AAKASH CAPITAL LIMITED Weekly Newsletter from Aakash Capital Limited for the week ending on 29th November, 2019

NEPSE UPDATE

Indicators 24th Nov, 2019

28th Nov, 2019

(+)/(-)

Change %

NEPSE 1120.60 1112.79 -0.70%

SENSITIVE 246.89 246.65 -0.10%

FLOAT 83.27 82.78 -0.59%

SEN. FLOAT 79.59 79.45 -0.18%

BANKING 1031.19 1021.21 -0.97%

TRADING 521.18 449.89 -13.68%

HOTELS 1755.88 1746.91 -0.51%

DEVELOPMENT BANKS 1535.61 1529.82 -0.38%

HYDROPOWER 914.23 911.43 -0.31%

FINANCE 557.15 554.30 -0.51%

NON LIFE INSURANCE 4061.59 3970.30 -2.25%

MANU. & PRO. 2259.76 2219.52 -1.78%

OTHERS 636.16 640.18 0.63%

MICROFINANCE 1473.67 1480.83 0.49%

LIFE INSURANCE 4955.24 4952.84 -0.05%

MUTUAL FUND 9.18 9.11 -0.76%

Market Summary Statistics (24th Nov to 28th Nov, 2019)

Total Turnover (Rs) 1,321,017,135

Total Traded Shares 5,151,227

Total Number of Transactions 22,174

Scrips Traded 168

Market Cap at Week start 1,408,519.76 Millions

Market cap at Week end 1,417,884.91 Millions

Floated Market Cap at Week start 511,976.97 Millions

Floated Market Cap at Week end 516,082.32 Millions

Bullion Update

As on 29th November, 2019 Hallmark Gold Rs.71,300/tola

Worked Gold Rs.71,000/tola

Silver Rs.855/tola

Quote for the week

“Do not save what is left after spending but

Spend what is left after saving.”

-Warren buffet

The market decreased by 0.70% (7.81 points) in the

trading week between 24th November and 28st

November 2019. The sensitive index, which measures

the performance of the companies classified under

group “A”, also registered a decline of 0.10% (0.24

points). Similarly, float index which measures the

performance of securities which are floated to public

also went down by 0.59% and sensitive float followed

the trend by decreasing 0.18%.

This week the market opened at 1120.60 on Sunday

and went down 10.52 points to sit at 1110.08 The

market failed to show positive signal in the review

week. The market remained stable on Monday. Index

continued its falling trend on Tuesday with negative

0.92 points. But Index tried to retrace on Wednesday

with positive 8.30 points but again market declined on

Thursday with negative 4.67 points to end the week at

1112.79 level.

In this review period, most of the sectors closed lower

except the Microfinance and Others sub-index. The

Trading sub-index declined the most with 13.68% due

to fall in the price of Salt Trading Corporation (STC). The

Non-Life Insurance sub index also registered the fall of

2.25% followed by Manu & Pro sub-index with 1.78%.

Similarly, Banking, Hotels, Development Banks,

Hydropower, Finance, Life Insurance and Mutual Fund

sub-index registered the fall of 0.97%, 0.51%, 0.38%,

0.31%, 0.51%, 0.05% and 0.76% respectively. However,

the Microfinance and Others sub-index registered the

gain of 0.49% and 0.63% respectively.

The market witnessed normal volume of transaction

turnover this week. The total turnover stood at Rs.1.32

billion with average of Rs.264.20 million a day. The

total market value decreased by Rs.9,938 million as the

market capitalization went down by 0.70%. Similarly,

floating market cap also registered a fall of 0.59% this

trading week.

.

News Update

Trade deficit down 8.9 percent to Rs414 billion on plunging imports Nepal’s trade deficit fell 8.9 percent year-on-year to Rs414 billion in the first four months of the fiscal year, helped by a sharp drop in imports of petroleum products, iron and steel, aircraft and aircraft parts and vehicles, according to the latest trade statistics…..Read More

Province 3 government stops issuance of grants to 17 local units The government of Province 3 has taken stringent action against 17 local units in the province for failing to deposit the revenue collection of the last fiscal year 2018/19 to the provincial government’s reserve fund. There are a total of 119 local units in the province…..Read More

Bhairahawa airport is nearing completion, but no foreign airline has applied to serve it

On a recent afternoon in Bhairahawa, hundreds of workers poured into the construction site of Gautam Buddha International Airport. A section of the workers are working on interior finishing of the arrivals and departures halls while others are completing ground work on the vehicle parking site in front of the terminal…..Read More

By-elections unlikely to affect national politics, analysts say As election campaigns officially come to a halt, all eyes are now on the possible results of the by-elections, as the polls are a significant mid-term litmus test for the political parties…..Read More

