AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 12th July, 2019

NEPSE UPDATE

Indicators 7th July, 2019

11th July, 2019

(+)/(-) %

NEPSE 1256.04 1248.53 -0.60% SENSITIVE 270.35 268.32 -0.75%

FLOAT 92.14 91.71 -0.47% BANKING 1128.71 1126.76 -0.17%

HOTELS 2062.18 2031.40 -1.49% DEVELOPMENT BANKS 1603.51 1595.33 -0.51%

HYDROPOWER 1185.18 1188.55 0.28% FINANCE 618.88 619.54 0.11%

NON LIFE INSURANCE 5164.27 5044.26 -2.32% MANU. & PRO. 2686.82 2635.57 -1.91%

OTHERS 721.79 710.83 -1.52% MICROFINANCE 1433.18 1424.26 -0.62%

LIFE INSURANCE 6026.81 5963.89 -1.04%

Market Summary Statistics (7th July to 11th July 2019)

Total Turnover (Rs) 2,633,331,127.00

Total Traded Shares 11,387,516.00

Total Number of Transactions 34,667.00

Scrips Traded 173.00

Market Cap at Week start 1,563,102.93 Millions

Market cap at Week end 1,554,362.51 Millions

Floated Market Cap at Week start 556,274.40 Millions

Floated Market Cap at Week end 553,916.88 Millions

Bullion Update

As on 12thJuly, 2019 Hallmark Gold Rs.64,500/tola

Worked Gold Rs.64,200/tola

Silver Rs.725/tola

Quote for the week

“Know what you own, and know why you own it”

- Peter Lynch

The market shed 7.51 points or 0.60% in the trading

week between July 7 and July 11, 2019. The sensitive

index, which measures the performance of big

companies, also registered a fall of 0.75% or 2.03

points. Similarly, float index also went down 0.47% or

0.43 points.

This week the market opened at 1262.98 on Sunday

and went down 13.44 points to sit at 1256.04 points.

The market lost points in all but one of the days that

followed. The market went down 8.69 points on

Monday. It gained a minimal 2.92 points on Tuesday.

The decline continued as the index lost 1.12 and 0.62

on Wednesday and Thursday to end the trading week

at 1248.53 points.

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

hydropower and finance closed at red. The highest

percent was lost by non-life insurance; it decreased by

2.32% or 120.01 points. It was followed by

manufacturing and processing sector, which declined

by 1.91% or 51.25 points. Similarly, others, hotels and

life insurance dropped more than 1%; they declined by

1.52%, 1.49% and 1.04% respectively. The

microfinance, development banks and commercial

banks went down less than 1 per cent as they shed

0.62%, 0.51% and 0.17% respectively. On the other

hand, hydropower and finance were the only gainers

this week, they added a slight 0.28% and 0.11%

respectively.

The market has been witnessing faltering

participations. The total turnover in this trading week

stood at just Rs 2.63 Billion while daily turnover

averaged at Rs 526.67 million. The total market value

declined by Rs. 8740.42 million as the market

capitalization decreased by 0.56 per cent.

Majority of the investor seems to be in a wait and see

mode in anticipation of how the upcoming monetary

policy will be and how it will address the merger and

acquisition in banking sectors.

.

News Update

Government capital spending dismal yet again

The government has spent only 57 percent of the budget allocated for development purposes as the current fiscal year draws

closer. Like usual, the last hour spending has also continued this year and some government officials are still optimistic that

capital spending will cross 80 percent in one week…Read More

Private sector leaders ask NRB to devise monetary policy to stabilize rising interest rates

Speaking at a discussion program organized by the NRB to solicit suggestions from various stakeholders for the upcoming

monetary policy, business leaders and executives have asked the central bank to bring provisions in the policy to tame the

skyrocketing interest rates of bank and financial institutions (BFIs)…Read More

15 commercial banks make commitment for merger: NRB

Altogether 15 commercial banks have informed Nepal Rastra Bank of their readiness for merger as per the instruction of the

central bank. The commercial banks which have submitted letters to the central expressing their commitment for merger include

NMB Bank, Sunrise Bank, Citizens Banbk, Laxmi Bank, NCC Bank, Sanima Bank, Civil Bank, Machhapuchhre Bank, Century Bank,

Nepal SBI Bank, Kumari Bank, NIC Asia Bank, Himalayan Bank, Mega Bank and Nepal Investment Bank…Read More

NAC to hand over its management to private company

Nepal Airlines Corporation (NAC) is preparing to hand over its management to a private company on contract basis through a

global tender. The debt-ridden airline adopted this strategy after the government turned down its request to provide financial

assistance of Rs 20 billion to repay the loan it had taken to purchase new aircraft some time ago…Read More

Market Announcements

Life Insurance Corporation (Nepal) Limited has announced its 17th AGM going to be held on 24th Shrawan, 2076.

