Volume 11 l Issue 1 l January 2015
in this issue
c o n t e n t s
COVER STORY
2
Ceramic Industry in Bangladesh: A Sector Rising Strong The ceramics industry of Bangladesh has invested about BDT 5,000 crore in the past decade. The export market for ceramic products was worth more than USD 41.3 billion, of which Bangladesh has a share of only 0.97% globally with USD 47.5 million in exports in fiscal 201314. More than a dozen of ceramic factories are operating in Bangladesh, employing more than 0.5 million workers.
Research in focus
9
Monetary Policy Statement H2 FY 2015: Inflation Waned, Growth Aspired Bangladesh Bank (BB) predicts the country’s economic growth to be between 6.5% and 6.8% in the current fiscal year (FY-15) based on the assumptions that political stability will prevail and issues related to infrastructural development will be addressed promptly.
IDLC CSR NEWS
ECONOMY
Korean firm builds water treatment plant in Chittagong
Inflation continues its downward trend
20 20
31
IDLC partners with SEID Trust for capacity development of 30 children with intellectual and multiple disabilities
TRADE
Bangladesh to import another 30-50MW power from India
Rice bran oil to raise hopes for cuts in imports
22 22
REGULATORY NEWS
NBR to set up data forensic lab to identify tax frauds
24
MARKET ROUNDUP
Major Currency Roundup Commodity Market Roundup
25 26
INTERNATIONAL
Design & Printing nymphea
Xiaomi develops into the most valuable tech start-up 27 Apple achieves highest profit in corporate history 27 MONTH IN REARVIEW
Business-firm specific
29
CAPITAL MARKET REVIEW
Market Commentary
32
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IDLC MONTHLY BUSINESS REVIEW
Ceramic Industry in Bangladesh A Sector Rising Strong
- Mohammad Areful Islam
C
eramics represent useful ornamental articles made from non-metallic, inorganic solids (clays, sand and feldspar) which are hardened at high temperature after molding. The industry is basically an advancement of traditional earth made pottery works. Before reaching the age of ceramic and porcelain, people had tried different materials starting from clay to wood, stone, shell and metal media. Based on the diversity of final merchandises (type, size, quality and standard) ceramic products are used to satisfy household as well as industrial demand around the globe. The earliest ceramics made by humans were pottery objects, including 27,000 year old figurines, made from clay, either by itself or mixed with other materials like silica, hardened, sintered, in fire. Later ceramics were glazed and fired to create smooth, colored surfaces, decreasing porosity through the use of glassy, amorphous ceramic coatings on top of the crystalline ceramic substrates. Ceramics now include domestic, industrial and building products, as well as a wide range of ceramic art. In the 20th century, new ceramic materials were developed for use in advanced ceramic engineering.
Overview
2
The ceramics industry is a growing manufacturing sector in Bangladesh. The industry started during the late 1950s when the first ceramic industrial plants were established. The industry mainly produces tableware, sanitary ware and tiles. As of 2011, there were 54 ceramic industrial units throughout Bangladesh, employing about 500,000 people. In the first nine months of the fiscal year 201314, Bangladesh exported about USD 36 million worth of goods after meeting 80% of the domestic demand. The main export destinations are the EU, USA and the Middle-East.
for porcelain tableware. Peoples Ceramic Industries, formerly Pakistan Ceramic Industries, started production in 1966. Bengal Fine Ceramics Ltd, the first Bangladeshi stoneware manufacturer, began its operations in 1986. One of the largest ceramic manufacturers in Bangladesh, Monno Ceramics, was established in 1985 to produce porcelain tableware with other ceramic items later. Shinepukur Ceramics was established in 1997 for the production of bone china and porcelain tableware. Shinepukur later captured around 60% of the domestic market.
The first ceramic plant was established in Bogra in 1958. Owned by Tajma Ceramic Industries, it was a small manufacturing plant
Some white clay deposits have been discovered in Mymensingh, Sylhet and Netrokona. The largest deposit of white clay is situated
IDLC MONTHLY BUSINESS REVIEW
at Bijoypur of Mymensingh which was discovered in 1957. However, ceramic manufacturers import almost all of their raw material. China, India, New Zealand and Germany are the main sources of the raw materials. Ceramic products have been exported to more than 45 countries. The largest export destinations are the United States, Italy, Spain, France, New Zealand, the Netherlands, Australia and Sweden. China and Thailand are amongst the major competitors in the international market for Bangladeshi ceramic manufacturers. However, the low labor costs of the local manufacturers have put Bangladesh in a strong position.
The initialstep in ceramic tile involves mixing the ingredients. If wet mill is used, the excess water is removed using filter pressing followed by spray drying. The resulting powder is then pressed into the desired tile body shape.Once the raw materials are processed, a number of steps take place to obtain the finished product. These steps include batching, mixing and grinding, spray-drying, forming, drying, glazing, and firing. Many of these steps are now accomplished using automated equipment. Manufacturing Process
Focus on the Ceramic industry The industry can be categorized in several sub segments considering the diversified use of ceramics, likeSub Segment
Batching
Structural
White wares
Tableware, floor tiles, wall tiles, pottery products and sanitary-ware in the form of earthenware, stoneware, porcelain and bone china.
Refractories
Heavy duty Brick and monolithic products used in kiln linings, gas fire radiant, steel and glass making crucibles.
Glasses
Flat glass (windows), container glass (bottles), pressed and blown glass (dinnerware), glass fibers (home insulation), and advanced/specialty glass (optical fibers) used in different purposes.
Abrasives
Natural and synthetic abrasives are used for grinding, cutting, polishing, lapping, or pressure blasting of materials.
Advanced ceramics
Structural (wear parts, bio-ceramics, cutting tools, engine components, armor), electrical (capacitors, insulators, integrated circuit packages, piezoelectric, magnets and superconductors), coatings (Engine components, cutting tools, and industrial wear parts) and chemical and environmental (filters, membranes, catalysts, and catalyst supports). Oxides (alumina, beryllium, ceria, zirconia), Non-oxides (carbide, boride, nitride, silicide) and Composite materials (particulate reinforced, fiber reinforced, combinations of oxides and non-oxides) Source: Bangladesh Ceramic Ware Manufacturers Association
The Manufacturing Process Raw Materials The raw materials used to form tile consist of clay minerals mined from earth’s crust such as feldspar and chemical additives required for the shaping process. The raw materials must be broken up and classified according to particle size.
Drying
Grinding
Green Storage
Atomisation (Spray Drying)
Firing
Product type Bricks, pipes, floor tiles, wall tiles and roof tiles used in construction and decoration.
Technical
Raw Material Storage
Storage silos Sieving Pressing
Fired Product storage Sorting Packing
Warehouse
Batching For many ceramic products, including tile, the body composition is determined by the amount and type of raw materials. The raw materials also determine the color of the tile body, which can be red or white in color, depending on the amount of iron-containing raw materials used. Therefore, it is important to mix the right amounts together to achieve the desired properties. Batch calculations are thus required, which must take into consideration both physical properties and chemical compositions of the raw materials. Once the appropriate weight of each raw material is determined, the raw materials must be mixed together. Mixing and grinding Once the ingredients are weighed, they are added together into a shell mixer, ribbon mixer, or intensive mixer. A shell mixer consists of two cylinders joined into a V, which rotates to tumble and mix the material. A ribbon mixer uses helical vanes, and an intensive mixer uses rapidly revolving plows. This step further grinds the ingredients, resulting in a finer particle size that improves the subsequent forming process. Sometimes it is necessary to add water to improve the mixing of a multiple-ingredient batch as well as to achieve fine grinding. This process is called wet milling and is often performed using a ball mill. The resulting water-filled mixture is called a slurry or slip. The water is then removed from the slurry by filter pressing (which removes 40-50 % of the moisture), followed by dry milling.
3
IDLC MONTHLY BUSINESS REVIEW
Spray drying
After a batch formulation is calculated, the raw materials are weighed, mixed and dry or wet milled. The milled glazes are then applied using
If wet milling is first used, the excess water is usually removed via
one of the many methods available. In centrifugal glazing or dicing,
spray drying. This involves pumping the slurry to an atomizer
the glaze is fed through a rotating disc that flings or throws the glaze
consisting of a rapidly rotating disk or nozzle. Droplets of the slip are
onto the tile. In the bell/waterfall method, a stream of glaze falls onto
dried as they are heated by a rising hot air column, forming small,
the tile as it passes on a conveyor underneath. Sometimes, the glaze
free flowing granules that result in a powder suitable for forming.
is simply sprayed on. For multiple glaze applications, screen printing on, under, or between tiles that have been wet glazed is used. In this
Tile bodies can also be prepared by dry grinding followed by granulation.
process, glaze is forced through a screen by a rubber squeegee or
Granulation uses a machine in which the mixture of previously dry-
other device.
ground material is mixed with water in order to form the particles into granules, which again form a powder ready for forming.
Dry glazing is also being used. This involves the application of powders, crushed frits (glass materials), and granulated glazes onto a
Forming
wet-glazed tile surface. After firing, the glaze particles melt into each other to produce a surface like granite.
Most tiles are formed by dry pressing. In this method, the free flowing powder—containing organic binder or a low percentage of
Firing
moisture—flows from a hopper into the forming die. The material is compressed in a steel cavity by steel plungers and is then ejected
After glazing, the tile must be heated intensely to strengthen it and
by the bottom plunger. Automated presses are used with operating
give it the desired porosity. Two types of ovens, or
pressures as high as 2,500 tons. After forming, the file is dried slowly (for several days) and at high Several other methods are also used where the tile body is in a
humidity, to prevent cracking and shrinkage. Next, the glaze is
wetter, more moldable form. Extrusion plus punching is used to
applied, and then the tile is fired in a furnace or kiln. Although some
produce irregularly shaped tile and thinner tile faster and more
types of tile require a two-step firing process, wet-milled tile is fired
economically. This involves to compacting a plastic mass in a high-
only once, at temperatures of 2,000 degrees Fahrenheit or more.
pressure cylinder and forcing the material to flow out of the cylinder
After firing, the tile is packaged and shipped.
into short slugs. These slugs are then punched into one or more tiles using hydraulic or pneumatic punching presses.
Kilns are used for firing tile. Wall tile, or tile that is prepared by dry grinding instead of wet milling, usually requires a two-step process.
Ram pressing is often used for heavily profiled tiles. With this method,
In this process, the tile goes through a low-temperature firing called
extruded slugs of the tile body are pressed between two halves of a
bisque firing before glazing. This step removes the volatiles from
hard or porous mold mounted in a hydraulic press. The formed part
the material and most or all of the shrinkage. The body and glaze
is removed by first applying vacuum to the top half of the mold to
are then fired together in a process called glost firing. Both firing
free the part from the bottom half, followed by forcing air through
processes take place in a tunnel or continuous kiln, which consists of
the top half to free the top part. Excess material must be removed
a chamber through which the ware is slowly moved on a conveyor on
from the part and additional finishing may be needed.
refractory batts—shelves built of materials that are resistant to high temperatures—or in containers called saggers. Firing in a tunnel kiln
Drying
can take two to three days, with firing temperatures around 2,372 degrees Fahrenheit (1,300 degrees Celsius).
Ceramic tile usually must be dried (at high relative humidity) after forming, especially if a wet method is used. Drying, which can take
Byproducts
several days, removes the water at a slow enough rate to prevent shrinkage cracks. Continuous or tunnel driers are used that are
A variety of pollutants are generated during the various manufacturing
heated using gas or oil, infrared lamps, or microwave energy. Infrared
steps; these emissions must be controlled to meet air control
drying is better suited for thin tile, whereas microwave drying works
standards. Among the pollutants produced in tile manufacture are
better for thicker tile. Another method, impulse drying, uses pulses
fluorine and lead compounds, which are produced during firing and
of hot air flowing in the transverse direction instead of continuously
glazing. Lead compounds have been significantly reduced with the
in the material flow direction.
recent development of no-lead or low-lead glazes. Fluorine emissions can be controlled with scrubbers, devices that basically spray the gases
Glazing
with water to remove harmful pollutants. They can also be controlled with dry processes, such as fabric filters coated with lime. This lime can
To prepare the glaze, similar methods are used as for the tile body.
4
then be recycled as a raw material for future tile.
IDLC MONTHLY BUSINESS REVIEW
The tile industry is also developing processes to recycle wastewater and sludge produced during milling, glazing, and spray-drying. Already some plants recycle the excess powder generated during dry-pressing as well as the overspray produced during glazing. Waste glaze and rejected tile are also returned to the body preparation process for reuse.
Major Player of Whiteware Sanitary Market in Bangladesh Market Segment
Major Players
Production capacity
Shinepukur
Approx. 70,000 piece/day
Munnu
Approx. 60,000 piece/day
The competitive edge of Bangladesh
Standard
Approx. 40,000 piece/day
FARR
Approx. 70,000 piece/day
Raw Materials: Most of the raw materials used in ceramic industry are minerals, which are collected from nature through excavation. Quality input materials are found in very few places in the world and fineness of the materials vary from place to place while quality of final product is contingent to the quality of raw materials used.
