Equity Note on Singer Limited (SINGERBD) Date: March 18, 2021 Resistance: 187.30 MFI: 55.66 Current Price (BDT): 170.00 Support: 162.90 RSI: 45.44

IPO Information Company Overview: Market Cap (BDT mn) 16,690.3 SINGERBD manufactures and markets home appliances, Equity Market Weight 0.4% , sewing machines, furniture and other Paid-up Capital (BDT mn) 997.0 appliances. Authorized Capital (BDT mn) 2,500.0  Incorporation & Commercial Operation: September, No. of Share Outstanding (in mn) 99.7 1979 Free-float Shares (Inst.+For.+Public) (in mn) 42.9  Key Personnel: DR. Fatih Kemal Ebiçlioğlu (Chairman), M. 1 Year Avg. Turnover* (BDT mn) 30.0 H. M. Fairoz (Managing Director & CEO). 1 Year Return 29.2%  Plant Location: Mousa Koulashur, Hemayetpur, Savar, 52-week price range (BDT) 130.6 - 187.40 , Bangladesh (East) Extension area DEPZ, Ganakbari, Sector Forward P/E 21.86 Savar, Dhaka-1349, Bangladesh. Market Forward P/E 15.03 Shareholding Structure:

2020 As on Sponsor/ Institutions Foreign Public 2017 2018 2019 (9m An”) Director Financial Information (BDT mn): Jan, 2021 57.00% 19.50% 6.69% 16.81% Net Sales 11,059 13,559 15,485 16,442 Dec, 2020 57.00% 19.39% 6.81% 16.80% Gross Profit 3,119 3,760 4,353 4,339 Dec, 2019 57.00% 19.27% 5.36% 18.37% Operating Profit 1,185 1,659 1,951 1,799 Dec, 2018 57.00% 12.68% 11.80% 18.52% Financial Expenses 158 319 404 497 Dec, 2017 57.00% 14.80% 7.42% 20.78% Profit After Tax 746 921 1,032 864

Assets 7,072 8,487 10,332 11,610 Business Profile: Debt 1,865 2,775 1,998 3,308 SINGERBD has a distribution network of 405 company owned Equity 2,223 2,378 3,192 3,073 stores and 974 wholesale dealers. The company also sells Retained Earnings 815 971 1,626 1,509 through e-commerce and corporate sales channel. The Cash & Cash Eqiv. 36 98 129 244 company currently manufactures 62% of its total product in Margin: Bangladesh. Gross Profit 28.2% 27.7% 28.1% 26.4% Acquisition of Arçelik: Ardutch B.V., a subsidiary of Arçelik A.S. Operating Profit 10.7% 12.2% 12.6% 10.9% (a member of Koc Holdings, Turkey) completed the acquisition Pretax Profit 9.3% 9.4% 9.5% 7.5% of Retail Holdings Bhold B.V. (holding Company of Singer Net Profit 6.7% 6.8% 6.7% 5.3% Bangladesh Limited) on 3rd April, 2019. Arçelik is the ultimate Growth (YoY): beneficial owner of the company however Retail Holdings Sales 22.8% 22.6% 14.2% 6.2% Bhold B.V. still maintains its status as the holding company of Gross Profit 20.2% 20.6% 15.8% -0.3% Singer Bangaldesh Limited. Operating Profit 26.8% 40.0% 17.6% -7.8% Arçelik is based on Turkey and has 12 brands, 23 manufacturing Net Profit 36.6% 23.4% 12.0% -16.3% facilities, 17 R&D centers, 31,500 employees and operates in Profitability: 147 countries. ROA 11.7% 11.8% 11.0% 7.9% Proposed Merger with Subsidiary: SINGERBD is in the process of merging with its 100% owned subsidiary International ROE 35.8% 40.0% 37.1% 27.6% Appliance Limited (IAL) to avail tax benefit (Listed Company- Leverage: 25%, Non-Listed Company-32.5%) of a publicly listed company. Debt Ratio 26.4% 32.7% 19.3% 28.5% The company has hold an Extraordinary General Meeting Debt-Equity 0.79 0.74 0.84 0.92 (EGM) on November 26, 2020 to secure approval of the Interest Coverage 7.5 5.2 4.8 3.6 Shareholders of Singer Bangladesh about this merger. Valuation: SINGERBD’s paid up capital will remain unchanged post-merger EPS (BDT) 9.79 9.24 10.35 7.85 as IAL is its 100% fully owned subsidiary. NAVPS (BDT) 28.99 23.18 32.02 32.2 P/E (x) 15.36 18.41 17.43 22.37 Revenue Composition: 2018 2019 P/NAV (x) 5.2 7.3 5.6 5.49 Revenue Amount Amount % Dividend (C/B)% 100/0 0/30 77/0 30/0 Segments % *Excluding block transaction (mn) (mn) Home appliances 9,267 68.3% 11,050 71.4% Price- Volume Movement of SINGERBD Consumer electronics 2,721 20.1% 2,555 16.5% Sewing machines 487 3.6% 792 5.1% 200 2,000,000 Other appliances 835 6.2% 919 5.9% 180 1,500,000 Furniture 249 1.8% 169 1.1% 160 1,000,000 Total 13,559 100% 15,485 100%

