Jun 18, 2021 (Asar 04, 2078) Vol 1, Issue 14 WEEKLY NEWSLETTER

Welcome to Our 14th Issue of NepseWatch

Covered in this weekly issue

Disc

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Analysis for this week (13th to 17th June) is here.

Thank you NepseWatchers for making it to the 14th

edition.

We Want to Hear From You!Give Your feedback and share your experience here.

Smart Wealth Pro’s newsletter; NepseWatch is provided only for general informational purposes, as a convenience to the subscribers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Source Code Pvt. Ltd. is not engaged in rendering any legal or professional services by placing these general informational materials on the newsletter. NepseWatch and its publishers specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of this material.

Weekly NEPSE Overview News Highlights

Sector Wise Analysis

International

The Strategy of the Expert

Technical Analysis of NEPSE Macroeconomics

Company Analysis

Editor’s Closing Message

NEPSE Price Action

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NEPSE Weekly Update(13th Jun 2021 to 17th Jun 2021)

WEEKLY NEPSE OVERVEIW

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SEBON’s list of 51 risky companies induced panic among the bullish investors, which resulted in the minor correction in the market on Wednesday and Thursday. This week, NEPSE achieved highest closing point of 3025.83 points on Monday and record turnover of Rs. 19.55 billion on Sunday. However, it started falling after SEBON’s press release. This week NEPSE closed on 2968.43 points which is 0.80% higher than the previous week’s closing of 2944.78 points. The turnover on Thursday stood at Rs.10.40 billion and the market capitalization on 18th June, 2021 stood at Rs. 4.09 trillion.

Market data as of Last Week’s Closing Price

NEPSE INDEX

TURNOVER IN RS.

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Stock Market Movers

Top Gainers of the Week

Top Losers of the Week

1 Union Hydropower Limited 428.00 305.00 123.00 40.33%

2 CEDB Hydropower Dev Company Ltd 685.00 502.00 183.00 36.45%

3 Oriental Hotels Limited 587.00 484.00 103.00 21.28%

4 Soaltee Hotel Limited 287.00 242.00 45.00 18.60%

5 Taragaon Regency Hotel Limited 400.00 348.00 52.00 14.94%

6 Joshi Hydropower Dev Company Ltd 312.00 282.00 30.00 10.64%

7 Himalayan Distillery Limited 5,390.00 4,880.00 510.00 10.45%

8 Ghalemdi Hydro Limited 320.00 291.00 29.00 9.97%

9 Ngadi Group Power Ltd. 500.00 465.00 35.00 7.53%

10 Agriculture Development Bank Limited 490.00 457.00 33.00 7.22%

1 United IDI Mardi RB Hydropower Limited 493.00 565.00 72.00 -12.74%

2 Mountain Hydro Nepal Limited 350.00 387.00 37.00 -9.56%

3 Ridi Hydropower Dev Company Ltd. 580.00 633.00 53.00 -8.37%

4 Narayani Development Bank Limited 651.00 710.00 59.00 -8.31%

5 Universal Power Company Ltd 322.00 350.00 28.00 -8.00%

6 Chhyangdi Hydropower Ltd. 440.00 477.00 37.00 -7.76%

7 Himalaya Urja Bikas Company Limited 369.00 400.00 31.00 -7.75%

8 Liberty Energy Company Limited 389.00 419.00 30.00 -7.16%

9 Chandragiri Hills Limited 1,652.00 1,774.00 122.00 -6.88%

10 Sadhana Laghubitta Bittiya Sanstha Ltd 1,697.00 1,819.00 122.00 -6.71%

RETURNS

RETURNS

TRADED COMPANIES

TRADED COMPANIES

CHANGE IN POINTS

CHANGE IN POINTS

PREVIOUS WEEK

CLOSING

PREVIOUS WEEK

CLOSING

THIS WEEK

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Index Value 1 Month Change Ranking

