PGW - PGG Wrightson

[Snoopy]

I am enjoying the share trajectory of REL on the unlisted market.

Percy highlights another rural winner. But would you top up on REL at today's prices, and given the liquidity could you do it? PGW has quite good liquidity for something outside the NZX 50. I wonder how close PGW is to getting back into the NZX50? Maybe selling down to those sucker index buyers is a medium term strategy for PGW shareholders?

SNOOPY

[percy]

Yes I would buy at today's price.
22,818 for sale at $4.30, however I would expect they will go through at $4.20.
Liquidity has been surprisingly good during the past year.Nothing like PGW,however, for an investor like me who doesn't mind if the market was closed for 5 years,it is not an issue.!!! lol.

[TimmyTP]

Just stumbled on this (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11160972) and thought it might be of some relevance to ppl on this thread.

Enjoy - I am not invested in PGW, never studied them so no opinion to offer, just thought the article might be of use.

[iceman]

Agria makes a full and early repayment of its loan to LIC !

http://www.nbr.co.nz/article/agria-repays-5-million-loan-and-interest-owed-livestock-improvement-dc-149556

[Agrarinvestor]

Agria makes a full and early repayment of its loan to LIC !

http://www.nbr.co.nz/article/agria-repays-5-million-loan-and-interest-owed-livestock-improvement-dc-149556

Yeah, would like to hear Snoopy's comments on that.

[Snoopy]

Agria makes a full and early repayment of its loan to LIC !

http://www.nbr.co.nz/article/agria-repays-5-million-loan-and-interest-owed-livestock-improvement-dc-149556

There is some interesting text in the Agria 20F filing about their New Zealand based loans. I quote from page 57:

------

Debt owed by our subsidiary, Agria Asia Investments:
· acquisition debt denominated in New Zealand dollars of NZ$13.8 million ($10.7 million) that matures on February 26, 2014 provided by a bank;
· acquisition debt denominated in New Zealand dollars of NZ$5.0 million ($3.9 million) that matures on March 5, 2014 provided by Livestock Improvement Company. If the bank which provided the acquisition debt referred to above extends the NZ$13.8 million acquisition debt facility, Livestock Improvement Company is restricted in its ability to enforce security in the event of them not being repaid on March 5, 2014;

-------

I see that as quite a big incentive for LIC to get their loan repaid early (as happened). If they did not and the New Zealand bank that is bankrolling Agria extended that bank loan, it looks like LIC may have had some difficulty getting their loan capital back.

SNOOPY

PS I notice the same clause was highlighted in the previous loan arrangement with LIC listed in the Agria FY2012 20F filing. That was how they got out of paying all the original LIC loan back last year and kept things legitimate.

[Snoopy]

Do you appreciate that Lai has given dividend guarantees to the Chinese government vehicle New Hope? IOW the Chinese government is planning on taking cash out of Agria Asia, not putting more money into it.


Maybe the cashflow arrangement with New Hope is not as onerous as I imagined? I have been reading the 6K form filed with the SEC in relation to the involvement of New Hope in the PGW takeover. I came across this in section 8.2

---------------

8.2 Dividend Policy
The dividend policy adopted by the Board of the Company will apply the following principles:
(a) while debt remains in the Company, the intention will be to focus capital flows on servicing and repayment of debt; and
(b) when all the debt of the Company has been repaid, it is intended (unless all the Shareholders agree otherwise) that the balance of net distributable cash flows less any amounts anticipated to be incurred in the operating of the Company in the next twelve months will be distributed as dividends to the Shareholders.

----------

My reading of that is that while Agria Asia has debt then all spare cashflow will be put into paying off that debt. But once the debt is paid off then New Hope will expect any spare cashflows as dividends. I need to get to grips with how much of Agria's huge debt mountain relates to Agria Asia!



Do you appreciate that New Hope can force Agria to repurchase their share of Agria Asia in the next couple of years at an undisclosed price I would guess is cost? That could mean more huge losses for Agria.


During FY2014 the New Hope guarantee clause comes to a head. Will New Hope demand their money back out of Agria Asia?

SNOOPY

[Agrarinvestor]

Maybe the cashflow arrangement with New Hope is not as onerous as I imagined? I have been reading the 6K form filed with the SEC in relation to the involvement of New Hope in the PGW takeover. I came across this in section 8.2

---------------

8.2 Dividend Policy
The dividend policy adopted by the Board of the Company will apply the following principles:
(a) while debt remains in the Company, the intention will be to focus capital flows on servicing and repayment of debt; and
(b) when all the debt of the Company has been repaid, it is intended (unless all the Shareholders agree otherwise) that the balance of net distributable cash flows less any amounts anticipated to be incurred in the operating of the Company in the next twelve months will be distributed as dividends to the Shareholders.

----------

My reading of that is that while Agria Asia has debt then all spare cashflow will be put into paying off that debt. But once the debt is paid off then New Hope will expect any spare cashflows as dividends. I need to get to grips with how much of Agria's huge debt mountain relates to Agria Asia!



During FY2014 the New Hope guarantee clause comes to a head. Will New Hope demand their money back out of Agria Asia?

SNOOPY

Dear Snoopy,

i have expected such an answer from you. You are still very obsessed with Agria is going bankrupt!
Fact is Agria has done very well during the past 2 years. You must consider David has taken over
Goliath.






june 2013
June 2012
June 2011


Total Liabilities
509,283
595,297
1,021,720









Goodwill
3,286
140,541
138,151









Intangible Assets
7,124
58,517
61,644









Net Tangible Assets
76,836
28,986
22,935









With Net Tangible Assets = Market Capitalisation, Agria is fair valued at the Moment.
If you put in mind how fast their domestic seeds market is developing, and their
succes with reducing debt and improving the quality of their book value, it is
hard to follow your conclusion.
If you compare market cap of Monsanto and NTA ratio, with Agria you must
admit that Agria is still cheap.

[Snoopy]

Dear Snoopy,

I have expected such an answer from you. You are still very obsessed with Agria is going bankrupt!
Fact is Agria has done very well during the past 2 years. You must consider David has taken over
Goliath.






june 2013
June 2012
June 2011


Total Liabilities
509,283
595,297
1,021,720









Goodwill
3,286
140,541
138,151









Intangible Assets
7,124
58,517
61,644









Net Tangible Assets
76,836
28,986
22,935









With Net Tangible Assets = Market Capitalisation, Agria is fair valued at the Moment.
If you put in mind how fast their domestic seeds market is developing, and their
succes with reducing debt and improving the quality of their book value, it is
hard to follow your conclusion.
If you compare market cap of Monsanto and NTA ratio, with Agria you must
admit that Agria is still cheap.

Agrainvestor, I have not double checked your tabulated figures because I am sure you are right. Yes I agree that the consolidated Agria has reduced its debt. But that is entirely due to the controlled PGW, 50.22% owned by Agria Asia, reducing its own underlying debt.

The real questions to me are what has happened to the debt of the privately held "Agria Asia", the jointly owned subsidiary (with New Hope and Ngai Tahu) that controls 50.22% of PGW? This question is important because it determines what happens to those dividends from PGW that the parent Agria may eventually receive.

The other question is what has happened to the debt of the underlying Agria, the public entity listed in the USA that you hold shares in? I won't go through the indignity of updating the Altmann Z statistic for that just yet. But I believe the capital position for the US Agria is very serious. But that I mean the underlying earnings do not cover their borrowing costs.

SNOOPY

[Snoopy]

Genuine PRC male professional dancing requires a combination of skills: Strength, discipline and timing. Alan Lai will need all of these attributes if he is to pull Agria back from the brink.

I have been running some numbers over the standalone Agria bank loans to see how precisely those dance shoes will have to move.

We are told that Agria is being charged interest at 4.5% above the base rate. For his US loans I am assuming this equates to 6.5%. The US domiciled loans mature between January 11th 2013 and April 19th 2013 and total US$58.2m. That gives an interest bill of $US3.78m.

The New Zealand loans mature(d) over October 2012. The larger bank loan ($US19.7m) has already been renewed, and the smaller loan linked to LIC ($US7.9m) matures at the end of the month (Loans converted assuming $1NZ= 80cUS). I am assuming the NZ interest rates are higher say 8.5%. I calculate the total NZ domiciled interest bill to be $US2.35m.

This gives a total annual interest bill of $US6.3m.

Now running a check on my assumptions. Interest and finance expenses from the consolidated Agria revenue statement are declared as $US18.660m.

From the PGW FY2012 Annual Report, interest and finance expenses are $NZ15.469m. Multiply that by 0.8 and I get $US12.375m. So the underlying Agria standalone finance expenses are:

$US18.660m - $US12.375m = $US6.285m

That is in close agreement with my estimate of Agria's interest bill above, so I conclude that I am in the ballpark with my figures.

Now the question arises, what size of dividend will Agria need from PGW to pay this? If we take $US6.285m to be equivalent to $NZ7.856m, and we know that there are 754.849m PGW shares on issue, this means the bankable dividend needed is.

$NZ7.856m/754.849m= 1c/share.

Of course Agria only controls half of PGW. So if we back out the 'non controlling interest' the dividend will need to be 2c per share. That definitely looks doable if PGW performs as forecast over FY2013, even if it does assume PGW will continue to go well ($NPAT25m for PGW with a 100% payout ratio) But you also need to factor in the cost of the corporate structure of Agria before Agria shareholders make any headway above their operational costs. Thus even a 3c share dividend from PGW will see Agria only just cover their costs. It really is knife edge stuff for Alan Lai.


We are told that Agria is being charged a 4.2% weighted average interest rate for its US and Chinese loans. A significant tranche of US domiciled loans mature between January 6th 2014 and April 21st 2014 and total US$25.8m (p57 FY2013 20F filing) . We must add to this a partially drawn trade facility in RMB, equivalent to a US dollar amount of $US2.6m that matures on 31st March 2014. Lastly there is a US bank loan of $US32m that matures on 29-05-2018. (I must say hats off to Lai for pulling that last one over the last year, a great dance move).

That gives an implied interest bill of $US2.53m.

Now we move onto the New Zealand based loans which I believe are effectively held by "Agria Asia".

The LIC loan has been repaid early. That just leaves the bank loan, originally taken out via "ANZ National" in New Zealand. This loan matures on 26th February 2014 and is for $NZ13.8m ($US10.7m). I shall assume the interest rate on this is somewhat in line with what PGW itself might be paying, around 7%. So this gives an implied interest bill of $US1.022m.

This gives a total annual interest bill for Agria, with PGW separated out, of $US3.57m.

Now running a check on my assumptions. Interest and finance expenses from the consolidated Agria revenue statement (p3 20F report) are declared as $US14.738m.

From the PGW FY2013 Annual Report p58, interest and finance expenses are $NZ6.316m. Multiply that by 0.8 and I get $US5.053m. So the underlying Agria standalone finance expenses are:

$US14.732m - $US5.053m = $US9.679m

That is quite a variation compared with my estimate of Agria's interest bill above. So I need to check out the reason for such a discrepancy. Any thoughts?

SNOOPY

[Joshuatree]

Snoopy i was going to send you a "conversational mirror" for xmas but its clear you don't need one ( Ive got floating anchors on special); you are making it cool and ok to talk to oneself.
Int to watch your combat missions with The red baron AKA Agrarinvestor(looks like a draw so far and tiger moths can be full of holes and still fly(but not holes full of fools) and i wish you both seasons greetings in the air and on the ground, may you both land safely:)

[Agrarinvestor]

We are told that Agria is being charged a 4.2% weighted average interest rate for its US and Chinese loans. A significant tranche of US domiciled loans mature between January 6th 2014 and April 21st 2014 and total US$25.8m (p57 FY2013 20F filing) . We must add to this a partially drawn trade facility in RMB, equivalent to a US dollar amount of $US2.6m that matures on 31st March 2014. Lastly there is a US bank loan of $US32m that matures on 29-05-2018. (I must say hats off to Lai for pulling that last one over the last year, a great dance move).

That gives an implied interest bill of $US2.53m.

Now we move onto the New Zealand based loans which I believe are effectively held by "Agria Asia".

The LIC loan has been repaid early. That just leaves the bank loan, originally taken out via "ANZ National" in New Zealand. This loan matures on 26th February 2014 and is for $NZ13.8m ($US10.7m). I shall assume the interest rate on this is somewhat in line with what PGW itself might be paying, around 7%. So this gives an implied interest bill of $US1.022m.

This gives a total annual interest bill for Agria, with PGW separated out, of $US3.57m.

Now running a check on my assumptions. Interest and finance expenses from the consolidated Agria revenue statement (p3 20F report) are declared as $US14.738m.

From the PGW FY2013 Annual Report p58, interest and finance expenses are $NZ6.316m. Multiply that by 0.8 and I get $US5.053m. So the underlying Agria standalone finance expenses are:

$US14.732m - $US5.053m = $US9.679m

That is quite a variation compared with my estimate of Agria's interest bill above. So I need to check out the reason for such a discrepancy. Any thoughts?

SNOOPY

No. But i think it is not important. And i don't beleave that Mr. Lai has difficulties to arrange new loans. The Agria/PGW story is an investment succes for Agria, and off course you are right it is not
free of charge. IMO it is not only the competence and the intangible assets like seeds, it is more than that. It is reputation for Agria in China and can be important in the future if Agria will export
seeds worldwide.
I am still holding 11.000 shares, and it is possible that i buy some shares if the half year results show a strong improvement in China. But i am afraid that the share price will double if the results are out.
In the meantime i am more concentrated on my chinese fertilizer investment in CGA. I beleave it would be an investment than can fulfill your enhanced requirements in cash and low debt. It has a P/E of 2.

[Snoopy]

<Woirking for current loans declared in Annual Report>

This gives a total annual interest bill for Agria, with PGW separated out, of $US3.57m.

Now running a check on my assumptions. Interest and finance expenses from the consolidated Agria revenue statement (p3 20F report) are declared as $US14.738m.

From the PGW FY2013 Annual Report p58, interest and finance expenses are $NZ6.316m. Multiply that by 0.8 and I get $US5.053m. So the underlying Agria standalone finance expenses are:

$US14.732m - $US5.053m = $US9.679m

That is quite a variation compared with my estimate of Agria's interest bill above. So I need to check out the reason for such a discrepancy. Any thoughts?


To (partially) answer my question....

The interest bill based on current loans at declared interest rates is a future projection

The underlying finance & interest figure calculated from the FY2013 balance sheets of PGW and Agria is a past reflection.

If the underlying bank loans of Agria have not changed over the past year, then the interest bill from one year should approximate that of the next. If however interest rates payable have decreased during the year (it seems they have) and if some underlying debt has been repaid (it has in Agria Asia at least) then you would expect the forecast annual interest bill will be less than the one you have just paid. I don't think this is the full story though. The extra difference may result from the change in 'finance charge' (the 'finance' bit of finance and interest). But I will need to do a bit more sleuthing to confirm that.

SNOOPY

[Snoopy]

No. But i think it is not important. And i don't beleave that Mr. Lai has difficulties to arrange new loans. The Agria/PGW story is an investment succes for Agria, and off course you are right it is not free of charge.


What will swing things for Agria as the preferred investment vehicle over PGW is when the income stream from PGW dividends consistently covers the cost of Agria's borrowings. This hasn't happened so far, but could it happen this year? PGW released EBITDA earnings guidance of $NZ52m-$NZ56m at this years AGM. Compare this to the operating EBITDA of $NZ46m for FY2013. We are looking at a 'best case' improvement of $NZ10m, say $NZ7.2m after tax. Forbar had adjusted operating net profit after tax at $NZ24.6m for FY2013. So perhaps we are looking at a NPAT for PGW of up to $NZ24.6m +$NZ7.2m = $NZ31.8m for FY2014?

$31.8m/754.8m= 4.2cps, a little bit up on the 3.2cps that Agria took out from PGW in FY2013.

50.22% of those forecast NPAT earnings is $NZ16m. This is what is available to Agria as a dividend if all after tax profits are paid out. Convert that to USD using $NZ1 =$0.8USD and I get $US12.8m. Last year the underlying Agria interest was $US9.7m. So if PGW has a good year as forecast, paying the interest bill looks doable for Agria. I am still unclear exactly how much rejigging of Agria's borrowings will reduce their underlying interest bill this year, and not even Agria can know this until the remaining US bank loans to be renegotiated are repriced.

The elephant in the room will be if New Hope want their money back, as they are entitled to recover their initial investment in Agria Asia this year. The amount New Hope put into Agria Asia in 2011 was $US20m. If New Hope demand that Agria repurchase their shareholding in Agria Asia then the Agria parent listed in the USA is in trouble. When Agria Asia took control of PGG Wrightson the price Agria Asia paid was 60c per share. Those same shares are now worth 40c. If as the Chairman of New Hope had a clause in your share subscription arrangement which forced Mr Lai to buy back your share of PGW at the equivalent 60c, would you do it?

SNOOPY

[Agrarinvestor]

What will swing things for Agria as the preferred investment vehicle over PGW is when the income stream from PGW dividends consistently covers the cost of Agria's borrowings. This hasn't happened so far, but could it happen this year? PGW released EBITDA earnings guidance of $NZ52m-$NZ56m at this years AGM. Compare this to the operating EBITDA of $NZ46m for FY2013. We are looking at a 'best case' improvement of $NZ10m, say $NZ7.2m after tax. Forbar had adjusted operating net profit after tax at $NZ24.6m for FY2013. So perhaps we are looking at a NPAT for PGW of up to $NZ24.6m +$NZ7.2m = $NZ31.8m for FY2014?

$31.8m/754.8m= 4.2cps, a little bit up on the 3.2cps that Agria took out from PGW in FY2013.

50.22% of those forecast NPAT earnings is $NZ16m. This is what is available to Agria as a dividend if all after tax profits are paid out. Convert that to USD using $NZ1 =$0.8USD and I get $US12.8m. Last year the underlying Agria interest was $US9.7m. So if PGW has a good year as forecast, paying the interest bill looks doable for Agria. I am still unclear exactly how much rejigging of Agria's borrowings will reduce their underlying interest bill this year, and not even Agria can know this until the remaining US bank loans to be renegotiated are repriced.

The elephant in the room will be if New Hope want their money back, as they are entitled to recover their initial investment in Agria Asia this year. The amount New Hope put into Agria Asia in 2011 was $US20m. If New Hope demand that Agria repurchase their shareholding in Agria Asia then the Agria parent listed in the USA is in trouble. When Agria Asia took control of PGG Wrightson the price Agria Asia paid was 60c per share. Those same shares are now worth 40c. If as the Chairman of New Hope had a clause in your share subscription arrangement which forced Mr Lai to buy back your share of PGW at the equivalent 60c, would you do it?

SNOOPY



Hi Snoopy,

>>price Agria Asia paid was 60c per share<< and >>Those same shares are now worth 40c.<<
We have talked about that a few times. It is normal that the share price of an object like PGW falls after a particual takeover. PGW shareholders can only hope for a dividend, thats all. Therefore the development
of the share price is limited. The discrepance of 20 cent to the current shareprice is a bargain, as Agria has full control over PGW.

And New Hope is a long term investor. They are not a greedy US hedgefonds that wants his return of investment in a short time. In an emergency situation i beleave Adam Lai can pay the amount out of his pocket.

best regards

Ralf

[Master98]

seems like pgw will announce a pre-xmas trading update?

[Snoopy]

Seems like pgw will announce a pre-xmas trading update?


Half year doesn't end until 31st December. Why do you expect a pre-xmas trading update Master? They didn't do it last year.

SNOOPY

[Master98]

Half year doesn't end until 31st December. Why do you expect a pre-xmas trading update Master? They didn't do it last year.

SNOOPY
they did it before and share trading volume quite high recently and price is firm.

[winner69]

As snapiti keeps reminding us its UP UP AND AWAY on the farm

http://www.interest.co.nz/business/67884/business-optimism-nearly-15-year-high-agriculture-confidence-19-year-high-according-l

[Agrarinvestor]

Big volume on Agria today:



Prev Close:
1.49


Open:
1.51


Bid:
1.58 x 2000


Ask:
1.60 x 5600


1y Target Est:
2.00


Beta:
0.57


Next Earnings Date:
N/A




Day's Range:
1.45 - 1.64


52wk Range:
0.69 - 1.74


Volume:
786,588


Avg Vol (3m):
137,78

[Stranger_Danger]

Big volume on Agria today:



Prev Close:
1.49


Open:
1.51


Bid:
1.58 x 2000


Ask:
1.60 x 5600


1y Target Est:
2.00


Beta:
0.57


Next Earnings Date:
N/A




Day's Range:
1.45 - 1.64


52wk Range:
0.69 - 1.74


Volume:
786,588


Avg Vol (3m):
137,78



Part of the reason for the interest will be the fact it is the main pick at the moment of the NIA, who many regard as a pump and dump operation.

Certainly, if you look at the long term track record, it consists of things starting at a dollar, going up to 5 bucks, and ending up at 50 cents.

Regardless, they apparently have millions on their mailing list, so their interest almost always pops a stock. A sample of their stuff is below.

---


New Zealand's exports to China reached a record $1.22 BILLION in the month of November alone, up a STUNNING 80% year-over-year! On an annualized basis this equals $14.64 BILLION up an AMAZING 597% since 2008, when total full year New Zealand exports to China were only $2.3 billion! Exports of agricultural products, mainly meat and dairy, are by far driving the overwhelming majority of this unbelievable growth.

China's wealthiest investors are rushing to buy up New Zealand agricultural assets. Agria (GRO) was the very first to do so several years ago, which allowed GRO to acquire the cream of the crop - PGG Wrightson, the largest agricultural services company in the entire nation with over 100 rural supply stores located throughout every part of both the North and South New Zealand islands. In New Zealand, the name PGG Wrightson is just as well known as McDonalds is in America. Today PGG Wrightson was the 7th most active stock on the NZX, and lately it has been one of New Zealand's most active stocks almost every single day.

The first half of PGG Wrightson's fiscal 2014 ends tomorrow, and by the time they report first half results in February, both PGG Wrightson and GRO will likely be trading significantly above their current share prices. New Zealand's economy is the fastest growing out of all developed countries due to its booming agricultural sector, and PGG Wrightson's business is such an integral part of New Zealand's agricultural sector that it's nearly impossible for GRO and PGG Wrightson not to be benefiting big time - with both companies likely set to report extremely strong financial results!

Based on PGG Wrightson's dividend paid in fiscal 2013, it has a dividend yield of 8%. Check out this web site: http://www.dividendyield.co.nz/hightolowdividend.php It lists PGG Wrightson's dividend yield as the 8th highest out of all NZX traded companies. However, if you look at things more closely, #7 on the list Pacific Brands paid out their dividend in Australian dollars, which have fallen dramatically vs. the NZD - and PGG Wrightson's dividend yield is actually now higher! #6 on the list Marlin Global may pay a slightly higher dividend yield but it trades an average of only 16,000 shares per day vs. PGG Wrightson's average volume of 474,000 shares per day!

#5 on the list Hallenstein Glasson only has a higher dividend yield because the stock is down 23% in recent months after poor earnings results, which will force them to lower their dividend next year to a yield less than PGG Wrightson! #4 on the list TeamTalk is also down 31% in recent months and will likely have to lower their dividend next year as well. #3 on the list Barramundi has little/no liquidity with average daily volume of 14,000. #2 on the list Chorus just withdrew its 2014 dividend guidance, causing a 38% drop in the stock. #1 on the list Pan Pacific is on the list by error and stopped paying a dividend last year.

As you can see, PGG Wrightson truly has the #1 highest dividend yield on the NZX, and GRO's 80.81% owned Agria Asia subsidiary will receive the majority of PGG Wrightson's HUGE cash dividend payments! PGG Wrightson is very liquid with rapidly increasing volume, and is currently in a major uptrend, with their EPS projected to double next year. PGG Wrightson's dividend will likely increase substantially next year to match their rapidly improving fundamentals!

Already GRO's PGG Wrightson ownership is worth $1.81 per share and including a 1-2X sales valuation for GRO's rapidly growing China seeds business, GRO deserves to rise immediately to $2.12-$2.42. For every $0.10 per share PGG Wrightson rises, GRO will deserve to rise an additional $0.45 per share. So if PGG Wrightson rises to $0.50 in January, GRO will deserve to rise to $2.57-$2.87. If PGG Wrightson rises to $0.60 in January, GRO will deserve to rise to $3.02-$3.32.

