PGW - PGG Wrightson

[Snoopy]

- I think it's pretty objectionable for you to accuse Balance of ramping up PGW. As if Sharetrader.co.nz was the kind of forum that would be able to propel a stocks price. You could easily accuse me of the same ramping up of PGW, though I would argue I spent some time advocating a thesis for the stock and then defending it. However, Balance doesn't strike me as the sort of person who would cash out for a pathetic 25% gain, when he/she knows if they wait patiently, then 55-60c awaits him/her.

- What if the market has woken up to the fact that this is a solid company, priced too cheaply, with some great potential, and a stronger balance sheet after the orgy of debt in 2007-2009? It might have nothing to do with Alan Lai at all. And even if it did, so what? What we really need to focus on is whether farmers are buying sheep dip and seeds in big numbers.

I hereby withdraw all inferences of ramping as regards Balance, Sparky. Compared to what you have done above, whatever Balance said has been reduced to a small inclination. 55-60c? What sort of earnings and what sort of PE are you implying with that? Even I would be in the money if it rose that far!

SNOOPY

PS I could never describe a gain of 25% as 'pathetic'.

[Xerof]

Are you inferring that Balance works on the sales desk at Forbar? No wonder things are as easy as ABC.....

:scared::scared:

[Master98]

So that should mean that ANZ, also owed $5m by today, has been repaid. The question that is still unanswered is, with negative assets and negative cashflow, how did Agria raise the money? The only obvious answer is by selling PGW shares. In due course all be be revealed I guess.

SNOOPY

at least , Agria dont need to sell down PGW holding to pay loan untill FEb. 2014, but in two years time anything could happen, good or bad, who knows.

[Snoopy]

at least , Agria dont need to sell down PGW holding to pay loan untill FEB. 2014, but in two years time anything could happen, good or bad, who knows.


By 2014 PGW should be paying dividends again, so IMO Agria should be able to pay back their outstanding $NZ10m debt (owed to ANZ and LIC) by then. It was only today's payment that had me concerned. What we know is the debt has been repaid. We don't know what strings Agria has pulled to do it.

SNOOPY

[Snoopy]

Are you inferring that Balance works on the sales desk at Forbar? No wonder things are as easy as ABC.....

:scared::scared:

You may infer what you like Xerof. I am inferring no such thing.

SNOOPY

[Snoopy]

Darren, bless his cotton sox, is wrong. Here is the top five from Forsyth Barr with notes.

PGG Wrightson (PGW) Price $0.37

PGW has made progress in improving the underlying operating performances of itscore rural services businesses. Its proprietary seed business remains in a strongposition with a competitive advantage in its significant R&D facilities. PGW remains focused on reducing its debt through the final monetisation of its loan portfolio and targeting working capital. Assuming no further drastic climatic condition issues in Australia and NZ, we believe PGW is well positioned to achieve solid earnings growth over the medium term.


OK, but look at the qualifications. Think back over the last few years and the climatic conditions that NZ and Oz farmers have faced. Assuming those weather fluctuations away does not strike me as a robust way to pick the future of PGW going forwards. Also I would suggest that implying a recommendation is unchanged when the share price has moved so much is reading more into the recommendation than was there to start with.

SNOOPY

[Snoopy]

25% is pathetic when 70% awaits you with patience. As the saying goes, "The key to making money in shares is not getting scared out of them." I did my homework, and with my various tools and calcs on my "spreadsheet of lies and distortions", accord PGW as a screaming buy when I bought in at between 32 and 34c. The target price of 55c is what I get from my intrinsic value calculation, based on current EPS of 3c a share and EPS growth for the next 5 years of around 8.5% p.a. on average.

Even at 39c, I consider it a great buy, and when they start paying a dividend in 2H13 or 1H14, I'll be even happier.

For every stock ramper on Sharetrader, there's a potential bear raider out to short a stock with negative comments. What say you, Snoopy?

I would say that five years of growth at 8.5% per year is optimistic, although not outside the bounds of what is possible. But I personally would not make an investment decision on a growth rate as optimistic as that.

SNOOPY

[Master98]

if PGW successfully landed in china, i would say pgw will be booming for a very long period.

[Balance]

All a true story Balance, but there are a few chapters of this story you have left out. Even as PGW now trades at 40c as I write this.

PGW was one of the brokers top tips at 33c, but on the latest list of recommended shares I see it has now been dropped as a recommendation. Hardly surprising when it rises by 25% in just a few days. Could your blatant ramping be an attempt to draw in the unsophisticated while you dump your own shares?

Could the reason the big seller having dried up be because Alan Lai has finished his sell down in preparation for paying of the $NZ10m Agria owes by the end of the day? What will the market reaction be when they realize Agria has sold down?

SNOOPY

Highly objectionable, Snoopy, to accuse yours sincerely here of blatant ramping to dump my shares.

FYI, I bought more at 38 cents and see plenty more upside to PGW.

I hope you are not writing from your own perspective of what you do!

So what if Alan Lai is selling down?

Fairfax had been selling down its Trade Me shares and there is no shortage of takers.

Reason? Because distressed sellers always present buying opportunities. Why do you think George Kerr's sell down of PGW at 28 cents and HNZ at 52 cents were so eagerly taken up?

[Agrarinvestor]

Highly objectionable, Snoopy, to accuse yours sincerely here of blatant ramping to dump my shares.

FYI, I bought more at 38 cents and see plenty more upside to PGW.

I hope you are not writing from your own perspective of what you do!

So what if Alan Lai is selling down?

Fairfax had been selling down its Trade Me shares and there is no shortage of takers.

Reason? Because distressed sellers always present buying opportunities. Why do you think George Kerr's sell down of PGW at 28 cents and HNZ at 52 cents were so eagerly taken up?

If AGRIA falls below 50% it can not consolidate PGWs revenue and earning. Revenue would fall from 1 Billion to 30 Million,
and they have to report a huge loss because the shareprice of PGW is far below 60 cent.
The loan problem is solved and therefore the last remaining argument against AGRIA is solved.

[Snoopy]

If AGRIA falls below 50% it can not consolidate PGWs revenue and earning. Revenue would fall from 1 Billion to 30 Million,
and they have to report a huge loss because the shareprice of PGW is far below 60 cent.


Yes I know that Agrainvestor. But if the $10m that was raised to pay back the loan came from PGW shares then Agria would have only had to sell about:

$10m/0.36= 27.8m shares.

They had 379.1m shares. So this potential sale means that Agria would have 351.3m shares left. That is 46.5% of the company. 46.5% is still effective control, even if some accounting standards do not see it that way.



The loan problem is solved and therefore the last remaining argument against AGRIA is solved.


The loan is repaid. But Agria have not announced how they raised the cash to repay the loan. When I see this I will agree that the new 'private' Agria is a going concern.

'Private Agria'? I say this because if the NYSE are good to their word, Agria will be delisted on 27th December, New York time. With the weekend and Christmas holidays coming up, I think Agria small shareholders have only 2 or 3 days to get out of the company before their shares become untradable. Since he has made no effort to avoid this, I would have to count the imminent 'privatization' of Agria as the next step in the Alan Lai master plan.

SNOOPY

[Snoopy]

Why should I worry about short term distress for a major shareholder that doesn't affect the company's underlying earnings. If they are required to dispose of some or all of their shares in the company, it may in fact help the company break free of the negative perceptions associated with the misfortune of that major shareholder. Just like Trademe and Fairfax.

If Agria do have to sell up, it will be a brief blip for shareholders while the business tracks along.


You shouldn't worry for any immediate reason. As you say Sparky/Balance the underlying PGW business will not be affected. But you should worry because if Alan Lai loses control of Agria then all of these 'mou-s' and 'joint showcase' deals could be in jeopardy. Doing business in China is a very personal thing. If PGWs personal champion goes, PGW management will have to start to process of co-operation from scratch. It could set back any PGW ambitions in China for five years.

SNOOPY

[Snoopy]

Highly objectionable, Snoopy, to accuse yours sincerely here of blatant ramping to dump my shares.

FYI, I bought more at 38 cents and see plenty more upside to PGW.

I hope you are not writing from your own perspective of what you do!


I apologize for the pump and dump suggestion Balance. I realise it would be out of character for you to do this. However your

1/ cent by cent commentary

2/ combined with you urging of potential shareholders to buy

"You gotta buy when the big seller is there."

3/ Plus your statement:

"PGW is one of the top picks by some of the brokers for 2013."

with no mention of what the price was when that recommendation was made...

1, 2 and 3 is all 'ramp speak', whether or not that was your intention.

SNOOPY

[Snoopy]

25% is pathetic when 70% awaits you with patience. As the saying goes, "The key to making money in shares is not getting scared out of them." I did my homework, and with my various tools and calcs on my "spreadsheet of lies and distortions", accord PGW as a screaming buy when I bought in at between 32 and 34c. The target price of 55c is what I get from my intrinsic value calculation, based on current EPS of 3c a share and EPS growth for the next 5 years of around 8.5% p.a. on average.

Even at 39c, I consider it a great buy, and when they start paying a dividend in 2H13 or 1H14, I'll be even happier.


PGW haven't given any official guidance as to earnings in FY2013. But under note 26, there are EBITDA growth assumptions. We also must consider the effect of lower debt as PGW repay all their 'bad bank' loans that Heartland refused to take on.

When I plug all that back into my financial model, and work out an 'after tax profit' for each division, then my picture of what will happen in FY2013 looks like this:

FY2012 to FY2013

Agriservices (less insurance, real estate, SA, and finance commissions): $14.3m -> $5.4m
Agritech: $3.7m -> $11.7m
Insurance and Real estate: $2.5m -> $2.6m
Finance Commissions: $0.2m -> $0.8m
South America: $3.3m ->$3.6m

Total: $24.0m ->$24.2m

I am assuming an annual net interest bill of $9.1m, down from $13.8m in FY2012

With 754.8m shares on issue this is eps of 3.3cps. At 40cps, PGW would be on a PE of 12. Hardly a bargain for a share in the cyclical rural industry. I would be in no hurry at all to top up at that price. At 40c there is already some growth you are paying for in FY2014, IMO. At 55c as you suggest Sparky, the PE goes up to 16.5 for FY2013. 55c is possible one day. But I would suggest that calendar day will not have a 2013 on the end of it.

SNOOPY

Note the above figures are underlying earnings and do not include one offs.

[Snoopy]

One year only? Look beyond that. The next page (pg66 of the 2012 Annual Report) outlines EBITDA growth assumptions over 2014 and 2015, at around 18 and 14% respectively. This should be a good clue to keep digging further beyond a one year assumption.


I am sure I could create a higher valuation Sparky, by looking out more than one year as you suggest. I choose not to do so because I don't believe a multi year projection method is valid in valuing PGW. There are too many external unknowns in the farming world, and the historical record of executing these 'growth strategies' would suggest when growth does happen it will happen slowly. Margins are wafer thin and that means that projected profit figures can be derailed by very modest changes in circumstances. I can well imagine that Forsyth Barr can justify a valuation like 55c given certain assumptions. I believe those assumptions to be optimistic. I can't see any hurry to board the PGW train at 40c a ticket.

SNOOPY

[Aaron]

I did my homework, and with my various tools and calcs on my "spreadsheet of lies and distortions", accord PGW as a screaming buy when I bought in at between 32 and 34c. The target price of 55c is what I get from my intrinsic value calculation, based on current EPS of 3c a share and EPS growth for the next 5 years of around 8.5% p.a. on average.

Dear Sparky
Reading your posts you seem very knowledgable. I would be very interested in knowing what tools and calcs you have on your spreadsheets. I need to DMOR and would like to know how people come to a decision on value.

[Balance]

I apologize for the pump and dump suggestion Balance. I realise it would be out of character for you to do this. However your

1/ cent by cent commentary

2/ combined with you urging of potential shareholders to buy

"You gotta buy when the big seller is there."

3/ Plus your statement:

"PGW is one of the top picks by some of the brokers for 2013."

with no mention of what the price was when that recommendation was made...

1, 2 and 3 is all 'ramp speak', whether or not that was your intention.

SNOOPY

Fair enuf, Snoopy.

Yours truly here is doing a service to my fellow posters in the season of goodwill.

1 Cent by cent commentary is to give those who do not watch the market as I do an appreciation of the sp dynamics.

2 Gotta buy when the big seller is there is timeless observation.

3 Anyone following the news will read that PGW was one of the top picks for 2013 - refer NBR 14 Dec 2012 :

Hot stocks for 2013
David Williams | WEEKEND REVIEW | 14 Dec 2012

Three companies near the bottom of NZX50 companies for performance this year are being plumped as stocks to watch in 2013.

Broking firms Hamilton Hindin Greene, Craigs Investment Partners and Forsyth Barr, as well as fund manager Brook Asset Management, provided NBR ONLINEwith their top three picks for 2013.

Three companies have emerged as favourites – PGG Wrightson, Mainfreight and Fisher & Paykel Healthcare.

That is despite their returns to shareholders being in the bottom 15 of NZX50 companies, as compiled by NZX Data.

According to the NZX Data figures (see RAW DATA below), all but four NZX50 companies had positive total shareholder returns between January 1 and December 7 – which includes share price fluctuations and dividends paid.

The standout was Fisher & Paykel Appliances, fuelled by Chinese firm Haier's successful takeover. However, the company was delisted in November and replaced in the NZX50 by Steel & Tube Holdings.

Hamilton Hindin Greene director Grant Williamson says a strong year for the sharemarket makes it harder to pick winners in 2013.

"Quite a few of them look fully priced. We're looking at those stocks that have good recovery prospects; stocks that haven't performed that well in 2012."

The entire New Zealand sharemarket had a dividend yield close to 6% this year, say Craigs Investment Partners head of institutional equities Geoff Zame and head of private wealth research Mark Lister.

"While the economy might remain sluggish, earnings growth for the NZX50 is forecast to be close to 10% next year."

Brook Asset Management's chief investment officer Andrew South says he is not relying on 2012 performance as yardstick for 2013.

"We're looking at where these companies are positioned going forward."

A similar brokers’ tipping exercise last year shows the benefit of a diversified portfolio.

McDouall Stuart, which picked Diligent, was dragged down by Cue Energy, while Macquarie Securities’ gains from Pumpkin Patch were undone by Chorus and Transpacific Industries.

The average performance of the seven firms was 35% returns, highlighting the strength of the sharemarket.

The winner was Forsyth Barr with an average of 69.4% return, from Chorus, F&P Appliances, Fletcher Building, Ryman Healthcare and Sky Network Television.

2013 stocks to watch



HAMILTON HINDIN GREENE

PGG Wrightson
Chorus
Tower

FORSYTH BARR

Mainfreight
PGG Wrightson
Sky City

CRAIGS INVESTMENT PARTNERS

Fisher & Paykel Healthcare
Ryman Healthcare
Diligent Board Member Services

BROOK ASSET MANAGEMENT

Fisher & Paykel Healthcare
Summerset Group Holdings

Mainfreight
DISCLAIMER: Information in relation to these stocks to watch is intended as general information and not financial advice. Readers should obtain professional advice before making investment decisions. Copies of disclosure statements of NZX adviser firms mentioned in this article can be obtained by contacting the firms.

[Balance]

Last big seller is backing off, moved his offer to 39 cents.

Does not look to me like he/she/fund has much left. Otherwise, will not back off like that.

Buyers now getting more aggressive - over 500T now bid at 38 cents.

I would say definitely 40 cents by end of this week.

You gotta buy when the big seller is there.

PGW is one of the top picks by some of the brokers for 2013.

And speaking of the inevitable, PGW just went 40 cents bid.

Me thinkth the big seller is gone and it's the traders now selling at 41 cents.

[Master98]

I heard more and more chinese company exit from NYSE, and back list in hongkong or china stock market, Agria could do the same thing.

[winner69]

Dear Sparky
Reading your posts you seem very knowledgable. I would be very interested in knowing what tools and calcs you have on your spreadsheets. I need to DMOR and would like to know how people come to a decision on value.

Probably no more sophistcated as (3*1.085^5)*12 OR ((3*1.085^5) + (a bit for the future))*10

Both give 55 or there abouts

Sorry sparky - no doubt you spreadsheet fill of whatever you describe is in them are more complicated than that

[Agrarinvestor]

I heard more and more chinese company exit from NYSE, and back list in hongkong or china stock market, Agria could do the same thing.

That is what i hope. The only question is with us small shareholer or without us. In the case they do it with a going privat first, the question about the compensation offer has
to be raised.
As Agria has done it's partial takeover for PGW, they have paid a price above shareholder assets, is that right ? I asume that Agria will pay the same to us shareholders. That would be above 4$.
In the other case they move with us to HSE it would be cheaper and better for Agrias reputation. HSE has strong lsiting requirements.

@Master, do you know which chinese companies have moved from US to HSE ?

[tim23]

Above $4.00? Gee I'd love that - can you explain your Maths Agrarinvester?

[Agrarinvestor]

Above $4.00? Gee I'd love that - can you explain your Maths Agrarinvester?

Hallo Tim,
http://finance.yahoo.com/q/bs?s=GRO+Balance+Sheet&annual
Current Market Cap is 42 Million. Stockholder equity is 228 Million US $ !!!!!

Mr. Lai own above 75% of Agria. He has earned 80 Millions during the IP for the shares that were listed. Investors had paid 16$ per share , all the money is invested in PGW and there china business.

During the partial takeover of PGW Agria paid a premium above stockholder equity.
If we face a going private we have the right of fair value. The low valuation is only about a long history of sceptic against Agria and has nothing to do with their business.

If someone here is a shareholder of Agria , please send me an email to:
webmaster@solinv.devvv

[Snoopy]

Above $4.00? Gee I'd love that - can you explain your Maths Agrarinvester?


Very easy to explain Tim. Current share price US78c

Exchange rate HKD to USD is $HK7.75 = $US1

So move to Hong Kong and the Agria share price becomes:

$7.75 *0.78= $6.05

A share price well above $4! Q.E.D.

SNOOPY

[Agrarinvestor]

Very easy to explain Tim. Current share price US78c

Exchange rate HKD to USD is $HK7.75 = $US1

So move to Hong Kong and the Agria share price becomes:

$7.75 *0.78= $6.05

A share price well above $4! Q.E.D.

SNOOPY

HAllo Snoopy,

your statement is wrong. Shareholder Equity per share is above 4 USD. I know that you are diving deep into the Balance sheets
and that you belong to the investors that are reading the annual reports careful. I have always handled your concerns wholehearted.
But why are you give such a wrong statement ?

All your apocalypse forecasting about Agria and PGW are not true:

Agria will report a strong loss in its annual report because of the decline in PGWs shareprice
Agria is not able to pay the LIC Loans back
PGW is not a buy, even at the shareprice was at 29 cent
PGW and Agria will not benefit from their teamplay
Agria is burning cash with its chinese seed business

all these predictions comes not out tu be true !

the last forecast of you about Agria will delist at end of December is as well not true !

But i must say: "Thank you" again, because i have taken your concerns always serious, i have saved a lot of money. Since yesterday i am buying Agria shares again.

[Snoopy]

Your statement is wrong. Shareholder Equity per share is above 4 USD. I know that you are diving deep into the Balance sheets
and that you belong to the investors that are reading the annual reports careful. I have always handled your concerns wholehearted.
But why are you give such a wrong statement ?


The balance sheet of Agria includes PGW valued at 60c per share. The market value for PGW shares is just over 40c. The difference is the negative equity that wipes out all of Agria'a net assets as presented on the balance sheet. It is the accounting rules that allow Agria to value their PGW shares at 60c. The market does not agree that PGW shares are worth 60c.



All your apocalypse forecasting about Agria and PGW are not true:

Agria will report a strong loss in its annual report because of the decline in PGWs shareprice


Yes I admit the writedown in PGW shares to market value did not happen. I hadn't realised that because Agria had consolidated PGW into its accounts that they no longer had to mark their PGW shares to market. I made a mistake and I don't always get things right. Of course this doesn't alter the fact that the market values PGW shares at just over 40c, not 60c.



Agria is not able to pay the LIC Loans back


This was correct. Agria had to negotiate a partial extension to 2014. Agria have not disclosed how they raised the money to repay half of their loan. They certainly had no cash income to pay down the loan.



PGW is not a buy, even at the shareprice was at 29 cent


Quoted out of context. I said this before PGW had released their FY2012 result which was much better than expected from Agriservices. Subsequent to that I raised my valuation of PGW. Indeed I bought some more PGW shares myself in the low 30c range.



PGW and Agria will not benefit from their teamplay.


I hinted at this before the announcement of various co-operative agreements over the last month. What I said before that was that I hadn't seen evidence that Alan Lai could bring any real benefit to PGW. With these co-operative announcements, I now have new hope (sic) that Agria and PGW can work well together.



Agria is burning cash with its chinese seed business


I said that the Agria directly chinese seed business is making no money, within the margin of error. From the FY2012 reported accounts this statement is true.



all these predictions comes not out to be true !