NEPSE 2,968.43 6.25% N/A

Finance 2,401.47 64.93% 1

Development Bank 4,721.13 51.28% 2

Mutual Fund 15.6 13.39% 3

Hotels And Tourism 3,770.93 9.09% 4

Banking 1,970.75 7.88% 5

Investment 110.13 4.22% 6

HydroPower 2,992.51 4.09% 7

Manu.& Pro. 6,233.53 3.82% 8

Life Insurance 18,256.40 0.09% 9

Non Life Insurance 15,134.43 5.37% 10

Others 2,313.11 2.01% 11

Microfinance 5,388.04 -1.21% 12

SECTORAL SHIFT

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News Highlights

Upcoming IPOs ... View More

Promoter Share Conversion ... View More 1,582,671 units of promoter shares of SICL has been converted into Public Shares which

makes Promoter to Public Share Ratio 51:49

2262,894 units of promoter shares of SLICL has been converted into public shares which makes Promoter to Public Share Ratio 60:40

Other Highlights NEPSE made a new record this week as well. The index crossed 3000 on 13th June closing

at 3025.83 index making it all time high. However, NEPSE closed at 2968.43 at the end of the week.

SEBON published the list of 51 companies trading in Nepal Stock Exchange (NEPSE), based on abnormalities in percentage gain of the share price in contrast to their financial health on Tuesday. The list contained companies which had increase of over 300% in their share price, P/E Ratio over 100, EPS in negative and net worth per share less than initial price and the current financial situation.

Jeevan Bikas Laghubitta is issuing 19.77 lakh units IPO share to general public from Ashad 11 to Ashad 15.

DOW THEORY: THE BULL IN NEPSE CONTINUES

NEPSE PRICE ACTION

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WYCKOFF METHOD REVIEW: NEPSE PRICE ACTION According to Dow theory; the series of higher highs and higher lows corresponds bullish trend in the market.

Primary (Long-term) Trend of NEPSE: BULLISH until NEPSE breaks below 2500

Secondary (Short-term) Trend of NEPSE: BULLISH until NEPSE breaks below 2930-2940

NEPSE Trend and Volume

NEPSE PRICE ACTIONNEPSE tests 3000

After breaking and closing above the important resistance of 2850 on 6th June, NEPESE rallied for a clear upward move. This was followed by NEPSE conquering the quest of a 3000 level after which NEPSE went for a correction closing at 2968 on 17th June.

The fall from 3000: An anticipated Correction triggered by SEBON

The volume decreased as the index value fell which is the classic sign of a correction (and not bearish).

The fact that despite the breaking news, the volume decreased which dictates that the demand (buyer side) is stronger and ready to digest the supply or any such news.

The correction was anticipated from the important psychological level of 3000, this was further triggered by the press release from SEBON where almost 25% of the listed companies were deemed overvalued and under research for insider/circular trading.

The sentiment, as evident from price action, can be taken as bullish as of now.

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Key levels

Immediate Support: 2930-2940

Support 2: 2890

Support 3: 2850

Immediate Resistance: 3065

Resistance 1 (Trend based fin Extension): 3164

Technical Indications:

All indicators are applied on Smart Wealth Pro’s advanced chart with default settings.

Indicator Measure Indication Signal

RSI Momentum Decreased upward momentum. Bearish

MACD Trend, Momentum MACD line above signal line. Bullish

Histogram above 0.

Bollinger Band Volatility Increased Volatility. Mean Reversion Neutral

to the 20 day MA possible.

ADX Trend, Direction Above 25 Bullish

Volume Price Action Decreasing with the fall in index. Bullish

Seller’s exhaustion.

MA (20,50) Price Below Index Bullish

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SECTORAL ANALYSIS

Analysis based on closing as of June 18. All charts are from Smart Wealth PRO

Development Bank FinanceThe stoploss has already been triggered, for those trading with the trend. Further for new trade setups, the stoploss is in the zone of 4535.

The stoploss on the trendline has already been triggered, for those trending with the trend. Further for new trade setups, the stoploss is in the zone of 2250.

Hydropower NON Life Insurance Stoploss triggered if the index closes below this channel. Entry if breaks out above the channel

Watchout the breakout above the rising wedge for entry or stop loss if breaks below the wedge.

