PGW - PGG Wrightson

[Toasty]

http://www.stuff.co.nz/business/farming/agribusiness/70766790/commerce-commission-alleges-price-fixing-by-pgg-wrightson-elders-nz

Anyone know what kind of damage we can expect?

[winner69]

http://www.stuff.co.nz/business/farming/agribusiness/70766790/commerce-commission-alleges-price-fixing-by-pgg-wrightson-elders-nz

Anyone know what kind of damage we can expect?

Collateral?

Probably at worst a few hundred thou and a tarnished reputation .... and the distraction it will be for some managers

[Xerof]

IIRC, the last one against the agricultural sector cost them $5.5mill in ~1996/7 - meat companies over weekly schedule pricing

[nextbigthing]

I hovered up a few extra at the close at 46 cents. Trading sum a juicy divvy in a couple of months I reckon that's good buying.

Roger,

You seem bullish on PGW generally, yet bearish on HNZ due to its exposure to dairy. Granted they're different companies with different revenue streams and risks etc but surely a complete dairy meltdown is going to be almost as bad for PGW. Big irrigation units, supplemental feed, store supplies etc would all be hit hard. Sheep and beef etc will keep ticking along but so will the other revenue streams for HNZ. I appreciate the effect is different, ie large loan right downs versus reduced sales but the overall affect would be the similar as a proportion perhaps.

Thoughts?

Appreciate your work as always.

Disc hold both.

NBT

[see weed]

I hovered up a few extra at the close at 46 cents. Trading sum a juicy divvy in a couple of months I reckon that's good buying.
Looks like somebodies also hovered up at 46c this morning. Was that you Roger? Results out next Tuesday.

[Beagle]

Who me :D :D

NBT - Dairy is a very small part of PGW's business and while it's true there will be some effect that already been factored into the SP the loss of a small percentage of sales is quite demonstrably different from the situation at HNZ.
If you read through the latest Tony Alexander report kindly posted by Winner69 in the HNZ thread you'll see the whole sector is under extreme duress and HNZ's loans at an average of a whopping 61% LVR are surely amongst the very highest in the sector.
As I said by PM to Winner this morning its alarming that HNZ even allowed average loan values to get this high and there's prima facie evidence to suggest some of their lending policies are simply too loose / imprudent...i.e. they chased loan growth too hard. IIRC there was a risk officer resigned last year ? Read between the lines there. There's also all their other lending that I've commented about many times before that I'm not comfortable with, unsecured and poorly secured consumer lending.

I think HNZ are under-playing the risks here and the potential for massive write-off's is very real. Apply whatever percentage loan losses you think are right to HNZ's exposure to this sector of circa $200m and interpret what effect on their circa $52m profit in FY16. That said analysts have pulled back their EPS estimate for FY16 for PGW too so your question is well considered with no easy and clear answer.

Bottom line is I think PGW's business is being run better with far more prudent management.

There's also the fact that on one hand PGW are executing attractively priced acquisitions whereas on the other hand despite much talk of acquisitions all HNZ have done is get rid of their director in charge of new product development...I will leave you to decide for yourself if some of their recently developed loan strategies like targeting sharemilkers and unsecured consumer loans through Harmoney and ifinance have worked well of it they've got enough problems to deal with already ? I think the fact that HNZ are not replacing that position in charge of new product development speaks volumes...

[winner69]

I felt like crying when I heard a sharemillker on the radio this morning saying after culling a few of his herd he was then going to sell his tractor and to get a bit more cash. (Shouldn't cry as he probably had 2 )

[arc]

In times like these farming has become a SIZE game. The bigger the farm(s) the easier you can ride out the hard times (you still need to be careful and prudent with consumable farm resources). This is also where the international trend of farm-buying co-op-group schemes will eventually displace traditional nz farmers.

Roger is right though... PGW have/are creating diversity.

[BlackPeter]

In times like these farming has become a SIZE game. The bigger the farm(s) the easier you can ride out the hard times (you still need to be careful and prudent with consumable farm resources). This is also where the international trend of farm-buying co-op-group schemes will eventually displace traditional nz farmers.

Roger is right though... PGW have/are creating diversity.

Its not necessarily about size. the farmers who started dairying at the last milk price peak and taking as well a lot of leverage, they are now in trouble ... while the farmers who are running their operation already for a number of cycles are typically much better off. As well - farmers who run a diversified business will be fine (remember - red meat is currently doing quite well). The farmers who put all their eggs into the diary basket look less flash.

So maybe you are right - in a way it is about size, but BIG is not good. Small is beautiful and diversity in farming is as crucial as in investing. Just a bit of common sense, really - but unfortunately common sense is (not just in farming) not so common after all.

[arc]

Its not necessarily about size. the farmers who started dairying at the last milk price peak and taking as well a lot of leverage, they are now in trouble ... while the farmers who are running their operation already for a number of cycles are typically much better off. As well - farmers who run a diversified business will be fine (remember - red meat is currently doing quite well). The farmers who put all their eggs into the diary basket look less flash.

So maybe you are right - in a way it is about size, but BIG is not good. Small is beautiful and diversity in farming is as crucial as in investing. Just a bit of common sense, really - but unfortunately common sense is (not just in farming) not so common after all.

I must agree, Its a complex issue and yes sometimes bigger is definitely not "better".... more is just more, until it becomes top heavy and Titanics..

I fully agree with the diversity element, and the ability of small players to change track within limited timeframes.

[pennyacw]

The cyclical nature of the industry is always going to result in larger players developing. If you have a well managed business then access to capital during times like this shouldn't be a problem. As a result farms with good capital structure and are well managed will get larger and larger as they are able to concentrate on the long term fundamentals rather than scabbling for survival during down cycles.

[Plutus]

PGW are underweight Dairy, so by luck that will insulate them in part. May effect Water in particular if centre pivot sales slow down from less dairy conversions. They are overweight Horticulture (through FruitFed) which is having a great time (industry just cracked $2b exports) and will more than counter Dairy effect. Overall looks stable through some diversification to me.

[Plutus]

Who me :D :D

NBT - Dairy is a very small part of PGW's business and while it's true there will be some effect that already been factored into the SP the loss of a small percentage of sales is quite demonstrably different from the situation at HNZ.
If you read through the latest Tony Alexander report kindly posted by Winner69 in the HNZ thread you'll see the whole sector is under extreme duress and HNZ's loans at an average of a whopping 61% LVR are surely amongst the very highest in the sector.
As I said by PM to Winner this morning its alarming that HNZ even allowed average loan values to get this high and there's prima facie evidence to suggest some of their lending policies are simply too loose / imprudent...i.e. they chased loan growth too hard. IIRC there was a risk officer resigned last year ? Read between the lines there. There's also all their other lending that I've commented about many times before that I'm not comfortable with, unsecured and poorly secured consumer lending.

I think HNZ are under-playing the risks here and the potential for massive write-off's is very real. Apply whatever percentage loan losses you think are right to HNZ's exposure to this sector of circa $200m and interpret what effect on their circa $52m profit in FY16. That said analysts have pulled back their EPS estimate for FY16 for PGW too so your question is well considered with no easy and clear answer.

Bottom line is I think PGW's business is being run better with far more prudent management.

There's also the fact that on one hand PGW are executing attractively priced acquisitions whereas on the other hand despite much talk of acquisitions all HNZ have done is get rid of their director in charge of new product development...I will leave you to decide for yourself if some of their recently developed loan strategies like targeting sharemilkers and unsecured consumer loans through Harmoney and ifinance have worked well of it they've got enough problems to deal with already ? I think the fact that HNZ are not replacing that position in charge of new product development speaks volumes...

Spot on Roger. If the AVERAGE is 61%, there will be plenty over 75 or 80% - after two years of losses, default interest rates etc. that will grow further - tick, tick, boom.

[IAK]

According to Harbour Asset Management portfolio manager Craig Stent fallout from Fonterra’s lower farmgate milk price forecasts is spreading to other companies exposed to the dairy sector.
“Farmers are going to pull back their capital expenditure on things like fencing and irrigation and equipment plus supplementary feed, so it will have a flow-on effect on companies like Skellerup and PGG Wrightson.

http://www.nbr.co.nz/article/market-talk-expect-flow-effects-fonterra-forecast-nr-176727

[percy]

According to Harbour Asset Management portfolio manager Craig Stent fallout from Fonterra’s lower farmgate milk price forecasts is spreading to other companies exposed to the dairy sector.
“Farmers are going to pull back their capital expenditure on things like fencing and irrigation and equipment plus supplementary feed, so it will have a flow-on effect on companies like Skellerup and PGG Wrightson.

http://www.nbr.co.nz/article/market-talk-expect-flow-effects-fonterra-forecast-nr-176727

Interesting.
I believe Harbour Asset Management have been adding to their SCL and HNZ holdings.

[nextbigthing]

Roger et al, thanks for your replies. We might be about to witness one of the best buying opportunities we've seen in a while.

[percy]

Roger et al, thanks for your replies. We might be about to witness one of the best buying opportunities we've seen in a while.

Wonder whether HNZ would lend on PGW shares??? lol.

[nextbigthing]

Wonder whether HNZ would lend on PGW shares??? lol.

Haha. Apparently they offered Roger a reverse mortgage on his current holding so he could enjoy his spoils now. 'Get your Riviera, before the summer' was the line that got him.
See Winner not all bankers are greedy, thinking about Roger like that.

[nextbigthing]

NBT - Dairy is a very small part of PGW's business

Is it quantifiable? I can't find anything in the annual reports or on the website (other than them saying when payouts were high that they wanted to increase their exposure to dairy across the board), have they given guidance anywhere as to what portion of their overall revenue they estimate comes from dairy?

Cheers

[Master98]

Is it quantifiable? I can't find anything in the annual reports or on the website (other than them saying when payouts were high that they wanted to increase their exposure to dairy across the board), have they given guidance anywhere as to what portion of their overall revenue they estimate comes from dairy?

Cheers
as I know, dairy farmers mainly use their own corporation suppliers such as RD1 and a few others.

[Beagle]

Haha. Apparently they offered Roger a reverse mortgage on his current holding so he could enjoy his spoils now. 'Get your Riviera, before the summer' was the line that got him.
See Winner not all bankers are greedy, thinking about Roger like that.

lol been there done that...nice boats, shame they keep breaking down almost every second trip and require endless maintenance at extortionate pricing charged by local Riviera dealer. Decent sized Stabicraft or similar is all you need, one engine and simple on-board systems and no need for a loan from HNZ.

I don't think the company has ever exactly specified the quantum of their business with dairy but have another read of the recent market update, IIRC there was some comments in there about the size of their business dealing with dairy and its quite small.

Don't get me wrong though, I'm not extremely bullish on this stock. I think its fair / good value at the current price and I am a long term investor so am investing looking at a time horizon that's longer than the current market cycle. I think its a great yield stock and trading cum the final fully imputed dividend is a solid hold.

[sb9]

So, one of first big ones to kick off results season on Tue 11th, last chance for bets tomorrow.

[LAC]

So, one of first big ones to kick off results season on Tue 11th, last chance for bets tomorrow.

Hmmmm ............... Revenue and divvy not as impressive. Profit up 18% though

[see weed]

Good result. 2c divi. As I expected

[nextbigthing]

Great result in these conditions. Undervalued.

[noodles]

Hmmmm ............... Revenue and divvy not as impressive. Profit up 18% though
They did beat their recent EBITDA guidance.
Given the recent acquisition, I didn't expect any more than 2c

[sb9]

Agree with you guys, good result.

[BlackPeter]

Great result in these conditions. Undervalued.

Respectable result - yes. Great? Not sure. I guess it could have been worse, but on the other hand - very little dairy exposure and the rest of agriculture was doing just fine this year.

I noticed a light drop in NTA (35 cts down to 33 cts) and a slight rise in liabilities to assets (57.5% up to 59%). Not enough to become worried, but something to keep an eye on, given that the last year was not too bad (but dairy). As well - good the profit went up, but looking at their CAGR (0.3%) - their long term revenue is not even growing with inflation - i.e. long term a shrinking company unless they do something about it.

Sure - they are a good dividend generator unless something goes wrong - but I am not sure whether I would call them "undervalued".

More interesting is what the future could bring. If we assume we go through a somewhat rocky period with dairy down, increased animal and farm sell-offs and subsequent reinvestment, than actually - they might continue to do just fine ... as long as El Nino behaves and dairy comes at some stage back out of the doldrums.

Discl: holding

[Beagle]

http://www.sharechat.co.nz/article/1002ae70/wrightson-beats-guidance-with-18-4-gain-in-full-year-earnings-lowers-dividend.html?utm_medium=email&utm_campaign=Wrightson+beats+guidance+with+184+gai n+in+full-year+earnings+lowers+dividend&utm_content=Wrightson+beats+guidance+with+184+gain +in+full-year+earnings+lowers+dividend+CID_1b70a6f30fb73fdc 41b0b85320380746&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle1002ae70wright son-beats-guidance-with-18-4-gain-in-full-year-earnings-lowers-dividendhtml

Agree with you guys. Good solid result. It was to be expected they'd trim their dividend on the back of the two recent acquisitions. I think they are well placed to make steady progress. Gross div yield at 47 cents is 11.8% and in my view is sustainable for the forseeable future. The most diversified agri stock and well worth having some as part of a well diversified portfolio in my opinion.
Happy holder.

[nextbigthing]

Hey BlackPeter,

IMHO if you look at the earnings of PGW versus the diversification it has within the company and the risks it faces and then compare this to other stocks on the nzx it leaves them for dead and on this basis I say it's undervalued. Sure others may have more growth ahead but what are they going to grow to? The same level of EPS as PGW? Why not just buy PGW now instead :)

Cheers,
NBT

[nextbigthing]

Roger,

Given they're about to pay a 2c dividend, you could argue the price today is effectively 45c with payments starting in 6 months... That's a damn good yield.

[GR8DAY]

18% growth in profit aint too shaby.....esp given current depressed dairy sector. UNDERVALUED?....almost certainly. (confrirmed in Rogers attachment above......3 analysts valuing PGW at 51c) On a yield basis the upcoming 2c divi equates to an immediate return of 4.5% (gross about 6%?).....and thats only 6mnts worth!! With falling bank investment rates this will soon equate to at least 3 times the bank returns.....sooo the SP is well and truly underpinned by this fact IMHO. Show me a better listed yield play?? HOLD and GATHER.

