The market has been going down steadily for this year. It’s difficult to make gain in NEPSE using this downtrend, however using the power of averaging, we can use this to our benefit and buy many good stocks at a lot low prices. Today we’ll discuss the Top 5 Undervalued shares in Nepal at the moment, that you can add to your portfolio at a discount! First let us see how the undervalued stocks are compiled:
Top Undervalued Shares in Nepal Criteria
Let’s see the criteria we’ve used to determine top 5 undervalued shares in Nepal. You can use Nepsealpha’s Fundamental/Technical Screener for your own due diligence.
Graham Number Indicating Undervalued Share
Graham Number represents the maximum amount you should pay for a Share. If a share price of a company is currently lower than the Graham number, it is considered to be undervalued. This method was devised by legendary trader Benjamin Graham. According to him, the price to earnings multiple and price to book value multiple of a stock should not exceed 15 times and 1.5 times.
PE Ratio of Undervalued Shares
The P/E Ratio of all the top undervalued stocks are less than 15 in this list complied below. The P/E Ratio is generally lower as compared to similar shares in the market as the price is low and earnings is high, hence the share is undervalued.
Dividend Yield of Undervalued Shares
Dividend yield show how much profit the company is able to distribute to the shareholders from their net earnings. Generally, Blue Chip companies provide a good dividend yield. In our list of top undervalued shares in Nepal, all the companies have a dividend yield of over 10%. So you can expect a good cashflow or bonus share from all the shares list below.
Top Undervalued Shares in Nepal
| S.N | Stock | Sector | LTP | PE Ratio |
|---|---|---|---|---|
| 1 | NLO | Manufacturing And Processing | 252.7 | 2.74 |
| 2 | MBL | Commercial Banks | 223 | 12.06 |
| 3 | SBL | Commercial Banks | 291 | 12.75 |
| 4 | ADBL | Commercial Banks | 312.4 | 12.87 |
| 5 | NBL | Commercial Banks | 270.1 | 12.99 |
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Nepal Lube Oil – NLO
Nepal Lube Oil Limited was Established in 1983 with agreement with Gulf Oil Corporation Limited. NLO was incorporated as Nepal Lube Oil Limited in 15 July, 1984. It is one of the first 4 companies to obtain ISO 9000 QMS certification in Nepal. NLO/Gulf lubricants has strong performance & a great market presence in Nepal. It’s strong and expanding distribution network and wide array of products has helped it maintain a strong foothold in Nepal.
| Sector | Manufacturing And Processing |
|---|---|
| Shares Outstanding | 387,585.00 |
| Market Price – 2022/05/11 | 252.70 |
| 52 Weeks High – Low | 252.70-247.80 |
| EPS | 92.28 (FY:078-079, Q:3) |
| P/E Ratio | 2.74 |
| Book Value | 918.36 |
| PBV | 0.28 |
| % Dividend | 5.00 (FY:077-078) |
| % Bonus | 30.00 (FY:077-078) |
Machhapuchchhre Bank Limited- MBL
Machhapuchchhre Bank Limited was the first regional commercial bank in the western region of Nepal. It was registered in 1998 and it started it’s banking operation from Pokhara since the year 2000. MBL in as ISO 9001:2015 certified bank and it aims to cater to the customer using latest technology and standard international practices.
The bank as 165 Branch Offices, 165 Branchless Banking Unites, 206 ATMs across Nepal and 8 Extension Counters. Machhapuchchhre Bank Limited also provides 365 Days banking and evening counter services through many of it’s offices.
