AAKASH CAPITAL LIMITED
Weekly Newsletter from Aakash Capital Limited for the week ending on 21st June, 2019
NEPSE UPDATE
Indicators 16th June, 2019
20th June, 2019
(+)/(-) %
NEPSE 1258.27 1,264.36 0.27% SENSITIVE 269.97 271.6 0.50% FLOAT 92.24 92.79 0.41% BANKING 1127.94 1,135.91 0.56% HOTELS 2074.62 2,078.60 -0.43% DEVELOPMENT BANKS 1587.81 1,596.95 0.75% HYDROPOWER 1189.98 1,202.79 0.33% FINANCE 615.06 617.47 0.06% NON LIFE INSURANCE 5268.16 5,239.14 -1.25% MANU. & PRO. 2709.23 2,710.98 -0.97% OTHERS 722.28 725.79 0.17% MICROFINANCE 1411.23 1,424.92 1.20% LIFE INSURANCE 6163.34 6,111.90 0.08%
Market Summary Statistics (16th June to 20th June)
Total Turnover (Rs) 1,914,975,112
Total Traded Shares 6,430,074
Total Number of Transactions 28,236
Scrips Traded 177
Market Cap at Week start 1,565,258.33 Millions
Market cap at Week end 1,573,038.23 Millions
Floated Market Cap at Week start 548,091.46 Millions Floated Market Cap at Week end 551,400.04 Millions
Bullion Update
As on 21st June, 2019 Hallmark Gold Rs.65,000/tola
Worked Gold Rs.64,700/tola
Silver Rs.740/tola
Quote for the week
“Compounding interest is the eighth wonder of
the World. He who understands it earns it. He
who doesn’t pays it”
- Albert Einstein
The market increased by an insignificant 0.27% or 6.09
points in the trading week between June 16 and June
21. The sensitive index, which measures the
performance of big companies, also registered a gain
of 0.50% or 1.63 points. Similarly, float index also went
down 0.41% or 0.55 points.
This week the market had opened at 1271.18 on
Sunday and went down by 12.91 points to sit at
1258.27 points. The market dangled in all the following
days, albeit very low points. The market gained 2.63 on
Monday and decreased by 2.24 and 0.20 points on
Tuesday and Wednesday respectively. At the end of
the trading week, Thursday, it gained 5.90 points to sit
at 1264.36 points.
In the review period, all the sub-indices except for
hotels, non-life insurance and manufacturing and
production posted gains. The highest gaining sector
this trading week was microfinance. It increased by
1.20 per cent or 13.69 points. Except for this, all the
other sectors that ended in green increased by less
than 1 per cent. Banking, development banks,
hydropower, finance, others and life Insurance
increased by a meagre 0.56%, 0.75%, 0.33%, 0.06%,
0.17% and 0.08% respectively. On the other hand, non-
life insurance, which has been shedding points for last
several weeks, lost the highest in the market with
1.25% or 7.66 point. Similarly, it was followed by
manufacturing and production and hotels sector with
0.97 % or 1.75 point and 0.43% or 3.98 point decline
respectively.
The total turnover in this trading week stood at Rs 1.91
Billion while daily turnover averaged just Rs 0.38
billion. This clearly shows the falling participation of
investors in the market. The total market Value
increased by Rs. 7779.9 million as the market
capitalization increased by 0.43 per cent.
.
