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Bank South Pacific delivers top dividend

Bank South Pacific (BSP) is declared as one of the best performers in the domestic investment portfolio of Kina Asset Management Limited (KAML) last year (2017).

Board chairman of KAML, Sir Rabbie Namaliu said BSP remains one of the strongest performers with an impressive total return of 17.9 percent, outperforming the benchmark index (KSi) by 15.4 percent.

This is despite his observation that PNG companies exposed to domestic consumption continued to suffer from low growth levels in the economy which he attributed to KAML’s reluctance to participate in City Pharmacy (CPL’s) 2017 capital raising effort.

But he said KAML remained focused on its investment with BSP. “We continued to monitor our position in BSP throughout the year and based on the company’s strong profitability and attractive consistency of dividend yield, we maintained the portfolio weighting slightly above 20 percent. The total dividend paid by BSP increased by 25.0 percent from the 2016 year, supporting KAML’s income levels,” Sir Rabbie said.

According to the chairman, KAML shares traded in minimal volumes during 2017 and ended the year at 95 toea per share. This price represents a discount of 26.9 percent compared to Net Tangible Assets (NTA) per share of K1.30 (US$0.39) at year-end.

However, Sir Rabbie said KAML believes that this price level is not reflective of the value of the underlying assets of the company and historical performance of the company over the last 10 years.

“The last 10 years has delivered to shareholders an average annual return on the issue price of K1.00 per share of 8.4 percent, a track record that would be enviable in any jurisdiction.”

But he added that as a result of the very good financial result this year, KAML declared a final dividend of 3 toea for 2017 financial year, to total the dividend for 2017 to 5 toea (US$0.1).

“This represents an increase of 25.0 percent in dividends from the previous year and reflects KAML’s commitment to provide shareholders with income through regular dividends in times of strong performance.”

For 2018, Sir Rabbie said his board has seen a high level of overseas market volatility and specific factors presenting challenges to investors of which KAML is not immune.

These include events such as the Royal Commission into banking practices in Australia, increasing bond yields in the United States and the spectre of a global trade war, amongst others.

He said domestically, conditions remained subdued generally, however what appears to be a sustained increase in commodity prices does seem to be aiding economic activity.

Sir Rabbie added that although foreign exchange constraints remain an issue, access to foreign exchange has improved recently providing temporary relief.

“The performance of the company for the year to date reflects the difficult current conditions in markets. Despite this the company was still able to achieve a positive investment return of K808,579 for the five months to May 2018, representing a return of 1.2 percent notwithstanding subdued performance in global markets and an appreciation of the PGK against the AUD as foreign currency access improved somewhat as discussed,” he said.

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