Contrary to former Indian envoy’s claims, Nepal has consistently raised Kalapani issue with Delhi Former Nepali foreign ministers and diplomats have dismissed the recent claim made by Shyam Saran, former Indian foreign secretary and Indian envoy to Nepal, that the Nepali side raises the issue of the disputed territory of Kalapani for rhetorical purposes, but isn’t interested in serious negotiations…..Read More

Market Announcements

Muktinath Bikas bank is auctioning its 4.03 lakh units right shares from Mangsir 8 to 15, 2076; Minimum bid quantity and price at 100

United Insurance is auctioning its 4.99 lakh unit shares from Mangsir 10, 2076; 1.57 lakh units promoter and 3.41 lakh ordinary shares available for bidding

Womi Laghubitta Bittiya Sanstha Limited has allotted its 62,183.80 units promoter shares in auction to the general public on 9th Mangsir, 2076 and refunding money to non-allottee investors from today (11th Mangsir, 2076).

Ghodighoda Laghubitta Bittiya Sanstha Limited has posted a net loss of Rs 2.48 million during the 1st quarter of the fiscal year 2076/77.

Universal Power Company Limited has posted a net profit of Rs 15.35 million and published its 1st quarter company analysis of the fiscal year 2076/77.

Reliance Finance Limited has posted a net loss of Rs 10.30 million and published its 1st quarter company analysis of the fiscal year 2076/77.

NIC Asia Capital Limited has published (NIC Asia Balanced Fund) Net Assets Value (NAV) till Kartik, 2076.

NMB Capital Limited has published (NMB 50) Net Assets Value (NAV) till Kartik, 2076.

Mahalaxmi Bikas Bank Limited is distributing 9.89% cash dividend directly to bank accounts to its shareholders.

Laxmi Bank Limited has announced its 19th AGM going to be held on 6th Poush, 2076.

BomKhola Mini Hydropower Limited has announced its 2nd AGM going to be held on 6th Poush, 2076.

Ridi Hydropower Development Company Limited has announced its 18th AGM going to be held on 4th Poush, 2076.

Sindhu Bikash Bank Limited has posted a net profit of Rs 4.64 million and published its 1st quarter company analysis of the fiscal year 2076/77.

Suryodaya Laghubitta Bittiya Sanstha Limited has announced its 7th AGM going to be held on 5th poush, 2076.

Soaltee Hotel Limited has announced its 45th AGM going to be held on 25th Mangsir, 2076.

Chhimek Laghubitta Bittiya Sanstha Limited has announced its 18th AGM going to be held on 30th Mangsir, 2076.

NEPSE - TECHNICAL ANALYSIS

The Nepalese stock market declined continuously after it made its top on 27th of July, 2016. The market had shown short term

bull in the month of March-April (during Nepali New Year 2076 BS) and reached the height of 1349 on 30th May 2019 but could

not close above the resistance level of 1340. Currently, the index is at 1112 level after falling from 1147 level last week. However,

in a weekly line chart the index is trading around the support zone of 1105 level. This week the market closed at 1112.79 forming

a red candle. This week NEPSE opened at 1120.60 and formed a red candle by closing at 1110.08, losing 10.52 points during the

day. The overall market lost 7.81 points during the week. This week the average turnover has decreased to Rs.264 million from

314 million of previous week. As of weekly line chart the short term support is at around 1105 level.

Technical Indicators

Indicators Value Signal

Support (S1) 1105 -

Resistance (R1) 1132 -

Relative Strength Index (RSI) 35.60 Moderate zone

Moving Average Convergence Divergence (MACD) -8.75 Bearish

5-Day Exponential Moving Average (EMA) 1114.80 Bearish

20-Day Exponential Moving Average (EMA) 1126.14 Bearish

180-Day Exponential Moving Average (EMA) 1177.64 Bearish

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 35.60 which indicates that the market is at moderate zone. In a weekly chart while comparing from

22nd September to 24th November 2019, there seems the formation of bullish divergence if the market retrace from 1112.

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 -28.49 and -24.85 respectively. MACD line is below the signal line and both are below the

base line. MACD has shown bearish signal for the market.

Moving Average Analysis

Moving average is a technical analysis tool that smooth 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 1114.80 and EMA (20, 0) red line is at 1126.14 The index is currently trading below 5 and 20 days

Exponential Moving Average. This indicates that the overall market is at correction phase.

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 1151.31, 1128.92 and 1106.52 respectively. The market is trading in between the

lower and middle band.

Stock Analysis: United Insurance Company (Nepal) Limited (UIC)

United Insurance Co. (Nepal) Limited is an ISO 9001:2000 certified insurance company. The company has started its operation from December 1, 1993 (Mangsir 16, 2050) after its registration with the Company Registrator's Office and approved by Insurance Board. The company is promoted by leading industrialists and reputed trading and commercial houses of Nepal and have a wide participation.

