AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 5th July, 2019

NEPSE UPDATE

Indicators 30th June, 2019

4th July, 2019

(+)/(-) %

NEPSE 1244.89 1260.47 1.25% SENSITIVE 269.24 271.45 0.82%

FLOAT 91.3 92.58 1.40% BANKING 1120.36 1135.41 1.34%

HOTELS 2082.65 2055.34 -1.31% DEVELOPMENT BANKS 1579.09 1600.36 1.35%

HYDROPOWER 1178.13 1188.34 0.87% FINANCE 617.89 616.18 -0.28%

NON LIFE INSURANCE 4990.73 5125.96 2.71% MANU. & PRO. 2656.45 2675.75 0.73%

OTHERS 724.89 722.25 -0.36% MICROFINANCE 1408.89 1441.66 2.33%

LIFE INSURANCE 5945.71 6077.05 2.21%

Market Summary Statistics (30th June to 4th May 2019)

Total Turnover (Rs) 2,669,719,142

Total Traded Shares 16,100,063

Total Number of Transactions 34,692

Scrips Traded 177

Market Cap at Week start 1,549,168.06 Millions

Market cap at Week end 1,568,593.01 Millions

Floated Market Cap at Week start 542,726.85 Millions

Floated Market Cap at Week end 558,957.40 Millions

Bullion Update

As on 4thJuly, 2019 Hallmark Gold Rs.65,000/tola

Worked Gold Rs.64,700/tola

Silver Rs.730/tola

Quote for the week

“The four most dangerous words in investing are:

“This time it’s different”.”

-Sir John Templeton

The market increased by slightly by 1.25% or 15.58

points in the trading week between June 30 and July 4,

2019. The sensitive index, which measures the

performance of big companies, also registered a rise of

0.82% or 2.21 points. Similarly, float index also went up

1.40% or 1.28 points.

This week the market opened at 1258.31 on Sunday

and went down by 13.42 points to sit at 1244.89 points.

The market floated in all the following days, albeit very

low points. The market gained 0.79 on Monday, 7.38

on Tuesday and 15.62 on Wednesday respectively.

However, market went down by 8.21 points on

Thursday to sit at 1260.47 points at the end of the

trading week.

In the review period, under sub-indices except hotels,

finance and others sector closed at green. The highest

percent was lost by hotels. It decreased by 1.31%% or

27.31 points. Besides this, finance and others sector

decreased by less than 1 per cent with 0.28% or 1.71

points and 0.36% or 2.64 points respectively. On other

hand of positive side, nonlife insurance gained the

highest in the market with 2.71% or 135.23 points.

Similarly, it was followed by microfinance, life

insurance, banking and lastly development banks with

2.33%, 2.21%, 1.34% and 1.35% respectively.

Remaining sub-indices closed at green with less than

1%. It means, hydropower increased by meager 0.87%

whereas manufacturing and production increased by

insignificant 0.73%

As was the case in previous trading week, the market

witnessed an enthusiastic trading volume. The total

turnover in this trading week stood at Rs 2.66 Billion

while daily turnover averaged at Rs 0.53 billion. The

total Market Value increased by Rs. 19424.95 million

as the market capitalization increased by 1.25 per cent.

Similarly, floating market cap saw a positive rise by

2.99% in this trading week.

.

News Update

Bankers seek tax incentives to go for M&A

Bankers have sought tax incentives from the government for merger and acquisition (M&A) between banks….Read More

135 local bodies yet to present budget for 2019-20 fiscal year

Against the federal government’s direction to all local level governments to present their budget on time, altogether 135 local

bodies are yet to present their budget for the upcoming fiscal year 2019-20…..Read More

Half of the economy is informal: Economic Census

Sunrise It has been found that 50% of the currently operating business institutions in the country are running without being

registered, which means the country has almost half of its economic activities unaccounted in the formal economy….Read More

Sugarcane farmers announce protest

Sugarcane farmers have announced protest from next week against the failure of sugar mill operators to issue payments to them

on time….Read More

Imports continue to surge via Rasuwagadhi-Kerung customs point

Imports via Rasuwagadhi-Kerung customs point have more than doubled in mid July-mid June this year….. Read More

Market Announcements

Upper Tamakoshi Hydropower Limited has announced its 11th AGM going to be held on 31st Ashad, 2076

Summit Laghubitta Bittiya Sanstha Limited and Swarojgar Laghubitta Bittiya Sanstha Limited has has announced its Special

General Meeting going to be held on 4th Shrawan and 11th Shrawan, 2076 respectively.

