CFA Institute Research Challenge Hosted by CFA Society University of Team: Basis Point

University of Dhaka Student Research Telecommunication Sector, Telecommunication Industry (DSE) Grameenphone

Date: 14 November, 2016 Current Market Price: BDT 279.00 (10/11/2016) Recommendation: BUY Ticker: DSE: GP Headquarter: GP House, Bashundhara, Dhaka Target Price: BDT 319

This report is published for educational We issue a BUY recommendation on Grameenphone Limited with a one year purposes. Only by students competing in the target price of BDT 318.98 using the Discounted Cash Flow analysis and a relative CFA Institute Research Challenge. valuation. We expect a total return of 20.8%, comprising of 14.3% of capital gain from its November 10, 2016 closing price of BDT 279.00 and a dividend yield of Table 1: Market Profile 6.4%. Market Profile (November 10, 2016) Grameenphone (DSE:GP) is currently the market leader in the telecommunication sector with a SIM market share of 43% and has the best Closing Price BDT. 279 network coverage, as measured by network sites and spectrum. With an 52 Week BDT.286.00/ BDT. estimated real SIM penetration of 51% (GP estimate) and data penetration of High/Low 224.50 around 28% (own estimate), the current state of demography and increasing Share 1,350.3 Million income within the economy, the growth opportunities in voice traffic is very Outstanding much there and that in data is huge. GP is also currently the least leveraged Market Cap. BDT. 379,434 Million operator in the telco industry with the last stated debt ratio of 21.8% in 2015 Dividend Yield 3.05% ( Current) and this is to not go no more than 25.2% as per our expectation for the next five Beta 1.20 years. GP’s timely investments and the ability to provide the best service to its customers has enabled it to establish a brand name that has enabled them to EV/Revenue 3.88x earn an ARPU as high as BDT 173.04 (as per 2016 own estimate) in one of the EV/EBITDA 7.16x lowest ARPU industries in the world. This has given GP the privilege to Sponsor/Director 90% consistently ensure an EBITDA margin of over 50%, which is not only significantly Public Holdings 2.48% higher than all its other competitors in the Bangladeshi telecommunication Valuation DCF Multiples industry but also the highest among all of ’s 13 subsidiaries, across the Estimated Price BDT. BDT. world. We expect GP to continue with this trend in the near future as well. 302.66 343.50 With a current mobile internet market share of around 40%(GP estimate), the best coverage of and 2G internet and being far ahead in investments in Weight 60% 40% infrastructure (current number of 3G sites is 10254), we expect GP to not only Target Price BDT. 318.98 ensure their share of the increasing pie of data segment, but to further increase Figure 1: Last 5 Year Stock Price Movement it. We expect that growth from the data segment to be GP’s lifeblood which is 400 going to ensure its overall success in the future. 381.9 The -Airtel merger will lead to the industry being more oligopolistic and 350 consolidated, and with significant differences in market share, operators will get 279.1 more market bargaining power. GP will retain its market leadership even after 300 the merger and stand to only benefit from the merger. The efficiency of GP’s executive team and the maintenance of a strong corporate 214.7 250 213.3 governance has been pivotal to GP’s success so far and is likely to propel GP 189.6 further as well. 200 226.8 Basic Indicators of GP Basic Indicators 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E

150 Revenue 102663 104754 113401 124294 135557 144089 154983 167182 143.8 139.9 Profit After Tax 19803 19707 22864 26980 30197 32919 36292 40101 100 EPS ( BDT) 14.7 14.6 16.9 20.0 22.4 24.4 26.9 29.7 EBITDA Margin 53.4% 53.3% 54.2% 55.9% 56.9% 57.8% 58.8% 59.7% (Revenue & PAT are in Millions of BDT) Price Earnings Ratios of GP Current P/E Forward P/E Implied P/E Source: DSE Archive 16.5 14.0 16.0 Figure 2: Cumulative Growth of GP RECENT NEWS GP Appointed Interim CEO (20/10/2016) –Petter-B-Furberg will act as interim 12.0% 10.4% CEO for GP effective from November 1st replacing Rajeev Sethi. Furberg is a 10.0% member of Telenor Group’s executive management team. 7.7% He was also CEO of for 3 years before appointed as interim 8.0% 6.9% CEO of GP. 6.0% 5.4% Q3 Financial Result of GP has been published (19/10/2016) – Revenue is up by 11.2% year on year basis. For July to September EPS was Tk. 4.78 whereas it was 4.0% Tk. 3.07 for July to September, 2015. From January to September EPS was Tk. 12.70 compared to Tk. 10.83 in 2015 for the same period of time. Net Asset Value 2.0% (NAV) was Tk. 21.01 on 30th September, 2016 and NOCFPS was Tk. 24.35 for 0.0% January- September. CAGR in Sales CAGR in Profit BUSINESS DESCRIPTION 2012-2016 2017-2021 Grameenphone Ltd. founded in 1996 as private limited company is the largest mobile operator in Bangladesh in terms of subscriber base, coverage and Source: Team Calculation revenue. The company successfully listed on Dhaka Stock Exchange and Table 2: Valuation Summary Stock Exchange on November 11, 2009. GP’s network is based on GSM standard and it provides service in 900 MHz, 1800 MHz and 2100 MHz

Valuation Summary frequency band under the license granted by BTRC. Grameenphone now covers Valuation Date 10 November, 2016 almost 90% of the total land area of Bangladesh with its 10,068 network sites Methods Weight Price around the country. Telenor Communications AS and Grameen Telecom are the two main sponsor shareholders holding 90% of the total share. General public, DCF 60% BDT 302.66 foreign investors and other institutions hold 2.89%, 2.10% and 5.01% of the total EBITDA Multiple 20% BDT 321.87 share respectively (See Figure 4). According to Q3 2016, Grameenphone has 55 million active subscribers among which 22.9 million are internet user. SIM P/E Multiple 20% BDT 365.04 market share improved to 43.7%. Gross revenue growth is 11.2% and data One Year Target Price 31/12/17 BDT 318.98 revenue experienced a stunning 72.1% growth. Current Market Price 10/11/16 BDT 279.00 GP is expecting data revenue to grow in the future as still a big portion of total population is offline. Currently data service revenue and VAS consist almost 15% One Year Expected Capital Gain 14.3% of total revenue. The industry is a consolidated one with 4 companies (excluding One Year Expected Dividend Yield 6.4% and considering Robi-Airtel Merger) and Grameenphone is clearly the market leader. Real subscriber penetration rate is still low and data user rate is One Year Holding Period Yield 20.8% rising, so there is growth opportunity in the telecom sector. Source: Team Calculation Figure 3: GP NEWS CHART

450 GP NEWS CHART New Chairman of Aggreement 381.9 the Board Appointed 400 with Orascom 350 CRAB Announced Term Loan Credit Rating: AAA 300 Arrangement up to Tk. 11 bn 250 237.3 279.1 200

BDT IN PRICE 150

100 Director Foreign Sold Share 50 Currency Loan Sold 51% USD. 345 M 0 of GPIT

Figure 4: Shareholder Composition Strategy of Grameenphone Grameenphone is the clear market leader in telecom sector. Its business 2.1% 2.48% 5.42% 34.2% strategies revolves around protecting its market share and expanding it. Main strategies of Grameenphone are: Protecting & Expending Market Share Grameenphone holds 43.7% of the total SIM market. GP fiercely protects its market share. To protect its market share and expanding it GP continuously offers new services and products, for example, GP was the first among the telecom companies to offer 24 hours customer care. Recently GP re-launched its mobile wallet service named GPAY. Company also launched MyGP, GP shop and 55.8% GP Music to improve customer experience to retain them. To hold market share Grameen Telecom GP is continuously enhancing its IT infrastructure. Investment to ensure 3G Telenor Communications AS coverage is expected to complete by 2016 and 3G sites are able to provide General Public service with low incremental investment. Foreign Capturing the Growth of Data Usage Other Institutions Reported internet penetration rate is 39% by BTRC but actual number can be significantly low. Internet usage is growing at very high rate. 3G coverage Source: DSE expansion and decrease in Smartphone price are the reasons behind data usage growth. Currently 40% of the total mobile internet user use GP. Grameenphone Figure 5: GP Revenue (In Billions) is capturing the data market with its better internet services and infrastructure. In 2016 GP took major 3G expansion project. Current number of 3G site is 10254 BDT 180 and these 3G sites are also able to provide 4G service with low incremental BDT 160 investment. We can expect a further increase in internet usage with the BDT 140 introduction of 4G (See Figure 6: Revenue Composition of GP). BDT 120 Operational Efficiency Grameenphone is currently experiencing economies of scale in its infrastructure BDT 100 investment. Company’s Non-Regulatory Capex to Sales ratio is the lowest among BDT 80 top three mobile operators. 2010-2015 Cumulative EBITDA margin is 52.3% for BDT 60 GP whereas the same is 35% and 35.6% for Robi and . Operating cash BDT 40 flow of GP is very high compared to its peers. BDT 20

BDT 104.75 BDT 113.40 BDT 124.29 BDT 135.56 BDT 144.09 BDT 154.98 BDT 167.18 MANAGEMENT AND GOVERNANCE BDT Executive Team Grameenphone executive team is a major resource and one of the key growth factors of Grameenphone. The team is very experienced and educationally very Source: Team Calculation qualified. Most members of the executive team have experience working for Figure 6: Revenue Composition of GP (For Data different multinational companies in different nations across different cultures. See Appendix M) Though the Chairman and the CEO are appointed recently, both of them has ample experience working in this region (See Appendix G). 100% Corporate Governance 90% 16% 20% Corporate governance standard in GP is very high (See Appendix I). Corporate 80% 25% 30% 35% 38% 41% governance system of GP is adequately transparent, accountable and 70% 60% responsible. The strength of corporate governance can be seen in the following 50% areas: 40% Board formation and Structure: Directors of the board are selected in the 70% 30% 66% 61% Annual General Meeting. GP’s board is consists of 10 directors. Among the board 57% 53% 50% 20% 47% members two are independent directors. The directors are informed about 10% financial position of Grameenphone timely and every director has access to all 0% information within the company. According to the Articles of Association (AoA) of GP the company requires board to meet at least four times a year to maintain good corporate governance whereas the board met ten times last year. The role and responsibility of CEO and the chairman is clearly established and GP also adopted “Rules of Procedure for Chief Executive Officer.” (See Appendix H) Voice Traffic Interconnection Ethics and Behavior: GP adopted a Code of Conduct that provides guidance on Data and Vas Customer Equipment conducting business, interacting with community, business partners, Other Revenue government and general workplace behavior. Company has policy relating to trading GP’s share by its employees, directors and other insider. According to Source: Team Calculation Figure 7: Mobile Phone Subscriber in this policy insiders’ are not allowed to trade GP’s share while they possess some Bangladesh unpublished price sensitive data. Communication with Shareholders: GP has clear policy regarding Grameenphone Banglalink communication with the shareholders. According to this policy, shareholders will Robi Airtel be informed in timely manner about current development of the business. Teletalk Citycell INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING 100% Revenue Drivers Telecommunication industry revenue is mainly driven by voice call and data 80% 20.1 25.0 24.7 28.3 23.3 usage. According to Company Presentation, the industry is yet to penetrate its 60% 29.0 25.7 27.7 29.9 32.9 49% real subscribers. Demand for data growth is dependent on the availabilty of 40% 3G enabled handset and network. Strong Econonic Growth: The economy has experienced 7.1% GDP growth 20% 39.8 45.3 49.7 55.0 54.5 despite all politial turmoil and hartal during the fiscal year 2015-2016. 0% Government aims to reach middle income country status by 2021. In order to 2012 2013 2014 2015 2016 fulfill this target, government takes various polices to increase FDI and plans to create 100 economic zones by the next 15 years. The potential rise in living Source: BTRC standard and income level will work as a major driver to boost the telecommunication industry (See Figure 9 GDP Growth and Internet Penetration Figure 8: Mobile Internet User (In Millions) Rate And Appendix: J Macro-economic factors). Increasing Popularity of Facebook: The popularity of this social network is so high that people in rural area mean internet as using facebook.Almost 80% of internet users of Bangladesh are on facebook. (source: The Daily Star; May 17, 58.4 2015). The everincreasing popularity of this social network becomes a boon for 50.7 the telecom industry of Bangladesh. (See Figure 8: Mobile Internet User) Demographics: Transformation from agrirarian economy by urbanization and 39.3 increasing female participation rate in workforce also contribute to the 34.7 economic boost and eventually result in the expansion of middle class society. 27.8 New generation is much more technology and internet oriented. All these demographic aspect becomes base for strong and persistent growth for telecommunication industry. Industry Supply 2012 2013 2014 2015 2016 Telecommunication industry suppliers are mainly various equipment suppliers.