GRO's net tangible assets grew 165% in fiscal 2013 to $76.836 million or $1.39 per share. In 2012, GRO averaged a share price of $1 or 1.92X its net tangible assets at the time of $0.52 per share, which will now value GRO at $2.67 per share! GRO is now a major global competitor of Monsanto (MON), the world's largest seeds company, which currently trades for 7.76X its net tangible assets. GRO's net tangible assets will likely increase tremendously once again in 2014 as they receive their HUGE cash dividend payments from PGG Wrightson. Remember, GRO controls PGG Wrightson and will make them pay out the largest cash dividends it can afford - to drive GRO's cash flow through the roof as high as possible! After GRO breaks $1.60 it could rapidly explode past $2. NIA will prepare a technical analysis chart to show you later!

NIA is not an investment advisor and is not making any target prices or financial projections. Never invest based on anything NIA says. Always do your own research and make your own investment decisions. NIA never recommends to buy or sell any stock.

Disclaimer: NIA currently owns 550,000 shares of GRO. NIA intends to sell its GRO shares and can do so at anytime. NIA reserves the right to add to its GRO position at any time. NIA initially discussed GRO in a private report that was released to a small exclusive group of NIA members over two years ago.

[Stranger_Danger]

And another...

--

NIA's technical analysis expert just provided us with a written Agria (GRO) technical analysis report, as well as a special GRO technical analysis chart:

Link to special GRO technical analysis chart: http://inflation.us/grotechnicalchart.png

When conducting a full technical analysis on GRO, we see several key indicators pointing to higher prices in the near future. First, the 200day MA has acted as support ever since GRO broke above it on March 7, 2013, on a significant increase in trading volume. GRO has never once traded below the 200day MA after that point; a bullish sign. Following the breakout in March, it took some time for the 200day MA to catch up to the share price in GRO. For the next seven months GRO for the most part traded sideways, patiently waiting for the 200day MA to play catch up. Then, in early October, we saw the 200day MA finally catch up to the share price of GRO and spark a massive breakout that led to a 59% gain in share price coupled with another significant spike in trading volume.

Not only was this breakout proof that the 200day MA is acting as strong support, but it also catapulted GRO through a major resistance level that stood firm for about seven months around the $1.20-$1.25 area. As many of you already know, resistance levels often times become support levels after broken to the upside on significant volume and that is exactly what is has happened with GRO. After breaking above $1.25 on October 9, 2013, GRO has not once traded below that mark. In fact, a bullish pennant is forming above the new support level hinting towards yet another breakout.

After October 9, 2013, you can see GRO’s trading range beginning to tighten or consolidate forming what is commonly known as a bullish pennant pattern. As the trading range gets smaller and smaller, GRO begins to creep towards its inflection point or breakout point. This is where the new support level and 200day MA will play a vital part in the anticipated move to the upside.

As the 200day MA plays catch up, like we saw back in October, GRO has held its new support level showing strength. We believe that once the 200day MA catches up to the current share price of GRO that we could see another strong breakout to the upside. Remember, the last time this happened we saw a 59% gain. A similar move today would rocket GRO to $2.28.

An early warning sign that things are starting to heat up is an increase in trading volume. And GRO’s trading volume in each of the past two days has far exceeded the trading volume of the previous 17 trading days. At this point, it appears as though $1.55 is the breakout point that we must keep our eye on. Once above $1.55, GRO will have broken out of the bullish pennant pattern with very little resistance standing in its way. It’s very possible that we could see GRO above $2.00 real soon.

NIA is not an investment advisor and is not making any target prices or financial projections. Never invest based on anything NIA says. Always do your own research and make your own investment decisions. NIA never recommends to buy or sell any stock.

Disclaimer: NIA currently owns 550,000 shares of GRO. NIA intends to sell its GRO shares and can do so at anytime. NIA reserves the right to add to its GRO position at any time. NIA initially discussed GRO in a private report that was released to a small exclusive group of NIA members over two years ago

[Stranger_Danger]

And finally, today's effort just in....

---

Not only is Agria (GRO) a China agriculture play, but it is the only U.S. traded New Zealand agriculture play. New Zealand will likely make huge headlines later this month as the first developed economy to raise interest rates. Over the past 5 years, the New Zealand Dollar (NZD) has been the world's strongest currency and the only currency to outperform gold, because New Zealand's strong agricultural based economy isn't dependent on printing money for growth.

America's reported "real GDP growth" is phony, because it uses hedonics to understate price inflation by 2% annually. After adjusting the implicit deflator for the real rate of price inflation, America's real GDP is actually declining. If not for 0% interest rates and $75 billion being printed each month by the Fed, America's gross GDP would be declining too.

New Zealand's economic growth is for real, with their economy exporting food, NOT printed out pieces of paper. As China slowly allows the yuan to appreciate vs. the U.S. dollar over time, as it positions itself to depeg from the U.S. dollar so that the yuan becomes the world's new reserve currency - China's appetite for food will continue to grow tremendously, and New Zealand's economy will benefit the most - with Agria (GRO) likely to become the #1 biggest gainer on the NYSE.

New Zealand's central bank currently has interest rates set at 2.5%, tied with Australia for being the highest out of all major central banks. With China rapidly increasing their agriculture imports from New Zealand at a much faster rate than from Australia, the NZD has gained 16.6% vs. the Australian Dollar (AUD) over the past twelve months - with the NZD/AUD exchange rate currently at its highest level in over six years. Economists forecast New Zealand's 4Q 2013 year-over-year GDP growth rate to reach 3.71% vs. 4Q year-over-year GDP growth of only 2% in Australia and the U.S., 1.6% in Canada, and -0.5% in the Euro Zone.

GRO's #1 asset is its 80.81% ownership of Agria Asia, which currently owns 50.22% of PGG Wrightson. New Hope Group, China's largest agriculture company with $12.7 billion in annual revenues, was very interested in PGG Wrightson and therefore invested $20 million into GRO for a 11.95% stake in Agria Asia. New Hope's two founders are currently ranked by Forbes the #10 and #30 richest people in China, respectively! Their investment values GRO's 80.81% Agria Asia ownership at $135.25 million or $2.44 per share.

Likewise, Ngai Tahu invested $12.44 million into GRO for a 7.24% take in Agria Asia. The last time Ngai Tahu made a similar venture capital investment, it invested NZ$7.4 million into Ryman Healthcare (NZX: RYM) at $0.185, before it rose 4,127% to its current price of $7.82. Ngai Thau is making NZ$268 million on a NZ$7.4 million investment and they see similar potential for their $12.44 million investment into GRO's Agria Asia. Their investment values GRO's 80.81% Agria Asia ownership at $138.85 million or $2.51 per share.

This isn't including GRO's China seeds business, which grew revenues last year by 98%! Including China seeds, GRO could easily rise to $3+ in the upcoming days/weeks.

GRO isn't like most other Chinese companies, which rely heavily on exports to the United States. GRO has absolutely no ties to the U.S. economy. Instead, GRO is the only U.S. traded stock capitalizing on New Zealand's booming exports to China, which were up a STUNNING 80% in November year-over-year, and on an annualized basis are up 597% since 2008!

China has now officially surpassed Australia to become New Zealand's largest trading partner. Not surprisingly, New Zealand's exports to the U.S. in November declined 16% year-over-year. Overall, New Zealand's total exports in November 2013 were up 17% to $4.5 billion, with $1.22 billion or 27.1% of exports going to China, up from 17.9% of exports going to China in November 2012. New Zealand's November 2013 exports to China were more than quadruple their exports to the U.S., with only 6.84% of exports going to the U.S. vs. 9.52% in November 2012.

Just like how New Zealand's rising exports to China are more than making up for New Zealand's declining exports to America, New Zealand is helping China's economy adjust to slowing growth of Chinese exports to America. New Zealand's imports from China grew 11% in November 2013 to $857.73 million, with 20% of New Zealand imports coming from China vs. 17.5% in November 2012.

New Zealand had a trade surplus with China in November 2013 of $366 million vs. a trade deficit with China in November 2012 of ($93 million). Overall, New Zealand had a total November 2013 trade surplus of $183 million, surpassing economist forecasts for a November 2013 deficit of ($117.3 million) - a positive surprise of $300.3 million and an improvement of $770 million from a November 2012 trade deficit of ($587 million).

New Zealand is now expected to have a 2014 full year trade surplus, and a 2015 full year budget surplus. The U.S., Canada, Australia, and the Euro Zone (excluding Germany) aren't forecasting trade or budget surpluses until over a decade from now.

GRO's PGG Wrightson generated fiscal 2013 revenues of $1.13 billion with 82% of revenues or $926.53 million coming from New Zealand. PGG Wrightson's importance to the New Zealand economy is the equivalent of a U.S. corporation that generates U.S. revenues of $67.8 billion. This makes PGG Wrightson just as important to the New Zealand economy is Apple is to the U.S. economy. A recent report shows that 16.5% of all New Zealand farmers shop at GRO's PGG Wrightson's retail stores: http://www.roymorgan.com/~/media/Files/Findings%20PDF/2013/July/5007-NZ-farmers.pdf.

GRO's EPS from PGG Wrightson this year is projected to MORE THAN DOUBLE!

NIA is not an investment advisor and is not making any target prices or financial projections. Never invest based on anything NIA says. Always do your own research and make your own investment decisions. NIA never recommends to buy or sell any stock.

Disclaimer: NIA currently owns 550,000 shares of GRO. NIA intends to sell its GRO shares and can do so at anytime. NIA reserves the right to add to its GRO position at any time. NIA initially discussed GRO in a private report that was released to a small exclusive group of NIA members over two years ago.

[Snoopy]

A recent report shows that 16.5% of all New Zealand farmers shop at GRO's PGG Wrightson's retail stores: http://www.roymorgan.com/~/media/Files/Findings%20PDF/2013/July/5007-NZ-farmers.pdf.


If you are going to spruik something at least do it right. PGGW the country's largest rural supplier by footprint and only 16.5% of farmers deal with them? I didn't realise the relationship between PGW and farmers had got that bad!

SNOOPY

PS The actual survey showed 16.5% of farmers deal with PGW over a one month period

[percy]

[QUOTE=Snoopy;452436]If you are going to spruik something at least do it right.


Yeah Right!!
Good joke coming from you.!!!!!

[Stranger_Danger]

If you are going to spruik something at least do it right. PGGW the country's largest rural supplier by footprint and only 16.5% of farmers deal with them? I didn't realise the relationship between PGW and farmers had got that bad!

SNOOPY

PS The actual survey showed 16.5% of farmers deal with PGW over a one month period

I'm sure you'll find more than that if you look. The more you know about a subject, the more scary their stuff is.

They used to recommend BVSN : Nasdaq which I know something about and, man, I can't believe how people swallowed it. It went from about $8 to about $50 and then back to $8. That is what these guys can do.

[Agrarinvestor]

I'm sure you'll find more than that if you look. The more you know about a subject, the more scary their stuff is.

They used to recommend BVSN : Nasdaq which I know something about and, man, I can't believe how people swallowed it. It went from about $8 to about $50 and then back to $8. That is what these guys can do.


Dear Fellows,

i always wonder. You are throwing Scheiße at Agria and on the oher side you beleave PGW is a value play. It is not the fault of Agria, if NIA wrote facts about PGW/Agria. It is a simple logic that Agria share price will raise more than PGW's. It is possible that PGW stay at 40 cent for ever, or maybe traded at 20 cent. Agria has the majority stake and the value of PGW's shareprice is strongly connected to the dividend.
The strategic Investment in PGW was clever. It helps to improve Agrias label and knowledge. PGW and New Zealand
has big advantages in doing business with China, but shareholders of PGW will be left outside.

[p2r]

I have a small rural block. Most people would buy stuff off RD1 (fontera) or farmlands or ravensdown, all cooperatives. But PGG more horticulture but can offer a sharp price. Certainly there is a market there for a sharp operator to undercut the sluggish coops. Perhaps internet sales will do that. PGG & Elders pretty similar in the livestock side I would say.

[Agrarinvestor]

You got that right. Never a great place to be unless the major holder is going to take 100% and Agria isn't likely to do that.

I know that a lot of sharetrader user here, have a deep knowledge of agriculture and on analyzing the fundamentals. China and new Zealand have a growing relation ship, what is good for your jobs.
There are some chines companys listed at NYSE where you should have a deeper look. Please spend some time on China Green Agriculture.
http://www.cgagri.com/IR/cgagri/presentation.asp.htm



2012
2010
2008


Australien 21%
VR China 15%
USA 9,2%
Japan 7%
Australien 23,1%
China VR 11,2%
USA 8,6%
Japan 7,8%
Australien 23,1%
USA 10,1%
Japan 8,4%
China VR 5,8%



Export in Million US Dollars
37.900 (2012)
31.880 (2010)
15.860 (2003)

[Master98]

Half Year Results Announcement Date


PGW Interim result will be out 3.00pm on Tuesday 25 February 2014. seems a little late at 3pm could be the chairman and most of board member are chinese and china is 5 hrs behind New Zealand.

[wealthboost]

PGG Wrightson partnering with Xero...: http://www.voxy.co.nz/business/xero-launch-farming-cloud-service-mid-year/5/182114

[BlackPeter]

PGG Wrightson partnering with Xero...: http://www.voxy.co.nz/business/xero-launch-farming-cloud-service-mid-year/5/182114

Interesting article. Great opportunity for PGW to integrate their system with the "Farming in the cloud" solution before the system goes life. If this takes off, it might move some farmers to the supplier who's systems work best with their accounting solution.

discl: holding PGW;

[BlackPeter]

Half year results are out and looking good:

https://www.nzx.com/companies/PGW/announcements/247467

[noodles]

Half year results are out and looking good:

https://www.nzx.com/companies/PGW/announcements/247467

But no upgrade:(

[Snow Leopard]

dividend is greater than profit which is greater than cash flow.

Best Wishes
Paper Tiger

[Xerof]

lol, I know you know why PT, but you are too much of a gentleman to say it.

So am I, so I won't either

:mellow:

[Snoopy]

Which means they expect a bumper 2nd half? ... Or majority owners need the cash?

Both. PGW earnings are always weighted towards the second half, but are expected to be 'bumper' only in relation to the first half.

It is funny how things go in circles though. Reading through the guff about all the divisions working together gave me a deja vue moment back to the turn of the century 'solutions strategy'. It looked quite wrong not to see former CEO Alan Freeth's signature signing off the market release statement!

SNOOPY

[Agrarinvestor]

Has anyone the exact number of Mr. Alan Lai's (Guanglin Lai) voting rights. Including BCL MFCL ?

[Agrarinvestor]

Agria Corporation (GRO) -NYSE  Following

2.05 http://l.yimg.com/os/mit/media/m/base/images/transparent-1093278.png 0.39(23.49%) Mar 5, 4:02PM EST|After Hours : 2.05 0.00 (0.00%) Mar 5, 7:59PM EST

[Under Surveillance]

Crunching through the numbers, Belgarion reckons Mr Mrkt should have PGW around 70-75c by FY.

PGW books are cleaning up nicely and there's a few things PGW are doing well that their co-op competitors are either not doing or not doing so well.

Snoopy, Care to comment on my bullish prediction? ;)Before Snoopy replies in detail, let me presume to say your prediction will prove to be bull**** rather than bullish unless Agria finds funding for a full takeover at a hefty premium.

[Agrarinvestor]

Before Snoopy replies in detail, let me presume to say your prediction will prove to be bull**** rather than bullish unless Agria finds funding for a full takeover at a hefty premium.

Dear Sirs,

i tried hard here to convince you to think about Agria as an investment instead of PGW. But i failed, maybe due to my bad english skills, i don't know. My main Argument that Agria is the controlling shareholder and that you as PGW shareholders can only hope of a dividend should be easy to understand. Agria has no need to take PGW private. Why should they ? They need the money to expand their business in China. There are more advantages to have PGW listed at NZX. If it is anoying for PGW's shareholder to discuss AGRIA's matter i can open a new AGRIA thread (but i fear loneliness;)). Please give me advice in that case. Agria was a threebagger the last 12 Month.


http://www.agriacorp.com/business.asp
China Business
Agria established its edible corn seed business in 2007, vegetable seed business in 2009, field corn seed business in 2010 and forage seed business in 2013.

Agria’s China seeds business is operated by Beijing Agria Nongkeyu Co., Ltd. For more information, please visit:

www.nongkeyu.com (http://www.nongkeyu.com/).


Field Corn Seeds

We have achieved dramatic growth in the field corn business over the past two years. Notable achievements include:

1. We set up an effective distribution channel with approximately 300 county-level dealers, covering the spring and summer corn markets in 12 provinces including Henan, Hebei, Shandong and Heilongjiang.
2. We are commercializing three key corn hybrids: BY11, Zhongdan 909 and ND375. An additional three hybrids are currently under development.
3. We built two modern corn seed conditioning and packaging plants in Xinjiang and Henan provinces, each with a capacity of 20 tons per hour.:t_up:
4. We have more than 1,500 hectares of seed production in Xinjiang and Gansu provinces, which are reliable and sustainable for high quality seed production.:t_up:

Edible Corn Seeds

We conduct our edible corn seed business through Shenzhen Nongkeyu. We have two operating units located in Beijing and Zhuhai. Our seed products cover different varieties including sweet corn, sticky corn and sweet/sticky corn. We have a distribution network covering 28 provinces in China and seed production bases in 6 provinces.Our annual sales volume currently totals approximately 1.2 million kilograms.

Our key focus is innovation in varieties. We are a leader in the industry of edible corn seed research and development.
China is one of the largest markets for edible corn. The planting area reaches 13.5 million mu. We are capturing market opportunities through our leading market share in the JKN2000 variety , as well as development of new species to both consolidate our significant position in China and to expand to southeast Asia.

Forage

We conduct our forage business through Shenzhen PGW Seeds Company Ltd., a wholly-owned subsidiary of Agria. This business unit focuses on developing eco-efficient ranching in China. Through technological cooperation and the introduction of advanced international germplasm, we aim to enhance the quality of forage and livestock.

We are committed to developing innovative grassland services to support the growth of agricultural and livestock industry in China. Through the competitive advantages of advanced forage seed varieties, production and processing technology, and management methods, we provide new technical ideas for the development of domestic and international livestock industry.

Our forage business focuses on three areas.

1. Advanced forage varieties
According to the local climate characteristics, the type of land management conditions and livestock species, we choose different varieties in order to enhance the nutritional value of grass. There are many appropriate forage varieties, including alfalfa, sainfoin, red or white clover, tall fescue, feed corn, peas, brassica crops and herbs.

2. Production technology
We have world leading endophyte technology that focuses on discovery and development of new endophytes and the demonstration of these to improve plant persistence and yield while also improving animal health and performance. Using our unique endophyte technology we protect the plant from a wider range of pests and this helps the plant to better manage other stresses like drought. Our endophyte technology has been widely adopted in temperate regions of the world because they can improve grass yields (in some regions up to 20%) and can reduce animal health issues leading to improved animal performance.

3. Processing technology
In winter, forage contains less nutrients and there is a lack of grass for livestock. Conversely, in warm seasons nutrient-rich forage is growing vigorously. In order to take advantage of the warm season forage, we process nutrient-rich forage by mowing, sun-drying, crushing and processing it into grass particles that we save for feeding livestock in the winter. We are changing traditional processing methods, such that our new processing method creates different nutritious composite particles appropriate for different livestock species, increasing forage utilization by 40%.

Vegetable seeds

We conduct both research and development and sales of vegetable seeds through Tianjin Beiao Seed Technology Development Co., Ltd (“BeOK”). BeOK was established in August 2008 in Tianjin. In January 2010, we acquired 100% of BeOK’s equity. Our vegetable seeds are primarily sold to distributors, who in turn sell them to farmers. As of June 30, 2012, we had approximately 71 vegetable seed products distributors in China. We sell varieties of vegetable seeds in nine categories, including broccoli, celery, chili, Chinese cabbage, cucumber and tomato.

[BlackPeter]

Crunching through the numbers, Belgarion reckons Mr Mrkt should have PGW around 70-75c by FY.

PGW books are cleaning up nicely and there's a few things PGW are doing well that their co-op competitors are either not doing or not doing so well.

Snoopy, Care to comment on my bullish prediction? ;)



Hmm - ft.com puts the annual target on between 36 cents and 56 cents (with a medium of 46 cents). 70 to 75 cents sounds quite optimistic to me. Without additional income for PGW would 75 cents mean a PE of 18.5. Not impossible, but only if the market expects ongoing strong growth - and not sure, whether I see that in this industry. Good years (2014?) are typically followed by bad ones. Where do you see the additional growth coming from?

Discl: still holding - i.e. I am optimistic as well, but not that optimistic!

[RTM]

Well done Snapiti and others who saw the opportunity with PGW. Wished I'd had confidence to add to my holding at that time.


Spot on belgarion, my buying into PGW at such low levels is based on a thoery that the major shareholder is going to use PGW as a cash cow at the same time benefiting from the share price falling to levels where stake holders think the major shareholder is a white knight when they come in with a full takeover.

I believe this will happen in the next 24 months.

Fundamentally PGW is a great buy at current levels.

[Food4Thought]

https://nzx.com/companies/PGW/announcements/249258

Interesting?

[Snoopy]

https://nzx.com/companies/PGW/announcements/249258

Interesting?

I am a long term shareholder of PGW. But I didn't have any idea the joint venture that is "4Seasons Feeds" had an buyout clause. The partner company is International Nutritionals Ltd (INL). INL is owned by RD1 Ltd and Australian company, Wilmar Gavilon Pty, and currently holds the other fifty percent of 4Seasons Feeds Ltd. RD1 is a direct competitor to PGW. Not sure why PGW would set up a joint venture with RD1 and arrange things so PGW could be kicked out. I hope they got a good price for the PGW 50% stake!

Dewdney goes on to say:
"Also, the balance of the portfolio of products currently in the Agri-feeds Ltd business which largely relate to the animal health sector will transition to the Agritrade business operated within the PGG Wrightson retail business unit.”

So it reads as though PGW are shutting down their dedicated animal feed retail arm (that I didn't know existed) and are combining the remnants of that into their normal retail sales channel. If that is what is happening it makes sense for PGW from a controlling the overheads perspective.

SNOOPY

[percy]

Yes,I hope someone found the announcement informative.?
Lost on me.!

[Master98]

Sheep and beef farm profits tipped to rise

http://www.nzherald.co.nz/trade/news/article.cfm?c_id=96&objectid=11247073

Yes Percy, we are all well positioned.

[nzspeak]

Could someone please let me know how the exchange rate affects PGG? obviously it affects farmers income etc but what would happen if say the $NZ went to $US.50 overnight? how would that affect the company/share price?

[BlackPeter]

Could someone please let me know how the exchange rate affects PGG? obviously it affects farmers income etc but what would happen if say the $NZ went to $US.50 overnight? how would that affect the company/share price?

Hmm - I haven't done an In-Depth Analysis, but on first view (assuming you mean PGW, not PGG):

Farmers (their major customers) would have more money with a lower NZ$ - must be good for PGW;

Retail: most of their stuff seems to be sourced in NZ (i.e. cost unchanged), but customers have more money - must be good for the SP;
Livestock & Wool: Better prices (in NZ$) for livestock means larger cut for PGW;
Real Estate: lower NZ$ means farmers have more money and foreign buyers have more money as well, real estate prices go up - must be good for the cut and the SP;
Insurance & Finance: probably not too much exchange rate sensitivity;
Irrigation & Pumping: Most of the equipment they sell probably sourced from overseas, i.e. becomes more expensive, but farmers have more money, i.e. probably no big exchange rate sensitivity;
Agritech (Australia & International) - lower dollar means better prices - must be good for the SP;

So I guess overall - a dropping NZ$ must be good for PGW. The question however is - why do you think the NZ$ would drop?

[noodles]

Could someone please let me know how the exchange rate affects PGG? obviously it affects farmers income etc but what would happen if say the $NZ went to $US.50 overnight? how would that affect the company/share price?
My guess is that the NZD would only go to 50c if commodity prices collapsed.

