IPO Note BBS Cables LTD

Date: 30 July 2017

Ticker: BBSCABLES

BBS Cable - Third Largest Cable Producer in the Country is the Associate Company of Bangladesh
Building Systems (BBS)
BBS Cable is the associate company of Bangladesh Building System (DSE: BBS). The Company, as a new venture of the BBS group, has
been incorporated in 2009 and started its commercial operation in 2011. The factory of BBS Cables Ltd. is located at Telehate, Jaina Ba-
zar, Sreepur, Gazipur, Bangladesh to manufacture and test the following products,

PVC, FR / FRLS PVC Insulated House Wiring Cables

PVC/XLPE Insulated Single & Multi Core LV Cables 49.0% of the fund from IPO proceeds will be used
PVC/XLPE Insulated MV Cables up to 12 kV in acquisition of plant and machinery
Telecommunication Cables BBS Cables Ltd. has 100 mn shares prior to IPO and through
Special Type Cables etc. the IPO they will be collecting a total of Tk.20 crore by offering
20 mn shares with Tk.10 face value each. From IPO, 49.0% of
the fund will be used in acquisition of plant and machinery,
22.3% will be used in building and other civil works, 20.0% will
be used in partial loan pay off and the rest 8.7% will be IPO
expense. Acquisition of plant & machinery, building and other
civil works will be started after 06 months, and partial loan pay
off will be done within 03 months after receiving the IPO fund.

Total Market Size - BDT 32.0 bn of which 75%

met by domestic producer and 25% met by import
Domestic cable market size is estimated at BDT 32.0 bn grow-
ing at 10.0% annually. Around 75.0% demand is met by local
manufacturers whereas the other 25.0% met by import. BRB
Cable is the largest player with 40.6% market share, followed
by Paradise Cable 7.2%, BBS Cables 5.8%, Eastern Cables 3.7%,
Supersign Industries (Electrical) 3.0%, Poly Cables 2.8%. Pres-
ently 50.0% - 60.0% of countrys total PVC Cable, Conductor
AAC & ACSR, Super Enameled Copper Wire are met by do-
mestic cable industries. Due to Rural Electrification Pro-
gramme by the Government demand of PVC Cables and Con-
ductor are increasing. So far in our country only 50.0% - 60.0%
is completed and still 40.0% - 50.0% will be electrified in near
future, the consumption of cable expected to be on increase at
large scale within near future.

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IPO Note BBS Cables LTD

Key end-users and customers include,

Power Generation Companies, Contractors and Sub-Contractors
Generator and Sub-Station Equipment Manufacturers and Suppliers
Knitting, Dyeing, Spinning, and Textile Mills for New Setup and BMRE
Real Estate and Construction Companies, Contractors and Sub-Contractors
REB, BPDB, PGCB, PWD, MES, DESA, DESCO, and their Contractors and Sub-Contractors
Any New Large Manufacturing Industries

Around 67.0% of the capacity has been utilized in

2016
In the recent time, BBS Cables has increased its capacity to
7200MT in 2016 from 5000 MT in 2014, whereas the industry
leader- BRB Cables has capacity of 30,000 MT. BBS Cables has
also increased its capacity utilization over the year from 61.0%
in 2014 to 66.4% in 2016. They have plan to increase their ca-
pacity by 15-20% and increase the capacity utilization up-to
70-75% every year until 2019.

More than 70.0% of the revenue comes from Power cables

The sales revenue of BBS Cable Ltd. has been decomposed into two major categories, domestic cables and power cables. If we see the last
five years revenue breakdown, the major contribution has come from power cables and which is around 70.5% in June 2016 . Though con-
tribution from domestic cables has increased a bit from 27.0% in June 2012 to 29.5% in June 2016.
In the year 2016 the revenue growth of BBS cables Ltd. was 14.0% which was around 47.7% in 2013. Last four years growth shows an in-
creasing trend at a decreasing rate over the period. Their revenue is growing because of the overall demand of various types of electrical
and communication cables and companys strong management with effective marketing policy.

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IPO Note BBS Cables LTD

Imports 95.0% of the raw materials

The major raw materials of BBS Cables Ltd. are Copper Cath-
odes and wire, Aluminum Wire Rod, PVC Resin, Calcium
Carbonate Powder, XLPE Compound, PVC Stabilizer, Calci-
um Stearate, and Galvanized Steel Core Wire. 95% of which
are procured from foreign suppliers such as Marubeni cor-
poration, Japan; Trafigura Pte Ltd, Singapore; KJV Alloy Con-
ductors, India; Ituchu Ltd, Thailand etc.
About 65% of the total raw material is copper compound
(Copper Wire Rod and Copper Tape). As a result, any change
in the price of copper in the international market would have
significant impact on the companys cost of production, so as
in its profit margins. Since 2011 till the beginning of 2016 inter-
national the copper price was in a declining trend.

Sources of Power, Gas and Water

BBS cables has own Diesel Generated power plant namely
Deutz, Generator with a capacity of 500 KVA and 800 KVA
which was bought in brand new condition from Germany.
The Company also has an agreement with BREB for power
supply. Operating load of power requirement for existing
project is 2,000 KW. They have also purchased locally LPG
cylinder to fulfill their gas requirement.

Consistently growing net profit margin over the

period
Gross profit margin, EBITDA margin and net profit margin
of BBS Cables Ltd. has remained between (31.0% to 35%),
(23.0% to 26.0%) (6.0% to 10.0%) respectively over the last 5
years.

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IPO Note BBS Cables LTD

Investment Facts

BBS Cables Ltd. has five year average revenue growth of almost 27.0%

Production capacity has been increased by 44.0% to 7200 MT. in 2016

from 5000 MT. in 2014

Consistently growing net profit margin, currently which is 9.51%

Company will repay BDT 40 mn loan by using their IPO proceed

which will reduce companys long term borrowing and will result in
reduced financial expenses

Asset size of the company has increased almost 3 times (from BDT 1.5

bn to BDT 4.5 bn) in the last five years.

Double digit ROE of almost 15.0% in 2016

Debt/Equity ratio of the company is in declining trend consistently

(from 8.15 times in 2012 to 1.26 times in 2016) due to large raise in share

capital (BDT 900 mn increased in share capital in 2016)

Exchange rate fluctuation may have a huge impact on their import price

since 95% of their raw materials are imported

Strong Management Profile

Mr. Engr. Mohammad Badrul Hassan, the Chairman of BBS Cables Ltd. is a Graduate from IIT India and has masters in Advanced
Engineering Management from BUET. He has 18 years of experience in the respective field.

Mr. Engr. Abu Noman Howlader, the Managing Director of BBS Cables Limited is Graduate from BUET in Mechanical Engineering
and has 17 years of work experience.

Lock-In Provision
BBS Cables has 120 million outstanding shares. Out of this, 15 million will be free
on day one. 2.5 million will be free after 3 months. Another 2.5 million will be free
after 6 months. 60 million will be free after 1 year and the rest 40 million will be
free after 3 years.

Price Prediction based on P/E valuation

The audited industry price-to-earnings is 23.2x. At industry P/E ratio, BBS Cables could be traded at BDT 47.6. At 15x P/E, BBS Cables
could be traded at BDT 30.8 and at 30x P/E it could be traded at BDT 61.5.

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IPO Note BBS Cables LTD

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