Board of Directors

Name Designation

Mr. Bharat Bahadur Karki Chairman

Mr. Buddha Kaji Shrestha Director

Mr. Mahesh Raj Panta Director

Ms. Pooja Dahal Director

Mr. Debesh Prasad Lohani Director

Mr. Niraj Tuladhar Public Director

Mr. Wilson Man Ranjit Public Director

Mr. Rabindra Raj Pant Independent Director

(Source: https://www.unitedinsurance.com.np/)

Act. Chief Executive Officer: Mr. Ramesh Kumar Bhattarai

Capital Structure

The Authorized Capital of the Company is Rs. 50 crores, Issued Capital 30.24 crores, out of which Rs. 30.24 crores have already been paid. However, the minimum paid up capital has to be Rs 1 arba by the FY 2074/75 as directed by the Insurance Board.

Authorized Capital NPR 500,000,000

Issued Capital NPR 30,24,00,000

Paid Up Capital NPR 30,24,00,000

Shareholding Pattern

Shareholder Share (Units)

Ownership (%)

Pro

mo

ters

Nepalese Institutions 1,283,222 42.43%

Nepalese Citizen 489,808 16.20%

Foreigner 25,920 0.86%

Total 1,798,950 59.49%

Common 1,225,050 40.51%

Others

Total 3,024,000 100%

Financial Highlights (Yearly Analysis)

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

Share Capital (Rs.000) 100,800.00 302,400.00 302,400.00 302,400.00 302,400.00 31.61%

Reserves & Surplus (Rs.000) 117,917.06 (163,191.36) (49,521.96) 16,105.01 60,533.07 -15.35%

Insurance Fund (Rs.000) 81,222.47 81,222.47 214,727.53 281,708.08 326,136.14 41.56%

Long term Investment (Rs.000) 129,655.90 141,961.33 145,412.49 157,291.93 201,667.22 11.68%

Total Revenue (Rs.000) 62,438.93 (244,453.84) 307,678.02 285,441.25 157,632.93 26.05%

Total Expenses (Rs.000) 17,497.60 14,612.07 51,012.57 151,480.16 65,521.72 39.11%

Gross Premium (Rs.000) 429,823.85 562,224.83 618,858.10 477,308.31 487,880.96 3.22%

Net Profit (Rs.000) 44,941.33 (259,065.92) 256,665.45 133,561.08 92,111.20 19.65%

Change Period on Period (%) -676.45% 199.07% -47.96% -31.03%

Net Profit to Gross Premium (%) 10.46% -46.08% 41.47% 27.98% 18.88%

ROE (%) 1.99% 16.76% 43.99% 25.05% 17.65%

ROA (%) 0.51% 7.64% 11.76% 12.64% 9.58%

EPS (Rs.) 44.58 -85.67 84.88 44.3 30.46

DPS (%) 20% 10% - - -

MPPS (Rs.) 392 1,300 1,300 955 850

Price Earnings ratio 8.79 -15.17 15.32 21.56 21.56

Book Value per Share (Rs.) 304.42 75.18 156.92 200.77 230.15

Solvency Margin (%) 1.13 1.37 2 1.02

Total no. of Policies 48,103 82,916 89,891 54,900 68,930

No. of Claims Paid 1,170 2,030 1,870 1,946 1,850

No. of Unpaid Claims 1,982 1,427 1,461 1,719 1,597

No. of Claims/Total No. of Policies (%)

8.34% 6.17% 2.79% 3.72% 3.86%

Insurance Agents 71 55 55 128

Total Employees 128 115 154 156

Total No. of office 22 23 29 29

Based on the data presented above, it can be seen that the company has inconsistent growth in its fundamentals. As of 2075/76

company has a paid up capital of Rs.302.4 million, which indicates the paid up capital below the regulatory requirement. The

company has reported negative growth in most of the fundamentals. Reserve & Surplus had positive growth only in last fiscal year.

It has Compounded Annual Growth Rate (CAGR) of negative 15%. Similarly, the company has reported 15% positive growth in

Insurance Fund, 28% in long term Investment, 2% in Gross Premium but negative growth in Total Revenue by 44% which have

resulted 31% decline in Net Profit. The company has reported solvency margin of 1.02 in 2074/75 which is below the margin directed

by Insurance Board. The company was affected by devastating earthquake of 2072 B.S. as most of the fundamentals had negative

growth and it was reflected by share price.

Company is operating from 29 different locations with its 156 employees and 128 agents. Currently, it is operating below the industry

average which indicates the lack of competitive advantage in the non-life sector. However, the company is trying to move towards

stable position.