RAK
22,000 sqm /day
Akij
25,000 Sqm/day
FU WANG
Approx. 6,000 sqm/day
China Bangla
6,000 Sqm/day
Mir Ceramics
Approx. 6,000 Sqm/day
Great Wall
Approx. 6,000 Sqm/day
RAK
3,400 pieces /per day
BISF
3,400 tons a year
Tableware
Capital: It requires a large volume of capital to establish a ceramic product manufacturing unit. However, the capital requirement varies based on the product dynamics and location. Machineries require the most portion of capital in a ceramic manufacturing unit. There are very few industrial machineries manufacturers in the world who can build quality ceramic product manufacturing machineries. Utility: The unique characteristic of ceramic product is that it needs to be blazed after molding. In recent times the combustion is done either by using natural gas or electricity. And the utility sources are not readily available in all prospective locations for building the industry. On the other hand, price of both the natural gas and electricity is following an uprising trend throughout the world causing an incremental trend of price of ceramic made products. Automation Vs Labor: At present ceramic manufacturers uses sophisticated capital machineries which reduces extensive use of human participation in the production process. Identical product quality, large scale production and reduced level of wastage help to compensate the high initial investment against capital machineries of a ceramic manufacturing facility. There are over a dozen of ceramic factories in Bangladesh, which produce over 40,000 tons of ceramic products a year. Monno, Shinepukur, Bengal Fine, Standard, Peoples and National Ceramic are engaged in tableware while RAK, Fu Wang, China-Bangla and Mir are engaged in tiles and sanitary ware. Ceramic products including stone tableware, porcelain tableware, bone China tableware, tiles and sanitary ware have a USD 20 billion global market out of which Bangladesh’s share is only 0.17%. Name of some of the companies
Turnover* (million)
Fu Wang Ceramics
744
Monno Ceramic
778
RAK Ceramics
4908
Shinepukur Ceramics Limited
1942
Standard Ceramic *As of 2013
210 Source: Dhaka Stock Exchange
Floor and wall tile
Sanitary Ware
Source: Bangladesh Ceramic Ware Manufacturers Association
World Outlook In twenty first century, rising labor cost coupled with fluctuating global financial scenario exert extreme challenges to the ceramic product manufacturers operated in developed countries. After the crash of mortgage market with subsequent slowdown in developed economics pushed ceramic industry into bearish zone. However, emerging markets were showing resilience which worked for a slow recovery of the industry. As per IMF, global economy will expand by 2.9% in 2013 and 3.6% in 2014 – down by 0.3 and 0.2 points respectively on its last predictions. However, emerging economics will grow at 4.5 in 2013 and 5.1 in 2014. Overall Growth to be driven more by advanced economies; emerging markets are showing weaker trend than expected. Year to year consumption growth rate of ceramic stands at 4.6% at the end of 2012 compared to CAGR of 6.85% (20092012 periods). Ceramic industry recovered a bit in 2010-2011 period, but trend to weaken for couple of years. Industry anticipated that as forecasted earlier as economy shows slow recovery. Sanitary ware consumption pattern The global market for ceramic tiles was valued at USD 55.79 billion in 2011 and is expected to reach USD 102.79 billion by 2018, growing at a CAGR of 9.2% from 2012 to 2018. In terms of volume, demand for ceramic tiles was 10,370.0 million square meters in 2011 and is expected to reach 18,154.1 million square meters by 2018, growing at a CAGR of 8.4% from 2012 to 2018. Ceramic tiles are majorly consumed in residential replacement market globally. Residential replacement accounted for approximately 54% of the total market in 2011. Along with the biggest market, residential replacement is also expected to be the fastest growing market for ceramic tiles at an estimated CAGR of 8.6% from 2012 to 2018. Commercial application of ceramic tiles followed residential replacement and has a share of over 30% of the market in 2011.
5
IDLC MONTHLY BUSINESS REVIEW
The Export Market
Ceramic Tiles Consumption and Production Global Consumption
Global Production
CHINA
BRAZIL
INDIA
IRAN
SPAIN
INDONESIA
VIETNAM
TURKEY
MEXICO
Others
ITALY
Source: Tile Info
Ceramic sanitary ware market will grow from estimated USD 22.17 billion in 2011 to USD 33 billion by 2016, with a CAGR of 8.29% during the same period. Asia is expected to lead the global ceramic sanitary ware market with share of 43% followed by Europe (21%) and South America (17.2%) in terms of production by the year 2016. The major drivers of ceramic sanitary ware are growth in the real estate market, diversification of ceramic sanitary ware production to emerging countries, and changing end-user preferences. The major restraints are low penetration percentage of pressure casting technology in ceramic sanitary ware production and environmental factors such as emissions to air, wastewater, solid waste, and energy intensive. The opportunities are cited in high growth rate in developing regions.
According to Bangladesh Ceramic Ware Manufacturers Association (BCWMA), there are approximately 54 ceramic manufacturers operating in this industry producing tableware, sanitary ware and tiles. A medium scale ceramic plant needs around BDT 100 million as initial investment and the BCWMA sources say the present investment in the country’s ceramic industry is roughly about BDT 53 billion and this sector employs some 0.5 million workers. Over the years, the ceramic industry in Bangladesh has flourished immensely and has gained recognition throughout the world. Local ceramic ware manufacturing industry is expecting a steady growth with a USD 100 million return from exports by 2015 as the global market favors more shipment from Bangladesh. In million Raw Material
2011-
2012-
2012-2013
Import
2012
2013
(July-Nov)
15.65
17.99
8.07
2013-
Changes
2014 (Jul
(July-Nov
-Nov)
12 & 13)
10.37
29.44%
Ceramic Porcelain and Melamine industry Source: Office of the Chief Controller of Import and Export
The global ceramic tableware industry is currently going through a phase of acquisition and consolidation as smaller firms in the developed countries are becoming uncompetitive and bankrupt. As a result, the big names like Noritake, Wedgewood, Lenox, Villeroy & Boch and Royal Doulton are all individually becoming billion-dollar operations.
Though export market of Bangladeshi ceramic industry is growing, the domestic market share of local ceramic wares is shrinking due to widespread import of low-priced foreign goods, mainly from China. As overseas demand is going up, country’s major manufacturers are now pumping 80% of the production into the international market. Moreover, the local companies export much of the products to the international market, thus creating a demand-supply gap in Bangladesh. Due to this, imports of ceramic products in Bangladesh are increasing very fast parallel to the growth in export.
World Manufacturing Areas
World Consumption Areas
Market Evolution and Trends Global ceramic Industry followed two proven strategy to improve returns:
Other Europe (Turky Included), 5% Central South America, 10%
Africa, 3%
Africa, 6%
European Union (27) 8% Other Europe (Turky Included), 5%
North America (Mexico Included), 3%
North America 4%
South America 11%
Asia, 66%
Asia, 69%
Source: Ceramic Industry Magazine
6
Source: Ceramic Industry Magazine
IDLC MONTHLY BUSINESS REVIEW
Ceramic Industry in 2014 at a glance
Export Maket Senario Year
Amount (ln USD)
Total companies
54
2008-09
31.17 million
Total investment
BDT 5,300 crore
2009-10
30.78 million
Export
2010-11
37.58 million
Employment
2011-12
33.75 million
Female
40%
2012-13
37.69 million
Value addition
65%
2013-2014 (Target)
42.21 million
BDT 400 crore 500,000
Source: Bangladesh Ceramic Ware Manufacturers Association
Source: Bangladesh Export Promotion Bureau
Tiles and sanitary trading industry is highly competitive in nature where profit margin varies widely and both the initial investment and working capital requirement is high. Demand of ceramics sanitary ware has been growing at a rate of 20% a year which is almost double of the growth of Bangladesh’s construction industry. Small manufacturers targeted the price sensitive local market while large manufacturers capture both the local and international markets. There are also some specialized mid capacity manufacturers who concentrated their production for export. In recent years ceramic industry realized incremental export performances and it is expected that the trend will continue in upcoming years.
Of the products, ceramic table wares are being exported to about 50 countries including US and Canada, tiles to India, Nepal and Bhutan, and sanitary wares to the Middle East. If the government could ensure sufficient energy supply and expedites refund of the import duties paid upon execution of exports, Bangladesh might become one of the largest global ceramic exporters in future. Besides, Government should increase the percentage of complementary tax on imported ceramic to protect local manufacturers. To cope with the increased global demand, most of the country’s leading exporters have increases their production capacity within last five years. Continuous export growth of ceramic sector of Bangladesh is expected to continue following the unique operational strength of the country.
In the latest years, it has been necessary for developed countries to shift production towards higher quality ranges with more remunerative prices. There is the cultural aspect, sanitary ware and ceramics reflects the taste and local habits, so producing for foreign markets means to study and customize products for different cultures. For manufactures in every country, in order to operate in the most advanced and remunerative markets it will be increasingly important to establish a loyal sales network and a brand name that is recognized and respected by industry professionals. Another important component to be considered when analyzing the ceramics and sanitary ware market is the link with other sectors, in particular with the real estate market. In ceramic tiles two different kinds of trends are generally spreading, dimensional increase of tiles and imitation of natural stones, whereas the evolution in sanitary ware ceramic products is almost fully trained by trends in design (Mr. Mohammad Areful Islam is an Assistant Manager of Credit Risk Management at IDLC Finance Limited and currently works at IDLC’s Dilkusha Branch)
7
Who Dominates The World of Tiles? IDLC MONTHLY BUSINESS REVIEW 4. Iran
made 400 million sq. mi of tiles supplied 4.2% of global demand of tiles
3. India
5. Italy
manufactured 387million sq. mi of tiles supplied 4.1% of global demand of tiles
1. China
produced 4.2 billion square miles of tile
manufactured 550 million sq. mi of tiles supplied 5.8% of global demand of tiles
2. Brazil
made 753 million sq. mi of tiles supplied 7.5% of global demand of tiles
China supplied a whopping 37.4% of the world’s demand for tiles
World Consumption
a 5.8 Indi 3 ina
a esi
%
3.5
n do
In Brazil 7.6%
%
5.8
an ope Eur 11.7% on Uni
%
Top 5 Consumers
Cen Am tral - S eric ou a 10 th .7% 5.6% Africa
Ch
Asi a 62 .3%
Top 5 Exporters
China 33.7% Italy 16.2% Spain 13.6% Turkey 3.9% Brazil 3.5%
8
Top 5 Manufacturers Country
Sq.M In Millions
% Of World Production
China Brazil India Iran Italy
4200 753 550 400 387
37.4 7.5 5.8 4.2 4.1 Source: Tile Info
IDLC MONTHLY BUSINESS REVIEW
ANALYSIS MONITOR Monetary Policy Statement H2 FY 2015: Inflation Waned, Growth Aspired
M
onetary Policy Statement (MPS) H2 FY15 was broadly unchanged in comparison to the last MPS, with a focus on growth. In our observation, while inflation control may be relatively easy, growth target poised to be challenging due to political unrest. Overall, the policy stance can be outlined as “Inflation Waned, Growth Aspired”.
MPS H1 FY15 REVISITED Despite challenging macro-economic landscape, H1 FY15 MPS turned out to be moderately successful. Cautious and realistic stance of central bank’s broad adjustment to address the reality assisted the monetary policy stance to reach close to its goals.
trend in the growth of non-agricultural GDP. Since agricultural GDP growth has very little to do with monetary policy, the trend in nonagricultural GDP captures better the impact of monetary policy. It shows a similar pattern, but interestingly there is a gentle upward trend between FY2013 and FY2015.
The trend in inflation captures the most recent experience in Bangladesh and nicely contrasts the two monetary policy stances pursued in Bangladesh: the expansionary phase FY2010-2011; and the prudent phase FY2012-2015. The average growth of money supply (M2) was 22% per year in the first phase and 16% per year in the second phase. The trend in inflation (solid line) shows a substantial upward spike between FY2010 and FY2011, responding to excess monetary growth, and since then a continued decline in response to the correction in the growth of money supply.The trend of GDP growth is represented by the dotted line, which shows an increase in GDP growth in FY2011 (from 5.6 to 6.5%) and then a flattening out at around 6.0-6.5%. The dashed line shows the
Bangladesh has been experiencing a vigorous rate of GDP growth in the range of 6.0-6.5% of GDP during the Sixth Plan period and at the same time it has successfully achieved a noteworthy decline in the rate of inflation.Despite sharp increases in the rate of growth of money, the average nominal lending and deposit rates were on an increasing trend during FY2010 and FY2012. Nominal average lending and deposit rates have been coming down since FY2013 even though monetary growth is sharply lower than in the expansionary phase.Lowering real interest rates through inflation is not a sustainable proposition as evidenced from the FY20102012 episode when nominal interest rates climbed with higher
9
IDLC MONTHLY BUSINESS REVIEW
FX Reserves (USD Bn)
CPI Inflation* 24
7.5
22
7
20
6.5
18
6
16 14
5.5
12 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
5
inflation.A further reduction in real interest rate can be brought about sustainably by reducing the spread between the average deposit rate and average lending rate. The spread is very high and a steady 5%, irrespective of monetary policy stance. The spread is high because of a number of inefficiencies in the banking sector including a high and growing ratio of non-performing loans. Banks tend to jack up their lending rates in order to cover these losses. Most importantly, the ability to achieve higher rate of GDP growth (accelerate from 6% to 8%) is forced primarily by the rate of investment, the quality of labor force, technology and institutions.
All three major sectors (Agriculture, Industry and Service) were in line with the projected growth trajectory while industry growth outperformed others.
USD:BDT
81
Dec-14
Oct-14
Jun-14
Aug-14
Apr-14
Feb-14
Dec-13
⿎⿎
Bangladesh Bank (BB) predicts the country’s economic growth to be between 6.5% and 6.8% in the current fiscal year (FY-15) based on the assumptions that political stability will prevail and issues related to infrastructural development will be addressed promptly.
Inflation declined, but remained above target ⿎⿎
Twelve month average inflation declined to 7.0% in Dec 14 from 7.3% in Jul 14. However, it failed to reach the target inflation of 6.5% set in last MPS, as we have observed in our last MPS review. Decline in food inflation remained the major driver in containing inflation.
⿎⿎
Average food inflation declined to 7.9% in Dec 14, due to
TOTAL CREDIT TO GOVT. BY BANKING SYSTEM (BDT BN)
1700
BDT
Oct-13
Contribution to investment in GDP stands at around 29.0% played a pivotal role in attaining 6.0%+ GDP growth rate.