[nzspeak]

Thanks for that Black Peter. Last year on a whim (yes I know that's what idiots do), I bought a few PGW when they crashed to $.29 I still haven't got around to understanding the fundamentals of there business. I own another stock FPH which is largely affected by the exchange rate so I follow the exchange rate closely. I see the currency depreciating but anyone who puts much faith in their ability to forecast the exchange rate is in my opinion a fool. Part of the reason I was curious was if say foot and mouth disease hit New Zealand could the subsequent decimation of the $NZ help PGW stay afloat. Much like my original post when I mentioned the $US.50, I do not think foot and mouth disease will hit NZ- I just think it can be good to know the implications of what one off disasters would be. I imagine a lot of people made a killing not in accurately forecasting the US sub prime collapse but by knowing what to do in advance, and doing it quickly, when it did strike. If there was a foot and mouth outbreak in NZ- I would say there would be a couple of smart people in this country who would know roughly how to price this in instantly, giving them an advantage over the market in the short term. I guess you could argue that all rural analysts at investments banks etc know the risks and opportunities but I wouldn't be shocked if not one analyst had a 'foot and mouth' algorithm. I'm not seriously going to research the implications of foot and mouth outbreak just interesting to think about it.

[Xerof]

If NZ had a 'credible' case of foot and mouth, then any agricultural based company would be decimated within a day or two for two reasons:

1. They would be required to write off all inventory, as it would be unsaleable
2. As most sensible exporters carry FX cover on either sales and/or inventory in store or on the water to markets, if the currency collapsed, they would have to SELL that cover into a collapsing NZD FX market, as the inventory being covered no longer has any value, i.e., the company is effectively suddenly VERY long NZD. Crystalised losses would be horrendous.

other factors to account for are:

most of these company's are poorly capitalised, with high debt levels. The Banks would want their money back immediately. No chance. The 'assets' comprise of inventory and specialised slaughter plants, which would be idle within days, and unsaleable. Staff redundancies would add further costs to the disaster.

Admittedly, one could argue PGW are not directly affected by such an outbreak, but the impact would nevertheless be quite severe, by having a large proportion of their customer base decimated.

quite frankly, it's simply a scenario we don't even want to contemplate ever befalling this country.

discl: been there as a risk manager through two 'scares' in last 25 years

but you are right, some smart-arse bank FX traders would immediately take advantage of the currency, but, their Corporate lending dept would take a hammering

[winner69]

Could someone please let me know how the exchange rate affects PGG? obviously it affects farmers income etc but what would happen if say the $NZ went to $US.50 overnight? how would that affect the company/share price?

Was sub 40 in 2000 and sub 50 not that many years ago

Can you remember what happened then?

[BlackPeter]

If NZ had a 'credible' case of foot and mouth, then any agricultural based company would be decimated within a day or two for two reasons:

1. They would be required to write off all inventory, as it would be unsaleable
2. As most sensible exporters carry FX cover on either sales and/or inventory in store or on the water to markets, if the currency collapsed, they would have to SELL that cover into a collapsing NZD FX market, as the inventory being covered no longer has any value, i.e., the company is effectively suddenly VERY long NZD. Crystalised losses would be horrendous.

other factors to account for are:

most of these company's are poorly capitalised, with high debt levels. The Banks would want their money back immediately. No chance. The 'assets' comprise of inventory and specialised slaughter plants, which would be idle within days, and unsaleable. Staff redundancies would add further costs to the disaster.

Admittedly, one could argue PGW are not directly affected by such an outbreak, but the impact would nevertheless be quite severe, by having a large proportion of their customer base decimated.

quite frankly, it's simply a scenario we don't even want to contemplate ever befalling this country.

discl: been there as a risk manager through two 'scares' in last 25 years

but you are right, some smart-arse bank FX traders would immediately take advantage of the currency, but, their Corporate lending dept would take a hammering

To predict the future its useful to know about the past. Interesting report about the economical impact of the foot and mouth disease outbreak in the UK (2001), written from an Irish perpsective, but looking into the impact on the effected regions: http://www.agriculture.gov.ie/media/migration/animalhealthwelfare/diseasecontrols/footandmouthdisease/FINAL%20REPORT.pdf

Yes, typically 20 to 30% of the agricultural businesses reported to have been "severely" impacted.

Interestingly - there was in every case as well quite significant impact on tourism in the effected regions (well, on second thoughts, makes sense, but its not what you would immediately worry about)

Didn't found information about severe impact on agricultural service provider (like PGW). Would expect that it would mean an initial drop of business, but than lots of farmers would need to buy new stock (hopefully paid by insurance).

So - it certainly wouldn't be pretty, but I don't think it would be the end of the world either - Well, it certainly wasn't the end of the world for the UK ;).

[Xerof]

Ok, lets get some perspective then......

Extract: "With New Zealand’s economy so bound up with agriculture, keeping the country free of exotic diseases is crucial. An outbreak of foot-and-mouth disease, for example, would cripple our export trade in meat and milk.
The EpiCentre and the Reserve Bank recently calculated that a moderate foot-and-mouth outbreak in New Zealand lasting three months would cost anywhere between USD6 and 8 billion, resulting in large job losses in the agricultural and allied sectors."

http://www.massey.ac.nz/massey/about-massey/news/article.cfm?mnarticle_uuid=A4183E7D-98A0-1B5F-DDD5-A3D19EBE7FF6

I didn't say it was the end of the world, but the impact would be severe.

More commentary on our state of preparedness, with interesting reflection on 'replacement stock' issues

http://www.stuff.co.nz/business/farming/advice/8656348/Are-we-ready-for-a-foot-and-mouth-outbreak

[BlackPeter]

Ok, lets get some perspective then......

Extract: "With New Zealand’s economy so bound up with agriculture, keeping the country free of exotic diseases is crucial. An outbreak of foot-and-mouth disease, for example, would cripple our export trade in meat and milk.
The EpiCentre and the Reserve Bank recently calculated that a moderate foot-and-mouth outbreak in New Zealand lasting three months would cost anywhere between USD6 and 8 billion, resulting in large job losses in the agricultural and allied sectors."

http://www.massey.ac.nz/massey/about-massey/news/article.cfm?mnarticle_uuid=A4183E7D-98A0-1B5F-DDD5-A3D19EBE7FF6

I didn't say it was the end of the world, but the impact would be severe.

More commentary on our state of preparedness, with interesting reflection on 'replacement stock' issues

http://www.stuff.co.nz/business/farming/advice/8656348/Are-we-ready-for-a-foot-and-mouth-outbreak





Hi Xerof, we might somewhat talk cross purpose, but I don't think that we disagree.

The original question was what would happen to PGW, if the NZ$ drops compared to the US$.

My answer was - I think it would be good for PGW (and I think this is true in general). As winner pointed out - the NZ$ has been below US 50 cents before, and the reasons for that had nothing to do with any NZ agricultural issue.

Only afterwards introduced nzspeak the scenario of a potential foot and mouth disease (FMD) outbreak in NZ (and what the impact would be). I agree that this scenario would bring the NZ$ down (as many other potential scenarios which would be unrelated to FMD), and we agree as well that this particular scenario (FMD) wouldn't be very helpful for PGW. Clearly the share price would initially drop, but I wouldn't think it would kill the company - and a couple of years later it would be business as usual - same as after a severe drought (costing similar sums as you floated above).

So just for the record - dropping NZ dollar (for most other reasons than FMD outbreak) would be good for PGW (and for agriculture, and for tourism, and for all other export business), FMD outbreak obviously would be bad for New Zealand (and PGW), but not the end of the world either. Do we agree?

[Xerof]

If you check the correlation between soft commodities prices and the NZ TWI, you will find there is not much benefit for exporters at the end of the day. The occasional shock event might give exporters a window to hedge a low currency level AND obtain high commodity pricing but in my experience the world markets are vicious when it comes to letting anyone make more than they are 'entitled' to.

As an aside, I used to give my marketing guys the curry when the currency collapsed - all of a sudden they were lazy and soft on the foreign currency price they sold product at, simply because with the low NZD, they thought they were achieving a good price. In fact they were giving all the benefit to the foreign buyers. Hence the correlation aforementioned, IMO......

The Australians got away with high hard commodity prices and a low dollar for a while, but it didn't last there either, and now look at the strife they are in with minerals - they got complacent on fixed costs, labour costs etc and are really paying for it now - suddenly uncompetitive and unprofitable (in some instances, goldies being a prime example)

And I genuinely believe a strong NZD is good for NZ overall. We are a heavily indebted nation, reliant on imports,so as a country we are a net SELLER of NZD's. Our exporters have managed well in general. Of course they would like a lower currency, but if they hedge when opportunities arise, there is no reason for these industries to whinge about it - just do the business and get on with life.

Noted re FMD side issue. Should have it all covered now :) - no, not the end of the world, but no room for FMD in our economy, and hugely disruptive if it did happen.

[winner69]

Xerof
And I genuinely believe a strong NZD is good for NZ overall. We are a heavily indebted nation, reliant on imports,so as a country we are a net SELLER of NZD's. Our exporters have managed well in general. Of course they would like a lower currency, but if they hedge when opportunities arise, there is no reason for these industries to whinge about it - just do the business and get on with life.


Agree entirely mate

Interesting comments from one involved as an exporter. I more involved with companies that make stuff from raw materials so at the moment give the marketing guys curry and tell them life easy eh because price not a real issue and margins pretty good.

I think exporters have got used to the higher dollar. They are now competing on real things and not just from a price advantage. I think a lot of the 'concern'/'worry' is rhetoric cause that what you went to say when dollar is high

I know that if the dollar fell even to US65 then inflation would not be the sub 2% reported at the moment. Imported products would rise, those who import raw materials would increase prices .... demand down .... jobs lost.

Hope the dollar keeps rising .... first time I went to the US I got $1.40 US for my NZD ..... but would remain reasonably happy if it stayed where it was now for a while

[BlackPeter]

If you check the correlation between soft commodities prices and the NZ TWI, you will find there is not much benefit for exporters at the end of the day. The occasional shock event might give exporters a window to hedge a low currency level AND obtain high commodity pricing but in my experience the world markets are vicious when it comes to letting anyone make more than they are 'entitled' to.

As an aside, I used to give my marketing guys the curry when the currency collapsed - all of a sudden they were lazy and soft on the foreign currency price they sold product at, simply because with the low NZD, they thought they were achieving a good price. In fact they were giving all the benefit to the foreign buyers. Hence the correlation aforementioned, IMO......

The Australians got away with high hard commodity prices and a low dollar for a while, but it didn't last there either, and now look at the strife they are in with minerals - they got complacent on fixed costs, labour costs etc and are really paying for it now - suddenly uncompetitive and unprofitable (in some instances, goldies being a prime example)

And I genuinely believe a strong NZD is good for NZ overall. We are a heavily indebted nation, reliant on imports,so as a country we are a net SELLER of NZD's. Our exporters have managed well in general. Of course they would like a lower currency, but if they hedge when opportunities arise, there is no reason for these industries to whinge about it - just do the business and get on with life.



Agree entirely mate

Interesting comments from one involved as an exporter. I more involved with companies that make stuff from raw materials so at the moment give the marketing guys curry and tell them life easy eh because price not a real issue and margins pretty good.

I think exporters have got used to the higher dollar. They are now competing on real things and not just from a price advantage. I think a lot of the 'concern'/'worry' is rhetoric cause that what you went to say when dollar is high

I know that if the dollar fell even to US65 then inflation would not be the sub 2% reported at the moment. Imported products would rise, those who import raw materials would increase prices .... demand down .... jobs lost.

Hope the dollar keeps rising .... first time I went to the US I got $1.40 US for my NZD ..... but would remain reasonably happy if it stayed where it was now for a while

Probably more an academical discussion. I think what you both are saying is that a strong NZ$ is an indicator for a strong NZ economy. Well, that's not rocket science, and we certainly agree on that.

What I tried to convey is that a weak NZ Dollar would help our exporters. I note however Xerofs remarks related to sales people getting lazy under benign conditions. Agreed as well - been there (worked for decades in the export sector), seen that.

This means the strength of the currency is as well indicator for the strength of the economy as well as an input variable. This means we look (as usual) at a rather complex system and not a simple equation.

However - there are enough examples around where a weak currency did help an economy to thrive:

Look at China: The Chinese kept their Yuan (Renminbi) artificially low for decades and look where they are now - second strongest economy!

Look at Germany: their economy got a real shot into the arm thanks to being able to operate now with a rather weak currency (the Euro is pulled down thanks to all the weak south European countries who joined in); I still remember the times when the German export was hampered by the strong Deutsch Mark.

Look at the US - They work hard to pull the US Dollar down (basically Zero interest and printing money). So far it looks like their recipe to grow their economy might work.

And looking at NZ: I always remember the smile on the face of our financial director (as indicated - was working in an export industry as well), when the NZ dollar tanked ...

Now - given all this not sure, what I hope for the NZ economy (well, obviously only the best :)). I think that a somewhat lower NZ Dollar would be beneficial (though see the problems related to our debt burden), but I agree it is unlikely to happen anyway as long as our economy is strong.

[Agrarinvestor]

Any reasons for the 2 cent (3.61%) up ? Volume 2,5 of the average volume.

[winner69]

Any reasons for the 2 cent (3.61%) up ? Volume 2,5 of the average volume.

The Percy couta effect ......when they start spreading the word things happen

[percy]

Sheep and beef farm profits tipped to rise

http://www.nzherald.co.nz/trade/news/article.cfm?c_id=96&objectid=11247073

Yes Percy, we are all well positioned.

Agrainvestor.
I think investors are reacting to this article.
I also believe the good work carried out by George Gould is been carried on by Mark Dewdney,who is also well regarded in this sector.I hear the weather in Australia means the seeds business there will/are doing well.
In the last couple of announcements there have been very positive statements that include;"our primary focus moved away from debt reduction to growth."
"store refurbishment and new stores".
With PGW clients better off,PGW is in the right place to benefit from their spending,which means the very high dividend is sustainable.

[Joshuatree]

Yes was hearing re 90$ plus for lambs on national radio rural report this morn and enthusiasm re prices getting better.

[Beagle]

Gents, don't PGW normally give a trading update sometime in May each year ? Perhaps that's what is conferring some renewed interest ?
Disc, I bought a few at 41 cents last week.

[Agrarinvestor]

Hi thanks for the information. If PGW gives us a positive trading update you can see Agria will hit the 2$ mark.
Dear Sirs,

i tried hard here to convince you to think about Agria as an investment instead of PGW. But i failed, maybe due to my bad english skills, i don't know. My main Argument that Agria is the controlling shareholder and that you as PGW shareholders can only hope of a dividend should be easy to understand. Agria has no need to take PGW private. Why should they ? They need the money to expand their business in China. There are more advantages to have PGW listed at NZX. If it is anoying for PGW's shareholder to discuss AGRIA's matter i can open a new AGRIA thread (but i fear loneliness;)). Please give me advice in that case. Agria was a threebagger the last 12 Month.


http://www.agriacorp.com/business.asp
China Business
Agria established its edible corn seed business in 2007, vegetable seed business in 2009, field corn seed business in 2010 and forage seed business in 2013.

Agria’s China seeds business is operated by Beijing Agria Nongkeyu Co., Ltd. For more information, please visit:

www.nongkeyu.com (http://www.nongkeyu.com/).


Field Corn Seeds

We have achieved dramatic growth in the field corn business over the past two years. Notable achievements include:

1. We set up an effective distribution channel with approximately 300 county-level dealers, covering the spring and summer corn markets in 12 provinces including Henan, Hebei, Shandong and Heilongjiang.
2. We are commercializing three key corn hybrids: BY11, Zhongdan 909 and ND375. An additional three hybrids are currently under development.
3. We built two modern corn seed conditioning and packaging plants in Xinjiang and Henan provinces, each with a capacity of 20 tons per hour.:t_up:
4. We have more than 1,500 hectares of seed production in Xinjiang and Gansu provinces, which are reliable and sustainable for high quality seed production.:t_up:

Edible Corn Seeds

We conduct our edible corn seed business through Shenzhen Nongkeyu. We have two operating units located in Beijing and Zhuhai. Our seed products cover different varieties including sweet corn, sticky corn and sweet/sticky corn. We have a distribution network covering 28 provinces in China and seed production bases in 6 provinces.Our annual sales volume currently totals approximately 1.2 million kilograms.

Our key focus is innovation in varieties. We are a leader in the industry of edible corn seed research and development.
China is one of the largest markets for edible corn. The planting area reaches 13.5 million mu. We are capturing market opportunities through our leading market share in the JKN2000 variety , as well as development of new species to both consolidate our significant position in China and to expand to southeast Asia.

Forage

We conduct our forage business through Shenzhen PGW Seeds Company Ltd., a wholly-owned subsidiary of Agria. This business unit focuses on developing eco-efficient ranching in China. Through technological cooperation and the introduction of advanced international germplasm, we aim to enhance the quality of forage and livestock.

We are committed to developing innovative grassland services to support the growth of agricultural and livestock industry in China. Through the competitive advantages of advanced forage seed varieties, production and processing technology, and management methods, we provide new technical ideas for the development of domestic and international livestock industry.

Our forage business focuses on three areas.

1. Advanced forage varieties
According to the local climate characteristics, the type of land management conditions and livestock species, we choose different varieties in order to enhance the nutritional value of grass. There are many appropriate forage varieties, including alfalfa, sainfoin, red or white clover, tall fescue, feed corn, peas, brassica crops and herbs.

2. Production technology
We have world leading endophyte technology that focuses on discovery and development of new endophytes and the demonstration of these to improve plant persistence and yield while also improving animal health and performance. Using our unique endophyte technology we protect the plant from a wider range of pests and this helps the plant to better manage other stresses like drought. Our endophyte technology has been widely adopted in temperate regions of the world because they can improve grass yields (in some regions up to 20%) and can reduce animal health issues leading to improved animal performance.

3. Processing technology
In winter, forage contains less nutrients and there is a lack of grass for livestock. Conversely, in warm seasons nutrient-rich forage is growing vigorously. In order to take advantage of the warm season forage, we process nutrient-rich forage by mowing, sun-drying, crushing and processing it into grass particles that we save for feeding livestock in the winter. We are changing traditional processing methods, such that our new processing method creates different nutritious composite particles appropriate for different livestock species, increasing forage utilization by 40%.

Vegetable seeds

We conduct both research and development and sales of vegetable seeds through Tianjin Beiao Seed Technology Development Co., Ltd (“BeOK”). BeOK was established in August 2008 in Tianjin. In January 2010, we acquired 100% of BeOK’s equity. Our vegetable seeds are primarily sold to distributors, who in turn sell them to farmers. As of June 30, 2012, we had approximately 71 vegetable seed products distributors in China. We sell varieties of vegetable seeds in nine categories, including broccoli, celery, chili, Chinese cabbage, cucumber and tomato.

[Snoopy]

i tried hard here to convince you to think about Agria as an investment instead of PGW. But i failed, maybe due to my bad english skills, i don't know.


Not much wrong with your English from where I sit.



My main Argument that Agria is the controlling shareholder and that you as PGW shareholders can only hope of a dividend should be easy to understand.


PGW pays dividends. Agria does not. Advantage PGW.



Agria has no need to take PGW private. Why should they? They need the money to expand their business in China.


I agree that Agria will not take PGW private in any forseeable future. They can consolidate PGW into their accounts now. And they do not have to money to make a full takeover bid anyway. The Chinese are used to working in joint ventures with the west. It is a very common business model for China.

Agria do need cash to supposrt their stand alone operations in China. But not for the reasons you think. The Chinese stand alone operations are so small in a PGW context they can be disregarded. The main reason Agria are still in China (IMO) is so that Agria can fulfill US listing requirements as being more than a front page for a foreign business, which would otherwise be regarded as a sham US listing. Agria's US tax treatment woudl change if they sold their Chinese operations.



There are more advantages to have PGW listed at NZX. If it is anoying for PGW's shareholder to discuss AGRIA's matter i can open a new AGRIA thread (but i fear loneliness);. Please give me advice in that case.


Agria is not sufficiently different from PGW to require its own thread IMO.



Agria was a threebagger the last 12 Month.


IMO Agria is a gamblers share. They are crippled by debt, the dividend payments they have received from PGW only barely cover their interest bill and they survive only at the behest of their bankers. Gambling shares are notoriously volatile. Those who have tripled their money in the last twelve months had a lucky spin on the roulette wheel.

SNOOPY

[percy]

Agrarinvestor,
I used to invest in USA and UK.Used to be a lot of trouble,and costs were high.I now only invest in New Zealand or Australian companies.

[Snoopy]

IMO Agria is a gamblers share. They are crippled by debt, the dividend payments they have received from PGW only barely cover their interest bill and they survive only at the behest of their bankers. Gambling shares are notoriously volatile. Those who have tripled their money in the last twelve months had a lucky spin on the roulette wheel.


Just checked the chart. No-one has tripled their money here. Agria peaked at $US2.05 on March 5th 2014. Since then the price has been on the slide. Agria closed at $US1.30 last night. The PGW chart is quite different showing steady gains over the last year and it has been flattish in the low 40c since, while Agria has declined. Agria still looks like an 'avoid' to me. PGW is the superior hold in every way I can see.

SNOOPY

[Snoopy]

IMO Agria is a gamblers share. They are crippled by debt, the dividend payments they have received from PGW only barely cover their interest bill and they survive only at the behest of their bankers. Gambling shares are notoriously volatile. Those who have tripled their money in the last twelve months had a lucky spin on the roulette wheel.


The March 2014 consolidated half year accounts (investor presentation dated Thursday 6th March 2014) make an interesting commparison with PGW.

Agria is showing short term debt of $US69.149m and long term debt of $US78.169m.

Convert those figures to NZD as at 31st December 2013 (Half year balance date) using $NZ1= $US 0.81624 and I get:

Agria is showing:
1 / Short term debt of $NZ84.717m and
2 / Long term debt of $NZ95.767m.

Now go the the interim PGW annual report and long and short term debt are listed on p15 as follows:
1/ PGW Short term debt $NZ62.245m
2/ PGW Long term debt $NZ60.000m

The difference between the two sets of figures is the underlying Agria debt:

1/ Underlying Agria short term debt: $NZ22.472m
2/ Underlying Agria long term debt: $NZ35.767m

The total income needed to service this extra debt at say 5% interest is:

0.05($22.472m + $35.767m) =$2.912m

The chinese standalone ventures contribute no profit for Agria the last time I looked. So all of this extra interest must be paid from any dividends received from Agrias 50% holding in PGW. Dividend paid by PGW over the last twelve months consist of a 1c dividend (September 2013) and a 2c dividend (April 2014)

Now from the annual PGW report, Agria holds 379,068,619 PGW shares.

A 3c annual dividend on those shares will provide:

0.03 x 379,068,619 = $NZ11.37m

So I take back what I said in the previous post. Agria should have enough free cashflow going forwards to cover their extra debt burden after all, assuming they are roughly cashflow neutral on the standalone Chinese operations.

But whether they were able to renegotiate their underlying Agria only debts at an interest rate of 5% (interest rates are very low in the US) , or whether New Hope has called in their dividend guarantee demanding cash from Agria and wrecking their cashflow is is all unknown and undisclosed. There is just not enough information released in the public domain to know what the true cash position of Agria is going forwards.

There are roughly 110.8m Agria shares on issue. So a PGW NPAT of say $35m less extra interest costs due to Agria of $3m gives $32m, of which the Agria 50% share is $NZ16m

$16m/110.8m = 14.4c eps for Agria shareholders.

14.4 x 0.86 / 130 = 9.5% yield

SNOOPY

[Agrarinvestor]

Just checked the chart. No-one has tripled their money here. Agria peaked at $US2.05 on March 5th 2014. Since then the price has been on the slide. Agria closed at $US1.30 last night. The PGW chart is quite different showing steady gains over the last year and it has been flattish in the low 40c since, while Agria has declined. Agria still looks like an 'avoid' to me. PGW is the superior hold in every way I can see.

SNOOPY

I asked for support here when Agria has a share price of 0.65$. Now Agria find a new botton at 1,30$. In my opinion they will touch the range betwenn 2$ and 2,5$ after earning release. The dividend of PGW is large enough to pay the interest bill for the PGW investment.

Thanks so far for the feadback. I have to admit the Quality of the statements here at sharetrader is as always fair and valuable. :t_up:

[Snoopy]

1/ Underlying Agria short term debt: $NZ22.472m
2/ Underlying Agria long term debt: $NZ35.767m

The total income needed to service this extra debt at say 5% interest is:

0.05($22.472m + $35.767m) =$2.912m

The chinese standalone ventures contribute no profit for Agria the last time I looked. So all of this extra interest must be paid from any dividends received from Agrias 50% holding in PGW. Dividend paid by PGW over the last twelve months consist of a 1c dividend (September 2013) and a 2c dividend (April 2014)

Now from the annual PGW report, Agria holds 379,068,619 PGW shares.

