AAKASH CAPITAL LIMITED Weekly Newsletter from Aakash Capital Limited for the week ending on 8th November, 2019

NEPSE UPDATE

Indicators 3rd Nov, 2019

7th Nov, 2019

(+)/(-)

Change %

NEPSE 1146.17 1131.97 -1.24%

SENSITIVE 252.08 248.31 -1.50%

FLOAT 84.91 83.94 -1.14%

SEN. FLOAT 80.89 79.73 -1.43%

BANKING 1053.17 1039.18 -1.33%

TRADING 292.51 326.39 11.58%

HOTELS 1821.33 1782.40 -2.14%

DEVELOPMENT BANKS 1564.94 1562.02 -0.19%

HYDROPOWER 949.23 949.71 0.05%

FINANCE 573.97 561.01 -2.26%

NON LIFE INSURANCE 4179.20 4140.76 -0.92%

MANU. & PRO. 2427.96 2395.73 -1.33%

OTHERS 651.90 630.60 -3.27%

MICROFINANCE 1469.00 1479.29 0.70%

LIFE INSURANCE 5064.58 5007.84 -1.12%

MUTUAL FUND 9.10 9.40 3.30%

Market Summary Statistics (3rd Nov to 8th Nov, 2019)

Total Turnover (Rs) 1,232,275,724.00

Total Traded Shares 4,650,258.00

Total Number of Transactions 21,185.00

Scrips Traded 163.00

Market Cap at Week start 1,447,763.47 Millions

Market cap at Week end 1,437,291.83 Millions

Floated Market Cap at Week start 524,436.74 Millions

Floated Market Cap at Week end 521,082.88 Millions

Bullion Update

As on 8th November, 2019 Hallmark Gold Rs.69,900/tola

Worked Gold Rs.69,600/tola

Silver Rs.835/tola

Quote for the week

"In investing, what is comfortable is rarely profitable."

- Robert Arnott

The market declined 1.24% (14.20 points) in the

trading week between 3rd November and 7th November

2019. The sensitive index, which measures the

performance of the companies classified under group

“A”, also registered a fall of 1.50% (3.77 points).

Similarly, float index which measures the performance

of securities which are floated to public also went

down by 1.14% and sensitive float followed the trend

by increasing 1.43%.

This week the market opened at 1146.17 on Sunday

and went down 6.88 points to sit at 1139.29. But the

market retraced by 0.97 points to sit at 1140.26 on

Monday. However, the falling trend continued on the

remaining days. The market declined by 0.81 points on

Tuesday, 1.43 points on Wednesday and followed by

decline of 6.05 points on Thursday to end the week at

1131.97

In this review period, most of the sectors closed lower.

The others sub-index declined the most by 3.27% but

it gained 0.39% last week. Similarly the Finance sub-

index registered the loss of 2.26% followed by Hotels

sub-index of 2.14%. The Banking, Development Banks,

Non-Life Insurance, Manu & Pro and Life Insurance

sub-index declined by 1.33%, 0.19%, 0.92%, 1.33% and

1.12% respectively. However, Trading sub-index

registered the highest gain of 11.58% followed by

Mutual Fund, Microfinance and Hydropower sub-index

with 3.30%, 0.70% and 0.05% respectively.

The market witnessed comparatively supportive

volume of transaction turnover this week as compared

to recent weeks. The total turnover stood at Rs.1.23

billion with average of Rs.246.45 million a day. The

total market value decreased by Rs.19,208.87 million

as the market capitalization went down by 1.31%.

Similarly, floating market cap registered a loss of 1.18%

this trading week.

.

