Ptcl vs Engro Portfolio Analysis

8/12/2019 Ptcl vs Engro Portfolio Analysis

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PTCL V.S ENGRO

Submitted To:

Mr. Syed Taimoor Haider

Submitted By:

AbdurRehman

10022120-067

Umar Bashir

10022120-076

MurtazaNaseem

10022120-089

Asfundyar

10022120-102

BBA 8THAT

UNIVERSITY OF GUJRAT

G.T ROAD CAMPUS


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Table of Contents

Brief History of Telecommunication in Pakistan: .......................................................................... 3Pakistan Telecommunication Corporation .................................................................................. 4

Company Profile: ............................................................................................................................ 4

Privatization of Pakistan Telecommunication Corporation: ........................................................... 5

Vision: ............................................................................................................................................. 5

Mission Statement:.......................................................................................................................... 5

Core Values:.................................................................................................................................... 6

History............................................................................................................................................. 6

Mission Statement ........................................................................................................................... 8

Our mission is twofold: ............................................................................................................... 8

Our Vision ....................................................................................................................................... 8

Core Values ..................................................................................................................................... 8

Profitability Ratio.......................................................................................................................... 10

Liquidity Ratio .............................................................................................................................. 10

Activity Ratio ................................................................................................................................ 10

Investment Ratio ........................................................................................................................... 11

Solvency Ratio .............................................................................................................................. 11

Conclusion .................................................................................................................................... 15

Profitability ratio ....................................................................................................................... 15

Liquidity ratio ........................................................................................................................... 15

Activity ratio ............................................................................................................................. 15

Investment Ratio ....................................................................................................................... 15

SOLVENCY ............................................................................................................................. 15

Questions to be answer ................................................................................................................. 16

Provide a detailed description of your investment strategy, based upon the goal of maximizing

your portfolio value....................................................................................................................... 16

Explain how you executed your investment strategy. .................................................................. 16

Discuss the risk characteristics of your investment strategy ........................................................ 16

REFERENCE ................................................................................................................................ 18


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INTRODUCTION OF PTCL

Brief History of Telecommunication in Pakistan:

From the beginnings of Posts & Telegraph Department in 1947 and establishment of Pakistan

Telephone & Telegraph Department in 1962, PTCL has been a major player in

telecommunication in Pakistan. Pursuing a progressive policy, the Government in1991,

announced its plans to privatize PTCL.

In 1995, Pakistan Telecommunication Ordinance formed the basis for PTCL monopoly over

basic telephony in the country. PTCL launched its mobile and data services subsidiaries in 2001

by the name of Ufone and PakNet respectively. A recent DSL service launched by PTCL reflects

the intro+duction of a new brand name and operation of the service being directly supervised

by PTCL. In middle of 2005 Government of Pakistan had decided to sell at least 26 percent of

this company to some private agency. There have been various changes in the company due to

privatization. Such examples include the VSS (Voluntary Separation Scheme for its employees),

ERP (SAP based), restructuring, BNCC (Billing and Customer Care Software) etc. Another

seemingly minor change was change of brand identity that presents PTCL's new face after

privatization, with greater focus on customer satisfaction and bringing about of new

advancements.

Pakistan telecommunication reorganization act 1996 according to which PTCL took over

all the properties assets rights and obligations of PTCL. Under the PTCL reorganization act,

1996 the telecommunication sectors were split up into four bodies.

Pakistan Telecommunication Company limited (PTCL) Pakistan Telecommunication Authority (PTA) National Telecommunication Corporation (NTC) Frequency Allocation Board (FAB)


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[1995 About 5% of PTC assets transferred to PTA, FAB & NTC]

Pakistan Telecommunication Corporation(PTC) (PTCL) is a company established to

undertake the telecommunication business formally carried on by Pakistan Telecommunication

Corporation (PTC)

The decade of 1990s brought about many changes in the economic structure of Pakistan. The

government of Pakistan pursued the deregulation and liberalization policy in production and

service industry. The major change in this regard was privatization and deregulation of many of

the departments of government of Pakistan which resulta transformation of PTC to PTCL. The

objective was to reduce the burden of the government minimize the bureaucratic influence and

improve the efficiency of these departments Pakistan telecommunication corporation (PTC) wastransformed into Pakistan telecommunication company limited (PTCL) on January 1st, 1996

under Pakistan telecommunication reorganization act 1996 according to which PTCL took

over all the properties assets rights and obligations of PTCL.

