KFM Weekly Investment Update: Friday, 18 March 2016

Local Market Summary:

• National Research Institute (NRI) released three reports on the Sovereign Wealth Fund (SWF) renewing calls to government to address issues regarding the SWF legislation. The reports are; (1) Review of Legislation establishing the Sovereign Wealth Fund, (2) Study on SWF: The efficacy of the withdrawal formula, and (3) PNG SWF Bill: Key weaknesses and proposals for improvement

• Minister for Petroleum Energy, Hon Ben Micah, stated in the LNG Asia conference in Singapore that the PNG LNG Project will exceeding expectations by producing above the original capacity of 7.4m tons per annum. According to him, LNG supply and demand should even out by 2022

• Kina Asset Management (KAM) recorded a full year 2015 net profit of K4.7m. KAM Chairman, Sir Rabbie Namaliu, said that KAM achieved an investment gain of 9.0% driven by growth of their international portfolio. KAM share price closed at 85 toea in 2015 and has increased 15.3% year to date to 98 toea; the company announced an NTA of K1.04 as at the 29th of February 2016

• City Pharmacy (CPL) declared full year 2015 net profit after tax of K6.6m compared to K6.9m in the previous year. CPL Chairman, Mahesh Patel, said sales volume was negatively affected by the fire at CPL’s largest retail outlet, Waigani Central. CPL share price closed at K1.33 in 2015 and has dropped 3.0% year to date to K1.29

• PNG Air (CGA) posted 2015 full year net loss of K9.4m. CGA revealed that there was a decline in revenue from its charter business largely due to slow down in in the resource and mining industry. Despite that decline in income, CGA pointed out a few highlights for the year (rebranding to PNG Air and launch of first two ATR 72-600 aircrafts into the fleet). CGA share price closed at 33 toea in 2015 and has dropped 54.5% year to date to 15 toea

• NGIP Agmark (NGP) recorded a full year 2015 net loss of K15.2m compared to a net loss of K12.9m in the previous year. NGP share price closed at 73 toea in 2015 and has remained unchanged year to date

• SP Brewery (SP) Managing Director Stan Joyce said whilst commemorating the first successfully produced brew from local cassava starch that the company is looking to source local materials. SP had set up the SP Cassava Project with Morobean farmers to supply starch to supplement its production which is expected to replace up to 30.0% of imported malted barley. Further he said that the project had a capacity to produce up to 38,000 tons of starch per annum much of which is earmarked for sale to the food industry

• Stanley (Raintree) Hotel and Suites opposite Vision City is scheduled to open in June and commence full operation in July 2016, according to its general manger Geoff Haigh. This will be the latest inclusion in the luxury class hotel industry and is expected to compete with existing hotels

• This week’s BPNG auctions in Central Banks Bills were only offered for 28 days with an oversubscription of K470.0m out of a total of K341.0m on offer. The weighted average yield was 1.17%. KFM expects short term rates to remain flat around current levels

• This week’s BPNG auctions in Treasury Bills were oversubscribed by K340.8m out of K271.8m on offer indicating strong appetite for the short term securities. Weighted average yields were 2.8% for 91 days, 4.8% for 182 days and 7.7% for 364 days from this week’s auctions

• After no GIS auctions in the first two months, the first auction this week saw an oversubscription by K98.7m out of K90.0m on offer. The weighted average yields for the series 2019, 2021, 2025 and 2029 were 9.0%, 11.8%, 12.0% and 12.0% respectively

• The KSi Index ended the week up by 12.1% to close at 3,779.90 points, supported by an increase in share price of Newcrest Mining (+32.0%) while the KSi Home Index was down by 0.1%, reflecting decline in Credit Corporation (-0.6%), to end at 9,113.92 points (refer graph)

International Market Summary:

• The US Federal Reserve left rates unchanged on Thursday and also reduced their projections for the number of rate hikes in 2016 to two from four. This was a greater drop than previously believed by most market participants

• European stocks fell on Thursday as a drop in airline Lufthanan and property group Immofinanz took the shine off an update from the US Federal Reserve that boosted commodity share prices

• Asian stocks headed for a weekly gain as material and energy companies climbed after oil topped $40 a barrel. Optimism was tempered in Japanese shares after the yen jumped against the dollar. The regional gauges, the MSCI Asia Pacific Index was slight up to 128.72, poised for a 1.5% increase and longest streak of weekly advances since July 2014

• Oil gained on Thursday after on the back of slight improvement in the weekly crude oil inventories and following news producers will meet next month in Qatar to discuss a proposal to freeze output

• PGK/USD remained unchanged for the week ending at 0.3265, PGK/AUD fell by 1.2% to close at 0.4264 caused by a pick-up in AUD/USD, up 1.2% to close at 0.7659

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pdfKFM Weekly Investment Update: Friday, 18 March 2016

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