AAKASH CAPITAL LIMITED Weekly Newsletter from Aakash Capital Limited for the week ending on 31st January, 2020

NEPSE UPDATE

Indicators 26th Jan,

2020 30th Jan,

2020

(+)/(-)

Change %

NEPSE 1297.47 1325.38 2.15%

SENSITIVE 278.72 281.76 1.09%

FLOAT 91.94 94.05 2.29%

SEN. FLOAT 91.65 93.03 1.51%

BANKING 1140.19 1148.92 0.77%

TRADING 791.23 786.53 -0.59%

HOTELS 1997.98 2042.32 2.22%

DEVELOPMENT BANKS 1747.65 1781.46 1.93%

HYDROPOWER 1006.35 1001.23 -0.51%

FINANCE 665.17 662.08 -0.46%

NON LIFE INSURANCE 5440.27 5901.45 8.48%

MANU. & PRO. 2480.94 2466.15 -0.60%

OTHERS 672.06 674.46 0.36%

MICROFINANCE 2015.82 2207.57 9.51%

LIFE INSURANCE 7214.45 7558.53 4.77%

MUTUAL FUND 10.19 10.15 -0.39%

Market Summary Statistics (26th to 30th Jan, 2020)

Total Turnover (Rs) 6,542,777,464

Total Traded Shares 16,289,249 Total Number of Transactions 72,188 Scrips Traded 180

Market Cap at Week start 1,628,006.50 Millions

Market cap at Week end 1,690,451.32 Millions

Floated Market Cap at Week start 593,176.36 Millions

Floated Market Cap at Week end 616,947.90 Millions

Bullion Update

As on 31st January 2020 Hallmark Gold Rs.76,000/tola

Worked Gold Rs.75,700/tola

Silver Rs.890/tola

Quote for the week

“Behind every stock is a company.

Find out what it’s doing.” - Peter Lynch

The market increased by 2.15% (27.91 points) in the

trading week between 26th and 30th January 2020. The

sensitive index, which measures the performance of

the companies classified under group “A”, also

registered the gain of 1.09% (3.04 points). Similarly,

float index which measures the performance of

securities which are floated to public also went up by

2.29% and sensitive float followed the trend by

increasing 1.51%.

This week the market opened at 1297.47 on Sunday

and went down 20.79 points to sit at 1276.68 level. But

market retraced 23.94 points on Monday and touched

1300 level. The positive sentiment was follow on

Tuesday with 5.53 points gain. Small correction of 0.27

point was seen on Wednesday but again market went

19.50 points up to end the week at 1325.38 level on

Thursday.

In this review period, among 12 sub-index 7 were able

to close higher. Microfinance sub-index registered the

highest gain of 9.51% this week. Non-Life insurance

which gained 4.06% last week continued its increasing

trend with the gain of 8.48% followed by Life insurance

sub-index with 4.77% gain in the review period.

Similarly, Banking, Hotels, Development banks and

Others sub-index also registered the gain of 0.77%,

2.22%, 1.93% and 0.36% respectively. However, the

Trading, Hydropower, Finance, Manu & Pro and

Mutual Fund sub-index declined by 0.59%, 0.51%,

0.46%, 0.60% and 0.39% respectively in the review

period.

The market witnessed supportive volume of

transaction turnover this week. The total turnover

stood at Rs.6.54 billion with average of Rs.1.30 billion

a day. The total market value decreased by

Rs.35,716.29 million as the market capitalization went

up by 2.16%. Similarly, floating market cap also

registered the gain of 2.31% this trading week.

.

Market Announcements

Bank of Kathmandu Limited is selling its 3,70,356 units promoter share in an auction to the general public and existing promoter shareholders from today (15th to 22nd Magh, 2076).

Agricultural Development Bank Limited is issuing its (25,00,000 units @ Rs.1000 per unit) 10.35% ADBL Krisi Bank Rinpatra 2083 to the general public from 14th Magh, 2076.

Nepal Rastra Bank has published the monthly balance sheet for the month of Poush, 2076.

