Financial analysis of Shine Resunga Development Bank
June 9, 2019 | Investopaper
The brief financial analysis of Shine Resunga Development Bank as performed by Investopaper team is as follows:
Introduction
Shine Resunga Development Bank is a ‘B’ class financial institution operating as a regional level development bank. It operates in 10 districts, namely Rupandehi, Nawalparasi, Kapilvastu, Palpa, Gulmi, Argakhachi, Baglung, Dang, Pyuthan, and Chitwan.
Shine Resunga Development Bank was formed after the successful merger of the Shine Development Bank located in Rupandehi with Resunga Bikas Bank of Gulmi. The merger completed on Chaitra 4, 2069. After that, the development bank merged with Gaumukhi Bikas Bank based on Pyuthan and started joint operation from Jestha 29, 2073.
Currently, Shine Resunga Development Bank has signed an acquisition agreement with Purnima Bikas Bank based on Rupandehi and Bhargav Bikas Bank based on Nepalgunj.
Board of directors and the Management team of Shine Resunga Development Bank:
The board of directors of Shine Resunga Development Bank includes:
| S.N. | Board Members | Post |
| 1 | Rajendra Prasad Shrestha | Chairman |
| 2 | Bhuwan Bhandari | Director |
| 3 | Krishna Prasad Bhandari | Director |
| 4 | Dr. Tara Prasad Upadhyaya | Director |
| 5 | Mohan Chapagain | Director |
| 6 | Gopal Prasad Pandey | Director |
The management of Shine Resunga Development Bank is led by Mr. Prakash Poudel. The management committee comprises of :
| S.N. | Management Team | Designation |
| 1 | Prakash Poudel | CEO |
| 2 | Sarjan Bhattarai | Deputy General Manager |
| 3 | Lok Raj Paneru | Deputy General Manager |
| 4 | Yashodhan Pandey | Chief Risk and Internal Audit Officer |
| 5 | Bhuwan Prasad Panth | Chief Finance and Compliance Officer |
| 6 | Kiran Prasad Sharma | Chief Credit Marketing Officer |
| 7 | Lal Mani Panthi | Chief Business Support Officer |
Financial Highlights of Shine Resunga Development Bank: Last 5 Years
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Paid-up Capital and Net Profit
In a period of 5 years, the paid-up capital of the bank has grown by 2.4 times while the net profit has doubled. The bank made a net profit of Rs. 16.20 crores with the capital of Rs. 54.99 crores in F.Y. 2070/71. At the end of F.Y. 2074/75, the bank paid-up capital rose to Rs. 137.86 crores and made a profit of Rs. 32.30 crores. Looking at the latest report, the bank’s paid-up capital stands at Rs. 162.27 crores and the bank made a net profit of Rs 31.09 crores in the 9 months of F.Y. 2075/76.
| Fiscal Year | Paid-Up Capital (Rs. ‘crores’) | Net Profit (Rs. ‘crores’) |
| 2070/71 | 54.99 | 16.2 |
| 2071/72 | 63.33 | 18.2 |
| 2072/73 | 86.84 | 26.9 |
| 2073/74 | 110.29 | 35 |
| 2074/75 | 137.86 | 32.3 |
| Third Quarter 2075/76 | 162.27 | 31.09 |
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Deposits and Loans
Shine Resunga Development Bank is able to grow its deposits from Rs. 4.91 Arba in F.Y. 2070/71 to Rs. 16.99 Arba until the third quarter of F.Y. 2075/76. Likewise, loans and advances have increased to Rs. 15.30 Arba in the third quarter of this fiscal year. In the year 2070/71, loans and advances stood at Rs. 4.30 Arba. The Deposits and Loans have grown by 29.88 percent and 30.63 percent per annum respectively.
