Executive Summary

The report provides a brief analysis of the financial performance of the company Titas Gas
Transmission and Distribution Company Limited of the years 2007 to 2011. From the balance
sheets and income statements from Titas gas, a vertical balance sheet and income statement is
created. In the vertical balance sheet, all figures are divided by total assets and expressed as a
percentage. In the vertical income statements, all figures are divided by sales and expressed as a
percentage, including averages and standard deviations. The horizontal balance sheets and
income statements are produced using a different approach. The figures are based on the year
2007, and all base year figures are taken as 100%. All the other items are expressed as a
percentage of its base year figures. The report further forecasts income statements and balance
sheets for 2012 and 2013.
This report also provides ratio analysis of year 2007 to 2011 and these ratios are calculated and
interpreted so that a trend of the performance in particular areas may be observed. The derived
data is also used to compare against past performances of the company and current performances
of existing competitors. Graphical representation is also provided for better understanding of the
numerical content. The method of analysis used is trend analysis for the mentioned years. The
types of ratios discussed are liquidity, asset management, debt management, and profitability and
stock-market ratios. The calculations are shown in details in the appendix and the formulas are
given within the ratio tables.
Required market return is determined using a risk free rate of 9.05 which is set by Bangladesh
Bank. Beta is calculated using market returns from July 2008 to July 2011. A weighted average
cost of capital is calculated using cost of equity, cost of debt and cost of retained earnings. This
helped us formulate an optimum capital structure for Titas. Finally, the report determined
intrinsic price using the dividend discount model. The calculations are shown in details in the
appendix and the formulas are given within the ratio tables.
In fact, the report has established a comprehensive view to understand companys financial
position and the market performance of the company through important indicators and authentic
interpretations.

Introduction
The report has represented an overall financial and market position of the company Titas Gas
Transmission Co. Ltd. Preparing this report, the company has been compared with the companies
which are enlisted in DSE in the same industry sector named Fuel and Energy Sector.
The report has tried to understand the companys current financial position and compared it with
previous performance. Moreover, monthly market return has been realized to understand the
companys volatility with market and the required rate of return that a shareholder can assume as
a perfect rate of return.
Moreover, report has tried to understand industry condition and tried to find the Titas Gas
Transmission Co Ltd. Loop holes in different performance indicator while giving suggestion to
improve the situation.

Company Background
Titas Gas T & D Co. Ltd. (TGTDCL) was formed in November 1964 as a joint Stock Company
(Under the Companys Act 1913) of the central Government of Pakistan on the one hand and
Pakistan Shell Oil Company on the other, with a view to transmitting and distributing natural gas
to the Dhaka city the then provincial capital of Pakistan from the discovered gas field called
Titas located on the bank of the River Titas, within the close vicinity of the present
Brahmanbaria district of Bangladesh. The authorized capital was Taka 17.8 million only, divided
into 17800 shares of Taka 10.00 each. Ninety percent of the shares were subscribed by the then
central Government of Pakistan and remaining ten percent by the Shell Oil Company.
In December 1971, after nine months of liberation war, Bangladesh emerged in the world map as
a new independent state with the same geographical boundary of the then East Pakistan. In
March 26, 1972 Govt. has formed Bangladesh Oil, Gas & Mineral Corporation (BOGMC)
under the Presidential Executive Order and Titas Gas T&D Co. Ltd. has become an enterprise of
BOGMC. Titas Gas T&D Co. Ltd. which was earlier established as a joint stock company with
90% share capital of the Govt. of Pakistan naturally vested to the Govt. of the Peoples Republic

of Bangladesh and the rest 10% share capital of Pakistan Shell Oil Company was transferred to
the newly formed Bangladesh Shell Oil Company. During 1975, under the nationalization
program, Govt. has brought back 10% share of Shell Oil Co. and Titas Gas T&D Co. Ltd. has
become a 100% Government owned Company. Meanwhile, during August1974, Bangladesh Oil
& Gas Corporation/Petrobangla and during October 1975, Ministry of Energy & Mineral
Resources had been formed. TGTDCL has been placed under the administrative control of the
newly formed ministry along with Petrobangla and its subsidiary Companys.
The basic objective of the Company was to construct, own and operate natural gas transmission
& distribution facilities in the mid-eastern region of Bangladesh i.e. Comilla, Mymensingh and
Dhaka district with the right of purchasing, transmission, distribution, sales and disposal of
natural gas within the jurisdiction of greater districts before creation of new districts.

Common Size Statements

Titas Gas Transmission and Distribution Company Limited
Vertical balance sheet
2007

2008

2009

2010

2011 AVERA
GE

STANDA
RD
DEVIATI
ON

1. CAPITAL
AND

28.9215

37.3510

38.7550

41.5726

47.2751

38.7750

7.1077%

23.3623

19.9490

16.9568

15.7679

16.6288

0.0029%

0.0039%

0.0136%

0.0490%

0.0143%

6.6932%

RESERVES
a) Share
capital
b) Deposits
for Share

0.0020%

6.0800%

0.0200%

c) Capital

2.2455%

2.0586%

1.7578%

1.4942%

1.2631%

1.7639%

0.4007%

19.5663

11.9272

17.0443

23.1080

30.1951

20.3682

6.8377%

13.6503

7.3386%

5.9360%

4.2541%

3.4960%

6.9350%

4.0395%

4.6579%

0.0000%

0.0000%

0.0001%

0.0053%

0.9327%

2.0825%

8.9925%

7.3386%

5.9360%

4.2540%

3.4907%

6.0024%

2.2414%

15.5279

17.3713

17.3848

15.7697

13.5497

15.9207

1.5848%

1.4845%

1.4146%

1.1988%

0.9892%

0.7723%

1.1719%

0.2960%

0.0276%

0.0287%

0.0223%

0.0293%

0.0263%

0.0268%

0.0028%

reserves
d) Revenue
reserves

2. LONGTERM

BORROWIN
GS
a) Unsecured
loans - local
sources
b) Unsecured
loans foreign
sources

3. OTHER
LONGTERM
LIABILITIES
a) Pension
fund
b) Gratuity

c) Leave pay

0.3934%

0.3874%

0.3446%

0.3208%

0.2888%

0.3470%

0.0443%

d) General

0.5817%

0.9121%

0.8861%

0.8276%

0.7522%

0.7919%

0.1326%

13.0407

14.6285

14.9331

13.6028

11.7100

13.5830

1.2960%

4. TOTAL

58.0997

62.0609

62.0759

61.5964

64.3208

61.6307

CAPITAL

0.0000%

0.0000%

0.0000%

0.0000%

0.0000%

0.0000%

0.0000%

35.3803

31.9513

27.3558

22.5859

19.3961

27.3339

6.5502%

35.3716

31.9404

27.3375

22.3235

18.8006

27.1547

0.0088%

0.0109%

0.0182%

0.2624%

0.5955%

0.1792%

provident
fund
e) Customers'
security
deposits

2.2410%

EMPLOYED
APPLICATI
ON OF
FUNDS :

5. FIXED
ASSETS
a) Fixed
assets (at

6.7747%

cost- less
accum.
depreciation)
b) Capital
work-inprogress

0.2567%

6.