Everest Bank Limited has posted a net profit of Rs 1.5 billion and published its 2nd quarter company analysis of the fiscal year 2076/77.

Sunrise Bank Limited has posted a net profit of Rs 944.38 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Laxmi Bank Limited has posted a net profit of Rs 903.02 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Nepal Bank Limited has posted a net profit of Rs 1.35 billion and published its 2nd quarter company analysis of the fiscal year 2076/77.

Kamana Sewa Bikas Bank Limited has published its annual financial highlights of the fiscal year 2075/76.

Kisan Microfinance Bittiya Sanstha Limited has amended its 2nd quarter report of fiscal year 2076/77.

Ghodighoda Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 0.44 million during the 2nd quarter of the fiscal year 2076/77.

Mahila Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 20.95 million during the 2nd quarter of the fiscal year 2076/77.

Asha Laghubitta Bittya Sanstha Limited has posted a net profit of Rs 27.07 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Mahuli Laghubitaa Bittya Sanstha Limited has posted a net profit of Rs 20.30 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

National Microfinance Bittya Sanstha Limited has posted a net profit of Rs 92.54 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

RMDC Laghubitaa Bittya Sanstha Limited has posted a net profit of Rs 146.16 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Rastra Utthan Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 11.83 million during the 2nd quarter of the fiscal year 2076/77.

Womi Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 41.61 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Sarathi Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 31.16 million during the 2nd quarter of the fiscal year 2076/77.

Trilok Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 15.78 million during the 2nd quarter of the fiscal year 2076/77.

Suryodaya Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 27.93 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Nagbeli Laghubitta Bittiya Sanstha Limited has posted a net profit of Rs 22.26 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Kisan Microfinance Bittiya Sanstha Limited has posted a net profit of Rs 7.44 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Ajod Insurance Limited has posted a net profit of Rs 23.18 million and published its 2nd quarter company analysis of the fiscal year 2076/77.

Sunrise Capital Limited has published (Sunrise First Mutual Fund) Net Assets Value (NAV) till Poush, 2076.

Global IME Capital Limited has published (Global IME Samunnat Scheme-1) Net Assets Value (NAV) till Poush, 2076.

CBIL Capital Limited has published “Citizens Mutual Fund-2” Net Asset Value (NAV) till Poush, 2076.

Sanima Middle Tamor Hydropower Limited has published a notice about the remaining payment of share balance to its promoter shareholder.

Hydroelectricity Investment and Development Company Limited Limited has published its 8th AGM minute.

NEPSE - TECHNICAL ANALYSIS

The Nepalese stock market (NEPSE) seems to be in the end of bearish trend after falling from July, 2016. Currently, Index has

shown similar pattern as of March-April 2019 with support level of 1102 and resistance level of 1149. But, the market has already

crossed the long term bearish trend line, which is positive for the market. Currently, index is at 1325.38 level after retracing from

support zone of 1275 level. This week NEPSE opened at 1297.47 and formed a red candle by closing at 1276.68, losing 20.79

points during the day. However, the overall market gained 27.91 points during the week. This week the average turnover has

decreased to Rs.1.30 billion from Rs.1.70 billion of previous week. As of weekly line chart resistance level might be at around

1343 level.

TECHNICAL INDICATORS

Indicators Value Signal

Support (S1) 1275 -

Resistance (R1) 1343 -

Relative Strength Index (RSI) 69.17 Bullish

Moving Average Convergence Divergence (MACD) 34.81 Bullish

5-Day Exponential Moving Average (EMA) 1310.06 Bullish

20-Day Exponential Moving Average (EMA) 1275.44 Bullish

180-Day Exponential Moving Average (EMA) 1194.15 Bullish

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 69.17 which indicates that the market is at bullish zone. There is no formation of divergence in short

term chart.

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 1368.52, 1275.69 and 1182.86 respectively. The market is trading in between upper

and middle band which indicates the market is at bullish zone.