A 3c annual dividend on those shares will provide:

0.03 x 379,068,619 = $NZ11.37m

So I take back what I said in the previous post. Agria should have enough free cashflow going forwards to cover their extra debt burden after all, assuming they are roughly cashflow neutral on the standalone Chinese operations.

But whether they were able to renegotiate their underlying Agria only debts at an interest rate of 5% (interest rates are very low in the US) , or whether New Hope has called in their dividend guarantee demanding cash from Agria and wrecking their cashflow is is all unknown and undisclosed. There is just not enough information released in the public domain to know what the true cash position of Agria is going forwards.

There are roughly 110.8m Agria shares on issue. So a PGW NPAT of say $35m less extra interest costs due to Agria of $3m gives $32m, of which the Agria 50% share is $NZ16m

$NZ16m/110.8m = NZ14.4c eps for Agria shareholders.

14.4 x 0.86 / 130 = 9.5% yield


I need to make a slight correction to my above 'earnings yield' calculation. If full year profit for PGW is $NZ35m (say), then half of that will be equity accounted for Agria shareholders $17.5m. Against that you have to offset all of the underlying Agria debt servicing costs, to get the underlying Agria NPAT attributable to shareholders.

$NZ17.5m - $NZ2.912m (converted from USD) = $NZ14.6m

$NZ14.6m/ 110.8m = NZ13.2c eps for Agria shareholders.

13.2 x 0.86 / 130 = 8.7% earnings yield, or a PE of 11.5

But what are the equivalent figures if you invest in PGW directly at 42c?

$35m / 760.8m = NZ4.6cps

4.6c / 42c = 11.0% earnings yield, or a PE of 9.1

I used $35m as a guess for PGW profits for FY2014. But you can use any figure and the relative results will be the same. Investing in PGW at 42c is the cheapest way to get exposure to PGW. Plus as an NZ investor you get the benefit of imputation credits on dividends. The alternative exposure to Agria may never pay a dividend. As a New Zealander, I would argue investing in Agria cannot be justified with an Agria price of $US1.30, as it loses on all comparative metrics. The relative benefits of investing in PGW are less if you are an overseas investor, but PGW still wins. Sell Agria Agrainvestor, and put your money into PGW. That would be my advice.

SNOOPY

[Snoopy]

I used $35m as a guess for PGW profits for FY2014. But you can use any figure and the relative results will be the same. Investing in PGW at 42c is the cheapest way to get exposure to PGW. Plus as an NZ investor you get the benefit of imputation crdits on dividends. The alternative exposure to Agria may never pay a dividend. As a New Zealander, I would argue investing in Agria cannot be justified with an Agria price of $US1.30, as it loses on all comparative metrics (*). The relative benefits of investing in PGW are less if you are an overseas investor, but PGW still wins. Sell Agria Agrainvestor, and put your money into PGW. That would be my advice.


There is one qualification here, where Agria may on paper be better. Because Agria is a leveraged investment in PGW, if the share price of PGW goes up, then in relative terms the underlying value of Agria will go up more. However, the only way this gain can be turned into cash is for Agria to sell some PGW shares. This won't happen. If Agria were to sell down, they would lose their ability to equity account PGW earnings. And if that happened they would also have to write down the remaining value of their PGW stake to market. Agria bought their controlling shares in PGW for NZ60c. Even despite the New Zealand dollar strengthening from 76c to 86c over the time since the stake was acquired, Agria are still underwater on their original investment. This is something they will not want to remind their bankers about!

SNOOPY

[Beagle]

With a potential dividend yeild of 9.4% fully imputed, assuming 4cps (4/42.5) = gross dividend yeild of 14% for someone on the top 33%tax rate, a N.Z. investor in PGW is potentially being very well rewarded for their patience :)

[waikare]

4:10pm, 19 Jun 2014 | FORECAST

PGG Wrightson Trading Update

Chief Executive, Mark Dewdney announced today that PGG Wrightson (PGW) is forecasting that its full year Operating EBITDA* is expected to be in the $56 - $58 million range, slightly up on the guidance range indicated in February.

Mr. Dewdney said “The market and PGW’s trading performance has held up well in the past six months despite some localised challenges. The upper North Island saw another summer drought develop with farmers looking for rains to come mid-April. Just as this happened we also experienced a tough spell in the South with very wet and cold weather conditions challenging arable production and winter sowing activities.

In recent weeks the dairy forward herd sale contract settlements were transacted to close out the season for Livestock. This saw the Livestock business report a record month for May. Driving this was the large quantum of dairy forward sales transacted in May along with the increasing values in sheep and beef, and higher than forecasted auction cattle volumes yarded. With this busy period behind us we are now better placed to provide a guidance update for the current fiscal year.”

The company also announced that it had acquired a property company, AG Property Holdings Limited (AG Property) that owns a number of properties that are leased by PGW. AG Property collectively owns 40 properties that are a combination of retail stores, seed processing sites and livestock saleyards located across New Zealand. AG Property has no other assets, staff or operations and by acquiring the company, PGW obtains ownership of the 40 properties for consideration of approximately $30 million.

Shortly after the 2005 merger of Wrightson and Pyne Gould Guiness the company sold these properties subject to a lease back to PGW. Mr. Dewdney said “The decision to sell the properties was made at a different point in time, and the company now has a completely different look to its balance sheet and we are pleased to have been able to negotiate their acquisition.”

“The business continues to evolve and this gives us the opportunity to re-shape our property portfolio. A strategic review of the company’s property needs would be undertaken and some of the reacquired sites may ultimately be divested. The important thing is that this acquisition provides PGW with flexibility to review its property and lease needs and make decisions that are right for the business today and moving into the future.”

The transaction will see debt increase by a corresponding amount.

PGW expects to announce its full year results on 13 August 2014 with details of the announcement to be confirmed closer to the time.

[Beagle]

Good credible update in my opinion :)

[percy]

A very positive update.
Bit early to be thinking divie,but looks safe.Great yield.

[winner69]

Good credible update in my opinion :)

Yep .....ebitda back to 2012 levels.

That's a good start to a long overdue turnaround

[percy]

Yep .....ebitda back to 2012 levels.

That's a good start to a long overdue turnaround

Not so.
Just continuing to build on the solid new foundations laid by Sir John Anderson and George Gould.!!!

[Joshuatree]

Yep .....ebitda back to 2012 levels.

That's a good start to a long overdue turnaround

OK and int to see s/p 2 years ago was re 30c so are we overpriced and diluted? Not from what I've been reading on the thread:). Sorry not familiar with whats gone on in between; less debt and div now i guess.

[winner69]

OK and int to see s/p 2 years ago was re 30c so are we overpriced and diluted? Not from what I've been reading on the thread:). Sorry not familiar with whats gone on in between; less debt and div now i guess.

It was just an observation that this years ebitda is going to be about what it was in 2012 and although Percy said 'not so' that is a good and at least some positive earnings momentum which may/ lead to better numbers in 2015.

Fair value goodness knows cause I haven't looked at all the stuff like depreciation and interest and tax.

Maybe snoopy can convert $56m ebitda into real profit

[traineeinvestor]

A good positive update, confirming that things are moving in the right direction.

Purchased at 41 cents today.

[winner69]

A good positive update, confirming that things are moving in the right direction.

Purchased at 41 cents today.
OMG - sub 40

Moosies warnings being heeded maybe

[RGR367]

OMG - sub 40

Moosies warnings being heeded maybe

Finally! Been waiting for 3 weeks to hit my buy price of 40. Just more sellers than buyers, I guess.

[Toasty]

Typical really. I watch for ages, read up a lot, see it survive the first negative dairy shock quite well and finally commit at 41 just in time for the second shock dairy price drop. So far I have made a small fortune on the share market, albeit from a larger one.....

[Beagle]

Buying opportunity when dairy prices head up again ? Trading cum a circa 2 cps fully imputed final dividend :)

[winner69]

Keith Woodford has penned a few interesting articles lately about PGW and Farmlands

He a good guy that Keith

Worthwhile reading both

http://keithwoodford.wordpress.com/2014/07/10/where-is-pgg-wrightson-heading/

http://keithwoodford.wordpress.com/2014/07/21/farmlands-now-the-dominant-farm-services-company/

[BlackPeter]

Keith Woodford has penned a few interesting articles lately about PGW and Farmlands

He a good guy that Keith

Worthwhile reading both

http://keithwoodford.wordpress.com/2014/07/10/where-is-pgg-wrightson-heading/

http://keithwoodford.wordpress.com/2014/07/21/farmlands-now-the-dominant-farm-services-company/

Thanks for sharing this. Very worthwhile reading. Makes one really wonder, where PGW is heading.

[Snoopy]

Thanks for sharing this. Very worthwhile reading. Makes one really wonder, where PGW is heading.

Keith's piece on PGW is an interesting historical oversight, but I am not sure that he has done justice to Mark Dewdney's current leadership. This is to expand organically with bolt on acquisitions into related areas like irrigation and avoid the past distractions of grand expansions. The fact that there is no obvious money to be made in China will have no effect on the growing business plans in South America. It is positive cashflow that Alan Lai is focused on and that is very good for small shareholders as well.

Pre the Farmlands /CRT merger the PGW retail stores were twice as profitable as the equivalent co-operative stores IIRC. Poor farmers may be better using the co-operatives. But rich farmers can buy PGW shares and enjoy a return far greater than any co-operative rebate.

Farmers have no reason to wish for the demise of PGW at the expense of co-operatives. For farmers all competition in the sector that supplies them is good.

SNOOPY

[percy]

4:10pm, 19 Jun 2014 | FORECAST

PGG Wrightson Trading Update

Chief Executive, Mark Dewdney announced today that PGG Wrightson (PGW) is forecasting that its full year Operating EBITDA* is expected to be in the $56 - $58 million range, slightly up on the guidance range indicated in February.

Mr. Dewdney said “The market and PGW’s trading performance has held up well in the past six months despite some localised challenges. The upper North Island saw another summer drought develop with farmers looking for rains to come mid-April. Just as this happened we also experienced a tough spell in the South with very wet and cold weather conditions challenging arable production and winter sowing activities.

In recent weeks the dairy forward herd sale contract settlements were transacted to close out the season for Livestock. This saw the Livestock business report a record month for May. Driving this was the large quantum of dairy forward sales transacted in May along with the increasing values in sheep and beef, and higher than forecasted auction cattle volumes yarded. With this busy period behind us we are now better placed to provide a guidance update for the current fiscal year.”

The company also announced that it had acquired a property company, AG Property Holdings Limited (AG Property) that owns a number of properties that are leased by PGW. AG Property collectively owns 40 properties that are a combination of retail stores, seed processing sites and livestock saleyards located across New Zealand. AG Property has no other assets, staff or operations and by acquiring the company, PGW obtains ownership of the 40 properties for consideration of approximately $30 million.

Shortly after the 2005 merger of Wrightson and Pyne Gould Guiness the company sold these properties subject to a lease back to PGW. Mr. Dewdney said “The decision to sell the properties was made at a different point in time, and the company now has a completely different look to its balance sheet and we are pleased to have been able to negotiate their acquisition.”

“The business continues to evolve and this gives us the opportunity to re-shape our property portfolio. A strategic review of the company’s property needs would be undertaken and some of the reacquired sites may ultimately be divested. The important thing is that this acquisition provides PGW with flexibility to review its property and lease needs and make decisions that are right for the business today and moving into the future.”

The transaction will see debt increase by a corresponding amount.

PGW expects to announce its full year results on 13 August 2014 with details of the announcement to be confirmed closer to the time.

I found this update a lot more relevant than Keith Woodford's overviews.

[winner69]

I found this update a lot more relevant than Keith Woodford's overviews.

Difference between 'overviews' and reading what you want to read only of course makes the PGW announcement more relevant (to you) eh Percy

Woodford did feel PGW that seeds as a standalone business (floating it off?) would be a beneficial proposition for shareholders. What you feel about that?

Good to see PGW making a bit more money this year. But they do don't make much do they.

[winner69]

Snoopy said - Poor farmers may be better using the co-operatives. But rich farmers can buy PGW shares and enjoy a return far greater than any co-operative

Only problem they would have lost heaps of money over the years though .....esp the last 5 or so

[percy]

Difference between 'overviews' and reading what you want to read only makes it more relevant (to you) eh Percy

Woodford did feel PGW that seeds as a standalone business (floating it off?) would be a beneficial proposition for shareholders. What you feel about that?

Good to see PGW making a bit more money this year. But they do don't make much do they.

Anything to unlock the full value of seeds would be welcome by shareholders.
I find overviews overviews.For someone with little knowledge of PGW's history they may be of interest.Any shareholder of PGW would be well aware of the nature of PGW's business.[and their competitors]
What I have found more relevant is my own observation that PGW branches have been upgraded.Look great.Better layouts,brighter premises.Welcoming.Bold statements.
"Well positioned."

[percy]

The share price was 39.5 cents on Friday.Bit of a tail wind with sheep and beef farmers doing well, we could see 49.5 cents in the next year.A 25% increase .I am looking for EPS of just over 4 cents,ie 4.1cents. So project PE is under 10. With projected growth of approx. 10 to 12% that PE is fine for me.Now with a net dividend yield of about 8% I am getting very excited.!!
So with the result due within 3 weeks, I will have a good idea whether I will achieve 33% or more return from PGW over the next year.
That 33% will be made up from 25% share price growth [39.5 cents to 49.5 cents] and my 8% net dividend yield.
Will PGW increase the divie??

[Beagle]

PGW result exceeds guidance. Very strong cash flows and very strong final dividend of 3.5 cps fully imputed. Total dividend for the year 5.5 cps fully imputed is a whopping 13.92% net or for those on a 33% tax rate = 20.8% gross.
Very, very impressive result. More than happy to hold and ride out the recent weakness in the SP.


PGW
12/08/2014 08:33
FLLYR

REL: 0833 HRS PGG Wrightson Limited

FLLYR: PGW: PGG Wrightson delivers strongest result for several years

PGG Wrightson delivers strongest result for several years

PGG Wrightson Ltd* (PGW) today announced its strongest operating result for
several years with a 28% uplift in Operating EBITDA.

For the period ending 30 June 2014, PGW achieved operating earnings before
interest, tax, depreciation and amortisation (Operating EBITDA)** of $58.7
million, up from $45.8 million for the prior financial year. Revenue was up
eight per cent and after factoring in last year's goodwill impairment, the
$42.3 million net profit after tax was $27.6 million ahead of the 2013
result. Cash from operating activities grew by $15.5 million to $54.8
million.

The company will pay a fully imputed dividend of 3.5 cents per share which
will be paid to shareholders registered as at the record date of 26 August
2014. The dividend will be paid on 3 October 2014.

This distribution is inclusive of a final dividend of 2.5 cents per share and
an additional special dividend component of 1 cent per share to recognise the
strong cash flows in the past year. This will bring the total dividends paid
for the full year to 5.5 cents per share.

"PGW continues to represent a leading option for investors looking for broad
based exposure to New Zealand agriculture, and the commercialisation of
agri-technologies to our growing international markets. This year's strong
financial result demonstrates the overall strength of the company.
"We have developed strategies to grow our business based around our clients'
business needs. This financial result suggests those plans are on track and
are delivering real benefits for our clients, staff and shareholders.

"New Zealand agriculture has performed strongly over the last year. Our
size, products and geographic reach, technical expertise, and dedicated staff
allowed PGW to capitalise on that" said Mark Dewdney, who commenced as Chief
Executive Officer on 1 July 2013.

Mark Dewdney said the company has recently undertaken a significant exercise
to refresh the PGW Group strategic plan. "This plan is now being implemented
at both the PGW Group and individual business unit level. Our business unit
strategies provide clear direction on how we see the markets in which we
operate, and how we are responding to capitalise on the opportunities
available to PGW. The strategic initiatives have been embraced positively by
the business. The company will outline the key elements of the plan to
shareholders and the market in coming months."

"We see an exciting phase where PGW can look to increase investment in its
people, product, service and technology offering. We are challenging every
business unit to grow market share. The outlook for our core sheep, beef,
arable, horticulture and viticulture markets is positive and will continue to
be a major focus for the company, and in addition we are going to put more
emphasis on the dairy, water and agronomy sectors in New Zealand. We also see
potential to grow strongly in South America and our other international
markets."
PGW's balance sheet remains strong and this enabled the company to make
strategic investments in Water Dynamics and AG Property Holdings during the
year.

PGW Chairman, Alan Lai, commented, "We continue to see significant
improvements across all aspects of the company. The management team has been
given a challenge to grow the business. Mark has an engaged and passionate
group of people working with him. The Board is aligned to the strategy and
believes that PGW can capitalise on its unique position in the agriculture
sector in New Zealand and other markets in which it operates
internationally."

Mr Lai also noted that the Board was pleased to announce Trevor Burt's
appointment as Deputy Chairman. "Trevor has been a director of PGW since
December 2012 and is well placed to support the company from his Christchurch
base where PGW's head office is also located. The Board and I welcome the
additional cover Trevor will be able to provide the business as Deputy
Chairman."

In concluding, Mark Dewdney said that "PGW was confident that it could
deliver further increases on this year's Operating EBITDA result through the
delivery of its strategy. However, given the volatility in the forecast
dairy price at the current time, and the need to assess the likely impact for
PGW's clients and the sector, it was the company's intention to provide a
forecast for the current fiscal year at the time of the Annual Shareholders
Meeting in October."

Further information:
Mark Dewdney
Ph 027 248 3151
End CA:00253731 For:PGW Type:FLLYR Time:2014-08-12 08:33:09

[winner69]

He's a hero and a guru that Mark guy

Big divie coming to the likes of devoted percy and snoopy

Spend it wisely

[Beagle]

Looking at the match price building strongly (still 25 minutes out from commencement of trading), the market is very impressed and there's plenty of enthusiasm to collect that very impressive final dividend.

[BlackPeter]

PGW result exceeds guidance. Very strong cash flows and very strong final dividend of 3.5 cps fully imputed. Total dividend for the year 5.5 cps fully imputed is a whopping 13.92% net or for those on a 33% tax rate = 20.8% gross.
Very, very impressive result. More than happy to hold and ride out the recent weakness in the SP.

Looks like the SP weakness magically recovered :t_up:. Glad I still managed to top up last week at 38.5 cents. I suppose this opportunity is now closed ...

[percy]

The share price was 39.5 cents on Friday.Bit of a tail wind with sheep and beef farmers doing well, we could see 49.5 cents in the next year.A 25% increase .I am looking for EPS of just over 4 cents,ie 4.1cents. So project PE is under 10. With projected growth of approx. 10 to 12% that PE is fine for me.Now with a net dividend yield of about 8% I am getting very excited.!!
So with the result due within 3 weeks, I will have a good idea whether I will achieve 33% or more return from PGW over the next year.
That 33% will be made up from 25% share price growth [39.5 cents to 49.5 cents] and my 8% net dividend yield.
Will PGW increase the divie??
Above post posted 27-06-2014
Today's announcement means I am a more than happy shareholder.

[Balance]

Payout ratio?

100% - obviously paid out as good balance sheet now with good bank support.

As I have mentioned before, there was too much focus and attention paid to PGW's major shareholder - not enough to the underlying businesses.

For those who bought at around 30 cents, enjoy the benefits from hereonin.

SP still needs some more upside though for Agria to do well.

[percy]

100% - obviously paid out as good balance sheet now with good bank support.

As I have mentioned before, there was too much focus and attention paid to PGW's major shareholder - not enough to the underlying businesses.

For those who bought at around 30 cents, enjoy the benefits from hereonin.

SP still needs some more upside though for Agria to do well.

Yes must agree with you.The underlying business was were we should have been focussed.
As the result of the improving business,I don't think Agria will have too long to wait to see SP upside.We are with them there.!!! lol.

[noodles]

re upside ... the dairy payout down to 6.00 won't affect pgw?
It will affect pgw. They stated this in their conf call. However, it is a small part of their business that they are gearing up to grow. I guess it just won't grow as much.

[Beagle]

100% - obviously paid out as good balance sheet now with good bank support.

As I have mentioned before, there was too much focus and attention paid to PGW's major shareholder - not enough to the underlying businesses.

For those who bought at around 30 cents, enjoy the benefits from hereonin.

SP still needs some more upside though for Agria to do well.

Probably splitting hairs mate but perhaps worth noting that $42.3m represents EPS of 5.6 cps so payout ratio was 98% although they did make the point in the announcement that the final dividend includes a special dividend of 1 cps due to the extremely strong cash flows from operating activities of $54.8m (7.25 cps). (i.e. effectively they paid out 76% of operating cash flows).
I guess i'm just making the point that this sort of dividend is potentially sustainable going forward but perhaps investors would be more prudent to expect about 5 cps next year given 1 cent of the 5.5 cps this year is a special divvy.

[winner69]

Good to see that the pension fund shortfall has fallen $13m. Was a problem a couple of years ago when close to $30m. Wouldn't want to honour that liability in a hurry even though the underfunding is significant relative to the size of the fund.

Suppose all the old timers deserve their pension, after all they made the company.

[percy]

Good to see that the pension fund shortfall has fallen $13m. Was a problem a couple of years ago when close to $30m. Wouldn't want to honour that liability in a hurry even though the underfunding is significant relative to the size of the fund.

Suppose all the old timers deserve their pension, after all they made the company.

I think the pension fund's HNZ holding is helping.!!!?????

[Balance]

I must say, once the SP calms down and we get a better SP the Moose Fund may be interested in a short term hold here for a divvy and capital gains. Yield is looking pretty good now! Will keep an eye on her, haven't been interested in it in the more than 2 years since I ladt traded her...

Oh o - there goes the neighborhood!

[percy]

So ... In conclusion ... PGW is talking a big story (in the face of an economic downturn in their primary markets) and we should, based on their 100% pay-out ratio ... sell into the dividend (thereby avoiding tax which we can if we spin the "intent" story correctly) and buy back after their 100% pay-out (to pocket the capital gain prior to the next dividend announcement)?

Sorry, not fooled. This is a pump-and-dump tax dodge. Not a viable business ;)

Yeah Right!!! lol.

[Beagle]

I must say, once the SP calms down and we get a better SP the Moose Fund may be interested in a short term hold here for a divvy and capital gains. Yield is looking pretty good now! Will keep an eye on her, haven't been interested in it in the more than 2 years since I ladt traded her...

I've spent a bit of time pondering if the SP is going to settle back a bit.
I was hoping it would and had a buy in the market at 41 but got to thinking.
1. Stock trades cum a great divvy of 3.5 cps and is ex very shortly on 26 August.
2. Based on ex stock price of 39.5 cps, (cum 43), you're paying a multiple of only 7 times last years earnings and the company sounds confident it'll grow current years earnings !!
3. Based on ex divvy price of 39.5 cps and assuming next year's dividend is 5 cps (fully imputed) PGW trades on a 2015 net dividend yield of 12.66%, gross of 18.9% for those on a 33% tax rate.
4. PGW beat the top end of market guidance.

I backed my own thinking by adding more today.

So why would it go back to 40 cps cum dividend....well let me put it this way, I'll be backing up the truck if it does :)

Worth noting, today's volume is more than 10 times daily average for this stock.

[BIRMANBOY]

Always makes me nervous when heavy selling prior to dividend......why wouldn't holders wait and take the dividend? Oh I know because they think its to their advantage to get out now....
I've spent a bit of time pondering if the SP is going to settle back a bit.
I was hoping it would and had a buy in the market at 41 but got to thinking.
1. Stock trades cum a great divvy of 3.5 cps and is ex very shortly on 26 August.
2. Based on ex stock price of 39.5 cps, (cum 43), you're paying a multiple of only 7 times last years earnings and the company sounds confident it'll grow current years earnings !!
3. Based on ex divvy price of 39.5 cps and assuming next year's dividend is 5 cps (fully imputed) PGW trades on a 2015 net dividend yield of 12.66%, gross of 18.9% for those on a 33% tax rate.
4. PGW beat the top end of market guidance.

I backed my own thinking by adding more today.

So why would it go back to 40 cps cum dividend....well let me put it this way, I'll be backing up the truck if it does :)

Worth noting, today's volume is more than 10 times daily average for this stock.

