I have analysed United Power Development & Generation (UPGD) Ltd. 's financial report to evaluate their stock price. I have also used various business tools to dissect their strategy.

1. Prepared By
Md. Shihabur Rahman

2.  Financial Perspective: Evaluate UPGDCL’s prospective
share price based on both its financial fundamentals
and industry situation.
 Strategic Perspective: Provide an insight of macro-
economic condition, industry situation and current
market position of Power sector and UPGDCL.

3.  Primary Data
 Road show by UPGDCL Representative &
 Interview of financial industry & power sector professional.
 Secondary Data
 Information Memorandum of UPGDCL
 Publicly available financial reports

4.  Sampling Technique: Non probabilistic ,
Snowball Sampling
 Interview Style:
 Depth Interview
 Open-ended questions

5. 1. Capacity Assumption:
Installed capacity = Declared Capacity * 92% (From previous years’ pattern)
Production Capacity = Installed Capacity *90% (During peak production year)
2. Tariff Growth Assumption:
Tariff rate growth will follow the current pattern of 2011-2012 (30%) for next two years.
So for year 2013, 2014 tariff growth will be 30%. For rest four years (2015- 2018) tariff
growth will follow 7% growth.
3. WACC Assumption:
Risk free rate is assumed to be 360 Days’ Treasury bill rate of Bangladesh Bank. Risk
Premium is assumed to be 7%. Tax rate is assumed zero
4. Terminal Value Assumption:
Long-term growth rate of cash flow is assumed to be equal to GDP growth

6.  With WACC 14.44% & GDP 6.3%
 Depending on the optimistic or pessimistic assumption of Long Term
cash flow growth & Tariff growth this share price varies
Share Price WACC GDP
77.52 Tk 14.44% 6.3%
LTG=2% LTG=6.73%
Share Price 56.14 77.52 Tariff
Growth=13.23%
Share Price 44.71 67.20 Extra Ordinary
Tariff
Growth=30%

7.  We have used five methods of relative
valuation:
 Method-1: Net Asset Value (NAV) per share
 Method-2: Historical earnings based value per share
 Method-3: Price based on P/E ratio of similar stocks
 Method-4: Market P/E ratio based fair price
 Method-5: Market P/E ratio based fair price
 The average price of above five methods is Tk.
58.93

8.  With contrast to DCF valuation, share price based on relative valuation
has also been conducted. Net asset value per share 17.67 Taka ,
Historical earnings based value per share is 42 taka , Price based on P/E
ratio of similar stock is 85.27 taka , Market P/E based fair price is 80.51
taka and sector P/E based fair price is 68.57 taka. The average price of
above five methods is Tk. 58.93. Considering 10% discount the bidding
price should be Tk. 53.00 per share.

9.  Current Market Scenario
 UPGD Target : Sell 30,000,000 shares at BDT 100.00 each
Company Latest Closing Price
DESCO 79.4
SUMITPOWER 34.7
POWERGRID 55.3
KPCL 52.3
GBBPOWER 24.8
UPGD 58.91 ~ 77.52
Total Expansion Cost 5,396,383,000
IPO Proceeds 3,000,000,000
Own Financing 2,396,383,000

10.  Before beginning trade UPGD share price is hanging between 58.93 to
77.52 Taka, being moderately optimistic.
 That is to say to say after trading begins we can expect UPGD price rise
more. This is compliant with UPGD expectation of selling each share at
100 Taka to fund their expansion cost.

11.  Political
 Govt encouragement for quick rental and other
 large scale power-plants
 Beneficiary policies for power production plants
 Economic
 Economic Growth
 Gas Price
 Tax rebate for large scale power plants

12.  Social
 Increasing demand of electricity as quality of life
 improves
 Increase in town based population
 Festive nature of urban culture
 Technological
 Development of telecommunication infrastructure
 Industrial development
 Future establishment of nuclear plant
 Discovery of new gas field

13.  Environmental
 Pollution Control
 Deforestation
 Taking up huge amount of cultivable lands
 Legal
 Importing machinery
 Payables
 Contractual agreement

14. New Gas Reserve Found Gas Reserve Decreased
Advancement in
Renewable
Energy Sector
Availability of Gas will ease Power
Production But Newly created
dependability on Renewable Energy
might see Govt policies shift away
from Gas based plants
Gas based plants will fail to continue.
Both Govt & Pvt run power plants will
shift to alternative energy sources as
well as renewable energy sources.
Innovation in
Renewable
Energy Sector is
Stagnant
In lack of renewable energy source ,
Gas based power plants will thrive as
more and more new gas fields are
found
Govt. & Pvt sector investor of power
plant will shift to coal and HFO based
production. Power production as a
whole will hamper.

15.  Power sector seems moderately attractive
 Industry friendly Govt policies, high entry barrier and high capital
expenditure helping the current establishments of the industry to thrive
fast
 Substitute does not even exist in many cases as Bangladesh is yet to
meet its daily demand of power supply.
Forces Score
Buyer Power 2.8
Supplier Power 3
Threat of New Entrants 3.2
Threat of Substitute 2.8
Industry Rivalry 2.8

16. 2.8
3
3.2
2.8
2.8
2.6
2.7
2.8
2.9
3
3.1
3.2
Buyer Power
Supplier Power
Threat of New EntrantsThreat of Substitutes
Industry Rivalry
Scores
Scores

17. Factors Retail Consumer Industrial Consumer
Scale ( Large or
Small)
 Small scale Plants not applicable for
retail consumer
 Small scales power plants for
industrial area
 Privately owned small power plant
for own industry
 Private owned industry buying
from external power plants
Govt Funded or
Private run
 Retail consumers get power supply
from the main grid which is
combination of Govt & Pvt sector
power production
 Industrial Consumers get power
supply from the main grid.
 Special Industrial zones get
power supply from private
sector power plants.
Quick Rental or
Long Term
Establishment
 Quick Rental is for emergency
power solution and comes with a
high tariff rate. Retail consumer
enjoy subsidized tariff rate in case
of quick-rental
 Often when Govt fail to meet
industrial power demand quick-
rental’s come to play. Industrial
consumers do not enjoy subsidized
tariff rate.

18. Strength
•Fixed Consumer
base
•Tariff rate variable
•Gas supply contract
for 15 years
•No tax
•Long project life
Weakness
•Availability of Gas
in future is not
certain
•Expansion
opportunity is low
•Can not sell excess
production to
external consumers
during off-peak
season
Opportunity
•No competitor
inside EPZ area.
•Can utilize Govt
encouragements
like tax-benefits
•Build & Operate
policy allows to
establish plant
facilities inside EPZ
area
Threat
• Scarcity of Gas
supply
•Increasing price of
Gas
• Technological
advance of
Renewable Energy
sector

19. Minimum Effort
Wartsila, Utility
Provider, Competitors
(Summit ,Energypac)
Keep Informed
Dhaka Bank, DBBL,
REB,
BPDB, Individual
Investors
Keep Satisfied
CEPZ, DEPZ,
Regulators,
Key players
GTCL, Titas Gas,
Owners, BEPZA
Interest
Pow
Low High
High

20.  Complying with the first objective mentioned we have valuated
UPGD’s share price in two different method and determined as
77.52 Tk & 58.93 Tk. We conclude given current market scenario
investment in UPGD will be profitable
 According to the second objective, all four layers of business
environment is examined to create an insight of the Power sector
business. We have examined unique patterns of power sector of
Bangladesh and seen that UPGD is enjoying some crucial
advantage over other market players making it and lucrative
business opportunity