How does new entrant Shivam Cements fair against veteran player Nepal Telecom? Which company would you choose among the two in terms of investment?

Fri, May 31, 2019 1:32 PM on Company Analysis, Stock Market, Exclusive, Latest,

Recently, share prices of Shivam Cements (SHIVM) have shot up after hitting the positive circuit almost every day for the past two weeks. Shivam Cement is one of its kind company listed on the stock market with lack of any direct competitor in the stock market. Another company that lacks direct competitors is Nepal Telecom Limited (NTC). The telecom giant is the only listed telecom company in Nepal. It has been a part of the stock market for a long time and has one of the highest market capitalizations in the stock market.

Both these companies are very different in terms of core business and operations. However, they share some features in common as a listed company in Nepal Stock Market. Considering the same, this article attempts at comparing both the companies in terms of potential investment opportunity to check whether one among them is better or both are at the same position in the market.

Background

Shivam cements was founded in the year 2003. It began commercial production from the year 2011 and is the largest manufacturing Greenfield project in Nepal. It is currently producing 3000 TPD cement and 1900 TPD (Tones per Day) clinker from the company’s self-owned limestone quarries. With a broad vision of business, Shivam Cement Private Limited was converted into Public Limited Company in the year 2015 to provide its customers and the stakeholders to be a part of the company.

Shivam Cement Limited also holds 88% shares in Shivam Holding Private Limited which in turn holds 30% stake in Hongshi Shivam Cement Pvt. Ltd. (HSCPL), a JV with Hongshi Group of China which has set up a cement plant with grinding capacity and clinker capacity of 6000 TPD, whose commercial production has started from Jestha 2, 2075.

On the other hand, Nepal Telecom Company was incorporated in the year 2004, converted from an existing entity called Nepal Telecommunication Corporation, under the Companies Act 2053. The company has been providing high quality voice and data services to its ever-growing base of consumers. The Government of Nepal owns majority stake (91.49%) in the company while 8.48% of the stake is held by the general public and 0.03% is held by Citizen Investment Trust.

Shareholding Pattern

Shivam Cements

Particular

%

Units

Promoter Shares

88.00%

   38,720,000

Ordinary Shares

10.22%

     4,494,695

Project Affected Locals

1.78%

         785,305

Total

100%

   44,000,000

Currently, only ordinary shares i.e. 10.22% of the total shares are tradeable in market while the remaining shares are having a lock in period of 3 years and will be tradeable in the year 2022.

Nepal Telecom

Particular

%

Units

Nepal Government

91.49%

137,235,000

Ordinary Shares

8.48%

12,720,000

Citizen Investment Trust

0.03%

45,000

Total

100%

   150,000,000

In case of Nepal Telecom, only the shares held by the general public are tradeable.

Financials

Q3 FY 75/76

Particulars (NPR)

Shivam Cements

Nepal Telecom

Share Capital

    4,400,000,000

   15,000,000,000

Reserves

    3,454,643,000

   86,408,242,188

Long Term Borrowings

    1,325,442,000

                             -   

Property, Plant & Equipment

    4,364,309,000

   39,073,558,025

Revenue from Core Operations

    8,376,101,000

     9,061,911,403

Depreciation

        511,862,000

         997,715,767

Income Tax

        206,148,000

     1,864,410,943

Net Profit

    1,058,995,000

     3,642,504,563

Annualized EPS

                     32.09

                   97.13

Net Worth Per Share

                  199.88

                  676.05

Current P/E Ratio (times)

                       20.60

                     7.53

In the past week, share prices of SHIVM have grown from Rs.547 to Rs.661 as of 30th May, 2019. The share price have increased by 20.84% within a period of one week. In the review period, the stock prices were at a high of Rs.679 per share. A total of 1,101,123 units of shares were traded in the review period.

However, share prices of NTC have slightly decreased from Rs.740 as of 23rd May, 2019 to Rs.731 as of 30th May, 2019. In a period of one week, the closing high was at Rs.740 per share while the closing low was at Rs.726 per share. A total of 130,412 units of shares were traded in the review period.

Dividend History

Year

NTC

SHIVM

2074/75

55%

15.78%

2073/74

55%

 -

2072/73

51%

 -

2071/72

50%

 -

2070/71

47%

 -

Both the companies have only endorsed cash dividend for the shareholders till now. NTC has been giving attractive dividend to its shareholders, averaging at more than 51%. SHIVM being a newly listed company has distributed cash dividend worth 15.78% in its short period of listing.

Conclusion

Looking at the aspects analyzed above, it would not be wrong to say that Nepal Telecom is at a relatively better position than Shivam Cements. NTC has more number of shares floated in the market and the key financials of the company are stronger compared to that of SHIVM. This is largely because NTC is a veteran player in the stock market while SHIVM is fairly a new entrant. NTC may be a better investment opportunity currently among the two but SHIVM is not far behind. Although both the established companies are market leaders in their field, in the long run, growth of SHIVM can outpace the growth of NTC. Currently, NTC is amongst the safest investment in the market, however, keeping a watchful eye on SHIVM is in the best interest of investors as the company has strong growth prospects but being a new entrant to the market, it is yet to experience the fire test of extreme market fluctuations.