Source: BTRC The all the players of telecom industry of Bangladesh except Teletalk which is owned by govt. are the subsidiary companies of some some parents companies Figure 9: GDP Growth and Internet Penetration which run their businesses through out Asia. So, naturally the telecom industry Rate has good supply chain network from which they buy their equipment based on 40% 7.5% medium to long term contract (Figure 7: Mobile Phone Subscriber in 38.21% Bangladesh). Telecommunication Industry : Industry of 6 companies namely GP, Banglalink, 35% 7.1% Robi, Airtel, Teletalk and Citycell. Except Teletalk, all others are overseas companies. GP is the market leader with having almost 43.7% market share 30% 6.7% accoding to their third quater released information.Banglalink is apparently in 6.52% 7.05% the second position grapsing approximately 24.61% market share. Robi, Airtel, Teletalk and citycell have approximately 19.75%, 6.75%, 2.48%, 0.12% market 25% 6.3% share respectively according to the BTRC published information on August, 2016.

GDP Growth Rate The industry has penetrated 51% of ots real subscribers (Figure 10). 20% 5.9% Recent Trends: The very crucial fact that is expected to shape the industry Internet Penetration Rate Internet Penetration significantly is the approval of Robi-Airtel merger. After the merger, they will be 18.95% the second largest company in terms of market share of approximately 27% and 15% 5.5% will be the highest spectrum owning company with a total of 39.8 MHz falling 2012 2013 2014 2015 2016 Internet Penetration rate behind GP. But it is expected that the regulators might withdraw the ban on joining the auction for 1800 MHz for those who already have more than 20 MHz GDP Growth Rate spectrum. The upcoming mobile number portabilty fact is expected to be a

Source: Based on BTRC website and world bank crucial event for the industry. website published data

Table 3: KPI Comparison Competitive positioning KPI Comparison GP Robi BL Though the industry is apparently an oligopilistic market as the 3 major players Service(2010-2015 Revenue Cumulative) (Billion) 539.2 240.9 231.8 comparising 90% of market share, the industry is very much compeitive (See Service Revenue CAGR 6.5% 12.5% 8.3% Appendix: L). The rivalry among the existing players is so high that it becomes EBITDA Margin 52.3% 35% 35.6% one of the lowest ARPU market in the world. GP’s APPM is BDT 0.64 (including Non-Regulatory Capex 81.3 84.8 74 data revenue) which is 18% higher than its nearest competitor. The burgaining Non(Billion) Regulatory 14.5% 34.9% 30.2% power of buyer and price war among the operators make the market tough for OCFCapex/ (Billion)Revenue 212.2 -0.6 13.3 companies to earn positive margin except GP which consistantly makes profit Service Revenue Market 53.3% 22.9% 23.8% being the only mobile telecom company enlisted in country’s capital market. Source:Share Company Presentation GP’s competitive position in the market lies in their strong capital base, largest Figure 10: Market share of telecommunication infrastrucural investment, largest network coverage with quality network (99% Industry area 2G coverage, 80%+ area 3G coverage), efficient management, quality customer care service which helped them to graps loyal customer and thus they Airtel, Teletalk Robi, became the market leader sharply (See Appendix: N). Though there is six , 2.5% 6.7% 19.8% operators in the market, it will become 3 afer the Robi-Airtel merger as Citycell is almost dying out and Teletalk is government’s operator. INVESTMENT SUMMARY GP, 46.3% We issue a BUY recommendation on Grameenphone with a one year target price of BDT 318.98 using the Discounted Cash Flow analysis and a relative valuation. Banglal We expect a total return of 20.8%, comprising of 14.3% of capital gain from its Citycell ink, November 10, 2016 closing price of BDT 279.00 and a dividend yield of 6.4%. This 24.6% , 0.1% valuation is supported by numerous merits, as stated below: A healthy and growing economy Bangladesh is one of the most populous countries in the world, ranked 8th in the Source: BTRC; updated August, 2016 world and with a young demography supported by an Increasing per capita Figure 11: Porter’s Five Forces Analysis of GP income. With an estimated real SIM penetration of 51% and data penetration of (See Appendix: L) around 28 %( Our Estimation, See Appendix P) and the current state of demography, increasing income the growth opportunities in both voice traffic Intensity of Competitive and data are still very much there. GP is currently the market leader with a SIM Rivalry market share of 43% with the best network coverage (supported by the highest 5 4 number of sites and spectrum), we expect that GP will not only ensure its market Bargaining 3 Threat of share but further increase it. power of 2 New Entry Capturing the data boom Suppliers 1 0 Mobile data volume has seen a phenomenal increase in the industry since 2012 and has increased by almost 18 times and such a growth is expected to likely to Burgaining Threat of follow. The fall in prices of smart phones and the expansion of 3G coverage have Power of Substitution Buyers been cited by the company CFO as the two main reasons behind the data boom. With a current mobile internet market share of around 40%, the best coverage of 3G and 2G internet and being far ahead in investments in infrastructure (current number of 3G sites is 10254), we expect GP to not only ensure their Source: Team Calculation share of the increasing pie of data segment, but to further increase it. Figure 21: Economic Value Added (In Billions) Consolidation of the telecommunication industry after Robi-Airtel merger (See Appendix V) The Robi-Airtel merger will lead to the industry being more oligopolistic and consolidated, and with significant differences in market share, operators will get BDT 80.00 40% more market bargaining power and market share. The introduction of mobile BDT 60.00 30% number portability will give GP to further bank on the opportunity to increase BDT 40.00 20% voice traffic revenue- people who used both Robi and Airtel SIMs may switch one of the SIMs to GP. BDT 20.00 10% Strong Financial Condition BDT 0.00 0% The efficiency of GP’s executive team and the maintenance of a strong corporate governance has been pivotal to GP’s success so far and is likely to propel GP

2012 2013 2014 2015 2016 further as well. 2017 E 2018 E 2019 E 2020 E 2021 E GP is currently the least leveraged operator in the telco industry with the last NOI NOI EVA stated debt ratio of 21.8% in 2015 (See Financial Analysis) and this is to not go EVA WACC ROI no more than 25.2% as per our expectation for the next five years. GP has also ROI WACC

Source: Team Calculation Figure 12: Growth in Sales & Net Income consistently been able to generate significantly positive Free Cash Flow to the Firm for the last five years and this is expected to go as high as BDT 40,473 million 40.0% in 2021. GP has also been consistently the most profitable operator not only in 34.7% the industry but among all of Telenor Group’s 12 other subsidiaries (See 30.0% Appendix C) because of its highest market share and best network, generating 10.5% 20.0% EBITDA margin of above 50% and this is likely to continue in the near future as well. In one of the lowest ARPU industries in the world, GP currently has an ARPU 10.0% of BDT 173.04 (as per 2016 estimate) and we expect this to further increase to 0.0% 7.9% as much as BDT 220.61 in 2021.

-10.0% Financial Analysis -16.0% -20.0% This section elaborates the results that is derived from the analysis of historical and forecasted financial data. A detailed analysis and interpretation has been showed with different aspects of the firm like leverage, profitability, and activity Growth in Sales and so on. Liquidity Ratio 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E Cash Position Indicator 0.04x 0.03x 0.03x 0.03x 0.03x 0.03x 0.03x 0.03x Growth in Net Income Current Ratio 0.24x 0.18x 0.18x 0.19x 0.19x 0.19x 0.19x 0.19x Quick Ratio 0.24x 0.17x 0.18x 0.18x 0.18x 0.18x 0.18x 0.18x Leverage Ratio Debt Ratio 21.5% 21.8% 21.3% 19.8% 25.2% 24.3% 23.1% 22.8% Source: Team Calculation Debt to Equity Ratio 89.8% 94.5% 90.6% 83.2% 112.9% 106.0% 98.0% 98.0% Financial Leverage Ratio 4.3x 4.2x 4.3x 4.2x 4.3x 4.4x 4.3x 4.3x Interest Coverage Ratio 14.5x 16.4x 15.1x 13.8x 15.6x 11.9x 12.9x 14.2x Figure 13: SWOT Analysis (See Appendix: N) Profitability Ratio Return on Equity (ROE) 63.4% 63.6% 70.7% 76.5% 79.8% 81.0% 83.0% 86.9% Return on Assets (ROA) 16.1% 16.0% 17.6% 19.5% 19.6% 20.0% 20.9% 21.9% Earnings Per Share 14.67 14.59 16.93 19.98 22.36 24.38 26.88 29.70 Strenght EBITDA Margin 53.4% 53.3% 54.2% 55.9% 56.9% 57.8% 58.8% 59.7% 30 Operating Profit Margin 31.7% 31.5% 31.2% 33.6% 34.6% 35.5% 36.5% 37.4% Net Profit Margin 19.3% 18.8% 20.2% 21.7% 22.3% 22.8% 23.4% 24.0% 20 Activity Ratio Expense Control Efficiency 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 Asset Utilization Ratio 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 10 Account Receivable Turnover 9.5x 12.3x 12.7x 11.3x 11.3x 11.2x 11.2x 11.3x Weaknes Shareholders’’ Ratios Threat 0 Dividend Payout Ratio 109.0% 96.0% 87.8% 90.0% 90.0% 90.0% 90.0% 95.0% s DPS 16.0 14.0 14.9 18.0 20.1 21.9 24.2 28.2 FCF per Share 12.6 22.7 19.0 17.6 21.8 23.0 25.2 29.2 Exclusive Ratios for GP ARPU 165.0 155.0 173.4 189.0 203.3 202.6 214.7 220.6 Market Share 42.8% 42.4% 46% 46% 45% 45% 44% 44% (For data source see Appendix B) Opportun Financial Stability ities According to the CFO of GP, their firm operates at below optimal level of debt and the statement is supported by the low debt ratio of the firm over the years (less than 25%). Additionally, a financial leverage of only 4times approximately is maintained all over the years by GP. Furthermore, the high interest coverage Source: Team Calculation ratio (always more than 11 times) maintained by GP is also an indication of the company’s financial stability (See Figure 14). Figure 14: Financial Leverage and Interest Profitability growth powered by 4G Coverage Ratio AS it is expected that 4G will be launched by GP in 2018, there will be a major upward trend in the profitability of the company. There is a major increase in all 20 13.82 14.23 of the profitability ratios. A huge increase in the ROE is evidential as the profit 15 8.60 from operation increases whereas the firm also does not issue new shares to 10 finance the additional fund required for the launch of 4G services (See Figure 15, 4.23 4.27 5 3.05 16, 17). High Payouts 0 The average of last 3 years’ payout was 111% and we also identify the forecasted ratios as approximately 90% which is quite relevant following the historical trend. There remains a question regarding the fact that GP being a firm with such Financial Leverage Ratio a high growth rate how do rationalize such high payouts. However, there Interest Coverage Ratio justifications can be low debt ratio and low cost of debt. Market Capture Source: Team Calculation By being the first to launch 4G services in the country GP can extend its market share up to 46%. And again, all the other competitors will also launch 4G as time

passes, GP may lose their competitive edge and that is why we forecast the

market share remaining at 44% after 2019. Moreover the ARPU of the firm is also showing an improving trend not only due to the growth in turnover but also Figure 15: ROE and ROA over the years subsequent growth in subscribers. 100.00% 86.86% DU PONT Analysis of ROE 76.45% The 5-factor ROE decomposition shows that the increasing trend of ROE will be 80.00% 47.09% supported by the increasing operating profit margin and asset turnover ratio. The most satisfying fact is that the forecasted growth of ROE is backed by the 60.00% growth of profit margin and asset turnover not the financial leverage or equity 21.87% multiplier (For Data See Appendix V). 40.00% 17.56% 19.50%

20.00% DU PONT Analysis 0.00% 6.00x 100.0% 2012 2013 2014 2015 2016 2017 E 2018 E E 2019 2020 E 2021 E Return on Equity (ROE) 4.00x 50.0% Return on Assets (ROA) 2.00x