140 500,000 Capacity Utilization Matrix: 120 0 Air Conditioner and operated in over capacity in Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 2019 which indicates further capacity expansions of these two VOLUME CLOSEP* product lines are to be expected in near future.

1 EBL Securities Limited Research

Equity Note on Singer Bangladesh Limited (SINGERBD) Date: March 18, 2021 Resistance: 187.30 MFI: 55.66 Current Price (BDT): 170.00 Support: 162.90 RSI: 45.44

Panel : Bangladesh3. In the last 5 years, AC demand has increased at Particulars 2017 2018 2019 the rate of 20%-25%. Current AC market size is BDT 65 billion Capacity 100,000 170,000 170,000 and local companies have 70% market share.4 Middle income and lower middle income people’s demand for AC is increasing Actual Production 97,203 143,826 135,852 as local manufacturers are providing AC at a lower and more Utilization % 97.2% 84.6% 79.9% affordable price and as a result the current market size is expanding. Air conditioner: Particulars 2017 2018 2019 The Government had shut down the country due to Covid-19 for a 2 month period from March 25 to May 30. Summer season Capacity 24,000 30,000 30,000 is generally the peak sales season for and AC. Actual Production 23,500 28,601 40,237 Almost 50% of the total sales are made in this period.5 Due to Utilization % 97.9% 95.3% 134.1% shutdown, E&E sales of 2020 stayed below 70% of the annual target level.6 Difficulty of import of raw materials that are used Furniture: in manufacturing E&E has also negatively impacted the Particulars 2017 2018 2019 industry.

