PGW - PGG Wrightson

[percy]

I had understood that PGW will pay likely the same high dividend as last year, and i remember that PGW/Agria Management like to set the expectations low, and prefer the market positive.
Currently AGRIA is trying to swallow PGW shares from New Hope. I wonder were all the money comes from. But Chinese banks are seeking investment opportunities in the whole world.

Expectations are modest.Growth will come from Australia and Uruguay,but the strength on the NZ $ means there will be no increase in bottom line profit.
The business does not require more capital,so depending on weather, and the usual challenges the rural sector face,the high dividend payout should continue.But remember any unforeseen set backs will put pressure on PGW's capacity to pay the high dividends.
There has been no pick up in irrigation.

[Beagle]

Any reasons for the drop?

See post 3993 above. Nobody's taken me to task over my figures. That pension plan is going to be a thorn in their side for many years sucking cash flow from this company (its a material headwind for the foreseeable future). $9m cash flow sucked out of a company only generating circa $30m in cash flow, material ?, you bet ya it is !

I expect they will plug the superannuation black hole this year with sale and lease back's of rural buildings but they can't keep doing that every year can they !

All of last years profit growth came from an unusually low tax for that year. I can't see any reason why the SP shouldn't return to the baseline 40 cents per share again, prospects for FY17 certainly aren't any better than 2015. I sold at 52 cps ex divvy, pleased to be out.

[winner69]

The mist telling line in the PGW Accounts is their Revenue Line

Last 5 years revenues (FY12 first) - $1,337m, $1,132m, $1,219m, $1,203m and $1,182m in FY15

Revenues declining eh - in spite of new strategies, fine tuning, postulating and great talk ad nauseam. It's always gunna to be better

Can't 'grow' forever by cutting costs

PGW is what it is - a no growth company with skinny margins - but generally generates enough cash to pay a reasonable dividend - just wish they wouldn't tout this 'growth' story

Share price then - what punters want to pay for the 3.75/4.00 cents dividend (what happens when interest rates inevitably rise?)

[Beagle]

I don't see over the long term how they can pay that dividend and fund the super scheme. At the risk of sounding like a broken record, the super scheme liability grew $9m last year and that was in the good year for the markets ! The think the brokers are totally missing this major point !

[Snow Leopard]

See post 3993 above. Nobody's taken me to task over my figures....

See this post (http://www.sharetrader.co.nz/showthread.php?2923-PGG-Wrightson-(-PGW-)&p=642467&viewfull=1#post642467).

Best Wishes
Paper Tiger

[RGR367]

See this post (http://www.sharetrader.co.nz/showthread.php?2923-PGG-Wrightson-(-PGW-)&p=642467&viewfull=1#post642467).

Best Wishes
Paper Tiger

And finally as in old software programming, a GOTO loop :p

[Beagle]

Paper Tiger - You didn't debate the numbers per se, just accept the directors word for it that NPAT will be similar...something I'd already read but was looking past what I think may be a little optimistic.

You'll have to forgive the hound for being naturally cautious in this soft market. So you accept at face value that the artificially low tax rate can continue and we won't revert to the full tax rate as in FY15 ?

Such blind faith in directors based on unusually low tax rates. The same directors that trumpeted a marvellous 20% increase in net profit in Fy16 without actually highlighting the entire profit increase was due to a much lower tax rate...Hmmm. These low tax rates can go on forever... right ?

[Beagle]

Am I right in saying that it is low interest rates, lowering the discount factor on future liabilities, that is doing the damage here? Somehow in a rising market, the value of pension plan assets dropped by 10%. Who are the fund managers that did that?

Did I read that expected Group contribution figure to the pension funds of $9.51m for FY2017, up from just $1.08m this year correctly? That is one hell of a hit on next years profit!

SNOOPY

Snoopy was first to pick this up on 9 August. I've done some more digging and the interesting thing is they're having to put in all this extra money because the size of the pension liability went up $9m last year. Actuaries rework their numbers every year based on assumptions around future returns, and average life expectancies. This in a good year for the markets. People are living a lot longer and with much lower market returns and ultra low interest rates the funding of historical superannuation schemes is shaping up as a major issue for companies which have them going forward.

Anyway...I have done my bit to highlight the risks.

[Snow Leopard]

And finally as in old software programming, a GOTO loop :p

The GOTO is dead, any decent programmer will write

whille(true)
{
AdNausem();
}

Best Wishes
Paper Tiger

PS: Commenting code is for wimps :t_up:

[Snow Leopard]

Paper Tiger - You didn't debate the numbers per se, just accept the directors word for it that NPAT will be similar...something I'd already read but was looking past what I think may be a little optimistic.

You'll have to forgive the hound for being naturally cautious in this soft market. So you accept at face value that the artificially low tax rate can continue and we won't revert to the full tax rate as in FY15 ?

Such blind faith in directors based on unusually low tax rates. The same directors that trumpeted a marvellous 20% increase in net profit in Fy16 without actually highlighting the entire profit increase was due to a much lower tax rate...Hmmm. These low tax rates can go on forever... right ?

