Book on 'fundamental analysis of share' out

Market analyst Rabindra Bhattarai has brought his new book 'Fundamental Analysis of Share' in the market.

The book will help investors analyse relationships among market, economy and the company, according to the author.

An intelligent and long-term investor anylises indicators of the company before buying the stock, but it is also important to analyse industry, economy and its trend, according to the book that has tried to give tips for fundamental analysis – one of the two major analysis techniques of the stock market – for the beginners.

Fundamental analysis will help investors create wealth in the long run, the book advices, adding that the investors must, thus, do fundamental analysis before selling or buying shares for maximum benefit.

As stock market is considered a mirror of the economy, it always follows the rule book, and the 'Fundamental Analysis of Share' – that has 30 chapters with enough examples for the beginners to learn the tricks of the trade – has explicitly described what is fundamental analysis and how to take benefit of it.

The 11^th book of the author and Securities Research Centre and Services (SRCS) – that has published many books related to share market under its financial literacy series – also has a case study report for investment that has added value to it.

As the market started heating – after the successful Constituent Assembly (CA) elections and its result – the book might be useful for an intelligent investment.

Fundamental Analysis of Share

Author: Rabindra Bhattarai

Publisher: Securities Research Centre and Services (SRCS)

Price: Rs 250

Banks' share price correction fails to lure investors

The banking sector that is the key player in the share market in terms of volume and returns till date, is correctly priced, if one goes by the average price-to-earnings ratio (PE ratio) of the listed banks, though they might not be able to pay the return compared to last few years.
The average PE Ratio — that measures the price paid for a unit of share relative to the annual net income or profit earned by the company per unit — of the listed 25 banks stands at 17.60 times, which is the correct pricing. "It stood at 19.55 times in the second quarter of the last fiscal year."
Similarly, the PE ratio under 10 means the stocks are underpriced. "But the current average PE ratio that stands at 17.60 times means that the banks shares are correctly priced but they may not be able to pay dividend cheque, compared to last few years as other indicators do not support," said share market analyst Rabindra Bhattarai.
The investors should buy the stocks that have high return on assets and low price-to-earnings (PE) ratio, he added.
Return on assets (RoA) — that reveals how profitable a company's assets are in generating revenue — has come down to 1.21 per cent in the second quarter of the current fiscal year from last fiscal year's same period's 1.75 per cent.
Similarly, the low PE ratio has not been able to make the investors feel comfortable as other key indicators of the listed banks' like earning per share, return on equity, capital adequacy ratio, cost of fund and non performing assets could not ensure equal dividend cheque compared to the last fiscal year.
The measuring rod of the rate of return on shareholders' equity of the common share holders, return on equity (RoE) has also come down to 11.54 per cent this fiscal year's second quarter from last year's same period's 17.17 per cent. It also revealed banks' efficiency at generating profits from every unit of shareholders' equity.
Similarly, the earning per share — that is the amount of earnings per unit share — came down to an average of Rs 19.68 per unit in the second quarter of the current fiscal year compared to Rs 25.98 per unit in the same period of the last fiscal year, which means the shares could not earn as much as they earned thus the investors will also get less return.
Similarly, the non performing assets (NPA) — that compels banks to make loan loss provisioning hitting their profits — has increased to 3.24 per cent from last fiscal year's second quarter's 2.49 per cent, which means the investors will get less dividend next year. Some banks non performing assets have reached to the highest accepted level by the central bank, which will ban the banks to open new branches after they cross the minimum NPA level.
However, the capital adequacy ratio (CAR) has seen increase to 14.04 per cent from the last fiscal year's second quarter's 13.59 per cent. The increase in capital adequacy ratio — that is a ratio of a bank's capital to its risk to ensure that it can absorb a reasonable amount of loss and complies with statutory capital requirements — shows further growth possibility of the banks through lending, which has contracted lately.
The central bank data revealed that the banks have Rs 29 billion liquidity till March 12. The high interest rate has made the private sector shy away from borrowing despite banks sitting on surplus liquidity.
The banks have been unable to lower the interest on lending due to high cost of fund, which has increased to 8.38 per cent from last year's same period's 7.39 per cent. The cost of fund that is interest paid on deposits has also forced the banks to lower new deposit rates.
The industry average not only helps the investors to take informed decision while buying shares but also help compare the players within the sector on where they stand.


