What You Need to Know About the Kina Securities Float

Kina Securities [ASX:KSL] is set to occupy a special space in the Asia-Pacific financial services market. It’s going to be amongst the first companies to be dual listed in both Papua New Guinea and Australia, starting today. And you could be amongst the first investors.

The Port Moresby Stock Exchange has the rather adorable acronym of POMSoX. It was established in 1999. At the moment, it’s got fewer than 20 listings, including Kina. Still, it’s closely related to the ASX in many ways. For example, the ASX has licensed its rules of operation for POMSoX to use.

POMSoX says its mission is to ‘to provide a medium for the mobilization and raising of national and international capital for the long-term benefit of the citizens of Papua New Guinea,’ and that an exchange in country is important because ‘ordinary peoplecan buy a small number of shares in a company and they can be part of the launching of new companies in PNG and overseas.’ Still, sometimes raising money within PNG isn’t enough for a company. Which is why Kina is looking to its neighbour for fresh funding.

What does Kina do?

When Kina gets up and running, they’ll be one of the biggest providers of financial services in Papua New Guinea. Like many big banks here, they’ll have distinct divisions: Kina Wealth Management, and Kina Bank.

Brand-wise, Kina is well positioned to become a leader in services such as lending, private wealth management, and superannuation. The Kina name has been around in PNG for decades. It also happens to be the name of the country’s currency.

Papua New Guinea currency Kina
Source: ABC
[Click to enlarge]

What’s most interesting is Kina’s potential to grow with the Papua New Guinean economy. Their prospectus says that ‘Kina will be attractively leveraged to the PNG economy which is expected to experience strong growth over the medium to long term.’ However, it also says that ‘Kina conducts the majority of its business in PNG and its financial performance is influenced by the level and cyclical nature of business activity in PNG.’

Analysts are conflicted about PNG’s economic future. Some say that the currency volatility is too much to handle, and government spending is going overboard. Others point out that PNG has lots of mining activity and plenty of reserves left. For example, the Asian Development Bank expects GDP to grow by 15% this year, mostly thanks to liquid natural gas production. It’s the first full year of exporting LNG, largely to Asia.

The World Travel and Tourism Council expects the direct contribution of travel and tourism to GDP to rise by around 6% a year up to 2025. At the moment, it’s about PGK269.5 million. That’s about $133.5 million. PNG has that all-important cachet of being an exotic destination that nobody’s been to yet. Apart from the Kokoda Track, with all its historical significance for Aussies, PNG also has stunning natural heritage sites, wildlife reserves and mountainous terrain. With increasing hotel and infrastructure development, it could become the next Bali, but with fewer bogans.

PNG’s unique topography also lends itself well to producing a variety of different crops. Notably, some things that can’t be grown (easily) in Australia. For example, Papua New Guinea’s second most important agricultural export. High-grade specialty coffee is grown in the highlands of PNG, farmed at altitudes of 1500 metres to 2800 metres.

Starting from such a low base and with so much room to grow, Papua New Guinea could technically be called an ‘emerging market’. However, some commentators say that resource-reliant emerging market economies — like PNG — are too risky at the moment.

Still, there are plenty of opportunities to profit from emerging markets.

In the free Money Morning report ‘Three Emerging Markets Primed for Explosive Growth in 2015’, editors Kris Sayce and Ken Wangdong explain why they believe now isn’t the time for that particular subset of emerging markets. They also discuss three emerging markets that they believe will achieve impressive growth this year. Click here to find out how to download your free copy.

When can individual investors buy in?

Kina shares started normal trading this morning. At the time of writing, they’re trading up 3.08% at $1.34.

ASX KSL
Source: Google Finance
[Click to enlarge]

You can find out more by reading the Kina prospectus, and asking your broker.

Eva Mellors,
Contributor, Money Morning

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