AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 26th April, 2019

NEPSE UPDATE

Indicators 21st April, 2019

25th April, 2019

(+)/(-) %

NEPSE 1,264.20 1292.12 2.21% SENSITIVE 273.41 279.67 2.29% FLOAT 93.38 95.44 2.21% BANKING 1,167.63 1197.69 2.57% HOTELS 1,818.80 1858.07 2.16% DEVELOPMENT BANKS 1,525.62 1584.97 3.89% HYDROPOWER 1,141.60 1130.18 -1.00% FINANCE 626.7 631.46 0.76% NON LIFE INSURANCE 5,461.67 5631.47 3.11% MANU. & PRO. 1,984.78 2075.04 4.55% OTHERS 713.97 717.03 0.43% MICROFINANCE 1,498.29 1488.75 -0.64% LIFE INSURANCE 6,095.89 6329.34 3.83%

Market Summary Statistics (21st April to 25th April)

Total Turnover (Rs) 5,005,859,973.00

Total Traded Shares 16,366,581.00

Total Number of Transactions 51,008.00

Scrips Traded 176.00

Market Cap at Week start 1,563,546.42 Millions

Market cap at Week end 1,601,054.22 Millions

Floated Market Cap at Week start 552,642.37 Millions Floated Market Cap at Week end 565,202.25 Millions

Bullion Update

As on 26th April, 2019 Hallmark Gold Rs.59,800/tola

Worked Gold Rs.59,500/tola

Silver Rs.730/tola

Quote for the week

“Its’s far better to buy a wonderful company at a

fair price than a fair company at wonderful price.”

-Warren Buffet

The market jumped 2.21% or 27.92 points in the

trading week between April 21 and April 25. Along

with Nepse index, the sensitive index which measures

the performance of blue chip companies also inclined

2.29% or 6.26 points. Similarly, float index also went

up 2.21% or 2.06 points.

The market index continued its growth this week too.

The secondary market had opened at 1232.53 points

on Sunday and went down by 31.67 points to end the

day at 1264.20. On Monday, the index shed 7.26

points as it declined to 1256.94. However, on

Tuesday, the market index increased by modest 3.74

points but turnover decreased to 614.14 million from

1046.03 million. The index increased by 18.61 points

supported by a good turnover of Rs 950.3 million on

Wednesday. The index added 12.83 points, while the

turnover grew to Rs 1357.55 million at the end of

trading week to close at 1292.12.

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

hydropower and microfinance posted gains. The

manufacturing and processing experienced highest

gain with 4.55%. The development banks

experienced second highest gain with 3.89% or 59.35

points. The life insurance and non-life insurance

which fluctuates most augmented by 3.83% and

3.11% respectively. The commercial bank, the

heavyweight sub-index, escalated 2.29% or 6.26

points. It was followed by hotels that went up 2.16%

or 39.27 points. Hydropower and Micro Finance, on

the other hand, lost 1% and 0.64% respectively.

As was the case in previous trading week, the market

witnessed an enthusiastic trading volume. The total

turnover during the review period stood at Rs 3.97

billion. Daily turnover averaged Rs. 992.23 million.

The total market value increased by Rs 37507.8

million as the market capitalization increased by 2.4%

during the trading week. The old investors seem to

have increased their investment volume while new

investors have entered the market as shown by an

increasing turnover amount.

.

News Update

NRA needs additional 429 billion

The National Reconstruction Authority (NRA) has said that it needs an additional Rs 429 billion to complete reconstruction of

structures devastated by the earthquakes of April and May in 2015. It had been estimated that a total of Rs 938 billion would

be required for the five- year reconstruction plan. Of this amount, Rs 186 billion was spent by fiscal year 2017-18, and the

revised projected expenditure for the fiscal year is Rs 123 billion…Read More

Ncell lodges petition at Supreme Court

A day before the expiry of the seven-day deadline to pay its capital gains tax, Ncell, a private telecom giant, on Monday lodged

a petition at the Supreme Court, saying the Large Taxpayers Office has wrongly determined their tax liability at Rs39.06

billion…Read More

Investment Summit’s progress report card

Nijgadh Airport has received the highest number of applications from prospective investors after being showcased at the Nepal

Investment Forum last month. The $3.45 billion mega airport project in Nijgadh, Bara, which is also a national pride project, is

among the most expensive projects the government has been trying to get foreign investment for… Read More

Private sector urges government to regulate imports through budget

The private sector has urged the government to impose both quantitative and qualitative restrictions on imports through the

upcoming budget for 2019- 2020 fiscal year. Citing that Nepal is the only country which allows haphazard import of goods,

private sector representatives said that the government should regulate import and allow the inflow of only qualitative and

quantitative goods in the domestic market… Read More

Market Announcements

3,35,000 units IPO shares of Ganapati Microfinance Limited to the general public is closing from 12th Baishak, 2076.