I wasn't making predictions. I was telling you what the figures in the annual accounts told me at the time. I stand by all my claims at the time I made them. As circumstances change, my impression of Agria/PGW will change. That is why I was willing to buy some PGW shares in the low 30c recently, yet I was unwilling to buy PGW shares at that price earlier in the year, before the PGW FY2012 annual result was released.



the last forecast of you about Agria will delist at end of December is as well not true !


The NYSE notified Agria on 27th June that they had six months to get their share price average over $1. If the NYSE are true to their word, then Agria will be delisted from the NYSE at the close of business on 27th December 2012.



Since yesterday i am buying Agria shares again.


You are a brave fellow. I prefer direct holding of PGW shares as my exposure to this situation.

SNOOPY

[Balance]

The balance sheet of Agria includes PGW valued at 60c per share. The market value for PGW shares is just over 40c. The difference is the negative equity that wipes out all of Agria'a net assets as presented on the balance sheet. It is the accounting rules that allow Agria to value their PGW shares at 60c. The market does not agree that PGW shares are worth 60c.



Yes I admit the writedown in PGW shares to market value did not happen. I hadn't realised that because Agria had consolidated PGW into its accounts that they no longer had to mark their PGW shares to market. I made a mistake and I don't always get things right. Of course this doesn't alter the fact that the market values PGW shares at just over 40c, not 60c.

You are a brave fellow. I prefer direct holding of PGW shares as my exposure to this situation.

SNOOPY

Snoopy, accounting principles do have underlying rationales behind them. The reason why Agria does not mark to market PGW is because it is not a a mark to market investment. Mark to market assumes that the market is always right about the value of a share, and we know that the market is not. Who famously said that the market is a beauty contest in the short term, and a weighing machine in the long term?

As an aside, I can recall a certain company (majority owned and managed by one of the highest profile scumbag hypocrites of business in NZ) changing its accounting policies every reporting date, depending on the share price of their major investment. Sp up, mark to market. Sp down, equity accounting! And the weak-knee yellow-belly auditors let them do so. Amazing what you could get away with back in those days if you were a high profile scumbag with connections to the government of the day. And they say that corruption does not exist in NZ!

Agree with you about Agria vs PGW to gain exposure.

[Snoopy]

Snoopy, accounting principles do have underlying rationales behind them. The reason why Agria does not mark to market PGW is because it is not a a mark to market investment. Mark to market assumes that the market is always right about the value of a share, and we know that the market is not. Who famously said that the market is a beauty contest in the short term, and a weighing machine in the long term?


Yes you are right Balance. And as Agrainvestor would say, Agria have full control of PGWs cashflows no matter what the PGW share price is. I guess what irks me about the accounting standards is that if Agria were to sell just 0.22% of the PGW shares on issue they would suddenly have to declare a massive loss come next balance date. We have the situation where selling a tiny number of PGW shares at the margin can make a huge difference to the financial results of Agria. And this is on the presumption that 100% of shareholders vote on every important issue. In practice I think Agria could probably sell 10% of shares on issue in PGW and still retain effective control. Yet the accounting standards do not recognise that.

I am picking that the banks that lend to Agria do recognise this when risk assessing Agria's loans. You couldn't have millions of dollars of loan money resting on the knife edge interpretation of accounting protocol.

Agria paid a short term premium for control of PGW, but it now looks like they paid a medium term premium as well. Generally when one company gains control of another they use synergy benefits to justify the price premium being paid. In the case of Agria and PGW, there are no synergy benefits that have trickled through to the PGW bottom line.

Long term that means Agria is under pressure. Agria was down nearly 4% to US 75c as the NYSE market closed for the week. No word on how Agria will deal with their imminent delisting. IMO Agria is treating their small shareholders with utter contempt, even as Alan Lai mounts the diving board to prepare to dive over his own nearly private 'fiscal cliff', leaving nothing but sand in the face of his remaining NYSE wooed followers.

SNOOPY

[Balance]

Refresh my memory - what was the company?


Think BNZ and who owned the BNZ.

[winner69]

Jeez what's up ......PGA at 42 cents ...might get into top 10 for the tear

Talking of what's up anybody know what happened to him/her

[winner69]

Just noted the page started year at 36 so only up 16% .......under forms the nzx

But some happy as mid year the time to get in eh

[Balance]

Gotcha.

Yes, wonderful news with PGW's share price. Here's hoping the momentum continues into January, though it's had a good run and may require some good news to get the buyers going again.

One of the top picks by brokers for 2013.

There will be more buying interest comes 27 Dec.

[Master98]

One of the top picks by brokers for 2013.

There will be more buying interest comes 27 Dec.

farmers are very happy this hot, humidity and rainy weather.

[Master98]

I can see 54c on its current earnings and earnings growth. That is with my conservative modelling, which I have in place given the fiscal cliff and global uncertainties.

If my "margin of safety" variables are moved to a more "neutral" setting that suggests we should be more aggressive on growth , then my figures suggest 62c. I say this, because we may feel more optimistic about NZ and global growth mid 2013.

Should PGW meet the Forsyth Barr 2013 projected EPS estimates of 4.1c and my growth assumption of 8.5% average growth for the next 5 years holds true, then I can see it going to 65c-75c.

But then, I'm a clown, so treat my numbers lightly. :-)

From various info and technical analysis i got support your prediction. let's see.

[winner69]

Seems tie up between name Agria and PGW ...and I know stuff all about the types of spuds

All I know is that the freshly dug "new" Agria spuds from the market gardens up Otaki way were a load of **** .....disappointing compared to the good old Little Purlers I normally get ....didn't ruin the Xmas lunch with the turkey and al that stuff but did expect more from the new spuds

Maybe Agria in name andl no connection to PGW

[noodles]

In the case of PGW it suggests thus:

2 X 8.5 * 3.2cps

17 * 3.2

= 54.4cps



eps for the last 5 years indicate negative growth using the data from aspect huntly. What are you using to calculate growth?

Perhaps you are using EBIT?

This might be a turnaround story next year, but do you really think Ben Graham would invest in this?

I will wait for solid results before touching PGW again. The destruction of wealth in the last few years has been quite staggering.

Good luck to all holders.

[noodles]

Hi sparky,

I think it was about 10 years ago. I don't think i made a loss. I remember recommending the stock to colleagues. I never recommend stocks now.

I take your points on change of management and recency bias.

Cheers,
noodles

[Snoopy]

.
Long term that means Agria is under pressure. Agria was down nearly 4% to US 75c as the NYSE market closed for the week. No word on how Agria will deal with their imminent delisting. IMO Agria is treating their small shareholders with utter contempt, even as Alan Lai mounts the diving board to prepare to dive over his own nearly private 'fiscal cliff', leaving nothing but sand in the face of his remaining NYSE wooed followers.


I don't understand why Agria is still listed on the NYSE given the average share price has been under $1 for 6 months now. Maybe there are some public holidays in lieu that are keeping Agria still listed? Last trading day of the year and Agria shares plunged nearly 6% to US 69c. Volume 95,000 exceeded the 30 day average of 39,000. Perhaps over the reflections of the Christmas turkey, some shareholders have realised it could be the last chance to salvage some cash and get out?

SNOOPY

[Snoopy]

The secret is out now. Pleased I bought when I did. If punters buy at today's price of 42c, then they will get a dividend of around 6.8% should they resume a dividend in 2H13.

Yes and 6.8% is a gross dividend yield.

However I must point out that one of the biggest drivers of earnings growth in FY2012 was the reduction in debt and the corresponding interest payments at about 9%. if the future cashflow is instead directed to dividends then this 'debt reduction growth' will cease.

SNOOPY

[Snoopy]

They have put a further dent in their debt with the Crafar loan repayment in early December. Around $25m, so that will be about $2.25m to the bottom line. Some other rats and mice in their receivables (Approx $4m) that should all be paid back within in 6 months. So that will be a total of $2.7m in extra earnings they can use for a dividend or further debt repayment.


Yes agreed and all of the loans being repaid, including Crafar, will flow into the FY2013 result as interest savings on capital no longer borrowed. My point was come FY2014 and beyond if the dividends are maximised, a situation that would be good for majority shareholder Agria, then the debt mountain will likely remain as it is come the end of June 2013. So in future years one of the greatest drivers of eps 'growth' (the ongoing debt reduction) will no longer be happening. If you are making assumptions of future earnings growth in your valuation model five years out, this should be taken into account.

SNOOPY

[Agrarinvestor]

I don't understand why Agria is still listed on the NYSE given the average share price has been under $1 for 6 months now. Maybe there are some public holidays in lieu that are keeping Agria still listed? Last trading day of the year and Agria shares plunged nearly 6% to US 69c. Volume 95,000 exceeded the 30 day average of 39,000. Perhaps over the reflections of the Christmas turkey, some shareholders have realised it could be the last chance to salvage some cash and get out?

SNOOPY

Hi Snoopy,

if you can not understand why Agria is still listed you should call David Pasquale. He is believable.
He has told the truth regarding the
- impact of the declined shareprice to Agrias Balance and Income sheet
- he told the truth regardind the debt and lic loans

I am sure that Agria will not be delisted and it will be a big trap for short sellers.

Congratulation to all PGW shareholders.

[Balance]

Hi Snoopy,

if you can not understand why Agria is still listed you should call David Pasquale. He is believable.
He has told the truth regarding the
- impact of the declined shareprice to Agrias Balance and Income sheet
- he told the truth regardind the debt and lic loans

I am sure that Agria will not be delisted and it will be a big trap for short sellers.

Congratulation to all PGW shareholders.

Snoopy spent too much time on Agria when it's really PGW which matters.

Agria is but a shareholder.

Liking the price action.

[Master98]

PGW is trading very strong. volume is over 2.3m all at 45c, hope can hold at this level today, business already turnaround still think possible Agria and NewHope will lunch a full t/o someday.

[Snoopy]

http://www.theage.com.au/environment/weather/the-heat--and-dry--is-on-20130102-2c5lg.html

It will not have escaped funds managers that PGG Wrightson does better with drier weather.

Have a play with the little slider to see how weather patterns have changed re rainfall in Australia in 2012.

It's getting drier and hotter in Australia after a couple of rainy years, meaning the farmers will need to re-sow and plant now and in following seasons. We can state with greater certainty from say Nov/Dec than the AUS seeds business will be significantly lifting its profit contribution to the PGG Wrightson group.

The slider shows a comparison between rainfall from Q1 in calendar year 2012 to Q2+Q3+Q4 calendar year 2012. The Q1 rainfall is very much above average and the second period is below average or very much below average except in South Australia (Keith Seed Territory) which looks to be in the grips of a drought. I don't think floods or droughts are ideal for farming. But I certainly hope your analysis is right Sparky. We PGW shareholders have certainly had a bonanza couple of months. The key to the on the ground recovery in PGW is the poorly performing seeds business, and the seed business performance has been poorest of all in Australia. I just hope the reality matches the share price hype.

A couple of months ago I had lost half of the capital I had invested in PGW. Now I have only lost a quarter of it!

SNOOPY

[Snoopy]

Correct - floods or droughts are not ideal for farming, but droughts are good for seed selling, insofar that it requires farmers to buy more seeds to replenish their paddocks and feed their stock. While this might look a little mercenary from the outside to profit from weather extremes, it is very much a part of the farmers business model and the risks they face.


I have been a foundation shareholder in Ridley Corporation in Australia since 199mumble. Ridley's core business is selling feed supplements to animal farmers. My experience is that while farmers need seeds following a dry period they cannot necessarily afford it. Farmers tend to spend their money on farm maintenance when the have the money to spend. A drought in Australia over summer will not give them the cashflows to spend. Culling animals to meet the feed available and selling their calves/lambs underweight is how farmers will cope with a drought.



I'd hazard a guess that you will be back in the black, share price wise, around March or April. And by the time PGW announce annual results, and if their next year earnings per share look like 4cps as I think they can reach, then they ought to be worth closer to 66-68c.


In farming, one season is not a pointer to the next season. If PGW rises to 66c then I will be out.

SNOOPY

[Hoop]

I agree weather is unpredictable, but apparently there is enough evidence and science to suggest it is cyclical over a period of years, EG La Nina and El Nino cycles, and the cycle in between. Australia's east coast is coming out of a period of wetter and more rainy weather, and into a more moderate/normalised weather cycle, by their standards.

But I freely admit I am not a farmer, and am unsure which end of the bull should be milked. :-)

However, you raise the proper investors view, which is - at what point do you sell? You have a fully understandable view which is to sell at around 66c, being a bit more than the price you entered in at. I would consider selling some, most or all of my holding at this price if it reached this level prematurely in the next few months, with a view to buying in if it dropped back.

My intent is a hold of around at least a year unless fundamentals look like they are deteriorating or growth is stagnating. Though if they declare a dividend and the position for PGW looks comfortable, the value play might happily morph into a yield play with some potential to grow further. If they pay 2c a share in dividends with 100% imputation credits it's a gross yield of around 8.6% (I bought my holding averaging at 33.7c). I can live with that in the portfolio. If they're fully valued but have no dividend, then I can happily sell.

Either way the stock will be expected to work for me. After all, I have other NZ stocks on my horizon which look like value plays.

The market seldom operates at exact value (theoretical normal), history and market theory shows that markets spend most of their time operating either at an overvalued or undervalued state ....therefore your theoretical use of the word proper is in fact improper in real life.
cheers
Hoop... CN (Chief Nitpicker)

[stoploss]

Jeez, something about hot weather on the east coast of Australia?

http://www.stuff.co.nz/science/8157600/Australia-is-so-hot-its-off-the-scale

shareprice is certainly hot, trading @ 50 .......

[GR8DAY]

.....50c (just) and still undervalued according to my GUTOMETER!

[GR8DAY]

.....congratulations SPARKY on that well founded call. Hope you invested heaps!

[percy]

Well, they say pride goes before the fall, but in this case, I'll allow myself a wee smile on this one.

http://www.sharetrader.co.nz/showthread.php?2923-PGG-Wrightson-(-PGW-)&p=385910&viewfull=1#post385910

Well done.!!! Excellent research = excellent results.

[GR8DAY]

.........once that 600,ooo plus sell order is cleared away SPARKY I can see your 56c happening pretty quickly??

[Master98]

I hope so.

I am optimistic about PGW meeting their EPS estimates for the coming year. That estimate is 4.1cps. On my spreadsheet of lies and distortions it gives me a share price value of 71c so I hope to see that as a price goal for Dec 2013.

It's nice to see my own successes here, but I hope this enthusiasm for PGW's stock engenders some rub-off support for all of NZ's agricultural listings.

All of New Zealand deserves to see the benefits of agricultural wealth.

4.1cps earning seem quite sure, at least interest save over 2.0m from loan repayments(25m+4m), if seeds business result is strong, I hope can see 5cps earning.

[Snoopy]

I am optimistic about PGW meeting their EPS estimates for the coming year. That estimate is 4.1cps. On my spreadsheet of lies and distortions it gives me a share price value of 71c so I hope to see that as a price goal for Dec 2013.


Where did that 4.1cps estimate from PGW come from Sparky? IIRC at annual report time PGW specifically gave no earnings guidance.

SNOOPY

[Snoopy]

Well, they say pride goes before the fall, but in this case, I'll allow myself a wee smile on this one.

http://www.sharetrader.co.nz/showthread.php?2923-PGG-Wrightson-(-PGW-)&p=385910&viewfull=1#post385910

Trading at 49c as I write this. However I won't be congratulating you Sparky until the first half year results are out. There have been no material earnings announcements from the company and I think a lot of this PGW share price rise is just speculation. Part of a Fonterra fueled 'rural share bubble' that is just waiting to burst.

It looks like extreme drought in Australia for the second half. Major shareholder Agria is set to be delisted from the NYSE next week. PGW are going to have to work very hard to match the FY2012 result in FY2013 I think.

SNOOPY

[stoploss]

Trading at 49c as I write this. However I won't be congratulating you Sparky until the first half year results are out. There have been no material earnings announcements from the company and I think a lot of this PGW share price rise is just speculation. Part of a Fonterra fueled 'rural share bubble' that is just waiting to burst.

It looks like extreme drought in Australia for the second half. Major shareholder Agria is set to be delisted from the NYSE next week. PGW are going to have to work very hard to match the FY2012 result in FY2013 I think.

SNOOPY

Well congratulations from me...speculation or not the shares are trading at 49, if you have some from 33 cents odd and dribble a few out here looks all good to me .

[flyingfox]

Well congratulations from me...speculation or not the shares are trading at 49, if you have some from 33 cents odd and dribble a few out here looks all good to me .

exactly, speculation also need a reason to start with, the reason was performance truely improved and better outlook

[noodles]

Stoploss, not sure I want to sell just yet.

What's fair value for PGW? I think we are at or nearing that price now. For it to move beyond 50c in a meaningful way, I think you are right, we will need to see future earnings growth, and either dividends paid out or debt paid back.

There are many stocks trading above what I would consider fair value on the NZX. You will be kicking yourself if it continues higher. Perhaps you could take some money off the table? Congrats on the trade.

[Snoopy]

Major shareholder Agria is set to be delisted from the NYSE next week.


A last minute dance step played by Alan Lai of Agria last week, a desperate attempt to remain listed?

------

Agria Announces Reverse Split and ADS Ratio Change

Jan 08, 2013 (Marketwire via COMTEX) --Agria Corporation (NYSE: GRO) (the "Company" or "Agria") today announced that its Board of Directors has approved a combination, or reverse split, of the ordinary shares currently issued by the Company at par value of $0.0000001 per share such that the Company shall issue one (1) ordinary share (each a "New Share" and collectively the "New Shares") for every three (3) ordinary shares held by its shareholders ("Old Shares") (the "Reverse Split"). The par value of each New Share will be $0.0000003, equal to the aggregate of the par value of three Old Shares combined. Additionally, the Board of Directors also approved to change the ratio of its American Depositary Shares ("ADSs") to ordinary shares from 1:2 to 1:1 (the "ADS Ratio Change"). The Company is working with its ADS depositary, The Bank of New York Mellon, to effectuate the ADS Ratio Change.

The Reverse Split requires approval of the shareholders of the Company, and will be put up for vote at the next annual general meeting of the Company, which is expected to be held in April 2013. The Company will announce the exact date and agenda of the annual general meeting once they have been determined. The Company expects that the Reverse Split and ADS Ratio Change will be effectuated contingent and simultaneously upon shareholder approval of the Reverse Split.

As a result of the Reverse Split and ADS Ratio Change, the Company expects the price of its ADSs to increase proportionally. Although the purpose of the proposed Reverse Split and ADS Ratio Change is to regain compliance with the minimum average closing price continued listing standard of the NYSE, the Company can give no assurance that this goal will be achieved if the Reverse Split and ADS Ratio Change are approved.

-------

Translation: A 'reverse split' is really a share consolidation. But what a complicated way of doing things!

Why not say, a simple 10:1 consolidation and be done with it? Why the complication of of doing a 3:1 consolidation and halving the ADS ratio? That makes it a 1.5:1 NYSE consolidation as I see it. So if the Agria shares are at US70c, they will consolidate to $US1.05, barely above the $US1 cut off point. This doesn't add up to my way of thinking. What is Alan Lai playing at?

SNOOPY

[Agrarinvestor]

@Snoopy,

you have made a lot of statements on sharetrader about Agria. All your statements have a negative undertone and were often proofed wrong. There is only one reason for the low valuation of Agrias shareprice and that is the fact that they are chinese, and all chinese companies are accused of unfairness and fraud. Therefore it is easy to unsettle their shareholders. This is unfair and not sportmanslike. A lot of shareholders had paid 16$ 5 years ago during the IPO.

@all
If you want to look how it works, go to yahoo finance message boards and look how shortsellers have tried to mislead about the ratio change.
http://finance.yahoo.com/mb/GRO/

I have bought during the last 3 weeks because of 2 facts:

1. PGWs shareprice has recovered about 30% and AGRIAs shareprice has declined for 60%.
2. PGW has anounced a dividend plan in december and that means the first half year must be a good one, if not they had not anounced a dividend plan
3. The anouncement in December about the collabaration with Chinese provincial governments in Shanxi, Guangzhou and Shandong. These are all key strategic forage opportunities for Agria in China.
4. The reverse split and the commitment to be listed at NYSE
5. The 1,5 to 1 reverse split, because they must have a reason for staying in the near of 1$
6. Try to find out about the success of foreign competitors (for example Monsanto) how much revenue they make in china and the difficulties they have.
7. Total Stockholder Equity is 228 Million US$ market capitalisation is 40 million US$
8. Undervalued stocks like Agria has the potential to triple within days
9. Agria with its 40 million market cap has control over PGW (362 million NZD)










>>Why not say, a simple 10:1 consolidation and be done with it? Why the complication of of doing a 3:1 consolidation and halving the ADS ratio? That makes it a 1.5:1 NYSE consolidation as I see it. So if the Agria shares are at US70c, they will consolidate to $US1.05, barely above the $US1 cut off point. This doesn't add up to my way of thinking. What is Alan Lai playing at? <<

I bet on Adam Lai. He has a plan. David Pascale has not described to me about the details of the plan. But i think (hope) we will see a concert of good news until the AGM in April and the shareprice is stable above 1,20$ without a reversesplit.

