Know which wholesale microfinance to buy and which one to sell

- ShareSansar, October 8, 2017  on Exclusive , Featured , Financial Analysis , Latest , Stock Market

  • Sijan Bajracharya

“It’s better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffet

Yeah! The icon of stock market, Warren Buffet above quote always triggered me if I deeply analyzed microfinance companies of Nepal. And not only me, those investors who knows basic fundamental factors and once compared with each other, then all might be in vain why prices of scrip with good fundamentals is lower than that of scrip whose fundamentals is not even sole of the shoe of good one.

It is the obligation for all the investors to know basic fundamental factors of the companies in which hard earn money is going to be poured. Fundamental factors like Paid up capital, reserve, borrowing and lending, net profit, etc. and major ratios like Non Performing Loan (NPL), Earning per Share (EPS), Net worth and Price Earning ratio (P/E ratio) is enough in the context of Nepalese stock market if one wants his investment to be safe. But one must brainstorm in other fundamental and technical tools himself if he really wants to make good profit instead of running behind rumour and exaggeration.

Wholesale microfinance are the one who don’t deal with individual person rather they deal with other microfinances. They are the one who take borrowings from banks and lend it to other microfinance.

Among 53 microfinance companies (both listed and unlisted in NEPSE), there are only 4 wholesale microfinance companies in Nepal. They are as follows:

  • Sana Kisan Bikas Bank Limited (SKBBL)
  • Rural Microfinance Development Center Limited (RMDC)
  • First Microfinance Development Bank Limited (FMDBL)
  • RSDC Laghubitta Bikas Bank Limited (RSDC)

Below table shows the major fundamental data of the 4 wholesale microfinance as of Ashad end 2073/74.

mf latest

From the above table, it is concluded that SKBBL and RMDC seems to be strong with an EPS of Rs 65.73 and Rs 30.54 respectively whereas FMDBL and RSDC’s EPS is only Rs 17.59 and Rs 5.71.

Last Traded Price in Nepal Stock Exchange (NEPSE) of RSDC is overvalued in compare to remaining 3 microfinance as earning of RSDC is comparatively lower as well as P/E ratio of RSDC stands at 228 times which is at extreme high side.

As per the guidelines directed by Nepal Rastra Bank, all the wholesale microfinance should have paid up capital of Rs 60 crore till the end of Ashad 2075. RMDC’s paid up capital is already Rs 69.22 crore whereas SKBBL’s paid up is Rs 57.80 crore which is near to Rs 60 crore.

SKBBL has announced 25% bonus shares after which paid up capital will reach to Rs 62.88 crore.

RMDC has announced 5% bonus shares and 15% cash dividends. After 5% bonus shares, its paid up capital will reach to Rs 72.67 crore.

FMDBL has announced 15% bonus and 50% right shares to its shareholders, after which its paid up will reach to Rs 68.43 crore.

RSDC is issuing 200% right shares to its shareholders and it is already shown in above paid up capital. Also, RSDC has announced 13% bonus shares. RSDC bonus is only 4.33% after 200% right share.