SAPDBL, also known as Saptakoshi Development Bank Ltd., is a small-cap company that is part of the development banks sector. With a paid-up capital of NPR 834,338,432, it now has a market capitalization of NPR 2,395,385,632.53. There are 8,343,384.30 shares in total outstanding, of which 3,608,513.71 are accessible to the general public. SAPDBL is classified as a Low momentum, Low-value, and Low-growth stock based on trading data and financials.
In comparison to its rivals, the stock is positioned as a Below Average Performing business based on its Paid-Up capital as well as business performance as reported in the most recent quarterly financial statement (Fiscal Year 080-081 Q2). It is noteworthy that the stock has a trailing twelve-month (TTM) PE ratio of 0 and a TTM Return on Equity (ROE) of -13%.
Fundamental & Technical Study
The company's financial statements shed light on both its performance and overall financial health during the given quarters. Beginning with the balance sheet, there is no change in the Paid-Up Capital, which indicates that the company's equity basis has not changed. A continuous downward trend in retained earnings points to potential financial difficulties. Reserves have increased significantly, reflecting the company's efforts to accumulate cash reserves.
A 14.30% decline in total equity raises questions about the company's capacity to create value for shareholders. Nonetheless, an 8.97% increase in total assets points to expansion. Positive signs point to an increasing consumer base, as evidenced by the 12.61% growth in customer deposits. The 303.83% rise in loans and advances to BFIs may indicate more financial activity.
The 30.80% decline in net interest income suggests that managing interest rate spreads may present difficulties. Concerns concerning the company's overall profitability are raised by the Operating Profit and Net Profit, both of which have negative numbers across quarters. There may not be enough money to distribute to shareholders, as indicated by the negative distributable profit.
The company's profitability has declined as seen by the regularly negative earnings per share (EPS). The company's fundamental worth has declined, as seen by the 14.30% decline in book value. A persistently low return on equity (ROE) indicates subpar financial performance in relation to shareholder equity.
At -2.86%, the Capital Adequacy Ratio (CAR) has somewhat decreased but is still within acceptable bounds. There has been a 10.94% decline in non-performing loans (NPL), indicating that the quality of the loan portfolio has improved. On the other hand, possible hazards are indicated by the declining trends in ROE and Net Profit.
The cost of money has dropped by 16.05%, suggesting that financing expenses may be lowered. A cautious approach to lending is suggested by the 8.71% decline in the credit to deposit ratio. Additionally, the Base Rate has dropped, which can lower the cost of borrowing.
The Interest Spread Rate has marginally improved by 0.44%, suggesting that the company's main lending activities are now somewhat more profitable. Potential investors may be concerned, nevertheless, as the financial statements present a difficult overall picture with diminishing profitability and negative ROE. In order to safeguard the company's future growth and increase shareholder value, effective management would have to tackle these issues. Before making an investment, investors should carefully analyze these risks because they could affect the future price of the company's shares.
Based on historical technical chart pattern detection, I can propose a successful strategy to potentially maximize profits in the stock market.
When the 14-day Relative Strength Index (RSI) value averages below 41, equities in the range of support levels are bought using the "Buy Low and Sell High" method. Furthermore, there is a bullish MACD signal about 17% of the time. In relation to the 50-day average volume, the relative volume should be roughly 63%. The stock should have dropped by about -9% during the course of one to two weeks before to entrance. During this time, the candle may be green around 50% of the time. The MACD should always remain in a bullish signal and the average RSI 14 value should be above 64 while selling. On average, the holding period spans about 22 days, with the candle color being green around 1% of the time. Relative volume can increase up to 240%.Regarding "Buy High and Sell Higher" strategies, successful breakout trades are initiated by purchasing stocks after a breakout from indicators like Bollinger Bands, Supertrend, Donchian Channel, or Envelope, within a one-month lookback period. The average RSI value prior to entry should be around 61, and a bullish MACD signal should appear about 67% of the time. The sell target is typically a 12% gain post-entry, or after an average holding period of 19 days. When entering the trade, the candle color should be green 100% of the time and positioned above the short-term moving averages.