If you care to read back on this thread you would notice that I stated that the relationship between EBITDA and NPAT for PGW was nearly as mecurial as.... and a bit of caution was warranted.

I then pointed out that normalised FY16 was the same as FY15.

So we start this year with an estimated EBITDA range $1M higher than last year and the statement about NPAT. I also said I was 'fascinated' by such.

Now strangely when you like a share (mentioning no airlines) you seem to regard the directors as wonderfully infallible people. Me I know that all humans are only human.

However I presume that some competent accountant type in the company has assured them that the wonderfully complex arrangements of PGW will result in a reduced tax amount for this year similar to FY16 and also FY14, so they have told us this.
I as always, work out a normalised value.

It can be interesting to look at the cash-flow statements and see how much cash they have given the tax man.

So going forward they have made a commitment to put (extra) money in to the pension funds over the next few years and somehow the funds took a hit this year (probably overweight AIR :p). Moving money into the fund does not affect profits but the performance of the fund does.

Where we end up at the end of the year depends upon the ups and downs of farming, so, as they say, if you can't stand the smell get out of the cow-shed.

Best Wishes
Paper Tiger

[Agrarinvestor]

AGRIA is halted from trading!

Any Agria Investors here?

http://finance.yahoo.com/news/agria-comments-trading-halt-163554784.html

[arc]

AGRIA is halted from trading!

Any Agria Investors here?

http://finance.yahoo.com/news/agria-comments-trading-halt-163554784.html

Will this flow down to pgw?

[winner69]

AGRIA is halted from trading!

Any Agria Investors here?

http://finance.yahoo.com/news/agria-comments-trading-halt-163554784.html

Pretty serious claims - 'the Company and its management engaged in operations contrary to the public interest and not in keeping with sound public policy' ....'Company (i) through a top executive and other intermediaries engaged in trading intended to artificially inflate Agria's stock price........ and (ii) provided incomplete, misleading, or false information in connection with investigations related to these issues.

So controlling shareholder who has directors on the PGW Board might be a bit dodgy

I don't like that .......a big red flag to me

[percy]

Pretty serious claims - 'the Company and its management engaged in operations contrary to the public interest and not in keeping with sound public policy' ....'Company (i) through a top executive and other intermediaries engaged in trading intended to artificially inflate Agria's stock price........ and (ii) provided incomplete, misleading, or false information in connection with investigations related to these issues.

So controlling shareholder who has directors on the PGW Board might be a bit dodgy

I don't like that .......a big red flag to me

Is anyone surprised.????????
I think a lot of us would be happy to see Agria's 50.5% shareholding revert back to NZders.

[Agrarinvestor]

>>top executive and other intermediaries engaged in trading intended to artificially inflate Agria's stock price...<<

I have watched closely to Agria's share price. Every day i had checked the daily chart. We have never seen any actions that have inflated the share price.
We have seen on almost every day small volume at the end of the trading session. And we have seen short seller Actions on nearly every day.
It is calming that Agria's largest asset is in New Zealand.

[stoploss]

>>top executive and other intermediaries engaged in trading intended to artificially inflate Agria's stock price...<<

I have watched closely to Agria's share price. Every day i had checked the daily chart. We have never seen any actions that have inflated the share price.
We have seen on almost every day small volume at the end of the trading session. And we have seen short seller Actions on nearly every day.
It is calming that Agria's largest asset is in New Zealand.


" small volume at the end of the trading session , almost every day "
Does that not seem a little bit suspicious ? I imagine fines for this sort of behavior could be pretty large in America . Not to mention the possibility of imprisonment ?

[winner69]

Agrarinvestor;643603
It is calming that Agria's largest asset is in New Zealand.



Maybe not so calming is the PGW's largest shareholder is Agria

[arc]

Maybe not so calming is the PGW's largest shareholder is Agria

What impact do you think it will have on PGW. Agria needing to obtain cash to fight the lawyers./law-suits..? PWG on the block as a result (plus what ever other companies they have bought into). Could we be looking at a significant sp drop... 50% - 60%?

Lemmings on a rather high cliff...?

[Agrarinvestor]

" small volume at the end of the trading session , almost every day "
Does that not seem a little bit suspicious ? I imagine fines for this sort of behavior could be pretty large in America . Not to mention the possibility of imprisonment ?

These kind of manipulation were done by short sellers. You can track their activity on a daily basis here. Look for "GRO".
I have never seen small trades, or large trade during the past 6 month at the end of trading session. Therefore I'm 100% sure that nobody has manipulated the stock price to higher value. I want to make it clear, bause the NYSE accusation is of inflating the share price.

http://regsho.finra.org/regsho-October.html

[winner69]

Good buying opportunities next few days for the believers

[Snoopy]

What impact do you think it will have on PGW. Agria needing to obtain cash to fight the lawyers./law-suits..? PGW on the block as a result (plus what ever other companies they have bought into). Could we be looking at a significant sp drop... 50% - 60%?

Lemmings on a rather high cliff...?


