AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 25th October, 2019

NEPSE UPDATE

Indicators 20th Oct, 2019

24th Oct, 2019

(+)/(-)

Change %

NEPSE 1137.75 1149.34 1.02%

SENSITIVE 249.12 252.05 1.18%

FLOAT 84.29 85.21 1.09%

SEN. FLOAT 79.98 80.93 1.19%

BANKING 1044.79 1056.66 1.14%

TRADING

HOTELS 1791.33 1814.34 1.28%

DEVELOPMENT BANKS 1556.79 1562.97 0.40%

HYDROPOWER 945.83 957.77 1.26%

FINANCE 570.17 576.3 1.08%

NON LIFE INSURANCE 4243.39 4219.18 -0.57%

MANU. & PRO. 2417.61 2414 -0.15%

OTHERS 640.58 649.39 1.38%

MICROFINANCE 1459.52 1474.16 1.00%

LIFE INSURANCE 5005.06 5093.04 1.76%

MUTUAL FUND 9.51 9.34 -1.79%

Market Summary Statistics (20th Oct to 24th Oct, 2019)

Total Turnover (Rs) 934,395,602.00

Total Traded Shares 3,484,271.00

Total Number of Transactions 17,260.00

Scrips Traded 155.00

Market Cap at Week start 1,440,453.95 Millions

Market cap at Week end 1,460,531.06 Millions

Floated Market Cap at Week start 521,378.82 Millions

Floated Market Cap at Week end 529,136.23 Millions

Bullion Update

As on 24th October, 2019 Hallmark Gold Rs.71,000/tola

Worked Gold Rs.70,700/tola

Silver Rs.860/tola

Quote for the week

"Wide diversification is only required when investors

Don’t understand what they are doing."

- Warren Buffett

The market increased 1.02% (11.59 points) in the

trading week between 20th October and 24th October

2019. The sensitive index, which measures the

performance of the companies classified under group

“A”, also registered a rise of 1.18% (2.93 points).

Similarly, float index which measures the

performance of securities which are floated to public

also went up by 1.09% and sensitive float followed

the trend by increasing 1.19%.

This week the market opened at 1137.75 on Sunday

and went down 4.04 points to sit at 1133.71. The

market followed the falling trend on Monday with

10.42 points and closed at 1132.40. But the market

retraced by 2.39 points on Tuesday followed by 7.81

points on Wednesday and 6.74 points on Thursday to

end week at 1149.

In this review period, all the sectors closed higher

except the Non-Life Insurance, Manu & Pro and

Mutual Fund sub-index. Life Insurance sub-index

gained the most and closed 1.76% higher. Similarly,

the others sub-index gained 1.38% followed by Hotels

and Hydropower sub-index. Hydropower sector was

in continuous falling trend when the trading of newly

listed Sanjen and Rasuwagadhi Hydropower began.

Hotels sub-index registered the gain of 1.28%

followed by 1.26% of Hydropower sub-index. Most of

the sub-index registered the gain this week. Banking,

Development Banks, Finance and Microfinance

registered the gain of 1.145, 0.40%, 1.08% and 1%

respectively. However, the Non-Life Insurance, Man &

Prod and Mutual Fund sub-index registered the loss of

0.57%, 0.15% and 1.79% respectively.

The market witnessed comparatively less volume of

transaction turnover this week as compared to recent

weeks. The total turnover stood at Rs.934 million with

average of Rs.186 million a day. The total market

value increased by Rs.14,971 million as the market

capitalization went up by 1.04%. Similarly, float

market cap registered a gain of 1.11% this trading

week.

.

News Update

After a massive revenue shortfall, officials find the culprit: overambitious target

The government has suffered a revenue shortfall of Rs70 billion, 28 percent below the target for the first quarter of the

current fiscal year, a result of both a slump in imports and the government’s failure to raise adequate revenue through

domestic economic activities.....Read More

Generation survey for the construction of the Upper Arun Hydroelectric Project to be done

The Department of Electricity Development has issued a permit to Upper Arun Hydroelectric to conduct a generation survey for the construction of the Upper Arun Hydroelectric Project.The company, a subsidiary of the Nepal Electricity Authority, received a two-year survey licence for the 1,061-megawatt.....Read More

