirs.

 Political

Political factors are basically to what degree the government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability.). Furthermore, governments have great influence on the health, education, and infrastructure of a nation. Now political situation is not good. often different political parties called strike. so bank political is not good but not bad.

Economic

Economic factors include economic growth, interest rates, exchange rates and the Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm’s cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economic. These factors have major impacts on how businesses operate and make decisions.

Social

Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. The five Banks have contributed different social activities. They are awarded scholarship to the brilliant student They have also awarded scholarship to the poor brilliant student.  They have distributed blanket to the helpless people of different areas of country in the winter season

Technological

Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. The five banks have online Remittance management system and successfully implemented a online Banking Solution thought its branches.

Legal

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products. The five banks have legal it  comply with law society codification of right.

Chapter- Industry Analysis

 PORTER’S 5 forces model

Porter’s 5 forces industry analysis. Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change.Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. The

Bargaining power of buyers

An advantage to consumers that comes from gathering together to put collective pressure on producers to lower prices or improve quality. The bargaining power of buyers typically has the strongest effect on pricing when buyers are organized and they collectively account or much of the producers income, they are interested in a product that has an excess of supplier, and they are interested in making substantial purchases. But banks have no bargaining power of buyer. That   means we are no bargaining with the bank.

Bargaining power of suppliers

Advantage that result when (1) suppliers are concentrated it is, however, usually illegal for them to openly or secretly form a cartel . (2) too few goods are chased by too many buyer, (3) a supplier’s goods are unique or highly differentiated with few or no substitutes, (4) suppliers are forward integrated (see forward   integration and/or (5) high costs are involved in switching from one supplier to another .the bank have bargaining power of supplier. that mean the banks are bargaining with supplier. Supplier competition – ability to forward vertically integrate and cut out the buyer. The bargaining power of suppliers is also described as the market of inputs.

Threat of new entrants

threat of new entrants refers to the threat new competitors pose to existing competitors in an industry. A profitable industry will attract more competitors looking to achieve profits. If it is easy for these new entrants to enter the market – if entry barriers are low – this poses a threat to the firms already competing in that market. The banks have threat of new entrants.   The banks have brand equity, capital  requirements, Access to distribution, Switching costs , Customer loyalty  to established brands, Absolute cost . Industry profitability; the more profitable the industry the more attractive it will be to new competitors.

 Threat of substitute products or services

The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. The banks have  threat of  substitute product or services. Buyer propensity to substitute Relative price performance of substitute Buyer switching costs Perceived level of product differentiation Number of substitute products available in the market Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product

 Competitive Rivalry between Existing Players

This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry. Competition between existing players is likely to be high. For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. There are many players of about the same size, Players have similar strategies

 Chapter-6 Company Analysis

 SWOT Analysis

SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

SWOT Analysis of National Bank

 Strengths

–          National Bank Limited has already established a favorable reputation in the banking industry of the country. It  is one of the leading private sector commercial banks in Bangladesh.

–          National Bank Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001.

–          National Bank has the reputation of being the provider of good quality service too its , potential customer.

Weaknesses

–          The main important thing is that the bank has no clear mission statement and strategic plan.

–         The banks have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank.

–         The bank failed to provide a strong quality –recruitment policy in the lower and some mid level position.

–         The poor service quality has become major problem for the bank. The quality of the service at National Bank is higher than Dhaka Bank or Prime Bank.

–         The bank main weakness is having a group of unsatisfied employees.

 Opportunity

–          National Bank reduces the business risk and Bank has to expand their business portfolio.

–          Starting merchant banking the activity in the secondary financial market has direct impact on the primary financial market.

–          National Bank must expand its product line to enhance its sustainable competitive advantage.

Threats:

–          All sustain banks and upcoming foreign, private banks posse’s enormous threat to National Bank Limited.

–          If that happens the intensity of competition will use further and banks will have develop strategies to compete against an on slough of foreign the banks.

–          The default risks of all terms of loan have to be minimizing in order to sustain in the financial market.

 SWOT-Analysis of National Credit &Commerce Bank NCCB

Strengths

–          NCC Bank Limited has already established a favorable reputation in the banking industry of the country. It  is one of the leading private sector commercial banks in Bangladesh.

–          NCC Bank has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001.The number of deposits and loan and advances are also increasing rapidly.

–          NCC Bank Limited has the reputation of being the provider of good quality service too its, potential customer.

–         NCC Bank has interactive corporate culture. The working environment is very friendly, interactive and informal.