1800
80
Aug-13
⿎⿎
GDP growth was over 6% ⿎⿎
Jun-13
* Base year 2005-6
Apr-13
8
12 Months Average
Dec-12
Point to Point
10
Feb-13
% (Percentage)
8
1600
79
1500
78
1400 1300
77
1200 76
1100
75
10
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Dec-14
Oct-14
Aug-14
Jun-14
Apr-14
Feb-14
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
1000
IDLC MONTHLY BUSINESS REVIEW
CREDIT GROWTH TO PVT. SECTOR
Memorandum Items
FY14*
FY15P
Export Growth (%)
12.6%
1.6%
Import Growth (%)
15.8%
16.6%
Remittance Growth (%)
-1.6%
10.3%
Gross Official Reserves ($ Mn)
21,508
22,310
13% 12% 12% 11% 11% 10%
⿎⿎
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
10%
*July-June, FY14 Source: Bangladesh Bank
declined global and regional food prices, particularly in India.
Policy Goals
Average non-food inflation edged up slightly to 5.60% in Dec 14, due to increased consumer demand.
⿎⿎
GDP Growth estimate of 6.5-6.8%
⿎⿎
BB’s estimate is moderately higher than that set in the previous MPS of 6.2-6.5%. Amid the context of ongoing political blockade and supply chain disruption the upward revision will be challenging to attain.
⿎⿎
Curb inflation to 6.5%
⿎⿎
Cautious management of money supply along with consistent policy rates (Repo 7.25% and Reverse Repo 5.25%) may assist in attaining inflation target.
Money and Credit growth undershot the targets Broad money grew by 12.8% in Nov 14, compared to target of 16.0% ⿎⿎
Reserve Money grew by 14.3% in Nov 14, compared to target of 15.5%
⿎⿎
Private sector credit grew by 12.7% in Nov 14, compared to target of 16.5%
⿎⿎
Public sector credit grew by 6.0% in Nov 14, compared to target of 12.9%
MPS H2 FY15 ⿎⿎
MPS H2 FY15 was furnished with the following Policy Instruments, Policy Goals and Intermediate Targets
Policy Instruments ⿎⿎
Liquidity support for banks through applicable policy instruments
⿎⿎
Policy interest rates
Intermediate Targets ⿎⿎
Target Adjustments in MPS
⿎⿎
Broad money growth target is set at 16.5%, which was 16.0% in last MPS
⿎⿎
Reserve money growth target is set at 15.9%, which was 15.5% in last MPS
⿎⿎
Domestic credit growth target is set at 17.4%, which was 13.8% in last MPS
⿎⿎
Private sector credit growth target is set at 15.5%, which was 16.5% in last MPS
⿎⿎
Public sector credit (including Govt.) is targeted to grow by 25.3%, which was 12.9% in last MPS
Concluding Remarks ⿎⿎
Monetary policy stance of H2 FY15 appears continuation of previous MPS stance. Curbing inflation while maintaining growth momentum remains the major goal.
⿎⿎
Although growth target of 6.5-6.8% is attainable, political unrest remains the major concern.
⿎⿎
Growing reserve may help to keep the exchange rate stable where BB plans to maintain 5-10 months of foreign reserve.
⿎⿎
A staggering 56.2% fall in international oil price will reduce subsidy; subsequently, government borrowing from the banking sector is expected to remain low for non-ADP expenditure.
11
IDLC MONTHLY BUSINESS REVIEW
RESEARCH IN FOCUS The Role of Financial Services in Society: Towards Responsible Financial Innovation
I
nnovations in financial services have lately been the primary impetus to economic growth and stability. Excess of services like annuities, forex swaps and mobile banking are constantly providing apropos benefits pertaining to the rapidly growing needs of the market. However, of late the innovations are becoming increasingly complex for the prospective consumers and investors to understand and evaluate. The Role of Financial Services in Society is a report published by the World Economic Forum. It is a multi-stakeholder initiative that seeks to restore public trust and confidence in the financial system. The initiative brings together financial institution leaders, financial policy-makers, leading economists and academics, executives of commercial firms that rely on financial services, and representatives of civil society. Overview The report aims to seek ways through which the benefits of the instruments’ can be properly utilized all the while containing the probable pitfalls. The report tries to evaluate the benefits of financial innovation, define the criterions under which the innovations might have negative repercussions, and propose ways through which the ramifications can be avoided. The report focuses on two important themes. Firstly, it discusses about the general problems through which new ideas might render problematic. Secondly, it is a well accepted fact that one specific financial innovation policy cannot be a panacea to all sorts of financial risks. Rather, efforts should be directed at building a flexible and resilient system. Nevertheless, the implications of financial services in today’s world are too mainstream to be disregarded altogether. A specific financial
12
instrument cannot be labeled as “good” or “bad”, as each have its pros and cons. The regulators have recently proposed a rejuvenation of the instruments aforementioned, with the intent to wield the benefits minus the risks. The rationale behind the proposition is the fact that new regulations are constantly being put into effect in order to avoid the obvious pitfalls. Preserving the benefits Although the small number of products and services that contributed to the financial debacle is always the burning topic, there is indeed numerous other instruments that have supported various financial innovations across the last decade. Risks have always been an omnipresent aspect of the financial innovations. Let’s consider the handful of derivatives clearing organizations that act as intermediaries between derivatives counterparties. The organizations reduce counterparty risk in the derivatives market by collecting and valuing collateral, issuing margin calls, netting
IDLC MONTHLY BUSINESS REVIEW
offsetting transactions and setting obligations. In that same token, every financial innovation has both benefits and risks. However, it is imperative that the risks are managed and the benefits utilized. Certain clearing organizations and other critical market utilities have already been designated as systematically important institutions subject to enhanced oversight. An approach that identifies the benefits and risks alike will promote responsible innovations and benefit society in the long run.
is denominated. This interconnectedness can amplify the detrimental effects in economy and society. Some significant features of financial innovations that account for the products under performance include: ⿎⿎
These innovations can be restructured and used in ways beyond their originally intended purpose.
⿎⿎
The risks pertaining to a newly introduced financial product is not fully known, for which devising and executing apropos incentives can be challenging.
⿎⿎
For different segments of clientele, the risks and benefits associated with a financial innovation is unevenly assessed and evaluated,
⿎⿎
Record keeping and other related upkeep may be undertaken in a maladroit manner once an innovation gains pace in the marketplace.
Defining the Risks Managing the risks of financial innovations is imperative, because these instruments impose wider implications to society in case they are misused. Generally, most financial products are: ⿎⿎
⿎⿎
⿎⿎
⿎⿎
Widely-used, big ticket items: Among many other uses, financial services help individuals save, smoothen cash flows and make payments. For instance, Home mortgages, student loans and retirement annuities are among the most expensive andcritical items on most personal balance sheets. Long-term in nature:Most financial products are long term in nature, a feature that contributes greatly to the products’ volatility. For example, a 30-year mortgage or a pension product. These products behave differently with varying interest rates. Furthermore, flaws in design may not be apparent right away. Susceptible to behavioral bias: Biases in human behavior may have strong ramifications in the performance of the financial products. One may not feel compelled to spend adequate time to understand certain complexities in the products, and even if they do, they may end up making bad decisions regarding these products. Interconnected: The performance of the most vanilla financial product, such as a corporate savings account, is tied to a host of other factors, including the provider’s performance and the performance of the currency in which the product
In order to tackle these pitfalls related to financial innovations, some recommended endeavors could be ⿎⿎
Review and adapt enterprise risk management and new product approval processes to address risks and uncertainties of incremental innovations arising from changes to existing products.
⿎⿎
A total overhaul of the incentive system to incorporate and manage the uncertainties associated with innovation in financial products.
⿎⿎
Implementation of an efficacious framework to render the clients of the financial innovation with adequate protection from the apparent drawbacks and risks.
⿎⿎
A proper infrastructure system must be developed to support the upcoming financial innovations.
These aforementioned criterions are imperative in the sense that the benefits of any financial innovation should outweigh the risks, in order for the financial products to attain maximum client exposure and acceptance in the long run. Considering the range of societal and economic implications innovations in financial products might have, endeavors designed to safeguard the products from underperforming or backfiring altogether is of utmost importance.
A developed nation is a prosperous nation. At IDLC, we help you contribute to this process. We are in the business of financing happiness.
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IDLC MONTHLY BUSINESS REVIEW
ENTREPRENEURS’ CORNER Al Rong: Style for Fashion In 2011, Ms. Shabiha Khan opened the outlet Al Rong at Banasree. Al Rong is basically a retailer and wholesaler of readymade garments. The outlet includes readymade garments for all gents, ladies and kids and attracts customers from Banasree , Badda, Rampura, Shahjadpur, etc. The outlet also sells a wide range of imported ladies purse and bags, shoes etc. In 2011, Ms. Shabiha Khan opened the outlet at Banasree.
Owner
: Ms. Shabiha Khan
Year of Establishment
: 2009
Website
: www.alrongbd.com
Main Product
:
Number of Outlets
: 1
Space
: 4500 square feet.
Number of Employees
: 15
Clothing for ladies, gents and kids, Leather goods, Shoes, etc.
Access to finance is the most important requirement that an entrepreneur must have, to operate any kind of business. And in my experience, taking loans have proven to be the most viable way to raise capital. Interview with
Ms. Shabiha Khan Owner Al Rong MBR: What made you want to have a clothing store, what was your inspiration? Back in 1997, I started her career in Westecs and continued until 2004. After that I switched to another boutique shop and in 2007, I joined Artisan. I had ton of experience in this field. Besides my experiences, my husband encouraged me to start business in such sector where I can use my experience effectively and do well in this field. In a word, my strong determination and husband’s support inspired me to start my business on clothing sector. MBR: What motivated you to select this name for your outlet? Al Rong means divine color. I selected the name even before I started my own outlet. I always thought of using this name for any business I start in the future.
14
MBR: What kind of barriers did you face while starting this shop in Dhaka? What surprised you most about the process of setting up a shop? Access to finance is the most important requirement that an entrepreneur must have, to operate any kind of business. And in my experience, taking loans have proven to be the most viable way to raise capital. Additionally, it is not easy for women entrepreneurs to avail loan facility from banks and financial institutions, since some of the institutions are less cooperative and discouraged me to start my own business which really surprised me. MBR: What according to you attract people to your outlet, what is unique about it? According to me, first of all it’s our product then it’s our service. We try to provide the best service quality to the customers to
IDLC MONTHLY BUSINESS REVIEW
that extent we can afford. Our service quality is best around Banasree and also better than a lot of outlets all over Dhaka. Our relationship with our customer is very strong; most of them are like family. We have 4,500 registered customer and we have great relationship with all of them. Our customer service is unique than any other outlet in Dhaka. MBR: What are the initiatives that you are taking to ensure customer’s satisfaction level? My employees and I mostly try to communicate with the customer and try to know their feedback and demand for specific products. Before releasing any new collection we always text all our member customers for the updates, and in response they visit us or tries to contact us. MBR: What is your opinion about doing business with the help of social networking sites and do you have any thought of using it? We do maintain a website and a Facebook page of Al Rong; however, we do not do any sort of business using webpage. MBR: Do you have your own production facility for garment items? If not, then do you have any intention to set up your own production system? Currently, we do not have any manufacturing units. We usually collect our products from various export-oriented garments or from various buying house. In future, I do have the intention to introduce my own production system.
MBR: Being a successful business person, how do you balance the family and business commitment? It’s tough. However, a person needs to understand while prioritizing between family and business. I carefully balance both as I maintain a schedule on a daily basis where I stay home till 2 pm and go to work from 3 pm onward and stay till my shop’s closing time. MBR: According to our country’s economic condition, what are the key challenges of running this clothing outlet? In the current economic condition, running a clothing outlet becomes tough. We have to think in the given situation what would attract the customers. As a result, we try to bring quality products with fewer prices. MBR: What can we expect from Al Rong in the upcoming season? Do you have any plan for launching jewelry segment to your business? In the upcoming season, Al Rong would offer huge kid’s collection as it is our most profitable section. Additionally, we would develop the men’s collection more. I want to launch jewelry section but not imitation ornaments. I prefer silver jewelry over imitation. However, I have no intention of launching it anytime soon. MBR: How has it been going so far? What are the initiatives that Al- Rong is planning to take in future?
MBR: Currently how many employees are operating in your shop and to what extent are they serving your outlet? In your opinion, what makes a good employee?
Since 2009, Al Rong has come a long way, there were many ups and downs because of last year’s economic condition but compared to other clothing store I think Al Rong did fine. In future, I want Al Rong to be the best known clothing store in Dhaka.
Currently, we have 15 employees in this outlet. I directly analyze my employees based on their performance and when I am not in the shop I gather information by calling. A good employee is one who maintains good customer service and thinks about the outlet’s future.
MBR: What two pieces of advice would you give someone who is an enthusiastic potential entrepreneurs regarding starting a similar clothing outlet?
MBR: Are you planning to expand to another outlet? If yes, will you open the outlet inside or outside Dhaka city? I do have a plan to open another outlet soon, however, I won’t disclose where. The new outlet should definitely be inside Dhaka so that I can easily manage it.
Someone, who wants to start a similar business, must have a basic level of understanding of the business he or she is going to start. Without experience one shouldn’t get involved in any sort of business. Additionally, customer care should be the top most priority for any business to get more satisfied customers. I think, providing the best quality service can bring huge success in any business.
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IDLC MONTHLY BUSINESS REVIEW
Buzzword Growth Hacker
O
nce startups are ready to scale, their biggest challenge is often hiring someone capable of leading the growth charge. A growth hacker is someone who thinks outside the box, disregards the rules, and discovers new ways to solve problems. In this way, a growth hacker needs to be as creative as she is analytical. Growth hacking is a set of disciplines learned through doing and out of necessity. Growth hackers have a common attitude, internal investigation process, and unique mentality among technologists and marketers. Growth hacker is a new word for most but a long held practice among the best internet marketers and product managers. With mass media fading away and the onslaught of mass customization & niching on the web, marketing as we know it for the past 100 years have died. People are awash with mounds of data and marketing fatigue is at an all-time high. Users are drowning and won’t pay attention to the next best widget, regardless of how good it is. Distribution is now the number one problem that faces every product and every startup.