1.Question: During the last weeks i have seen large blocktrades of PGW shares. Why do you think that the buying interest comes from speculation about dividend or the weather in Australia. There is no discussion
about PGWs prospects in China. Why do you think it can not be about the AGRIA/PGW team play in china ?

2.Question is anyone here willing to bet a crate of beer against my 1,20$ at 1. April goal ?

[Snoopy]

My concern with Agria is that if I wanted to get more information on them, its hard to find it. Just take a look at their investor relations website. There are no annual reports on the Annual Report page and the last quarterly report is Q3 2007! Now, it may well be tucked away as a nondescript link in another page, but if they won't make it easy to source information, I won't go out of my way to find it.

http://ir.agriacorp.com/phoenix.zhtml?c=216437&p=irol-reportsAnnual


Sparky, to get the recent Agria reports you have to go to the SEC filings page.

http://ir.agriacorp.com/phoenix.zhtml?c=216437&p=IROL-sec&secCat01.1_rs=1&secCat01.1_rc=10

Then you select the 20F document from 10/10/2012. 20F is US market speak for 'annual report'.

SNOOPY

[Snoopy]

You have made a lot of statements on sharetrader about Agria. All your statements have a negative undertone and were often proved wrong. There is only one reason for the low valuation of Agrias shareprice and that is the fact that they are chinese, and all chinese companies are accused of unfairness and fraud. Therefore it is easy to unsettle their shareholders. This is unfair and not sportmanslike. A lot of shareholders had paid 16$ 5 years ago during the IPO.


I think I answered this before in my post 2485 posted on 22nd December 2012 Agrainvestor. I have no hang up about the Chinese and agriculture in general. I do think that Alan Lai's record with Agria has not yet left a positive legacy.

I think December 2012 did show two glimmers of hope for the future with:

1/ The 3rd December announcement of PGW developing the "The China Yangling - New Zealand Agriculture Showcase" - It will serve as a showcase for Agria, PGG Wrightson and other New Zealand agriculture-related businesses to promote New Zealand's advanced agriculture, science, technologies and innovative services. The Yangling Agricultural High-Tech Industries Demonstration Zone will promote industrialization of agriculture, with an emphasis on international cooperation.

2/ The 18th December announcement of two joint ventures:

2a/ To establish the China Guangdong - New Zealand Agriculture Showcase for the showcasing and promotion of innovative products, advanced agricultural technology, advanced plant species, and advanced agricultural production models;
To cooperate in the exchange and training of agriculture specialists;
To strengthen the cooperation in the development, production and promotion of new plant species including edible corn, forage and vegetable seeds;
To leverage and apply New Zealand's geographical and climate advantages by establishing a base in New Zealand for seed production of Guangdong Province; and
To jointly set up a working committee to coordinate the establishment of the project, with representatives from all parties, and to communicate and cooperate in other areas.

2b/ According to the memorandum of understanding with Shandong Province Seeds Group Co., Ltd., the parties will cooperate in the following areas:

To strengthen the cooperation in the scientific research, production and promotion of plant species including corn, forage and vegetable seeds; and
To jointly set up a working committee to coordinate the establishment of the project, with representatives from all parties, and to communicate and cooperate in other areas.

The venture into the Guangdong Province seems the one that might lead to some positive sales for PGW in the shortest time frame. But it is still early days.

To balance these positives is the patchy record that Alan Lai has within Agria in relation to his own staff and business partners. He had to buy out his original business partner in China, and when left with what was close to a shell company Agria dived into PGW in New Zealand. Then late last year his CEO and CFO suddenly quit on the same day. Personal relationships are important in all business, but extremely so in China. From the outside it looks like Alan Lai's main claim to business fame is falling out with the people closest to him. This is the big worry for me with Agria. If Lai falls out with the senior people with which he has set up these joint ventures it could be back to square one for PGW in China.

SNOOPY

[Snoopy]

Snoopy,

yes I discovered the SEC filings around 20 mins after I typed that post. Still, begs the question why they don't have it under "Annual Reports".

The 2012 annual report or 20F for 10 Oct 2012 doesn't, at first glance, make for encouraging reading.

The US is much more a legal minefield than any other country. The 20F filing is I feel a way to tick all the legal boxes. To draft an 'annual report' independent of this might be open to misinterpretation. The other US company I am intimate with (YUM) also files a 20F each year under the same dreary format, which includes dire prewarnings about every possible risk factor. Yet all the information is there in the 20F if you look.

SNOOPY

[Snoopy]

These are two conferences. There will be business cards swapped. Some leads may be generated afterwards. But I think its premature to say this is driving the shareprice up. Nothing has actually happened, apart from two conferences or product expos announced.

I agree with you Sparky. The only comment I would add is that moving into China will be slow, although perhaps not quite as slow as it took to get up and running in South America. So I wouldn't have expected anything more from PGW/Agria at this stage.

SNOOPY

[Snoopy]

1.Question: During the last weeks i have seen large blocktrades of PGW shares. Why do you think that the buying interest comes from speculation about dividend or the weather in Australia. There is no discussion
about PGWs prospects in China. Why do you think it can not be about the AGRIA/PGW team play in china?


In this digital age people are used to getting instant results. Instant does not happen in China and it certainly does not happen in agriculture. Most Western companies that succeed in China do so because they have a strong Chinese partner. At the moment Agria makes no money at all in China itself (within rounding error). So it is unrealistic to expect the PGW share price to move when partnering deals with Agria are announced.

A half share of $0 is $0! When Agria starts to make money on its own account in China, only then will I believe PGW is on the cusp of something significant.

SNOOPY

[Snoopy]

1. PGWs shareprice has recovered about 30% and AGRIAs shareprice has declined for 60%.

7. Total Stockholder Equity is 228 Million US$ market capitalisation is 40 million US$
8. Undervalued stocks like Agria has the potential to triple within days
9. Agria with its 40 million market cap has control over PGW (362 million NZD)


Agrainvestor, Agria still has the serious matter of renewing their US loans within a few months. The reason why the Agria share price has declined is that Agria is losing money and is cashflow negative. This is the exact opposite to PGW which is profitable and cashflow positive.

You will also know that Agria's stockholder equity is based on PGW shares valued at NZ60c. Last time I did the calculation if Agria was forced to sell at market price then all of their equity would be wiped out.

I put it to you that a company with 'effective negative net assets', 'negative cashflow' and being 'loss making' could never be called 'undervalued'. To me it looks like the most expensive share on the NYSE!

You may say the price could triple in a few days. I would say Agria is much more likely to be declared bankrupt at short notice. Last year was a good one for PGW, yet Agria still made a loss on an operational basis. What do you think will happen to Agria should PGW, go forbid, have a bad year?

SNOOPY

[frostyboy]

I put it to you that a company with 'effective negative net assets', 'negative cashflow' and being 'loss making' could never be called 'undervalued'. To me it looks like the most expensive share on the NYSE!

SNOOPY

I think it is valued similar to an option

[Agrarinvestor]

@frostboy,
thats the point. Agria is similar as an option. If the underlying value is doing well it should rise. If PGW fails it should decrease. And if PGW has 2 bad years it can collapse. But PGW is doing well, and they have declare a dividend plan. Keep in mind, if anyone want to buy the majority stake in PGW he has to pay 40 million at the moment.

This is a Quote from "Hoop":
>>The market seldom operates at exact value (theoretical normal), history and market theory shows that markets spend most of their time operating either at an overvalued or undervalued state ....<<

That is the point why i said it could triple.


>>company with 'effective negative net assets', 'negative cashflow' and being 'loss making' could never be called 'undervalued'<<

a) they have 821 Million USD Assets and 593 Million USD Liabilities = 228 Million Stockholder Equity

http://finance.yahoo.com/q/bs?s=GRO+Balance+Sheet&annual

b)Total Cash Flow From Operating Activities 28,753 Million USD
http://finance.yahoo.com/q/cf?s=GRO+Cash+Flow&annual

c) Income is a loss of 2,5 Million USD. Not so much for a company with 1 Billion USD Revenue
http://finance.yahoo.com/q/is?s=GRO+Income+Statement&annual

Your statement about the loans is typical for you:
>>Agria still has the serious matter of renewing their US loans within a few months<<

You have done that in the past with the lic loans and ANZ loans. But it is only "hot air". Agria has reached an agreement with both of them.
Imagine you build a big house, your loan matured, what is normal and you have to renew. Your neighbours are saying :"Snoopy can not pay it back."
They had no problems to renew, they had not to sell stakes in PGW, but you will never stop making accusions. They had not even to sell PGW shares
where the shareprice was at 29 cent ! Remeber , has Snoopy ever making a buy recommendation of PGW, not even at 29 cent.

>> Instant does not happen in China and it certainly does not happen in agriculture. Most Western companies that succeed in China do so because they have a strong Chinese partner. At the moment Agria makes no money at all in China itself (within rounding error). So it is unrealistic to expect the PGW share price to move when partnering deals with Agria are announced. <<

The fact is, in China the majority of the competitors have a gross margin of 40%. Agrias Gross Margin is 47.8%. Operating profit is 0.3 million (page 42). This is not much but it is not a lost. Keep in mind that all the western companies like Monsanto are minority shareholders. I have tried to figure out Monsantos revenue and earnings for china, but i found no numbers. But i found some very nice presentations. This is a must read for every PGW shareholder.After reading you can imagine why the partnership of PGW/Agria is so important and why they have support of LIC, New Hope and Ngai Tahu. Think about what Monsanto has to do with their patents if they want to be succesful their. They don't want to share their knowledge and register their patents in china.

Page 14:
http://www.monsanto.com/investors/Documents/2012/FINAL%20Q3F12%20Monsanto%20Earnings%20Presentation .pdf

look at 147 BU/AC versus 84 BU/AC and now look here for Agrarland per person in the states/china



if you multiply the 2 numbers you come to the conclusion, that china has to increase the efficience by 7. This is almost impossible.
But it is one of chinas government top goals in their current 5 year plan.

https://www.google.de/publicdata/explore?ds=d5bncppjof8f9_#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ag_lnd_arbl_ha_pc&scale_y=lin&ind_y=false&rdim=region&idim=region:SAS:NAC&ifdim=region&hl=de&dl=de&ind=false
If it doesn’t work go to:
https://www.google.com/publicdata/directory

[Snoopy]

I think it is valued similar to an option


Interesting observation frostyboy. Not having done much with options myself, how do you see Agria performing in relation to the PGW share price into the future?

SNOOPY

[Snoopy]

A last minute dance step played by Alan Lai of Agria last week, a desperate attempt to remain listed?

A 'reverse split' is really a share consolidation. But what a complicated way of doing things!

Why not say, a simple 10:1 consolidation and be done with it? Why the complication of of doing a 3:1 consolidation and halving the ADS ratio? That makes it a 1.5:1 NYSE consolidation as I see it. So if the Agria shares are at US70c, they will consolidate to $US1.05, barely above the $US1 cut off point. This doesn't add up to my way of thinking. What is Alan Lai playing at?


Jan 15th close was at 75c on a mere 12,000 shares. If the NYSE is as good as their word, that was the last day of trading. However, 75c translates to $1.12.5 post the proposed consolidation in April. Is this enough to give Agria a reprieve? All will be revealed tomorrow!

SNOOPY

[Snoopy]

>>company with 'effective negative net assets', 'negative cashflow' and being 'loss making' could never be called 'undervalued'<<

a) they have 821 Million USD Assets and 593 Million USD Liabilities = 228 Million Stockholder Equity

http://finance.yahoo.com/q/bs?s=GRO+Balance+Sheet&annual


I prefer to deal with the actual 20F filing by Agria

http://media.corporate-ir.net/media_files/priv/ccbn/event_help/smalldownload/pdf.gif

The balance sheet is labelled 'page F4'. However in this instance the figures have been correctly transcribed to yahoo and your quotes are correct. However, the actual underlying equity is calculated by revaluing the PGW shares on the Agria books at NZ60c to their current market value of NZ47c. There are 754m PGW shares on issue, and Agria owns half of them. So the 'overstatement of value' on the Agria books is:

(0.60-0.47) x 754m *0.5= $NZ49.1m, or $US41m (using NZD1 = US84c).

So the stockholder equity is down to $US228m - $US41m= $US187m

This is of course assuming that balance sheet is unaltered from 30th June 2012. This won't be correct, but until the half year results are out it is the best information that we have. Nevertheless $US593m worth of liabilities stacking up against $US187m worth of assets is a weak position.



b)Total Cash Flow From Operating Activities 28,753 Million USD
http://finance.yahoo.com/q/cf?s=GRO+Cash+Flow&annual


Yes, but net cashflow used financing activities was $US43.167m. So the ongoing operational deficit is:

$US23.753 - $US43.167m = -$US19.414m.

This is why I say that on an underlying basis, Agria is cashflow negative. PGW will have booked some profits for Agria since. But profits are split 1/3 2/3 between the interim and final result. So even though profits may improve on an annual basis, looking at the first six months the operating deficit will certainly not be less than $10m. And that doesn't include any payouts Agria made to the outgoing CEO and CFO on their quitting.

Being generous this means Agria shareholder equity was down to $US177m by 31st December



c) Income is a loss of 2,5 Million USD. Not so much for a company with 1 Billion USD Revenue
http://finance.yahoo.com/q/is?s=GRO+Income+Statement&annual


Maybe, but this 'profit' was boosted by one off cashflows from realizing investments of $27.631m. This is not a repeatable cashflow. So on an underlying basis Agria is losing around $US30m per year. At this rate Agria shareholder equity is shrinking rapidly. The banks of course will not allow situation to continue, which is why the renegotiation of the US based Agria debt starting in April is so critical.



Your statement about the loans is typical for you:
>>Agria still has the serious matter of renewing their US loans within a few months<<

You have done that in the past with the lic loans and ANZ loans. But it is only "hot air". Agria has reached an agreement with both of them.


Yes but Agria has not told us how they raised the money to partially repay those loans. Given they on an underlying basis Agria is loss making, they must have sold something. What? Or did they somehow increase their other borrowings even more? All we do know is that they have agreed to pay higher interest rates on the outstanding balance.



Imagine you build a big house, your loan matured, what is normal and you have to renew. Your neighbours are saying :"Snoopy can not pay it back."
They had no problems to renew, they had not to sell stakes in PGW, but you will never stop making accusions. They had not even to sell PGW shares
where the shareprice was at 29 cent ! Remeber , has Snoopy ever making a buy recommendation of PGW, not even at 29 cent.


I didn't buy at PGW at NZ29c, because at that time PGW had not revealed their final result. Once the big uptick in Agriservices was confirmed, I bought some PGW at NZ32c



>> Instant does not happen in China and it certainly does not happen in agriculture. Most Western companies that succeed in China do so because they have a strong Chinese partner. At the moment Agria makes no money at all in China itself (within rounding error). So it is unrealistic to expect the PGW share price to move when partnering deals with Agria are announced. <<

The fact is, in China the majority of the competitors have a gross margin of 40%. Agrias Gross Margin is 47.8%. Operating profit is 0.3 million (page 42).


Agria has what amount to a couple of research projects under their own name in China. It is really stretching things to say they have any commercial business at all under the name Agria. Net margin is what is important. Not gross margin. I don't think it is realistic to suggest Agria will suddenly become as profitable as Monsanto. Agria is being crippled by the high interest payments on their substantial borrowings. The rise in the PGW share price from 30c to 47c may have bought some temporary relief. If even if underlying equity is no longer negative, Agria is still in a very serious position IMO.

SNOOPY

[GR8DAY]

......"GUT-O-METER" right again and bailed last week! (sorry holders, but just gotta go with that gut instinct........proving to be very reliable) Probably nothing wrong with the company either....apart from too high a SP at the moment.

[noodles]

PGW down 3c today to 43c on the back of a Goldman Sachs/JB Were recommendation to SELL, citing the big price rise in recent weeks, plus that they deem PGW to be a "low quality business".

I disagree with their analysis, and am tempted to buy more should the price drop further.

Hi Sparky,
Where do you see FY13/14 eps?

How does it vary from Goldman Sachs/JB Were?

Cheers,
Chris

[winner69]

From buy to accumulate

Does that mean current shareholders can still buy, ie accumulate ....but if you don't own you shouldn't buy

Or does accumulate mean buy ....but not too many

Always wondered and never the fie print n the disclaimers

[noodles]

I don't have the GSJBW report, I have only seen a brokers commentary.

I bought in back in November based on FY2013 with EPS of 4.1cps, and accumulated more when I saw that Forsyth Barr increased their assumptions to 4.3cps (see my post 2556 above).

Upon comparing the November and January analysis, it seems that Forbarr are expecting EPS to grow at more like 9% plus over the next few years, instead of 7-8% (from their November report). This probably reflects the Crafar debt repayment as well as some general positive sentiment in Agriservices.

Thanks Sparky,

I like your conviction towards stocks. It's a quality I lack.

This recent decline just feels like a blow off after a hefty rise. I imagine the RSI was well over 70 and the negative report just accelerated things. Should be well supported with earnings at 4cps'ish.

I might even get in if the half year result is decent.

Do you expect to see eps over 2c for the half year?

Cheers

[winner69]

Do punters react when they hear news from NUF and sell their PGW ....even though one provides the seeds for things to grow while the other protect them from nasties and even kills them

Looks like NUF disappointed te market today cutting Aust NZ for the reason

PGW guilty by association?

[Hoop]

Started firing sell signals a week ago...The rapid drop in momentum (red circle) is the reason for your gut feelings ...even the most insensitive guts would have felt this one...
I have this share so how could I not feel it..eh? :p .... Short termer will be out and after today's support breaks some medium termers may be gone as well.

Did I sell out? ..Nah, hasn't hit my stop/loss yet ....Its a Medium term investment for me as I think this is a bull market correction event. I tend to have loose stops during Bull markets.
My favourite indicator DMI hasn't triggered a sell signal as of yesterday :) Today price fall won't help:( but I'm hoping for a bottom above 40c...if I'm wrong and get chucked out for a small loss I'll take it on the chin, get over it and move on to my next adventure without fuss and fanfare. Tally ho!!!

http://i458.photobucket.com/albums/qq306/Hoop_1/PGW22012013_zps7e4266c4.png

[noodles]

Do you expect to see eps over 2c for the half year?



Given the seasonality of earnings, I reckon eps>1.5c will be a good result.

From AGM: "First half earnings generally 30% of total year"

[winner69]

Given the seasonality of earnings, I reckon eps>1.5c will be a good result.

From AGM: "First half earnings generally 30% of total year"

your original question - Do you expect to see eps over 2c for the half year?


Lets chane to Do you expect to see eps over 1.5c for the half year?

My answer ...doubt it

[Hoop]

Thanks for the charts Hoop, confirms my opinion it will bottom out around 40 cents. Then it's buy time again!

Can't ignore that old rascal Fibonnacci eh?

I some times do .. actually, I usually forget about it as its not on my top best list but each to their own...you use the indicators that you have the most success with and those that best suits your discipline style........behavioural instincts shown up in a mathematical or chart format can be seen as spooky at times ...Fib is no exception.. eh? :)

I consider the Fib Retracement as another support line indicator and as you Moosie have pointed out this 50% line is around the 39.5c area...however Moosie you can't relax knowing this as nothing is confirmed that 40c is the bottom ..if all different TA and FA methods point to that 40c mark being the bottom then the odds of it being the bottom has increased..that's all....and...if those 38-40 lines of support is breached it gets technically ugly and you don't want to be exposed to this as there are other better performing stocks to invest in.....

Time to buy at 40c???....I don't know ...PGW has to get first, if it does, then we analyse again...if there are no buy signals it pays to wait (reduce the risk) patience is a virtue.

Below is todays depth snap shot of the state of play at 11.30am...So far today PGW is trading at 44 up 1c..That charted short term level at 44 - 45c is showing up clearly in todays depth diagram below.... It seems as of 11.30am that 44/45 is a very strong resistance zone and even though there is a lot of buying pressure it is at this moment not enough to break back though to 46+c ....interesting to see the depth support at 40,,,eh Moosie:).......Depth 40 point is agreeing with the chart's long term 40 support...so far all is going to plan. :)
http://i458.photobucket.com/albums/qq306/Hoop_1/PGWdepth_zpsf4a1f14c.png

[Hoop]

Yes very interesting to see it turning up on the depth chart. I usually rely on depth to confirm the technical specs. If it all matches up, buy/sell time (also taking into account the gut-o-meter).

I don't mind risk on a short/medium term correction, as long as the long-term trend is up. No catching falling knives for me!

Thanks again!