Stock Analysis: NLG Insurance Company Limited (NLG)

NLG Insurance Company Limited is a part of National Life & General Insurance (NLGI) incorporated in 1988 to conduct Life as well as General business, as composite insurance company. As per requirement of the Insurance Act of Nepal, General Insurance business of NLGI was separated and a new company by the name NLG Insurance Company Ltd.

NLG has over 25 years of experience in providing insurance services to its individual and corporate clients. Through customer driven service packages, personalized service delivery and technology focused operation, its clients enjoy value that are unparalleled in the industry. NLG is widely acknowledged for its promptness in claims services, it serves its large client base by providing diverse product range throughout the country by its largest number of network. NLG has reliable reinsurance support of world's renowned reinsurer Hannover Re.

Board of Directors

Name Designation

Mr. Bimal Prasad Wagle Chairman

Mr. Bharat Bahadur Basnet Director

Mr. Suresh Prasad Khatri Director

Mr. Mana Bahadur Rai Director

Mr. Min Bahadur Samari Director

Dr. Bharat Kumar Thapa Independent Director

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

Chief Executive Officer: Mr. Sunil Ballav Pant

Capital Structure (As on 31st Asad 2075)

Authorized Capital NRs. 1,500,000,000

Issued Capital NRs. 640,406,250

Paid-up Capital NRs. 640,406,250

Shareholding Pattern (As of 31st Asad 2075)

Shareholders 2074/75

Holding units Percentage

Promoter Group A Domestic Institutions 3,202,031 50%

Nepalese Citizen - -

Foreigner - -

General Public Group B 1,280,813 20%

General Public Group C 1,921,219 30%

Total 6,404,063 100%

Right Share Notice

NLG Insurance Company (NLG) will be issuing 60% right shares i.e. 3,842,437.50 units at par to raise capital worth Rs.38.42

Crore. The book closure date for the issue has been declared on Magh 27, 2076 (February 10, 2020). Laxmi Capital Market

has been appointed as the issue manager.

Financial Analysis (Yearly Analysis)

