Securities Analysis
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Introduction We have been given Rs 500,000 in a hypothetical situation, in which we are to invest this money in the security market by selecting any five different shares of our choice in five different sectors. Before investing, we are to do a detailed analysis in the following hierarchy: •
Economic Analysis of the country to take decision that whether it will be beneficial to invest in the current economic conditions prevailing in Pakistan?
•
On the basis of the sector performance, level of associated Risk & returns and investment feasibility, sector trend, Selection of 5 sectors out of 34 sectors in KSE (Excluding mutual funds)
•
Selection of 1 company from each sector on the basis of company’s past performance, consistency in performance, expectation of growth, trend of company, company’s policies, share prices trend, and ratios analysis of the company
•
AS our main objective is to study the shares prices of the company, to check for the Risk and return associated with the securities in which we are to invest afterwards. Our Analysis of securities starts from 1st January 2001 to 30th October 2008. 1st January and 31st December in each year are considered to be the opening & closing dates in each year respectively.
Table of Contents Chapter # 1: Common Stock Analysis •
Economic Analysis
•
Industry Analysis
•
Company Analysis
•
Technical Analysis
•
Summary
Chapter # 2: Actual Risk & Return of the Companies •
Actual Return
•
Relative Return
•
Actual Risk
Chapter # 3: Expected Risk & Return •
Forecasted Returns o Probabilities assigned (Reasons) o Forecasted Returns
•
Expected Risk
•
Observation
Chapter # 4: Expected Portfolio Risk & Return •
Expected Return of Portfolio
•
Risk Factor Calculation (Correlation Coefficient)
•
Expected Risk of portfolio
•
Interpretation
Economic Analysis of the Country A brief view of the indicators is given below: Serial No. 1
Economic Indicator
Effect on the Economy
GNP Consumption
100% of GDP
Investment
21.6% of GDP
Govt. Expenditures Development
$496 billion
Non-Development
683.4 billion
Trade balance
-$1.196 Billion
2 CPI
12.00%
3 Per capita Income
$1085
25%
The longer the higher inflationary pressure persists, the greater is the chance for wage-price spiral to gain a firm hold.
15%
Higher the interest rate, lower will be the investment, which will lead to less production. Consequently, less demand will be fulfilled, increase in
5 Interest Rate
This has drastically impacted the purchasing power of a consumer. Hence, consumers are not even able to fulfill their necessities Rise in PCI is a good indicator, but real PCI is showing not good indications.
4 Inflation rate
There is reported less NI growth as compared to the previous year. The reason might be the insolvency position of the country
inflation rate, unemployment will occur. 6
GDP growth
5.8%
7 F.D.I
$3.6 billion
Unemployment Rate
16%
8
9
Monetary Policy
Tight M.P •
Disc. rate 12%
•
Cash Reserve Requirement 9%
•
Statutory Liquidity Requirement 19%
•
• •
Less than targeted 7.2% which is showing economic instability. FDI was relatively high in previous year -$ 8 billion. But due to the financial instability of the country, most of FDIwas injected out. There have been an investment outflow of 8.84 billion in the period when the ceiling of KSE was released, Unemployment rise subsequently drag the people to below poverty line. People can not fulfill their necessities. The money supply growth during July- May 10th 200708 (henceforth July-May) of the current fiscal year slowed to 9%
The FY 08 growth in M2 is entirely attributable to a rise in Margin the net domestic assets Requirement for (NDA) of the banking system L.O.C. 35% due to high government money supply borrowings for budgetary growth 9.0% support, as the NFA Floor of 5% on the registered a contraction R.O.R on PLS during the period, mainly A/c. reflecting the weaknesses in country's external balance of payment.
The monetary tightening has been successful in moderating the exceptional rise in private sector credit growth seen in recent years to levels consistent with its long term trends. However, the impact of this desirable moderation in private sector growth on M2 was more than offset by continued strong budgetary borrowings of the government from the banking system. The borrowings from the State Bank of Pakistan reached an alarming level SBP to Rs 945.9 billion. The spread - a measure of banking sector efficiency/inefficiency increased from 6.3 percent to 6.7. 10
Fiscal Policy •
Fiscal Deficit
$398 billion
The total revenue collected during FY 2007-08 stood at Rs 1545.5 billion, higher than the targeted level of Rs 1476 billion (based on information till May 23, 2008). This increase of Rs 69.5 billion from the budgeted revenues was mainly due to higherthan-targeted non-tax collections. an additional Rs 103 billion in non-tax revenues, reaching to Rs 483 billion. Slippages in provincial tax revenues amount to Rs 8 billion. There was an overall
fiscal deficit of Rs 398 billion. 11
12
Debts Domestic
$ 14.2 Billion & 945 Billion from SBP
Foreign
$45.00bn
Reserves
$9.3396 Bln
IMF loan of $ 3.5 billion has caused to rise the reserves of the country. Otherwise, there might be a downfall.
Money Depreciation by 6.4%
Money depreciation from past year. Although now a days there have been seen a relative appreciation. But its less than to compensate the conditions
13 Exchange Rate
23.9%
Poverty has increase due to increased in inflation rate, interest rate, unemployment increase and decrease in purchasing power of people.
4.8%
In manufacturing sector, there have been some L.S.G, showing the country is moving towards future stable conditions.
14 Poverty
15 L.S. Manufacturing growth
16
Political Conditions
Political Instability.
17
Population Growth
1.8%
Political conditions has drastically impacted the country, in addition to this, the continuing rage between the neighbor countries, resulting the decrease in FDI. Population growth rate has decreased. Showing facilities inapprehension.
18
Base Wage
Rs 6000
Can increase the purchasing power, but will also increase the prices.
Source: Economic Survey of Pakistan (issued, October,2008)
Interpretation: Almost all the indicators are showing that the country is in a severe economic recession now a days, and there are least chances that the investor can have good returns out of stocks. Keeping in view all of the above stated factors, we have decided 5 sectors in which we think that we can have some good returns. We think that our perceived sectors will at least be affected by current economic conditions. Which are discussed in the succeeding pages.
Industry Analysis 1.
Banking Sector:
Particulars
Description Stabilizing stage, for some companies there has been the declining stage, going for mergers and acquisitions with some foreign as well as some domestic banks to ensure their existence in the market. Even an international bank ABN Amro is being acquired by RBS another international bank. MCB is going for merger with Barclays to maintain economic capital limit of 12%, set by state bank of Pakistan.
Sector Life Cycle
Historical performance
In the past few year, banking sector had a boom with an annual growth rate of 20%. Showing robust performance. But from the declaration of insolvency position of Pakistan in May 2008 and grading it to CCC-, a huge amount of F.D.I. has out flowed, now the banking sector’s overall growth is reduced to 11% for this year.
Type of industry
Interest Sensitive industry
Market players
HBL, NIB, MCB, NBP ABP, UBL, Bank Al-Habib, Saudi Pak Bank, Meezan Bank, Bank al Islami
Competitors MCB
of HBL, ABP, UBL, NBP
Competition Nature
Indirect Competition against Each other.
Threats
Bargaining power, Supplier
Industry Life Cycle
Stabilizing Stage
Risk & mitigation
Inflation rate, Interest Rate, Rise in Economic Capital Limit.
Financial Indicators
Profitability in FY07 was 75.86bn, declined by 5.6% as compared to 80.32bn in FY06,Non- performing loans of banks increased to 160bn.
Mergers and Acquisition
Maybank has acquired 25% shares in MCB
Interpretation: Banking industry is most affected by interest hike, foreign direct investment outflow, inflation rate rise and risk of default. Therefore, a significant decrease in growth rate and profitability is addressed.
2.Fertilizer Industry Particulars
Description Expansion Stage, rising farming is resulting to rising needs of fertilizers. Therefore, there have been a rising sales growth trend in the sector.
Sector Life Cycle
Historical performance
Fertilizer industry is fastly growing industry, being aided by government of Pakistan, as it is Associated with agriculture. Pakistan, being an agriculture country will have to support all industries which are directly related to Agriculture to ensure maximum benefits as well as maximum production. Current the sector is growing with almost 35% rate.
Type of industry
Growth industry.
Market players
Dawood Hercules, fauji fertilizers, Engro Chemicals
Competitors Engro
of
Dawood Hercules, fauji fertilizers, Chemicals
Competition Nature
Direct competition
Threats
Supplier (Raw materials), Consumer.(Less purchasing power).
Industry Life Cycle
Expansion stage. Industry is having maximum profits.
Risk & mitigation
Inflation rate, Interest Rate, Environmental problems, political instability.
Financial Indicators
•
overall profitability of the fertiliser sector increased 45%
•
Increase in fertilizers demand by 18%.
Interpretation: Although the industry has shown a positive trend in growth, sales and profits. But due to the economic downfall, there will be a set back for the company is shape of decreasing demand for fertilizers. Subsequently, the company’s stock prices are decreasing down, which may affect the company’s growth rate.
3.Cement Industry Particulars Sector Life Cycle
Historical performance
Description Stabilizing, Domestic shortfall in demand but rising production is offset by exporting more in the foreign market. In the previous years, as there were many developmental projects in the country, raised the need of cements in the country. This gave a chance to the industry to flourish. Now a days, Economic slowdown coupled with aggravating law and order situation has had an adverse impact on local sales growth. However, growth in exports proved as a saving grace for the overall cement dispatches Export market share has also risen to 34.1%. Capacity utilization also declined to 78.9%
Type of industry
Growth industries
Market players
Bestway cements, Lucky Cements, Fauji cements
Competitors of Bestway cements, Fauji Cements Lucky Cements Competition Nature
Direct Competition among the companies
Threats
Supplier (Raw material), Consumer (Decreased DPs)
Industry Life Cycle
Stabilizing Stage
Risk & mitigation
Inflation rate, Interest Rate, Downfall in developmental projects
Financial Indicators
Total cement dispatches during showed a nominal growth of 0.7%, while domestic cement sales , depicting a decline of 15.4%, Profitability of the sector detained at 17%.
Interpretation: The current decrease in cement demand as compared to rising production to utilize optimize capacity, has been offset by exporting to the other countries. This means in case of any set back, company can stay in market due to steps embossed in the foreign market.
4.
Oil Sector(Oil Marketing Companies)
Particulars
Description
Sector Life Cycle
Stabilizing to expansion stage. As there has been more exploration of oil fields in Pakistan by Exploration and production companies, there will be more chances for the oil marketing companies to expand by rising sales through availability of reduced price oil, offsetting importing prices by the domestic production.
Historical performance
In the previous years, OMCs have performed very well, having huge profits, and high growth rate. But the rise in oil prices from 2007 has made their profits to decrease significantly, after the releasing of government subsidy over the petroleum, the profits shrinked to an alarming level, even now most of the OMCs are in loss.
Type of industry
Cyclical industry
Market players
PSO, Shell, Attock Petroleum, Caltex, Askari.
Competitors PSO
of Shell, Attock Cements
Competition Nature
Indirect Competition.
Threats
New entrants, Suppliers (Changing petroleum prices)
Industry Life Cycle
Expansion
Risk & mitigation
Inflation rate, Interest Rate, Rise in oil prices, oil shortages.
Financial Indicators
the oil consumption in the country posted a slight decline of 2.9 percent. 52 percent of the total consumption was met through local refineries and the remaining 48 percent met through imports. Among the companies, PSO occupied the largest slice of 68.2 percent
Interpretation: The rising demand of oil in the market has given the OMCs a chance to again establish themselves on the floor of market. The oil prices crunch had made many companies to abolish their existence. In future it is expected that there will be growth in the sector.
