Posts in category: Investment

The floor price restriction for British American Tobacco (BAT) Bangladesh stock is set to be withdrawn on 4 March, as stated by the Bangladesh Securities and Exchange Commission (BSEC).

In a directive issued on 6 February, the market regulator said the floor restriction for BAT Bangladesh shares would be removed the day after the record date, scheduled for 3 March.

The floor price is the lowest price set by the securities regulator at which a stock can be traded. In January this year, the commission lifted the restriction for most stocks 18 months after its enforcement.

Currently, BAT Bangladesh shares have been stuck at the floor price of Tk518.70 each at the Dhaka bourse since September 2022.

BAT is currently recognised as the second-largest company in terms of market capitalisation, representing 6.55% of the Dhaka Stock Exchange’s total valuation. The tobacco company’s current total market cap stands at Tk28,000 crore.

On 8 February, BAT Bangladesh declared a 100% cash dividend to its shareholders for 2023, marking the lowest dividend in over a decade.

The multinational tobacco manufacturer reported a profit of Tk1,788 crore in 2023, a marginal increase from Tk1,787 crore in 2022.

Despite the similar profit, the company declared a dividend, representing only 30% of last year’s total profit. This marks a significant decrease from the 200% cash dividend payout in 2022.

While dividend data for BAT Bangladesh was not available before 2010, the company was known for announcing generous dividends over the years.

As per the disclosure, it reported earnings per share of Tk33.11 in 2023, a marginal increase from Tk33.10 in the previous year.

BAT Bangladesh is scheduled to convene its annual general meeting on 28 March.

The cigarette manufacturer operates factories in Dhaka and Savar, along with a green leaf threshing plant in Kushtia and a green leaf re-drying plant in Manikganj.

Over the past three years, the company has invested more than Tk1,200 crore in various phases to enhance its production capacity and meet the growing demand.

BAT Bangladesh has yet to publish detailed annual financial statements. However, based on available data, the company’s net turnover for the first nine months of 2023 grew by 10%, reaching Tk6,793 crore.

During the same period, domestic cigarette sales witnessed a 10% year-on-year increase, totalling Tk6,493 crore. Additionally, leaf exports surged by 16%, amounting to Tk30 crore during the January-September period of 2023.

BAT exports cigarettes to various countries, with notable markets like China and the Maldives. China, being a significant market for cigarettes, contributes substantially to the company’s global exports.

In addition to cigarettes, BAT also exports tobacco green leaf to a range of countries, including Belgium, Spain, the Netherlands, Turkey, the United Arab Emirates, Germany, the UK, the United States, and South Africa.

The claims settlement ratio for life insurance companies in the country has reached 72% in 2023, marking a significant 5.03% increase compared to the previous year.

The sector saw improvement in claims settlement ratio due to various initiatives undertaken by the Insurance Development and Regulatory Authority (IDRA), said its chairman Mohammad Jainul Bari at a press conference in Dhaka on Wednesday (28 February) on the occasion of National Insurance Day to be observed on 1 March.

He further announced that Prime Minister Sheikh Hasina will be chief guest at the official programme to be observed to mark the day on 1 March, with Finance Minister Abul Hassan Mahmood Ali in the chair.

Jainul Bari said “Life insurance companies paid Tk8,754 crore out of a total claim amount of Tk12,117 crore in 2023. This translates to a claims settlement ratio of Tk72 for every Tk100 of claims received.”

“To brighten up the image of the insurance sector, the authorities have been directing the insurance companies to give utmost importance to the payment of insurance claims.”

Mohammad Jainul Bari, Chairman, IDRA

The term “claims settlement ratio” refers to the percentage of claims resolved by an insurance provider during a year out of the total claims received. This metric reflects an insurer’s credibility by comparing successful claims resolutions to total customer requests.

In 2023, the claims settlement of the insurance sector rose 4% compared to the previous year, the IDRA chairman said.

He mentioned that 82 authorised insurers are now providing insurance services in the country. Currently 1.71 crore people of the country are covered by insurance. “To brighten up the image of the insurance sector, the authorities have been directing the insurance companies to give utmost importance to the payment of insurance claims,” the IDRA chairman added.

“Corporate Governance Guidelines 2023 and Regulatory Sandbox Guidelines have been issued to modernise the country’s insurance system. Bancassurance has been introduced to market insurance products through banks which will be inaugurated by the PM on Insurance Day. Already five banks have signed an agreement in this regard,” he said.

The IDRA chairman said 19 life insurance companies paid claims around 80–90% while 10 companies paid 70% of claims. “The rest of the companies could not pay claims properly as they were unable to pay. Here, the regulator could not do anything,” he added.

Jainul Bari said IDRA is working with microcredit authorities so that more people are included in the insurance sector. “Besides, numerous tools are pending like solvency margin regulation and risk-based supervision. If it is possible to run these tools, it will play a vital role in building confidence in the insurance sector.”

Industry insiders say a few years ago, the companies used to spend excessively to increase business procurement.

“For instance, to bring fresh Tk100, we used to spend Tk120. This is why it was difficult for life insurance companies to build adequate life funds to meet the claims of policyholders back then,” a senior official told TBS.

Infographic: TBS

NRB Bank is set for its trading debut on the country’s stock market on Tuesday, with investors anticipating significant returns from the very first day.

The fourth-generation bank, with the majority of its shares owned by non-resident Bangladeshis, will enter the capital market with a face value of Tk10 per share.

