KFM Weekly Investment Update: Friday, 03 July 2015

Local Market Summary:

•The National Government’s total debt outstanding in the March quarter was more
than K16.0b, K789.7m greater than the December quarter according to BPNG. The
increase was largely attributed to an increase in the issuance in T-Bills and GIS, whilst
the depreciation of the PGK was the main contributor to the increase in foreign debt
obligations. Additionally, total revenue, including foreign grants, during the March
quarter was 30.0% lower than revenue in the previous corresponding period (pcp)

•PERNIX Group, specialising in power generation, construction and infrastructure
development, is set to establish operations in PNG in next two months. According to
the company the ongoing Government reforms in trade and investment sector as
well as overall investment and business climate in PNG played a role in the expansion

•Credit Corporation (CCP) recorded a fall in Net Profit down 3.0% to K24.5m in 2014.
Management indicated that the decline in profit was attributed to a lack of consumer
activity and subsequent fall in earnings as a direct consequence of the winding down
of the PNG LNG Project’s construction phase. Furthermore the management stated
that valuation losses on the company’s BSP holdings contributed to a large negative
adjustment. CCP also declared a dividend of 13.0 toea per share

•Japan’s average price for imported liquefied natural gas (LNG) fell, dragged down by
declining oil markets. The majority of LNG imports in Japan are oil-linked long-term
contracts that respond to falling oil prices with a _me lag of several months. LNG
import prices averaged US$8.8 (K24.2) per million British thermal units (mmBtu) in
May. Imports from PNG were the cheapest on a cost, insurance and freight (CIF)
basis last month at $7.7 per mmBtu. A flood of new supply coming on stream later
this year in Australia and the United States is capping the price of LNG

•The Frieda River copper-gold project in West Sepik province is progressing well under
the stewardship of PanAust and joint venture partner Highlands Pacific. Frieda River
remains on track to become a world-class copper-gold operation which will be an
important driver of economic growth for local landowners, communities and PNG

•Digicel has filed for its initial public offering (IPO) with the US Securities and Exchange
Commission (SEC), the offering is valued up to $200.0m (K547.0m). The company
plans to list under the symbol DCEL. Digicel intends to use the net proceeds of the
offering for general corporate purposes, including capital expenditures and acquisitions
and to repay existing indebtedness

•Kina Asset Management Limited (KAML) held its AGM on the 30/06/15 at Ela Beach
Hotel and noted all resolutions were passed by its shareholders. KAML recorded a
net loss of K0.4m underpinned by subdued performance of major exposures in
BSP and OSH and valuation losses in international holdings. A 2.0 toea dividend was
declared at the meeting and payment details are yet to be confirmed

•This week’s BPNG T-Bill auction was undersubscribed by K144.5m out of the K200.0m
on offer across both 182 and 364 terms. Weighted average yields were 4.5% for 182
days and 7.2% for 364 days from the week’s auctions

•The KSi index was flat from the previous week while the KSi Home Index ended the
week higher 0.1% to 9,765.6

PNG welcomes the South Pacific teams and delegates

International Market Summary:

•IMF warned on Thursday that Greece would need an extension of its EU loans and a
potentially a large debt write-off if it cannot implement economic reforms and its
growth slows; Greece needs €60bn in new aid, says IMF and according to the Economist
Europe’s future in Greece’s hands

•Chinese stocks closed the week falling, as authorities set their sights on short sellers
and market manipulators in their latest effort to halt the slide. Shanghai Stock Index
fell 5.8% on Friday, after shedding 3.5% Thursday; while the Shenzhen Composite
shed 5.4% after falling 5.6% the previous day

•Japan’s Nikkei share average inched up on Friday, paring earlier losses thanks to
gains by banking sector shares and other large-caps, although caution ahead of a
weekend Greek national vote limited overall action. The Nikkei share average rose
0.1% to 20,539.7 after losing as much as 0.4%

•Oil prices dropped as a rising US rig count stoked fears of oversupply and after Chinese
regulators opened an investigation into suspected stock market manipulation.
Front-month US crude futures were trading at US$56.7 per barrel, down 27.0% pcp

•PGK/USD ended the week lower by 0.3% to 0.3635 while PGK/AUD was up for the
week by 0.4% to 0.4793

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pdfKFM Weekly Investment Update: Friday, 03 July 2015

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