AAKASH CAPITAL LIMITED

Weekly Newsletter from Aakash Capital Limited for the week ending on 14th June, 2019

NEPSE UPDATE

Indicators 10th June, 2019

13th June, 2019

(+)/(-) %

NEPSE 1275.82 1269.55 -0.49 SENSITIVE 272.46 271.81 -0.24 FLOAT 93.48 93.05 -0.46 BANKING 1137.72 1135.07 -0.23 HOTELS 2096.57 2102.19 0.27 DEVELOPMENT BANKS 1603.31 1598.77 -0.28 HYDROPOWER 1205.61 1200.79 -0.40 FINANCE 629.64 621.77 -1.25 NON LIFE INSURANCE 5512.64 5379.19 -2.42 MANU. & PRO. 2779.48 2744.52 -1.26 OTHERS 732.94 729.41 -0.48 MICROFINANCE 1447.56 1440.72 -0.47 LIFE INSURANCE 6241.95 6198.79 -0.69

Market Summary Statistics (10th June to 13th June)

Total Turnover (Rs) 2,050,401,643

Total Traded Shares 6,877,663

Total Number of Transactions 29,382

Scrips Traded 174

Market Cap at Week start 1,586,288.39 Millions

Market cap at Week end 1,579,387.95 Millions

Floated Market Cap at Week start 554,990.11 Millions Floated Market Cap at Week end 552,949.63 Millions

Bullion Update

As on 14th June, 2019 Hallmark Gold Rs.63,000/tola

Worked Gold Rs.62,700/tola

Silver Rs.720/tola

Quote for the week

“If you have trouble imagining a 20% loss in the

stock market, you shouldn’t be in the stocks”

- John C. Bogle

The market opened for 4 days this trading week as it

remained closed on Sunday on the occasion of Bhoto

Jatra. The market declined slightly by 0.49% or 6.27

points in the trading week between June 10 and June

13. The sensitive index, which measures the

performance of big companies, also registered a loss

of 0.24% or 0.65 points. Similarly, float index also

went down 0.46% or 0.43 points.

This week the market had opened at 1278.28 on

Monday and went down 2.46 points to sit at 1275.82

point. The market dangled in all the following days,

albeit with very low points. The market gained an

insignificant 0.17 and lost 3.50 and 2.95 points on

Tuesday, Wednesday and Thursday respectively to

end the trading week at 1269.55 points.

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

hotels posted loss. The only gaining sector in this

week, hotel, gained a meager 0.27 per cent. Non-life

Insurance lost the highest by 2.42 per cent this

trading week. Manufacturing and processing, and

Finance followed the suit as they gave up 1.26 and

1.25 per cent respectively. The remaining sectors

dropped by less than 1 per percent. To be precise,

Banking, Development Banks, Hydropower ,

Microfinance, Life Insurance and other sector lost

0.23%, 0.28%, 0.40%, 0.69% and 0.48% respectively

this trading week.

The total turnover during this trading week stood at

Rs 2.05 billion. The market has seen some falling

volume in past couple of weeks, after some surges

seen in past several weeks. Moreover, in this review

period, the volume during a day stayed lower than

the preceding day’s volume in each of the following

trading days. This shows declining participation of

investors in the market. The daily turnover averaged

just Rs 0.51 billion. The total market value declined by

Rs. 1006900.44 million as the market capitalization

decreased by 0.43 per cent.

.

News Update

Investors brush off recent budget announcement

Nepal Stock Exchange (NEPSE) plunged 34.88 points to close at 1,284.59 points last week, as the investors showed their lack of

confidence in the recently announced government budget to address issues in the secondary market…Read More

Govt gets Rs 9.89 billion in dividend from only seven PEs

According to the latest figures released by Office of the Auditor General in its annual audit report, these seven enterprises,

who made profit from their businesses, paid the government a total of Rs 9.89 billion in cash dividend in the last fiscal year…

Read More

Bankers demand policy incentives, relaxation for 'big' M&A

Nepal Bankers' Association (NBA) has advised the Nepal Rastra Bank (NRB) to bring policy incentives for commercial banks to

encourage them to go for 'big' merger and acquisition (M&A)…Read More

AIIB to provide $90m loan for 216MW Upper Trishuli-1

The Asian Infrastructure Investment Bank (AIIB) has approved a loan of up to US $ 90 million for the 216 MW Upper Trishuli-1

Hydropower Project, which is being developed by a Korean joint venture company…Read More

Nepal's economic growth rate to reach 7.1 per cent: World Bank

The World Bank has assumed 7.1 percent as Nepal’s economic growth rate for the current fiscal year 2076/77 The report

stated that the growth in Nepal’s economy is speeding up contributing to the assumption… Read More

Market Announcements

Swastik Laghubitta Bittiya Sanstha Limited has announced its Special General Meeting to be held on 4th Ashad, 2076.

