W e a l th Monthly Newsletter from Nabil Investment Banking Ltd. (Nabil Invest) Vol.5. Issue 12, Chaitra, 2073
NEPSE UPDATE INDICATORS NEPSE
As at Chaitra 24, 2073
. Shrawan 2072
Upcoming AGMs
Falgun End, 073
Magh End, 073
(+/-) % from Magh End till Chaitra 24
1651.04
1347.09
1,296.23
27.37
SENSITIVE
358.47
292.64
281.46
27.36
BANKING
1547.25
1288.78
1245.97
24.18
DEV. BANKS
1831.58
1475.47
1,388.98
31.87
733.62
614.13
609.14
INSURANCE COs
8679.16
6198.7
HYDROPOWER
1995.99
HOTELS MANU. & PRO.
Company’s Name
Book Closure Date
AGM Date
Stock Dividend (%)
Cash Dividend (%)
NCM Merchant Banking Limite d*
-
21-Apr-17
-
-
Sagarmatha Finance Limited Nepal Credit & Commercial Ba nk Limited*
05-Mar-17
21-Apr-17
18.3
-
19-Apr-17
28-Apr-17
-
-
20.44
Mahalaxmi Bikas Bank Limited
20-Apr-17
04-May-17
7.9
-
5,380.87
61.30
21-Apr-17
05-May-17
-
-
1606.08
1,549.30
28.83
Yeti Development Bank Limited *Special Annual General Meeting
2139.34
1812.57
1,628.13
31.40
2199.88
6198.7
2,161.86
1.76
OTHERS
680.53
649.01
680.24
0.04
TRADING TOTAL SHARES TRADED (‘000)
209.25
206.16
206.16
1.50
38138.38
38159.40
42,770.32
(10.83)
FINANCE COs
Nabil Invest UPDATE
NEPSE Index witnessed an increment of 354.81 points i.e. 27.37% from Magh End till Chaitra 24, 2073 closing at 1651.04 points. Sensitive Index which measures the performance of class ‘A’ stocks also increased by 27.36% in comparison to Magh End, 2073 and closed at 358.47 points. Among the nine sectoral index, all sectors ended in the green zone. An upward trend has been observed in NEPSE during the review period mainly due to some ease in liquidity condition as a result of relaxation provided by NRB over CCD ratio calculation, capital increment requirement for both life and non-life insurance companies, expectation of good financial result for the third quarter of FY 73/74, rights share issues in the pipeline as well as some positive impact of recent political development and upcoming local level election. Economic situation also seems to be improving as government is supposed to provide major expenditure towards the development work and for election purpose. Thus, the resulting inflow of cash in the financial system is likely to bring stability in the market and ease the liquidity.
Market UPDATE
Nabil Invest, as an Issue Manager for 4.10 lakhs units of IPO of Radhi Bidyut Company Ltd. is going to open the issue for the locals from Baisakh 04, 2074. Nabil Invest, as an Issue Manager for 60% right share issue of Siddhartha Development Bank Ltd. is going to open the issue from Baisakh 07, 2074. Nabil Invest has been appointed as an issue manager for 20% right shares of United Finance Ltd.
Stock Analysis for this month’s issue of “Wealth”: Himalayan General Insurance Co. Ltd. (HGI)
Bullion Desk UPDATE Fine Gold (9999)
NRs. 47,670/10 Gms.
Standard Gold (9950)
NRs. 0000/10 Gms.
Silver
NRs. 694.50/10 Gms.