Ghodighoda Laghubitta Bittiya Sanstha Limited is issuing its 1,32,600 units IPO shares to the general public from 20th Ashad,

2076.

Himal Dolkha Hydropower Company Limited has published an offer letter to issue 76,72,210 units IPO shares to the general

public from 25th to 29th Ashad, 2076.

Taragaon Regency Hotel Limited is distributing 12.631% Cash Dividend directly to bank accounts.

Kamana Sewa Bikas Bank Limited is distributing 1.5% bonus share directly to DEMAT accounts and 8% cash dividend directly

to bank accounts to its shareholders.

Asian Life Insurance Company Limited has allotted its 2420.70 unit promoter shares and 2,18,939.03 ordinary shares in

auction to the general public on 13th Ashad, 2076.

Everest Insurance Company Limited closed it's 1:3 ratio 82,19,475 units right share to its shareholders from 16th Ashad,

2076

Womi Laghubitta Bittiya Sanstha Limited has announced a book closure date for its upcoming 1:1 ratio right share on 27th

Ashad, 2076.

Nepal Bangladesh Bank Limited has allotted its 20,00,000 units @ Rs.1000 per unit "10.5% NBBL Debenture 2080" to the

general public on 19th Ashad, 2076.

Gurans Life Insurance Company Limited has published a notice regarding bid opening date of 2,40,571 unit promoter shares

and 82,005 unit ordinary shares in auction to the general public on 18th Ashad, 2076.

NIBL Ace Capital Limited closed its 12.5 million units of Rs 10 face value each mutual fund scheme worth Rs 125 million (NIBL

Sahabhagita Fund) to the general public from 16th Ashad, 2076.

NEPSE - TECHNICAL ANALYSIS

The Nepalese stock market declined continuously after it made its top on 27th of July, 2016. Currently, the index is in at support

zone. The market had shown short term bull after Nepali New Year. This week the market closed at 1260.47 forming a red candle

on last trading day. This week NEPSE opened at 1258.31 and formed a bear candle by closing at 1244.89, losing 13.42 points

during the day. The transaction turnover has increased from Rs.375 million of previous week ending to Rs.670 million at the end

of this week. In this trading week market crossed turnover of Rs.500 million 3 times which indicates buyers have started to

accumulate stocks. Downtrend market has shown short term bull basically in the month of March and April in last three years.

As of weekly line chart currently, the market is at support zone of around 1257. Taking the Fibonacci retracement from 1100 to

1316, the 0.382 Fibonacci ratio lies at 1235, which indicates strong psychological support.

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 46.41 which indicates that the market is at moderate zone. Looking into chart from March 3, 2019

to July 1, 2019 regular bullish divergence has been observed which indicates the chances of short term bull in the market.

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 -7.17 and -8.23 respectively. MACD has crossed the signal line and both are below the base

line and trying to move towards the base line which indicates the positive signal for the market.

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) green line is at 1253.74 and EMA (20, 0) red line is at 1261.93 The index is currently trading above 5 days and

below 20 days Exponential Moving Average. This indicates that the overall market is retracing from the 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 1282.15, 1261.93 and 1241.71 respectively. The market is trading at the middle

band which indicates the market is at moderate zone.

Stock Analysis: Himilayan Bank Limited (HBL)

Himalayan Bank was established in 1993 in joint venture with Habib Bank Limited of Pakistan. Despite the tough competition in

the Nepalese Banking sector, Himalayan Bank has been able to maintain a lead in the primary banking activities- Loans and

Deposits.

Legacy of Himalayan lives on in an institution that's known throughout Nepal for its innovative approaches to merchandising

and customer service. Products such as Premium Savings Account, HBL Proprietary Card and Millionaire Deposit Scheme besides

services such as ATMs and Tele-banking were first introduced by HBL.

Board of Directors

Name Designation

Mr. Manoj B. Shrestha Chairman

Mr. Faisal N. Lalani Director

Mr. Prachanda B. Shrestha Director

Mr. Tulasi Prasad Gautam Director

Mr. Sushil Bickram Thapa Director

Mr. Bijay Bahadur Shrestha Director

Mr. Radha Krishna Pote Independent Director

Capital Structure

As of 16 July 2018

Authorized Capital (Rs.) 10,000,000,000

Issued Capital (Rs.) 8,114,529,375

Paid Up Capital (Rs.) 8,114,529,375

Shareholding Pattern

As of 16 July 2018

S.N. Particulars Percent (%) Amount (Rs.)