5.Commodities Sector Particulars
Description Expansion stage. There is a rising demand for the commodities, as these are the basic necessities for the people. The rising population at a rate of 1.8 contributes towards more sales of the commodities. And giving a backhand to flourish the industry. The industry has although growth at lesser rate as compared to previous year.
Sector Life Cycle
Historical performance
In the past years the industry has performed well, with ever increasing sales growth. Even now in such an economic set back, the industry is performing well as the commodities are the need of every person.
Type of industry
Growth industry, having high profits.
Market players
Haleeb, Nurpur, Continental foods, Dawn, Bake Parlour
Competitors Nestle
of Haleeb, Nurpur.
Competition Nature
Indirect Competition, healthy competition
Threats
New entrants, Suppliers (Changing petroleum prices), consumer based.
Industry Life Cycle
Expansion
Risk & mitigation
Inflation rate, Interest Rate, Rise in oil prices, decreasing purchasing power of consumers
Financial Indicators
Sales growth by 25%, Gross profit margin of the industry is 24% while the net profit margin is 5%. Reduced Net profit margin is
due to increased debt cost and rising tax rate.
Interpretation: The Commodities sector has although flourished but at a lesser pace as compared to previous year. The rising demand for the commodities might be handy in the development of the sector.
Company Analysis Muslim Commercial Bank
Particulars
Description
Net Revenues
28,235,393 (20% growth)
Profit after Tax
15,266 Million (25.8% increase)
Dividends
7854 Million (98% increase), Per share 12.5
Ratios: Capital Adequacy Ratio
17.88%
Dividend Yield Ratio
0.03
Dividend payout ratio
51.45%
Earning per share
24.3
Interpretation: The company’s overall profitability is showing that it is going with a good growth rate. It future it is expected that the company will give more better profits.
Nestle Pakistan
Particulars
Description
Net Revenues
(Recent) 28,235,393 (26% growth)
Profit after Tax
1,805,212 (27.14% increase)
Dividend per share
10
Ratios: Profit Margin
6.39%
Return on equity
43.90%
Dividend Yield Ratio
51.45%
Dividend payout ratio
82%
Earning per share
39.81
Interpretation: Nestle Pakistan is fastly growing company, with a growth rate of 25%. It is expected that it will give good returns.
Engro Chemicals:
Lucky Cements Interpretation:
Particulars
Description
Net Revenues
(Recent) 23183 Million (37.1% growth)
Profit after Tax
3155 Million (23.9% increase)
Dividend per share
7
Ratios: Profit Margin
14%
Return on equity
20%
Dividend Yield Ratio
51.45%
Dividend payout ratio
54%
Earning per share
17.7
Engro chemicals has given good returns in the current year. It is expected that it will give better profits in future irrespective of current economic spoil.
Pakistan State Oil
Particulars
Description
Net Revenues
290589 Million (40%% growth)
Profit after Tax
2149Million (25% increase)
Dividend per share
18
Ratios: Profit Margin
7.3%
Return on equity
18%
Dividend payout ratio
90%
Earning per share
12.53
Interpretation: PSO is expected to have loss in the current quarter. But it is supposed that its loss will be changed into profits to give good returns.
Engro Chemicals 2001 Period First Quarter
Opening Closing Dividends Cash Stock 70.12 66.32 0 0
Return
R.R
-5.42%
0.95
Act. Risk
(Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
58.93
58.75
0
0
-0.31%
1.00
53.58
49.87
0
0
-6.94%
0.93
52.38 58.75
54.33 57.32
7.5 1.88
0 0.00
18.04% 1.34%
1.18 1.01
11.49%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2002 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
62.52
69.68
0
0
11.46%
1.11
65.90
61.45
0
0
-6.75%
0.93
61.08
62.15
0
0
1.75%
1.02
68.45 64.49
78.10 67.85
7.5 1.88
0 0.00
25.05% 7.88%
1.25 1.08
13.66%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2003 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
87.65
84.67
0
0
-3.40%
0.97
81.30
82.55
0
0
1.54%
1.02
91.47
89.52
0
0
-2.13%
0.98
82.37 85.70
86.30 85.76
8 2.00
0 0.00
14.49% 2.62%
1.14 1.03
8.18%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
1.92%
1.02
2004 Period First Quarter (Avg)
95.28
97.12
0
0
Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
98.52
98.25
0
0
-0.27%
1.00
95.77
93.58
0
0
-2.28%
0.98
100.15 97.43
112.93 100.47
8.5 2.13
0 0.00
21.25% 5.16%
1.21 1.05
10.87%
Return
R.R
Act. Risk
2005 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Opening Closing Dividends Cash Stock 126.33
126.18
0
0
-0.12%
1.00
120.43
115.90
0
0
-3.76%
0.96
118.05
125.80
0
0
6.57%
1.07
154.80 129.90
163.45 132.83
11 2.75
0 0.00
12.69% 3.84%
1.13 1.04
7.29% 7.29%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2006 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
196.62
211.13
0
0
7.38%
1.07
193.00
180.13
3
0
-5.11%
0.95
175.37
178.60
3
0
3.55%
1.04
177.75 185.68
174.38 186.06
3 2.25
0 0.00
-0.21% 1.40%
1.00 1.01
5.34%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2007 Period First Quarter (Avg) Second Quarter (Avg)
178.62
184.22
0
0
3.14%
1.03
200.18
222.58
2
0
12.19%
1.12
Third Quarter (Avg) Fourth Quarter (Avg) Average
244.17
246.47
2
0
1.76%
1.02
272.05 223.75
274.00 231.82
3 1.75
0 0.00
1.82% 4.73%
1.02 1.05
5.02%
Return
R.R
Act. Risk
2008 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Average
Opening Closing Dividends Cash Stock 291.52
310.90
0
0
6.65%
1.07
310.65
296.29
2
0
0.96
223.86 275.34
190.40 265.86
2 1.33
0 0.00
-3.98% -14.05 % -0.04
0.86 0.96
10.35%
Interpretation: Engro Pakistan is giving negative returns in securities. The current economic downfall has affected it positions of giving good returns a lot.
Lucky Cements
Period First Quarter
Openi ng 7.52
Closi ng 6.83
2001 Dividen ds Cash 0
Stoc k 0
Retur n
R.R
-9.09
0.91
Act. Risk
(Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
6.78
6.97
0.75
0
6.43
5.65
0
0
6.47
7.25
0
6.80
6.68
0.19
0 0 .00
Closi ng
2002 Dividen ds
Openi ng
Cash First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
9.78
10.83
0.00
9.17
8.55
0.75
8.82
9.33
0.00
9.85
10.33
0.00
9.40
9.76
0.19
Closi ng
2003 Dividen ds
Openi ng
Cash First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
10.18
9.80
0.00
11.55
14.22
0.75
20.60
21.47
0.00
20.70
22.03
0.00
15.76
16.88
0.19
2004
% 13.76 % -12.1 8% 12.11 % 1.15 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
10.73 % 1.45 % 5.86 % 4.91 % 5.74 %
Retur n Stoc k 0 .08 0 .00 0 .00 0 .00 0 .02
-3.03 % 29.58 % 4.21 % 6.44 % 9.30 %
1.14 0.88 1.12 1.01
13.68 %
R.R
Act. Risk
1.11 1.01 1.06 1.05 1.06
3.83 %
R.R
Act. Risk
0.97 1.30 1.04 1.06 1.09
14.11 %
Period
Openi ng
Closi ng
Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
26.13
29.03
0.00
38.70
40.62
0.75
38.83
38.35
0.00
36.75
37.75
0.00
35.10
36.44
0.19
Openi ng
Closi ng
2005 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
43.55
46.17
0.00
43.27
42.27
0.00
45.35
47.65
0.00
64.72
75.22
0.00
49.22
52.83
0.00
Openi ng
Closi ng
2006 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
98.35 110.2 3 102.8 8 88.67 100.0 3
111.1 7 103.9 7 101.9 7
0.00 1.00 0.00
75.03
0.00
98.03
0.25
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
11.10 % 6.89 % -1.24 % 2.72 % 4.87 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
6.01 % -2.31 % 5.07 % 16.22 % 6.25 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
13.03 % -4.78 % -0.89 % -15.3 8% -2.00 %
R.R
Act. Risk
1.11 1.07 0.99 1.03 1.05
5.32 %
R.R
Act. Risk
1.06 0.98 1.05
1.06
7.62 % 7.62 %
R.R
Act. Risk
1.16
1.13 0.95 0.99 0.85 0.98
11.74 %
Period
Openi ng
Closi ng
2007 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
63.98 97.93 126.0 3 126.1 8 103.5 3
70.45 117.4 2 122.8 7 122.2 7 108.2 5
Openi ng
Closi ng
0.00 1.25 0.00 0.00 0.31
Average
120.7 0 130.4 7
128.4 5 116.5 3
77.87 109.6 8
67.84 104.2 7
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2008 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
Retur n
0.00 1.25 0.00 0.42
10.11 % 21.17 % -2.51 % -3.10 % 6.42 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00
6.42 % -9.73 % -12.8 8% -0.05
R.R
Act. Risk
1.10 1.21 0.97 0.97 1.06
11.57 %
R.R
Act. Risk
1.06 0.90 0.87 0.95
10.35 %
Interpretation: At the start of 2008, lucky cements had given good returns, but the economic downfall has affected the company’s returns a lot.
MCB
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
Openi ng
Closin g
2001 Dividend s Cash
Stoc k
30.73
27.75
0.00
0.00
25.52
25.83
0.00
0.00
22.75
21.67
0.00
0.00
22.90
22.37
0.00
0.00
25.48
24.40
0.00
0.00
Openi ng
Closin g
2002 Dividend s Cash
Stoc k
Return
R.R
-9.71 %
0.90
Act. Risk
1.24% -4.76 % -2.33 % -3.89 %
1.01
0.96
4.60%
Return
R.R
Act. Risk
0.95 0.98
22.87
25.13
0.00
0.00
9.91%
1.10
26.82
27.88
0.00
0.00
1.04
26.12
25.45
0.00
0.00
3.98% -2.55 %
30.97 26.69
33.05 27.88
0.00 0.00
0.00 0.00
6.73% 4.52%
1.07 1.05
5.30%
Closin
2003 Dividend
Return
R.R
Act.
