AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 19th July, 2019

NEPSE UPDATE

Indicators 14th July, 2019

18th July, 2019

% change

NEPSE 1249.49 1272.49 1.84% SENSITIVE 268.57 273.84 1.96% FLOAT 91.77 93.61 2.01% SEN. FLOAT 85.14 87.02 2.21% BANKING 1126.15 1148.38 1.97% HOTELS 2043.36 2070.62 1.33% DEVELOPMENT BANKS 1604.18 1636.86 2.04% HYDROPOWER 1189.48 1216.62 2.28% FINANCE 617.93 627.42 1.54% NON LIFE INSURANCE 5044.13 5104.26 1.19%

MANU. & PRO. 2633.04 2717.5 3.21% OTHERS 713.08 720.75 1.08% MICROFINANCE 1424.11 1460.48 2.55% LIFE INSURANCE 5996.41 6040.71 0.74% TRADING - - -

MUTUAL FUND 9.52 10.12 6.30%

Market Summary Statistics (14th to 18th July, 2019)

Total Turnover (Rs) 1,901,142,521

Total Traded Shares 8,599,017

Total Number of Transactions 24,133

Scrips Traded 170

Market Cap at Week start 1,555,642.94 Millions

Market cap at Week end 1,584,393.40 Millions

Floated Market Cap at Week start 554,304.01 Millions

Floated Market Cap at Week end 565,462.60 Millions

Bullion Update

As on 19thJuly, 2019 Hallmark Gold Rs.65,500/tola

Worked Gold Rs.65,200/tola

Silver Rs.770/tola

Quote for the week

“If a business does well,

the stock eventually follows.” -Warren Buffet

The market increased by 1.84% (23 points) in the

trading week from 14th to 18th July 2019. The sensitive

index, which measures the performance of the

companies classified under group “A”, registered a rise

of 1.96% (5.17 points). Similarly, float index which

measures the performance of securities which are

floated to public also went up by 2.01% and the rise of

2.21% followed by sen. float.

This week the market opened at 1248.94 on Sunday

and went up by 0.55 points to sit at 1249.49 level. The

market floated on all the following days. The market

gained 5.07 on Monday, 4.45 on Tuesday and 15.85 on

Wednesday respectively. However, market went down

by 2.37 points on Thursday to sit at 1272.49 at the end

of the review week. Red signal on the last day might be

the result of confusion on newly implemented Capital

Gain Tax (CGT).

In this review period, all the sub-indices closed forming

green candles. The highest percent was gained by

newly introduced index, Mutual Fund Index. It gained

6.30% (0.60 points). Manufacturing & Production

Index increased by 3.21% (84.46), Microfinance Index

by 2.55% (36.37 points), Hydropower by 2.28% (17.14

points) and 2.04% followed by Development Banks.

Among 12 sub-indices 5 sub-indices registered the gain

of more than 2%. Similarly, the Trading index which

includes two companies Bishal Bazar Copmpany Ltd.

(BBC) and Salt Trading Company Ltd. (STC) has not

shown any transaction since 7th July 2019. On 7th July it

closed at 259.84 level. Life Insurance Index reported

lowest gain of 0.74% followed by Others Index.

Market has gained 23 points in this review week,

however the trading volume has not been supportive.

The total turnover in this trading week stood at Rs 1.9

Billion while daily turnover averaged Rs380 million.

The total Market Value increased by Rs. 30,030.89

million as the market capitalization increased by

1.93%. Similarly, floating market cap saw a positive rise

by 2.08% in this trading week.

.