Prabhu Insurance Limited has announced its 23rd AGM going to be held on 17th Shrawan, 2076.

Himalayan Bank Limited has published an offer letter to issue 30,00,000 units @ Rs.1000 per unit 10% Himalayan Bank

Limited Debenture 2083 to the general public from 2nd to 6th Shrawan, 2076.

Everest Insurance Company Limited has allotted its 1:3 ratio 76,89,656 units right share to its shareholders on 25th Ashad,

2076.

Global IME Laghubitta Bittiya Sanstha Limited has announced a book closure date for its upcoming 1:1 ratio right share on

1st Shrawan, 2076.

Sagarmatha Insurance Company Limited has urged its shareholders to pay tax amount for 86% bonus share distribution

purpose.

NIBL Ace Capital Limited has allotted its 20 million units of Rs 10 face value each mutual fund scheme worth Rs 200 million

NIBL Sahabhagita Fund to the general public on 24th Ashad, 2076.

Jeevan Bikas Laghubitta Bittiya Sanstha Limited has announced its Special General Meeting going to be held on 10th Shrawan,

2076.

Swabalamban Laghubitta Bittiya Sanstha Limited is selling its 3,77,457.5 unit promoter shares in an auction to the general

public from 31st Ashad to 29th Shrawan, 2076.

Gurans Life Insurance Company Limited has allotted its 1,50,000 unit promoter shares and 82,005 unit ordinary shares in

auction to the general public on 23rd Ashad, 2076 and refunding money to non-allottee investors from 26th Ashad, 2076.

Sabaiko Laghubitta Bittiya Sanstha Limited has published an offer letter to issue 5,30,000 units IPO shares to the general

public from 1st to 5th Shrawan, 2076.

Womi Laghubitta Bittiya Sanstha Limited is issuing it's 1:1 ratio 10,10,880 units right share to its shareholders from 9th

Shrawan to 11th Bhadra, 2076.

NEPSE - TECHNICAL ANALYSIS

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

zone. The market had shown short term bull after Nepali New Year. This week the market closed at 1248.53 forming a red candle

on last trading day. This week NEPSE opened at 1262.98 and formed a bear candle by closing at 1256.04, losing 6.94 points during

the day. The transaction turnover has been quiet consistent in this review period, around 500 million. Market crossed the

turnover of Rs.500 million 3 times which indicates buyers have started to accumulate stocks. Downtrend market has shown short

term bull basically in the month of March and April in last three years but most highs are seen in the month of July. As of weekly

line chart currently, the market is at support zone of around 1242. Taking the Fibonacci retracement from 1100 to 1316, the

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

Relative Strength Index (RSI) Analysis

RSI is a moment indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions

in the price of a stock. RSI is typically used on a 14-day time frame, measured on a scale from 0 to 100, where a value above 70

represents overbought and below 30 represents oversold condition.

Current RSI value of NEPSE is 52.63 which indicates that the market is at moderate zone. There is no any short term divergence

in chart as both the price and RIS are fluctuating in the same direction.

Moving Average Convergence Divergence (MACD)

MACD is a momentum oscillator formed by using two different moving averages, typically a 26 day EMA and 12 day EMA, which

provides specific buy/sell signal. When the MACD line crosses signal line from above, it is considered bearish, indicating a sell

signal and vice-versa.

Currently MACD and signal line is at -7.29 and -7.28 respectively. MACD has crossed the signal line and both are below the base

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

Moving Average Analysis

Moving average is a technical analysis tool that smooths out price data by creating a constantly updated average price. It is used

to identify the trend direction, support or resistance levels and also to generate potential buy/sell signals. Price crossover and

MA crossover are some of the strategies that can be used to buy/sell a stock.

The EMA (5, 0) green line is at 1250.26 and EMA (20, 0) red line is at 1255.58 The index is currently trading below both 5 days

and 20 days Exponential Moving Average. This indicates that the overall market is having short term correction.

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 1268.93, 1255.58 and 1242.23 respectively. The market is trading in between the

middle band and the lower band which indicates the market is moving towards support zone.

Stock Analysis: Civil Bank Limited (CBL)

Founded in 2010, Civil bank Limited is an ‘A’ class commercial bank licensed by Nepal Rastra Bank and has branches all across

the nation with its head office in Kathmandu which provides entire commercial banking services.

Founded by promoters coming from a diverse professional backgrounds (such as manufacturing, trading, financial industry &

real estate) with vision of becoming the most trusted bank by providing dedicated service to all the clients/ customers,

believes in contributing to the economic growth of the country by rendering services to all classes and sectors of society. The

Bank has also diversified through the acquisition of Civil Capital Market Limited and looks to the future to offer various

services related to mutual fund activities, portfolio management and other merchant banking services through this subsidiary.