As of 18/04/2017
Slowdown in price rise makes NRB optimistic… Price of goods and services has not gone up in…….….Read More
Quote of the Month
Banking outlet mandatory in every local level Deputy Governor said all the banks' branches will…...Read More
Banks still walk the tightrope on deposits, loans Banks have extended more loans than total deposit…Read Mor e
Paid-up requirement for Insurance Co’s hiked by 4 times As the banking industry rus hes to meet its………......Read More
“Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.” -Warren Buffet
Our Services: Issue Management |Underwriting |Registrar to Share/Depository Participant| Portfolio Management| Corporate Advisory | Fund Manager and Depository for Nabil Mutual Fund
NEPSE – Technical Analysis Trend Analysis The benchmark index of the only stock exchange of the country NEPSE reached all time high of 1,881.45 points on 27th July, 2016 and dropped down to the lowest point at 1,252.50 points on 12th February, 2017 after a bearish run. However, within very short span of time, the market has bounced back pretty well to close at 1,651.04 points at the end of the review period (i.e. 6th April, 2017) mainly because of increase in confidence among the investors due to ease in liquidity condition as a result of relaxation provided by NRB over CCD ratio, announcement of capital increment requirement for Insurance Companies by the Insurance Board (i.e. NPR 1 billion for Non-Life and NPR 2 billion for Life Insurance Companies) and positive impact of recent political development & upcoming election. The market started to rise from 19th March, 2017 from 1,382.19 points due to news surrounding that the capital increment requirement for the Insurance Companies is likely to be announced soon, which subsequently rallied the Banking, Microfinance and other sectors as well. Thus, after the official announcement from the Insurance Board on 31st March, 2017, the market again gained momentum and witnessed the rise to close at 1,651.04 points on 6th April, 2017. In addition, other factors such as local level election to be held on 14th May 2017, stock brokers extending their service outside the valley through their Remote Work Station (RWS) and preparation to implement full online trading system before Dashain in the year 2074 has helped to build the confidence of the investors.
2000
1800 1600 1400
1200 1000 800 6-Apr-16
6-Jun-16
6-Aug-16
6-Oct-16
6-Dec-16
6-Feb-17
6-Apr-17
Relative Strength Index (RSI) Analysis In the recent period, the RSI of NEPSE is hovering around the overbought zone ending at 78.02 at the end of the review period indicating that investors are high on confidence. Since the RSI is in the overbought zone, some selling pressure might as well be observed due to profit booking by the investors. Although RSI is very effective and widely used leading indicator in the trending market, it is not appropriate to take decision solely based on RSI. RSI mainly reflects the momentum of the market. One should be aware that the large surge and drop in the price of an asset will affect the RSI by creating false buy or sell signals. To reflect better position, RSI is generally confirmed along with Moving Averages and Moving Average Convergence Divergence (MACD).
90.00 70.00 50.00
30.00 10.00
Moving Average Convergence Divergence (MACD) The MACD line crossed the trigger line from below on 19th February, 2017 when NEPSE index was at 1,369.35 points indicating an upward trend. Moreover, at the end of the review period the MACD line still lies above the trigger line which indicates the continuation of an upward trend. Nevertheless, the decision for entry and exit shouldn’t solely rely on MACD as it is a lagging indicator and gives late signals just for confirmation of trend. 200 150
100 50 0 -50
MACD
Triggerline
150
100 50
0 -50
-100
-100
-150
-150
Moving Average Analysis Moving Average lines are used to identify current trends and trend reversals as well as to set up support and resistance levels. Further, moving averages can be used to quickly identify whether security is moving in an upward trend or a downward trend depending on the direction of the moving average.
20 days MA and 50 days MA analysis: From the moving average chart below, we can see that the NEPSE index line crossed the 20 Days MA line from below on 2nd March, 2017 when NEPSE index was at 1,329.41 points; and also crossed the 50 Days MA line from below on 19th March, 2017 when NEPSE index was at 1,382.19 points indicating an upward trend. Moreover, the 20 Days MA line has also crossed the 50 Days MA from below on 28th March, 2017 when NEPSE index was at 1,610.62 points indicating upward trend in the short run. 2,100.00
1,900.00 1,700.00 1,500.00
1,300.00
NEPSE Index
1,100.00
50 Days MA
900.00
20 Day MA
700.00
50 Days MA and 200 days MA analysis: If we look at the chart below, the NEPSE index line has crossed both the 50 Days MA line and 200 Days MA line from below when NEPSE index was at 1,382.19 points and 1,610.62 points respectively indicating an upward trend in the long run as a result of positive sentiment among the investors mainly due to announcement of paid up capital increment by four times for Insurance Companies, upcoming local level election and expectation of good financial performances by the listed companies in the third quarter of FY 2073/74.
1,800 1,600
1,400 1,200 1,000 800
NEPSE Index 50 Days MA 200 days MA
Himalayan General Insurance Co. Ltd. 2017 ..
Rating: Price 8th April 2017, NPR): Short term Target Price (NPR): Long term Target Price (NPR): 52-Week High-Low Range (NPR) Market Cap. (NPR): as on Q2 73/74
SELL 1700 1980 1380 736-2203 6.55 Bn.
Share price since 2012
Presence of GBBL in Nepal
Stock Info Vs Industry
*Ttm stands for Trailing 12 months. *Values in blue represents company position while white represents industry average range.