35,34,340 units IPO shares of Union Hydropower Company Limited to the general public is closing from 12th Baishak ,

2076.

Nepal Investment Bank Limited is distributing 18% bonus share directly to DEMAT accounts and urged its shareholders to

dematerialize their shares.

Agricultural Development Bank Limited is distributing 15.053% cash dividend directly to bank accounts and has urged its

shareholders to dematerialize their shares.

Shangrila Development Bank Limited is distributing 4% bonus share directly to DEMAT accounts and has urged its

shareholders to dematerialize their shares

Siddhartha Bank Limited is distributing (11% SBL Debenture 2075) principal and interest payment to the debenture holders

from 12th Baishakh, 2076.

Nepal Insurance Company Limited has allotted its 1:0.65 ratio 38,67,288.50 units right share to its shareholders on 10th

Baishakh, 2076 and refunding money to non-allottee investors from Baishakh 15, 2076.

Grameen Bikas Laghubitta Bittiya Limited has alloted its 1:0.5 ratio 32,75,000 units right share to its shareholders from 27

Baishak, 2076 to 30 Jestha, 2076.

Aarambha Microfinance Bittiya Sanstha Limited has announced its Special General Meeting going to be held on 26th

Baishak, 2076.

Lumbini General Insurance Limited has announced its Special General Meeting going to be held on 25th Baishakh, 2076. Chhimek Laghubitta Bikas Bank Limited has announced its 17th AGM going to be held on 30th Baishak, 2076. National Hydro Power Company Limited has announced its 22nd AGM going to be held on 27th Baishakh, 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 a short

term bullish trend after it made its bounce back from the low of 1098.95 on 5th March, 2019. This week the market closed at

1292.12. Four out of candles during the trading period were bullish. This week NEPSE opened at 1232.53 and formed a bullish

marubozu candle by closing at 1264.20, gaining 31.67 points during the day. On second day, a spinning top candle was formed,

meaning both buyers and sellers dominated at some point during the course, with sellers winning some. The spinning top like

candle was also formed during the third day, indicating indecision prevailed during the day. The last two candle sticks were

bullish in nature. The psychological resistance of 1288 was breached during the last day. So, we might witness further upward

rally in the forthcoming trading 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 immediate support of the Nepse index lies at 1166 whereas a strong support level

is at 1098. In this trading week, the market continued its bullish momentum, breaking the resistance level of 1288.

Along with the change in momentum, the market witnessed enormous increase in volume this week. Although there were

sellers in the market, bulls ultimately won over the bears. The Nepse Index is likely to continue its bullish momentum with

some corrections in between as it has crossed a strong psychological resistance level of 1288.

With the overall sentiment remaining bullish, the market index made a satisfying closing during the review trading week.

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 has reached to 84.57 which implies the market is at overbought zone. This indicates a strong buyer

dominance in the market. There isn’t any kind of RSI divergence seen in the market as the rise 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 33.98 and 23.35 respectively. Both are above the base line, and MACD line is above the

signal line after the golden cross on 1st April, 2019. The gap between the two lines have widened significantly. This represents

a bullish signal and hence a buy signal.

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 1268.68 and EMA (20, 0) is at 1215.69. After making a golden cross on March 10, 2019, currently the gap

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

This indicates that the overall market is in a short term bullish momentum.

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 1293.51, 1202.98 and 1112.45 respectively. The market has been trading in the

upper band for some time now, which indicates that the index is at overbought zone.