Company Profile:With employee strength of 30,000 and 4,681,000 customers, PTCL is the largest

telecommunications provider in Pakistan. PTCL also continues to be the largest CDMA operator

in the country with 0.8 million V-fine customers.

The company maintains a leading position in Pakistan as an infrastructure provider to other

telecom operators and corporate customers of the country. It has the potential to be an

instrumental agent in Pakistans economic growth. PTCL has laid an Optical Fiber Access

PTC

PTCL NTC PTA FAB P


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Network in the major metropolitan centers of Pakistan and local loop

services have started to be modernized and upgraded from copper to an optical network.

On the Long Distance and International infrastructure side, the capacity of two SE-ME-WE

submarine cables is being expanded to meet the increasing demand of International traffic.

In addition to wire line operations, PTCL also provides fixed line service through its

countrywide CDMA based WLL (Wireless Local Loop) network, under the Vfone brand name.

In the cellular segment, the second largest cellular provider in Pakistan, Ufone,is also a wholly

owned subsidiary of PTCL.

Privatization of Pakistan Telecommunication Corporation:Privatization of PTCL took place on Saturday, the 18 June 2005 ,was an important day in the

history, which witnessed the successful sale of 26% strategic share to Emirates

Telecommunication Corporation Etisalat, the process of PTCL privatization might be a routine

Government affair, but factually the process has been a long drawn and an difficult one. In this

write up aim at recording the Process of PTCL privatization from the very beginning (1994) till

its completion.

Vision:To be the leading ICT (Information and Communication Technology) Service Provider in the

region by achieving customer satisfaction and maximizing shareholders' value'.

Mission Statement:To achieve our vision by having;

An organizational environment that fosters professionalism, motivationand quality.

An organizational environment that is cost effective and qualityconscious.

Services that are based on the most optimum technology. Quality and Time conscious Customer Service. Sustained growth in earnings and profitability.
http://en.wikipedia.org/wiki/Ufonehttp://en.wikipedia.org/wiki/Ufone


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Core Values: Professional Integrity Customer Satisfaction Team Work Company Loyalty Corporate Culture

INTRODUCTION OF ENGROHistory

ENGRO Chemical Pakistan Limited is the second largest producer of Urea fertilizer in

Pakistan. The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan

Limited until 1991, when Exxon decided to divest their fertilizer business on a global basis and

SOLD off its equity of 75% shares in our company. The Employees of ENGRO, in partnership

with leading international and local financial institutions bought out Exxons equity and the

company was renamed as ENGRO Chemical Pakistan Limited. ENGRO is a public limited

company listed on the Stock Exchanges of Karachi, Lahore and Islamabad.

ENGRO accomplished significant progress not only in its base urea fertilizer business but also in

diversification projects. Urea production was increased from an annual capacity of 270,000 tons

in 1991 to 850,000 tons in 2001. Further expansion plans are being developed to debottleneck

plant capacity to 1.2 million tons in stages. In addition, ENGRO has over thirty years of

experience of fertilizer marketing in Pakistan with an elaborate dealer network.

As part of our growth and diversification plans, we have established a $60 million 50:50 Joint

Venture company named ENGROVopak Terminal Limited in 1995, between ENGRO and

Royal Vopak (formerly Royal Pakhoed), a Netherland based company and one of the foremost


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terminal operators in the world. This joint venture company has built a

modern Jetty & Terminal at Port Qasim, Karachi for handling and storage of bulk liquid

chemicals, which was completed in 1997. This is a key infrastructure for the development of

capital intensive chemical industry in the heavy industrial zone of Port Qasim, Karachi.

