Kathmandu. The risk of investors getting trapped in the shares of Guardian Micro Life Insurance, which has been trading in a positive circuit since its introduction in the secondary market, is increasing.
Guardian Micro Life is the first micro insurance company to be traded in the secondary market. The shares of this company were traded on the Nepal Stock Exchange (NEPSE) since Magh 27. Yesterday, Falgun 25, the 19th day, the shares of Guardian Micro Life are undergoing a positive circuit.
Nepse had set a minimum price of Rs 100.34 per share and a maximum price of Rs 301.02 per share for trading in the secondary market. The maximum range set by Nepse was Rs 301. Guardian Micro Life shares were last traded at Rs 1,839.40 per share on Sunday.
A total of 7.5 million shares of Guardian Micro Life are listed on NEPSE. Of which 5.25 million shares belong to the founding group and 2.25 million shares belong to the general public (including employees, Nepalis employed abroad, and collective investment funds).
The share price of Guardian Micro Life is being unnecessarily inflated due to low volume. The company’s financial health does not look good. As of the second quarter of the current fiscal year, the company’s annualized EPS is only Rs 4.41. The company’s book value, which has a PE ratio of 595.49 times, is Rs 77.07.
The company engaged in small life insurance business has earned a profit of only Rs 1.15 crore till the second quarter. The company’s total insurance premium income till this period is Rs 125.5 crore.
As of the second quarter, the company has Rs 1.351 lakh in its disaster fund, Rs 7.784 lakh in retained earnings, Rs 3.358 lakh in other equity and Rs 8.62 crore in life insurance fund. The company’s solvency margin ratio is 1.97.
According to market experts, investors are unnecessarily raising the share price of Guardian Micro Life. ‘The company’s business progress is not visible, the company is doing small life insurance business in a limited area,’ said market expert Binod Bhandari. ‘With the share price of a fundamentally weak company increasing like this, the fear of investors getting trapped has increased. One should invest in shares by looking at the technical and fundamental aspects of the company. Otherwise, the risk of getting trapped is high.’
Old stock market investor Mohan Tripathi also says that investors are unnecessarily raising the share price of Guardian Micro Life, which is fundamentally weak. ‘Their bet is to reduce the share price of this company by Rs. 2,000. “Intelligent investors are buying shares at high points,” said Tripathi. “Investors are jumping into shares of weak companies based on what others say. In the end, it is the intelligent investors who are the ones who get caught.”
Tripathi suggests investing only after understanding the company’s financial condition.