The stock price being above 20-day SMA indicates an upward short-term trend. The stock price is currently trading above the 50-day SMA, indicating a positive mid-term trend. RSI 14 is in neutral zone, it indicates that the stock is neither considered cheap nor expensive in the short term. This range suggests a balanced condition where the stock's price may continue its current short term trend. When a bullish Moving Average Convergence Divergence (MACD) signal is observed, it indicates that the stock's upward momentum is strengthening, making it a favorable moment to contemplate buying or holding the stock. This is the case in this stock Stock is highly sensitive to the movement of NEPSE. The Price-Trend strength of this stock over 3 to 6 month is weaker than majority of the stocks that are actively traded in NEPSE.
The current market price of the stock at NPR 287.10 is above the nearest key resistance zone at NPR 283.50. This suggests a bullish breakout, indicating a potential upward momentum in the stock's price. Either pullback entry or momentum buy is favorable in this situation.If we are already in this stock trailing stop loss is suggested, if we are waiting fo reentry pull back near uptrending channel or moving averages is better place with reversal candle conformation. As of today trailing stop loss at NPR 255 is recommended. July is the best month and March is the low return month for trading in this stock as per historical data.
Based on various technical indicators, these short term trading strategies, including buying in the support area, buying breakouts, or buying on retracement after a breakout, appear to be effective because the stocks are currently exhibiting a short-term bullish trend. Implementing trailing stop-loss orders, such as placing them at recent support areas or using trailing stop-loss to secure profits, can be beneficial. Trailing stop-loss orders help protect against potential losses by automatically adjusting the stop-loss level as the stock price moves in a favorable direction, allowing for potential profit maximization. Examples Moving averages, Super trend, Envelopes , etc. SAPDBL has Average volume of 20,087.66 Nos Per day. As of last trading day Broker number 41,44,46 are the top buyers with 1611,1553,1500 kitta. and Broker number 70,41,44 are the top seller brokers with 1800,1779,1110 kitta. Mutual fund industry does not hold any quantity of this stock as of last available data which is 0 % of total tradeable shares available in the market.
Given that the stock is currently trading above the Graham Number, its price may be perceived as expensive. As an initial approach, it might be prudent to adopt a 'wait and watch' stance for considering it as a potential long-term investment. However, if a comprehensive analysis of the company's growth prospects and earnings justifies the higher price, it could indeed be a worthwhile investment opportunity. Also you may exercise with other popular valuations techniques like Discounted Cash Flow, Free Cash Flow Yield, Dividend Discounted Model and many.
Time Series Analysis of stock Price
If traders look at this stock through the lens of time series analysis,they should consider employing trend-following strategies to capitalize on the prevailing market direction since stock price over last 2-3 months are non-stationary. Indicators such as moving averages , MACD and ADX can be useful in identifying and confirming trends. Traders could seek buying opportunities during uptrends and selling or shorting opportunities during downtrends. Since trend is down with Non-stationary time series, shorting is not available in Nepal stock exchange.
Elliot Wave Analysis
The current Primary Elliot 5th Wave is exhibiting an Impulsive wave structure, indicating a strong and decisive price movement in the upward direction. Impulsive waves are characterized by powerful and relatively quick price advances, indicating the prevailing trend's strength. During this Primary wave, the buying pressure in the market is dominant, leading to sustained upward movement in asset prices. Traders and investors may observe higher highs and higher lows during the Primary Impulsive wave, suggesting a series of strong upward price swings with limited retracement. Market participants are likely to be optimistic and confident in the ongoing uptrend.
The ongoing Intermediate Degree Impulsive Wave 3rd is characterized by a strong and decisive price movement in the upward direction. Impulsive waves are the core movements of the Elliott Wave pattern and are known for their powerful and sustained price advances.
The Minor wave for this symbol is corrective wave 2nd which is a part of larger impulsive wave. The Minor Elliott Waves are essential for traders and analysts as they help identify short-term trends and provide insights into potential entry and exit points.
Since the waves are in mixed direction, it indicates volatile and uncertain environment. It suggests the balance between bears and bulls.
