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KSL - Kina Securities

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System

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Kina Group is a leading diversified financial services provider in Papua New Guinea (PNG) and is the largest licenced funds management company in the country with $2.5 billion of funds under management, and with more than 155,000 superannuation clients.

The company provides traditional stockbroking, trustee services, corporate advice and finance. It is a major provider of leases and mortgages. It has about 200 staff, of whom 92.5 per cent are Papua New Guinean, and more than half are women.

It is anticipated that KSL will list on the ASX on 30 July 2015.

http://www.kina.com.pg
 
Interesting float.
Looks like it will be priced at a discount to the domestic banking sector, obviously due to the PNG factor..
 
Certainly interesting, just had a quick look at the PNG economy. There is some definite risks such as: poor infrastructure, 75-80% of employment reliant on agriculture, the majority of exports and GDP reliant on mining/oil and gas, plus over 40% of the people live on less than $1 a day... that said, the economy has grown at an average rate of around 9% over the last 10+ years and is forecast to keep growing. Worth watching I think.
 
Check out the team they've got. There's
  • Sir Rabbie Namaliu - an ex-prime minister...and well..he's a Sir!
  • Syd Yates - involved in the establishment of the Port Moresby Stock exchange and is a director of PNG Olympic committee
  • David Foster - ex-CEO of Suncorp Bank (5 years)

Not bad...
 
KSL to acquire ANZ's retail and commercial/SME business in PNG at what looks to be a very attractive price. They are predicting a 30% lift in EPS from this transaction alone. With growth already expected in their core business, should give them very attractive fundamentals. Price and volume has been responding well but price is still below IPO price of $1.00.
 
Nice chart … solid volume/definite lack of overhead resistance;)
KSL 7th July 2018.jpg
 
Up 8% today after their FY18 report, with NPAT up 109% on a poor FY17. Also got regulatory approval from Bank of PNG for the takeover of ANZ's PNG business which should be completed by September. Holding in my SMSF for the unfranked dividends.
 
Have acquired Westpac's PNG and Fiji business. Shareprice has been depressed after a poor capital raising with a big overhang from the underwriter. However seems to be gaining some traction now with this acquisition which they maintain will bring the diluted earnings per share back to last years level, ie 15c per share, without including synergies.
Seems cheap at their present price even allowing for PNG sovereign risk.
 
The sovereign risk stopped me taking a position at 80c. Probably an error of omission!
 
My top pick for the 2021 competition. If they can integrate the cheap Westpac acquisition successfully I would expect the share price to be a multiple of today's price in a few years. In the meantime hoping the 10c per share dividend will be maintained till the growth sets in.
 
The multiple for the Westpac acquisition is actually much higher than the original Kina business.

Would have liked to have seen some growth figures or projections to support the price.
 
Full Year 2021 results, as we knew the rejection of the Westpac deal by the PNG government had a material affect on profits for KSL this year. Otherwise a very solid result.

Divvy maintained at 10c for the year so over 10% yield!

Share price still reflects the uncertainty about PNG economy & Aussie investors reluctance to invest in foreign businesses on the ASX

Screen Shot 2022-03-02 at 9.35.00 am.png


This summary explains the results pretty well,

Screen Shot 2022-03-02 at 9.37.42 am.png

Screen Shot 2022-03-02 at 9.38.07 am.png
 
PNG government increasing corporate tax on banks from 30 to 45 % from January. These types of decisions is probably why this is trading at such a discount to the market.
 
