AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 24th May, 2019

NEPSE UPDATE

Indicators 19th May, 2019

23rd May, 2019

(+)/(-) %

NEPSE 1318.71 1314.55 -0.32% SENSITIVE 281.44 280.38 -0.38% FLOAT 96.65 96.34 -0.32% BANKING 1177.19 1167.42 -0.83% HOTELS 2092.5 2166.38 3.53% DEVELOPMENT BANKS 1611.93 1599.68 -0.76% HYDROPOWER 1190.81 1278.88 7.40% FINANCE 625.96 618.87 -1.13% NON LIFE INSURANCE 6029.8 5894.23 -2.25% MANU. & PRO. 2662.45 2591.65 -2.66% OTHERS 752.41 765.02 1.68% MICROFINANCE 1525.92 1506.46 -1.28% LIFE INSURANCE 6754.39 6650.28 -1.54%

Market Summary Statistics (19th May to 23rd May)

Total Turnover (Rs) 5,023,096,113.00

Total Traded Shares 16,156,438

Total Number of Transactions 57,076.00

Scrips Traded 173

Market Cap at Week start 1,634,467.09 Millions

Market cap at Week end 1,632,116.21 Millions

Floated Market Cap at Week start 571,670.46 Millions Floated Market Cap at Week end 571,317.56 Millions

Bullion Update

As on 24th May, 2019 Hallmark Gold Rs.59,700/tola

Worked Gold Rs.59,400/tola

Silver Rs.710/tola

Quote for the week

“Much success can be attributed to inactivity.

Most investors cannot resist the temptation

to constantly buy and sell”

-Warren Buffet

The market declined slightly by 0.32% or 4.16 points

in the trading week between May 19 and May 23. The

sensitive index, which measures the performance of

big companies, also registered a fall of 0.38% or 1.06

points. Similarly, float index also went down 0.32% or

0.31 points.

The market seems to have consolidated after around

210 points rally from the beginning of March.

Currently, the market is hovering between 1300 and

1320 points, suggesting some indecisiveness. This

week the market had opened at 1322.68 on Sunday

and went down 2.29 points to sit at 1318.71. The

market further gave up 11 points on Monday. On the

following two days, it added 4.43 and 7.49 points. On

the last trading day of the week, however, the index

shed 5.08 points to end the week at 1314.55 points.

In the review period, all the sub-indices except for

hotels, hydropower, and others posted loss. The

hydropower experienced highest gain with a surge of

7.40%. It was followed by hotels and others, which

rose by 3.53% and 1.68% respectively. Manufacturing

and processing suffered the most, dropping 2.66% as

the stock of Shivam witnessed some correction after

several days of upward rally. Insurance stocks

followed the suit as non-life insurance and life

insurance dropped 2.25% and 1.54% respectively. The

BFIs stock also edged lower as microfinance, finance,

commercial bank and development banks shed 1.28%,

1.13%, 0.83% and 0.76% respectively.

Market participation has been in the higher side of

the spectrum since the start of the New Year, and it

continued this trading week too. The total turnover

during the review period stood at Rs 5.02 billion. Daily

turnover averaged Rs. 1 billion, which is a very good

sign. The total market value declined slightly by Rs.

2,350.88 million as the market capitalization went

down by 0.14% during the trading week.

.

News Update

Outbound Nepalis spent Rs 68 billion in nine months

According to Nepal Rastra Bank, total money that flowed out of the country for travel purpose rose to Rs 67.94 billion in the

review period, up by 16.4 percent in the corresponding period of FY2017/18. The data has left many people worrying as

spending by outbound Nepali holidaymakers is soon outpacing the country’s total tourism earnings…Read More

Inflation moderates to 4.4 percent on subdued food prices

Inflation has moderated to 4.4 % in the 9 months of the current fiscal year from 5.3% a year ago mainly due to subdued food

prices. Though there were concerns that the economy operating above potential driven by strong domestic demand and

expansionary budget and monetary policy could drive up inflation, the low food prices have held down inflation in the current

fiscal year…Read More

Many macroeconomic indicators worsen on Oli government's watch

Most of the economic indicators have worsened in the first three quarters of the current fiscal year compared to a year ago.

