AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 22nd February, 2019

NEPSE UPDATE

Indicators 17th Feb, 2019

21st Feb, 2019

(+)/(-) %

NEPSE 1109.72 1113.07 0.30% SENSITIVE 236.16 236.6 0.19% FLOAT 86.23 80.9 -6.18% BANKING 954.28 953.27 -0.11% HOTELS 1696.81 1721.52 1.46% DEVELOPMENT BANKS 1420.72 1417.24 -0.24% HYDROPOWER 1124.38 1117.83 -0.58% FINANCE 591.78 591.89 0.02% NON LIFE INSURANCE 5296.51 5342.14 0.86% MANU. & PRO. 1987.97 1990.22 0.11% OTHERS 703.26 706.2 0.42% MICROFINANCE 1387.06 1399.69 0.91% LIFE INSURANCE 5528.19 5594.78 1.20% TRADING 247.23 245.2 -0.82%

Market Summary Statistics (17th Feb to 21st Feb)

Total Turnover (Rs) 990,567,463.00

Total Traded Shares 3,576,841.00

Total Number of Transactions 25,694.00

Scrips Traded 173.00

Market Cap at Week start 1,349,570.59 Millions

Market cap at Week end 1,358,688.18 Millions

Floated Market Cap at Week start 47,234,168.84 Millions Floated Market Cap at Week end 475,554.39 Millions

Bullion Update

As on 22nd Feb, 2019 Hallmark Gold Rs.63,100/tola

Worked Gold Rs.62,800/tola

Silver Rs.785/tola

The market gained a meager 0.30% or 3.35 points in

the trading week between February 17 and February

21. Along with Nepse index, the float index also fell by

6.18% or 5.33 points. The sensitive index went up by

0.19% or 0.44 points to end the week at 236.6.

The secondary market had opened at 1117.70 points

on Sunday and went down 7.98 points to end the day

at 1109.72. On Monday, the index fell further by 7.21

points, hitting a 38 months low at 1102.51. The market

on Tuesday gained a major 21.72, followed by the

monetary policy review to check the increasing

interest on loan. However, the market couldn’t sustain

the next day as profit booking surged. It fell by 12

points on Wednesday and gained a slight 0.84 points

on Thursday to end the trading week at 1113.07.

In the review period, banking, development bank,

hydropower and trading subgroups ended in red.

Having said that, no significant changes in the NEPSE

index or any subgroup was seen compared with

previous trading week.

The total turnover during the trading week stood at Rs

990.57 billion. A lackluster market activity was seen,

with the average daily turnover at just Rs 198.11

million. This clearly indicates that investors are in a

wait and watch situation, as no new developments in

the market have taken. The total market value

increased by Rs 9117.59 million as the market

capitalization increased a minor 0.68% during the

trading week.

To conclude, the investors’ interest in the share

market is progressively fading. NRB’s mid-year

monetary policy review inclined towards addressing

the recent credit rate enigma fueled investor

optimism. The uninspired trading, however continued

as bankers criticized the policy, and debate rose

between the bankers and industrialists. This prompted

the investors into a wait-and-watch scenario as no

concrete developments have taken place in the

market.

.

News Update

PM instructs Finance Minister to intervene in reducing lending rates

Prime Minister KP Sharma Oli has instructed Minister for Finance Yuba Raj Khatiwada to make necessary 'intervention' in

reducing burgeoning interest rates of bank loans….Read More

NRB increases refinance fund size

the NRB has announced through the mid-term policy review that it will further increase the size of refinance fund to Rs 50

billion from existing limit of Rs 35 billion….Read More

International Monetary Fund predicts 6.5% growth

Nepal is expected to reach a growth rate of 6.5% in fiscal 2018-19, largely due to ongoing reconstruction, investment in

hydropower projects, a rebound in agricultural production, and strong tourism-related activities, according to the International

Monetary Fund….Read More

Central bank sets maximum interest rate spread at 4.5%

Nepal Rastra Bank has directed commercial banks to maintain the spread rate at a maximum of 4.5% by the end of the current

fiscal year ending mid-July. The central bank issued the directive through its mid-term review of the Monetary Policy released

on Monday….Read More

Government urged to allocate budget scientifically

The government has been recommended to promote ‘systematic and scientific’ allocation of its budget in a bid to ensure effective public expenditure at the federal, provincial and local levels….Read More

Market Announcements

7930226.30 units bonus shares of Chilime Hydropower Co. Ltd. has been listed on Falgun 09, 2075.