Capacity 5,300 5,300 5,300 Investment Insight Actual Production 5,108 5,108 3,072 Investment Positive Utilization % 96.4% 96.4% 58.0% . In the last third and fourth quarters of FY’20, SINGERBD has made 4.08% and 67.90% EPS growth respectively. Refrigerator: However, during the same period, many other companies Particulars 2017 2018 2019 in the consumer electronics and other industries suffered Capacity 120,000 120,000 132,000 negative growth in the bottom line. This strong recovery Actual Production 88,010 88,010 141,660 of SINGERBD indicates it is poised to have a positive FY’21 Utilization % 73.3% 73.3% 107.3% given stability in the macro and global economy. . The recent acquisition of SINGERBD by Arçelik will help Industry Overview SINGERBD to use its global expertise in both The Electrical & Electronics (E&E) industry has mainly manufacturing process and supply chain. It will help dependent on imported products, however, this is changing as SINGERBD both to improve the quality of its product and more local businesses have started manufacturing products distribute product throughout the country. Arçelik has locally. Currently, the market is growing at 20% which has already assigned experts to Refrigerator & TV production encouraged both local and multinational manufacturers to team and is planning to assign expert to AC production as enter into the market. E&E sector employs around 1 million well. people. Government has shown support to increase the sales . International appliance limited (IAL), a 100% owned in this industry by giving VAT exemption on the production of subsidiary by SINGERBD, has achieved BDT 2,553 million compressors, refrigerators and air conditioner till June 30, revenue in 2019 and net profit before tax of BDT 38 2021. Online sales through Equal Monthly Installments (EMI) is million. Although, due to high income tax expense, the becoming more prevalent in the E & E sector. subsidiary contributed negatively in the bottom line. If the Freezer, frost & no-frost refrigerators are the main types of planned merger between SINGERBD and IAL successfully refrigerators that are sold in Bangladesh. Local manufacturing happens, that would reduce the tax rate of IAL from 32.5% currently fulfils the 80% demand of the market. Some of the to 25% which would improve its bottom line contribution local manufacturers or assemblers are: Transcom, Minister, to SINGERBD. Vision, Jamuna, Singer Bangladesh and . Refrigerator . SINGERBD has achieved 22.35% CAGR in the top line and industry has been growing at double digits over the last 5 29.33% growth in CAGR in the bottom line in the last 4 years.1 The current market size of refrigerators is estimated to years. Growth in home appliances and consumer be at BDT 57.80 billion2. Increase in purchasing power, electronics have driven the topline growth of Singer availability of electricity in the rural areas, decrease in the price Bangladesh in last 4 years. of the refrigerators and installment system are currently . Although, dividend payment is inconsistent, SINGERBD driving the refrigerator market’s growth. has given reasonably healthy dividend yield since 2015. In the last 5 years, SINGERBD’s dividend yield ranged from Increased urbanization, increased global warming and increase 1.75% to 6.65% and dividend payout ratio ranged from in purchasing power are the factors driving the growth in AC 38% to 98%. industry in Bangladesh. In the summer season, the highest . Bangladesh’s current MAC (middle class and affluent sales of AC is generally witnessed. Currently, there are 25 consumers) population is only 15% of 170 million companies, both local and foreign, are selling ACs in population which is expected to triple by 2025 to 34

1 https://www.thedailystar.net/business/news/made-bangladesh- 4 https://www.dhakatribune.com/business/2019/04/05/ac-sellers- refrigerators-dominate-market-1808239 brace-up-for-summer-sales 2 https://www.thedailystar.net/business/news/rural-demand-drives- 5 https://www.dhakatribune.com/business/2020/04/29/coronavirus- fridge-sales-1636753 refrigerator-ac-sales-dip-in-peak-season 3 https://www.dhakatribune.com/business/2019/04/05/ac-sellers- 6 https://www.thedailystar.net/business/news/consumer-electronics- brace-up-for-summer-sales companies-predict-grim-outlook-2020-1968177

2 EBL Securities Limited Research

Equity Note on Singer Bangladesh Limited (SINGERBD) Date: March 18, 2021 Resistance: 187.30 MFI: 55.66 Current Price (BDT): 170.00 Support: 162.90 RSI: 45.44

million. Bangladesh government has made plan to invest short term debt is BDT 3.28 billion which was only BDT $40 billion to achieve 60,000 MW power generation 1.96 billion in 2019. Annualized financial expense of 2020 capacity by 2041. Urban population (%) of Bangaldesh has is BDT 497 million a 214% increase to BDT 158 million in increased from 29.71% in 2009 to 37.41% in 2019. All 2017. As a result, times interest earned ratio of SINGERBD these factors would increase demand for SINGERBD’s as of June 2020 is 3.6, a very low number compared to 7.5 product portfolio. in 2017. This indicates SINGERBD’s bottom line is getting adversely affected by increasing finance cost. Investment Concern . Inventory turnover ratio of SINGERBD has decreased from . COVID-19 has caused the SINGERBD’s EPS to drop by 3.90 in 2016 to 2.68 in 2019. Cash conversation cycle has 16.29% respectively in FY’20 compared to the same period increased from 88.76 days to 123.52 days in the same in the previous year. Lockdown and economic hardship of period. This indicates working capital is not getting potential customers have resulted in lower demand for optimized and it is fuelling the need to borrow more short SINGERBD products. Although, in the last two quarters, term loan. Covid-19 has also further worsened the SINGERBD’s EPS was higher than that of the previous year, situation regarding receivable collections. 80% EPS drop in the second quarter have ultimately Recent Financial Performance resulted in an EPS de-growth in 2020 which has also The Company has reported Consolidated EPS of Tk. 7.85, caused the low dividend payment. Consolidated NAV per share of Tk. 32.19 and Consolidated . Gross profit margin, operating profit margin and net profit NOCFPS of Tk. 9.08 for the year ended on December 31, 2020 margin of SINGERBD has declined by 1.39%, 2.23% and as against Tk. 10.35, Tk. 32.02 and Tk. 13.59 respectively for the 1.93% in 9m FY’20 compared to the same period in same period of the previous year. SINGERBD has previous year. recommended 30% cash dividend for the year ended on . SINGERBD’s long term debt as of June, 2020 is BDT 14.21 December 31, 2019. million where there was no long term debt in 2017 and