Performance on the external front has remained particularly weak as the trade deficit continues to widen at an alarming rate.

At the same time, foreign income has been dwindling. FDI has nearly halved. The foreign exchange reserve is depleting due to

the rising import bill. Of the allocated budget nearly half has remained unspent although only two months are left…Read More

NIBL Ace Capital to launch open-ended mutual fund

NIBL Ace Capital is launching an open-ended mutual fund scheme, the first of its kind in the Nepali capital market, by making a

public issue worth Rs125 million on June 2. The country’s capital market has seen only closed-ended mutual fund schemes so

far…Read More

Market Announcements

Unnati Microfinance Bittiya Sanstha Limited has published a notice regarding bid opening date of 1,278unit promoter

shares and 7,617 unit ordinary shares in auction to the general public on 10th Jestha, 2076.

Nepal Bangladesh Bank Limited is issuing its 20,00,000 units @ Rs.1000 per unit 10.25% NBBL Debenture 2085 to the

general public from 10th Jestha, 2076.

Nepal Reinsurance Company Limited has announced its 4th AGM going to be held on 31st Jestha, 2076.

CBIL Capital Limited is issuing its 100 million units of Rs 10 face value each mutual fund scheme worth Rs 1 billion “Citizens

Mutual Fund-2” to the general public from 9th Jestha, 2076.

NIBL Ace Capital Limited has published an offer letter to issue 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 19th to 22nd Jestha, 2076.

Himal Dolkha Hydropower Company Limited has published an offer letter to issue 16,00,000 units IPO shares the project

affected local residents of Ilam Municipality ward no. 9 & 10 and Mai Municipality ward no. 9 from 14th Jestha to 28th

Jestha, 2076.

Infinity Laghubitta Bittiya Sanstha Limited has published an offer letter to issue 6,74,000 units IPO shares to the general

public from (13th to 16th Jestha, 2076).

Swabhimaan Laghubitta Bittiya Sanstha Limited has allotted its 2,50,000 units IPO shares to the general public on 5th

Jestha, 2076.

Nepal Rastra Bank is selling "Development Bond 2087 kha" worth Rs. 6 arba on auction.

Janasewi Laghubitta Bittiya Sanstha Limited has allotted its 4,63,300 units IPO shares to the general public on 6th Jestha,

2076.

Prabhu Bank Limited has published a notice regarding the conversion of promoter share structure from 61.31% to 55%.

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

resistance zone. The market had shown short term bull after Nepali New Year. This week the market closed at 1314.55 forming

a bearish candle on last trading day. This week NEPSE opened at 1319.62 and formed a bear candle, closing at 1316.84 after

losing 2.78 points during the day. There was stable and quiet supportive transaction turnover from Rs.1.06 billion to Rs.932

million on the last trading day of the week. The transaction of more than a billion was seen on first two trading days, and on

average the turnover per day remained at Rs. 1 billion. This is a good signal for the market to make breakthrough. Downtrend

market has shown short term bull basically in the month of March and April in last three years. It can also be seen that

investors are diversifying their investments as sectoral shift could be witnessed from commercial bank to insurance to

development bank to microfinance and then lately to hydropower. This is a good indication for bull market to come in the

coming weeks.

Taking the Fibonacci retracement from 1098.95 to 1296.92, the 0.618 Fibonacci ratio lies at 1174.48. So, the market holds a

psychological support level at 1174.48.

The market currently looks indecisive as it is hovering between 1300 and 1320 points. This can be considered a strong

resistance zone. If the market breaks this level with support of large volume of turnover, we might witness another rally

upwards. The immediate support might be around 1302 to 1306.

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 56 which indicates that the market is at moderate zone. Comparing the weekly price chart and

RSI chart from April 28 to May 23, 2019, a regular bearish divergence can be seen in the market, which indicates that the

market is likely to fall from the current resistance zone.