News Update
Finance ministry transfers Rs 85m in two months to finance foreign junkets
The Ministry of Finance (MoF) has transferred Rs 84.51 million from one budget heading to another to finance foreign junkets
of top-ranking functionaries and officials in the past two months alone…Read More
Provinces bring Rs 260 billion budget with focus on agro, tourism, and infrastructure
Provincial governments have brought budgets of a total size of Rs 259.57 billion for the upcoming fiscal year –
FY2019/20. Presenting budgets in the provincial parliaments, finance ministers of respective provincial governments have
unveiled expenditure plans for their provinces as well as the sources of resources for such expenditures…Read More
Trade deficit balloons to Rs 1,100 billion in first ten months
In a recent statistics released by the Department of Customs (DoC) based on data from 23 major ports of Nepal, trade deficit of
the country has risen to Rs 1,099.6 billion in the first 10 months of the current Fiscal Year 2018/19…Read More
Stakeholders call for merger of cooperatives
Stakeholders in the cooperatives sector have urged cooperative organizations to merge, considering the steady rise in the
number of cooperatives and traits of financial anarchy…Read More
BoP under pressure as trade deficit widens
Owing to rising imports amid slower exports, country’s trade deficit widened by 19.7 per cent to Rs 1,099.6 billion in the first 10
months of the current fiscal year (mid-July to mid-May), according to statistics of Nepal Rastra Bank…Read More
Market Announcements
Sagarmatha Insurance Company Limited has announced its 22nd AGM going to be held on 13th Ashad, 2076.
Prabhu Life Insurance Limited has announced its 2nd AGM going to be held on 26th Ashad, 2076.
Corporate Development Bank Limited has announced its 11th AGM going to be held on 27th Ashad, 2076.
Progressive Finance Limited has announced its 21st & 22nd AGM going to be held on 29th Ashad, 2076.
Upper Syange Hydropower Limited has announced its 2nd AGM going to be held on 29th Ashad, 2076.
Unnati Microfinance Bittiya Sanstha Limited is distributing 5:1 ratio right share directly to DEMAT accounts and
urged its shareholders to dematerialize their shares
Nepal Insurance Company Limited has allotted its 2,511.73 unit promoter shares and 1,44,591.35 ordinary shares
in auction to the general public on 31st Jestha, 2076 and refunding money to non-allottee investors from today
(1st Ashad, 2076).
Nepal Investment Bank Limited has allotted its 20,00,000 units @ Rs.1000 per unit of 10.5% Nepal Investment
Debenture 2082 to the general public on Ashad 04, 2076.
Multipurpose Finance Company Limited is issuing it's 1:8.65 ratio 35,85,264 units right share to its shareholders
from 23rd Ashad to 26th Shrawan, 2076.
Multipurpose Finance Company Limited has announced a book closure date for its upcoming 1:8.65 ratio right
share on 11th Ashad, 2076
Nepal Insurance proposed 7.5% bonus for its shareholders; Paid-up capital to reach Rs 1.09 Arba
NEPSE lists 59.5 lakh bonus and right shares of Jebils Finance, LIC Nepal, Mithila Laghubitta and Mero
Microfinance
12% bonus shares of Nabil Bank Limited listed on NEPSE
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 1264.36 forming a green
candle on last trading day. This week NEPSE opened at 1269.60 and formed a bear candle by closing at 1258.27, losing 11.33
points during the day. Mostly, the sellers dominated the market during the trading week. As a result, the market shed points.
Along with the fall in index, the transaction turnover also lost its momentum. . The transaction turnover has decreased from
Rs.418 million of previous week ending to Rs.375 million at the end of this week. Market was unable to cross turnover of Rs.500
million in any of the trading day this week. This shows the faltering participation of investors in the market.
Downtrend market has shown short term bull basically in the month of March and April in last three years. Currently, market is
at support zone of around 1257.
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.
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 40.64 which indicates that the market is at moderate zone. There isn’t any kind of RSI divergence
seen in the market as fall in price and RSI is somewhat similar.
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 -6.24 and -0.97 respectively. MACD has already crossed the signal line and both are below
the base line which indicates the negative 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 1263.09 and EMA (20, 0) red line is at 1278.24. The green line has already crossed the red line
which is known as death cross indicating chance of fall in the market. The index is currently trading below 5 days and above 20
days Exponential Moving Average. This indicates that the overall market is falling towards 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 1330.24, 1287.27 and 1244.31 respectively. The market is trading in between
middle and lower band which indicates market is at oversold zone.