Himalayan General Insurance Co. Ltd. {NEPSE: HGI} RECOMMENDED SELL / HOLD WITH CAUTION
Average fundamentals, Overpriced General Information: Himalayan General Insurance Co. Ltd. commenced operations in December 1993 to write Insurance Policies after obtaining license from the Insurance Board of Nepal. It worked with Swire Blanch Asia Ltd., Singapore, through a technical service agreement for the initial five years in order to arrange reinsurance with the world’s best reinsurers. Policies that HGI provides include auto, fire, marine, aviation, business and other.
Financial Indicators: P/BV (Price to Book Value) of 13.81, TP/E (Trailing Price to Earnings per Share) of 47.47 with closing price of 17th April 2017, EPS of NPR 20.95 as of Q2 and NWPS (Net Worth per Share) of NPR 119.44. The company’s beta ranges from 1.01 to 1.28 indicating higher than market volatility & average monthly VAR (Value at Risk) at 1% is -27.94% indicating that it is unlikely for the stock price to fall more than 27.94% in a month. Its financial indicators are good and the company has been consistently providing 20% bonus shares for last 2 years.
Catalysts: 1) Positioning: HGI is one of the leading nonlife insurance company of Nepal having decent presence in major regions of Nepal 2) Financials (Q2 FY2073-74): EPS of 20.95, NWPS of 119.44, P/E of 52.5 3) Industry Index Growth: The insurance index has shown decent rise from 6091.04 on April 10, 2016 to NPR 8,644.24 in April 9, 2017. 4) Company expansion: Near term expansion seems possible to happen as insurance board has already announced the minimum paid-up-capital policy of NPR 1 Billion for non-life insurance sector. This policy will put pressure on expansion to maintain the EPS in future. Target Price: We have ascertained the long-term price of the stock to be NPR. 1384.56 based on average of industry indicators and based on current market trend, and technical indicators the short term target could be NPR 1980. However, the stock might trade below 1380 levels in long term.
Himalayan General Insurance Co. Ltd. 2017
Financials & Non-Financial Highlights Figure 2 – HGI key indicators – quarter to quarter comparison
Particulars
As on Poush End, 2073
As on Poush End, 2072
As on Poush End, 2071
63.43
27.76
15.09
1,329.00
713.00
441.00
119.44
150.14
133.97
40,352,000.00
34,353,000.00
36,539,000.00
385,200,000.00
267,500,000.00
250,000,000.00
74,882,000.00
134,136,000.00
84,918,000.00
284,769,000.00
210,615,000.00
136,122,000.00
606,837,000.00
392,424,000.00
396,467,000.00
13,495.00
9,715.00
8,910.00
7,999.00 253,426,000.00
7,650.00 180,375,000.00
9,034.00 205,756,000.00
EPS Annualized (NPR) Closing Market Price (NPR) NWPS (NPR) Net Profit (NPR) Paid In Capital (NPR) Reserve & Surplus (NPR) Insurance Fund (NPR) Total Premium (NPR) Total no. of Policies Total no. of Renewed Policies Total Claim Amount (NPR)
Capital and Reserves
42 40 38 36 34 32 30
Millions
Millions
Net Profit (NPR)
As on Poush As on Poush As on Poush End, 2073 End, 2072 End, 2071 Net Profit (NPR)
500 400 300 200 100 0 As on Poush End, 2073 Paid In Capital (NPR)
As on Poush End, 2072
As on Poush End, 2071
Reserve & Surplus (NPR)
Summary: Based on the time series analysis presented above we can see that HGI had average financial performance for the Q2 of FY2072-73 which was also reflected in the annual report in that year. The major reason for this could be the earthquake and blockade in last fiscal year (FY 2072-73) due to which the claims over insurance by various consumers over various products had increased. The current year has seen promising results as reflected above. The closing market price which had increased from NPR 441 on Q2 71/72 to NPR 713 on Q2 72/73 has raised to NPR 1329 this F/Y Q2 indicating higher demand for the stock. The company has witnessed profit increment from NPR 34.35 Crores on Q2 72/73 to NPR 40.35 Crores on Q2 73/74, paid up capital increased to NPR 38.52 Crores from NPR 26.75 Crores through the distribution of 20% stock dividend for the fiscal year 2072/73 and 2071/72 and has proposed the right share of 166.67%, due to which the stock seems somewhat attractive and can be one of the good stocks among non-life insurance sector to gain some short term profit. Since insurance sector is more volatile and has seen a huge correction in last quarter, only small investment should be made in this sector for portfolio diversification purpose only.
