College of Commerce & Economics
Individual Project Assignment
Done by: Jameela Ali Al Hamhami
ID : 23990
Bank Muscat at Glance4
Reasons of selecting Bank Muscat5
Comparison between risk and return in 2007 and 20087
Calculation of WACC on book value basis9
Calculation of WACC on Market value basis10
In my report as requested I picked one component of MSM30 Index sample. I have chosen to talk about Bank Muscat Share (BKMB) to analyze its performance based on historical trading data from the period of 2005 to 2008 and comparing it with the performance of the market performance represented by MSM30 Index. In addition, the report studied the relationship between the risk indicator "Beta" of the firm and the required rate of return that are asked by investor to invest his/her capital in that stock. This is in return the cost of capital for the company.
Bank Muscat is very well known institution in the area and one of the main competitors in banking sector. He is really expanding very fast, he have an excellent management team. The bank has raised the money to finance his investments through both equity and debt (bonds). Currently the outstanding number of shares of the bank is (1,077,133,715) and trades in the market for 0.84 Baisa. Imperative to mention is that the bank had implemented stock split on March 2006, his par value now is .100 Baiza. The analysis show that the bank was doing well in the past few years but poorly in 2008 and this is because of the world financial crisis which affects all the markets around the world, in general the overall trend of the market in 2008 was going down. Analyzing the cost of capital of the bank either using book value or market value it mostly gave same result, it is 13.28% and 13.36% respectively. It is higher than market which was 12.07% (average total return of 16 years). Because bank Muscat having a Beta of 1.181 more than the market, therefore the bank trying to compensate his stockholders by giving them higher return than the market and this is reasonable.
Bank Muscat at Glance
He is the largest financial services provider in Oman with a strong presence in Corporate Banking, Retail Banking, Investment Banking, Treasury, Private Banking and Asset Management. The Bank has a network of 119 branches and about 320 ATMs and 91 CDMs in Oman, a branch in Riyadh, Saudi Arabia, and a representative office in Dubai (UAE). The bank use both equity and debt to finance his projects. The following table shows the capital structure of the bank. Table (1): shows the capital structure weights on a Market book value basis |Type of Security |Number of shares |Market |Market Value |Market Value Weight|Closing Price based on| | | |Prices | | | | |Common Stock (BKMB) |1,077,133,715 |0.84 |904,792,321 |0.94 |07/12/2008 | |Bank Muscat Bond 6.25% |29,802,860 |1.05 |31,293,003 |0.03 |28/09/2009 | |Bank Muscat Bond 7% |25,000,000 |1.065 |26,625,000 |0.03 |30/11/2010 | |Total MV |1,131,936,575 | |962,710,324 |1.000 | |
Bank Muscat distributed dividends on March every year. The following table shows the historical dividends distribution for the bank for the last three years. Table (2): shows the yearly AGM date for Bank Muscat with the distributed dividends in...