Snapshot of Performance

10.08

30.24 30.24 30.24 30.24

11.79

(16.32)

(4.95)

1.61 6.05

(20.00)

(10.00)

-

10.00

20.00

30.00

40.00

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

Share Capital & Reserve and Surplus

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

8.12 8.12

21.47 28.17

32.61

-

10.00

20.00

30.00

40.00

2 0 7 1 / 7 2 2 0 7 2 / 7 3 2 0 7 3 / 7 4 2 0 7 4 / 7 5 2 0 7 5 / 7 6 *

INSURANCE FUND (RS.CRORES)

6.24

(24.45)

30.77 28.54

15.76

1.75 1.46

5.10 15.15

6.55

(30.00)

(20.00)

(10.00)

-

10.00

20.00

30.00

40.00

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

Revenues vs Expenses

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

1.75 1.46 5.10

15.15 6.55

4.49

(25.91)

25.67

13.36 9.21

(30.00)

(20.00)

(10.00)

-

10.00

20.00

30.00

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

Expenses vs Net Profit

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

4.49 (25.91)

25.67 13.36

9.21

44.58

-85.67

84.88

44.3 30.46

(100.00)

(50.00)

-

50.00

100.00

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

Net Profit vs EPS

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

44.58-85.67

84.88 44.3 30.46

392

1,300 1,300

955 850

-500

0

500

1000

1500

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

EPS vs MPPS

EPS (Rs.) MPPS (Rs.)

4,298.24 5,622.25 6,188.58 4,773.08 4,878.81

48,103

82,916 89,891

54,900

68,930

-

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

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

Gross Premium vs Total Policies

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

20%

10%

0%

5%

10%

15%

20%

25%

2 0 7 1 / 7 2 2 0 7 2 / 7 3

DPS (%)

Technical Analysis of UIC as on November 28, 2019

(Source: https://pro.sharesansar.com)

Day Candle

Open 220

High 220

Low 219

Close 219

Pattern Analysis

Chart Pattern Short term sideways

Resistance R1:234 R2: 252

Support S1: 213 S2: 183

Higher Breakout Level 252

Particulars Points Remarks

Volume 450 The daily volume of stock is higher than 1 week’s

and 1 month’s average volume. Avg. Volume (1 week) 398.40

Avg. Volume (1 month) 404.05

No. of Transaction 9

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

Avg. no. of Transaction (1 week) 8.00

Avg. no. of Transaction (1 month) 7.10

180 days Average (Rs.) 611.28 The price of the stock is trading below both the 180 day’s 360 day’s average. 360 days Average (Rs.) 718.79

52 Weeks High Price (Rs.) 1,100 The stock is currently trading around 52 week’s low price. 52 Weeks Low Price (Rs.) 218

Nepse Index 1 year Change -3.99% The overall market has declined and also the industry in last 12 months. The stock has declined in the past one month and even more in last one year.

Industry Index 1year Change -24.36%

Stock 1-Month Change -13.44%

Stock 1-Year Change -69.88%

Total Holdings of Mutual Funds (Ashwin 2076) 41,621 The Mutual Funds are holding less number of shares of the company as compared to other companies.

Auction Notice

The company is selling its 341,543 units’ ordinary and 157,649.60 units’ promoter shares through auction from 10th Mangsir to

17th Mangsir 2076 (26th November to 3rd December 2019). The company has appointed NMB Capital as the issue manager for

the auction. Interested individuals can bid for the auction above Rs.100 per share with minimum units of 100 units.

Concluding Remarks

The company has a decade long experience in Insurance industry (Non-life) with an experienced board and management team

& diversified and adequate geographical coverage. However, company is unable to perform well in recent years. The company

is facing bad times with its negative fundamentals. Earthquake of 2072 might be a major reason for its poor performance. As

compared to other companies it seems very volatile and investors need to be careful in selecting these kind of companies for

investment. The company has a very low market share in terms of gross premium collection among the listed non-life insurance

sector. Company needs to focus on its operations and other management part in order to do better in the upcoming fiscal year.

Indicators Points Remarks

RSI (14) 25.06 UIC is at oversold zone.

MACD (12,26,9) -9.50 The MACD line is below the signal line and both are below the baseline.

Signal Line (12,26,9) -8.35

Histogram (12,26,9) -1.15

EMA (5,0) 223.37 The price is below the EMA 5 and EMA 20.

EMA (20,0) 235.59

+DMI(13,8) 16.85 The -DMI is dominant over +DMI and ADX is at 25.57.

-DMI(13,8) 42.33

ADX (13,8) 25.57

Chaikin Money Flow (20) -0.35 CMF is below the baseline which shows selling 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

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