Overview To reach a market and distribute an idea, growth hacking appeared as the modern way in the age of Web 2.0. Instead of classic marketing which typically interrupts your day, a growth hacker uses “pull”; he or she understands user behavior provides value immediately to persuade. A growth hacker wraps messaging into the fabric of the lives and thoughts of users. A growth hacker will leverage across disciplines, pulling in insights from behavioral economics and gamification, to find the right message to pull in users. A growth hacker finds a strategy within the parameters of a scalable and repeatable method for growth, driven by product and inspired by data. Growth hacking’s goal are based in marketing but driven
16
by product instincts. A growth hacker lives at the intersection of data, product, and marketing. A growth hacker lives within the product team and has a technical vocabulary to implement what he or she wants. The essential characteristic of a growth hacker is creativeness. His or her mind is the best tool in their war chest. A growth hacker looks beyond adwords or SEO (Search Engine Optimization) for distribution. A traditional marketing channel often means high cost per acquisition and low life-time value due to high saturation. In an age of social users, the right growth strategy with the right productmarket fit will lead to massive scale through viral loops. This mindset of data, creativity, and curiosity allows a growth hacker to accomplish the features of growing a user base into the millions.
IDLC MONTHLY BUSINESS REVIEW
Data
Growth hacking ideas
Growth hackers have a passion for tracking and moving a metric. This strong bias towards data drives a growth hacker away from vanity metrics towards metrics that will make or break the business. Data and metrics are paramount to the scientific way a growth hacker discovers a path to growth. A growth hacker’s focus is to attain growth through moving specific metrics with iterations. These metrics can be anything from a sign up conversion rate to a viral coefficient. Data inspires new product and actionable segmentation.
LinkedIn: This professional networking service grew from 2 million to 200 million users using a pretty awesome growth hacking technique, allowing users to create public profiles so the search engines index their profiles and show up organically in search results. Prior to LinkedIn, it was indeed hard to find yourself in the top 5 search results on Google unless you were a big shot.
Creativity A growth hacker has a vibrant mental dexterity to think of new ways to acquire and loop in users. Growth hackers do not stop at data but build into new and unknown frontiers to find growth. Growth hackers operate across disciplines and functions, involved with UI/ UX to metric decisions. The combination of both a creative and analytical mindset allows a growth hacker to have a cohesive and systematic picture of product. Curiosity Growth hackers are constantly curious and have an insatiable desire to learn. They look deeply into user behavior and explore the edges of behavioral economics. A growth hacker does not so much care that growth occurs but desires to understand the user mindset and product flow to replicate the method over and over.
YouTube: Now the second largest search engine after Google started out as a platform allowing users to share videos. They had an easyto-go option of “Embedding” the video. This made it seamlessly easy for users to upload their YouTube videos and running it like a video player on their own website. The results have been astonishing. Youtube now has more than 1 billion unique visits each month with more than an hour of video uploaded every second. PayPal: Growth hacking has undoubtedly been the sole propeller of this payments and transfers company. As PayPal noticed their growth among eBay sellers, they worked out a deal with eBay to include the PayPal logo on the listings that accepted PayPal. This growth hacking idea was successful because eBay was already well-established, so PayPal was driving growth from the success of another company’s success. As more and more sellers only accepted payment via PayPal, this forced consumers and buyers to create PayPal accounts, hence the start of growth hacking. Since then, eBay acquired PayPal for USD 1.5 billion and is now the only logo that is shown on eBay listings in the payment methods section.
Growth hackers are a rare breed and they implausibly mashup data, creativity, and curiosity. The end goal of every growth hacker is to build a self-perpetuating marketing machine that reaches millions by its self; however, growth hacking is a process, not a secret book of ideas. Growth strategies cannot be easily copied and pasted from product to product. Growth is never instantaneous. It is never overnight. It is a mindset at which you approach problems.
17
IDLC MONTHLY BUSINESS REVIEW
ENTREPRENEURS’ assistance tool TIN Certificate An Individual or Corporation has to obtain TIN Certificate for filing
a district headquarter, deed value of which exceeds 0.1 million taka,
return for Income Tax under the law of Income Tax Ordinance.
sanction of loan exceeding Tk 0.5 million to a person by commercial
TIN (Taxpayers Identification Number) is a number provide by
bank or leasing company, issue of credit card, issue of practicing
NBR (National Board of Revenue) to a person who applies for the
licence to doctor, a chartered accountant, a cost and management
certificate. It is a ten digit number. First, three digits for taxpayers’
accountant, a lawyers or an income tax practitioner, giving ISD
location, middle three digits for taxpayers’ status and last four digits
connection to any kind of telephone, being director of a company
for taxpayers’ unique number.
or sponsor shareholder of a company, renewal of membership of any trade body, issuance of drug licence, submitting a plan
TIN Certificate is very important for Bangladeshi citizen who needs
for construction of building for obtaining approval from RAJUK,
to pay Income Tax, collection of IRC Bangladesh, ERC Bangladesh,
CDA, KDA, and RDA, application for gas and electricity connection
L/C opening, Trade License renewal, Company Registration in
for commercial purpose in a city corporation, pauroshova or
Bangladesh, VAT Registration, and Renewal of Vehicle fitness.
cantonment board, submitting nomination form for any election in upazilla, pauroshova, city corporation or Jatiyo Sangsad.
TIN Certificate is also important for Loan sanction from bank and financial institute over BDT 5 lac, collection of Drug License, Credit
Under the e-TIN registration, applicant would have to register first at the
Card, Practice License of an income tax practitioner, a cost and
income tax website and then register for new TIN or for changing existing
management accountant, a chartered accountant or a doctor,
TIN. The interested individuals will require to login in a specific website
Registration of land, apartment, building in city corporation area and
(www.incometax.gov.bd) and provide your National Identity Number
many more.
(NID), passport or RJSC, the system would verify the information in a few minutes through cross-checking, then all of your information’s will
In recent circular of NBR (National Board of Revenue), TIN
generated automatically. After inserting all requirements the concerned
Certificate needs for depositors of money over taka one lac in
person will get his/her TIN number and certificate robotically. The
any bank. In present tax at source on interest income is 10% who
applicants would be able to print the generated TIN certificate or save
showing their TIN Certificate to the bank. However, who is failed
or forward it to his or her e-mail address.
to show TIN Certificate will charge 15% on interest (for depositors over taka one lac).
On the other hand, organizations also need collecting e-TIN. The on hand institutional income tax payers only need to enter their
There are forty lac TIN Certificate in Bangladesh, of which only eight
Incorporate Certificate (IC) digit in websites and all of information
lac pay income tax and the rest thirty two lac do not pay tax. For
would simplify automatically. For this purpose NBR has signed a
betterment of Bangladesh we ought to pay tax. The government is
Memorandum of Understanding (MOU) with Private and Public Ltd
trying to increase TIN Certificate holders as well as Tax Payers and has
Company Registration Office.
taken various initiatives. For collection of eTIN Certificate following documents should be Procedure to get eTIN certificate:
maintained:
After 1st January 2014 existing TIN is not valid, so eTIN is required
For Personal TIN Certificate:
for submitting your return. eTIN means Electronic Tax Identification Number. It is 12 digit numbers but before it was 10 digit numbers. New taxpayer will get 12 digit numbers. It is a digitalized service from National Board of Revenue (NBR). It has started from 1 July
2 Copies of photograph
⿎⿎
Copy of National ID/ Passport
2013. Once TIN has been created then every year TIN holder has to
For Company TIN Certificate:
submit income tax return. This e-TIN is important for 27 areas where
⿎⿎
3 Copies of photograph of Chairman/MD
furnishing eTIN is mandatory including opening letter of credit (L/C)
⿎⿎
Copy of Trade License
⿎⿎
Copy of Memorandum of Articles (If Limited Company)
⿎⿎
Copy of Incorporation Certificate (If Limited Company)
company act, 1994, registration for purchase of land, building or an
⿎⿎
Copy of Partnership agreement (If Partnership Business)
apartment situated within any city corporation or any pauroshova of
⿎⿎
TIN Certificates of all Directors (If Limited Company)
for import, renewal of trade license and car registration or renewal of registration, submitting tender documents for supply of goods or any contract, application for membership of a club registered under
18
⿎⿎
IDLC MONTHLY BUSINESS REVIEW
ECONOMY Foreign exchange reserve hits new high Foreign currency reserves reached a new high, hitting USD 22.46 billion on the back of renaissance in exports. According to the ministry of commerce, exports raked USD 2.84 billion, up 4.41% year-on-year, which was USD 2.42 billion in November 2013. Additionally, the total export earnings in the first half of fiscal 2014-15 reached USD 14.91 billion, a slight improvement of 1.56 % over the previous year. On December 30, 2014, reserves hit USD 22.30 billion, a record until now. If the trend continues, seeing the steady inflow of remittance, BB might soon have to resume its purchase of greenbacks in the interbank market. Inward remittance grew at double-digit rates in the first half of fiscal year to USD 7.47 billion. Some USD 1.26 billion was sent in December 2014 by migrant workers, according to BB data.
Bangladesh inked a USD 20.14 million deal with FAO With the intent to strengthen the enabling environment for food security and nutrition, an agreement between the Food and Agriculture Organization (FAO) of the United Nations and the government of Bangladesh has been signed for USD 20.14 million (approximately BDT 1.56 billion). The assistance would be provided to implement the program titled ‘Meeting the Under Nutrition Challenge’ (MUCH).The program would
be executed jointly by the Ministry of Food and FAO from October 2014 to September 2019. The expected outcome of the MUCH would be achieved through five mutually reinforcing outputs, all of which are focused on strengthening national capacities through on the job, long- and short-term training programs. The total amount would be funded by the United States Agency for International Development (USAID) and European Union (EU). FAO would also provide technical support to the Ministry of Food.
Remittance rises by 10% in six months According to Bangladesh Bank, inward remittance grew at double-digit rates to reach USD 7.47 billion in the first half of this fiscal year. The growth rate was 10.3% between July and December, compared to the same period a year ago. Bangladesh received nearly USD 6.77 billion in remittance in the July-December period of fiscal 2013-14 and in total USD 14.23 billion in remittance in 2013-14, down from USD 14.46 billion a year ago. If expatriates continue to send money as they have done so far, Bangladesh may receive USD 15 billion in the current fiscal year. Remittance, the money sent home by Bangladesh’s migrant workers overseas plays a key role in reducing the overall incidence of poverty in the country. The poverty rate at present has come down to almost half of 48% in 2000.
Private sector credit to grow 13% in November The private sector credit grew 12.67% year-on-year to BDT 531,051 crore in November, the fastest in a year. The growth came due to declining interest rates and a boost in business confidence in the first half of the current fiscal year. If political situation improves and lending rates decrease, the private sector will go for loans for business expansion.
Private Credit Growth In % (Jan -Nov) 13
12.67
12.5
As stated by Bangladesh Bank (BB), the trend improved every month, which is a very good sign for the economy. The lending rates also came down to 12-13% now from 15-16% a year ago. The manufacturing and productive activities are yet to pick up to the level of 2011-12, but trade, commerce and services sectors have kept the economy vibrant, leading to a rise in credit growth. The trend shows that the government’s borrowing from the banking sector would remain under control due to the declining prices of fuel oils in the international market.
12.15 12.12
11.9
12 11.5
11.5
11.4
11.58 11.25
11.08 11
11.39
10.7
10.5 10 9.5
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Source: Bangladesh Bank
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IDLC MONTHLY BUSINESS REVIEW
Korean firm builds water treatment plant in Chittagong In order to build a water treatment plant in Bangladesh, South Korean builder Taeyoung Engineering and Construction Co has clinched a USD 49.76 million. As stated by the company, under the deal with Chittagong Water Supply and Sewerage Authority, Taeyoung would construct the plant in Modunaghat in the southeastern port region. The project which is funded by the World Bank, includes development of a booster pump station in the nearby region of Patenga and the construction of the plant would last 30 months.
Inflation continues its downward trend According to the inflation data, inflation extended its downward trend in December, coming down to 6.11 % the lowest in 25 months, primarily due to declining commodity prices on the worldwide market. The overall inflation rate, which has been on the decline for the last several months, was 6.21 % in November. In October 2012, inflation was 5.86 %, which rose to 6.55 % in November the same year. As reported by Bangladesh Bureau of Statistics, food inflation was the primary driver behind the plunge in the overall inflation. The non-food inflation went up to 6.48 % in December from 5.84 % because of a rise in house rent, transportation costs, education and medical expenses and prices of other non-food items.
Inflation In 2014 (in %) 2014 10 9
8.84
8.81
8.96
8.95
2013
9.09 8
8
7.94
7.67
7 6
5.53
5.37
5.26
5.23
5.16
5.45
5.76
5.71
7.63 5.63
7.16 5.74
6.48 6.44 5.84 5.86
5 4 3 2 1
According to CPD international prices for almost all commodities experienced a decline in recent past, precisely after the recession of 2007-09. The annual average global price in November 2014 was 3.9% lower compared to the corresponding month in 2013. Stable exchange rate also helped to keep prices stable, and lower consumer demand in the domestic market arrested the upward pressure on prices. The central bank, forecasts that an upward
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bangladesh Bank
pressure on inflation will remain in 2015 because of the new pay scale for government employees, the possibility of oil price hike and the demand pull impact on the price level because of expected 6.5% economic growth.