ENGRO has also formed another Joint Venture company with Mitsubishi and Asahi Glass of

Japan named ENGRO Asahi Polymer & Chemicals Ltd. to develop a Polyvinyl Chloride

(PVC) resin project at Port Qasim, Karachi, with an initial capacity of 100,000 tons per year

based on imported Vinyl Chloride Monomer. The project has been successfully completed and

commenced production in November 1999. The plant production is being marketed both in

domestic and export market under the brand name SABZ. ENGRO has 50% equity in this $74

million venture.

Construction of ENGROs 100,000 tons p.a. capacity NPK fertilizers plant at Port Qasim at a

cost of US $10 million was completed in 2001. The plant is in production and considerably

benefiting the countrys agriculture by providing balance nutrition to improve farm yields.

During the year 2004 the products generic name of NPK was replaced by Zarkhez.

In April 2003 ENGRO acquired 51% intrest in the Automation & Control Division of Innovative

(Private) Limited, a Lahore (Pakistan) based company that provides process control industrial

solutions in the knowledge based services sector. The joint venture has been named as

"Innovative Automation & Engineering (Private) Limited (IAEL)".The aquisition was part of

ENGROs diversification strategy.

Our Seeds business completed four years of operations and during this period, the Company has

made significant progress in developing its own hybrid seeds of maize and sunflower crops and

launched two new maize hybrids of imported origin. All seed products are being marketed under

the brand name of Bemisal.

ENGRO has announced plans to set up a milk processing facility to produce and market branded

UHT milk, cream and other milk products. The plant to be located in Sukkur is expected to cost


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Rs 1 billion and will be completed by March end 2006. All major

equipment is on order and civil construction is expected to commence soon. ENGRO plans to

procure raw milk supplies from Sindh and lower Punjab

Mission Statement

Our mission is twofold:

1) To help farmers maximize their farm produce by providing quality plant nutrients andtechnical services upon which they can depend.

2)

To create wealth by building new businesses based on company and country strengthsin Petrochemicals, Information Technology, Infrastructure and other Agricultural sectors.

In pursuing the mission we shall at all times be guided in our conduct and decisionmaking by our Core Values.

Our Vision

To be the premier Pakistani enterprise with a global reach, passionately pursuing value creation

for all stake holders

Core Values

Safety, health & environment Ethics and integrity Leadership Quality & continuous improvement Enthusiastic pursuit of profit External & community involvement Candid & open communications Enjoyment & fun Innovation


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Individual growth & development Teamwork & partnership Diversity & international focus

Balance Sheet

Share Capital 5,113 5,113 3,933 3,277 2,979 2,128

Reserves 4,913 4,420 4,312 3,995 4,202 4,955

Shareholders Funds / Equity 56,203 43,220 41,861 34,115 29,344 23,548

Long-term Borrowings 78,321 73,257 82,560 89,152 84,142 40,739

Capital Employed 149,279 143,914 145,987 138,811 115,862 64,608

Deferred Liabilities 268 260 214 140 119 113

Property, Plant & Equipment 131,969 132,553 135,092 129,068 110,504 58,293

Long-term Assets 137,269 137,072 139,267 131,082 112,182 60,141

Net Current Assets / Working Capital 20,143 12,894 12,670 11,489 6,329 8,703

Profit and Loss

Sales 155,360 125,151 114,612 79,976 58,152 40,973

Gross Profit 40,597 28,520 32,081 20,274 13,494 10,862

Operating Profit 25,754 17,229 22,032 12,044 6,825 6,677

Profit before Tax 13,263 2,457 11,459 8,277 5,062 5,184

Profit After Tax 8,690 1,797 7,811 6,441 3,719 4,207Year 2013 2012 2011 2010 2009

Share Capital 5113 5113 3933 3277 2979

Revenue 4913 4420 4312 3995 4202

Shareholders

Equity

56203 43220 41861 34115 29344

Long-term

Borrowings

78321 82560 89152 84142 40739

Capital

Employed

EBITDA 35,034 26,330 29,813 15,501 9,067 8,085


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Financial Ratios

Profitability Ratio

Measure of profitability to sales to determine the return earned on the revenue generated.