Stock Analysis: Sunrise Bank Limited (SRBL)

Introduction

Sunrise Bank Limited officially started its operation in October 12, 2007. It is the 23rd commercial bank of Nepal. Having

already completed 11 years of operation, the bank is driven by the motto "Rising to Serve" and offers innovative products and

services to all categories of clients. It is promoted by reputed entrepreneurs having extensive knowledge who are

industrialists, businessman, engineer and prominent person of Nepal, and managed by seasoned banking and management

professionals.

Currently, the bank has paid-up capital of Rs 8.15 Billion. Its corporate office is located at the Gairidhara Crossing in

Kathmandu. At present, the bank has the networks of 103 branches and 115 ATMS across 7 provinces, 6 province offices and

24 branch-less banking outposts. The bank has customer base of 476,000 till November 2018. Both the number of accounts

and deposits has been growing satisfactorily.

The bank has an asset size of Rs. 90.50 billion as on mid-January 2019. Sunrise has a market share of about 2.86% in terms of

deposit base and 2.86% in terms of total loans and advances in Nepal as on mid-January 2019.

Board of Director

The bank has experienced and diverse promoters who have diversified experience in sectors like banking, insurance,

manufacturing, import, export and trading etc. The Board consists of 3 from promoters group, 3 from public shareholders and

1 independent director. The board includes eminent businessmen and industrialists with wide experience in the financial

services. Mr. Motilal Dugar is the chairman of the bank, who has been engaged in service and manufacturing industry, trading,

insurance, hydro power, banking and business sector for more than 5 decades. Mr. Ratna Raj Bajracharya is the current CEO of

the bank, who has more than 40 years of industry experience.

Name Designation

Mr. Motilal Dugar Chairman, promoter group

Er. Bachh Raj Tater Director, promoter group

Mr. Malchand Dugar Director, promoter group

Er. Shailendra Guragain Public Director

Ms. Sharada Sharma Pudasaini Public Director

Mr. Deepak Nepal Public Director

Mr. Om Krishna Joshi Independent Director

Current Share Holding Composition

Sunrise Bank currently has an authorized capital of Rs. 10 Billion, issued capital of Rs 8.15 Billion and paid-up capital of Rs 8.15

Billion.

Particulars Percent

Nepal Government -

"A" class licensed institutions -

Other Institutions -

Promoters 51.11

Public 48.9

Total 100

Financial Highlights

2.242.97

3.98

7.02

8.15

0.46 0.380.80

2.723.40

0

1

2

3

4

5

6

7

8

9

2013/14 14/15 15/16 16/17 17/18

Paid up and Reserve and Surplus (billion)

Paid up Reserveand Surplus

26.6233.49

49.98

57.29

67.37

19.9426.38

44.2052.33

61.33

0

10

20

30

40

50

60

70

80

2013/14 14/15 15/16 16/17 17/18

Deposits and Loans and Advances (billion)

Deposits Loans andAdvances

24.70

47.10

95.10

111.29

147.70

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

2013/14 14/15 15/16 16/17 17/18

Profit (Crore)

11.03

19.27

23.94

17.26

18.13

0

5

10

15

20

25

30

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

Earnings per share

9.59%

15.58%

20.04%

15.07%

18.13%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

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

ROE

0.83%

1.26%

1.62% 1.61%

1.78%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

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

Return on asset

Company Financials

Yearly Analysis

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

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

Paidup capital ('000) 2,236,650 2,972,656 3,976,046 7,018,105 8,152,556

Reserve and surplus ('000) 461,268 375,317 801,747 2,717,000 3,402,000

Deposits ('000) 26,616,667 33,486,669 49,981,295 57,286,159 67,366,128

Loans and advances ('000) 19,938,326 26,380,083 44,197,000 52,334,000 61,326,000

Total assets ('000) 29,661,000 37,389,000 58,739,000 71,456,000 82,783,000

Revenue ('000) 2,423,846 2,402,657 3,652,000 6,107,000 8,563,000

Gross profit ('000) 1,095,134 1,106,300 1,503,572 2,192,723 2,871,000

Operating profit ('000) 312,856 406,075 955,387 1,695,000 2,047,000

Net profit ('000) 247,000 471,000 951,000 1,112,859 1,476,972

Capital fund to RWA 11.49% 11.11% 12.05% 15.20% 13.38%

Non-performing loan 4.94% 2.90% 1.22% 1.37% 1.37%

Base rate 8.62% 8.36% 6.86% 11.19% 11.39%

Return on equity 9.59% 15.58% 20.04% 15.07% 18.13

Return on asset 0.83% 1.26% 1.62% 1.61% 1.78%

Earnings per share 11.03 19.27 23.94 17.26 18.13

Net worth per share 120.48 112.63 115.91 117.15 141.73

P/E ratio 46.22 20.5 31.26 23.63 14.15

P/B ratio 4.23 3.5 6.5 3.7 1.62

From the data presented on the above table, we can see that major indicators such as deposits, loans and advances,

operating profit and net profit are increasing which means that bank has enjoyed a satisfactory rate of business growth.