Great to hear you still have 10 fingers
You have a couple more than me :(

[winner69]

u can tell how long a glazier has been a a glazier by how fingers they have

[Balance]

PGG Wrightson should be able to catch some small upside from this weakness in one of their main competitors as they go through a very difficult merger process. It will be hard for Farmlands-CRT staff to perform at their best when the companies have warring directors.

http://www.stuff.co.nz/business/farming/8217385/Rural-co-op-merger-threatens-to-turn-dirty

I had understood the Farmlands-CRT merger would cause some teething problems (as all mergers do), but I didn't realise it was turning quite so unpleasant.

People think that mergers are always a case of 1+1 = 3.

History shows that it's more a 50:50 situation with 1+1 = 1 in some instances.

[Hoop]

People think that mergers are always a case of 1+1 = 3.

History shows that it's more a 50:50 situation with 1+1 = 1 in some instances.

Animal herd behaviour and survival instincts to the fore....evidence that humans haven't evolved above other animals.....

A bigger animal has revived itself and now threatenting (PGW??) ...the smaller animal groups come together to form an overall bigger herd (safety in numbers) This bigger herd needs a leader...The leaders of the smaller groups commence the head butting stage.....

Yawn ....wake me up when its over

Disc: Farmlands shareholder (very small)

[glennj]

Farmlands and CRT hardly compete against each other on the ground at the moment and I see the merger case as compelling & will certainly be voting for it. The extra buying synergies should be a big help even if there are no back office savings. PGW shareholders take note that a combined Farmlands/CRT will be formidable competition. Having lived in both islands and dealt with all three companies and been a shareholder in all three I have afew insights into them.
Back in the mid 1990's when I was representing a major potential new customer Wrightsons blew a new account opportunity where merchandise sales could have been around a million annually. Frankly they were shocking/lazy/ disinterested and I hope for PGW shareholders sakes things have improved. Farmlands ended up getting the account and they were excellent.
I'm currently invested in PGW as a turnaround play but if progress stalls I'll be out, especially if the Farmlands/CRT merger goes ahead.

[Dej]

Have animals on the mind today do we Hoop?

I think he does, he should keep the narratives coming though! Perfect analogies.

[Dej]

Very entertaining.

You taking requests Hoop? Wouldn't mind something involving sharks, fluffy kittens, gazelle and maybe a flamethrower???

I think you should do one between Gareth Morgan and cats!

[Dej]

I've already posted up that to make up for culled cats we should all adopt Great White Sharks and start in intensive breeding program. Could be a great growth stock with massive potential once people catch on to the trend. I'll even name the company in honour of Gareth and the massive profits we could make: Gareth_4_Sharks_R_Us.com

We will have to try and patent the idea to get some IP behind us so we can capture the market! Don't want any knock-off Great Whites appearing from external companies.

I would invest in Gareth_4_Sharks_R_Us.com :t_up:

[Hoop]

Have animals on the mind today do we Hoop?

http://i458.photobucket.com/albums/qq306/Hoop_1/monster_zpsfa1497e6.gif

[janner]

Bal, so very true ... mergers need a) a very good and thoroughly debated business case and b) exceptional excution ... Kiwi mgt is generally poor at this as it gets left to (generally hopeless) middle management.

I wonder what PGW would look like if Farmlands and CRT were merged into PGW? With RD1 heavily backed (and subsidised) by Fonterra a new and enlarged PGW may be able to compete along the lines of the great NZ grocery duopoly that is Foodstuffs (RD1) and Woolworths/Progressive (PGW).

Now that is an extremely good thought Belg..

The Synergies !!.. The Cost Savings.. The Buying Power..

[winner69]

Here's are the meanings behind Buy/Accumulate/Hold/Reduce/Sell

BUY - High conviction for material positive return comfortably above its cost of capital.
ACCUMULATE - Shares moderately under-valued. Positive share price outlook.
HOLD - Fully valued. Could remain a portfolio holding but more attractive stock options should be considered.
REDUCE - Shares moderately over-valued. Negative share price outlook.
SELL - Overvalued and/or carries significant risks. High conviction for material negative return.




So Farbar says that if I already own PGW I still can buy a few more cause there is a positive outlook anyway ..... but maybe not too many more

But if zi don't alraedy have PGW I shouldn't really buy any cause there a better things to buy (the BUY ones)

ACCUMULATE just seems an odd phrase ..... but heck what do I know anyway

Probably jsut a con to keep punters buying and selling to keep the money coming in

[percy]

Bal, so very true ... mergers need a) a very good and thoroughly debated business case and b) exceptional excution ... Kiwi mgt is generally poor at this as it gets left to (generally hopeless) middle management.

I wonder what PGW would look like if Farmlands and CRT were merged into PGW? With RD1 heavily backed (and subsidised) by Fonterra a new and enlarged PGW may be able to compete along the lines of the great NZ grocery duopoly that is Foodstuffs (RD1) and Woolworths/Progressive (PGW).

Will happen.Don't know how many years it will take,but with internet buying/selling/trading it willn't be too many years away.

[Agrarinvestor]

Cynics will argue anything other than "BUY" is a "SELL".

Accumulate makes sense to me. It says there is upside if you are adding to a larger position bought more cheaply, or if you are buying on temporary pricing weakness.

Remeber the rating of PGW in 2009. Price target 2.05$. The biggest joke here are these 5 cent. Why not simple 2$.
If these genius analyst of Goldman Su*** give PGW a accumulate it means nothing.

>>Goldman Sachs is not changing its earning estimates or neutral recommendation on PGG Wrightson. It has a 12-month target price of $2.05 on the stock.<<

http://www.nbr.co.nz/article/failed-...-damages-55247 (http://www.nbr.co.nz/article/failed-deal-could-cost-pgg-wrightson-144m-damages-55247)


In my opinion it is more important to observe market prices
4289

http://www.indexmundi.com/commoditie...0&currency=nzd (http://www.indexmundi.com/commodities/?commodity=corn&months=60&currency=nzd)

[Snoopy]

PGW haven't given any official guidance as to earnings in FY2013. But under note 26, there are EBITDA growth assumptions. We also must consider the effect of lower debt as PGW repay all their 'bad bank' loans that Heartland refused to take on.

When I plug all that back into my financial model, and work out an 'after tax profit' for each division, then my picture of what will happen in FY2013 looks like this:

FY2012 to FY2013

Agriservices (less insurance, real estate, SA, and finance commissions): $14.3m -> $5.4m
Agritech: $3.7m -> $11.7m
Insurance and Real estate: $2.5m -> $2.6m
Finance Commissions: $0.2m -> $0.8m
South America: $3.3m ->$3.6m

Total: $24.0m ->$24.2m

I am assuming an annual net interest bill of $9.1m, down from $13.8m in FY2012

With 754.8m shares on issue this is eps of 3.3cps. At 40cps, PGW would be on a PE of 12. Hardly a bargain for a share in the cyclical rural industry. I would be in no hurry at all to top up at that price. At 40c there is already some growth you are paying for in FY2014, IMO.

SNOOPY

Note the above figures are underlying earnings and do not include one offs.

Since I wrote this there has been drought in South Australian and NSW and floods in Queensland. That means the expected boost in Agritech sales is IMO unlikely. I think PGW will have a real job to match last years earnings now. 40c a share representing a PER of 15 anyone? My FA analysis says that 40c is a fully stretched valuation for PGW in this market . But you TAers please keep believing that 40c is a really cheap entry point. I will need you there if I want to offload my shares after the half year result is out.

SNOOPY

[Hoop]

Since I wrote this there has been drought in South Australian and NSW and floods in Queensland. That means the expected boost in Agritech sales is IMO unlikely. I think PGW will have a real job to match last years earnings now. 40c a share representing a PER of 15 anyone? My FA analysis says that 40c is a fully stretched valuation for PGW in this market . But you TAers please keep believing that 40c is a really cheap entry point. I will need you there if I want to offload my shares after the half year result is out.

SNOOPY

Thxs for the FA update Snoopy much appreciated...
I curious..why wait until the results to sell...
This TA er just reads and reports on Mr Markets behaviour... Snoopy don't shoot the messenger
40c is just a chart theoretical support point that under that 40 should see buyer numbers drop significantly....In practice I've just looked at the depth and it is true..


412,704https://www.directbroking.co.nz/DirectTrade/images/spacer.gif
14

43



851,447https://www.directbroking.co.nz/DirectTrade/images/depth_before.gif
21
42


236,064https://www.directbroking.co.nz/DirectTrade/images/depth_before.gif
10
41


420,380https://www.directbroking.co.nz/DirectTrade/images/depth_before.gif
13
40



30,000https://www.directbroking.co.nz/DirectTrade/images/depth_before.gif
3
39






Looking at the above depth (as of Friday close).There's a solid block of buyers and its increasing... so 43c seems supported now... good news for us Nervous Nellies...eh?

".....But you TAers please keep believing that 40c is a really cheap entry point. I will need you there if I want to offload my shares after the half year result is out......"
Got some bad news for you Mate...if PGW gets to that point I'm going to be ahead of you in the selling queue...and I guess I won't be alone either :D.

Actually this is the 3rd stock in my portfolio that I nearly pushed the sell button on this week...kinda makes me wonder whether Mr Market has already priced in the anticipation of a good reporting season...Hmmmm

[Queenstfarmer]

Droughts / floods...whatever hand Australia gets delt weatherwise...it can't go year in year out without requiring seed.

[Snoopy]

Thxs for the FA update Snoopy much appreciated...
I curious..why wait until the results to sell...


Actually if you know my style Hoop, you will know that I won't be selling for a while yet. I am a long term PGW investor who has only just increased their holding in anticipation of the return of dividends. My comment was more along the lines that some FA investors are more flighty. If PGW produces a poor result then they might sell, leaving some short term investors who believe that PGW is cheap at 40c to pick up their discards. I can tell you that I for one won't be buying more at 40c unless that half year result produces a hidden positive surprise. And if PGW does produce a surprise positive result I won't be buying either as that will be an unlikely trigger for a share price fall at all!

SNOOPY

[Snoopy]

Droughts / floods...whatever hand Australia gets delt weatherwise...it can't go year in year out without requiring seed.


Buying seed is a voluntary action.

The farmers may have been saving their own seed from the previous years crop...

SNOOPY

[Snoopy]

In my opinion it is more important to observe market prices
4289

http://www.indexmundi.com/commoditie...0¤cy=nzd (http://www.indexmundi.com/commodities/?commodity=corn&months=60¤cy=nzd)


Thanks for this chart Agrainvestor. The cynical may say NZ doesn't produce much maize, nor buy it in for stock feed. So the above chart is of little interest for NZ based agricultural businesses. However, I beg to differ.

This kind if chart is important because it represents the cost pressures on industrial scale farms like those found in the US which do have a feed cost issue. So what this chart represnts is a window on competitors costs in $NZ terms. NZ farmers as a rule do not have these costs. So the higher this chart goes, the better for NZ farmers because in relative terms our 'grass input' cost structure become more cost competitive with maize feed.

Despite the fall off since June, this chart indicates things are still looking good for NZ farmers.

SNOOPY

[Agrarinvestor]

@ Question to the Farmers,

>>Buying seed is a voluntary action.

The farmers may have been saving their own seed from the previous years crop..<<

Is it realy what Farmers are doing. I have learned that it is more common oday to use Hybrid Seeds, than using their own seeds.
The reason is that Hybrid Seeds have 30% higher yield.

I would be very nice if some experts from the farmer section can answer this.

[Joshuatree]

Actually if you know my style Hoop, you will know that I won't be selling for a while yet. I am a long term PGW investor who has only just increased their holding in anticipation of the return of dividends. My comment was more along the lines that some FA investors are more flighty. If PGW produces a poor result it is they that might sell, leaving some short term investors who believe that PGW is cheap at 40c to pick up their discards. I can tell you that I for one won't be buying more at 40c unless that half year result produces a hidden positive surprise. And if PGW does produce a surprise positive result I won't be buying either as that will be an unlikely trigger for a share price fall at all!

SNOOPY that should be ,..." a surprise positive result I wont be "SELLING" more at 40c i take it?

[Snoopy]

that should be ,..." a surprise positive result I wont be "SELLING" more at 40c i take it?

No, sometimes my fingers type faster than my brain works but not on this occasion.

I always look for value. 40c for PGW I regard as expensive, based on what is known in the market on PGW company performance. If the result is a surprise positive then I am betting the share price won't fall. So I won't be buying at 40c on a surprise positive result.

Scenario2 that is the result is a huge positive surprise and the share price goes up. Depending on how good the result is I may decide the share is now worth 40c. But with a share price well north of 40c, it would be difficult to see any value there for me at a higher price. So I will have 'missed the boat' and still won't be buying at 40c!

SNOOPY

[Agrarinvestor]

Rogers is more bullish on agriculture than anything else currently
Markets Headed for Disaster in 2013?
Jim Rogers: 4200% Investing Returns Are Still Possible Lauren Lyster

Famed investor Jim Rogers is more bullish on agriculture than anything else, and he’s positive about Russia for the first time in 46 years.

http://finance.yahoo.com/blogs/daily-ticker/jim-rogers-4200-… (http://finance.yahoo.com/blogs/daily-ticker/jim-rogers-4200-investing-returns-still-possible-135053601.html;_ylt=AssFavBMCEzleVuAI1qcEPqiuYdG;_ ylu=X3oDMTQ0YjZqdDdhBG1pdANGUCBUaGUgRGFpbHkgVGlja2 VyBHBrZwNkYTM0OTQ1Ny02MTZjLTNmZDUtYTQzNC04MDEwNDNi ODE0MTEEcG9zAzEEc2VjA01lZGlhU2VjdGlvbkxpc3QEdmVyAz JhYzlhYWQzLTZmYTYtMTFlMi1iZWYxLWVlZTQzZTJhZDMzZg--;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRw c3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3)

Famed investor Jim Rogers co-founded Quantum Fund with George Soros in the early 1970s, retired at age 37, and is perhaps best known these days for his market analysis in the media.

But since his new book Street Smarts: Adventures on the Road and in the Markets is a memoir, we decided to take a step back from the markets and look at the bigger picture.

Rogers, born and raised in the U.S., moved his entire family to Singapore in 2007 because he wanted his two young daughters to grow up speaking Mandarin.

“In my view, China is going to be the most important country in the 21st century,” Rogers tells The Daily Ticker.

Rogers is a long-time China bull but acknowledges that China's rise "is not going to happen overnight or straight up." He argues that the U.S. had many setbacks on its way to the top in the 20th century, and China is sure to have similar setbacks as well.

On the same note, he’s not claiming the U.S. is going down the tubes tomorrow.

“When the UK went into decline - which was the greatest country in the 19th century - it took a long time,” he notes. “So America is not about to fall off the face of the Earth, but had you moved to New York in 1907 from the UK, you would have done a very smart thing, so that’s the way I’m looking at this now.”

Positive economic data won't shake his negative U.S. thesis. According to Rogers, “the U.S. is the largest debtor nation in the world while China is the largest creditor nation in the world."

Related: Jobhttp://images.intellitxt.com/ast/adTypes/icon1.png (http://www.wallstreet-online.de/diskussion/1179314-1-10/4200-investing-returns-are-still-possible#) Market ‘Making Slow and Steady Progress Every Month’: Jack Ablin

Rogers has also been critical of U.S. higher education. He cites the rising price of tuition (a 1120% increase since 1978 according to Bloomberg) and the staggering studenthttp://images.intellitxt.com/ast/adTypes/icon1.png (http://www.wallstreet-online.de/diskussion/1179314-1-10/4200-investing-returns-are-still-possible#) loan debt load (topping $1 trillion according to the CFBP) as reasons why.

“You have to follow your own passions,” he says. “But...tertiary education in America is a bubble. There's no question about that.”

As for investing advice, Rogers is more bullish on agriculture than anything else currently, and he’s positive about Russia for the first time in 46 years. He even sees positive developments on the horizon for North Korea (he invests in the communist nation via stamps and coins). He argues that the North Korean generals and leaders have been influenced by the progress they’ve seen in Moscow and Beijing, and has predicted North Korea will merge with South Korea in the next few years.

Looking at the U.S., Rogers is not enthusiastic about the recent rally in the U.S. stock market, which drove the Dow Jones Industrial Average (DJI) to close last Friday at 14,000 for the first time since October 2007. In his book, Rogers writes “there’s nothing quite like a bull market to make people feel smart.” And intelligence, Rogers argues, is not what has been driving these moves.

Related: Dow 14,000: The More Things Change, The More They Stay the Same

“The market is going up because the BOJ said two months ago we’re going to print unlimited amounts of money,” Rogers quips. “And Mr. Bernanke didn’t want to be outdone. It’s gonna end badly for all of us - we’re all going to wake up one day with a horrible headache - probably in 2014-2015, or the end of 2013.”

Related: Don’t Bet on Fed ‘Exit’ in 2013…or Even 2014: Alan Blinder

Rogers reminds us repeatedly in his book that he is not very good at market timing. He writes, “I am not very good at figuring out the moment when suddenly everybody else realizes that what is happening is insane.”

And while Rogers and Soros may have been pioneers in hedge funds and international investing in the U.S. when they started Quantum Fund back in 1973, he believes the staggering 4200% returns the fund delivered over 10 years is still possible, despite today’s more crowded investing world.

“Anything is possible if you do your homework,” Rogers asserts. “There were smart people then and I’m sure there’s lots of smart people now.”

[Agrarinvestor]

Here are some statements from Syngenta about the effect of drought to seed selling:

>>Latin American farmers have snapped up Syngenta's products to make up for shortfalls in the wake of the worst drought in over 50 years in North America, which sent U.S. corn and soybean prices to record highs.<<
>>"Our confidence in the coming season is reinforced by the fourth quarter business (http://www.reuters.com/finance?lc=int_mb_1001) strength, notably in North and Latin America, as well as robust commodity (http://www.reuters.com/finance/commodities?lc=int_mb_1001) crop prices,"<<
>>High crop prices have driven demand for crop protection products and advanced seeds and equipment as farmers faced with increasingly erratic and extreme weather conditions turn to technology to boost yields.<<

http://www.reuters.com/article/2013/02/06/syngenta-results-idUSL5N0B60RA20130206?feedType=RSS&feedName=marketsNews&rpc=43

[Joshuatree]

From Snoopy down many thanks for your thoughts,im joining a few dots both ways:).

[Snoopy]

What you are really saying is you don't want any more PGG Wrightson shares!


Not at all. One possible scenario is that I roughly double my holding. What I am saying is I don't want to overpay!

SNOOPY

[Snoopy]

This will be the second reporting season in the black for the company since being in the red since forever.


I think you have to look through those one off write offs, if you want to gauge the future performance of PGW.



If the company is turning around then it deserves a higher share price.


A PE of 12 already factors in a lot of future growth.



Last time the company reported well the SP hit 39 cents, so I can see it going much higher than 40 cents. Remember, the market does not always act in rational ways, especially in such a bull market. People are willing to pay what they are willing to pay for a stock.


Very true. However, I won't be one of those overpaying and pushing the price up. I would suggest those who are planning this take a good look at their chest , just to see what they might look like shirtless!

SNOOPY

[Agrarinvestor]

Not at all. One possible scenario is that I roughly double my holding. What I am saying is I don't want to overpay!

SNOOPY
You are saying that you want the share price right down at the botton, because you are a little bit unhappy that you have not bought enough
shares when the shareprice was low. There is a enough space for PGWs shareprice to raise. Compare PGW with Monsanto:




PGW

MONSANTO



P/E

12

23



Price/Book

1,3

4.3

[Snoopy]

There is a enough space for PGWs shareprice to raise. Compare PGW with Monsanto:




PGW

MONSANTO



P/E

12

23



Price/Book

1,3

4.3




I believe that "PGW Agritech" may use Monsanto as a long term measuring stick. But to say the whole of PGW is an equivalent company to Monsanto is I would suggest not being honest with yourself.

By my modelling, the net after tax profit of Agritech alone over FY2012 was $3.7m. With 754.8m shares on issue, this represents earnings per share of 0.490cps.

Revenue at Agritech was $390m out of a total divisional revenue for PGW of $1400m. So Agritech represents:

$390m/$1400m = 27.86% of the PGW empire by revenue.

I would argue the partial share price attributable to Agritech, based on the total PGW being worth 43cps is therefore:

0.2786 x 43c = 12.0c

That means the market currently attributes an implied earnings multiple of Agritech alone of:

12.0/0.490 = 24.4

This is above your quoted PE of 23 for Monsanto Agrainvestor. I would argue therefore that this provides more evidence that PGW is overvalued at 43c.

SNOOPY

[Snoopy]

By my modelling, the net after tax profit of Agritech alone over FY2012 was $3.7m.