14.5783

16.7379

23.8109

31.3809

36.1923

24.5401

a) Long-term

12.0701

14.5220

21.9376

29.9952

34.5558

22.6161

bank deposits

2.5082%

2.2159%

1.8734%

1.3857%

1.6366%

1.9239%

0.4476%

50.0414

51.3108

48.8333

46.0332

44.4116

48.1261

2.8499%

3.9339%

3.9198%

4.2662%

3.6019%

3.0377%

3.7519%

0.4633%

0.7680%

2.9310%

0.6486%

0.6848%

0.4050%

1.0875%

1.0394%

41.1249

38.6690

30.3638

27.9368

25.5293

32.7248

6.8222%

3.5031%

5.4864%

12.0233

12.2200

13.3685

9.3203%

INVESTME

9.2630%

NTS AND
OTHER
ASSETS

b) Loan to

9.6721%

employees

7. CURRENT
ASSETS
a) Inventories
of stores and
other
materials
b) Advances,
deposits and
prepayments
c) Trade
debtors (Net)
d) Cash and
bank balances

4.4900%

e) Other

0.7115%

0.3045%

1.5313%

1.5897%

2.0711%

1.2416%

0.7163%

100.0000 100.0000 100.0000 100.0000 100.0000

100.0000

0.0000%

current assets
TOTAL
ASSET

8.
CURRENT

41.9003

37.9391

37.9241

38.4036

35.6792

38.3693

34.7699

25.6940

24.9805

24.0934

23.4682

26.6012

31.8303

23.8113

22.7944

20.2214

1.8943%

20.1103

3.2323%

2.1774%

1.6848%

1.6378%

2.3397%

2.2144%

0.6454%

0.0000%

0.0000%

0.0771%

0.0911%

0.1331%

0.0603%

0.0588%

0.0000%

0.0000%

0.0000%

1.6377%

1.6332%

0.6542%

0.8958%

2.2410%

LIABILITIES
( 8i + 8ii )
i) GROUP
COMPANY

4.6444%

ACCOUNTS
a) Payable for
gas purchase

11.0690%

&
transmission
b) Payable for
PDF&
BAPEX
margin
c) Payable for
defi cit
wellhead
margin fund
for BAPEX
d) Payable for
gas
development

fund

e) Group

-0.2926%

0.4241%

0.5054%

0.4193%

0.1523%

0.4086%

12.2451

12.9436

14.3102

12.2110

11.7681

2.7284%

10.2282

11.0844

12.4679

10.5833

9.6963%

3.2327%

0.6615%

0.7682%

0.8481%

0.9785%

1.0340%

0.8581%

0.1519%

2.3514%

1.2488%

1.0111%

0.8638%

0.5936%

1.2137%

0.6789%

8.1411%

13.3717

10.9092

7.6296%

8.7324%

9.7568%

2.3759%

58.0997

61.9627

62.0759

61.5964

64.3208

61.6111

2.2367%

current

0.2948%

accounts
ii) OTHER

7.1304%

LIABILITIES
a) Creditors

4.1175%

and accruals
b) Workers'
Profi t
Participation
Fund
c) Current
portion of
long

9. NET
CURRENT
ASSETS ( 7

10. NET
ASSETS (
5+6+9 )

Here all the figures were divided by Total assets of that particular year and they were expressed
as a percentage of that years total asset.
Titas Gas Transmission and Distribution Company Limited
Vertical Income statement
2007

2008

2009

2010

2011

AVERAGE

STANDARD
DEVIATION

1. SALES

a) Gas sales revenue

b) Operational
income

100.0000%

100.0000%

100.0000%

100.0000%

100.0000%

100.0000%

0.0000%

98.5896%

98.6618%

98.8712%

98.8194%

98.9241%

98.7732%

0.1420%

1.4104%

1.3382%

1.1288%

1.1806%

1.0759%

1.2268%

0.1420%

2. COST OF SALES

90.3151%

88.0798%

87.6849%

86.3899%

84.5901%

87.4120%

2.1187%

85.1478%

83.2766%

83.3092%

82.2537%

80.3566%

82.8688%

1.7496%

69.3685%

69.9588%

71.4980%

68.6464%

65.5326%

69.0008%

2.2047%

6.6325%

6.6481%

5.3214%

4.7532%

4.6727%

5.6056%

0.9771%

c) Price deficit charge

8.4057%

6.1360%

5.7181%

4.6577%

5.4028%

6.0641%

1.4163%

d) Gas development

0.0000%

0.0000%

0.0000%

3.5695%

4.0319%

1.5203%

2.0881%

0.7412%

0.5337%

0.4062%

0.3345%

0.3784%

0.4788%

0.1643%

(2i + 2ii)

