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KFM Weekly Investment Update: Friday, 27 February 2015

Local Market Summary

• The National Superannuation Fund (Nasfund) has recorded a profit after tax of K258.5m in 2014. Nasfund Chairman Mr William Lamur said the Board approved a crediting rate of 8.5% equating to K264.0m to be paid to members’ accounts for the 2014 Financial year.

• Bank South Pacific’s (BSP) operating profit increased by 16.1% to K507.3m from K436.8m in 2013. BSP board chairman Mr Kostas Constantinou released the full year report for 2014, saying BSP’s revenue was up 4.0% mainly from treasury bills and inscribed stock. Income from foreign exchange dropped from K184.5m in the first half of 2014 to K83.0m in the second half. This was due to changes in margin bands on foreign exchange. Furthermore, BSP’s total assets were K15.4b. This was in line with KFM’s projected for full year profit 2014 of K506.5m.

• Oil Search’s (OSH) financial performance recorded a 72.0% increase in profit. OSH posted a profit of US$353.2m (K942.5m) in 2014 compared with US$206.0m in 2013. Revenues last year more than doubled to US$1.61b (K4.3b). OSH has received more than US$850.0m (K2,268.0m) revenue from the PNG LNG Project’s first distribution. Managing director Mr Peter Botten said OSH was financially and operationally strong enough to weather a long period of lower prices.

• Furthermore, OSH is paying 44.0% of last year’s core profit as dividends to shareholders. MD Mr Botten said the core profit for the year was US$482.8m (K1.2b), an increase of 135.0% from 2013. The board has approved the payment of a final unfranked dividend of 8.0 US cents per share, as well as special unfranked dividend of 4.0 US cents per share, taking the total dividend payment to 14.0 US cents per share.

• Sime Darby this week announced it now owns more than 90.0% of New Britain Palm Oil (NBPOL). In a market report Sime Darby said it has received valid acceptances of the offer in respect of 149.7m NBPOL shares, representing approximately 98.8% as at the expiry date 23/02/15. The £547.0m (K2.1b) which Sime Darby offered for NBPOL shares last October was for a 51.0% stake. NBPOL chief executive Mr Nick Thomson had welcomed the new partnership saying PNG needs foreign investment particularly in the agriculture sector.

• NBPOL has delisted its shares from the London Stock Exchange. The firm has cancelled trading in its shares after announcing 98.8% of shareholders have now accepted a takeover offer from Sime Darby Plantation this week.

• Nautilus announced the commissioning and factory acceptance testing of its third and final seafloor production tool (SPT), the auxiliary cutter. CEO Mr Mike Johnston expressed confidence that the company was now on track to complete testing phase and deliver 3 SPT’s in the 4th quarter of 2015.

• This week’s BPNG auctions in Treasury Bills were undersubscribed by K86.3m with a weighted average yield of 4.6% for 182 days and 7.4% for 364 days.

• This months BPNG auctions in Government Inscribed Stocks was oversubscribed by K65.0m for K200.0m of bonds on offer. The weighted average yields were 9.8% for 2018, 10.8% for 2020, 11.1% for 2022 and 11.6% for 2023 series.

• The KSi index was up 1.6% to 3,650.73 for the week and KSi Home Index closed 1.7% higher for the week at 9,798.62.

International Market Summary

• Asian shares were mostly lower as a sharp overnight pullback in crude oil prices dampened risk appetite. Strong factory output data and a weaker yen pushed Tokyo’s Nikkei to a fresh 15-year high closing 2.5% up for the week at 18,797.94.

• US Federal Reserve officials held its meeting this week and indicated that rates will not go up anytime soon citing given current low inflation rates and employment levels in the economy. The S&P500 closed the week at even 2,1110.74.

• The US Dollar surged against a basket of currencies the previous day as US economic data while comments from Fed officials prompted investors to raise their bets on a rate increase. The euro edged up 0.1% to US$1.1213, but remained not far from a one-month low of US$1.1184.

• Australian shares managed to overcome a 9.5% fall in Woolworth thanks to a late rally led by CBA, Telstra and CSL. The supermarket owner shocked with an earnings downgrade. The benchmark S&P/ASX 200 index closed higher for the week, up 0.8% to 5928.8.

• Crude oil futures rebounded with Brent heading for its biggest monthly gain as supply outages in the North Sea and renewed fears of gas supply disruption in Europe supported prices. Better than expected oil demand have helped Brent prices rise 15.0% from January’s close of US$52.99. Brent crude rose to US$61.03 a barrel to close the week (refer to graph in the PDF attachment below).

• PNG/USD closed unchanged at 0.3747 while PGK/AUD appreciated 0.6% to 0.4807 for the week.

Click on the link below to view full report in PDF.

pdfKFM Weekly Investment Update: Friday, 27 February 2015

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