240250 units rights shares of Kisan Microfinance Bittiya Samstha Ltd. has been listed on Falgun 09, 2075.

8031117 units bonus shares of NIC Asia Bank Ltd. has been listed on Falgun 09, 2075.

1870274 units Rights shares of Century Commercial Bank Ltd has been listed on Falgun 09, 2075.

5500000 units IPO of Ghalemdi Hydro Limited has been listed on Falgun 05, 2075.

SEBON has approved 269,630 units share of Sparsha Laghubitta Bittiya Sanstha Ltd. to be issued to general public.

Global IME Bank Limited is going to issue 1,500,000 units "10.25% Global IME Bank Limited debenture 2080/81 " at

Rs.1000 per unit to the general public from Falgun 15 to Falgun 19, 2075.

Civil Bank Limited has proposed 4.05% cash dividend.

Sahara Bikash Bank Limited is distributing 1:2.5 ratio right share directly to DEMAT accounts.

Muktinath Bikas Bank Limited is distributing 18.25% bonus share directly to DEMAT accounts.

Shine Resunga Development Bank Limited is distributing 17.70% bonus share directly to DEMAT accounts.

Himalayan Distillery Limited is distributing Rs 21.05 per cash dividend directly to bank accounts of its shareholders

Manjushree Finance Limited is distributing its 2.9% cash dividend directly to bank accounts of its shareholders.

Nabil Bank Limited has announced its 34th AGM going to be held on Falgun 27, 2075.

Miteri Development Bank Limited has announced its 13th AGM going to be held on Chaitra 09, 2075.

Excel Development Bank Limited proclaim its 13th AGM going to be held on Chaitra 11, 2075.

Samata Microfinance Bittiya Sanstha Limited has changed its name to Samata Laghubitta Bittiya Sanstha Limited.

https://myrepublica.nagariknetwork.com/news/pm-instructs-finance-minister-khatiwada-to-intervene-in-reducing-lending-rates/https://myrepublica.nagariknetwork.com/news/nrb-increases-refinance-fund-size-to-rs-50-billion/http://kathmandupost.ekantipur.com/news/2019-02-19/international-monetary-fund-predicts-65-percent-growth.htmlhttp://kathmandupost.ekantipur.com/news/2019-02-20/central-bank-sets-maximum-interest-rate-spread-at-45pc.htmlhttps://thehimalayantimes.com/business/govt-urged-to-allocate-budget-scientifically/

NEPSE - TECHNICAL ANALYSIS

The benchmark index of Nepal, that made a high on 27th July, 2016 is currently on a bearish trend. The current bearish trend of

the market started from 16th of January, 2019. This trading week the market closed at 1112.87 showing bearish sentiment in

the market. Moreover, this trading week the market hit a 38 month low. The immediate support of the market lies at 1101 and

its strong support lies at 1022. Taking the Fibonacci retracement from 299 to 1881, 50% retracement lies at 1090 and 61.8%

retracement lies at 900. The mentioned Fibonacci retracement are the psychological support level for the market.

The weekly volume of the market stood at a dismal Rs 19.81 crore, which is even less than the previous week’s Rs 22.4 crore.

This shows a clear indication that investors are not attracted towards the stock market at the moment. Along with the market,

all the sub-indices and sector-wise indices are in the bearish trend. In a long-term view, the downfall of hydropower sector is

high in comparison to other sectors. In contrary, insurance is the only sector that has low downfall than that of other sectors

as well as the overall market.

