Financial services

 

The Company

Established in 1985, Kina Securities (Kina) is a diversified financial services provider offering financial solutions including savings accounts, small business loans, investments, mortgages, stockbroking and financial advice, investment management and fund administration.

Kina saw its net assets grow by 146%, shifting the company into a dynamic, diversified financial services group with scale. The expansion was enhanced by the acquisition of Maybank PNG for PGK350m ($119.5m) in 2015. The acquisition provided Kina with a banking licence, which has had a positive impact in reducing funding costs, enabling access to new markets, and realising potential synergies and cross-selling opportunities. The acquisition was financed through an initial public offering (IPO) of Kina shares and a successful listing of the shares on the Australian and Port Moresby Stock exchanges. The company raised approximately PGK202m ($69m), with more than 1500 investors participating in the offering, which was heavily oversubscribed.

As a result of its acquisition of Maybank PNG, which was finalised in September 2015, Kina became the fourth-largest bank in PNG with more than 11,000 customers, seven branches and an expanding electronic network.

In addition, Kina is also the largest wealth management business in the country with assets in excess of PGK5.5bn ($1.9bn). The company recorded a solid result in its first year of operations as a diversified financial group. The company posted a net profit of PGK47.5m ($16.2m), which exceeded the forecast of PGK45.3m ($15.5m) included in the IPO prospectus by 4.9%.

A net interest margin of 9.6% was achieved during FY 2015. Cost-to-income ratio was at 45%. This included costs relating to the integration process of Maybank, which was completed in September 2015. Kina’s capital adequacy position was at 33%, post-dividend. The company also declared a maiden dividend of A$0.034 ($0.025) per share which exceeded the dividend indicated in the IPO prospectus of A$0.032 ($0.024). This represents a dividend yield of approximately 3.25% at the current price. Return on assets was 4.8%, while return on equity was 19.43%.

Recent efforts have focused on migrating the deposit book to a lower interest rate profile and investment portfolio to a longer duration providing higher returns. Kina also has a strong capital adequacy ratio of 33%.

Outlook

The outlook of the company remains optimistic notwithstanding changes in the global economy and particularly in the domestic market. Lower commodity prices have significantly impacted growth rates and domestic economic activity. Going forward the company aims to build on the progress made in 2015.

There are opportunities for the company to reduce costs. These include eliminating duplication, increasing operating efficiencies and lifting sales by providing quality products and services to existing and new customers.

The first focus in 2016 is the completion of the Maybank integration process and to introduce system and technology enhancements to provide greater service and access to a broader customer base. Risk management systems require strengthening to maintain credit quality.

The second focus for Kina includes refining the product and service offerings to ensure that targeted growth segments are captured.

Key staff members have been recruited, advancing the process of rebuilding the management capability to deliver Kina’s ambitious targets. Kina at present has approximately 4% of the market share, and it holds substantial growth potential.

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The Report: Papua New Guinea 2016

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