Agria is the 50.1% shareholder but plays no part in the day to day running of PGW. I wouldn't expect any affect on the PGW share price as a result of Agria shares being suspended.

Agria will not be able to sell any shares they own in PGW because if they do, they will no longer be able to consolidate the PGW accounts within Agria. Agria selling down their PGW stake at this stage would cause a multi-million dollar loss for Agria as any remaining PGW stake was 'marked to market'. Last time I looked Agria was still highly indebted. So writing down that PGW stake might cause Agria to collapse. Agria have no other investments of any meaningful size outside of their stake in PGW.

It looks grim for Agria in the headlines now. But Chariman Alan Lai is the master of dance. I wouldn't discount his ability to waltz out of trouble just yet. A 2:1 share consolidation at Agria is all that it would take to fix things with the NYSE listing requirments.

SNOOPY

[Queenstfarmer]

I see there are a number of law firms asking for disgruntled Agria shareholders to come forward if wanting to seek representation should Agria be found guilty of inflating the SP.
Perhaps a chance for PGW shareholders to increase their stakes at good value not too far around the corner?

[Snow Leopard]

Nice little uptrend developing - must be all that high priced milk.

Best Wishes
Paper Tiger

[tim23]

They don't have biggest exposure to diary more sheep & beef but good signs last few days

[Agrarinvestor]

Happy new Year o all PGW investors,

I think many of you have noticed that the controlling shareholder of PGW has currently delisted from the NYSE.
Do you think it is tecnical possible and manageable that they will seek a new listing in New Zealand?
Agria is still replying to inquiries, but they give us no details about their plan for the future.
I wonder what is more likely, a new Lsiting in NZ or China, or a lsiting in the states at the OTC ?

[Hectorplains]

Happy new Year o all PGW investors,

I think many of you have noticed that the controlling shareholder of PGW has currently delisted from the NYSE.
Do you think it is tecnical possible and manageable that they will seek a new listing in New Zealand?
Agria is still replying to inquiries, but they give us no details about their plan for the future.
I wonder what is more likely, a new Lsiting in NZ or China, or a lsiting in the states at the OTC ?

Having been booted off the NYSE for engaging " in operations contrary to the public interest " I'm sure that they'd fit right in on the NZX.

[Beagle]

Just when you think the SP might be recovering from calcium depletion...maybe not. Still under 1oo day MA and still on my watchlist but not presently owned.

[tim23]

Nice recovery this week close to 12 month high

[Agrarinvestor]

Having been booted off the NYSE for engaging " in operations contrary to the public interest " I'm sure that they'd fit right in on the NZX.


I have read the accusations, and these accusation are very vague:
http://securities.stanford.edu/filings-case.html?id=105933

Agria is currently very quit. They are discussing several scenarios. A worse case would be if they go dark, but this is not very likely.
They are the controlling shareholder of PGW.

[Hectorplains]

I have read the accusations, and these accusation are very vague:
http://securities.stanford.edu/filings-case.html?id=105933

Agria is currently very quit. They are discussing several scenarios. A worse case would be if they go dark, but this is not very likely.
They are the controlling shareholder of PGW.

Vague, or otherwise... they're not fighting against them.

[Agrarinvestor]

Vague, or otherwise... they're not fighting against them.

Sorry, for asking. Do you have read through the accusations and agree that these accusation are very vague?

The accusation from the NYSE was, that they manipulated the stockprice during the last months. This was, that is for sure, not true.
I have watched every day for volume and checked how many shares were short selled. We have seen manipulation from short sellers.
Always during the last minutes someone sold a few shares. I have the impression that this is constructed, that someone has misinformed the NYSE.
Very difficult to understand what really has happened.

We are currently feeling very unwell because we hear no official announcements.

[Hectorplains]

I have read the accusations, and these accusation are very vague:
http://securities.stanford.edu/filings-case.html?id=105933

Agria is currently very quit. They are discussing several scenarios. A worse case would be if they go dark, but this is not very likely.
They are the controlling shareholder of PGW.

Go back to the website quoted. Go to the bottom of the page, in a box called "Document Title" click on "Complaint for Violation of the Federal Securities Laws 11/09/2016." That will bring up a 20 page PDF file that details the allegations.

They chose not to fight the delisting... yes, that will have been done without prejudice to the judicial charges but....

You're not likely to hear much from the company at this point as matters are subjudice.

[BlackPeter]

Go back to the website quoted. Go to the bottom of the page, in a box called "Document Title" click on "Complaint for Violation of the Federal Securities Laws 11/09/2016." That will bring up a 20 page PDF file that details the allegations.

They chose not to fight the delisting... yes, that will have been done without prejudice to the judicial charges but....

You're not likely to hear much from the company at this point as matters are subjudice.

cheers, interesting document. Does not look uplifting for Agria shareholders.

More interesting for the audience on this thread is however - what does this all mean for PGW shareholders? So lets assume for arguments sake that Agria might lose the battle (which obviously might take years, unless they concede) - what impact would it have on PGW?