Stock Analysis: Prime Commercial Bank Limited (PCBL)
Introduction
Prime Commercial Bank Ltd. was established in September 2007 as the 21st commercial bank in Nepal. It is an ‘A’ Category
Financial Institution in Nepal with its registered central office in Kamal Pokhari, Kathmandu. It has been established by prominent
business personnel and professionals from diversified areas with a prime objective of providing ‘The Banking Services to
Everyone’ in the country. It has committed to provide the highest standard of services for customers from all regions and
societies. The bank has established itself as an emerging player in financial sector with focus in customer service excellence
maintaining excellent relationship with valued customers. It is counted among the top 10 commercial banks in Nepal by
independent raters and publications in the country.
Today, it has 73 branches and operates 46 ATMs outlets throughout the seven provinces of Nepal strategically placed for the
convenience of customers. After the acquisition of Kankai Bikas Bank and Lalitpur Finance, the branch network of the bank will
reach to 92 branches. It has a market share of 2.61% in terms of deposit base and 2.99% of the total advances of commercial
bank industry as on mid-April 2019.
Board of Director
The Board of Director of Prime Commercial Bank consists of three members from promoter, 3 from public and one Independent
Promoter. The BOD is chaired by Mr. Rajendra Das Shrestha and Mr. Narayan Das Manandhar is the current CEO of the company.
Current Share Holding Composition
PCBL has an authorized capital of Rs 10 billion and paid-up capital of Rs 8.033 billion. The promoters of PCBL hold the 51
percent of total shares of bank while public holds the rest 49 percent. The current shareholder structure of the bank is as
follows:
S.N. Particulars Percent (%) Amount (Rs.)
1 Domestic Ownership 100 8,033,298,870
1.1 Nepal Government - -
1.2 “A” Class Licensed Institutions - -
1.3 Other Licensed Institutions - -
1.4 Other Institutions - -
1.5 Public 49 3,936,316,446
1.6 Other 51 4,096,982,423
2 Foreign Ownership - -
Total 100 8,033,298,870
Name Designation
Mr. Rajendra Das Shrestha Chairman
Mr. Uday Mohan Shrestha Director
Mr. Narendra Bajracharya Director
Mr. Gajendra Bista Public Director
Mr. Mangala Shrestha Independent Director
Mr. Prachanda Man Shrestha Public Director
Mr. Manoj Paudel Public Director
Financial Highlights
314.01370.53
455.75
632.54
803.33
47.69 62.75 84.62140.18
317.44
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
34.0541.01
48.34
65.8672.64
27.1032.62
40.27
57.71
69.97
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2013/14 2014/15 2015/16 2016/17 2017/18
Deposits and loans (in arba)
Deposits Loans and advances
55.34
74.56
111.58
146.79
172.62
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
2013/14 2014/15 2015/16 2016/17 2017/18
Net profit (in crore)
17.63
20.12
24.48
18.27
21.49
0
5
10
15
20
25
30
2013/14 2014/15 2015/16 2016/17 2017/18
EPS
1.57%
1.78%
2.23%2.22%
1.81%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2013/14 2014/15 2015/16 2016/17 2017/18
ROA
16.85%
18.76%
22.92%
19.79%
15.40%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2013/14 2014/15 2015/16 2016/17 2017/18
Return on equity
Company Financials
Yearly Analysis
The following table presents the trend of financial performance of PCBL from the FY 2013/14 to 2017/18:
Year 2013/14 2014/15 2015/16 2016/17 2017/18
Paidup capital "000" 3,140,053 3,705,262 4,557,473 6,325,432.181 8,033,298.870
Reserve and surplus "000" 476,895 627,527 846,223 1,401,824.68 3,174,411.75
Deposits "000"" 34,045,263 41,005,754 48,342,121 65,855,880.39 72,635,987.98
Loans and advances "000" 27,104,417 32,616,506 40,272,095 57,711,391.95 69,966,856.44
Total assets "000" 38,030,964 45,800,892 54,398,973 77,702,801.85 95,043,979
Revenue "000" 2,871,169 3,242,635 3,556,635 5,208,727.38 8,559,690.846
Gross profit "000" 1,059,966 1,387,783 1,588,461 1,904,341.19 2,665,915.437
