With the reporting season for the 2021 financial year in Papua New Guinea over, which of Papua New Guinea’s listed companies performed the best last year? Analysis from stockbroker JMP Securities tells us, and also gives us a unique view on how the market has performed over the past year.

The financial year in PNG ended on 31 December and companies listed on the country’s stock exchange, the PNGX, have now advised the market of their financial results.

So, how did they do?

Overall, the market performed well, according to analysis from stockbroker JMP Securities. The 10 listed companies on the PNGX between them posted a net profit of K7.84 billion, although two of these ten – dual-listed overseas resources giants Santos and Newcrest Mining – accounted for 83 per cent of these profits.

Excluding these two stocks, JMP Securities calculates that domestic-only stocks between them brought in K1.34 billion in profits, representing an impressive earnings growth of 33.34 per cent over the past year. It’s the best result in years, as the chart below indicates.

2021 was the year local stocks bounced back on the PNGX. Credit: JMP Securities

Of these, Credit Corporation led, growing its earnings by 249.48 per cent – albeit from what JMP describes as a ‘low FY2020 base’. Credit Corporation was followed by Kina Asset Management Ltd (79.95 per cent earnings growth), NGIP Agmark (34.72 per cent) and Bank South Pacific (33.70 per cent).

‘We’re getting tailwinds in 2022, so our hope is that Return on Equity is going to increase.’

Measuring performance

JMP Securities’ Lars Mortensen

‘The most valid measure for evaluating the performance of a company as distinct from the performance of its shares is Return on Equity (ROE),’ Lars Mortensen, Managing Director of JMP Securities, tells Business Advantage PNG.

‘Return on Equity is important to understand if a company is doing well and then the price-to-earnings (PE) ratio is: is the market recognising the fact that the company is doing well?’

PNG’s two listed banks, BSP (a 28.32 per cent ROE) and Kina Bank (a 12.28 per cent ROE), led the market in 2021.

Mortensen considers both banks’ results as strong.

‘Kina’s performance for 2021 probably looks worse than what it was. BSP’s reported performance for 2021 looks a bit better than actual.’

PNGX-traded stocks, and their performance in 2021 (click to enlarge). Credit JMP Securities

With the exception of BSP and Kina Bank, most of the companies on the PNGX delivered an ROE in the seven-to-nine per cent range.

‘We’d like to see it a bit higher, to be honest, but that’s a feature of a tough economy, a tough market,’ says Mortsensen. ‘We’re getting tailwinds in 2022, so our hope is that return on equity is going to increase.’

Generally, the lower the price-to-earnings (PE) ratio, the better the investment. On this measure, JMP data shows agricultural commodity exporter NGIP Agmark coming top, with a PE ratio of 4.35.

‘I’m impressed with the way they’re stringing together a couple of years of profitability after a couple of abysmal years,’ says Mortensen. ‘I like the fact that their business touches on so many people. What we need is for companies like NGIP Agmark to be tightly run, performing well.’

Market valuation

JMP’s analysis also gives us a picture of the total value of all listed stocks on the PNGX. This was a massive K197 billion at the end of December 2021, with Santos and Newcrest by far the most valuable companies.

The combined value of just local stocks was K37.9 billion, with BSP the largest local listed company (with K30.44 billion in total assets), followed by Kina Securities (K3.78 billion), Steamships (K1.52 billion) and Credit Corporation (K1.42 billion).