It might mean that Agria has to pay a huge compensation to (Agria) investors ... which obviously would only be material for them if any US court verdict can be enforced against a company incorporated in the Cayman's islands. I do have my doubts, but I am no specialist on these things.

However - if they lose it probably will mean (no matter whether they pay up or not) that the defendants have after the verdict a somewhat limited travel freedom - going to the US (and probably as well to NZ) might be after a conviction a no-no for them unless they want to be incarcerated until they pay up ... Could have some impact on PGW's board composition - I guess you couldn't excuse these guys forever ...

It might mean as well that Agria would need to have a fire sale for their PGW shares (btw bankrupting Agria, given that it is unlikely they could sell at or above their average purchase price) ... could be a good opportunity to pick up some PGW shares at a nice discount.

Do we see any other potential impact on PGW? Agria is not really material to their supply and / or sales chain - are they?

Discl: holding currently just a wee (not really material) parcel - leftover from a sale; however always happy to consider buying some more at an substantial discount to todays price;);

[kiwico]

Given it's only an ADR that is being delisted, not the company's shares, would there be much effect on PGW? The delisting removes easy access to Agria shares via the NYSE but they should still be available in whichever market Agria's primary listing resides.

But where is Agria Corp's primary listing? Their website (http://www.agriacorp.com/) at a light glance appears to refer to only the ADRs on the NYSE. Most companies refer to their primary listing along with a reference to an ADR. What market is the listing in that the ADRs refer to?

[BlackPeter]

Given it's only an ADR that is being delisted, not the company's shares, would there be much effect on PGW? The delisting removes easy access to Agria shares via the NYSE but they should still be available in whichever market Agria's primary listing resides.

But where is Agria Corp's primary listing? Their website (http://www.agriacorp.com/) at a light glance appears to refer to only the ADRs on the NYSE. Most companies refer to their primary listing along with a reference to an ADR. What market is the listing in that the ADRs refer to?

The impact for PGW would not be in the Agria de-listing, but in the court case against Agria and its executives for manipulating the Agria share price (obviously depending on the outcome of the court case).

Main listing for Agria? Well, this was the NYSE. This means they would be now de facto unlisted - I don't think they are currently listed anywhere else (but they might look for a new listing place).

[Snoopy]

cheers, interesting document. Does not look uplifting for Agria shareholders.


I am not so sure. The way I read it, isn't the court acting for Agria shareholders who bought their shares on the market? But as you rightly note later, whether the court has any jurisdiction over a Cayman Island's commpany is another matter. So maybe the real effect of this court case is only to save potential future shareholders from investing?



More interesting for the audience on this thread is however - what does this all mean for PGW shareholders? So lets assume for arguments sake that Agria might lose the battle (which obviously might take years, unless they concede) - what impact would it have on PGW?

<snip>

It might mean as well that Agria would need to have a fire sale for their PGW shares (btw bankrupting Agria, given that it is unlikely they could sell at or above their average purchase price) ... could be a good opportunity to pick up some PGW shares at a nice discount.


Or it might mean a bid for the whole of PGW if the Agria stake is placed in the hands of a single buyer?

SNOOPY

[Agrarinvestor]

I don't see any negative impact for PGW if Agria has to sell shares for whatever reason. The impact should be positive. Because it is possible for another company to take over PGW.
My hope is that it is possible to seek a listing in New Zealand. This would boost the share price.

@Hector,
>>Go back to the website quoted. Go to the bottom of the page, in a box called "Document Title" click on "Complaint for Violation of the Federal Securities Laws 11/09/2016." That will bring up a 20 page PDF file that details the allegations. <<

I have read through the filing and i only see a lot of unspecific accusation. The Question in the moment is will they "Go Privat" or will they seek a new listing.
For a new listing, that is what i prefer, it is important to find a settlement in the class action. If Agria is coming out with a plan for a new listing in New Zealand, i would withdrew from the class.
TPG one of the largest hedge fons has a stake in Agria. This could be important for Agria and PGW shareholders.
In the meantime I'm happy with the development of PGW's shareprice.

[Hectorplains]

I don't see any negative impact for PGW if Agria has to sell shares for whatever reason. The impact should be positive. Because it is possible for another company to take over PGW.
My hope is that it is possible to seek a listing in New Zealand. This would boost the share price.

@Hector,
>>Go back to the website quoted. Go to the bottom of the page, in a box called "Document Title" click on "Complaint for Violation of the Federal Securities Laws 11/09/2016." That will bring up a 20 page PDF file that details the allegations. <<

I have read through the filing and i only see a lot of unspecific accusation. The Question in the moment is will they "Go Privat" or will they seek a new listing.
For a new listing, that is what i prefer, it is important to find a settlement in the class action. If Agria is coming out with a plan for a new listing in New Zealand, i would withdrew from the class.
TPG one of the largest hedge fons has a stake in Agria. This could be important for Agria and PGW shareholders.
In the meantime I'm happy with the development of PGW's shareprice.



Why do you see TPG's stakeholding in Agria as important for PGW?

[Agrarinvestor]

Why do you see TPG's stakeholding in Agria as important for PGW?