[Beagle]

Wrong, its heavy buying. Stock up 9% in one day :t_up:

[BIRMANBOY]

Hah..LOL quite right half empty or half full. Good luck...I'm waiting for a lower entry but who knows how that pans out.;)
Wrong, its heavy buying. Stock up 9% in one day :t_up:

[Beagle]

Believe me Roger ... They'll be plenty who want out of this continuously under performing dog. (and they'll have been badgering PWG mgt to do something so they can get out and its been delivered).

discl: been a holder off and on since 2002ish so not fooled. sold out at 42.5 over a year ago not CG just divi. And todays VWAP? just 42.57. Yeah ... pull the other one.

You calling it a tax dodge, that's a good laugh. Selling more than one investment property and not paying tax on the gain and thinking a simple excuse will hold you in good stead...I don't want to appear to be mean but the I.R.D. love having a crack at that sort of thing so it wouldn't surprise me in the slightest if you have a battle on your hands there.

Yeah I've been a holder before too but you never know they might finally be getting their act together. Every dog has its day :t_up:

[Master98]

just wondering if it is possible or when PGW will back to NZX50.

[BlackPeter]

just wondering if it is possible or when PGW will back to NZX50.

Well, PGW's market cap ($332m) is certainly significant higher than of the recently to NZX50 advanced (and since then dropping) starlet PEB ($216m). However not sure, whether the full PGW market cap counts for NZX50 entry (given Agrias predominant position - not all shares are freely available).

[nextbigthing]

I don't really follow this stock so sorry if this is an oversimplification, but isn't the large rise in shareprice a little short sighted given the rapidly falling dairy prices and therefore spending power of farmers?

[Snoopy]

That yield is outstanding, so no surprise on the high volume (there are 700M plus out there...). Will wait a bit and see if Snoppy digs deep on this one.


I dug deep into PGW last year Moosie. I have set myself investment rules that limit the amount of capital I can put into shares outside of the NZX50. So I have no plans to dig deeper at this point, no matter how attractive the bone. But my instinct is to say this is probably as good as it gets.

A PE of 7-8 at the top of the farming cycle is in theory about where the share price should be in a cyclical business like this. Mr Market has a tendency to overshoot, so I don't rule out the share price heading higher. And I haven't made any allowance for the new managnement broom. All I am saying is, from here, the statistics are going to start to stack up against you IMO.

I have been looking at the PGW result though. $97.8m to $108.2m is a good rise in commission revenue (note 5). A sign of rising business through the Heartland bank connection? There is more than a million dollar drop in bad debts written off too (note 8).

Much was made of the improved cashflow at announcement time. But to me it looks like a marginal change in difference between two very big numbers. Profit margins remain low. So who knows if it will be sustainable? Meanwhile the asset base continues to shrink. Mark Dewdney has done a commendable job squeezing more profits out of a balance sheet that one might describe as a 'lazy lemon'. But if the lazy lemon balance sheet is getting smaller with time, there will be a limit to the juice you can squeeze out of it.

SNOOPY

[winner69]

I dug deep into PGW last year Moosie. I have set myself investment rules that limit the amount of capital I can put into shares outside of the NZX50. So I have no plans to dig deeper at this point, no matter how attractive the bone. But my instinct is to say this is probably as good as it gets.

A PE of 7-8 at the top of the farming cycle is in theory about where the share price should be in a cyclical business like this. Mr Market has a tendency to overshoot, so I don't rule out the share price heading higher. And I haven't made any allowance for the new managnement broom. All I am saying is, from here, the statistics are going to start to stack up against you IMO.

I have been looking at the PGW result though. $97.8m to $108.2m is a good rise in commission revenue (note 5). An sign of rising business through the Heartland bank connection? There is more than a million dollar drop in bad debts written off (note 8).

Much was made of the improved cashflow. Biut to me it looks like a marginal change in difference between too very big numbers. Profit margins remain low. So who knows if it will be sustainable? Meanwhile the asset base continues to shrink. Mark Dewdney has done a commendable job squeezing more profits out of a balance sheet that one might describe as a 'lazy lemon'. But if the lemon is getting smaller with time, there will be a limit to teh juice you can squeeze out of it.

SNOOPY

Alison Holst told me if you microwave the lemon for a few seconds you get more juice when you squeeze it .... so Mark probably got another year or two squeezing yet

[Snoopy]

2. Based on ex stock price of 39.5 cps, (cum 43), you're paying a multiple of only 7 times last years earnings and the company sounds confident it'll grow current years earnings !!


What Mark actually said in the press release was:
“PGW was confident that it could deliver further increases on this year’s Operating EBITDA result through the delivery of its strategy. However, given the volatility in the forecast dairy price at the current time, and the need to assess the likely impact for PGW’s clients and the sector it was the company’s intention to provide a forecast for the current fiscal year at the time of the Annual Shareholders Meeting in October."

That means Mark is confident of further operational improvements at PGW. But he is not yet in a position to forecast a profit increase. Indeed another interpretation of what he said was that macro-economic factors may yet cause the PGW annual net profit to fall in FY2015

Now if we move onto the profit figure for FY2014, you will see that it was padded out with a lot of favourable 'one offs'. If you look at the ongoing business I get a very different NPAT compared to the $42.3m headlined in the press release.

Operating EBITDA: $58.7m
Equity accounted earnings of associates: +$2.5m
Depreciation & Amortization: -$11.2m
Net Interest & finance cost: -$7.9m

=> NPBT = $42.1m

Using a tax rate of 28%, NPAT is $42.1m x (1-0.28) = $30.3m

With 754.8m shares on issue that makes eps of: $30.3m/754.8m = 4.0cps

Based on an ex-dividend share price of 39.5c, we are looking at a PE of 10.1. 10.1 is not a no growth PE. Mark is going to have to work hard to grow earnings growing forward and the market is already pricing in that he will succeed. As an an investment prospect I would argue PGW is now a dividend play only at an ex-dividend price of 39.5c.

SNOOPY

[Snoopy]

3. Based on ex divvy price of 39.5 cps and assuming next year's dividend is 5 cps (fully imputed) PGW trades on a 2015 net dividend yield of 12.66%, gross of 18.9% for those on a 33% tax rate.


5cps assumes core earnings growth of 20% over FY2014. That is possible but I would say a very bullish earnings outlook given the current rural outlook is mixed. I certainly wouldn't put any more of my own money into PGW under an assumption like that.

SNOOPY

[Beagle]

You can be a sceptic if you like just like with HNZ but I'm happy mate. According to Reuters of the three analysts covering it two rate it as outperform and one as a buy with a target price of 53 cents.
The market is clearly impressed with the result and prospects. I'll have a good look at the full accounts in due course but in the meantime I'm looking forward to the very substantial dividend :)

[percy]

.
The market is clearly impressed with the result and prospects. I'll have a good look at the full accounts when they're out but in the meantime I'm looking forward to the very substantial dividend :)

Yes,while you can look forward to the very substantial dividend, I think the improvements made to the core business over the past couple of years,means the company will now have the capacity to pay on going substantial DIVIDENDS.

[Beagle]

Yes,while you can look forward to the very substantial dividend, I think the improvements made to the core business over the past couple of years,means the company will now have the capacity to pay on going substantial DIVIDENDS.

Sure will mate. I've been busy buying at 42 and 43 cents after the result which looks like a winning strategy seeing as they closed the week at 45:t_up:

[percy]

The share price was 39.5 cents on Friday.Bit of a tail wind with sheep and beef farmers doing well, we could see 49.5 cents in the next year.A 25% increase .I am looking for EPS of just over 4 cents,ie 4.1cents. So project PE is under 10. With projected growth of approx. 10 to 12% that PE is fine for me.Now with a net dividend yield of about 8% I am getting very excited.!!
So with the result due within 3 weeks, I will have a good idea whether I will achieve 33% or more return from PGW over the next year.
That 33% will be made up from 25% share price growth [39.5 cents to 49.5 cents] and my 8% net dividend yield.
Will PGW increase the divie??
Gee whiz,the above was posted 27-07-2014,Seems a long time ago.!
Great dividend,special dividend and the share price at 45 cents is all great news to us shareholders.
With the market waking up to this "sleeping beauty" I feel we are "well positioned."

[Beagle]

Gee whiz,the above was posted 27-07-2014,Seems a long time ago.!
Great dividend,special dividend and the share price at 45 cents is all great news to us shareholders.
With the market waking up to this "sleeping beauty" I feel we are "well positioned."

Well done mate. I take my hat off to anyone who had the courage of their convictions and bought recently when it dipped under 40 cents.
Very well positioned :)

[Queenstfarmer]

Agreed Roger. Have myself been accumulating PGW for 3 years now and the SP has been all over the place in that time. Very happy to have it has my biggest holding. Onwards and upwards.

[noodles]

Based on an ex-dividend share price of 39.5c, we are looking at a PE of 10.1. 10.1 is not a no growth PE. Mark is going to have to work hard to grow earnings growing forward and the market is already pricing in that he will succeed. As an an investment prospect I would argue PGW is now a dividend play only at an ex-dividend price of 39.5c.

SNOOPY

Snoopy, I think you may be looking in the rear mirror. Brokers are unanimously in disagreement with you over your no-growth call. Broker estimates for FY15 are 0.046,0.042,0.045. Broker targets are 50c+.

Of course time will tell, but I look forward to 3.5+2+2.5=8c + imp credits dividends over the next 13 months. What sort of yield is that? Around 24%!!!

I'm not all in yet, but I will be looking to add if the AGM guidance is in line with the brokers.

Snoopy, I recall you bought in the high 20c. Nice trade if you just exited.

[Snoopy]

Snoopy, I think you may be looking in the rear mirror. Brokers are unanimously in disagreement with you over your no-growth call. Broker estimates for FY15 are 0.046,0.042,0.045. Broker targets are 50c+.


What no growth call? My PE of 10 estimated still implies growth.

If underlying growth is estimated to be around 10% (from 4.0eps in FY2014), to say 4.4c eps in FY2015 that is still only half of Roger's 5.0c eps end point growth expectation.

If broker's think earnings of 4.4c justify a share price 50c I would suggest their assumed multiple is too high. Have those brokers made any allowance for droughts floods currency strains etc.? I thought not. A PE of 12 might be appropriate at the bottom of the business cycle, but not at the top. I suspect those analysts experience in PGW falls short of the ups and downs over 17 years I have been investing in it. Pain is a very good teacher!



Of course time will tell, but I look forward to 3.5+2+2.5=8c + imp credits dividends over the next 13 months. What sort of yield is that? Around 24%!!!


Arbitrarily choosing a twelve month period to incorporate three dividend payments earned over an 18 month period does not help your case. I diagnose a case of 'dividend fever' here, and you are by no means the most acute sufferer on this thread Noodles.



Snoopy, I recall you bought in the high 20c. Nice trade if you just exited.


Yes I did buy in the high 20s, but al that good work was undone by earlier higher priced purchases. After 17 years, I finally just broke even last week! Mind you that does not include the dividends received over that time.

SNOOPY

[percy]

With your 17 years poor history with this stock I think I will side with the brokers' forecasts!!!!!! lol.

[The BOWMAN]

Hi SNOOPY, appreciate your views. Cheers!

[noodles]

If underlying growth is estimated to be around 10% (from 4.0eps in FY2014), to say 4.4c eps in FY2015 that is still only half of Roger's 5.0c eps end point growth expectation.

Roger undershot on the dividend announcement. He bullishly predicted 2c. Instead we got 3.5c. Maybe he is being conservative over the 5c eps as well. And hats off to Roger for making that dividend call well before the announcement.



Arbitrarily choosing a twelve month period to incorporate three dividend payments earned over an 18 month period does not help your case. I diagnose a case of 'dividend fever' here, and you are by no means the most acute sufferer on this thread Noodles.

Actually, it is 3 dividend payments in the next 12 months and 2 weeks (not 18 months as you suggest). My 24% is a bit light actually.



Yes I did buy in the high 20s, but al that good work was undone by earlier higher priced purchases. After 17 years, I finally just broke even last week! Mind you that does not include the dividends received over that time.
SNOOPY
I wish I had so much capital I could hold a loser for 17 years.

[percy]

[QUOTE=noodles;498545]Actually, it is 3 dividend payments in the next 12 months and 2 weeks (not 18 months as you suggest). My 24% is a bit light actually.


Thanks for your sound logic.
May pay me to pay more attention and think longer than just a year ahead.!!
Another two weeks makes a HUGE difference.!

[Beagle]

Roger undershot on the dividend announcement. He bullishly predicted 2c. Instead we got 3.5c. Maybe he is being conservative over the 5c eps as well. And hats off to Roger for making that dividend call well before the announcement.


Actually, it is 3 dividend payments in the next 12 months and 2 weeks (not 18 months as you suggest). My 24% is a bit light actually.


I wish I had so much capital I could hold a loser for 17 years.

Thanks Noodles and you're dead right that I am extremely pleased with the final divvy of 2.5 cps which comfortably exceeded my expectations and the extra 1 cps special divvy was definitely not on my radar but it a very nice bonus.
I think this highlights an important attribute with PGW, something that many of us know already, but it shines the spotlight on the fact that the majority owner definitely likes high dividends.
I had a quick look at the balance sheet yesterday and it looks in good shape to me.
Broker forecasts are indicating 4.5 cps next year which is great but it wouldn't surprise me in the slightest if there's another 1 cps special divvy, I rate this as 50/50 chance depending if they have another good year of cash flow for a total of 5.5 cps but given the special is maybe 50/50 lets call it 5.0 cps :)

I'll have a more detailed look at the financials when I get more time but there's nothing leaping out of there that worries me. Abnormal items and tax look lower than the figures you've indicated Snoopy.

[Snoopy]

I wish I had so much capital I could hold a loser for 17 years.


A small correction to my previous commentary. I said I had owned PGW for 17 years, but this of course can't be right. PGW only came into existance in CY2005. Before that 'PGW' was two separate companies, Pyne Gould Guiness and Wrightsons. It was Wrightson's I held shares in all those years ago.

Noodles says I held a loser for 17 years. In terms of capital appreciation he is correct. But as I said before, that 'capital result' doesn't include the effect of dividends. Include those and the picture is very different.

SNOOPY

[Snoopy]

Noodles says I held a loser for 17 years. In terms of capital appreciation he is correct. But as I said before, that 'capital result' doesn't include the effect of dividends. Include those and the picture is very different.


With a cyclical share like PGW I prefer to look at dividends over a business cycle. Going back in history is a little complicated with PGW.

1/ There was a cash issue on 11th December 2009 (TaxYear2010 for me), where shareholders had the opportunity to apply for 9 new shares for every 8 they already owned. That means that looking backwards a PGW share today was only entitled to 8/(9+8) = 8/17s of the dividends paid before that date.

2/ Just before the above cash issue, Agria upped their stake in PGW by being issued 41m new shares which were added to the 289m shares already in existance before that time. That in turn means that looking backwards,any PGW share now is only entitled to 289/(41+289) = 289/330s of dividends declared on PGW shares before that date.

Combining theese two effects, any shares today would have been entitled to receive the declared historical dividend (as paid before 10th December 2009) multiplied by the appropriate equity dilution factor:

(289/330) x (8/17) = 0.4121

From my tax files (year ended 31st March) , I can pull out the following dividend information:

TY2008: 6c x 0.4121 = 2.5c
TY2009: 12c x 0.4121 = 5.0c
TY2010: 16c x 0.4121 = 6.6c
TY2011: 5c x0.4121 = 2.1c
TY2012: 0c
TY2013: 2.2c
TY2014: 1.0c
TY2015F: 5.5c

Average that over 8 years and I get a net yield of 3.1cps. Based on a market price of 45c that gives a business cycle net yield of:

3.1 / 45 = 6.9%, or a gross yield of 6.9/0.67= 10.3%

I think that a gross yield of 9% is the sort of figure I would be looking for over the business cycle.

Based on that fair value for PGW, on a vield basis is: 45c x (10.3/9) = 51.5c

Blimey, I am starting to agree with Roger! And Noodles, I don't think any investment that has returned 10.3% gross return each year (averaged over 8 years) can be called a 'loser'.

SNOOPY

discl: hold PGW

[BIRMANBOY]

Being a dividend bloodhound, I am always looking for good dividend yields. However, reality should remind us that there is no long term history yet for reliability and consistency of dividends here. Four or five years of consistent dividends would be more desirable to my way of thinking. However I'm rooting for you all (in a metaphorical sense of course).
Thanks Noodles and you're dead right that I am extremely pleased with the final divvy of 2.5 cps which comfortably exceeded my expectations and the extra 1 cps special divvy was definitely not on my radar but it a very nice bonus.
I think this highlights an important attribute with PGW, something that many of us know already, but it shines the spotlight on the fact that the majority owner definitely likes high dividends.
I had a quick look at the balance sheet yesterday and it looks in good shape to me.
Broker forecasts are indicating 4.5 cps next year which is great but it wouldn't surprise me in the slightest if there's another 1 cps special divvy, I rate this as 50/50 chance depending if they have another good year of cash flow for a total of 5.5 cps but given the special is maybe 50/50 lets call it 5.0 cps :)

I'll have a more detailed look at the financials when I get more time but there's nothing leaping out of there that worries me. Abnormal items and tax look lower than the figures you've indicated Snoopy.

[winner69]

I'll have a more detailed look at the financials when I get more time but there's nothing leaping out of there that worries me. Abnormal items and tax look lower than the figures you've indicated Snoopy.

The Annual Accounts are really an annual reminder how much wealth has been destroyed over the years

Shareholders have put $606 million into the company (real cash at some point in time)

Its only worth $$270 million now (and don't kid me into believing that the $336 million difference has been dividends ....its noted as accumulated losses)

Amazing eh

So just as well that Mark has inherited the dog that has had a decent groom and got of rid of its fleas and is looking very sleek in a shiny healthy coat.

See things can be 'different this time'

[percy]

Being a dividend bloodhound, I am always looking for good dividend yields. However, reality should remind us that there is no long term history yet for reliability and consistency of dividends here. Four or five years of consistent dividends would be more desirable to my way of thinking. However I'm rooting for you all (in a metaphorical sense of course).

Four or five years of consistent dividends from PGW will mean the sp will adjust upwards and the yield downwards and you will have missed the excellents SP growth as well as the high yields.
In the meantime keep metaphoricaly rooting! lol.

[percy]

The Annual Accounts are really an annual reminder how much wealth has been destroyed over the years

Shareholders have put $606 million into the company (real cash at some point in time)

Its only worth $$270 million now (and don't kid me into believing that the $336 million difference has been dividends ....its noted as accumulated losses)

Amazing eh

So just as well that Mark has inherited the dog that has had a decent groom and got of rid of its fleas and is looking very sleek in a shiny healthy coat.

See things can be 'different this time'

Not so Winner69.Sir John Anderson and George Gould got the dog groomed and in good shape.Mark is now taking the dog to dog shows.and collecting the prizes.!! lol.

[Snoopy]

Abnormal items and tax look lower than the figures you've indicated Snoopy.


I calculated tax payable for FY2014 at $11.8m, based on NPBTx (1-0.28), which is assuming a 28% tax rate. The actual tax payable was $8.472m. How can a company continue to pay tax a rate lower than the NZ corporate rate? In the long term it can't. There are all sorts of reasons why the actual tax paid was less than my 'Continuing Profit' calculation in FY2014.

What I am implying (and now saying) is that going forwards PGW looks like it will be paying more tax than it does now. That isn't good for PGW shareholders.

SNOOPY

[Snoopy]

Four or five years of consistent dividends from PGW will mean the sp will adjust upwards and the yield downwards


Yes and that will happen after four or five years of consistent good years for the farmer, with the promise of more to come. And that will never happen. And Birmanboy will never join the PGW share register :-(.

SNOOPY

[winner69]

Four or five years of consistent dividends from PGW will mean the sp will adjust upwards and the yield downwards and you will have missed the excellents SP growth as well as the high yields.
In the meantime keep metaphoricaly rooting! lol.

Oh percy - I did say Mark had inherited the champion dog - Best in Show this year

Just didn't want to mention Sir John and George again ... think of the future

[Snoopy]

I had a quick look at the balance sheet yesterday and it looks in good shape to me.


I have looking at the PGW balance sheet and thinking, how could I hide some debt in there, natural cynic that I am?

One way to hide your debt is to not pay your bills. Of course I don't mean "don't pay any bills" as all your suppliers would stop doing business with you if you adopted that policy. But what about if you were just a bit slower in paying your bills?

Have a look at the "accounts payable and accruals" section of the balance sheet, under LIABILITIES, current. The accounts payable have gone up by $17.404m over the calendar year. If those 'extra bills' were suddenly paid, PGW would have to borrow the money to do so, putting an extra $17.404m on the company debt pile. What say you Roger, is there some 'financial engineering' going on here?

Now go up the balance sheet to the ASSETs, current and look at 'Trade and Other Receivables'. There you will find $18.908m more worth of 'Trade and Receivables' on the books compared to last year. If PGW collected that extra money, that would be cash that they could put towards reducing their borrowings. That would be a good thing, even if it is a bad thing that in reality they did not collect that money by balance sheet time.

So does not collecting their extra dues, balance out the fact that PGW are a bit slow paying their suppliers at the other end? Or does all this mean the company is just getting lazier?

SNOOPY

[percy]

Oh percy - I did say Mark had inherited the champion dog - Best in Show this year

Just didn't want to mention Sir John and George again ... think of the future

Winner69 I am sorry I misread your post.

[percy]

I have looking at the PGW balance sheet and thinking, how could I hide some debt in there, natural cynic that I am?

One way to hide your debt is to not pay your bills. Of course I don't mean "don't pay any bills" as all your suppliers would stop doing business with you if you adopted that policy. But what about if you were just a bit slower in paying your bills?

Have a look at the "accounts payable and accruals" section of the balance sheet, under LIABILITIES, current. The accounts payable have gone up by $17.404m over the calendar year. If those 'extra bills' were suddenly paid, PGW would have to borrow the money to do so, putting an extra $17.404m on the company debt pile. What say you Roger, is there some 'financial engineering' going on here?

Now go up the balance sheet to the ASSETs, current and look at 'Trade and Other Receivables'. There you will find $18.908m more worth of 'Trade and Receivables' on the books compared to last year. If PGW collected that extra money, that would be cash that they could put towards reducing their borrowings. That would be a good thing, even if it is a bad thing that in reality they did not collect that money by balance sheet time.

So does not collecting their extra dues, balance out the fact that PGW are a bit slow paying their suppliers at the other end? Or does all this mean the company is just getting lazier?

SNOOPY

Most probably the Water Dynamics acquisition.This would add to both current assets and current liabilities.

[Beagle]

Snoopy, It just means everyone in business is taking a little longer to pay their bills. Some on here are over-thinking this. Maybe Sunday is a good day to groom and walk their own dog(s) :)

[winner69]

Snoops me old mate

PGW Beneish M Score is -2.69 / -2.54 using the 8 variable model

if M > -2.22, the firm is likely to be a manipulator

[Beagle]

Announcement this morning - CEO bought 50,000 more shares last week at 42.5 cents. Looks like I was in very good company last week doing the same thing :)

What a lot of people don't realise is that Beef farmers have had a HUGE YEAR and there's no sign of it letting up anytime soon.

[Snoopy]

4Seasons feed limited was a joint venture in the supplementary liquid animal feed market, set up on 1st August 2012. Joint venture partners were PGW (50%) and International Nutritionals Limited (50%). International Nutritionals is in turn owned jointly by RD1 and the Australian company Wilmar Gavilion. On 31st May 2014, PGW sold out to its joint venture partners.

According to this article

https://agrihq.co.nz/article/pgg-wrightson-divests-shareholding-in-4seasons-feeds?p=214

the ultimate divestment of 4Seasons Feeds was part of PGWs grand plan.

The 2014 cashflow statement shows that proceeds from the sale of investments net of cash totalled $21.1m during the year. Those proceeds included 50% of Gramins PTY Limited and Australian company that was deregistered (assume zero cash inflow for that) and 20% of "Di Santi y Romualdo LTDA", a dairy farm auction and liquidation business partly owned in Uruguay. In FY2013 "Di Santi y Romualdo LTDA" PGWs share of that business contributed a loss of $0.427m to the bottom line.

Assuming all of the sale of investment cash inflow was for 4Seasons Feeds (that assumption should overestimate the value of 4Seasons Feeds if anything) , that means the total 4Seasons Feeds business was valued at $42.2m as at 31st May 2014. Profits earned for an 11 month period were $4.048m. So the sale was on a PE of:

$42.2m/ [$4.084m x (12/11)] = 9.5

The margin of this business was: $4.048m/$55.192m = 7.3%

Compare that to PGWs own margin of under 3%.