Some operating performance ratios are the profit margin, gross margin ratio and operating profit

margin. The higher these ratios, the better the profitability earned on the company's sales. Each

of these ratios have differing inputs and measure different segments of a company's overall

operational performance, but the ratios do give users insight into the company's performance and

management during the period being measured.

Gross Profit Ratio = Gross profit/sales

Net Profit Ratio = Net income/sales

Return on Equity = Net income/average total equity

Liquidity Ratio

Focuses on the ability of a firm to convert its assets into liquid form in the quickest

manner. These ratios measure your ability to pay debts coming due in the very near future (i.e.,

your ability to survive the short-run)

Current Ratio = Current Assets/Current Liabilities

Quick Ratio = Cash + Marketable Securities + Receivables

Activity Ratio

It is also called as Asset utilization ratios which provide measures of management

effectiveness. These ratios serve as a guide to critical factors concerning the use of the firm's

assets, inventory, and accounts receivable collections in day-to-day operations. Activity ratios

are especially important for internal monitoring concerning performance over multiple periods,


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serving as warning signals or benchmarks from which meaningful

conclusions may be reached on operational issues

Inventory Turnover = COGS/Average Inventory

Total Assets Turnover = Sales/Average Total Assets

Investment Ratio

These market measures are the crux of the analysis. They measure investor response to

owning a company's stock and also the cost of issuing stock

Earnings Per Share = Net income/ Shareholders equity

Price to Earnings = Market price per share/ annual earnings per share

Solvency Ratio

One of many ratios used to measure a company's ability to meet long-term obligations.

The solvency ratio measures the size of a company's after-tax income, excluding non-cash

depreciation expenses, as compared to the firm's total debt obligations. It provides ameasurement of how likely a company will be to continue meeting its debt obligations. It is

calculating by adding the company's post-tax net profit and depreciation, and dividing the sum

by the quantity of long-term and short-term liabilities; the resulting amount is expressed as a

percentage. A high solvency ratio indicates a poor company, while a low ratio indicates the

opposite. A low solvency ratio further indicates likelihood of default. One of many ratios used to

measure a company's ability to meet long-term obligations. The solvency ratio measures the size

of a company's after-tax income, excluding non-cash depreciation expenses, as compared to the

firm's total debt obligations. It provides a measurement of how likely a company will be to

continue meeting its debt obligations.