Price Range Forecast
The stock exhibits a historical (3 Years) High Price-to-Book (PB) ratio of 5.07 and a historical Low PB ratio of 1.40. This ratio reflects the market's assessment of the stock's value relative to its book value per share. If the company's earning growth improves in the future, there is a possibility that investor confidence may drive the stock's price upwards, potentially reaching NPR 313.05. Current Price is below this bullish forecast price. Conversely, in scenarios where the earning growth of the company does not meet expectations, the stock may face downward pressure. Historically, the stock has reached till lowest to 1.40 PB ratio. So, we can expect price to reach as low as NPR 86.64 Current Price is above this bearish forecast price. While historical PB ratios can provide valuable insights, they should not be the sole basis for investment decisions. Based on its historical volatility, the stock is expected to show a short-term trading range between 246.67 and 327.53 over the next 20 days. This range indicates the potential price fluctuations that the stock may experience within that timeframe.
Summary
In conclusion, the short-term technical position is beneficial. The stock is in the markup phase, according to longer-term technical analysis. As of the most recent financial statements released for its industry, this company's financial performance is rated as Weak. Being above the sector average for the PE ratio indicates that it is comparatively overvalued when compared to its rivals. These stocks are similar to RFPL, MKHC, SFCL, MCHL, UHEWA, HHL, MEHL, NMBMF, PROFL, MHNL, JFL, SPC, SSHL, AHL, RLFL, RHGCL, ACLBSL, DOLTI, BEDC, and AKJCL when looking at the company's financial metrics, which include the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, Return on Equity (ROE), Market Capitalization (Market Cap), and comparable other items.Economic Indicators' Impact on Stock Performance
The current month's economic indicators in Nepal can potentially influence the Development Bank sector stocks in various ways.
Real Sector Indicators:
Real GDP Growth: Indicates the overall economic performance. Higher growth may imply increased business activities and borrowing, potentially benefiting the development bank sector.
Gross Fixed Capital Formation: Represents investment in fixed assets. Higher investment levels could mean more lending opportunities for development banks.
Price Change Indicators:
CPI and Price Index: Inflation affects borrowing and lending behaviors. Higher inflation might lead to higher interest rates, affecting loan demand and profitability of banks.
Salary and Wage Rate Index: Reflects changes in labor costs, which can influence operating expenses for banks.
External Sector Indicators:
Trade Balance and BOP: Reflects the country's trade and balance of payments situation. A negative trade balance or BOP deficit might indicate external borrowing requirements, impacting interest rates and liquidity in the banking system.
Workers' Remittances: Significant for Nepal, remittances influence consumption and investment levels in the economy, potentially impacting loan demand.
Financial Sector Indicators:
Broad Money (M2) and Narrow Money (M1): Indicate liquidity in the economy. Higher liquidity can stimulate borrowing and investment.
Interest Rates: Higher interest rates may lead to increased interest income for banks but could reduce loan demand.
Total Deposits and Credit to Private Sector: Reflect the deposit base and lending activities of banks.
Market Capitalization/GDP: Reflects the overall size and performance of the financial market, which can influence investor sentiment.
Public Finance Indicators:
Revenue and Expenditure Growth: Government spending affects overall economic activity and borrowing demand.
Domestic and External Debt: Reflects government borrowing and its impact on interest rates and liquidity in the financial system.
Considering the above, here's how the current month's economic indicators might affect the Development Bank Sector stocks of Nepal:
Real Sector: Moderate GDP growth and capital formation might sustain demand for loans, benefiting the sector.
Price Change: Moderate inflation and wage growth may not significantly impact banks' operations.
External Sector: The negative trade balance and BOP deficit might signal increased external borrowing, potentially impacting interest rates. Remittances might provide liquidity to the economy.
Financial Sector: Stable liquidity and moderate interest rates could support lending activities and profitability.
Public Finance: Moderate revenue and expenditure growth might maintain stability in the economy, with government borrowing not exerting excessive pressure on interest rates.
Overall, the impact on Development Bank Sector stocks would likely depend on how these indicators collectively influence economic activity, borrowing demand, and interest rate dynamics.
