Introduction:

Asset based valuation:

Analysts use a wide spectrum of models, ranging from the simple to the sophisticated. These models
often make very different assumptions about the fundamentals that determine value, but they do
share some common characteristics and can be classified in broader terms. There are several
advantages to such a classification -- it makes it is easier to understand where individual models fit in
to the big picture, why they provide different results and when they have fundamental errors in
logic.

Discounted Cashflow Valuation

In discounted cashflows valuation, the value of an asset is the present value of the expected
cashflows on the asset, discounted back at a rate that reflects the riskiness of these cashflows. This
approach gets the most play in classrooms and comes with the best theoretical credentials. In this
section, the will look at the foundations of the approach and some of the preliminary details on how
the estimate its inputs.

Basis for Approach

The buy most assets because the expect them to generate cash flows for us in the future. In
discounted cash flow valuation, the begin with a simple proposition. The value of an asset is not
what someone perceives it to be worth but it is a function of the expected cash flows on that asset.
Put simply, assets with high and predictable cash flows should have higher values than assets with
low and volatile cash flows. In discounted cash flow valuation, the estimate the value of an asset as
the present value of the expected cash flows on it.

where,

n = Life of the asset

E(CFt) = Expected cashflow in period t

r = Discount rate reflecting the riskiness of the estimated cashflows

The cashflows will vary from asset to asset -- dividends for stocks, coupons (interest) and the face
value for bonds and after-tax cashflows for a business. The discount rate will be a function of the
riskiness of the estimated cashflows, with higher rates for riskier assets and lother rates for safer
ones.

c. Variations on DCF Models

The model that the have presented in this section, where expected cash flows are
discounted back at a risk-adjusted discount rate, is the most commonly used discounted cash flow
approach but there are two widely used variants. In the first, the separate the cash flows into excess
return cash flows and normal return cash flows. Earning the risk-adjusted required return (cost of
capital or equity) is considered a normal return cash flow but any cash flows above or below this
number are categorized as excess returns; excess returns can therefore be either positive or
negative. With the excess return valuation framework, the value of a business can be written as the
sum of two components:

Value of business = Capital Invested in firm today + Present value of excess return cash flows from
both existing and future projects

DCF Valuation: Pluses and Minuses

To true believers, discounted cash flow valuation is the only way to approach valuation, but
the benefits may be more nuanced that they are willing to admit. On the plus side, discounted cash
flow valuation, done right, requires analysts to understand the businesses that they are valuing and
ask searching questions about the sustainability of cash flows and risk.

Relative Valuation

While the focus in classrooms and academic discussions remains on discounted cash flow valuation,
the reality is that most assets are valued on a relative basis. In relative valuation, the value of an
asset is derived by looking at how the market prices similar assets. Thus, when determining what to
pay for a house, the look at what similar houses in the neighborhood sold for rather than doing an
intrinsic valuation. Extending this analogy to stocks, investors often decide whether a stock is cheap
or expensive by comparing its pricing to that of similar stocks (usually in its peer group). In this
section, the will consider the basis for relative valuation, ways in which it can be used and its
advantages and disadvantages.

Basis for approach

In relative valuation, the value of an asset is derived from the pricing of 'comparable' assets,
standardized using a common variable. Included in this description are two key components of
relative valuation. The first is the notion of comparable or similar assets. From a valuation
standpoint, this would imply assets with similar cash flows, risk and growth potential. In practice, it is
usually taken to mean other companies that are in the same business as the company being valued.
The other is a standardized price. After all, the price per share of a company is in some sense
arbitrary since it is a function of the number of shares outstanding; a two for one stock split would
halve the price.

Variations on Relative Valuation

In relative valuation, the value of an asset is based upon how similar assets are priced. In
practice, there are three variations on relative valuation, with the differences primarily in how the
define comparable firms and control for differences across firms:

a. Direct comparison: In this approach, analysts try to find one or two companies that look almost
exactly like the company they are trying to value and estimate the value based upon how these
similarcompanies are priced. The key part in this analysis is identifying these similar companies
and getting their market values.
b. Peer Group Average: In the second, analysts compare how their company is priced (using a
multiple) with how the peer group is priced (using the average for that multiple). Thus, a stock is
considered cheap if it trade at 12 times earnings and the average price earnings ratio for the sector
is 15. Implicit in this approach is the assumption that while companies may vary widely across a
sector, the average for the sector is representative for a typical company.

c. Peer group average adjusted for differences: Recognizing that there can be wide differences
bettheen the company being valued and other companies in the comparable firm group, analysts
sometimes try to control for differences bettheen companies. In many cases, the control is
subjective: a company with higher expected growth than the industry will trade at a higher multiple
of earnings than the industry average but how much higher is left unspecified. In a few cases,
analysts explicitly try to control for differences bettheen companies by either adjusting the multiple
being used or by using statistical techniques.