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 22.86 and 26.40 respectively. MACD has already crossed the signal line which indicates

high chance of fall towards base line however, both the signal lines are above the base line.

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 1314.50 and EMA (20, 0) is at 1295.23. After making a golden cross on March 10, 2019, currently the gap

between the two lines is widening. The index is currently trading around 5 days and above 20 days Exponential Moving

Average. This indicates that the overall market is trying move towards uptrend.

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 1327.92, 1305.01 and 1282.10 respectively. The market is trading in between

upper and middle band and all the bands are trying to squeeze.

Stock Analysis: NIC Asia Bank Limited (NICA)

Introduction

NIC ASIA Bank has its antecedents in NIC Bank which was established on 21st July 1998. The Bank was rechristened as NIC ASIA

Bank after the merger of NIC Bank with Bank of Asia Nepal on 30th June 2013. This was a historic merger in the annals of

Nepalese financial landscape as the first of its kind merger between two successful commercial banks in the country.

During the post-merger integration phase, NIC ASIA managed the transition very smoothly receiving accolades from the

regulators as well as the stakeholders, paving the way for other mergers and consolidation in the Nepalese financial sector.

After the merger, NIC ASIA was recognized as “Bank of the Year 2013-Nepal” by The Banker, Financial Times, UK. This is the

second time that the Bank was recognized with this prestigious award, the previous occasion being in 2007.

NIC ASIA Bank is now, one of the largest private sector commercial banks in the country in terms of capital base, balance-sheet

size, number of branches, ATM network and customer base. The Bank has 282 branches, 40 extension counters, 26 branch less

banking and 289 ATMs across Nepal with a network covering all major financial centers of the country.

Board of Director

The promoters of the bank are well experienced in sectors like banking, insurance, manufacturing, import and export, trading

etc. Similarly, the BOD includes eminent businessmen and industrialists with wide experience in the financial services. Mr.

Tulsi Ram Agrawal is the Chairman of the bank, who has been engaged in industry, banking and business sector for more than

30 years. Mr. Roshan Kumar Neupane is the current CEO, who is a Chartered Accountant by qualification and has been

working at NIC Asia since March 2008 at various managerial positions.

Current Share Holding Composition

NICA has authorized capital of NPR 8.04 billion and paid up capital of NPR 8.03 billion. The current shareholder structure of the

bank is as follows:

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 6.3 508,096,800

1.5 Public 93.7 7,523,020,198

1.6 Other - -

2 Foreign Ownership - -

Total 100 8,031,116,998

Name Designation

Mr. Tulsi Ram Agrawal Chairman

Mr. Jagdish Prashad Agrawal Director

Mr. Ram Chandra Sanghai Director

Mr. Rajendra Aryal Director

Mr. Binod Kumar Pyakurel Director

Mr. Ganesh Man Shrestha Director

Mr. Trilok Chand Agrawal Director

Financial Highlights

265.83

369.50

457.54

669.26

803.11

221.47180.38

161.07187.77

269.57

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

Paidup capital and reserve and surplus (in crore)

Paidup capital Reserve and surplus

44.9853.48

64.61

79.91

139.59

36.33 42.14

57.8870.62

115.80

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

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

Deposits and loans (in arba)

Deposits Loans and advances

35.98

25.59

28.31

23.06

16.62

0

5

10

15

20

25

30

35

40

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

EPS

83.16

68.03

106.69

136.54133.49

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

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

Net profit (in crore)

15.93%

13.05%

16.50%

16.84%

12.09%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

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

ROE

1.71%

1.21%

1.51%

1.64%

0.97%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

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

ROA

Company Financials

Yearly Analysis

The following table presents the trend of financial performance of NICA from the FY 2013/14 to 2017/18:

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

Paid-up Capital (Rs.000) 2,658,285 3,695,016 4,575,374 6,692,597 8,031,116

Reserve (Rs.000) 2,214,747 1,803,768 1,610,680 1,877,686 2,695,684

Debentures & bonds (debt securities)

