Pacific Denims Ltd. IPO Note on

Transcription

1 IPO Snapshot IPO Size (BDT mn) Public Offer (Shares mn) Offer Price (BDT) Face Value (BDT) Premium (BDT) 0.00 Year End June Issue Date of the Prospectus November 13, 2016 Starng Date of Subscripon December 11, 2016 Closing Date of Subscripon December 19, 2016 Sector Use of IPO Proceeds Parculars Amount (BDT mn) Paral Loan Payoff Business Expansion A. Building & Other Civil Works I. Factory Building with Heavy Foundaon (Steel structured one storied building) Ii. Factory Office Building (Three storied building with ten storied foundaon) B. Capital Machinery IPO expenses Total Capital Structure of the Company Parculars Category of Shareholders No. of Shares (mn) No. of ordinary share holdings Texle Implementa on schedule A:er 3 months of receiving fund A:er 24 months of receiving IPO fund Time to me Amount (BDT mn) Holding structure of securies before and a=er the issue % of Holding The inial public offering (IPO) subscripon of Pacific Denims Limited (PDL) is to raise fund worth BDT 750 million. As no eligible investor can apply for more than 10% of the total securies reserved for the other eligible investor, we can apply for at most 3,000,000 shares. Company Overview Pacific denims Ltd. is a denim manufacturing factory incorporated as private limited company on March 20, 2003 and commenced its commercial operaon on April 01, The main acvies of the company are concentrated in manufacturing, dyeing, weaving, & finishing of 100% export oriented denim fabrics and exporng the same. Key Facts 15%, 10%, & 6% increase of sales revenue in FY 2016, 2017, & 2018 respecvely, possessing 5.50% market share, is being expected by PDL through 64% ulizaon of IPO fund for business expansion. Exisng about 50% demand supply gap in home, and the increasing demand & unit price with low labor cost are encouraging the company to upgrade its products quality through new machinery installaon. New instrument will be raised at the rate of 12.06% and 8.72% in FY 2016 and 2017 respecvely. In accordance with the previous performance, expecng an average of 84% COGS may help the company to maintain its gross profit margin at 15% for the upcoming years. Apart from business expansion, BDT 250 mn loan repayment through 33% ulizaon of IPO fund in 2016 will increase NPBT 1.82% and reduce financial expense BDT 43 mn. Average 7% financial expense of revenue will stand at 3.32% upto 2018 which is the result of decrease of current debt/equity rao, 91%, to 29% in The a:er loanrepayment consecuve debt/ equity rao in 2017 and 2018 will be 21% and 14% which will improve NPBT 2% and 1% more in respecve years. Pre-IPO Paid-up Capital Initial Public Offering Year Post-IPO Paid-up Capital , Sales (BDT mn) 1, , , , , Gross Margin (%) Operang Margin (%) Pre IPO Post IPO Pre IPO Post IPO Net Profit Margin (%) Sponsors & Directors 35,000,000 35,000, % 30.97% Asset Turnover (X) Instuonal 30,000, % 26.55% Return on Equity (%) Mutual Fund 7,500, % 6.64% Debt Service Coverage Rao Individual 3,000,000 33,000, % 29.20% NRBs EPS (BDT) 7,500, % 6.64% Total 38,000, ,000, % 100% Debt Equity (X)