Selected Economic Indicators Item
Period/As of
Value/ bn
Period/ As of
Value/ bn
+/(-)%
January'15
22.31
December'14
17.83
25.12%
Workers’ Remittances (USD)
December'14
1.26
November'14
1.06
18.53%
Revenue Collection (BDT)
November'14
97.20
October'14
89.14
9.03%
Broad Money (M2) (BDT)
November'14
7250.65
October'14
7250.03
0.01%
Reserve Money (RM) (BDT)
November'14
1378.18
October'14
1400.64
-1.60%
Total Domestic Credit (BDT)
November'14
6620.39
October'14
5938.93
11.47%
Credit to Private Sector (BDT)
November'14
5310.51
October'14
4684.67
13.36%
Foreign Exchange Reserve (USD)
Source: January 2015, Selected Economic Indicators, Bangladesh Bank
20
IDLC MONTHLY BUSINESS REVIEW
TRADE Garment exporters look to an optimistic year l Due to increasing numbers of international orders boosted by ebbing worries on regulatory incompliance, the garment exporters expects promising and tempting 2015. The favorable factory inspection reports by two retailers’ groups Accord and Alliance have shed some positive light on safety and labor standards. 98% factories were cleared as safe by Accord in its report last September, which was a highly desirable achievement for the sector with terrible compliance track records leading to major losses of life and property.
Garment Monthly Exports (In billions of USD) 17.61
10.06
9.74 7.09
5.06
3.66
4.23 0.77
0.07
-2.06 -2.76
In spite of last year’s stability, challenges like an insufficient supply of gas and power to the industrial units and poor infrastructure still hold back the sector. Slow business in the first half can be attributed to relocation of many factory units from Dhaka to other places, as well as some remedial measures being undertaken as per suggestions by Accord and Alliance. According to data from Export Promotion Bureau, garment exporters of Bangladesh made revenue of USD 22.26 billion between January and November 2014.
2
1.51
1.94
1.94
May
June
July August Sept
Oct
Nov
Dec
1.71
2.51
Feb March April
2.31
Jan
2.2
1.92
1.97
1.91
2.24
-9.69
Source: Export Promotion Bureau
Bicycle exporters may face uneven ride l Bangladesh presently exports low and mid-range bicycles that cost between USD 100 and USD 150 a unit. The bicycle manufacturers requested the government to facilitate business by improving infrastructure, particularly the roads and ports to enhance competitiveness. As stated by industry insiders, Bangladesh exported around 500,000 bicycles worth USD 110 million in 2014; it also exports bicycle parts and accessories to Europe. The Philippines exports only low-end bicycles that are priced between USD 60 and USD 70 a unit which is USD 30 to USD 40 lower than Bangladesh. In December 2014, the European parliament voted in favor of the European Commission’s proposal to include the Philippines in EU’s GSP plus, which would make all imports from the Southeast Asian nation to the EU duty free, including bicycles, parts and accessories. The Philippines would now benefit from zero tariffs on 6,274 products nearly two-thirds of its exports destine for Europe. According to exporters, the European Union’s decision to grant the Philippines the generalized system of preferences (GSP) plus status last month will intensify competition for Bangladesh’s bicycle exports to Europe.
Bicycle Exports (in millions of USD) 140 121.21 120
112.89
110.86 99.83
105.59
105.08
2011-12
2012-13
100
80
60
40
20
0 2009-10
2010-11
2013-14
2014-15
Source: Export Promotion Bureau
21
IDLC MONTHLY BUSINESS REVIEW
Bangladesh to import another 30-50MW power from India l In order to meet the shortfall in power imports from India, the government plans to buy 30-50 megawatts of electricity from NTPC Vidyut Vyapar Nigam Ltd (NVVN) from private parties. As stated by the Bangladesh Power Development Board (BPDB), a proposal from the power ministry will be sent to the cabinet committee on purchase for approval. Under the deal, Bangladesh got 250MW of electricity through NVVN and the remaining 250MW from Power Trading Company India Ltd (PTC). The country has been importing 500MW of electricity from India through grid interconnectivity between Bohorompur in India and Bheramara in Bangladesh since October 2013. In reality, the country has been getting 30-50MW of electricity less due to auxiliary consumption at the generating station and losses during transmission. According to the BPDB, the new power import from private players will cost an approximate BDT 4.74 a unit, which seems consistent with the price paid so far. The average price for a kilowatt-hour of electricity from the Indian government is BDT 3.27 per unit, much less than the market rate of BDT 5.99 per unit. Once approved by the purchase committee, the country would receive electricity, stated by the ministry of power.
Rice bran oil to raise hopes for cuts in imports l The demand for the antioxidant-rich rice bran oil is rising exponentially on the back of increased health consciousness among urban people. According to the experts, after an intense awareness campaign, particularly among housewives, demand for rice bran oil increased from 15-20 tons a day in 2012 to 70-100 tons now.
22
Cooking Oil Imports (in crores of BDT) 14000
13051
12000
The growing demand rice bran oil has also created expectations of bringing down the country’s import dependency for cooking oil. According to estimates by agricultural scientists, the country produces more than 5 crore tons of paddy a year, which yields 40 lakh tons of rice bran.
10000
According to Bangladesh Bank and industry estimates, at present, the country spends over BDT 10,000 crore a year to import 14-15 lakh tons of edible oil against the domestic demand of 18 lakh tons,. The rice bran oil holds very good market potential.
2000
8000
0
7260 7600
6905 5952
6000 4000
12529 11185
2773 2698
3174
4022
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Source: Export Promotion Bureau
IDLC MONTHLY BUSINESS REVIEW
BUSINESS Float-glass makers to raise capacity l With intent to make the most of the sector’s double-digit growth, large float-glass manufacturers have decided to expand their production capacities. For instance, Nasir Group, which has a 70% market share, is setting up its second manufacturing unit for nearly BDT 1,200 crore, while PHP Float Glass, which occupies the second spot, has also planned to double its production capacity to 300 tons per day. The float glass market, which is now worth about BDT 15,000 crore a year, is relatively new in the country. The demand for float glass, essentially used in buildings, now stands at around 15,000 tons per month, which ten years ago was just 200 tons, however, in the next five years, the monthly demand is expected to rise up to 30,000 tons. Between 2005 and 2013, the demand was driven by urban consumers, however of late; it is being fuelled by rural consumers, who now prefer the low-cost float glass to the costly wood in their houses. Silica and gas, the primary needs of float glass makers, are
available in the country, while the secondary raw materials such as dolomite, feldspar and limestone are imported from neighboring Bhutan, Nepal and India.
Existing Production Capacity of Float Glass Makers (in tons per day) 600 500 400
200
150 40
35
MEB
USMANIA
0 NASIR
PHP
Source: Bangladesh Bureau of Statistics
Cotton usages to grow 4% on elevated demand l According to the forecast of London-based Economist Intelligence Unit (EIU), Bangladesh’s cotton consumption would rise 4.08% in fiscal 2015-16, riding on higher demand from local spinners and foreign investors in the textile sub-sector. As stated by the former president of Bangladesh Textile Mills Association, cotton consumption in Bangladesh would increase if the investment proposals in the textiles sector from aboard are really implemented here. Global cotton consumption is expected to expand by 3.3% in 201415, following a small decline of 0.5 % in 2013-14. The consumption would increase to 1.02 million tons despite poor safety standards, mainly due to a shift in investment in the textile sector from India and China, as stated by EIU. Bangladesh imports woven fabrics worth more than USD 5 billion a year mainly from India and China as the local weavers can only meet 40% of the fabric need of the garment makers. The local
weavers cannot supply an adequate quantity of fabric due to lower investment in the sub-sector as the investors require higher capital.
Cotton Consumption In Bangladesh (in million of tons) 1.2 0.9
1 0.8
0.7
0.98
1.02
2014-2015
2015-2016
0.77
0.6 0.4 0.2 0
2011-2012
2012-2013
2013-2014
Source: Economist Intelligence Unit
23
IDLC MONTHLY BUSINESS REVIEW
REGULATORY NEWS BB escalates the charge on inter-bank ATM transactions l Under NPSB (National Payment Switch Bangladesh project), customers would have to count double charge of BDT 15 from existing BDT 10 on each inter-bank transaction through automated teller machines (ATM). The central bank in response to the frequent pressure from the enlisted banks is going to implement the double charge on the customers on inter-bank ATM transactions. Previously, on March 18, 2014 the central bank had asked all banks to impose a maximum charge of BDT 10 for each inter-bank transaction by clients through ATM under its NPSB as it had no instruction in this connection.
inter-bank ATM transaction. The BB tried for a long to continue with the inter-bank ATM charge of BDT 10, but the private banks put massive pressure on the central bank to reconsider its decision.
According to the Bangladesh Bank (BB) circular, the card (debit or credit card) issuer banks would have to pay BDT 15 to the ATM owner banks for each inter-bank transaction by the customer through the ATM machines, meaning that the card issuer banks would have to pay a subsidy of BDT 10 per such transaction. As stated by the central bank, after the issuance of the central bank circular, the card issuer banks had conveyed their dissatisfaction and objection before BB requested to release them from the subsidy cost of BDT 10 in every
However, the central bank would intervene if it finds irregularities in the rent and expenses, and may close down the booth, if necessary. If the rent increases by more than 15%, BB’s approval has to be taken. Meanwhile, in another development, banks can now go for rental or leasing renewal without prior permission from the central bank within three years of the latest approval on the same issue. BB would have to be notified of the renewal within one month of approval from the banks’ board of directors.
Additionally, to help banks expand their networks, the central bank relaxed the guidelines for setting up electronic booths, including automated teller machines (ATM). The schedule banks now could set up all kinds of electronic booths including ATMs without prior permission from the central bank, according to Bangladesh Bank (BB).
Tightened rules for large loan restructuring l With intend to ensure no further defaults on the loans; Bangladesh Bank has now followed through on its decision to allow restructuring of large loans until June 30 with a watertight guideline for banks. Political turmoil has damaged many large borrowers’ business and their debt servicing capacities and it has noteworthy importance from the socio-economic and employment generation perspective, the
BB board agreed to extend restructuring facility to them on their loans of BDT 500 crore and above. The banks would have to set up special cells headed by their heads of recovery for continuous monitoring of the restructured loans. All restructured loans would be treated as special mention assets (SMAs) and these are potentially weak loans or
assets presenting an unwarranted credit risk but are less risky than substandard assets. As collateral, the banks should acquire charge documents covering the restructured loan amounts, corporate guarantees from the business concerns of the groups and personal guarantees from all the directors/owners. They should also try to raise more physical collaterals to cover the restructured loans.
NBR to set up data forensic lab to identify tax frauds l With intent to identify tax and financial frauds, the National Board of Revenue (NBR) has launched a state-of-the-art forensic lab to extract all data including secret accounts and records from taxpayers’ computers. The step comes in response to the growing trend among businesses to switch to electronic record-keeping from paper-based accounting systems. In spite of digital record keeping systems convenient and environmentally-friendly nature, it has created scope to hide actual accounts and other transaction records from taxmen and financial fraud investigators. The taxmen also faces trouble in getting full access to all data from computers seized as part of inquiry due to the option of password protection. To address the growing issue, the tax authority has obtained equipment and software and set up a forensic lab at the Central Intelligence Cell (CIC) in its headquarters, with funds from the Department for International Development, the British government’s arm for overseas aid. The lab would authorize taxmen to get full access to all digitized records kept by taxpayers in their computers and IT infrastructure to prevent tax evasion. According to the NBR, Bangladesh will be among the few least developing countries that have state-of-the-art facilities to dig into digital records and analyze data electronically. As Tax dodging is widespread in the country where less than 1% of the population pays income tax, according to NBR’s modernization plan this lab would help to catch tax dodgers
24
IDLC MONTHLY BUSINESS REVIEW
MARKET ROUNDUP Currency Market Roundup January, 2015
Money Market l
The Bangladesh interbank call money rate was around 7.25% – 8.25% on 31 January, 2015.
Foreign Exchange Market l Local: The USD/BDT rate was steady and was range bound 31 January, 2015. Trading volume was steady with more cross currency transactions. International: The dollar traded mixed on 30 January, 2015 after weaker-than-expected headline U.S. fourth-quarter gross domestic product data, which included the fastest pace of consumer spending since 2006 and left intact market expectations of long-term greenback gains. U.S. economic activity in the fourth quarter rose 2.6%, below economists’ consensus forecast of 3 percent and nearly half of the third quarter’s 5% rate. While the U.S. Federal Reserve is still expected to begin raising interest rates later this year, the contrast with loosening monetary policies elsewhere in the world is becoming even more stark.
Treasury Bill/Bond Auction Information l Auction Date
Tenure & Name of the Securities
Sale Value (in BDT mn)
Weighted Average Yield (%)
22/01/2015
30-day BB Bill
776.648
5.25
26/01/2015
91 days T.Bill
7852.18
7.59
19/01/2015
182 days T.Bill
5772.445
7.92
26/01/2015
364 days T.Bill
3700.561
8.17 8.5
7/1/2015
2 yr T.Bond
280
14/01/2015
5yr T.Bond
500
9.5
21/01/2015
10yr T.Bond
400
10.88
24/12/2014
15yr T.Bond
297.7
11.52
24/12/2014
20yr T.Bond
214.3
12.05
* Sale value not applicable, Face Value used.
Source: Bangladesh Bank
Financial Sector Prices l The spread of weighted average lending and deposit rate declined to 5.09% in December 2014 which was 5.10% November 2014. The weighted average call money rate in the interbank market went up from 7.77% in November 2014 and stood at 7.46% at December, 2014. Bangladesh Bank has changed repo and reverse repo rate at 7.25% and 5.25% respectively, following a declining revision by 50 basis point effective from February 1, 2013.
Exchange and Forward Rates l (As of January 31, 2015) Major Currency Exchange Rates
Major Currency Exchange Rates
BC Sell BDT
TT Buy BDT
BC Sell BDT
TT Buy BDT
USD
78.30
77.30
CAD
63.54
60.48
EUR
89.41
85.41
HKD
10.13
9.63
INR
62.02
1.25
GBP
118.80
114.80
SGD
58.04
55.17
PKR
101.10
0.77
AUD
62.34
59.82
AED
21.39
20.33
LKR
132.23
0.59
JPY
0.67
0.64
SAR
21.52
20.48
THB
32.73
2.38
CHF SEK
87.40 9.54
83.18 9.07
DKK
11.93
11.34
KWD
266.27
523.09
MYR
3.63
21.43
Currency
Currency
Exchange Rate of Some Currencies Currency
Currency Per USD
BDT per Currency
Source: Standard Chartered Bank.