News Update

Revenue collection target missed by Rs 25bn

Initially, the government had set revenue collection target at Rs 945 billion in the 2018-19 fiscal, which ended on Tuesday. The

Ministry of Finance (MoF) had later revised down the collection target to Rs 860 billion…..Read More

Farmers urge government to continue chemical testing on imported farm produce

Farmers on Saturday urged the government to continue checking imported vegetables and fruits for pesticide residues, saying

that the move will safeguard consumers and help boost demand for domestic produce…..Read More

Three days of nonstop torrential rain tops up Kulekhani reservoir

The torrential rain that fell nonstop for three days last week topped up the Kulekhani reservoir in mid-July for the first time in

living memory. Formed by Kulekhani dam, the lake located 20 km southwest of Kathmandu supplies water to the Kulekhani I and

II hydropower projects…..Read More

Rain, floods affect telecom services in various districts of provinces 1 and 2

Telecommunication services across different districts in Province 1 and 2 have been affected due to the recent floods across

different areas triggered by heavy rainfall…..Read More

China’s economy growth cools further amid US tariff war

China’s economic growth slowed to its lowest level in a decade in the quarter ending in June, adding to pressure on Chinese

leaders as they fight a tariff war with Washington…..Read More

Market Announcements

Himal Dolakha Hydropower Company Limited has extended its 76,72,210 units IPO shares to the general public till (24th

Shrawan, 2076).

Sabaiko Laghubitta Bittiya Sanstha Limited is issuing its 5,30,000 units IPO shares to the general public from 1st Shrawan,

2076.

NIC Asia Capital Limited has published an offer letter to issue 125 million units of Rs 10 face value each mutual fund scheme

worth Rs 1.25 billion (NIC Asia Balanced Fund) to the general public from (8th to 12th Shrawan, 2076).

Nepal Rastra Bank is selling 17,29,989.50 units Promoter shares of (Nepal Stock Exchange Limited) in auction to Bank,

Financial Institutional, Stock Broker and Listed companies from (31st Ashad to 2nd Bhadra, 2076).

Himalayan Bank Limited is issuing its (30,00,000 units @ Rs.1000 per unit) 10% Himalayan Bank Limited Debenture 2083 to

the general public from today (2nd Shrawan, 2076).

Grameen Bikas Laghubitta Bittiya Sanstha Limited is selling its 3,92,393 units promoter shares and 1,90,451 unit ordinary

shares in an auction to the general public from (8th to 15th Shrawan, 2076).

Hathway Finance Company Limited has announced its Special General Meeting going to be held on 14th Shrawan, 2076.

Global IME Bank Limited has announced its Special General Meeting going to be held on 14th Shrawan, 2076.

Nyadi Hydropower Company Limited has announced its Special General Meeting going to be held on 17th Shrawan, 2076.

Siddhartha Capital Limited has published a notice regarding the maturity of its mutual fund “Siddhartha Equity Oriented

Scheme”.

Reliance Finance Limited is distributing 2.63% Cash Dividend directly to bank accounts and urged its shareholders to

dematerialize their shares.

First Microfinance Laghubitta Bittiya Sanstha Limited has posted a net profit of 133.21 million and published its 4th quarter

company analysis of the fiscal year 2075/76.

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 support

zone as seen in the weekly chart. The market had shown short term bull after Nepali New Year. This week the market closed at

1272.49 forming a red candle on last trading day. This week NEPSE opened at 1248.94 and formed a green candle by closing at

1249.49, gaining 0.55 points during the day. The transaction turnover decreased from Rs.460.03 million of previous week ending

to Rs.411.36 million at the end of this week. This week transaction was not that supportive as the market was unable to cross

the turnover of Rs.500 million during the trading days, however the market gained 23.96 points this week. 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 the resistance might be at around 1319. Taking the Fibonacci retracement from 1100 to 1316, the

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

Technical Indicators

Indicators Value Signal

Support (S1) 1249 -

Resistance (R1) 1319 -

Relative Strength Index (RSI) 57.49 Moderate zone

Moving Average Convergence Divergence (MACD) 20.60 Bearish

5-Day Exponential Moving Average (EMA) 1262.08 Bullish

20-Day Exponential Moving Average (EMA) 1256.07 Bullish

180-Day Exponential Moving Average (EMA) 1203.72 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 56.96 which indicates that the market is at moderate zone. There is no any short term divergence

as increase in price and RSI chart is 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 -2.06 and -5.99 respectively. MACD has already 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. MACD has shown

bullish signal for the overall 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 1262.08 and EMA (20, 0) red line is at 1256.07 The index is currently trading above 5 days and

below 20 days Exponential Moving Average. This indicates that the overall market is retracing from the 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 1273.17, 1256.07 and 1238.96 respectively. The market has closed above the

upper band which indicates the market is at overbought zone. This fluctuation has seen because of short term bull of this week.

