PGW - PGG Wrightson

[Snoopy]

Some might say my recent FOMO share purchasing was a result of a 'Foolish Overzealous Maniacal Obsession'. Don't feel too sorry for me though. I did the calculations and found out that after my FOMO purchase, my average price paid per share is now $1.89. So my 'averaging up' (note 'not averaging down') has not exactly left me on poor street with this one. And while that $1.89 does include the proceeds of the seed division sale returned to shareholders, it does not include all of those juicy dividends received over 'most' years. Which just goes to show if you hang around long enough (I have been a PGG Wrightson shareholder 'since the beginning' and was a Wrightson shareholder before that, where I got my 'first taste' in 1995), it is quite difficult to lose money in the sharemarket, by investing in shares that generally make a profit at least! So what do I do from here?

There will be no bell rung at the rural market (share) bottom. So at some point you 'have to be in to win'. The PGW share price chart may look at bit like Synlait's over the last year. But this is no Synlait, I am very sure of that.

The handicap for me is that I have set myself an 'extra investment rule' that most of you fellow investors do not have. That rule being I am not allowed to purchase two parcels of shares in the same company twice in a row. Fortunately I managed to buy some SCT shares last week. So I am now free to purchase some more PGW shares if I wish to do so. But should I do so? I think yes, although with possibly no dividend until CY2025 now, that 'FOMO urgency' has gone. The share is still trading at around a 30% discount to my 'Capitalised Dividend Valuation' model where I bet on a 9% business cycle gross yield. This is enough of a discount to make me lose interest in all of those listed property entities I have been investigating getting into over the last twelve months. It is hard to rationalise why PGW shares should be worth $1 less than they were barely a month ago when Alan Lai dropped his special meeting bombshell (since withdrawn).

Looked at the market and did a double take when I saw the PGW share price under 2 bucks. What the.....? What I can say is that come the end of the day some nervous nellies will be sleeping better, while I will be on my way to being much richer. Yes I couldn't resist topping up today. My average acquisition price for my PGW shares is now $1.90. Creeping up. But when the market takes to attacking the PGW share price with a sledgehammer, there is nothing else to do but BUY BUY BUY!

Or as Split Enz might say to the sheep dog herding up those rogue shares: "What more can a poor doggie do?"

SNOOPY

[Davexl]

Wondering if Alan Lai, feeling aggrieved, is dumping some shares and driving the price down - been a stinker today...

[Snoopy]

Wondering if Alan Lai, feeling aggrieved, is dumping some shares and driving the price down - been a stinker today...

I guess anything is possible. But what would be the motive to do something like that? Maybe to really wound already hurting shareholders, driving the share price down even further, at which point Mr Lai comes in with a low ball full takeover offer? However there is a glaring flaw in such a plan. Elders hold a blocking stake. Why would Elders having gone to a lot of effort to acquire their blocking stake at a high price from the Chinese government only a little over a year ago, suddenly decide to sell out at a large loss?

There were 50,793 PGW shares traded today. Alan Lai, via Agria controls 33,483,399 PGW shares. If Mr Lai was serious about a sell down, I don't think he would do it 'on market' like this.

SNOOPY

[mike2020]

I have to be honest with you here. It is not a liquid stock a lot of the time, I wanted to sell 10,000 at one stage quite a while ago and the trade was held up at the broker end. Aside from a takeover move as a catalyst there is little hope of a return to divs in the medium term and I lowered my buy price several times and after the last update it is still below todays price.
I look at the real estate, retail and livestock as all in a trough with farmers making less and not spending or moving or probably even borrowing. Costs can only be up, those new Santa Fes are over 80k. Staff and compliance costs? It all equals costs up income down.
PGW has been one of my favorite listed companies over the years but this is a big down cycle. Long term you will be fine.

[Snoopy]

I have to be honest with you here. It is not a liquid stock a lot of the time, I wanted to sell 10,000 at one stage quite a while ago and the trade was held up at the broker end. Aside from a takeover move as a catalyst there is little hope of a return to divs in the medium term and I lowered my buy price several times and after the last update it is still below todays price.
I look at the real estate, retail and livestock as all in a trough with farmers making less and not spending or moving or probably even borrowing.