News Update

New Delhi responds to uproar in Nepal over new political map, says it is “accurate” Raveesh Kumar, spokesperson for India’s Ministry of External Affairs, says the map has not revised the boundary and that it accurately depicts India’s sovereign territory…..Read More

NRB’s Deputy Governor Shrestha suspended

The Nepal Rastra Bank (NRB) board today formed a three-member inquiry committee to probe allegations of misconduct by the central bank’s Deputy Governor Shiba Raj Shrestha. Following this, Shrestha also got suspended from his post at the central bank.....Read More

NERC drafts electricity tariff guidelines

Nepal Electricity Regulatory Commission (NERC) has drafted the ‘Electricity Customer Tariff Determination Guidelines’ aiming to manage electricity generation, transmission, distribution and trade to balance demand and supply of electricity for customers.....Read More

Government issues one directive after another to medical colleges to refund additional fees, but has taken no

action as yet Students from different medical colleges in Capital to pressurise the government and their colleges for increased fee refunds…..Read More

Why has Nepal failed to attract enough foreign direct investment? Nepal aims to become a middle-income country and achieve the Sustainable Development Goals by 2030. But the current level of investment is not enough for the country to reach the middle-income stage from the current low-income status as targeted, according to a World Bank report.....Read More

Market Announcements

Prabhu Bank Limited is issuing its (10,00,000 units @ Rs.1000 per unit) 10.25% Prabhu Bank Debenture 2086 to the general public from today (21st Kartik, 2076).

Nepal Investment Bank Limited is selling its 29,380 units promoter shares in an auction to the general public from (21st to 28th Kartik, 2076).

Lumbini General Insurance Company Limited is issuing it's 10:2 ratio 17,60,000 units right share to its shareholders from (24th Kartik to 29th Mangsir, 2076).

Global IME Bank Limited has posted a net profit of 753.14 million and published its 1st quarter company analysis of the fiscal year 2076/77.

Mero Microfinance Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 42.72 million and published its 1st quarter company analysis of the fiscal year 2076/77.

Aarambha Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 3.22 million and published its 1st quarter company analysis of the fiscal year 2076/77.

Janaki Finance Limited urges its shareholders to collect uncollected due dividends.

Sunrise Bank Limited is distributing 5.8% cash dividend directly to bank accounts to its shareholders and urged its shareholders to dematerialize their shares.

Oriental Hotels Limited is distributing 10.79% cash dividend directly to bank accounts to its shareholders and urged its shareholders to dematerialize their shares.

Global IME Laghubitta Bittiya Sanstha Limited has allotted its 56,561 units ordinary shares in auction to the general public on 17th Kartik, 2076 and refunding money to non-allottee investors from today (20th Kartik, 2076).

Srijana Finance Limited has extended its 10:6 ratio right share to its shareholders till (6th Mangsir, 2076).

Gurans Laghubitta Bittiya Sanstha Limited has announced its 4th AGM going to be held on 14th Mangsir, 2076.

Chilime Hydropower Company Limited has announced its 23rd AGM going to be held on 11th Mangsir, 2076. Myagdi Hydropower Limited has announced its 12th AGM going to be held on 12th Mangsir, 2076. RSDC Laghubitta Bittiya Sanstha Limited has announced its 6th AGM going to be held on 13th Mangsir, 2076.

NEPSE - TECHNICAL ANALYSIS

The Nepalese stock market declined continuously after it made its top on 27th of July, 2016. The market had shown short term

bull in the month of March-April (during Nepali New Year 2076 BS) and reached the height of 1349 on 30th May 2019 but could

not close above the resistance level of 1340. Currently, the index is at 1131 level after falling from 1149 level last week.

However, in a weekly line chart the index is trading around the support zone of 1130 level. This week the market closed at

1131.97 forming a red candle. This week NEPSE opened at 1145.83 and formed a red candle by closing at 1139.29, losing 6.88

points during the day and the overall market lost 14.20 points during the week. This week the average turnover has increased

to Rs.246 million from 215 million of previous week. As of weekly line chart the short term support might be at around 1130.

Technical Indicators

Indicators Value Signal

Support (S1) 1130 -

Resistance (R1) 1149 -

Relative Strength Index (RSI) 40.23 Moderate zone

Moving Average Convergence Divergence (MACD) -5.85 Bullish

5-Day Exponential Moving Average (EMA) 1137.19 Bearish

20-Day Exponential Moving Average (EMA) 1141.61 Bearish

180-Day Exponential Moving Average (EMA) 1186.94 Bearish

Relative Strength Index (RSI) Analysis

RSI is a moment indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions

in the price of a stock. RSI is typically used on a 14-day time frame, measured on a scale from 0 to 100, where a value above 70

represents overbought and below 30 represents oversold condition.