Stock Analysis: Standard Chartered Bank Nepal Limited (SCB)

Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987 when it was initially registered as a joint-

venture operation. Today, the Bank is an integral part of Standard Chartered Group having an ownership of 70.21% in the

company with 29.79% shares owned by the Nepalese public. The Bank enjoys the status of the largest international bank

currently operating in Nepal.

The Bank has been the pioneer in introducing ‘client focused’ products and services and aspires to continue its leadership in

introducing new products. It is the first Bank in Nepal to implement the Anti- Money Laundering policy and to apply the ‘Know

Your Customer’ procedure on all the customer accounts.

Board of Directors

Name Designation

Mr. Jitendra Arora Chairman

Ms. Karen De Alwis Director

Mr. Krishna Kumar Pradhan Director

Mr. Bharat Kunwar Director

Mr. Anirvan Ghosh Dastidar Director

(Source: https://www.sc.com )

Senior Executives

Name Designation

Anirvan Ghosh Dastidar Chief Executive Officer & Head Retail Clients

Gorakh Rana Head Global Banking & Commercial Banking

Michael Siddhi Head Transaction Banking

Adarsha Bazgain Head Financial Markets & Financial Market Sales

Rajan Udas Head Human Resource

Gopi K Bhandari Senior Credit Officer & Chief Risk Officer

Suraj Lamichhane Financial Controller

Sanjay Pant Head Compliance

Sujit Shrestha Chief Information Officer

Bimal Singh Head, Legal & Company Secretary

(Source: https://www.sc.com )

Capital Structure (As of 16 July 2018)

Authorized Capital (Rs.) 9,000,000,000

Issued Capital (Rs.) 8,011,430,667

Paid Up Capital (Rs.) 8,011,430,667

Shareholding Pattern (As of 16 July 2018)

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

1 Domestic Ownership 29.79% 2,386,605,195.70

1.1 Nepal Government - -

1.2 “A” Class Licensed Institutions - -

1.3 Other Licensed Institutions - -

1.4 Other Institutions 2.44% 195,478,908.27

1.5 Public 27.35% 2,191,126,287.42

1.6 Other - -

2 Foreign Ownership 70.21% 5,624,825,471.30

Total 100 8,011,430,667

Financial Highlights

Yearly Analysis

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

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

Paid-up Capital (Rs.000) 2,245,839 281,022 3,749,901 4,005,715 8,011,430 37.43%

Reserves (Rs.000) 2,842,252 3,282,542 3,774,274 3,797,504 4,511,029 12.24%

Deposits from customers (Rs.000)

46,298,532 57,286,482 55,727,178 59,694,608 67,061,046 9.70%

Growth %

23.73% -2.72% 7.12% 12.34%

Total Assets (Rs.000) 53,324,102 65,059,044 65,185,732 78,356,012 84,031,554 12.04%

Loan and advances to customers (Rs.000)

25,976,585 27,681,313 31,302,950 38,433,867 44,561,330 14.44%

Growth %

6.56% 13.08% 22.78% 15.94%

Interest Income (Rs.000) 2,583,958 2,574,590 2,415,583 3,191,877 4,940,674 17.59%

Net Interest Income (Rs.000) 2,007,659 1,913,515 1,849,878 2,328,418 3,298,034 13.21%

Total Operating Income (Rs.000)