Openi
0.97
ng First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
g
s
Risk Cash
Stoc k
33.71
33.68
1.50
0.00
4.35%
1.04
34.20
35.63
0.00
0.00
4.19%
1.04
45.03
47.45
1.25
0.00
8.14%
1.08
44.23 39.29
46.43 40.80
0.00 0.69
1.00 0.25
7.23% 5.98%
1.07 1.06
2.01%
Closin g
2004 Dividend s
Return
R.R
Act. Risk
Openi ng
Cash
Stoc k
51.42
50.52
1.00
0.00
0.19%
1.00
53.90
54.53
0.00
0.00
1.18%
1.01
51.40
51.17
1.50
0.00
2.46%
1.02
50.00 51.68
52.93 52.29
0.00 0.63
1.00 0.25
7.87% 2.93%
1.08 1.03
3.42%
Openi ng
Closin g
2005 Dividend s
Return
R.R
Act. Risk
Cash
Stoc k
67.53
69.30
1.75
0.00
5.21%
1.05
69.08
0.00
0.00
1.50
0.00
1.00
2.00
1.06
0.50
7.38% 19.05 % 11.76 % 10.85 %
1.07
92.46
74.18 105.7 7 156.9 7 101.5 5
Openi ng
Closin g
90.10 143.1 3
2006 Dividend s Cash
Return Stoc
1.19 1.12 1.11
6.11%
R.R
Act. Risk
k First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Average
215.2 7 220.4 8 215.8 0 261.5 0 228.2 6
234.3 5 215.5 7 230.7 0 258.5 3 234.7 9
Openi ng
Closin g
279.0 2 303.2 0 333.7 0 361.8 0 319.4 3
287.2 0 334.6 5 323.0 3 384.1 2 332.2 5
Openi ng
Closin g
408.9 5 368.3 0 280.4 6 352.5 7
414.1 3 338.6 0 252.5 7 335.1 0
2.00
0.00
1.10
0.00
9.79% -1.32 %
2.00 2.00
0.00
7.83%
1.08
1.50
1.50
0.01%
1.00
1.88
0.38
4.08%
1.04
5.55%
Return
R.R
Act. Risk
1.04
2007 Dividend s
0.99
Cash
Stoc k
2.50
0.00
2.50
0.00
2.50
0.00
3.83% 11.20 % -2.45 %
5.00
0.00
7.55%
1.08
3.13 2008 Dividend s
0.00
5.03%
1.05
5.82%
Return
R.R
Act. Risk
1.02
0.00
1.63% -7.25 % -9.94 %
0.00
-0.05
0.95
Cash
Stoc k
1.50
0.00
3.00
0.00
2.25
1.11 0.98
0.93 0.90 6.06%
Interpretation: MCB has given all time good returns. It the current year it had initially given very good return. The economic downfall has somewhat affected the company initially, but
afterwards it stabilize it by again showing positive returns. But being an interest sensitive company, the outflow of F.D.I and interest rate hike again dropped its returns to losses
PSO
Period
Openi ng
Closi ng
2001 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
143.5 3 139.4 5 127.9 7 105.3 3 129.0 7
140.4 2 138.8 7 119.0 0 100.9 3 124.8 0
Openi ng
Closi ng
0.00 0.00 0.00 0.00 0.00
116.6 3 150.0 5 161.1 5
138.2 2 144.3 3 180.2 5
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2002 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
Retur n
0.00 0.00 0.00
-2.17 % -0.42 % -7.01 % -4.18 % -3.44 %
Retur n Stoc k 0 .00 0 .00 0 .00
18.51 % -3.81 % 11.85 %
R.R
Act. Risk
0.98 1.00 0.93 0.96 0.97
2.83 %
R.R
Act. Risk
1.19 0.96 1.12
Fourth Quarter (Avg) Average
Period
189.7 2 154.3 9
Openi ng
194.4 5 164.3 1
Closi ng
0.00 0.00 2003 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
199.7 9 207.3 3 266.4 8 267.4 2 235.2 6
196.9 3 215.8 0 283.2 2 270.7 7 241.6 8
Openi ng
Closi ng
0.00 0.00 0.00 0.00 0.00
Average
Period
289.7 7 275.8 2 256.5 3 258.7 2 270.2 1
288.7 3 266.2 5 254.3 8 270.8 7 270.0 6
Openi ng
Closi ng
0.00 0.00 0.00 0.00 0.00
First Quarter (Avg) Second Quarter
336.6 0 375.0
373.6 8 371.0
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
0.00 0.00
-1.43 % 4.08 % 6.28 % 1.25 % 2.55 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2005 Dividen ds Cash
2.49 % 7.26 %
Retur n
2004 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
0 .00 0 .00
Stoc k 0 .00 0
-0.36 % -3.47 % -0.84 % 4.70 % 0.01 %
1.02 1.07
9.88 %
R.R
Act. Risk
0.99 1.04 1.06 1.01 1.03
3.36 %
R.R
Act. Risk
1.00 0.97 0.99 1.05 1.00
3.41 %
Retur n
R.R
Act. Risk
11.02 % -1.07
1.11 0.99
(Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
0 383.2 2 403.8 3 374.6 6
0 382.8 8 414.4 5 385.5 0
Openi ng
Closi ng
0.00 0.00 0.00 2006 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
416.1 2 339.6 7 333.8 8 304.0 2 348.4 2
401.5 0 318.3 3 334.9 0 300.0 0 338.6 8
Openi ng
Closi ng
0.00 18.00 0.00 6.00 6.00
Average
Period
329.7 3 361.8 5 365.3 2 399.1 7 364.0 2
350.0 8 373.9 8 355.0 2 414.5 2 373.4 0
Openi
Closi
4.00 11.00 5.00 0.00 5.00 2008 Dividen
% -0.09 % 2.63 % 3.12 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2007 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
.00 0 .00 0 .00 0 .00
-3.51 % -0.98 % 0.30 % 0.65 % -0.88 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
7.38 % 6.39 % -1.45 % 3.85 % 4.04 %
Retur
1.00 1.03 1.03
5.49 %
R.R
Act. Risk
0.96 0.99 1.00 1.01 0.99
1.89 %
R.R
Act. Risk
1.07 1.06 0.99 1.04 1.04
3.95 %
R.R
Act.
ng
ng
ds
n
Cash First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Average
447.5 2 492.1 5 356.8 6 432.1 8
489.8 0 453.4 1 311.1 1 418.1 1
6.00
6.00
Stoc k 0 .00 0 .00 0 .00 0 .00
10.79 % -7.87 % -12.8 2% -0.03
Risk
1.11 0.92 0.87 0.97
12.45 %
Interprettion: PSO has given all time good returns. During the current year it had initially given very good return. The economic downfall has somewhat affected the company initially, but afterwards it stabilize it by again showing positive returns. But being a cyclical nature company, the rise and fall in prices of petroleum has greatly affected the current p[performance of PSO. PSO is at 12.2 loss per share in the quarter. But hoping to change losses into profits in the remaining year.
Nestle
Period
Openi ng
Closin g
2001 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
143.0 0 132.3 3 142.6 7
139.6 7 131.3 3 148.6 7
0.00 0.00 0.00
Retur n Stoc k 0 .00 0 .00 0 .00
-2.33 % -0.76 % 4.21 %
R.R
0.98 0.99 1.04
Act. Risk
Fourth Quarter (Avg) Average
Period
159.0 0 144.2 5
158.6 7 144.5 8
Openi ng
Closin g
0.00 0.00
2002 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
167.3 3 183.0 0 189.8 3 199.0 0 184.7 9
174.6 7 187.6 7 190.5 0 207.8 3 190.1 7
Openi ng
Closin g
0.00 0.00 0.00 0.00 0.00
Average
Period First Quarter
205.5 3 216.0 0 266.2 7 274.3 7 240.5 4
Openi ng 436.6
200.3 7 231.6 7 275.6 0 307.0 3 253.6 7
0.00 0.00 0.00 4.00 1.00
Closin g
2004 Dividen ds
471.3
Cash 0.00
-0.21 % 0.23 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2003 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
0 .00 0 .00
4.38 % 2.55 % 0.35 % 4.44 % 2.93 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
Stoc k 0
-2.51 % 7.25 % 3.51 % 13.36 % 5.40 %
1.00 1.00
2.80 %
R.R
Act. Risk
1.04 1.03 1.00 1.04 1.03
1.93 %
R.R
Act. Risk
0.97 1.07 1.04 1.13 1.05
6.66 %
Retur n
R.R
Act. Risk
7.94
1.08
(Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
5 483.0 0 461.6 7 465.0 2 461.5 8
2 482.6 7 455.3 3 485.0 0 473.5 8
Openi ng
Closin g
0.00 0.00 5.00 1.25
2005 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
509.9 8 537.0 8 542.2 2 562.3 3 537.9 0
511.6 7 540.0 8 549.8 8 577.3 3 544.7 4
Openi ng
Closin g
0.00 0.00 0.00 15.00 3.75
Average
697.0 0 990.6 7 1030. 07 930.0 2 911.9 4
771.3 3 1083. 19 975.8 8 965.0 0 948.8 5
0.00 0.00 0.00 5.00 1.25
% -0.07 % -1.37 % 5.37 % 2.97 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2006 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
.00 0 .00 0 .00 0 .00 0 .00
0.33 % 0.56 % 1.41 % 5.33 % 1.91 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
10.66 % 9.34 % -5.26 % 4.30 % 4.76 %
1.00 0.99 1.05 1.03
4.42 %
R.R
Act. Risk
1.00 1.01 1.01 1.05 1.02
2.33 %
R.R
Act. Risk
1.11 1.09 0.95 1.04 1.05
7.22 %
Period
Openi ng
Closin g
2007 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
1275. 98 1586. 33 1513. 33 1621. 67 1499. 33
Openi ng
1487. 67 1541. 33 1498. 33 1721. 67 1562. 25
Closin g
0.00 0.00 0.00 10.00 2.50
Average
1696. 97 1405. 84 1640. 00 1580. 93
1600. 97 1448. 50 7.00 1524. 74
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2008 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
Retur n
7.00
16.59 % -2.84 % -0.99 % 6.78 % 4.89 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00
-5.66 % 3.03 % 0.00 % -0.01
R.R
Act. Risk
1.17 0.97 0.99 1.07 1.05
8.85 %
R.R
Act. Risk
0.94 1.03 1.00 0.99
4.41 %
Interpretation: Neslte Pakistan has given all time good returns. Even in the current economic spoil, nestle was initially had a downfall, but being an international company, it has made it stabilized to give expected returns at good rate.
Expected Risk & Return Engro Expected Return S.No 1 2 3
Return (R) 10.00% 5.00% 3.00%
Probability (P) 0.08 0.12 0.15
4
-5.00%
0.25
5 Total
-10.00%
0.4 1
Expected Risk (δA)
R(R-ṜA)2 ̅ṜA=∑RP ṜA 0.008 0.09 0.008464 0.006 0.04 0.001936 0.0045 0.03 0.000650 -0.0 -0.0125 4 0.001406 -0.0 -0.04 6 0.003600 -3.40% δA = √∑(RṜA)2P
(R-ṜA)2P 0.00067712 0.00023232 9.7538E-05 0.00035156 0.00144 0.00279854
5.29%
Interpretation: The expected returns of the company are depicted to be negative with a high risk involvement.
Muslim Commercial Bank Expected Return S.No 1 2 3 4 5 Total
Return (R) 10.00% 8.00% 5.00% 2.00% -5.00%
Expected Risk (δB)
RProbability (P) 0.1 0.12 0.2 0.4 0.18 1
̅ṜB=∑RP 0.01 0.0096 0.01 0.008 -0.009 2.86%
ṜB 0.09 0.07 0.04 0.01 -0.0 4
(R-ṜB)2
(R-ṜB)2P
0.008100 0.004956 0.001600 0.000144
0.00081 0.00059474 0.00032 0.0000576
0.001681
0.00030258 0.00208492
δB = √∑(RṜB)2P
4.57%
Interpretation: MCB is expected to give good returns in future with a least rate of risk associated with it.
Lucky Cements Expected Return S.No 1 2 3
Return (R) 5.00% 3.00% 1.00%
Probability (P) 0.08 0.2 0.3
4
-2.00%
0.27
Expected Risk (δC)
R(R-ṜC)2 ̅ṜC=∑RP ṜC 0.004 0.05 0.002116 0.006 0.02 0.000576 0.003 0.01 0.000049 -0.0 -0.0054 1 0.000213
(R-ṜC)2P 0.00016928 0.0001152 0.0000147 5.7553E-05
Nestle Pakistan Expected Return S.No 1 2 3 4 5 Total
Return (R) 15.00% 10.00% 5.00% 2.00% -2.00%
Expected Risk (δE)
RProbability (P) 0.1 0.15 0.3 0.4 0.05 1
̅ṜE=∑RP 0.015 0.015 0.015 0.008
ṜE 0.14 0.09 0.04 0.01 -0.0 -0.001 2 5.20%
(R-ṜE)2
(R-ṜE)2P
0.018225 0.007225 0.001225 0.000144
0.0018225 0.00108375 0.0003675 0.0000576
0.000361
0.00001805 0.0033494
δE = √∑(RṜE)2P
5.79%
Interpretation: Nestle, being an international company, is expected to give good returns at a highest rate out of the securities with somewhat level of risk associated with it.
