AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 15th March, 2019

NEPSE UPDATE

Indicators 10th Mar, 2019

14th Mar, 2019

(+)/(-) %

NEPSE 1128.71 1155.5 2.37% SENSITIVE 240.11 246.1 2.49% FLOAT 82.19 84.29 2.56% BANKING 964.57 997.96 3.46% HOTELS 1724.06 1754.52 1.77% DEVELOPMENT BANKS 1433.67 1467.52 2.36% HYDROPOWER 1132.85 1175.33 3.75% FINANCE 595.32 610.89 2.62% NON LIFE INSURANCE 5463.51 5503.49 0.73% MANU. & PRO. 2000.24 1997.45 -0.14% OTHERS 702.62 708.85 0.89% MICROFINANCE 1410.54 1415.2 0.33% LIFE INSURANCE 5938.64 5959.67 0.35% TRADING

Market Summary Statistics (10th Mar to 14th Mar)

Total Turnover (NRs) 1,944,984,774.00

Total Traded Shares 6,462,335.00

Total Number of Transactions 27,091.00

Scrips Traded 176.00

Market Cap at Week start (NRs) 1,378,491.12 Millions

Market cap at Week end (NRs) 1,405,334.15 Millions

Floated Market Cap at Week start (NRs) 483,325.34 Millions Floated Market Cap at Week end (NRs) 493,363.19 Millions

Bullion Update

As on 15th Mar, 2019 Hallmark Gold Rs.60,500/tola

Worked Gold Rs.60,200/tola

Silver Rs.745/tola

The market gained 2.37% or 26.79 points in the trading

week between March 10 and March 14. Along with

Nepse index, the float index also went up by 2.56% or

2.1 points. The sensitive index went up by 2.49% or

5.99 points to end the week at 246.1.

The secondary market had opened at 1127.29 points

on Sunday and went up by 1.42 points to end the day

at 1128.71. NEPSE, on the first trading day of the

week, ended flat as the trading remained largely

affected by technical glitches. On Monday, the index

went further up by 14.22 points. The rise in market

was further substantiated on Tuesday as it gained a

major 20.33 points. The market retraced after the

extended gaining run on Wednesday; it dipped 13.16

points as profit booking surged. The market gained

5.40 points on Thursday to end the trading week at

1155.50.

In the review period, except manufacturing and

production index all other index ended green. Banking

and Hydropower were the highest gainers during the

week.

Nepse witnessed considerable strength this trading

week as seen in the turnover amount. The total

turnover during the trading week stood at Rs 1.94

billion. An average daily turnover at Rs 388.99 million

was recorded, which is quite higher compared to the

lackluster trading in past several weeks. This indicates

the rising optimism of investors in the market,

followed by the news of bankers’ attempts in lowering

the interest rate on loan. The total market value

increased by Rs 26843.03 million as the market

capitalization increased by 1.95% during the trading

week.

To conclude, the investors’ optimism has started

building in recent weeks. The buyers continued to

dominate the market in recent weeks followed by

expectations in lower interest on loan and SEBON has

also loosened a provision of mandatory requirement of

PAN for stock investors.

Quote for the week

“Be fearful when others are greedy

And greedy only when others are fearful”

-Benjamin Graham

.

News Update

Nepse ends week on a high note

Stocks struggled in early trading session on Thursday as the Nepal Stock Exchange (Nepse) 7 points by midday. However, the

index recovered its initial losses later in the afternoon posting a gain of 5.40 points to close the week at 1,155.50 points…Read

More

Investment Board of Nepal to showcase some 50 projects for FDI

IBN has prepared a list of 50 projects for showcasing to foreign investors at the Nepal Investment Summit 2019 scheduled for

March 29 and 30. IBN has itself readied 32 of the projects, many with preliminary study reports. It is also set to exhibit 11

projects under the private sector…Read More

SEBON brings regulation to govern private equity, venture capital funds

SEBON has issued the Specialized Investment Fund Regulation, 2075 (2019), paving the legal way for operation of various funds

like private equity fund, venture capital fund and hedge funds in the securities market. The new regulation is aimed at allowing

start-ups, innovative business ventures and services to secure funding and financing from specialized investment funds like

venture capitals and equity funds…Read More

Fuel import bill balloons to all-time high of Rs131.93b

Nepal’s oil import bill ballooned to a record Rs131.93 billion in the first 10 months of the fiscal year, largely due to a sharp

growth in domestic consumption despite regular electricity supply. The jump has also been attributed to a rise in crude oil

prices in the international market and appreciation of the US dollar….Read More

Market Announcements

Nepal Oil Corporation Limited has announced its 37th AGM going to be held on 21st Chaitra, 2075.