Source: Team Calculation Figure 16: EPS over the years 0.00x 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 BDT BDT E E E E E 12.96 BDT 29.70 Asset Turnover Ratio or Asset Use Efficiency BDT 30 19.98 BDT 25 Financial Leverage Ratio BDT 20 Net Profit Margin BDT 15 BDT 10 ROE BDT 5 BDT 0 Financial leverage shows an increasing trend during 2018 and 2019 as it is expected that GP will launch 4G in 2018 where they will need a huge capital flow. 2012 2013 2014 2015

2016 The impact of tax burden ratio and interest burden ratio remains low (Tax 2017 E 2018 E

2019 E burden ratio remains fixed and interest burden ratio increases by only .06% over 2020 E 2021 E the forecasted period) as tax rate is expected to be fixed at 40% in the forecasted period and basing on the historical analysis, interest expense is also expected to Source: Team Calculation maintain a very consistent trend. Figure 17: ARPU over the years Growing Trend From both the historical and forecasted analysis, it is clear that GP is considerably BDT 189.0 BDT 220.6 to have a growing prospect in the upcoming years. The major justification of this BDT 191.0 BDT 250 BDT 173.4 is the launching of 4G within 2018 that will convey them a competitive BDT 200 advantage. Moreover, the digital Bangladesh concept, growing economy and still BDT 150 the very high unpenetrated portion of the market (only 51% penetrated) will BDT 100 contribute towards the growth of the firm. BDT 50 Cost of Equity BDT 0 As we have already calculated the FCFE, now cost of equity is required to determine the value of equity of GP. For this, the determination of Risk free rate, 2012 2013 2014 2015 2016 beta of GP and Market risk premium of GP’s share is required. 2017 E 2018 E 2019 E

2020 E Capital market is depressed in last few years in our country and so, market return 2021 E is negative considering last 5 years (2011-2016). We followed Adjusted Risk Premium approach to determine cost of equity as CAPM would mislead us in this Source: Team Calculation case. The risk free rate is 6.15 which is the cut off yield of 5 years Treasury bond. Table 4: Cost of Equity We added 5.25 % equity market risk premium (for details see Appendix S). The Risk Free Rate (Cut off yield of 5 6.15% equity beta for Grameenphone is 1.20. So, Cost of equity is: Year Treasury Bond 13.10.2016) 6.15% + (1.2*5.25%) = 6.15%+6.30%=12.45% Equity Beta 1.2 Terminal Growth Rate Equity Market Risk Premium 5.25% The worldwide practice of valuation shows a conservative approach to Equity Risk Premium of GP 6.30% determine terminal growth rate ranges from 3% to 4% whereas an optimistic Cost of Equity 12.45% approach is to keep it from 5% to 6%. For any company, it is very unusual to grow at a rate of 5% to 6% perpetually. The long-term growth rate of GDP is impossible Table 5: Valuation Results to think as 5% to 6%. Thus, we fix the terminal growth rate at 3.5% considering Valuation Results the unstable political and economic condition of Bangladesh. Valuation Date 10 November, 2016 Valuation Methods Weight Price From Table 5 we can see two valuation methods used here to reach the target DCF 60% BDT 302.66 price of BDT 318.98 of GP are: EBITDA Multiple 20% BDT 321.87 a. Discounted Cash Flow Method P/E Multiple 20% BDT 365.04 b. Relative Valuation One Year Target Price 31/12/17 BDT 318.98 The intrinsic value that we reached through these two different two methods One Year Holding Period Yield 20.8% has been multiplied by specific rates such as 60% weight on DCF (as we Recommendation Buy calculated the multiples here by ourselves using assumptions and historical data Figure 18: Book Value per Share we attach more confidence on it) and 40% weight on relative valuation. Discounted Cash Flow Method In the DCF method, Free Cash Flow to equity has been calculated and then BDT 31.2 BDT 33.6 BDT 34.8 BDT

BDT 29.0 BDT discounted it at the rate of cost of equity. The price reached through DCF is equal BDT 27.0 BDT BDT 26.3 BDT BDT 25.2 BDT to BDT 302.66. We have discounted the FCFE of the years from 2018 to 2021 at BDT 23.2 BDT BDT 23.1 BDT BDT 22.7 BDT the cost of equity, added the terminal value of the firm and also added the FCFE of the year 2017. After that we have divided this summation by the total number of the shares outstanding and got the intrinsic value of the share as per DCF (for details see Appendix T). At first, the EBIT of the firm increases over the forecasted time following the historical trend. The CAPEX of the firm highly increased in 2018 due to the investment inevitable for launching 4G. Thus we have also get a growing trend in the FCFE of the firm, a very significant positive indicator to the existing and potential investors of GP. All the financial values to determine the FCFE is derived Source: Team Calculation from the forecasted income statement and balance sheet (attached in Appendix Figure 19: Capex, Sales and Capex to Sales ratio B). BDT 200.00 46.2% 32.6% 50% CAPEX BDT 150.00 40% GP took major 3G rollout project in 2016. According to company, these 3G sites 30% are also able to provide 4G services with low incremental investment in the BDT 100.00 20% future. We are expecting a major increase in capex in late 2017 or early 2018 BDT 50.00 10% because spectrum auction for the unsold portion of 1800 and 2100 MHz bands BDT 0.00 0% is likely to happen at that time. Right now mobile companies are allowed to use 1800 MHz and 900MHz bands to provide 2G service and 2100 MHz band for 3G

2012 2013 2014 2015 2016 service. Government now considering technology neutrality so that operator can 2017 E 2018 E 2019 E 2020 E 2021 E use any spectrum for any type of telecom services. This technology neutrality Sales initiative will make the auction more competitive. The floor price for per MHz CAPEX spectrum is $25 million but technology neutrality, if implement, which is likely to happen, can drive the price as high as $30 million. From 2019 to 2021 we are CAPEX/ SALES expecting stable capital expenditure for developing infrastructure (for details see Appendix R and Figure 19). Source: Team Calculation Relative Valuation Table 6: Relative Valuation Using two multiples presented in Table 6; P/E and EV/EBITDA; of 11 different (All Values in Millions of BDT) telecom companies within the region (See Appendix: U), we have tried to Relative Valuation determine the relative value of GP’s share. Price Based on EV/EBITDA Multiple Based on the median of the multiples of the 11 companies we get 2 different EV/EBITDA 7.2x price and then we take the average price of these two multiples as the target EBITDA of GP 69,514.6 EV of GP 497,724.4 price. As we are calculating the target price on 31 December, 2017 we have used Equity Value 434,620.6 the multiples of 2017 (See Appendix: U). These two multiples have been given No of common 1350.3 equal weights and thus we got a price of BDT 343.5. Pricestock Outstanding BDT 321.87 Book value per share Price Based on P/E Multiple The book value per share of GP as calculated by dividing the total equity by the P/E 18.3x number of shares outstanding. The historical data shows that GP has the EPS 20.0 outstanding shares fixed at 1350.3 million. We forecast a growing a trend of GP Price BDT 365.0 as a result of market share capturing through 4G initiation and DATA growth. For Method Price Weight Product this reason, holding the outstanding shares constant, an increasing book value EV/EBITDA 321.9 50% 160.9 P/E 365.0 50% 182.5 per share is very much relevant (See Figure 18). Weighted Price BDT 343.5 Table 7: Sensitivity of target price with cost of MONTE CARLO SIMULATION AND SENSITIVITY OF TARGET equity (ke) and terminal growth rate (g) 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% PRICE ke/g 10.00% 358.3 370.9 385.4 402.3 422.2 446.2 The sensitivity of target price with cost of equity and terminal growth rate is 11.00% 332.9 342.3 353.0 365.2 379.3 395.8 shown in Table 7. The Monte Carlo Simulation has been done here to determine

12.00% 312.8 320.1 328.3 337.5 347.9 359.8 the sensitivity of the target price with some factors such as risk free rate, terminal growth rate, equity market risk premium and equity beta. The 12.45% 305.1 311.7 319.0 327.1 336.3 346.7 sensitivity chart (See Figure 20) attached here shows the impact of the factors in 13.00% 296.6 302.4 308.8 315.9 323.8 332.8 the target price. Here, we find that risk free rate and equity market risk premium 14.00% 283.2 287.9 293.0 298.7 304.9 311.8 has a strong negative impact whereas terminal growth has significant positive 15.00% 272.0 275.8 280.0 284.6 289.6 295.0 impact on price. Equity beta has minimum impact. Source: Team Calculation Assumptions: 1. Beta: Triangular distribution with parameters: Minimum 1.00, Likeliest Figure 20: Sensitivity Chart 1.20, Maximum 1.40 2. Equity Market Risk Premium: Uniform distribution with parameters: Minimum 3.5%, Maximum 6% 3. Risk Free Rate: Uniform distribution with parameters: Minimum 4%, Maximum 7.5% 4. Terminal Growth Rate: Uniform distribution with parameters: Minimum 2%, Maximum 6% Valuation: Here we have tried to figure out the different possibilities of the target price of GP on 31 December, 2017 and thereby the respective recommendations basing on the target price. So the findings are as follows: There is 88.62% probability of going the price BDT 307 and thereby indicating a buy recommendation. BDT 307 is the price that crosses the current market price of BDT 279 by more than 10%. There is 10.93% probability of being the price between BDT 279 and BDT 307 which leads to a hold recommendation. This is the range that shows the current market price of BDT 279 plus 10% of it. There is only .45% probability of being the price less than the current Source: Team Calculation by Crystal Ball market price of BDT 279 and leading towards a sell recommendation.

This is a rare chance and very insignificant.

Thus we can strongly recommend GP as a buy recommendation in the current Figure 22: Risk Matrix context of the company’s fundamentals and the growing economy of the country MR (for details see Appendix W). Determining probability of target price range

RR 1 OR 1 ER 1

Probability OR 2

ER 2 RR 2 Others BDT 279>PRICEBDT 307 BUY DECISION WITH A PRICE< BDT 279 SELL CERTAINITY OF DECISION CERTAINITY 88.62% 0.45%

Impact

Source: Team Calculation Source: Team Calculation by Crystal Ball

INVESTMENT RISKS Market Risk 1. Merger of major competitors: The merger of Robi-Airtel is now the hot topic of the industry which can have a game changing effect on Grameen Phone. There may come a threat of price cut leading towards deteriorating margins and

Figure 23: Fall of Telecom Customer turnover. In addition, the competitive edge that the company have stated as the most reliable network may also face a warning which is explained by the following spectrum allocation that the merged entity will have. However, we think GP can still maintain its leading position in the market through focusing on continuous development in network structure and customer loyalty. Regulatory Risk 1. Biometric Registration: Due to the biometric verification, already till the February of 2016, the telecom companies have already faced a loss of 1.97% of active connections which equals to 26.35 lakhs of connections. This is also a major impediment to the new SIM card sale. The market leader GP as a result lost 3.5 lakh of its subscribers during this period (See Figure 23). 2. Higher Tax Imposition: Bangladesh ranked on top as the high taxing region on Source: The Daily Star on March 15, 2016 telecom industry. Currently, GP is on 40% income tax bracket. In addition to this, Figure 24: ARPU of last 5 years 5% supplementary duty on mobile phone services has also a negative impact BDT 250 on the revenue and market share growth. Operational Risk BDT 200 1. Declining trust of customers: Nowadays, all the telecom companies in Bangladesh are facing regulatory obligations to disclose customers’ personal BDT 150 data according to the demand of government. We have already seen a question BDT 214 of protection from a huge number of customers regarding personal protection BDT 191

BDT 100 BDT 176 and security during the biometric registration. However, GP can turn this BDT 165

BDT 155 challenge into a way of differentiation by offering improved safety features BDT 50 taking into consideration the agreement with the policy makers. 2. Technological Risk: Customers’ preferences are highly driven by new BDT 0 innovations and technology. For example, currently we are noticing customers 2011 2012 2013 2014 2015 inclining to broadband services due to lower cost and higher convenience through Wi-Fi router. Although they are not authorized to provide broadband Source: Annual Report 2015 services, according to them they keep the intention to step up in this segment in Figure 25: EPS of last 5 years future. Economic Risk BDT 20 1. Political Risk: Very recently in the year of 2015, GP has experienced the bitter part of the unstable political condition in Bangladesh. Due to election, strike and BDT 15 political turmoil, in 2015 the company face negative growth in some of the most important indicators like ARPU, EPS and Market Share. BDT 10 Market Share of last 5 years 43.0% BDT 14.7 BDT 14.6

BDT 5 BDT 14.0 BDT 13.0 BDT 10.9 BDT 0 42.0% 42.8% 2011 2012 2013 2014 2015 42.7% 41.0% 42.4% Source: Annual Report 2015 41.2% 41.4% Figure 26: Risk Management Approach of GP 40.0% 2011 2012 2013 2014 2015 Source: Annual Report 2015 Objective Setting 2. Devaluation of Currency: Devaluation of the local currency that is BDT can possess risk for GP. For instance their capital expenditure will soar up in terms of BDT while importing equipment at lower amount of Dollars. On the other hand, Event Control & Identifica- consecutive devaluation will lead to decrease in the purchasing power. SWAPS Monitoring tion Risk and Forward Rate Agreements are possible solutions to safeguard against such Management risk. Process Other Risks Contingencies: The most recent news regarding GP that will obviously draw the attention of every rational and sophisticated investor is that GP is fined TK. 30 Risk Risk crore for providing broadband services illegally through Go Broadband. In Response Assesment addition to this, the firm has some other lawsuits ongoing named as BTRC audit, SIM tax on replacement SIMs, VAT rebate on 2G license renewal fee and Claim Source: Annual Report 2014 for VAT based on C&AG audit which amount to a contingent liability of BDT 52.29 billion. Disclosures Ownership and material conflicts of interest: The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the content or publication of this report. Receipt of compensation: Compensation of the author(s) of this report is not based on investment banking revenue. Position as a officer or director: The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company. Market making: The author(s) does not act as a market maker in the subject company’s securities. Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with CFA Society of Buffalo and Rochester, CFA Institute or the CFA Institute Research Challenge with regard to this company’s stock.