[Beagle]

Roger,

Given they're about to pay a 2c dividend, you could argue the price today is effectively 45c with payments starting in 6 months... That's a damn good yield.

LOL You've been reading my previous posts haven't you :D Yes absolutely agreed mate. Good sound value at this price in what many would argue is otherwise a market that's fully priced.
I am happy and comfortable with the way they're managing the business.

[noodles]

Had a listen in to the conference call. It is fair to say that FY16 is going to be very challenging. They have 20-25% exposure to dairy. Thus 20-25% of their debtor book is also exposed to dairy. They are expecting a higher debtor days in Fy16.

But a very well run company and a great set of results.

[percy]

Had a listen in to the conference call. It is fair to say that FY16 is going to be very challenging. They have 20-25% exposure to dairy. Thus 20-25% of their debtor book is also exposed to dairy. They are expecting a higher debtor days in Fy16.

But a very well run company and a great set of results.

Like everyone I was very surprised to hear the level of PGW's dairy exposure.

[GR8DAY]

.....sadly I guess the Real Estate division will pick up some increase in commisions from forthcoming forced sales of stressed dairy farms.....prefer this not to happen but sounding like it's now inevitable?

[RTM]

Like everyone I was very surprised to here the level of PGW's dairy exposure.

Might be higher than Heartlands Percy !

[percy]

Might be higher than Heartlands Percy !

Three times HNZ's exposure.!

[Beagle]

Might be higher than Heartlands Percy !


Three times HNZ's exposure.!

The key difference being that when dairy owners go broke HNZ loses heaps whereas the next owner of the property bought at less than half its theoretical price still has to buy farming supplies.

[couta1]

Both stocks are worth holding regardless of dairy influences.

[RGR367]

Yeah, all these dairy exposures just meant a buying signal for me for PGW and HNZ. Gut feel, of course :)

[nextbigthing]

The key difference being that when dairy owners go broke HNZ loses heaps whereas the next owner of the property bought at less than half its theoretical price still has to buy farming supplies.

To be fair though Roger, with what money? Dairy farmers chequebooks are shut! They'll only be buying bare necessity's. And the guy who buys the farm might use Heartland again.

On the flip side, what will the return drop down to for both HNZ and PGW? 8%? I'll be sure to mop up the tears off my new Ferrari's dash.

[percy]

WARNING.!
EPS...down from 0.055 to 0.043.
Revenue .....down.
Net cash from operating revenue....down.
Current assets up about $5mil while current liabilities are up $18mil.
Shareholders equity down.
Had it not been for Foreign currency translation reversal the accounts would have been a disaster.
Improved from negative [7,062] to positive 13,628.
Yes a very well run business,but will need to be with the challenges they face.

[winner69]

Yeah, all these dairy exposures just meant a buying signal for me for PGW and HNZ. Gut feel, of course :)

The guy who runs the local corner shop says dairy doing just fine.

Your gut feel should be acted on.

[IAK]

Go the Dewd! We were in the same hostel at university.

Disc. Not holding.

[Beagle]

To be fair though Roger, with what money? Dairy farmers chequebooks are shut! They'll only be buying bare necessity's. And the guy who buys the farm might use Heartland again.

On the flip side, what will the return drop down to for both HNZ and PGW? 8%? I'll be sure to mop up the tears off my new Ferrari's dash.

LOL, trust me, you're better off with a Mercedes-benz, more reliable...those Italians are too troublesome. There will be a lot of un-dairy conversions coming. Buy a dairy farm for nix and convert to beef, cropping or whatever. Front page of the Herald today, Dairy receiverships starting to come thick and fast or words to that effect. It's just the beginning.


WARNING.!
EPS...down from 0.055 to 0.043.
Revenue .....down.
Net cash from operating revenue....down.
Current assets up about $5mil while current liabilities are up $18mil.
Shareholders equity down.
Had it not been for Foreign currency translation reversal the accounts would have been a disaster.
Improved from negative [7,062] to positive 13,628.
Yes a very well run business,but will need to be with the challenges they face.

At least they're being prudent and honest and not trying to B.S. people with a profit forecast when they know you can't reliably forecast at this point. Unlike another company I know. Invest through the cycle. Heaps of dairy un-conversions coming and lot of business for PGW's grain and seed business with new cropping ventures. Banks will get a real bath and PGW will be there to service the new owners having copped a little clip around the ears from a couple of months of supplies not paid, no biggie really.

[Hoop]

The guy who runs the local corner shop says dairy doing just fine.

Your gut feel should be acted on.

Speaking about the local corner store...My local store was selling milk 2 for $5.19 ..until the Fonterra heavies recently put the hard word on the store to put the price back to 2 for $6...It seems Fonterra doesn't want its discount branded milk used as a lost leader product...

[nextbigthing]

I hate it when Mum and Dad fight. I hope they kids and make up for the sake of us sharetrader kids.

Come on Roger and Percy, kiss and make up.

[Plutus]

Another 2 cps div. Is it just me, or do their div's always look like they match Agria's requirement to pay their interest bill ?

[Beagle]

Another 2 cps div. Is it just me, or do their div's always look like they match Agria's requirement to pay their interest bill ?

LOL I was hoping their interest bill would have been a bit higher. Still..... I'll take it and be content that I know the company is being managed well and that they're investing for growth in acquisitions.

[percy]

Just picturing life down on the farm.
Repossession agent from PGW approachs the dairy farmer,and says;"I have come to repossess the feed you have not paid for."
Farmer replies;"you can have what is left of it,in fact you are standing in it,but it you will note it has been through the cow." lol.

[percy]

Another 2 cps div. Is it just me, or do their div's always look like they match Agria's requirement to pay their interest bill ?

Agria may have to line up behind the commerce commission soon.?

[nextbigthing]

Just picturing life down on the farm.
Repossession agent from PGW approachs the dairy farmer,and says;"I have come to repossess the feed you have not paid for."
Farmer replies;"you can have what is left of it,in fact you are standing in it,but it you will note it has been through the cow." lol.

Just picturing the HNZ branch in town looking very busy, full of repossessed dairy cows standing round HNZ can't find a home for :D

[percy]

Just picturing the HNZ branch in town looking very busy, full of repossessed dairy cows standing round HNZ can't find a home for :D

I think they would make their way to the KFC opposite HNZ's Riccarton Branch.lol.

[couta1]

Agria may have to line up behind the commerce commission soon.?
Don't mention those cowboys Percy, time they spent some time down on the farm so to speak.

[Beagle]

Just picturing life down on the farm.
Repossession agent from PGW approachs the dairy farmer,and says;"I have come to repossess the feed you have not paid for."
Farmer replies;"you can have what is left of it,in fact you are standing in it,but it you will note it has been through the cow." lol.

LOL that is funny. Less so when HNZ reposses the cows from sharemilkers geared up to their eyeballs and finds they can only get 25-30% of what they'd loaned at $3,000 a head at the peak. Then who'll be standing in the **** ?

[Beagle]

WARNING.!
EPS...down from 0.055 to 0.043.Revenue .....down.
Net cash from operating revenue....down.
Current assets up about $5mil while current liabilities are up $18mil.
Shareholders equity down.
Had it not been for Foreign currency translation reversal the accounts would have been a disaster.
Improved from negative [7,062] to positive 13,628.
Yes a very well run business,but will need to be with the challenges they face.

This is deliberately disingenuous. For one thing last year's EPS included an extraordinary gain from the sale of one of the business operations.
For another, the balance sheet is in good shape, to call it a disaster is factually incorrect. I will run my own analysis when I have time...in the meantime feel free to ignore Percy's post folks.

[GR8DAY]

This is deliberately disingenuous. For one thing last year's EPS included an extraordinary gain from the sale of one of the business operations.
For another, the balance sheet is in good shape, to call it a disaster is factually incorrect. I will run my own analysis when I have time...in the meantime feel free to ignore Percy's post folks.

AGREE, I THINK IT'S FAIRLY CLEAR PERCY IS UP TO HIS OLD TRICKS AND IS VERY KEEN TO BUY THE BEST YIELDING STOCK ON THE NZX.!! ( not too worried tho.....the lower it goes the more I buy, the higher the yield)

[percy]

WARNING.!
EPS...down from 0.055 to 0.043.
Revenue .....down.
Net cash from operating revenue....down.
Current assets up about $5mil while current liabilities are up $18mil.
Shareholders equity down.
Had it not been for Foreign currency translation reversal the accounts would have been a disaster.
Improved from negative [7,062] to positive 13,628.
Yes a very well run business,but will need to be with the challenges they face.

As always it is up to each of us to do our own research and invest accordingly.

disc.I no longer hold any PGW shares.

[Beagle]

Lets unpack some of Percy's claims. Last year comparatives in brackets
1.Revenue down. This is factually correct although nothing material, Revenue 2015 $1.2b ($1.22b) down 1.6%
2. Net cash flow from operating revenue down. this would be because stock has increased by circa $15m.
3. The tax paying position of the company has changed significantly, $16m this year circa $9m last year, (all figures from memory)
4. NTA 32.9 cps (33.5 cps) No biggie really
5. Non operating items and fair value adjustments this year - $2.2m ($7.7m) last years gain from sale of division added 1.02 cents EPS (Normalised EPS was 4.48 cps.
Trade receivables of circa $250m, only 1% was overdue more than 90 days, how does that compare to HNZ Percy ?

Various other changes are significant, contribution to employee scheme, changes in depreciation e.t.c.e.t.c.

The bottom line is 4.3 cps after full tax is a respectable result for FY15 considering that for much of that year dairy was already in the toilet. Last years EPS excl gain on sale of business operation was 4.48 cps on a dramatically lower tax rate, (and that was a boom year for dairy).

I think all things considered this business has performed very well in challenging times and is well positioned to weather the storm and has notably very few problematic trade receivables.

Further, their provisioning against doubtful receivables is well over 2% whereas HNZ is currently at what I consider to be a woefully inadequate at 0.7%, only one third of PGW's level in percentage terms, so who's kidding who here on provisioning for problematic receivables ?

[winner69]

One other thing Roger, PGW ROIC was over 10%

That is well above their cost of capital, a lot of economic value added here I reckon.

Over the long term the value of PGW is how much their returns are in excess of the cost of capital and PGW doing very well in this respect.

Geek note: MVA = NPV of future EVA. MVA is market cap less equity, EVA is economic value added (excess returns over cost of capital).

[sb9]

In the spirit of disclosure, just letting know that I've sold my parcel today.

Might look at entering at a later date.

[zymwh]

Please who can tell me when is the record date? Thanks!

[sb9]

I think its 1st Sep with payment being month later 1st Oct.

[BlackPeter]

I think its 1st Sep with payment being month later 1st Oct.

Not quite. Ex dividend 28. August. Always a good idea to check with the NZX webpage:

https://www.nzx.com/markets/NZSX/securities/PGW/dividends

[zymwh]

Thanks! Will buy more ;-)

[BlackPeter]

Thanks! Will buy more ;-)

Gosh - 44.5 cts... looks like they are today on special. I can understand now why you thought they might be already ex-dividend ;).

[Hectorplains]

Gosh - 44.5 cts... looks like they are today on special. I can understand now why you thought they might be already ex-dividend ;).

Yikes, shudder to thing what share price a bad result might have seen!

[Beagle]

Gosh - 44.5 cts... looks like they are today on special. I can understand now why you thought they might be already ex-dividend ;).

The whole market is getting hit. Check HNZ's SP for instance.

[iceman]

The whole market is getting hit. Check HNZ's SP for instance.

Roger after your prolonged and repetitive anti HNZ comments on the HNZ thread, you stated a couple of days ago (after it being kindly pointed out that enough is enough) that you would ease of. Now you seem to bringing your dislike, dare I say hatred, of HNZ to this thread. 3 of your last 4 posts mention HNZ in a negative way. Mate I have always enjoyed your comments and research but surely you have made you point on the HNZ thread sufficiently and no need to bring that onto this thread. I hope you agree my friend.

[Beagle]

Believe it or not, and many probably won't, I get a kick out of helping people which is what has been behind my thorough articulation of concerns surrounding HNZ. Those that listened and there weren't many, saved themselves from a near 20% beating. Hatred is a very strong word and its certainly not that although I do have a sense that my bloodhound nose's B.S. meter is well and truly going off regarding their FY16 forecast for all the reasons previously stated.

One of the posts attempted to compare delinquency rates in terms of 90 days plus overdue, the other was intended as a comment that the sector, (anything associated with dairy in any way), is down so there's no need to be too sensitive about that one. Its only natural that in some respects the two stocks which both have exposure to the dairy sector will draw some comparison from time to time which was the thrust of the other post and its only natural when former holders post somewhat misleading attempted analysis that current holders will want to correct factual inaccuracies. I think given the absolute deluge of negative press in the last little while, (which depending on your current location you may be unaware of) means I could have posted half a dozen relevant links to articles pertinent to HNZ in the last couple of days but didn't, speaks for itself.

[see weed]

In the spirit of disclosure, just letting know that I've sold my parcel today.

Might look at entering at a later date.
That's funny, I bought some today for 45c. and looking forward to a big divi payout.

[BobbyMorocco]

Believe it or not, and many probably won't, I get a kick out of helping people which is what has been behind my thorough articulation of concerns surrounding HNZ. Those that listened and there weren't many, saved themselves from a near 20% beating. Hatred is a very strong word and its certainly not that although I do have a sense that my bloodhound nose's B.S. meter is well and truly going off regarding their FY16 forecast for all the reasons previously stated.


Please keep sharing your great knowledge and research Roger and same goes for you to Percy. I'm only a young fella who's pretty inexperienced in the sharemarket and so I don't post often but I've taken a great interest in reading a number of threads on and off since I began investing in stocks at the beginning of 2013. Poster's like Roger and Percy have helped me considerably to learn about this art and thanks to them, as well as others and then doing my own research has helped my portfolio be a considerable amount in the blue. The money I've made on my investments is a significant amount to me and will no doubt help me greatly as I get a little bit older and have to start taking on more of life's responsibilities.

For example in this instance I was considering purchasing PGW a few weeks ago when the share price was around 47/47.5 cents. Percy's comments prompted me to do some more of my own research and after doing that research I did not consider there to be enough upside to pay that amount for them. I'm glad because had I have purchased I would now see a red arrow with about 4% sitting next to it, and I'm very comfortable with my decision that it wasn't the right time to buy and I still don't think it is. It wouldn't surprise me if the share price is around 42/43 cents once PGW goes ex divy and so I'll continue to sit out as PGW has considerable headwinds in the near future.

