WELCOME

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“VALUATION OF BATA SHOE
COMPANY (BANGLADESH)
LIMITED”

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Road Introduction
Company
Findings

Map
Overview

Conclusion Analysis

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Road Valuation

Relative
Map DDM OFCF
valuation

Analysis

Fundamental Technical

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 “
Research Question

Is the Intrinsic Value of Bata Shoe (Bangladesh) Limited Overvalued

or Undervalued on the basis of its Market Stock Price?

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 Bata Origination

▪ Bata Shoe Company was founded by the famous

Company entrepreneur Mr. Tomas Bata in 1894
Overview ▪ Bata worldwide headquarter is situated in
Switzerland which was recently situated at
Toronto, in Canada.

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 Bata in Bangladesh

▪ Bata Shoe Organization began its operation in

Company Bangladesh in 1962 and

Overview ▪ incorporated in 1972.

▪ It has 2 production units in Tongi and Dhamrai.
▪ In 1985, Bata Shoe listed in capital of Bangladesh stock
market.

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 Introduction of a strong shoe line targeted to various
Mission 
market segments to maintain leadership through
increased market share

 To provide good quality shoes at an affordable price by

Vision keeping in mind the comfort that needs to be there and
providing new designs with it

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 Bata has been delivering hand-crafted quality footwear over 100
Quality and years to maintain and build on heritage of creating high quality,
comfortable and stylish shoes
Premium
Collection
Ambassador Bata B’First Babby Bubble

Bata Light and Hush Puppies Weinbrenner Marie Claire

Easy
Bata Industrial Bata and I Nike Power

North-Star Bata Comfit Sandak Bubble Gummers

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 Incorporated as a Public Limited 1972
Corporate Company

Governance Date of Commercial Operation 1962

Listed in Capital Market 1985
BODs Chairman :Mr .Rajeev Gopalakrishnan

Director: Mr .Shaibal Sinha, Mr .Chitpkan

Kanhasri, Mr .K .J .Rezaul Hasnath,
Mrs .Rupali Chowdury

Authorized Capital Tk .200 Million

Paid-up Capital Tk .163.80 Million

Number of Employees 1500 regular efficient employees

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 “
Historical Growth

Historical Growth Rate

100

80

60

40

20

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-20

-40

Sales Net Income EPS Dividend Cash Flow

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Dividend Discounting Model

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 What Is DDM?
This model is based on the theory that the stock price of a
company is equal to the sum of all of its future dividend
payments, discounted to their present value

Formula

𝐷1 𝐷2 𝐷3
𝑃= + 2
+ 3
+ ⋯…………………
1+𝑘 1+𝑘 1+𝑘

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 Calculation of growth rate
After analyzing their
last 18 years of
accumulated dividend
payment per share and
doing the point to point
analysis the next year
(2019) dividend growth
rate found to be at 4%.

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 .The required rate of return (𝑟) will be estimated with the help of
Capital Asset Pricing Model (CAPM)

Calculation Formula
of
𝑟 = 𝑅𝐹 +𝛽(𝑅𝑀 −𝑅𝐹)
RRR Where,
r: Required rate of return by investors
RF: Risk free rate (interest rate of 5-year Treasury bond)
RM: Market return
β: Systematic risk

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 . Cost of equity

Calculation
Risk free rate 2.79%

beta 0.43

of market risk premium

CAPM
5.08%

4.974400%

RRR country risk premium 5.12%

adjusted CAPM 10.09%

So, The RRR is 10.09%

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 .

Calculation
of
DDM

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 “
Analysis with Dividend Discounting Model:
DDM
1180
1160
1140
1120
Overvalued
1100
1080
1060
1040
1020
1000
Intrinsic Value Stock Price
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Present Value of Operating
Free Cash Flow

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 “
Procedure

₪ To discount the firm’s operating free cash flow to the firm

at the firm’s weighted average cost of capital

₪ OFCF is the cash flow generated by a company’s operations

and available to all who have provided capital to the firm

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 “
₪ As it is the cash flow available to all capital suppliers, it is
discounted at the firm’s WACC.

₪ Before getting the present value, we required the Weighted

Average Cost of Capital, WACC

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WACC The formula that we have used to calculate WACC:
Calculation 𝐸 𝐷
𝑊𝐴𝐶𝐶 = 𝐸+𝐷 (𝑘) + 𝐸+𝐷 (1 − 𝑇)(𝑟d)

E = Market Value of the firm’s Equity

D = Market Value of the firm’s Debt

k = Cost of Equity

rd = Cost of Debt

T = Tax rate

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 “
Calculation of WACC of Bata Shoe Company (Bangladesh) Ltd.

