10 June, 2024
Hello and welcome to this week’s JMP Report,
On the equity front last week we saw 3 stocks trade on the local market. KSL traded 240,153 shares, closing 1t higher K2.98, STO traded 301 shares, closing steady at K19.37 and SST traded 1,020 shares, closing K3.00 higher K48.00.
WEEKLY MARKET REPORT | 1 June, 2024 – 5 June, 2024
| STOCK | QUANTITY | CLOSING PRICE | BID | OFFER | CHANGE | % CHANGE | 2024 INTERIM | 2024 FINAL DIV | YIELD % | EX-DATE | RECORD DATE | PAYMENT DATE | DRP |
| BSP | – | 16.86 | 16.87 | – | – | 0.00 | K0.370 | K1.060 | 8.87 | TUE 27 FEB 2024 | WED 28 FEB 2024 | FRI 22 MAR 2024 | NO |
| KSL | 240,153 | 2.98 | 2.98 | 3.05 | 0.01 | 0.34 | K0.097 | K0.159 | 8.82 | TUE 4 MAR 2024 | WED 6 MAR 2024 | MON 15 APR 2024 | YES |
| STO | 301 | 19.37 | 19.37 | – | – | 0.00 | K0.314 | K0.660 | 5.04 | MON 26 FEB 2024 | TUE 27 FEB 2024 | TUE 26 MAR 2024 | – |
| NEM | – | 145.00 | 145.00 | – | – | 0.00 | – | USD 0.250 | 0.63 | MON 4 MAR 2024 | TUE 5 MAR 2024 | WED 27 MAR 2024 | – |
| KAM | – | 1.25 | 1.16 | – | – | 0.00 | K0.12 | – | – | – | – | – | YES |
| NGP | – | 0.70 | – | – | – | 0.00 | K0.03 | – | – | – | – | – | – |
| CCP | – | 2.16 | 2.15 | – | – | 0.00 | K0.110 | K0.131 | 6.21 | FRI 22 MAR 2024 | WED 27 MAR 2024 | FRI 19 APR 2024 | NO |
| CPL | – | 0.79 | – | 0.79 | – | 0.00 | – | – | – | – | – | – | – |
| SST | 1,020 | 48.00 | – | 50.00 | 3.00 | 6.00 | K0.35 | K0.60* | 1.33 | WED 24 APR 2024 | FRI 26 APR 2024 | FRI 26 JULY 2024 | NO |
Dual listed PNGX/ASX Stock
BFL – 6.50 +1c
KSL – 975c +3c
NEM – 63.60 +1.15
STO – 7.63 +8c
Interest Rates
On the interest rate front we saw the 364 day TBills weaken further with an auction average of 3.97%. The Bank had offered 230mill, received 372mill in bids and issued 357mill.
The Bank also announced the next GIS auction which is to be held this week, maturities range from 2yr through to 10yrs with a total offering of 500mill. Expect to see more stock issued if the tail in the bids are within Treasuries acceptance levels.
You can still expect to achieve 2.35% or better in the TD market this week.
Other Assets we monitor
Gold – 2,293 -$42
Silver – 29.16 –$1.28
Palladium – 914 – flat
Platinum – 966 -$72
Bitcoin – 69,700 +2.78%
Ethereum – 3,714 –1.90%
What we have been reading
Australia Court Finds Active Super Guilty of Making Misleading ESG Investing Claims
INVESTORS/ REGULATORS
Mark Segal June 6, 2024
A federal court in Australia ruled today that superannuation fund Active Super trustee LGSS Pty Limited contravened the law by making misleading ESG investing representations to its members, by continuing to invest in securities in areas that it had claimed to eliminate for environmental or social reasons.
The judgement follows the filing of a suit last year by Australia’s corporate, markets, and financial services regulator, the Australian Securities & Investments Commission (ASIC), arguing that from 2021 through 2023 Active Super invested in securities that it had claimed to have eliminated or restricted by ESG investment screens, in areas including gambling, coal mining and oil tar sands, as well as Russian investments following a restriction added after the invasion of Ukraine.