2 Average 5.86% net profit margin for the last five years derived from the 3.59% CAGR of revenue, might have subsumed a strong return on equity of 10.96%. Hence, the declining EPS growth rate might be deceigul but behind the scene was 280% stock diluon in Expected 25% revenue growth for the next three years is covertly leading the company to expand the producon capacity and maintain its capacity ulizaon up to 80%. Since the company acknowledges weakness in new product innovaon, the constant 80% capacity ulizaon up to 2018 assuming a huge demand supply gap and simultaneous capacity installaon is very much pedanc. The exisng capacity of PDL is mn Yds which will be raised to mn Yds and mn Yds in FY 2016 and The company has taken more term loan from NCC Bank Foreign Exchange branch amounng of BDT mn within the last six month without paying its term loan, amount BDT 500 mn and 27 mn with Agrani Bank, Brac Bank respecvely within last six month. All the term loans are secured by the personal guarantee of directors of the company, corporate guarantee of pacific group and the pari passu sharing agreement between banks on fixed and floang assets of the company. Lease liabilies decreased by BDT 40 mn in last six months. Total BDT lease amount has been received from IDLC Finance, IIDFC, First Lease Finance & Investment Ltd. 100% export oriented company with only one source of revenue product item, Denims, might expose to Forex risk and Market risk. The company is looking forward to new buyers and suppliers, it exerts low bargaining power of the company as well which is intensified by the low barriers to new entry. The only compeve advantage of the company is cheap customized product. That customizaon might lead to higher cost of producon. The Company is contemplang about sejng a system of hedging on foreign currency transacons in the future. The company, PDL, has its own capve power plant (average 1250 KW), deep tube Well for water (60 cubic meter/hour), connecon with Titas Gas Transmission and Distribuon Company Ltd for gas, and boiler (10 ton/hr). To purify waste water by ETP, produced from manufacturing plant, the company strictly follows rules, guidelines, and direcves from environmental directorate. In case of any disrupon of gejng raw materials, the company has already have a conngency plan. The current supplier s countries are China, UAE, Thailand, Vietnam, Singapore, and Hong Kong. There are no associates, subsidiary and holding company of Pacific Denims Limited. The buyers are Mark & Spancer, Tesco, Zara, H&M, Wal mart and garments Exporters. Burgeoning Denim Industry. As the global denim industry is being expected to reach at USD 64.1 billion by 2020, only 25 denim producing factories in Bangladesh with 11.30% global market share will not be enough to meet this huge demand supply gap. So more and more local and foreign investment and infant companies as well as new buyers are allured to this industry in Bangladesh. The current investment in this sector in Bangladesh is USD 900 million. 70% denim is being produced in Asia and Bangladesh has already taken 11.3% market share of export to US, a:er Mexico and China.

3 Pacific Denims Ltd possesses 3.75% of total market share in Bangladesh. The other major competors possession are as following: Product Segmentaon SL Product Segmentaon Product Type 1. By Fabric Effect 2. By Composion 3. By Color Basic Denim Ring denim CoRon Stretch Denim CoRon Polyster Stretch Denim CoRon Denim Indigo Blue Back Black Sub Denim Cross Slub Denim Tencel Denim CoRon Polyester Denim CoRon Jute Denim Olive Ecru 4. By Weaving 2/1 RHT Broken Twill 3/1 RHT, 3/1 LHT San Summary of Valuaon

4 Peer Comparison ( , 18 months) Pacific Denims Shasha Denims Envoy Texles* Argon Denims A:er IPO SOS (mn) Revenue (BDT mn) 2, , , , Gross profit (BDT mn) , , Gross Margin (%) Operang profit (BDT mn) , Operang Margin (%) Net profit (BDT mn) Net Profit Margin (%) EPS (BDT) Total asset (BDT mn) 2, , , , Total liabilies (BDT mn) 1, , , , Equity (BDT mn) 1, , , , Debt/Equity ROE (%) Long term debt (BDT mn) , Cash & Cash Equivalent (BDT mn) , Producon capacity (Yds mn) i. Export Bill SDL,SGL i. Export sales Ii. Rental Received Ii. Yarn Dyeing & Rewinding Sources of Revenue i. Export Sales Iii. Energy Sales Iv. Fuel Payment Iii. Weaving & Finishing i. Export Sales V. Service charge (Transportaon) Iv. Sample Sales V. Export Incenve 52 weeks price range (BDT) * 1 Year (Sept, 2015)

5 Projected Financial Statement

6 Size of the present issue, with break up (number of securies, descripon, nominal value and issue amount):