25
IDLC MONTHLY BUSINESS REVIEW
Commodity Market Roundup Global food price remained steady throughout the year l The global food prices in December 2014 were nearly 1.7% below its revised value for November and 3.7% lower than in December 2013. The global food price illustrated a downward trend between March and September, remained fairly stable in October and November, before falling again in December. Over the full 2014 year, the averaged was 202 points, there was a downward trend of 3.7% from 2013, and with the sharpest year-on-year falls registered by cereals (12.5%), followed by dairy products (7.7%), oils (6.2%) and sugar (3.8%). Only the FAO Meat Price Index recorded an increase, advancing by 8.1% compared to 2013. Cereal price inclined slightly up by 0.4% from November, primarily driven by a rise in wheat prices which more than offset a decline in rice quotations. Rice prices fell markedly, reflecting a combination of abundant export supplies and sluggish import demand.
growth in export availability were among the main factors influencing prices. However, meat products were the only commodity group within the FAO Food Price Index to register an increase during 2014, up 8.1% from 2013. Sugar price decreased in December 2014 to an average 219 points which was down 11 points or 4.8% from November. Ample supplies in major sugar producing countries, including Brazil, the world’s largest producer and exporter, and falling crude oil prices, which reduce the volume of sugar crops being converted into ethanol, weighed on international sugar quotations in December. Sugar prices were mostly under downward pressure over 2014, averaging 9.6 points, or 3.8%, lower than in 2013. FAO Food Price Index
Price of oils & fats decremented to 161 points in December, which was down by 2.4% from November. The drop in the global price mainly reflects developments in the palm oil market, as the recent slump in crude oil prices depressed demand for palm oil as a biodiesel feedstock, causing international palm oil values to weaken. Dairy products saw a rapid fall of 4.1 points or 2.3% over November. The decline in prices was most pronounced for milk powders, followed by butter and cheese. Abundant export supplies continued to weigh on international prices in December. Over 2014, prices for international milk products averaged 224.2 points, down 7.7% from 2013. Meat price declined to 204 points in December, only 1.9% or 4 points than the revised value from November. The stronger US dollar and a
2002-2004-100 250 2011 2010 220
2012 2013
190
2014 160 130 J
F
M
A
M
J
J
A
S
O
N
D
Source: Food and Agricultural Organization
International Commodity Prices l Commodity
Unit
Price 26 Jnauary 2015 (USD/unit)
Price 28 December 2014 (USD/unit)
Change +/(-)
Crude Oil
Barrel
45.15
56.52
-0.20
Gold
Ounce
1281.25
1177.00
0.09
Silver
Ounce
17.83
15.77
0.13
Nickel
Tonne
14375.00
15275.00
-0.06
Tin
Tonne
19500.00
18795.00
0.04
Lead
Tonne
1845.00
1847.50
-0.02
Aluminium
Tonne
1818.00
1834.00
0.14
Zinc
Tonne
2090.50
2152.50
1.55
Copper
Tonne
5490.00
6361.00
-1.00 Source: LBMA; Worldal; WTRG.
26
IDLC MONTHLY BUSINESS REVIEW
INTERNATIONAL Xiaomi develops into the most valuable tech start-up l Xiaomi, Chinese smartphone maker has become the world’s most valuable technology start-up just four years after it was founded. The firm raised USD 1.1 billion (£708 million) in its latest round of funding, giving it a valuation of USD 45 billion, which surpassed the USD 40 billion value of taxi booking app Uber. It has quickly risen to the
ranks of the world’s biggest Smartphone makers, behind Samsung and Apple in sales. In order to overtake giant Samsung this year in sales in the world’s second largest economy China, Xiaomi’s strategy of producing cheap smart phones has catapulted its growth too. Its skyrocketing
valuation comes despite the intellectual property challenges it faced earlier this month in India, where sales were temporarily halted after Swedish firm Ericsson filed a patent complaint. The company’s worth is now more than quadruple the USD 10 billion valuation it received during its last financing round last year.
Oil moves for biggest annual drop since 2008 l Oil dropped below USD 45.15 a barrel and headed for the biggest annual decline since 2008, pressured by weakening demand and a supply glut prompted by the US shale boom and Opec’s refusal to cut output. The prices came under pressure from a survey showing China’s factory sector shrank for the first time in seven months in December which is a bearish indication on the strength of oil demand in the world’s secondlargest consumer.
US benchmark West Texas Intermediate for March delivery fell 70% to USD 45.53 while Brent for March eased 60% to USD 49.00 in afternoon trade. According to Singapore’s United Overseas Bank (UOB), the Fed statement will be pored over by investors for clues to the central bank’s thinking on the timing for an expected interest rate hike later this year, the first since 2006. The Fed has kept its key federal funds rate pegged between zero and 0.25% since late 2008 to support the US economy’s recovery from the deep 2008-2009 recession.
Apple achieves highest profit in corporate history l Apple has recently seen its largest bout of sales with the record breaking figures for its large screen phones coupled with a 70% increase in China sales, ensuing in the company’s biggest profit period. Despite many analysts’ prediction of fewer than 70 million unit sales, the company reached the 74.5 million mark by the fiscal first quarter ended Dec 27, 2014. Previously, profit of USD 18 billion was the biggest ever reported by a public company, worldwide, according to S&P analyst Howard Silverblatt. Apple’s funds now amount to USD 178 billion, enough to buy IBM or equivalent to USD 556 for every American. Furthermore, the release of the company’s new product, the Apple watch, is due in April. The company’s shares rose about 5 percent to USD 114.90 in after-hours trade, a welcome sign amidst perpetual disappointments from other tech giants like IBM and Microsoft. Apple stated that the company did not sell more iPhones in China
than it did in the US. However, the primary antecedent to the company’s success in the region is its partnership with China Mobile Ltd, plus the appeal of larger screen phones like iPhone 6 and 6 Plus. The sales figures have been so impressive that it seems improbable that the sales would go down in spite of the fact that China has been experiencing sluggish economic growth. Apple reported net profit of USD 18.02 billion, or USD 3.06 per diluted share, compared with USD 13.07 billion, or USD 2.07 per share, a year earlier. That topped expectations of USD 2.60 per share, according to Thomson Reuters I/B/E/S. Analysts had expected revenue of USD 67.69 billion. The company heralded a new mobile payment service, the Apple Pay, which lets customers buy products from their phones, and more user friendly and attractive features are on the line as the company looks forward to expand outside US on a full scale basis.
International Economic Forecast Year on year percentage change
GDP 2015
2014
2016
CPI 2015
2014
2016
Global (PPP Weight)
3.3%
3.4%
3.8%
3.6%
3.4%
3.6%
Advanced Economies
1.9%
2.4%
2.6%
1.4%
0.8%
1.8%
Euro Zone
0.9%
1.3%
1.8%
0.4%
0.3%
1.0%
Developing Economies
4.5%
4.3%
4.9%
5.7%
5.9%
5.4%
Forecast as of January 2015 Source: Wells Fargo Securities, LLC
27
IDLC MONTHLY BUSINESS REVIEW
Insight Analysis l
Football wealth Revenue, 2013-14 season, EUR million Commercial Broadcasting Match day 0 100 200
Football wealth Having become the first team to win the European Cup on ten occasions in 2014, Real Madrid has also claimed the title of world’s highest-earning club for the tenth straight year. According to Deloitte’s football money league the Spanish giants earned EUR 549.5 million (USD 745 million) in the 201314 season. Aggregate annual revenues from the world’s 20 highest-earning clubs surpassed EUR 6 billion for the first time, with ticket sales contributing the lowest share in the report’s 18 years. Broadcasting rights and commercial deals are becoming increasingly important; the Premier League’s lucrative television deals now mean that all 20 teams in the English division make the top 40 richest globally.
300
400
500
600
Real Madrid Manchester United Bayern Munich Barcelona Paris Saint-Germain Manchester City Chelsea Arsenal Liverpool Juventus Borussia Dortmund AC Milan Source: Deloitte
Source: IEA World Energy Outlook 2014
International Market Movement l Markets
Index Jan 14th
United States (DJIA) United States (S&P 500) United States (NAScomp) China (SSEA) Japan (Nikkei 225) Britain (FTSE 100) Canada (S&P TSX) Germany (DAX) Hong Kong (Hang Seng) India ( BSE) Pakistan (KSE) Singapore (STI)
One Week
17427.1 2011.3 4639.3 3376.6 16796.0 6388.5 14084.4 9817.1 24112.6 27346.8 33585.5 3326.2
-0.9 -0.7 -0.2 -4.5 -0.5 -0.5 -1.4 3.1 1.8 1.6 2.3 0.8
% Change on Dec 31st, 2013 In Local currency In USD 5.1 5.1 8.8 8.8 11.1 11.1 52.5 49.0 3.1 -7.3 -5.3 -13.1 3.4 -8.1 2.8 -12.1 3.5 3.5 29.2 28.5 33.0 38.9 5.0 -0.6 Source: The Economist
Selected Economic & Financial Indicators l Global domestic product Country United States China Japan Britain Canada France Germany Russia Hong Kong India Singapore Brazil Mexico
Consumer prices
Latest
qtr
2015
latest
2014
Unemployment rate, %
2.7 7.3 -1.3 2.6 2.6 0.4 1.2 0.7 2.7 5.3 1.5 -0.2 2.2
5 7.8 -1.9 3 2.8 1 0.3 0.0 6.8 8.1 1.6 0.3 2
3.1 7.1 1.0 2.7 2.4 0.9 1.2 -3.5 2.6 6.5 3.6 0.5 3.0
1.3 1.5 2.4 0.5 2.0 0.1 0.2 11.3 5.1 5.0 -0.3 6.4 4.1
1.6 2.1 2.8 1.4 1.9 0.6 0.8 7.7 4.4 7.3 1.1 6.3 3.9
5.6 4.1 3.5 6.0 6.6 10.3 6.5 5.2 3.3 8.8 2.0 4.8 4.7
*% change on previous quarter, annual rate. ** The Economist poll or Economist Intelligent Unit estimate/forecast.
28
% change on year-on-year Current account balance Latest 12 months, $bn -388.1 196.6 16.1 -163.0 -41.2 -29.1 283.5 54.2 7.7 -23.4 58.9 -88.7 -25.4
% of GDP 2014 -2.3 2.4 0.3 -4.8 -2.4 -1.3 7.3 2.6 1.8 -2.0 20.7 -4.0 -2.0
Interest rates, % 10-year gov’t bonds, latest 1.92 3.47 0.26 1.63 1.58 0.74 0.43 14.70 1.54 7.78 1.94 12.2 5.58 Source: The Economist.
IDLC MONTHLY BUSINESS REVIEW
MONTH IN REARVIEW Business-firm Specific l
With intent to grab a bigger share of the growing e-commerce market, Ekhanei.com and OLX.com.bd have merged. The new company would continue to operate under the Ekhanei.com name and OLX users will not have to repost their ads as they will be migrated to ekhanei.com. The venture would be owned by SnT Classified (an equal shareholding joint venture between Schibsted and Telenor) by 50.3%, the parent company of ekhanei.com, and 49.7% owned by Naspers, the parent company of OLX.com.bd. The transaction is part of a larger partnership agreement to join forces in selected emerging markets.
With intent to platform the latest technology and products of the growing sector, a four-day international fair of plastic manufacturers commenced in Dhaka. This 10th Dhaka International Plastic Fair took place at Bangabandhu International Conference Centre from January 27 to 30. According to Bangladesh Plastic Manufacturers and Exporters Association, the country now has 5,000 plastic factories where 12 lakh people work. According to the experts, Bangladesh has the opportunity to become a global player in plastic market by raising its turnover to USD 2 billion by 2015 and USD 4 billion by 2020. The show offered an opportunity to participants and visitors to browse the latest technology and products and meet professionals.
In order to strike the Bangladesh’s pharma market, a three-day expo opened to showcase the pharmaceutical products and services creating a platform for reaching more clients. Vanrx Pharmasystems, a Canadian manufacturer of pharmaceutical machinery, provide high-tech solutions in design, engineering and construction, and sells equipment and machinery to local pharma companies. Pharmaceutical exports rose 15.65 % year-on-year to BDT 553.3 crore in fiscal 2013-14, riding on the back of growing global demand, high quality products and competitive prices. The local pharma market is valued at BDT 12,000 crore. The industry meets around 99% of local demand where the domestic market for pharma is expanding with the growth in the national economy.
Management Change l Banks, Fis and Other Organizations Name
Position
Organization
Md Nojibur Rahman
Chairman
National Board of Revenue
Md Shahinul Islam Khan
Chairman
Power Development Board
Chief Executive Officer
Standard Chartered Bank
President
Chevron Bangladesh
Md Shaheed Sarwar
Managing Director
Dhaka Electric Supply Company Ltd
Md Golam Rabbani
Deputy Managing Director
Prime Bank Ltd.
Md Shawkat Ali
Deputy Managing Director
South Bangla Agriculture and Commerce Bank Ltd.
Md Arifur Rahman
Deputy Managing Director
Bangladesh Krishi Bank
Additional Managing Director
Social Islami Bank Ltd.