i) PURCHASE
COST

a) Gas purchase

b) Gas transmission
charge

charge

e) BAPEX margin

f) Deficit wellhead

0.0000%

0.0000%

0.3656%

0.2924%

0.3382%

0.1992%

0.1838%

5.1673%

4.8032%

4.3757%

4.1363%

4.2336%

4.5432%

0.4320%

a) Personnel costs

1.7536%

1.5391%

1.4251%

1.5457%

1.6623%

1.5852%

0.1261%

b) Professional

0.0396%

0.0355%

0.0336%

0.0200%

0.0210%

0.0300%

0.0089%

c) Promotional costs

0.0212%

0.0155%

0.0136%

0.0156%

0.0110%

0.0154%

0.0038%

d) Power costs

0.0592%

0.0438%

0.0339%

0.0339%

0.0331%

0.0408%

0.0112%

e) Communication

0.0134%

0.0116%

0.0087%

0.0074%

0.0064%

0.0095%

0.0029%

margin for BAPEX

ii)
ADMINISTRATIVE
& OTHER COST

services

costs

f) Transport costs

0.1677%

0.1388%

0.1262%

0.1218%

0.1121%

0.1333%

0.0215%

g) Occupancy costs

0.1049%

0.0915%

0.0766%

0.0793%

0.0964%

0.0898%

0.0118%

h) Administrative

0.0765%

0.1144%

0.0833%

0.0856%

0.0964%

0.0913%

0.0148%

0.0584%

0.0432%

0.0310%

0.0225%

0.0288%

0.0368%

0.0142%

0.1040%

0.0592%

0.0937%

0.0533%

0.0616%

0.0744%

0.0229%

k) Financial charges

0.0164%

0.0038%

0.0019%

0.0025%

0.0043%

0.0058%

0.0060%

l) Bad & doubtful

0.8146%

0.8489%

0.7637%

0.6757%

0.6957%

0.7597%

0.0744%

costs

i) Miscellaneous
costs

j) Transmission &
distribution costs

debts provision

m) Depreciation

1.7658%

1.7460%

1.5360%

1.2993%

1.2295%

1.5153%

0.2474%

0.1464%

0.1119%

0.1484%

0.1737%

0.1751%

0.1511%

0.0258%

9.6849%

11.9202%

12.3151%

13.6101%

15.4099%

12.5880%

2.1187%

0.6291%

0.7547%

0.6795%

0.5637%

0.8363%

0.6927%

0.1064%

10.3140%

12.6750%

12.9945%

14.1738%

16.2461%

13.2807%

2.1703%

charges

n) Petrobangla
Service Charge

3. OPERATING
PROFIT (1-2)

4. NONOPERATIONAL
INCOME

5. TOTAL INCOME
(3+4)

6. FINANCIAL

-0.3141%

-0.6247%

1.5502%

1.8634%

2.6419%

1.0233%

1.4237%

Interest income

0.4633%

0.3636%

1.7571%

2.0069%

2.7604%

1.4703%

1.0336%

Less: Interest cost

0.7774%

0.9882%

0.2070%

0.1435%

0.1185%

0.4469%

0.4061%

7. NET PROFIT

10.6281%

13.2996%

14.5447%

16.0372%

18.8880%

14.6795%

3.0778%

0.5061%

0.6333%

0.6926%

0.7637%

0.8994%

0.6990%

0.1466%

10.1220%

12.6663%

13.8521%

15.2735%

17.9886%

13.9805%

2.9312%

INCOME

BEFORE
CONTRIBUTION
TO WPPF (5+6)
8. WORKERS
PARTICIPATION
IN PROFITS

9. NET PROFIT
BEFORE
TAXATION (7-8)

10. PROVISION

3.5115%

3.2296%

3.5437%

3.9145%

4.6008%

3.7600%

0.5293%

a) Current Tax

0.0000%

3.1349%

3.4284%

3.7802%

4.4522%

2.9591%

1.7256%

b) Deferred Tax

0.0000%

0.0947%

0.1153%

0.1343%

0.1486%

0.0986%

0.0587%

11. NET PROFIT

6.6104%

9.4367%

10.3084%

11.3590%

13.3878%

10.2205%

2.4991%

FOR TAXATION

FOR THE YEAR

AFTER TAXATION
(9-10)

Here all the figures were divided by Total sales of that particular year and they were expressed as
a percentage of that years total sales.
Titas Gas Transmission and Distribution Company Limited

Horizontal Balance sheet

2007

2008

2009

2010

2011

100.0000%

140.8718%

171.1765%

216.0233%

290.5956%

a) Share capital

100.0000%

358.5342%

358.5342%

358.5342%

394.3876%

b) Deposits for

100.0000%

160.9869%

252.4671%

1046.2096%

4463.0694%

c) Capital reserves

100.0000%

100.0000%

100.0000%

100.0000%

100.0000%

d) Revenue

100.0000%

66.4922%

111.2773%

177.4872%

274.3495%

100.0000%

58.6429%

55.5506%

46.8364%

45.5304%

100.0000%

0.0000%

0.0000%

0.0038%

0.2017%

100.0000%

89.0184%

84.3244%

71.0945%

69.0095%

100.0000%

122.0290%

143.0195%

152.6248%

155.1297%

a) Pension fund

100.0000%

103.9452%

103.1654%

100.1457%

92.4894%

b) Gratuity

100.0000%

113.4480%

103.0497%

159.8528%

169.7612%

c) Leave pay

100.0000%

107.4262%

111.9082%

122.5379%

130.5295%

d) General

100.0000%

171.0220%

194.5680%

213.8010%

229.8694%

100.0000%

122.3607%

146.2797%

156.7619%

159.6373%

1. CAPITAL
AND RESERVES

Share

reserves
2. LONG-TERM
BORROWINGS
a) Unsecured
loans - local
sources
b) Unsecured
loans - foreign
sources
3. OTHER
LONG-TERM
LIABILITIES

provident fund
e) Customers'
security deposits

4. TOTAL

100.0000%

116.5164%

136.4853%

159.3294%

196.8134%

100.0000%

98.5077%

98.7698%

95.9378%

97.4607%

100.0000%

98.4984%

98.7285%

94.8469%

94.4919%

100.0000%

135.7753%

264.8468%

4483.1985%

12037.0429

CAPITAL
EMPLOYED
APPLICATION
OF FUNDS :
5. FIXED
ASSETS
a) Fixed assets (at
cost- less accum.
depreciation)
b) Capital workin-progress
6.

%
100.0000%

125.2388%

208.6450%

323.5001%

441.3551%

100.0000%

131.2375%

232.1745%

373.4703%

508.9636%

100.0000%

96.3710%

95.4127%

83.0263%

115.9997%

100.0000%

111.8464%

124.6590%

138.2473%

157.7771%

100.0000%

108.6893%

138.5357%

137.6009%

137.2788%

100.0000%

416.2701%

107.8791%

133.9937%

93.7354%

INVESTMENTS
AND OTHER
ASSETS
a) Long-term bank
deposits
b) Loan to
employees
7. CURRENT
ASSETS
a) Inventories of
stores and other
materials
b) Advances,
deposits and

prepayments
c) Trade debtors

100.0000%

102.5656%

94.3168%

102.0909%

110.3601%

100.0000%

170.8351%

438.4349%

524.2433%

678.4314%

100.0000%

46.6838%

274.9443%

335.7970%

517.5022%

100.0000%

98.7673%

115.6207%

137.7432%

151.3824%

100.0000%

80.6066%

91.7770%

104.1381%

119.9924%

100.0000%

81.5994%

91.4798%

95.4742%

10.5799%

100.0000%

73.4817%

66.5868%

76.1497%

128.6854%

100.0000%

109.9033% -185.1467%

-259.5647%

-254.7592%

100.0000%

187.3249%

231.8899%

301.6124%

304.4504%

100.0000%

270.9619%

343.8881%

455.0664%

456.9470%

100.0000%

126.6744%

163.7896%

222.3195%

277.9012%

(Net)
d) Cash and bank
balances
e) Other current
assets
8. CURRENT
LIABILITIES ( 8i
+ 8ii )
i) GROUP
COMPANY
ACCOUNTS
a) Payable for gas
purchase &
transmission
b) Payable for
PDF& BAPEX
margin
c) Payable for defi cit wellhead
margin fund for BAPEX
d) Payable for gas
development fund
e) Group current
accounts
ii) OTHER
LIABILITIES
a) Creditors and
accruals
b) Workers' Profi t