Board of Directors

Name Designation

Er. Ichchha Raj Tamang Chairman

Mr. Ambir Bogati Director

Mr. Prakash Tayal Director

Mr. Pratap Jung Pandey Director

Mr. Bhimananda Dhungana Independent Director

Mr. Yugesh Bahadur Malla Director

Mr. Shambhu Prasad Panta Director

(Source: http://www.civilbank.com.np)

Senior Executives

Name Designation

Govinda Gurung Chief Executive Officer

Sunil Kumar Pokharel Deputy Chief Executive Office

Sachin J. Rayamajhi Chief Credit Officer

Bhesh Raj Khatiwada Chief Operating Officer

Suman Acharya Chief Risk Officer

(Source: http://www.civilbank.com.np)

Capital Structure

As of 16 July 2018

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

Issued Capital (Rs.) 7,259,310,362

Paid Up Capital (Rs.) 7,259,310,362

Shareholding Pattern

As of 16 July 2018

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

1 Domestic Ownership

1.1 Nepal Government - -

1.2 “A” Class Licensed Institutions - -

1.3 Other Licensed Institutions - -

1.4 Other Institutions 12.11% 879,050,800

1.5 Public 86.81% 6,301,770,662

1.6 Other - -

2 Foreign Ownership 1.08% 78,488,900

Total 100 7,259,310,362

Financial Highlights

Yearly Analysis

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

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

Paid-up Capital (Rs.000)

2,887,849

3,082,779

3,082,779

5,185,222

7,259,310

Reserve (Rs.000)

180,491

205,322

271,195

727,803

1,484,597

Deposits from Customers (Rs.000)

22,049,295

26,656,425

29,099,655

31,186,198

34,222,597

Growth

20.89% 9.17% 7.17% 9.74%

Total Assets (Rs.000)

25,434,076

30,423,586

35,526,103

42,299,417

51,925,229

Loans & advances to Customers (Rs.000)

18,657,191

22,534,195

24,969,811

29,038,317

38,254,794

Growth

20.78% 10.81% 16.29% 31.74%

Interest Income (Rs.000)

1,868,369

2,192,024

2,409,674

3,410,225

4,441,858

Net Interest Income (Rs.000)

612,776

850,749

994,861

1,325,359

1,408,397

Total Operating Income (Rs.000)

789,907

1,043,718

1,239,996

1,627,250

1,827,369

Net Income (Rs.000)

238,099

230,020

193,730

348,280

629,899

Growth

-3.39% -15.78% 79.78% 80.86%

Return on Assets (ROA) 0.94% 0.76% 0.55% 0.82% 1.21%

Return on Equity (ROE) 7.76% 7.00% 5.33% 4.89% 6.39%

EPS 8.24 7.46 6.03 5.87 9.69

Book Value Per share 105.14 106.66 108.04 137.458 135.69

Market Value per share 149 330 255 246 153

Price Earning Ratio 18.08 44.24 42.29 8.29 15.79

Capital Fund to RWA (CAR) % 14.65% 13.65% 12.19% 18.82% 20.32%

Non Performing Loan(NPL) to Total Loan 1.76% 3.20% 4.49% 3.96% 2.63%

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

year 2017/18 bank had net profit of Rs. 629 million which is 80.86% higher than that of previous fiscal year. The bank has not

met its paid-up capital of 8 arab as directed by Nepal Rastra Bank till the end of fiscal year 2017/18. Among 28 commercial

banks 3 bank were unable to meet the paid up capital of 8 arab directed by NRB. The bank has reported 103.98% rise in reserve

to Rs.1.4 billion in 2018. There seems low growth in deposits from customer in past 5 years as compared to the whole industry.

Deposit collection in 2018 is Rs.34.22 billion which is just 9.74% higher than that of previous fiscal year. Similarly, loan & advance

to customer has raise from Rs29.03 billion to Rs. 38.25 billion in fiscal year 2017/18. Evaluating the above fundamental

indicators, the company has average fundamental but unable to generate good profit.

Comparing with whole commercial bank industry, bank has low competitive advantage as it is one of the lowest market share

in the industry in terms of Paid-up capital, Reserves, Deposits, Loans and Net Profit. However, it has huge potential in the

Nepalese emerging financial market.