APPENDIX

APPENDIX A GLOSSARY

AoA (Articles of Association): The articles of association is a document that specifies the regulations for a company's operations, and they define the company's purpose and lay out how tasks are to be accomplished within the organization, including the process for appointing directors and how financial records will be handled. (Source: investopedia.com) ARPU (Average Revenue per user): The average revenue per unit (ARPU) is a measure of the revenue generated per user or unit. Average revenue per unit allows for the analysis of a company's revenue generation and growth at the per-unit level, which can help investors to identify which products are high or low revenue-generators. (Source: investopedia.com) CAPEX (Capital Expenditure): Capital expenditure, or Capex, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm. This type of outlay is also made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building, to purchasing a piece of equipment, or building a brand-new factory. (Source: investopedia.com) CAGR (Compound Annual Growth Rate): The compound annual growth rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer than one year. To calculate compound annual growth rate, divide the value of an investment at the end of the period in question by its value at the beginning of that period, raise the result to the power of one divided by the period length, and subtract one from the subsequent result. (Source: investopedia.com) EBITDA (Earnings before Interest, Taxes, Depreciation & Amortization): EBITDA is one indicator of a company's financial performance and is used as a proxy for the earning potential of a business, although doing so has its drawbacks. Further, EBITDA strips out the cost of debt capital and its tax effects by adding back interest and taxes to earnings. (Source: investopedia.com) EVA (Economic Value Added): Economic value added (EVA) is a measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis. EVA can also be referred to as economic profit, and it attempts to capture the true economic profit of a company. This measure was devised by Stern Stewart and Co. (source: investopedia.com) FCFE (Free Cash flow to Equity): It is a measure of how much cash can be paid to the equity shareholders of a company after all expenses, reinvestment and debt are paid. FCFE is a measure of equity capital usage. It is calculated as FCFE = Net Income - Net Capital Expenditure - Change in Net Working Capital + New Debt - Debt Repayment. (Source: investopedia.com) FCFF (Free Cash flow to the Firm): It is a measure of financial performance that expresses the net amount of cash that is generated for a firm after expenses, taxes and changes in net working capital and investments are deducted. FCFF is essentially a measurement of a company's profitability after all expenses and reinvestments. It's one of the many benchmarks used to compare and analyze financial health. (Source: investopedia.com) Mobile number portability: Mobile number portability (MNP) enables mobile telephone users to retain their mobile telephone numbers when changing from one mobile network carrier to another (source: Wikipedia.com) Technology neutrality: Use of any spectrum for any kind of telecom service (source: gibsondunn.com)

APPENDIX B FORECASTED FINANCIAL STATEMENTS AND ASSUMPTIONS (All Values in Millions of BDT) Historical Income Statement Projected Income Statement Particulars 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E

Revenue 91,920.4 96,624.2 102,663.4 104,754.4 113,400.7 124,294.2 135,556.6 144,089.5 154,983.1 167,181.5

Operating expenses

Cost of material and traffic charges - 6,106.67 - 8,395.31 - 9,591.88 - 10,693.58 - 10,472.77 - 10,967.35 - 11,961.12 - 12,714.03 - 13,675.25 - 14,751.60

Salaries and personnel cost -7,045.5 -7,062.2 -6,455.3 -6,373.3 -8,541.6 -8,670.2 -9,455.8 -10,051.0 -10,810.9 -11,661.8

Operation and maintenance -3,549.7 -5,023.4 -5,070.6 -4,419.1 -4,234.3 -5,457.1 -5,951.5 -6,326.2 -6,804.4 -7,340.0

Sales, marketing and commissions -13,352.5 -14,446.5 -13,200.7 -12,913.4 -11,637.4 -11,981.3 -11,555.2 -10,675.7 -9,754.5 -8,657.9 Revenue sharing, spectrum charges and license fees -7,571.6 -7,571.3 -8,082.2 -8,255.6 -9,011.0 -9,887.0 -10,782.8 -11,461.6 -12,328.1 -13,298.4

Other operating (expenses)/income, net -5,442.6 -5,587.5 -5,710.0 -6,128.1 -7,612.0 -8,030.2 -8,981.5 -9,784.6 -10,780.1 -11,904.5

Depreciation and amortization -15,176.9 -15,339.0 -17,656.7 -19,007.7 -20,753.7 -21,386.2 -23,324.0 -24,792.2 -26,666.6 -28,765.5

Total Operating Expenses -58,245.4 - 63,425.3 -65,767.3 -67,790.7 -72,262.7 -76,379.3 - 82,012.1 -85,805.4 - 90,819.9 - 96,379.7

Operating Profit 33,675.1 33,198.9 36,896.1 36,963.7 41,137.9 47,914.9 53,544.5 58,284.1 64,163.1 70,801.8

Non-Operating Expenses/ Income

Share of profit of associate 30.3 125.0 15.1 -338.1 -32.5 - 35.4 -37.6 -40.5 -43.7

Gain on sale of shares in GPIT 1,024.9 .0 .0 .0 .0 .0

Finance expense/(income), net -3,306.2 -2,595.0 -2,307.0 -1,940.7 -2,652.5 -3,162.4 -3,448.9 -3,666.0 -3,943.2 -4,253.5

Foreign exchange (gain)/loss -175.4 1,192.9 140.9 -115.7 -92.1 245.9 268.2 285.1 306.6 330.8

Total Non-Operating Expenses -3,481.6 -346.9 -2,041.1 -2,041.3 -3,082.6 -2,948.9 -3,216.1 -3,418.5 -3,677.0 -3,966.4

Profit Before Tax 30,193.4 32,852.1 34,855.0 34,922.4 38,055.3 44,966.0 50,328.4 54,865.5 60,486.2 66,835.4

Income tax expense -12,688.6 -18,150.5 -15,051.7 -15,215.5 -15,191.4 -17,986.4 -20,131.4 -21,946.2 -24,194.5 -26,734.2

Profit After Tax 17,504.8 14,701.6 19,803.3 19,706.9 22,863.9 26,979.6 30,197.1 32,919.3 36,291.7 40,101.2

Other comprehensive income

Remeasurement of defined benefit plan - 1,444.6 181.6 - 303.0 - 330.5 - 351.3 - 377.8 - 407.6

Related taxes 577.9 .0 .0 .0 .0 .0

Total Other Comprehensive Income - 866.79 181.57 - 303.02 - 330.48 - 351.28 - 377.84 - 407.58

Total comprehensive income for the year 17,504.8 14,701.6 19,803.3 18,840.1 23,045.4 26,676.6 29,866.6 32,568.0 35,913.9 39,693.7

Assumptions: 1. As all of the operating expenses are mainly related with the operations of the business and highly dependent on the firm's turnover, so we have forecasted them as a percentage of revenue. The percentage or ratio has been calculate through determining the average ratio of the respective items to revenue for the last 5 years. 2. Share of profit of associate represents Grameenphone share of Accenture Communications Infrastructure Solutions Ltd. Over the years its performance is not very satisfactory and so do we expect in the future also. Thus, the average negative proportion of it to sales has been used with no doubt. 3. As gain on sale shares in GPIT is an unusual and unsustainable item existing in only 2013, we forecast not to have such an in future. 4. As we see a very consistent relationship between net finance expense and income with revenue for the last 5 years, we have forecasted it basing on the average historical ratio of net finance expense or income to sales. 5. As no detail data is found, we simply forecast foreign exchange gain or loss as the proportion of revenue taking account the average of last 5 years. 6. GP's earnings are taxed at the rate of 40%. 7. We have forecasted premeasurement of defined benefit plan basing on the average historical ratio of it to sales 8. As related taxes is an unusual and unsustainable item existing in only 2015, we forecast not to have such an in future. (All Values in Millions of BDT)

Particulars Historical Balance Sheet Projected Balance Sheet

ASSETS 2011 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E

Non-current assets

Property, plant and BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT equipment, net 69,461.9 69,584.9 69,922.7 70,306.6 74,204.5 81,732.7 88,420.5 95,714.4 103,467.3 111,806.4 120,801.9

Intangible assets, net 7,021.9 34,075.1 47,734.2 44,774.2 41,045.5 41,603.2 41,585.1 55,140.7 54,237.0 53,333.3 52,429.6

Investment in associate 570.5 695.5 710.6 609.5 609.5 609.5 609.5 609.5 609.5

Other non-current assets 31.5 4,561.0 6,190.4 6,190.4 6,190.4 6,190.4 6,190.4 6,190.4

Total non-current assets 76,483.9 103,660.0 118,227.4 115,807.9 120,521.8 130,135.7 136,805.5 157,655.0 164,504.2 171,939.6 180,031.3

Current assets

Inventories 354.0 416.9 560.0 387.5 435.3 506.4 555.0 605.3 643.4 692.1 746.5 Trade and other receivables 23,830.3 9,879.5 11,809.7 9,717.6 7,339.4 10,452.9 11,457.0 12,495.2 13,281.7 14,285.8 15,410.2

Short-term investment 181.9 143.7 78.3 Cash and cash equivalents 8,054.6 3,565.2 4,545.3 4,759.9 4,153.1 3,975.9 4,357.8 4,752.7 5,051.9 5,433.8 5,861.5

Total current assets 32420.8 14005.3 16993.2 14864.9 11927.8 14935.2 16369.9 17853.2 18977.0 20411.7 22018.3 BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT Total Assets 108,904.7 117,665.4 135,220.6 130,672.8 132,449.6 145,070.9 153,175.4 175,508.1 183,481.2 192,351.3 202,049.6

EQUITY AND LIABILITIES

Shareholders' equity

Share capital 13503.0 13503.0 13503.0 13503.0 13503.0 13503.0 13503.0 13503.0 13503.0 13503.0 13503.0

Share premium 7,840.2 7,840.2 7,840.2 7,840.2 7,840.2 7,840.2 7,840.2 7,840.2 7,840.2 7,840.2 7,840.2

Capital reserve 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.4 Deposit from shareholders 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9

General reserve 2,139.7 2,139.7

Retained earnings 15,383.6 11,958.7 9,781.0 10,005.0 9,265.7 12,731.8 15,126.7 17,816.0 20,756.6 24,007.9 25,605.4

Non-controlling interest .0 .0

Total Equity 38882.9 35458.0 31140.6 31364.5 30625.3 34091.3 36486.3 39175.5 42116.2 45367.5 46965.0

Non-current liabilities

Finance lease obligation 5019.8 5019.8 5310.9 5277.6 5207.1 5127.3 5075.4 5013.3 4951.2 4889.1 4826.9

Loans and borrowings* 11,665.2 24,003.7 18,964.2 16,339.7 16,961.3 29,307.2 28,254.9 26,568.2 26,628.6