Profitability Margins of SINGERBD Last Five Year's EPS (BDT)

GP Margin OP Margin PBT Margin NPAT Margin 12.50 35% 9.79 10.35 30% 10.50 9.24 25% 7.85 8.50 7.12 20% 6.50 15% 4.50 10%

2.50 5%

0% 0.50 2016 2017 2018 2019 2020 9M An' 2016 2017 2018 2019 2020

Five Years' Cash Dividend (%) Last Eight Quarter’s EPS (BDT)

4.41 4.59 100% 3.91

77% 70%

30% 1.23 1.11 1.36 0.81 0.79 -

2016 2017 2018 2019 2020 2019 Q1' 2019 Q2' 2019 Q3' 2019 Q4' 2020 Q1' 2020 Q2' 2020 Q3' 2020 Q4'

3 EBL Securities Limited Research

Equity Note on Singer Bangladesh Limited (SINGERBD) Date: March 18, 2021 Resistance: 187.30 MFI: 55.66 Current Price (BDT): 170.00 Support: 162.90 RSI: 45.44

STATEMENT OF COMPREHENSIVE INCOME (IN BDT)

Particulars Year 2016 Year 2017 Year 2018 Year 2019 Year 2020 9M An' Gross Turnover 8,844,133,053 10,967,038,473 13,467,035,283 15,370,867,488 16,350,372,267 Earned carrying charges 163,336,157 92,100,854 92,214,224 114,367,991 91,262,100 Net Turnover 9,007,469,210 11,059,139,327 13,559,249,507 15,485,235,479 16,441,634,367 Cost of Goods Sold 6,413,780,897 7,940,639,289 9,799,164,928 11,131,991,883 12,102,341,817 GROSS PROFIT 2,593,688,313 3,118,500,038 3,760,084,579 4,353,243,596 4,339,292,549 Operating Expenses 1,660,079,486 1,961,971,433 2,269,575,658 2,556,920,102 2,710,415,784 Other Operating Income 1,536,354 28,797,286 168,795,783 154,708,430 170,541,195 OPERATING PROFIT 935,145,181 1,185,325,891 1,659,304,704 1,951,031,924 1,799,417,960 Interest Income 9,840,369 563,183 624,370 307,831 Financial Expenses 97,298,322 158,195,568 319,292,407 403,631,459 497,018,032 Net Finance Costs -87,457,953 -157,632,385 -318,668,037 -403,323,628 -497,018,032 Share of profit/(loss) of equity- -27,081,070 56,387,751 accounted investees, net of tax PROFIT BEFORE WPPF 820,606,158 1,084,081,257 1,340,636,667 1,547,708,296 1,302,399,928 Allocation for WPPF 41,030,308 56,958,437 65,702,515 77,335,951 65,629,127 PROFIT BEFORE TAX 779,575,850 1,027,122,820 1,274,934,152 1,470,372,345 1,236,770,801 Income Tax Expense 233,253,651 280,975,762 354,035,183 438,572,792 373,051,012 PROFIT AFTER TAX FOR THE YEAR 546,322,199 746,147,058 920,898,969 1,031,799,553 863,719,789 EPS (Basic) 7.12 9.79 9.24 10.35 8.66