My question is this. Why did PGW agree to sell a relatively high margin core business at what seems to be a bargain price? Because of this their profit will be hit by over $2m a year going forwards. Yet the profit on the sale was a measly $4.848m (note 10). Next year the total declared profit at PGW will take a hit of over $6.8m because of this sale. Why did PGW agree to sell their investment in this company, when on the face of it, it seems to be exactly the sort of company they should be buying?

SNOOPY

[Snoopy]

Most probably the Water Dynamics acquisition.This would add to both current assets and current liabilities.


Percy, Note 23 contains all the information Mark did not release during the year when he purchased Water Dymanics. The fair value of Assets and Liabilities was $7.62m. Yet Mark only paid $6.38m. So we shareholders booked a 'profit' on this purchase of $1.24m Woo Hoo! Or is it too good to be true?

We learn that:
"If the significant acquisition of Water Dynamics and Aquaspec had occurred on 1 July 2013, the estimated Group revenue would have been $6.12 million higher and profit would have been $0.17 million higher for the year to 30 June 2014."

The margin on this new business is:

$0.17m / $6.12m = 2.8%

Makes interesting reading comparing that with the 4Seasons Feeds business we just got rid of doesn't it?

SNOOPY

[winner69]

What you think of that M-score Snoopy

[winner69]

Snoopy - do you ever look at the bottom half of the Statement of Comprehensive Income.

The bit that reduces the $42m profit to $38m (Comprehensive Income)

Some interesting big numbers in that bit

[Snoopy]

What you think of that M-score Snoopy


You mean the one that is calculated using the following formula?

-----

M = -4.84 + 0.92 DSRI + 0.528 GMI + 0.404 AQI + 0.892 SGI + 0.115 DEPI – 0.172 SGAI + 4.679 TATA – 0.327 LVGI

where

Days Sales in Receivables Index (DSRI). This measures the increase in receivables and revenues between two reporting periods (the average for well-run companies is 1.031, while those companies that have manipulated sales have an average value of 1.465%).
Depreciation Index (DEPI)
Sales Growth Index (SGI)
Leverage Index (LVGI)
Total Accruals to Total Assets (TATA)
Gross Margin Index (GMI)
Asset Quality Index (AQI)
Sales, General and Administrative Expenses Index (SGAI)

-------

It gave me a headache thinking about it! How can someone come up with a formula as complicated as that? But since you managed to somehow work through the calculation Winner, whcih were the parameters that pushed PGW towards the edge?

SNOOPY

[Snoopy]

Snoopy - do you ever look at the bottom half of the Statement of Comprehensive Income.

The bit that reduces the $42m profit to $38m (Comprehensive Income)

Some interesting big numbers in that bit


The true believers see what they want to see - $42m - dangled in front of them and swallow it. That $42m is not indicative of what might be achieved next year. The equity earnings from associates looks like it will drop to next to nothing next year, for example. The 'fair value adjustments' are usually a lottery so I disregard those. And as for the non-operating items. Unfortunately you can only sell 4Season's Feeds once.

But are you suggesting the below the profit for the year items might derail things going forwards?

A $5m gain on closing the gap on the defined benefit liability is all about the pension plan isn't it? I know PGW Pensions have been an issue for a while. But those schemes have been closed to new employees since 2000. PGW knocked $3m off their future liabilities by changing from a post tax to a pre tax discount rate when valuing the future payout streams. Good stuff. Who said accountant's can't add value? The deficit in the pension plan is still $13.5m. But that deficit is narrowing. If you believe in trends, the deficit is on track to being wiped out.

Foreign currency differences? They wiped out $7m, but I assumed this is something to do with the rising New Zealand dollar. I guess it can't keep rising forever!

Overall, no I am not overly concerned at the below Profit for the Year adjustments. I think of it more as an exercise in swings and roundabouts. Even if the roundabout falls over, I feel there is enough equity in PGW now to clean up any mess.

I am concerned with all those one offs above the highlighted profit for the year though!

SNOOPY

[Beagle]

The true believers see what they want to see - $42m - dangled in front of them and swallow it. That $42m is not indicative of what might be achieved next year. The equity earnings from associates looks like it will drop to next to nothing next year, for example. The 'fair value adjustments' are usually a lottery so I disregard those. And as for the non-operating items. Unfortunately you can only sell 4Season's Feeds once.

But are you suggesting the below the profit for the year items might derail things going forwards?

A $5m gain on closing the gap on the defined benefit liability is all about the pension plan isn't it? I know PGW Pensions have been an issue for a while. But those schemes have been closed to new employees since 2000. PGW knocked $3m off their future liabilities by changing from a post tax to a pre tax discount rate when valuing the future payout streams. Good stuff. Who said accountant's can't add value? The deficit in the pension plan is still $13.5m. But that deficit is narrowing. If you believe in trends, the deficit is on track to being wiped out.

Foreign currency differences? They wiped out $7m, but I assumed this is something to do with the rising New Zealand dollar. I guess it can't keep rising forever!

Overall, no I am not overly concerned at the below Profit for the Year adjustments. I think of it more as an exercise in swings and roundabouts. Even if the roundabout falls over, I feel there is enough equity in PGW now to clean up any mess.

I am concerned with all those one offs above the highlighted profit for the year though!

SNOOPY

You're making my head hurt especially with post #3475. For goodness sake do you like the stock at 45.5 cents or not ? A simple and succinct answer will suffice :)

[Snoopy]

For goodness sake do you like the stock at 45.5 cents or not ? A simple and succinct answer will suffice :)


I understand why you would want a sound byte of my own valuation of PGW Roger. But as you will soon see, a glib answer is not useful because the structure of PGW is complicated. My own philosophy is to study a share in the simplest way that will give me an investment answer, but no simpler. IMO, the simplest way you can break PGW down is into three parts:

1/ An 'Agriservices' arm, using sales reps and based around the rural supplies stores you see dotted all over New Zealand.
2/ An 'Agritech' arm that is principally supplying seeds to boteh the Australian and New Zealand markets.
3/ A South American arm with a beachhead in Uruguay, which is the best medium term growth prospect for the company.

You might think that all of these business units would be correlated in terms of sales and sales trends. Unfortunately they are not, which is what causes all the headaches for analysts trying to get to the bottom of PGWs performance. IMO the only way to get a good view on where PGW is going is to regard the above three as separate businesses and evaluate them accordingly. This is what I am going to do next.

SNOOPY

[Snoopy]

1/ An 'Agriservices' arm, using sales reps and based around the rural supplies stores you see dotted all over New Zealand.



Mark 'the Deud' said

"PGG Wrightson Ltd* (PGW) today announced its strongest operating result for several years with a 28% uplift in Operating EBITDA"

As far as Agriservices go, this is an understatement. Since PGG Wrightson formed as a merged entity in 2007, this is easily the best result ever. The question going forwards is, can Agriservices go to another new level?

In the past PGW has used its finance division as a point of difference. So it was interesting to me to see this record divisional result, despite the finance division being sold to Heartland. The previous year's result disclosed Heartlands finance commission, and that disclosure gave a window as to how important PGW Finance (now Heartland owned) is important to PGW Agriservices. This information is missing in the FY2014 results disclosure so far.

I would guess that farmers, sensible chappies and chapesses that they are, would choose the lowest cost way to fund their farm running costs. When annual cashflow is good, that probably means taking a seasonal mortgage out on their land. This is bad for Heartland/PGW Finance because they are getting out of financing property. But when the season is not so good and farm prices are not so good, PGW Finance might indeed be the logical finance stop for farmers.

I don't think there is much doubt that FY2015 will be tougher for farmers that FY2014. But will PGW Finance be able to provide the competitive finance that has carried PGW Agriservices through poor years in the past? I think the jury is still out on that. My overall estimate is that Agriservices will deliver a lower result in FY2015, knocking $2m off PGWs earnings. $2m/754.9m shares = 0.26c eps reduction.

SNOOPY

[Snoopy]

2/ An 'Agritech' arm that is principally supplying seeds to both the Australian and New Zealand markets.


Agritech turned in its best result since FY2009. I use my own apportioning methods to get an after tax profit for Agritech as a division. This includes looking at the South American results separately (see later post). So in my analysis Agritech is strictly an Australian and New Zealand concern.

For 2014 I estimate Agritech earned $13.3m on $437m of sales. This is a margin of:

$13.3m / $437m = 3% ($13.3m/754.9m = 1.8cps)

For 2009 I estimated Agritech earned $15.9m on only $352m of sales. This is a margin of:

$15.9m / $352m = 4.5% ($15.9m/754.9m = 2.1cps based on today's number of PGW shares issued)


The comparison is not strictly apples with apples, because since FY2009 PGW has added all sorts of (struggling) Australian seed businesses to try and bolster their presence in the dry continent. There is no breakdown of profitability in terms of Australia and New Zealand in the annual results.

Australian sales are quoted though, and these make an interesting comparison.

FY2014: $NZ84.2m x 0.9 = $A75.8m

FY2009: $NZ67.1m x 0.83 = $A55.7m

So sales have jumped significantly in five years (+36%) but profitability for Agritech overall is still down (-17%). I guess some of that might be attributed to rollover effects of the recent Australian droughts? Barring more droughts, I believe that we will continue to see an improvement in Agritech to approach that FY2009 high point. I would hope that PGW could add around 0.2cps in NPAT because of growth in Agritech.

SNOOPY

[Snoopy]

3/ A South American arm with a beachhead in Uruguay, which is the best medium term growth prospect for the company.


Again there has been a slight shift in the reporting details for FY2014. Profitability figures for South America are no longer quoted. I am always suspicious when detail like this disappears from a report, and ask the question:

"What have management got to hide?"

Note 4 does report the revenues though: down from $NZ118.674m (FY2013) to $NZ110.880m (FY2014). Uruguay and ultimately Brazil has always been the add on with potential. South America is of course small, only 10% of sales and rather less than that in profits, in the grand scheme that is PGW now. But IMO those South American sales figures are a disappointing result. I predict PGW will continue to 'stumble along' in South America, as it has for ten years, with no increase in eps coming from there in FY2015. With the growth engine stalled, that is enough to remove any growth premium for the PGW share price going forwards IMO.

SNOOPY

[Snoopy]

For goodness sake do you like the stock at 45.5 cents or not ? A simple and succinct answer will suffice :)

Stir in the three ingredients above and I am predicting a lower core profit for PGW in FY2015.

I estimate core earnings to be around $37.7m in FY2014. $37.7m / 754.9m = 5.0cps.

5.0 -0.26 + 0.2 = 4.94cps NPAT is my pick, assuming the weather remains favourable.

At 42c, this is a PE of 42/4.94= 8.5. Mr Market looks about right on a long term PE basis.

If all that profit is paid as a dividend though, the net yield for FY2015 will be 5/42 = 11.9%.(gross yield 17%).

Even given the vagueries of weather dependent earnings, I would argue that is too high. That means the share price needs to appreciate to reduce the net yield to some 9%.

42c x (11.9/9 0) = 55c

Of course this will require interest rates to stay where they are now for a year (unlikely). Maybe a middle path is to halve the difference detween my two valuation methods?

(42c +55c)/2= 48.5c as my valuation target.

Happy?

SNOOPY

[Beagle]

Thanks for all your Snooping Snoopy. I appreciate your insights and in depth knowledge of the PGW.
I agree its a good hold at current level's and arguably N.Z's best yield for dividend hounds. The current spell of protracted fine weather around the country is exactly the medicine the rural sector needed after what feels like a long cold winter. Its hard to find sensible value on the NZX and realistic price earnings ratio's. Now we are done with sorting out that PGW is a good hold all we have to worry about is what to spend that dividend on :)

[Snoopy]

If all that profit is paid as a dividend though, the net yield for FY2015 will be 5/42 = 11.9%.(gross yield 17%).

Even given the vagueries of weather dependent earnings, I would argue that is too high. That means the share price needs to appreciate to reduce the net yield to some 9%.

42c x (11.9/9 0) = 55c



Oh dear I seem to have caught the same disease that I accused everyone else on this thread as having- dividend fever!

Please go back to my post 3457 for a sensible dividend valuation calculation!

I think PGW going ex-dividend and the anticipated arrival of that 3.5c dividend cheque in my bank account is what caused my 'infection'. When you imagine these dividend cheques going into your bank account it is very easy to focus on the short term. I can well believe that such payments will continue indefinitely into the future too, just based on 'current account lubrication'. One year out I might be right. But we all know deep down farming is a cyclical business and the endless harvests of high dividends will, must, come to an end.

From 3457

-----

Average that over 8 years and I get a net yield of 3.1cps. Based on a market price of 45c that gives a business cycle net yield of:

3.1 / 45 = 6.9%, or a gross yield of 6.9/0.67= 10.3%

I think that a gross yield of 9% is the sort of figure I would be looking for over the business cycle.

Based on that fair value for PGW, on a vield basis is: 45c x (10.3/9) = 51.5c

------

Now redoing my valuation averaging between the two methods

(42c +51.5c)/2= 47.0c as my valuation target.

SNOOPY

[Beagle]

Okay, completely understood...large dividends can be known to have addictive properties, not dissimilar to alcohol so all is forgiven and now please go and get your snout into the PGW presentation.

[Snoopy]

please go and get your snout into the PGW presentation.

Um, what presentation is that?

SNOOPY

[winner69]

Snoopy- not manipulation but all about the good story they want you to believe.

Gaynor says market response to PGW a bit muted because so many stories about the actual result going around has confused everybody.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11316404

Extract -

PGG Wrightson, which was incorporated in 1900, reported a spectacular upturn in earnings and is paying its first full-year dividend since 2009.

Investor response to the result has been muted, mainly because the company's accounting presentations are inconsistent and extremely difficult to decipher.

The company's June 2014 net profit after tax has been reported as follows:

• PGG Wrightson's media release states that net earnings increased from $14.7 million for the June 2013 year to $42.3 million for the latest period.

• The NZX one-page summary stated that net earnings increased from $19.8 million to $42.3 million.

• The NZ IFRS compliant financial statements shows that net earnings went from a loss of $303.7 million in the 2012/13 year to a net profit after tax of $38.7 million for the latest period.

• A broker report, using normalised net earnings, shows that net earnings rose from $24.6 million to $28.7 million over the same period.

These figures highlight the huge differences between adjusted, normalised, underlying and NZ IFRS-based earnings. These figures can be extremely confusing for investors because they allow companies to emphasise the highest profit figure for the latest reporting period and the lowest one from the previous corresponding period. As a consequence, the year on year percentage increase can be made to look extremely impressive.

[Snoopy]

Snoopy- not manipulation but all about the good story they want you to believe.

Gaynor says market response to PGW a bit muted because so many stories about the actual result going around has confused everybody.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11316404


This is why I put a lot of time into developing my own model for PGW Winner. Even though I am still underwater on my PGW investment in capital terms, applying my model has meant that I have gone from a situation where I had lost half of my capital to almost breaking even. It has been a huge turnaround.



Extract -

PGG Wrightson, which was incorporated in 1900, reported a spectacular upturn in earnings and is paying its first full-year dividend since 2009.

Investor response to the result has been muted, mainly because the company's accounting presentations are inconsistent and extremely difficult to decipher.

The company's June 2014 net profit after tax has been reported as follows:

• PGG Wrightson's media release states that net earnings increased from $14.7 million for the June 2013 year to $42.3 million for the latest period.

• The NZX one-page summary stated that net earnings increased from $19.8 million to $42.3 million.

• The NZ IFRS compliant financial statements shows that net earnings went from a loss of $303.7 million in the 2012/13 year to a net profit after tax of $38.7 million for the latest period.



The IFRS compliant report contained the effect of the goodwill writedown, which is not relevant in looking at how PGW is performing on an operating basis.



• A broker report, using normalised net earnings, shows that net earnings rose from $24.6 million to $28.7 million over the same period.


The broker report looks the most credible. The $42.5m figure most quoted by PGW contains all kinds of one offs.



These figures highlight the huge differences between adjusted, normalised, underlying and NZ IFRS-based earnings. These figures can be extremely confusing for investors because they allow companies to emphasise the highest profit figure for the latest reporting period and the lowest one from the previous corresponding period. As a consequence, the year on year percentage increase can be made to look extremely impressive.


In fairness I think looking at the growth rate is completely the wrong way of going about analysing PGW. PGW is not really a growth company, as any growth shoots are too small to make an impact on the big picture. If you think of PGW as a dividend payer only, and look over a business cycle, and use a PE multiple of no more than 10 at the top, that will give the best view as to whether or not you are getting a bargain buying PGW on the market today.

SNOOPY

[winner69]

This is why I put a lot of time into developing my own model for PGW Winner. Even though I am still underwater on my PGW investment in capital terms, applying my model has meant that I have gone from a situation where I had lost half of my capital to almost breaking even. It has been a huge turnaround.



The IFRS compliant report contained the effect of the goodwill writedown, which is not relevant in looking at how PGW is performing on an operating basis.



The broker report looks the most credible. The $42.5m figure most quoted by PGW contains all kinds of one offs.



In fairness I think looking at the growth rate is completely the wrong way of going about analysing PGW. PGW is not really a growth company, as any growth shoots are too small to make an impact on the big picture. If you think of PGW as a dividend payer only, and look over a business cycle, and use a PE multiple of no more than 10 at the top, that will give the best view as to whether or not you are getting a bargain buying PGW on the market today.

SNOOPY

So the only real number which is consistently reported is Free Cash Flow

FY14 it was $36.3m which was down r4om $41.9m FY13

How much of the $36m being paid out in dividends?

[percy]

So the only real number which is consistently reported is Free Cash Flow

FY14 it was $36.3m which was down r4om $41.9m FY13

How much of the $36m being paid out in dividends?

May pay to use brokers' research,as they seem to stick with the same "apples."

[RGR367]

May pay to use brokers' research,as they seem to stick with the same "apples."

Looks like the same enthusiasm is now being shared by ASB as this stock will be once more covered with margin lending of 50% starting tomorrow.

[Agrarinvestor]

I expect 30% plus within 2 weeks. A turnaround is possible.

------------------------------------------------------------------


Agria Corporation to Report Fiscal Year 2014 Financial Results on Thursday, September 11, 2014



BEIJING, CHINA--(Marketwired - Sep 2, 2014) - Agria Corporation (NYSE: GRO) (the "Company" or "Agria") today announced that the Company plans to release financial results for the year ended June 30, 2014 on Thursday, September 11, 2014, before the U.S. market open. The Company will discuss its financial results and outlook in a conference call on September 11, 2014 at 8:00 a.m. Eastern Time/8:00 p.m. Beijing time. The call will be hosted by Mr. Patrick Tsang, Chief Financial Officer, and Mr. Kean Seng U, Head of Corporate and Legal Affairs.


Investors interested in participating in the live call should dial +1 (913) 312-0982 and enter passcode 8392933. A simultaneous live webcast will be available on the Company's website atwww.agriacorp.com (http://www.agriacorp.com/). A replay of the call will be available either via telephone or webcast until September 18, 2014. The telephone replay can be accessed by dialing +1 (858) 384-5517 and entering passcode 8392933. The webcast replay can be accessed in the Investor Center on the Company's website.

[Beagle]

I think we've built a new base at circa 40-41 cents ex divvy and with the exceptional forecast dividend yield for 2015 and beyond I bought more this morning. No sense leaving too much money sitting in a call account.

[Agrarinvestor]

Good Night ?

Agrias results are available:

Financial Highlights for the fiscal year ended June 30, 2014:


Consolidated revenue was $1.0 billion for the fiscal year ended June 30, 2014, a 9% increase from $940.2 million for the fiscal year ended June 30, 2013. All business segments contributed to revenue growth, with strong performance in the Crop Protection, Nutrients and Merchandise segment and the Rural Services segment.
Operating profit was $34.7 million, representing an increase of 62% from $21.4 million in fiscal 2013. Operating profit growth was mainly driven by increased gross profit.
Net profit was $26.1 million, compared to net loss of $199.4 million in fiscal 2013. The turnaround was primarily due to the absence of material impairment charges in 2014, as compared to the one-time goodwill impairment charge of $140.8 million and the provision for impairment of land use rights and non-current prepayments of $57.0 million made in 2013.
Net profit attributable to shareholders was $5.9 million, compared to net loss attributable to shareholders of $137.2 million in fiscal 2013.

Mr.
Alan Lai, Agria's Executive Chairman, commented, "We continue to pursue our vision of establishing Agria as a major global agricultural leader. Our leadership positions in key product categories in Asia-Pacific and South America are the foundation for future growth, as we continue to focus on our global integration and strategies. Our improved results this year indicate the strength of this foundation. Solid revenue growth and improved profitability are signals that our products meet the needs of farmers and ranchers within our current footprint. We are confident that we can realize global synergies as we expand into new growing regions around the world."Mr. Lai continued, "During the year we re-organized the business to focus on key product categories that we intend to offer globally over time. Each segment demonstrated revenue growth and greatly improved operating profit. Within each segment, we grew by focusing on better meeting customer needs, developing new value-added technologies, and nurturing a passionate and technically sound team with global vision and execution capabilities. These timeless business values define Agria and will be the basis of our success for years to come."
Business Highlights
The Company experienced growth across all business segments during the fiscal year ended June 30, 2014. Seed and Grain revenue grew 3% with operating profit up 22%. Crop Protection, Nutrients and Merchandise revenue grew 14% with operating profit up 22%. Rural Services revenue grew 12% with operating profit up 34%.
The following table summarizes the results of business segments for the fiscal year ended June 30, 2014.






Revenue

Operating Profit





2014

2013

2014

2013





US$'000

US$'000

US$'000

US$'000



Seed & Grain

384,930

375,096

23,523

19,226



Crop Protection, Nutrients & Merchandise

406,327

357,315

23,185

18,977



Rural Services

232,314

207,783

21,794

16,243



Corporate

-

-

(33,850
)
(33,069
)


Total

1,023,571

940,194

34,652

21,377


As of June 30, 2014, cash and cash equivalents were $14.0 million. Total debt was $118.0 million, representing a decrease of 30% since June 30, 2013.
Seed and Grain
Seed and Grain generated revenue of $384.9 million and operating profit of $23.5 million in fiscal year 2014, representing year-over-year increases of 3% and 22% respectively. This segment contributed 37% to consolidated revenue. Revenue growth was driven by a 27% increase in grain sales and a 17% increase in revenue from seeds in New Zealand. Favorable trading conditions in New Zealand resulted in a greater volume sold of proprietary grasses, maize, and Cleancrop™ Brassica system. In Australia, a higher volume of proprietary products was sold. The higher volumes combined with revised discounts and rebate programs resulted in greater overall profitability.
Crop Protection, Nutrients, and Merchandise
Crop Protection, Nutrients and Merchandise generated revenue of $406.3 million and operating profit of $23.2 million, representing year-over-year increases of 14% and 22% respectively. This segment contributed 40% to consolidated revenue. Improved performance resulted from initiatives to develop better technical expertise and customer service skills within the sales force, combined with enhancements to logistics systems.
Strong sales growth also reflected higher confidence in the dairy sector, increased investment by farmers in fruit production, and market share growth in key value-added categories related to agronomy inputs, in particular agricultural chemicals and fertilizers.
Rural Services
Rural services generated revenue of $232.3 million and operating profit of $21.8 million, representing year-over-year increases of 12% and 34% respectively. This segment contributed 23% to consolidated revenue.
Due to the completion of the Vietnam export contract last year, Livestock revenue decreased by 20% to $63.8 million. Despite a decline in the volume of sheep sold, average unit price increased from the previous year. The Company increased its dairy market share, a result of ongoing efforts to improve the quality and capacity of the livestock representative force. Finally, cattle and dairy prices on average were higher than the previous year, and remained firm throughout the year. This mix of impacts netted out to increased Livestock operating profit.
Other sectors in Rural Services with notable revenue growth include Irrigation and Pumping (up 44%), Wool (up 31%), and Real Estate (up 27%).
Irrigation and Pumping operating profit grew by 34%. The Company expanded its presence across all of New Zealand via the acquisition of a complementary irrigation and pumping business. Results were also enhanced by strong demand created by wind damage experienced by many clients in New Zealand's Canterbury region.
Real Estate experienced an exceptionally good year with operating profit up 187%, due mainly to successful transactions for a number of large farms and a farm portfolio. Activity was driven by strength in the dairy sector. Agria's agent force expanded during the year, and demonstrated better productivity due to improved knowledge and experience.
Higher revenue from Wool was driven by strong growth in export sales and higher wool price.
New Reporting Conventions Reflect Global Operations
With this report, Agria Corporation changed the presentation currency of its consolidated financial statements from Chinese Renminbi ("RMB") to the U.S. dollar. The Company believes that the U.S. dollar is more appropriate than the Chinese RMB for presenting its performance and financial position, due to the global nature of its operations, the worldwide recognition of the U.S. dollar, and the greater ease in making direct comparisons with industry peers and other US-listed companies. Agria has evolved from a China-based company into a group with global reach. The Company has a presence in various countries including New Zealand, Australia, Uruguay, Brazil and Argentina, as well as exposure to customers in 47 countries across every continent through its international trading and seed multiplication businesses.
The consolidated financial statements of the Company for the fiscal years ended June 30, 2013 and 2014 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board("IASB").