Particulars 2071/72 2072/73 2073/74 2074/75 2075/76* CAGR

Share Capital (Rs.000) 341,550 409,860 512,325 640,406 640,406 17.02%

Reserves & Surplus (Rs.000) 115,898 143,294 138,321 119,913 198,348 14.38%

Insurance Fund (Rs.000) 351,696 466,275 581,337 705,119 792,269 22.51%

Long term Investment (Rs.000) 323,650 288,817 348,565 343,628 525,500 12.88%

Total Revenue (Rs.000) 217,520 379,146 420,555 457,981 326,317 10.67%

Total Expenses (Rs.000) 64,706 149,632 189,558 210,158 152,018 23.80%

Gross Premium (Rs.000) 975,319 1,207,974 1,347,156 1,475,663 1,665,571 14.32%

Net Profit (Rs.000) 152,814 229,514 230,998 247,821 174,299 3.34%

Change Period on Period (%) 50.19% 0.65% 7.28% -29.67%

Net Profit to Gross Premium (%) 15.67% 19.00% 17.15% 16.79% 10.46%

ROE (%) 19.33% 19.53% 18.89% 16.97% 13.72%

ROA (%) 8.60% 9.66% 10.24% 8.96% 7.43%

EPS (Rs.) 47.86 61.09 36.07 38.70 27.22

DPS (%) 20.00% 26.31% 26.31% -

MPPS (Rs.) 559 1,970 1485 930 762

Price Earnings ratio 11.68 32.25 41.17 24.03 27.99

Book Value per Share (Rs.) 239 256 249 237 264.54

Solvency Margin (%) 2.67 3.66 4.37 1.47

Total no. of Policies 145,054 191,756 197,101 167,461 171,164

No. of Claims Paid 2,776 4,946 5,142 5,300 6,498

No. of Unpaid Claims 2,043 1,566 1,425 1,644 2,540

No. of Claims/Total No. of Policies (%) 3.00% 0.82% 3.33% 4.15% 5.28%

Insurance Agents 244 209 268 350

Total Employees 182 206 236 273

Total No. of office 28 30 34 49

Based on the data presented above from 2071 to 2076 BS, the company has shown volatility in most of its fundamentals. As of 2075/76 its paid up capital is Rs.640 million which shows that the company has failed to maintain the paid up capital directed by Insurance Board. Most of the non-life companies are still unable to meet their minimum paid-up capital directed by the regulatory body. The company has reported 65% growth in Reserves & surplus which was -13% in in 2074/75. Similarly, it has reported 12% growth in Insurance Fund, 52.93% in Long Term Investment, 12% in Premium collection but failed to maintain positive growth in Revenue which have resulted 29% decline in Net Profit. Most of the fundamentals seems to be in a falling trend in recent years, which have resulted the loss of competitive advantage in it sector.

As of 4th Quarter report of 2075/76 most of the indicators are operating below the industry average. Net Profit has declined to Rs.174.29 million from Rs.247.82 million of 2074/75 which has reflected by its share price. However, growth in Premium collection and long term investment can uplift the performance of the company. The company has reported solvency margin of 1.47 in 2074/75 which is below the minimum solvency margin directed by Insurance Board. The company wasn’t affected by devastating earthquake of 2072 B.S. as most of the fundamentals had positive growth. It seems the company made a good decision in 2072/73 by reducing their investments mostly in the capital market as the overall market (NEPSE) started to fall after reaching 1881 level.

The company has given regular dividend to its shareholders except in 2074/75. Looking at the history of dividend distribution, it

seems to be highly focused on distributing bonus share. However, company didn’t pay any dividend in 2074/75.

Financial Highlights

34.1640.99

51.23

64.04 64.04

11.59 14.33 13.83 11.9919.83

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Share Capital and Reserves & Surplus

Share Capital (Rs.crores) Reserves & Surplus (Rs.crores)

35.17

46.63

58.13

70.51

79.23

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Insurance Fund (Rs.crores)

21.75

37.9142.06

45.80

32.63

6.47

14.9618.96 21.02

15.20

0.00

10.00

20.00

30.00

40.00

50.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Revenue vs Expenses

Total Revenue (Rs.crores) Total Expenses (Rs.crores)

6.47

14.96

18.9621.02

15.2015.28

22.95 23.10 24.78

17.43

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Expenses vs Net Profit

Total Expenses (Rs.crores) Net Profit (Rs.crores)

15.2822.95 23.10 24.78

17.43

47.86

61.09

36.07 38.7027.22

0.00

20.00

40.00

60.00

80.00

2071/72 2072/73 2073/74 2074/75 2075/76*

Net Profit vs EPS

Net Profit (Rs.crores) EPS (Rs.)

47.86 61.09 36.07 38.70 27.22

559

1,9701485

930 762

0.00

500.00

1000.00

1500.00

2000.00

2500.00

2071/72 2072/73 2073/74 2074/75 2075/76*

EPS vs MPPS

EPS (Rs.) MPPS (Rs.)

145,054 191,756 197,101 167,461 171,164

975,3191,207,974

1,347,1561,475,663

1,665,571

0

500,000

1,000,000

1,500,000

2,000,000

2071/72 2072/73 2073/74 2074/75 2075/76*

No. of Policies vs Gross Premium

Total no. of Policies Gross Premium (Rs.crores)

20.00%

26.31% 26.31%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2071/72 2072/73 2073/74

Dividend %

Technical Analysis of NLG as on January 31, 2020

Day Candle

Open 825

High 860

Low 819

Close 847

Pattern Analysis

Resistance R1: 881 R2: 900

Support S1: 803 S2: 772

Particulars Points Remarks

Volume 13,713 The daily volume of stock is higher than both 1

week‘s and 1 month’s average volume. Avg. Volume (1 week) 10,195.00

Avg. Volume (1 month) 7,905.90

No. of Transaction 114 The daily number of transaction is higher than both 1 week and 1 month’s average no of transaction.