WATCH OUR PREVIOUS WEEK’S ANALYSIS FOR OTHER SECTORAL ANALYSIS

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COMPANY ANALYSIS: SHORT TERM TRADING

Financial Snapshot: Sound Key Ratios

Muktinath Bikas Bank (MNBBL)

The company had consolidated and stayed in a channel for almost 5 months. The explosion was expected from the technical aspects provided the valuations and financials from the fundamental aspects were also affirmative. RSI shows the lost of momentum but it is still a high momentum zone and the RSI’s below 60 could be a selling signal.

The correction accompanied by the news from SEBON made the stock price drop by almost 10% even since the all-time high of 745 on 14th June. The next mark-up is a probable event and the setup is provided below:

Technical Setup

Current Price: Rs. 684

Stoploss: Rs. 635-640

Target 1: Rs. 735 (Risk Reward=1:1.5)

Target 2: Rs. 786 (Risk: Reward= 1:3)

Target 3: Rs. 867 (Risk: Reward: 1:5)

This is not a recommendation for buy or sell

Daily Chart

MNBBL Hourly Chart

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Garima Bikas Bank Limited (GBBL)

Financial Snapshot: Sound FundamentalsSTOPLOSS: Rs. 500- 510

Target 1: Rs 602 (Risk: Reward = 1:1)

Target 2: Rs 655 (Risk: Reward= 1:3)

Target 3: Rs 741 (Risk: Reward=1:5)

Price Performance (MNBBL and GBBL)

Financial Performance (MNBBL & GBBL)

This is not a recommendation for buy or sell

Weekly Beta MNBBL: 1.1 (Risk: Moderate)

GBBL: 0.95 (Risk: Low)

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MACROECONOMIC UPDATES

Commodities Prices in Nepal

Macroeconomic Indicators

Indicators 16/06/2021 16/06/2021

Total Deposits 4,503.00 4,495.00 (in NPR Billion)

Commercial Banks Total Deposits 3,988.00 3,981.00 (in NPR Billion)

Other BFIs Total Deposits 515.00 515.00 (in NPR Billion)

Total Lending 4,098.00 4,093.00 (in NPR Billion)

Commercial Banks Total Lending 3,647.00 3,641.00 (in NPR Billion)

Other BFIs Total Lending 452.00 452.00 (in NPR Billion)

CCD Ratio 78.59 78.76 (in %)

Interbank Interest Rate LCY-Weighted Avg. 4.81 4.39 (in %)

Gold Hallmark - tola -5kfjfn ;'g_ Nrs. 90,7981.41

Gold Tejabi - tola -t]hfaL ;'g_ Nrs. 90,296.86

Silver - tola -rfFbL_ Nrs. 1,305.20

Gold Hallmark - 10g -5fkfjfn ;'g_ Nrs. 77,845.00

Gold Tejabi - 10g -t]hfaL ;'g_ Nrs. 77,415.00

Silver - 10g -rfFbL_ Nrs. 1,119.00

Gold Hallmark - Tola

Price

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As of Jun 18, 2021

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$ Foreign Exchange Rates

Currency Buy Sell

USD 118.23 118.83

EUR 141.30 142.01

GBP 165.19 166.02

AUD 89.81 90.26

SGD 88.32 88.77

JPY 10.68 10.74

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This Week’s Community Sentiment Result Question for next Week

SEBON's list of 51 overvalued stocks caused a significant selling. You are __________ on these companies from Sunday.

1) Bullish 2) Bearish 3) Neutral

To vote, please visit

www.smartwealthpro.com

(Effective from 2021-06-11 AD to 2021-06-18 AD)

What is your plan on Finance, Development Banks and Hydropower Sector for coming week?

Current Macroeconomic and Financial Situation of Nepal (Based on Ten Month’s Data Ending Mid-May, 2020/21)

CPI-Based Inflation (Y-O-Y) 3.65%Imports 22.30%Exports 32.20%Remittance (NPR) 19.20%Remittance (USD) 16%Balance of Payment (Surplus in NPR) 7.75bnGross Foreign Exchange (USD) 11.87bnFederal Government Spending (NPR) 824.81 bnFederal Government Revenue (NPR) 761 bnBroad Money (M2) on Y-O-Y 15.40%Deposits at BFIs (Y-O-Y) 22%Claims on private sector (Y-O-Y) 23.10%

INTERNATIONAL

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Global Indicies

Commodities

Stock Market Indexes

Indexes Date Level Ch. This Week Ch.