Listed banks’ indicators
Indicators — Unit — This Year Six Months — Last Year Six Months
Cost of Fund — per cent — 8.38 — 7.93
CAR — per cent — 14.04 — 13.59
RoE — per cent — 11.54 — 17.17
RoA — per cent — 1.21 — 1.75
NPA — per cent — 3.24 — 2.49
EPS — Rupees — 19.68 — 25.98
PE Ration — times — 17.60 — 19.55*
(*Machhapuchhchhre Bank (150 times), Kist Bank (84 times) and Sanima Bank (84 times) are omitted while calculating PE Ratio as their much higher PE Ratio could distort the overall PE Ratio average. The indicators are an average of 25 listed banks only. Source: SRCS)

Understanding share, commodities and forex markets technically

Renowned market analyst Rabindra Bhattarai has brought yet another book ‘Share, Commodities and Bideshi Mudrako Prabidhik Bishleshan’ –Technical Analysis of Share, Commodity and Forex Markets.
The book – under ‘financial literacy series’ of Securities Research Centre and Services (SRCS) – helps investors to understand these markets technically.
Share, commodity and forex markets are highly unpredictable thus technical and fundamental analysis help the investors to take right decisions on when the market goes up and comes down, when to buy and when sell, and how low the market can plunge and how high it can swing.
Though the domestic share market is a decade-and-a half old and the commodity and forex market has just started operating, the investors have not been much aware of the scientific methods of analysis like fundamental analysis and technical analysis.
They have been investing on hear-say instead of understanding the dynamics of the market making them loose their hard earned money. Thus, the book could help financially literate the investors. A sensible investor never loses but a naïve does.
The book could be a guide for the sensible investors to understand the market movements and take advantages.
Fundamental Analysis looks at Earnings per Share (EPS), Price to Earnings Ratio (P/E), Projected Earning Growth (PEG), http://stocks.about.com/od/evaluatingstocks/a/ps.htmPrice to Book (P/B), Dividend Payout Ratio, Dividend Yield, Book Value and Return on Equity, whereas Technical Analysis helps to evaluate future prices and market directions based on statistical analysis of variables such as trading volume, and price changes to identify patterns.
The book discusses the tools and analysis methods like Candlestick Analysis, Relative Strength index (RSI), Moving Average Convergence-Divergence (MACD), A-D Ratio, Bollinger Band, Fibonacci Retrenchment, Stochastic Oscillator and Pivot Point Analysis.
Similarly, Fundamental Analysis looks at a share’s market price in light of the company’s underlying business proposition and financial situation. It involves making both quantitative and qualitative judgements about a company. Fundamental analysis can be contrasted with 'technical analysis’, which seeks to make judgments about the performance of a share based solely on its historic price behaviour and without reference to the underlying business, the sector it's in, or the economy as a whole.
The analysis is done by tracking and charting the companies’ stock price, volume of shares traded day to day, both on the company itself and also on its competitors. In this way investors hope to build up a picture of future price movements.
Had the author given more examples of past market movements in the Nepal Stock Exchange (Nepse), the book would have been more enlightening to the investors to analyse their past mistakes.
However, the book has also included a chapter on astrological relations to the market, which could be beneficial to the investors.
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Book: Share, Commodities and Bideshi Mudrako Prabidhik Bishleshan
Author: Rabindra Bhattarai
Publisher: Securities Research Centre and Services (SRCS)
Price: Rs 150

Second edition of economic indicator

Securities Research Center and Services Pvt Ltd (SRCS) has published the second edition of 'Financial Indicator' that includes financial data of companies listed and unlisted at the Nepal Stock Exchange (Nepse).

The book has the financial statistics of twenty-five companies belonging to different sectors like commercial banks, development banks, finance companies, insurance companies and hydro power and so on.

The publisher believes that the book will facilitate share investors, students, researchers, market analysts, journalists and the regulatory board. Investors can analyze these statistics and select safe companies to invest in. "This is the only book published in Nepal that includes such financial information," said Rabindra Bhattarai, a renowned share market analyst, who has edited the book.

SRCS has already published ten books on Nepal's capital market, derivatives and banking.