| Sector | Commercial Banks |
|---|---|
| Shares Outstanding | 102,571,555.80 |
| Market Price 2022/07/12 | 224.20 |
| 52 Weeks High – Low | 455.00-220.00 |
| EPS | 20.17 (FY:078-079, Q:3) |
| P/E Ratio | 11.12 |
| Book Value | 139.67 |
| PBV | 1.61 |
| % Dividend | 0.70 (FY:077-078) |
| % Bonus | 13.30 (FY:077-078) |
Siddhartha Bank Limited – SBL
Siddhartha Bank is an ‘A’ Class commercial bank with it’s head office in Hattisar, Kathmandu. It was established in 2002 AD and has branches all across the nation. Siddhartha bank has aimed at “total customer satisfaction by rendering efficient and diversified financial services through improved technology.“
Siddhartha Bank is one of the most trusted banks in Nepal. It has a total 190 branches throughout Nepal with 208 ATMs and 4 Extension counters.
| Sector | Commercial Banks |
|---|---|
| Shares Outstanding | 125,244,268.30 |
| Market Price 2022/07/12 | 290.00 |
| 52 Weeks High – Low | 605.00-290.10 |
| EPS | 22.23 (FY:078-079, Q:3) |
| P/E Ratio | 13.05 |
| Book Value | 172.24 |
| PBV | 1.68 |
| % Dividend | 0.75 (FY:077-078) |
| % Bonus | 14.25 (FY:077-078) |
Agricultural Development Bank Limited – ADBL
Agricultural Development Bank was established in 1968 under the ADBN act 1967.
Various amendments later on empowered the bank to extend credit to small farmers under group liability and expanded the scope of extending it’s financing to promote cottage industries in Nepal. Further, the bank was permitted to engage in commercial banking activities for the optimal use and mobilization of domestic resources.
Initially, the bank worked as a premier rural credit institution. However, since 1984, the bank is also involved in commercial banking to provide commercial banking services. ADBL has 278 branches and ATMs throughout the country.
| Sector | Commercial Banks |
|---|---|
| Shares Outstanding | 197,071,701.60 |
| Market Price | 310.00 |
| % Change | -0.77 % |
| Last Traded On | 2022/07/12 03:00:00 |
| 52 Weeks High – Low | 620.00-298.00 |
| 120 Day Average | 355.08 |
| 1 Year Yield | -35.42% |
| EPS | 14.55 (FY:078-079, Q:3) |
| P/E Ratio | 21.31 |
| Book Value | 171.04 |
| PBV | 1.81 |
| % Dividend | 20% |
| % Bonus | 20% |
Nepal Bank Limited – NBL
Nepal Bank Limited (NBL) is the first bank of Nepal. NBL embarked the beginning of banking system in Nepal. It was established on Kartik 30, 1994 (November 15, 1937 A.D.) under Nepal Bank Act 1937. The bank was established with an authorized capital of Rs.10 million, issued capital of Rs.2.5 million and paid up capital of Rs.0.842 million. The share held by government and private sector was 60% and 40% respectively.
Nepal bank is facilitating banking throughout Nepal with 217 branches and 144 ATMs.
| Sector | Commercial Banks |
|---|---|
| Shares Outstanding | 144,059,048.30 |
| Market Price 2022/07/12 | 269.00 |
| 52 Weeks High – Low | 575.00-265.50 |
| EPS | 20.30 (FY:078-079, Q:3) |
| P/E Ratio | 13.25 |
| Book Value | 240.60 |
| PBV | 1.12 |
| % Dividend | 3.00 (FY:077-078) |
| % Bonus | 14.00 (FY:077-078) |
Using Undervalued Shares to Your Benefit
We compiled the list of most undervalued shares in Nepal so you don’t have to! If you are not an active trader, or value investing is your things. You won’t go wrong with the undervalues shares listed above. As we’ve seen the market is going down since the beginning of 2022, with value investing approach, you are less likely to go wrong as you will be getting regular cash and bonus shares from the companies even if the price doesn’t increase due to market conditions. All the companies listed above have a great Grahams number and are undervalued considering various factors live Grahams number, P/E Ratio, book value compared to other companies in the same sector.
We hope this will help you with your investing decisions, if you have any issue, feel free to comment in the comment section below.