DOW [+] 6/16/2021 34,033.67 -0.77% -1.29%

NASDAQ [+] 6/16/2021 14,039.68 -0.24% -0.21%

S&P 500 [+] 6/16/2021 4,223.70 -0.54% -0.56%

STOXX 50 [+] 6/17/2021 4,158.14 0.15% 0.76%

FTSE 100 [+] 6/17/2021 7,153.43 -0.44% 0.27%

DAX [+] 6/17/2021 15,727.67 0.11% 0.22%

CAC 40 [+] 6/17/2021 6,666.26 0.20% 0.99%

NIKKEI [+] 6/17/2021 29,018.33 -0.93% 0.24%

Metals Price Weekly Monthly YTD

Gold 1784.33 -4.84% -4.48% -5.84%USD/t.oz

Silver 26.16 -5.98% -5.51% -0.52%USD/t.oz

Platinum 1065.75 -6.94% -10.13% 0.40%USD/t.oz

Energy Price Weekly Monthly YTD

Crude Oil 70.73 -0.76% 11.08% 45.03%USD/Bbl

Brent 72.67 -0.41% 8.60% 39.75%USD/Bbl

Natural 3.19 -2.70% 8.20% 26.31% USD/MMBtu

INTE

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As of June 18, 2021, 11:050 am As of June 18, 2021, 11:050 am

International News Highlights

Cristiano Ronaldo snub wipes billions off Coca-Cola’s market value

Cristiano Ronaldo removed two Coca-Cola bottles during a press conference at the European Championship which wiped out $4 Billion in the share price of Coca-Cola Company.

The Portugal captain is a renowned health fanatic and made it clear what he thinks of the carbonated soft drink. The 36-year-old shifted the bottles of Coca-Cola away from him during a press conference in Budapest on Monday. Ronaldo followed it by holding up a bottle of water before declaring in Portuguese: “Agua!, appearing to encourage people to choose that instead.

Coca-Cola is one of the official sponsors of Euro 2020. The company’s share price dropped from $56.10 to $55.22 almost immediately after Ronaldo’s gesture, a 1.6% dip. The market value of Coca-Cola went from $242 billion to $238 billion losing $4bn.

Crypto

S.N. Name Price 7d% Market Cap

1 Bitcoin BTC $37,598.18 1.99% $706,099,007,897

2 Ethereum ETH $2,336.62 4.88% $272,485,502,373

3 Tether USDT $1.00 0.00% $62,591,705,131

4 Binance Coin BNB $353.73 0.57% $54,409,436,858

5 Cardano ADA $1.48 2.70% $47,168,479,569

6 Dogecoin DOGE $0.303 6.12% $39,487,865,171

7 XRP XRP $0.8393 2.86% $38,814,965,813

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STRATEGY OF THE EXPERT

Basic Analyses and Prediction of the Price of your IPO

JEEVAN BIKAS MICROFINANCE CASE STUDY (Step by Step Approach)

Step 1: Find the Offer letter.

Step 2: Look at the current financial information and the projections.

You can find that on the company website or you may also simply visit Smart Wealth Pro’s new section to view the offer letter. For e.g., you can view the offer letter of Jeevan Bikash Laghubitta Bittiya Sanstha Limited here. The company is issuing IPO from 11th Ashad to 15th Ashad.

Step 3: Compare with the current companies with similar financials in the sector.Paid-up capital, EPS, Book value per share (also called net worth per share) and reserves comparison gives a good view.

You can visit Smart Wealth Pro’s Stock Screener for peer comparison and analysis.

For example

Present Book Value Per Share of Jeevan Bikash microfinance: Rs 305.27

Present Earning Per Share: Rs 104.97

Paid Up capital after issuance: 60.84 crores.

Reserve: 1.2 Arba (twice the paid-up)

The company is low cap microfinance and therefore, we will compare accordingly by sorting the microfinance in the SWP’s screener.

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Step 4: THE PE RATIO

Step 5: Further Analysis

For a growth stock like Jeevan Bikash, the 40 PE ratio seems suitable and achievable. To achieve this PE, the company pricing must be: (Simple algebra here)

So, we predict price using 40 as PE

PE= Price/ EPS

Or, Price = EPS*PE =104.97*40 = Rs 4200

Visiting Company Website to view the business model, target customers, promoters etc.