1 Domestic Ownership

1.1 Nepal Government - -

1.2 “A” Class Licensed Institutions - -

1.3 Other Licensed Institutions - -

1.4 Other Institutions 65 5,274,444,094

1.5 Public 15 1,217,179,406

1.6 Other - -

2 Foreign Ownership 20 1,622,905,875

Total 100 8,114,529,375

Financial Highlights

Year 2013/14 2014/15 2015/16 2016/17 2017/18

Paid-up Capital (Rs.000) 3,332,700 4,499,145 4,499,145 6,491,624 8,114,529

Reserves (Rs.000) 2,750,711 2,459,755 2,733,717 3,328,499 4,523,962

Debt Securities Issued

(Rs.000)

1,100,000 600,000 622,761 622,997 623,358

Deposit Liabilities (Rs.000) 64,674,848 73,538,200 86,433,181 92,334,455 98,988,791

Growth

13.70% 17.54% 6.83% 7.21%

Total Assets (Rs.000) 73,589,846 82,801,551 100,561,895 108,063,252 116,462,301

Loans & Advances to

Customers (Rs.000)

45,320,359 53,476,230 66,269,388 74,471,810 82,474,994

Growth

18.00% 23.92% 12.38% 10.75%

Total Revenue (Rs.000) 4,742,975 4,627,751 5,015,844 7,106,676 9,724,871

Gross Profit (Rs.000) 2,494,178 2,673,488 3,449,948 3,933,342 4,321,824

Total Operating Income

(Rs.000)

3,743,392 3,825,268 4,757,683 5,359,784 5,853,378

Net Income (Rs.000) 959,107 1,112,286 1,935,908 2,281,774 1,875,610

Growth

15.97% 74.05% 17.87% -17.80%

Return on Assets (ROA) 1.40% 1.39% 2.10% 2.09% 1.61%

Return on Equity (ROE) 16.85% 17.06% 24.53% 18.50% 13.26%

EPS 33.37 43.03 33.55 35.15 23.11

Book Value Per share 208.81 196.12 180.31 189.91 174.24

Market Value per share 813 1500 886 886 551

Price Earnings Ratio 24.36 34.86 26.41 25.21 23.84

Capital Fund to RWA

(CAR)

11.14% 10.84% 12.15% 12.15% 12.46%

Non-Performing Loan(NPL)

to Total Loan

3.22 1.23 0.85 0.85 1.4

Based on the data presented above, the bank has made consistent growth in all the fundamentals. In fiscal year 2017/18 bank

had net profit of Rs. 1.87 billion which is 17.80% lower than that of previous fiscal year. However, reviewing 5 years net income,

bank has an average growth rate of 22.52%. The bank has met its paid-up capital of 8 arab as directed by Nepal Rastra Bank in

fiscal year 2017/18. The bank has reported 35.92% rise in reserve to Rs.4.5 billion in 2018. There seems unsatisfactory growth

in deposits from customer in past 5 years. Deposit collection in 2018 is Rs.98.98 billion which is 7.21% higher than that of

previous fiscal year. Similarly, loan & advance to customer has raise from Rs.74.47 billion to Rs.82.47 billion in fiscal year

2017/18. Evaluating the above fundamental indicators, the company has sound fundamental and has huge potential in the

Nepalese emerging financial market.

Snapshot of performance

333.27

449.91 449.91

649.16

811.45

275.07 245.98 273.37

332.85

452.40

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

2013/14 2014/15 2015/16 2016/17 2017/18

Paid-up capital & Reserves

Paid-up Capital (crores) Reserves (crores)

6467.487353.82

8643.329233.45

9898.88

4532.045347.62

6626.947447.18

8247.50

0.00

2000.00

4000.00

6000.00

8000.00

10000.00

12000.00

2013/14 2014/15 2015/16 2016/17 2017/18

Deposits and Loans & advance to Customers

Deposit Liabilities (crores)

Loans & Advances to Customers (crores)

33.37

43.03

33.55

35.15

23.11

0

5

10

15

20

25

30

35

40

45

50

2013/14 2014/15 2015/16 2016/17 2017/18

EPS

95.91111.23

193.59

228.18

187.56

0.00

50.00

100.00

150.00

200.00

250.00

2013/14 2014/15 2015/16 2016/17 2017/18

Net Income (crores)

Quarter to Quarter Comparison

Particulars Q3 2018/19 Q3 2017/18 Growth (%)