Rajdhani Investment Fund Limited has announced its Special General Meeting going to be held on 9th, Ashad, 2076.

Prudential Insurance Company Limited has announced its Special General Meeting going to be held on 10th Ashadh, 2076.

IME General Insurance Limited has announced its 21st AGM going to be held on 29th Ashad, 2076.

Radhi Bidyut Company Limited has announced its Annual General Meeting going to be held on 29th Ashad, 2076.

Nepal Investment Bank Limited closed its (20,00,000 units @ Rs.1000 per unit) 10.5% Nepal Investment Debenture 2082 to

the general public from 30th Jestha, 2076.

Gurans Life Insurance Company Limited has allotted its 2:1 ratio 26,47,424 units right share to its shareholders on 28th

Jestha, 2076. It is selling its 2,40,571 unit promoter shares and 82,005 unit ordinary shares in an auction to the general

public from 5th to 12th Ashad, 2076

Grameen Bikas Laghubitta Bittiya Limited is closing its 2:1 ratio 32,75,000 units right share to its shareholders from 30th

Jestha, 2076.

Himalayan Distillery Limited is distributing Rs 68.42 per share cash dividend directly to bank accounts of its shareholders

Janautthan Samudayic Laghubitta Bittiya Sanstha Limited is issuing its 1:1 ratio 2,88,000 units right share to its

shareholders from 12th Jestha to 15th Shrawan, 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 1269.55 forming a

red candle on last trading day. This week NEPSE opened at 1278.28 and formed a bear candle by closing at 1275.82, losing 2.46

points during the day. The sellers dominated the market in each of the trading days during this week. As a result, the market

kept on giving up points day-after-day.

Along with the fall in index, the transaction turnover also lost its momentum. The transaction turnover decreased from Rs.588

million of previous week ending to Rs.456 million at the end of this week. A continuous decreasing volume was witnessed in

each of the trading days during the week. This shows the faltering participation of investors in the market.

Downtrend market has shown short term bull basically in the month of March and April in last three years. Currently, market is

at support zone of around 1269.

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.

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 39.87 which indicates that the market is trying to moving towards oversold zone. There isn’t any

kind of RSI divergence seen in the market as fall 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 0.03 and 7.38 respectively. MACD has already crossed the signal line and about to touch

the base line which indicates the negative 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 1276.71 and EMA (20, 0) red line is at 1289.87. The green line has already crossed the red line

which is known as death cross indicating chance of fall in the market. The index is currently trading below 5 days and above 20

days Exponential Moving Average. This indicates that the overall market is falling towards 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 1334.99, 1301.06 and 1267.14 respectively. The market is trading in lower band

which indicates market is at oversold zone.

Stock Analysis: Gandaki Bikas Bank Limited (GDBL)

Introduction

Gandaki Bikas Bank Limited, a national level development bank, which was established in November 21, 2007 i.e. 5th Mangsir

2064, has become a prominent name in the Nepalese banking sector. The bank is promoted by prominent business persons

and professionals from diversified areas with a prime objectives of easy & prompt service to all kind of customers with

customer friendly services. The bank is dedicated to excellence in delivery of an entire range of financial services in order to

achieve sound business growth and maximize stakeholders’ value by energetic team spirit, progressive technology and

corporate governance.

Gandaki offers its services to customers through 77 full-fledged branches and is facilitating customers from 20 ATM booths as

of mid-July, 2018. It has market share of 9.34% in terms of deposit base and 9.25% of the total advances of national level

development bank industry as on mid-April 2019.

Board of Director

The BOD includes eminent businessmen and industrialists with wide experience in the financial services. The BOD consists of 3

from promoter group and 3 from public group. The BOD is chaired by Mr. Sushil Gauchan, where as Mr. Resham Bahadur

Thapa is the current CEO of the bank.

Current Share Holding Composition

GDBL has an authorized capital of Rs 3 billion and paid-up capital of Rs 2.75 billion. The promoters of GDBL hold 51 per cent of

total shares while public holds 49 percent. The current shareholder structure of the bank is as follows:

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

1 Domestic Ownership 100 2,750,000,000

1.1 Nepal Government - -

1.2 “A” Class Licensed Institutions - -

1.3 Other Licensed Institutions - -

1.4 Other Institutions - -

1.5 Public 49 1,347,500,000

1.6 Other 51 1,402,500,000

2 Foreign Ownership - -

Total 100 2,750,000,000

Name Designation

Mr. Sushil Gauchan Chairman (Promoter Group)

Mr. Padma Prasad Paudel Director (Promoter Group)

Mr. Kishor Ojha Director (Promoter Group)

Mr. Narayan Bahadur Baniya Director (Public Group)