Participation Fund
c) Current portion

100.0000%

57.9304%

54.9279%

55.2056%

44.8826%

100.0000%

179.1613%

171.1767%

140.8421%

190.6893%

100.0000%

116.3321%

136.4853%

159.3294%

196.8134%

100.0000%

127.8041%

145.5692%

299.8819%

615.5089%

0.0000%

77.2441%

106.4167%

724.1199%

2032.1331%

of long
9. NET
CURRENT
ASSETS ( 7
10. NET ASSETS
( 5+6+9 )
AVERAGE
STANDARD
DEVIATION

Here, the figures of 2007 balance sheet were taken as the base year data and all the other figures
for other 4 years were expressed as percentage of the figures of 2007.
Titas Gas Transmission and Distribution Company Limited
Horizontal Income statement
2007

2008

2009

2010

2011

1. SALES

100.0000%

114.7410%

135.7982%

165.7129%

175.9656%

a) Gas sales revenue

100.0000%

114.8250%

136.1861%

166.0991%

176.5626%

b) Operational

100.0000%

108.8707%

108.6813%

138.7169%

134.2335%

100.0000%

111.9011%

131.8434%

158.5109%

164.8113%

100.0000%

112.2195%

132.8660%

160.0804%

166.0641%

income
2. COST OF SALES
(2i + 2ii)
i) PURCHASE
COST

a) Gas purchase

100.0000%

115.7175%

139.9670%

163.9880%

166.2353%

b) Gas transmission

100.0000%

115.0113%

108.9531%

118.7575%

123.9709%

100.0000%

83.7587%

92.3794%

91.8237%

113.1020%

100.0000%

82.6221%

74.4214%

74.7865%

89.8300%

100.0000%

106.6548%

114.9941%

132.6475%

144.1684%

a) Personnel costs

100.0000%

100.7075%

110.3648%

146.0739%

166.8052%

b) Professional

100.0000%

102.7088%

115.0358%

83.7747%

93.2909%

c) Promotional costs

100.0000%

83.8129%

86.8999%

121.7389%

90.8989%

d) Power costs

100.0000%

84.8104%

77.8006%

94.6853%

98.2623%

e) Communication

100.0000%

99.1870%

87.6410%

91.3799%

83.6163%

f) Transport costs

100.0000%

94.9911%

102.1950%

120.3268%

117.6912%

g) Occupancy costs

100.0000%

100.0746%

99.1929%

125.2357%

161.7564%

h) Administrative

100.0000%

171.6710%

147.9413%

185.5579%

221.8503%

100.0000%

84.9515%

72.1055%

63.9472%

86.6814%

100.0000%

65.2907%

122.3062%

84.8456%

104.1918%

k) Financial charges

100.0000%

26.4307%

15.6336%

25.4553%

46.2341%

l) Bad & doubtful

100.0000%

119.5733%

127.3174%

137.4543%

150.2809%

charge
c) Price deficit
charge
d) Gas development
charge
e) BAPEX margin
f) Deficit wellhead
margin for BAPEX
ii)
ADMINISTRATIVE
& OTHER COST

services

costs

costs
i) Miscellaneous
costs
j) Transmission &
distribution costs

debts provision
m) Depreciation

100.0000%

113.4586%

118.1299%

121.9327%

122.5228%

100.0000%

87.6839%

137.6357%

196.6873%

210.4414%

100.0000%

141.2245%

172.6778%

232.8751%

279.9837%

100.0000%

137.6471%

146.6616%

148.4899%

233.9034%

100.0000%

141.0062%

171.0909%

227.7278%

277.1729%

100.0000%

228.2081%

-670.2454%

-983.1501%

charges
n) Petrobangla
Service Charge
3. OPERATING
PROFIT (1-2)
4. NONOPERATIONAL
INCOME
5. TOTAL INCOME
(3+4)
6. FINANCIAL
INCOME

1480.1405%

Interest income

100.0000%

90.0297%

514.9773%

717.7448%

1048.3014%

Less: Interest cost

100.0000%

145.8530%

36.1533%

30.5919%

26.8237%

7. NET PROFIT

100.0000%

143.5832%

185.8417%

250.0517%

312.7225%

100.0000%

143.5832%

185.8417%

250.0517%

312.7225%

100.0000%

143.5832%

185.8417%

250.0517%

312.7225%

100.0000%

105.5275%

137.0408%

184.7282%

230.5495%

BEFORE
CONTRIBUTION
TO WPPF (5+6)
8. WORKERS
PARTICIPATION
IN PROFITS
9. NET PROFIT
BEFORE
TAXATION (7-8)
10. PROVISION

FOR TAXATION
a) Current Tax
b) Deferred Tax
11. NET PROFIT

100.0000%

163.7987%

211.7652%

284.7523%

356.3735%

100.0000%

113.8777%

110.6839%

130.4038%

146.3029%

0.0000%

34.9823%

156.7841%

225.2809%

329.7675%

FOR THE YEAR

AFTER
TAXATION (9-10)
AVERAGE
STANDARD
DEVIATION

Here, the figures of 2007 income statement were taken as the base year data and all the other
figures for other 4 years were expressed as percentage of the figures of 2007.

Forecasted Statements for 2010 and 2011:

Forecasted balance sheets and Income statements for 2012 and 2013 have been created through
percentage of sales method. Discretionary financing and common equity excluding retained earnings
assumed to be fixed for both two years.

Forecasted Balance Sheet:

Titas Gas Transmission Distribution Ltd
Pro forma balance sheet (% of Sales Method)
As at 2012 & 2013

2012

2013

Current asset

30582950474.29

35246850421.61

Fixed Asset

13356272254.46

15397164573.22

Investments

24926171208.05

28727412317.28

Total asset

68865393936.79

79371427312.11

Current liabilities

24570647371.49

28317671095.63

Long term

2,088,802,253

2,088,802,253

8,095,811,119

8,095,811,119

34755260743.49

38502284467.64

Share capital

9,421,160,300

9,421,160,300

Deposits for Share

29,272,335

29,272,335

Capital reserves

754,693,866

754,693,866

Revenue

3293498371.21

3798623967.99

Total Equity

13498624872.21

14003750468.99

Total Equity and

48253885615.70

52506034936.63

20611508321.09

26865392375.49

Equity and
Liabilities

Borrowings
Others Long term
liabilities
Total Liabilities

Equity

reserve/retained
earnings

Notes:

Liabilities

While
retained

Discretionary
Financing Needed

calculating
earnings

dividend was calculated as the percentage of the income of the 2011 dividend paid.