Marigold prices likely to rise this season, say merchants

Householders planning to decorate their houses with marigold flowers this festival season should be prepared to open their

wallets wider. Traders said the price of the golden yellow blossoms could swell by more than 15 percent this Tihar because the

cost of growing them has increased.....Read More

Mobile banking users increase by over 4.5 times in 4 years

The number of mobile banking users has increased by over 4.5 times in the past four years. According to a report recently

published by Nepal Rastra Bank – Situation of Access to Finance in Nepal 2019 – the number of mobile banking users has gone

up from 1.75 million to 8.35 million.....Read More

Nepal to achieve 6.5 percent growth, World Bank says

Nepal's economy is estimated to grow at 6.5 percent in this fiscal year 2019-20, way below the ambitious 8.5 percent target set by the government, according to the World Bank.....Read More

Market Announcements

• Sunrise Bank Limited has published an offer letter to issue (30,00,000 units @ Rs.1000 per unit) 10.25% Sunrise Debenture 2083 to the general public from (20th to 24th Kartik, 2076).

• NMB Laghubitta Bittiya Sanstha Limited is issuing it's 1:1.5 ratio 24,30,093.75 units right share to its shareholders from (24th Kartik to 29th Mangsir, 2076).

• Surya Life Insurance Company Limited has allotted it's 10:7 Ratio right share to its shareholders on 6th Kartik, 2076 and refunding money to non-allottee investors from (13th Kartik, 2076).

• Womi Laghubitta Bittiya Sanstha Limited has allotted its 14,520 units promoter shares and 46,509.20 units ordinary shares in auction to the general public on 30th Ashwin, 2076 and refunding money to non-allottee investors from (3rd Kartik, 2076).

• First Microfinance Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 26.83 million and published its 1st quarter company analysis of the fiscal year 2076/77.

• Kanchan Development Bank Limited has posted a net profit of Rs 13.99 million and published its 1st quarter company analysis of the fiscal year 2076/77.

• Chautari Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 12.37 million and published its 1st quarter company analysis of the fiscal year 2076/77.

• Mega Bank Nepal Limited has announced its 9th AGM going to be held on 29th Kartik, 2076 and its audited financial highlights of the fiscal year 2075/76.

• Nyadi Hydropower Limited has announced its 12th AGM going to be held on 6th Mangsir, 2076.

• Mero Micfinance Bittiya Sanstha Limited has announced its 7th AGM going to be held on 29th Kartik, 2076.

• Bottlers Nepal Limited (Balaju) has announced its 41st AGM going to be held on 28th Kartik, 2076.

• Bottlers Nepal (Terai) Limited has announced its 33rd AGM going to be held on 28th Kartik, 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 1149 level after retracing from 1132 level this week.

However, in a weekly line chart the index is trading around the resistance zone of 1149 level. This week the market closed at

1149.34 forming a green candle. This week NEPSE opened at 1137.75 and formed a red candle by closing at 1133.71, losing

4.04 points during the day. However, the overall market gained 11.59 points during the week. This week the average turnover

has decreased toRs.186 million from 205 million of previous week. As of weekly line chart the short term support might be at

around 1137.

Technical Indicators

Indicators Value Signal

Support (S1) 1142 -

Resistance (R1) 1172 -

Relative Strength Index (RSI) 49.97 Moderate zone

Moving Average Convergence Divergence (MACD) -7.92 Bullish

5-Day Exponential Moving Average(EMA) 1138.56 Bullish

20-Day Exponential Moving Average(EMA) 1138.41 Bullish

180-Day Exponential Moving Average(EMA) 1208.46 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 49.97 which indicates that the market is at moderate zone. In a weekly chart while comparing

from 24th February to 29thSeptember 2019, there seems the formation of regular bullish divergence as it is retracing from 1129

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 -7.92 and -11.04 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 1138.56 and EMA (20, 0) red line is at 1138.41 The index is currently trading above 5 and 20 days

Exponential Moving Average. This indicates that the overall market is retracing from support zone.

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 1151.41, 1138.41 and 1125.41 respectively. The market is trading in between the

lower and upper band. The indicates the market is moving towards resistance zone.

Stock Analysis:Himalayan General Insurance Co. Ltd. (HGI) Himalayan General Insurance Co. Ltd. commenced operations in December 1993 to write Insurance Policies after

obtaining license from the Insurance Board of Nepal to underwrite General Insurance (Non-life). The company issued first

fire Insurance policy on 1st November, 1993. It worked with Swire Blanch Asia Ltd., Singapore, through a technical service

agreement for the initial five years in order to arrange reinsurance with the world’s best reinsurers.

Spanning a history of over 25 years, the company has been providing clients with stability and confidence of security, and

shareholders with consistent returns. HGI is widely acknowledged for its market leadership in claims services, it services a

large and diverse product range and client base.

