KFM Weekly Investment Update: Friday, 28 February 2014

Local Market Summary

• The PNG Government has secured a US$239 million loan with the Asian Development Bank (ADB). A total of US$109 million will go towards improving the Highlands Highway with the balance invested in the Aviation Development Program.

• The Asian Development Bank (ADB) reveals that despite improvements in the business environment over the past decade, law and order and corruption remain the most severe constraints in PNG. This analysis was captured in a publication “The Challenges of Doing Business in PNG”, which was released early this week.

• The National Superannuation Fund (Nasfund) posted a Net Profit of K332.2 million in 2013, up 50% from the previous corresponding period. The super fund will pay members 11% of their accumulated individual contributions, equivalent to more than K307 million.

• Treasury Minister Don Polye has stated that all proceeds from the sale of the liquefied natural gas (LNG) project will go directly into the Sovereign Wealth Fund for future investment purposes.

• The issue of climate change is real and the Government is putting together strategies to address the issue, Forest and Climate change Minister said on Friday.

• New Britain Palm Oil has announced a profit before tax of USD 17.3 million which is 78.2% lower compared to the previous year. Revenue was also down by 17.5% to USD 558.7 million compared to the previous year which was USD 677.0 million.

• Oil Search Limited (OSH) as announced a 17% increase in NPAT of US $205.7 million with both revenue and production up by 6%. The Company has also announced the acquisition of a 23% stake for $900 million in the Elk and Antelope gas fields. The acquisition will be funded by issuing 149 million new shares at A$8.20 per share to the PNG government. The market reacted positively to the release. OSH resumed trading at A$8.67 (see chart in the PDF attachment below)

• Digicel (PNG) Ltd has announced that it will be the first internet provider to introduce long term evolution (LTE) technology next month. CEO, John Mangos is confident that the move would strengthen the country’s data backbone and improve the offering of wireless broad band and data related services.

• A condensate marketing agency agreement was recently signed by The National Petroleum Company of PNG (NPCP) and Oil Search Ltd. Under the deal, OSH will be allowed to sell NPCP’s share of the condensate produced from the Hides and other LNG project related oil and gas fields in the Highlands.

• PNG kina has weakened by roughly 3% YTD, as weak export proceeds fail to match continuing import demand.

• BPNG Treasury auctioned K200 million in long dated bonds this month. Yields increased as demand did not meet supply.

• KSI index and KSI Home Index were flat at 3,613.98 and 8,076.42, respectively.

International Market Summary

• Woolworths has posted a mixed profit result for the first half but upped its guidance for the full year. Woolworths reported an underlying first half net profit of $1.32 billion.

• Commonwealth Bank of Australia could issue up to $900 million of fresh equity through its dividend reinvestment plan (DRP) in what amounts to a defacto capital raising. It highlights the bank’s appetite for more capital and proves companies are in no mood to snap their equity issuance binge.

• The Reserve Bank is facing a new headache as a big drop in company spending adds to the evidence that the rest of the Australian economy is struggling to take up the slack from the slowdown in mining.

• Japanese investors might be taking a break from Australian assets, but they’ll be back and so too will their appetite for the local currency.

• European stocks broadly lost ground amid increased political tension in Ukraine and as falling German inflation highlighted concerns about the risk of deflation in the Euro zone.

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

pdfKFM Weekly Investment Update: Friday, 28 February 2014

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