Salapa Bikas Bank Limited has announced its 7th AGM going to be held on 23rd Chaitra, 2075.

Mithila Laghubitta Bittiya Sanstha Limited has announced its 10th AGM going to be held on 23rd Chaitra, 2075.

Samudayik Laghubitta Bittiya Sanstha Limited has announced its 5th AGM going to be held on 24th Chaitra, 2075.

Trisuli Jal Vidhyut Company Limited has published an offer letter to issue 37,05,000 units IPO shares to the general public

from 7th to 11th Chaitra, 2075.

NMB Bank Limited is issuing its 12,00,000 units at Rs.1000 per unit "10% NMB debenture 2085 " to the general public from

30th Falgun, 2075.

Jyoti Bikas Bank Limited and Hamro Bikas Bank Limited have received final approval from NRB to commence their joint

transaction (after acquisition) in the name of Jyoti Bikas Bank Limited from 15th Chaitra, 2075.

Jebils Finance Limited is selling its 3,40,955.50 unit promoter shares in auction to the general public from 5th to 13th

Chaitra, 2075.

Appointment of company secretary in Shangrila Development Bank Limited (SADBL).

Global IME Bank Limited is going to acquire Hathway Finance Limited.

NEPSE - TECHNICAL ANALYSIS

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

market closed at 1155.50 with high volume in the market than that of previous week. Moreover, the market showed bullish

momentum forming a short-term bullish trend in the market. The immediate support of the market lies at 1098.95 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 is the psychological support level for the market.

This week, the market got covered with positive sentiments among the investors. Though the market couldn’t give continuity

to the bullish trend at the end of the week because the investors couldn’t resist to book their profit. In 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, only manufacturing and production index ended red otherwise all other index ended green. Commercial Bank and

hydropower index are the highest gainers of the week. Microfinance and Life insurance are the index getting lowest gain in the

review period.

Taking the Fibonacci retracement of the market from 1232.74 to 1098.95, the market has ended its bullish momentum that

had started from 6th of March at 50% retracement level. The market tested the level of 1098 before and that level can still be

the strong support level for the current market.

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 60.44, which imply that the market is currently at moderate zone. Negative divergence of RSI can

be seen as the peak of RSI is higher than previous peak but the peak of stock price is lower than that of previous peak.

Negative RSI in the market signals for downfall.

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 9.66, 1.53 and -8.13 respectively. MACD line is above the base line and the

signal line. MACD line is deviated from the signal line which shows the probability of volatility in the market.

Moving Average Analysis

Moving average is a technical analysis tools that smoothes 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 1146.94 and EMA (20, 0) is at 1131.37. The market is currently trading above 5 days and 20 days

Exponential Moving Average. A golden cross between the EMA lines was made on 10th of March and the gap between EMA

lines is higher.

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, which signals the volatility.

Stock Analysis – Nepal SBI Bank Limited (SBI)

Company Introduction

Nepal SBI Bank Ltd. (NSBL) is a subsidiary of State Bank of India (SBI) having 55 percent of ownership. Your bank is one of the

largest joint ventures of SBI, providing banking services through its 88 offices. Further, the Bank is all set to expand its services

in coordination with the Joint Venture within the country via Branchless Banking units. Nepal SBI Bank Ltd also has a wholly

owned subsidiary, Nepal SBI Merchant Banking Ltd (NSMBL).

Ordinary Shares:

Authorized Capital 100,000,000 Ordinary share of Rs. 100 each

10,000,000,000

Issued & Paid up Capital 80,469,052.60 Ordinary share of Rs. 100 each

8,046,905,260

Shareholder Information Board of Directors

Shareholders Holdings

Promoter shareholder: 70%

State Bank of India 55%

Employee Provident Fund 15%

Public shareholder 30%

Total 100%

Financial Highlights

1.07

1.33

1.54

1.141.22

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2070/71 2071/72 2071/73 7073/74 2074/75

Net Profit (in arab)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

2070/71 2071/72 2071/73 7073/74 2074/75

Paid up Capital & General Reserve (in arab)

Paid up capital (in arab) General reserve (in arab)

Board Members Position

Sujit Kumar Varma Chairman

R.S. Ramesh Director

Deepak Rauniar Director

Keshav Raj Acharya Professional Expert Director

Bala Krishna Shrestha Director

Anukool Bhatnagar Managing Director (CEO)

Company Financials

Yearly Analysis:

The following table presents the trend of financial performance of SBI from the FY 2070/71 to 2074/75.