Board of Directors

Name Designation

Mahendra Krishna Shrestha Chairman

Nura Kumari Sharma Director - Public

Bikram Krishna Shrestha Director

Vijit Krishna Shrestha Director

Dashrath Lal Shrestha Director – Independent

Ajay Ratna Sthapit Director – Public

(Source: https://hgi.com.np)

Chief Executive Officer: Sushil Bajracharya

Capital Structure

(As on 31st Asadh 2075)

Authorized Capital NRs. 2,000,000,000

Issued Capital NRs. 1,027,200,000

Paid-up Capital NRs. 1,027,200,000

Shareholding Pattern

(As of 31st Asadh 2075)

Shareholders 2074/75

Holding units Percentage

Promoter

Domestic Institutions - -

Nepalese Citizen 5,238,720 51.00%

Foreigner - -

General Public 5,033,280 49.00%

Others - -

Total 10,272,000 100.00%

Yearly Analysis

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

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

Share Capital (Rs.000) 267,500 311,000 385,200 1,027,200 1,027,200 39.99%

Reserves & Surplus (Rs.000) 116,959 118,906 51,624 155,998 255,255 21.54%

Insurance Fund (Rs.000) 180,387 245,003 305,335 373,825 473,082 27.26%

Long term Investment (Rs.000) 202,403 119,075 316,494 587,993 476,620 23.88%

Total Revenue (Rs.000) 198,148 215,201 202,183 241,454 329,467 13.55%

Total Expenses (Rs.000) 56,473 84,337 80,413 99,596 130,955 23.40%

Gross Premium (Rs.000) 837,239 1,051,801 1,315,672 1,187,757 1,458,853 14.89%

Net Profit (Rs.000) 141,675 130,864 121,770 141,859 198,512 8.80%

Change Period on Period (%) -7.63% -6.95% 16.50% 39.94%

Net Profit to Gross Premium (%) 16.92% 12.44% 9.26% 11.94% 13.61%

ROE (%) 15.50% 18.12% 15.78% 8.84% 14.80%

ROA (%) 4.86% 9.30% 8.27% 5.72% 9.16%

EPS (Rs.) 52.96 40.77 31.61 13.81 19.33

DPS (%) 21.05% 21.05% 15.00%

MPPS (Rs.) 378 1,380 745 450 350

Price Earnings ratio 7.14 33.85 23.57 32.59 18.11

Book Value per Share (Rs.) 211.84 215.46 199.33 154.78 174.1

Solvency Margin (%) 2.5 3.25 3.78 1.67

Total no. of Policies 33,935 35,626 44,231 58,387 46,205

No. of Claims Paid 9,839 10,484 5,103 4,760 5,829

No. of Unpaid Claims 1,752 1,266 809 1,271 1,053

No. of Claims/Total No. of Policies (%) 29.30% 28.07% 10.80% 8.15% 8.15%

Insurance Agents 74 66 181 134

Total Employees 91 95 117 148

Total No. of office 9 11 17 22

Based on the data presented above from 2071 to 2076 BS, the company has shown volatility in most of its fundamentals. As of 2075/76 its paid up capital is Rs.1.02 billion which shows that the company has maintained the paid up capital directed by Insurance Board. While most of the non-life companies are still unable to meet their minimum paid-up capital directed by the regulatory body. The company has reported 63% growth in Reserves & surplus which was 202% in 2074/75 but negative 56% in 2073/74. The company has reported 26% growth in Insurance Fund which seems stable as compared to other fundamentals. Similarly, the company has reportednegative growth of 18% in Long Term Investment and 20% in no. of Policies but reported positive growth in Premium collection by 22% which have resulted the growth of Net Profit by 39%. Most of the fundamental’s values are below the industry average, which indicates that the company is lacking the competitive advantage in its sector.

As of 4th Quarter report of 2075/76 company has reported Net Profit of Rs.198 million with EPS of Rs19.33 per share. The company had negative growth in Net Profit by 7% in 2072/73 followed by 6% in 2073/74 which was reflected by its share price. It indicates that the company was affected by the devastating earthquake of 2072 B.S. Similarly, the company has reported solvency margin of 1.67 in 2074/75 which is just above the minimum solvency margin directed by Insurance Board. The company has potential to do better in the Nepalese emerging market with its better operation. Currently it is operating with 134 agents, 148 employees through 22 branches.