 Weaknesses

–          Not proper utilization of banking system and important thing is that the bank has no clear mission statement plan.

–         The banks have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank.

–         The bank failed to provide a strong quality –recruitment policy in the lower and some mid level position.

–         The poor service quality has become major problem for the bank. The quality of the service at National Bank is higher than Dhaka Bank or Dutch Bank but The bank has to compete with multinational Bank located here.

 Opportunity:

–          NCC bank reduces the business risk and Bank has to expand their business portfolio.

–          Starting merchant banking the activity in the secondary financial market has direct impact on the primary financial market.

–          Opportunity in the retail banking lies in the fact that country increased population is gradually learning to adopt consumer finance.

 Threats

–         All sustaining multinational banks and upcoming foreign, private banks significant threat to NCC Bank Limited.

–           The default risks of all terms of loan have to be minimizing in order to sustain in the financial market.

–          If that happens the intensity of competition will rise further and banks will have to

           Develop strategies to compete against these local and foreign banks.

SWOT-Analysis of One bank

Strengths

–         One bank has already established a role mode in the Banking sector of Bangladesh.

–          It is one of the leading private sector commercial banks in Bangladesh.

–         One Bank has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001.

–          The bank is number of deposits and loan and advances are also increasing rapidly.

–          The banks provide fulfillment for our People and create shareholder value.

–          Good working environment.

 Weaknesses

–          No clear mission statement plan.

–         The banks have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank.

–         This is a weakness of one bank that it is having a group of unsatisfied employees.

–         The bank has lack of motivation exists in person filling those position.

–         The poor service quality has become major problem for the bank. The quality of the service at National Bank is higher than Dhaka Bank or Dutch Bank.

 Opportunity:

–         In order to reduces the business risk.

–         The bank management can consider options of starting merchant banking or diversify into leasing and insurance sector.

–          Merchant Banking activity in the secondary financial market has direct impact on the primary financial market.

–          Investment in the secondary market governs the national economic activity.

 Threats

–           Default risks of all terms of loan have to be minimizing in order to sustain in the financial market.

–          Because default risk the organization may be become bankrupt One bank has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not eliminate.

–          The low compensation package of the employees from mid level to lower position  is not  able to keep the employee motivation.

 Premier Bank SWOT –Analysis

Strengths

–          The Bank has a clear vision towards its ultimate destiny- to be the best amongst the top financial institutions.

–         The bank to be the most caring and customer friendly provider of financial services, creating opportunities for more people in more places.

–          The bank to ensure stability and sound growth whilst enhancing the value of shareholders.

–         Primer bank to provide congenial atmosphere which will attract competent work force that will proud and eager to work for the Bank.

Weaknesses

–         No clear vision.

–         The bank has to follow aggressive marketing campaign.

–         The bank has to aggressively adopt technology.

–          Long term strategies not enough. aggressively adopt technology

Opportunity:

–          ‘Service first’ is not just an abstraction; we mean it. It holds a

             central focus in our operation.

–          Discharge of quick & quality service is the hallmark for banking standard.

–          The bank is a good understanding with them, while carrying out business transactions, helps us perceive their goals and thus, enable to respond pro-actively to their financial needs.

Threats

–         Competitors are using several new marketing policies to attract the customer.

–         They obey ethical standard in all operation.

–          Competitors are offering innovative new products and services.

–          Upcoming of new commercial banks, leasing companies and merchant bank etc. they all are competitors.

–          The bank Expertise, efficiency and experience in Management

 Prime bank SWOT-analysis

Strengths

–          Adequate capitalization.

–          Good profitability. This banking is introduced on –line banking.

–          It provides quick and prompt service to its customer.

–          Bank quickly expanding its business all over the country.

–          T 24 has been implemented at the branch.

–          It is located at a convenient place of the city.

Weaknesses

–          Long term investment is not sufficient.

–          Lack of experienced employees in junior level management.

–          Shortage of lower level manpower.

–          Capital resources are short for its investment.

–          Has not yet expanded its network in rural areas.

–          Insufficient workforce.

Opportunity:

–          Launching own master card-Credit service.

–          It can expand its network in rural areas.

–          Potential to expand franchise bases on customer.

–          Internet and SMS Banking.

–          Opportunity to take market share from rivals by offering new innovative product or service.

–          Client’s reliability on MTBL is growing day by day on the bank.

Threats:

–         Very competitive market.