2,913,423 2,928,425 2,885,049 3,416,905 4,680,558 12.58%

Personnel Expenses (Rs.000) 482,083 468,278 484,136 771,619 997,877 19.95%

Net Profit (Rs.000) 1,336,589 1,310,352 1,292,494 1,549,986 2,189,898 13.14%

Growth %

-1.96% -1.36% 19.92% 41.29%

Return on Assets (ROA) 2.51% 2.01% 1.98% 1.98% 2.61%

Return on Equity (ROE) 26.27% 21.69% 17.18% 11.98% 18.66%

EPS 65.47 57.38 45.96 35.49 27.33

Book Value Per share 249 265 268 296 174

Market Value per share 2799 1943 3600 2295 755

Price Earnings Ratio 42.75 33.86 78.33 64.67 27.63

Capital Fund to RWA (CAR) %

12.27% 13.10% 16.38% 21.08% 22.99%

Non-Performing Loan(NPL) to Total Loan %

0.48% 0.34% 0.32% 0.19% 0.18%

Branches (including Extension Counters)

20 15 15 15 15

ATMs 24 23 23 23 26

Total Staff number 460 433 435 495 485

Based on the data presented above, the bank has made consistent growth in all its fundamentals. The bank had net profit of

Rs.2.18 billion in 2017/18 which is 41.29% higher than that of previous fiscal year, however it has reported fall in its EPS from

Rs.35.49 to Rs.27.33 in the same period due to increase in share outstanding from 40,057,153 units in 2016/17 to 80,114,307

units in 2017/18. The bank has met its paid-up capital of 8 arab as directed by Nepal Rastra Bank in fiscal year 2017/18.

Reviewing 5 years net income, bank has Compounded Annual Growth Rate (CAGR) of 13.14%. The bank has reported 18.79%

rise in reserve to Rs.4.5 billion in 2018. In 2017/18 bank has able to collect deposits of only Rs.67 billion from its customers and

has lend loans of Rs.44.56 billion, which is comparatively lower than the industry average. This indicates the company is lacking

competitive advantage. Evaluating the above fundamental indicators, the company has sound fundamental and has huge

potential in the Nepalese emerging financial market.

Snapshot of performance

224.58

28.10

374.99 400.57

801.14

284.23 328.25 377.43 379.75

451.10

-

200.00

400.00

600.00

800.00

1,000.00

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

Paid up capital and reserves

Paid-up Capital (crores) Reserves (crores)

4,629.85

5,728.65 5,572.72 5,969.46

6,706.10

2,597.66 2,768.13 3,130.29 3,843.39

4,456.13

-

2,000.00

4,000.00

6,000.00

8,000.00

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

Deposits & Loan and advances

Deposits from customers (crores)

Loan and advances to customers (crores)

133.66 131.04 129.25

155.00

218.99

65.47

57.38 45.96 35.49 27.33

-

50.00

100.00

150.00

200.00

250.00

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

Net Profit & EPS

Net Profit (crores) EPS

460

433 435

495

485

4,820.83 4,682.78 4,841.36 7,716.19

9,978.77

400

420

440

460

480

500

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

1 2 3 4 5

Total number of Staffs & Personnel Expenses

Personnel Expenses (lacks) Total Staff number

65.47

57.38

45.96

35.49

27.33

2799

1943

3600

2295

755

0

10

20

30

40

50

60

70

0

500

1000

1500

2000

2500

3000

3500

4000

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

EPS vs MPS

Market Value per share EPS

65.4757.38

45.9635.49

27.33

51.544.21

35.08

105.26

17.5

0

20

40

60

80

100

120

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

EPS vs DPS

EPS DPS

Quarter to Quarter Comparison

Particulars Q3 2018/19 Q3 2017/18 Growth (%)

Paid-up Capital Rs. '000' 8,011,431 8,011,431 0.00%

Reserve Rs.’000’ 4,511,029 3,842,808 17.39%

Deposits from customers Rs.’000’ 70,813,030 60,715,968 16.63%

Loans and advances to customersRs.’000’ 53,462,305 45,175,438 18.34%

Personnel expenses 769,062 720,807 6.69%

Net Profit Rs.’000’ 1,734,478 1,553,791 11.63%

Return on equity (%) 12.22% 11.60% 5.37%

Return on asset (%) 1.96% 2.04% -3.94%

Net worth per share Rs. 177.18 167 6.10%

Earnings per share Rs. 28.87 25.12 14.93%

MPS Rs. 591 855 -30.87%

P/E ratio 20.47 34.03 -39.85%

Credit to Deposit Ratio (%) 78.47% 76.44% 2.66%

Capital fund to RWA (%) 18.89% 22.68% -16.71%

As of third quarter ending the net profit of the bank has increased by 11.63% to Rs.1.73 billion. The bank has 16.63% increase

in deposits and 18.34% rise in Loans and advances to customers which are below industry average. Similarly, the bank has

reported rise of 17.39% in reserve and 6.69% in personnel expenses. Most of the fundamentals of the bank are growing at good

pace.