Himalayan General Insurance Co. Ltd. 2017
Fig: Total Premium to Total Claims
As per company's published financials of Q2 FY 73/74 the percentage growth in premium amount has been higher than percentage growth in claim amount. Amount collection has increased from NPR 39 crores in Q2, FY2072-73 to NPR 60 crores in Q2 FY2073-74. It shows that the company is increasing the business through the sales of product of various categories. FY 73/74 Q2 report shows the increase of 54.64% over total premium amount and increase of 40.50% over the total claim amount with respect to FY 72/73 Q2.
---------Millions--------
700 600 500 400
Total Premium (NPR)
300 200
Total Claim Amount (NPR)
100 0 As on As on As on Poush Poush Poush End, 2073 End, 2072 End, 2071
Fig: Earthquake Claims
We expect the company to strengthen in terms of geographical presence, service and market share. Currently HGI has 10 branches in operation. HGI had an estimated insurance claim of NPR 4.9 Arba to pay to the insurer. The appending table shows the details about claims that took place after the earthquake. The company has already paid for 373 out of 549 claims amounting to NPR 3.8 Arba out of claim amount of NPR 4.9 Arba.
Earthquake Claim Details No. of Claim Intimated Amount of Estimated Claim: NRS. No. of Paid Claim:
3,843,200,000.00
No. of Advance Paid:
2.00
Amount of Advance Paid: NRS. No. of No Claim:
3,600,000.00 151.00
* Updated on 13th March, 2017
14,000 12,000 10,000 Total no.Policies of Policies Total
8,000
Sold
6,000
Total no.Policies of Renewed Total Policies Renewed
4,000 2,000 0 As on Poush End, 2072
4,907,000,000.00 373.00
Amount of Paid Claim: NRS.
Fig: Number of Policies & Renewed Policies 16,000
As on Poush End, 2073
549.00
As on Poush End, 2071
We can observe that in recent quarter there has been increase in the number of policies sold from 9,715 in Q2 FY 72/73 to 13,495 in Q2 FY 73/74. The report shows that the business of the company is gradually increased from previous year quarter to this year quarter. Renewed policies increased from 7,650 to 13,495 in Q2 73/74 as compared to FY 72/73 Q2, due to earthquake, as more number of consumers wanted to be secure over the insured policy for more number of years. These figure, makes the company much better than before in the market.
Himalayan General Insurance Co. Ltd. 2017
Valuation & Summary:
The various price details of the company are as follows:
1) Multiples: - Price obtained by P/E is NPR 1339.25 per share and by P/B is NPR 1429.86 per share.
2) Net Worth per Share: - The net worth of the company stands at NPR 119.44 per share as of Q2, 207374. 3) 180 days Moving Average: - As per the data available in Nepse, the 180 days weighted average price of HGI is NPR 1431.37 per share as on April 9, 2017.
In relation to price multiples, the company has positioned itself in the forth (upper) quartile, while for EPS and ROE it lies in first quartile. These parameters indicate that the company is performing lower than industry average but trading higher than industry adjusted price. After averaging the various methods of valuation on an equal weighted approach, we value the shares at Rs. 1,384 per share. However, based on market trends, stocks usually trade at a much higher premium to their fair price and hence we recommend a sell/hold with caution approach for the company. Recently, the insurance board has instructed for non-life insurance companies to increase its paid up capital to NPR 1 Billion. Currently the paid of capital of the company is NPR 385.2 Million and the company has proposed right share in the ratio of 1:1.6667 which will increase the paid up capital of the company to approximately NPR 1.03 Billion fulfilling the required minimum criteria of the insurance board. The reserves as per Q2, 2073-74 stands at NPR 74.9 Million which indicate that the company’s future stock dividend could be lesser than other companies provided the number of shares reaches 10 Million. This further indicates that we might not hear much positive news on the company in regards to distribution of returns to shareholders in short term.
Even RSI, a technical indicator, is around the level of 75.59 indicating SELL for the stock. RSI level of HGI shows the overbought zone. Currently, increase in price change seems like 10.3% within a week, 48.67% for 4 weeks and 15.63% for 112 weeks. This shows that the investors holding the stock can gain around 15.63% of return over stock for long term. NPR 736 per share was the lowest price of HGI traded over stock market and NPR 2,203 per share was the highest till date. Finally, an investor should look into overall aspects for investing in a stock along with the stocks suitability in the context of total portfolio. Stocks in this sector have an average PE of 62 which is very high indicating high risk in investing in any of the stocks in the sector. But again, recent history in the sector shows very high returns earned by the investors. This makes the stock a lucrative investment considering HGI to be a growth stock. So, based on our above evaluation, we advice to trade on this stock with caution.
