Research @ ResCon:

The Accumulated Net Profit summary of the Finance Companies Group is given below.

Up to Q3 of 2064/65:                              Rs 507.95 million
Average Net Profit in Q3 2064/65:          Rs 8.76 million

Up to Q3 of 2065/66:                              Rs 1,036.84 million
Average Net Profit in Q3 2065/66:          Rs 17.88 million

Increment in Net Profit :                        439%

Please note that the report comprises of the figures of all the finance companies (listed and non-listed), which have published their financial results, except for Cosmic Merchant Banking & Finance, Lumbini Finance & Leasing, Lord Buddha Finance, Paschimanchal Finance, Bhajuratna Finance & Saving, Butwal Finance, Nepal Shree Lanka Merchant Bank and Everest Finance and some other non-listed companies (these companies are yet to publish their financial statements).

1. The 3rd Quarter of FY 2065/66 unaudited Net Profit figures of Finance Comapnies group clearly shows that finance companies, in general, performed well in this quarter as compared to corresponding quarter of the previous year.

2. On an average, finance companies’ profit advanced by 439% this quarter. The group accumulated Rs 1,036.84 million in net profits this quarter compared to Rs 507.95 million net profits in the corresponding previous year quarter.

3. The net profit of each finance company is 17.88 million on an average.

4. Kuber, Shikhar, Kaski Finance Companies have highest net profit advancement. They have increased their profit by 8,601%, 2,600% and 2,287%r respectively over the corresponding previous quarter.  The increments are exceptional.

5. Nava Durga, Nepal Share Market and Janaki Finance are the only companies that have negative profit growth figure.

The net profit growth on Quarter to Quarter as of second quarter (Exclusive Analysis @ ResCon) showed that the finance companies group’s profit had increased by 174% on an average. Find the report here. Earlier we had also performed a research on the profit figures of commercial banks and development banks which too showed the similar story.

Hence from the analysis of profit figures of commercial banks, development banks and finance companies, it is evident that Nepalese service sector is performing well even during thes difficult times. Boom in realty sector, good inflow of remittance, increased exposure to hydropower sector, quality of loans (those not deemed "BAD") in portfolio, focus on SMEs are some of the key factors that have played vital roles in improving the profit figures of these companies.

ResCon Tip-Off:

We know that there exists a strong positive correlation between Earnings and Market Share Price figures. That is, if earnings’ figure of a company increases, the share price of the company increases too. But in case of the Nepalese finance companies, such a phenomenon is not being witnessed. In spite of better performance, the share prices of most of the finance companies are down.

To summarize, if you are someone who follows Warren Buffett, you will certainly know that the market price of a company must always address its fundamentals. In our case, there are some good finance companies which are currently undervalued. These banks’ share prices will definitely go up in the future. All you need to do is put on your thinking cap and choose the correct bank to invest in.

Well if you think you need some professional help, let us know.