The managing director at a brokerage firm told The Business Standard that the private sector lender witnessed a remarkable response to its initial public offering (IPO) subscription, with the subscription amounting to 3.91 times higher than the allocated shares.

He also noted that investors have received favourable returns from recent IPO shares like Best Holdings and Sikder Insurance. As a result, investors are expecting promising returns from NRB Bank shares as well.

General investors were allotted 255 primary shares in NRB Bank, while non-resident Bangladeshis received 209 shares against a Tk10,000 deposit.

Earlier, on 9 November, the bank received approval from the Bangladesh Securities and Exchange Commission (BSEC) to raise Tk100 crore.

The lender plans to invest Tk92 crore in government securities, Tk4.17 crore in the secondary market, and the remainder to cover IPO expenses.

However, other fourth-generation banks that were listed in recent years failed to meet investors’ expectations, as they did not generate significant returns from their IPO shares.

Global Islami Bank and Union Bank are currently trading below their face value of Tk10 each, while Midland Bank, SBAC Bank, and NRB Bank shares are hovering between Tk12 and Tk14.

What EBL Securities says

One of the leading brokerage firms, EBL Securities, published a report on the financial strength of NRB Bank on its website on 25 February.

The broker noted that NRB Bank exhibited a 5-year compound annual growth rate (CAGR) of 16% in loans and advances and 18% in deposits from 2018 to 2022.

These figures surpass the industry average of 12% for loans and 10% for deposits, indicating the bank’s strong performance in deposit mobilization and loan disbursements.

The bank has the potential to further enhance its interest rate spread and net interest margin by strategically minimising the cost of funds, the report added.

But investors have concerns about the bank’s profitability due to surging non-performing loans.

The EBL Securities report highlighted a potential concern for investors, noting that the non-performing loan ratio of the bank rose significantly to 6.1% by September of last year, compared to 3.2% in 2022.

Furthermore, the report emphasised that the return on assets and return on equity of the bank are considerably lower than the industry average. This suggests that the bank has encountered notable challenges in effectively utilising its assets to generate satisfactory returns for its stakeholders.

General investors were allotted 255 shares in the initial public offering (IPO) of NRB Bank, while non-resident Bangladeshis (NRBs) received 209 shares against a Tk10,000 deposit.

The Dhaka Stock Exchange (DSE) allocated the IPO shares of the bank on a pro-rata basis.

The IPO was oversubscribed by 3.61 times, as stated in a DSE press release.

Earlier, on 9 November, the bank received approval from the Bangladesh Securities and Exchange Commission (BSEC) to raise Tk100 crore through issuing new shares at Tk10 each under the IPO.

The bank will invest Tk92 crore in government securities, Tk4.17 crore in the secondary market and Tk3.83 crore to meet its IPO expenses.

According to the financial report of January to September of 2023, its consolidated net profit after tax stood at Tk16 crore and earnings per share at Tk0.27, which was Tk55 crore and Tk0.94 respectively in 2022.

As on 30 September 2023, its net asset value per share stood at Tk12.72.

According to the prospectus of the bank, at the end of September 2023, its non-performing loan (NPL) ratio stood at 6.10% of the total outstanding, which was 3.22% a year ago.

NRB Bank, established in 2013, launched a wide variety of products and services under different categories such as retail banking, SME banking, NRB banking, corporate banking, and e-banking.

The Dhaka Stock Exchange (DSE) yesterday launched “Smart Submission System of DSE”, an online data submission platform for listed firms, aiming to ease hassles and reduce error.

With the help of its strategic partner Shenzhen Stock Exchange (SZSE), the premier bourse introduced the system, in which the issuer companies from now on will be able to submit their information online.

At the launching event of the system at DSE office, ATM Tariquzzam, managing director of the bourse, said the platform will help issuers to be compliant with rules. Besides, there will be realtime information transfer between issuers and investors.

“Therefore, the market will be efficient based on proper information, and irregularities in the market will also come down,” he added.

Calling the system a “timely initiative,” Rupali Chowdhury, president of the Bangladesh Association of Publicly Listed Companies said, “Companies will be the biggest beneficiaries of this system.”

She said integrating the platform will not be an issue for large companies like Berger or Grameenphone. However, companies that are not automated will have some trouble initially. The association will support those to utilise the platform.

“The requirements of stock exchanges and the regulator are the same, but we had to submit information in three mediums. Now with one medium, it will be much easier for the issuers,” she expressed.

Earlier, the issuers had to submit information through traditional means of communication such as FAX, letter, email, and courier, or even post. After receiving the information, the DSE used to disseminate them manually.

This information consists of price sensitive information, yearly, half-yearly and quarterly financial data, meetings, record dates, shareholding status, dividend status, and expansion of business among others.

Professor Hafiz Md Hasan Babu, chairman of the DSE said, “To make the capital market smart, its operations should be made paperless. And that paperless journey has started today with the launch of this platform.”

Steps against non-compliance 

When asked why the DSE is not taking action against non-compliant companies, Dhaka bourse officials explained that while the DSE has the authority to do so, it must first go through the Bangladesh Securities and Exchange Commission (BSEC) to take direct action.

Citing an example, Md Rabiul Islam, head of listing affairs, said the DSE once delisted Rahima Food Corporation and Modern Dyeing Limited for closure of operation for six months. But later, the BSEC in a notification re-listed them to the market.

Md Rabiul Islam presented the keynote, where he sheds light on the purpose, usage and technical framework of the software and various modules.