Abrar A Anwar Kevin Lyon
Ihsanul Aziz
29
IDLC MONTHLY BUSINESS REVIEW
IDLC CSR NEWS IDLC partners with SEID Trust for capacity development of 30 children with intellectual and multiple disabilities l
IDLC has partnered with SEID Trust to provide vocational training to 30 specially-challenged children having intellectual and multiple disabilities, including autism. The training will be provided for a period of 12 months, focusing on two areas: Sewing and Embroidery, and Block/Batik/Tie-dye. The project attempts to aid social rehabilitation and acceptability of these children by empowering them with income-generating skills. After completion of the training program, an exhibition will be arranged to create more awareness among people regarding the ability of these children. A MoU has been signed with SEID Trust on January 27, 2015. Mr. Selim R. F. Hussain, Managing Director, IDLC Finance; Ms. Dilara Satter Mitu, Managing Trustee and Director, SEID Trust; other senior officials from both organizations and some of the beneficiaries were present during the signing ceremony.
IDLC stands by the marginal people this winter l
30
IDLC MONTHLY BUSINESS REVIEW
IDLC has recently distributed around 6,000 blankets and warm clothes in more than 40 locations including Bogra, Lalmonirhat, Kurigram, Gabtoli, Sherpur, Shariakandi, Nandigram, Shantahar, Noagaon, Mohadevpur, Joypurhat, Jamalganj, Bibirpukur, Shahjahapur, Sirajganj, Nilphamari, Kishoreganj, Dinajpur, Birol, Setabjganj, Birgong, Fulbari, Syedpur, Rangpur Sadar, Natore, Ishwardi, Chanchkoir, Rajshahi and Chapanababganj in North Bengal; Jessore, Khulna, Kushtia, Chuadanga, Jheinaidaha, Kaligonj and Norail in the Southwestern Region; Chittagong Sadar; and Moksehdpur village in Gopalganj. IDLC carries out blanket distribution program every year, to help out the marginal people most effected by the extreme cold. The distribution was carried out by officials at IDLC’s Bogra, Jessore, Khulna, Chittagong and Natore branches, together with IDLC clients and local NGOs. Officials from Bangladesh Bank were also present during the distribution at Lalmonirhat and Kurigram. Moreover, staff from different IDLC branches voluntarily collected and distributed blankets and warm clothes among underprivileged people in different parts of Dhaka and Sirajganj.
IDLC and Fareast conduct healthcare session for RMG trainees in Gazipur l
IDLC has partnered with TAHN Foundation to conduct healthcare sessions for female trainees under its ongoing RMG skills development project in Gazipur. The sessions focus on female health and hygiene issues such as importance of personal hygiene, timing of marriage and first pregnancy, safe delivery of the baby, nutrition for adolescent girls and pregnant/breastfeeding mothers etc. IDLC started the skills development project in June 2013, in partnership with Fareast Knitting and Dyeing Industries Limited, ILO Bangladesh, Gazipur Technical School and College (under the Directorate of Technical Education), and Care Bangladesh, targeting capacity development of marginal women from North Bengal and their subsequent employment as Machine Operators in Fareast. Besides technical training, the trainees also receive lessons on non-technical issues such as factory rules and regulations, labor rights, gender issues, worker-management relations, occupational health and safety standards etc. The healthcare sessions are an extension of the training program, focusing on issues more relevant for industry workers.
31
IDLC MONTHLY BUSINESS REVIEW
CAPITAL MARKET REVIEW 2015 began with a gloomy scenario. As major political parties put themselves in a stand off, market anticipated a prolonged political turmoil and unrest, asking for higher risk premium from the equity market. Resultantly, prime bourse observed waves of strong sell pressure, descending into a bloodbath. Naturally, turnover squeezed in fear, putting immense pressure on brokerage business. At the end, all the major indices fell sharply with DSEX losing 140.9 points (2.9%), DS30 losing 55.3 points (3.1%) and DSES losing 34.52 points (3.0%). The selling frenzy indiscriminately butchered stocks across cap classes. All the major cap class shrank devastatingly, with Micro Cap (-6.0%) falling in the most wretched condition, followed very closely by Mini Cap (-5.8%). After gaining 95.5 points in the last month of 2014, market commenced with a strong upbeat vibe. Although, a major political party went for a countrywide strike, hopeful sentiment persisted in the first half of the month. During that period prime index DSEX advanced 95.5 points, with average turnover improving slightly to BDT 3.2 bn. However, political considerations took hold of the market sentiment in the later half. Negativity snowballed through rest of the month, as one correction reinforced by another, as investors got frantic over capital protection. During the last half of January, DSEX
dropped sharply by 232.0 points, DS30 by 91.6 points and DSES by 58.7 points. Amid this panicked environment, fresh fund injection obviously dried up, causing the free fall of scrips. Daily turnover averaged around BDT 2.4 bn, providing little room for portfolio reallocation to the investors. During January, two new stocks NFML and CNATEX debuted in the market. CNATEX helped Textile to be the most active sector of the month, capturing 14.5% of total turnover. Fuel & Power turned out to be the second most active sector, with 13.1% share of total turnover. Amid this slaughter, Food & Allied managed to gain 8.9%, while all other major sectors got crushed. Specially, Telecommunication fell by stunning 8.9%, as sectoral and market giant GP eroded by 9.0%. Meanwhile, two minor sectors Services & Real Estate and Paper & Printing got significantly downsized by 19.5% and 17.4%. This month, corporate activities remained low. BSEC fined two brokers/dealers for breaching security related laws. The commission also decided to transform ICB AMCL Islamic Unit Fund from closed end to Open end. In addition, BSEC has cancelled the facility to apply for IPO through Banks, effective from April 01, 2015.
Monthly Market Statistics l Advance/Decline (January, 2015)
Index Movement (January, 2015) Index Point
Change
% Change
YTD change
DSEX
4,724.0
(140.9)
-2.9%
-2.9%
DS30
1,747.8
(55.3)
-3.1%
-3.1%
DSES
1,115.7
(34.5)
-3.0%
-3.0%
Top Ten Gainers’ List (January, 2015) Gainers
29-Jan-15
30-Dec-14
All Category
Advanced
Declined
Unchanged
57
228
7
Top Ten Losers’ List (January, 2015) % Change
Losers
29-Jan-15
30-Dec-14
% Change
29.0
24.9
16.5%
PRIMELIFE
57.2
79.4
-28.0%
PF1STMF
5.3
4.6
15.2%
SAPORTL
62.6
82.9
-24.5%
DULAMIACOT
8.0
7.0
14.3%
QSMDRYCELL
57.4
71.8
-20.1%
238.0
209.4
13.7%
REPUBLIC
21.1
25.7
-17.9%
20.4
18.3
11.5%
NTLTUBES
95.2
115.8
-17.8%
2,934.4
2,650.3
10.7%
HAKKANIPUL
25.1
30.4
-17.4%
SAIHAMCOT
19.8
18.1
9.4%
SAFKOSPINN
23.0
27.8
-17.3%
DACCADYE
15.6
14.4
8.3%
BDTHAI
38.7
46.6
-17.0%
BRACBANK
39.5
37.2
6.2%
PROGRESLIF
72.6
87.4
-16.9%
DBH
75.9
71.6
6.0%
CONTININS
17.2
20.6
-16.5%
ALLTEX
GEMINISEA DHAKABANK BATBC
*% change includes post record date effects
32
IDLC MONTHLY BUSINESS REVIEW
Market Capitalization
Top Ten by Value (January, 2015) Top Ten (Value)
29-Jan-15
30-Dec-14 % Change
Value
50,000
LAFSURCEML
124.5
123.0
1.2%
2,023.5
GP
329.3
361.9
-9.0%
1,481.1
40,000
AGNISYSL
31.3
32.3
-3.1%
1,458.0
30,000
IDLC
75.8
74.7
1.5%
1,372.2
CNATEX*
25.1
22.0
14.1%
1,326.2
20,000
BRACBANK
39.5
37.2
6.2%
1,304.5
SAIFPOWER
67.7
62.3
8.7%
1,268.6
OLYMPIC
68.3
69.5
-1.7%
1,267.5
233.9
227.3
2.9%
1,212.9
29.0
24.9
16.5%
1,155.1
ALLTEX
*% change includes post record date effects
10,000 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15
DESCO
USD in mn
DSE Turnover and DSEX
BDT in mn
Lowest P/E and Lowest P/BV ratio
44.0%
IFIC
7.6x
POPULAR1MF
44.2%
UTTARAFIN
7.7x
IFIC1STMF
45.8%
JAMUNAOIL
7.7x
AIBL1STIMF
46.7%
CONTININS
7.8x
1JANATAMF
47.9%
BDT mn
-9.0%
BATBC
176.1
10.7%
LAFSURCEML
144.6
1.2%
SQURPHARMA
141.0
-1.6%
TITASGAS
74.2
-5.9%
ICB
56.9
-2.0%
RENATA
44.1
1.5%
ISLAMIBANK
38.2
1.3%
OLYMPIC
37.1
2.9%
MARICO
35.5
0.4%
Mcap (All) Mcap (Equity) Turnover
Small
Mid
Large
-2.00% -2.13% -3.00% -3.28% -4.00%
-5.00%
-4.69%
-6.00% -6.01%
-5.77%
-7.00%
Market Statistics (January, 2015) 29-Jan-15
Mini
% Change
444.7
Unit
0.00%
-1.00%
GP
Market Stat
Market Cap Class wise Stock Movement Micro
Top Ten Market Capitalization (January, 2015) Top Ten Mkt Cap
Jan-15
PHPMF1
Dec-14
7.4x
Oct-14
ASIAPACINS
1,000 Nov-14
43.6%
Sep-14
EBLNRBMF
Jul-14
6.9x
Aug-14
ABBANK
2,000
Jun-14
43.0%
Apr-14
DBH1STMF
May-14
6.5x
Mar-14
UNITEDAIR
3,000
Jan-14
42.4%
Feb-14
GREENDELMF
Dec-13
6.5x
Oct-13
TRUSTBANK
4,000
Nov-13
41.7%
Sep-13
MBL1STMF
Jul-13
6.1x
Aug-13
FAMILYTEX
5,000
Jun-13
41.3%
Apr-13
LRGLOBMF1
May-13
6.0x
Mar-13
SOUTHEASTB
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Jan-13
Lowest Price/NAV
Feb-13
Lowest P/E
30-Dec-14
% Change
Recent Corporate Declaration l
BDT Bn
3,177.7
3,259.2
-2.5%
USD Bn
41.1
42.1
-2.5%
BDT Bn
2,622.1
2,703.7
-3.0%
GSP Finance Company Bangladesh Limited 23.02.15 05.02.15 55%
USD Bn
33.9
34.9
-3.0%
H.R. Textiles Limited
BDT Mn
2,784.9
3,006.6
-7.4%
Prime Finance First Mutual Fund
USD Mn
36.0
38.8
-7.4%
Company name
AGM Date
Record date
31.03.15 12.02.15 N/A
10.02.15
SD
CD
Rights
13% 10%
*SD = Stock Dividend **CD =Cash Dividend.
33
IDLC MONTHLY BUSINESS REVIEW
Sector Indicators (January, 2015) l Sectoral Indicators Sector
Value in BDT mn
% of Total Trade
Industry Cap
Forward PE
Trailing PE
89.1
3.2%
18.1%
20.9x
22.3x
-
Bank
268.3
9.6%
16.1%
10.4x
6.5x
-
-0.2%
Pharmaceuticals & Chemicals
267.1
9.6%
12.8%
22.4x
22.8x
-
-2.1%
Fuel & Power
365.8
13.1%
12.7%
12.1x
11.1x
-
-4.9%
Food & Allied
158.8
5.7%
9.0%
31.0x
30.4x
-
8.9%
Cement
121.7
4.4%
7.8%
36.4x
33.1x
-
-0.7%
Telecommunication
Price/BV
Sector Performance January -8.9%
NBFI
225.0
8.1%
5.7%
14.6x
13.5x
-
-2.9%
Engineering
339.0
12.2%
4.2%
24.4x
24.0x
-
-7.7%
Textile
402.6
14.5%
3.5%
16.6x
21.7x
-
-3.0%
Miscellaneous
116.0
4.2%
2.6%
30.6x
34.9x
-
-6.6%
Life Insurance
31.2
1.1%
2.1%
N/A
N/A
-
-6.9%
Non Life Insurance
19.5
0.7%
1.4%
11.7x
12.0x
-
-7.7%
Travel & Leisure
29.0
1.0%
1.0%
14.6x
14.9x
-
-3.9%
Tannery
15.6
0.6%
0.9%
23.3x
21.2x
-
0.6%
Ceramics
30.7
1.1%
0.9%
32.8x
34.4x
-
-6.3%
Services & Real Estate
120.0
4.3%
0.8%
36.9x
30.8x
-
-19.5%
IT
117.4
4.2%
0.2%
15.8x
17.9x
-
0.7%
18.0
0.6%
0.1%
13.1x
11.6x
-
-17.4%
Paper & Printing Jute
2.9
0.1%
0.0%
N/A
N/A
-
-8.7%
46.8
1.7%
-
-
-
-
-
0.4
0.0%
-
-
-
-
-
2,784.9
100.0%
100.0%
17.1x
15.0x
-
-
Mutual Funds Corporate Bond
Weekly (Jan 18 - Jan 22, 2015) Mutual Funds Update l Following table exhibits the Open-End Mutual Funds (7) in order of YTD change in NAV. Sl No
Name of Mutual Funds
Initial Fund Re-Purchase Size (BDT mn) Price 100 256.0
Selling Price 261.0
Effective Date* 25-Jan-15
255.8
NAV
% Change in NAV from last week 0.0%
YTD Change Fund in NAV Manager 0.0% ICB AMCL
1
ICB AMCL Unit Fund
2
ICB AMCL Pension Holders' Unit Fund
100
205.0
210.0
25-Jan-15
204.8
0.0%
0.0%
ICB AMCL
3
ICB AMCL Converted First Unit Fund
500
11.1
11.4
25-Jan-15
11.1
0.0%
0.0%
ICB AMCL
4
CAPM Unit Fund
100
100.9
103.9
25-Jan-15
103.9
-1.3%
0.0%
CAPM
5
Bangladesh Fund
50000
108.0
111.0
25-Jan-15
107.7
-0.1%
0.0%
ICB AMCL ACAML
6
MTB Unit Fund
1000
10.1
10.4
25-Jan-15
10.2
-3.5%
-2.7%
7
Prime Financial First Unit Fund**
200
97.0
100.0
28-Jan-15
100.8
-0.7%
N/A
PAMC
8
Shandhani Life Unit Fund
500
N/A
N/A
N/A
N/A
N/A
N/A
Alif AMCL
* **
For ICB AMCL and ACAML, effective date is the date from which repurchase price, selling price and NAV are applicable. For PAMC and Alif AMCL, effective date is the date until which repurchase price, selling price and NAV are applicable. Sale and repurchase of Prime Financial First Unit Fund remains closed each Thursday.