An interesting consequence of this is the oft reported dream of Agria to split PGW into Agriservices and Agritech , then list Agritech on the Singaporean Stock Exchange. Here are the SGX stock exchange rules for main board listings

http://rulebook.sgx.com/en/display/display_viewall.html?rbid=3271&element_id=4869

Under rule 210 section 2 (Quantitative listings) we see that a minimum pretax profit of $S30m (currently $NZ29m) is required.

A $NZ3.7m after tax profit represents a pre tax profit of $NZ5.1m. So in order for Agritech to be considered for listing on the SGX, profit would have to improve by more than 500%. Some improvement could be gained by bringing down the very high debt levels of PGW. But since Agria has no spare cash to do this, I think this route is unlikely. So all of the required profitability gains would have to be operational.

Historically 'Agtriech' as a stand alone entity has made more than $15m per year, so operational improvement is possible. But to take the best ever year for Agritech, and ask thenm to improve profits by 100% on that is a very big ask. Thus my conclusion is, if Agritech were to separate and move their primary listing to Singapore, this would be ten or more years out into the future. In today's terms, 'Agria Asia' as the Southern Hemispheres answer to Monsanto is an unrealistic dream.

SNOOPY

[lowrolling]

3. The Very High Debt levels are not as bad as Snoopy suggests. PGW states in their November 2012 report $125.3m of debt ($141m debt less $16m cash). They will be able to free up more ability to service debt from the $25m in Crafar finance receivables paid back in December, plus some more receivables of around $4. This suggests debt is more like $100m. They also hold $9m of Heartland shares which could be used to pay back debt as well. Debt of $100m in a company with $577m of equity doesn't seem to bad to me. Current ratio of $525m/259m or 2, and a quick ratio of just under 1 (arguably slightly over 1 if you include "biological assets" like cattle that might able to be sold quickly at a reasonable price.

Quote from Gould in Stuff article: PGG Wrightson had reduced debt levels to "well under $100 million"

[ScrappyO]

Quote from Gould in Stuff article: PGG Wrightson had reduced debt levels to "well under $100 million"

http://www.stuff.co.nz/business/farming/8286696/PGG-jittery-over-fall-in-sheep-prices

[Snoopy]

Quote from Gould in Stuff article: PGG Wrightson had reduced debt levels to "well under $100 million"


"well under $100 million" to me means some figure between $90m and $100m. With most sales in the second half, I can see debt going out again to $100m. After all PGW will need to spend to restock their branches.

Whether the true figure is $90m or $100m, this debt is still high when the company is earning some $25m NPAT when farm conditions are at their most favorable.

The article in 'Stuff' today was a profit warning in all but name. Of course the company is under no obligation to issue any profit warnings because they have not made any earnings forecasts.

-----

From CEO George Gould:

"Cattle's been pretty steady but sheep values are down, they're around half of what they were a year ago (caused by) supply and demand. The schedule prices published by meat companies are down, market prices in the UK are down."

"They actually notched back a bit even more last week, so we're getting in some cases less than half"

-----

The above is George's profit warning for the Livestock division

-----

"About 80 per cent of our grain seed revenue and sales occur in the second half, January to June," Gould said.

"In New Zealand we're pretty confident about our position, we've got a pretty good robust business here. In Australia it's newer and the climate changes are more extreme. The worry we have, which we have every year, is just how will Australia pan out. It does look quite promising to the extent that there have been some early recent rains in some very dry areas."

For those not aware of Agritech's history, it has always done well in New Zealand. It was when they made the big push into Australia adding all sorts of bolt on loss making businesses to their existing Australian presence that profits in Agritech collapsed. The above is George's profit warning for Agritech in Australia.

------

Of course the superbulls out there will ignore all of this and continue to proclaim that PGW is undervalued. I will be waiting for the share price to dip once the half year results are made public.

SNOOPY

[Balance]

"well under $100 million" to me means some figure between $90m and $100m. With most sales in the second half, I can see debt going out again to $100m. After all PGW will need to spend to restock their branches.

Whether the true figure is $90m or $100m, this debt is still high when the company is earning some $25m NPAT when farm conditions are at their most favorable.

The article in 'Stuff' today was a profit warning in all but name. Of course the company is under no obligation to issue any profit warnings because they have not made any earnings forecasts.


Hope you are out then, Snoopy.

[Snoopy]

3. The Very High Debt levels are not as bad as Snoopy suggests. PGW states in their November 2012 report $125.3m of debt ($141m debt less $16m cash). They will be able to free up more ability to service debt from the $25m in Crafar finance receivables paid back in December, plus some more receivables of around $4. This suggests debt is more like $100m. They also hold $9m of Heartland shares which could be used to pay back debt as well. Debt of $100m in a company with $577m of equity doesn't seem to bad to me. Current ratio of $525m/259m or 2, and a quick ratio of just under 1 (arguably slightly over 1 if you include "biological assets" like cattle that might able to be sold quickly at a reasonable price.


The Heartland shares were subscribed to at 75c by PGW IIRC. So I think management would be looked on dimly for selling them at less than that price.

I estimate the interest bill for FY2013 to be $9.5m, accounting for the repayment of those Crafer loans. FY2014 will be the first year that the repayment of the Crafer loan effect flows across the full year. I am estimating a net interest bill of $8m for FY2014.

I agree that superficially $577m of equity verses $100m of debt doesn't sound too bad. The problem I see is the wafer thin margins that PGW operates on make for a high business sensitivity risk. And the fact that if underlying profits fall to under $20m this year, that $100m debt would still take many years to repay.

SNOOPY

[Snoopy]

And if you truly think there is a profit warning coming, I expect you will be selling your shares, since you seem to think the shares are overpriced right now. Or do you lack the courage of your negative convictions?


Like I said before Sparky, it is impossible to issue a 'profit warning' if you haven't made a 'profit forecast'. PGW has made no profit forecast for FY2013. Gould is doing the right thing, keeping shareholders informed of current market conditions. It is up to individual shareholders to decide what effect those market conditions will have on profits.

I still see value in Agritech from a long term perspective. Even if that means pulling out of the Australian market by simply walking away from PGW's investment there. So I will continue holding PGW until that value is unlocked. I don't see any Agritech value being unlocked in FY2013, in fact it may well get worse. If PGW shares get cheaper in the meantime, then so much the better. I have already declared my intention to buy more, but only at the right price. If I am wrong, well I will still have the PGW shares that I own already.

SNOOPY

[Balance]

I have my doubts you will buy any more shares. You were a bear at 33c when I first bought in! See posts 2354, 2368, 2379, 2381, 2395, 2396, 2397 and no doubt many other posts since November until today!

Well articulated, STC.

Snoopy has got PGW since 33 cents dead wrong - just about every step of the way.

Still, nice to get the alternative view.

[Master98]

6m shares changed hand at 45c today, very encouraging volume.:t_up:

[Master98]

Must have been Snoopy selling out, what with the selling signal in David B's post above about PGW only being able to pay off all their debt in two years from operating activities.

from NZ herald article, more investors interesting in agricultural sector.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10864594

[percy]

from NZ herald article, more investors interesting in agricultural sector.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10864594

Must admit I have recently brought more agricultural stocks.:
Rural Equities [REL] on the Unlisted Market.
Tru-Test traded via the company.
Hold PGW.
Hold HNZ who offer finance to the rural sector.

[Master98]

Must admit I have recently brought more agricultural stocks.:
Rural Equities [REL] on the Unlisted Market.
Tru-Test traded via the company.
Hold PGW.
Hold HNZ who offer finance to the rural sector.

"It's the backbone of the New Zealand economy"

[Balance]

Must have been Snoopy selling out, what with the selling signal in David B's post above about PGW only being able to pay off all their debt in two years from operating activities.

If the sp goes higher in the months ahead, Snoopy will be telling us he was actually buying today on the 'profit warning' !!!!

[percy]

"It's the backbone of the New Zealand economy"


Was thinking it is really "HEARTLAND" New Zealand..... lol.

[Balance]

Snoopy ...those million shares you sold to lighten your exposure ..... Balance bought them

Nice

I wish!

Back in October, PGW's sp was .... 35 cents.

[Balance]

I don't think you can discuss what is a fair buy in price for PGW, without having some kind of future scenario in mind in tandem with your price.

IMO the best thing PGW can do to improve their earnings is reduce debt. Unfortunately with Agria in control, I believe dividends will be reinstated in advance of what is prudent for all shareholders. Some small shareholders may cheer and drive the share price up to 40c. I would see PGW as a sell at that price.

35c to me says PGW are expecting a large increase in contribution from Agritech to offset the decline in Agriservices coming off a boom year. I was very disappointed to hear at the AGM that after Agritech hit a five year rock bottom in FY2012, their profitability has worsened yet again in the opening of the FY2013 year. At the moment I see the chance of a downside risk of the PGW share price as high, and greater than the possibility of missing a share price rally. Of course with any sub 50c shares, a movement of only one or two cents is quite a large percentage move. So if the share price got down to say 32c, I would look at PGW again.

Personally I do not buy the China expansion story. So whether Agria or New Hope stay involved with PGW does not affect my own valuation of PGW. Some may see that differently though. If Agria did start having to sell PGW shares to pay their debts, pushing the PGW share price down as a consequence, I would cetainly look at buying more PGW, maybe a lot more if I could get the shares for 30c....

SNOOPY

Snoopy's take on PGW's sp at 35 cents and 40 cents.

So at 45 cents, Snoopy is long time gone.

[Snoopy]

I see that their cash flow from operating activities y/e 2012 (and after they have paid out their interest) was $58.5m.


Before anyone else gets too excited about this, I would like to point out that if you add investment cashflow and financing cashlow then PGW is strongly cashflow negative. More specifically adding the three numbers:

$58.5m - $32.4m -$82.0m = -$55.9m

Of course FY2012 was an unusual year in that PGW in that they were divesting PGW finance to Heartland. Incredibly PGW turned even that into a negative cashflow event. My assessment of PGW is that they are extremely bad managers of cash, and they have in fact become experts in frittering cash away rather than paying down debt. There is certainly no spare cash in the company and no easy way to generate it.

Nevertheless FY2013 is a new year.

SNOOPY

[Snoopy]

I see that their cash flow from operating activities y/e 2012 (and after they have paid out their interest) was $58.5m. So if they applied all the cash from their operating activities (assuming these stay flat) to pay off their loans it would take them under two years to do it. That doesn't seem so bad to me.

Your thoughts Snoopy?


I think I get the gist of your argument David B. What you are saying is that at an operational level PGW are generating cash. So that means that underneath all the manure of recent years there should be a good cash generating business here.

The first point I would make is that, is that not akin to someone saying:

"Well, I have a really great income, a nice new house and a mortgage." "If I didn't have to make those mortgage repayments I would be making so much cash I would be wallpapering my bedroom with it."

The problem with the above yuppie attitude is that the mortgage does have to be paid. Imagining a scenario where the financing of debt is optional is somewhat spurious. However having said that the debt repayments by PGW will be lower in FY2013. I am forecasting interest payments to go down from $9.5m in FY2013 to $8m in FY2014.

The next point I want to make is the idea of ignoring the investment cashflow. I should point out that even if PGW had received a financing holiday from the banks and didn't pay back any interest or capital, that the negative investment cashflow alone puts a $32.4m hole in your highlighted operating cashflow of $58.5m.

I think the phrase 'investment cashflow' is unfortunate, as some might take it that if PGW has a small 'investment holiday' then they would suddenly be generating lots of operating cash. I don't think this is right, as much of this investment is stuff needed for the normal operation of the business that nevertheless cannot be written off in the year of purchase.

Furthermore one item of investment cashflow was $32.2m on the sale of investments. Remove that from the sum of operating cashflows and investing cashflows and you can see that the underlying business of PGW, before any finance charges are paid, is actually cashflow negative.

I would argue that far from being on the cusp of being able to deliver large cashflows to shareholders, PGW is in fact in a very serious position because in underlying business terms it is desperately short of cash.

SNOOPY

[Snoopy]

Snoopy's take on PGW's sp at 35 cents and 40 cents.

So at 45 cents, Snoopy is long time gone.

Balance, this that post of mine was made on 28th October 2012. Since that time I have reduced my farming investment exposure, thanks to Olam breaking the spine of the resistance group of which I was a member and acquiring my NZS shares.

In my total portfolio picture, this made me less reluctant to sell PGW at 45c, even though if I had followed my own advice I probably should have. The good thing about this share investing game is that you don't have to be right every time. A large part of it is having the patience to hang on until you are right. I am still on the PGW register with my holding, without any of the anxiety suggested by others.

In fact in this instance, despite the share price drop from the recent high of the late 40s, and despite being wrong on where the share price is now, I am being well rewarded!

SNOOPY

[Snoopy]

In the other case they move with us to HSE it would be cheaper and better for Agrias reputation. HSE has strong lsiting requirements.


Interesting to consider the possibility of Agritch eventually listing on the Hong Kong stock exchange. here are the listing requirements:

http://www.hkex.com.hk/eng/listing/listreq_pro/listreq/equities.htm

With $NZ1 = $HK6.50 as I write this.

There are three alternative tests for new entrants listed there. Not all require the company to be profitable, but if not then the market capitalization must be at least $HK2billion, or $NZ307m. Perhaps this is possible?

However with 754.8m shares on issue at 45c, that gives a total PGW market capitalization of $NZ340m. If Agritech is worth half of that share price (and it probably isn't right now) hen it will have a standalone market capitalization of only $170m. There is a long way to go for Agrtitech to go down the HK listing path!

SNOOPY

[Agrarinvestor]

Is PGW movingin the right direction ? YES



Jun 10
Jun 11
Jun 12
3 years


Gross Margin
23
22
22
22,7


Operating Margin
4,9
2,48
3,4
3,6



Net Profit Margin
1,4
(2,82)
1,9
0,16



Interest Coverage

1,04
3,0
2,0




Net Profit is small but climbing. Interest Coverage is climbing. if you compare PGW with Monsanto
you see the US Giant valuating with 4 times higher then the Book Value and a P/E of 23.
How much room for improvement , for PGW. If they archive the Gross Margin of Monsanto they will have a net Profit that is 10 times higher. I am sure they can do it.!
- I think they will their Australia business
- I think they will make use of AGRIAs prepaid land use rights in china and produce seeds there. That will improve the operating margin. Remember AGRIA has Operating margin above 40%. That meany the business is profitable if they had more money in the pockets.


@Snoopy,

cash level is higher as before. In the annual report you see 15.09 million instead of 0.2 one year earlier.
The cashflow is negative because they have reduced loans. I don't understand you. Why are you always complaining. Do you really think you know more then the people who purchased these large Blocks of shares during the last weeks. And with Agria you will see a large surprise in the next months.

[Snoopy]

Is PGW movingin the right direction ? YES



Jun 10
Jun 11
Jun 12
3 years


Gross Margin
23
22
22
22,7


Operating Margin
4,9
2,48
3,4
3,6



Net Profit Margin
1,4
(2,82)
1,9
0,16



Interest Coverage

1,04
3,0
2,0




Net Profit is small but climbing. Interest Coverage is climbing. if you compare PGW with Monsanto
you see the US Giant valuating with 4 times higher then the Book Value and a P/E of 23.
How much room for improvement , for PGW. If they archive the Gross Margin of Monsanto they will have a net Profit that is 10 times higher. I am sure they can do it.!
- I think they will their Australia business


I think with cash concerns you should be analyzing the position of the company today. It is all very well looking at three year averages. But as you know, PGW today is a very different company to PGW three years ago. If PGW does not have the cash it needs today it matters not one jot that they did have the cash in 2010, or that in an average year they would have had the cash. If bankers want a loan repaid, they want it repaid this year.

PGW have largely done the selling off of unwanted assets now. They do not have another PGW Finance to sell off in future years, although given this transaction generated negative cashflow when they unloaded the business unit to Heartland, perhaps this is just as well!

I agree that things would improve dramatically if the profitability in Agritech Australia improved to the level of a Monsanto. But given this business is probably loss making right now, this would be a huge leap of faith and could take a decade. In the meantime PGW must survive until that time. It seems much more likely to me that a further injection of capital of some kind will be necessary.



- I think they will make use of AGRIAs prepaid land use rights in china and produce seeds there.


This would be a good idea, but I have to ask 'what seeds'? Has anything come of PGWs China specific R&D yet? While Agria is congratulating itself with joint venture university research projects, have these projects come up with anything commercial yet?



That will improve the operating margin. Remember AGRIA has Operating margin above 40%. That means the business is profitable if they had more money in the pockets.


But Agria don't have money in their pockets. All they have is a non value adding management overhead, which is not adding value to a marginally profitable investment - PGW. This is why Agria are losing money.

SNOOPY

[Snoopy]

@Snoopy,

cash level is higher as before. In the annual report you see 15.09 million instead of 0.2 one year earlier.
The cashflow is negative because they have reduced loans.


True the paying back of loans is producing negative cashflow. And I think the picture will become much clearer when we see the half year balance sheet. However based on the EOFY2012 cashflow statement and leaving out all financial cashflows (i.e. only considering operating cashflows and investing cashflows) and leaving out one off inflows of cash from other asset sales (a sub header of investing cashflows) the cashflow position of PGW for FY2012 was still negative overall. This has to be a worry.



I don't understand you. Why are you always complaining. Do you really think you know more then the people who purchased these large Blocks of shares during the last weeks. And with Agria you will see a large surprise in the next months.


The large blocks of shares you refer too are not really that large when there are 754.8m shares on issue! And yes given I have been on the share register of PGW for more than ten years and have lost money on my investment overall (there is nothing like losing money to focus your attention as you try to understand the company better) I probably do have a better business cycle view of PGW than those who are following the 'rural bubble' who have bought in over the last year.

SNOOPY

[Snoopy]

You, someone who has lost money in PGW, has a better business cycle view of PGW? Someone who stayed through all the Norgate years through to the bitter ending of his era of hubris?


I learned my lesson, and my subsequent judgment was improved by holding PGW shares through the Norgate era.



It is hard to believe your better business cycle view is better than someone who bought in at 25-35c, when PGW traded at its lowest point in 2012. In my opinion, this was the point to buy precisely when it was de-risked - when it had already turned the corner but investors didn't realize.


If you recall, I did buy most of my PGW shares in precisely the time period you state Sparky, at a price of 32c



I hate to break it to you Snoops-me-ole-mate, but PGW is not a risky stock for me, precisely because I researched it well and bought it cheaply, prior to this so called rural bubble you are referring to. If there is indeed a rural bubble, which until your post above, I was unaware was in effect.


I don't wish to criticise you too much Sparky, because when it comes down to it your view and mine of where we think PGW is going are not too different.

Where I differ with you is that you have swallowed your favourite brokers view on where PGW is going and swept the caveats under the carpet.

Anyone who has had any involvement in agriculture, and that may or may not include the pointy head who compiled your brokers report, knows that a straight line growth path in earnings for any agricultural business will not happen. The fine print which says "barring any unforseen events", like drought, floods, significant upward movement in the NZ dollar, farms slumping in value (relevant to the real estate division) and price turmoil in overseas markets is all happening right now. Yet you steadfastly believe that PGW is on track and that this years earnings will be 8% higher than last year.

Short of flogging you with a docked lambs tail, is there any way to wake you from your tunnel visioned path?

SNOOPY

[Balance]

I learned my lesson, and my subsequent judgment was improved by holding PGW shares through the Norgate era.



If you recall, I did buy most of my PGW shares in precisely the time period you state Sparky, at a price of 32c


SNOOPY


Please show us when u bought?

[Snoopy]

What I was getting at is that in my view, PGW's current debt is not outrageously high wrt to its assets or its operating cash flows, but rather it is manageable and does not pose a serious threat to the company in the medium term.


OK, I think your view on the debt position of PGW is reasonable.



Of course the less debt the better,


Yes and the key issue that PGW faces, by not earning their cost of capital, is that the best way to improve earnings is to repay their debt as fast as they can. However, it is doubtful that controlling shareholder Agria will allow this to happen.



although I do point out that some of that negative investing cash flow y/e 2012 is a one off,


Yes like the proceeds from sale of investments, a $32.532m one off gain that won't be repeated. Remove that to the -$32.461m sum of the investing cashflows and I get a 'normalised' investing cashflow of -$65m.

That more than wipes out the $58.578m of operating cashflow!



So how much is too much debt for a business to carry? Taking your mortgage analogy, the way I would judge PGW on that score is, if I owned a house that was worth $600,000, and I had borrowed $100,000 mortgage from the bank, and my income (operating cash flow) was $60,000, (i.e., sufficient that if I applied very cent of that to my loan I could pay it all back in 20 months, am I over extended? And the answer to that, I would suggest, is clearly no. So long as I keep my other costs under control, my mortgage level is affordable.


Last years normalised income was $25m though. Not the $60m you are implying here that was operating cashflow.

SNOOPY

[Balance]

OK, I think your view on the debt position of PGW is reasonable.



Yes and the key issue that PGW faces but not earning their cost of capital, is that the best way to improve earnings is to repay their debt as fast as they can. However, it is doubtful that controlling shareholder Agria will allow this to happen.