The WACC of Bata Shoe Ltd = 9.18%

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 Operating Free Cash Flow

OFCF represents the amount of cash flow from operations available for distribution
after depreciation expenses, taxes, working capital, and investments are paid.

A measurement of a company's One of the many benchmarks used

profitability after all expenses and to compare and analyze financial
reinvestments health

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 Calculation of Present Value of OFCF
𝑶𝑭𝑪𝑭𝟎(𝟏 + 𝒈)𝟏 𝑶𝑭𝑪𝑭𝟎(𝟏 + 𝒈)𝟐 𝑶𝑭𝑪𝑭𝟎(𝟏 + 𝒈)𝟑 𝑶𝑭𝑪𝑭𝟎(𝟏 + 𝒈)𝒏
𝑷𝑽 = + + + ⋯ … … … … . +
(𝟏 + 𝑾𝑨𝑪𝑪) (𝟏 + 𝑾𝑨𝑪𝑪)𝟐 (𝟏 + 𝑾𝑨𝑪𝑪)𝟑 (𝟏 + 𝑾𝑨𝑪𝑪)𝒏

𝑂𝐹𝐶𝐹0 = Operating Free Cash Flow for the current year

𝑔= Growth rate

𝑊𝐴𝐶𝐶 = Weighted average cost of capital for the firm

n = Number of years

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 “
Calculation of Present Value of OFCF

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 “
Analysis with Operating Free Cash flow:
OFCF
1180
1160
1140
1120 Overvalued
1100
1080
1060
1040
1020
1000
980
Intrinsic Stock Price
Value
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Relative Valuation Techniques

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Relative  The current share prices of 6 companies
Valuation  The last year EPS, Cash Flow, Sales of these 6
Techniques Companies.
The average of these data to obtain the industry average
EPS, Cash Flow, & Sales.

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The Price/
₪ The Price/ Earing Ratio=Price/EPS
Earing Ratio
= 302.2166667/16.106667 = 18.76345199
₪ So the Industry P/E Ratio is 18.76

₪ The EPS of Bata Shoe at (2017)= 82.34.

₪ The historical Growth rate average of EPS=
10.28%.

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The Price/  Estimated growth of 5% this year (2018) =
Earing Ratio 82.34(1+0.05) = 86.457

 Intrinsic value of its share, which is

=Industry P/E Ratio × EPS of BATA Shoe BD on 2018
= 18.77 × 86.457 = 1622.569511

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  The Price/ Cash Flow Ratio= Price/CF
The Price/ = 302.2166667/ 310,394,712.8
Cash Flow = 0.000000973653
Ratio
So the Industry P/CF Ratio is 0.000000973653

 The Cash Flow of BATA Shoe BD at the year (2017)

was 839,291,033
 The historical Growth rate average of CF was
14.90%
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The Price/ Intrinsic value of its share
Cash Flow =Industry P/CF Ratio × CF of BATA Shoe BD on 2018
Ratio = (0.000000973653 × 1,007,149,240) = 980.6136302

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  The Price/ Sales Ratio=Price/Sales
The Price/ = 302.2166667/4,521,825,166
Sales Ratio = 0.0000000980896
So, the Industry P/Sales Ratio is 0.0000000980896

 The Sales of BATA Shoe BD at the year (2017) was

9,040,558,355
 The historical Growth rate average of Sales was
7.05%.

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The Price/ ۞With estimated growth of 5% this year (2018), the Sales
Sales Ratio this year = 9,040,558,355 (1+ 0.05) = 9,492,586,273

The intrinsic Value of Stock

=Industry P/Sales Ratio × Sales of BATA Shoe BD on 2018
= (0.0000000980896 × 9,492,586,273) = 931.1244235

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 “
Formula Says

 If Estimated Intrinsic Value > Market Price, Buy or Hold it if you Own It.

 If Estimated Intrinsic Value < Market Price, Don’t Buy or Sell it if you Own It.

 Based on DSE stock Index the current market price of Bata Shoe Company

(Bangladesh) Limited is BDT 1158.7

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Comparison of Used Relative Stock’s Today’s Share Decision
stock intrinsic Valuation Intrinsic Values Price in DSE
value with Techniques (01/04/19)
today’s Market
P/E Ratio 1622.569511 1158.7 Undervalued
Share Price.
P/CF Ratio 980.6136302 1158.7 Overvalued

P/Sales Ratio 931.1244235 1158.7 Overvalued

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Overall Stock Price

Valuation Current Market Price

DDM

OFCF

P/E Ratio

P/CF Ratio

P/Sales Ratio

0 500 1000 1500 2000

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TECHNICAL
ANALYSIS
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Conclusion

Place a sell order at 1150tk area

Take profit 1040tk area
Stop loss at 1206tk area

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THANK YOU

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