4 EBL Securities Limited Research

Equity Note on Singer Bangladesh Limited (SINGERBD) Date: March 18, 2021 Resistance: 187.30 MFI: 55.66 Current Price (BDT): 170.00 Support: 162.90 RSI: 45.44

STATEMENT OF FINANCIAL POSITION (IN BDT)

Particulars Year 2016 Year 2017 Year 2018 Year 2019 Year 2020 9m An’ Non-Current Assets: 1,610,705,191 1,770,972,719 1,815,103,824 2,939,159,082 2,847,945,807 Property, Plant and 1,034,080,145 1,424,361,116 1,411,211,583 1,420,024,293 1,392,225,458 Equipment-Carrying Value Intangible assets 36,032,923 39,542,064 35,472,985 29,765,141 25,462,388 Right-of-use (ROU) asset 1448941241 1,380,113,934 Investments 288,278,188 4,199,450 4,199,450 4199450 4,199,450 Deferred tax assets 37,391,385 18,871,202 26,507,800 16,266,103 Deposits and prepayments 214,922,550 283,998,887 337,712,006 36228957 29,678,474 Current Assets: 4,089,413,802 5,300,612,072 6,672,046,886 7,392,519,609 8,761,555,033 Inventories 2,159,740,405 2,968,387,371 3,897,325,730 4,398,389,858 4,076,928,954 Accounts Receivable 1,538,442,838 1,856,060,667 2,225,136,036 2,471,880,052 4,103,246,714 Advances, Deposits and 238,801,245 237,332,959 256,024,530 212,030,470 165,480,124 Prepayments Current Tax Assets 35,896,460 98,490,242 128,507,136 243,574,964 Cash and Cash Equivalents 152,429,314 202,934,615 195,070,348 181712093 172,324,277 TOTAL ASSETS 5,700,118,993 7,071,584,791 8,487,150,710 10,331,678,691 11,609,500,839 Shareholders' Equity: 1,947,030,527 2,223,431,133 2,377,578,543 3,192,075,074 3,072,967,332 Share Capital 766,944,910 766,944,910 766,944,910 997,028,380 997,028,380 Reserves 585,380,060 577,857,676 573,075,690 569,134,429 566,691,593 Retained Earnings 594,705,557 815,464,263 971,039,498 1,625,912,265 1,509,247,359 Non-Controlling Interest 63,164,284 66,518,445 Non-Current Liabilities: 1,444,915,010 1,474,393,261 1,725,215,637 2,647,383,314 2,822,172,219 Long Term Loans - Secured 37,150,985 25,682,777 14,214,573 Deferred Tax Liability 1,110,395 Lease liability (non-current 896,938,482 871,904,389 option) Other liabilities 1,335,297,010 1,470,774,961 1,688,064,652 1,723,651,660 1,909,330,775 Retirement Obligations 109,618,000 3,618,300 7,874,380 Current Liabilities: 2,308,173,456 3,373,760,397 4,384,356,530 4,492,220,303 5,733,209,390 Accounts Payable 1,157,720,304 1,508,412,542 1,646,432,946 2,386,901,238 2,301,390,558 Short Term Bank Loan 1,130,878,507 1,587,039,816 2729201744 1,961,093,776 3,277,521,561 Lease liability (current 132,757,081 138,380,838 portion) Current tax liabilities 19,574,645 Short term portion of long 278,308,039 8,721,840 11,468,208 15,916,433 term debt TOTAL SHAREHOLDERS' 5,700,118,993 7,071,584,791 8,487,150,710 10,331,678,691 11,609,500,839 EQUITY AND LIABILITIES Net Asset Value (NAV) per 25.39 28.99 23.18 32.02 30.82 share No. of Share Outstanding 76,694,491 76,694,491 76,694,491 99,702,838 99,702,838 *2020 data are as on 30th June, 2020.