Reasons to apply probabilities to the securities
Engro Chemicals
Return (R) 10.00% 5.00% 3.00% -5.00% -10.00%
Probability (P) 0.08 0.12 0.15 0.25 0.4 1
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Engro Chemicals. In the past years, the security’s prices were rising steadily, showing a good growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices. While after that the prices are constantly decreasing. Showing all time negative returns. The last return given by the security in September was. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock prices will go down. There is a rise in interest rate (13.33%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%) depicting that the company is affected highly by the current economic disaster. Positive returns are assumed by having the following assumptions: •
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Muslim Commercial Bank
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Muslim Commercial Bank. In the past years, there was a healthy rise in prices, showing a robust growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices (). While after that the prices had both increasing and decreasing trend showing negative as well as positive returns. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock prices will go down. There is a rise in interest rate (15%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%). The statistics are depicting that the company was affected highly initially but making itself stable in the current economic disaster. The rise in economic capital limit set by the state bank of Pakistan is another issue for the bank. Positive returns are assumed by having the following assumptions: •
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Lucy Cements
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Lucky Cements. In the past years, there was a pretty fair rise in prices, showing a fair growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices (). But the matter does not end here; there was a constant decrease in prices until the prices reached almost the half of the peak value, giving negative returns. The company didn’t give stable positive returns at any period. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock
prices will go down. There is a rise in interest rate (15%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%). The statistics are depicting that the company is affected highly by the current economic disaster. Positive returns are assumed by having the following assumptions: •
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Pakistan State Oil
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Pakistan State Oil. In the past years, there was a healthy rise in prices, showing a robust growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices ().While after that the prices had decreasing trend until the prices reached almost the half of the peak value, giving negative returns. In the current quarter the company had a heavy loss of -48.88 EPS, depicting that company will not be able to give progress in the current scenario. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock prices will go down. There is a rise in interest rate (13.33%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%). The statistics are depicting that the company was affected highly by the current economic disaster. Positive returns are assumed by having the following assumptions:
•
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Nestle Pakistan
Return (R) 15.00% 10.00% 5.00% 2.00% -2.00%
Probability (P) 0.1 0.15 0.3 0.4 0.05 1
There was a slight deviation in prices of Nestle in May 2008, but the decrease didn’t last for long. And the company, being an international company, grew at a robust rate irrespective of the current economic conditions of the country. So it can be interpreted that the company will give high positive returns in future. As the Company have grown at a steady rate, so somewhat less but constant returns are expected.
Portfolio Risk & Return Let Returns of; Expected risk are: Engro = A -3.40% 5.29% MCB = B 2.86% 4.57% L.C. = C 0.01% 2.51% PSO = D -1.30% 6.86% Nestle = E 5.20% 5.79% Portfolios = {AB,AC,AD,AE,BC,BD,BE,CD,CE, DE} So examining all of the above stated portfolios one by one:
1. Engro with MCB S. no 1 2 3
A 0.1000 0.0500 0.0300
B 0.1000 0.0800 0.0500
4 5 Total
-0.0500 -0.1000 0.0300
0.0200 -0.0500 0.2000
A.B 0.0100 0.0040 0.0015 -0.001 0 0.0050 0.0195
A2 0.0100 0.0025 0.0009
B2 0.0100 0.0064 0.0025
0.0025 0.0100 0.0259
0.0004 0.0025 0.0218
Expected Portfolio Risk (δP1) r1 =
0.9714
δA =
5.29%
δB =
4.57%
δP1 =
0.038%
2. Engro with MCB S. no 1 2 3 4 5 Total
A 0.1000 0.0500 0.0300 -0.0500 -0.1000
C 0.0500 0.0300 0.0100 -0.0200 -0.0500
A.C 0.0050 0.0015 0.0003 0.0010 0.0050 0.0128
A2 0.0100 0.0025 0.0009 0.0025 0.0100 0.0259
C2 0.0025 0.0009 0.0001 0.0004 0.0025 0.0064
A2 0.0100 0.0025 0.0009 0.0025 0.0100 0.0259
D2 0.0100 0.0049 0.0009 0.0025 0.0225 0.0408
Expected Portfolio Risk (δP2) r2 =
0.9945
δA =
5.29%
δC =
2.51%
δP2 =
0.024%
3. Engro with PSO S. no 1 2 3 4 5 Total
A D 10.00% 10.00% 5.00% 7.00% 3.00% 3.00% -5.00% -5.00% -10.00% -15.00% 3.00% 0.00%
Expected Portfolio Risk (δP3) r3 =
0.9847
δA =
5.29%
δD =
6.86%
A.D 0.0100 0.0035 0.0009 0.0025 0.0150 0.0319
δP3 =
0.059%
4. Engro with Nestle S. no 1 2 3
A 10.00% 5.00% 3.00%
E 15.00% 10.00% 5.00%
4 5 Total
-5.00% -10.00% 3.00%
2.00% -2.00% 30.00%
A.E 0.0150 0.0050 0.0015 -0.001 0 0.0020 0.0225
A2 0.0100 0.0025 0.0009
E2 0.0225 0.0100 0.0025
0.0025 0.0100 0.0259
0.0004 0.0004 0.0358
Expected Portfolio Risk (δP4) r4 =
0.9674
δA =
5.29%
δE =
5.79%
δP3 =
0.048%
5. MCB with Lucky Cements S. no 1 2 3
B 10.00% 8.00% 5.00%
C 5.00% 3.00% 1.00%
4 5 Total
2.00% -5.00% 20.00%
-2.00% -5.00% 2.00%
Expected Portfolio Risk (δP5) r5 =
0.9851
δB =
4.57%
δC =
2.51%
δP5 =
0.020%
B.C 0.0050 0.0024 0.0005 -0.000 4 0.0025 0.0100
B2 0.0100 0.0064 0.0025
C2 0.0025 0.0009 0.0001
0.0004 0.0025 0.0218
0.0004 0.0025 0.0064
6. MCB with PSO S. no 1 2 3
B 10.00% 8.00% 5.00%
D 10.00% 7.00% 3.00%
4 5 Total
2.00% -5.00% 20.00%
-5.00% -15.00% 0.00%
B.D 0.0100 0.0056 0.0015 -0.001 0 0.0075 0.0236
B2 0.0100 0.0064 0.0025
D2 0.0100 0.0049 0.0009
0.0004 0.0025 0.0218
0.0025 0.0225 0.0408
B2 0.0100 0.0064 0.0025 0.0004 0.0025 0.0218
E2 0.0225 0.0100 0.0025 0.0004 0.0004 0.0358
Expected Portfolio Risk (δP6) r6 =
0.9946
δB =
4.57%
δD =
6.86%
δP6 =
0.052%
7. MCB with Nestle S. no 1 2 3 4 5 Total
B 10.00% 8.00% 5.00% 2.00% -5.00% 20.00%
E 15.00% 10.00% 5.00% 2.00% -2.00% 30.00%
B.E 0.0150 0.0080 0.0025 0.0004 0.0010 0.0269
Expected Portfolio Risk (δP7) r7 =
0.9507
δB =
4.57%
δE =
5.79%
δP7 =
0.042%
8. Lucky Cements with PSO S. no
C
D
C.D.
C2
D2
1 2 3 4 5 Total
5.00% 3.00% 1.00% -2.00% -5.00% 2.00%
10.00% 7.00% 3.00% -5.00% -15.00% 0.00%
0.0050 0.0021 0.0003 0.0010 0.0075 0.0159
0.0025 0.0009 0.0001 0.0004 0.0025 0.0064
0.0100 0.0049 0.0009 0.0025 0.0225 0.0408
Expected Portfolio Risk (δP8) r8 =
0.9902
δC =
2.51%
δD =
6.86%
δP8 =
0.035%
9. Lucky Cements with Nestle S. no 1 2 3 4 5 Total
C 5.00% 3.00% 1.00% -2.00% -5.00% 2.00%
E 10.00% 7.00% 3.00% -5.00% -15.00% 0.00%
C.E. 0.0050 0.0021 0.0003 0.0010 0.0075 0.0159
C2 0.0025 0.0009 0.0001 0.0004 0.0025 0.0064
E2 0.0100 0.0049 0.0009 0.0025 0.0225 0.0408
D2 0.0025 0.0009 0.0001 0.0004 0.0025
E2 0.0100 0.0049 0.0009 0.0025 0.0225
Expected Portfolio Risk (δP9) r9 =
0.9902
δC =
2.51%
δE =
5.79%
δP9 =
0.027%
10. PSO with Nestle S. no 1 2 3 4 5
D 5.00% 3.00% 1.00% -2.00% -5.00%
E 10.00% 7.00% 3.00% -5.00% -15.00%
D.E. 0.0050 0.0021 0.0003 0.0010 0.0075
Total
2.00%
0.00%
0.0159
0.0064
0.0408
Expected Portfolio Risk (δP10) r10 =
0.9902
δC =
6.86%
δE =
5.79%
δP10 =
0.064%
Risk on A,A B,B C,C D,D E,E
1 1 1 1 1
Return: -0.0136 0.01144 4E-05 -0.0052 0.0208
Total Portfolio Risk & Return w1w1r1.1s1* s1*
w1w2.r1.2s1*.s 2*
w1w3.r1.3s1*. s3*
w1.w4.r1.4.s1*. s4*
w1.5.r1.5.s1*s5 *
w2w1r2.1s2* s1*
w2.w2.r2.2.s2* .s2*
w2.w3.r2.3.s2 *.s3*
w2.w4.r2.4.s2*s 4*
w2.w5r2.5.s2*.s 5*
w3w1r3.1.s3* .s1*
w3.w2.r3.2.s3* s2*
w3w3.r3.33s3 *.s3*
w3.w4.r3.4s3*.s 4*
w3.w5.r3.5.s3*. s5*
w4w1.r4.1s4* .s1*
w4w2r4.2.s4*s 2*
w4.w3.r4.3.s4 *.s3*
w4w4.r4.4.s4.*s 4*
w4.w5.r4.5.s4*. s5*
w5w1.r5.1.s5 *.s1*
w5.w2.r55.2.s5 *.s2*
w5.w3.r5.3s5* .s3*
w5.w4.r5.4.s5*. s4*
w5.w5.r5.5.s5*. s5*
w1=
0.2
s1*=
w2=
0.2
s2*=
w3=
0.2
s3*=
w4=
0.2
s4*=
4.57 % 4.57 % 2.51 % 6.86 %
A,A A,B A,C A,D
0.038 % 0.024 % 0.059 % 0.048 %
B,B B,C B,D B,E
0.052 % 0.042 % 0.035 % 0.027 %
C,D C,E D,D D,E
1 .00 1 .00 1 .00 1 .00
w5=
0.2
s5*=
5.79 % A,E
0.020 % C,C
Portfolio Risk =
1.13%
0.064 % E,E
1 .00
Economic Analysis of the country to take decision that whether it will be beneficial to invest in the current economic conditions prevailing in Pakistan?