Current RSI value of NEPSE is 40.23 which indicates that the market is at moderate zone. In a weekly chart while comparing from

13th October to 7th November 2019, there will be the formation of divergence if it retrace from 1130 level.

Moving Average Convergence Divergence (MACD)

MACD is a momentum oscillator formed by using two different moving averages, typically a 26 day EMA and 12 day EMA, which

provides specific buy/sell signal. When the MACD line crosses signal line from above, it is considered bearish, indicating a sell

signal and vice-versa.

Currently MACD and signal line is at -5.85 and -7.19 respectively. MACD line is above the signal line and both are below the base

line. MACD has shown bullish signal for the overall market.

Moving Average Analysis

Moving average is a technical analysis tool that smooth out price data by creating a constantly updated average price. It is used

to identify the trend direction, support or resistance levels and also to generate potential buy/sell signals. Price crossover and

MA crossover are some of the strategies that can be used to buy/sell a stock.

The EMA (5, 0) green line is at 1137.19 and EMA (20, 0) red line is at 1141.61 The index is currently trading below 5 and 20 days

Exponential Moving Average. This indicates that the overall market is at correction phase.

Bollinger Band

Bollinger band is a technical indicator that consists of a set of lines plotted two standard deviations up and below a 21-day simple

moving average. The bands are an indication of volatility; a widening gap indicates higher volatility and vice-versa. Prices are

relatively high when above the upper band and low when below the lower band.

The upper, middle and the lower bands are at 1150.83, 1140.10 and 1129.38 respectively. The market is trading in between the

middle and lower band.

Stock Analysis: Surya Life Insurance Company Ltd. (SLICL)

Surya Life Insurance Company Ltd. has been established and registered under Company Act 2063 B.S and Insurance Act 2049 as a Public Limited Company and was issued a license to operate Life Insurance Business on 2064/12/06 (19th March 2008). Spanning a history of over 11 years, the company has been providing clients with stability and confidence of security, and shareholders with consistent returns.

The Company has made reinsurance arrangement with Nepal Re-Insurance Co Ltd and it is operating with a mission to create resources and means for economic development of the country and work for the betterment of the people by introducing and implementing various attractive payback life insurance plans. The company is providing its services through 72 offices with 245 employees and 13,304 agents.

Board of Director

Name Designation

Mr. Keshab Prasad Bhattarai Chairman

Mr. Bishal Agrawal Director

Mr. Hemanta Nahata Director

Dr. Binod Atreya Director

Mr. Ganga Prasad Sharma Independent Director

Mrs. Kriti Tibrewal Director

Mr. Birendra Babu Shrestha Public Director

(Source: https://www.suryalife.com/)

Chief Executive Officer: Shiva Nath Pandey

Capital Structure (As on 31st Asadh 2075)

Authorized Capital NRs. 2,000,000,000

Issued Capital NRs. 1,131,900,000

Paid-up Capital NRs. 1,094,821,300

Shareholding Pattern (As of 31st Asadh 2075)

Shareholders 2074/75

Holding units Percentage

Promoter

Domestic Institutions 2,817,017 39.02%

Nepalese Citizen 2,236,110 30.98%

Foreigner - -

General Public 2,165,625 30.00%

Others - -

Total 7,218,752 100.00%

Yearly Analysis

The following table presents the trend of financial performance of SLICL from the FY 2071/72 to 2075/76*

Particulars 2071/72 2072/73 2073/74 2074/75 2075/76* CAGR

Share Capital (Rs.000) 500,000 500,000 656,250 1,094,821 1,267,728 26.19%

Reserves & Surplus (Rs.000) 142,017 257,212 353,626 327,262 410,293 30.37%

Insurance Fund (Rs.000) 1,051,001 1,646,025 2,417,176 3,524,700 5,252,452 49.52%

Long term Investment (Rs.000) 750,502 750,768 1,815,169 2,841,642 2,849,012 39.58%