Mr. Krishna Bahadur Thapa Chhetri Director (Public Group)

Mr. Basudev Tripathi Director (Public Group)

Financial Highlights

41.98

99.50120.00

228.90

275.00

6.0618.95 28.35

48.49 61.78

0.00

50.00

100.00

150.00

200.00

250.00

300.00

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

Paidup capital and reserve and surplus (in crore)

Paidup capital Reserve and surplus

3.80

9.37

11.73

18.33

23.52

3.14

8.0010.09

16.31

19.82

0.00

5.00

10.00

15.00

20.00

25.00

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

Deposits and loans (in arba)

Deposits Loans and advances

7.85

21.76

29.90

40.23

49.55

0.00

10.00

20.00

30.00

40.00

50.00

60.00

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

Net profit (in crore)

18.69

21.87

30.0529.08

18.02

0

5

10

15

20

25

30

35

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

EPS

2% 2.03%2.22%

1.87%1.79%

0%

1%

1%

2%

2%

3%

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

ROA

16.33%

18.37%

20.15%

14.50%14.71%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

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

ROE

Company Financials

Yearly Analysis

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

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

Paid-up Capital 419,819,400 995,000,000 1,199,970,000 2,289,018,450 2,750,000,000

Reserve & Surplus 60,623,136 189,477,886 283,462,841 484,920,325 617,830,803

Deposit Liabilities 3,795,784,409 9,372,965,275 11,730,955,097 18,334,571,466 23,520,371,936

y-o-y Growth 146.93% 25.16% 56.29% 28.28%

Total Assets 4,883,391,955 11,928,741,605 14,924,272,728 24,293,734,551 31,061,005,402

Loan, advances & Bills purchased 3,135,432,604 7,995,339,908 10,090,547,382 16,305,205,616 19,819,748,120

y-o-y Growth 155.00% 26.21% 61.59% 21.55%

Total Revenue 440,622,865 1,038,842,926 1,179,685,817 1,558,210,518 2,770,874,106

Gross Profit 165,812,745 468,102,757 581,811,685 764,288,823 1,045,746,107

Total Operating Income 208,028,218 556,803,147 691,083,173 856,720,544 1,220,344,634

Net Income 78,468,377 217,615,785 298,955,014 402,258,740 495,513,475

y-o-y Growth 177.33% 37.38% 34.55% 23.18%

Return on Assets (ROA) 2% 2.03% 2.22% 1.87% 1.79%

Return on Equity (ROE) 16.33% 18.37% 20.15% 14.50% 14.71%

EPS 18.69 21.87 30.05 29.08 18.02

Book Value Per share 114.44 119.04 148.11 147.56 136.67

Market Value per share 295 313 560 635 205

Price Earning Ratio 15.78 14.31 18.64 21.84 11.38

Capital Fund to RWA (CAR) % 12.93 13.35 16.09 19.3 18.32

Non Performing Loan(NPL) % 0.02 0.7 0.54 0.41 0.41

Moderate and steady growth in major indicators such as deposit, loans and advance, balance sheet size and net profit can be

seen, which means that bank has experienced healthy business growth. Deposits have increased by 6.19 times where as loans

and advance has increased by 6.32 times over the past five years. Likewise, net profit has increased by more than 6 times

with an average of about Rs. 300 million in each of the past five years. Return on assets seems fairly stable over the past five

years and has been providing constantly more than 1.5 per cent in each of the past five years. Return on equity has declined

in the last couple of years because of capital injection at large; however it can also be seen that the bank has been able to

provided return no less than 14 per cent over the five years. In fact, it has provided return of 16.81 per cent on average over

the span of five years. This shows its efficiency in using the equity to generate income for the bank. One of the greatest

strengths of the bank is its ability to maintain a very low non-performing loan year after year.

The bank has a high capital adequacy ratio of 18.32% as against the minimum requirement of 10%. This means that the bank

has a strong capital base which can be used to support the management’s growth plans without affecting its solvency. Also,

looking at its pricing ratios, both the P/E and P/B has declined over the past years on average. So, it can be said that the stock

price has become relatively cheaper.

Evaluating the above fundamental indicators, the company has sound fundamental and has huge potential in the Nepalese

emerging financial market.

Quarterly Analysis

The following table presents 3rd Quarter analysis of the company for the FY 2017/18 to 2018/19.

As of Q3 of fiscal year 2018/19, deposit has grown by a huge 34.53 per cent in comparison to the corresponding period of

previous year. Similarly, loans and advances have grown by 32.03 per cent in the current quarter as compared to the same

period last year. Net profit has also increased satisfactorily by around 15 per cent in comparison to the same quarter of

corresponding year and it has an above industry average net profit. On weaker side, reserve and surplus has decreased by

22.35 per cent. However, it still has a reserve that is way above the industry average.