•
On the basis of the sector performance, level of associated Risk & returns and investment feasibility, sector trend, Selection of 5 sectors out of 34 sectors in KSE (Excluding mutual funds)
•
Selection of 1 company from each sector on the basis of company’s past performance, consistency in performance, expectation of growth, trend of company, company’s policies, share prices trend, and ratios analysis of the company
•
AS our main objective is to study the shares prices of the company, to check for the Risk and return associated with the securities in which we are to invest afterwards. Our Analysis of securities starts from 1st January 2001 to 30th October 2008. 1st January and 31st December in each year are considered to be the opening & closing dates in each year respectively.
Table of Contents Chapter # 1: Common Stock Analysis •
Economic Analysis
•
Industry Analysis
•
Company Analysis
•
Technical Analysis
•
Summary
Chapter # 2: Actual Risk & Return of the Companies •
Actual Return
•
Relative Return
•
Actual Risk
Chapter # 3: Expected Risk & Return •
Forecasted Returns o Probabilities assigned (Reasons) o Forecasted Returns
•
Expected Risk
•
Observation
Chapter # 4: Expected Portfolio Risk & Return •
Expected Return of Portfolio
•
Risk Factor Calculation (Correlation Coefficient)
•
Expected Risk of portfolio
•
Interpretation
Economic Analysis of the Country A brief view of the indicators is given below: Serial No. 1
Economic Indicator
Effect on the Economy
GNP Consumption
100% of GDP
Investment
21.6% of GDP
Govt. Expenditures Development
$496 billion
Non-Development
683.4 billion
Trade balance
-$1.196 Billion
2 CPI
12.00%
3 Per capita Income
$1085
25%
The longer the higher inflationary pressure persists, the greater is the chance for wage-price spiral to gain a firm hold.
15%
Higher the interest rate, lower will be the investment, which will lead to less production. Consequently, less demand will be fulfilled, increase in
5 Interest Rate
This has drastically impacted the purchasing power of a consumer. Hence, consumers are not even able to fulfill their necessities Rise in PCI is a good indicator, but real PCI is showing not good indications.
4 Inflation rate
There is reported less NI growth as compared to the previous year. The reason might be the insolvency position of the country
inflation rate, unemployment will occur. 6
GDP growth
5.8%
7 F.D.I
$3.6 billion
Unemployment Rate
16%
8
9
Monetary Policy
Tight M.P •
Disc. rate 12%
•
Cash Reserve Requirement 9%
•
Statutory Liquidity Requirement 19%
•
• •
Less than targeted 7.2% which is showing economic instability. FDI was relatively high in previous year -$ 8 billion. But due to the financial instability of the country, most of FDIwas injected out. There have been an investment outflow of 8.84 billion in the period when the ceiling of KSE was released, Unemployment rise subsequently drag the people to below poverty line. People can not fulfill their necessities. The money supply growth during July- May 10th 200708 (henceforth July-May) of the current fiscal year slowed to 9%
The FY 08 growth in M2 is entirely attributable to a rise in Margin the net domestic assets Requirement for (NDA) of the banking system L.O.C. 35% due to high government money supply borrowings for budgetary growth 9.0% support, as the NFA Floor of 5% on the registered a contraction R.O.R on PLS during the period, mainly A/c. reflecting the weaknesses in country's external balance of payment.
The monetary tightening has been successful in moderating the exceptional rise in private sector credit growth seen in recent years to levels consistent with its long term trends. However, the impact of this desirable moderation in private sector growth on M2 was more than offset by continued strong budgetary borrowings of the government from the banking system. The borrowings from the State Bank of Pakistan reached an alarming level SBP to Rs 945.9 billion. The spread - a measure of banking sector efficiency/inefficiency increased from 6.3 percent to 6.7. 10
Fiscal Policy •
Fiscal Deficit
$398 billion
The total revenue collected during FY 2007-08 stood at Rs 1545.5 billion, higher than the targeted level of Rs 1476 billion (based on information till May 23, 2008). This increase of Rs 69.5 billion from the budgeted revenues was mainly due to higherthan-targeted non-tax collections. an additional Rs 103 billion in non-tax revenues, reaching to Rs 483 billion. Slippages in provincial tax revenues amount to Rs 8 billion. There was an overall
fiscal deficit of Rs 398 billion. 11
12
Debts Domestic
$ 14.2 Billion & 945 Billion from SBP
Foreign
$45.00bn
Reserves
$9.3396 Bln
IMF loan of $ 3.5 billion has caused to rise the reserves of the country. Otherwise, there might be a downfall.
Money Depreciation by 6.4%
Money depreciation from past year. Although now a days there have been seen a relative appreciation. But its less than to compensate the conditions
13 Exchange Rate
23.9%
Poverty has increase due to increased in inflation rate, interest rate, unemployment increase and decrease in purchasing power of people.
4.8%
In manufacturing sector, there have been some L.S.G, showing the country is moving towards future stable conditions.
14 Poverty
15 L.S. Manufacturing growth
16
Political Conditions
Political Instability.
17
Population Growth
1.8%
Political conditions has drastically impacted the country, in addition to this, the continuing rage between the neighbor countries, resulting the decrease in FDI. Population growth rate has decreased. Showing facilities inapprehension.
18
Base Wage
Rs 6000
Can increase the purchasing power, but will also increase the prices.
Source: Economic Survey of Pakistan (issued, October,2008)
Interpretation: Almost all the indicators are showing that the country is in a severe economic recession now a days, and there are least chances that the investor can have good returns out of stocks. Keeping in view all of the above stated factors, we have decided 5 sectors in which we think that we can have some good returns. We think that our perceived sectors will at least be affected by current economic conditions. Which are discussed in the succeeding pages.
Industry Analysis 1.
Banking Sector:
Particulars
Description Stabilizing stage, for some companies there has been the declining stage, going for mergers and acquisitions with some foreign as well as some domestic banks to ensure their existence in the market. Even an international bank ABN Amro is being acquired by RBS another international bank. MCB is going for merger with Barclays to maintain economic capital limit of 12%, set by state bank of Pakistan.
Sector Life Cycle
Historical performance
In the past few year, banking sector had a boom with an annual growth rate of 20%. Showing robust performance. But from the declaration of insolvency position of Pakistan in May 2008 and grading it to CCC-, a huge amount of F.D.I. has out flowed, now the banking sector’s overall growth is reduced to 11% for this year.
Type of industry
Interest Sensitive industry
Market players
HBL, NIB, MCB, NBP ABP, UBL, Bank Al-Habib, Saudi Pak Bank, Meezan Bank, Bank al Islami
Competitors MCB
of HBL, ABP, UBL, NBP
Competition Nature
Indirect Competition against Each other.
Threats
Bargaining power, Supplier
Industry Life Cycle
Stabilizing Stage
Risk & mitigation
Inflation rate, Interest Rate, Rise in Economic Capital Limit.
Financial Indicators
Profitability in FY07 was 75.86bn, declined by 5.6% as compared to 80.32bn in FY06,Non- performing loans of banks increased to 160bn.
Mergers and Acquisition
Maybank has acquired 25% shares in MCB
Interpretation: Banking industry is most affected by interest hike, foreign direct investment outflow, inflation rate rise and risk of default. Therefore, a significant decrease in growth rate and profitability is addressed.
2.Fertilizer Industry Particulars
Description Expansion Stage, rising farming is resulting to rising needs of fertilizers. Therefore, there have been a rising sales growth trend in the sector.
Sector Life Cycle
Historical performance
Fertilizer industry is fastly growing industry, being aided by government of Pakistan, as it is Associated with agriculture. Pakistan, being an agriculture country will have to support all industries which are directly related to Agriculture to ensure maximum benefits as well as maximum production. Current the sector is growing with almost 35% rate.
Type of industry
Growth industry.
Market players
Dawood Hercules, fauji fertilizers, Engro Chemicals
Competitors Engro
of
Dawood Hercules, fauji fertilizers, Chemicals
Competition Nature
Direct competition
Threats
Supplier (Raw materials), Consumer.(Less purchasing power).
Industry Life Cycle
Expansion stage. Industry is having maximum profits.
Risk & mitigation
Inflation rate, Interest Rate, Environmental problems, political instability.
Financial Indicators
•
overall profitability of the fertiliser sector increased 45%
•
Increase in fertilizers demand by 18%.
Interpretation: Although the industry has shown a positive trend in growth, sales and profits. But due to the economic downfall, there will be a set back for the company is shape of decreasing demand for fertilizers. Subsequently, the company’s stock prices are decreasing down, which may affect the company’s growth rate.
3.Cement Industry Particulars Sector Life Cycle
Historical performance
Description Stabilizing, Domestic shortfall in demand but rising production is offset by exporting more in the foreign market. In the previous years, as there were many developmental projects in the country, raised the need of cements in the country. This gave a chance to the industry to flourish. Now a days, Economic slowdown coupled with aggravating law and order situation has had an adverse impact on local sales growth. However, growth in exports proved as a saving grace for the overall cement dispatches Export market share has also risen to 34.1%. Capacity utilization also declined to 78.9%
Type of industry
Growth industries
Market players
Bestway cements, Lucky Cements, Fauji cements
Competitors of Bestway cements, Fauji Cements Lucky Cements Competition Nature
Direct Competition among the companies
Threats
Supplier (Raw material), Consumer (Decreased DPs)
Industry Life Cycle
Stabilizing Stage
Risk & mitigation
Inflation rate, Interest Rate, Downfall in developmental projects
Financial Indicators
Total cement dispatches during showed a nominal growth of 0.7%, while domestic cement sales , depicting a decline of 15.4%, Profitability of the sector detained at 17%.
Interpretation: The current decrease in cement demand as compared to rising production to utilize optimize capacity, has been offset by exporting to the other countries. This means in case of any set back, company can stay in market due to steps embossed in the foreign market.
4.
Oil Sector(Oil Marketing Companies)
Particulars
Description
Sector Life Cycle
Stabilizing to expansion stage. As there has been more exploration of oil fields in Pakistan by Exploration and production companies, there will be more chances for the oil marketing companies to expand by rising sales through availability of reduced price oil, offsetting importing prices by the domestic production.
Historical performance
In the previous years, OMCs have performed very well, having huge profits, and high growth rate. But the rise in oil prices from 2007 has made their profits to decrease significantly, after the releasing of government subsidy over the petroleum, the profits shrinked to an alarming level, even now most of the OMCs are in loss.
Type of industry
Cyclical industry
Market players
PSO, Shell, Attock Petroleum, Caltex, Askari.
Competitors PSO
of Shell, Attock Cements
Competition Nature
Indirect Competition.
Threats
New entrants, Suppliers (Changing petroleum prices)
Industry Life Cycle
Expansion
Risk & mitigation
Inflation rate, Interest Rate, Rise in oil prices, oil shortages.
Financial Indicators
the oil consumption in the country posted a slight decline of 2.9 percent. 52 percent of the total consumption was met through local refineries and the remaining 48 percent met through imports. Among the companies, PSO occupied the largest slice of 68.2 percent
Interpretation: The rising demand of oil in the market has given the OMCs a chance to again establish themselves on the floor of market. The oil prices crunch had made many companies to abolish their existence. In future it is expected that there will be growth in the sector.
5.Commodities Sector Particulars
Description Expansion stage. There is a rising demand for the commodities, as these are the basic necessities for the people. The rising population at a rate of 1.8 contributes towards more sales of the commodities. And giving a backhand to flourish the industry. The industry has although growth at lesser rate as compared to previous year.
Sector Life Cycle
Historical performance
In the past years the industry has performed well, with ever increasing sales growth. Even now in such an economic set back, the industry is performing well as the commodities are the need of every person.
Type of industry
Growth industry, having high profits.
Market players
Haleeb, Nurpur, Continental foods, Dawn, Bake Parlour
Competitors Nestle
of Haleeb, Nurpur.