In its suit, ASIC listed 28 holdings by Active Super which exposed members to these areas, such as holdings in casino operator Skycity Entertainment Group, tobacco company Amcor, and Russian oil and gas companies Gazprom and Rosneft.
Among the arguments brought by the Active Super trustee defending the holdings were claims that some of the investments were made indirectly through its holdings in pooled funds, and that consumers would draw distinctions between direct and indirect holdings.
In the ruling, however, Justice O’Callaghan wrote that “it seems to me that such a consumer would not draw that distinction,” particularly as Active Super website said that there was “No Way” it would invest in these areas, indicating “that there was a way in which it would do exactly that, by investing indirectly.”
Justice O’Callaghan added:
‘If such a consumer was told, as they were told, that there was “No way” that LGSS would invest in tobacco or gambling, he or she would not search around for some investment policy that might qualify such statements. Absent some indicator on the face it, such as a footnote or asterisk with some accompanying statement that the apparently unqualified language was, in fact, something that was subject to qualifications or limitations, they would have no reason to.”
The court did not find in favor of ASICs claims in all counts, with conclusions that Active Super’s investments in companies involved in the production of packaging used for tobacco products did not violate its representations, and that specific representations in its Sustainable and Responsible Investment Policy were not misleading with respect to Russian or oil tar sands investments.
The ASIC suit formed part of a series of a series of greenwashing-focused actions by the regulator, including cases against Marsh McLennan company Mercer Superannuation and Vanguard Investments. The cases follow a warning by ASIC Chair Joseph Longo to providers of investment funds and financial products that the regulator was watching out for misleading sustainability claims, and that it was providing guidance for fund managers and issuers to keep clear of greenwashing.
Following the ruling, ASIC Deputy Chair Sarah Court said:
“This is a significant outcome which shows our commitment to taking on misleading marketing and greenwashing claims made by companies in the financial services industry. ASIC took this case because it sends a strong message to companies making sustainable investment claims that they need to reflect their true position.”
The court said that it will hold a further hearing to consider the appropriate form of declaratory relief, and that it will consider ASIC’s claims for pecuniary penalties.
Over 70% of Companies Have Abandoned Acquisitions Over ESG Concerns: Deloitte Survey
COMPANIES/ M&A/ REPORTS, STUDIES
Mark Segal June 3, 2024
Sustainability considerations are becoming increasingly central in the mergers and acquisitions dealmaking process, with more than 70% of M&A leaders reporting abandoning potential acquisitions over ESG concerns, and a vast majority saying they would be willing to pay more for targets with strong ESG attributes, according to a new survey released by global professional services firm Deloitte.
For the report, Deloitte surveyed 500 M&A leaders from corporations with at least $500 million in revenue and private equity firms with at least $1 billion in assets under management, across North America, Europe & Middle East and Asia Pacific regions.
The survey found that ESG factors were becoming increasingly integrated into the M&A process, with a growing impact on target considerations, due diligence, final decision making and valuation, particularly as sustainability-related data becomes more readily available, and as companies evolve their understanding of ESG issues.
For example, while 99% of respondents reported that their organizations measure the potential impact of an M&A transaction on their ESG profile, up from 92% in a prior survey 2 years ago, 57% reported that they do so with clearly defined metrics, up from only 39% in the earlier survey. Similarly, more than 90% said that they have a high or very high level of confidence in accurately evaluating a potential acquisition target’s ESG profile, compared to less than 75% in the 2022 survey.
Tanay Shah, M&A ESG Leader at Deloitte, said:
“Advancements in the strategies and tactics used to improve ESG footprints have enabled significant progress in the frequency in which ESG is considered as part of a standard pre-close process for both corporates and PEs.”
The study found that ESG issues were already having a significant, and growing, impact on dealmaking decisions with 72% of respondents reporting that they have decided not to proceed with a potential acquisition due to concerns about the target’s ESG profile, up from less than half of respondents who said this in the prior survey. These results were mirrored by respondents on the sell-side of transactions, with 66% reporting that they have been forced to abandon a divestiture for ESG-related reasons, compared with 33% in the prior survey.
