Profit growth rate of hydros slows
KATHMANDU, DEC 1:
Hydropower companies — that have 5.6 per cent share of total market capitalisation in the secondary market — failed to repeat the similar surge in profit observed earlier in the first quarter of the current fiscal year.
Three among the four listed hydropower companies have registered 10 per cent growth in the first quarter of the current fiscal year in comparison to the corresponding quarter of last fiscal year, according to the unaudited financial results of Arun Valley Hydropower, Butwal Power Company (BPC) and Chilime Hydropower Company.
National Hydropower Company –– the fourth listed hydro company –– last published its quarterly financials up to the third quarter of fiscal year 2010-11. It has been marred by bad corporate governance also due to the regulator’s weakness in taking action against them to make the capital market more professional and competitive.
The profit growth rate of listed hydropower companies could not repeat the performance of the fourth quarter of fiscal year 2011-12, when it observed a profit growth of 54.5 per cent.
These three companies earned Rs 381.85 million as net profit in the first quarter, while a year back their profit stood at Rs 347.6 million.
Based on last year’s return, Chilime and Arun Valley have already announced dividends. Chilime will distribute 20 per cent cash and 30 per cent stock dividend, and Arun Valley has announced 0.75 per cent cash and 15 per cent stock dividend. BPC has yet to announce any dividend.
The average Price to Earning (P/E) ratio of the subgroup stands at 78, revealing that investors are paying 78 times more than the earning of the subgroup.
“Investors are aware about the scope of hydropower companies in terms of profit generation, so they are willing to pay more, and hydro companies also give handsome dividends,” pointed out president of General Investors’ Association Dipak Karki. “If there are more good hydro companies listed at the stock exchange, the market will benefit.”
Since the beginning of the current fiscal year, market capitalisation of the subgroup has increased by 33 per cent in four months.
The hydropower subgroup index has jumped from 683 points in mid-July to 1018 points by the end of November, after hitting 1,072 points a week ago. Market capitalisation of hydropower companies stands at only Rs 28 billion –– making only 5.6 per cent of total market capitalisation. Thus, good performance of the hydro companies fails to affect the overall market due to the small share in total market capitalisation.
In the last four and a half months, Chilime’s share price has reached Rs 1,818 from Rs 845 in the beginning, BPC’s has remained stable at around Rs 781, and Arun Valley’s has gone up to Rs 331 from Rs 300.
However, National Hydropower’s share price has remained close to Rs 50 due to bad corporate governance. The company has not even conducted annual general meetings of the last three fiscal years despite pressure from shareholders.
Source: THT