| Fiscal Year | Deposits (Rs. ‘Arba’) | Loans & Advances (Rs.’Arba’) |
| 2070/71 | 4.91 | 4.3 |
| 2071/72 | 6.24 | 5.26 |
| 2072/73 | 8.39 | 7.29 |
| 2073/74 | 10.27 | 8.79 |
| 2074/75 | 14.54 | 12.39 |
| Third Quarter 2075/76 | 16.99 | 15.3 |
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Earnings Per Share and Non-Performing Loans
The development bank is able to maintain the stable Earnings Per Share(EPS) during the period of last 5 years. Although the capital has increased by almost two and a half times, the EPS has remained relatively stable between Rs. 23.43 to Rs. 31.78 during last five years. Until the third quarter of F.Y. 2075/76, EPS stands at Rs. 25.55. Likewise, Non-Performing Loans (NPL) has stayed below one percent which shows the quality of lending of this bank. NPL has fluctuated between as low as 0.07 to as high as 0.93 percent. In the nine months of F.Y. 2075/76, NPL of the bank stands at 0.19 percent.
| Fiscal Year | Earnings Per Share (EPS) | Non-Performing Loans (NPL) |
| 2070/71 | 29.53 | 0.38 |
| 2071/72 | 28.77 | 0.93 |
| 2072/73 | 31.05 | 0.31 |
| 2073/74 | 31.78 | 0.22 |
| 2074/75 | 23.43 | 0.07 |
| Third Quarter 2075/76 | 25.55 | 0.19 |
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Market Price Per Share and Market Capitalization
The share of Shine Resunga Development Bank is trading at Rs. 255 as of Jestha 23, 2076. The share price remains at a low level compared to the previous five years. The Market Capitalization of the company has improved at a steady pace. The market value of Shine Resunga Development Bank as of last trading day (Jestha 23) is Rs. 4.13 Arba. The company has earned Rs. 31 crores until the third quarter. If we annualize the third-quarter earnings, the company will be able to earn Rs. 42 crores. Looking at this, we can conclude that Shine Resunga is trading at a bargain price level.
| Fiscal Year | Market Price Per Share | Market Capitalization (Rs. ‘Arba’) |
| 2070/71 | 450 | 2.47 |
| 2071/72 | 360 | 2.28 |
| 2072/73 | 650 | 5.64 |
| 2073/74 | 425 | 4.69 |
| 2074/75 | 271 | 3.74 |
| Jestha 23, 2076 | 255 | 4.13 |
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Dividend History
Shine Resunga Development Bank has provided shareholders with consistent dividend in the last five years. The dividend payout has ranged from 18.63 percent to Rs. 28.42 percent. With the intent of increasing the capital, the company has focused more on the bonus shares. The dividend payout of 20-25 percent is highly attractive, especially when the share is trading at Rs. 250-300. There are several companies trading in Nepse at the price higher than Rs. 500 which provides a similar return to Shine Resunga Development Bank.
| Dividend | |||
| Fiscal Year | Bonus | Cash | Total |
| 2070/71 | 10 | 12 | 22 |
| 2071/72 | 27 | 1.42 | 28.42 |
| 2072/73 | 27 | 0 | 27 |
| 2073/74 | 25 | 0 | 25 |
| 2074/75 | 17.7 | 0.93 | 18.63 |
Financial Highlights of Shine Resunga Development Bank: Third Quarter, F.Y. 2075/76
Based on the third-quarter report of this fiscal year, the paid-up capital of Shine Resunga Bank has increased by 17.70 percent to Rs. 1.62 Arba due to the bonus share of the previous year. Reserve and Surplus have increased by almost 27 percent to Rs. 64.24. The bank has increased deposits and loans by 32.12 percent and 33.51 percent respectively. The deposits and loans until the third quarter stood at Rs. 16.99 Arba and Rs. 15.30 Arba respectively.
The bank is able to increase its net profit by 31 percent. The major reason for the increase in net profit is due to the increase in Net Interest Income by 36 percent. The Net Interest Income and Net Profit of the bank remain at Rs. 63.92 crores and Rs. 31.09 crores respectively.