Waiting for your reply re your shrewd buying at 32 cents.

[Snoopy]

Please show us when u bought?

From mid November 2012 I was buying PGW at 32c, over a period of several days. And no I didn't buy millions of shares. Liquidity was so tight at the price that my ordinary sized order took several days to fill.
Curse all those 'block special crossing' guys that jumped the queue ahead of me!

SNOOPY

[Balance]

From mid December 2012 I was buying PGW at 32c, over a period of several days. And no I didn't buy millions of shares. Liquidity was so tight at the price that my ordinary sized order took several days to fill.
Curse all those 'block special crossing' guys that jumped the queue ahead of me!

SNOOPY

Fooled me.

Especially after your 'Balance ramping PGW sp' accusation.

[Snoopy]

Fooled me.

Especially after your 'Balance ramping PGW sp' accusation.


I apologise for accusing you of ramping PGW on 19th December 2012 Balance.

Having just doubled by holding a month or so before at 32c, I did consider the rise to 40c in just a month to be a case of too far too fast.

SNOOPY

[Snoopy]

Snoopy, I do my homework. For example, I have flown down to Christchurch from Auckland to visit PGG's head office and ask C-level officers questions directly to satisfy my interest in the stock after Forsyth Barr recommended it. I have regularly visited PGG Wrightson stores and offices between Whangarei and Hamilton to ask staff questions about the company performance, and how certain events or trends may be impacting them. I even ask their livestock agents if they are meeting budget and whether the real estate guys are happy. Sometimes, a PGW employee offers up a little gem like "Oh yeah, Mike who does the paperwork in the next room reckons our share price is too cheap and bought some the other day".

I will visit PGW's head office again in a few weeks, after they announce their results, as well as some other aspects of PGW's business in the Canterbury region.


I have to admire your due diligence Sparky.



As for swallowing the analyst's view, I can also say that when their reports came out in November and again in January, I picked up the phone and also traded emails to ask questions of the analyst. I have been impressed with their thoroughness, which is why I liked the report.

Hence why I am optimistic about PGW's future, and disinterested in their past which you have suffered for many years.


I have some sympathy with your 'history is bunk' view. Except when history is forgotten it has a tendency to be repeated.



For example, there has been oodles of angst, some of it (but not all) written by you on this post about Alan Lai and Agria's problems. In fact, little of this had anything to do with the underlying business of PGW in the last quarter of 2012. Even if Agria tips over, then the PGW shares they hold will be placed on market by the banking consortium largely controlled by ANZ. All this angst did, typical of PGW's commentary over 2H2012, was to cause a cheaper entry price in the shares, one which both you and I enjoyed.


I don't agree that Agria should be consigned to the history books. This is very much a live issue as far as PGW are concerned. Granted Agria does not affect the day to day running of PGW. But they do control PGW and could rob it of cash when without Agria there, the cash could be put to better use inside PGW, by paying off debt!



So I am optimistic about their future. They won't be the standout corporate performer of 2013. Rather, they will do better than the market will have thought they would do when I bought. They will be delivering business as usual and meet budgets, with an opportunity to really do well if weather treats them favourably. That's what my homework tells me.


I do believe your and your brokers long term view of PGW is possible. But my feeling is that the ride will be a lot more bumpy than you both think. For example I don't think earnings will grow by 8% this year. But I believe that it is highly possible that earnings will have grown by a compounding cumulative rate of 8% per year in two years time. So why make a fuss if I agree with you that earnings in FY2014 could be 16.6% higher than the FY2012 figures? Because I believe the earnings volatility should be reflected in a lower PE for the company. By my reckoning a PE of 12-13 is already building in a substantial recovery by Agritech in Australia. I want to see some evidence that PGW will achieve this before I commit any more money to the cause. And yes I do realsie that I will very likely be paying a higher price for my next purchase of PGW shares should this come to pass. The trade off is that I will avoid buying PGW shares should the problems in Australia take longer to sort out than management hopes.

SNOOPY

[Snoopy]

Not really a good look to lose the CEO and CFO in one day is it? However Agria itself is only down 2c to US80c.


The above was written on 12th October 2012.

Four months on, one of the vacant positions has been filled.

-------
BEIJING -- (MARKETWIRE) -- 02/15/13 -- Agria Corporation (NYSE: GRO) (the "Company" or "Agria") today announced that it has appointed Patrick Wai Yip Tsang as Chief Financial Officer effective February 15, 2013. Mr. Tsang is currently a director of PGG Wrightson Limited (NZSE: PGW), the Company's majority-owned subsidiary listed on the New Zealand Stock Exchange, and a director of China Pipe Group Limited, a company listed on the Hong Kong Stock Exchange.

-------

However the name "China Pipe Group" rings a bell. This is the company of Lai Fulin, the younger brother of Alan Lai! This whole Agria thing is starting to look a bit incestuous.

SNOOPY

[Balance]

I apologise for accusing you of ramping PGW on 19th December 2012 Balance.

Having just doubled by holding a month or so before at 32c, I did consider the rise to 40c in just a month to be a case of too far too fast.

SNOOPY

Apology was accepted.

Just making the point that normally an investor buying a stock at 32 cents would be happy to see the stock rise to 40 cents (especially in a short time)?

[Agrarinvestor]

The above was written on 12th October 2012.

Four months on, one of the vacant positions has been filled.

-------
BEIJING -- (MARKETWIRE) -- 02/15/13 -- Agria Corporation (NYSE: GRO) (the "Company" or "Agria") today announced that it has appointed Patrick Wai Yip Tsang as Chief Financial Officer effective February 15, 2013. Mr. Tsang is currently a director of PGG Wrightson Limited (NZSE: PGW), the Company's majority-owned subsidiary listed on the New Zealand Stock Exchange, and a director of China Pipe Group Limited, a company listed on the Hong Kong Stock Exchange.

-------

However the name "China Pipe Group" rings a bell. This is the company of Lai Fulin, the younger brother of Alan Lai! This whole Agria thing is starting to look a bit incestuous.

SNOOPY

>>However the name "China Pipe Group" rings a bell. This is the company of Lai Fulin, the younger brother of Alan Lai! This whole Agria thing is starting to look a bit incestuous.

<<

You should keep in mind the history of Agria. Adam Lai has bad expirience with people in key positions. After the IPO a key executive tried to put his fingers into shareholders pockets. Mr. Lai prevented us from that rubbery but the result was a delay in the annual report and shareholder class actions against Agria. All claims were settled at the end and Agria has nothing to pay and was acquitted. Therefore i applause to that decision. And i am sure that Mr. Tsang will not be an overpaid greedy Wallstreet Junkie. I assume that he has worked for Agria in the background before Feb 15.th.

[winner69]

Good news is always worth putting out to the market, no matter how small or insignificant it is.

but as you said on another thread a warm fuzzy story just before a half year ann says punters expectations will not be met next week ...... and i never said oh bugger we are not on track to deliver what sparks and forbar think

[Snoopy]

Just making the point that normally an investor buying a stock at 32 cents would be happy to see the stock rise to 40 cents (especially in a short time)?


Obviously I did well out of the share price jump, but what about those that sold to me at 32c? I was concerned because I don't believe the underlying valuation of PGW changed that much in a month. So were those that bought at 40c Patsy's? Given the price went up still further, I guess no. But I am concerned when a share price bounces around as much as this in such a small timeframe.

I believed that 32c was a fair albeit slightly on the high side entry price. By my thinking then, it was all the higher price action that puffed the PGW share price above fair value. I don't think it is very healthy for the sharemarket. But with the reporting date a few days away, we will just have to see what comes out in the wash.

SNOOPY

[The Grinch]

Got to be good news for the PGW real estate division.

http://www.stuff.co.nz/business/farming/8318785/Farm-sales-rise-13-pc

[Balance]

Obviously I did well out of the share price jump, but what about those that sold to me at 32c? I was concerned because I don't believe the underlying valuation of PGW changed that much in a month. So were those that bought at 40c Patsy's? Given the price went up still further, I guess no. But I am concerned when a share price bounces around as much as this in such a small timeframe.

I believed that 32c was a fair albeit slightly on the high side entry price. By my thinking then, it was all the higher price action that puffed the PGW share price above fair value. I don't think it is very healthy for the sharemarket. But with the reporting date a few days away, we will just have to see what comes out in the wash.

SNOOPY

Maybe the market was wrong at 32 cents, rather than the price at 32 cents reflecting fundamental value?
Market as you and I know is not driven by fundamental value in the short term but by fear, greed, emotions and other things.

What did the world's greatest investor said? Something about beauty contest and weighing machine.

[Snoopy]

Maybe the market was wrong at 32 cents, rather than the price at 32 cents reflecting fundamental value?
Market as you and I know is not driven by fundamental value in the short term but by fear, greed, emotions and other things.

What did the world's greatest investor said? Something about beauty contest and weighing machine.


Perhaps Balance. But I also do homework on PGW, although I prefer a more stand offish approach. Unlike Sparky, I don't ring up the management because I don't want to end up believing their own hype. I am not saying Sparky is wrong to do what he is doing. It is just a different style of research. With results coming up, I am prepared to put up my own case for 32c.

SNOOPY

[Snoopy]

Got to be good news for the PGW real estate division.

http://www.stuff.co.nz/business/farming/8318785/Farm-sales-rise-13-pc

Is it good news though? Here is a cut and paste from the middle of the article

------

The median price per hectare for all farms sold in the three months to January was $23,980 - up 18.1% on $20,299 for the same period last year.

The REINZ All Farm Price Index eased by 3.2 per cent to 3039.77 in the three months to January compared to the same period last year. The index is designed to provide a more accurate measure of farm price movements.

-------

This seems to be saying that the Real estate Institute data is selective and not representative across the full spectrum of farming, or pulling out spikes in monthly data as representative of a trend. Overall farm prices seem to have declined over the year. This is an example of what I mentioned in post 2680 about talking to industry people then believing their own hype.

SNOOPY

[Snoopy]

I raided my own PGW database this morning to reveal the historical picture since PGW has existed in its current form (following the merger of Pyne Gould Guinness and Wrightson.). I am using the share price as at 30th September of each year. Why pick that date? Because I have that data readily available from my income tax file! But nevertheless I believe it is a representative date.

30th September is about a month after the results for the financial year are released to the market. So analysts have had time to digest the result, but any immediate 'gut reaction' to the result has died away. Also the end of September is early enough in the new financial year for the prospects of that year to be 'weather neutral' in terms of the outlook. Getting into spring it is normally too early to tell if the rest of the year will be subject to droughts or floods.

For years 2009 to 2012 inclusive I have assumed 754.8m PGW shares are on issue. This wasn't true at the end of FY2009, but the large cash issue had been announced and the market was already pricing the share assuming that number of shares would shortly exist. In FY2008 and FY2007 I have used 289.3m as the number of shares on issue.

The earnings figures I have used strip out all of the one off write downs and conversely one off gains that have occurred. I have done this to represent a more normalised earnings picture. Also included in these earnings are those from the now disposed of finance division.

OK with all of those caveats out of the way, time to roll out a few figures...

SNOOPY

[Snoopy]

OK with all of those caveats out of the way, time to roll out a few figures...


Using: Price Earnings Ratio= (Share Price) / [(Normalised earnings)/(No. Shares on Issue) ]

2007: $1.93 / [$27.9m/289.3m] = 19.6
2008: $1.60/ [$47.9m/289.3m] = 9.7
2009: $0.64/ [$19.3m/754.8m] = 25.0
2010: $0.56/ [$18.0m/754.8m] = 23.4
2011: $0.40/ [$7.1m/754.8m] = 42.5
2012: $0.35/ [$24.0m/754.8m] = 11.0

My forecast for FY2013 was a Normalised NPAT of $24.2m. I have used EBITDA figures from FY2012 and modified them by the growth (and where appropriate shrinkage) factors noted on page 26 of the FY2012 annual report. figures But that was before all the floods and the droughts exchange rate appreciation and all the rest of the turmoil that our farmers have to put up with. And yes that $24.2m does include a reduced interest bill thanks to the paying back of the Crafar Loans.

Given what has happened I would be very surprised if that $24.2m figure for the full year will be reality, even if the first half year earnings come in at just above the $8m that I expect (traditionally profits have been earned 2/3 in the second half).

FY2012 was quite a benign year weatherwise in New Zealand. While FY2013 may be better than expected, I don't expect Agriservices to match their FY2012 earnings. But mostly I don't think Agritech Australia will recover as budgeted. With this kind of outlook I still see the PE of 2012 ( 11.0 ) as appropriate.

SNOOPY

[Snoopy]

Using: Price Earnings Ratio= (Share Price) / [(Normalised earnings)/(No. Shares on Issue) ]

2007: $1.93 / [$27.9m/289.3m] = 19.6
2008: $1.60/ [$47.9m/289.3m] = 9.7
2009: $0.64/ [$19.3m/754.8m] = 25.0
2010: $0.56/ [$18.0m/754.8m] = 23.4
2011: $0.40/ [$7.1m/754.8m] = 42.5
2012: $0.35/ [$24.0m/754.8m] = 11.0



For some companies, typically those that follow a steady growth path I tend to use an average historical PE when trying to judge how a share might be priced in the future. If I did that for PGW that figure would be 18.6.

Nevertheless this is an instance when simple averaging will get you into trouble. PGW has no historical record of being a growth company. Indeed in FY2012, widely regarded as a 'good' year for farming their earnings ($24.0m) are less than they were in FY2007 ($27.9m) before all those merger benefits had flowed through and before Craig Norgates failed growth path was trod.

If you look at the year when the PE was highest (FY2011) you will see that underlying earnings were at a near disastrous low point. This is probably a correct reflection by Mr Market. Surely things could not get worse than FY2011 and earnings did indeed rebound in FY2012.

If you look all through the earnings history you can see that the share price has not been as volatile as the earnings. This is again what I would expect as one good year does not imply that the following years earnings will be good. This is the reason why in FY2012, the share price ended at 'only' 35c. Because there can be no certainty or even likelihood that FY2013 would be any better.

Since that time some brokers are predicting a much better ayer and the share price has appreciated accordingly. However, at no stage has PGW itself forecast a good year in FY2013, nor released any profit hints to support that view. In fact quite the contrary. The information coming from George Gould of late indicates the year may be difficult. Given that the growth path is so uncertain I have a lot of difficulty paying for PGW a price that assumes a PE above 12.

SNOOPY

[Snoopy]

Graham Number is calculated by multiplying P/E by Price/Book (in NZ, we often call this Price/NTA).

If the Graham number is less than 22.5, with P/E ideally 15 or under, then the stock is a buy.


I don't agree with this methodology as regards PGW Sparky. This simple Graham calculation does not differentiate between companies in different industries. PGW has a lot of lazy assets by the nature of the company it is. Graham is assuming the utilization of these assets will improve to some average figure thus boosting PGWs profitability. I say that PGW has already rationalized their asset base and that closing more branches and reducing stock levels further will not help the company (PGW) to grow.

Graham is also saying that anything with a PE under 15 is a buy which I would caution to be a simplistic assumption.



PGW's NTA per share was 31c according to page 55 of the 2012 annual report.

So 35c/31c = a P/B of 1.13. Call it 1.1


Agree with your calc.



On a P/E number of 11, and a P/B of 1.1, PGW was an absolute screaming buy (if you like Ben Graham's thinking) - scoring 12.1
Hence why I see this as a real value play, and value plays are what I love the most.


Sorry I can't agree with your conclusion because it attempts to put alll companies in a "one size fits all' bucket. IMO PGW does not fit into that bucket.

SNOOPY

[Snoopy]

Also, Gould indicated what I considered to be optimism over the Australian seeds division, rather than pessimism.

"In New Zealand we're pretty confident about our position, we've got a pretty good robust business here. In Australia it's newer and the climate changes are more extreme. The worry we have, which we have every year, is just how will Australia pan out. It does look quite promising to the extent that there have been some early recent rains in some very dry areas."


I think you need to take your cue from the baseline view that has been established.

Look at Note 26 in the FY2012 annual report. Baseline assumption is that EBITDA for Agritech will grow by 40%. Now George is saying if the weather is more favourable (based on a summer of unfavourable weather and a hint of good), then profits might be OK.

I see this as a downgrade from the annual report position. This is the main reason that I don't see my original forecast modelled profit of $24.2m being achieved.

SNOOPY

PS Although I do agree that 'Agriservices' in NZ might surprise on the upside.

[Snoopy]

You misunderstand slightly. Graham said that a P/E x P/B under 22.5, AND where the P/E was (preferably) under 15 was a buy.


I think what you are saying is that buying a company on an underlying PE of 15 is OK, but if you can get it for a lower PE then so much the better. I agree with that, in the most general sense.

However, I think you should ask yourself why the PE of PGW was only 11 as at 30th September last year. The underlying reason is that the business has volatile earnings and has seasonal risks. IOW there is a very good reason that the PE is lower than average and IMO why it should always be lower than average.

The basic logic that applies to your Graham staistic is IMO in the instance of PGW flawed. PGW will not 'revert to the mean' of all companies from a PE perspective.

SNOOPY

[Snoopy]

The information from George Gould of late (if you mean the comment re lamb prices) needs more than a cursory sweep over.

Here's the link again

http://www.stuff.co.nz/business/farming/8286696/PGG-jittery-over-fall-in-sheep-prices

Analysts have told me that livestock typically contributes little to 1H numbers for PGW, meaning the impact from lower lamb prices will be minimal for the upcoming announcement. Forsyth Barr's analysts have said that they had pulled back their estimates from livestock already, though they felt this could be revised further if needed once the earnings announcement was made.


OK I agree that the fall in lamb prices will not be a big deal in the coming result. Nevertheless the sharemarket works on future expectations. I believe that the fall in stock prices in general will have a bigger effect on the second half and the outlook into FY2014.

I seem to be writing a lot of negative stuff, but there is something positive to come out of this dry weather for PGW. Apparently it is a great season for grapes (think Fruitfed).

SNOOPY

[Snoopy]

Using that calculation HNZ is a screaming buy at 10.5. Sweet, thanks! :t_up:

Moosie please tell me you are only eighteen and weren't around the markets when virtually the entire NZ finance industry went belly up in 2008 and 2009. If you are older than that, well, it might pay to cut the consumption of weed just a bit. There were plenty of finance companies around that were a screaming buy on a 'PE' or 'asset' or 'yield' basis. It didn't stop them all going belly up though.

SNOOPY

[Snoopy]

I think you need to take your cue from the baseline view that has been established.

Look at Note 26 in the FY2012 annual report. Baseline assumption is that EBITDA for Agritech will grow by 40%. Now George is saying if the weather is more favourable (based on a summer of unfavourable weather and a hint of good), then profits might be OK.

I see this as a downgrade from the annual report position. This is the main reason that I don't see my original forecast modelled profit of $24.2m being achieved.

SNOOPY

PS Although I do agree that 'Agriservices' in NZ might surprise on the upside.

OK, prediction time. I am picking a steady as she goes first half of $8m in NPAT earnings. I predict the second half, while much better than the first (as is traditional) will be much tougher than expected. In number terms I am looking for $13m NPAT. So total for the year will be $21m. With 754.8m shares on issue that equates to 2.78cps. Based on a PE of 11 (same as last year), this gives a fair value share price of 31c. So quite a bit of pain could be in store for shareholders buying in at the 45c level then!

Looking further out things should get a bit better. South America is a bit of a dark horse and I think earnings there could surprise on the upside as they (hopefully) come out of the drought of last season. Australia though remains a real worry. PGW has been busy adding to their seed portfolio by buying up local businesses in South Australia and Queensland at great prices. The problem is they only managed to buy these businesses at great prices because these so called great acquisitions were coming out of bankruptcy. The idea of integrating these businesses sounds good in theory. But they are so diverse and so widely spread geographically an Australian head office for seeds could very easily stuff things up in a big way. I do feel there is a real risk that PGW might have to walk away from their Australian investments. And the delicate PGW balance sheet will not be agreeable to yet more writedowns!

At 32c I effectively paid almost nothing for that Australian Agritech arm. I feel there is a very real chance my 'valuation' will prove accurate.

SNOOPY

[Minerbarejet]

"In order to be wise, one must first be an idiot". ;)
Who came up with that doozer? (as an interested bystander of course)

[Balance]

OK, prediction time. I am picking a steady as she goes first half of $8m in NPAT earnings. I predict the second half, while much better than the first (as is traditional) will be much tougher than expected. In number terms I am looking for $13m NPAT. So total for the year will be $21m. With 754.8m shares on issue that equates to 2.78cps. Based on a PE of 11 (same as last year), this gives a fair value share price of 31c. So quite a bit of pain coul dbe in store for shareholders buying in at the 45c level then!