Dividend History

Year Dividend

Total % Bonus % Cash %

2013/14 10 41.5 51.5

2014/15 25 19.21 44.21

2015/16 33.33 1.75 35.08

2016/17 100 5.26 105.26

2017/18 0 17.5 17.5

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 17.5% cash dividend to

its shareholder in 2017/18.

Technical Analysis of SCB as on July 18th, 2019

Day Candle

Open 698

High 698

Low 677

Close 678

Pattern Analysis

Chart Pattern Short term Uptrend

Resistance R1: 684 R2: 702

Support S1: 658 S2: 623

Higher Breakout Level 723

Particulars Points Remarks

Volume 5,495 The daily volume and weekly volume of the stock

is lower than that of the 1 month. Avg. Volume (1 week) 6,410.60

Avg. Volume (1 month) 7,585.19

No. of Transaction 58 The daily number of transactions is lower than that of average transaction of the week and month.

Avg. no. of Transaction (1 week) 61

Avg. no. of Transaction (1 month) 64.43

180 days Average 618.84 The price of the stock is trading in between 180 days and 360 days average. 360 days Average 710.12

52 Weeks High Price 766 The stock is currently trading between 52 weeks high and low price. 52 Weeks Low Price 520

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 but has gained in 1 month’s period.

Industry Index 1year Change -0.03%

Stock 1-Month Change 1.95%

Stock 1-Year Change -10.08%

Monthly Beta 1.111 Both the monthly and quarterly beta of the stock are higher than the market. Quarterly Beta 1.465

Total Holdings of Mutual Funds (Jestha) 59,712 The Mutual Funds are holding less number of shares of the company as compared to other companies.

Stock Holdings of Top Broker (from June, 2019) 17,138 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 666

Top Broker Avg. Sell Price 665.01

Concluding remarks

Standard Chartered Bank (SCB) is a part of Standard Chartered Group having an ownership of 70.21% (Foreign) in the company

with 29.79% shares owned by the Nepalese public. As it is has mixed capital from domestic as well as foreign investors, in terms

of its contribution to the Nepalese economy we can look from different perspectives. It was started in 1987, when we had very

less number of financial institutions. It has been able to create value for customers and for the whole banking industry. On the

other side, foreign investment creates capital outflow which might harm the economy.

SCB is considered as one of the blue chip company because of its strong fundamentals. Despite of limited number of branches,

the bank has able to generate Rs.2.18 billion of Net Profit in 2017/18 which lies in top ten among the commercial banks. It is

one of the most respected bank in the world and also in Nepal. The bank has to initiate new move on its operations to occupy

better market share and to maintain its brand in the Nepalese banking industry. Currently, the company is performing below

industry average in terms of fundamentals like deposits, loans and advances, reserves etc. which indicates that the bank is

lacking competitive advantage in its sector. However, it can do better in the Nepalese emerging economy with the help of its

efficient management and operations.

Indicators Points Remarks

RSI (14) 56.12 SCB is at moderate zone.

MACD (12,26,9) 2.57 The MACD line is above and signal line is below the baseline.

Signal Line (12,26,9) -1.03

Histogram (12,26,9) 3.61

EMA (5,0) 678 EMA 5 and price are at same level and EMA 20 is below the price.

EMA (20,0) 665.90

+DMI(13,8) 33.76 The +DMI is dominant over -DMI and ADX is at 21.33.

-DMI(13,8) 10.16

ADX (13,8) 21.33

Chaikin Money Flow (20) 0.2097 CMF is above the baseline which shows 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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