Forecasted Income Statements:

Sales Growth Calculation:

Year

Growth (g)

2008

14.74%

2009

18.35%

2010

22.02%

2011

6.19%

Growth calculation from Future value formula

FV=PV*(1+g)4
Or, (1+g)4 =
Or, g= 0.1517 or 15.17%
Average sales growth:
g=
Or, g= 15.25%

Average growth
15.33%

Titas Gas Transmission Distribution Ltd

Pro forma Income Statements (% of Sales Method)
For the year ended June 30, 2012 & 2013

2012

2013

Revenue

79005297014.43

91053604809.13

Cost of turnover

63485936927.77

73167542309.26

Gross Profit

15519360086.65

17886062499.86

Operating Expenses:
Operating Expenses

3341924063.71

3851567483.42

Operating profit

12177436022.94

14034495016.44

Non Operational

663644494.92

764850280.39

Total Income

12841080517.86

14799345296.83

Financial Income

2099307225.6

2431840520.73

Net profit Before

14940387743.46

17231185817.56

711047673.12

819482443.28

14229340070.33345

16411703374.28531

Tax

3638442255.98

4196472552.80

Net Profit for the

10590897814.34

12215230821.4

2012

2013

Income

Contribution to
WPPF
Workers Participation
In Profit
Net Profit Before
Tax(EBT)

Year After Tax

Revenue

79005297014.43

91053604809.13

Cost of turnover

63485936927.77

73167542309.26

15519360086.65

Gross Profit

17886062499.86

Operating Expenses:
Operating Expenses

3341924063.71

3851567483.42

Operating profit

12177436022.94

14034495016.44

Non Operational

663644494.92

764850280.39

Total Income

12841080517.86

14799345296.83

Financial Income

2099307225.6

2431840520.73

Net profit Before

14940387743.46

17231185817.56

711047673.12

819482443.28

14229340070.33345

16411703374.28531

Tax

3638442255.98

4196472552.80

Net Profit for the

10590897814.34

12215230821.4

Income

Contribution to
WPPF
Workers Participation
In Profit
Net Profit Before
Tax(EBT)

Notes:

Year After Tax

Depreciation expenses changes with changes in sales overtime

Ratio Analysis
Liquidity Ratio
Current Ratio:
Current Ratio=

Year

2007

2008

2009

2010

2011

Industry
Average

1.19 times

Ratio

1.35 times

1.29 times

1.20 times

1.24 times

1.97 times

Current Ratio

TIMES
1.4

1.35

1.35

1.29

1.3

1.24

1.25

1.2

1.19

1.2

Current Ratio

1.15
1.1
2007

2008

2010

2011

YEAR

Current Ratio(2011)

TIMES
4
3.5
3
2.5
2
1.5
1
0.5
0

2009

3.64

3.49

2.09
1.24

1.12

1.19

1.97

1.05
Current Ratio

Company & Industry

Avg.

Analysis:
In 2011, Titas Gas Transmission & Distribution Co. Ltds current assets were only 1.24 times of
their current liabilities. The ratios are fluctuating through 2007 to 2011. In 2011 current ratio
slightly increased by changing the trend from downward to upward but it is less than 2008
&2009. So performance is not satisfactory. It caused due to more relative change in current asset
than current liabilities. Some of the Company like Barakatullah & Desco are doing much better
than Titas. They are above industry average whereas Titas is operating below industry Average.
So performance is really bad.

Quick/Acid Test Ratio:

Acid Test Ratio=
Year

2007

2008

2009

2010

2011

Industry
Average

1.10 times

Ratio

1.24 times

1.18 times

1.10 times

1.16 times

1.69 times

Acid Test Ratio

TIMES
1.3
1.24

1.25

1.18

1.2
1.15

1.16

1.1

1.1

Acid Test Ratio

1.1
1.05
1
2007

2008

2010

2011YEAR

Acid Test Ratio(2011)

TIMES
4
3.5
3
2.5
2
1.5
1
0.5
0

2009

3.51
2.78
1.9
1.16

0.87

0.72

1.69

0.9
Acid Test Ratio

Company &
Industry Avg.

Analysis:
In 2011, Titas gas transmission and co. ltds Current asset excluding inventory was only 1.16
times of its current liabilities. It declined compared to 2008 and 2009. The trend is fluctuating
from year to year. It also is operating below industry average. So Performance is not favorable.

But it increased from 2010 due to more relative change in current asset excluding inventory that
current liabilities.

Net Working Capital:

Net Working Capital=Current Asset-Current Liabilities
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

2736131661

4902089610

4683621210

3853625688

5217510630

TK

TK

TK

TK

Tk

5,072,665,231tk

Net Working Capital

Amount

BDT 6,000,000,000.00
BDT 5,000,000,000.00

3853625688

BDT 4,000,000,000.00
BDT 3,000,000,000.00

5217510630

4902089610
4683621210

2736131661
Net Working Capital

BDT 2,000,000,000.00
BDT 1,000,000,000.00
BDT 0.00
2007

2008

2009

2010

2011

YEAR

BDT 7,974,800,362.00

BDT 14,016,189,592.00

BDT 6,000,000,000.00
BDT 4,000,000,000.00
BDT 2,000,000,000.00

BDT 5,072,665,231.00

BDT 8,000,000,000.00

BDT 921,625,711.00

BDT 10,000,000,000.00

BDT 2,777,516,000.00

BDT 12,000,000,000.00

BDT 2,312,891,940.00

BDT 14,000,000,000.00

BDT 2,288,122,381.00

BDT 16,000,000,000.00

BDT 5,217,510,630.00

Net Working Capital(2011)

Amount

Net Working Capital

BDT 0.00

Company &
Industry Avg.

Analysis:
In 2011, net working capital increased but the trend is fluctuating significantly through 2007 to
2011. It is above industry average but significantly below some companies in the industry. So the
performance is not enough.
Cash Conversion Cycle:
Cash Conversion Cycle = Days in Inventory + Days Sales Outstanding Average Payment Period
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

27 days

45 Days

24 days

23 days

18 days

217.67days

Cash Conversion Cycle

DAYS
45

50
40
27

30

24

23
18

20

Cash Conversion Cycle

10
0
2007

2008

2010

2011 YEAR

Cash Conversion Cycle(2011)

Days
400
200

2009

160

82

18

75

141

218

0
-0.44

-200
-400

Cash Conversion Cycle

-600

Company &
Industry Avg

-800
-1000
-1200

-1049

Analysis:
On an average, In 2011 it takes 18 day to covert Titas gas distribution &transmission co. Ltds
invested Capital into cash.
Insight Gain:
The companys liquidity ratios are indicating that the company is not doing well in this section.
Their performance is not stable through the years. In some cases its performance is below
industry average whereas some company is doing above industry average. So management need
to find out the problem and should take necessary initiatives. Otherwise the company will not be
able to compete in the industry.