Snapshot of performance

288.78 308.28 308.28

518.52

725.93

18.05 20.53 27.12 72.78

148.46

-

200.00

400.00

600.00

800.00

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

Paid-up Capital & Reserves

Paid-up Capital (Crores) Reserve (Crores)

2,204.93 2,665.64 2,909.97 3,118.62 3,422.26

1,865.72 2,253.42 2,496.98 2,903.83

3,825.48

-

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

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

Deposits & Loans and advances

Deposits from Customers (Crores)

Loans & advances to Customers(Crores)

8.24

7.46

6.03 5.87

9.69

0

2

4

6

8

10

12

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

EPS

23.81 23.00 19.37

34.83

62.99

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

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

Net Income (Crores)

8.57.1

3.03

10.79

4.05

0

2

4

6

8

10

12

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

DPS (%)

105.14 106.66 108.04

137.458 135.69

0

20

40

60

80

100

120

140

160

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

Book Value Per share

Quarter to Quarter Comparison

Particulars Q3 2018/19 Q3 2017/18 Growth

(%)

Paid-up Capital Rs. '000' 8,003,390 7,259,320 10.25%

Reserve Rs.’000’ 1,639,995.00 1,484,597.00 10.47%

Deposits from customers Rs.’000’ 39,927,972.00 34,222,597.00 16.67%

Loans and advances to

customersRs.’000’ 41,412,029.00 38,254,794.00 8.25%

Net Profit Rs.’000’ 493,892.00 335,505.00 47.21%

Return on equity (%) 5.28% 7% -24.57%

Return on asset (%) 0.98% 1% -2.00%

Earnings per share 6.17 6.84 -9.80%

Net worth per share 125.01 129.5 -3.47%

P/E ratio 25.93 25.93%

Credit to Deposit Ratio (%) 76.66 77.78 -1.44%

Capital fund to RWA (%) 18.82 21.94 -14.22%

As of third quarter ending the net profit of the bank has increased by 47.21% to Rs.493 million. The bank has 16.67% increase

in deposits and 8.253% rise in Loans and advances to customers. Similarly, the bank has reported rise of 10.47% in reserve.

Most of the fundamentals of the bank are below industry average and needs to focus more on their operation.

Dividend History

Year Dividend Total

% Cash % Bonus %

2013/14 1.5 7 8.5

2014/15 0.35 6.75 7.1

2015/16 0.15 2.88 3.03

2016/17 0.54 10.25 10.79

2017/18 4.05 0 4.05

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

the bank seems to be highly focused on distributing bonus share. However, bank has distributed only 4.05% cash dividend to

its shareholder in 2017/18.

Technical Analysis of CBL as on 11th July, 2019

Day Candle

Open 156

High 158

Low 155

Close 157

Pattern Analysis

Chart Pattern Short term Uptrend

Resistance R1: 161 R2: 170

Support S1: 138 S2: 130

Higher Breakout Level 170

Particulars Points Remarks

Volume 113,323.00 The daily volume and weekly volume of the stock

is higher than that of the 1 month. Avg. Volume (1 week) 174,879.20

Avg. Volume (1 month) 81,452.81

No. of Transaction 218 The daily transaction and weekly transaction of

the stock is higher than that of the 1 month. Avg. no. of Transaction (1 week) 346.80

Avg. no. of Transaction (1 month) 168.24

180 days Average 157.76 The price of the stock is trading close to 180 days and 360 days average. 360 days Average 158.44

52 Weeks High Price 188 The stock is currently trading between 52 weeks high and low price. 52 Weeks Low Price 142

Nepse Index 1 year Change 3.56% The industry grew at a faster rate as compared to the market. The stock, however, hasn’t grown in the same rate as compared to the industry.

Industry Index 1year Change 10.47%

Stock 1-Month Change 6.80%

Stock 1-Year Change 5.37%

Monthly Beta 1.033 The monthly beta is slightly higher and quarterly beta of the stock is lower than the market. Quarterly Beta 0.829

Total Holdings of Mutual Funds (Jestha) 425,147 The Mutual Funds are holding good number of shares of the company.

Stock Holdings of Top Broker (from April 23, 019) 495,737 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 152.20

Top Broker Avg. Sell Price 152.75

Concluding remarks

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

fundamental indicators are below industry average and the bank is lacking competitive advantage in the commercial bank

sector. However, the company is growing and has potential to grow further. In 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.

Indicators Points Remarks

RSI (14) 70.62 CBL is at an overbought zone.

MACD (12,26,9) 2.5676 The MACD and signal line are above the base line after a golden cross on July 1. Signal Line (12,26,9) 1.6572

Histogram (12,26,9) 0.9104

EMA (5,0) 156.28 EMA 5 is above the EMA 20 and the price is closer to EMA 5.

EMA (20,0) 151.36

+DMI(13,8) 31.72 The +DMI is dominant over -DMI and ADX is at 48.27. So, the trend is somewhat significant. -DMI(13,8) 9.65

ADX (13,8) 48.27

Chaikin Money Flow (20) 0.140 CMF is 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

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