With regards to HNZ. It was Roger this time who helped me significantly because I was considering buying back into HNZ a few weeks ago when the share price was on it's way back up after it dropped to $1.17. Had I have purchased I probably would have paid around $1.21, but after reading Roger's posts and doing my own research I decided to play it safe and not buy. Now that the share price is $1.10 I've saved myself from having a 9% loss on paper. This makes me feel even better considering Roger's posts helped me to realise that it was time to get out and sell my HNZ shares for around $1.30 earlier in the year.

What I'm trying to say is both Roger and Percy's knowledge, research and opinions are very valuable. I don't always agree with them, sometimes I may agree with one and not the other and as we can see from my examples above I'm quite happy to agree with Roger in one instance and Percy the next. But in the end it's up to me to do my own research, which helps me form my own opinions and make my own decisions, however making my own decisions is made a whole lot easier after reading through some of the info shared on this site.

Please Roger and Percy as well as everybody else continue to share your knowledge, research and opinions on this site and if you genuinely believe something and want to help others by sharing the info and opinions you have then don't be afraid just because some people may disagree and argue against you.

If I were to meet either of you I'd shout you both a beer. Once again thanks for your insight, it is tremendously helpful!
Happy posting!

[LAC]

If I were to meet either of you I'd shout you both a beer. Once again thanks for your insight, it is tremendously helpful!
Happy posting!

Dito, I would include Snoopy and w69. Very helpful posts. I may not post as much but def read all posts by the more seasoned guys on here. Thanks

[BeeBop]

This is a thanks! I for one am always happy to read other people's opinions. It is up to me to sift out the relevant or not relevant (for me). Personally, I have been reading these boards since the late 1990s (although I think back then it was on a different platform). I can not for the life of me remember one astute bloke's name who has since died but thanks to him and many others, I have become a gobal investor sticking to my own developed recipe that has served well through the financial cycles we have seen. I own PGW and will be sitting in it for quite some time (purchased at 0.42 and 0.52) from a dividend perspective. Not too happy with its debt level but the other metrics suit my portfolio.

Who was it that said, a portfolio is like a bar of soap, the more you handle it the smaller it gets?

Cheers,
BeeBop.

[percy]

[QUOTE=BeeBop;585804.

Who was it that said, a portfolio is like a bar of soap, the more you handle it the smaller it gets?

Welcome.
With quotes like that I hope you will post regularly from now on.

[winner69]

Beebop, that old geeza you mentioned was probably stolwyk. Some of his posts are still on sharetrader.

He was a good soul that Gerry and some found him very helpful.

A real ramper at times though but suppose we are all guilty of that.

[couta1]

Did you teach this dude how to ramp winner?

[winner69]

Did you teach this dude how to ramp winner?

No no, no way

He had the same modus operandi like a few on here, like getting people's trust and making them feel comfortable in buying by only talking about the good things and discounting/refuting the bad things.

[Joshuatree]

[QUOTE=winner69;


A real ramper at times though but suppose we are all guilty of that.[/QUOTE]

Not sure about that, speak for yourself. Great to promote a stock but ramping is attempting ti influence and we don't want/ need it here.

[Beagle]

Thanks for those kind words folks. I always maintain there is benefit to all from a good open and vigorous debate. It would be pretty boring if all we did on here was pump each others tyres on the stocks we own wouldn't it !!

[see weed]

43c, how looooow can you gooow. Good buying now :D It has dropped 4c (years dividend) in 2 weeks.

[Beagle]

43c, how looooow can you gooow. Good buying now :D

I agree, trading cum a 2 cent fully imputed dividend. Company has made a couple of good acquisitions on very attractive multiples using good common sense earn out provisions. Must be good buying for long term investment through the business cycle at this level but as always, keep your seatbelt firmly fastened.

[Joshuatree]

Its tricky atm, chart looks terrible dropping price on increasing vol below MA

[sb9]

Its tricky atm, chart looks terrible dropping price on increasing vol below MA

Yeah my thoughts too jt, hence the reason I sold out y'day. Not trying to downramp here but we might see sp in low or below 40c in the medium term.

[Crackity]

Yeah my thoughts too jt, hence the reason I sold out y'day. Not trying to downramp here but we might see sp in low or below 40c in the medium term.

Below 40 cents I am very interested - keeping a close eye on this one!

actually fairly tempted above 40c too!

[winner69]

Didn't the shareprice fall to 40 cents after the full year last year as well

Soon afterwards it was all back to normal

[Beagle]

Yeah my thoughts too jt, hence the reason I sold out y'day. Not trying to downramp here but we might see sp in low or below 40c in the medium term.

That would be HAMMER time :)

[Snoopy]

First half result a little better than I expected. But took the opportunity to unload a few more shares late last week at 52c cum-dividend. I still have 3/4 of my highest previous high holding left. So not deserting the ship. Average holding price now 42cps. So even with the sales I am still behind a lot of you!

Just rebalancing because I think the earnings and dividend may shrink in FY2016 and FY2017. The farming cycle doesn't stay at the top forever. I think there are plenty of signs (milk price, drought) that things are going to get worse from here.

I know that every cloud has a silver lining. Some see the drought as fuel for a big increase in irrigation sales. I can tell you this won't happen, because there won't be enough farmers with cash in the bank to do it. No cash. no collateral => no loan.

Mark Dewdney doing a fantastic job, but I keep remembering the old Buffettism.

"When great management takes over an average business, it is usually the business that leaves with its reputation intact."

Have to side with Master98 on this one I'm afraid!

SNOOPY

discl PGW shareholder who has been through the cycles before



Having owned a beagle hound for 12 years they are eternally optimistic and have a veracious and opportunistic approach towards food consumption. Never trust a hound that isn't optimistic !!

This is a lesson I leaned at cost from the resident snoopy beagle hound who was extremely conservative about HNZ's prospects back when they were 95 cents...hmmm the canine missed out on a huge feed there...one ponders how his ability to sniff out a feed was so far off the mark...

I think management are doing a good job and if they can make their current forecast in the current extremely challenging climatic conditions this augers very well indeed for 2016 and beyond.

I note broker consensus is for 2015 and 2016 EPS of 5.0 cps.

That post I made in March still looking sound, and prophetic given what has happened to the PGW share price since. Also the HNZ performance hasn't been exactly stellar since Roger mounted his response defence. I think even Roger from being HNZs second greatest promotor has subsequently joined the HNZ dark side. And my PGW reduction was all done right at the peak without having to trip out on one of Winners chart lines too! So it looks like this ol' beagle snout has still got a few good sniffs in it after all....

SNOOPY

[Beagle]

Yes the snout is still working mate. Did I ever tell you the story about how my late beagle Kelly could smell me open a packet of chocolate biscuits in my bedroom from the other end of the house...down the hall, through two sets of closed doors ? Or the time she opened my suitcase with her teeth pulling on the zipper after a business trip and rooted through my clothes to find the packet of chocolates at the bottom I'd brought home for my wife and scoffed the lot ?
You've got your work cut out keeping up with Kelly's legend so keep up the good work mate. I'm not too worried about the current drop, sound business, well managed and is doing well in challenging times...just imagine how they'll perform when times are better...think Crofts Dog Show :D

[BeeBop]

Yes, it was Gerry....he really got me started!

[winner69]

Roger, your Kelly must have been a lucky dog

Chocolates and dogs don't go well together I'm told

[Beagle]

Roger, your Kelly must have been a lucky dog

Chocolates and dogs don't go well together I'm told

No they don't mate ! She was bloody sick after scoffing that box of choclates lol.

[glennj]

Yes, it was Gerry....he really got me started!

Gerry's encouragement back in 1978 got me saving via direct investment in the sharemarket. He was the most enthusiastic stock market follower I've ever met & would talk little but the stock market. (We worked out of the same building in Rotorua and shared smoko & lunch facilities) He retired in 1987 and did the markets after that. I did the same when I reached my late 40's. I have a few PGW at the moment!

[Crackity]

Gerry's encouragement back in 1978 got me saving via direct investment in the sharemarket. He was the most enthusiastic stock market follower I've ever met & would talk little but the stock market. (We worked out of the same building in Rotorua and shared smoko & lunch facilities) He retired in 1987 and did the markets after that. I did the same when I reached my late 40's. I have a few PGW at the moment!

I love happy stories! Nice work Glenn

[BeeBop]

I may go back and find some of his posts....I am not actually changing any positions in the markets at the moment. I sold up a huge lot of shares in the UK, uS and NZ (3m, pfe, fpa! To name just 3 great performers) in November 2013 after the boom, put the proceeds into my mortgages and have since been building a more long term income based portfolio mostly in the UK and NZ this time. Reviewing his posts may give me some inspiration to go forwards - after all paying off property mortgages is really really really boring (forcing myself into a much much lower debt ratio as you never know what the future holds). More PGW may be calling with the spare dividend cash although, their debt level is a little higher than I would like.

[Yoda]

:p Vaguely related but funny..
http://www.thenewsteller.com/pakistan/social/two-cows-theory-world-economy-explained-its-entertaining/21467/

[Joshuatree]

I may go back and find some of his posts....I am not actually changing any positions in the markets at the moment. I sold up a huge lot of shares in the UK, uS and NZ (3m, pfe, fpa! To name just 3 great performers) in November 2013 after the boom, put the proceeds into my mortgages and have since been building a more long term income based portfolio mostly in the UK and NZ this time. Reviewing his posts may give me some inspiration to go forwards - after all paying off property mortgages is really really really boring (forcing myself into a much much lower debt ratio as you never know what the future holds). More PGW may be calling with the spare dividend cash although, their debt level is a little higher than I would like.

Great to see you've found a voice BB after 25 years or so:D. Looking forward to more of your thoughts e.g. those overseas investments sound int.

[Joshuatree]

That post I made in March still looking sound, and prophetic given what has happened to the PGW share price since. Also the HNZ performance hasn't been exactly stellar since Roger mounted his response defence. I think even Roger from being HNZs second greatest promotor has subsequently joined the HNZ dark side. And my PGW reduction was all done right at the peak without having to trip out on one of Winners chart lines too! So it looks like this ol' beagle snout has still got a few good sniffs in it after all....

SNOOPY
So you are re 2 and bit cents in the black atm Snoopy . The chart looks v weak and the macro re commodities and mkts are volatile and downwards.You must be confident re the road ahead for PGW?
How are you faring Roger?. You disclosed at least one top up @ re 48c ; hows your average going?
Not holding atp missed my buy away back sub 40c.

[BeeBop]

My goodness that is frightening....25 years...well actually, it has been 21 yrs since my first purchase...IFT at around 50c in 1994 with $500 using direct broking, then moved to access brokerage - released our cash for an Auckland house deposit from them just 1 week before they went 'belly up'. Maybe I will post very occasionally as I am slowly getting back into the NZ market...it is just so slow and seemingly quiet compared to the UK market (currently hold GSK, ALNT, BON, IUKD plus a speculative embarrassment!) Added to that I have one or two small ETFs. When I get home (live overseas and come back to NZ to enjoy the frigid southern winter with family) maybe a post on the international board may not go amiss (although those buying with NZD may find the international markets not ideal long-term, some good short terms can be found if that is what you like - not my scene though as I am turnaround/value and long term).

[Beagle]

So you are re 2 and bit cents in the black atm Snoopy . The chart looks v weak and the macro re commodities and mkts are volatile and downwards.You must be confident re the road ahead for PGW?
How are you faring Roger?. You disclosed at least one top up @ re 48c ; hows your average going?
Not holding atp missed my buy away back sub 40c.

I got most of mine back at 40 cents so I'm all good and have really enjoyed the tremendous fully imputed dividends the company has paid, especially last year's final and special. I am comfortable holding as a yield stock.
http://www.4-traders.com/PGG-WRIGHTSON-LIMITED-6497113/financials/
Consensus brokers estimates at 4.4 eps 2016 and 5.1 eps 2017. At least two brokers have revised their ratings after the result and consensus price target is now 49 cents, down from 51 cents.
Stock trades cum 2 cents fully imputed final divvy so people selling now at 44 cents are really only getting 42 cents less brokerage, (might as well call the real price they're effectively getting). I won't be selling but would consider doubling down if it gets a bit lower.

[Bjauck]

My goodness that is frightening....25 years...well actually, it has been 21 yrs since my first purchase...IFT at around 50c in 1994 with $500 using direct broking, then moved to access brokerage - released our cash for an Auckland house deposit from them just 1 week before they went 'belly up'. Maybe I will post very occasionally as I am slowly getting back into the NZ market...it is just so slow and seemingly quiet compared to the UK market (currently hold GSK, ALNT, BON, IUKD plus a speculative embarrassment!) Added to that I have one or two small ETFs. When I get home (live overseas and come back to NZ to enjoy the frigid southern winter with family) maybe a post on the international board may not go amiss (although those buying with NZD may find the international markets not ideal long-term, some good short terms can be found if that is what you like - not my scene though as I am turnaround/value and long term).

I bought my investment in IFT at the same time as you and what a good investment it has been! Infrastructure assets are usually* less volatile than the markets PGW operates in. I originally bought PGW as a recovery stock - which did occur - and I now hold it as an income stock. The UK market certainly has greater depth and access to a broad range of sectors. Despite the UK market having stagnated for the past year or so, the NZ dollar returns would be quite high for NZ investors.

New rules, perhaps introduced after you left NZ, means that NZ domiciled investors need to account for UK (& other foreign investments with some Aussie exceptions) investment returns according to the FIF rules. As the rules can impose NZ income tax on unrealised capital gains on foreign investments, it does not encourage individual investors in NZ to diversify their investments to include business sectors not available on the NZ exchange.

*politics notwithstanding!

[BlackPeter]

New rules, perhaps introduced after you left NZ, means that NZ domiciled investors need to account for UK (& other foreign investments with some Aussie exceptions) investment returns according to the FIF rules. As the rules can impose NZ income tax on unrealised capital gains on foreign investments, it does not encourage individual investors in NZ to diversify their investments to include business sectors not available on the NZ exchange.

*politics notwithstanding!

Just a wee correction - whether stocks fall under the FIF regime has nothing to do with whether they are traded on the NZ stock exchange. The criterion is, whether the company is NZ based.