All material included in this document is based on data / information gathered from various sources and is based on certain assumptions of Nabil Invest. Therefore, this study should not be solely relied upon for making any decision, investment or otherwise. The prospective user of this study is encouraged to carry out his / her own due diligence and gather any information he / she considers necessary for making an informed decision. The content of this study does not bind Nabil Investment Banking Ltd. in any legal or other form.
NABIL Mutual Fund NAV Summary of Nabil Balanced Fund I as on Falgun End, 2073 Research UPDATE Investment
Amount (NPR)
Listed Securities Shares Debentures
Amount (NPR)2 754,705,728.00
640,275,448.00 114,430,280.00
Unlisted Securities Shares Bond/Debentures
126,153,738.00 126,153,738.00 -
Fixed Deposits Total Investment Current Assets
75,000,000.00
Bank Balance Other Assets
75,000,000.00 955,859,466.00
642,398,903.00 18,974,053.00 Total Assets
661,372,956.00
Current Liabilities Other Liabilities Accumulated Fees & Commission
9,842,494.00 3,678,105.00
Total Liabilities Gross Assets Value Fund Managers Fees
13,520,598.00 1,603,711,823.00 2,636,239.00
Depository's Fees Supervisors Fees Net Assets Value (NAV)
659,060.00 659,060.00 1,599,757,465.00
No. of Units NAV per Unit
75,000,000.00 21.33
Monthly NAV Trend of Nabil Balanced Fund –I
NPR
NBF-1 NAV 31 26 21 16 11 6
25.87 18.26 17.54 16.82 16.21 16.54
20.7 21.36 18.65 19.75
22.83
Months
28.92 28.22 29.38
26.33 25.33
22.48 22.58
20.53 21.33
NAV Summary of Nabil Equity Fund as on Falgun End, 2073 Investment Amount (NPR) Amount (NPR)2 Listed Securities 137,090,732.00 Shares 137,090,732.00 Debentures Unlisted Securities Shares
29,246,660.00 29,246,660.00
Bond/Debentures Fixed Deposits Total Investment Current Assets Bank Balance Other Assets
125,000,000.00
125,000,000.00 291,337,392.00
926,421,164.00 16,779,565.00
Total Assets Current Liabilities Other Liabilities
943,200,729.00 12,904,627.00
Accumulated Fees & Commission Total Liabilities Gross Assets Value
2,035,702.00 14,940,329.00 1,219,597,793
Fund Managers Fees Depository's Fees Supervisors Fees
1,503,614.00 501,205.00 125,301.00
Net Assets Value (NAV) No. of Units NAV per Unit
1,217,467,673.00 125,000,000 9.74
*No te: Major po rtion of Issue Management Cost has been loaded in th e calculation of NA V.
Monthly NAV Trend of Nabil Equity Fund
NEF NAV 10
NPR
9.9 9.8
9.89 9.81
9.7
9.83 9.74
9.6
9.63
9.5 Kartik, 2073
Mangsir, 2073
Poush, 2073
Months
Magh, 2073
Falgun, 2073
rd
Nabil Investment Banking Ltd., 3 Floor, Central Plaza, Nar ayanchaur, N axal, Kathmandu Phone: 01-4411604, 4411733 | Fax: 01-4410554 |
[email protected] |http://www.nabilinvest.com.np/ | www.facebook.com/NabilInvest
Disclaimer and important information: This document has been prepared by Nabil Investment Banking Ltd. (Nabil Invest) for information and illustration purpose only. The information provided in this document is subject to change. While this information has been ob tained from sources believed to be reliable, Nabil Invest is not liable for erroneous information obtained from the sources. Nabil Invest, 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 per formance is no indication of future results. Nabil Invest is regulated by Securities Board of Nepal. This document may not be reproduced, distributed or published by any person for any purpose without Nabil Invests’ prior written consent. rd
Nabil Investment Banking Ltd., 3 Floor, Central Plaza, Nar ayanchaur, N axal, Kathmandu Phone: 01-4411604, 4411733 | Fax: 01-4410554 |
[email protected] |http://www.nabilinvest.com.np/ | www.facebook.com/NabilInvest
