PGW - PGG Wrightson

[percy]

PGW do not have any spare capital, so they can't grow their earnings (apart from the cyclical ups and downs). Let me expand on "can't". PGW have tough competition from the co-ops and much of their retail business is on razor thin margins. While a good single season is possible, long term their competitors are as nimble as they are and PGW has no unique compelling advantage going forwards. So cross selling across their sales teams with the 'one PGW' mantra is the best they can hope for and a sensible strategy going forwards in my view.

Before Mark Dewdney came on board, PGW had a pretty patchy record and the long shadow of the Craig Norgate failed grand plan meant even some reputable analysts simply turned off their radar as far as PGW was concerned. The best hope for shareholders was for the company to get back to their knitting and learn to knit well. This is essentially what 'the Dewd' has done for the company, by reengaging the frontline staff from the ground up. All is not lost to shareholders from here though. If PGW can demonstrate that they can handle the ups and downs of the business cycle better, there is every chance they will be re-rated in PE terms. This, the consistent high yield, and lack of correlation with other shares in my portfolio is the reason I still hold.

SNOOPY

Snoopy .
The ground work for PGW "reengaging " was laid by Sir John Anderson and George Gould.
"The Dewd" built on their solid work.
PGW's growth is expected to come from Uruguay,yet no mention of Uruguay in their latest announcement.

[winner69]

I am curious why you would think that an agri service industry with all the cyclical elements that implies and given their long history of cyclical earnings would warrant a PE re-rating ?

Always will be a laggard - if only because it struggles to grow it top line (still much the same as 5 years ago) and has been unable to expand (thin) margins over the last few years.

Market must be nuts to rerate it any further - already done that trick methinks.

[Beagle]

Always will be a laggard - if only because it struggles to grow it top line (still much the same as 5 years ago) and has been unable to expand (thin) margins over the last few years.

Market must be nuts to rerate it any further - already done that trick methinks.

Have to agree. The other beagle is barking up the wrong tree looking for a PE re-rating with this one.

[Snoopy]

Snoopy .
The ground work for PGW "reengaging " was laid by Sir John Anderson and George Gould.
"The Dewd" built on their solid work.
PGW's growth is expected to come from Uruguay, yet no mention of Uruguay in their latest announcement.

Quite right to acknowledge Sir John and GG for their contribution. We all build on the work of those that came before us. But I do think 'The Dewd' has done a good job since. I hope the new culture of the place can in turn be built on by the new CEO. Maybe time for an internal appointment this time?

PGW has been in Uruguay for ten years. They are trying to replicate the 'One PGW' model in Uruguay, with the move into retail supply to go with what they already had. But that country has been beset by weather events.

My great hope for growth is actually the seeds business, intellectual property with a fence around it, with all the expansion into Australia in recent years. Despite all that , Seeds has never made the kind of money (profit) that it did back in the Craig Norgate years. But I am keeping the faith with this jewel that Alan Lai wanted to split from the rest of PGW before 'The Dewd' came along.

I am curious why you would think that an agri service industry with all the cyclical elements that implies and given their long history of cyclical earnings would warrant a PE re-rating ?

Perhaps in today's frothy market, you could argue that the rerating has already taken place!

Some of us with long memories will recall those years of no dividend at all in the cyclical downturn. If we are just coming to the end of a 'down' year, then I can see a large improvement today. PGW will always be a cyclical. But IMO it is how the down years are handled that the market will assess, in determining where the PE of this share should lie. PE has an attractive dividend yield relative to the rest of the market. When the dividend yield comes closer to the market average, that could be the sign to reduce my stake.

SNOOPY

[winner69]

Hey snoops

Christmas has come early for you

Look at all these numbers PGW have provided you with to analyse. I expect some good insights

https://www.nzx.com/companies/PGW/announcements/305134

I'm sure if you give Peter Scott a ring he'll give you the whole set in an excel file - save you punching them all in from scratch ha ha

[sb9]

First off the block to report earnings...

[Beagle]

Basic eps is stated at 6.1 cps but strip out the $9.6m gain on sale of property which the company has ostensibly admitted will not repeat to the same extent next year and we get eps of 4.86 cps. Wages and other expenses which make up the lions share of operating costs have both risen just on 3%, well above the inflation rate and added many millions to operating costs.

I would stick with my time tested PE of no more than 10 for this very average cyclical agricultural stock and see fair value at 10 x 4.86 cps = 48.6 cps.
Disc: Don't own and not looking to acquire. I am sure the other hound has considerably more time to analyse this and will post more interesting insights but with my limited time available at present that's my 2 cents worth.

[winner69]

First off the block to report earnings...

Profits down from year ago but share price up from a year ago

Just shows you how happy the markets are at the moment eh

[winner69]

Cash Flow Statement is what really matters

Operating cash flow down quite a lot on last year

And one could construe that that selling (unwanted) assets paid for the dividend - fair enough

[winner69]

Reducing the likely earn-out provision on Uruguay acquisition by $2.4m is interesting

Uruguay not making as much as they thought it would?