Secondary market bled dry, govt unconcerned

Oversupply and low demand coupled with government apathy has bled the secondary market white over the last couple of months.

The secondary market index today lost 3.65 points to close at 469.17 points as all sub-groups performed poorly.

Among the listed companies, Everest Bank became the top loser as it lost Rs 82 per unit in today’s trading whereas groupwise, hydropower sub-group — that has only three hydropower companies under its belt — lost heavily.

Among the nine sub-groups, hydropower saw a whopping fall of 9.66 points to close at 729.58 points. Others sub-group declined by 8.22 points to 531.08 points and development bank sub-group dropped by 5.79 points to 491.98 — bringing the secondary market down.

Technically, the market has also seen loss of confidence of among the investors as they have been sustaining repeated shocks.

However, the bear will continue to dominate Nepse, according to the Securities Research Center and Services (SRCS) study.

“If Nepse starts gaining, the first resistance point comes at 509.69 points. Even if it crosses that, it will again face an important resistance point at 512.48 points,” said the centre that has projected the data based on the index of March 1, when Nepse index was at 497.86 points.

If the bearish trend continues, the first major support will be at 466.89 points. However, if Nepse crosses this level too, the next support level would be at 447.75 points, according technical analysis done by SRCS.

“Liquidity crunch also has hit the secondary market,” said Rabindra Bhattarai, a renowned market analyst and lecturer at Shanker Dev College.

NMB’s further public issue

KATHMANDU: The capital market is experiencing a new phenomenon — further public issue — for the first time in its history of over one-and-a-half decade. NMB Bank Ltd has floated further public issue for the first time. It has floated 7,15,000-unit of shares for the public at Rs 285 per unit — adding Rs 185 premium to the face value of Rs 100. The 25th commercial bank has floated the further public issue since last Friday.

Sebon union on warpath

KATHMANDU: Securities Board of Nepal (Sebon) — the regulatory authority of the capital market — is in trouble since last week due to the dispute between the union and Sebon’s chairman. The union closed the office of the chairman last week saying chairman Dr Soorbir Poudel was not serious about solving the problems of the secondary market. “From today all the departments of the Board have been padlocked,” said the union members.

PAC forms committee to look into balance sheets

Following the report in The Himalayan Times, Publica Accounts Committee (PAC) of parliament has formed a four member team -- including the secretary of PAC Som Bahadur Thapa and auditor of Auditor General's Office -- to look into the matter.
The Himalayan Times has on Wednesday published a report based on variation analysis of audited and unaudited reports of commercial banks.
According to the fiscal year 2006-07 fourth quarters report on variation analysis on net profit in the unaudited report of 19 commercial banks prepared by the Securities Research Centre and Services (SRCS) the reputed banks like Nabil Bank, Nepal Investment Bank Ltd (NIBL), Standard Chartered Bank Nepal (SCNBL), Everest Bank, Lumbini Bank, Laxmi Bank and NMB Bank have less than one per cent variation, which is negligible.
However, the highest variation is 100.47 per cent and the lowest is 0.02 per cent, while going through the unaudited and audited books of the 19 commercial banks. Last year the highest variation between the unaudited and audited report was 31.52 per cent. Among the listed commercial banks, the highest in the fiscal year 2007-08 is 33.49 per cent and among the not-listed ones the variation is 100.47 per cent.
The report shows that the central bank has to increase its monitoring ansd supervision as the number of financial institutions is increasing.
Those who has clean balance sheet are Nepal Investment Bank that has a variation of 0.24 per cent and Nabil Bank that has 0.51 per cent variation. Similarly, SCNBL has 0.56 per cent and Everest Bank has a 0.24 per cent variation followed by Laxmi Bank with 0.60 per cent variation that are negligible.
Himalayan Bank and Bank of Kathmandu both has 2.83 per cent and 2.63 per cent variation, while NIC Bank also has a variation of 2.36 per cent in its audited and unaudited reports.
NCC Bank's loss had increased to Rs 11.24 million or 10.74 per cent inthe fiscal year's repord but this year it has a variation of only 0.64 per cen. However, Lumbini Bank in the 2006-07 report had the highest variation -- 31.52 per cent or Rs 71.18 million difference between its unaudited and audited report. But in 2007-08, the bank has a minimal difference of 0.32 only.