(Rs.000)

500,000 500,000 515,702 501,249 3,487,908

Deposits from customers (Rs.000) 44,984,218 53,477,184 64,606,790 79,905,602 139,589,607

Growth y-o-y 18.88% 20.81% 23.68% 74.69%

Total Assets (Rs.000) 51,500,486 60,519,401 83,573,552 103,108,361 170,943,177

Loan, advances to customers (Rs.000) 36,325,070 42,144,338 57,876,398 70,615,820 115,804,620

Growth y-o-y 16.02% 37.33% 22.01% 63.99%

Interest Income (Rs.000) 3,995,005 3,917,759 4,401,911 7,088,588.24 13,545,820

Net Interest Income (Rs.000) 1,798,222 1,577,471 1,957,735 2,725,659.20 4,209,664

Total Operating Income (Rs.000) 2,238,833 2,102,211 2,613,249 3,602,423 5,358,136

Net Income (Rs.000) 831,588 680,316 1,066,907 1,365,415 1,334,861

Growth y-o-y -18.19% 56.83% 27.98% -2.24%

Return on Assets (ROA) 1.71% 1.21% 1.51% 1.64% 0.97%

Return on Equity (ROE) 15.93% 13.05% 16.50% 16.84% 12.09%

EPS (as per NAS 26 - EPS) 35.98 25.59 28.31 23.06 16.62

Book Value Per share 183.31 148.82 161 151 145.32

Market Value per share 970 617 798 445 316

Price Earnings Ratio 26.96 24.11 28.19 19.30 19.01

Capital Fund to RWA (CAR) % 14.05% 12.49% 12.44% 13.83% 12.24%

Non Performing Loan(NPL) to Total Loan 2.33 2.07 0.76 0.36 0.06

Based on the data presented above, the bank has made consistent growth in all its fundamentals in last five years. The bank

has followed an aggressive growth strategy. It opened more than 100 branches in the FY 2017/18 alone. As such, it has seen a

huge growth in its deposit collection and loan provided to its customers, with an increase of 74.69% and 63.99% respectively.

It’s net Income of Rs.1.33 billion in year 2017/18 is 2.24% lower than that of previous fiscal year. Fall in net Income is because

of unbalanced growth between total operating income and total operating expenses. In 2017/18, the total operating income

of the bank increased by 48.74% from Rs.3.60 billion to Rs.5.35 billion, whereas total operating expenses has risen by 70.13%

from Rs.1.84 billion to Rs.3.13 billion. The operating cost mainly increased on the back drop of aggressive branch expansion,

increase in number of employees and high expenses towards business promotion activities.

The bank has met its paid-up capital of 8 arba as directed by Nepal Rastra Bank in fiscal year 2017/18. The bank has reported

43.56% rise in its reserve. Also, the bank has raised Rs. 3 arba in 2017/18 by issuing subordinated debentures to maintain and

strengthen its capital base. This has helped to maintain a CAR of 12.24% in 2017/18 as against the norm of 11%. Its strength

also lies in maintaining its non-performing loan to a very minimum level despite a huge outlay in loan during 2017/18.

Evaluating the above fundamental indicators, the company has sound fundamental and has huge potential in the Nepalese

emerging financial market. If it can maintain its operating cost, and quality of its loan in the years to come, it can do even

better.

Quarterly Analysis

The following table presents 3rd Quarter analysis of the company for the FY 2017/18 to 2018/19.

Looking at the third quarter results of the bank, it has put on an extraordinary performance, thanks to its aggressive growth

strategy. The net profit of the bank has increased by a staggering 145.41% to Rs.2.27 billion till Q3 2018/19 as compared to

the same period of corresponding year. Since the paid up capital didn’t increase as much, it’s earnings per share also surged.

