Bank Of Asia Nepal Limited Insight analysis

1.Introduction: Name: Bank Of Asia Nepal Limited Business: Banking Date of operation: 12.10.2007 C.E.O: Mr. Parshuram K. Chettri Chairman: Mr. Trilok Chand Agrawal Branches(Including H.O): 29 ATMs: 22 Registered Office: Tripureshwor, Kathmandu. Stock code (Nepse): BOAN 2.Ownership Pattern: Domestic Ownership: 100% Other entities: 7.79% Individuals: 92.21% Foreign Ownership: - NOTE: The pattern of ownership is based upon latest published annual report. 3.List of Prominent Shareholders: Shareholders Shareholding in % Ram Chandra Sanghai 10.20% Trilok Chandra Agrawal 8% Govinda Lal Sanghai 6.65% Tulsi Ram Agrawal 4.53% Anuj Agrawal 4.00% Nikunja Agrawal 3.96% Vishal Agrawal 3.92% Nepal Life Insurance Co. Ltd. 3.50% Birendra Kumar Sanghai 2.17% Neelam Sanghai 1.50% Suresh kumar Agrawal 1.33% Manju Agrawal 1.21% Satish Kumar More 1.00% Pramila Devi Agrawal 1.00% Dina Nath Khendelwal 1.00% Citizen Investment Trust 1.00% Triveni Daal and Oil Ent. Pvt. Ltd. 0.97% Triveni Byapaar Co. Pvt. Ltd 0.93% 4.Equity Analysis: 52 Week High Price: 227 52 Week Low Price: 132 Last Trading Price(05.04.2012): 161 Paid-up Capital: 200 Cr. Market Capitalization: 322 Cr. EPS(annualized)*: 11.61 P/E Ratio*: 13.87 Net Worth per Share*: 113.53 P/B.V Ratio*: 1.42 Total trading days*: 57 Total number of transaction*: 740 *Based on unaudited second Quarter 2068/69. 5.Performance Highlights: Particulars F/Y 2064/65 F/Y 2065/66 F/Y 2066/67 F/Y 2067/68 Total Assets (NPR ‘Cr.) 429.3 1,164.35 1,554.36 1,769.96 YOY Increase in total Assets (%) - 171.22 33.50 13.87 Total Deposit (NPR ‘Cr.) 305.48 887.56 1,248.08 1,367.74 YOY Increase in total deposit (%) - 190.55 40.62 9.59 Total loan Advance and Bill purchased (NPR ‘Cr.) 272.77 763.58 1,110.74 1,162.90 YOY Increase in total Lending (%) - 179.94 45.46 4.70 Investment (NPR ‘Cr.) 70.31 172.7 241.59 264.82 Net profit (NPR ‘Cr.) 0.45 6.15 20.79 20.99 Non performing Credit/Total Credit (%) 0 0.01 0.27 1.4 Weighted average interest rate spread (%) 2.85 4.1 3.68 2.52 No. of shares(No. in '000) 7,000 10,000 15,000 20,000 No. of employees(No.) 87 234 301 311 6.Key Findings: 1. Based on FY 2067/68 comparison among 24 Commercial banks(25 at present) listed in Nepal Stock Exchange, BOAN ranks as follows: Head Rank By M-Cap 13th By Operation date (as commercial bank) 20th By Deposit 17th By Total Asset 17th By Per share total assets value 17th 2. Ratio of total assets value to market capitalization for this bank comes around 5.6. Based on this value, the stock looks moderately priced. However, the value of P/E ratio for this stock comes around 13.87 whereas the ratio of price to book value is around 1.42. Looking at P/E, the stock appears reasonably priced. Taken P/BV as reference, the stock looks dearly priced. 3. The latest published financial statement (as of second quarter 2068/69) reveals the following facts: • Around 83.55% of total deposit is used to provide loan and advances. • Around 22.86% of the total deposit is utilized for the Investment purpose. • Around 4.01% of total deposit is foreign currency deposit. • The ratio of its non-interest income to total operating income comes around 6.11%. • The lending portfolio of the bank with sector wise exposure is presented below: Head Exposure (%) Real Estate Loan 19.20% Personal Home Loan (Up to Rs. 100 lacs or less) 5.54% Margin Type Loan 0.95% O.D/ TR Loan/ WC Loan 43.10% Term Loan 12.29% Other Lending 18.94% 4. The performance of the bank in 2nd Quarter 2068/69 as compared to same period in the previous year doesn’t reflect satisfactory result. There is a minimal growth in size of deposit, substantial increase in provisions and contraction in the size of total lending. Fall in profit has been observed in this reporting period. The performance highlight during this period is shown below: Growth in Deposit 5.41% Decline in Total Lending 0.44% Increase in provision for possible loss 135.98% Decrease in Net Profit 5.73% 5. It might be a surprising fact that BOAN is one among few banks that has been operating with the lowest spread. With spread of 2.35% appearing in the quarterly report (F/Y 2068/69, 2nd Quarter), the bank has been able to generate good value of profit. However the cost of fund of this bank is well above the industrial average appearing around 10.53% in Q2 2068/69 report. With improving economic scenario and parallel fall in interest rate, the bank will be able to report a good rise in profit. 6. In the latest AGM of F/Y 2067/68 dated 03-09-2068, the shareholders of the bank has unanimously approved the special proposal regarding preparation of memorandum of understanding, appointment of auditor to carry out due diligence audit of assets and liabilities of the bank, fix remuneration of auditor for this purpose and similar other tasks for merger with any other suitable financial institution. The AGM has granted the authority to carry out all these activities regarding merger to the Board of directors of the bank. 7. Within a very short span of operation, the bank has been able to pay regular dividends to its shareholders since last three years. Taking into consideration the running price of its stock, the return might appear promising. Paticulars F/Y 2064/65 F/Y 2065/66 F/Y 2066/67 F/Y 2067/68 Cash Dividend on Share Capital (%) - 5 10.53 7.37 Bonus share on share Capital (%) - - - - Total Payout (%) - 5 10.53 7.37