Financial Analysis: Square Pharma

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Financial Analysis:

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Submitted To:
Dr. Masud Rahman

Submitted By:
Nogmaye Habiba ID # 073293060 Mehrin Afroze Chowdhury ID # 072 475 060 M. Rubbyat Akram ID # 063085060

Submission Date:
12th April, 2009

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April 12, 2009

To,
Dr. Masud Rahman
Professor, MBA Program
North South University

Dear Sir,

We are pleased to work on our group term paper: “Predicting Stock Price: Square Pharmaceuticals Ltd”. This stimulating work has helped us to better understand the different variables affecting the stock price of a firm. This in-depth financial analysis will truly be useful for each of us in our own field of work.

We will thus greatly value the opportunity you gave us in this course. In case of any questions regarding our findings please do contact any of the group members & we will remain obliged to clarify wherever necessary.

Thanking You,

______________________________________________
Mehrin Afroze Cowdhury Nogmaye Habiba
ID# 072-475-060 ID# 073293060

______________________
M. Rubbyat Akram
ID# 063085060
Executive Summary

THE OBJECTIVE OF THIS REPORT IS TO PROJECT THE STOCK PRICE OF A SPECIFIC COMPANY, AS IN THIS CASE SQUARE PHARMACEUTICALS LIMITED THROUGH DIFFERENT FINANCIAL ANALYSIS, WHICH STARTED OFF WITH IDENTIFYING VARIABLES AFFECTING THE STOCK PRICE AND THEN THROUGH STOCK VALUATION.

This analysis is done mainly based on the information collected from the annual report issued by Square Pharmaceuticals Limited in the fiscal years 2006-2007 & 2007-2008. Daily Market Index and Stock price was collected from DSE.

The different growth rate analysis for the company’s sales & profitability led to choose an optimum growth rate, which in this case is the “Sustainable Growth Rate” or “SGR”. Using this justified growth rate, pro forma statements (Balance Sheet & Income Statement) were prepared along with different scenario analysis. The analysis suggested that SPL maintains a sustainable growth without requiring any external financing excepting for the case of a highly optimistic scenario.

It has been observed empirically that a good number of variables affect the variations of Stock Price & the proceedings have been discussed in the report. This research also revealed that apart from quantitative variables, some company specific and market specific information including dividend declaration, Ex-date, etc. also affect the stock price valuation.

In conclusion it can be stated that as a Blue Chip share SPL shows a sustainable constant growth potential and it reflects a high confidence level from the investors.

Table of Contents

1.0 COMPANY OVERVIEW5
2.0 Problem Statement5
3.0 Objective of the Study6
4.0 Methodology6
5.0 Limitation of Study7
6.0 Financial Analysis8
Balance Sheet Analysis8
Pro Forma Statements13
Plug Variables15
Scenario Analysis15
7.Beta17
8.Expected Return of SPL using CAPM18
9.Dividend Declaration, Firm Specific News and Market News19 10. STOCK Valuation22
11. Conclusion23

1.0 Company Overview
Square Pharmaceuticals is a renowned Pharmaceutical Company of our country. It is currently the leading corporation in its field of expertise. Square Pharmaceuticals began its operations in the year 1958 as a Partnership Firm. It converted into a Private Limited Company in 1964.

The company became Public & became listed in the DSE in the year 1991, since then there was no looking back. The supremacy of Square is such that the closest competitor Beximco Pharmaceuticals is not even close in comparison to the market share; the latter has only about half the market share.

Square Pharmaceuticals...
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