Asset Management Ratios

Inventory turnover:
Inventory turnover=
Year

2007

2008

2009

2010

2011

Industry
Average

25.08 times

Ratio

25.90 times

24.06 times

29.19 times

31.95 times

10.01times

Inventory turnover
40
31.95

30

25.9

25.08

20

31.95

29.19
24.06

Inventory turnover

10
0
2007

2008

2008

2009

2010

2011

Inventory turnover
35
30
25
20
15
10
5
0

31.95

Analysis:

13.43

11.85

8.5
0.391

2.18

10.01
3.42
Inventory turnover

In 2011, the company has sold out and restored its inventory 31.95 times. Performance inclined
compared to 2009 and its far above industry average which shows a superior position in the
industry. However, inventory turnover ratio increased as relative change in COGS was higher
than the relative change in inventory.
Days in Inventory:
Days in Inventory=

Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

15days

14.09days

15 days

13 days

11.42 days

188.54days

Days in invetory
20
15

15

14.09

15
13

10

11.42
Days in invetory

5
0
2007

2008

2009

2010

2011

Days Inventory
1000
900
800
700
600
500
400
300
200
100
0

933.5

167.43
11.42

27.23

43

31

106.72

188.54

Days Inventory

Analysis:
It means the inventory of Titas Gas Transmission Co. Ltd on average stays in the inventory for
11.4 days before it sold out.

Total Asset turnover ratio:

TATO=
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

1.16 times

1.20 times

1.23 times

1.28 times

1.15 times

1.29 times

TATO
1.3

1.28

1.25

1.23

1.2

1.2
1.16

1.15

1.15

TATO

1.1
1.05
2007

2008

2009

2010

2011

TATO
6
5
4
3
2
1
0

5.21

4.5

4.3
1.86

1.29
0.42

0.24

0.08

TATO

Analysis:
In 2011 every 1 TK worth of asset generated 1.15 TK worth of sales. Performance declined
compared to 2010 and the performance was unfavorable as it was below industry average.
However, the decline in the performance was caused by the higher relative change in total asset
than the relative change in sales.

Fixed Asset turnover ratio:

FATO=

Year

2007

2008

2009

2010

2011

Industry
Average

3.28 times

Ratio

3.76 times

4.51 times

5.66 times

5.92times

39.33times

FATO
6
5
4
3
2
1
0

5.66
4.51
3.76

3.28

FATO

2007

2008

2009

2011

FATO
300
250
200
150
100
50
0

245.3

5.92

15.76

6.57

39.33
1.27

0.41

0.11

FATO

Analysis:
In 2011 every 1 TK worth of fixed asset generated 1.15 TK worth of sales. Performance inclined
compared to 2010 but the performance was unfavorable as it was below industry average.
However, the incline in the performance was caused by the higher relative change in sales than
the relative change in fixed assets.
Days Sales Outstanding:

DSO =
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

130 day

117 days

90 day

80 days

81.22 days

80

81.22

219 days

DSO
140

130

120

117

100

90

80

DSO

60
40
20
0
2007

2008

2009

2010

2011

DSO
1400
1200
1000
800
600
400
200
0

1167

81.22

2.01

55

80.27

67

81

219
DSO

Analysis:
In 2011, Titas took on an average 81.22 days to collect account receivables from the customers.
Days Payable Outstanding:

DSO =
Year

2007

2008

2009

2010

2011

Industry
Average

118 days

Ratio

86 days

81 days

70 days

74.99

490 days

DPO
140
120

118

100
86

80

81

74.99

70

60

DPO

40
20
0
2007

2008

2009

2010

2011

DPO
3500

3150

3000
2500
2000
1500
1000
500
0

Analysis:

490
74.99

29.68

87.21

35

47

DPO

In 2011, Titas took on an average 74.99 days to make payment to its suppliers.
Comparing with DSO of 2011 Titas was in unfavorable position since it takes 81.22 days to
collect A/R from customers and 74.99 days to make payment to suppliers.

Insight Gained from Asset Management Ratio:

Analyzing all the ratios it can be clear that the company has inefficiency in collecting A/R from
the customer which can create liquidity problem in future for the company. Moreover, it has
inefficiency in utilizing assets to generate higher sales revealing the companys weakness in
asset management.

Debt Management Ratio:

Debt Ratio:
Debt Ratio =
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

29.18%

62.64%

61.24%

58.43%

52.72%

62.71%

Debt Ratio
62.64%

70.00%

61.24%

58.43%

60.00%

52.72%

50.00%
40.00%

29.18%

Debt Ratio

30.00%
20.00%
10.00%
0.00%
2007

2008

2009

2010

2011 YEAR

Debt Ratio(2011)
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

90.72%

94%
82.22%

73.45%

52.72%

62.71%

36.46%
9.40%

Debt Ratio

Company &
Industry Avg

Analysis:
In 2011, the companys 52.72% of the total assets were purchased by debt which means for
every 1 TK of total asset nearly .53 TK financed by debt. It is declining from 2008 which is very
favorable for the company because lower the debt ratio, the higher the cushion against creditors
losses in the event of bankruptcy.
From Capital Structure Point of View
Titas gas transmission & distribution company ltds capital structure consists of 52.72% debt and
rest is equity.

Times Interest Earned:

Times Interest Earned =
Year

2007

2008

2009

2010

2011

Industry
Average

20.90 times

Ratio

34.86 times

130.03 times

32.02times

130.03
112.74
71.27
Times Interest Earned

34.86

20.9

2007

2008

2009

2010

2011
YEAR

Times Interest Earned(2011)

TIMES
140
120
100
80
60
40
20
0

112.74 times

Times Interest Earned

TIMES
140
120
100
80
60
40
20
0

71.27 times

130.03

7.2

20

32.02
2.38

0.5293

Times Interest Earned

Company & Industry

Avg.

Analysis:
In 2011, Titas gas distribution & company ltds Earnings before interest and tax is 130.03 times
higher than its interest expense and it is increasing through the year. The company is much
higher than industry average. So the company is in a good shape.

Insight Gain:

The company is doing well in the debt management in the company. The times interest earned is
increasing which is an indication that company using less amount of debt in its operation.

Profitability Ratio
Gross Profit Margin:
Gross Profit Margin=
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

14.85%

16.95%

16.69%

17.75%

19.64%

22.33%

Gross Profit Margin

25.00%
20.00%
15.00%

14.85%

16.95%

16.69%

17.75%

19.64%
Gross Profit Margin

10.00%
5.00%
0.00%
2007

2008

2009

2010

2011

Gross Profit Margin

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

49.18%
35.19%
26.86%
22.75%
19.64%

22.33%

1.46% 1.24%

Gross Profit Margin

Analysis:
In 2011, for every 100 Tk sales Titas Gas Transmission Co. Ltd generated 19.64 Tk gross profit.
Performance inclined compared to 2009 and its certainly below industry average which shows
an unfavorable position in the industry. However, gross profit margin increased as relative
change in gross profit was higher than the relative change in sales.