Deferred tax liabilities 10,243.0 9,275.5 7,820.6 7,993.4 7,910.6 6,774.6 6,210.0 5,602.4 4,994.9 4,387.4 3,779.9

Employee benefits 1,444.6 1,202.3 1,317.8 1,437.2 1,527.6 1,643.1 1,772.4 Other non-current liabilities 3,289.7 4,852.3 703.3 631.4 672.5 644.1 628.7 615.0 601.4 587.7 574.0

Total non-current liabilities 18552.5 19147.6 25500.1 37906.2 34199.1 30088.0 30193.1 41975.1 40329.9 38075.5 37581.9

Current liabilities Trade and other payables 32,305.1 35,644.7 40,368.5 20,780.8 22,575.3 30,546.1 33,480.5 36,514.2 38,812.6 41,747.0 45,032.8

Provisions 14,303.9 14,077.9 15,442.7 15,747.0 16,316.5 16,885.9 17,455.3 18,024.7

Loans and borrowings 8,195.0 7,700.0 4,147.6 9,975.6 14,548.1 13,407.8 14,905.9 16,404.1 17,902.3 19,400.5

Current tax payable 17,806.3 17,897.5 23,463.7 19,629.3 19,785.7 17,638.1 20,883.2 23,373.6 25,480.7 28,091.1 31,039.8

Other current liabilities 1,357.8 1,322.6 7,047.8 2,540.7 1,210.7 2,716.6 2,977.5 3,247.3 3,451.7 3,712.7 4,004.9

Total current liabilities 51469.3 63059.8 78580.0 61402.1 67625.2 80891.6 86496.0 94357.5 101035.1 108908.3 117502.7 BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT Total Equity and Liabilities 108,904.7 117,665.4 135,220.6 130,672.8 132,449.6 145,070.9 153,175.4 175,508.1 183,481.2 192,351.3 202,049.6 Assumptions: 1. PPE has been calculated as the median of CAPEX to Sales ratio equaling to 22.59% of last 5 years for the projected years.

2. For 2017 Intangibles have been taken as the geometric mean of the last 5 years. After that in 2018, as w expect 4G to be launched, we forecast a new investment in intangibles equaling to 10% of sales. In the following years, we just reduced the amortization from the beginning balance. 3. We predict Investment in associate as fixed over time because we do not find any particular trend in this kind of asset and we rarely find any relation with the future growth of the firm and this asset. 4. We predict other non-current assets as fixed over time as a large part of this asset includes Input Vat Claim which is considerably an unsustainable item. 5. Inventories and Trade Receivables grow according to the growth of revenue as these are dependent on revenue. 6. As there were no STM investment in last 3 years, we predict it not to have such also in future 7. As the revenue of GP increases, it will have more money as cash. For this reason, we assume that cash Grows according to the growth rate of revenue. 8. The historical data shows that all these items; share capital, share premium, capital reserve, deposit from shareholders remained fixed over time and this is also expected to be continued further. 9. As there were no general reserve in last 4 years, we predict not to have any such also in future 10. Retained Earnings is calculated as follows: RE (Beg Bal.)+Comprehensive Income - Dividend 11. As there were no Non-controlling Interest in last 4 years, we predict not to have any such also in future 12. Finance Lease obligation has been forecasted using the trend analysis for the last 4 years, It seems very rational to have a decreasing trend as GP has not recently entered into any finance lease contract after 2007 13. Long term borrowing is considered as the Plug Variable; Calculated as Beg Bal. + External Fund Needed 14. Deferred tax liabilities is forecasted using the last 5 years' value's trend analysis as it is difficult to calculate the tax payable of GP which is depending on the tax calculation approach undertaken by govt. 15. Employee benefits grows according to the growth rate of revenue as we expect GP to increase employee benefits with the growth of the firm. 16. As we do not get any material public detail regarding other non-current liabilities and these are not also tagged with revenue, we forecast it basing on the trend analysis of last 5 years. 17. Trade and payables grows according to the growth of revenue as trade payables are related to turnovers. 18. Provision is forecasted using the trend analysis of the data for last 3 years as there is no static relation between provision and revenue. 19. Loans and borrowings is forecasted using the trend analysis for last 5 years data as we could not reach exact detail dat 20. Current tax payable is forecasted to grow by the growth rate of tax expense. 21. Other current liabilities mainly include accruals for profit sharing plan and payable for bills pay receipts which are mostly tagged with revenue and so we forecast this item to grow according to the growth of revenue.

APPENDIX C: EBITDA MARGIN OF TELENOR GROUP IN DIFFERENT COUNTRIES EBITDA Margin % 2012 2013 2014 2015 2016 (annualized) Norway 41.7 41.9 41.4 40.7 42.2 Denmark 19.4 18.1 11.7 7.1 10.4 Sweden 24.2 29.4 29.4 28.7 31.5 Bulgaria Nm 31.7 38.2 38.5 38.6 Hungary 31.9 33.8 31.6 30.3 31.9 Montenegro & 38.5 38.9 37.3 34.8 34.8 Serbia Thailand () 29.8 31.4 34.7 31.7 33.6 Malaysia (digi) 45.9 45.0 45.1 43.5 45.0 Bangladesh (GP) 53.1 51.0 53.1 53.3 54.4 Pakistan 38.1 37.4 36.3 40.5 41.8 India Nm nm nm nm nm Myanmar Nm nm nm 37.6 44.0

nm=not mentioned Reason India's nm Negative EBITDA Bulgaria & Myanmar's nm Non-existent at that time

APPENDIX D: MARKET PENETRATION POSSIBILITIES Voice Traffic Penetration Growth Opportunity: The current population of Bangladesh is 162 million. It is the 8th most populous country. The pollution is growing at 2% rate but estimated real subscriber penetration is only 51%. So growth opportunity in voice traffic still exists. According to latest financial result (Q3, 2016), voice traffic experienced positive growth of 6.6% year on year basis. According to GSMA research, 21 million new users will be added to existing user base by 2020. Only 51% penetration rate and future subscriber increase will drive up voice traffic. Airtel and Robi merger will also help Grameenphone to increase their voice traffic revenue in near future because less competition will give higher pricing power to Grameenphone. Introduction of Mobile number portability is also an opportunity for GP. Previously, people who used both Robi and Airtel SIMs may switch one of the SIM to GP. Data Service Growth Opportunity: Growth in data services revenue mainly depends on 3G coverage, growth in Smartphone penetration, growth in mobile data user and usage. According to BTRC data, mobile internet penetration rate is only 39%, so in future the penetration will increase. Smartphone user is growing at the rate of 15%-20%. Currently, 20% of the total subscriber use Smart phone in 2015 (annual report). Introduction of 4G will increase Smartphone user further. Mobile Financial Market: The mobile financial market promises growth potential in the future but unpredictability around the final regulation would affect Grameenphone future strategy and actions. The company has strong intention to participate in MFS space because MFM is lucrative sector to enter. APPENDIX E: BOARD COMMITTEE OF GP Audit Committee Title Human Resource Committee Title Dr. Jamaluddin Ahmed FCA Chairman Hans Martin Hoegh Henrichsen Chairman Tore Johnsen Member M Shahjahan Member M Shahjahan Member Mohammed Shariful Islam Member Hossain Sadat Secretary Hossain Sadat Secretary

Treasury Committee Title Health, Safety, Security & Environment Title M Shahjahan Chairman Committee Hans Martin Hoegh Henrichsen Chairman Pal Stette Member M Shahjahan Member Dilip Pal Member Mohammed Shariful Islam Member Imdadul Haque Secretary Hasanur Rahman Rakib Secretary

APPENDIX F: INSIDER HOLDINGS AND COMMUNICATION WITH SHAREHOLDERS Insider Holdings Name Position Market Value % of Share 6/11/2016 Mr. Hossain Sadat 376 BDT. 104,904 0.00% Mr. Hasan Faisal 195 BDT. 54,405 0.00% Source: Annual Report 2015 Communication with Shareholders: Type of Disclosure Description Continuous Continuous disclosure is the primary method of informing shareholders. disclosure Periodic disclosure This disclosure involves quarterly and yearly financial result. Event based Event based disclosure depends on the happening of specific events. Company published it through stock disclosure exchange and press release. All type of disclosure are made available to the public through company website.

APPENDIX G: KEY EXECUTIVES Executive Title History with GP Description Petter-B-Furburg Interim CEO Newly appointed Served as CEO of Telenor Myanmar for 3 years. He also Joined: November 1st, performed many executive roles in Asia Pacific and 2016 replacing Rajeev European region. Sethi. Dilip Pal CFO CFO since September, He has 25 years of experience in financial service, 2014. engineering and telecom sector. Before joining GP he worked in Vodafone India as Executive Vice President. Also served in executive position in Tata Tinplate, Coca-Cola India. He is a Chartered Accountant and also a Cost Accountant. Medhat El CTO CTO since October, 2014 He has 20 years of experience in telecom sector. Before Husseiny joining GP he was CTO of Orascom Telecom Algeria and a member of Vimepelcom Group Leadership Team. He has expertise in operation management, corporate strategy, contract management and many other areas of telecom sector. Yasir Azman CMO CMO since June, 2015 He has experience of working in many countries and across many cultures. He was the Head of Distribution and eBusiness of Telenor for across all Telenor operations before joining GP. He worked in as EVP also. He played a major role in setting Grameenphone’s sales and distribution organization. Mohammed CHRO CHRO since September, He works extensively in recruitment process and talent Shariful Islam 2015. 8 years working management of Grameenphone. He is also instructor at experience with State University of Bangladesh and East West University. He Grameenphone. has a MBA from University of Texas. Mahmud CCAO CCAO since March, 2010. Mr. Mahmud Hossain worked with various Hoassain telecommunication companies in his long career. He is B.Sc in EEE from BUET and has MBA from Institute of Business Administration. Nehal Ahmed Head of Working as Head of Before joining as head of communication he was director Communications Communications since, marketing of Grameenphone. He also has experience 2015 working with Qubee, Bacardi, Mars and BAT.

Erlend Prestgard Head of Strategy Head of Strategy since He was the director in the strategy team of the Telenor ASA September, 2013 prior joining GP. He was also CCO and CFO of various TV and music streaming companies.

Erwan Gelebart Head of Mobile Head of Mobile Financial He was Mobile Financial Service Director for Telenor Group Financials Services services since January, prior joining Grameenphone. He also worked for 2016 Madagascar and Orange Mali before joining Telenor. He has a MBA from Asian Institute of Technology

Naser Fazley Head of Customer Joined Grameenphone He has 18 years of experience in sales. He joined GP as head Azam Experience and April, 2006. of trade marketing. He managed Retail channel Service Appointed as Head of Management Function, Retail Channel Management and Customer Experience and Trade Marketing Function. He Started his career as Territory Service in July, 2015 Officer in British American Tobacco Bangladesh. Kazi Mahboob Head of Head of Transformation He was Senior Management Consultant at Deloitte UK. He Hassan Transformation Since February, 2016 worked in many sectors including Telecom, Consumer Business, Oil & Gas and Financial Service. He has a MBA degree from University of Oxford. He is also an ACCA.

Hossain Sadat Company Company Secretary since He worked for many multinational companies including Secretary, Director July, 2010. Shell Oil & Gas KPMG Bangladesh and Claim Energy PLC. He and Head of Director and Head of is Chartered Secretary by profession. Regulatory Affairs. Regulatory Affairs since February, 2014.

