Financial results (4th quarter) - SCB
Paid up capital: 1.8539 Arab
Reserve: 3.5052 Arab
Profit: 1.2179 Arab
EPS: 65.70
Problems and Challenges
A. Internal:
1. Inflationary and regulatory pressures
2. Managing staff aspirations in an uncertain socio-economic environment
B. External:
1. Unstable socio-political environment
2. Deteriorating risk environment
3. Growing local competition
The above a few figures and problems and challenges mentioned by SCB tell a lot. Now, SCB should either expand its business and for this, should adopt growth strategy or scale down and should sell it to some other enthusiastic promoters. SCB's above assessment of challenges clearly reflects the managements understanding of its limitations for now. Hence, SCB could not stay in period of indecision for long. I believe, this indecision seen for the past few years has contributed towards its price stagnation.
First, I think, SCB will go for growth. Hence, it will go for higher % of bonus shares and will stay for a long period in Nepal being as a highly regarded company. Its reserve fund is could provide a good foundation for this.
Second, it will sell its business to some other international banks. In that case, the new enthusiastic entrant will add value and try to take the new entity's image and standing up.
In both situations, long-term investors will be good position. However, for traders that would not be the same. If the period of indecision and stagnation ends soon, that would be better for all. I am hopeful that we will see some light in its next dividend declaration.
There is a Filipino saying, "If he has no dog
to slaughter, he will not invite for a dog-meat dinner." Similarly, a
finance/management Czar never tells that his company may leave Nepal if
NRB tries to force to increase the paid up capital to 5 Arab for
commercial banks. Though, the SCB CEO told this informally as reported,
but there is something deeper in regard to addressing the NRB plan, if
NRB goes ahead.
Hence,SCB has, most probably, decided about its growth strategy/scalling down plan by now.
I will read that if the bonus share is 20% or more, SCB has decided to continue their operation in Nepal and if it is much less than that, say less than 15%, SCB has no intention to grow here. Therefore, 20% or above bonus, I will buy. If it is between 15% and 20%, I will hold and if it is less than 15%, I will sale, irrespective of profit or loss.
I like to base my logic on certain assumptions and try to take decisions independently from profit or loss if these assumptions tell me that there is high probability of long-term impact.
Disclosure: I have second highest investment, after Nabil, in SCBN.
Hence,SCB has, most probably, decided about its growth strategy/scalling down plan by now.
I will read that if the bonus share is 20% or more, SCB has decided to continue their operation in Nepal and if it is much less than that, say less than 15%, SCB has no intention to grow here. Therefore, 20% or above bonus, I will buy. If it is between 15% and 20%, I will hold and if it is less than 15%, I will sale, irrespective of profit or loss.
I like to base my logic on certain assumptions and try to take decisions independently from profit or loss if these assumptions tell me that there is high probability of long-term impact.
Disclosure: I have second highest investment, after Nabil, in SCBN.
- Rajesh Sharma