Total Revenue (Rs.000) 31,515 119,137 153,063 221,301 297,063 75.22%

Total Expenses (Rs.000) 9,573 13,329 16,811 34,759 88,450 74.34%

Gross Premium (Rs.000) 725,803 1,078,653 1,338,231 1,749,457 2,550,843 36.92%

Net Profit (Rs.000) 21,941 132,467 136,253 186,542 208,613 75.60%

Change Period on Period (%) 503.73% 2.86% 36.91% 11.83%

Net Profit to Gross Premium (%) 3.02% 12.28% 10.18% 10.66% 8.18%

ROE (%) 4.30% 9.55% 8.54% 15.84%

ROA (%) 1.20% 2.81% 2.36% 3.97%

EPS (Rs.) 4.39 26.49 20.76 16.48 16.46

DPS (%) 5.00% 11.00% 18.00% 12.63%

MPPS (Rs.) 709 856 1070 600 456

Price Earnings ratio 161.50 32.31 51.54 36.41 27.70

Book Value per Share (Rs.) 128.4 151.44 139.47 115.36 138.49

Solvency Margin (%) 1.8 1.81 2.17 1.24

Total no. of Policies 174,190 271,416 280,332 324,240 376,967

No. of Claims Paid 513 894 1,200 1,774

No. of Unpaid Claims 5 207 186 769

No. of Claims/Total No. of Policies (%) 0.28% 0.30% 0.26% 0.37% 0.67%

Insurance Agents 4,202 6,569 5,067 13,304

Total Employees 206 217 206 245

Total No. of office 67 67 67 72

Based on the data presented above from 2071 to 2076 BS, the company has shown consistent growth in most of its fundamentals in the review period. As of 2075/76 its paid up capital is Rs.1.26 billion which shows that the company has failed to maintain the paid up capital directed by Insurance Board. Most of the non-life companies are still unable to meet their minimum paid-up capital directed by the regulatory body. However, SLICL is in the process of making its paid up capital Rs.2 billion by issuing 70% right share to its shareholders. The company has reported 25% growth in Reserves & surplus which was -7% in 2074/75. Similarly, it has reported 49% growth in Insurance Fund, 0.26% in Long Term Investment, 45% in Premium collection, which have resulted 34% growth in Revenue collection and 11% rise in Net Profit.

As of 4th Quarter report of 2075/76 most of the indicators are stable. The company has made positive growth in most of the indicators, however the growth in Reserve & Surplus in 2074/75 was negative 7% but the Compounded Annual Growth Rate (CAGR) in the review period is 30%. Most of the fundamentals have done progress but share price is in decreasing trend. The company has reported solvency margin of 1.24 in 2074/75 which is below the minimum solvency margin directed by Insurance Board. Total no of Policies has increased from 174,190 in 2071/72 to 376,967 in 2075/76. The company seems to be in a stable position and has potential to become one of the market leader in its sector with a benefit of competitive advantage. As of 2074/75 the company is operating in 72 locations with 13,304 agents and 245 employees.

The company has given regular dividend to its shareholders. Looking at the history of dividend distribution, it seems to be

highly focused on distributing bonus share. However, dividend from 2075/76 has not been declared yet.

Snapshot of Performance

50.00 50.0065.63

109.48126.77

14.2025.72

35.36 32.73 41.03

0.00

50.00

100.00

150.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Share Capital and Reserves & Surplus

Share Capital (Rs.crores) Reserves & Surplus (Rs.crores)

105.10164.60

241.72

352.47

525.25

0.00

100.00

200.00

300.00

400.00

500.00

600.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Insurance Fund (Rs.crores)

3.15

11.9115.31

22.13

29.71

0.96 1.33 1.683.48

8.85

0.00

10.00

20.00

30.00

40.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Revenues vs Expenses

Total Revenue (Rs.crores) Total Expenses (Rs.crores)

0.961.33 1.68

3.48

8.85

2.19

13.25 13.63

18.6520.86

0.00

5.00

10.00

15.00

20.00

25.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Expenses vs Net Profit

Total Expenses (Rs.crores) Net Profit (Rs.crores)

2.19

13.25 13.63

18.6520.86

4.39

26.49

20.76

16.48 16.46

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Net Profit vs EPS

Net Profit (Rs.crores) EPS (Rs.)