The bank has improved its EPS by 48.46 percent which is at Rs. 25.55. NPL has increased slightly from 0.16 to 0.19 while the base rate has declined from 11.02 to 9.85. Net-worth Per Share of the bank is Rs. 139.59. At a market price of Rs. 255, the share of Shine Resunga has a P/E ratio of 9.98. This indicates that the shares of Shine Resunga are trading at reasonably bargain prices.
| Headings | 3rd Qtr, F.Y. 2075/76 | 3rd Qtr, F.Y. 2074/75 | % Change |
| Paid-up capital(Rs.’ Arba’) | 1.62 | 1.38 | 17.70 |
| Reserve and Surplus(Rs.’ crores’) | 64.24 | 50.64 | 26.86 |
| Deposits(Rs.’ Arba’) | 16.99 | 12.86 | 32.12 |
| Loans & Advances(Rs.’Arba’) | 15.3 | 11.46 | 33.51 |
| Net Interest Income(Rs.’ crores’) | 63.92 | 46.98 | 36.06 |
| Net Profit(Rs.’ crores’) | 31.09 | 23.72 | 31.07 |
| Earnings Per Share, EPS(Rs.) | 25.55 | 17.21 | 48.46 |
| Non Performing Loans, NPL(%) | 0.19 | 0.16 | 18.75 |
| Base rate(%) | 9.85 | 11.02 | -10.62 |
| Networth Per Share ( Rs.) | 139.59 | 136.73 | 2.09 |
| Market Price Per Share (Rs.) [Jestha 23, 2076] | 255 | ||
| P/E Ratio | 9.98 |
Financial Position of Shine Resunga after the acquisition of Purnima Bikas Bank and Bhargav Bikas Bank
Shine Resunga Development Bank is in the acquisition process with Purnima Bikas Bank and Bhargav Bikas Bank. It is planning to upgrade itself into a national level development bank by meeting the paid-up capital requirement of Rs. 250 crores.
Let us assume that the share swap ratio of Shine, Purnima, and Bhargav Bikas Bank is 1:0.6:0.6 looking at their financial position until the third quarter of this fiscal year. Shine Resunga Development Bank’s paid-up capital will rise to Rs. 225.44 crores. With a bonus share from the profit of this fiscal year, the bank can reach the capital of Rs. 250 crores. Likewise, the reserve will rise to Rs. 135 crores. The deposits and loans will increase to Rs. 23.67 Arba and Rs. 21.29 Arba.
Financial Position of Shine Resunga Bikas Bank after the acquisition of Purnima and Bhargav Bikas Bank based on the unaudited third-quarter report of F.Y 2075/76 is shown in the table below:
| Headings | Shine | Purnima | Bhargav | After Acquisition
(Swap Ratio 1:.6:.6)*** |
| Paid-up capital(Rs.’ crores’) | 162.27 | 55.13 | 50.16 | 225.44 |
| Reserve and Surplus(Rs.’ crores’) | 64.24 | 14.75 | 13.53 | 134.64 |
| Deposits(Rs.’ Arba’) | 16.99 | 3.43 | 3.25 | 23.67 |
| Loans & Advances(Rs.’Arba’) | 15.3 | 3.12 | 2.87 | 21.29 |
| Net Interest Income(Rs.’ crores’) | 63.92 | 13.18 | 12.12 | 89.22 |
| Net Profit(Rs.’ crores’) | 31.09 | 5.68 | 5.23 | 42 |
| Earnings Per Share, EPS(Rs.) | 25.55 | 13.73 | 13.89 | 24.84 |
| Non Performing Loans, NPL(%) | 0.19 | 0.79 | 0.76 | – |
| Base rate(%) | 9.85 | 10.95 | 12.17 | – |
| Networth Per Share ( Rs.) | 139.59 | 126.76 | 126.97 | 159.72 |
***Note: Financial Position will differ with the change in swap ratio which will be finalized after the DDA. Also, three development banks’ reports will vary in the fourth quarter.
Decision
The decision to invest in the shares of Shine Resunga Development Bank is of the investor himself. However, looking at the past financial performance of the bank, we can assume that the bank is able to improve its profitability and financial condition steadily. The management is capable to establish the bank as a reliable and growing financial institution among the customers and stakeholders. With the acquisition of Purnima and Bhargav Bikas Bank, the fundamentals of the bank will get stronger.
From the point of view of the investors, the shares of the bank are currently available at an attractive price of Rs. 250. The bank is consistently providing healthy returns to investors and will continue to do so if it can maintain its growth in the future. This might be the stock to include in your portfolio at a cheap price to minimize the risk. Dividend return, especially the bonus share of 20-30 percent is expected from this fiscal year.
(Investments are subject to market risks and investors are advised to do personal homework before making any investment decision. This material is just a guideline for the investors to do further investigations)