There are a number of NZX traded stocks which you need to declare under the FIF regime (unless the de minimum rule applies): some examples (just from memory) would be e.g. DIL, TEM, OGC, COA - and I am sure, there are plenty more. All of these funds (or companies) are listed on the NZX, but based outside of NZ and Australia.

Obviously - if in doubt consult your tax professional ...

[Bjauck]

Just a wee correction - whether stocks fall under the FIF regime has nothing to do with whether they are traded on the NZ stock exchange. The criterion is, whether the company is NZ based.

There are a number of NZX traded stocks which you need to declare under the FIF regime (unless the de minimum rule applies): some examples (just from memory) would be e.g. DIL, TEM, OGC, COA - and I am sure, there are plenty more. All of these funds (or companies) are listed on the NZX, but based outside of NZ and Australia.

Obviously - if in doubt consult your tax professional ...
I did not go into the details of the FIF scheme on a thread for PGW as there are there are other threads that cover that. However I did not say that all NZ traded stock were automatically exempt from FIF rules. All fund and company investments outside NZ are to be treated as FIF unless on the Australian Share Exemption List produced annually by the IRD. As always DYOR.

[Snoopy]

So you are re 2 and bit cents in the black atm Snoopy . The chart looks v weak and the macro re commodities and mkts are volatile and downwards.You must be confident re the road ahead for PGW?


As a dividend seeking investor rather than a trader, I am interested in building up an income creating asset that pays a decent dividend stream. Even if the amount of the dividend paid does not change, the yield will change as the market price of the share changes. I know it is tempting to compare the market price of the share with the price you paid, but I try not to think about this too much. If I am happy with the income stream, it doesn't really matter what Mr Market is prepared to pay for my shares on any given day. OTOH if I have new money to invest, then it is in my interest for the share price to be as low as possible regardless of what price I paid for any shares in the same company that I have bought in the past.

I am confident that PGW will remain a major player in the farm supplies market for the next ten years at least. That means I am prepared to look through any cyclical downturn in the PGW share price without losing too much sleep!

SNOOPY

[BeeBop]

And that is exactly the same approach I also have to all of my shares. Interestingly, it has paid off well when I purchase in down times. I have a target minimum yield (different by market) and provided the numbers stack up, I buy and maintain the portfolio by "purchase price". PGW is good for this..that said I do recheck alignment with each report coming out.

[Beagle]

As a dividend seeking investor rather than a trader, I am interested in building up an income creating asset that pays a decent dividend stream. Even if the amount of the dividend paid does not change, the yield will change as the market price of the share changes. I know it is tempting to compare the market price of the share with the price you paid, but I try not to think about this too much. If I am happy with the income stream, it doesn't really matter what Mr Market is prepared to pay for my shares on any given day. OTOH if I have new money to invest, then it is in my interest for the share price to be as low as possible regardless of what price I paid for any shares in the same company that I have bought in the past.

I am confident that PGW will remain a major player in the farm supplies market for the next ten years at least. That means I am prepared to look through any cyclical downturn in the PGW share price without losing too much sleep!

SNOOPY

Good approach mate.

[Baa_Baa]

What is the reason why a dividend investor, when confronted with a confirmed SP downtrend, wouldn't sell in between the dividends, to preserve capital and buy back more stock later at a lower price to avail themselves of the next dividend? This more active capital management approach seems a complementary approach to the astute yield hunting & holding approach, though I'm open to being enlightened. TIA.

[couta1]

But Baa Baa at the moment we are waiting for the PGW dividend and others like SPK not in between them:cool:

[iceman]

What is the reason why a dividend investor, when confronted with a confirmed SP downtrend, wouldn't sell in between the dividends, to preserve capital and buy back more stock later at a lower price to avail themselves of the next dividend? This more active capital management approach seems a complementary approach to the astute yield hunting & holding approach, though I'm open to being enlightened. TIA.

The short answer to that is tax. A trader is liable to income tax on any gains whereas a long term investor is not
I like and share Snoopy's approach with most of my investments but also run a small trading portfolio separately

[couta1]

The short answer to that is tax. A trader is liable to income tax on any gains whereas a long term investor is not
I like and share Snoopy's approach with most of my investments but also run a small trading portfolio separately
Actually iceman under our current very grey tax law anyone who bought and collected a divvy then sold to protect capital and then repurchased would not be liable for tax because their intent at time of purchase was to acquire dividends not to make a profit by reselling, intent at time of purchase is what determines if you pay tax not your reason for selling but capital protection would have to be the most water tight reason for selling anyways.

[iceman]

Actually iceman under our current very grey tax law anyone who bought and collected a divvy then sold to protect capital and then repurchased would not be liable for tax because their intent at time of purchase was to acquire dividends not to make a profit by reselling, intent at time of purchase is what determines if you pay tax not your reason for selling but capital protection would have to be the most water tight reason for selling anyways.

I think one would struggle to convince the IRD of that if it was a regular occurance. Agree the tax law is grey but IRD certainly looks at frequency of trades

[couta1]

I think one would struggle to convince the IRD of that if it was a regular occurance. Agree the tax law is grey but IRD certainly looks at frequency of trades
Possibly but by collecting and paying tax on the divvies IRD would have a hard job proving your intent was otherwise even if it was a regular occurrence. Most serious traders don't care about divvies full stop.

[iceman]

Possibly but by collecting and paying tax on the divvies IRD would have a hard job proving your intent was otherwise even if it was a regular occurrence. Most serious traders don't care about divvies full stop.

Different strokes for different folks mate. Regularly trading around dividends is not an approach I would be comfortable with for my tax free (capital gains) investment portfolio. But this has been debated on different threads and people clearly have different views on it

[Baa_Baa]

But Baa Baa at the moment we are waiting for the PGW dividend and others like SPK not in between them:cool:

That avoids the question, introducing the 'right now' situation doesn't defunct my question, whether the methodology could be implemented profitably. Your subsequent posts suggest that you think that there is doubtful exposure to tax implications. Hence there is a window where one can enjoy a dividend, sell the stock in a downtrend, buy in again later at a lower price, to enjoy the next dividend, and at higher yield.

[couta1]

Different strokes for different folks mate. Regularly trading around dividends is not an approach I would be comfortable with for my tax free (capital gains) investment portfolio. But this has been debated on different threads and people clearly have different views on it
Yep its a bit like how long is a piece of string, everyone must make their own mind up on where they stand, cheers.

[Baa_Baa]

Different strokes for different folks mate. Regularly trading around dividends is not an approach I would be comfortable with for my tax free (capital gains) investment portfolio. But this has been debated on different threads and people clearly have different views on it

Appreciate your reply iceman, I would need to get into the detail of what IRD consider 'trading' (though couta suggests that it is grey, and is not trading to sell and buy for a dividend - ergo intent), I'm asking partly because despite the encouraging commentary here, PGW is in a confirmed downtrend, yet the mainstream view is that that is OK (to diminish capital) as long as the dividends consistently follow. That's why I wonder if a more active approach to managing capital is a realistic approach.

[couta1]

That avoids the question, introducing the 'right now' situation doesn't defunct my question, whether the methodology could be implemented profitably. Your subsequent posts suggest that you think that there is doubtful exposure to tax implications. Hence there is a window where one can enjoy a dividend, sell the stock in a downtrend, buy in again later at a lower price, to enjoy the next dividend, and at higher yield.
That first post was just a cheeky one Baa Baa, so yes as you observed in the subsequent posts I agree with your thinking:cool:

[iceman]

Agree Baa Baa that PGW is in a confirmed downtrend. The report this week did not give me confidence that PGW will be able to maintain current level of dividends, so I made an exit with my holding. Still like this well managed company, just not for me at the moment

[couta1]

Agree Baa Baa that PGW is in a confirmed downtrend. The report this week did not give me confidence that PGW will be able to maintain current level of dividends, so I made an exit with my holding. Still like this well managed company, just not for me at the moment
Interested in how you differentiate between this stock and HNZ which is also in a confirmed downtrend and even if PGW cut their dividend its still likely to be at least equal to or better than HNZ. Hold both but more PGW.

[Baa_Baa]

Agree Baa Baa that PGW is in a confirmed downtrend. The report this week did not give me confidence that PGW will be able to maintain current level of dividends, so I made an exit with my holding. Still like this well managed company, just not for me at the moment

Thanks for sharing iceman, I was looking at the longer term chart and wondering how many people who enjoy PGW for it's dividends, but don't actively manage the capital, have suffered a massive capital loss. Surely they wouldn't sacrifice capital on this scale for dividends of a much lesser scale? An PGW is in a confirmed down trend, albeit at a considerably lower price than historical performance. Conversely, one can see that these prices if dividends are maintained must represent an appealing ROI. The issue being that a few cents here or there is a big percentage hit or gain on capital.

7520

7521

[percy]

Interested in how you differentiate between this stock and HNZ which is also in a confirmed downtrend and even if PGW cut their dividend its still likely to be at least equal to or better than HNZ. Hold both but more PGW.

One has eps growth,the other has flat earnings.
One has 7.8% exposure to dairying,the other has between 20 and 25% exposure.
One has the capacity to pay increasing dividends,the other does not.
I hold one ,but not the other.
Both are very well run businesses.

[winner69]

Was there a DEATH CROSS the other day?

Seems to be a lot of those darned things lately.

[blackcap]

Go watch the rugby you three :)

[Baa_Baa]

Go watch the rugby you three :)

If SkyGo worked (diseased mutt that it is) I would. But it's on Prime tomorrow, so no spoilers please :)

[Baa_Baa]

Was there a DEATH CROSS the other day?

Seems to be a lot of those darned things lately.

Umm, yes. There are a lot of them aren't there.

[couta1]

Thanks for sharing iceman, I was looking at the longer term chart and wondering how many people who enjoy PGW for it's dividends, but don't actively manage the capital, have suffered a massive capital loss. Surely they wouldn't sacrifice capital on this scale for dividends of a much lesser scale? An PGW is in a confirmed down trend, albeit at a considerably lower price than historical performance. Conversely, one can see that these prices if dividends are maintained must represent an appealing ROI. The issue being that a few cents here or there is a big percentage hit or gain on capital.

7520

7521 Unfortunately Baa Baa in the real world many of us holding dividend stocks find ourselves holding large capital paper losses from time to time especially in a downtrend like we currently have but most of them will come back up in value in due course, your theories are sound but impractical for the vast majority of holders of these type of stocks.

[BeeBop]

In my opinion, if you have a good company and are looking long- term, it is not worth worrying too much about capital - yes, shorter- term, if you don't have the capital to spare, then yes, selling on a downtrend could be worth considering but you. Can't really predict what the future might hold and you could fail to ride an uptrend. I sold out of a UK stock that had not really performed for me at all, the day before an uptrend! I then watched it slide back down so took a small holding in it again thinking I could play a small trade or two on it. Two weeks later it was subject to a friendly takeover at +45% ..... Had I not sold my intial holding, I would have been even happier. I am more of a basics numbers and instinct investor who mostly only adds to the portfolio, only ever selling to pay down investment property debt.

[couta1]

If SkyGo worked (diseased mutt that it is) I would. But it's on Prime tomorrow, so no spoilers please :) It will be starting on Prime soon Baa Baa:cool:

[iceman]

Interested in how you differentiate between this stock and HNZ which is also in a confirmed downtrend and even if PGW cut their dividend its still likely to be at least equal to or better than HNZ. Hold both but more PGW.

A couple of months back, I sold about 1/3 of my NZX holdings, including HNZ. My remaining HNZ shares owe me about 20c each. One of my rules with my dividend shares is that they need to maintain or increase dividend YoY. I believe HNZ and my other divie shares will do so but no longer sure about PGW. So I sold out
Just want to reiterate I think this is a good company but my funds will go elsewhere

[Baa_Baa]

Unfortunately Baa Baa in the real world many of us holding dividend stocks find ourselves holding large capital paper losses from time to time especially in a downtrend like we currently have but most of them will come back up in value in due course, your theories are sound but impractical for the vast majority of holders of these type of stocks.

I don't get it couta, why is it impractical to sell a share that is in a confirmed downtrend, on the premise of continuing to make a dividend that is a modest %, below the capital lost, let alone the potential for further capital losses?

[couta1]

I don't get it couta, why is it impractical to sell a share that is in a confirmed downtrend, on the premise of continuing to make a dividend that is a modest %, below the capital lost, let alone the potential for further capital losses?
Quite simply because most average investors buy and hold and don't follow trends that closely, your preaching to a different animal with your (Good) ideas, now go watch the rugby.

[iceman]

Go watch the rugby you three :)

They dont show it down here at Cape Horn. Weather and fishing also poor so fighting some BaaBaa-rra-Couta will have to do :-)

[Baa_Baa]

In my opinion, if you have a good company and are looking long- term, it is not worth worrying too much about capital - yes, shorter- term, if you don't have the capital to spare, then yes, selling on a downtrend could be worth considering but you. Can't really predict what the future might hold and you could fail to ride an uptrend. I sold out of a UK stock that had not really performed for me at all, the day before an uptrend! I then watched it slide back down so took a small holding in it again thinking I could play a small trade or two on it. Two weeks later it was subject to a friendly takeover at +45% ..... Had I not sold my intial holding, I would have been even happier. I am more of a basics numbers and instinct investor who mostly only adds to the portfolio, only ever selling to pay down investment property debt.

You sound like my grandad (no offence meant). He didn't actively manage capital ... more accurately he didn't seem to care! As long as the divis paid the bills. He did die wealthy so you've got me there. Maybe not as wealthy as he could have, had he managed his capital as closely as he managed his income?

I just don't understand this passive approach to investing that can debilitate more capital in favour of a lesser income = net going backwards, particularly in a confirmed downtrend as we have here with PGW. It's not that hard to sell a down trend and buy and later buy the uptrend. I'd try to, but as an active manager of my portfolio, I'd prefer not to expose myself to obvious and avoidable capital losses, for the sake of income.

Appreciate your perspective on this BeeBop.

[Baa_Baa]

Quite simply because most average investors buy and hold and don't follow trends that closely, your preaching to a different animal with your (Good) ideas, now go watch the rugby.

Really? Are you saying, that for the sake of a simple price performance chart, (informing an up or down trend, that one can buy or sell into) that my approach is more sophisticated than the typical yield investor? I really doubt that, there are a lot of much more sophisticated investors here than me, and yet they still advocate buying a downtrend on the basis of a nice yield. That's the thing I don't get.