Three business valuation approaches

That said, there are three fundamental ways to measure what a business is worth:

Asset Approach

Market Approach

Income Approach

Asset approach

The asset approach views the business as a set of assets and liabilities that are used as building
blocks to construct the picture of business value. The asset approach is based on the so-called
economic principle of substitution which addresses this question:

Since every operating business has assets and liabilities, a natural way to address this question is to
determine the value of these assets and liabilities. The difference is the business value.

Sounds simple enough, but the challenge is in the details: figuring out what assets and liabilities to
include in the valuation, choosing a standard of measuring their value, and then actually determining
what each asset and liability is worth.

Market approach

The market approach, as the name implies, relies on signs from the real market place to determine
what a business is worth.

So the market approach to valuing a business is a great way to determine its fair market value a
monetary value likely to be exchanged in an arms-length transaction, when the buyer and seller act
in their best interest. Market data is great if you need to support your offer or asking price after all,
if the going rate is this much, why would you offer more or accept less?

Income approach
The income approach takes a look at the core reason for running a business making money. Here
the so-called economic principle of expectation applies:

Notice the future expectation of economic benefit in the above sentence. Since the money is not in
the bank yet, there is some measure of risk of not receiving all or part of it when you expect it. So,
in addition to figuring out what kind of money the business is likely to bring, the income valuation
approach also factors in the risk.

Since the business value must be established in the present, the expected income and risk must be
translated to today. The income approach uses two ways to do this translation:

Capitalization

Discounting

Valuation of a business by discounting its cash flows

The discounting method works a bit differently: first, you project the business income stream over
some future period of time, usually measured in years. Next, you determine the discount rate which
reflects the risk of getting this income on time.

Last, you figure out what the business will be worth at the end of the projection period. This is called
the residual or terminal business value. Finally, the discounting calculation gives you the so-called
present value of the business, or what it is worth today.

Business valuation and risk: discount and cap rates are related

Since both income valuation methods do the same thing, you would expect similar results. If fact,
the capitalization and discount rates are related:

CR = DR - K

where CR is the capitalization rate, DR is the discount rate, and K is the expected average growth
rate in the income stream. Lets say that the discount rate is 25% and your projections show that the
business profits are growing at a steady 5% per year. Then the capitalization rate is 25 - 5 = 20%.

Perhaps the biggest difference bettheen capitalization and discounting is what income input you
use. Capitalization uses a single income measure such as the average of the earnings over several
years. The discounting is done on a set of income values, one for each year in the projection period.

If your business shows smooth, steady profits year to year, the capitalization method is a good
choice. For a growing business with rapidly changing and less predictable profits, discounting gives
the most accurate results.

Importance of valuation:

Business valuation is used to set the fair market value of the shares of a business, in other words to
know how much the business is worth. This analysis is useful in various situations, such as a
transaction (purchase or sale of a business), tax reorganization, integration of a new shareholder or
in the context of litigation.

When comes the time to have their business valued, the owners biggest concern is to maximize the
value of it. Seeking an expert in business valuation provides not only an objective and independent
value, but also guarantees a suitable transaction in terms of taxation while making sure that no
money is left on the table.

The valuation is based on the analysis of different types of information, for instance financial
statements, budgeting, business plan, client list, salaries, etc. In addition to providing a thorough
evaluation, experts in business valuation, due to their experience and knowledge of the market, are
also able to assist with ideas for investment or acquisition projects or any other element that could
help maximize the value of a business.

Industry analysis:

Bangladesh's shrimp exports totaled $507.3 million for the fiscal year ending in June, the Bangladesh
Frozen Foods Exporter Association reported, down 1.5 percent from the previous fiscal year. Shrimp
production accounted for 95 percent of the country's frozen food exports, which totaled $534
million. The shrimp industry remains the second largest foreign currency earner for the country,
close behind the garment industry. Bangladesh's total export income for the year was $12.18 billion.
Maksudur Rahman, president of the BFFEA, says that Bangladeshi shrimp exports, which go mainly
to the EU, Japan and the United States, would continue to increase as product quality improves. The
Southeast Asian country, with 94 shrimp farms concentrated in the Southwestern coastal area,
projects a shrimp export income of $1.5 billion by 2010. The Bangladesh shrimp industry employs
roughly 20,000 people.

S-C-P analysis:
 Structure
Total 88 firms export shrimp
Most firms are public limited company have licence for export
Customers are USA & EU ( Belgium, Germany)

Conduct
Potentiality is high for cheap labour, increasing demand in Uk and EU
Price is based on the market demand
Causing environmental problem as the lands become infertile for cultivation
Distributation channel is Shrimp farmer- Shrimp faria-shrimp aratdar-
commision agent-processing industry-exporter-foreign buyer
production capacity is 300000 M ton per year

Performance
400 million currency every year
second largest export goods
3.78% of total gdp

Industry Life Cycle Analysis

Under the production and market introduction phases, revenues and earnings are likely to be very
low, which makes investments during these phases more speculative in nature. .Through the growth
phase, revenues and margins are likely to be on the rise due to an increase in demand for a product
and the pricing pother the firm has due to a small number of competitors. Stock prices are likely to
rise during this phase.

