KFM Weekly Investment Update: Friday, 13 March 2015

Local Market Summary

• The State will adopt a feasibility study in partnership with the Belgian Chocolate firm to establish a chocolate factory in Wewak. The State’s willing to fund 50.0% of the cost of study says Trade Commerce and Industry Minister Richard Maru. He added that the potential partnership would push for downstream processing of PNG produce from organically grown cocoa for PNG and abroad while being competitive in terms of quality.

• During the Australia-PNG Business meeting in Sydney, Prime Minister Peter O’Neill revealed the States’s aim to sell its 50.0% stake in Air Niugini, preferably to state owned entities. This is in line with the State’s privatisation move to restructure its entities says Mr O’Neil adding that interested investment organisations and development partners have already submitted expressions of interest.

• Petromin Holdings is considering closing Tolukuma Gold mine (TGM) in Goilala due to failed attempts at bringing a credible partner. Board Chairman Sir Brown Bai mentioned this at a Board Meeting last week adding that the high operating costs and subdued gold price had being an ongoing challenge for TGM which Petromin may not sustain. The final decision is subject to further consultation by the management with appropriate regulators and stake holders.

• Toyota Tsusho Ela Motors (PNG) opened a new logistics centre in Lae, a milestone after years of planning and construction. Toyota Tsusho PNG Managing Director and acting Chief Executive Officer, Shigeru Ito said that the facility will stock the three core functions previously spread across different sites. i.e. ‘parts distribution and Yamaha stock; vehicle bond yard for 300 units; and a holding area for up to 320 vehicles.

• OSH and Santos were disappointed with the discovery of water in deep exploration beneath the existing Hides Field as the well was targeted as a potential large new gas location that would have been used for a cost effective expansion of the project. A spokeswoman of OSH stated that Hides Deep failure does not impact the immediate expansion of the project though, it reduces options for gas supply to the PNG LNG expansion and difficulties in locating gas resources according to analysts.

• CCP recorded a profit after tax of K24.5m for 2014 (58.6% decline) compared to K59.1m profit after tax in 2013. Chairman Garth Mcllwain said a total dividend payment of K41.2m was distributed to shareholders for the financial year 2013 at 13 toea per share. An 8.0% increase from K38.2m (12 toea per share) distributed for the financial year 2012.

• Steamships reported a profit after tax of K88.7m for the year 2014. A 22.2% decline from K114.0m profit after tax reported in 2013. Despite its’ performance, the company is able to pay a final dividend of 60 toea per share pending approval at the company’s annual general meeting in May.

• Airlines PNG released a preliminary news flash for its financial year end 2014, indicating a Net loss of K20.2m (down 14.0%) due to increased operational cost.

• CPL released its preliminary results for the year 2014 reporting a net after tax profit of K6.9m (down 57.8%) compared to K16.4m in the previous corresponding period.

• Kina Asset Management announced an NTA of K1.06 per share for the month of February 2015 up 5 toea from the previous month.

• This week’s BPNG auctions in Treasury Bills were oversubscribed by K44.4m out of the K160.0m on offer. Weighted average yields remained flat at 4.7% for 182 days and 7.4% for 364 days from last week’s auctions.

• The KSi index ended the week 0.1% lower to 3,648.7 from 3,651.1. Similarly the KSi Home Index closed 0.3% lower to 26.5% for the week to 9,744.1 from 9,770.7.

International Market Summary

• Asian markets rose after a rebound in US shares due to unexpected drop in American retail sales that braced the case for lower interest rates for longer in the world’s largest economy.

• S&P 500 finished 0.3% lower to 2,065.9 at the close in New York, a8er losing 1.9% in the previous two sessions. Similarly, the Dow Jones Industrial Average dropped 0.7%, to 4,893.3. Both indexes posted their strongest gains year-to-date.

• Foreigners have snapped up $17.7b in Japanese shares and as the Topix index rallies without a tumbling yen eating into gains.

• European share market ended a highly volatile session on a mostly downbeat note, as investors digested disappointing US retail sales and mixed corporate news.

• Copper futures closed higher buoyed by better-than-expected Chinese data.

• Oil prices fell to a six-week low as swelling crude inventories weighed on the market. Light Crude closed at 47.13 or 5.0% from 51.1 so as Brent Crude closing 57.3 or 4.1% from 60.9 for the week.

• Gold prices pared gains, as investors turned wary ahead of a key Federal Reserve meeting next week. Closing the week to 1,159.8 or 0.4% from 1,197.7.

• PGK/USD remained unmoved for the week to 0.3775 while the PGK/AUD appreciated 0.4% to 0.4917.

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