Particulars 2070/71 2071/72 2071/73 7073/74 2074/75

Net Profit 1,065,436,141 1,331,881,801 1,538,850,228 1,144,987,363 1,218,765,930

Paid Up Capital 2,650,205,800 3,058,059,500 3,883,735,600 6,924,893,000 8,046,905,300

Statutory General Reserve 1,110,693,413 1,123,780,642 1,390,157,003 1,694,804,484 2,099,506,709

Book value per share (BVPS) 171.15 186.49 184.87 151.90 159.08

Basic Earnings Per Share (EPS) 34.83 34.48 36.78 33.46 25.16

Return on Equity (ROE) 22.85% 17.08% 17.46% 14.87% 15.81%

Return on Assets (ROA) 1.50% 1.64% 1.59% 1.57% 1.97%

Non-Performing Loan (NPL) 0.26 0.19 0.14 0.10 0.20

Price to Earning (PE) ratio 36.75 25.73 50.98 27.64 19.83

Base rate 8.78 7.71 5.98 8.98 10.12

CD ratio % 65.54 78.39 72.90 78.07 89.60

Number of branches 56 56 62 62 72

The Net profit of the Bank throughout the mentioned years shows the company’s profit after the regulatory

adjustment is quite random. The Bank hasn’t been able to increase its profit alike the increment in paid up capital

in its successive years. Though the Bank is increasing its general reserve from year to year adding 20% of its Net

profit in each year, but the Bank still has a long way to go to make the general reserve twice of paid up capital as

per the regulatory requirement. The BVPS, EPS, ROE & ROA of the Bank are quite random as like the profit after the

regulatory adjustment.

Though the company has managed to recover its default loan in last five years, but the NPL of FY 74/75 is higher

than that of FY 73/74 which means the Bank still needs to be more focused on lending with proper control and

supervision.

The base rate of the Bank in the last year is higher than the previous last year which negatively hits the profit and

loss statement of the Bank. The CD ratio of the Bank in the last year has crossed the regulatory ceiling of 80%. The

CD ratio of this year shows excessive utilization of available financial resources. The PE ratio of last year is lower

than the previous last year which means the market price of the company’s stock is selling at cheaper price than in

previous year.

34.83 34.4836.78

33.46

25.16

0

5

10

15

20

25

30

35

40

2070/71 2071/72 2071/73 7073/74 2074/75

Basic Earnings Per Share (EPS)

22.85%

17.08% 17.46%

14.87%15.81%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2070/71 2071/72 2071/73 7073/74 2074/75

Return on Equity (ROE)

Quarterly Analysis:

The following table presents 2nd Quarter analysis of the company for the FY 2074/75 to 2075/76.

Particulars Industry Average 2075/76 (Q2) 2074/75 (Q2) Q2 change

Paid Up Capital 8,707,963.48 8,449,251 8,046,905 5.00%

Reserve & Surplus 6,050,027.70 4,471,838 3,692,756 21.10%

Borrowing 1,910,978.41 2,662,550 4,324,000 -38.42%

Deposits 91,622,816.78 97,837,621 85,169,260 14.87%

Net Profit (after regulatory adjustment) 921,975.81 902,216 913,041 -1.19%

Non-Performing Loan (NPL) 1.47 0.19 0.13 46.15%

Cost of Funds 7.2 5.91 5.14 14.98%

Credit to Deposit (CD) Ratios 77.77 77.77 77.03 0.96%

Base Rate 9.98 9.82 9.5 3.37%

Earnings Per Share (EPS) 24.58 24.3 22.69 7.10%

Net Worth Per Share 167.84 152.93 145.89 4.83%

P/E Ratio 12.84 16.01 26.22 -38.94%

Liquidity Ratio 21.4 21.96 23.4 -6.15%

Return on Equity (ROE)% 14.26 15.83 15.55 1.80%

Return on Assets (ROA)% 1.85 1.75 1.76 -0.57%

Price To Book (PB) Ratio 1.84 2.58 2.71 -4.80%

The paid of capital and reserve & surplus of the Bank is lower than the industry average. The borrowings of

the Bank in the current quarter have been heavily decreased than the previous corresponding quarter. The

borrowings and deposits of the Bank are higher than the industry average. The net profit of the Bank is lower

than the industry average and has been slightly decreased than the previous corresponding quarter. Though

the cost of funds of the Bank is lower but it has increased in comparison to previous corresponding quarter.