I hear you about the liquidity. PGW is not a traders share. I would crash the market if I sold my total PGW stake in a hurry. And as you found out mike2020, with PGW, it can take as few as 10,000 shares to do that! Psychologically I get around this 'lack of liquidity' by imagining holding my shares right through the business cycle and thinking about those juicy dividends I will be raking in at the top. PGW has never been my biggest NZX shareholding. But I think PGW still holds the record for the largest dividend cheque from an operational business period that I have ever received. There may be no dividend this calendar year. But my hybrid capitalised earnings and dividend valuation as of now:

https://www.sharetrader.co.nz/showth...=1#post1043694

is telling me this share is worth $3.13, as a 'mid-point' business cycle valuation, based on my required gross yield of 9%. Granted of the five years I was using for business cycle valuation purposes 2021, 2022 and 2023 were exceptionally good. But with shares trading at $1.92 on the market today, that is a 39% discount to my fair value mid business cycle price. For a stable company in a steady sized but cyclical market, my 'rule of thumb' is that 'the bottom' is 20% below my mid business cycle fair valuation. That equates to $2.50. But on the market at $1.92, we are 23% below even that! According to the stockpicking competition, PGW shares have slumped 43.53% just this year. This makes it the worst performing share of all, below even Synlait and Rua Biosciences. This to me is crazy. The receivers are not barking at the PGW gate. Blame the Alan Lai fracas?

I disagree about the dividend being AWOL as far as we can forecast. Alan Lai is an international businessman and he needs cashflow from PGW to keep his other business interests humming. We know that PGW has the capacity, and banking syndicate approval for some level of dividend to be paid. So I think it will happen in the first half of CY2025, once the new Alan Lai lead board is in place.

If farmers need to keep their animals and crops alive, then they will be spending at retail, even if they have to go into debt to do so. If they can't afford to keep their animals, then it is off to the livestock yards with them and PGW clips the ticket. Real Estate does seem to be a perpetual thorn in the side of the PGW empire. But I did hear on the rural news this morning that the price for rural land for the three months to the end of March has not dropped as expected. So at least that is not a negative. It helps to think of PGW Real Estate as part of the old 'One PGW' plan. That is, it opens up cross selling opportunities to new farm owners, even if the Real Estate division is not profitable within itself right now.

The only thing that is stopping me buying even more PGW shares today is my self imposed rule of not being allowed to buy a second order of the same share twice in a row. I have to buy into a different share next, before I am 'allowed' another bite at PGW.

Costs can only be up, those new Santa Fes are over 80k. Staff and compliance costs? It all equals costs up income down.
PGW has been one of my favorite listed companies over the years but this is a big down cycle. Long term you will be fine.

The cost cutting has started. Those expensive Santa Fes, are in the rear view mirror now, just like Christmas. Our local Ford dealer had a yard full of PGW branded Rangers a couple of months ago. PGW is keeping ahead of Farmlands. The new Farmlands Rangers are only making their way onto that same Ford yard now.

SNOOPY

[whatsup]

I hear you about the liquidity. PGW is not a traders share. I would crash the market if I sold my total PGW stake in a hurry. And as you found out mike2020, with PGW, it can take as few as 10,000 shares to do that! Psychologically I get around this 'lack of liquidity' by imagining holding my shares right through the business cycle and thinking about those juicy dividends I will be raking in at the top. PGW has never been my biggest NZX shareholding. But I think PGW still holds the record for the largest dividend cheque from an operational business period that I have ever received. There may be no dividend this calendar year. But my hybrid capitalised earnings and dividend valuation as of now:

https://www.sharetrader.co.nz/showth...=1#post1043694

is telling me this share is worth $3.13, as a 'mid-point' business cycle valuation, based on my required gross yield of 9%. Granted of the five years I was using for business cycle valuation purposes 2021, 2022 and 2023 were exceptionally good. But with shares trading at $1.92 on the market today, that is a 39% discount to my fair value mid business cycle price. For a stable company in a steady sized but cyclical market, my 'rule of thumb' is that 'the bottom' is 20% below my mid business cycle fair valuation. That equates to $2.50. But on the market at $1.92, we are 23% below even that! According to the stockpicking competition, PGW shares have slumped 43.53% just this year. This makes it the worst performing share of all, below even Synlait and Rua Biosciences. This to me is crazy. The receivers are not barking at the PGW gate. Blame the Alan Lai fracas?