Looking further out things should get a bit better. South America is a bit of a dark horse and I think earnings there could surprise on the upside as they (hopefully) come out of the drought of last season. Australia though remains a real worry. PGW has been busy adding to their seed portfolio by buying up local businesses in South Australia and Queensland at great prices. The problem is they only managed to buy these businesses at great prices because these so called great acquisitions were coming out of bankruptcy. The idea of integrating these businesses sounds good in theory. But they are so diverse and so widely spread geographically an Australian head office for seeds could very easily stuff things up in a big way. I do feel there is a real risk that PGW might have to walk away from their Australian investments. And the delicate PGW balance sheet will not be agreeable to yet more writedowns!

At 32c I effectively paid almost nothing for that Australian Agritech arm. I feel there is a very real chance my 'valuation' will prove accurate.

SNOOPY

If you believe what you have written, you should be out.

[Balance]

Precisely. So Snoopy either doesn't believe what he wrote, or is irrational.

Sadly, Snoopy reminds me of another character who has since disappeared from ST. That individual was always right. Yet he lost so much money! Guess why?

[Queenstfarmer]

Still a few distressed sellers out there for the hunters and collectors to pick up large amounts for a song!

[Snoopy]

If you believe what you have written, you should be out.


Like I said Balance, I topped up on the assumption of no value in the Australian seed business. Arguably one could say that as of 30-06-2012 this was correct. Any value that does emerge will be a bonus, which I have paid nothing for. It might still be valueless as of 30-06-2013. I am banking on some value emerging eventually. But I do not have a date on that. Nor, do I need a date. All I need is patience. My action of holding PGW is only irrational if I have a date of 30-06-2013 where a payback is demanded.

SNOOPY

PS I note that revenue was down 4% and EBIT was down 8% in the Agridivision of just reporting Skellerup for the half year.

[Snoopy]

Sadly, Snoopy reminds me of another character who has since disappeared from ST. That individual was always right. Yet he lost so much money! Guess why?


I have put my case down in numbers Balance, for 'fair value' at PGW being 31c. If you don't like the message, I guess it is only natural to have a go at the messenger. But is 'kicking the dog' a viable long term investment strategy?

SNOOPY

[Agrarinvestor]

I have put my case down in numbers Balance, for 'fair value' at PGW being 31c. If you don't like the message, I guess it is only natural to have a go at the messenger. But is 'kicking the dog' a viable long term investment strategy?

SNOOPY

You are not a messenger. It is only your personal opinion, and you have not a high stake in PGW.

Sparky's assumption of 30 millions in earnings is equivalent with the mean rating of 5 analyst:

http://www.reuters.com/finance/stocks/analyst?symbol=PGW.NZ

The P/E valuation of 13,8 for PGW is far away from the sector average rating of 27.
Therfore i think there is much more upside portential for PGW. The downside risk is limited
due to the very low Price/Book ratio of .58 versus 2.52 for the sector.

http://www.reuters.com/finance/stocks/financialHighlights?symbol=PGW.NZ

[ak1261]

What happens to PGW these days? Is tomorrow's report implying something negative like what Snoopy predicted?

[ak1261]

Thanks Sparky for your in-depth analysis. It seems that some punters are thinking of worst scenarios for tomorrow.

[percy]

George Gould ;"Our job is to add value to our farmer clients,helping them make their farming businesses more profitable.If we do add value,there is a worthwhile margin for us,and the track record shows we are achieving success on this front."
Gould has certainly refocused the company.Debt down,strong cash flow,and paying a divie,make it an excellent result.

[ak1261]

Up more? say 3 - 4 cents. Where is Snoopy?

[Snoopy]

Up more? say 3 - 4 cents. Where is Snoopy?


Quite a lot to digest here. Earnings for the half year 1cps. Dividend 2.2cps. In the short term the share price might rise as cash in the bank will always appeal to punters. But paying out over twice your earnings in dividends is obviously not sustainable. I think what we are seeing here is the hand of Agria who are busy renegotiating their US domiciled debt as I write this.

On the face of this dividend payment Agria may be saved, but at the medium term cost of PGW going backwards.

SNOOPY

[Snoopy]

Debt down,strong cash flow,and paying a divie,make it an excellent result.


I always turn straight to the segmental analysis section of any result for PGW, and this one has thrown up a few surprises.

Agriservices has certainly gone better than I expected, with EBITDA up 15% over the comparable prior period. However within that, it looks like if you add in the apportioned corporate costs (up by 25%, ouch!) that Livestock is now loss making. Ditto real estate.

Irrigation is the big mover upwards within Agriservices as foreshadowed by Gould. Perrenial problem child Wool has also surprised on the upside. There is a modest increase in profitability in South America. Since that is where I see the main growth in PGW earnings coming, this is good. But really we will need to see the second half year results in South America before anyone gets too excited.

Outside of South America, Agritech seems to have been a bit of a disaster. It looks much worse than I expected. Sales up in seeds and grains, but profit sharply down is not a good situation. Agrifeeds being down is not so bad as this is always weather dependent.

Meanwhile back in New Zealand, large areas of the country are on the cusp of being declared in drought. Many farmers have not recovered financially from the last one in 2009/2010. I fear the outlook for the second half year for PGW is not great.

SNOOPY

[ak1261]

Thanks Sparky and Snoopy for the analysis, and as both of you suggest that the market is not very excited with the 2.2c div, and the rest.

[Snoopy]

First NZ have confirmed that pre-abnormal NPAT was $8.3m, which is halfway between Snoopy's pick of $8.1m and my lower band pick of $8.5m!

So, well done Snoopy and myself!

For the operating HY2013, I get:

$4.829m+ (1-0.28)[ $2.981m +0.577m ] = $7.391m

This removes the after tax effect of the non-operating earnings that are one off write downs (note 4) and the fair value adjustments (note 5) that are also distortionary. If I remove the 0.72 tax adjustment factor then I get $8.3m as First NZ have stated.

If my calculation is correct I will give myself a C- for accuracy of my first half prediction. I predicted $8m rather than $8.1m if you look back) I am afraid Sparky, that means you get a D on this one.

SNOOPY

[Snoopy]

Not sure I agree that PGW is "going backwards". It is all paid out of retained earnings (this and last year). However I agree this was a face-saving way for Agria to extract money. I anticipate future dividends will be less generous. Perhaps 1c for 2H2013.

They would only recommence a dividend if they were confident of future cashflows. That's exactly what they told me when I visited their HQ some months ago.

I note the 2.2c was declared today as a 'special dividend'. I take it from that that PGW have not resumed 'normal dividends' as yet.

SNOOPY

[Snoopy]

So in your book, the investment story has changed. You selling then?


I never expected a great year in FY2013 Sparky. So while the short term outlook may have weakened, I do not hold PGW for the short term. I want to see what PGW can do with Agritech, and how things go in South America. In the meantime I will wait for that PGW share price to gain a 3 in front of it (post divi) and look to pick up some more shares around NTA later in the year, if the opportunity arises.

SNOOPY

[Balance]

Operational result is not great.

Profit improvement all from lower interest cost.

Relax though guys.

Payment of dividend means company has well and truly walked through the valley of debt/death. Banks would not be happy to allow dividends if balance sheet is not in good shape.

Focus can now shift well and truly into operational efficiencies and improvements.

I always take a company resuming the payment of dividends as a 'buy' signal. Served me very well in the past.

[percy]

Operational result is not great.

Profit improvement all from lower interest cost.

Relax though guys.

Payment of dividend means company has well and truly walked through the valley of debt/death. Banks would not be happy to allow dividends if balance sheet is not in good shape.

Focus can now shift well and truly into operational efficiencies and improvements.

I always take a company resuming the payment of dividends as a 'buy' signal. Served me very well in the past.

Must agree and add that I think Sir John and George Gould have returned the business back to being a sound business in good shape with a bright future.

[wealthboost]

I note the 2.2c was declared today as a 'special dividend'. I take it from that that PGW have not resumed 'normal dividends' as yet.

SNOOPY

During the call this morning, George stated that "special dividend' in the report was a mistake and that it should have stated "interim dividend"

[percy]

Same statement (in bold) could have been made by RD1 ... And, as they're a co-op, they could have left out the remainder!

It is important to me as it shows PGW have regained the focus they lost in the Norgate years.

[Balance]

Yeah right! Remember who controls the company. They'll do whats in their best interests and not minority shareholders. Richina anyone?

More to the point, finance companies anyone?

Based upon Richina as an example, New Zealanders should now avoid any companies associated with all National Party politicians?

[percy]

Yeah right! Remember who controls the company. They'll do whats in their best interests and not minority shareholders. Richina anyone?

I think Sir John would walk,rather than "put the company at risk". A lot more morals than Jenny Shipley.

[winner69]

Same statement (in bold) could have been made by RD1 ... And, as they're a co-op, they could have left out the remainder!

Same statement made by lots of companies. .....don't help customers make money don't have customers

Nice warm fuzzy stuff from John in the c-suite ....thought he could have come out with something better than that

But Percy loved it anyway

[winner69]

Jeez some 700 mill capital invested and they make 8 mill operating profit in half year.

Need to make at least 70 mill to cover cost of capital

Spouse trading at less than book value then .....low return the reason

[Agrarinvestor]

Sir John Anderson is a class act. Yes, Agria would have pitched hard for the dividend, but Sir John wouldn't have approved unless he knew the company could do it.


>>PGW announced an increased profit of NZ$4.8 million for the six months to 31 December 2012, up from NZ$3.1 million a year ago. PGW also reported strong cash flows from operating and investing activities, delivering a combined total of NZ$24.4 million (up from NZ$6.0 million last year). This result follows a strong profit for the full year to 30 June 2012 announced last August and has allowed the company to halve its net debt position over the course of the last 12 months<<

If they earned through investing activities 20 additional millions, why should they not pay a dividend ? This is normal. If a company is paying dividends it
could win new shareholders, for example pension funds. This dividend is not only in the interest of Agria.
For me as a shareholder of Agria the most important message is:
>>We are especially pleased with the performance of our New Zealand Seed, Retail, Wool and Irrigation & Pumping businesses -- all of which showed sizeable gains<<
Because the seed business is the reason why Agria purchased the majority stake in PGW.

[Xerof]

Sooo, if we take out ~25mill incoming cashflow from the one-off Crafer settlement, we have an underlying negative cashflow from normal business units.....

despite George saying there was a correction to the type of dividend declared, i.e. says Special, but he meant Interim, I don't believe him.....

unless it's corrected by announcement

[winner69]

Sooo, if we take out ~25mill incoming cashflow from the one-off Crafer settlement, we have an underlying negative cashflow from normal business units.....

despite George saying there was a correction to the type of dividend declared, i.e. says Special, but he meant Interim, I don't believe him.....

unless it's corrected by announcement

stop upsetting the disciples zerof .... they are a titchy lot at the moment ..... reds under the beds and all that sort of stuff ..... and george is a good bloke and wouldn't get confused

and stop scaremongering about the cash .... just negative is soooo good for 1st half ...... as you know a very seasonal business where all money made in H2

so all on track ..... a real turn around underway ..... john and george got things under control ..... the market just doesn't get it .... boy punters are stupid sometimes

[winner69]

the forms clearly say interim and the interim box is ticked (no tick against the special box) ---- so interim of $16m plus it is

[Xerof]

Sorry W69......interim accepted, I hadn't seen Appendix 7

oh, did I forget to mention 4mill of the profit was revaluation of the HNZ shareholding? Apologies if I missed that earlier

:scared:

[noodles]

Wow, PGW have a dividend policy of paying 200% of profits. C'mon that sounds like a "special divi" to me.

[GR8DAY]

.......maybe this (special divi) will allow Agria to fund borrowings for a full takeover?? how much do they own already?

[ak1261]

According to 2012 annual report, Agria owns 379,068,619, which is 50.22%.

[winner69]

.......maybe this (special divi) will allow Agria to fund borrowings for a full takeover?? how much do they own already?

yep the $8m will go a long way

[GR8DAY]

yep the $8m will go a long way


.....yep $8m of interest ie

[ak1261]

It seems that some big institutional shareholders are selling for profits before the end of March?

[Master98]

pgw NTA 67.31c:confused:

[Queenstfarmer]

Many many very small sales in the past hour seeing it drop back to 40c. Manipulation at its very best.

[winner69]

WTF .... 40 cents .... whats up

Anybody know what happened to whats up .... enjoyed his/her posts

[winner69]

Many many very small sales in the past hour seeing it drop back to 40c. Manipulation at its very best.



maybe staff selling their staff shares

manipulation ........ doubt it ... who would bother ... worry about other things balance

[Queenstfarmer]

Well if that were the case...they'd be better off holding for the record date. At 40/41c... Dividend received would be more than double what the banks would pay if it were to go back into an account.

[Queenstfarmer]

Or perhaps kiwis wanting funds available for the Mighty River listing?

[winner69]

Methinks it is Paul Simon fans cashing in to buy tickets to the concert

What has the world come to .... having to sell a thousand pgw shares to get 2 tickets to a concert

[winner69]

Many many very small sales in the past hour seeing it drop back to 40c. Manipulation at its very best.

Many many very big sales at the close seeing it stay at 40c. Manipulation at its very best

[winner69]

Or was it sparky doing the profit taking trick .....his phone calls to John and George yesterday gave him the heebie jeebies today and out of the portfolio they went

[Queenstfarmer]

The possibilities are endless...ill go with the Paul Simon conspiracy.

[percy]

The possibilities are endless...ill go with the Paul Simon conspiracy.

Music to my ears.!!!

[Hoop]

maybe staff selling their staff shares

manipulation ........ doubt it ... who would bother ... worry about other things balance

Nah...it was those dirty rotten greedy unloyal TA investors.....can't trust em.. upsets everyones plans..eh?

Disc: sold out @42c yesterday, I was lucky and got a second chance after it broke the 38.2% Fib retrace 2 days ago (happened to be 43c support break as well..makes for a strong sell signal)

[Snoopy]

Nah...it was those dirty rotten greedy unloyal TA investors.....can't trust em.. upsets everyones plans..eh?

Disc: sold out @42c yesterday, I was lucky and got a second chance after it broke the 38.2% Fib retrace 2 days ago (happened to be 43c support break as well..makes for a strong sell signal)


Hoop you are now on record as the second most intelligent PGW investor on the forum, second only to our old mate Winner who sold the balance of his holding at 45c shortly after Agria took the rest of his shares at 60c. My own shares still owe me 60c, so I am right down there on the PGW IQ scale.

Take my $7.4m calculation of operational normalized earnings, then multiply that by the profit prediction fudge factor for PGW of 3 and we are looking at $22m NPAT for the year. Divide by the 754.8m share on issue and you get earnings of 2.9cps.

At 41c share price this put PGW on a prospective PE ratio of 14. You would have to say a full recovery of seed sales and profitability in Australia is already factored in at that price. Just as well farming is such a certain business that these high PE ratios are possible, but now expected (see FSF). ;-P

SNOOPY

discl: delirious shareholder

[GR8DAY]

.....wow thanks for that SNOOPY (PGG owing you 60c ie).....dont feel so bad now having just bought into this fingers crossed recovery story........at 42/43c. Might see you back at the 60c level one day soon.??

[Snoopy]

.....wow thanks for that SNOOPY (PGG owing you 60c ie).....dont feel so bad now having just bought into this fingers crossed recovery story........at 42/43c. Might see you back at the 60c level one day soon.??

I'm not counting on PGW seeing 60c again (sadly) :-(

SNOOPY

[percy]

I don't know where PGW's SP will be on Monday or in a year's time.PGW will/should do well when farmers do well.
What we have seen is a company that lost it's way,slowly returning to the focus of supplying rural needs.The strong chairman,SirJohn Anderson and the CEO
George Gould
are showing leadership.A year ago it was a "pig in poke".Today it is a well focused,much stronger company,trading in a competitive market.The right people have given this company a much brighter future.

[Queenstfarmer]

If PGW was capable of getting near $3 per share in its hey day with 350 million ord shares...I'm sure $1 is not impossible with 750 million ord shares out there now. I think we've seen the hard yards and this company is well placed to keep going fwd. Hang in there Snoopy.

[GR8DAY]

........add some heavy rain to the equation and I think you might just be right QF.............back to 60c before you know it! I dont pretend to be an expert in such matters but the report seemed to be indicating a fresh start from a steady baseline for PGW.......all indicators are pointing northwards. In my opinion now is the right time to buy into this turnaround story.......rain baby rain!!

[Hoop]

Hoop you are now on record as the second most intelligent PGW investor on the forum, second only to our old mate Winner who sold the balance of his holding at 45c shortly after Agria took the rest of his shares at 60c. My own shares still owe me 60c, so I am right down there on the PGW IQ scale.

Take my $7.4m calculation of operational normalized earnings, then multiply that by the profit prediction fudge factor for PGW of 3 and we are looking at $22m NPAT for the year. Divide by the 754.8m share on issue and you get earnings of 2.9cps.

At 41c share price this put PGW on a prospective PE ratio of 14. You would have to say a full recovery of seed sales and profitability in Australia is already factored in at that price. Just as well farming is such a certain business that these high PE ratios are possible, but now expected (see FSF). ;-P

SNOOPY

discl: delirious shareholder

Thank you for those very kind words Snoopy...My head swelled a few more centimetres...time to get wider doors for the house.

As for PGW I agree with Percy (#2780) I too think they have turned a corner... Snoopy, thanks for the very valuable analysis, it does seem the shareprice got overvalued and Mr Market is punishing every overvalued Company that reports less than Stellar results...eh?

[Snoopy]

Winner, thanks and I accept your correction for term 'B':

WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($239.4m+$20.7m)+($228.1m-$207.1m)= $281.1m

So A = $281.1m/$980.5m = 0.287

----

B= (Retained earnings/Total Assets)

-$34.30m/$980.472m=-0.035

--------

C= (EBIT/ Total Assets) = $42.438m/$980.472m = 0.043

--------

D= (Market value of Equity/Total Liabilities) = (0.37 x 754.85m)/$402.698m = 0.694

--------

E= (Sales/Total Assets) = $1,336.8m/$980.472m = 1.363

-------

So putting everything together:

Z= 1.2A+1.4B+3.3C+0.6D+1.0E
= 1.2(0.287)+1.4(-0.035)+3.3(0.043)+ 0.6(0.694)+1.0(1.363)= 2.22




Time to rerun my Altman test on PGW

A= (Working capital/Total Assets)

So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($202.6m+$9.9m)+($239.4m-$272.5m)= $174.4m

So A = $174.4m/$987.3m = 0.177

----

B= (Retained earnings/Total Assets)

-$29.655m/$987.272m= -0.030

--------

C= (EBIT/ Total Assets) = ($11.240m+($42.438m-$11.614m))/$987.272m = 0.043

--------

D= (Market value of Equity/Total Liabilities) = (0.40 x 754.85m)/$402.887m = 0.749

--------

E= (Sales/Total Assets) = ($589.120m+($1,336.813m-$693.710m))/$987.272m = 1.248

-------

So putting everything together:

Z= 1.2A+1.4B+3.3C+0.6D+1.0E

= 1.2(0.177)+1.4(-0.030)+3.3(0.043)+0.6(0.749)+1.0(1.248)

= 0.212 - 0.042 + 0.142 + 0.449 +1.248

= 2.009

Not a good result. Altman Z says that PGW is closer to the point of bankruptcy than 6 months ago.

SNOOPY

[Snoopy]

Not a good result. Altman Z says that PGW is closer to the point of bankruptcy than 6 months ago.


There was a significant drop in the Agria share price overnight. Down 6.5% to 72c. Add in the post AGM share consolidation multiplication factor of 1.5 and we get share price of $1.08. Getting back down to that delisting risk zone of $1.

It will be fascinating to see what card shuffling has been done to keep Agria afloat. The basic problem of Agria adding other layers of oversight management that so far, have not been value adding to PGW remains. PGW made a profit last year, yet Agria lost money because of management dead weight. If the performance of PGW deteriorates this year, and every indication is that it will, then Agria will lose even more money in FY2013.

Agria have got a 2.2c ps dividend lifeline from PGW, but will it be enough? And what about the 'dividend guarantee' that Agria have promised shareholder 'New Hope'? How much of that dividend from PGW will Agria be allowed to keep?

Agria repaid half of their NZ based loans and got an extension for the rest, albeit a punitive interest rates. Given they are cashflow negative, where did the money to (half) repay the loan come from?

But Alan Lai says everything is still sweet, so everything must be hunky dory, right?

So many unanswered questions, but hopefully soon the Agria half year result will supply some answers.

SNOOPY

[Snoopy]

So putting everything together:

Z= 1.2A+1.4B+3.3C+0.6D+1.0E

= 1.2(0.177)+1.4(-0.030)+3.3(0.043)+0.6(0.749)+1.0(1.248)

= 0.212 - 0.042 + 0.142 + 0.449 +1.248

= 2.009

Not a good result. Altman Z says that PGW is closer to the point of bankruptcy than 6 months ago.


It is always dangerous to look at a number and assume that it tells the whole story. The Altman Z figure that I have just calculated is on a rolling annual basis, combining the first half results of this year with the last half results from last. PGW is a seasonal business and Altmann Z makes no allowance for this.