TPG is an American investment company, it is one of the largest private equity (https://en.wikipedia.org/wiki/Private_equity) investment firms in the world, focused on leveraged buyouts (https://en.wikipedia.org/wiki/Leveraged_buyout), growth capital (https://en.wikipedia.org/wiki/Growth_capital) and leveraged recapitalization (https://en.wikipedia.org/wiki/Leveraged_recapitalization) investments in distressed companies and turnaround situations.
With TPG involved i hope for fairness. They have to loose a reputation. It would be much better if AGRIA has a new Listing in New Zealand.
They should close their China based business. Perhaps we see a complete takeover of PGW.
https://en.wikipedia.org/wiki/TPG_Capital

[winner69]

PGW at 55 cents

Truly amazing - staggering stuff - astounding

Has the world gone mad or something?

Hasn't been 55 cents since Jan 2011 or six years ago

[hogiela]

PGW at 55 cents

Truly amazing - staggering stuff - astounding

Has the world gone mad or something?

Hasn't been 55 cents since Jan 2011 or six years ago


I almost regret selling out of PGW @ 52c to invest in NZR ... almost ...

If only I had enough cash to invest in both :)

[Agrarinvestor]

Doyouhaveseenthis?

Investor Radar: Taking a Closer Look at PGG Wrightson Limited (NZSE:PGW)
Active investors may be taking a second look at shares of PGG Wrightson Limited (NZSE:PGW). Checking in on some levels, the six month price index is currently at 1.24389. The six month price index is measured by dividing the current share price by the share price six months ago. A ratio above one indicates an increase in the stock price over the six month time frame. A ratio under one signals that the price has lowered over that same time frame.
We can also take a look at some stock volatility data on shares of PGG Wrightson Limited (NZSE:PGW). The 12 month volatility is currently 22.729400. The 6 month volatility is noted at 34.641200, and the 3 month is recorded at 27.657300. When following the volatility of a stock, investors may be challenged with trying to decipher the correct combination of risk-reward to help maximize returns. As with any strategy, it is important to carefully consider risk and other market factors that might be in play when examining stock volatility levels.
Investors may be looking at the Piotroski F-Score when doing value analysis. The F-Score was developed to help find company stocks that have solid fundamentals, and to separate out weaker companies. Piotroski’s F-Score uses nine tests based on company financial statements. PGG Wrightson Limited (NZSE:PGW) currently has a Piotroski F-Score of 6. One point is given for piece of criteria that is met. Typically, a stock with a high score of 8 or 9 would be seen as strong, and a stock scoring on the lower end between 0 and 2 would be viewed as weaker.
Shifting gears, PGG Wrightson Limited (NZSE:PGW) has an FCF quality score of 0.536985. The free quality score helps estimate the stability of free cash flow. FCF quality is calculated as the 12 ltm cash flow per share over the average of the cash flow numbers. When reviewing this score, it is generally thought that the lower the ratio, the better. Presently, PGG Wrightson Limited has an FCF score of -0.372957. The FCF score is determined by merging free cash flow stability with free cash flow growth. In general, a higher FCF score value would represent high free cash flow growth. Monitoring FCF information may help provide some excellent insight on the financial health of a specific company.
Investors might want to take a look at shares of PGG Wrightson Limited (NZSE:PGW) from a different angle. Let’s take a peek at the current Q.i. (Liquidity) Value. PGG Wrightson Limited (NZSE:PGW) has a Q.i. value of 12.00000. This value ranks stocks using EBITDA yield, FCF yield, earnings yield and liquidity ratios. The Q.i. value may help identify companies that are undervalued. A larger value would indicate low turnover and a higher chance of shares being priced incorrectly. A lower value may show larger traded value meaning more sell-side analysts may track the company leading to a lesser chance that shares are priced improperly.

http://marionbusinessdaily.com/investor-radar-taking-a-closer-look-at-pgg-wrightson-limited-nzsepgw/83022/

[winner69]

OMG -PGW has an FCF score of -0.372957.

The worlds gone made

[Brain]

Thanks Agrarinvestor. Its good to start the day with a good laugh.

[winner69]

Thanks Agrarinvestor. Its good to start the day with a good laugh.

But it's not often one can bask in the glory of PGW being one of the stars of the NZX - would be market darling if the excitement caught on.

[Agrarinvestor]

Sorry. I have not read the complete article. At the moment i have other problems. I'm heavily invested in Agria and they are delisted.
The company doesn't share information with us. We have wrote tons of emails but they responded with useless information.
We understand that the situation is difficult, but we can not understand why Adam Lai is not discussing with us the opportunities we have.

PGW and Agria shareholders have one thing in common. We are minority shareholders and Adam Lai has a lot of power about our investment.
I hope that you can agree on the following:
It is important that Adam Lai is showing good will that he is fair to minority shareholders. At the moment we are seeking support at leading NZ media. It is not acceptable that Chinese CEO's ignore minority shareholders interests.
The conference call next week is a good opportunity to raise that question.
Is there someone on the board who can help me and address this question during the call?