Conference Call
Agria will discuss its financial results and outlook in a conference call on September 11, 2014 at 8:00 a.m. Eastern Time/8:00 p.m.Beijing time. The call will be hosted by Mr.
Patrick Tsang, Chief Financial Officer, and Mr. Kean Seng U, Head of Corporate and Legal Affairs. Investors interested in participating in the live call should dial +1 (913) 312-0982 and enter passcode 8392933. A simultaneous live webcast will be available on the Company's website at www.agriacorp.com (http://www.agriacorp.com/). A replay of the call will be available either via telephone or webcast until September 18, 2014. The telephone replay can be accessed by dialing +1 (858) 384-5517and entering passcode 8392933. The webcast replay can be accessed in the Investor Center on the Company's website.

[Snoopy]

Good Night ?

Agrias results are available:



Thanks for that Agrainvestor. There is detail in that which was not released in the PGW result. So good to see that come out. China was not specifically mentioned this year. So maybe Agria have now publically admitted they are really only a proxy way of holding PGW shares, using a vehicle listed in the USA?

The reporting currency has now been standardised as USD. NZ shareholders should note that the NZD/USD exchange rate has gone from NZD1 = USD 0.7744 (30th June 2013) to NZD1 = USD 0.8802 (30th June 2014). That means that 13.6% of the prior comparative period 'growth' reported from NZ operations by Agria was due to the NZD/USD exchange rate appreciation over the year.

Converting the dividends received by Agria from PGW during the year at the prevailing exchange rate, those amounted to USD 9.279m. Net profit for all of Agria was USD 5.9m. So it does look like the corporate structure that is Agria is a value losing proposition for Agria shareholders. Such shareholders would continue to be better off owning PGW shares directly IMO.

SNOOPY

[Beagle]

nice move Rodger.
All looks very good for PGW for the next year and given the NZX market IMHO mostly offers fully valued investments I believe PGW, with a very nice supporting divi, could be trading at 50 cps in the next few months.
The lowering of the $ is giving wool, sheep meat and beef farmers a big lift in income at the moment.

Thanks mate. The outlook for the dollar is probably for further easing so this should provide further support. Not sure we'll see 50 cents any time soon but with the excellent dividend yield holders can afford to be patient :)

[Beagle]

positive outlook, huge yield and very low PE..... so I can see plenty of buying pressure coming.
Don't know if you are a chartist but a consolidation at these levels will create a cup and handle pattern which is very bullish.

More FA than TA but I like it a lot when both analysis methodologies line up. You PM box is full mate.

[Agrarinvestor]

Thanks for that Agrainvestor. There is detail in that which was not released in the PGW result. So good to see that come out. China was not specifically mentioned this year. So maybe Agria have now publically admitted they are really only a proxy way of holding PGW shares, using a vehicle listed in the USA?

The reporting currency has now been standardised as USD. NZ shareholders should note that the NZD/USD exchange rate has gone from NZD1 = USD 0.7744 (30th June 2013) to NZD1 = USD 0.8802 (30th June 2014). That means that 13.6% of the prior comparative period 'growth' reported from NZ operations by Agria was due to the NZD/USD exchange rate appreciation over the year.

Converting the dividends received by Agria from PGW during the year at the prevailing exchange rate, those amounted to USD 9.279m. Net profit for all of Agria was USD 5.9m. So it does look like the corporate structure that is Agria is a value losing proposition for Agria shareholders. Such shareholders would continue to be better off owning PGW shares directly IMO.

SNOOPY

Agria Market Capitalisation:

Market Cap:
74.77M



PGW Market Cap:



Market Cap:
313.26M




Agria owns 50.01% and has the Control. Therefore I see Agria as a fourbagger. The China domestic Revenue we see in the 8K, next week.

[Agrarinvestor]

Will the insurrance pay the cost ?

[BlackPeter]

Will the insurrance pay the cost ?

A bit more context to your question could help answering it ... however, if you are referring to the cow poisoning linked to cows probably feeding on too much brassica foilage (check: http://www.stuff.co.nz/southland-times/10492933/Mild-winter-likely-cause-of-cow-deaths), than based on the provided information do I not see why there would be any liability for PGW.

Its just a fact of life that some parts of some food plants are poisonous - and it is unfortunate that mild weather (and unaware farmers) gave the stock access to brassica with an abundance of leaves.

Just an example ... imagine you are buying potatoes, store them afterwards too warm and than eat the shoots growing out of them. You will get sick (or even might die). However - is this the fault of the store which supplied the potatoes in the first place? Same thing.

[Agrarinvestor]

A bit more context to your question could help answering it ... however, if you are referring to the cow poisoning linked to cows probably feeding on too much brassica foilage (check: http://www.stuff.co.nz/southland-times/10492933/Mild-winter-likely-cause-of-cow-deaths), than based on the provided information do I not see why there would be any liability for PGW.

Its just a fact of life that some parts of some food plants are poisonous - and it is unfortunate that mild weather (and unaware farmers) gave the stock access to brassica with an abundance of leaves.

Just an example ... imagine you are buying potatoes, store them afterwards too warm and than eat the shoots growing out of them. You will get sick (or even might die). However - is this the fault of the store which supplied the potatoes in the first place? Same thing.

I have bought more Agria the last days and was shocked after i read the press release. Later i saw that the message was from Friday.
Do you really fead it to cows ?
In Germany it is a delicate (http://dict.leo.org/#/search=delicate&searchLoc=0&resultOrder=basic&multiwordShowSingle=on)food (http://dict.leo.org/#/search=food&searchLoc=0&resultOrder=basic&multiwordShowSingle=on)

http://api.ning.com/files/yubMGCMk7fqgJIjVJ1lF8jTLOu7o1qKE1C4CQWUB2HPHYAfrYy qdmN6rbAUYhtOkhqkNF1YqeSJj6hOsJeHoGUdE7aJnstXG/Fotolia_11763937_XS_gruenkohl.jpg?width=250

thanks and best regards

Ralf

[BlackPeter]

I have bought more Agria the last days and was shocked after i read the press release. Later i saw that the message was from Friday.
Do you really fead it to cows ?
In Germany it is a delicate (http://dict.leo.org/#/search=delicate&searchLoc=0&resultOrder=basic&multiwordShowSingle=on)food (http://dict.leo.org/#/search=food&searchLoc=0&resultOrder=basic&multiwordShowSingle=on)

http://api.ning.com/files/yubMGCMk7fqgJIjVJ1lF8jTLOu7o1qKE1C4CQWUB2HPHYAfrYy qdmN6rbAUYhtOkhqkNF1YqeSJj6hOsJeHoGUdE7aJnstXG/Fotolia_11763937_XS_gruenkohl.jpg?width=250

thanks and best regards

Ralf

Hi Ralf, this might divert from the theme of the main thread ... but while some brassica are "delicate food", not all of them are. The best translation for swedes (a plant from the brassica family) would be "Futterrueben". Haven't seen these yet as delicatesse on German tables (maybe after the war?).

[Agrarinvestor]

Hi Ralf, this might divert from the theme of the main thread ... but while some brassica are "delicate food", not all of them are. The best translation for swedes (a plant from the brassica family) would be "Futterrueben". Haven't seen these yet as delicatesse on German tables (maybe after the war?).


Yes, thanks a lot. "Futterrueben" is for cows, that sounds familar. :t_up:

[Agrarinvestor]

>>New Zealand dollar sinks after central bank sellshttp://l.yimg.com/os/152/2012/04/21/image001-png_162613.png (http://www.ap.org/) By NICK PERRY7 hours ago





 (https://www.tumblr.com/share/link?url=http%3A%2F%2Ffinance.yahoo.com%2Fnews%2Fz ealand-dollar-falls-central-bank-040528529.html%3Fsoc_src%3Dmediacontentstory&description=WELLINGTON%2C%20New%20Zealand%20%28AP% 29%20%E2%80%94%20The%20New%20Zealand%20dollar%20sa nk%20Monday%20after%20the%20central%20bank%20discl osed%20it%20conducted%20its%20biggest%20sell-off%20of%20the%20currency%20in%20seven%20years%20t o%20lower%20an%20exchange%20rate%20that%20is%20squ eezing%20exporters.&name=New%20Zealand%20dollar%20sinks%20after%20cent ral%20bank%20sells)

 (https://www.facebook.com/dialog/feed?app_id=90376669494&redirect_uri=http%3A%2F%2Ffinance.yahoo.com%2F_xhr %2Fmediacontentsharebuttons%2Fpostshare%2F%3Fsrc%3 Dfb&link=http%3A%2F%2Ffinance.yahoo.com%2Fnews%2Fzeala nd-dollar-falls-central-bank-040528529.html%3Fsoc_src%3Dmediacontentstory&picture=http%3A%2F%2Fl.yimg.com%2Fbt%2Fapi%2Fres%2 F1.2%2F81I5U991YW6EEaB2Cjd58g--%2FYXBwaWQ9eW5ld3M7cT04NTt3PTYwMA--%2Fhttp%3A%2F%2Fl.yimg.com%2Fos%2Fmit%2Fmedia%2Fm% 2Fsocial%2Fimages%2Fsocial_default_logo-1481777.png&name=New+Zealand+dollar+sinks+after+central+bank+s ells&description=WELLINGTON%2C+New+Zealand+%28AP%29+%E2 %80%94+The+New+Zealand+dollar+sank+Monday+after+th e+central+bank+disclosed+it+conducted+its+biggest+ sell-off+of+the+currency+in+seven+years+to+lower+an+exc hange+rate+that+is+squeezing+exporters.&display=popup&show_error=yes)

 (https://twitter.com/share?text=New+Zealand+dollar+sinks+after+central+ bank+sells&url=http%3A%2F%2Ffinance.yahoo.com%2Fnews%2Fzealan d-dollar-falls-central-bank-040528529.html%3Fsoc_src%3Dmediacontentstory&via=YahooFinance)

 (http://finance.yahoo.com/_xhr/mtf_popup/?url=http%3A%2F%2Ffinance.yahoo.com%2Fnews%2Fzeala nd-dollar-falls-central-bank-040528529.html%3Fsoc_src%3Dmediacontentstory&site=finance&region=US&lang=en-US&content_id=72a40334-6286-35e0-b702-7944127e1400&alias_id=story%3Dzealand-dollar-falls-central-bank-040528529)






[*=center]
[*=center]
[*=center]










WELLINGTON, New Zealand (AP) — The New Zealand dollar sank Monday after the central bank disclosed it conducted its biggest sell-off of the currency in seven years to lower an exchange rate that is squeezing exporters.<<

Is this a good development für PGW ?

[see weed]

PGW looking good , plus good yield, and div. last week. Very tempted to buy some more.

[winner69]

PGW looking good , plus good yield, and div. last week. Very tempted to buy some more.

And the man at the ASM says we probably make more money this tell ....we tell you how much in Feb when release 1/2 year

[Beagle]

PGW looking good , plus good yield, and div. last week. Very tempted to buy some more.

I was too but then saw a lot of people had the same idea. I'll wait for the noise to die down and then sneak in like a hungry cat at night.

[percy]

I was too but then saw a lot of people had the same idea. I'll wait for the noise to die down and then sneak in like a hungry cat at night.

You may not be alone!! lol.

[Beagle]

I'll scare them off with a huge MEOW :D

[Beagle]

You may not be alone!! lol.

You're not wrong mate, buyers are like a whole pack of hungry beagles at the food bowl completely ignoring my cat-like stalking tactics. Bugger !!
Edit, make that two packs.:ohmy:

[Snoopy]

PGW looking good , plus good yield, and div. last week. Very tempted to buy some more.

I think I must have been reading a different AGM presentation to what some of you read.

Not quite sure why the PGW price has risen since the AGM. Yes the first quarter went well. But 'The Dewd' said not enough time had elapsed to provide any profit guidance for the year. Those who have been following the weather would have known that farmers have had a good three months. No dividend is due. And even when it comes in some five months time, the interim will be small due to the seasonal nature of PGWs business.

Perhaps it is just a relief rally because nothing seriously went wrong, (except for all those cattle dying from PGW supplied swede seed). Have others only just realised PGW isn't strongly coupled to the milk price? No mention of their finance partner Heartland either, apart from the fact they were pleased to be uncoupled from them.

SNOOPY

discl: PGW holder, but haven't been sniffing around the PGW feeding dish recently.

[see weed]

I was too but then saw a lot of people had the same idea. I'll wait for the noise to die down and then sneak in like a hungry cat at night.

Well I just bought some more today. What the h..l , just can't get my hand off buy button.

[winner69]

I think I must have been reading a different AGM presentation to what some of you read.

Not quite sure why the PGW price has risen since the AGM. Yes the first quarter went well. But 'The Dewd' said not enough time had elapsed to provide any profit guidance for the year. Those who have been following the weather would have known that farmers have had a good three months. No dividend is due. And even when it comes in some five months time, the interim will be small due to the seasonal nature of PGWs business.

Perhaps it is just a relief rally because nothing seriously went wrong, (except for all those cattle dying from PGW supplied swede seed). Have others only just realised PGW isn't strongly coupled to the milk price? No mention of their finance partner Heartland either, apart from the fact they were pleased to be uncoupled from them.

SNOOPY

discl: PGW holder, but haven't been sniffing around the PGW feeding dish recently.

The paper said the head honcho said they were going to earn more this year than last year.

[see weed]

The paper said the head honcho said they were going to earn more this year than last year.

If they keep that up, then Agria might make a take over offer of 48c to 50c lol.

[Beagle]

The funny thing about Beagle's is they can sniff a feed a mile off. We had one for over a decade and Kelly was absolutely addicted to food, she lived for it.
Once she was way down the other end of the house in the lounge closed off with bi-fold double doors and I was down the other end of the house in my bedroom with the door closed and opened a pack of toffee-pops to scoff a few with my cup of milo at bed time and about thirty seconds later there was a scratching at the door, She'd smelt the toffee pops through two sets of closed off doors and a fifteen metre gap down the hallway !!
Another time I came back from a trip and had a chocolate bar that was un-opened in my closed suitcase. She snuck her way into our bedroom, opened the suitcase with her teeth, used her snout to worm her way through everything else in the suitcase down to the bottom, got the chocolate bar out, opened it by scratching with her paws ands scoffed the lot !!

By now, if not long before, LOL you will be wondering what possible relevance has this got to do with PGW ? Well I reckon the yield hounds are really hungry for yield and its crossed their mind that if PGW can pay a 5.5 cps divvy last year and if profit is a little higher they can do so again. We all know Agria love their full share of divvy's so a 5.5 cent fully imputed divvy really satisfies those hounds on a 44 cent SP with a whopping 17.4% gross yield, (5.5 / 44) / 0.72
10 times the normal daily volume today says I ain't the only one that loves a good divvy feed :D
Kelly got nice and fat and contented off those glutinous feeds and I reckon more than a few people, including myself, would like to follow suit :)
(Before anyone says chocolate is really bad for dogs, I know that already but she was tenacious to say the least).

[Beagle]

snaps must be part beagle then as I smelt this one coming a month ago........ post 3265

Good sniffing skills there mate. I snapped up a few myself but its never enough with hindsight so my tail is only wagging at half speed :D

Snoopy - I reckon it is a relief rally. Dairy has had such a pummelling I guess punters were a bit worried about the general contagion effect on the whole farming sector.

[noodles]

By now, if not long before, LOL you will be wondering what possible relevance has this got to do with PGW ? Well I reckon the yield hounds are really hungry for yield and its crossed their mind that if PGW can pay a 5.5 cps divvy last year and if profit is a little higher they can do so again. We all know Agria love their full share of divvy's so a 5.5 cent fully imputed divvy really satisfies those hounds on a 44 cent SP with a whopping 17.4% gross yield, (5.5 / 44) / 0.72

Are you suggesting we will see 5.5c divi this year? Remember, last years included a special dividend of 1c.
Brokers are forecasting eps=4.5c

Now given you great call last financial year, I'm not going to disagree, but maybe you are more of a bulldog than a beagle?

Nobody has mentioned that the rally may be part relief, part technical. We have a dividend adjusted breakout from resistance.

Like Snoopy, my earnings expectations have not changed since the announcement. Neither has my Brokers.

I'm a happy holder

[Beagle]

Agria is just like my old dearly departed beagle, they absolutly love a huge feed so whatever they earn I expect close to 100% pay-out ratio.

[Snoopy]

Well I reckon the yield hounds are really hungry for yield and its crossed their mind that if PGW can pay a 5.5 cps divvy last year and if profit is a little higher they can do so again. We all know Agria love their full share of divvy's so a 5.5 cent fully imputed divvy really satisfies those hounds on a 44 cent SP with a whopping 17.4% gross yield, (5.5 / 44) / 0.72
10 times the normal daily volume today says I ain't the only one that loves a good divvy feed :D


I'm in the 4.5cps annual dividend camp.

At 44c we are looking at a gross yield of:

(4.5/44)/0.7= 14.6%

Yes that is a great yield, but it is also a ducks lining up peak yield. Farm profitability and output pricing can go down, and I'm not just talking about dairy here. Still I have confidence in 'The Dewd' and his senior management team. I liked that story that came out the other day about how PGW are investing in staff training and how much more engaged the staff on the ground had become. I am happy with onwards and sideways, at least in the short term, from here.

SNOOPY

[Beagle]

Fair enough Snoopy. Companies can't impute any more than the company tax rate of 28% so I make it (4.5/44)/0.72 = 14.2%, still a very tasty feed :)

[see weed]

.465c and rising, maybe 48c to 50c by months end. It's at a 34 months high. Yield still looks good.

[Snoopy]

.465c and rising, maybe 48c to 50c by months end. It's at a 34 months high. Yield still looks good.


It is at times like this shareholders need to remember that PGW is a cyclical share, not a growth share in the conventional sense. PGW in its current form came into being in CY2006. Here is the dividend record since then.






Interim Dividend


Final Dividend



20061.88c2.82c


20071.88c3.76c


20082.35c5.18c


20092.35cNil


2010NilNil


2011NilNil


2012NilNil


20132.2c1.0c


20142.0c3.5c



The dividends in the pre 2010 part of the table have been adjusted for the 9:8 cash issue that took place.
9 new shares issued for every 8 held means that these earlier dividends have to be multiplied by a factor of:

8/(8+9) = 8/17

to gain a comparative measure with each shares on issue today.

I average all that out to a calendar year dividend of 3.21c/share (net). Based on today's closing price of 47.5c this is a net yield over the business cycle of:

3.21/47.5 = 6.76%

To satisfy Roger, that equates to 6.76%/0.72 = 9.39% (gross) ("Companies can't impute any more than the company tax rate of 28%").

For mere taxpayers such as myself, I would be earning (net): 9.39% x 0.7 = 6.57%. (I hope Roger will correct me if I have that wrong!)

These figures strike me as about right (similar in yield to the DPC bonds I have applied for). I would say as an income investor you might look at accumulating PGW on any weakness. But it is no longer cheap enough to chase as a bargain. Having said this, we are still in a favourable part of the farming cycle. So 48-50c may not be out of the question soon. Just don't bank on the current level of dividend being permanent.

SNOOPY

discl: have held PGW since it was created

[bunter]

$1.41 at fair value, assuming 9% div growth.
Most undervalued stock on the exchange, my model says.
In a strong uptrend.
Last company report forecast an increase in earnings.
Candidate for the NZSE 50 at around 60c, is my guess.

Downside - could be hard to sell in a crash.

[noodles]

$1.41 at fair value, assuming 9% div growth.
Most undervalued stock on the exchange, my model says.
In a strong uptrend.
Last company report forecast an increase in earnings.
Candidate for the NZSE 50 at around 60c, is my guess.

Downside - could be hard to sell in a crash.
i think you may have posted on the wrong thread? 1.41?

[see weed]

It is at times like this shareholders need to remember that PGW is a cyclical share, not a growth share in the conventional sense. PGW in its current form came into being in CY2006. Here is the dividend record since then.




Interim Dividend

Final Dividend



2006

1.88c

2.82c



2007

1.88c

3.76c



2008

2.35c

5.18c



2009

2.35c

Nil



2010

Nil

Nil



2011

Nil

Nil



2012

Nil

Nil



2013

2.2c

1.0c



2014

2.0c

3.5c




The dividends in the pre 2010 part of the table have been adjusted for the 9:8 cash issue that took place.
9 new shares issued for every 8 held means that these earlier dividends have to be multiplied by a factor of:

8/(8+9) = 8/17

to gain a comparative measure with each shares on issue today.

I average all that out to a calendar year dividend of 3.21c/share (net). Based on today's closing price of 47.5c this is a net yield over the business cycle of:

3.21/47.5 = 6.76%

To satisfy Roger, that equates to 6.76%/0.72 = 9.39% (gross) ("Companies can't impute any more than the company tax rate of 28%").

For mere taxpayers such as myself, I would be earning (net): 9.39% x 0.7 = 6.57%. (I hope Roger will correct me if I have that wrong!)

These figures strike me as about right (similar in yield to the DPC bonds I have applied for). I would say as an income investor you might look at accumulating PGW on any weakness. But it is no longer cheap enough to chase as a bargain. Having said this, we are still in a favourable part of the farming cycle. So 48-50c may not be out of the question soon. Just don't bank on the current level of dividend being permanent.

SNOOPY

discl: have held PGW since it was created

Thanks for that info. I have only held pgw off and on for the last couple of years.

[Leftfield]

These figures strike me as about right (similar in yield to the DPC bonds I have applied for). I would say as an income investor you might look at accumulating PGW on any weakness. But it is no longer cheap enough to chase as a bargain. Having said this, we are still in a favourable part of the farming cycle. So 48-50c may not be out of the question soon. Just don't bank on the current level of dividend being permanent.

SNOOPY

discl: have held PGW since it was created

Very good post thanks Snoopy.

[couta1]

i think you may have posted on the wrong thread? 1.41?
Maybe not after all he has valued Summerset at 82c .Lol. This boy really likes his Tuis.

[percy]

It is at times like this shareholders need to remember that PGW is a cyclical share, not a growth share in the conventional sense. PGW in its current form came into being in CY2006. Here is the dividend record since then.






Interim Dividend


Final Dividend



20061.88c2.82c


20071.88c3.76c


20082.35c5.18c


20092.35cNil


2010NilNil


2011NilNil


2012NilNil


20132.2c1.0c


20142.0c3.5c



The dividends in the pre 2010 part of the table have been adjusted for the 9:8 cash issue that took place.
9 new shares issued for every 8 held means that these earlier dividends have to be multiplied by a factor of:

8/(8+9) = 8/17

to gain a comparative measure with each shares on issue today.

I average all that out to a calendar year dividend of 3.21c/share (net). Based on today's closing price of 47.5c this is a net yield over the business cycle of:

3.21/47.5 = 6.76%

To satisfy Roger, that equates to 6.76%/0.72 = 9.39% (gross) ("Companies can't impute any more than the company tax rate of 28%").

For mere taxpayers such as myself, I would be earning (net): 9.39% x 0.7 = 6.57%. (I hope Roger will correct me if I have that wrong!)

These figures strike me as about right (similar in yield to the DPC bonds I have applied for). I would say as an income investor you might look at accumulating PGW on any weakness. But it is no longer cheap enough to chase as a bargain. Having said this, we are still in a favourable part of the farming cycle. So 48-50c may not be out of the question soon. Just don't bank on the current level of dividend being permanent.