Source: Company Website APPENDIX H: BOARD MEMBERS Member Independent Career Background Tenure Christopher Adam Laska No Newly appointed chairman. Appointed on 29th September, Newly 2016 replacing sigve Brekke. Previously he was the CEO of Appointed for 5 years. After that he joined Telenor Asia Office as Senior Vice President of Board of Governance and Partnership Relations. M Shahjahan No Appointed to the board committee on June, 2006. Mr. M 10 Years Shahjahan is also the chairman of Treasury Committee. He is also acts as the board of directors of several companies that works in various field including welfare, education, fields of health etc. He is a Chartered Accountant. Tore Johnsen No Mr. Johnsen is part of board of director since December, 3 Years 2013. He is also acting as Senior Vice President at Telenor Group and was CEO of Grameenphone from 2011 to 2013. He joined Telenor Group in 1974. Md. Ashraful Hassan No He is Managing Director of Grameen Telecom, Grameen 7 Years Distribution Ltd., Grameen Fabrics & Fashion Ltd. and Grameen Knitwear Ltd. he was appointed to the board on January, 2010. He has experienced in different sectors and very knowledgeable in sales channels and product sourcing. Hans Martin Hoegh No He is a board of director since January, 2014 and chairman 3 Years Henrichsen of Company’s Human Resources Committee. After Joining Telenor in 2000 he held different senior positions of the company. He is currently Senior Vice President in Telenor Asia. Hakon Bruaset Kjol No Mr. Hakon Joined Telenor Group in 1995. Currently he is 5 Years the Senior Vice President and Head of Corporate Affairs for Asia of Telenor Group. He joined Grameenphone’s Board Director in September, 2011. Parveen Mahmud No She is the Managing Director of Grameen Telecom Trust. 4 Years She was appointed to the board in October, 2012. She is a Chartered Accountant and the first female President of ICAB. Apart from Grameenphone She serves in various board. Oivind Burdal No Mr. Burdal appointed to the board of director in May, 2016. Newly He joined Legal department of Telenor ASA in 2004 and in Appointed 2015 he was appointed as Senior Vice President ,Head of 4 Months Legal in Telenor Myanmar Ltd. Prof. (Dr.) Jamilur Reza Yes Pro. Dr. Jamilur Rahman Chowdhury was Appointed as Newly Chowdhury Independent director on August 28, 2016. appointed 2 Months Rokia Afzal Rahman Yes Ms Rokia Afzal was former adviser to the Caretaker 4 Years Government of Bangladesh and a leading woman entrepreneur. She is the Vice President of International Chamber of Commerce- ICC Bangladesh. She was appointed to the board of directors in December, 2012. Source Company Website Grameenphone fulfills BSEC requirement regarding constitution of Board of Directors but only 20% (2 out of 10) of the Board of Directors is Independent which is the minimum requirement. However no member from the executive team is part of Board of Directors. This is the sign that the Board is fairly independent. APPENDIX I: CORPORATE GOVERNANCE 5 criteria are chosen to analyze the strength of Grameenphone’s corporate governance:

Key

1 Very low threat to Shareholders 2 Low threat to Shareholders 3 Moderate threat to Shareholders 4 High Threat to Shareholders

5 Very High threat to Shareholders

Board of Directors-2 Current structure of Board of Directors fulfills BSEC requirements of minimum number of independent directors. No member of executive management is part of Board of Directors. Only one member of Board of Director is serving for 10years and another board member was Ex-CEO of Grameenphone. Otherwise, the board is fairly independent. Disclosures and Transparency- 1 Financial reporting procedure is strong and clear. Financial report is produced in accordance with International/ Bangladesh Financial Reporting Standards (IFRS/BFRS). GP has clear policy regarding communication with shareholders. Grameenphone quarterly publishes its abridge unaudited financial results and annually publishes its annual financial results. Investor relationship site of GP is very good. All annual reports and financial results are available to all public on timely basis on its website. Executive Management-1 The executive management team of Grameenphone is very experienced and qualified. Executive team consists of both native and foreign members. Most members of the executive team have experience working across different culture. Employee Code of Conduct is adopted by GP that guides employees about their relation status with related parties. Insiders are not allowed to trade GP’s share based on price sensitive information. Rights and Obligations of Shareholders-1 One vote per ordinary share is followed by Grameenphone. Shareholders elect board of director in AGM. GP has also a dedicated number and share office to answer any queries relating to the shareholdings. Audit Committee-1 Audit committee is appointed annually in AGM. The chairman of Audit Committee is an independent director. Audit committee activities are reported to the shareholders. Score: 1.2/5 Criteria Risk Board Structure Low Shareholders Right Very Low Executive Management Very Low Audit Committee Very Low Disclosure and Transparency Very low Grameenphone Rating Very Low

APPENDIX J: MACROECONOMIC FACTORS There is a deep relation with the macro economic variables and the financial condition of the target company Grameenphone. This is the reason to go through an inspection of the core macro-economic variables that can convey an impact on the financial variables of GP. We forecast a growing in the upcoming years. The GDP of the country is thought of increasing although in a decreasing rate but it must increase in the forecasted period. It is very natural that a country cannot maintain a very high growth rate of more than 7% for a longer period.

GDP Growth rate and GDP 10.00% BDT 300.00 BDT 200.00 5.00% BDT 100.00 0.00% BDT .00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 E E E E E E

GDP in Billion GDP Growth Rate

Inflation, GDP deflator (Annual %) 10.00%

5.00%

0.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 E2018 E2019 E2020 E2021 E

Inflation, GDP deflator (Annual %)

The unemployment rate is predicted to decrease in the following years from 4.43% to 4.38%. This is a very good indicator for a telecom company like GP. As more people are employed, the more the expenditure of the country and the more the mobile user. on the other hand, the forecasting also shows that the disposable income of people are going to increase 74.86 million from 58.74 million. This is quite relevant as the country is going to be the middle-income country within 2021. If this happen, GP can expect higher revenue growth and market penetration. Unemployment Rate( Total %) 5.50%

5.00%

4.50%

4.00%

3.50% 2007 2008 2009 2010 2011 2012 2013 2014 2015 E 2016 E 2017 E 2018 E 2019 E 2020 E 2021 E

Unemployment Rate( Total %)

Disposable Personal Income ( in Million) BDT 80.00 BDT 60.00 BDT 40.00 BDT 20.00 BDT .00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E2017 E2018 E2019 E2020 E2021 E

Disposable Personal Income (Million)

Year GDP in Billion GDP Growth Inflation, GDP deflator Unemployment Disposable Personal Rate (Annual %) Rate (Total %) Income (Million) 2007 BDT 71.82 6.43% 6.47% 4.30% BDT 23.28 2008 BDT 79.61 6.19% 7.86% 4.40% BDT 24.41 2009 BDT 91.63 5.05% 6.76% 5.00% BDT 25.74 2010 BDT 102.48 5.57% 7.14% 4.50% BDT 26.67 2011 BDT 128.28 6.46% 7.86% 4.50% BDT 28.06 2012 BDT 128.64 6.52% 8.16% 4.50% BDT 29.61 2013 BDT 133.36 6.01% 7.17% 4.50% BDT 51.31 2014 BDT 149.99 6.06% 5.67% 4.30% BDT 51.31 2015 BDT 172.85 6.55% 5.87% 4.45% BDT 53.03 2016 BDT 195.08 7.05% 5.96% 4.43% BDT 58.74 2017 E BDT 211.61 8.47% 5.79% 4.42% BDT 62.77 2018 E BDT 227.93 7.71% 5.63% 4.41% BDT 66.80 2019 E BDT 244.05 7.07% 5.46% 4.40% BDT 70.83 2020 E BDT 259.98 6.53% 5.30% 4.39% BDT 74.86 2021 E BDT 275.71 6.05% 5.30% 4.38% BDT 74.86

APPENDIX K: COMPETITOR COMPARISION Particulars GP Banglalink Robi Airtel Robi+ Airtel( After merger) Teletalk Subscriber base( in Million) 54.507 28.977 23.263 7.943 31.206 2.925 Market Share 46.29% 24.61% 19.75% 6.75% 26.50% 2.48% Spectrum(in MHz) 2G 22 15 14.8 15 29.8 15G.2 3G 10 5 5 5 10 10 No. of cell sites: 3G 7635 3750 3300 3000 6300 1400 No. of Cell sites: 2G 10336 9400 9000 5500 14500 3050 Investor Relation Department Capital Market enlisting GP is the market leader undoubtly. Its major three compeititors are Banglalink, Robi, Airtel. After the Robi-Airtel Merger, the market will become narrower. As a government firm, Teletalk is not considered as true competitor for the rest of the firms.

APPENDIX L: PORTER’S 5 FORCES ANALYSIS

Intensity of Competitive LEGEND Rivalry 5 0 No threat to GP 4 Bargaining 3 Threat of 1 Insignificant threat to GP power of 2 1 New Entry Suppliers 2 Low threat to GP 0

3 Moderate threat to GP Burgaining Threat of Power of 4 Significant threat to GP Substitution Buyers 5 High Threat to GP

1. Intensity of Competitive Rivalry- Very High: Competition among the mobile operators is quite high. The number of companies is more than enough to serve the telecom market in Bangladesh.Hardly few of the company have been able to make positive figure of net income other than Grameenphone. The intense competition among the competitors in terms of voice call rate and data price results in lower APPM and makes the industry one of the lowest ARPU market in the world. The high exit Barrier also contributes to this price war. Moreover, Robi-Airtel merger will make the market more competitive as they will have more sectrum than the market leader GP thou the number of competitors will decrease. 2. Burgaining Power of Buyers- Very High: All the operators provide almost homogenous service and the customers can choose their preferred operator. The upcoming “mobile number portability” facility will make customer more vulnerable. Low switching cost and intense rivalry among the operators make the bargaining power of customer even stronger. Besides the availability of all offers and promotion makes the buyer more aware and prudent. 3. Bargaining power of Suppliers – Low: The supply chain network is good for the industry and operators normally make medium to long term contract with the suppliers. Most of the operators of the industry are the subsidiary companies of some large parent companies which work as a boon for good supply chain network for the telecommunication industry. 4. Threat of Substitution-Moderate to Low: The substitutes of voice call are getting popular like imo,Tango,Viber, Skype, whatsapp etc, but they are not so bad as the data volume will offset the decrease in voice call. The substitutes of data revenue and voice call are ISP and PSTN. The following table showing the internet subscribers purports some threat as the proportion of total internet subscribers for ISP ans PSTN is increasing.

Operators No. Of subscribers in million August, 2015 No. Of subscribers in million August,2016 Mobile Internet 50.7 97.2% 58.4 93.8%

WiMAX 0.17 0.3% 0.1 0.2% ISP + PSTN 1.3 2.5% 3.8 6.1%

Total 52.2 100% 62.3 100% Source: BTRC website 5. Threat of New Entry- Low: As a Large capital and resource intensive industry, telecommunication industry in Bangladesh has high entry barrier. Moreover, high brand positioning and economies of scale of existing companies make more barrier for the potential new entrants to the industry. Future outlook as a whole: The industry is too much competitive. In future to remain competitive, a firm must provide quality network and give emphasis on internet service with convenient offers. Besides, it needs to come up with various innovative strategies from time to time.

APPENDIX M: GRAMEENPHONE REVENUE COMPOSITION Grameenphone Revenue Composition Categories % of Revenue Mobile Communications 97.6% Voice Traffic 70.26% Interconnections 10.06% Data and VAS 15.53% Customer Equipment 1.96% Other Revenue 2.05% Total 100% Source: Annual Report 2015

APPENDIX N: SWOT ANALYSIS OF GP

GP SWOT Analysis Market Leader Strenght Largest Network Customers' perception 30 Coverage of being most High operating Cash flow expensive operator 20 Top Corporate Complicated pricing Governance strategy 10 Brand Name Growing Customer Quality Network Dissatisfaction Threat 0 Weakness SWOT

Rising income level Decrease in the price of Government regulation Opportunities smart phone Political Instability ICT revolution Robi- Airtel merger Multilateral use of mobile Potential liabilities phone from lawsuits Mobile number Increased growth of portability ISP and PSTN

The SWOT analysis is created to have a clear understanding aboout GP. The analysis is based on various attributes which is ranked based on their importance and likelihood. The rankings of strenght, Weakness, oppotunities and threat is shown below through graph. The summation of rankings of each sector is shown on the upper left. Weakness Rating Strenght Rating Complicated Market pricing Leader strategy Convenient 2 3 Network Customer Coverage Servicing… 2 Strong 1 Operating Supply 1 Cash flow Growing chain customer Lack of 0 0 Infrastructu dissatisfactio Copyright ral Low debt n investment Top Quality Corporate Network Governance Brand Name Inflexibility of Billing

Opportunities Rating Threat Rating

Rising income level 3 Governme Decrease in Mobile nt 2 the price of number regulation smart 3 portability Increased 1 phone growth of 2 Political 0 ISP and Instability Potential PSTN Multilateral 1 subscribers use of Potential ( 51% real 0 Intense mobile liabilities subscriber competitio phone from penetrated) n lawsuitsPotential ICT loss of revolution in market Price war line with share form Digital Robi-… Bangladesh