[James108]

Because

1) I don't beleieve "a confirmed down trend" actually means anything i.e. I believe there is a 50% chance of the SP going up or down (short term) from this point.
2) Why would I sell a stock that I believe is trading at a discount to intrinsic value unless I have no spare cash AND can buy a stock that I believe is trading at an even greater discount to intrinsic value.

For the record I have fair value at around 45 cents a share.

[BeeBop]

You sound like my grandad (no offence meant). He didn't actively manage capital ... more accurately he didn't seem to care! As long as the divis paid the bills. He did die wealthy so you've got me there. Maybe not as wealthy as he could have, had he managed his capital as closely as he managed his income?

I just don't understand this passive approach to investing that can debilitate more capital in favour of a lesser income = net going backwards, particularly in a confirmed downtrend as we have here with PGW. It's not that hard to sell a down trend and buy and later buy the uptrend. I'd try to, but as an active manager of my portfolio, I'd prefer not to expose myself to obvious and avoidable capital losses, for the sake of income.

Appreciate your perspective on this BeeBop.

Baa Baa, i daresay I am like your Grandfather to a degree. Taking a long term view (as with property), prices do fluctuate and you just can't quite predict when there will be an unexpected event. If, I held only two or three stocks and was really watching my capital then maybe I would take the sell on downtrend and buy when I was sure that was over. As the day to day value would be quite important and I may want to build it up.

For me, my approach works and has done for a very long time. I watch others come unstuck when the market goes down badly, or those trading unable to turn a good enough profit (where their capital is too small some good Documentaries from UK TV following these). I came from a very "non financial background" with negative equity when I left university and have been able to turn a very tidy net worth. Some years are soooooo inactive that I don't track performance (2009, 2011/2012) other than the health of what I do have and then sink money into desperately undervalued stocks. Additionally, I have a real estate portfolio as well which "secures" gains (i.e. Theoretically the house won't disappear into the ether). Overall, if you run a narrow portfolio then maybe doing what you are suggesting could possibly work (maybe you have to make it work?) but broadening to a degree means that risks are lower - not that I am an advocate of a highly diverse spread....might as well just employ a broad ETF...and now, that is absolutely NO fun!

Maybe in two years PGW will pay out a higher yield? Maybe the price will go down to 30c pushing the yield up? Or maybe, with bank deposits lower more will buy and the market will favour PGW a tad more? I don't know but I do know that I can wear a capital value slide. Take a look at PFE.US, I think it was in 2011 that it was way out of favour after a down trend....yes, I bought and it was not good on for my capital value for some time but then Mid 2013 came around and it was closing in on $28. Yes, I sold them because that was just too good for me and my mortgages enjoyed a lump sum payment.

[Beagle]

Baa Baa. I think the explanation you seek as to why people aren't selling lies in the dividend yield. If one sells at 43.5 cents and misses the final fully imputed dividend yield that they've held the stock for all this time then they're only getting a net price of 41.5 cps less brokerage. While there's clearly some debate about the prospects for the current FY16 year many of us long term investors believe that over time PGW can sustain fully imputed dividends of 4 cps.

4 / 0.72 = gross dividends of 5.56 cps and on a net sale price of 41.5 cents people selling now are foregoing a gross future dividend yield of 13.39%.

Now while I understand your argument that in theory one can time the market and acknowledge the stock is in something of a downtrend right at the minute, many investors would already have taken a cautious position in this market and presently be sitting on a fair chunk of cash which would be returning them something like 3%, (will be 2% by the end of the year). As interest rates continue to dive to fifty year lows people will be looking for income stocks.

I think there's a few people out there not too worried it if gets down to 40 cents as that's hammer time. I'd put myself in that camp. Hope that helps answer your question mate.
I suspect there's a fair few people playing the same long dividend yield game with HNZ but the yield is inferior and they've got smacked down a lot further in percentage terms from $1.41 to $1.09.
Notwithstanding that its interesting to note those same investors are running for cover with this stock...maybe they learned their lesson from the school of hard knocks while us others are now attending a similar school :) Only time will tell. I think the stock is great value at this level on a long term view especially trading cum the final 2 cent fully imputed dividend.

[couta1]

Even those of us with a 47c average buy in its still best to just hold until the divvy as the latest correction aside it could just as easily have gone up and been at 49c now ( The timing of certain events can't always be forseen) However for those that don't really care about divvies and had a lower average then I can see the merit in selling and buying back cheaper.

[noodles]

Even those of us with a 47c average buy in its still best to just hold until the divvy as the latest correction aside it could just as easily have gone up and been at 49c now ( The timing of certain events can't always be forseen) However for those that don't really care about divvies and had a lower average then I can see the merit in selling and buying back cheaper.
Couta, I would argue that in fact the decline this week could be foreseen. The event was the FY16 outlook on 11 Aug, followed by the confirmation that 20-25% of earnings are in dairy.

[Baa_Baa]

Thanks everyone. Really interesting perspectives, appreciate you taking the time to share.

[couta1]

Couta, I would argue that in fact the decline this week could be foreseen. The event was the FY16 outlook on 11 Aug, followed by the confirmation that 20-25% of earnings are in dairy.
I was thinking more in terms of the sudden devaluation of the Chinese currency and the Macro effect that has had on all stocks and more so on stocks like PGW.

[noodles]

I was thinking more in terms of the sudden devaluation of the Chinese currency and the Macro effect that has had on all stocks and more so on stocks like PGW.
Maybe a bit of both (event and macro). But in any case, it is rear screen mirror stuff now. Best of luck.

[Beagle]

Thanks everyone. Really interesting perspectives, appreciate you taking the time to share.

You're most welcome mate. The tactic that can work well when people really like a share and are investing for the long term, but expect a short period of SP weakness, is to sell half and look to buy it back at a lower price. This achieves a number of things. Firstly there's an acknowledgement that you can't be completely sure at any point in time, despite the appearance of a short term price trend, exactly what a SP will do next so completely selling out vs 50% sale acknowledges one's attempts to effectively "time the market" are often fraught with considerable execution risk.

Secondly there's the very useful psychological backstop of consoling oneself that if the price does go up in the short term after selling half, despite one's expectation of a short term period of SP weakness, at least you didn't sell all your shares. Thirdly if it does go down as expected for a short time, you still feel "connected" and a sense of involvement with your chosen company and console yourself that the short term reduction in the value of your position was mitigated by selling half but also you feel empowered for the long term because you're actively looking for a weaker price point to re-enter your original more fulsome market position. Indeed one might buy slightly more at the point of re-establishment of a more fulsome position at the lower price point because of your previous 50% sale at the higher price point generating the funds to do so.

I think this is a useful way to "manage" a short period of expected SP weakness both from a financial and psychological perspective and acknowledges that one's personal attempts to time the market will never be correct anywhere even remotely close to 100% of the time. i.e. anyone who claims they can time the market right 100% of the time is quite simply "full of it". I reckon if you can time the market right 70% of the time you're doing well.

[amalgam]

I have followed this debate with much interest. Over the years I have followed a buy & hold policy..rebalancing my portfolio when a holding gets too high in value..or selling if the original reasons for investing in the company should change
Always in the back of my mind is I don't wish to be classified as a trader by the IRD
As some posts have mentioned it is not possible to time a buy or sell perfectly ...& following this technique I have had a number of multi bangers which make up for any loss on a particular share. After all the most one can loose on any company is 100 percent, but by buying smaller cap companies particularly in Australia it is possible to do very well
Just a few thoughts from my respective..we are all different but chasing the same reward

[nextbigthing]

.... many of us long term investors believe that over time PGW can sustain fully imputed dividends of 4 cps.....



Hey Roger,

Can you please expand on this bit? How do you come to this conclusion?

Cheers,

NBT

disc hold.

[Beagle]

Hey Roger,

Can you please expand on this bit? How do you come to this conclusion?

Cheers,

NBT

disc hold.

Hi mate,

Broker consensus forecasts for FY16, FY17 & FY18 are for EPS of 4.4cps, 4.8cps and 5.1 cps respectively.

The majority shareholder needs a lot of those earnings each year by way of dividend to fund their balance sheet.

Hope that helps. explain it.
Cheers

http://www.4-traders.com/PGG-WRIGHTSON-LIMITED-6497113/financials/

[Beagle]

Nice bounce today from a heavily oversold position. Anyone who was brave enough to buy recently at 42.5 cents cum the final divvy is already up nearly 6% in a couple of days :)

[nextbigthing]

Hi mate,

Broker consensus forecasts for FY16, FY17 & FY18 are for EPS of 4.4cps, 4.8cps and 5.1 cps respectively.

The majority shareholder needs a lot of those earnings each year by way of dividend to fund their balance sheet.

Hope that helps. explain it.
Cheers

http://www.4-traders.com/PGG-WRIGHTSON-LIMITED-6497113/financials/

Cool, thanks Roger.

Yes 42.5c was crazy level buying!

[zymwh]

should I buy before tomorrow 4:45pm to get the div? (just want to conform ;-)

Thanks!

[Joshuatree]

Ex 28th friday so tomorrow last chance. But is the div a prop holding up the s/p? If so what happens when that prop is taken away in these volatile mkts.A bit irrational atm with great results still being marked down.

[BIRMANBOY]

With almost 2 million in the sells and just 320,000 in the buys..could be better buying (for long term) to be had after the dividend?
Ex 28th friday so tomorrow last chance. But is the div a prop holding up the s/p? If so what happens when that prop is taken away in these volatile mkts.A bit irrational atm with great results still being marked down.

[Joshuatree]

Certainly need to look at both sides and not pressure oneself into a weak position ( pant, pant mustn't miss out, must buy cum div). And what sentiment is in the mkts on the day etc. Been pretty spastic out there; .......knee jerks.

[see weed]

With almost 2 million in the sells and just 320,000 in the buys..could be better buying (for long term) to be had after the dividend?
Do you think all those sellers above 45c are waiting to pounce after ex. div? If they are, bring it on. I will keep on buying right down to the bottom. Looking forward to big div in oct.

[BIRMANBOY]

Sellers don't pounce.....buyers pounce...Also it doesn't matter what price you want to pay or sell for if the market pressures dictate something else. To make a highly generalized statement...more sellers than buyers will/should push SP down. In many cases SP will drop by the amount of the div after it goes ex-div. No-one in their right mind buys at a higher price than they need to...not even die-hard boosters of a share. Yes its a good dividend..I am looking at buying myself...but the dividend history is rather short and has been dropping. To insulate myself against further possible div drops and SP erosion I am trying to buy as cheaply as possible so am gambling that I can buy cheaper AFTER the div.. Notice I said gamble...cos that what it is. May or may not drop but in present climate I believe that its a strong possibility. There's plenty out there for everybody....you don't need to rush:)
Do you think all those sellers above 45c are waiting to pounce after ex. div? If they are, bring it on. I will keep on buying right down to the bottom. Looking forward to big div in oct.

[see weed]

Yesterdays close from memory was .435c. Today it says yesterdays close was .415c :confused:.

[sb9]

Yesterdays close from memory was .435c. Today it says yesterdays close was .415c :confused:.

They might've adjusted the 2c divvy see weed, hence the difference as it went ex-div.

[Hectorplains]

Yesterdays close from memory was .435c. Today it says yesterdays close was .415c :confused:.


And back up to $43c this afternoon. Looks like there was some very good buying had pre-dividend.

[Beagle]

Wow...to quote a famous line from the movie Wall St, I sure went down the toilet on that ugly *****

Where too from here ?...I have no idea to be honest.

[Joshuatree]

Ex 28th friday so tomorrow last chance. But is the div a prop holding up the s/p? If so what happens when that prop is taken away in these volatile mkts.A bit irrational atm with great results still being marked down.

Watching for an entry.

[Beagle]

A little queue at 38...maybe that's the bottom J ?

[nextbigthing]

Wow...to quote a famous line from the movie Wall St, I sure went down the toilet on that ugly *****

Where too from here ?...I have no idea to be honest.

Reasonably small volume and retail trades Roger. No big deal.

[see weed]

Watching for an entry.
What are the positives and negatives of El Nino on PGW sp? Picked up some late this avo for 39c. Just a gamble.

[RTM]

Totally exposed to agriculture which in many folks mind equates to dairy I would guess.
HNZ dropped around 25% on that perceived exposure...remember the angst by some ?
PGW down ~ 30% from their high......So they deserve similar treatment ? Maybe more as all Agriculture.


Ex 28th friday so tomorrow last chance. But is the div a prop holding up the s/p? If so what happens when that prop is taken away in these volatile mkts.A bit irrational atm with great results still being marked down.

[nextbigthing]

Totally exposed to agriculture which in many folks mind equates to dairy I would guess.
HNZ dropped around 25% on that perceived exposure...remember the angst by some ?
PGW down ~ 30% from their high......So they deserve similar treatment ? Maybe more as all Agriculture.

Not quite, for example http://pggwrightson.co.nz/services/fruitfed-supplies.

Horticulture is booming. I emailed PGW a while ago and they replied they were confident things like the booming horticulture industry easily made up for dairying. Meat and wool still receiving good prices as well.

[Beagle]

Totally exposed to agriculture which in many folks mind equates to dairy I would guess.
HNZ dropped around 25% on that perceived exposure...remember the angst by some ?
PGW down ~ 30% from their high......So they deserve similar treatment ? Maybe more as all Agriculture.

Two different kettles of fish mate. I posted a while back that PGW's problematic receivables were quite minor whereas on the other hand...

[RTM]

Sorry....should have been clearer.....Maybe I should have said "products of the land".
I agree with what you say NBT, so again...its perceived exposure. And in the next year to three there will be an oversupply of apples, kiwifruit, avo's....the price will drop. Of course milk will be in short supply and so....
The cycle goes on.


Not quite, for example http://pggwrightson.co.nz/services/fruitfed-supplies.

Horticulture is booming. I emailed PGW a while ago and they replied they were confident things like the booming horticulture industry easily made up for dairying. Meat and wool still receiving good prices as well.

[IAK]

Concerns over a strong El Nino (and drought) this summer too. If so, some of the over indebted dairy farmers will be really struggling. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11509286

http://www.radionz.co.nz/news/national/280235/concerns-over-strong-el-nino

[Beagle]

Reasonably small volume and retail trades Roger. No big deal.