If i can change back time i would have listen to you and bought PGW directly and not via Agria. Shame on me.

[RTM]

Sorry. I have not read the complete article. At the moment i have other problems. I'm heavily invested in Agria and they are delisted.
emphasis added

This is a note to myself as much as anyone else. The thought occurred to me reading the Snoopy etc exchanges in the Heartland thread, and was reinforced by your comment above Agrarinvestor.
Important to be well diversified, with not to much in any one company, and maybe sector. Without trying to hard, most of my holdings are in the 3-6 % area of my total portfolio. One (HBL) has grown to ~ 13%, And I certainly don't want it to get much bigger (although I don't want it to stop growing either) So if anyone of them fails or strikes trouble....I am not going to be immediately out on the streets. I am considering whether to sell some HBL.

Good luck getting resolution A.......I have PGW...2% of my portfolio,

Cheers
RTM

[Agrarinvestor]

I think the impact for PGW shareholders is not material, but it should be of concern. The big question here is how much care will
Alain Lai take if he has the chance to fool investors to gain an advantage.
The company is not sharing with us the information about what they want to do with our ADS.
If Agria is fooling the shareholders of Agria, the same thing can happen with you.
But I have still hope. The fact that PGW is such a fine company, and that New Zealand is an important market for China
should help.

[BlackPeter]

Interesting - markets seem to be pretty certain about PGW's value - share price bouncing now for more than a week between the 54 and 55 cent mark, and for more than one month between 53 and 55.

Results announcement tomorrow. So what do we think? Will it be a stellar result (as the markets seem to expect) - or is it more likely that the results are at the lower boundary due to PGW noticing (similar to SKL) that farmers are using their increased income first to pay back debts? I guess agriculture overall doing quite well, question is just how the farmers spend their money.

Personally not sure I expect an outrageous result ... but than, the outlook might be really bright.

[winner69]

BP I think it will be an outrageous result

After all the worlds gone mad and pushed the PGW share price up to multi year high.

Bugger used that word push ....go Pushpay

[Agrarinvestor]

BP I think it will be an outrageous result

After all the worlds gone mad and pushed the PGW share price up to multi year high.

Bugger used that word push ....go Pushpay
Outrageous. I think they are inline.
http://www.sunsirs.com/uk/prodetail-89.html

All prices for fertilizers are up thats good.
Prices for wheat are stable and it looks like a positive uptrend.
http://www.finanzen.net/rohstoffe/weizenpreis/Chart

Do you have such charts available in New Zealand?
Are Farmers available that can say something about spending for 2017?

[nextbigthing]

https://www.nzx.com/companies/PGW/announcements/297069

[winner69]

https://www.nzx.com/companies/PGW/announcements/297069

Outrageous result?

Operating Ebitda down heaps in H1 but some recovery hoped for in H2 but still going to be less than last year

Are they getting desperate to create a good impression by putting in headlines 'full year increase in profit after tax forecasted'. Just as well for property sales - sneaky eh, maybe that's the outrageous bit.

Hope still seems to be the strategy - let's hope it works

[Beagle]

They use the word challenging a fair bit in the text of the result. Its certainly challenging being a shareholder which when there's so many other opportunities where companies are growing their earnings...Even from a gross dividend yield perspective this isn't nearly as good as it once was. 1.75 cps plus est 2.0 cps final = 3.75 cps fully imputed = 5.21 cps gross which on a 55 cent SP gives a gross divvy of 9.47% which I suppose is okay if you believe the talk of better times ahead in FY18. Pretty clear they are trying to prop up FY17 results artificially with property sales in the second half.

Can't help wondering how they're going with that expensive legacy pension plan...

[Snow Leopard]

Kind of as expected.

Nothing exciting, but seem to have a good handle on where there are going to which, is where they already are!

If you are really interested in the pension scheme(s) read the accounts, they get a mention or two.

Best Wishes
Paper Tiger

[Snoopy]

Am I right in saying that it is low interest rates, lowering the discount factor on future liabilities, that is doing the damage here? Somehow in a rising market, the value of pension plan assets dropped by 10%. Who are the fund managers that did that?

Did I read that expected Group contribution figure to the pension funds of $9.51m for FY2017, up from just $1.08m this year correctly? That is one hell of a hit on next years profit!


From note 9 of the Interim report for FY2017 (half year period ending 31st December 2016).

-----

Defined Benefit Asset/Liability

During the period the group made lump sum contributions to the two defined benefit plans, amounting to $6.03m. In addition the assets and liabilities of the Wrightson Retirement Plan were transferred to the PGG Wrightson Employee Benefits Plan during the period. This resulted in the Wrightson Retirement Plan having no liabiliity as at 31st December 2016.

------

That $6.03m is a good start towards the $9.51m PGW said they would put towards the deficit in their retirement plans. I said this would be a be negative on FY2017 profits. But this seems to be not the case, from my reading of the accounts. The "Interim Statement of Comprehensive Income" shows "Items that will never be reclassified to Profit or Loss". In those items I see:

Remeasurements of Defined Benefit Liability of $3.343m (so their liability has gone up :-O !!!)

