MAKAR: Fundamental Analysis and Behavior after Lock-in period

Makar Jitumaya Suri Hydropower Company Limited is a hydro-power company with a paid-up capital of Rs. 76,00,00,000 and listed in NEPSE as MAKAR. It was established in 2065 B.S. as a private company and was later transformed as public limited under the Company act 2053 on 2075 B.S. Makar Jitumaya Suri Hydropower Limited was incorporated on 31st Ashad, 2078, after the merger of Makar Jitumaya Hydropower Private Limited with Suri Khola Hydropower Limited. Let’s look at some of the fundamental indicators of MAKAR in its fourth-quarter financial statements published for FY 2080/81, FY 2081/82 and FY 2082/83:

We can see that the company has improved its fundamentals drastically as its net worth per share, net profit, and EPS all increased simultaneously from FY 2080/81 to FY 2082/83. P/E ratio and PBV ratio has also improved. The sharp improvement in MAKAR's financial indicators in FY 2081/82 was primarily supported by growth in electricity-generation and power-sales revenue as revenue generation became more substantial and consistent which MAKAR maintained in FY 2082/83 too. The company’s financial reports show that paid-up capital remained unchanged while profit and EPS increased substantially. Since the paid-up capital remained at Rs. 76,00,00,000, the improvement in earnings was reflected directly in profit and earnings per share. It also increased net worth per share without having to issue different shares.

Behaviour After Lock-in Period Expiry 

MAKAR published a notice regarding the expiration of the lock-in period of its shares, that the lock-in period will expire on 28th Chaitra, 2082. The company now has 76,00,000 units of shares listed on NEPSE of which the promoters held 53,20,000 units, the residents of the project-affected held 6,78,600 units, and the company's employees held 32,028 units. These shares are now able to be traded in the secondary market. The company’s lock-in period expired at the end of third quarter of FY 2082/83.

The total volume traded during the 30 trading sessions before the expiry was approximately 371.43 thousand shares, whereas the corresponding volume after the expiry increased to approximately 516.56 thousand shares. The increase in volume indicates that market activity in MAKAR was higher after the lock-in period expired. Approximately, 5.59 million shares have been traded since the lock-in period expired.

Overall, MAKAR showed a significant improvement in its fundamental indicators between FY 2080/81 and FY 2082/83. The company moved from a net loss to sustained profitability. Trading activity also increased after the lock in period of its shares expired and if we compare the trading volume 30 trading days before and after the expiry there is approximately 39.1% increase in trading.