KFM Weekly Investment Update: Friday, 06 February 2015

Local Market Summary

• Treasury Secretary Mr Dairi Vele outlined the PNG LNG revenue flows into the 2014-2019 budget. Speaking at the Leaders Summit this week, he outlined that in 2015 a total of K2,156.3m in LNG revenue is projected to flow into the state, which is made up of LNG tax and dividends. These proceeds would be divested into the SWF fund and the government holding company NPCP.

• Telikom PNG increased its portfolio of media subsidiaries with the latest acquisition being EMTV. The Fiji TV announced the agreement to sell subsidiary, Media Niugini Ltd, which runs EMTV in PNG to Telikom PNG for K27.0m. It is now awaiting necessary shareholders’ and government approvals for the next 60 days for the sale to be sealed and completed. Telikom PNG already owns FM100 and Datec PNG.

• Cash strapped PNG Power Limited (PPL) has announced the recovery of K70.0m from its outstanding arrears within the span of three weeks after the announcement of the state of emergency for collecting outstanding bills. PPL owed BSP K45.0m in an overdraft facility but now is in a position to repay the overdraft.

• ExxonMobil PNG, has advised that the PNG LNG project has satisfied all of its financial completion tests. In the statement by Oil Search (OSH), MD Mr Peter Botten said that the financial completion is a major milestone for the project, which is now operating at levels above expectations. OSH will receive more than US$700.0m in the project’s first distribution to co-venturers.

• OSH MD Mr Botten said that the company has been reducing its exploration expenses. Speaking at the leaders Summit in Port Moresby he noted that there was a substantial oversupply of oil which has attributed to drop in oil prices. He further noted that this will obviously have a negative impact on the revenue streams in the oil and gas business and the LNG project.

• New Britain Palm Oil shareholders have until next month to make their decision on the offer from Sime Darby to buy all shares. According to Sime Darby the offer was made on 23/10/14 and its offer documents contained all of the required information. It is now up to the shareholders to make their decisions by the end of the offer on 20/03/15.

• Marengo Mining says its work programme for this year will continue to focus primarily on analysing geologic evidence from previously completed work for its Yandera project in Madang. CEO Mr Pieter Britz said “All work was focused on improving economic viability of the Yandera project”.

• Bank South Pacific (BSP) has launched a new finance subsidiary to help businesses with asset finance needs. Speaking at the launch of BSP Finance, CEO Mr Robin Flemming said the new subsidiary would offer an alternative to PNG market with an expanded product range that included term deposits, finance lease and commercial loans.

• This week’s BPNG auctions Treasury Bills were undersubscribed by K77.0m for 364 days with a weighted average yield of 7.4%. There were no offers for 182 day bill.

• The KSi index was up 1.9% to 3,661.50 for the week and KSi Home Index closed 4.3% for the week at 9,991.30.

International Market Summary

• US stocks rallied, as a rebound in oil prices and upbeat company news helped push the Dow into positive territory for the year. For the week, DJIA gained 4.2%, Nasdaq gained 2.8% and the S&P 500 gained 3.4%.

• Greece stocks sold off after the European Central Bank restricted liquidity to Greek banks, while the broader European stock markets got a boost from the rally in oil prices. The FTSE closed the week up 1.7% while in France, the CAC 40 closed higher in the week 2.2%.

• The ASX continued its positive trend ending a record 12th straight day of gains this week. This was in spite of the Reserve Bank of Australia indicating in its monetary statement that there is a lesser possibility that the cash rate would be cut in March. The ASX S&P 200 surged 4.1% at 5,819.40 on the last trading day of week.

• Light Crude closed the week up 6.0% to reclaim the US$50 a barrel level, as better-than -expected jobless claims data in the US and a higher economic growth forecast for the European Union helped improve the outlook for energy demand.

• Gold fell as US equities market improved with shifting expectations for US interest rates hemmed in traders’ appetite for the haven asset. It closed the week 1.0% lower.

• PNG/USD stayed at 0.3814 while PGK/AUD depreciated by 0.9% to 0.4867 for the week.

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pdfKFM Weekly Investment Update: Friday, 06 February 2015

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