Growth of key financials (mentioned in Offer letter)

IPO Rating

The article from rating agency

You can search the pdf as follows: (simply type the company name and the rating agency name)

Article:https://www.icranepal.com/wp-content/uploads/2021/03/123.-Rationale_Issuer-Rating_

Jeevan-Bikas-Laghubitta-Bittiya-Sanstha_March-2021.pdf

This article is very comprehensive and points out the unique strengths and weaknesses of the company.

Step 6: Jotting down the observation/comparison (a mental analysis)

Company has the highest BVPS and EPS among the closest peers and the highest reserve standalone or relative to the paid-up capital.

Company has the best fundamentals among its peers and the lucrative growth aspects.

Naturally investors get more excited about the new companies owing to their future prospects driving a price bit higher than the companies currently in the market.

Microfinance sector has a good sentiment among investors and the sector provides good dividends.

It is an investment-grade company (low rating)

It is a bull market; the price goes relatively higher on listing than on the bear market.

(We can perform mathematical calculations to determine the relative price or simply make a rough estimate of the price)

In Jeevan Bikas Microfinance’s case:

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EDITOR'S CLOSING MESSAGE

SEBON’s recent official dispatch containing 51 companies, which according to the officials were deemed to be overvalued, was made public on 15th June. This drew the attention of many and as a result the panic selling was seen. Something interesting and saddening about this release was the basis on which the over and undervaluation was determined.

The knowledge gap is clearly seen in the higher level and this has questioned the credibility of SEBON as a whole. The policy, plans and research of SEBON under such knowledge gap is likely to prevent the young Nepalese Capital Market to achieve greater heights.

Moreover, the sudden move of SEBON which was later criticized by NEPSE and finance ministry which shows the lack of communication and goal congruence among the related parties. To make things worse, the officials themselves admitted that the wordings in the notice was not as intended. The fact that such sensitive notices are regarded highly by the market participants undoubtedly shows the negligence of the board. Many investors have rightfully raised the voice against such negligence and even suspected if the notice was under undue influence.

Further, the author’s technical views regarding the market have been discussed in the price-action section and some setups have been provided for the traders in the sections above.

Smart Wealth Pro team prays for the comfort of the landslide and flood victims throughout the country.

May the blessings from the almighty be with you and your family!!

EDIT

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Inherently, the stock market is a free market and direct interventions other than the implied intervention from the macroeconomic level is seldom welcomed in the global context. Even after paying one of the highest commissions in the world, we are obliged to pay the price of conflict between the two individuals (SEBON and NEPSE official) and this is not only sad but a financial loss to the investors. We believe it is high time we collectively question the morale and wrong doings of the concerned authority.

Final Step: The Rough EstimateBased on PE= Rs 4200 (Calculation above)

Based on Other factors= Best among the peers= price highest among the peers seems plausible= above 5000

Companies’ recent growth and commitments (projections) seem to justify the price.

So, targets can be set at a minimum of 4200, 5000 for the IPO of Jeevan Bikas on fundamental grounds.

IPOs are subject to massive speculation which can drive the price much higher than anticipations evident from the past.

The low cap companies are susceptible to share cornering.

The lack of sellers may take much longer for the share to achieve the target.

For sectors like hydropower, per megawatt cost, PPA, payback periods and the project details play a vital role making it complex to predict the rough estimate. However, the Net worth per share, EPS and the Per MW cost have proved to be a good measure. For example, RURU hydropower was expected to beat MEN price provided the company had lower per MW cost, higher EPS and higher BVPS.

Standalone companies like NRIC, NIFRA are difficult to perform analysis.

Lots of assumptions.

(The method in the article is not the replacement for the standard valuations by professionals. It is simply a guide to make a rough estimate using readily available data with no complex calculations, it is advisable to learn valuation methods for reliable analysis and calculation)

The undiscounted factors

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C o n n e c t w i t h u s

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P. O. BOX: 23009, Panipokhari, Kathmandu, Nepal+977 9802098294, 9802320956, 9886049950info@smartwealthpro.com, www.smartwealthpro.com

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