Paid-up Capital Rs. '000' 8,520,255.84 8,114,529.38 5.00%

Reserve Rs.’000’ 5,190,960.08 4,523,962.18 14.74%

Deposits from customers Rs.’000’ 108,582,107.09 98,988,791.21 9.69%

Loans and advances to customersRs.’000’ 93,775,356.55 82,474,993.68 13.70%

Net Profit Rs.’000’ 2,014,075.75 1,827,027.79 10.24%

Return on equity (%) 13.19 12.92 2.09%

Return on asset (%) 1.52 1.57 -3.18%

Earnings per share 31.52 25.81 22.12%

Net worth per share 179.17 163.61 9.51%

P/E ratio 15.54 23.63 -34.24%

Credit to Deposit Ratio (%) 79.01 78.74 0.34%

Capital fund to RWA (%) 11.82 12.44 -4.98%

As of third quarter ending the net profit of the bank has increased by 10.24% to Rs.1.82 billion. The bank has 9.69% increase in

deposits and 13.70% rise in Loans and advances to customers. Similarly, the bank has reported rise of 14.74% in reserves, 0.34%

in Credit to deposit ratio. However, Capital fund to RWA has decreased by 4.98%.

Dividend History

Year Dividend Total %

Cash % Bonus %

2013/14 6.05 15 21.05

2014/15 7.1 35 42.1

2015/16 1.57 30 31.57

2016/17 1.3158 25 26.3158

2017/18 10.78 5 15.78

The bank is providing consistent dividend either in the form of cash or bonus. Looking at the history of dividend distribution,

the bank seems to be highly focused on distributing bonus share. However, bank has distributed only 10.78% cash dividend to

its shareholder.

Technical Analysis of HBL as on 4th June, 2019

Day Candle

Open 560

High 565

Low 556

Close 556

Pattern Analysis

Chart Pattern Short term Uptrend

Resistance R1: 301 R2: 310

Support S1: 279 S2: 273

Higher Breakout Level 316

Particulars Points Remarks

Volume 903 The daily volume and weekly volume of the stock

is lower than that of the 1 month. Avg. Volume (1 week) 1313.60

Avg. Volume (1 month) 3864.90

No. of Transaction 14 The daily number of transactions is lower than that of average transaction of the week and month.

Avg. no. of Transaction (1 week) 14.80

Avg. no. of Transaction (1 month) 19.52

180 days Average 508.49 The price of the stock is trading above both 180 days and 360 days average. 360 days Average 548.45

52 Weeks High Price 644 The stock is currently trading between 52 weeks high and low price. 52 Weeks Low Price 418

Nepse Index 1 year Change -6.81% The overall market in the last 12 months is in a downtrend and so is the industry. The stock has fall in the past one year and even more so in the 1 month’s period.

Industry Index 1year Change -0.03%

Stock 1-Month Change -2.28%

Stock 1-Year Change -2.21%

Monthly Beta 0.852 The monthly is lower and quarterly beta of the stock is higher than the market. Quarterly Beta 1.327

Total Holdings of Mutual Funds (Jestha) 281,319 The Mutual Funds are holding good number of shares of the company.

Stock Holdings of Top Broker (from June, 2019) 33,483 The sum of Stock holdings of 5 Brokers is shown with the average of their average buying and selling price.

Top Broker Avg. Buy Price 560.06

Top Broker Avg. Sell Price 558.41

Concluding remarks

From the above analysis, it is clear that the company has enjoyed a healthy growth in business and its operations. Most of the

fundamental indicators of the company are growing and has potential to grow further. The bank has to focus on its operations,

it seems that the deposit collection and loan to customers are growing at slow pace which resulted in decrease in Net Income

by 17.80% in previous fiscal year.

The bank has a fairly long track record of operations, experienced promoters and management team and stable profitability.

Overall, the balance sheet size and business has quite increased in recent time and it can do better if it can keep up its growth

momentum without compromising on the quality of its assets.

Indicators Points Remarks

RSI (14) 46.17 HBL is at moderate zone.

MACD (12,26,9) -4.18 The MACD line is below baseline and above the signal line.

Signal Line (12,26,9) -4.78

Histogram (12,26,9) 0.59

EMA (5,0) 555.17 EMA 5 is below the EMA 20 and the price is below EMA 20 and just above EMA 5. EMA (20,0) 559.02

+DMI(13,8) 23.58 The -DMI is dominant over +DMI and ADX is below is at 14.77.

-DMI(13,8) 25.31

ADX (13,8) 14.77

Chaikin Money Flow (20) -0.2914 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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