Looking at the table presented above, it can be seen that the company has been maintaining above industry average in most

of the important components such as reserve, deposits, loans and advances, net profit, earnings per share and so on.

Moreover, its price-to-earnings ratio is below the industry average. So, it can be said that the bank has a healthy

fundamentals and positioned high among its counterparts.

Dividend History

The bank has been providing consistent dividend either in the form of cash or bonus over the last five years. On an average, it

has provided 19.7 per cent over the past 5 years. Evaluating the data presented above, bank has a practice of giving more

bonus than cash to its shareholders. However, the bank has given only cash dividend of 14.2% in the fiscal year 2017/18.

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

Paid-up Capital (Rs.000) 1,332,063.43 2,304,908 2,750,000 19.31%

Reserve (Rs.000) 444,815.33 1,298,354 1,008,185 -22.35%

Deposits (Rs.000) 12,206,380.20 20,434,059 27,489,299 34.53%

Loans & advances (Rs.000) 10,867,300.00 18,322,952 24,191,814 32.03%

Net Profit (Rs.000) 169,808.07 340,443 390,353 14.66%

Earnings per share 15.48 19.69 18.93 -3.86%

Net worth per share 127.06 156.33 136.66 -12.58%

P/E ratio 14.71 11.93 10.04 -15.84%

Credit to Deposit Ratio (%) 76.21 76.38 77.23 1.11%

Capital fund to RWA (%) 23.18 21.22 17.12 -19.32%

Year Dividend

Total% Cash % Bonus %

2013/14 10 10 20

2014/15 1.21 23 24.21

2015/16 1.03 19.75 20.78

2016/17 0 19.31 19.31

2017/18 14.2 0 14.2

20

24.21

20.78 19.31

14.2

0

5

10

15

20

25

30

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

Total Dividend %

Technical Analysis of GDBL as on 13th June, 2019

Particulars Points Remarks

Volume 5,801.00 The daily volume is lower than that of weekly

volume and 1 month. Avg. Volume (1 week) 8702.80

Avg. Volume (1 month) 12653.67

No. of Transaction 22.00 The daily number of transactions is lower than that of weekly and 1 month average transaction.

Avg. no. of Transaction (1 week) 27.40

Avg. no. of Transaction (1 month) 36.00

180 days Average 196.58 The price of the stock is trading above 180 days and 360 days average. 360 days Average 207.79

52 Weeks High Price 223 The stock is currently trading closer to 52 weeks low price. 52 Weeks Low Price 175

Nepse Index 1 year Change 2.21% The industry has gained 10.24% in the last one year. The stock, on the other hand, has gained just 4.48%.

Industry Index 1year Change 10.24%

Stock 1-Month Change 1.45%

Stock 1-Year Change 4.48%

Monthly Beta 1.121 The monthly and quarterly beta is higher than the market. Quarterly Beta 1.001

Total Holdings of Mutual Funds (Baishakh) 134084 The Mutual Funds are holding good number of

shares of the company.

Stock Holdings of Top Broker (from Dec 26, 2018) 32390.20 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 book closure date for 14.2% cash dividend.

Top Broker Avg. Buy Price 202.16

Top Broker Avg. Sell Price 201.92

Day Candle

Open 211

High 212

Low 210

Close 210

Pattern Analysis

Chart Pattern Ranging

Resistance R1: 215 R2: 225

Support S1: 205 S2: 190

Higher Breakout Level 225

Concluding remarks

From the above analysis, it is clear that the bank has steady performance along with healthy financial and asset quality

indicators. It has a below industry average cost to income ratio of 35.47% as against the average of 42.52%. Also, it has a good

profitability indicators which is supported by steady net interest income to total operating income of 80.91% and rest from

non-interest income. Most of the fundamental indicators of the company are growing and has potential to grow further.

Overall, the balance sheet size and business has quite increased in recent time and it can do better if it can control its cost of

fund and hence, the base rate; cost of fund stands at 8.90% as against the industry average of 8.40%.

Indicators Points Remarks

RSI (14) 46.81 GDBL is moving towards moderate zone.

MACD (12,26,9) 1.21 MACD line has crossed the signal line from above. Both are still above the base line, but there is no clear indication. Signal Line (12,26,9) 2.24

Histogram (12,26,9) -1.03

EMA (5,0) 212.12 The dead cross has just taken place as the EMA 5 has crossed the EMA 20 from above. This is an indication of bearish signal. EMA (20,0) 212.65

+DMI(13,8) 23.58 The -DMI is slightly dominant over +DMI and ADX is at 17.53. So, there is no significant trend. -DMI(13,8) 29.45

ADX (13,8) 17.53

Chaikin Money Flow (20) 0.18 CMF is slightly 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

regulated by Securities Board of Nepal. This document may not be reproduced, distributed or published by any person for any

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