This week, banking, development bank, hydropower and trading ended in a red zone. Among these, trading sub-group lost the

most. The other remaining sub-groups, namely, hotels, finance, non-life insurance, manufacturing, micro finance, life

insurance and others ended in the green zone. Among these hotels, non-life insurance, life-insurance and microfinance sub-

group was able to beat the market.

Currently, the market lacks volume and the selling pressure in the market is higher. The psychology of the investors are

instilled with indecisiveness and uneagerness and this is reflected in the stock market of Nepal. They are currently in a wait

and see strategy as the market and the economy as a whole has not seen any concrete positive changes.

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.

The current RSI of NEPSE is 34.80 which implies that the market is near the oversold zone. No divergence in RSI is seen in the

as the fall in price and RSI is somewhat similar. When the market index was at 1195.54, the RSI was at 57.61 and beyond that

point, continuous fall in price and RSI can be observed. The market gained some optimism once the mid-term monetary policy

review was published this week, but this couldn’t last long as seen in the decline in RSI afterwards.

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 histogram, MACD and signal line is at -0.9789, -15.5927 and -14.6138 respectively. Both MACD line and signal line

are below the baseline. The MACD line is below the signal line after the crossover on 20th of January, 2019 and currently

moving deep below the baseline. A cross over might be seen in the next trading week, but this does not give a clear indication.

Moving Average Analysis

Moving average is a technical analysis tool that smooths 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) is at 1114.68 and EMA (20, 0) is at 1132.81. The market is currently trading below 5 days and 20 days

Exponential Moving Average. The market is continuously falling after making the dead crossover on 20th of January, 2019. The

gap between 5 days and 20 days EMA is gradually increasing which supports the current bearish trend. Also, the 5-day EMA has

acted as a strong resistance level.

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 1175.21, 1135.65 and 1096.08 respectively. The market, which was trading

closer to the lower band moved its way up a little before reverting back closer to the lower band. From the starting of the

month of February, the gap between upper band and lower band has increased, signaling the volatility.

Stock Analysis – Nepal Credit and Commerce (NCC) Bank Limited

Company Introduction

Nepal Credit & Commerce Bank Ltd. (NCC Bank) formally registered as Nepal - Bank of Ceylon Ltd. (NBOC), commenced its

operation on October 14, 1996 as a Joint Venture with Bank of Ceylon, Sri Lanka. The Head Office of the Bank is located at

Siddhartha Nagar, Rupandehi while its Corporate Office is located at Bagbazar, Kathmandu. The name of the Bank was

changed to Nepal Credit & Commerce Bank Ltd., (NCC Bank) on 10th September, 2002, due to transfer of shares and

management of the Bank from Bank of Ceylon, to Nepalese Promoters. At present NCC provides banking services and facilities

to rural and urban areas of the country through its 107 branches and 71 ATMs.

The bank has an authorized capital of Rs 10 billion and issued capital of Rs 7.109 billion, followed by the recent right share

issuance of 2:1.

Board of Directors

The BOD is chaired by Mr. Upendra Keshari Neupane and Mr. Ramesh Raj

Aryal is the current CEO of the company.

Snapshot of performance

1.472.03

2.35 2.35

4.68 4.68

0.79 0.60 0.61

1.32

2.562.86

0.00

1.00

2.00

3.00

4.00

5.00

Equity (in arba)

Paid Up Capital Reserve and Surplus

35.4839.21

40.77

70.78

132.58

107.20

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

Net Profit (in crore)

1.56%1.50%

1.42%

2.17%

2.39%

1.45%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

Return on Assets (ROA)

16.95%16.03%

14.59%

21.35%

23.16%

13.95%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Return on Equity (ROE)

Name Position

Mr. Upendra Keshari Neupane Chairman

Mr. Iman Singh Lama Member

Mr. Chandra Prasad Bastola Member

Mr. Madhav Prasad Bhatta Member

Mr. Krishna Shrestha Member

Dr. Kailash Patindra Amatya Member

Company Financials

Yearly Analysis:

The following table presents the trend of financial performance of NCCB from the FY 2012/13 to 2017/18.