Some fairly big trades today which gives a disappointing insight into what some of the bigger holders consider its worth, (39.5 cps).

[nextbigthing]

Yes, it's in a fairly decent downtrend at the moment unfortunately. No use fighting that. However, for future reference, I can assure you, each and every one of the sellers is wrong. :D

[James108]

Will probably look to buy if it gets down to 37-38.

[couta1]

Yes, it's in a fairly decent downtrend at the moment unfortunately. No use fighting that. However, for future reference, I can assure you, each and every one of the sellers is wrong. :D Great minds think alike, I was just thinking the same about those selling Air but hey sellers are always wrong unless it's us but then we might be wrong also, confused, don't be:cool:

[Joshuatree]

"Sellers are always wrong if you are buying" JT 2008

not buying atpit so sellers are right:cool:

[nextbigthing]

Pre-tax profits for an average sheep and beef farm in New Zealand will increase to $109,900 this season - 9.6 per cent more than last season, but 3.1 per cent below the five-year average, Beef and Lamb New Zealand says in its 2016/6 season outlook.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11511075

[Beagle]

Three increases in the dairy price and the stock is still very close to the bottom. Good value ? you be the judge but for what its worth I bought some more at 40 cents this morning.

[see weed]

Three increases in the dairy price and the stock is still very close to the bottom. Good value ? you be the judge but for what its worth I bought some more at 40 cents this morning.
I was gonna buy those, you beat me to it. Got some at .405c later on. Took half a day for order to go through. Just another gamble:).

[Crackity]

I was gonna buy those, you beat me to it. Got some at .405c later on. Took half a day for order to go through. Just another gamble:).

40 cents with a 4 cent a year dividend doesn't look like much of a gamble to me. Looks more like a winning hand:)

[Grimy]

I topped up my (small) holding at .395 last week. One of my first share purchases was Wrightson's 20 years ago. I've been in and out a bit, but overall it's been a good company(ies) return-wise.

[Lewylewylewy]

Does PGW have much of a financial pot to get them through hard times, does anyone know?

I think I read somewhere that they pretty much deliver all their profit in dividends.

[Jantar]

Does PGW have much of a financial pot to get them through hard times, does anyone know?

I think I read somewhere that they pretty much deliver all their profit in dividends.
According to their annual report, their NPAT was $32.8M. They also had some one off income that gave them a total profit for the year of Close to $39.9. The divi at $0.04 is $30.2M So just on NPAT they would have $2.6M spare, but in total they would have $9.7 M in reserve.

[Beagle]

I was gonna buy those, you beat me to it. Got some at .405c later on. Took half a day for order to go through. Just another gamble:).

Good on ya mate. Technical analysis be dammed, they're good value at this level. Buy in gloom, sell in boom :)

[James108]

Does PGW have much of a financial pot to get them through hard times, does anyone know?

I think I read somewhere that they pretty much deliver all their profit in dividends.

Have you tried looking at an annual report?

They have net debt, so apart from debt facility (?) no they don't.

[Lewylewylewy]

According to their annual report, their NPAT was $32.8M. They also had some one off income that gave them a total profit for the year of Close to $39.9. The divi at $0.04 is $30.2M So just on NPAT they would have $2.6M spare, but in total they would have $9.7 M in reserve.

Thanks Jantar, that's not a lot of rainy day savings (or is it dry day savings in the farming world?) for a company with outgoings in the region of 90M. How well positioned are this company to survive another 2008 type event? I notice looking at Google Finance's 10 year view, that the share price never really recovered from the GFC in 2008, while most others did. Economies experience some sort of crash every 8 years on average, is PGW doomed to pay great dividends then lose all the value every decade or so?

[Sideshow Bob]

Again, relatively low exposure to dairy

http://viewer.zmags.com/publication/0a779aec#/0a779aec/28

[couta1]

Interesting depth chart this morning, price on the up and sellers drying up, must be due for a wee breakout methinks, perhaps thoughts of the dairy impact subsiding.

[Beagle]

Interesting depth chart this morning, price on the up and sellers drying up, must be due for a wee breakout methinks, perhaps thoughts of the dairy impact subsiding.

Yeah I noticed that too mate. I think the correction all the way down to 39.5 - 40.0 cents is a little overdone.

[winner69]

There was a guy on the radio this morning saying El Niño will curb farmers spend .....and specifically mentioned PGW as one to be affected

It was referring to a Forbar report - i thought Forbar were guru analysts.

[couta1]

There was a guy on the radio this morning saying El Niño will curb farmers spend .....and specifically mentioned PGW as one to be affected

Jeez, he an idiot eh Egg on his face aye winner, think of all that extra irrigation equipment going out the door courtesy of El Nino.

[Beagle]

Its amazing really all the talk of some Canterbury farmers still currently being susceptible to a drought and enduring the effects of last summer's drought. I just travelled from Chch to Auckland after picking up my daughter's new car over 1,000 km's, so after travelling most of the length of N.Z. all I saw was a sea of green everywhere I went, (apart from on the Cook St ferry of course) although there were a few passengers looking a bit green with a fairy rough crossing :)

The odd farmer who is still bleating like a lamb lost from its mother about the effects of last year's drought really ought to get proactive and irrigate and do something about it ASAP, (yes I realise irrigation schemes can take years of planning and resource consenting but then we've had many years of drought's haven't we !).

On another note speaking of water and leaks and all. Interesting that exactly two weeks before the annual meeting and a scheduled update on the forecast for FY16 we have a fundamental sea change in the balance between the depth of buyers and sellers and the price being hunted up fairly aggressively. Leaks or investor anticipation ?, you be the judge.

[Jantar]

There was a guy on the radio this morning saying El Niño will curb farmers spend .....and specifically mentioned PGW as one to be affected

It was referring to a Forbar report - i thought Forbar were guru analysts.
Well he got that wrong. A sudden big increase in PGW price in the past 1/2 hour. I'm smiling again.

[BlackPeter]

Drought a problem for PGW? Lets see -

2012/2013 was a quite severe drought ... and actually PGW had a terrible year (though mainly for writing off their overvalued assets).

2014/2015 was quite dry for the East coast ... and actually PGW had a bumper year

Niwa says: "Drought is a common feature of New Zealand's climate. On average, every year or two somewhere in New Zealand experiences a drought." Funny - PGW does not have every year or two a bad year, don't they?

And now people are talking about a potential drought for 2015/16 ...

I can see that a drought is changing the business of traders like PGW ... farmers will buy irrigation equipment or sell surplus stock prior to an expected drought, they will buy supplementary food during the drought and they will buy seeds (and potentially restock) afterwards. Farms will sell for more money in moister conditions, but more farms will sell in droughts. Whatever it is - as long as NZ decides to stay in the agricultural business, farmers need to trade - keeping PGW busy.

Don't think that shareholders need to worry too much, no matter how the weather develops this summer ...

[see weed]

Drought a problem for PGW? Lets see -

2012/2013 was a quite severe drought ... and actually PGW had a terrible year (though mainly for writing off their overvalued assets).

2014/2015 was quite dry for the East coast ... and actually PGW had a bumper year

Niwa says: "Drought is a common feature of New Zealand's climate. On average, every year or two somewhere in New Zealand experiences a drought." Funny - PGW does not have every year or two a bad year, don't they?

And now people are talking about a potential drought for 2015/16 ...

I can see that a drought is changing the business of traders like PGW ... farmers will buy irrigation equipment or sell surplus stock prior to an expected drought, they will buy supplementary food during the drought and they will buy seeds (and potentially restock) afterwards. Farms will sell for more money in moister conditions, but more farms will sell in droughts. Whatever it is - as long as NZ decides to stay in the agricultural business, farmers need to trade - keeping PGW busy.

Don't think that shareholders need to worry too much, no matter how the weather develops this summer ...
Very well said. And on that note, sunk my teeth into another 25,000 this arvo and more to eat tomorrow at the right price:).

[Snoopy]

Its amazing really all the talk of some Canterbury farmers still currently being susceptible to a drought and enduring the effects of last summer's drought. I just travelled from Chch to Auckland after picking up my daughter's new car over 1,000 km's, so after travelling most of the length of N.Z. all I saw was a sea of green everywhere I went.


I think your observation is a little superficial Roger. It is still possible to have your soil in severe moisture deficit, yet have a 'green bloom' on top due to recent rain.

SNOOPY

[Fisherking]

I'm no farmer, though I do have a few acres, but I'm my case i'm far more likely to spend $ with PGW during a drought because I need to buy supplemental feed. Probably a bit different for the real farmers but i'm sure there's pro's and con's of droughts.

[see weed]

Has anyone noticed support has risen from 39c to 41c in the last week? Yesterday 300,000 odd support jumped from 41c to 42c. Is this the start of 48c here we come?:t_up:

[Beagle]

Has anyone noticed support has risen from 39c to 41c in the last week? Yesterday 300,000 odd support jumped from 41c to 42c. Is this the start of 48c here we come?:t_up:

Hi mate. You'd have to figure that with four strong increases in the GDT auction prices things are nowhere near as bleak for the dairy sector as they were in the depth's of the winter of discontent. I think the rise in the primary support to 42 cents is well overdue. Prospects for some moderate further gains from here look sound to me. Based on 4 cents fully imputed (5.56 cents gross) PGW at 42 cents trades on a gross dividend yield of 13.23%.

[winner69]

How good are PGW at facing up to disruptive technology?

http://www.radionz.co.nz/audio/player/201774853

Stock X to replace the friendly PGW agent.

Disruptive? (Of course not cause things don't change that fast in rural and they say)

[Crackity]

Based on 4 cents fully imputed (5.56 cents gross) PGW at 42 cents trades on a gross dividend yield of 13.23%.

Agreed Roger - this and GNE are still my two favorite stocks based on dividend yield....if you have a long term view these are much more attractive than bank deposits.

[Beagle]

Hi mate. You'd have to figure that with four strong increases in the GDT auction prices things are nowhere near as bleak for the dairy sector as they were in the depth's of the winter of discontent. I think the rise in the primary support to 42 cents is well overdue. Prospects for some moderate further gains from here look sound to me. Based on 4 cents fully imputed (5.56 cents gross) PGW at 42 cents trades on a gross dividend yield of 13.23%.
I find it a bit surreal how you can post on here and then even though you weren't thinking of buying the stock on the day, because of the fact that you've taken the opportunity to detail and clarify your thoughts you think well...why not ? and end up talking yourself into buying more which is what I did at 42.5 cents this morning. Yield is irresistible for a dividend hound like me and on balance I'd say pretty comfortably that the upside risk is considerably higher than the downside. Even more surreal when said post ends up making you 3.5% on the day...benefits of regular posting on ST you could say !

[tim23]

About time that market woke up to this bargain!

[Jantar]

I had a contractor plant out one of our paddocks in lucerne on Saturday. That seed (from PGW) costs $660 for a 20kg bag. Someone is making a nice profit, and I hope to see some of it back in the next dividend. :mellow:

[Beagle]

I had a contractor plant out one of our paddocks in lucerne on Saturday. That seed (from PGW) costs $660 for a 20kg bag. Someone is making a nice profit, and I hope to see some of it back in the next dividend. :mellow: That stuff good in a dry year isn't it ! Market is eagerly awaiting tomorrow's annual meeting and profit guidance for FY16.

[kiwidollabill]

Considering the amount of Pivot irrigators that have been put up in the last 12 months in the upper Clutha I imagine their irrigation BU will be doing well..

[Plutus]

Considering the amount of Pivot irrigators that have been put up in the last 12 months in the upper Clutha I imagine their irrigation BU will be doing well..

That extra water acquisition a year or two back will come in to its own.

[winner69]

When you see a headline 'Wrightson's first quarter on track' you know bad news is coming

WOW. - on track to lower earnings

So last year $69.5m ebitda could be as low as $61m this year

That's not good

A shocker really

But the corporate spin came out as usual .....all on track to something in the future. All honky dory, no worries

[kiwidollabill]

That extra water acquisition a year or two back will come in to its own.

Ngai Tahu have pushed the button on converting a whole lot of their canterbury farms into Dairy. They've bought 42 pivots.....

[couta1]

But winner they said they were tracking slightly ahead of expectations so all good.

[winner69]

But winner they said they were tracking slightly ahead of expectations so all good.

Must be bloody low expectations then mate

A strategy for growth and guidance with ebitda possible 12% lower than last year

Whose kidding who here

[winner69]

That stuff good in a dry year isn't it ! Market is eagerly awaiting tomorrow's annual meeting and profit guidance for FY16.

You got your wish?

[winner69]

The divie is safe - Alan will see to that

[winner69]

But winner they said they were tracking slightly ahead of expectations so all good.

That's good

Share price should respond positively now

Might not rocket ahead but at positive.

The market does not lie uncertainty and the company has reassured them things on track, good

[winner69]

EPS trends interesting

Used to be 8/9 cents over 2007/2009 but that was when things were pretty good. Best since was 2014 when eps was 5.6 cents

But it fell to 4.5 cents in 2015 (yes fell) and latest guidance implies another fall in 2016

So eps back to 2012 levels.

Growth strategy?

No wonder the share price languishes where it is. Another disaster year and what will happen to it?

In spite of the comforting words in the announcement maybe the underlying message is actually things are actually getting tough down on the farm.

[see weed]

EPS trends interesting

Used to be 8/9 cents over 2007/2009 but that was when things were pretty good. Best since was 2014 when eps was 5.6 cents
But it fell to 4.5 cents in 2015 (yes fell) and latest guidance implies another fall in 2016

So eps back to 2012 levels.

Growth strategy?

No wonder the share price languishes where it is. Another disaster year and what will happen to it?

In spite of the comforting words in the announcement maybe the underlying message is actually things are actually getting tough down on the farm.
Do you have any PGW shares?

[sb9]

But winner they said they were tracking slightly ahead of expectations so all good.

Get worried when they use words as "on track" means its not so great after all.

Disc - Non-holder now (sold out after the FY 15 results)

[winner69]

Interestingly the market has obviously been expecting a minimum of 10% drop in profit this year as per consensus estimates on 4traders

So at the mid point of 61-67m = 64m this is less than a 10% reduction in EDITDA.