Financial Leverage = Average total assets/ Average total equity

Debt to Equity Ratio = Total debts/ Total shareholders equity


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Financial Ratios of PTCL

Profitability Ratios

Years 2013 2012 2011 2009 2008

Gross Profit Ratio 24.90% 19.13% 21.03% 25.68% 25.20%

Net Profit to Sales 15.66% 12.01% 13.44% 16.26% 15.45%

Return on Equity 12.85% 7.19% 7.50% 9.33% 9.28%

Liquidity Ratio

Years 2013 2012 2011 2009 2008

Current Ratio 1.94 2.05 2.30 1.39 1.51

Quick Ratio 1.85 1.95 1.27 1.37 1.36

Activity Ratios

2013 2012 2011 2009 2008

Inventory Turnover 4.77 3.06 5.71 5.46 4.91

Total Assets Turnover Ratio 1.06 0.49 0.75 0.75 0.74


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Investment Ratios

2013 2012 2011 2009 2008

Earnings per Share 2.49 1.41 1.46 1.82 1.79

Price Earnings 11.42 9.66 9.76 9.77 9.61

Solvency Ratios

2013 2012 2011 2009 2008

Leverage Ratio 43.38% 32.30% 33.36% 32.51% 34.47%

Debt to Equity Ratio 0.39% 0.27% 0.22% 0.18% 0.16%

Financial Ratios of ENGRO

Profitability Ratios

2013 2012 2011 2009 2008

Gross Profit Ratio 26% 23% 28% 25% 23%

Net Profit to Sales 6% 1% 7% 8% 6%

Return on Equity 19% 3% 24% 24% 21%

Liquidity Ratio


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2013 2012 2011 2009 2008

Current Ratio 1.41 1.33 1.39 1.52 1.47

Quick Ratio 0.99 0.91 1.03 1.12 1.18

Activity Ratios

2013 2012 2011 2009 2008

Inventory Turnover 6 7 8 9 8

Total Assets Turnover Ratio 0.75 0.66 0.62 0.49 0.44

Investment Ratios

2013 2012 2011 2009 2008

Earnings per Share 16.01 2.61 15.77 13.28 7.27

Price Earnings 9.89 35.26 4.57 11.22 14.97

Solvency Ratios

2013 2012 2011 2009 2008

Leverage 1.77 2.46 2.59 3.24 2.99

Debt to Equity Ratio 1.66 2.33 2.49 3.07 2.95


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Conclusion

Profitability ratio

Gross profit ratio from 2011 to 2013 gross profit ratio of ENGRO is increased instead of

PTCL. PTCL is decreased in 2011 and 2012 but it also performs well.

Net profit ratio of ENGRO is low the PTCL. Its main reason can be that, PTCL products

are being used in every house.

Return on Equity of ENGRO is much more than PTCL. ENGRO is much based on shares

but PTCLs 51% shares are owned by government.

Liquidity ratio

Current ratio of PTCL is better the current ratio of ENGRO. It can fulfill its current

liabilities by selling its current assets

Quick ratio of PTCL is better than ENGRO. By watching this, it has more reliable and

less risky.

Activity ratio

Inventory turnover of PTCL is less than ENGRO which means PTCL is not managing itsinventory properly.

Total assets turnover ratio of ENGRO is less the PTCL but it is gradually increasing

yearly. Whereas PTCLs ratio is higher than ENGROs one but it is fluctuated.

Investment Ratio

If we analyze Earning per share 2012 was the worst year on ENGRO but it balanced itself

in year 2013. Its earning per share is much more than PTCLs earning per share.

PTCLs price to earnings ratio is better because it is fluent but ENGROs ratio totally

fluctuated

SOLVENCY

ENGRO is much better in leverage ratio. Lesser the leverage ratio means less risky the

company is.


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Debt to equity ratio must be low so your organization is less

risky.

Questions to be answer

Provide a detailed description of your investment strategy, based

upon the goal of maximizing your portfolio value.

I will not invest in just a single company, neither I will do 50 50. By analyzing both

companies I have decided to distribute my amount of investment in this way.

I will invest 65% to ENGRO and rest of 35% to PTCL. Liquidity ratio of PTCL is better

than ENGRO as its current assets are more than its current liabilities. Reason of spending on

PTCL is also that its net income is also impressive then ENGRO.

I will invest more on ENGRO due to many reasons. Its Activity ratio and Investment

ratio is better and more than PTCL, and its Solvency ratio is less than PTCL.

Explain how you executed your investment strategy.

I am investing more on ENGRO, because its condition is better than PTCL. But I am not

investing my total investment on it. If we take a look at investment ratio then we will realize that

EBGRO has more investment ratio then PTCL. But PTCL has fluent growth. This is also a

reason that I will invest 65% in ENGRO because its ratio is more, and 35% in PTCL as it has a

gradual growth.

Activity turnover is somehow compare with each other as Inventory turnover of ENGRO

is more but its total assets turnover is less the PTCL.

Discuss the risk characteristics of your investment strategy


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Risk is the basic element of every business. We avoid risks and

tries to earn more. If we had a choice then we goes for less risky work. Investing in PTCL is

more risky that is why, I am investing more in ENGRO because investing in ENGRO is less

risky than PTCL.

Solvency ratio of any organization must be less. ENGROs solvency ratio is less than

PTCLs ratio. This is one of the main reason I am investing more in ENGRO


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REFERENCE

ANNUAL REPORT OF PTCL 2013

ANNUAL REPORT OF ENGRO 2013

Ptcl vs Engro Portfolio Analysis

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