Operating Profit Margin:

Operating Profit Margin=
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

9.68%

12.08%

12.32%

16.18%

15.41%

15.38%

Operating Profit Margin

20.00%
16.18% 15.41%

15.00%
12.08% 12.32%

10.00%

Operating Profit
Margin

9.68%

5.00%
0.00%
2007

2008

2009

2010

2011

Operating Profit Margin

25.00%
20.00%

19.74%
16.28%

15.41%

15.41%
13.59%
12.32%

15.00%
10.00%
5.00%

Operating Profit Margin

0.78%1.19%

0.00%

Analysis:
In 2011, for every 100 Tk sales Titas Gas Transmission Co. Ltd produced 14.41 Tk operating
profit. Performance declined compared to 2009 and its just above industry average which shows
a favorable performance in the industry. However, operating profit margin declined because
relative change in sales was higher than the relative change in operating profit.
Net Profit Margin:
Net Profit Margin=
Year

2007

2008

2009

2010

2011

Industry
Average

6.61%

Ratio

9.56%

10.31%

11.36%

13.39%

13.81%

Net Profit Margin

16.00%
14.00%

13.39%

12.00%
10.00%

10.31%

9.56%

11.36%

8.00%

Net Profit Margin

6.61%

6.00%
4.00%
2.00%
0.00%

2007

2008

2009

2010

2011

Net Profit Margin

35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

30.93%
21.40%
12.02%

9.68%
1.30% 0.85%

14.78% 13.81%
Net Profit Margin

Analysis:
In 2011, Titas Gas Transmission Co. Ltd generated 13.39 Tk net profit for every 100 Tk of sales.
Performance inclined compared to 2010 whereas ratio was just below industry average showing
slightly unfavorable performance in the industry. However, the incline in the ratio compared to
2010 was caused due to higher relative change in net profit compared to relative change in sales

Return on Asset:

Return on Asset=
Year

2007

2008

2009

2010

2011

Industry
Average

7.66%

Ratio

11.50%

12.70%

14.53%

15.36%

5.59%

Retrun on Asset
20.00%
15.00%
11.50%

10.00%

12.70%

14.53%

15.36%

Retrun on Asset

7.66%
5.00%
0.00%
2007

2008

2009

2010

2011

Return on Asset
18.00% 15.36%
14.78%
16.00%
14.00%
12.00%
10.00%
6.78%
8.00%
5.12% 5.59%
5.04%
6.00%
4.05%
4.00%
1.58%
2.00%
0.00%

Analysis:

Return on Asset

In 2011, Titas Gas Transmission Co. Ltd generated 15.36 Tk net profits from every 100 Tk
worth of total assets. The ratio inclined from 2010 and it was far above industry average
presenting its superior performance in the industry. However, the incline in the ratio in 2011 was
caused by a higher relative change in net profit than the relative change in total assets.

Operating Return on Asset:

Operating Return on Asset=
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

11.23%

14.53%

12.32%

20.68%

17.68%

6.38%

Operating return on asset

25.00%
20.68%

20.00%

17.68%
15.00%
10.00%

14.53%
11.23%

12.32%

Operating return on asset

5.00%
0.00%
2007

2008

2009

2010

2011

Operating Return on Asset

20.00% 17.68%
18.00%
16.00%
14.00%
10.23%
12.00%
10.00%
6.82%
6.38%
8.00%
4.05%
6.00%
2.22% 2.58%
4.00%
1.14%
2.00%
0.00%

Operating Return on Asset

Analysis:
In 2011, Titas Gas Transmission Co. Ltd generated 17.68 Tk operating profit from every 100 Tk
worth of total assets. The ratio declined from 2010 but it was far above industry average
presenting its better performance in the industry. However, the decrease in the ratio in 2011 was
caused by a higher relative change in total assets than the relative change in operating profit.

Return on Equity
Return on Equity=
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

26.49%

30.8%

32.78%

34.92.%

32.49%

26.11%

Return on Equity
40.00%
35.00%

34.92%

32.78%

30.80%

30.00%

32.49%

26.49%

25.00%
20.00%

Return on Equity

15.00%
10.00%
5.00%
0.00%
2007

2008

2009

2010

2011

Return on Equity
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

40.46%

38.14%
32.49%
26.65%

26.11%

22.07%
14.90%
8.06%

Return on Equity

Analysis:
In 2011, common share holders of the Titas Gas Transmission Co. Ltd earned 32.49 Tk for every
100 Tk invested in the company. The performance declined compared to 2010 but the
performance was far better than industry average showing a good position in the industry.
However, the decline in the performance in 2011 was caused by higher relative change in total
common equity than relative change in net income.

Insight Gained from the profitability ratio:

Analyzing the entire profitability ratio it is apparent that company is doing better in most of the
cases. However, it has not done well in the gross profit section reflecting its inefficiency in
controlling cost of goods sold which is reducing the gross profit in turn reducing the ratio.

Market Ratio:
Earnings per Share:
Earning per Share=

Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

N/A

TK 49.25/

Tk 63.67/

TK

TK 97.41/

TK 37.11/

share

share

85.62/share

share

share

EPS
120
100

97.41
85.62

80
65.67

60
40

EPS

49.25

20
0
2008

2009

2010

2011

EPS
120
100
80
60
40
20
0

97.41
70.99
29.82
4.3

37.11

22.07

18.39

2.32

EPS

Analysis:
In 2011, the common share holder earns TK 97.41/ Share. EPS increased compared to 2010 and
it was far above industry average. However, the increase in EPS was caused by increase in net
income from 2010 to 2011.
Market to Book Value Ratio (M/B):

M/B Ratio=
Year

2007

2008

2009

2010

2011

Industry
Average

Ratio

N/A

3.12 times

3.53 Times

0.89times

0.23times

2.57 times

M/B Ratio
4
3.53
3.12

3
2

M/B Ratio

0.89
0.23

0
2008

2009

2010

2011

M/B ratio
8
7
6
5
4
3
2
1
0

7.4

3.64

4.13
2.57
1.65
0.238

0.23
Titas

Jamuna Meghna

Padma

Desco

M/B ratio

0.68
Power Barkatulla Industry
Grid
average

Analysis:
In 2011, the Market value of Titas share was .23 times higher than the book value per share. The
ratio declined compared to 2010 and it was far below industry average showing a serious
unfavorable position in the industry. However, the ratio declined as relative change in book value
per share was higher than the relative change in market value.
Price Earnings ratio:

Price Earnings ratio=

Year

2007

2008

2009

2010

2011

Industry
Average

N/A

Ratio

10.13

11.67

10.78

0.69

10.49

P/E Ratio
15
11.67

10.78

10.13

10

P/E Ratio

5
0.69

0
2008

2009

2010

2011

P/E ratio
30
25
20
15
10
5
0

27.77
20.52
9.54
0.69

10.49

10.21
1.59

3.12
P/E ratio

Analysis:
In 2011, the common share holders of Titas were willing to pay .69 TK for every dollar of
reported earnings. The ratio is very low compared to industry average showing the share price is
highly undervalued. It also implies that it will create lack of confidence among the common
share holder on the company.
Insight gained from Market ratios:

Analyzing entire market ratios, it is apparent that in 2011 in DSE the price of share was
undervalued which is actually reflected by the P/E ratio. Although earning per share was
Average Return

Standard

Coefficient of

Deviation

Variation

Titas Gas Co Ltd

2.37%

12.84%

5.42

DSE General

0.89%

10.21%

11.47

Index
significantly high, investors were having lack of confidence to invest on it. It may be caused due
to the severe market fall in 2011 which caused the market price to fall significantly.