Competition Nature
Indirect Competition, healthy competition
Threats
New entrants, Suppliers (Changing petroleum prices), consumer based.
Industry Life Cycle
Expansion
Risk & mitigation
Inflation rate, Interest Rate, Rise in oil prices, decreasing purchasing power of consumers
Financial Indicators
Sales growth by 25%, Gross profit margin of the industry is 24% while the net profit margin is 5%. Reduced Net profit margin is
due to increased debt cost and rising tax rate.
Interpretation: The Commodities sector has although flourished but at a lesser pace as compared to previous year. The rising demand for the commodities might be handy in the development of the sector.
Company Analysis Muslim Commercial Bank
Particulars
Description
Net Revenues
28,235,393 (20% growth)
Profit after Tax
15,266 Million (25.8% increase)
Dividends
7854 Million (98% increase), Per share 12.5
Ratios: Capital Adequacy Ratio
17.88%
Dividend Yield Ratio
0.03
Dividend payout ratio
51.45%
Earning per share
24.3
Interpretation: The company’s overall profitability is showing that it is going with a good growth rate. It future it is expected that the company will give more better profits.
Nestle Pakistan
Particulars
Description
Net Revenues
(Recent) 28,235,393 (26% growth)
Profit after Tax
1,805,212 (27.14% increase)
Dividend per share
10
Ratios: Profit Margin
6.39%
Return on equity
43.90%
Dividend Yield Ratio
51.45%
Dividend payout ratio
82%
Earning per share
39.81
Interpretation: Nestle Pakistan is fastly growing company, with a growth rate of 25%. It is expected that it will give good returns.
Engro Chemicals:
Lucky Cements Interpretation:
Particulars
Description
Net Revenues
(Recent) 23183 Million (37.1% growth)
Profit after Tax
3155 Million (23.9% increase)
Dividend per share
7
Ratios: Profit Margin
14%
Return on equity
20%
Dividend Yield Ratio
51.45%
Dividend payout ratio
54%
Earning per share
17.7
Engro chemicals has given good returns in the current year. It is expected that it will give better profits in future irrespective of current economic spoil.
Pakistan State Oil
Particulars
Description
Net Revenues
290589 Million (40%% growth)
Profit after Tax
2149Million (25% increase)
Dividend per share
18
Ratios: Profit Margin
7.3%
Return on equity
18%
Dividend payout ratio
90%
Earning per share
12.53
Interpretation: PSO is expected to have loss in the current quarter. But it is supposed that its loss will be changed into profits to give good returns.
Engro Chemicals 2001 Period First Quarter
Opening Closing Dividends Cash Stock 70.12 66.32 0 0
Return
R.R
-5.42%
0.95
Act. Risk
(Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
58.93
58.75
0
0
-0.31%
1.00
53.58
49.87
0
0
-6.94%
0.93
52.38 58.75
54.33 57.32
7.5 1.88
0 0.00
18.04% 1.34%
1.18 1.01
11.49%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2002 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
62.52
69.68
0
0
11.46%
1.11
65.90
61.45
0
0
-6.75%
0.93
61.08
62.15
0
0
1.75%
1.02
68.45 64.49
78.10 67.85
7.5 1.88
0 0.00
25.05% 7.88%
1.25 1.08
13.66%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2003 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
87.65
84.67
0
0
-3.40%
0.97
81.30
82.55
0
0
1.54%
1.02
91.47
89.52
0
0
-2.13%
0.98
82.37 85.70
86.30 85.76
8 2.00
0 0.00
14.49% 2.62%
1.14 1.03
8.18%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
1.92%
1.02
2004 Period First Quarter (Avg)
95.28
97.12
0
0
Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
98.52
98.25
0
0
-0.27%
1.00
95.77
93.58
0
0
-2.28%
0.98
100.15 97.43
112.93 100.47
8.5 2.13
0 0.00
21.25% 5.16%
1.21 1.05
10.87%
Return
R.R
Act. Risk
2005 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Opening Closing Dividends Cash Stock 126.33
126.18
0
0
-0.12%
1.00
120.43
115.90
0
0
-3.76%
0.96
118.05
125.80
0
0
6.57%
1.07
154.80 129.90
163.45 132.83
11 2.75
0 0.00
12.69% 3.84%
1.13 1.04
7.29% 7.29%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2006 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
196.62
211.13
0
0
7.38%
1.07
193.00
180.13
3
0
-5.11%
0.95
175.37
178.60
3
0
3.55%
1.04
177.75 185.68
174.38 186.06
3 2.25
0 0.00
-0.21% 1.40%
1.00 1.01
5.34%
Opening Closing Dividends Cash Stock
Return
R.R
Act. Risk
2007 Period First Quarter (Avg) Second Quarter (Avg)
178.62
184.22
0
0
3.14%
1.03
200.18
222.58
2
0
12.19%
1.12
Third Quarter (Avg) Fourth Quarter (Avg) Average
244.17
246.47
2
0
1.76%
1.02
272.05 223.75
274.00 231.82
3 1.75
0 0.00
1.82% 4.73%
1.02 1.05
5.02%
Return
R.R
Act. Risk
2008 Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Average
Opening Closing Dividends Cash Stock 291.52
310.90
0
0
6.65%
1.07
310.65
296.29
2
0
0.96
223.86 275.34
190.40 265.86
2 1.33
0 0.00
-3.98% -14.05 % -0.04
0.86 0.96
10.35%
Interpretation: Engro Pakistan is giving negative returns in securities. The current economic downfall has affected it positions of giving good returns a lot.
Lucky Cements
Period First Quarter
Openi ng 7.52
Closi ng 6.83
2001 Dividen ds Cash 0
Stoc k 0
Retur n
R.R
-9.09
0.91
Act. Risk
(Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
6.78
6.97
0.75
0
6.43
5.65
0
0
6.47
7.25
0
6.80
6.68
0.19
0 0 .00
Closi ng
2002 Dividen ds
Openi ng
Cash First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
9.78
10.83
0.00
9.17
8.55
0.75
8.82
9.33
0.00
9.85
10.33
0.00
9.40
9.76
0.19
Closi ng
2003 Dividen ds
Openi ng
Cash First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
10.18
9.80
0.00
11.55
14.22
0.75
20.60
21.47
0.00
20.70
22.03
0.00
15.76
16.88
0.19
2004
% 13.76 % -12.1 8% 12.11 % 1.15 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
10.73 % 1.45 % 5.86 % 4.91 % 5.74 %
Retur n Stoc k 0 .08 0 .00 0 .00 0 .00 0 .02
-3.03 % 29.58 % 4.21 % 6.44 % 9.30 %
1.14 0.88 1.12 1.01
13.68 %
R.R
Act. Risk
1.11 1.01 1.06 1.05 1.06
3.83 %
R.R
Act. Risk
0.97 1.30 1.04 1.06 1.09
14.11 %
Period
Openi ng
Closi ng
Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
26.13
29.03
0.00
38.70
40.62
0.75
38.83
38.35
0.00
36.75
37.75
0.00
35.10
36.44
0.19
Openi ng
Closi ng
2005 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
43.55
46.17
0.00
43.27
42.27
0.00
45.35
47.65
0.00
64.72
75.22
0.00
49.22
52.83
0.00
Openi ng
Closi ng
2006 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
98.35 110.2 3 102.8 8 88.67 100.0 3
111.1 7 103.9 7 101.9 7
0.00 1.00 0.00
75.03
0.00
98.03
0.25
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
11.10 % 6.89 % -1.24 % 2.72 % 4.87 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
6.01 % -2.31 % 5.07 % 16.22 % 6.25 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
13.03 % -4.78 % -0.89 % -15.3 8% -2.00 %
R.R
Act. Risk
1.11 1.07 0.99 1.03 1.05
5.32 %
R.R
Act. Risk
1.06 0.98 1.05
1.06
7.62 % 7.62 %
R.R
Act. Risk
1.16
1.13 0.95 0.99 0.85 0.98
11.74 %
Period
Openi ng
Closi ng
2007 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
63.98 97.93 126.0 3 126.1 8 103.5 3
70.45 117.4 2 122.8 7 122.2 7 108.2 5
Openi ng
Closi ng
0.00 1.25 0.00 0.00 0.31
Average
120.7 0 130.4 7
128.4 5 116.5 3
77.87 109.6 8
67.84 104.2 7
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2008 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
Retur n
0.00 1.25 0.00 0.42
10.11 % 21.17 % -2.51 % -3.10 % 6.42 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00
6.42 % -9.73 % -12.8 8% -0.05
R.R
Act. Risk
1.10 1.21 0.97 0.97 1.06
11.57 %
R.R
Act. Risk
1.06 0.90 0.87 0.95
10.35 %
Interpretation: At the start of 2008, lucky cements had given good returns, but the economic downfall has affected the company’s returns a lot.
MCB
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
Openi ng
Closin g
2001 Dividend s Cash
Stoc k
30.73
27.75
0.00
0.00
25.52
25.83
0.00
0.00
22.75
21.67
0.00
0.00
22.90
22.37
0.00
0.00
25.48
24.40
0.00
0.00
Openi ng
Closin g
2002 Dividend s Cash
Stoc k
Return
R.R
-9.71 %
0.90
Act. Risk
1.24% -4.76 % -2.33 % -3.89 %
1.01
0.96
4.60%
Return
R.R
Act. Risk
0.95 0.98
22.87
25.13
0.00
0.00
9.91%
1.10
26.82
27.88
0.00
0.00
1.04
26.12
25.45
0.00
0.00
3.98% -2.55 %
30.97 26.69
33.05 27.88
0.00 0.00
0.00 0.00
6.73% 4.52%
1.07 1.05
5.30%
Closin
2003 Dividend
Return
R.R
Act.