The shrimp industry starts in the year of 1994 and experienced growth from the year 1998 to 2008.
Although the industry`s growth is not constant over the period, it is now staying in the growth stage
of industry life cycle.
Major trends:

During the first quarter 2015, sale volumes of shrimp increased in the international market
compared with the same period last year, supported by good availability of shrimp and 20-30%
declines in export prices compared with the first quarter of 2014.Imports increased in the USA and
Canada as well as some EU markets, including Spain, France, Italy, the UK, the Netherlands, and
Germany. With 80 600 tonnes of exports, Ecuador was the number one shrimp exporter in the world
during the first quarter 2015.

Lother shrimp prices in the international market induced demand in many markets worldwide.
During the first quarter of 2015, imports increased in Canada by 39% compared with the same
period last year to total 11 410 tonnes. Mexican imports there were decreasing, indicating a
recovery in the aquaculture production of shrimp. In Bangladesh, black tiger shrimp producers have
started to tap the domestic market as the traditional export markets to the USA and the EU continue
to import less and pay very low prices. Although the volume is still low and is targeting only a niche
market, shrimp in the domestic market are fetching better prices, with the volume expected to
increase in the future. According to national data, export revenue from shrimp in Bangladesh
declined by 3.6% year-on-year to USD 440.50 million, during the first ten months of the fiscal year

Country Name Import Export

Quantity Value (US $) Quantity Value (US $)

(tons) (tons)
EU 33498.73 365503980.38

USA 4032.20 53922872.68

Japan 2588.21 23532501.90

Other countries (Rasa, China, Thailand, 35219.04 103318857.71

Vietnam, India, Malaysia, Philippine,
Saudi Arab etc.

India, Myanmar, Oman, Pakistan, 88593.50 42413194.26

Thailand. (Most of from India,
Myanmar)

2.3Concentration level

This transition points to a move to a more organized regime in fishing and profit seeking motives by
the farmers. In the period 1985-86 for instance, the capture category of fish supply consisted of 56%
of the total production whereas in 2011-12, it only consisted of 30% with the culture category
making up 53% of production. In addition, this points to opportunities for market interventions
which would enhance the production volume in the culture category of fishing and increase its share
from the current rate of around 55% of fishing production.

The fish they produce increasingly go forward in the value chain in the form of value added products
such as processed fish. These products are in turn sold in urban retailing outlets or exported. There
are around 160 processing plants in Bangladesh and most of them are concentrated in the Southern
parts of the country namely, Khulna, Satkhira, Barisal, Chittagong and Coxs Bazar. These plants have
a combined capacity of producing 350,000 MT of processed fish per year.

This capacity is going to be put under strain as the processed fish sector is going to experience
progressively faster demand with increased levels of urbanization (growth of 4%/year) and changing
employment and socio-economic profile of Bangladesh. With the rising popularity of retail outlets
such as Agora, Meena Bazar, Nandan, Swapno and the move to a more processed style of eating in
the urban areas, domestic demand for processed fish is projected to be robust in the coming years.
An estimated 1.2 million people of Bangladesh are fishers and earn their livelihood from fishing. A
further 12 million people indirectly earn their livelihood from fisheries and aquaculture and related
activities, and employed in the backward and forward linkages of the value chain such as the
downstream activities of fish trading, fish seed production, collection of shrimp and prawn seed, fish
handling, processing and marketing, net making, input supply and processing. The number of fish
farmers and shrimp/prawn farmers presently are 13.86 millions and 0.83 millions, respectively.
Among the people involved in the sector 10% are women.

DDM:

The dividend discount model (DDM) is a procedure for valuing the price of a stock by using the
predicted dividends and discounting them back to the present value. If the value obtained from the
DDM is higher than what the shares are currently trading at, then the stock is undervalued.

BREAKING DOWN 'Dividend Discount Model - DDM'

This procedure has many variations, and it doesn't work for companies that don't pay out dividends.
For example, the supernormal dividend growth model takes into account a period of high growth
followed by a lower, constant growth period. The principle behind the model is the net present value
(NPV) of the cash flows. To get a growth number, one option is to take the return on equity (ROE)
and multiply it by the retention ratio (which is the opposite of the payout ratio).

Limitation:

The most obvious limitation: it doesn't work for companies that don't pay dividends.

Assuming the company pays a dividend, one needs to know what the dividends will be in the
future. And anyone who was holding a dividend-paying bank stock during the financial crisis knows
that a steady quarterly cash dividend will quickly get slashed when profits collapse.

Furthermore, the DDM is very sensitive to the growth rate (g) and the discount rate (k) assumptions.

Key assumptions made while valuing:

1. The sales growth has been found by the past five years company sales which can change in
the future and the average growth rate was determined -14%.
 2. Earning over the upcoming years is projected using upcoming net profit margins which is
0.74%
3. Dividends per share are found on SECs website or companys financial statements.
4. The dividend pay-out ratio is determined by the historical data of 2011-2016s financial
statements.
5. The cost of equity is determined by CAPM model.
6. The terminal growth rate is 7% adjusting average inflation rate and the current GDP.

Decision:

As the share is overvalued in the market it is better to sell.