Know the high and low risk companies traded on NEPSE (Exclusive Study based on PE analysis)
Fri, Sep 22, 2017 2:29 PM on Latest, Exclusive, Financial Analysis, Featured, Breaking News, Company Analysis, NEPSE News, Others, Stock Market,
The price-earnings ratio (PE) is the ratio for valuing a company that measures its current share price relative to its per-share earnings. In simple language, PE of the stock shows whether it’s price is undervalued, fair or overvalued. For e.g.:
• Higher than Average PE = Relatively High price (High fluctuation expected in price and high risk)
• Nearby Average PE = Fairly Price
• Lower than Average PE = Relatively Under Price (Low fluctuation in price and low risk)
There are 208 stock listed in the Nepal Stock Exchange Ltd. (NEPSE), among them we have calculated the Sector Wise PE with the following total 148 companies which are only traded in the NEPSE. We have considered the latest paid up capital, last quarter profit and current market price for calculating PE.
1. BANKING SECTOR:
Banking Sector has 27 tradable companies with average PE of 23.53 times. Nepal Bank Limited has the lowest PE of 8.81 times and the Standard Chartered Bank Limited has the highest PE of 62.03 times. Nepal Bank Limited due to huge cumulative retained loss might be the reason for investors to pay low price resulting low PE and investors are expecting 100% bonus share from the Standard Chartered Bank Limited (SCB) resulting high price. But we need to consider the fact that high PE means high risk and there can be high fluctuation in SCB price.
2. Development Bank Sector
Development Bank Sector has 28 tradable companies and their average PE is 17.59 times excluding the 179.26 PE of Green Development Bank Limited (for the realistic average PE). Mahalaxmi Bikas Bank Limited has the lowest PE of 8.32 times and the Green Development Bank Ltd. has the highest PE 179.26 in this sector. It seems risky to invest on Green Development Bank Ltd (GRDBL) stock, 1:4 right share is the major reason for hiked price of GRDBL.
3. FINANCE SECTOR:
Finance Sector have19 tradable companies and their average PE is 16.22 times excluding the 1,384.26 PE of General Finance Ltd (for the realistic average PE). Lalitpur Finance Ltd. has the lowest PE 2.61 times though it is unsafe to invest because of its negative reserve of 10.51 Cr., NPL 99.40% and other negative financial aspects whereas General Finance Ltd. has the highest PE of 1384.26 times. The General Finance Ltd.last traded price (LTP) is Rs.134/- and yearly high price is Rs.430/-, comparing both prices LTP seems very low and some investors may think to invest on it but high PE is alerting those investors to re-think.
4. MICRO FINANCE SECTOR
Micro Finance Sector have33 tradable companies and their PE are 69.69 times excluding the PE of Samata Microfinance Bittiya Sanstha Ltd., Swadeshi Laghubitta Bittiya Sanstha Ltd., Suryodaya Laghubitta Bittiya Sanstha Ltd. and Mahuli Samudayik Laghubitta Sanstha Ltd (these companies are not easily available to buy on their LTP). Similarly, Samata Microfinance Bittiya Sanstha Ltd. has the lowest pe 10.25 but available to buy at its LTP Rs.456/- whereasRSDC Laghubitta Bittiya Sanstha Ltd. has the highest PE of 224.31 times.
5. LIFE INSURANCE SECTOR
The Life Insurance Sector has 7 tradable companies and their average PE is 163 times. Surya Life Insurance Company Limited has the lowest PE of 71.83 times and Asian Life Insurance Co. Limited has the highest PE of 284.81 times among other life insurance companies. However the earnings from actuarial valuation of long term insurance business are not included resulting higher PE.
6. NON-LIFE INSURANCE SECTOR
Non-Life Insurance sector have 17 tradable companies and their average PE is 53.09 times excluding the PE of Rastriya Beema Company Limited i.e 176.63 for the realistic average. NLG Insurance Company Ltd has the lowest PE of 32.13 times and Rastriya Beema Company Limited has the highest of PE of 176.63 times among total 17 Non-Life Insurance companies.
7. HYDRO POWER SECTOR
Hydro Power sector have 13 tradable companies and its average PE is 42.06 times excluding the PE of Ridi Hydropower Development Company Ltd. i.e 3140 times. This sector has 4 companies namely Arun Kabeli Power Ltd, Chhyangdi Hydropower Ltd , National Hydro Power Company Limited and Dibyashwori Hydropower Ltd which has 0 PE due to companies weak performance. Ridi Hydropower Development Company Ltd. has the highest PE 3140 times among hydro power companies.