4.39 26.49 20.76 16.48 16.46

709856

1070

600

456

0

200

400

600

800

1000

1200

2071/72 2072/73 2073/74 2074/75 2075/76*

EPS vs MPPS

EPS (Rs.) MPPS (Rs.)

725,8031,078,653

1,338,2311,749,457

2,550,843

174,190 271,416 280,332 324,240 376,967

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2071/72 2072/73 2073/74 2074/75 2075/76*

No of Policies vs Gross Premium

Gross Premium (Rs.000) Total no. of Policies

5.00%

11.00%

18.00%

12.63%

0.00%

5.00%

10.00%

15.00%

20.00%

2 0 7 1 / 7 2 2 0 7 2 / 7 3 2 0 7 3 / 7 4 2 0 7 4 / 7 5

DPS (%)

Technical Analysis of SLICL as on November 7, 2019

(Source: https://pro.sharesansar.com)

Day Candle

Open 256

High 261

Low 256

Close 256

Pattern Analysis

Chart Pattern Short term sideways

Resistance R1: 258 R2: 262

Support S1: 253 S2: 221

Higher Breakout Level 287

Particulars Points Remarks

Volume 1,761 The daily volume of stock is lower than 1 week’s

and 1 month’s average volume. Avg. Volume (1 week) 2,314.40

Avg. Volume (1 month) 2,548.33

No. of Transaction 14

The daily number of transaction is lower than 1 week’s and 1 month’s average no transaction.

Avg. no. of Transaction (1 week) 19

Avg. no. of Transaction (1 month) 16.14

180 days Average (Rs.) 445.34 The price of the stock is trading below both 180 day’s 360 day’s average. 360 days Average (Rs.) 501.57

52 Weeks High Price (Rs.) 619 The stock is currently trading around 52 week’s low price. 52 Weeks Low Price (Rs.) 254

Nepse Index 1 year Change -7.41% The overall market and the industry has declined in the last 12 months. The stock has fall in the past one month and ever more in last one year.

Industry Index 1year Change -8.42%

Stock 1-Month Change -4.48%

Stock 1-Year Change -49.90%

Total Holdings of Mutual Funds (Ashwin 2076) 2,566 The Mutual Funds are holding very less number of shares of the company as compared to other companies.

Auction Notice

The company is selling its 281,913 units’ ordinary and 27,389 units’ promoter shares through auction from 24th Karthik to 1st

Mangsit 2076 (10th to 17th November 2019). The company has appointed Nic Asia Capital as the issue manager for the auction.

Interested individuals can bid for the auction above Rs.100 per share with minimum units of 100 units.

Concluding Remarks

As per the Economic survey report 2018/19 by Ministry of finance, Insurance industry contributes 2.04% to GDP in Nepal with market penetration of just 18%. This industry is facing a lot of criticism as compared to other industry. Most of the people are unaware about insurance and even educated people are reluctant to buy insurance policy. Most of the people underestimate the return of insurance and lacks knowledge how insurance protects an individual financially. If companies can convince their customers about the risk and reward of their policies, they can do better in this emerging economy. Surya Life Insurance Company Limited is an established insurer in Life Insurance sector with 13,304 agents and 245 employees and presence in 72 locations. Most of the fundamentals seems to in a stable position and has potential to become one of the best in its sector.

Indicators Points Remarks

RSI (14) 40.68 SLICL is at moderate zone.

MACD (12,26,9) -5.03 The MACD line is below the signal line and both are below the baseline.

Signal Line (12,26,9) -4.74

Histogram (12,26,9) -0.29

EMA (5,0) 257.92 Both EMA 5 and EMA 20 are above the price.

EMA (20,0) 263.69

+DMI(13,8) 19.72 The -DMI is dominant over +DMI and ADX is at 8.95.

-DMI(13,8) 23.14

ADX (13,8) 8.95

Chaikin Money Flow (20) -0.2272 CMF is below the baseline which shows selling pressure for the stock in the market.

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Disclaimer and important information: This document has been prepared by Aakash Capital Limited for information and

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