I would imagine that at the end of June, PGW are building up their seed stock for spring.

Sales to total assets are down. But this isn't unexpected as it could be explained by the balance sheet timing, as at 31st December 2012. A company might need to build up their seed stock before a late summer growing season (thinking Australia here). Likewise many supplies, like fertilizer. However, this theory is contradicted by inventory going down (from $239m to $203m) together with livestock on the books going down (from $20.7m to $9.9m - this last one perhaps more expected). Anyone like to hazard an explanation for this conundrum?

SNOOPY

[winner69]

Not a good result. Altman Z says that PGW is closer to the point of bankruptcy than 6 months ago.

SNOOPY


Snoopy .... NO WAY ..... John and George are doing a great job I hear .... and that Crafar debt has been repaid

Snoopy - you just get it do you ........... some will say stop this scaremongering

Snoopy - maybe Mr Altman has to allow for seasonality .... his ratio will double in the 2nd half of the year

Snoopy - can't be right .... they going to hand out $16m in divies


Snoopy - for this post I score you 0 out of 10 ..... just for upsetting the status quo

[winner69]

It is always dangerous to look at a number and assume that it tells the whole story. The Altman Z figure that I have just calculated is on a rolling annual basis, combining the first half results of this year with the last half results from last. PGW is a seasonal business and Altmann Z makes no allowance for this.

I would imagine that at the end of June, PGW are building up their seed stock for spring.

Sales to total assets are down. But this isn't

Funny I said Mr Altamn needed a seasonality figure .... but 2 some extent you have by using a rolling 12 months

Stocks might be high today in building them up but debtors might be lower than normal because of lower sales in the months leading up to December (compared to the 2nd half of the year)

On balance might not make a difference

Wonder what the score is if you take $16 mill of equity and cash for the dividend

[winner69]

Snoopy, W69 loves the Altman Z ... but it is woefully wrong in many instances. HBY anyone?

,,,,but HBY did something about fixing the problems eh Belg .... unlike the likes of Feltex who had similar scores

as you know its all about probabilities and likliehood and all that sort of stuff .... not black and white yes it will happen

Is PGW fixing things ...... sort off ..... are they fixing it fast enough ..... maybe .... or maybe not ..... but like HBY it will take some time to see what happen

Low Altman scores are good buy signals if you have the faith in management to fix the problems .... otherwise it is a signal tom stay away and find other opportunities

John and George may do the trick .... good blokes

We'll both be happy when PGW is a buck or more won't we belg

[GR8DAY]

....why is the friggn sp so weak?? Bugger.

[Queenstfarmer]

Interesting this altman z analysis. I see it puts telecom and fletcher building at a 35 & 36% chance of bankruptcy respectively and our dear old struggling PGW at 43-44% chance. With some good fortune in Australia and South America for the second half of this year and a few other things in the mix...perhaps a more accurate assessment may see PGW in the thirty's also?

[Snoopy]

Interesting this altman z analysis. I see it puts telecom and fletcher building at a 35 & 36% chance of bankruptcy respectively and our dear old struggling PGW at 43-44% chance. With some good fortune in Australia and South America for the second half of this year and a few other things in the mix...perhaps a more accurate assessment may see PGW in the thirty's also?


Any business where sales are seasonal can probably be made to look worse than they really are, in terms of Altman Z, by picking a certain balance sheet point. In the end any percentage chance of bankruptcy is all smoke and mirrors. PGW will either go broke or it won't. There is no "in between" end point.

However, I don't like the blowout in trade receivables at PGW (in comparison with the EOFY in June). Nevertheless I do note receivables are slightly less than the same time a year ago (but did that figure include outstanding payments on finance loans?).

I don't like the special dividend to help bail out Agria. Margins are looking thinner than ever, and the best way to improve profits at PGW is still to pay down debt. Unfortunately we may see debt begin to rise again at PGW this year. Of course from an Agria perspective the dividend was probably absolutely necessary or Agria may not survive.

While the cash flow at half year has been OK, I would say the underlying cashflow at PGW is not in a good position. The big increase in accounts receivable combined with the decrease in inventory implies that PGW is selling stuff but their customers are not yet paying for it. Maybe this situation will correct itself at the end of year in June?

SNOOPY

[Queenstfarmer]

No arguments from me Snoopy...you do your homework and with accuracy. Can be a little unnerving to read "more of a chance of bankruptcy than 6 months ago" I guess I found it a little more comforting to read that Telecom and Fletcher building aren't really all that far away when it comes to probability.

[Snoopy]

PGW has dropped out of the NZX50, replaced by A2 Milk Corporation. I'm happy as an A2 holder, less so as a PGG Wrightson shareholder!


A bit premature Sparky. The index change doesn't happen until 18th March. The index managers still have a bit of time to sort their holdings out.

Of course if Agria goes into administration, the free float of PGW may suddenly double. That would rocket PGW back into the NZX50 again!

SNOOPY

[Snoopy]

However, I remain a happy holder, having done some more homework on PGG Wrightson in the last few days, including speaking with a senior officer of the company. There is some very impressive work being done in their Agritech division.

The company is paying back debt in a meaningful way, and I think it will perform on track for $20-22m of NPAT, barring a terrible drought for the next three months in Australia and NZ, and sheep prices dropping to below $70 for an extended period.

I feel more optimistic about rains coming in mid March-mid April, lamb prices not so much.

Wow, Sparky, here is what you wrote in post 2704 only a month ago!
"I therefore have expectations of $8.5-9.5m of NPAT, rather than the too bullish $10m-11m above. I do however, expect 2H2013 to uprate to around $20m+"

So is the NPAT $20m-$22m you refer to in the post above just for the second half? Or are you now admitting this dog deserves a bone after all?

Oh and BTW that terrible drought caveat you were referring to? It is all over the news in New Zealand already - the worst drought in 50 years in some places. Milk production in the first half of next financial year is already affected. Mid March and April rains will probably not be enough to fix things, as there won't be enough post rain warm weather to get significant grass growth before the winter.

SNOOPY

[Queenstfarmer]

I wonder how well PGW are actually doing out of all these stock sales going on? Of course all these farmers off loading will need to buy new stock when there paddocks have replenished?

[winner69]

PGW has dropped out of the NZX50, replaced by A2 Milk Corporation. I'm happy as an A2 holder, less so as a PGG Wrightson shareholder!
.

Its good for the NZX50 as well .... isn't the who process under the guise of 'quarterly index rebalancing' just a snaky way to cull the dogs out of the index (the stocks that aren't helping it go up) with something that looks more promising (which will help the index)

And instos feel honourbound to play the game .... isn't it all a bit stupid

[Snoopy]

There was a significant drop in the Agria share price overnight. Down 6.5% to 72c. Add in the post AGM share consolidation multiplication factor of 1.5 and we get share price of $1.08. Getting back down to that delisting risk zone of $1.


Pretty extraordinary things happening on the Agria share register. Four days after touching a near all time low of 72c, the share price is now $1.14! That is a rise of nearly 60% in just four days! Trading volumes are up hugely. Generally 10 to 20 thousand Agria shares trade per day. On Friday over 600,000 shares were traded. That is over 30 times the 'normal' amount.

The underlying investment in PGW doesn't justify such a move. But all those US loans are up for renegotiation. So maybe a favourable outcome has been reached? Alternatively Alan Lai is at last cash rich again thanks to the imminent dividend payout from PGW. So maybe he is putting some of his cash to work to shore up the share price of his company (Agria)? A recovered share price might prove useful when renegotiating those bank loans!

I was thinking something would be revealed when Agria files their half year accounts. But looking back on last years announcements, I can't see that Agria files half year accounts. Strange, or perhaps I just went blind?

I see the Agria reverse split (share consolidation) will not occur until after the AGM scheduled in April.

SNOOPY

[Snoopy]

I get the impression that Agria will muddle through its issues. It's price will recover in time as people realise they probably are around to stay.


I find many people get their 'impressions' from a rise in share price. Sometimes these impressions are justified and sometimes they are not. Fundamentally Agria is losing money on a NPAT basis and is cashflow negative. There is no way a company in that position can survive long term. There are no profits coming out of China, so Agria are really a leveraged bet on PGW which has a precarious existence because of the boom and bust nature of the farms it services. Agria has a record of disagreements at senior management level and has now been without a CEO for 5 months.

If I had to draw up a hypothetical tell tale case study using bullet points to select a company to avoid, then Agria would tick all the boxes.

Of course on the other side, hardly any company ticks all the right boxes and still has the value pricing that would attract the growth at a reasonable price investor. In real world investing you have to stack up the good points and bad points and distilling those check how a potential investment fits into your value equation. However, with Agria this exercise is easy, because the company has no redeeming features at all. Is there anything to suggest they will survive, other that the fact that if they went under their bankers would take a huge hit, so the US banks will somehow connive to keep them afloat?

SNOOPY

[percy]

The longer Agria can muddle through,the more likely-hood of them coming out smelling of roses,as Sir John and George Gould's stable management is improving PGW future prospects steadily,and our chances of a cheap placement are receding.
Bit of rain would paint a very pretty picture I am told.!? In the meantime I expect PGW irrigation are doing well.

[Snoopy]

That's a long way from your implying that I'm backing Agria's long term prospects. Conversely, I'm hoping for the reverse - an opportunity to buy Agria's PGW shares should they experience misfortune. I'm not convinced that's going to happen though, they will probably under perform and unimpress - e.g. muddle through.


Since Agria don't have a CEO Sparky, why not apply for the job? You probably know more about the underlying PGW business than anyone else on the staff there (and yes I am being serious in that suggestion)! You have the optimism to succeed, but can you follow the recipe required:

Ingredient 1/ Negative cashflow
Ingredient 2/ Making Losses

Please advise how to combine these two ingredients to get your probable result 'muddling through'.

SNOOPY

[Snoopy]

Sir John and George Gould's stable management is improving PGW future prospects steadily


It is times like this I remember a Buffett quote:

"When good management take on a mediocre company, it is normally the company that leaves with its reputation intact."



Bit of rain would paint a very pretty picture I am told.!?


We will need more rain than just a bit. The drought in the North island is now the worst in 70 years. Both west and east coast affected, so we can't get around it by just moving stock or feed around.



In the meantime I expect PGW irrigation are doing well.


Yes, irrigation is going gang busters. Pity it isn't enough to offset all the other stuff though.

SNOOPY

[percy]

It is times like this I remember a Buffett quote:

"When good management take on a mediocre company, it is normally the company that leaves with its reputation intact."



We will need more rain than just a bit. The drought in the North island is now the worst in 70 years. Both west and east coast affected, so we can't get around it by just moving stock or feed around.



Yes, irrigation is going gang busters. Pity it isn't enough to offset all the other stuff though.

SNOOPY
Mediocre,no.A fine business.Not a great business. Buffett invested in a lot of fine businesses as well as great businesses,
I would suggest you read "Billionaire The Life and Times of Sir James Goldsmith" by Ivan Fallon.Goodsmith was of the view if you put in the right people you get the results.
In PGW business I would think Goldsmith is the better person to quote.

[winner69]

Jeez l snoopy ....you getting some of the faithful very emotional this fine Sunday - they seem a bit ruffled

Keep up the good work - the professor at Oxford, or was it the London school of economics, is watching closely

[Snoopy]

I'd rather you just acknowledged that you selectively cropped my quote to suit a dishonest interpretation of events. Though I acknowledge this may be a perfectly honest representation of your investment methodology - to only look at certain words rather than "the whole sentence".


Sparky, if I hadn't 'selectively cropped your post', tell me how my response to it would have changed? Answer it wouldn't. I never meant to make out that you are some kind of rampant Agria supporter and I apoligise if that is how you took it.

What I did question was your mention of the possibility of Agria muddling along. I was wondering how you could deduce that that was even possible, given what we know about Agria.

SNOOPY

[Agrarinvestor]

Agrias wase a little bit short in cash, since the PGW partial takeover. But they were never short in cash because of big operation losses. On Page 47 you can read that Agria provide payments in advance to their seed farmers.

>>At the beginning of each growing season, we provide parent seeds to production companies to grow for us under contractual arrangements, which detail thearea of land, standard yield and quality requirements. We also provide advances to the production companies for their rental of land,payments to farmers, purchase of fertilizer and other production materials. At the end of the growing season, we take delivery of the
seeds and undertake various sorting, selecting, coating and packaging processes to produce our finished goods.<<

IMO that had brought a lot of cash back into Agrias pockets. Therefore i am very optimistic to see semi annual reporting from Agria in the next weeks,
that impress analysts and institutional investors. It is sad that nobody here in the PGW thread is optimistic for Agria, and that you ignore the potential that
the partnership will have for both of them.

If you compare Agria with Monsanto on a basis of shareholder Assets , Agria could be more than a ten bagger! I know that Agria has not the cash flow of Monsanto,
but that can change within the next weeks. I dare to say that on earnings/share basis Agria can easy arcive a P/E of 2.
The current improvement of Agrias share price is only the beginning. Some of you were impressed by the recovering of PGWs share price, but i predict
in a few weeks you are annoyed if you miss the chance to be a shareholder of Agria.

Edible Corn Seed Gross Marging in China is 47%

[traderjoe]

:confused:If PGW is such a dog, why was it such a popular choice in the share competition?

[Xerof]

:confused:If PGW is such a dog, why was it such a popular choice in the share competition?


LOL, my opinion only, but I picked it this year as a recovery stock, much like I picked FPA last year for the same reason


really, only Snoopdog berates it, despite being a long term holder. Eyeore probably holds also......

I don't hold in real life, just in the fantasy comp

[Xerof]

Yep, didnt see that coming when we all made our picks back in December, and its probably going to remain my worst performer

[Xerof]

Sparky, sparky, in terms of the annual comp, it's my worst performer, and it was belg who poured scorn on my initial comment in response to traderjoe's search for logic re dogs​ being popular comp picks!!

[Lizard]

Yep, didnt see that coming when we all made our picks back in December, and its probably going to remain my worst performer

I'm in the same boat. Picked it for the same reasons and don't own it either. :ohmy:

[Cool Bear]

I'm in the same boat. Picked it for the same reasons and don't own it either. :ohmy:
I am in the other boat. Did not pick it but own it:(. But do not own much.

[Snoopy]

It was dishonest to selectively cut a quote into two without noting it Snoopy, and shame on you for not acknowledging that or acknowledging it changed context.


Sparky, the purpose of I quoting you is to bring into context the point that I was trying to make.

Your post's full content is still there for those who want to read it, because your original post is still there. Anyone who reads my post can go back and look at yours and make their own judgements about whether I have manipulated what you said. All I can say is that it was not my intention to manipulate what you said into something else. I apologize to you if my post caused you to perceive that I was manipulating what you said, even though I had no intention of doing so.

This is a thread. That means that no post should stand alone and must be read in context of the entire thread. Perhaps if you believed that you would not have been so offended.

SNOOPY

[Agrarinvestor]

I was wondering how you could deduce that that was even possible, given what we know about Agria.

SNOOPY

Dear Gentlemen,

i wonder when i read the sentence above. Is it possible that you (all) have a complete wrong picture about Agria ?

Small David has helped Goliath in 2009, you remember?
>>Preliminary agreement has been reached for Agria to invest in PGG Wrightson through the placement of new equity representing 13 percent of PGG Wrightson's share capital, at 88 cents per share, at a value of NZ$36 million. Both parties' aspiration is to become a significant shareholder in PGG Wrightson over time<<

Was there a single bad decision since Agria is majority shareholder. I belief you agree that concentrating on seed and core business was not a bad one.

Now Agria and all the other shareholder of PGW has received a small dividend out of an additional income that PGW has received (craffar loans).
PGW has done well in the first half year and everybody knows it is the weaker half year. Sparky the CLown told us that he is confident that PGW will reduce the debt level:
>>My homework suggests the debt will continue to drop from $103m to $50-60m sometime in the second half of the year.<<

I asume he has done not only his homework. Sparky is someone who use the telefone, email and does't hesitate to make a personal visit. :t_up: That's good.
I do the same(except the personal visits). It is my experience that management never tell a lie to small investors.

>>Since Agria don't have a CEO Sparky, why not apply for the job? You probably know more about the underlying PGW business than anyone else on the staff there (and yes I am being serious in that suggestion)! You have the optimism to succeed, but can you follow the recipe required:

Ingredient 1/ Negative cashflow
Ingredient 2/ Making Losses<<

Snoopy can i asume that you would be full of awe if Agria has made money during the last half year ?

I have full respect for Sparkys investifgations and knowledge in PGW. But i think Agria is in search of person who has the best connections to the Ministry of Agriculture, CAAS or
local governement, and of course is someone with a academic reputation in seed science. They don't need someone who is a replacement for Mr. Tao. I beleaf they have a trustful
relationship with the management and the Kiwis.

I expect 1.40$ end of April. And if PGW is doing well at fiscal year end and the first whisper numbers came in and if they are a little bit better than last year you will see Agria is going through the roof.

[Queenstfarmer]

I'm surrounded by dairy farms in the South Waikato and each day I watch as my neighbours put out feed for their herds that they would usually save for winter. The rain will come but perhaps a little too late to bring on enough growth before the ground temperature drops and grass growth slows to near on nil. Winter feeds will be in hot supply. Have PGW and Agria got their thinking caps on. Overseas contacts...container ships...MONEY!

[Food4Thought]

PGW is a supplier of a wide range of stock feeds. PKE, loved by Farmers because of it's price/efficiency is one of the items in the Agri Feed list that PGW provides. The weather hasn't been good for dairy/sheep farmers (in parts of NZ). Fruit growers, wineries and maize/wheat etc have had a great growing and ripening season. Wool trade is up. Irrigation demand has increased. Demand for protein from overseas is up. Demand for dairy is up. I think that it will be tough for some NZ dairy/sheep/beef farmers, but for PGW this will be only an aspect of their business, and this is likely to play favourably for PGW. I find it interesting that the seed business is improving. Have a hunt around and you will find that the season has been more favourable in NZ and Australia over the last 2-3 years. With solid management in place, a dedicated team, and sticking to their fundamental business, PGW will have a solid year's results. The second half of the year will be a pleasant reminder to those who have invested in PGW.

[Snoopy]

You mean like how an investment should not be assessed on financial statements alone, but should also include some rigourous analysis of the company's business model, possibly including questions of management and those who professionally research the company?


I prefer not to ask for a running commentary from PGW B level managers Sparky. The company is very diverse and I believe the answers that I would receive from questioning such people would not be helpful to me. I have never heard a sales manager forecast a decrease in sales, for example. Yet we know that in farming related companies there are always ups and downs. Getting my ear close to the ground for a running commentary is not my style. Buy in gloom and sell in boom is. It is more macro factors that drive the booms and glooms. I don't need the middle level managers to tell me exactly when this is happening.

As for looking at broker research, well I will look at what others have to say. But clearly putting an annual profit growth projection on a straight line scale and rolling it over into subsequent years is overly simplistic. The researchers know this too and put certain caveats on their predictions. Caveats which some investors are happy to ignore.

SNOOPY

.

[percy]

I prefer not to ask for a running commentary from PGW B level managers Sparky. The company is very diverse and I believe the answers that I would receive from questioning such people would not be helpful to me. I have never heard a sales manager forecast a decrease in sales, for example. Yet we know that in farming related companies there are always ups and downs. Getting my ear close to the ground for a running commentary is not my style. Buy in gloom and sell in boom is. It is more macro factors that drive the booms and glooms. I don't need the middle level managers to tell me exactly when this is happening.

As for looking at broker research, well I will look at what others have to say. But clearly putting an annual profit growth projection on a straight line scale and rolling it over into subsequent years is overly simplistic. The researchers know this too and put certain caveats on their predictions. Caveats which some investors are happy to ignore.

SNOOPY

.

Speaking to any employee is always rewarding.You can quickly pick up whether they are proud to work for the company,what they think of where the company is going,are they getting the right products to sell,do they get the support from head office they need,and finding out what the opposition are doing.
You can pick up whether the company is in good shape or not.Really you just need to know what to ask.
Peter Lynch,Warren Buffett,in fact any successful investor checks out "the whole" business.
I trust you tried a KFC before buying their shares.?
And we must not forget "the tea lady" has always been the greatest source of inside information.

[noodles]

I'm surrounded by dairy farms in the South Waikato and each day I watch as my neighbours put out feed for their herds that they would usually save for winter. The rain will come but perhaps a little too late to bring on enough growth before the ground temperature drops and grass growth slows to near on nil. Winter feeds will be in hot supply. Have PGW and Agria got their thinking caps on. Overseas contacts...container ships...MONEY!

Biosecurity nightmare!

[Minerbarejet]

Biosecurity nightmare!
Thats all we need - foot and mouth - think what that will do to your PGW

[percy]

Thats all we need - foot and mouth - think what that will do to your PGW

Think what would happen to NZ..!!!!