Tuesday, August 14, 2012

Reports fail to rescue hydropower companies

The steep growth in the profit of listed hydropower companies signalling handsome dividends for investors could not rescue the stock market today, as the market dropped by 5.17 points to close at 392.01 points from the morning's opening of 397.18 points.
The hydropower subgroup lost 17.9 points to close at 746.64 points dragging the secondary market index down.
Three among the four listed hydropower companies have registered 54.5 per cent growth in the fourth quarter of the last fiscal year in comparison to the third quarter, according to the unaudited financial results of Arun Valley Hydropower, Butwal Power Company and Chilime Hydropower.
National Hydropower Company — the fourth listed hydro company — last published its quarterly financials till the third quarter of fiscal year 2010-11. The three companies earned Rs 1.5 billion as net profit in the last fiscal year while in the previous quarter their profit stood at Rs 994.45 million.
Likewise, in comparison to fiscal year 2010-11's last quarter they have registered a 29.3 per cent growth in profit when they earned Rs 1.18 billion as net profit.
The hydropower subgroup's index has appreciated by 11 per cent in the last one year following the capital market’s rally since mid-April, 2012. Last week, Nepse witnessed a surge in hydropower stock prices due to rumours regarding the possibility of hydro companies distributing generous dividends, though, from the beginning of this week their stock prices started to decline a little.
The three companies had distributed attractive dividends from the previous fiscal year’s profit. Chilime was one of the highest dividend payers among the listed companies with its 30 per cent cash dividend and 40 per cent stock dividend. Likewise, Butwal Power and Arun Valley distributed 25 per cent and 15 per cent cash dividend, respectively. Dividends are one of the important features that a non-speculative investor regards before purchasing a stock.
Though the three hydropower companies are raking money for investors, National Hydropower is a black sheep in the subgroup. Despite running successful hydro projects, the company's balance sheets show trouble all because of bad corporate governance and embezzlement of funds by the promoters –– NB Group.
The company has not even conducted the annual general meeting of the last two fiscal years despite pressure from shareholders. The good performance of the hydro companies failed to affect the overall market due to its small share in total market capitalisation. The market capitalisation of hydropower companies only stands at Rs 28.3 billion, making only 5.7 per cent of the total market capitalisation.
Meanwhile, National Hydropower seems unlikely to hold its 14th and 15th annual general meetings (AGM) by August 21, as directed by the regulators. A meeting held between the regulators — District Administration Office, Company Registrar's Office and Securities Board of Nepal — had ordered National Hydropower to hold its 14th and 15th AGMs within August 21. It will be highly disappointing if the regulator fails to take action against the company's board even now as it had been putting off its AGM since the last three years. NB Group holds 20 per cent stake in the company and is blamed by shareholders for trying to take the company down and is being held responsible for large scale fund misappropriation.

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