Avg. no. of Transaction (1 week) 91.60

Avg. no. of Transaction (1 month) 64.33

180 days Average (Rs.) 663.64 The price of the stock is trading in above both 180 day’s 360 day’s average. 360 days Average (Rs.) 751.07

52 Weeks High Price (Rs.) 918 The stock is currently trading in between 52 week’s high and low price. 52 Weeks Low Price (Rs.) 482

Nepse Index 1 year Change -5.48% The overall market has lost but industry has gained in last 1 year. Similarly, the stock has lost in last 12 months but gained in last 1 month.

Industry Index 1year Change 5.51%

Stock 1-Month Change 38.85%

Stock 1-Year Change -2.42%

Total Holdings of Mutual Funds (Poush, 2076) 124,588 The Mutual Funds are holding less no of shares of the company.

Quarterly Analysis

Particulars Q1 2075/76 Q1 2076/77 Growth (%)

Share Capital (Rs.000) 640,406 640,406 0.00%

Reserves & Surplus (Rs.000) 166,393 224,646 35.01%

Insurance Fund (Rs.000) 737,490 818,568 10.99%

Total Revenue (Rs.000) 98,521 126,485 28.38%

Total Expenses (Rs.000) 46,696 73,887 58.23%

Net Profit (Rs.000) 51,825 52,598 1.49%

Gross Premium (Rs.000) 432,871 442,197 2.15%

Total no. of Policies 41,242 45,722 10.86%

No. of Claims Paid 1,204 1,644 36.54%

No. of Unpaid Claims 2,044 3,096 51.47%

EPS (Rs.) 32.37 32.85 1.48%

Price Earnings ratio 27.28 17.99 -34.05%

Book Value per Share (Rs.) 247.73 272.75 10.10%

ROE (%) 13.07% 12.05% -7.80%

ROA (%) 7.42% 6.45% -13.07%

As of first quarter report of 2076/77, the paid up capital stands at Rs.640.40 million. The company has sold more than forty five

thousand policies during the first quarter and collected Rs.442.19 gross premiums which have resulted the net profit to increase

by 1.49% to Rs.52.59 million. Most of the fundamentals of the company has grown and company is in the process of issuing

Right Share to meet the minimum paid up capital directed by Insurance Board.

Concluding Remarks

As per the Economic survey report 2018/19 by Ministry of finance Insurance industry contributes 2.04% to GDP in Nepal with market penetration of just 18%. This industry is facing a lot of criticism as compared to other industry. Most of the people are unaware about insurance and even educated people are reluctant to buy insurance policy. Most of the people underestimate the return of insurance and lacks knowledge how insurance protects an individual financially. If companies can convince their customers about the risk and reward of their policies, they can do better in this emerging economy.

NLG Insurance Company Limited is still unable to meet the paid up capital of Rs.1 billion directed by Insurance Board. Company will be issuing 1:0.6 right share to its existing shareholders to meet the paid up capital directed by Insurance Board. As of unaudited report of Q4 2075/76, the company has made positive growth in most of the fundamentals but unable of increased its Net Profit, which have resulted the lack of competitive advantage as most of the fundamentals are operating below industry average. However, the company seem eligible to become one of the best in its sector.

Indicators Points Remarks

RSI (14) 81.67 NLG is at overbought zone.

MACD (12,26,9) 58.57 The MACD line is above the signal line and both are above the baseline.

Signal Line (12,26,9) 55.09

Histogram (12,26,9) 3.47

EMA (5,0) 819.53 The price is trading above both EMA 20 and 5 days moving average.

EMA (20,0) 748.00

+DMI(13,8) 42.94 The +DMI is dominant over -DMI and ADX is at 46.58

-DMI(13,8) 8.40

ADX (13,8) 56.58

The following table shows the total dividend declared by Hotel Companies from the profit of 2075/76

S.N Symbol Company Name

Dividend

Total Dividend (%) Bonus (%) Cash (%)

1 SHL Soaltee Hotel Limited 15.00 11.31 26.31

2 TRH Taragaon Regency Hotel Limited 0.00 12.00 12.00

3 OHL Oriental Hotel Limited 5.00 10.79 15.79

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