Weekly Change (%) of NAV of Closed-end Mutual Funds in 2014 l Following table exhibits the Closed-End Mutual Funds (40) in order of YTD change in NAV based on latest NAV/unit as on January 22 2015. On the basis of Price/NAV, 39 Mutual Funds out of 40 were traded below their respective NAV. LRGLOBMF1 and EBLNRBMF had the lowest Price/NAV and were traded at 59% and 57% discount, respectively. 1STPRIMFMF was traded at higher multiple than others, 38% premium. Last week, NAV of 38 Mutual Funds decreased, 1 Mutual Funds increased and 1 remained unchanged. On the other hand, price of 23 Mutual Funds decreased, 10 increased while 7 remained unchanged. On an average, price of Mutual Funds decreased by 0.79% while NAV decreased by 1.93% from previous week, against a 3.19% decline in DSEX over the week. In terms of price changes, 31 Mutual Funds outperformed DSEX over last week. Among all the asset managers, VIPB outperformed most in terms of change in NAV of its funds, adding an additional 0.08% on an average over Mutual Funds managed by it.
34
IDLC MONTHLY BUSINESS REVIEW
DSE Code
Name of Mutual Funds
Price (Jan Latest NAV/ Price/ 22, 2015) unit NAV
%Change of %Change in YTD Change Performance against "Redemption Price from NAV from last Year" in NAV DSEX (YTD) last week week
"Fund Manager"
3RDICB
3rd ICB M.F.
240.0
332.3 72.2%
6.1%
-1.9%
2.5%
Outperformed
2015
ICB
1STICB
1st ICB M.F.
1153.6
1552.2 74.3%
0.5%
-1.1%
1.3%
Outperformed
2015
ICB
1JANATAMF
First Janata Bank Mutual Fund
10.6
47.9%
-1.9%
-0.9%
0.8%
Outperformed
2020
RACE
NLI1STMF
NLI First Mutual Fund
12.6
63.4%
1.3%
0.2%
0.7%
Outperformed
2022
VIPB
2NDICB
2nd ICB M.F.
255.3
300.7 84.9%
-5.8%
-2.9%
0.7%
Outperformed
2015
ICB
4THICB
4 ICB M.F.
204.0
288.0
70.8%
0.0%
-2.4%
0.5%
Outperformed
2015
ICB
AIMS1STMF
Aims 1st M.F.
29.2
36.7
79.6%
-1.0%
-1.2%
0.5%
Outperformed
2015
AIMS
SEBL1STMF
Southeast Bank 1st Mutual Fund
7.7
12.3
62.8%
0.0%
0.0%
0.5%
Outperformed
2021
VIPB
th
5.1 8.0
LRGLOBMF1 LR Global Bangladesh Mutual Fund One
4.3
10.4
41.3%
-4.4%
-1.0%
0.5%
Outperformed
2021
LR Global
EXIM1STMF
6.3
10.9
58.0%
0.0%
-1.0%
0.5%
Outperformed
2023
RACE
POPULAR1MF Popular Life First Mutual Fund
4.8
10.9
44.2%
-4.0%
-1.1%
0.5%
Outperformed
2020
RACE
GRAMEEN1
Grameen Mutual Fund One
23.0
30.5
75.5%
-3.0%
-1.2%
0.4%
Outperformed
2015
AIMS
MBL1STMF
MBL 1st Mutual Fund
4.3
10.1
42.7%
0.0%
-1.6%
0.3%
Outperformed
2021
LR Global
GREENDELMF Green Delta Mutual Fund
4.4
10.1
43.4%
0.0%
-1.5%
0.3%
Outperformed
2020
LR Global
NCCBLMF1
NCC Bank Mutual Fund 1
5.8
10.5
55.0%
5.5%
-1.3%
0.3%
Outperformed
2022
LR Global
FBFIF
First Bangladesh Fixed Income Fund
6.8
10.8
63.1%
4.6%
-0.7%
0.3%
Outperformed
2022
RACE
EXIM Bank 1st Mutual Fund
PHPMF1
PHP First Mutual Fund
4.4
10.2
43.0%
-2.2%
-1.1%
0.2%
Outperformed
2020
RACE
ABB1STMF
AB Bank 1ST Mutual Fund
6.2
11.8
52.6%
5.1%
-0.8%
0.2%
Outperformed
2022
RACE
GRAMEENS2 Grameen One : Scheme Two
12.0
18.6
64.6%
-0.8%
-1.7%
0.1%
Outperformed
2023
AIMS
AIBL1STIMF
AIBL 1st Islamic Mutual Fund
4.5
10.1
44.7%
-2.2%
-1.2%
0.1%
Outperformed
2021
LR Global
IFIC1STMF
IFIC Bank 1st Mutual Fund
5.0
10.7
46.8%
-3.8%
-1.4%
0.1%
Outperformed
2019
RACE
RELIANCE1
RELIANCE ONE MUTUAL FUND
6.8
12.4
54.7%
-1.4%
-1.5%
0.1%
Outperformed
2021
AIMS
EBL1STMF
EBL First Mutual Fund
5.1
10.1
50.5%
-1.9%
-1.6%
-0.1%
Outperformed
2019
RACE
TRUSTB1MF
Trust Bank 1st Mutual Fund
5.1
10.6
48.0%
-3.8%
-1.7%
-0.2%
Outperformed
2019
RACE
DBH1STMF
DBH First Mutual Fund
4.5
10.0
45.0%
-2.2%
-1.7%
-0.2%
Outperformed
2019
LR Global
ICBSONALI1
ICB AMCL Sonali Bank Limited 1st Mutual Fund
6.6
9.9
67.0%
-1.5%
-1.8%
-0.3%
Outperformed
2023
ICB AMCL
EBLNRBMF
EBL NRB MUTUAL FUND
4.4
10.3
42.7%
-2.2%
-1.2%
-0.5%
Outperformed
2021
RACE
8THICB
8th ICB M.F.
64.3
72.8
88.4%
0.2%
-3.3%
-0.9%
Outperformed
2016
ICB
5THICB
5 ICB M.F.
189.3
247.5 76.5%
-0.4%
-2.8%
-1.0%
Outperformed
2016
ICB
ICBAMCL2ND ICB AMCL Second Mutual Fund
4.6
8.7
52.6%
2.2%
-3.5%
-1.0%
Outperformed
2019
ICB AMCL
PF1STMF
Phoenix Finance 1st Mutual Fund
4.4
7.9
55.8%
-4.3%
-3.2%
-1.1%
Outperformed
2019
ICB AMCL
PRIME1ICBA
Prime Bank 1st ICB AMCL Mutual Fund
th
1STPRIMFMF Prime Finance First Mutual Fund
4.4
8.4
52.7%
0.0%
-3.1%
-1.2%
Outperformed
2019
ICB AMCL
15.8
11.4
138.1% -3.7%
-3.1%
-1.2%
Outperformed
2015
ICB AMCL
IFILISLMF1
IFIL Islamic Mutual Fund-1
6.0
9.7
62.2%
3.4%
-2.4%
-1.2%
Outperformed
2019
ICB AMCL
6THICB
6th ICB M.F.
55.8
60.7
91.9%
0.7%
-3.2%
-1.3%
Outperformed
2016
ICB
ICB2NDNRB
ICB AMCL 2nd NRB Mutual Fund
7.8
11.0
71.0%
-2.5%
-3.7%
-1.3%
Outperformed
2018
ICB AMCL
7.7
ICB3RDNRB
ICB AMCL Third NRB Mutual Fund
4.3
55.6%
0.0%
-3.3%
-1.4%
Underperformed
2019
ICB AMCL
7THICB
7th ICB M.F.
90.3
108.0 83.6%
0.0%
-3.8%
-1.6%
Underperformed
2016
ICB
ICB1STNRB
ICB AMCL 1st NRB Mutual Fund
21.0
24.6
85.3%
-3.7%
-3.2%
-1.6%
Underperformed
2017
ICB AMCL
ICBEPMF1S1 ICB Employees Provident MF 1: Scheme 1
4.3
8.2
52.4%
-4.4%
-3.5%
-1.6%
Underperformed
2019
ICB AMCL
LRGLOBMF1 LR Global Bangladesh Mutual Fund One
4.7
10.4
45.4%
2.2%
-0.3%
-2.1%
Underperformed
2021
LR Global
YTD Change in DSEX
-1.4%
35
IDLC MONTHLY BUSINESS REVIEW
INVESTMENT INSIGHT: Square Textiles Ltd. Square Textiles Ltd. (DSE: SQUARETEXT)
2
Financials (BDT mn)
2012
2013
Net Revenue Gross Profit Operating Profit Net Profit After Tax Total Asset Total Equity
8,742 1,375 1,043 837 8,870 5,331
8,164 1,322 1,038 837 8,512 5,958
9M, 20142 (Unaudited) 5,994 1,027 821 650 8,861 6,339
Year ends on December
9M, 2014
Growth (%)
2012
2013
Net revenues
-7%
-7%
2%
Net profit after tax
2%
0%
1%
Per Share (BDT)
2012
2013
9M, 2014 (unaudited)
5.66 36.06
5.66 40.29
4.40 42.87
Diluted EPS BVPS Others (%)
2012
2013
Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Assets (ROA) Return on Equity (ROE ) Stock Dividend Cash Dividend
16% 12% 10% 9% 17% 15% 18%
16% 13% 10% 10% 15% 10% 20%
(unaudited)
9M, 2014 (unaudited) 17% 14% 11% 7% 11% -
Source: DSE; Financial Statements of SQUARETEXT, MALEKSPIN, MATINSPIN, SAIHAMCOT and Research, IDLC Investments Ltd.
Terminologies Free Float: % of total shares not owned by Sponsors/ Directors, and Govt. Forward PE: Based on Annualized Earnings of the latest declared quarter Trailing PE: Based on Latest 12 Months Earnings
Jan-15
Dec-14
Oct-14
Nov-14
Sep-14
Jul-14
Jun-14
Apr-14
May-14
Mar-14
Jan-14
Feb-14
Oct-13
Aug-14
1
Dec-13
Based on latest earning disclosure
25
Nov-13
16.49x
Sep-13
Forward PE – Textile Sector
45 Jul-13
15.96x
Aug-13
Trailing PE 1– SQUARETEXT
65
Jun-13
15.50x
85
Apr-13
Forward PE1 – SQUARETEXT
105
May-13
38%
Mar-13
147.86
Free Float (%)
SQUARETEXT
125
Jan-13
Total Number of Share (mn)
DSEX
145
Feb-13
90.90
Rebased Price
Current Price (29/01/2015 )
Company Profile Square Textiles Limited (DSE: SQUARETEXT) was incorporated as a public limited company in 1994. It started its commercial operation in 1997 as a manufacturer and marketer of 100% cotton ring spun yarn. In 2002, it was listed in DSE and CSE. 61.61% of total shares of SQUARETEXT are held by the sponsors. The company is a concern of Square group, one of the leading business conglomerates in Bangladesh. It has two subsidiaries, Square Yarns Limited and Square Texcom Limited.
Key Revenue Drivers & Company Insight SQUARETEXT manufactures and markets cotton yarn, primarily to export oriented garments industry. The company acquires its core raw material, cotton from international market and converts it into yarn. Since the company’s product is used in export oriented garments industry, its selling is considered deemed export. The company currently has 59,472 spindles and 3,960 rotors capable of producing about 24 mn kg of yarn. In 2013, SQUARETEXT operated at 85% capacity utilization rate. In that period, the company generated revenue BDT 8,164 mnwhich was second highest among the listed textile companies in DSE. But the revenue was 7% lower than that of 2012, due to political unrest and lower export demand.
Financial Performance Revenue is in downtrend for last two years, due to higher revenue base in 2011. However, profit sustained during the period. Gross, Operating and Net Profit Margin stayed at 16%, 13% and 10%, respectively in 2013, almost same as a year before. However, ROE fell to 15% in 2013, from 17% in 2012, due to naturally higher equity base. The company slightly improved in terms of both growth and profitability during9M, 2014. Revenue and profit both rose by 2% and 1%YoY, respectively. Recently, the company has reported consolidated net profit after tax (excluding non-controlling interests) of Tk. 650.15 million with consolidated EPS of Tk. 4.40 for the period of nine months (Jan’14 to Sep’14) as against Tk. 644.88 million and Tk. 4.36 respectively for the same period of the previous year.
DISCLAIMER This Document has been prepared and issued by IDLC Finance Limited on the basis of the public information available in the market, internally developed data and other sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts & information stated in the Document are accurate as on the date mentioned herein. Neither IDLC Finance Limited nor any of its director, shareholder, and member of the management or employee represents or warrants expressly or impliedly that the information or data of the sources used in the Document are genuine, accurate, complete, authentic and correct. Moreover, none of the director, shareholder, and member of the management or employee in any way is responsible about the genuineness, accuracy, completeness, authenticity and correctness of the contents of the sources that are publicly available to prepare the Document. It does not solicit any action based on the materials contained herein and should not be construed as an offer or solicitation to buy sell or subscribe to any security. If any person takes any action relying on this Document, shall be responsible solely by himself/herself/themselves for the consequences thereof and any claim or demand for such consequences shall be rejected by IDLC Finance Limited or by any court of law.
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