The company has met its paid-up capital requirement in 2017/18 mostly by issuing bonus shares for three consecutive years

till 2016/17. Paid up capital and reserve and surplus has increased significantly, hence the shareholder’s equity has also

increased. In the same, net income has increased steadily which is a positive indication. As a result, return on equity has

increased by more than 15 per cent on average over this five year period, which implies that bank has been able to use its

shareholders’ equity efficiently. The asset base of the bank has increased tremendously. It has increased by more than 2.5

times over the span of five years. Its strength lies in the efficient utilizations of the assets as the return on assets has been

increasing. Moreover the bank has made great improvement to minimize its non-performing loan; so, it can be said that the

bank has a fairly good asset base.

On the revenue side, the revenue of the company has been increasing year-on-year. Similarly, the net profit as well as

operating profit of the bank has been in an increasing trend for the past five years, which is a good sign. Looking at its capital

side, the bank has an adequate capital base, with 13.38% capital adequacy ratio in the recent fiscal year. The capital base is

set to ease as the bank is issuing debenture worth of Rs. 1 billion. So, the bank has scope for additional risk taking in the

future. On its pricing multiples, both the P/E and P/B has declined significantly, meaning that the stock has become fairly

cheaper.

All in all, the balance sheet figure and income statement are quite healthy. The company can do further better by improving

its assets quality, and controlling its operating expenses, which will reduce its base rate and make it more competitive in the

industry.

Quarterly Analysis

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

Particulars (‘000) Industry Q2 18/19 Q2 17/18 Q2 18/19 %change

Paidup capital ('000) 8,707,963.48 8,152,556 8,152,556 0.00%

Reserve and surplus ('000) 6,050,027.70 2,100,536 4,106,130 95.48%

Deposits ('000) 91,622,816.78 63,269,277 76,062,607 20.22%

Loans and advances ('000) 82,594,050.67 56,241,791 67,753,770 20.47%

Net profit ('000) 1,052,204.00 587,558 792,754 34.00%

Return on equity 14.26 11.46 12.93 12.83%

Return on asset 1.85 1.55 1.75 12.90%

Earnings per share 24.58 14.41 19.45 34.98%

Net worth per share 167.84 125.77 150.37 19.56%

P/E ratio 12.84 18.25 11.06 -39.40%

The bank has completed eleventh years of operation. The growth of the bank has been monumental as discussed in the

above section. Now, looking at quarter to quarter growth in various variables, this also reinforces the healthy growth of

business. Reserve and surplus, deposits, loans and advances and net profit has increased significantly all with more than 20

per cent. Reserves and Surplus has increased by 95.48 per cent, almost by double as compared to the corresponding quarter

of the previous year. Most importantly, net profit has soared by 34 per cent which is indication of overall good performances

of its activities. However, these particulars are still below industry average but it seems it will achieve these industry averages

in near future looking at their growth rate.

The bank has less paid-up capital than industry averages with 8.15 billion as a paid up capital but we can see there is no any

incremental change. The deposit base as well as the loans and advance has increased satisfactorily compared to the

corresponding quarter of previous year. In fact, growth in loans and growth in deposit has increased in equal proportionate.

This has been same with the case of return on equity and return on assets. Followed by this, earning per share and net worth

per share has also increased.

Dividend History

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

Dividend Per Share 11 22.63 33.33 15 11.5

Bonus % 11 21.5 33.33 15 -

Cash % - 1.13 - - 11.5

It can be seen from the table that the bank has been distributing dividend to its shareholders regularly. This year, the bank

has proposed cash dividend for the first time during last 5 years at 11.5% amounting to NPR 937 million. The bank has been

distributing “stock” dividend continuously since last three years to support enhancement in requisite capital. It has met the

requisite capital of NPR 8 billion in 2017/18. Since growth in banking business has to be supported by proportionate increase

in its capital, it may consider distinctive dividend policy in the coming years.