So announcement no real surprise to those who do their homework

[BlackPeter]

Been on the AGM and thought to share some of my impressions with you ... for the benefit of shareholders who couldn't make it:

Full board attendance and lots of senior managers - everybody easy to recognise on their green PGW ties. Management clearly takes the AGM seriously. As well - a lot of Agria people there ... but no surprise, given that they own 50%.

Other shareholders - my estimate between 50 and 70 (I know, I should have spent more time counting them). Still lots of empty seats - would be nice to get the room next time full;).

Presentation published on the NZX: https://www.nzx.com/files/attachments/223559.pdf.

After a brief introduction from chairman Alan Lai - the main part of the presentation was hold by Mark Dwedney, and he answered as well the questions (I think all of them ...). Now - we know how the year went (actually - not too bad ...) what I heard "between the lines" is that they try to improve the expertise / soft skills of their staff and the organisational culture.

Mark talked about a number of "exciting contracts" they won in the wool area (high quality / high margin), but didn't quantify them.

Strategy: South America was still boasted as opportunity - and when I followed up after the meeting with some of the directors, they called South America "low hanging fruit" but it felt that they are as well still working on China as long term target (no surprise given the board composition).

Financial results outlook: Came obviously with all the appropriate disclaimers ... but the earnings downgrade from this morning was more packaged like: "if we achieve that, than it will be the second best year in recent history" (and yes, this is what it is - check slide 22). Overall people appeared to be reasonable optimistic (despite the dairy sector) and expecting definitely a recovery in 2017.

Most of the overseas directors (but Alan) stood for re-election - and they all talked about the growth they expect long term to see ... maybe as well a reflection on the share price Agria paid for PGW, but it felt (as well in individual discussions) that they do see huge future growth potential in Asia - though mid to long term.

Good to see all the candidates speaking to the meeting ... though I must say, that most of the came better across in a 1-to-1 after the meeting than in their address to the meeting (cultural background - eye contact / language?).

Some of the questions I found interesting and didn't comment on earlier (like future markets - s. above) .... in no particular order:

Q: Expected milk price payout for 2016? Marks answer (with lots of disclaimers and his private view ...): Fonterra's current indication of $5 /kg is probably quite realistic ... though personally could he see it going up to $6 (he said ... maybe ... just his hope);

Q: Given PGW's slim margins - what is their unique sales proposition? A: Expertise of their staff ... (and maybe that's something they try to improve with their training focus).

Q: What would a very dry summer mean for PGW? A: A summer with some regions dry would be "business as usual". If really all parts of NZ would be impacted, than things are more complicated, but even than there would be opportunities (e.g. if the drought is followed by a not too late drought breaker ...

Q: Impact on silverfern deal ... A: They have a good relationship with Silverfern and don't see that at risk. Good to see them now on a more solid financial basis.

Q: reason for increased inventory in South America (actually Max from the NZSA found this point - Respect - he must have read the report!)? Answer: they do expect improved business and took this risk ('You can buy seeds only once a year")'

Q: Gender diversity in the board? A: concern noted ... they do have a policy ... but as we see, at this stage it is just males on the board (though obviously with some ethnic diversity.

There was as well a question on why they report on EBITDA instead of NPAT ... but somehow did the answer escape my attention ...

Ah yes - most of the questions came either from the NZSA ... and from one other shareholder (who shall not be identified;)). Went well, though a bit more wide spread question basis next time couldn't hurt ...

My personal impression on PGW: I think I go with the Chinese owners and do recognise long term value in this company. Intend to stay invested (and potentially accumulate if the SP drops). However - I said that before for other companies ... and I was not always right ... i.e. DYOR!

[Crackity]

Been on the AGM and thought to share some of my impressions with you ... for the benefit of shareholders who couldn't make it:

Full board attendance and lots of senior managers - everybody easy to recognise on their green PGW ties. Management clearly takes the AGM seriously. As well - a lot of Agria people there ... but no surprise, given that they own 50%.

Other shareholders - my estimate between 50 and 70 (I know, I should have spent more time counting them). Still lots of empty seats - would be nice to get the room next time full;).

Presentation published on the NZX: https://www.nzx.com/files/attachments/223559.pdf.

After a brief introduction from chairman Alan Lai - the main part of the presentation was hold by Mark Dwedney, and he answered as well the questions (I think all of them ...). Now - we know how the year went (actually - not too bad ...) what I heard "between the lines" is that they try to improve the expertise / soft skills of their staff and the organisational culture.

Mark talked about a number of "exciting contracts" they won in the wool area (high quality / high margin), but didn't quantify them.

Strategy: South America was still boasted as opportunity - and when I followed up after the meeting with some of the directors, they called South America "low hanging fruit" but it felt that they are as well still working on China as long term target (no surprise given the board composition).

Financial results outlook: Came obviously with all the appropriate disclaimers ... but the earnings downgrade from this morning was more packaged like: "if we achieve that, than it will be the second best year in recent history" (and yes, this is what it is - check slide 22). Overall people appeared to be reasonable optimistic (despite the dairy sector) and expecting definitely a recovery in 2017.

Most of the overseas directors (but Alan) stood for re-election - and they all talked about the growth they expect long term to see ... maybe as well a reflection on the share price Agria paid for PGW, but it felt (as well in individual discussions) that they do see huge future growth potential in Asia - though mid to long term.

Good to see all the candidates speaking to the meeting ... though I must say, that most of the came better across in a 1-to-1 after the meeting than in their address to the meeting (cultural background - eye contact / language?).

Some of the questions I found interesting and didn't comment on earlier (like future markets - s. above) .... in no particular order:

Q: Expected milk price payout for 2016? Marks answer (with lots of disclaimers and his private view ...): Fonterra's current indication of $5 /kg is probably quite realistic ... though personally could he see it going up to $6 (he said ... maybe ... just his hope);

Q: Given PGW's slim margins - what is their unique sales proposition? A: Expertise of their staff ... (and maybe that's something they try to improve with their training focus).

Q: What would a very dry summer mean for PGW? A: A summer with some regions dry would be "business as usual". If really all parts of NZ would be impacted, than things are more complicated, but even than there would be opportunities (e.g. if the drought is followed by a not too late drought breaker ...

Q: Impact on silverfern deal ... A: They have a good relationship with Silverfern and don't see that at risk. Good to see them now on a more solid financial basis.

Q: reason for increased inventory in South America (actually Max from the NZSA found this point - Respect - he must have read the report!)? Answer: they do expect improved business and took this risk ('You can buy seeds only once a year")'

Q: Gender diversity in the board? A: concern noted ... they do have a policy ... but as we see, at this stage it is just males on the board (though obviously with some ethnic diversity.

There was as well a question on why they report on EBITDA instead of NPAT ... but somehow did the answer escape my attention ...

Ah yes - most of the questions came either from the NZSA ... and from one other shareholder (who shall not be identified;)). Went well, though a bit more wide spread question basis next time couldn't hurt ...

My personal impression on PGW: I think I go with the Chinese owners and do recognise long term value in this company. Intend to stay invested (and potentially accumulate if the SP drops). However - I said that before for other companies ... and I was not always right ... i.e. DYOR!


Thanks for for the match report BP - fully imputed div yield around the 13% mark ticks my boxes as a long term investment.....

[winner69]

Do you have any PGW shares?

seeweed, I have been keeping track of PGW well before the turn of the century

Read all their preentations, reports and even been to a few ASMs.

In spite of restructures, change in strategy and all those other wonderful things from a financial performance point of view things never seem to change.

See chart. Revenues struggle to grow at the rate of inflation and NPAT much the same as it always has been. Not actually exciting is it - pretty boring eh. I can't really see how this time its any different

That vision of a wonderful company always seems to be on forever disappearing horizon.

But heck buy for the dividend in these low interest times - but that's not for me

[Brain]

Can anybody answer the question "why does PGW report EBITDA?"
I am not a finance guy so would appreciative a bit of education on this one.
Thanks

[winner69]

Can anybody answer the question "why does PGW report EBITDA?"
I am not a finance guy so would appreciative a bit of education on this one.
Thanks

Standard reply is it better represents the operational performance of the company.

The official version is (from PGW)

PGW’s standard profit measure prepared under New Zealand GAAP is “Profit/(loss) for the period”. PGW has used non-GAAP profit measures when discussing financial performance in this document. The directors and management believe that these measures provide useful information as they are used internally to evaluate performance of business units, to establish operational goals and to allocate resources. They also represent some of the performance measures required by PGW’s debt providers. For a more comprehensive discussion on the use of non-GAAP profit measures, please refer to the policy “Non-GAAP Financial Information” available on our website (www.pggwrightson.co.nz).

[winner69]

Mark seems resigned to having a ****e year this year. One of least enthusiastic CEO interviews I have heard. C'mon Mark, your shareholders deserve better

Pretty desperate referring to 'engaged staff and we should get our share of what's 'on offer'

http://www.radionz.co.nz/audio/player/201776486

[Brain]

Thanks Winner

[BlackPeter]

Can anybody answer the question "why does PGW report EBITDA?"
I am not a finance guy so would appreciative a bit of education on this one.
Thanks

Actually - you should have been at yesterdays AGM (or was it you asking this question)? Still - I was, but must have found something more interesting to occupy myself with while Mark responded to this question.

Having said that - if you look into the annual report, than you will find that PGW is obviously reporting as well on profit (just look into the financial statements) ... as does everybody else. So - they are nothing hiding here ... they just decided to highlight the EBITDA in page 2 of the report instead of the NPAT (for all the people who never pass page 3 of any report ...). I use in my spreadsheets NPAT as one of the criteria to compare companies - and never had a problem to find the relevant numbers for PGW or any other listed company.

Now, I am not an accountant (and don't desire to turn into one), but from my limited financial understanding does EBITDA give you a better idea of the underlying earning capabilities of a company (without worrying about the noise created by interest rates, revaluations and taxes paid) - while NPAT is obviously what the CFO finds at the end of the year as (hopefully) surplus in the companies accounts and balance sheets.

In my view there are very valid reasons to look into both numbers - and the EBITDA gives you probably a more realistic scenario to assess the ongoing earnings potential of a company (unless you look at companies who benefit regularly from "one-off's).

So - everybody is reporting on EBITDA as well as on NPAT. So does PGW. Some companies choose to highlight EBITDA, some NPAT in the glossy parts of their reports ... and some people even might think this choice might be driven by which of the numbers looks better in the respective year. Obviously - I never would be that cynical to think that, wouldn't I?

[winner69]

BP / Brain - ebitda is also seen as a proxy for operating cash flow which in itself is a useful thing. There are, as stated by PGW, several good reasons why this a good measure, esp for internal reporting of business units.

I don't think Brain thought there was any ulterior motives in companies using ebitda as their measure of operating profit.

[Brain]

I was surprised that my question was taken as being critical of PGW
It was just a question

[BlackPeter]

Mark seems resigned to having a ****e year this year. One of least enthusiastic CEO interviews I have heard. C'mon Mark, your shareholders deserve better

Pretty desperate referring to 'engaged staff and we should get our share of what's 'on offer'

http://www.radionz.co.nz/audio/player/201776486

Quite harsh (and I think unfair) assessment based on a roughly 20 second interview response. Actually - if I think at PGW's famous previous (and now late) "more enthusiastic" leader who nearly run the company into the ground - than I think I prefer Mark. However - everybody to their own.

[winner69]

Quite harsh (and I think unfair) assessment based on a roughly 20 second interview response. Actually - if I think at PGW's famous previous (and now late) "more enthusiastic" leader who nearly run the company into the ground - than I think I prefer Mark. However - everybody to their own.

Well maybe he was tired after a hard day and the ASM etc ........but definitely did not come across as 'optimistically enthusiastic' did he. Hence my comments maybe he is resigned to a bad year


And by the way it was no reflection on his ability as an CEO - just how he came across. Hope he listens to that little interview

Good on you for coming to his defence though - like a bit of passion

[Joshuatree]

Sounded genuine and spin free to me ;refreshing, but some don't know the difference or expect spin and not hearing spin may go into a withdrawal reverse spin if you get my drift:cool:

[winner69]

Should have read the script instead of just looking at the pretty pictures

Mark said re the 61- 67 million guidance - at this point at the upper end of the range.

So must be more like 65-66 million - probably threw the 61 million in to give himself a bit of wriggle room if things are ****e ....wonder why go so low

[percy]

Should have read the script instead of just looking at the pretty pictures

Mark said re the 61- 67 million guidance - at this point at the upper end of the range.

So must be more like 65-66 million - probably threw the 61 million in to give himself a bit of wriggle room if things are ****e ....wonder why go so low

Maybe he is making a provision for the commerce commission price fixing case.!??

[kiwidollabill]

Maybe he is making a provision for the commerce commission price fixing case.!??

Any thoughts on how a sentence will affect the SP. 99% certain they are going to get a large cash fine in the near future....

[percy]

Any thoughts on how a sentence will affect the SP. 99% certain they are going to get a large cash fine in the near future....

No idea,although in an earlier post, on this thread, Xerof did warn it could be substantial.Post #3503 page 234.

[kiwidollabill]

No idea,although in an earlier post, on this thread, Xerof did warn it could be substantial.Post #3503 page 234.

Thanks, I'd also like to warn that it will be substantial. Pretty sad since I understand there was practically zero financial benefit and the companies involved were 'trying to do something for the good of the industry'

[BlackPeter]

Any thoughts on how a sentence will affect the SP. 99% certain they are going to get a large cash fine in the near future....

Interesting prediction ... given your certainty you must have quite detailed insider knowledge in this case. Tell us a bit more about it - I am sure the courts are all ears ...

[kiwidollabill]

Interesting prediction ... given your certainty you must have quite detailed insider knowledge in this case. Tell us a bit more about it - I am sure the courts are all ears ...

Sure.......

[Joshuatree]

IIRC, the last one against the agricultural sector cost them $5.5mill in ~1996/7 - meat companies over weekly schedule pricing As much as this one BILL,Pray tell:)

[kiwidollabill]

Don't know any details fair friends but 'reading between the lines' of a few convos I doubt it will be a 'slap on the wrist' of 100k or so. Anything else we can only speculate - and we're good at doing that round here.

[sb9]

Maybe he is making a provision for the commerce commission price fixing case.!??

One of few reasons why sold out earlier, I think the ComCom fine will be substantial in my opinion.

[sb9]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11491116

Article relating to price fixing case from Aug this year, interesting point from that was:

"Companies convicted of price-fixing can attract a maximum penalty that's the greater of $10 million, or three times the commercial gain, or if that can't be established easily, 10 per cent of turnover".

