Market capitalisation up around 50% in 18 months

 

Since the end of 2015 the Port Moresby Stock Exchange (POMSoX) has seen four companies exit for various reasons, decreasing the number of listed companies from 19 to 15. However, the same year saw an increase in the overall market value of the bourse from PGK51.3bn ($16.3bn) to PGK78bn ($24.7bn).

During the same period, Kina Securities applied for a dual listing on both the POMSoX and the Australian Securities Exchange. Kina Securities issued over 97m shares to raise PGK202m ($64m) to assist with the acquisition of Maybank’s banking licence – making it the latest entrant to the banking market. There are nine companies with dual-listing status, including Copper-moly, Highlands Pacific, Kina Petroleum, Kina Securities, Newcrest, Oil Search and Steamships Trading. Two junior miners have been suspended from trading for not meeting listing requirements.

Major Companies 

Newcrest and Oil Search together comprise 87% of the total market capitalisation of the bourse. The value of the market was mostly driven by share price gains by Newcrest, Oil Search and Bank South Pacific (BSP). Newcrest Mining’s share price has increased from A$13.25 ($9.98) to A$21.45 ($16.15) since 2015. Newcrest owns two of the four mines that have a lifespan in excess of 20 years: Cadia in Australia and Lihir in PNG. Furthermore, those two mines are two of only five with a reserve base in excess of 10m oz.

Oil Search’s share price moved from A$6.88 ($5.18) to A$6.73 ($5.07) over the same period, largely steady. The company shares peaked at A$8.63 ($6.50) following the successful delivery of ExxonMobil’s PNG LNG project. Oil Search has interests in the PNG LNG project and Papua LNG, which is led by Total of France. The company has a strong balance sheet and margins despite the lower commodity prices. The company is cost conscious and is managing the low price situation well. Oil Search is also investing in the Muruk gas fields – a potential new gas find – and conducting appraisal programmes for its 22.8% interest in the Elk-Antelope liquefied natural gas (LNG) field. A 38.5% stake is also held in the P’nyang field. It is estimated that the resources of the two fields are sufficient for at least two LNG trains.

Meanwhile, BSP saw a significant improvement in its share price, buoyed by strong operating results. Net profit increased from PGK603m ($191.2m) in 2015 to PGK696m ($220.6m) in 2016. The company continued to generate strong returns for its shareholders with a dividend yield of 10.7%. The share price increased more than 5% during the last six months, from PGK9.00 ($2.85) to PGK9.50 ($3.01) per share. BSP’s balance sheet continues to remain robust with the full integration of new assets acquired from Westpac in 2014. This strategic move provided a geographically diverse revenue stream. The Pacific Island branches contributed sizeably during the year, representing more than 20% of the bank’s total assets and profitability. In May 2017 BSP announced its entry into Cambodia through its asset finance business.

Other listed companies have more or less remained stable, with Highlands Pacific’s returns hovering around A$0.06 ($0.04) per share. In 2016 Guangdong Rising Asset Management proposed to replace the directors of Highlands Pacific with their nominees in a manoeuvre to maximise their control of the company and their interest in the Frieda River project.

Going Forward 

Investments in the equities asset class declined in 2015 and 2016 after the completion of the PNG LNG project due to sluggish business conditions, as investors turned towards cash and government securities. Total value traded on the POMSoX was PGK105.1m ($33.3m) in 2015 and PGK32.8m ($10.4m) in 2016. The year 2017 should be similar to 2016.

The level of interest in equities is projected to rebound as the economy recovers. Foreign currency flows should improve with the impending second LNG project, led by Total, which will commence its front-end engineering design work by early 2018, with a final investment decision expected by the start of 2019.

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