Risk and Return Analysis

Here,
Standard Deviation =

Coefficient of variation=

* 100

Index
Analysis:
From the table, it is clear that Titas has a high rate of return and risk compared to market (DSE
general index). As we know, coefficient of variation measures the risk involved in per unit of
return, from the table it is apparent that Titas has low risk per unit of return compared to DSE
general index.

Market Return Analysis

Beta calculation:

Titas
50.00%
y = 0.8494x + 0.0161

40.00%
30.00%
20.00%
DSE General
Index
-40.00%

10.00%
0.00%
-20.00%
0.00%
-10.00%

Linear (Titas)
20.00%

40.00%

Linear (Titas)

-20.00%
-30.00%
-40.00%
Titas monthly Return

Notes: Beta has been calculated by the monthly return from July, 2008 to July, 2012 as the
company was enlisted in DSE since July, 2012.

Analysis:

=.85

So the beta for the company is 0.8494 found by the scattered diagram and the regression analysis
which shows that the companys volatility to the market returns. It means 1% change in the
market return will lead to .85% change in the companys return.
Risk Free Rate (RF:
RF= 9.05%

Reason to choose the rate of monthly T-Bill as the Risk Free Rate (RF):
From Bangladesh Bank website risk free rate of 9.05% has been chosen, which is the rate of
monthly T-bill is. It is chosen monthly as all the data used to calculate beta are in monthly basis.
Moreover, to calculate the average market return (RM) rate of return, DSE general index are used
which are also monthly. So, to match the period while calculating required rate of return (R K)
through CAPM, monthly risk free rate has been chosen.
Monthly Required Rate of Return (RE) Using CAPM:
Here,
Monthly Average Market Return= 0.89%
Risk Free return= 9.05%
= 0.85
CAPM:
RE = RF+ (RM-RF)
RE=9.05%+.85(.89%-9.05%)
RE=2.11%
Annual Required Rate of Return (RE)= 25.37%

Interest and other Cost of financing of debt:

Annual Required Rate of Return (RE)= 25.37%

Cost of debt is the calculated from the 2011 interest expense divided by long term loan of
2011and tax rate is calculated is divided by the tax paid in 2011 by the corresponding EBT.
Moreover, cost of equity/ retained earnings is the companys annual required rate of return.

WD (weight of

KD (Cost of

debt)

debt)

Tax rate

WE( Weight of

WRE( Weight

KE /KR ( Cost

Common

of Retained

of Common

equity)

Earnings)

equity/retained
earnings)
25.37%

Weighted Average Cost of Capital:

WD*KD

WE*KE

WRE*KRE

WACC

6.74%

11.91%

26.32%

(1-T)
7.67%

Analysis:
WACC is a calculation of a firm's cost of capital in which each category of capital is
proportionately weighted. All capital sources - common stock, preferred stock, bonds and any
other long-term debt - are included in a WACC calculation. So, it is apparent from the table that
Titas has to spend proportionately 7.67% as the cost of debt, 6.74% as the cost of equity and
11.91% as the cost of retained earnings generating a total cost of capital of 26.32%.

Optimal Capital Structure

combinat

Capital

Debt

WACC

Value of the firm

ion

Retained

Common

Earnings

Equity

46.95%

26.55%

26.50%

26.32%

29872803275.08

36.95%

16.55%

36.50%

26.68%

29469721971.51

26.95%

6.55%

46.50%

26.75%

29392604942.06

56.95%

36.55%

16.50%

26.96%

30287064029.28

66.95%

26.55%

6.50%

26.60%

30712975867.19

Note: Weight combination of different categories of capital is arbitrary assumed

Analysis:
As we can see from the table, the optimal structure of the firm is the combination-5 which
consist of 66.95% retained earnings, 26.55% common equity and 6.50% generating highest value
of 30712975867.19 for the firm.

Dividend Policy
There are three views of dividend policy that a company can follow.
1st View: Dividend Policy is absolutely irrelevant
This view says that there is no relationship between dividend policy and stock value. The logic
behind this is (total return=Capital gain yield + Dividend yield) that investor do not care whether

return come from capital gain yield or dividend yield. What they care is the total rate of return.
This view assumes perfect capital market exist.
2nd View: Dividend is absolutely relevant
This view says high dividend increases the share price because t believes that dividend income
has a higher value to the investor than do capital gains income. Logic for this is that dividends
are more certain than capital gains. There is no assumption in this view.
3rd View: Low Dividend increases the Share Price
This view says people always try to maximize after tax income. Investors always try to defer
taxes whenever possible. In case of dividend income taxes are paid when the dividend is
received, whereas capital gains are deferred until the stock is actually sold. So investors want
low dividend and high retention of firms earnings to increase the share price.
Titas Gas Transmission & Distribution Company ltd follows the 2nd view that is High
Dividend Increases the share price.
Justification:
As we see the historical dividend payment of Titas gas transmission and distribution company ltd
from 2008 to 2011, we see that it is increasing. So we can say that they are actually following 2 nd
view. The reason behind this is that people are always concern about their certain income. In the
view of people dividend is a certain income whereas they are uncertain about the income from
the capital gain. The reason behind their belief is dividends can be predictable compared to
capital gain as management can control dividend but it cannot dictate the price of stock.
Keeping all this in mind the company decided to follow the view of Dividend is totally relevant.

Payment plans regarding dividend:

Titas gas limited has been paying cash dividend to its shareholders since it started giving
dividends. The dividend per share paid to the shareholders in 2008, 2009, 2010, 2011 has been
9.38, 15.52, 26.98, and 24.80 taka respectively.

They have maintained a stable trend of increase in dividends in small amounts from 2008 to
2010. Only in 2011 there has been a slight decrease in dividend. Apart from this year, our
forecasted dividend for 2012, 2013 and 2014 has been 33.29, 44.94 and 47.19 taka respectively
which show small but upward increments in dividends.
So, we can conclude that Titas gas limited follows stable dollar dividend payment plan in
paying dividends to its shareholders.

Conclusion
The financial position and performance of the company was overall good. The company should
try to improve the performance in certain areas especially in the asset management area to use of
the companys full capability. Moreover, the company should use debt properly as a source of
fund rather than mostly depend on high cost sources like common holders equity and retained
earnings.
However, the market position of the firm was volatile as the price at the December end 2011 was
very low. P/E ratio indicates the undervaluation of the share price as well as the intrinsic price
determined in the report also proves the same. To improve the situation company should come
forward with new techniques and better understanding of the market.