–         Central Bank’s policies sometime are not in favor of the private bank’s policies.

–          Entry of new commercial banks, leasing companies and merchant bank etc. they all are competitors.

–          Competitors are offering innovative new products and services.

–          Competitors are using several new marketing policies to attract the customer.

Chapter 07: Ratio analysis

 Risk analysis

Business risk analysis

Business analysis is a technique to identify and assess factors that may jeopardize the success of a project or achieving a goal. This technique also helps to define preventive measures to reduce the probability of these factors from occurring and identify to successfully deal with possible negative effects on the competitiveness of the company.

Financial risk analysis

Financial risk analysis the practice of creating economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk. Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflation risks, etc

Financial risk analyses are two kinds. These are

1)      Degree of Operating Leverage – DOL

2)  Degree of Financial Leverage –   DFL

Credit risk

Credit risk refers to the risk that a borrower will default on any type of debt by failing to make payments which it is obligated to do. The risk is primarily that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial and can arise in a number of circumstances

 Degree of Operating Leverage – DOL

A type of leverage ratio summarizing the effect a particular amount of operating leverage has on a company’s earnings before interest and taxes (EBIT). Operating leverage involves using a large proportion of fixed costs to variable costs in the operations of the firm. The higher the degree of operating leverage, the more volatile the EBIT figure will be relative to a given change in sales

 Degree of Financial Leverage – DFL

A leverage ratio summarizing the affect a particular amount of financial leverage has on a company’s earnings per share (EPS). Financial leverage involves using fixed costs to finance the firm, and will include higher expenses before interest and taxes (EBIT). The higher the degree of financial leverage, the more volatile EPS will be, all other things remaining the same.

• Current ratio

The current ratio is the best known ratio of financial analysis. It presents in relative terms what net working capital measures in absolute terms.

• Quick ratio:

The quick ratio, also known as the acid-test ratio, is a liquidity ratio that is more refined and more stringent than the current ratio.

• Cash ratio

The cash ratio is the most conservative of the three liquidity ratios covered in this article. As the name implies, this ratio is simply the ratio of cash and equivalents compared to current liabilities

• Debt ratio

Debt ratio measures the percentage of total funds in the business provided by its creditors.

• Return on asset

The return on assets (ROA) percentage shows how profitable a company’s assets are in generating revenue.

·        Debt Equity Ratio

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders’ equity and debt used to finance a company’s assets

·        Price–earnings ratio

The price-to-earnings ratio, or P/E ratio, is an equity valuation measure defined as market price per share divided by annual earnings per share.

7.6                         Ratio analysis

Current ratio

 Quick ratio

Cash ratio

Return on asset

 Price earning ratio

 Debt ratio

 Debt equity ratio

 Degree of Operating Leverage

 Degree of financial leverage

 Z-score

National bank Limited

 National bank is Distress.

NCC Bank Limited

 NCC Bank is grey and safe.

One Bank Limited

 One Bank safe Zone.

Premier Bank Limited

 Premier Bank is grey zone.

Prime bank Limited

Prime bank is Grey and Safe zone.

Part -5 Decision Making and   Conclusion

Chapter-8: Decision making and conclusion

Decision making

 Conclusion

The Chittagong  Stock Exchange is the prime bourse of the country. Through its nonstop highly fault tolerant screen based automated trading system the exchange has been offering facilities for transparent and highly efficient provisions for secondary market activities of securities. I had the opportunity to work for this organization during my internship program. I was placed at the of CSE  main office, Stock Exchange Building ,9E motijheel. During this time I got opportunity to observe the overall activities process of the CSE  specially about CSE   performance and potential Banks.  of CSE .

• The overall performance of 5 bank  is satisfactory than the all other listed Banks. .
• Company’s corporate governance is  efficiently and trying there level best.

The CSE  has been able to attract a significant volume of foreign funds and the number of foreign investor is growing day  by day .

 Reference

• INVESTMENTS   , Jones
• PRINCIPAL MANAGERIAL  FINANCE, LAWRANCE J. GITMA
• Annual report 2011,  National Bank Limited.
• Annual report 2011, One Bank Limited
• Annual report 2010, One Bank Limited
• Dhaka Stock exchange.
• Annual report 2009,Prime Bank Limited
• Annual report 2010,Prime Bank Limited

Bibliography

• www.csebd.com
• www.onebank.com
• www.primebank.com
• www.premierbank.com
• www.nationalbank.com
• www.nccbl.com