SNOOPY

discl: have held PGW since it was created

PGW is a very different beast today than it was in 2006.
Sir John Anderson and George Gould repositioned the business,concentrating on "the customer."
The excellent CEO Mark Dewdney is taking advantage of this, and driving the company forward.
One only has to drive from ChCh to Wanaka to see the changing rural landscape.Irrigation is driving more intensive farming on previously poor land.I noted even sheep farmers are using irrigation.Sheep,beef,arable, and horticulture are PGW's main customers.PGW is looking to also grow their dairy sector.
As the outlook for PGW's customer's looks very good I expect strong growing earnings from PGW.
In short I think irrigation has gone a long way to alter the so called farming cycle.

[Beagle]

Nice analysis Snoopy but I think there's a case to be made for the business being transformed along the lines Percy has suggested and also there's been a massive reduction in debt.
You could make the case that with dairy now in the absolute doldrums the rural cycle is now in a trough...demand for good beef and sheep and other agricultural products isn't going to go away that's for sure !! American's love their burgers, so do I :D If they can grow their EPS (as they seem confident they can), with dairy presently where it is I think this arguers well for the shares in the long term especially now they have a much stronger balance sheet.

One thing we know for absolute sure Agria love and need their full dividends so the company will be paying the maximum divvy's it reasonably can for the foreseeable future.
SP is in a nice uptrend and was 51 cents a couple of years ago. I see no reason it can't go back to at least that by mid 2015 and potentially mid-late 50's if they can meaningfully grow their EPS.
I'm a happy and relaxed holder. Stick around my beagle friend, there's lots of nice juicy fully imputed divvy's to come and YES it looks like you got your imputation maths right assuming you're on a 30% personal tax rate. But if you're paying more tax on your fully imputed dividends (2% extra) doesn't that beg the question of why not have your shares in your own company at a 28% tax rate, (some free tax advice for you to help feed a keen snooper) :)

[Snoopy]

PGW is a very different beast today than it was in 2006.
Sir John Anderson and George Gould repositioned the business,concentrating on "the customer."
The excellent CEO Mark Dewdney is taking advantage of this, and driving the company forward.


Wrightson's shareholders have been here before, when very similar customer focussed policies were rolled out under then CEO Alan Freeth, way before 2006. He called it the 'Solutions' Strategy'. Wrightson's had less debt then too. Not wishing to disparage Mark Dewdney, George Gould or Sir John Anderson. I agree with most of what you have written on their business acumen. But I keep coming back to the well known Buffetism. When excellent managment takes on a mediocre business, it is usually the business that leaves with its reputation intact!



One only has to drive from ChCh to Wanaka to see the changing rural landscape.Irrigation is driving more intensive farming on previously poor land.I noted even sheep farmers are using irrigation.Sheep,beef,arable, and horticulture are PGW's main customers.PGW is looking to also grow their dairy sector.
As the outlook for PGW's customer's looks very good I expect strong growing earnings from PGW.
In short I think irrigation has gone a long way to alter the so called farming cycle.


I admire your optimisim that 'things will be different this time' , the farming cycle is a past phenomenon and it is a one way path onwards and upwards from here. But I can't help feeling that if there is a time to take some profits from your PGW holding, it might just be within the next twelve months.

SNOOPY

[Snoopy]

One thing we know for absolute sure Agria love and need their full dividends so the company will be paying the maximum divvy's it reasonably can for the foreseeable future.


This is the one thing that has changed. If debt has a silver lining, it may be that it stops PGW going off on another Norgate style tangent. Alan Lai may not have been able to bring much, as some cynical commentators have said, to PGW in terms of meaningful contacts in China, or deep pockets to fund growth. But if Lai's legacy to PGW is the 'discipline of debt', then he may have made a bigger contribution to PGW than some of those critics ever imagined.

SNOOPY

[winner69]

I found this an interesting comment from Matt Whineray of the NZ Super Fund, esp in the context of investing with a long term horizon

Whineray says the fund is particularly wary of investing in businesses that rely too heavily on management skill. "We have a belief that skill is quite rare," he says.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11354484

[Stranger_Danger]

This is the one thing that has changed. If debt has a silver lining, it may be that it stops PGW going off on another Norgate style tangent. Alan Lai may not have been able to bring much, as some cynical commentators have said, to PGW in terms of meaningful contacts in China, or deep pockets to fund growth. But if Lai's legacy to PGW is the 'discipline of debt', then he may have made a bigger contribution to PGW than some of those critics ever imagined.

SNOOPY

Funnily enough, that is my entire investment thesis with PGW! I don't see it as a superstar, but between the past and the dominant owners need for cash, I see a focus on the day to day, as much cash as possible paid out to shareholders, and nothing left over for pipe dreams. To which I say, great!

[percy]

Wrightson's shareholders have been here before, when very similar customer focussed policies were rolled out under then CEO Alan Freeth, way before 2006. He called it the 'Solutions' Strategy'. Wrightson's had less debt then too. Not wishing to disparage Mark Dewdney, George Gould or Sir John Anderson. I agree with most of what you have written on their business acumen. But I keep coming back to the well known Buffetism. When excellent managment takes on a mediocre business, it is usually the business that leaves with its reputation intact!



I admire your optimisim that 'things will be different this time' , the farming cycle is a past phenomenon and it is a one way path onwards and upwards from here. But I can't help feeling that if there is a time to take some profits from your PGW holding, it might just be within the next twelve months.

SNOOPY

I never had shares in Wrightson.I did follow Reid Farmers and had shares in Pyne Gould Guinness via Pyne Gould Corp.When Reid Farmers and PGG merged George Gould did a fantastic job bringing the two companies together.Gould knew and continues to under stand rural supplies.Alan Freeth never did.Mark Dewdney does.
PGW is a very different beast today.The basic business has seen a lot of changes,horticulture supplier Fruitfed added to the business,huge and growing business of irrigation added to the business. The basic business was servicing sheep and arable farms.PGW has grown to "full service"rural supply business.So it is unlikely all areas will suffer a down turn at the same time.Irrigation has changed the landscape,with what was once poor land now being intensively used for such uses as growing grapes to dairy farms.All of which is offering more opportunities for PGW.China's [and Asia's] growing wealth means on going demand for NZ farm produce.

[Beagle]

Funnily enough, that is my entire investment thesis with PGW! I don't see it as a superstar, but between the past and the dominant owners need for cash, I see a focus on the day to day, as much cash as possible paid out to shareholders, and nothing left over for pipe dreams. To which I say, great!

Amen to that and that's what makes it a good fit as part of a well diversified portfolio.

[bunter]

Maybe not after all he has valued Summerset at 82c .Lol. This boy really likes his Tuis.
Two years ago I worked out a share valuation system based on dividends. It's not perfect but I wanted shares that could pay for themselves.

I've just adjusted the PGW valuation down to 1.26 to take account of an increase in long term interest rates from 5%, when I started, to 5.5% now.

So far this system (combined with some TA) is working out OK.

[percy]

Two years ago I worked out a share valuation system based on dividends. It's not perfect but I wanted shares that could pay for themselves.

I've just adjusted the PGW valuation down to 1.26 to take account of an increase in long term interest rates from 5%, when I started, to 5.5% now.

So far this system (combined with some TA) is working out OK.

Fantastic news.!
When does your system project the $1.26 will be achieved?

[bunter]

That's what it's worth right now Percy, or so the system says. But don't go booking your winnings just yet!
It says nothing about when these valuations will be achieved, though the stocks listed below have mainly made good progress towards system valuations, especially lately.

The system takes no account of liquidity of the stock or the quality of its earnings or assets (which I'd discount PGW for).

The system anticipated and has benefited from the market's current interest in dividend yield.

I was going to say something snarky about XRO, SUM, PEB and Tuis - but over the past two years, those three have done OK too, overall.
Bumpy ride though.

[winner69]

I don't really follow this thread or company, however I would've thought with dairy payouts crashing farmers would be tightening the belts and earnings would suffer. Or is this being offset by the stellar beef prices?

Announcement this morning says they doing quite well so far this year

Well diversified they are

https://www.nzx.com/files/attachments/206036.pdf

[nextbigthing]

Thanks Winner

http://www.nbr.co.nz/article/pgg-wrightson-reaffirms-2015-earnings-growth-signs-weak-dairy-weighing-market-bd-167059

[NZSilver]

Just looking into PGW - seems they are well diversified. However how much competition do they have from the likes of farm source (RD1) or farmlands. Also in there other business ventures is there much competition? seeds cf pioneer.

Also how are they tied in with heartland? seems there stock loans are advertised on their website - http://www.heartland.co.nz/content/rural/pgw-flexistock-advance.aspx

What is their growth prospects like both in nz and overseas?

Would be interested in this company but its quite hard to get an overview as they have their fingers in so many pies.

seems to fly under the radar a bit.

[winner69]

Just looking into PGW - seems they are well diversified. However how much competition do they have from the likes of farm source (RD1) or farmlands. Also in there other business ventures is there much competition? seeds cf pioneer.

Also how are they tied in with heartland? seems there stock loans are advertised on their website - http://www.heartland.co.nz/content/rural/pgw-flexistock-advance.aspx

What is their growth prospects like both in nz and overseas?

Would be interested in this company but its quite hard to get an overview as they have their fingers in so many pies.

seems to fly under the radar a bit.

The answers to all those questions on this thread

Been discussed several times over time

[nextbigthing]

What does a drought mean for PGW?

[BFG]

What does a drought mean for PGW?

More seed sales (hopefully). Looking at this map are we? (yes, it is a bit scary!)

https://www.niwa.co.nz/static/climate/smd_map.png?1234

[percy]

Drought must mean more irrigator sales for PGW.

[Beagle]

Yes more irrigation sales and more throughput at the stockyards as farmers shed stock due to lack of feed BUT one can't deny that NIWA image is a real worry with the vast majority of, and hottest part of summer still to come :eek2: That's climate change for ya !!

[Biscuit]

Does drought necessarily mean more irrigation sales? Farmers might pump more water in droughts (good for power generators) but do they really buy more irrigators?

[Jantar]

Just the opposite. During an El-Nino drought there is less surface water available for irrigation and less chance of obtaining any ground water resource consent. Large irrigators will only be sold after resource consent has been obtained, and from first applying for a consent to actually having the irrigator installed and running can easily be more than a year.

What can happen though is smaller lifestyle blocks buying K-line sprinklers instead of using flood irrigation.

[Beagle]

Does drought necessarily mean more irrigation sales? Farmers might pump more water in droughts (good for power generators) but do they really buy more irrigators?

Over the long haul it does but I agree that these sort of projects can have a long lead time. The other issue is irrigation restrictions due to water supply flow in the rivers and streams. I was watching the news the other night and a Cantabrian farmer was bitterly complaining that they weren't allowed to use their irrigation system and the farmer wryly noted...just when they really needed it. Ironic isn't it !

[percy]

Well farmers are facing a drought,yet WHS's sales are down because of the cold and wet weather????
Cold and wet in the cities and towns,hot and dry in the countryside!!!!!!??????????????????

More through put at sales yards should be good for Heartland.

[GR8DAY]

Hi Percy......your'e a longtermer in this one arnt you? when is the next divi due and any idea how much that will be for? Im looking hard at all high yield stocks for now......maybe you have some other recommendations for this old retired trader?? LOL

[BFG]

Well farmers are facing a drought,yet WHS's sales are down because of the cold and wet weather????
Cold and wet in the cities and towns,hot and dry in the countryside!!!!!!??????????????????

More through put at sales yards should be good for Heartland.

Percy, is your Director BS meter going off the scale these days? ;)

[percy]

Hi Percy......your'e a longtermer in this one arnt you? when is the next divi due and any idea how much that will be for? Im looking hard at all high yield stocks for now......maybe you have some other recommendations for this old retired trader?? LOL

Sorry you have retired from trading,and welcome to the boring old f.rt dividend loving club!!!!
Noodles started an excellent thread;"10%+Dividend payers for next year." You will love it!!!
PGW are due to report late February,and I expect a dividend early March.
Sorry I have no idea what it will be?
ps.There is some good posts on this thread,go back to page 212,and read from there onwards.Well worth the effort.

[percy]

Percy, is your Director BS meter going off the scale these days? ;)

Certainly is.
I note the headline on my Yahoo home page;"13,500 Retail stores have closed over the past 6 years."
No surprises or BS there!!!

[BlackPeter]

What does a drought mean for PGW?

Well, just lets look at the last big drought and how PGW did during that time:

According to NZ Herald (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10903236) and other sites, the summer 2012/13 brought the worst drought for New Zealand in 70 years, so I assume this period qualifies for comparison?

PGW was at that stage still in recovery mode from the big bungles it made leading into the GFC ... and ended up with a quite reasonable (though not super flash) result in the 2013 financial year: http://www.pggwrightson.co.nz/Userfiles/files/Investors/Reports/PGW%20AR%202013%20%20-%2020%20September%202013.pdf. Obviously - they had as well a huge goodwill write off in 2013 (making the numbers look terrible), but this was unrelated to the weather conditions (more related to the stupidity of the previous board).

Interesting to observe ... The PGW share price tanked in the first half of 2013 (dropping from the high 40'ies down into the high 20'ies) ... and the trend reversed in the second half after the market (probably?) starting to understand that the drought wasn't that bad for PGW after all.

So - if we take the past as a guide and acknowledge that this years drought distribution is somewhat different than in 2012/13 (more in the South and East) as well as that PGW shareholders are at current probably not that nervous anymore than they have been in 2013 ... I would think that if the drought continues, the PGW share might end up somewhat softer in the first part of this year (maybe 30'ies, very unlikely 20'ies - buying opportunities?) and expect this years result, though likely weaker than last year, still to turn out quite solid.

I guess ... at the end PGW is providing mainly staples for the farmers: they can't stop to feed their stock, to sow seeds and to fertilize, or to buy and sell stock, but they still will feel that they have overall less disposable income.

Discl: holding (though reduced at last year's peak)

[GR8DAY]

Sorry you have retired from trading,and welcome to the boring old f.rt dividend loving club!!!!
Noodles started an excellent thread;"10%+Dividend payers for next year." You will love it!!!
PGW are due to report late February,and I expect a dividend early March.
Sorry I have no idea what it will be?
ps.There is some good posts on this thread,go back to page 212,and read from there onwards.Well worth the effort.


Cheers Percy......I will look into that thanks. Yes looking to de-risk a little and retire properly (as an oldsh fart) on the back of divis......shudve done it years ago actually, but never too late i say!!

[sb9]

Looks like the tide has turned up a notch....

[sb9]

Wow...big volumes in the last few days followed by good jump in sp as well..

[see weed]

good aye, 50c here we come. Still not going to sell. To good a dividend.

[noodles]

good aye, 50c here we come. Still not going to sell. To good a dividend.
PGW still sits below average broker target of 51c. Most dividend plays sit ABOVE target. So lots of scope for appreciation as we approach the dividend announcement.

[GR8DAY]

.....I think? the best dividend yield on the market is under-pinning PGW. Where else can you get 11%pa plus hopefully a capital appreciation?? From what I can gather this on-going drought may actually have a positive impact on revenue also .....cockys quitting stock now only to re-purchase them when the rain does finally arrive.....PGW clipping the ticket each time. Feel sorry for the poor old farmers but HAY, .......what do you do?

[bunter]

. Where else can you get 11%pa plus hopefully a capital appreciation??
see '10%' thread, e.g. NZR - 20% gross div.

[BFG]

good aye, 50c here we come. Still not going to sell. To good a dividend.

Hey see weed, have to get that money from somewhere to buy more ATM stock and milk eh? ;)

PGW is seeing a nice uptick along with all the other solid, divvy yielding companies of late. If the others are to go by, PGW has quite a way to run before it's fairly valued. 50 cents would be a major milestone if surpassed and held.

[noodles]

see '10%' thread, e.g. NZR - 20% gross div.
http://www.sharetrader.co.nz/showthread.php?10063-10-Dividend-payers-for-next-year

[bunter]

PGW is due to report in late February and has been forecasting increased profit for the full year and noting a strong performance in H1.

I'm guessing EBITDA will be up 10% for the FY, but that longer term, the profits will be patchy with not much growth, and prone to earnings shocks.

The company talks about growth but doesn't seem to have any convincing concrete plans other than running its existing business well.

Looks undervalued all the same - IMO a yield of 14.2% is not sustainable - either the price goes up or the dividend comes down. Think I'll get some more.




PGW 31/1/15
ShIssued m
755




Growth 15 %
10%




Price 30/1/15
0.485











14
1H15e
2H15e
15e


EBITDA-Ass
58.7
32.285
32.285
64.57


Int
7.9
3.95
3.95
7.9


Tax
8.5
4.675
4.675
9.35









EBDA-Ass
42.3
23.3
23.3
46.5


NPAT
42.3
23.3
23.3
46.5


eps
0.056

0.031
0.031
0.062









Div Int
0.028
0.031




Div Fin
0.035

0.038



Div Ttl
0.063


0.069


Div yield
12.9%


14.2%


Payout %
80%
71%
89%
80%


Pay%InclSD



92%









Valuations






Growth 10y
5.0%
7.5%
10.0%



GrahamVal
1.04
1.32
1.60



DivFlowVal
1.19
1.34
1.51




'-ass' means excluding associates' earnings.
'SD' = last year's 1c special div, paid at the same time as the final div.
Graham = Benjamin Graham - Buffet's guru.
DivFlow is my dividend flow valuation.

[babymonster]

49c seems to be a resistance.

[sb9]

Might test the 50c mark today...

[BFG]

Might test the 50c mark today...

I am starting to see euphoria/"the only place to be" mentality starting to move into these stocks. Not saying they won't go higher, just saying be careful out there (and leave the rational cap at the coat check before entering) :)

[noodles]

PGW is due to report in late February and has been forecasting increased profit for the full year and noting a strong performance in H1.

I'm guessing EBITDA will be up 10% for the FY, but that longer term, the profits will be patchy with not much growth, and prone to earnings shocks.

The company talks about growth but doesn't seem to have any convincing concrete plans other than running its existing business well.

Looks undervalued all the same - IMO a yield of 14.2% is not sustainable - either the price goes up or the dividend comes down. Think I'll get some more.




PGW 31/1/15
ShIssued m
755




Growth 15 %
10%




Price 30/1/15
0.485











14
1H15e
2H15e
15e


EBITDA-Ass
58.7
32.285
32.285
64.57


Int
7.9
3.95
3.95
7.9


Tax
8.5
4.675
4.675
9.35









EBDA-Ass
42.3
23.3
23.3
46.5


NPAT
42.3
23.3
23.3
46.5


eps
0.056
0.031
0.031
0.062









Div Int
0.028
0.031




Div Fin
0.035

0.038



Div Ttl
0.063


0.069


Div yield
12.9%


14.2%


Payout %
80%
71%
89%
80%


Pay%InclSD



92%









Valuations






Growth 10y
5.0%
7.5%
10.0%



GrahamVal
1.04
1.32
1.60



DivFlowVal
1.19
1.34
1.51




'-ass' means excluding associates' earnings.
'SD' = last year's 1c special div, paid at the same time as the final div.
Graham = Benjamin Graham - Buffet's guru.
DivFlow is my dividend flow valuation.
Thanks for your research.
A couple of points:
1.You have evenly split the EBITDA between halves. This will not be the case. The first half will be much lower and the second higher.
2.I think you have the eps way too high for that level of EBITDA. Likely dps is way too high as well.

Average brokers have the following:
EBITDA $62mil ( you are close)
NPAT $34.6 (huge deviation)
eps 4.5c (huge deviation)
dps 4.25c (huge deviation)

Now there is a good chance that they will beat broker estimates, but by the magnitude you are suggesting?
http://www.4-traders.com/PGG-WRIGHTSON-LIMITED-6497113/financials/

As a holder, I hope you analysis is spot on.

[bunter]

Thanks for your research.
A couple of points:
1.You have evenly split the EBITDA between halves. This will not be the case. The first half will be much lower and the second higher.
2.I think you have the eps way too high for that level of EBITDA. Likely dps is way too high as well.

Average brokers have the following:
EBITDA $62mil ( you are close)
NPAT $34.6 (huge deviation)
eps 4.5c (huge deviation)
dps 4.25c (huge deviation)

Now there is a good chance that they will beat broker estimates, but by the magnitude you are suggesting?
http://www.4-traders.com/PGG-WRIGHTSON-LIMITED-6497113/financials/

As a holder, I hope you analysis is spot on.

I never read the broker valuations; you can work out the difference between the pros' valuations and this amateur's better than I can!
They seem to be suggesting a 20% FALL in 15 earnings. PGW disagrees.


I split EBITDA 50/50 for the two half years just to get a rough idea of the dividend payout % - it doesn't make any difference to the figures of interest - 2015 NPAT and dividend.

The 2014 NPAT and dividend figures are actuals - see http://pggwrightson.co.nz/Userfiles/files/Investors/Investors/2014/PGG%20Wrightson%20Annual%20Report%202014.pdf , p30.

And the 2015 estimated NPAT and divs are simply the 2014 ones plus 10% - PGW said it looked like the 2015 figures would be 'better'.

10% might be too much - hence other valuations (table above) based on long-term 5% and 7.5% growth.

[Snoopy]

The 2014 NPAT and dividend figures are actuals - see http://pggwrightson.co.nz/Userfiles/files/Investors/Investors/2014/PGG%20Wrightson%20Annual%20Report%202014.pdf , p30.

And the 2015 estimated NPAT and divs are simply the 2014 ones plus 10% - PGW said it looked like the 2015 figures would be 'better'.

10% might be too much - hence other valuations (table above) based on long-term 5% and 7.5% growth.

Bunter, the PGW dividend paid out last year was greater than the net profit of the company on a normalised earnings basis. You can't carry on paying out more than you earn, when as a company you still have a significant debt burden. So I would suggest using last years dividend as a 'base' figure and increasing your dividends from there in what is a cyclical agricultural market will give you an unrealistically high dividend forecast figure. Even your 'conservative' lower estimate is IMO likely to be too high.

SNOOPY

discl: hold PGW

[noodles]

I never read the broker valuations; you can work out the difference between the pros' valuations and this amateur's better than I can!
They seem to be suggesting a 20% FALL in 15 earnings. PGW disagrees.


I split EBITDA 50/50 for the two half years just to get a rough idea of the dividend payout % - it doesn't make any difference to the figures of interest - 2015 NPAT and dividend.

The 2014 NPAT and dividend figures are actuals - see http://pggwrightson.co.nz/Userfiles/files/Investors/Investors/2014/PGG%20Wrightson%20Annual%20Report%202014.pdf , p30.

And the 2015 estimated NPAT and divs are simply the 2014 ones plus 10% - PGW said it looked like the 2015 figures would be 'better'.

10% might be too much - hence other valuations (table above) based on long-term 5% and 7.5% growth.

Have a look at pg.28 of the annual report. It highlights the one-off items that increased profit. Operating EBITDA is the important amount. From that you can work out what NPAT should have been.

Snoopy is correct. You should not include the special dividend (1c as I recall)

[bunter]

Bunter, the PGW dividend paid out last year was greater than the net profit of the company on a normalised earnings basis. You can't carry on paying out more than you earn, when as a company you still have a significant debt burden. So I would suggest using last years dividend as a 'base' figure and increasing your dividends from there in what is a cyclical agricultural market will give you an unrealistically high dividend forecast figure. Even your 'conservative' lower estimate is IMO likely to be too high.

SNOOPY

discl: hold PGW

I excluded the 1c special dividend from the 2014 dividend figures.
From NZX...



22/08/2014
Final

3.500c
0.618c
1.361c
03/10/2014
NZD


10/03/2014
Interim
2.000c
0.353c
0.778c
02/04/2014
NZD





I used 2.5c + IC for the final div.

Excluding the special div it paid 80% of NPAT out (don't know about 'normalised').
I think it is reasonable to use 80% payout for 2015.

BTW by my calcs, including the special dividend, PGW didn't pay more than it earned in 2014 - it paid 98% of total earnings.

[bunter]

Have a look at pg.28 of the annual report. It highlights the one-off items that increased profit. Operating EBITDA is the important amount. From that you can work out what NPAT should have been.

Snoopy is correct. You should not include the special dividend (1c as I recall)

Spec div - see above.

Operating EBITDA - that is the approach I tried to use.

Took the company's figure for operating EBITDA, which excludes excluding associates' earnings, non-operating items and fair value adjustments.

Then took off interest and tax.

As it happens - it give a figure ('EBDA-ASS' above) which coincidentally is the same as the reported NPAT.

Does that method look right to you - any income in there that shouldn't be?