5 EBL Securities Limited Research

Equity Note on Singer Bangladesh Limited (SINGERBD) Date: March 18, 2021 Resistance: 187.30 MFI: 55.66 Current Price (BDT): 170.00 Support: 162.90 RSI: 45.44

RATIO ANALYSIS

Particulars Year 2016 Year 2017 Year 2018 Year 2019 Year 2020 9m An’ Liquidity Ratios Current Ratio 1.77 1.57 1.52 1.65 1.53 Quick Ratio 0.84 0.69 0.63 0.67 0.82 Cash Ratio 0.07 0.06 0.04 0.04 0.03 Operating Efficiency Ratios Inventory Turnover Ratio 3.90 3.10 2.85 2.68 2.86 Receivable Turnover Ratio 6.98 6.52 6.64 6.59 5.00 Avg. Collection Period (Days) 51.57 55.25 54.18 54.60 71.98 Inventory Conversion 92.25 116.25 126.12 134.14 126.05 Period(Days) Operating Cycle (Days) 143.82 171.49 180.29 188.74 198.04 A/C Payable Turnover Ratio 6.54 5.96 6.21 5.52 5.16 Payables Pay. Period (Days) 55.06 60.44 57.95 65.22 69.73 Cash Conversion Cycle 88.76 111.06 122.34 123.52 128.31 Total Asset Turnover 1.93 1.73 1.74 1.65 1.50 Fixed Asset Turnover 9.67 9.00 9.56 10.94 11.69 Operating Profitability Ratios Gross Profit Margin (GPM) 28.79% 28.20% 27.73% 28.11% 26.39% Op. Profit Margin (OPM) 10.38% 10.72% 12.24% 12.60% 10.94% Pre Tax Profit Margin 8.65% 9.29% 9.40% 9.50% 7.52% Net Profit Margin (NPM) 6.07% 6.75% 6.79% 6.66% 5.25% Leverage Ratios: Total Debt to Equity 0.74 0.79 0.74 0.84 0.92 Debt to Total Assets 19.84% 26.38% 32.70% 19.34% 28.49% Coverage Ratios: Times Interest Earned (TIE) 9.61 7.49 5.20 4.83 3.62 Valuation Ratios: NAVPS (Basic) 25.39 28.99 23.18 32.02 30.82 EPS (Basic) 7.12 9.79 9.24 10.35 8.66 Growth Rates: EPS Growth Rate 48.22% 36.58% 23.42% 12.04% -16.29% Sales Growth Rate 30.34% 22.78% 22.61% 14.20% 6.18% Gross Profit Growth Rate 40.73% 20.23% 20.57% 15.78% -0.32% EBIT Growth Rate 50.25% 26.75% 39.99% 17.58% -7.77% Net Income Growth Rate 48.22% 36.58% 23.42% 12.04% -16.29% Other Data: Number of shares outstanding 76,694,491 76,694,491 76,694,491 99,702,838 99,702,838 DUPONT ANALYSIS: Net Profit AT/Sales 6.07% 6.75% 6.79% 6.66% 5.25% Sales/Total Assets 192.61% 173.18% 174.30% 164.57% 149.87% ROA 11.68% 11.68% 11.84% 10.97% 7.87% Net Profit AT/Total Assets 11.68% 11.68% 11.84% 10.97% 7.87% Total Asset/ Total Equity 2.78 3.06 3.38 3.38 3.50 ROE 32.48% 35.78% 40.03% 37.05% 27.57% Extended DUPONT ANALYSIS: Net Profit/Pretax Profit 70.08% 72.64% 72.23% 70.17% 69.84% Pretax Profit/EBIT 83.36% 86.65% 76.84% 75.36% 68.73% EBIT/Sales 10.38% 10.72% 12.24% 12.60% 10.94% Sales/Assets 192.61% 173.18% 174.30% 164.57% 149.87% Assets/Equity 2.78 3.06 3.38 3.38 3.50 ROE 32.48% 35.78% 40.03% 37.05% 27.57%

6 EBL Securities Limited Research