The CD ratio of the Bank in current quarter is balanced to industry average and is under the ceiling set by the

regulatory body. The Base rate of the Bank in current quarter has increased which may negatively affect the

profit of the company in this year. The EPS and net worth per share of the company has increased than the

previous corresponding quarter but is lower than the industry average. The liquidity ratio of the Bank is

higher than the industry average and has been increased in comparison to previous corresponding quarter

which shows the Bank is able to meet its debt obligations. The ROA and ROE of the Bank is approximately

similar to the industry average and previous corresponding quarter. The P/E & PB ratio of the Bank is lower in

comparison to previous corresponding quarter which is good but is higher than the industry average which

shows the stock price of the Bank is still costly to invest within its industry.

Dividend Distribution

Dividend 2070/71 2071/72 2072/73 2073/74 2074/75

Bonus % 15 27 28 15.42 5

Cash % 7 1.42 1.53 0.81 10.79

The dividend distribution pattern of SBI shows that the company has been distributing satisfactory dividends to its

equity holders mainly in the form of bonus shares.

Technical Analysis of the Company

As on 14th March, 2019

Day Candle

Open 395

High 395

Low 390

Close 391

Pattern Analysis

Chart Pattern Bearish

Resistance 437 518

Support 380 366

Higher Breakout Level 437

Particulars Points Remarks

Volume 6,818 The volume of the day is higher than the average

volume of the week and month. The increase in

volume shows the interest of investors towards

the stock.

Avg. Volume (1 week) 4,572.20

Avg. Volume (1 month) 3,863.14

No. of Transaction 27

The average number of transactions is approximately equal.

Avg. no. of Transaction (1 week) 28.80

Avg. no. of Transaction (1 month) 25.62

180 days Average 449.49 The price of the stock is trading below 180 days and 360 days average. 360 days Average 542.03

52 Weeks High Price 634 The stock is currently trading near to 52 weeks low price. 52 Weeks Low Price 366

Nepse Index 1-Year Change -10.14% 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 -12.68%

Stock 1-Month Change -3.71%

Stock 1-Year Change -30.43%

Monthly Beta 0.914 The Monthly beta of the stock is lower than the market which describes the stock is less risky. Quarterly Beta 0.911

Total Holdings of Mutual Funds (Poush) 247,576 The Mutual Funds are holding good no. of shares.

Overall, the financials of the company are strong and has been launching various programs like; branchless banking which

shows the Bank is dedicated to its customers. The Bank is performing quite well within its industry and is highly supported by

its parent company which occupies 55% of the company’s shareholdings. The stock price of bank seems costly within its

industry but it doesn’t imply that the stock of SBI isn’t good to invest. The downfall of stock is very high than that of the

Industry and the overall market.

Monthly Beta 0.914 The Monthly beta of the stock is lower than the market which describes the stock is less risky. Quarterly Beta 0.911

Total Holdings of Mutual Funds (Poush) 247,576 The Mutual Funds are holding good no. of shares.

Stock Holdings of Top Broker (from 2nd Jan, 2019) 31,160 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 5% bonus share.

Top Broker Avg. Buy Price 383.19

Top Broker Avg. Sell Price 384.34

Indicators Points Remarks

RSI (14) 58.998 The stock is currently at moderate zone.

MACD (12,26,9) 1.5854 The MACD line is above the baseline and the signal line. There is higher gap between MACD and signal line. Signal Line (12,26,9) -2.04

Histogram (12,26,9) 3.6255

EMA (5,0) 389.3542 The EMA 5 and 20 are below the price line. The stock witnessed golden cross on 10th of March.

EMA (20,0) 382.2710

+DMI(13,8) 33.78 Positive directional movement is dominant over negative directional movement but the ADX is below 25 which implies the current trend isn’t

strong. -DMI(13,8) 17.84

ADX (13,8) 24.97

Chaikin Money Flow (20) 0.14 CMF is above the baseline which shows slight buying pressure of 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.

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