Nevertheless the good old taxman has come to the rescue, at least mostly:

Deferred tax on remeasurements of Defined Benefit Liability of ($2.564m)

So my summary of what has happened.

1/ Pension scheme liability has gone up, but the tax man is funding most of the difference.
2/ Even though real cash has gone in to bailing out the scheme, accounting rules keep this cash sink out of the profit and loss statement.

No, I don't understand it either!

SNOOPY

[Beagle]

Kind of as expected.

Nothing exciting, but seem to have a good handle on where there are going to which, is where they already are!

If you are really interested in the pension scheme(s) read the accounts, they get a mention or two.

Best Wishes
Paper Tiger

Too many other more interesting accounts to read today...besides that I knew the other hound would go snooping :)

[Snow Leopard]

...Remeasurements of Defined Benefit Liability of $3.343m (so their liability has gone up :-O !!!)

Nevertheless the good old taxman has come to the rescue, at least mostly:

Deferred tax on remeasurements of Defined Benefit Liability of ($2.564m)

So my summary of what has happened.

1/ Pension scheme liability has gone up, but the tax man is funding most of the difference.
2/ Even though real cash has gone in to bailing out the scheme, accounting rules keep this cash sink out of the profit and loss statement.

No, I don't understand it either!

SNOOPY

Actually the liability has gone down and the tax man in theory wants more.
But this is all future stuff that varies from day to day and appears in P&L when or if it becomes reality.

The cash movement of $6.03M is that a movement. As a result of $6.03M cash disappearing from the assets an equal $6.03m disappears from the (pension scheme) liabilities.
No profit and no loss.

Any actual realised profits or losses as a result of the pension scheme will be buried in the P&L.

Just don't try and follow it to closely your brain will explode :ohmy:

Best Wishes
Paper Tiger

[Beagle]

No matter how they slice and dice it the pension scheme sucked $6m of cash out of the company this half. NO wonder they are having to sell and lease back property to try and maintain the dividend.
Creative accounting ? you folks be the judge...of course I couldn't possibly comment :blush:

[Snoopy]

Actually the liability has gone down and the tax man in theory wants more.
But this is all future stuff that varies from day to day and appears in P&L when or if it becomes reality.

The cash movement of $6.03M is that a movement. As a result of $6.03M cash disappearing from the assets an equal $6.03m disappears from the (pension scheme) liabilities.
No profit and no loss.


What an amazing escape. $6m in cash disappears, and there is no effect on the balance sheet! Ronnie Biggs take note. I guess this is why corporate accountants are paid so highly!

Nevertheless a little look at the balance sheet for comparative periods is in order:



HY2017FY2016HY2016


Total Liabilities (A)$472.236m$412.917m$482.166m


Total Assets (B)$748.148m$687.216m$754.128m


Debt ratio (A)/(B)63.1%60.1%63.9%


Inventories$214.251m$244.074m$209.163m



Because PGW is a seasonal business, the first half of the year tends to be 'stock heavy'. Less inventory is on hand at the end of the financial year (June 30th) when the farming season is over, and the inventories have been cleaned out. However this was not true as at 30th June 2016. This might be reflecting excess stock from irrigation systems not installed, and seeds not sold due to flooding in South America, specifically Uruguay. The 'like for like' period HY2017 vs HY2016 shows a greater inventory in FY2017 (more of the irrigation system products from last season and more seeds still on hand?) but also a (slightly) lower debt ratio. Hmmmm.

SNOOPY

[Beagle]

What an amazing escape. $6m in cash disappears, and there is no effect on the balance sheet! Ronnie Biggs take note. I guess this is why corporate accountants are paid so highly!

Nevertheless a little look at the balance sheet is in order



HY2017FY2016HY2016


Total Liabilities (A)$472.236m$482.166m$412.917m


Total Assets (B)$748.148m$754.128m$687.216m


Debt ratio (A)/(B)63.1%63.9%60.1%



SNOOPY

Wish that flowed through to suburban bean counters.

When looking at this whole creative accounting exercise one reaches the indicative conclusion they are selling off the silverware to prop up their pension scheme.

Its one thing to take capital profits on property and lease them back and effectively take gains to fund increasing liabilities and thereby apparently magically extinguish them them but here's some disturbing food for thought going forward. What happens in FY19 with the new accounting standard that requires accounting for lease liabilities ? It would appear that while they can temporarily craft an apparent extinguishment of an increased liability, (pension scheme)...the chooks will eventuallky come home to roost. Then what happens to their debt equity level !

[Snow Leopard]

What an amazing escape. $6m in cash disappears, and there is no effect on the balance sheet! Ronnie Biggs take note. I guess this is why corporate accountants are paid so highly!