The company has given regular dividend to its shareholders except in 2074/75. Looking at the history of dividend

distribution, it seems to be highly focused on distributing bonus share. However, it has given cash dividend of 15% in

2073/74.

Snapshot of Performance

26.75 31.10 38.52

102.72 102.72

11.70 11.89 5.1615.60 25.53

0.00

50.00

100.00

150.00

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

Share Capital and Reserve & Surplus

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

18.04

24.5030.53

37.38

47.31

0.00

10.00

20.00

30.00

40.00

50.00

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

Insurance Fund (Rs.crores)

19.81 21.52 20.22 24.15

32.95

5.65 8.43 8.04 9.9613.10

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)

5.658.43 8.04

9.9613.10

14.17 13.0912.18

14.19

19.85

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)

14.17 13.09 12.1814.19

19.85

52.96

40.77

31.6113.81 19.33

0.00

10.00

20.00

30.00

40.00

50.00

60.00

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

Net Profit vs EPS

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

52.96 40.77 31.61 13.81 19.33

378

1,380

745

450350

0

500

1000

1500

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

EPS vs MPPS

EPS (Rs.) MPPS (Rs.)

83.72 105.18 131.57 118.78 145.89

33,935 35,62644,231

58,387

46,205

0.00

20000.00

40000.00

60000.00

80000.00

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

No. of Policies vs Gross Premium

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

21.05% 21.05%

15.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

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

DPS (%)

Technical Analysis of HGI as on October 24th, 2019

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

Day Candle

Open 280

High 280

Low 275

Close 275

Pattern Analysis

Chart Pattern Short term sideways

Resistance R1: 286 R2: 295

Support S1: 263 S2: 259

Higher Breakout Level 287

Particulars Points Remarks

Volume 1,605 The daily volume of stock is higher than 1 week’s

average volume but lower than that of 1 month’s

average volume.

Avg. Volume (1 week) 1,056.40

Avg. Volume (1 month) 2,460.29

No. of Transaction 13 The daily number of transaction is higher than 1 week’s average no. of transaction but lower than that of 1 month’s average no transaction.

Avg. no. of Transaction (1 week) 8.80

Avg. no. of Transaction (1 month) 15.67

180 days Average (Rs.) 353.70 The price of the stock is trading below both 180 day’s 360 day’s average. 360 days Average (Rs.) 390.08

52 Weeks High Price (Rs.) 441 The stock is currently trading around 52 week’s low price. 52 Weeks Low Price (Rs.) 260

Nepse Index 1 year Change -8.05% The overall market and the industry has declined in the last 12 months. The stock has fall in the past one year but has gained 2% in last one month.

Industry Index 1year Change -26.58

Stock 1-Month Change 2.00%

Stock 1-Year Change -134.00%

Total Holdings of Mutual Funds (Bhadra 2076) 73,778 The Mutual Funds are holding very less number of shares (0.72%) of the company as compared to other companies.

Concluding Remarks

As per the Economic survey report 2018/19 by Ministry of finance Insurance industry contributes 2.04% to GDP in Nepal. This industry is facing a lot of criticism as compared to other industry due to less number of people involving in insurance business. Most of the people are unaware about insurance and even educated people are reluctant to buy insurance policy. Most of the people under estimate 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.

Himalayan General Insurance Company Limited is an established and experienced insurance company with 25 years of operation with paid up capital of Rs.1.02 billion. As of unaudited report of Q4 2075/76, the company has made positive growth in most of the fundamentals but couldn’t increase the no. of policies which have caused the lack of competitive advantage. However, the company seems eligible to become one of the best in its sector.

Indicators Points Remarks

RSI (14) 48.03 HGI is at moderate zone.

MACD (12,26,9) -6.46 The MACD line is above the signal line and both are below the baseline.

Signal Line (12,26,9) -9.71

Histogram (12,26,9) 3.25

EMA (5,0) 271.47 Both EMA 5 and EMA 20 are below the price.

EMA (20,0) 272.98

+DMI(13,8) 31.05 The +DMI is dominant over -DMI and ADX is at 26.27.

-DMI(13,8) 25.13

ADX (13,8) 26.27

Chaikin Money Flow (20) -0.0212 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

illustration purpose only. The information provided in this document is subject to change. While this information has been

obtained from sources believed to be reliable, Aakash Capital Limited is not liable for erroneous information obtained from the

sources. Aakash Capital Limited, its directors and employees are not liable/responsible for any direct, indirect or consequential

loss arising from use of this document or its contents. Past performance is no indication of future results. Aakash Capital is

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