Particulars 2017/18 (Q4) 2016/17(Q4) 2015/16 2014/15 2013/14 2012/13

Net Profit (‘000) 1,072,037 1,325,817 707,840.70 407,654 392,112 354,828

Paid Up Capital (‘000) 4,679,853 4,679,058 2,353,176 2,353,176 2,028,600 1,470,000

Reserve and Surplus (‘000) 2,864,760 2,560,040 1,315,731.52 607,891 598,280 794,168

Book Net Worth 161.22 154.71 155.91 145.97 178.7 154.03

Earnings Per Share (EPS) 22.91 28.34 30.08 17.32 19.33 24.14

Return on Equity (ROE) 13.95% 23.16% 21.35% 14.59% 16.03% 16.95%

Return on Assets (ROA) 1.45% 2.39% 2.17% 1.42% 1.50% 1.56%

Non-Performing Loan (NPL) 3.9% 4.8% 1% 2% 3% 3%

Price to Earning (PE) ratio 10.91% 25.12% 12.07 26.5 33.21 9.24

CD ratio % 76.76% 71.48% 80.46% 80.43% 80.30% 73.96%

*For the FY 2016/17 and FY 2017/18, 4th Quarterly data are used.

NCC bank has paid up capital of 4,679,853 but with the adjustment of right shares, the paid up capital of the bank will

increase to 7.01 arab. The non-performing loan of the bank has increased in recent 2 years, which shows its weaker

performance in lending; this ultimately hits the profit and loss statement of the bank as loan loss provisions has to be

maintained. Within the past two years, the bank has increased its reserve and surplus which gives a stable backbone in case

of any failure. The company financials shows decline in EPS, ROA and ROE but still the PE ratio of the company is low.

Quarterly Analysis:

The following table presents 2nd Quarter analysis of the company for the FY 2017/18 to 2018/19.

Particulars (Rs. In '000) Industry 2018/19 Q2 FY 2018/19 Q2 FY 2017/18 Q2 Q2 % change

Paid Up Capital 8,707,963.48 7,018,559 4,679,058 50%

Reserve & Surplus 6,050,027.70 4,179,303 3,769,101 11%

Borrowing 1,910,978.41 1,130,570 779,231 45%

Deposits 91,622,816.78 64,717,387 59,152,766 9%

Net Profit/(Loss) 1,052,204.00 741,172 530,019 40%

Non-Performing Loan (NPL) 1.47 3.53 4.04 -13%

Cost of Funds 7.2 7.95 8.64 -8%

Credit to Deposit (CD) Ratios 77.77 78.21 76.48 2%

Base Rate 9.98 10.87 11.45 -5%

Earnings Per Share (Annualized) 24.58 21.12 22.65 -7%

Net Worth Per Share 167.84 159.55 180.55 -12%

P/E Ratio 12.84 10.32 14.61 -29%

Liquidity Ratio 21.4 24.61 24.32 1%

Return on Equity 14.26 13.24 12.55 5%

Return on Assets 1.85 1.88 1.51 25%

Price To Book Ratio 1.76 1.29 1.14 13%

The Bank has increased its paid up capital by 50% in comparison to corresponding previous quarter but still need to maintain

the required paid up capital as directed by Nepal Rastra Bank. The reserve & surplus, borrowings, deposits and net profit of

the company has increased but is low the industry average. The NPL of the bank shows poor performance in loan collection

from clients which ultimately hits the profit/loss statement. The CD ratio of the bank is below 80% as guided by regulatory

body but the base rate is below industry average. The earnings per share and net worth is below industry average

and has declined in comparison to previous corresponding quarter. The liquidity ratio of the company is above

industry average that shows excess liquidity in the bank. The PE and PB ratio is above industry average whereas,

the cost of fund of the company is below industry average. The ROE of the company is below industry average

whereas, the ROA is above industry average. The company fundaments are poor in comparison to industry

average.