Operating profit "000" 733,764 1,010,968 1,435,009 1,990,902.68 2,425,837.108
Net profit "000" 553,448 745,589 1,115,759 1,467,942.93 1,726,246.11
Capital fund to RWA 12.40% 12.16% 11.73% 13.36% 12.24%
Non-performing loan 2.43% 1.83% 1.23% 0.88% 0.85%
Base rate 8.91% 7.62% 6.97% 10.64% 10.47%
Return on equity 16.85% 18.76% 22.92% 19.79% 15.40%
Return on asset 1.57% 1.78% 2.23% 2.22% 1.81%
Earnings per share 17.63 20.12 24.48 18.27 21.49
Net worth per share 115.19 116.94 118.57 117.45 120.27
P/E ratio 33.08 22.61 30.47 23.04 13.35
P/B ratio 4.25 3.27 5.1 2.82 2.05
Market Price 583 455 746 421 287
Looking at the major indicators like deposits, loans and advances and net profit, it can be said that the bank has experienced a
moderate and steady rate of business growth. Deposit base has increased to Rs. 72.6 billion from Rs. 34.05 billion and loans
and advances to Rs. 69.96 billion from 27.1 billion in five years. In other words, loans and advance has increased by 2.58 times
whereas deposit has increased by 2.13 times in five years periods. As is the case with many banks in Nepalese banking industry,
the growth rate of loans and advances has surpassed that of deposits consistently. This is one of the reasons for liquidity crunch
suffered by banks in last 2-3 years.
Likewise, net profit has increased by more than 3.11 times with an average of Rs. 111.6 million each year over the past five
years. Return on assets seems fairly stable over the past five years and has been providing constantly more than 1.94 per cent
since past five years. Though return on equity has declined insignificantly for couple of years but hasn’t provided return less
than 15 per cent over the five years. In fact, has provided return of 18.74 per cent on average over the span of five years. Prime
Commercial Bank has a good asset base, as it has been maintaining a low non-performing loan of 0.85 per cent.
Looking at its pricing ratios, both the P/E and P/B has declined over the past years. It has almost decreased by 2 times meaning
that the stock has become fairly cheaper whose impact can be seen in the market price of Bank.
On the whole, the balance sheet figure and income statement are quite healthy. The company can do further better by
controlling its operating expenses, which will reduce its base rate and make it more competitive in the industry. The company’s
overall size is set to increase as the bank is set to acquire Kankai Bikas Bank Limited and Lalitpur Finance Limited.
Quarterly Analysis
The following table presents 3rd Quarter analysis of the company for the FY 2017/18 to 2018/19.
There is no any change in the capital structure of the bank. Reserve and Surplus has increased remarkably by 76.58 percent,
Net profit by almost 14 per cent in comparison of same quarter of corresponding past year though it is less than industry
average. Similarly, earnings per share has increased and is above industry average which is positive indication for a company.
On weaker side, Loans and advances have increased by 9.52 per cent and worst is deposit base has decreased by 7.47 per cent
instead of increasing in comparison of last year of same quarter which may be alarming and both indicators are still below
industry average. Similarly, return on equity and Price to Earning has decreased by less than one per cent. Moreover there is
no any improvement in return to Assets.
The way forward would be to increase its deposit base equivalent to industry average offering various lucrative schemes and
make a balanced proportional growth between deposit and loans and advance. This would eventually help the bank refraining
from inviting possible undesirable outcomes due to non-performing loans.
Dividend History
It can be seen that the bank has been providing regular dividend to its shareholders. It provided remarkable 27 percent returns
to shareholders in 2016/17. On an average, bank has provided more than 20 percent return to shareholders across five year
comparative periods focusing more on stock dividend.