Full Year Result 2022 - Kina Bank delivers strong growth and ROE
• Underlying NPAT increased by 10% to PGK 106.1m.
• Net Fees and Commissions increased by 30% to PGK 116.2m primarily by continued
development and build out of Kina’s channel network. Organic growth and digital expansion
resulted in an increase of 78% in channel fees
• The Loan book grew by 11%.
• Kina grew its customer base by 19%, which delivered strong low-cost transactional deposit
growth of 27.7%.
• Digital Channel growth of 89% year on year, due to expanded EFTPOS and terminal of choice
strategy.
• Cost to income ratio remained flat at 58.7% with investment in a middleware API layer, and
further investments in core technology and enabling infrastructure.
• Underlying ROE was 17.9% demonstrating Kina’s ability to generate quality returns.
• Reduction in impairment cost to PGK 4.8m. The lower impairment in the current year is due to
such factors as the continued application of the asset recovery program of work and security
database improvements contributing to robust loan and asset quality measures.
• Kina Investment Superannuation Services recorded an increase of 10% in total revenue
associated with an increase in total funds under administration to PGK 17.3b and an increase of
4% in total membership.
• FX customer volume increased by 19%, albeit the revenue reduction was significantly driven by
transactions using lower margin USD currency.
Kina Securities Limited (ASX:KSL | PNGX:KSL) (Kina) has announced today an underlying NPAT of PGK
106.1m, an increase of 10.3% by comparison to prior corresponding period (PCP). Kina’s FY22 results
were underpinned by solid revenue growth in core banking products and digital services contributing
towards the progress of the 2025 strategic plan. Kina’s underlying ROE remains above 15%, at 17.9%
and restores the rate of return immediately prior to the 2020 capital raising, while maintaining a robust
balance sheet with regulatory capital at 22.5% well above the minimum requirement. The strong results
demonstrate Kina’s ability to execute a revenue diversification strategy, with 50% of income derived
from non-interest products.
The Board declared an unfranked final dividend for 2H22 of AUD 6.5 cents per share/PGK 16.1 toea per
share. This compares to AUD7.0 cents/per share/PGK 18.5 toea in the PCP.
ASX Markets Announcement Office PNGX Markets
Exchange Centre Harbourside West Building
20 Bridge Street Unit 1B.02, Level 1, Stanley Esplanade
Sydney NSW 2000 Down Town, Port Moresby 121
Australia Papua New Guinea
kinabank.com.pg
Kina’s CEO and Managing Director, Greg Pawson said that the result was pleasing and demonstrates
Kina’s commitment to executing against our Strategic plan by delivering diversified income streams,
increased revenues in digital channels and solid growth in our core business.
“In 2022 we reached the half way point of 2025 strategic plan. Executing sustainable growth on the core
lending businesses through a targeted approach to segments has been constant over the past two years.
This has enabled our market share to improve by 1% in both deposit and loans and customer growth of
19%. Our digital revenues trajectory remains positive. Merchant fees, online banking fees, EFTPOS usage
and other digital led initiatives such as What’s App Banking drive these results.”
Operating performance
Banking – Lending
Overall lending was up 11% against PCP with the overall balance above PGK2.1bn. Growth in Commercial
was up 9.6%, this includes a strong year on year SME growth of 25% and Home lending up 19%. Total
system growth in PNG was lower in 2022 compared to 2021, at 5%. Further demonstrating Kina’s strong
performance with market shares gains of 1%, bringing total market share to 16%. Restored momentum
in the back end of the year with over PGK 250m of lanes settled and an additional PGK 155mn of
syndicated loans. Home loans grew by 19% due to a marketing leading cash back offer that resonated
strongly with our targeted segments. Term loans increased by 7%, with Kina continuing to onboard
corporate customers in Retail aligning with our credit expertise. Asset Finance, was up 137%, although off
a lower balance, this segment continues to experience solid support due the expansion from the
construction and building industry.
Funds Under Administration – Revenue Growth of 10%
Kina’s Funds Administration business delivered key efficient programs of work that reduced processing
time, improved data management and streamlined customer experience to enhance revenues. Kina
Investment Superannuation Services recorded an increase of 10% in total revenue associated to an
increase in total funds under administration to PGK 17.3b and an increase of 4% in total membership.
Operating Expenses – Investment in Capabilities
Total operating cost as at December 2022 was PGK 215.2m, an overall increase of 11%. Staff,
administrative and occupancy costs contributed 41%, 31% and 22% respectively to total operating costs
for the year.
Administrative expense increased by PGK 4.3m or 6.8%. The increase was primarily due to continued
investment in technology capabilities combined with costs associated with increase in customer and
transactional activity. Brand and marketing campaigns were launched to promote some new initiatives in
WhatsApp banking, Xero Bank Feed, Home and School Fee loans.
Staff expenses increased by PGK 12.1m or 16%. This reflects the bank’s focus in building capability in
emerging areas of risk, cybersecurity and an increased distribution footprint.

kinabank.com.pg
PNG Operating Landscape – Corporate Tax implications
In December 2022, the PNG government announced the 2023 budget with an increase in Corporate
Income Tax for commercial banks from 30% to 45%.
It was also indicated in the budget announcement that further consultations will continue with the
banking industry in the first half of 2023 to consider whether other tax alternatives may be more
appropriate for the industry.
For the FY2022 full year results, the impact of the budgeted corporate income tax increase is reflected in
the deferred tax assets (DTA). This has resulted in a revaluation inline with IFRS in tax credit of PGK
10.4m increasing the statutory NPAT to PGK 116.5m.
Delivering on 2025
Strategic Plan – Driving our strategic pillars to deliver prosperity for our communities
Kina Bank is tracking well to deliver on our 2025 strategic plan. Having fully established ourselves as a
challenger brand, our market share and digital footprint continue to grow. Our mission to deliver
prosperity for the communities we serve remains at the heart of all we do, these initiatives for 2023
include:
• Auditing of all branch locations to ensure our service and product offerings are accessible and
inclusive
• Revamping of flagship branch and key locations to provide a better experience for our customers
• Enhancing ICT infrastructure and capabilities
• Expanding our footprint beyond Papua New Guinea
Mr. Pawson said, “Momentum was sustained in 2022 across all key portfolios. This is obvious in our
increased market share, delivery of customer led digital products such as WhatsApp banking, single view
and our internet payment gateway and well capitalized bank that has a disciplined approach to capital
allocation.”

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DYOR

i hold KSL
 
Market has consistently over rated the sovereign risk with KSL IMO, then the 15% increase in corporate tax rate spooked them further. Now paying over 13% divvy!

I think the biggest risk, a bit like UOS, is that ASX investors just dont like businesses that operate solely in other local markets. This means the price may well never get anywhere close to the intrinsic value so capital gains can be problematic. One way or the other the value should get unlocked eventually, in KSL's case, very high yield.

Also a happy holder, i think we should probably keep quiet about it though @divs4ever - I am happy to keep accumulating sub $1.
 
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