KFM Weekly Investment Update: Friday, 07 March 2014

Local Market Summary

• The Government has formed a new state-owned company PNG DataCo Ltd. Public Enterprise Minister Ben Micah said DataCo was approved and created to oversee transformation and modernisation of the country’s communication infrastructure and to overhaul the information and communication sector

• Inter Oil Limited completed the partnership deal with Oil Search Limited (OSH) where OSH agreed to acquire 22.84% interest in Elk-Antilope fields (the largest underdeveloped gas resource in PNG) for a consideration of US$900 million plus
further contingent payment.

• OSH delivered strong operational and financial performance in FY 2013, driven by a 9% increase in oil and gas sales for the year despite slightly lower realised oil prices compared to previous corresponding period (pcp). After Tax Profit of USD205.7 million, a 34% increase on pcp of USD257.2 .This was mainly attributed to a 6% increase in production of oil & gas (6.74 mmboe) in FY 2013 compared to 6.38 mmboe in the 2012 full year.

• Furthermore OSH said it would fund its acquisition by issuing 149 million new shares at A$8.20 a share to the PNG government, allowing the government to retain a strategic stake in the company after giving up a A$1.68 billion stake to Abu Dhabi’s International Petroleum Investment Co. Despite the possibility of issuing new shares to PNG Government at A$8.20, the market reacted favourably to OSH’s announcement seeing the share price close at A$8.89 for the week (see chart in the PDF attachment below ).

• New Britain Palm Oil released preliminary results for the year ending 31 December 2013 with top line revenue plunging 17.5% o US$558.7 million due to lower price of Oil Palm. According to the results, profit before tax dived 78.8% to US$17.3 million while earnings per share attributable to shareholders fell 79.4% to US 74 cents.

• Bank South Pacific (BSP) Chief Executive Officer, Mr Robin Fleming announced during the week that the group achieved an increase of 11.3% on the consolidated 2012 operating profit of K545.3 million, while its assets increased approximately K2.3 billion to K15.8 billion. He said the profit was sound and would ensure its shareholders get a good return.

• Commercial Banks ANZ Bank Ltd (ANZ) and BSP have responded favourably to government’s agenda of financial inclusion by removing fees and charges in some of their products.

International market Summary

• US longer-term treasury prices fell slightly on Thursday (yields higher) as investors positioned ahead of Friday´s employment report. The better-than-expected data on unemployment benefits lessened supported for government bonds. US 2 year yields were steady at 0.345% while US 10 year yields lifted 3 points to 2.737%.

• European shares were broadly flat on Thursday as investors awaited the pivotal US jobs data. The FTSEurofirst 300 index was up by 0.04%, the UK FTSE rose by 0.2% and the German DAX rose by 0.85 points or less than 0.1%. Mining shares lifted in London trade with shares in BHP Billiton up by 0.3% while Rio Tinto gained 1.3%.

• Base metal prices were generally higher up to 1.4% on the London Metal Exchange on Thursday with aluminium and nickel leading the gains. But zinc lost 0.2%. The Comex gold futures price rose as the greenback fell, up by US$11.50 an ounce or 0.9% to US$1,351.80 per ounce. Iron ore rose by US20c on Thursday to US$116.90 a tonne.

• World oil prices rose on Friday, rallying in the last hour of trade. Brent crude closed the week at US$108.45 a barrel while US NYMEX crude rose by US11c to US$101.86 a barrel.

• Crimea’s Moscow-backed government voted to secede from Ukraine and join Russia and accelerated a snap referendum to ratify the move, a dramatic escalation of tension that pushed the West closer to imposing sanctions if Russian troops don’t withdraw. A Russian move to absorb Crime against the will of Ukraine’s national government would mark the first time since World War II that such a manoeuvre had been attempted in Europe.

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

pdfKFM Weekly Investment Update: Friday, 07 March 2014

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