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KFM Weekly Investment Update: Friday, 20 May 2016

Local Market Summary:

•Prime Minister Peter O’Neill speaking at the 32nd Australia-Papua New Guinea
Business Forum said given the current global economic downturn, PNG has
demonstrated that it can still manage its economy during trying times. He added
that the domestic economy of PNG is expected to grow at a very moderate rate
this year as we deal with the lower commodity prices that we are experiencing

•Kina Securities Limited (KSL) held its first Annual General Meeting (AGM) as a
listed entity on Wednesday 18th in Port Moresby. Chairman Sir Rabbie Namaliu
said that the two significant highlights of the company in 2015 were the acquisition
of Maybank and the trading of Kina on the Australian and PNG Exchanges

•KSL CEO Syd Yates said following the acquisition, Kina operates as the fourth
largest bank in PNG, with more than 11,000 clients, 7 branches and an expanding
electronic network, and the acquisition was vitally important for the organisation,
creating a solid platform for Kina to be a stronger competitor just as PNG’s
financial services sector is maturing and consumers are increasingly demanding
better products and improved services to cater for their expanding aspirations

•Bank of South Pacific (BSP) also held its AGM this week, Chairman Sir Kostas
Constantinou stated that improvements in FY2015 performance were led by an
11.0% increase in net interest income on the back of the continued growth in
lending. The Chairman further announced Q1 2016 results, with the bank
generating net profit of K143.7m up 10.0% compared to the previous
corresponding period. The Board announced a Final Dividend of 63 toea per share
bringing the total dividend per share to 85.5 toea for the year 2015, a c.13.0%
increase from the previous year

•Oil Search Limited (OSH) announced that they have signed a definitive agreement
under which OSH will acquire all of the outstanding shares of InterOil. The implied
transaction value of the OSH share component of the consideration is US$40.25
per InterOil share, for a total transaction value of approximately US$2.23bn, which
represents a significant premium to InterOil’s recent trading prices

•Additionally, OSH signed a MoU with Total SA (Total) to sell down 60.0% of the
interest acquired from InterOil in PRL 15 and 62.0% of InterOil’s exploration assets
(including PRL 39 and four exploration licences). The terms of the sell down will be
consistent with the terms of the InterOil Transaction and reflect each party’s
ownership interest. Following completion of the InterOil Transaction and the Total
MoU, Oil Search’s interest in the Papua LNG Project will increase to 29.0% and
Total’s stake will increase to 48.1% (assuming the PNG government exercises its
back-in rights of 22.5%)

•Kina Asset Management Limited (KAML) announced an NTA of K1.13 as at the 30
April 2016

•Singapore based Jaya Holdings entered into a reverse takeover agreement to
acquire PNG based Heduru Moni (Moni Plus) for S$232.0m. Jaya Holdings plans
to undertake both a two-into-one share consolidation with the issue shares priced
at S$0.3. Moni Plus MD, David Kelso said it is our long term aspiration to seek a
listing on an international global exchange like the Singapore Exchange

•Air Niugini advised the public that they are leasing a Boeing 767-300 from
Euroatlantic out of Portugal while two of its Boeing 767 aircrafts are to undergo
scheduled maintenance overseas. The Euroatlantic aircraft is under a ‘wet lease’
arrangement which means that Euroatlantic provides the aircraft with pilots, senior
crew and engineers while the rest of the cabin crew are from Air Niugini

•This week’s BPNG auctions in Central Banks Bills were offered for 28 days only,
with an under subscription of K359.0m out of a total of K445.0 on offer. The
weighted average yield was 1.1%

•This week’s BPNG auctions in Treasury Bills were oversubscribed by K468.3m out
of a total K315.0m on offer indicating stronger appetite for the short term
securities. The weighted average yield for 63 days was 2.4%, 91 days was 2.7%,
182 days was 4.7% and 364 days was at 7.7%

•The KSi Index ended the week up by 0.1% to close at 4,311.38 points while the
KSi Home Index was up by 1.6%, supported by an increase in share price of Bank
of South Pacific (+2.0%) to end at 9,200.73 points

International Market Summary:

•US stocks recovered some of the early losses but ended lower on Thursday
following the release of minutes from the Fed’s latest meeting, which emphasized
the central bank’s intent to raise interest rates soon, provided the US economy
continues to strengthen. The S&P 500 fell 7.6 points, or 0.4%, to 2,040.0 and
turned negative for the year (Refer to graph)

•The head of the New York Federal Reserve said on Thursday that a rate rise in
June or July would likely be appropriate and that he was “surprised” by Wall
Street’s subdued expectations for when the central bank would next tighten policy

•Australian shares have again proved resilient to global jitters, this time related to
US rate hike talk, to finish the day higher and in the process racking up their sixth
straight week of gains. The ASX 200 added 28 points, or 0.5%, for the session,
and 22 points for the week to close at 5,351.3

•PGK/USD remained unchanged for the week to end at 0.3160, PGK/AUD gained
0.4% to close at 0.4368 caused by a fall in AUD/USD, down 0.5% to close at
0.7235

Click the link below to view the full daily market report in PDF.

pdfKFM Weekly Investment Update: Friday, 20 May 2016

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