Similarly, its reserves rose by 50.52%. The bank has 10.42% rise in deposits from customers and 22.24% rise in loans and

advances to customers. Even though there is a mismatch in deposit collected and loan outlayed, its CCD ratio is in a

comfortable positon of 77.55% as against the ceiling of 80%. One of the reasons is because of the fund collected through its

subordinated debts. This has also put its CAR in a very comfortable position.

Dividend History

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.

Year Dividend Total Dividend (%)

Cash (%) Bonus (%)

2013/14 6.3 15 21.3

2014/15 20.85 20.85

2015/16 0.85 16.07 16.92

2016/17 9.3 2.5 11.8

2017/18 5.45 4 9.45

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

Paid-up Capital (Rs.000) 8,834,228.69 8,031,116.99 10.00%

Reserve (Rs.000) 4,057,596.12 2,695,684.00 50.52%

Deposits from customers (Rs.000) 154,135,180.58 139,589,607.84 10.42%

Loans & advances to customers (Rs.000) 141,555,894.54 115,804,620.90 22.24%

Net Profit (Rs.000) 2,276,469.01 927,636.71 145.41%

Earnings per share 34.71 15.49 124.08%

Net worth per share 161.74 137.65 17.50%

P/E ratio 14 20.86 -32.45%

Credit to Deposit Ratio (%) 77.55% 76.16% 1.83%

Capital fund to RWA (%) 13.10% 13.03% 0.54%

Year Dividend Total

Dividend

(%)

Cash

(%)

Bonus

(%)

2013/14 15 15 30

2014/15 2.05 39 41.05

2015/16 1.37 26 27.37

2016/17 1.05 20 21.05

2017/18 0.526 10 10.526

Technical Analysis of NICA as on 23rd May, 2019

Particulars Points Remarks

Volume 24,480 The daily volume is lower than that of weekly

volume and 1 month. Avg. Volume (1 week) 33,397

Avg. Volume (1 month) 44,565

No. of Transaction 119 The daily number of transactions is lower than that of weekly and 1 month average transaction.

Avg. no. of Transaction (1 week) 123

Avg. no. of Transaction (1 month) 177

180 days Average 415.84 The price of the stock is trading above 180 days and 360 days average. 360 days Average 373.69

52 Weeks High Price 304 The stock is currently trading closer to 52 weeks high price. 52 Weeks Low Price 515

Nepse Index 1 year Change -1.03% The overall market in the last 12 months is in a downtrend; the industry, however has gained in the last 12 months. In 12 months, the stock has significantly beaten the market and industry return.

Industry Index 1year Change 3.83%

Stock 1-Month Change -1.22%

Stock 1-Year Change 44.05%

Monthly Beta 03903 The monthly beta is lower than the market, but quarterly beta is above the market. Quarterly Beta 1.149

Total Holdings of Mutual Funds (Chaitra) 91,200 The Mutual Funds are holding good number of

shares of the company.

Stock Holdings of Top Broker (from Dec 04, 2018) 380,082 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 2.5% bonus share.

Top Broker Avg. Buy Price 441.85

Top Broker Avg. Sell Price 447.35

Day Candle

Open 486

High 486

Low 481

Close 484

Pattern Analysis

Chart Pattern Bullish

Resistance R1: 490 R2: 515

Support S1: 481 S2: 438

Higher Breakout Level 506

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. 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 by containing its

expenses and maintaining its asset quality.

Indicators Points Remarks

RSI (14) 57.42 NICA is moving towards moderate zone .

MACD (12,26,9) 9.38 MACD line has crossed the signal line from above, giving a sell signal.

Signal Line (12,26,9) 13.88

Histogram (12,26,9) -4.49

EMA (5,0) 484.94 EMA 5 is converged towards EMA 20 and the price is more or less similar to both the EMAs. EMA (20,0) 482.26

+DMI(13,8) 24.06 The +DMI is dominant over –DMI and ADX is at 33, but falling. So, the uptrend is losing its significance. -DMI(13,8) 16.53

ADX (13,8) 33.73

Chaikin Money Flow (20) -0.17 CMF is below the baseline which shows slight 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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