I disagree about the dividend being AWOL as far as we can forecast. Alan Lai is an international businessman and he needs cashflow from PGW to keep his other business interests humming. We know that PGW has the capacity, and banking syndicate approval for some level of dividend to be paid. So I think it will happen in the first half of CY2025, once the new Alan Lai lead board is in place.

If farmers need to keep their animals and crops alive, then they will be spending at retail, even if they have to go into debt to do so. If they can't afford to keep their animals, then it is off to the livestock yards with them and PGW clips the ticket. Real Estate does seem to be a perpetual thorn in the side of the PGW empire. But I did hear on the rural news this morning that the price for rural land for the three months to the end of March has not dropped as expected. So at least that is not a negative. It helps to think of PGW Real Estate as part of the old 'One PGW' plan. That is, it opens up cross selling opportunities to new farm owners, even if the Real Estate division is not profitable within itself right now.

The only thing that is stopping me buying even more PGW shares today is my self imposed rule of not being allowed to buy a second order of the same share twice in a row. I have to buy into a different share next, before I am 'allowed' another bite at PGW.



The cost cutting has started. Those expensive Santa Fes, are in the rear view mirror now, just like Christmas. Our local Ford dealer had a yard full of PGW branded Rangers a couple of months ago. PGW is keeping ahead of Farmlands. The new Farmlands Rangers are only making their way onto that same Ford yard now.

SNOOPY

Snoopy, isnt the future of PGW in the hands of the Cushings family and if that is the case wouldnt they be wanting a beaten down s p before making their move ?

[Snoopy]

Snoopy, isnt the future of PGW in the hands of the Cushings family and if that is the case wouldnt they be wanting a beaten down s p before making their move ?

H&G, the Cushing family vehicle, IIRC enabled Agria sell down from their 50.1% majority stake position to a non-controlling position of owning 'only' 44.33% of the company, by divesting shares to a 'friendly ally', H&G. This parcel of shares was later on sold to a Chinese government controlled entity. The Chinese government cannily sold out a year or two back to Elders.

H&G retain a 'rump' of shares listed to number 295,000 in the FY2023 annual report. The Cushings are no longer a defining player in the future of PGW, with their remaining shareholding. I think it would be a big ask, even for them, to launch a full takeover offer for PGW. And success would depend on Agria wanting to sell out, which I don't believe they do.

SNOOPY

[bull....]

timber massive downgrade

[Balance]

timber massive downgrade

I would not call it a massive downgrade - $7m from $50m to $43m so 14%.

What is more significant is that it is a second downgrade :

1st downgrade - from $52m in Oct 2023 to $50m in Feb 24.

And we all know that downgrades come in threes, especially when this downgrade is less than 2 months from the last downgrade.

[Snoopy]

Late last year (2023) PGW reduced their EBITDA guidance to $52m, so $50m is a second downgrade. What did you say about downgrades coming in threes? It would come as no surprise to me if the new $50m EBITDA guidance for the FY2024 year was not met. You also have to remember that traditionally most of the profit comes in the first half. So it wouldn't surprise me if PGW only breaks even on a NPAT basis for the year.

I was predicting an interim dividend of no more than 4c. So with rural conditions softening, it is no real surprise there is no interim dividend.

So am I selling out? Quite the reverse. I topped up my holding this morning. Looking through the next business cycle and averaging across the dividend stream, I reckon I am going to get a 10% gross yield. That is far too tasty a prize to leave on the table. Next plan is to free up some of my bank deposit money to buy some more.

I would not call it a massive downgrade - $7m from $50m to $43m so 14%.

What is more significant is that it is a second downgrade :

1st downgrade - from $52m in Oct 2023 to $50m in Feb 24.

And we all know that downgrades come in threes, especially when this downgrade is less than 2 months from the last downgrade.

You need to check that abacus Balance. EBITDA of $43m is downgrade number three. So that is it. We have reached the bottom - phew! Our currency weakening off is the first green shoot that our farmers are turning the corner. Share price up this morning on this bad news, so it was already baked into the boiler. The PGW steam train boiler is indeed building up pressure and the train is preparing to leave the station. See you on board. Don't miss the ride!

SNOOPY

discl: holding PGW and accumulating