Openi
0.97
ng First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
g
s
Risk Cash
Stoc k
33.71
33.68
1.50
0.00
4.35%
1.04
34.20
35.63
0.00
0.00
4.19%
1.04
45.03
47.45
1.25
0.00
8.14%
1.08
44.23 39.29
46.43 40.80
0.00 0.69
1.00 0.25
7.23% 5.98%
1.07 1.06
2.01%
Closin g
2004 Dividend s
Return
R.R
Act. Risk
Openi ng
Cash
Stoc k
51.42
50.52
1.00
0.00
0.19%
1.00
53.90
54.53
0.00
0.00
1.18%
1.01
51.40
51.17
1.50
0.00
2.46%
1.02
50.00 51.68
52.93 52.29
0.00 0.63
1.00 0.25
7.87% 2.93%
1.08 1.03
3.42%
Openi ng
Closin g
2005 Dividend s
Return
R.R
Act. Risk
Cash
Stoc k
67.53
69.30
1.75
0.00
5.21%
1.05
69.08
0.00
0.00
1.50
0.00
1.00
2.00
1.06
0.50
7.38% 19.05 % 11.76 % 10.85 %
1.07
92.46
74.18 105.7 7 156.9 7 101.5 5
Openi ng
Closin g
90.10 143.1 3
2006 Dividend s Cash
Return Stoc
1.19 1.12 1.11
6.11%
R.R
Act. Risk
k First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Average
215.2 7 220.4 8 215.8 0 261.5 0 228.2 6
234.3 5 215.5 7 230.7 0 258.5 3 234.7 9
Openi ng
Closin g
279.0 2 303.2 0 333.7 0 361.8 0 319.4 3
287.2 0 334.6 5 323.0 3 384.1 2 332.2 5
Openi ng
Closin g
408.9 5 368.3 0 280.4 6 352.5 7
414.1 3 338.6 0 252.5 7 335.1 0
2.00
0.00
1.10
0.00
9.79% -1.32 %
2.00 2.00
0.00
7.83%
1.08
1.50
1.50
0.01%
1.00
1.88
0.38
4.08%
1.04
5.55%
Return
R.R
Act. Risk
1.04
2007 Dividend s
0.99
Cash
Stoc k
2.50
0.00
2.50
0.00
2.50
0.00
3.83% 11.20 % -2.45 %
5.00
0.00
7.55%
1.08
3.13 2008 Dividend s
0.00
5.03%
1.05
5.82%
Return
R.R
Act. Risk
1.02
0.00
1.63% -7.25 % -9.94 %
0.00
-0.05
0.95
Cash
Stoc k
1.50
0.00
3.00
0.00
2.25
1.11 0.98
0.93 0.90 6.06%
Interpretation: MCB has given all time good returns. It the current year it had initially given very good return. The economic downfall has somewhat affected the company initially, but
afterwards it stabilize it by again showing positive returns. But being an interest sensitive company, the outflow of F.D.I and interest rate hike again dropped its returns to losses
PSO
Period
Openi ng
Closi ng
2001 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
143.5 3 139.4 5 127.9 7 105.3 3 129.0 7
140.4 2 138.8 7 119.0 0 100.9 3 124.8 0
Openi ng
Closi ng
0.00 0.00 0.00 0.00 0.00
116.6 3 150.0 5 161.1 5
138.2 2 144.3 3 180.2 5
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2002 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
Retur n
0.00 0.00 0.00
-2.17 % -0.42 % -7.01 % -4.18 % -3.44 %
Retur n Stoc k 0 .00 0 .00 0 .00
18.51 % -3.81 % 11.85 %
R.R
Act. Risk
0.98 1.00 0.93 0.96 0.97
2.83 %
R.R
Act. Risk
1.19 0.96 1.12
Fourth Quarter (Avg) Average
Period
189.7 2 154.3 9
Openi ng
194.4 5 164.3 1
Closi ng
0.00 0.00 2003 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
199.7 9 207.3 3 266.4 8 267.4 2 235.2 6
196.9 3 215.8 0 283.2 2 270.7 7 241.6 8
Openi ng
Closi ng
0.00 0.00 0.00 0.00 0.00
Average
Period
289.7 7 275.8 2 256.5 3 258.7 2 270.2 1
288.7 3 266.2 5 254.3 8 270.8 7 270.0 6
Openi ng
Closi ng
0.00 0.00 0.00 0.00 0.00
First Quarter (Avg) Second Quarter
336.6 0 375.0
373.6 8 371.0
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
0.00 0.00
-1.43 % 4.08 % 6.28 % 1.25 % 2.55 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2005 Dividen ds Cash
2.49 % 7.26 %
Retur n
2004 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
0 .00 0 .00
Stoc k 0 .00 0
-0.36 % -3.47 % -0.84 % 4.70 % 0.01 %
1.02 1.07
9.88 %
R.R
Act. Risk
0.99 1.04 1.06 1.01 1.03
3.36 %
R.R
Act. Risk
1.00 0.97 0.99 1.05 1.00
3.41 %
Retur n
R.R
Act. Risk
11.02 % -1.07
1.11 0.99
(Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
0 383.2 2 403.8 3 374.6 6
0 382.8 8 414.4 5 385.5 0
Openi ng
Closi ng
0.00 0.00 0.00 2006 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
416.1 2 339.6 7 333.8 8 304.0 2 348.4 2
401.5 0 318.3 3 334.9 0 300.0 0 338.6 8
Openi ng
Closi ng
0.00 18.00 0.00 6.00 6.00
Average
Period
329.7 3 361.8 5 365.3 2 399.1 7 364.0 2
350.0 8 373.9 8 355.0 2 414.5 2 373.4 0
Openi
Closi
4.00 11.00 5.00 0.00 5.00 2008 Dividen
% -0.09 % 2.63 % 3.12 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2007 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
.00 0 .00 0 .00 0 .00
-3.51 % -0.98 % 0.30 % 0.65 % -0.88 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
7.38 % 6.39 % -1.45 % 3.85 % 4.04 %
Retur
1.00 1.03 1.03
5.49 %
R.R
Act. Risk
0.96 0.99 1.00 1.01 0.99
1.89 %
R.R
Act. Risk
1.07 1.06 0.99 1.04 1.04
3.95 %
R.R
Act.
ng
ng
ds
n
Cash First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Average
447.5 2 492.1 5 356.8 6 432.1 8
489.8 0 453.4 1 311.1 1 418.1 1
6.00
6.00
Stoc k 0 .00 0 .00 0 .00 0 .00
10.79 % -7.87 % -12.8 2% -0.03
Risk
1.11 0.92 0.87 0.97
12.45 %
Interprettion: PSO has given all time good returns. During the current year it had initially given very good return. The economic downfall has somewhat affected the company initially, but afterwards it stabilize it by again showing positive returns. But being a cyclical nature company, the rise and fall in prices of petroleum has greatly affected the current p[performance of PSO. PSO is at 12.2 loss per share in the quarter. But hoping to change losses into profits in the remaining year.
Nestle
Period
Openi ng
Closin g
2001 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
143.0 0 132.3 3 142.6 7
139.6 7 131.3 3 148.6 7
0.00 0.00 0.00
Retur n Stoc k 0 .00 0 .00 0 .00
-2.33 % -0.76 % 4.21 %
R.R
0.98 0.99 1.04
Act. Risk
Fourth Quarter (Avg) Average
Period
159.0 0 144.2 5
158.6 7 144.5 8
Openi ng
Closin g
0.00 0.00
2002 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
167.3 3 183.0 0 189.8 3 199.0 0 184.7 9
174.6 7 187.6 7 190.5 0 207.8 3 190.1 7
Openi ng
Closin g
0.00 0.00 0.00 0.00 0.00
Average
Period First Quarter
205.5 3 216.0 0 266.2 7 274.3 7 240.5 4
Openi ng 436.6
200.3 7 231.6 7 275.6 0 307.0 3 253.6 7
0.00 0.00 0.00 4.00 1.00
Closin g
2004 Dividen ds
471.3
Cash 0.00
-0.21 % 0.23 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2003 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
0 .00 0 .00
4.38 % 2.55 % 0.35 % 4.44 % 2.93 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
Stoc k 0
-2.51 % 7.25 % 3.51 % 13.36 % 5.40 %
1.00 1.00
2.80 %
R.R
Act. Risk
1.04 1.03 1.00 1.04 1.03
1.93 %
R.R
Act. Risk
0.97 1.07 1.04 1.13 1.05
6.66 %
Retur n
R.R
Act. Risk
7.94
1.08
(Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
5 483.0 0 461.6 7 465.0 2 461.5 8
2 482.6 7 455.3 3 485.0 0 473.5 8
Openi ng
Closin g
0.00 0.00 5.00 1.25
2005 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
509.9 8 537.0 8 542.2 2 562.3 3 537.9 0
511.6 7 540.0 8 549.8 8 577.3 3 544.7 4
Openi ng
Closin g
0.00 0.00 0.00 15.00 3.75
Average
697.0 0 990.6 7 1030. 07 930.0 2 911.9 4
771.3 3 1083. 19 975.8 8 965.0 0 948.8 5
0.00 0.00 0.00 5.00 1.25
% -0.07 % -1.37 % 5.37 % 2.97 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2006 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg)
.00 0 .00 0 .00 0 .00 0 .00
0.33 % 0.56 % 1.41 % 5.33 % 1.91 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
10.66 % 9.34 % -5.26 % 4.30 % 4.76 %
1.00 0.99 1.05 1.03
4.42 %
R.R
Act. Risk
1.00 1.01 1.01 1.05 1.02
2.33 %
R.R
Act. Risk
1.11 1.09 0.95 1.04 1.05
7.22 %
Period
Openi ng
Closin g
2007 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg) Fourth Quarter (Avg) Average
Period
1275. 98 1586. 33 1513. 33 1621. 67 1499. 33
Openi ng
1487. 67 1541. 33 1498. 33 1721. 67 1562. 25
Closin g
0.00 0.00 0.00 10.00 2.50
Average
1696. 97 1405. 84 1640. 00 1580. 93
1600. 97 1448. 50 7.00 1524. 74
Stoc k 0 .00 0 .00 0 .00 0 .00 0 .00
2008 Dividen ds Cash
First Quarter (Avg) Second Quarter (Avg) Third Quarter (Avg)
Retur n
7.00
16.59 % -2.84 % -0.99 % 6.78 % 4.89 %
Retur n Stoc k 0 .00 0 .00 0 .00 0 .00
-5.66 % 3.03 % 0.00 % -0.01
R.R
Act. Risk
1.17 0.97 0.99 1.07 1.05
8.85 %
R.R
Act. Risk
0.94 1.03 1.00 0.99
4.41 %
Interpretation: Neslte Pakistan has given all time good returns. Even in the current economic spoil, nestle was initially had a downfall, but being an international company, it has made it stabilized to give expected returns at good rate.
Expected Risk & Return Engro Expected Return S.No 1 2 3
Return (R) 10.00% 5.00% 3.00%
Probability (P) 0.08 0.12 0.15
4
-5.00%
0.25
5 Total
-10.00%
0.4 1
Expected Risk (δA)
R(R-ṜA)2 ̅ṜA=∑RP ṜA 0.008 0.09 0.008464 0.006 0.04 0.001936 0.0045 0.03 0.000650 -0.0 -0.0125 4 0.001406 -0.0 -0.04 6 0.003600 -3.40% δA = √∑(RṜA)2P
(R-ṜA)2P 0.00067712 0.00023232 9.7538E-05 0.00035156 0.00144 0.00279854
5.29%
Interpretation: The expected returns of the company are depicted to be negative with a high risk involvement.
Muslim Commercial Bank Expected Return S.No 1 2 3 4 5 Total
Return (R) 10.00% 8.00% 5.00% 2.00% -5.00%
Expected Risk (δB)
RProbability (P) 0.1 0.12 0.2 0.4 0.18 1
̅ṜB=∑RP 0.01 0.0096 0.01 0.008 -0.009 2.86%
ṜB 0.09 0.07 0.04 0.01 -0.0 4
(R-ṜB)2
(R-ṜB)2P
0.008100 0.004956 0.001600 0.000144
0.00081 0.00059474 0.00032 0.0000576
0.001681
0.00030258 0.00208492
δB = √∑(RṜB)2P
4.57%
Interpretation: MCB is expected to give good returns in future with a least rate of risk associated with it.
Lucky Cements Expected Return S.No 1 2 3
Return (R) 5.00% 3.00% 1.00%
Probability (P) 0.08 0.2 0.3
4
-2.00%
0.27
Expected Risk (δC)
R(R-ṜC)2 ̅ṜC=∑RP ṜC 0.004 0.05 0.002116 0.006 0.02 0.000576 0.003 0.01 0.000049 -0.0 -0.0054 1 0.000213
(R-ṜC)2P 0.00016928 0.0001152 0.0000147 5.7553E-05
Nestle Pakistan Expected Return S.No 1 2 3 4 5 Total
Return (R) 15.00% 10.00% 5.00% 2.00% -2.00%
Expected Risk (δE)
RProbability (P) 0.1 0.15 0.3 0.4 0.05 1
̅ṜE=∑RP 0.015 0.015 0.015 0.008
ṜE 0.14 0.09 0.04 0.01 -0.0 -0.001 2 5.20%
(R-ṜE)2
(R-ṜE)2P
0.018225 0.007225 0.001225 0.000144
0.0018225 0.00108375 0.0003675 0.0000576
0.000361
0.00001805 0.0033494
δE = √∑(RṜE)2P
5.79%
Interpretation: Nestle, being an international company, is expected to give good returns at a highest rate out of the securities with somewhat level of risk associated with it.