APPENDIX O: COMMON SIZED FINANCIAL STATEMENTS Common Sized Income Statements 2012 2013 2014 2015 2016 Revenue 100% 100% 100% 100% 100% Operating expenses Cost of material and traffic charges -7% -9% -9% -10% -9% Salaries and personnel cost -8% -7% -6% -6% -8% Operation and maintenance -4% -5% -5% -4% -4% Sales, marketing and commissions -15% -15% -13% -12% -10% Revenue sharing, spectrum charges and license fees -8.24% -7.84% -7.87% -7.88% -7.95% Other operating (expenses)/income, net -5.92% -5.78% -5.56% -5.85% -6.71% Depreciation and amortization -17% -16% -17% -18% -18% Total Operating Expenses -63% -66% -64% -65% -64% Operating profit 37% 34% 36% 35% 36%

Share of profit of associate 0% 0% 0% 0% 0% Gain on sale of shares in GPIT 0% 1% 0% 0% 0% Finance expense/(income), net -4% -3% -2% -2% -2% Foreign exchange (gain)/loss 0% 1% 0% 0% 0% -4% 0% -2% -2% -3% Profit before tax 33% 34% 34% 33% 34% Income tax expense -14% -19% -15% -15% -13% Profit after tax 19% 15% 19% 19% 20%

Other comprehensive income 0% 0% 0% 0% 0% Remeasurement of defined benefit plan 0% 0% 0% -1% 0% Related taxes 0% 0% 0% 1% 0%

Total comprehensive income for the year 19% 15% 19% 18% 20%

Historical Balance Sheet ASSETS 2011 2012 2013 2014 2015 2016 Non-current assets Property, plant and equipment, net 63.78% 59.14% 51.71% 53.80% 56.02% 56.34% Intangible assets, net 6.45% 28.96% 35.30% 34.26% 30.99% 28.68% Investment in associate 0.00% 0.00% 0.42% 0.53% 0.54% 0.42% Other non-current assets 0.00% 0.00% 0.00% 0.02% 3.44% 4.27% Total non-current assets 70.23% 88.10% 87.43% 88.62% 90.99% 89.70% Current assets Inventories 0.33% 0.35% 0.41% 0.30% 0.33% 0.35% Trade and other receivables 21.88% 8.40% 8.73% 7.44% 5.54% 7.21% Short-term investment 0.17% 0.12% 0.06% 0.00% 0.00% 0.00% Cash and cash equivalents 7.40% 3.03% 3.36% 3.64% 3.14% 2.74% Total current assets 29.77% 11.90% 12.57% 11.38% 9.01% 10.30% Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% EQUITY AND LIABILITIES Shareholders' equity Share capital 12.40% 11.48% 9.99% 10.33% 10.19% 9.31% Share premium 7.20% 6.66% 5.80% 6.00% 5.92% 5.40% Capital reserve 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% Deposit from shareholders 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% General reserve 1.96% 1.82% 0.00% 0.00% 0.00% 0.00% Retained earnings 14.13% 10.16% 7.23% 7.66% 7.00% 8.78% Non-controlling interest 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Total Equity 35.70% 30.13% 23.03% 24.00% 23.12% 23.50% Non-current liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Finance lease obligation 4.61% 4.27% 3.93% 4.04% 3.93% 3.53% Loans and borrowings* 0.00% 0.00% 8.63% 18.37% 14.32% 11.26% Deferred tax liabilities 9.41% 7.88% 5.78% 6.12% 5.97% 4.67% Employee benefits 0.00% 0.00% 0.00% 0.00% 1.09% 0.83% Other non-current liabilities 3.02% 4.12% 0.52% 0.48% 0.51% 0.44% Total non-current liabilities 17.04% 16.27% 18.86% 29.01% 25.82% 20.74% Current liabilities Trade and other payables 29.66% 30.29% 29.85% 15.90% 17.04% 21.06% Provisions 0.00% 0.00% 0.00% 10.95% 10.63% 10.64% Loans and borrowings 0.00% 6.96% 5.69% 3.17% 7.53% 10.03% Current tax payable 16.35% 15.21% 17.35% 15.02% 14.94% 12.16% Other current liabilities 1.25% 1.12% 5.21% 1.94% 0.91% 1.87% Total current liabilities 47.26% 53.59% 58.11% 46.99% 51.06% 55.76% Total Equity and Liabilities 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

APPENDIX P: SALES FORECAST To make the forecast of sales, we have first identified the different revenue segments of GP such as 1. Mobile Communication a. Voice Traffic b. Interconnection c. Data and Vas* 2. Customer Equipment 3. Other Revenue For these different revenue segments, we have inspected the historical average growth rate and then using our own assumption we have forecasted the revenues in line with the historical growth rate. For voice traffic and interconnection we have forecasted a negative growth rate in 2019. The reason is that another election is going to happen in that year. The experience of 2015, an election year has been very unfortunate for GP showing negative growth in some revenue segments due to strike and close down. *Data and VAS has been forecasted in a different way described later. (All Values in Millions of BDT)

Sales Forecast

Particulars 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E

BDT BDT BDT BDT BDT BDT BDT BDT BDT Revenue BDT 91,920 96,624 102,663 104,754 113,401 124,294 135,557 144,089 154,983 167,182 Revenue Growth (%) - 5.1% 6.3% 2.0% 8.3% 9.6% 9.1% 6.3% 7.6% 7.9% Mobile Communication 89,719.5 92,943.4 98,464.6 100,409.6 108,665.8 119,134.4 129,933.2 137,988.7 148,332.8 159,898.8 Voice Traffic 73,570.0 75,005.3 76,605.5 73,600.2 74,822.8 76,319.2 77,845.6 76,288.7 77,433.0 78,594.5 Interconnection 8,972.0 10,037.9 10,634.2 10,543.0 11,070.2 11,513.0 11,973.5 11,853.7 12,327.9 12,697.7 Data and Vas 7,177.6 7,900.2 11,225.0 16,266.4 22,772.9 31,302.2 40,114.1 49,846.2 58,571.8 68,606.6 89,719.5 92,943.4 98,464.6 100,409.6 108,665.8 119,134.4 129,933.2 137,988.7 148,332.8 159,898.8 Customer Equipment 275.1 1,874.9 2,095.4 2,050.3 2,308.8 2,539.7 2,793.7 3,073.0 3,380.4 3,718.4 Other Revenue 1,925.8 1,806.0 2,103.4 2,294.5 2,426.0 2,620.1 2,829.7 3,027.8 3,270.0 3,564.3 Total Revenue 91,920.4 96,624.2 102,663.4 104,754.4 113,400.7 124,294.2 135,556.6 144,089.5 154,983.1 167,181.5

Common sizing of Revenue Segments 2017 2018 2019 2020 2021 Particulars 2012 2013 2014 2015 2016 Average E E E E E Mobile Communication (% of Total Revenue) 97.6% 96.2% 95.9% 95.9% 95.8% 96.3% 95.8% 95.9% 95.8% 95.7% 95.6% % of Mobile Voice Traffic Communication 82.0% 80.7% 77.8% 73.3% 68.9% 76.5% 64.1% 59.9% 55.3% 52.2% 49.2%

% of Total Revenue 80.0% 77.6% 74.6% 70.3% 66.0% 73.7% 61.4% 57.4% 52.9% 50.0% 47.0% % of Mobile Interconnection Communication 10.0% 10.8% 10.8% 10.5% 10.2% 10.5% 9.7% 9.2% 8.6% 8.3% 7.9%

% of Total Revenue 9.8% 10.4% 10.4% 10.1% 9.8% 10.1% 9.3% 8.8% 8.2% 8.0% 7.6% % of Mobile Data and Vas Communication 8.0% 8.5% 11.4% 16.2% 21.0% 13.0% 26.3% 30.9% 36.1% 39.5% 42.9%

% of Total Revenue 7.8% 8.2% 10.9% 15.5% 20.1% 12.5% 25.2% 29.6% 34.6% 37.8% 41.0%

Customer Equipment % of Total Revenue 0.3% 1.9% 2.0% 2.0% 2.0% 1.7% 2.0% 2.1% 2.1% 2.2% 2.2%

Other Revenue % of Total Revenue 2.1% 1.9% 2.0% 2.2% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1%

Growth of Revenue Segments

Particulars 2012 2013 2014 2015 2016 Average 2017 E 2018 E 2019 E 2020 E 2021 E Mobile Communication 3.6% 5.9% 2.0% 8.2% 4.9% 9.6% 9.1% 6.2% 7.5% 7.8% Voice Traffic* 2.0% 2.1% -3.9% 1.7% 1.8% 2.0% 2.0% -2.0% 1.5% 1.5% Interconnection* 11.9% 5.9% -0.9% 5.0% 5.5% 4.0% 4.0% -1.0% 4.0% 3.0% Data and Vas* 10.1% 42.1% 44.9% 40.0% 41.0% 37.5% 28.2% 24.3% 17.5% 17.1% Customer Equipment* 581.5% 11.8% -2.2% 12.6% 12.2% 10.0% 10.0% 10.0% 10.0% 10.0% Other Revenue* -6.2% 16.5% 9.1% 5.7% 7.4% 8.0% 8.0% 7.0% 8.0% 9.0% Total Revenue 5.1% 6.3% 2.0% 8.3% 5.7% 9.6% 9.1% 6.3% 7.6% 7.9% *The growth rate of these segments for the forecasted period is forecasted basing on historical average and using our own assumptions. * Described in the following section Forecasting Data and VAS We have forecasted the revenue from Data and VAS by considering different macro and market factors. The assumptions can be summarized in the following ways: (All Values in Millions of BDT) Input Data for forecasting Revenue from DATA and VAS Particulars 2016 2017 2018 2019 2020 2021 Population 162.9 164.9 166.8 168.8 170.9 172.9 Data penetration 28.0% 35.0% 42.0% 49.0% 55.0% 59.0% Data User 45.6 57.7 70.1 82.7 94.0 102.0 GP's Market share of data (Assumed) 50.2% 50.0% 51.0% 51.0% 50.0% 51.0% GP Data User 22.9 28.9 35.7 42.2 47.0 52.0 Growth of GP Data User - 26.0% 23.9% 18.1% 11.4% 10.7% ARPU from DATA/month (per taka) 58.0 61.5 65.5 69.9 74.8 80.2 Growth of ARPU from DATA 6.0% 6.5% 6.8% 7.0% 7.3% Assumptions: 1. Population has been grown at the rate of 1.20% ( the average rate of population growth of last 5 years) 2. Data penetration rate according to BTRC is 39% but it is not the unique Data penetration, thus we being a little bit conservative and consider the actual penetration rate to be 28%. 3. Total number of data user is thus found by multiplying total population with the data penetration rate. The forecasted data user is got through multiplying the future population by the data penetration rate. 4. GP currently has a data user of 22.9 million so their market share is thus 50%. For this reason, we forecast their market share of data will remain approximately 50% over the forecasted period and thus got the GP Data user by multiplying its market share by the total data user of the country. 5. We got the ARPU of 2016 and thereby grow it by a rate of 6% to 7.3% over the forecasted period. 6. In the forecasted period, we expect a preferable growth in Data revenue as a result of 4G launch and a large portion of the unpenetrated market.

Calculation of revenue from Data and VAS 1. Of revenue from Data and VAS, Data will share the maximum proportion. For this we have always forecasted the proportion of Data more than 65%. 2. First of all revenue from Data has been calculated by multiplying the GP data user by the ARPU from Data per year. 3. Then we have calculated the total revenue from Data and VAS by dividing the revenue from Data by the proportion of data. On next revenue from VAS has been calculated as the difference between these two.