Brooke Thiessen, Partner, Infrastructure M&A, Financial Advisory at Deloitte Canada, said:
“Abandoning a deal is certainly not an easy decision. While commercial or operational concerns are often the main reasons for walking away from a deal, ESG red flags are increasingly being considered with the same level of seriousness to either pause or end deal activity.”
Similarly, the survey found an increasing influence of ESG factors on M&A valuation. 83% of respondents said that they would be willing to pay a premium of at least 3% for an asset with a high ESG profile, or one that improves their organization’s ESG profile, compared to only 62% in the 2022 survey, and only 1% said that they would not pay any premium for a high ESG profile, compared to 8% who reported this in the prior survey. Additionally, 67% said that they would seek a discount of at least 3% due to a negative ESG profile, up significantly from only 27% in the prior survey.
In the report, authors Deloitte Partner Briann Lightle, Managing Director Sarah Corrigan, and Senior Manager Ketiwe Zipperer wrote:
“Overall, ESG appears to be more deeply embedded in the M&A process than ever before, with a greater recognition among leaders that it is a lever for measuring, protecting, and creating value. One reason for this trend is that ESG data is now better defined, captured, and measured, thus, allowing metrics to be more precise and better understood than they were only a few years ago. Understanding ESG data starts with determining material ESG issues, which is another aspect of organizations’ enhanced maturity and sophistication over recent years.”
Oil Price Plunge Hits BP and Shell Shares
By Charles Kennedy – Jun 04, 2024, 9:30 AM CDT
The slump in oil prices so far this week has dragged down shares in the top UK-based oil and gas supermajors, Shell and BP, with their stock falling on Tuesday and pushing London’s main FTSE 100 index in the red.
As oil prices fell by more than 3% on Monday and continued to drop early on Tuesday, shares in BP and Shell also slumped in London today.
BP (LON: BP) was down by 3.7%, and Shell’s (LON: SHEL) stock had dropped by 2% as of 2 p.m. in London on Tuesday.
U.S. Could Accelerate Refill Rate of Strategic Petroleum Reserve
As major constituents of the FTSE 100 index, the supermajors dragged the entire index down.
BP’s shares were also weighed down by S&P Global Ratings revising down its outlook on the supermajor to ‘stable’ from ‘positive’, due to a slower-than-expected reduction in debt. According to the rating agency, the new cash allocation strategy at BP is not expected to meaningfully reduce its debt.
The shares in the supermajors and other oil companies have been tracking the losses of international crude oil prices this week.
The Brent Crude price slumped on Monday below the $80 per barrel threshold, for the first time since February, after OPEC+ confused the market with its production decision this weekend and bearish sentiment continued to build about economic weakness ahead, which could affect oil demand.
After losing more than 3% on Monday, oil prices continued to slide on Tuesday, and Brent Crude was down by nearly 2% at $76.82 per barrel as of 9:25 a.m. EDT, while the U.S. benchmark, WTI Crude, had slumped by 2.09% at $72.67.
Commenting on OPEC+ rolling over part of the cuts into 2025, ING’s commodities strategists Warren Patterson and Ewa Manthey said on Tuesday,
“While the extension of additional voluntary supply cuts into 3Q24 leaves the market in deficit over the upcoming quarter, the gradual return of 2.2m b/d of supply from October 2024 through to September 2025, in addition to a 300k b/d higher production target for the UAE, risks leaving the market in surplus through 2025.”
I hope you have enjoyed this weeks read, please feel free to reach out to discuss your investment needs.
Regards,
Head, Fixed Interest and Superannuation
JMP Securities
a. Level 3, ADF Haus, Musgrave St., Port Moresby NCD Papua New Guinea
p. PO Box 2064, Port Moresby NCD Papua New Guinea
Mobile (PNG):+675 72319913
Mobile (Int): +61 414529814