KFM Weekly Investment Update: Thursday, 25 August 2016

Local Market Summary

• The Australia-Papua New Guinea Business Council raised concerns about the Government’s intentions to place a 20.0% limit on rice imports and give the balance to a new company known as Naime Agro Innovative Industry Ltd. Council president Greg Pawson said the Council was deeply concerned with the Governments proposed decision which would conflict with its commitments under international trade and investment agreements. Mr Pawson urged the Government
to consider its proposed action which will damage its international investmen reputation

• Water PNG has completed the alignment and infusion of an integrated planning and performance management system, the Balance Scorecard, into all its business centres. PNG Water COO, Billy Imar said this was done in its efforts to become one of the best performing State-owned entities (SoE). Mr Imar added that the reform will accelerate revenue growth, stimulate innovation and improve services to its customers and instil operational excellence

• Bank South Pacific (BSP) Group recorded a consolidated operating profit after tax of K301.4m for the first half of 2016, a 12.9% increase compared to previous corresponding period (pcp). Chairman Sir Kostas Constantinou, said the Group achieved solid results in the first half of 2016 despite a slowdown in the economy Total assets increased by approximately K1.4bn to K19.6bn. Group revenue also increased 11.3% supported by growth from interest income streams

• Furthermore, BSP announced that it has entered into a Memorandum of Understanding (MoU) with Kumul Consolidated Holdings (KCH) to establish a joint venture (JV) to operate Pacific MMI Limited in PNG

• Oil Search (OSH) reported a net profit of US$25.6m (K79.9m) after tax for the first half of 2016, tumbling 89.0% from US$227.5m (K596.9m) in the previous corresponding period (pcp). Despite lower results, OSH achieved a 4.0% increase in production to 14.9 million barrels of oil equivalent (mmboe) the second highest half-year production in the company’s history. MD Mr Peter Botten said the company is continuing to manage costs closely, to ensure its competitiveness in a lower oil price environment. Furthermore, it announced an interim dividend of one US cent per share (US¢0.01), compared to six US cents (US¢0.06) per share in the pcp

• Furthermore, Mr Botten said during first half of 2016, 53 LNG cargoes were sold, comprising 45 sold under long-term contracts and 8 sold on the spot market. This adds the total LNG cargoes sold to 205 as of June 2016. Mr Botten made those remarks when commenting on OSH’s half year results this week

• Comrade Trustee Services Limited trustee for Defence Force Retirement Benefit Fund (CTSL) issued a public notice regarding payments of entitlements under the new Accumulation Scheme. Members who have made an election to transfer to the Accumulation scheme have been advised that Unfunded State Share portion (8.4%) of their retirement benefits are yet to be appropriate by State. Those members who exit at this stage, will only be paid the Employees portion of the retirement benefits, but not the State Share Employer portion

• This week’s BPNG auctions in Central Banks Bills were offered for 28 days and 63 days with an oversubscription of K420.0m out of a total of K348.5m on offer. The weighted average yields were 1.12% and 2.38%, respectively

• Auctions in Treasury Bills were only offered for 364 days with an undersubscriptionof K81.4m out of K101.6m on offer indicating weak appetite for the short term securities. Weighted average yield was 7.70% for 364 days from this
week’s auctions

• The KSi Index ended the week up by 1.1% to close at 4,799.11 points, supported by an increase in share price of Newcrest Mining (+2.2) while the KSi Home Index was down by 0.1% reflecting decline in BSP (-0.1%) to end at 0,202.34 points

International Market Summary

• Sharp falls for oil and metals prices helped drive US equity indices down from recent record levels as the dollar gained ground against the euro and the yen ahead of this week’s gathering of central bankers. The S&P 500 fell 0.5% to close at 2,175.4 points. The health-care sector slumped amid a public debate over pharmaceutical companies’ pricing practices

• European stocks advanced after a choppy start to the day, as a rally for banks and advertising giant WPP outweighed pressure from falling commodity prices. The Stoxx 600 index gained 0.4%, closing in positive for a third straight session

• Stocks in Asia were treading cautiously as the price of oil went into retreat and investors awaited the start of the US central bankers gathering in Jackson Hole later on Thursday for any clues on the outlook for global monetary policy

• Australian sharemarket ended weaker despite a valiant lift from Woolworths and Amcor, surging despite posting big slides in profit. Energy stocks fell less than expected, with the likes of Woodside Petroleum even moving higher despite oil prices sliding 3.0% in the wake of inventory data from the US revealing a surprising rise in stockpiles. The S&P/ASX 200 spent most of the day trading lower ending down 0.4% at 5541.9

• Oil prices declined with West Texas Intermediate and Brent crude falling 2.8% to $46.80 and 1.9% to $49, respectively. The decline was extended by data released on Wednesday unexpectedly showing that US crude stocks rose unexpectedly


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pdfKFM Weekly Investment Update: Thursday, 25 August 2016

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