(All Values in Millions of BDT) Forecast of Revenue from DATA and VAS Particulars 2016 2017 2018 2019 2020 2021 Revenue from DATA & VAS BDT 22,772.9 BDT 31,302.2 BDT 40,114.1 BDT 49,846.2 BDT 58,571.8 BDT 68,606.6 Growth of Revenue from Data and Vas - 37.5% 28.2% 24.3% 17.5% 17.1% Revenue from DATA 14,802.4 21,285.5 28,079.9 35,390.8 42,171.7 50,082.8 Proportion of Revenue from DATA (Assumed) 65% 68% 70% 71% 72% 73% Revenue from VAS 7,970.5 10,016.7 12,034.2 14,455.4 16,400.1 18,523.8 Proportion of Revenue from VAS 35% 32% 30% 29% 28% 27% Data Growth - 43.8% 31.9% 26.0% 19.2% 18.8% Vas Growth - 26% 20% 20% 13% 13% Data % of revenue - 17.1% 20.7% 24.6% 27.2% 30.0%

APPENDIX Q: WORKING CAPITAL

Current assets 2011 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E

Total current assets 32,420.79 14,005.31 16,993.24 14,864.94 11,927.81 14,935.17 16,369.88 17,853.17 18,976.97 20,411.69 22,018.26

Total current liabilities 51,469.29 63,059.78 78,580.00 61,402.14 67,625.18 80,891.61 86,495.97 94,357.48 101,035.08 108,908.33 117,502.70

Working Capital -19,048.51 -49,054.47 -61,586.75 -46,537.20 -55,697.37 -65,956.43 -70,126.09 -76,504.31 -82,058.11 -88,496.64 -95,484.44

Change in WC -30,005.96 -12,532.29 15,049.55 -9,160.16 -10,259.07 -4,169.65 -6,378.22 -5,553.80 -6,438.53 -6,987.80

APENDIX R: CAPEX To determine Capex in the upcoming years, we have at first calculated the historical capex to sales ratio, the average of which is 22.59%. We decided to keep it fixed in the forecasted period except for 2018. We expect a higher capex in 2018 due to 4G launch and hereby added here an additional investment in intangibles which is 10% of that year’s revenue. Thus, in 2018, the capex to sales ratio becomes 32.59%. (All Values in Millions of BDT) 2011 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E Revenue BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT 89,060 91,920 96,624 102,663 104,754 113,401 124,294 135,557 144,089 154,983 167,182 Capex BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT 12,963 42,508 29,925 15,164 19,269 30,368 28,074 44,174 32,545 35,006 37,761 Capex/Sal 14.56% 46.24% 30.97% 14.77% 18.39% 26.78% 22.59% 32.59% 22.59% 22.59% 22.59% es (All Values in Millions of BDT) BDT 30,617.87 PPE for 2018 (22.59% of revenue) Intangibles for 2018 (10% of revenue) BDT 13,555.66 APPENDIX S: DETERMINATION OF COST OF EQUITY AND COST OF CAPITAL Cost of equity As we have already calculated the FCFE, now cost of equity is required to determine the value of equity of GP. For this, the determination of Risk free rate, beta of GP and Market risk premium of GP’s share is required. Capital market is depressed in last few years in our country and so, market return is negative considering last 5 years (2011-2016). We followed Adjusted Risk Premium approach to determine cost of equity as CAPM would mislead us in this case. The risk free rate is 6.15 which is the cut of yield of 5 years Treasury bond. We added 5.25 % equity market risk premium. We considered three major things determining business risk. 1. Regulatory Risk: Regulatory risk is the major risk for Grameenphone. Regulatory requirement can jeopardize the business model of Grameenphone. For example, possible regulation i.e. mobile number portability can affect existing subscriber base positively or negatively. 2. Robi-Airtel merger is a matter of both threat and opportunity for GP. In one hand the combined entity will consolidate the industry and therefore more pricing power for GP. On the other hand, the merged entity will have more spectrum than Grameenphone and there is a possibility that GP will lose market share to the merged entity. 3. Litigations: Grameenphone is currently facing 4 major cases. These cases are not unique to Grameenphone, other industry incumbents are also facing these types of cases. There is a possibility of loss arises from these litigations. The equity beta for Grameenphone is 1.20. So, Cost of equity is: 6.15% + (1.2*.25%) = 6.15%+5.30%=12.45% Cost of Equity Risk free rate 6.15% Equity Beta 1.20 Equity Market Risk Premium 5.25% Equity Risk Premium of GP 6.30% Total 12.45% WACC We have already cost of equity as calculated. Now the cost of debt is calculated by dividing the interest expense of GP by the total amount of debt of the firm. This resulted in a cost of debt equals to 8.84%. as the tax rate is 40%, we get a after tax cost of debt equals to 5.3%. Cost of equity 12.45% 2012 2013 2014 2015 2016 Avera ge cost of debt 5.30% Interest 1803 2098 2212 2070 2028 2042 weighted average no of 1350.30 Longexpense term .62 116613 240082 189624 163326 61 share Borrowing 5.21 3.73 4.21 9.65 Market value of Share on 10 279 Short term 8195 7700 4147 9975 1454 November, 2016 TotalBorrowing 8195.00 193600 281558 289357 30888.09 2310 Market value of Equity 376733.71 Average cost .00 5.21 1.31 9.78 7.74 8.847.81 Market value of Debt 30887.74 Taxof debt rate 40%% Market value of Firm 407621.44 After tax cost 5.3% WACC 11.9085% of Debt

APPENDIX T: DCF VALUATION

(All Values in Millions of BDT)

Discounted Cash Flow Valuation Particulars 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT EBIT/Operating Profit 33,675.1 33,198.9 36,896.1 36,963.7 41,137.9 47,914.9 53,544.5 58,284.1 64,163.1 70,801.8 EBIT (1-T) 20,205.0 19,919.4 22,137.6 22,178.2 24,682.8 28,748.9 32,126.7 34,970.5 38,497.9 42,481.1 ADD: Depreciation & Amortization 15,176.9 15,339.0 17,656.7 19,007.7 20,753.7 21,386.2 23,324.0 24,792.2 26,666.6 28,765.5 LESS: Capex 42,508.0 29,925.0 15,164.0 19,269.0 30,367.7 28,074.1 44,173.5 32,545.2 35,005.7 37,760.9 LESS: Change in WC -30,006.0 -12,532.3 15,049.6 -9,160.2 -10,259.1 -4,169.7 -6,378.2 -5,553.8 -6,438.5 -6,987.8 BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT FCFF 22,879.9 17,865.7 9,580.8 31,077.1 25,327.8 26,230.8 17,655.5 32,771.3 36,597.3 40,473.4 LESS: Interest Expense(1- T) 1,983.7 1,557.0 1,384.2 1,164.4 1,591.5 1,897.4 2,069.3 2,199.6 2,365.9 2,552.1 ADD: Net Borrowing 8,195.0 11,170.2 8,786.1 788.5 1,948.0 -518.7 13,844.1 445.8 -188.5 1,558.6 BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT FCFE 29,091.2 27,478.9 16,982.7 30,701.1 25,684.3 23,814.7 29,430.2 31,017.5 34,042.9 39,479.9 BDT Terminal Value at 31 December, 2021 456,555.7 (All Values in Millions of BDT) PV of FCFE at 31 December, 2017 BDT 123,148.3 PV of Terminal Value at 31 December, 2017 BDT 285,532.7 Value of Equity at 31 December, 2017 BDT 408,681.0 Number of Outstanding Share 1350.3 Intrinsic Value Per Share Based on FCFE BDT 302.66 Intrinsic Value Per Share at Date 10 November, 2016 BDT 296.25

APPENDIX U: RELATIVE VALUATION For relative valuation we have selected 11 telecom companies operating in Asia and calculated their multiples such as EV/EBITDA and P/E multiple. Then we have taken the median of the multiples of all these 11 companies. To determine the value of GP we have multiplied the median of these multiples with respective values of GP in the year 2017. The reason of taking the EBITDA and Earning of 2017 of GP is that we are setting the target price for a holding period of 1.

Companies EV/EBITDA P/E AIS, Thiland 7.54x 12.22x Relative Valuation Price Based on EV/EBITDA Multiple Bharati airtel, India 6.26x 31.47x EV/EBITDA 7.2x China Mobile, China 4.34x 14.34x EBITDA of GP (millions BDT) 69,514.6 DTAC, Thiland 3.72x 24.42x EV of GP (millions BDT) 497,724.4 Equity Value (millions BDT) 434,620.6 Digi.com, Malaysia 13.68x 23.95x No of common shares (millions BDT) 1350.3 Globe Telecom, Philippines 6.72x 14.62x Pricestock Outstanding BDT 321.87 Idea Cellular, India 6.04x 12.83x Price Based on P/E Multiple P/E 18.3x PLDT, Philippines 7.84x 21.00x EPS 20.0 PT Telkom, Indonesia 7.16x 18.42x Price BDT 365.0 Method Price Weight Product Reliance, India 7.85x 18.27x EV/EBITDA 321.9 50% 160.9 Sri Lanka Telecom, Sri Lanka 7.50x 17.64x P/E 365.0 50% 182.5 Median 7.16x 18.27x Weighted Price BDT 343.5

APPENDIX V: DATA FOR DU PONT ANALYSIS AND ECONOMIC VALUE ADDED DU Pont Analysis (ROE Decomposition) by deducting its cost of capital from its operating profit, adjusted DU Pont Analysis 2016 2017 2018 2019 2020 2021 for taxes on a cash basis. EVA can also be referred to as economic Tax Burden Ratio 60.1 60.0E 60.0E 60.0E 60.0E 60.0E profit, and it attempts to capture the true economic profit of a Interest Burden Ratio 93.5% 93.4% 93.6% 93.7% 93.9% 94.0% company. The NOI is reached through the forecasted financial Operating Profit 35.9% 38.7% 39.7% 40.6% 41.6% 42.5% statement of GP and WACC is calculated previously. As we AssetMargin Turnover Ratio 0.82% 0.83x% 0.82x% 0.80x% 0.82x% 0.85x% Financial Leverage 4.29x 4.23x 4.34x 4.42x 4.30x 4.27x multiply the total capital of the firm by the WACC, we get the ROERatio 70.7x 76.5 79.8 81.0 83.0 86.9 opportunity cost. In this way, the EVA is calculated. The growing Source: Team Calculation% % % % % % EVA is very much prevalent with the growing difference between Economic value added (EVA) is a measure of a company's ROI and WACC. financial performance based on the residual wealth calculated (All Values in Millions of BDT) 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E

NOI BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT 33,675.1 33,198.9 36,896.1 36,963.7 41,137.9 47,914.9 53,544.5 58,284.1 64,163.1 70,801.8 WACC 11.91% 11.91% 11.91% 11.91% 11.91% 11.91% 11.91% 11.91% 11.91% 11.91%

Total BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT Capital 117,665.35 135,220.64 130,672.83 132,449.57 145,070.92 153,175.36 175,508.13 183,481.18 192,351.28 202,049.59 Opportunity BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT cost 14,012.16 16,102.73 15,561.15 15,772.74 17,275.75 18,240.86 20,900.36 21,849.83 22,906.12 24,061.04 EVA BDT BDT BDT BDT BDT BDT BDT BDT BDT BDT 19,662.91 17,096.21 21,334.92 21,190.96 23,862.19 29,674.03 32,644.16 36,434.26 41,257.02 46,740.76 ROI 28.62% 24.55% 28.24% 27.91% 28.36% 31.28% 30.51% 31.77% 33.36% 35.04%

BDT 250,000.00 40.00%

35.00% BDT 200,000.00 30.00%

BDT 150,000.00 25.00% 20.00%

BDT 100,000.00 15.00%

10.00% BDT 50,000.00 5.00%

BDT .00 0.00% 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E 2021 E

NOI Total Capital Opportunity cost NOI Total Capital Opportunity cost EVA EVA WACC ROI ROI WACC

We see an upward trend in the EVA of the firm. This is mainly due to the increasing NOI of the firm. Thus, the EVA increases as ROI increases over the time whereas the WACC of the firm is constant. Moreover the growing capital of GP also contributes to the increasing EVA of the firm.

APPENDIX W: MONTE CARLO SIMULATION Forecast: One Year Target Price at 31 December, 2017 Summary: Certainty level is 79.1563% Certainty range is from BDT 318.98 to ∞ Entire range is from BDT 263.23 to BDT 938.20 Base case is BDT 318.98 After 1,000,000 trials, the std. error of the mean is BDT 0.06

Statistics: Forecast values Trials 1,000,000 Base Case BDT 318.98 Percentiles: Forecast values Mean BDT 365.37 0% BDT 263.23 Median BDT 352.11 10% BDT 304.96 Mode --- 20% BDT 318.01 Standard Deviation BDT 59.87 30% BDT 329.20 Variance BDT 3,584.94 40% BDT 340.26 Skewness 1.61 50% BDT 352.11 Kurtosis 7.17 60% BDT 365.55 Coeff. of Variation 0.1639 70% BDT 381.80 Minimum BDT 263.23 80% BDT 403.94 Maximum BDT 938.20 90% BDT 441.78 Range Width BDT 674.97 100% BDT 938.20 Mean Std. Error BDT 0.06

Here we see the probability of the market price on 31 December, 2017 being greater than the target price of BDT 318.98 is 79.16%.