Particulars Q3 Industry Average Q3 2017/18 Q3 2018/19 Growth (%)
Paidup capital ('000) 8,864,608.63 8,033,299 8,033,299 0.00%
Reserve and surplus ('000) 5,999,375.60 2660399.22 4,697,629 76.58%
Deposits ('000) 91,041,633.19 74,200,724.56 68,657,824.00 -7.47%
Loans and advances ('000) 84,891,475.83 66,535,632.54 72,868,687 9.52%
Net profit ('000) 1,561,848.85 1358574.54 1,547,905 13.94%
Return on equity 14 16.94 16 -0.94
Return on asset 2% 2.08% 2% 0.00
Earnings per share 23.39 22.55 25.69 13.92%
Net worth per share 165.82 133.12 158.48 19.05%
P/E ratio 13.91 13.08 12.84 -0.24
Dividend 2013/14 2014/15 2015/16 2016/17 2017/18
Dividend Per Share 20 18.95 18.46 27 16
Bonus % 19 18 17.25 27 16
Cash % 1 0.95 1.21 0 0
Technical Analysis of PCBL as on 20th June, 2019
Particulars Points Remarks
Volume 13,314 The daily volume and weekly volume of the
stock is lower than that of the 1 month. Avg. Volume (1 week) 17,923.80
Avg. Volume (1 month) 30,543.52
No. of Transaction 59 The daily number of transactions is lower than that of average transaction of the week and month.
Avg. no. of Transaction (1 week) 66.80
Avg. no. of Transaction (1 month) 115.86
180 days Average 326.57 The price of the stock is trading below both 180 days and 360 days average. 360 days Average 313.78
52 Weeks High Price 397 The stock is currently trading closer to 52 weeks high price. 52 Weeks Low Price 273
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 -21.31%
Stock 1-Year Change -0.69%
Monthly Beta 1.009 The monthly and quarterly beta of the stock is higher than the market. Quarterly Beta 1.125
Total Holdings of Mutual Funds (Baishakh) 326,047 The Mutual Funds are holding good number of shares of the company.
Stock Holdings of Top Broker (from Dec 26, 2018) 382,411 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 343.09
Top Broker Avg. Sell Price 340.54
Day Candle
Open 286
High 290
Low 286
Close 288
Pattern Analysis
Chart Pattern Short term Uptrend
Resistance R1: 301 R1: 301
Support S1: 279 S1: 279
Higher Breakout Level 316
Concluding remarks
From the above analysis, it is clear that the bank has steady performance along with healthy financial and asset quality
indicators. It has the best cost to income ratio in the commercial banking industry at 23.80%. This shows that the bank is
operationally very efficient. Also, it has a good profitability indicators which is supported by steady net interest income to total
operating income of 76.26% as against the industry average of 78.10%. 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 control its cost of
fund and hence, the base rate; cost of fund stands at 8.29% as against the industry average of 7.17%. One of the major weakness
of the bank is its inability to attract deposit and hence provide loans. The major challenge for the bank would be to bring down
its loan portfolio or increase its deposit as the loans and advance has surpassed the deposit collection.
Indicators Points Remarks
RSI (14) 30.33 PCBL is at an oversold zone.
MACD (12,26,9) -14.7235 MACD and signal line both are below the base line. The MACD line looks to be crossing the signal line from below which gives the buy signal. But, confirmation is required.
Signal Line (12,26,9) -14.7280
Histogram (12,26,9) 0.0045
EMA (5,0) 288.20 EMA 5 is below the EMA 20 and the price is below both the EMAs, meaning that the stock is in bearish trend. EMA (20,0) 303.80
+DMI(13,8) 24.78 The -DMI is dominant over +DMI and ADX is below is at 15.21.
-DMI(13,8) 25.65
ADX (13,8) 15.21
Chaikin Money Flow (20) -0.0570 CMF is slightly above the baseline which shows slight buying 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
regulated by Securities Board of Nepal. This document may not be reproduced, distributed or published by any person for any
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