Reasons to apply probabilities to the securities
Engro Chemicals
Return (R) 10.00% 5.00% 3.00% -5.00% -10.00%
Probability (P) 0.08 0.12 0.15 0.25 0.4 1
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Engro Chemicals. In the past years, the security’s prices were rising steadily, showing a good growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices. While after that the prices are constantly decreasing. Showing all time negative returns. The last return given by the security in September was. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock prices will go down. There is a rise in interest rate (13.33%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%) depicting that the company is affected highly by the current economic disaster. Positive returns are assumed by having the following assumptions: •
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Muslim Commercial Bank
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Muslim Commercial Bank. In the past years, there was a healthy rise in prices, showing a robust growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices (). While after that the prices had both increasing and decreasing trend showing negative as well as positive returns. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock prices will go down. There is a rise in interest rate (15%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%). The statistics are depicting that the company was affected highly initially but making itself stable in the current economic disaster. The rise in economic capital limit set by the state bank of Pakistan is another issue for the bank. Positive returns are assumed by having the following assumptions: •
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Lucy Cements
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Lucky Cements. In the past years, there was a pretty fair rise in prices, showing a fair growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices (). But the matter does not end here; there was a constant decrease in prices until the prices reached almost the half of the peak value, giving negative returns. The company didn’t give stable positive returns at any period. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock
prices will go down. There is a rise in interest rate (15%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%). The statistics are depicting that the company is affected highly by the current economic disaster. Positive returns are assumed by having the following assumptions: •
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Pakistan State Oil
From May 2008 onwards, there have been a decreasing trend in the security’s prices of Pakistan State Oil. In the past years, there was a healthy rise in prices, showing a robust growth rate. But the first set back occurred in May 2008 when there has been a drastic decrease in the prices ().While after that the prices had decreasing trend until the prices reached almost the half of the peak value, giving negative returns. In the current quarter the company had a heavy loss of -48.88 EPS, depicting that company will not be able to give progress in the current scenario. As now a days there have been a cash outflow of $8.84 billion out of stock market by the foreign investors, so it can be easily interpreted that the stock prices will go down. There is a rise in interest rate (13.33%), although somewhat money appreciation is seen now a days but the discount rate is still very high (10.2%). The statistics are depicting that the company was affected highly by the current economic disaster. Positive returns are assumed by having the following assumptions:
•
There have been a stable interest rate
•
No further inflation rate hike
•
Money appreciation in future
•
IMF loan of $3.5 billion for maintaining the solvency position of the country
•
Foreign reserves has got a nominal rise
Nestle Pakistan
Return (R) 15.00% 10.00% 5.00% 2.00% -2.00%
Probability (P) 0.1 0.15 0.3 0.4 0.05 1
There was a slight deviation in prices of Nestle in May 2008, but the decrease didn’t last for long. And the company, being an international company, grew at a robust rate irrespective of the current economic conditions of the country. So it can be interpreted that the company will give high positive returns in future. As the Company have grown at a steady rate, so somewhat less but constant returns are expected.
Portfolio Risk & Return Let Returns of; Expected risk are: Engro = A -3.40% 5.29% MCB = B 2.86% 4.57% L.C. = C 0.01% 2.51% PSO = D -1.30% 6.86% Nestle = E 5.20% 5.79% Portfolios = {AB,AC,AD,AE,BC,BD,BE,CD,CE, DE} So examining all of the above stated portfolios one by one:
1. Engro with MCB S. no 1 2 3
A 0.1000 0.0500 0.0300
B 0.1000 0.0800 0.0500
4 5 Total
-0.0500 -0.1000 0.0300
0.0200 -0.0500 0.2000
A.B 0.0100 0.0040 0.0015 -0.001 0 0.0050 0.0195
A2 0.0100 0.0025 0.0009
B2 0.0100 0.0064 0.0025
0.0025 0.0100 0.0259
0.0004 0.0025 0.0218
Expected Portfolio Risk (δP1) r1 =
0.9714
δA =
5.29%
δB =
4.57%
δP1 =
0.038%
2. Engro with MCB S. no 1 2 3 4 5 Total
A 0.1000 0.0500 0.0300 -0.0500 -0.1000
C 0.0500 0.0300 0.0100 -0.0200 -0.0500
A.C 0.0050 0.0015 0.0003 0.0010 0.0050 0.0128
A2 0.0100 0.0025 0.0009 0.0025 0.0100 0.0259
C2 0.0025 0.0009 0.0001 0.0004 0.0025 0.0064
A2 0.0100 0.0025 0.0009 0.0025 0.0100 0.0259
D2 0.0100 0.0049 0.0009 0.0025 0.0225 0.0408
Expected Portfolio Risk (δP2) r2 =
0.9945
δA =
5.29%
δC =
2.51%
δP2 =
0.024%
3. Engro with PSO S. no 1 2 3 4 5 Total
A D 10.00% 10.00% 5.00% 7.00% 3.00% 3.00% -5.00% -5.00% -10.00% -15.00% 3.00% 0.00%
Expected Portfolio Risk (δP3) r3 =
0.9847
δA =
5.29%
δD =
6.86%
A.D 0.0100 0.0035 0.0009 0.0025 0.0150 0.0319
δP3 =
0.059%
4. Engro with Nestle S. no 1 2 3
A 10.00% 5.00% 3.00%
E 15.00% 10.00% 5.00%
4 5 Total
-5.00% -10.00% 3.00%
2.00% -2.00% 30.00%
A.E 0.0150 0.0050 0.0015 -0.001 0 0.0020 0.0225
A2 0.0100 0.0025 0.0009
E2 0.0225 0.0100 0.0025
0.0025 0.0100 0.0259
0.0004 0.0004 0.0358
Expected Portfolio Risk (δP4) r4 =
0.9674
δA =
5.29%
δE =
5.79%
δP3 =
0.048%
5. MCB with Lucky Cements S. no 1 2 3
B 10.00% 8.00% 5.00%
C 5.00% 3.00% 1.00%
4 5 Total
2.00% -5.00% 20.00%
-2.00% -5.00% 2.00%
Expected Portfolio Risk (δP5) r5 =
0.9851
δB =
4.57%
δC =
2.51%
δP5 =
0.020%
B.C 0.0050 0.0024 0.0005 -0.000 4 0.0025 0.0100
B2 0.0100 0.0064 0.0025
C2 0.0025 0.0009 0.0001
0.0004 0.0025 0.0218
0.0004 0.0025 0.0064
6. MCB with PSO S. no 1 2 3
B 10.00% 8.00% 5.00%
D 10.00% 7.00% 3.00%
4 5 Total
2.00% -5.00% 20.00%
-5.00% -15.00% 0.00%
B.D 0.0100 0.0056 0.0015 -0.001 0 0.0075 0.0236
B2 0.0100 0.0064 0.0025
D2 0.0100 0.0049 0.0009
0.0004 0.0025 0.0218
0.0025 0.0225 0.0408
B2 0.0100 0.0064 0.0025 0.0004 0.0025 0.0218
E2 0.0225 0.0100 0.0025 0.0004 0.0004 0.0358
Expected Portfolio Risk (δP6) r6 =
0.9946
δB =
4.57%
δD =
6.86%
δP6 =
0.052%
7. MCB with Nestle S. no 1 2 3 4 5 Total
B 10.00% 8.00% 5.00% 2.00% -5.00% 20.00%
E 15.00% 10.00% 5.00% 2.00% -2.00% 30.00%
B.E 0.0150 0.0080 0.0025 0.0004 0.0010 0.0269
Expected Portfolio Risk (δP7) r7 =
0.9507
δB =
4.57%
δE =
5.79%
δP7 =
0.042%
8. Lucky Cements with PSO S. no
C
D
C.D.
C2
D2
1 2 3 4 5 Total
5.00% 3.00% 1.00% -2.00% -5.00% 2.00%
10.00% 7.00% 3.00% -5.00% -15.00% 0.00%
0.0050 0.0021 0.0003 0.0010 0.0075 0.0159
0.0025 0.0009 0.0001 0.0004 0.0025 0.0064
0.0100 0.0049 0.0009 0.0025 0.0225 0.0408
Expected Portfolio Risk (δP8) r8 =
0.9902
δC =
2.51%
δD =
6.86%
δP8 =
0.035%
9. Lucky Cements with Nestle S. no 1 2 3 4 5 Total
C 5.00% 3.00% 1.00% -2.00% -5.00% 2.00%
E 10.00% 7.00% 3.00% -5.00% -15.00% 0.00%
C.E. 0.0050 0.0021 0.0003 0.0010 0.0075 0.0159
C2 0.0025 0.0009 0.0001 0.0004 0.0025 0.0064
E2 0.0100 0.0049 0.0009 0.0025 0.0225 0.0408
D2 0.0025 0.0009 0.0001 0.0004 0.0025
E2 0.0100 0.0049 0.0009 0.0025 0.0225
Expected Portfolio Risk (δP9) r9 =
0.9902
δC =
2.51%
δE =
5.79%
δP9 =
0.027%
10. PSO with Nestle S. no 1 2 3 4 5
D 5.00% 3.00% 1.00% -2.00% -5.00%
E 10.00% 7.00% 3.00% -5.00% -15.00%
D.E. 0.0050 0.0021 0.0003 0.0010 0.0075
Total
2.00%
0.00%
0.0159
0.0064
0.0408
Expected Portfolio Risk (δP10) r10 =
0.9902
δC =
6.86%
δE =
5.79%
δP10 =
0.064%
Risk on A,A B,B C,C D,D E,E
1 1 1 1 1
Return: -0.0136 0.01144 4E-05 -0.0052 0.0208
Total Portfolio Risk & Return w1w1r1.1s1* s1*
w1w2.r1.2s1*.s 2*
w1w3.r1.3s1*. s3*
w1.w4.r1.4.s1*. s4*
w1.5.r1.5.s1*s5 *
w2w1r2.1s2* s1*
w2.w2.r2.2.s2* .s2*
w2.w3.r2.3.s2 *.s3*
w2.w4.r2.4.s2*s 4*
w2.w5r2.5.s2*.s 5*
w3w1r3.1.s3* .s1*
w3.w2.r3.2.s3* s2*
w3w3.r3.33s3 *.s3*
w3.w4.r3.4s3*.s 4*
w3.w5.r3.5.s3*. s5*
w4w1.r4.1s4* .s1*
w4w2r4.2.s4*s 2*
w4.w3.r4.3.s4 *.s3*
w4w4.r4.4.s4.*s 4*
w4.w5.r4.5.s4*. s5*
w5w1.r5.1.s5 *.s1*
w5.w2.r55.2.s5 *.s2*
w5.w3.r5.3s5* .s3*
w5.w4.r5.4.s5*. s4*
w5.w5.r5.5.s5*. s5*
w1=
0.2
s1*=
w2=
0.2
s2*=
w3=
0.2
s3*=
w4=
0.2
s4*=
4.57 % 4.57 % 2.51 % 6.86 %
A,A A,B A,C A,D
0.038 % 0.024 % 0.059 % 0.048 %
B,B B,C B,D B,E
0.052 % 0.042 % 0.035 % 0.027 %
C,D C,E D,D D,E
1 .00 1 .00 1 .00 1 .00
w5=
0.2
s5*=
5.79 % A,E
0.020 % C,C
Portfolio Risk =
1.13%
0.064 % E,E
1 .00
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