8. Hotel, Manufacturing & Processing and Others Sector
Hotel, Manufacturing & Processing and Others sector PE are shown in the same bar due to limited no. of companies.
• Hotel = 2
• Manufacturing & Processing = 3
• Others = 2
At the conclusion, PE is the strong fundamental tools that can help investors to select the best company. In the developing country like Nepal where NEPSE is also in the developing stage, the tool like PE supports a lot.
1. BANKING SECTOR:
Banking Sector has 27 tradable companies with average PE of 23.53 times. Nepal Bank Limited has the lowest PE of 8.81 times and the Standard Chartered Bank Limited has the highest PE of 62.03 times. Nepal Bank Limited due to huge cumulative retained loss might be the reason for investors to pay low price resulting low PE and investors are expecting 100% bonus share from the Standard Chartered Bank Limited (SCB) resulting high price. But we need to consider the fact that high PE means high risk and there can be high fluctuation in SCB price.
2. Development Bank Sector
Development Bank Sector has 28 tradable companies and their average PE is 17.59 times excluding the 179.26 PE of Green Development Bank Limited (for the realistic average PE). Mahalaxmi Bikas Bank Limited has the lowest PE of 8.32 times and the Green Development Bank Ltd. has the highest PE 179.26 in this sector. It seems risky to invest on Green Development Bank Ltd (GRDBL) stock, 1:4 right share is the major reason for hiked price of GRDBL.
3. FINANCE SECTOR:
Finance Sector have19 tradable companies and their average PE is 16.22 times excluding the 1,384.26 PE of General Finance Ltd (for the realistic average PE). Lalitpur Finance Ltd. has the lowest PE 2.61 times though it is unsafe to invest because of its negative reserve of 10.51 Cr., NPL 99.40% and other negative financial aspects whereas General Finance Ltd. has the highest PE of 1384.26 times. The General Finance Ltd.last traded price (LTP) is Rs.134/- and yearly high price is Rs.430/-, comparing both prices LTP seems very low and some investors may think to invest on it but high PE is alerting those investors to re-think.
4. MICRO FINANCE SECTOR
Micro Finance Sector have33 tradable companies and their PE are 69.69 times excluding the PE of Samata Microfinance Bittiya Sanstha Ltd., Swadeshi Laghubitta Bittiya Sanstha Ltd., Suryodaya Laghubitta Bittiya Sanstha Ltd. and Mahuli Samudayik Laghubitta Sanstha Ltd (these companies are not easily available to buy on their LTP). Similarly, Samata Microfinance Bittiya Sanstha Ltd. has the lowest pe 10.25 but available to buy at its LTP Rs.456/- whereasRSDC Laghubitta Bittiya Sanstha Ltd. has the highest PE of 224.31 times.
5. LIFE INSURANCE SECTOR
The Life Insurance Sector has 7 tradable companies and their average PE is 163 times. Surya Life Insurance Company Limited has the lowest PE of 71.83 times and Asian Life Insurance Co. Limited has the highest PE of 284.81 times among other life insurance companies. However the earnings from actuarial valuation of long term insurance business are not included resulting higher PE.
6. NON-LIFE INSURANCE SECTOR
Non-Life Insurance sector have 17 tradable companies and their average PE is 53.09 times excluding the PE of Rastriya Beema Company Limited i.e 176.63 for the realistic average. NLG Insurance Company Ltd has the lowest PE of 32.13 times and Rastriya Beema Company Limited has the highest of PE of 176.63 times among total 17 Non-Life Insurance companies.
7. HYDRO POWER SECTOR
Hydro Power sector have 13 tradable companies and its average PE is 42.06 times excluding the PE of Ridi Hydropower Development Company Ltd. i.e 3140 times. This sector has 4 companies namely Arun Kabeli Power Ltd, Chhyangdi Hydropower Ltd , National Hydro Power Company Limited and Dibyashwori Hydropower Ltd which has 0 PE due to companies weak performance. Ridi Hydropower Development Company Ltd. has the highest PE 3140 times among hydro power companies.
8. Hotel, Manufacturing & Processing and Others Sector
Hotel, Manufacturing & Processing and Others sector PE are shown in the same bar due to limited no. of companies.
• Hotel = 2
• Manufacturing & Processing = 3
• Others = 2
At the conclusion, PE is the strong fundamental tools that can help investors to select the best company. In the developing country like Nepal where NEPSE is also in the developing stage, the tool like PE supports a lot.
- Deep Thapa (Nepal Stock Data Analyst)