Dividend Distribution

Dividend 2016/17 2015/16 2014/15 2013/14

Dividend Per Share (Rs.) - - 16.84 40

Bonus % - - 16% 38%

Cash % - - 0.84% 2%

Dividend Payout Ratio - - 97.21% 206.94%

From the above table it is clear that NCC Bank has failed to distribute regular dividend to its shareholders. In Fiscal year

2013/14, The Company has distributed bonus from its reserves since the dividend payout ratio is 206.94%.

Technical Analysis of the Company (As on 21st February, 2019)

Day Candle

Open 205

High 207

Low 204

Close 206

Pattern Analysis

Chart Pattern Sideways

Resistance 224 236

Support 197 172

Higher Breakout Level 236

Particulars Points Remarks

Volume 7,647

The volume of the stock is in a declining trend. Avg. Volume (1 week) 17,686.60

Avg. Volume (1 month) 25,061.52

No. of Transaction 32 The number of transaction of the stock is low.

Avg. no. of Transaction (1 week) 50.60

Avg. no. of Transaction (1 month) 68.43

180 days Average 214.08 The price of the stock is trading below 180 days and 360 days average. 360 days Average 266.38

52 Weeks High Price 320

The stock price is moving towards 52 weeks low. 52 Weeks Low Price 172

Nepse Index 1-Year Change 19.75% The overall market is at downtrend and so as the industry as well as the stock. The 1 year change of stock is higher than that of the Industry and the overall market index.

Industry Index 1-Year Change 21.56%

Stock 1-Month Change -4.63%

Stock 1-Year Change -34.81%

Monthly Beta 0.965 The quarterly beta of the stock is above the market beta. Quarterly Beta 1.071

Total Holdings of Mutual Funds (Poush) 15,806 Poor holdings of stock by mutual fund.

Stock Holdings of Top Broker (from 31st July, 2018) 428,131 The sum of Stock holdings of 5 Brokers is shown with the average of their average buying and selling price. The holding period is taken after the price adjustment for 10% bonus share.

Top Broker Avg. Buy Price 210.9

Top Broker Avg. Sell Price 211.39

Indicators Points Remarks

RSI (14) 41.5767 BPCL is at moderate zone and nearer to oversold zone.

MACD (12,26,9) -1.9383 The MACD line is negative and converged to signal line and the histogram is above the baseline. So, MACD doesn’t give any indication of change in current trend.

Signal Line (12,26,9) -2.1419

Histogram (12,26,9) -0.2036

EMA (5,0) 206.1896 The EMA 5 and 20 are slightly above the price line.

EMA (20,0) 208.8062

+DMI(13,8) 21.5615 Both DMI are below 25 and +DMI is dominant over -DMI. The ADX is below the level of 25 which means the current trend is weak. The DMI doesn’t give proper indication when the stock is trending sideways. -DMI(13,8) 12.3933

ADX (13,8) 16.2578

Chaikin Money Flow (20) -0.1343 CMF is below the baseline which shows selling pressure in the market.

Concluding remarks

From the above financials it is clear that the condition of Bank is sound and the Bank is able to distribute dividend. The Bank

has basically focused on to increase its Reserves rather than its Paid up Capital. It has already issued right shares and currently

the Paid up Capital of Bank is 7.01 arab. NCC Bank still needs to issue shares to meet the required Paid up Capital of 8 arab as

directed by the regulatory body. The Bank is most likely to distribute Bonus shares either from its earnings or from its

reserves as we can see it has previously distributed huge bonus in the fiscal year 2013/14. Minimum required Bonus to meet

the Paid up Capital is 13.98%. The current price of the stock is very low and can be a proper time to buy for those investors

with long-term investment strategy.

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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.

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