[Snoopy]

One of few reasons why sold out earlier, I think the ComCom fine will be substantial in my opinion.

I would suggest the fine will probably not be substantial in overall shareholder terms. I can't remember when I first read about the likely implications, but the foillowing extract is from an article that appeared on July 6th 2015.

http://www.agrimoney.com/news/pgg-wrightson-plays-down-potential-fine-over-livestock-fees--8545.html

-----

PGG Wrightson plays down potential fine over livestock fees

PGG Wrightson played down an admission that it is likely to be fined by an investigation into price fixing in livestock charges, saying that the penalty is unlikely to be big enough to warrant a dent to its share price.

PGG Wrightson, or PGW, said that the Commerce Commission fair trade authority has "signalled its intention to seek a pecuniary penalty" from the company, New Zealand's best known farm services group, over charges implemented following the introduction of animal tracing rules three years ago.

The commission, known in New Zealand as ComCom, "has indicated that it has reached the view that the Commerce Act has been breached", PGW chief executive Mark Dewdney said.

However, the group, while failing to detail the proposed fine, said that in its view, and taking account of New Zealand Stock Exchange rules on disclosure, "the proposed level of that penalty, while significant, is not materially price-sensitive for PGW".

--------

Also from the FY2015 annual report, p9

--------

"At the time of writing the matter remains subject to court proceedings and accordingly PGG Wrightson cannot comment further other than a note that a provision has been made on the year end financial statements to 30 June 2015 to cover the potential costs and outcomes of the proceedings."

-------

The penalty won't be nice, but neither will it be worth selling any shares over. Any effect was probably already built into he accounts when the matter became public. Try more homework and less speculation and you will sleep more soundly.

SNOOPY

[Joshuatree]

Don't know any details fair friends but 'reading between the lines' of a few convos I doubt it will be a 'slap on the wrist' of 100k or so. Anything else we can only speculate - and we're good at doing that round here.

Thanks Bill, ...Not again!! Is that what they mean re "to improve the expertise and soft skills of staff and management"...

softly softly fixey priceme

[Snoopy]

Should have read the script instead of just looking at the pretty pictures

Mark said re the 61- 67 million guidance - at this point at the upper end of the range.

So must be more like 65-66 million - probably threw the 61 million in to give himself a bit of wriggle room if things are ****e ....wonder why go so low

It's because of the weather Winner. If that naughty little brat 'El niño' starts running around he can cause trouble. But that is only if he bunks school. How much school he bunks matters. Mark is thinking the worst case scenario is a dry summer and autumn. Dry summer only won't be so bad, as a wet autumn will be a big buy signal for farmers to start planting pre winter crops - not ideal, still OK for PGW.

SNOOPY

[Snoopy]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11491116

Article relating to price fixing case from Aug this year, interesting point from that was:

"Companies convicted of price-fixing can attract a maximum penalty that's the greater of $10 million, or three times the commercial gain, or if that can't be established easily, 10 per cent of turnover".

$10m spread over 754.8m shares represents 1.3cps, probably already provided for. Don't be nervous about relatively small things. There are far bigger things out there to worry about than this.

SNOOPY

[Snoopy]

EPS trends interesting

Used to be 8/9 cents over 2007/2009 but that was when things were pretty good. Best since was 2014 when eps was 5.6 cents

But it fell to 4.5 cents in 2015 (yes fell) and latest guidance implies another fall in 2016

So eps back to 2012 levels.

Growth strategy?

No wonder the share price languishes where it is. Another disaster year and what will happen to it?


Winner, I am sure there are no inaccuracies in your post. But there are other ways to look at the figures. And I don't think your summary gives a fair overview of the way PGW has been managed in the post Craig Norgate era (after FY2009).

Those early eps figures you quote are before the capital reconstruction. During the Agria lead bail out, the number of shares on issue jumped from 281.3m to 754.8m, while the underlying business remained substantially the same size. So it is not realistic to think that 'earnings per share' measures will ever return to 2007/2009 levels. It was unfortunate for shareholders at the time a bail out was needed. But it was, and PGW came out of it with new financial discipline. The great increase in the number of shares means that eps comparisons with the Craig Norgate era are no longer meaningful.

As for the 'fall' in eps figures from FY2014 to FY2015, you get a quite different perspective if you look at the underlying business result, rather than working from the 'bare' EBITDA figure. Below are the figures I am working from in the FY2015 'Statement of Profit and Loss'.



FY2016FFY2015FY2014


Operating EBITDA$66.5m$69.450m$58.747m


add Associate Profit$0.181m$0.181m$2.521m


less Depreciation & Amortization$7.948m$7.948m$11.242m


less Net interest $10.780m$10.780m$7.926m


less Income tax $16.172m$16.172m$8.472m


Total $31.781m$34.731m$33.628m


eps, based on 754.8m shares 4.2c4.6c4.5c



SNOOPY

PS Stuck in a forecast for FY2016. It looks like the dividend over the coming year of 4cps is on.

[winner69]

Any penalty will probably be treated as on-recurring and won't affect 'normalised earnings'

Anyway markets are forward looking and as this won't affect f16 'normalised' earnings or F17 expectations it won't be affecting the share price (except for a day or two when its known and when the shock horror punters sell out and that is the day you top up eh).

Probably wont even be any corporate reputational damage either - the world seems to forgive this sort of behaviour these days - all done and dusted and forgotten a month later

[couta1]

$10m spread over 754.8m shares represents 1.3cps, probably already provided for. Don't be nervous about relatively small things. There are far bigger things out there to worry about than this.

SNOOPY One of the best pieces of advice you have ever posted Snoopy:cool:. Disc-Holding a large number.

[Beagle]

Been on the AGM and thought to share some of my impressions with you ... for the benefit of shareholders who couldn't make it:

Full board attendance and lots of senior managers - everybody easy to recognise on their green PGW ties. Management clearly takes the AGM seriously. As well - a lot of Agria people there ... but no surprise, given that they own 50%.

Other shareholders - my estimate between 50 and 70 (I know, I should have spent more time counting them). Still lots of empty seats - would be nice to get the room next time full;).

Presentation published on the NZX: https://www.nzx.com/files/attachments/223559.pdf.

After a brief introduction from chairman Alan Lai - the main part of the presentation was hold by Mark Dwedney, and he answered as well the questions (I think all of them ...). Now - we know how the year went (actually - not too bad ...) what I heard "between the lines" is that they try to improve the expertise / soft skills of their staff and the organisational culture.

Mark talked about a number of "exciting contracts" they won in the wool area (high quality / high margin), but didn't quantify them.

Strategy: South America was still boasted as opportunity - and when I followed up after the meeting with some of the directors, they called South America "low hanging fruit" but it felt that they are as well still working on China as long term target (no surprise given the board composition).

Financial results outlook: Came obviously with all the appropriate disclaimers ... but the earnings downgrade from this morning was more packaged like: "if we achieve that, than it will be the second best year in recent history" (and yes, this is what it is - check slide 22). Overall people appeared to be reasonable optimistic (despite the dairy sector) and expecting definitely a recovery in 2017.

Most of the overseas directors (but Alan) stood for re-election - and they all talked about the growth they expect long term to see ... maybe as well a reflection on the share price Agria paid for PGW, but it felt (as well in individual discussions) that they do see huge future growth potential in Asia - though mid to long term.

Good to see all the candidates speaking to the meeting ... though I must say, that most of the came better across in a 1-to-1 after the meeting than in their address to the meeting (cultural background - eye contact / language?).

Some of the questions I found interesting and didn't comment on earlier (like future markets - s. above) .... in no particular order:

Q: Expected milk price payout for 2016? Marks answer (with lots of disclaimers and his private view ...): Fonterra's current indication of $5 /kg is probably quite realistic ... though personally could he see it going up to $6 (he said ... maybe ... just his hope);

Q: Given PGW's slim margins - what is their unique sales proposition? A: Expertise of their staff ... (and maybe that's something they try to improve with their training focus).

Q: What would a very dry summer mean for PGW? A: A summer with some regions dry would be "business as usual". If really all parts of NZ would be impacted, than things are more complicated, but even than there would be opportunities (e.g. if the drought is followed by a not too late drought breaker ...

Q: Impact on silverfern deal ... A: They have a good relationship with Silverfern and don't see that at risk. Good to see them now on a more solid financial basis.

Q: reason for increased inventory in South America (actually Max from the NZSA found this point - Respect - he must have read the report!)? Answer: they do expect improved business and took this risk ('You can buy seeds only once a year")'

Q: Gender diversity in the board? A: concern noted ... they do have a policy ... but as we see, at this stage it is just males on the board (though obviously with some ethnic diversity.

There was as well a question on why they report on EBITDA instead of NPAT ... but somehow did the answer escape my attention ...

Ah yes - most of the questions came either from the NZSA ... and from one other shareholder (who shall not be identified;)). Went well, though a bit more wide spread question basis next time couldn't hurt ...

My personal impression on PGW: I think I go with the Chinese owners and do recognise long term value in this company. Intend to stay invested (and potentially accumulate if the SP drops). However - I said that before for other companies ... and I was not always right ... i.e. DYOR!

Thanks BP, good post. I agree and think in the context of the very difficult patch dairy has gone though / is going through the company is doing quite well. I think 4 cps fully imputed is a fairly safe bet as a minimum going forward so 4 / 0.72 = 5.55 cps gross / 0.425 = 13.1% which makes it one of the very highest dividend yielders on the NZX. Shareholders are being extremely well and can comfortably afford to be patient to enjoy better times ahead.
Good Hold in my opinion.

[Snoopy]

Thanks for all your Snooping Snoopy. I appreciate your insights and in depth knowledge of the PGW.


Time for a little more snooping, in fact the full 'snoopshot' treatment! How does PGW go when subjected to my four investment selection tests?

1/ Top Three player in chosen market?

PGG Wrightson Limited (PGW) was formed in 2005, a result of a merger between two established agricultural supply service leaders: Wrightson Limited and Pyne Gould Guiness. However, the DNA of the operation goes back much further than this. Wright Stevenson & Company was established in Dunedin in 1868. Even they are a new boy on the block though, as Gould Beaumont & Co. had been founded in Christchurch as early as 1851.

Under the leadership of CEO Mark Dewdney, PGW has regrouped under the 'One PGW' mindset. Despite being a diverse company, 'One PGW' is about customer relations in the widest sense: where one division not only looks after their own operations but seeks an awareness of opportunities for the complimentary group businesses. Down to earth people serving down to earth customers succinctly sums up the ethic. The recognised business units as detailed in the annual report are below:

1/ Merchandising (rural themed products): Traditional competitors RD1 (Fonterra owned) and Farmlands (a co-operative) are the two other large players in the game. There are others, but on a smaller scale to 'the big three'.

2/ Livestock Trading: PGW has NZs largest group of livestock representatives, handling 50%+ of transactions nationwide.

3/ Insurance: Commission agents for AON and Vero

4/ Real Estate: Specialising in rural and small town properties. Together with Bayley's, PGW is one of the largest two players in what is a fragmented market.

5/ Water: At last with nationwide coverage through recent 'bolt on' acquisitions, PGW offer turf irrigation, for landscaping and sports use, along with their more traditional 'rural irrigation' and the bread and butter ongoing servicing work that tends to be higher margin. There is a wholesale side of the business too, supplying water and irrigation products. With nearly $85m of turnover in FY2015, PGW stands out as a major national player in a fragmented market.

6/ Wool: PGW manages a substantial portion of the strong wool supply chain in New Zealand , from on farm procurement, freight and logistics through to sales (be they via auction, private sales, export (the Bloch & Behrens brand) and domestic). Higher value finer wool is marketed through the associtaed NZ Merino company.

7/ Seeds: The largest seed producer in the Southern Hemisphere, with interests spread across New Zealand, Australia and South America.

The beachhead of PGW remains in New Zealand. But there is potential to replicate the 'One PGW' model, particularly in South America in the coming years. Uruguay in particular is where PGW is building a strong presence.

Conclusion: Ticks the 'major player' (top three) criterion across all markets in which they operate.

[banter]

FY2016F
FY2015
FY2014


Operating EBITDA
$66.5m
$69.450m
$58.747m


add Associate Profit
$0.181m
$0.181m
$2.521m


less Depreciation & Amortization
$7.948m
$7.948m
$11.242m


less Net interest
$10.780m

$10.780m

$7.926m


less Income tax
$16.172m

$16.172m
$8.472m


Total
$31.781m
$34.731m
$33.628m


eps, based on 754.8m shares
4.2c
4.6c
4.5c




PS Stuck in a forecast for FY2016. It looks like the dividend over the coming year of 4cps is on.

Should cut that tax figure since earnings are lower. Also they paid a high % of tax in 2015, c 30% of NPBT.
I estimated 12.6m.

I sold half yesterday - falling earnings (0.4cps), fine coming, raised chance of a significant drought.
Div yield should fall to 'only' 11.5% if the company's mid point earnings forecast holds and their payout ratio is the same.

Note 'Interest and Finance' includes hedging gains and losses as well as interest.

My 2016 guesses below.




14

15a
16e



EBITDA-Ass
58.7

69.45
64
Mid pt of estimate



Share of Ass.
2.5
0.181
0.181



EBITDA
61.2
69.6
64.181



Non Op items
6.4
-2.1
-2
Fine?


FV adjustments
1.3
-0.023

0



D&A
-11.2
-7.9
-7.9



NetFincost
-7.9
-10.8
-9.35
Avg of 14 and 15


NPBT
49.8
48.783
44.931



Tax
-8.5
-16.17
-12.58



Disc.ops
0.9
0.14
0



NPAT
42.2
32.753
32.35



ul NPBT
39.6
50.75
46.75



ul NPAT (est)
28.512
36.54
33.66
EBITDA-ASS-NetFinCost-Tax



ul eps
0.0378
0.0484

0.0446



Gross Div Int
0.028

0.028





Div Fin

0.035
0.028





Div Ttl
0.063
0.056

0.0514



Div yield
14.7%
13.1%
11.6%



PO (%of NPAT
119%
83%
83%
=NET div / ul NPAT

[see weed]

Lucky me picked up 15,000 @ .415c 4.58pm this arvo:). Many more wanted thank you. I am looking forward to a takeover bid for PGW one day:cool:.