Technical Analysis of SRBL as on 25th April, 2019

Day Candle

Open 267

High 276

Low 261

Close 272

Pattern Analysis

Chart Pattern Short term Uptrend

Resistance R1: 281 R2: 310

Support S1: 214 S2: 204

Higher Breakout Level 300

Particulars Points Remarks

Volume 79,374 The daily volume and weekly volume of the stock

is higher than that of the 1 month. Avg. Volume (1 week) 42,326.40

Avg. Volume (1 month) 37,629.43

No. of Transaction 233 The daily number of transactions is higher than that of average transaction of the week and month.

Avg. no. of Transaction (1 week) 126

Avg. no. of Transaction (1 month) 95.29

180 days Average 225.82 The price of the stock is trading above both 180 days and 360 days average. 360 days Average 237.71

52 Weeks High Price 276 The stock is currently trading closer to 52 weeks high price. 52 Weeks Low Price 203

Nepse Index 1 year Change -6.81% The overall market in the least 12 months is in a downtrend and so is the industry. However, the stock has gained 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 25.35%

Stock 1-Year Change 6.25%

Monthly Beta 1.705 The monthly and quarterly beta of the stock is higher than the market. Quarterly Beta 1.376

Total Holdings of Mutual Funds (Falgun) 76,939,650 The Mutual Funds are holding good number of

shares of the company.

Stock Holdings of Top Broker (from Dec, 2018) 201,105 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 46% right share.

Top Broker Avg. Buy Price 230.29

Top Broker Avg. Sell Price 228.96

Concluding Remarks

From the above analysis, looking at the fundamental aspect of company, it is clear that the company has enjoyed a healthy

growth in business and its operations. As per the second quarter result of the fiscal year 2018/19, the bank has a capital

adequacy ratio of 12.90%, as against the minimum requirement of 11%. With the issuance of debenture, the capital adequacy

of the bank is likely to ease out. The company has a cost-to-income ratio of 40.47% as against the industry average of 38.72%.

The ratio can be considered at par with the industry, but it can improve its profitability if the ratio can be further brought

down.

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) 81.03 SRBL is at an over bought zone.

MACD (12,26,9) 11.52 The MACD line is above baseline and the signal line. The MACD line above the signal line gives buy signal. Signal Line (12,26,9) 8.68

Histogram (12,26,9) 2.85

EMA (5,0) 260.92 EMA 5 is above the EMA 20 and the price is above both the EMAs, meaning that the stock is in bullish trend. EMA (20,0) 243.76

+DMI(13,8) 47.36 The +DMI is dominant over –DMI and ADX is above is at 63. This indicates that the current uptrend is significant. -DMI(13,8) 5.86

ADX (13,8) 63.17

Chaikin Money Flow (20) 0.3974 CMF is above the baseline which shows buying pressure for the stock in the market.

Investing Solutions

Investing solutions enable individuals to realize their aspirations by making their money work for them.

Growing our hard-earned money should be simple and accessible to everybody, so that each of us is able to live the life we

desire. With this objective, we ensure we gain an in-depth understanding of each individual’s aspirations and ambitions so that

we are able to recommend the right investment solution. We encourage people to link their investments to specific life goals so

that they are able to realize these goals meticulously and with ease.

Portfolio Management Services

Tailor made solutions to meet your investing needs

Across the world people are turning to specialists Portfolio Management Services for managing their equity investments.

Portfolio Management Services is the Portfolio Management division of Aakash Capital that helps you access the equity market

in Nepal.

Portfolio Management Service brings you a whole range of investment products,

from which your portfolio manager puts together your optimal portfolio. We take

into account your financial goals, time horizon, risk appetite and investment

outlook.

Choose a solution that fits your needs

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

purpose without Aakash Capital Limited’s prior written consent.

Aakash Capital Limited

4th Floor, Trade Tower, Thapathali, Kathmandu, Nepal

Tel: 01-5111145

Email: info@aakashcapital.com.np

Website: www.aakashcapital.com.np

Facebook: www.facebook.com/AakashCap