Major highlights of the article
- Today is the last day to clinch 55% cash dividend of NTC
- NTC’s upward rising scrip throughout the year observes plunge since December 19
- NTC’s share prices decline despite cash dividend announcement being made
Nepal Doorsanchar Company Limited (NTC) revolves around the objective of providing both quality and cost-effective communication service in every lanes of the country.
Nepal Doorsanchar Company Limited popular as Nepal Telecom (NT) is a state-owned telecommunications company established in 2032 BS with the objective of providing nationwide access of communication services in Nepal. The company has established a brand name in telecommunication sector as it was able to transform Nepal Telecom from a monopoly government company to a customer-oriented business company.
NTC has been operating in a competitive market with NCell as its major competitor in the Nepalese Telecommunication industry. However, in Telecommunication sector, NTC is the only company listed in NEPSE.
Board of Directors:
A team of experienced professionals are elected as Board of Directors in NTC:
Financial overview:
NTC has been trying to satisfy its clients through its services whereas its shareholders through the numbers in the financial statements. The company’s financial position for the first quarter of two corresponding years i.e. FY 2074/75 and FY 2073/74 is provided below:
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As of first quarter of FY 2074/75, the company has maintained its paid up capital at Rs 15 arba. The company has not made any difference in the paid-up capital as compared to the first quarter of the last fiscal year. As of Q1 of 2074/75, the reserve and surplus of NTC stands at Rs 81.57 arba. This reserve and surplus is 9.4% more than the first quarter of FY 2073/74. The total income attained by NTC is Rs 11.83 arba as of Q1 of 2074/75. The net profit after tax has decreased by 2.08% compared to the first quarter of 2073/74. It amounts to Rs 4.05 arba as of Q1 of 2074/75. Such decrease in net profit of the company impacts EPS of the company.
EPS, P/E ratio and net worth per share of NTC is Rs 108.17, 6.24 and Rs 643.84 respectively as of the first quarter of 2074/75. Its EPS decreased while P/E ratio and Net worth per share increased in Q1 of FY 2074/75. The 2.09% decrease in EPS can be attributed to the declining net profit of NTC. Similarly, P/E ratio slightly increased by 0.48% whereas net worth per share increased by 7.85%.
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Nepal Telecom has been providing its investors with cash dividend continuously. For FY 2072/73, it offered cash dividend of 51% from its net profit to the investors. The cash motivated investors are getting return in the form of cash dividend from NTC.
Nepal Doorsanchar has further decided to endrose 55% cash dividend from the net profit of FY 2073/74. The book closure date for the AGM has been set from Poush 12 to Poush 30, 2074. Thus, those shareholders holding their shares till Poush 11, 2074 (today) will be eligible to participate in the AGM and receive the proposed cash dividend of Rs 55 per share. The company will be convening its 1
0th Annual General Meeting (AGM) on Poush 30, 2074.
Market overview:
The total market capitalization as of 25
th December, 2017 is Rs 17.06 kharba. Nepal Telecommunication has the highest market capitalization of Rs 1.27 kharba.
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The scrip of NTC has been observed in upward trajectory this year. On Dec 26, 2016, stocks of NTC were priced at Rs 692. On 24
th December, 2017, the stocks were traded at Rs 850.
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NTC’s stocks have been traded as high as Rs 872 and as low as Rs 840 as on 24
th December, 2017. The price of the stocks decreased by 10 points compared to the previous day (i.e. 23
rd December, 2017). The first transaction of the day stood at Rs 843. There were 30,830 units shares traded for the day.
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Is it worth investing in NTC’s shares?
NTC’s shares trading can be observed in two aspects: micro and macro. If we observe the weekly trends of NTC, the short term trader must have been benefitted with the sale of shares on December 18, 2017 when the price closed as high as Rs 940. However, the telecom stocks fell near Rs 850 on Sunday, December 24. Those short term investors who held their shares even after December 18 are facing loss due to the depressed stock price. Thus, the declining share price in recent period might be one of the limitations of NTC stock trading. The declining share price of NTC can be attributed to investors higher opportunity cost in holding NTC’s shares for a cash dividend of 55%. For instance, if NTC’s market price (MP) is assumed to be at Rs 900, the return on MP will be 6.11% (i.e. 55/900*100) only. Therefore, smart market players are assumed to have swapped the NTC’s shares leading the company’s share prices to decline. On the other hand, the provided cash dividend of 55% is seen to be a good investment only to the cash-focused investors. However, if we see the quarterly and yearly stock trends of NTC, the stock prices are steadily increasing.
NTC’s initiation in terms of 4G Lite, GSM services in several rural areas, several voice call packages, and internet packages has still built confidence among shareholders. Thus, holding company’s stocks might benefit the investors in the long run.
Furthermore, unlike other sectors such as banking where stock prices reflect as per the announced interest rates of the banks, NTC’s shareholders do not need to be concerned about such overreaction of the investors in the stock market. In addition to this, six years ago, in the year of 2067/68 NTC’s EPS was around Rs 85 however, now in the year of 2073/74, the company’s EPS stands at Rs 100. Even in terms of P/E ratio, it was around 4.88, six years ago however, as of 2073/74, it stands at 6.74. The increased P/E ratio might be a limitation for NTC yet; one cannot discard the decent return that investors have been gaining from the company. Finally, those investors who seek bonus shares and speculators in the stock market may not be satisfied with NTC, however, investors who seek cash dividend and adopt long term investment strategy might go for NTC’s shares.
What kind of investment strategies do you adopt? Do you think NTC is a good choice as per your investment strategy? Why or why not? Please share your views in the comment section below.
(Disclaimer: Any kind of information that is provided in the article should not be used as a sole advice or recommendation by investors in order to design their investment portfolio. So, before taking steps for any kind of the information, the investors are required to base their judgment on their own financial analysis, appropriateness of the information and seek independent financial advice. The information of the company has been taken from the authorized sources such as website of the company, NEPSE and financial reports of the company, any changes not updated in these may differ in the analysis. Invest at your own risk.)