Nevertheless a little look at the balance sheet for comparative periods is in order:




HY2017
FY2016
HY2016


Total Liabilities (A)
$472.236m
$482.166m
$412.917m


Total Assets (B)
$748.148m
$754.128m
$687.216m


Debt ratio (A)/(B)
63.1%
63.9%
60.1%


Inventories
$214.251m
$209.163m
$244.074m



Because PGW is a seasonal business, the first half of the year tends to be 'stock heavy'. Less inventory is on hand at the end of the year when the farming season is over, and the inventories have been cleaned out (see above table). The like for like period HY2017 vs HY2016 shows a lower inventory (less of the irrigation system assets on hand?) but also a higher debt ratio. Hmmmm.

SNOOPY

Hmmm indeed.

You have swapped the 2016 half and full numbers around.

Best Wishes
Paper Tiger

[Snoopy]

A slight change in tack to my valuation method. PGW has now largely finished restructuring. They also have a policy of paying 100% of earnings out as dividends. So I shall assume all earnings over the last five years would have been paid out as dividends and make my PGW valuation from that.

eps figures, adjusted for the removal of the finance division over the last five years were as follows:

FY2011 : $5.9m/ 754.8m = 0.8c
FY2012 : $25.2m/ 754.8m = 3.3c
FY2013 : $24.3m/ 754.8m = 3.2c
FY2014 : $33.8m/ 754.8m = 4.5c
FY2015 : $34.8m/ 754.8m = 4.6c

I calculate that as an average earnings rate of 16.4c/5 = 3.3c

For a cyclical like this I would require a 'gross return' of some 8.5%. Given a 28% tax rate (72% reatined earnings rate), my valuation over the business cycle of PGW is that it should average:

3.3 / (0.085 x 0.72) = 54c

Increase that required gross return to 9%, and the valuation drops to

3.3 / (0.09 x 0.72) = 51c



I posted the above on 31st October 2015.

I am now changing my valuation method to reflect the dividends actually paid from years 2012 to 2016 inclusive, representing the whole Alan Lai era.



YearDividends Paid 'per share'Total


FY2012 0.0cps + 0.0cps0cps


FY2013 2.2cps + 1.0cps3.2cps

[/TR]

FY2014 2.0cps + 2.5cps + 1.0cps (s)5.5cps


FY2015 2.0cps + 2.0cps4.0cps


FY20161.75cps + 2.0cps3.75cps


FY2017(f)1.75cps + 2.0cps(f)3.75cps


Average FY2012 to FY2017 inclusive3.37cps



(f) indicates forecast result.
(s) indicates 'special dividend'

SNOOPY

[Snoopy]

Average FY2012 to FY2017 inclusive3.37cps





Plugging in a representative yield, one that represents the ups and downs of the farming cycle of PGG Wrightson in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

3.37c / 0.72 x 0.095 = 49.2c

Note that I am using 9.5% as my acceptable gross yield. Some might argue that is high. But I think it is fair given that much of PGW's profit comes from low margin commodities subject to weather event demand. Some years ago PGW paid no dividend at all for several years in a row. This kind of risk is reflected in my selection of a 9.5% acceptable yield, about half as much again more than a tier one utility company.

This 49c valuation is measured at the average point in the business cycle. One might argue that we are now riding high in the business cycle and that this 49c valuation is consequently too low given today's circumstances (sp closed today at 54c). I wouldn't argue with that. If I use my +20% rule of thumb, one might expect a share price of 59c at the top of the business cycle. Likewise 39.5c would be the bottom. Take off the imminent 1.75c fully imputed dividend and PGW doesn't look so overvalued today (remember too that there is a strong case to say that most of the market is slightly overvalued right now). I wouldn't be selling or buying more PGW shares based on these numbers.

SNOOPY

discl: hold PGW

[Snoopy]

Voracious shareholders are milking PGW of all the dividends they can. Yet PGW is not debt free. Could the long term future of PGW be at risk because of the high dividend draw down? This is a question that needs looking into:



20152014


Debt Short Term$57.195m$35.573m


Deriv Liabilities Short Term$3.266m$0.887m


Debt Long Term$66.000m$65.000m


Deriv Liabilities Long Term$1.980m$0.005m


Long Term Provisions$5.597m$6.609m


Defined Benefit Liability$14.655m$13.528m


Change in Receivables/Payables Adjustment (*)-$5.745m$1.304m


Total$143.758m$120.298m



(*) The Change in Receivables/Payables Adjustment takes into account that you can hide debt by:

1/ not paying your bills OR
2/ by collecting money that is owed to you faster than is normal, when you may not be able to do that in the future.

Alternatively if you do the opposite of 1/ and 2/ (as is the case in both years here) , then the debt is actually smaller than it appears. This is why the adjustment is negative for FY2015 and FY2014.

Taking the above debts and dividing them by normalised profits will give us a theoretical 'minimum debt repayment time - minDRT' (assuming all profits from the current year are directed to paying down debt). This assumption is not management policy. But it nevertheless gives us a measure of the indebtedness of PGW relative to underlying earnings.

min DRT(2015) = $143.758m / $34.8m = 4.1 years

Compare that with last years figure

min DRT(2014) = $120.298m / $33.8m = 3.6 years

Despite the slight deterioration, I rate this as OK. A debt repayment time of under two years I regard as low. Up to five years I would regard as a 'medium sized debt'. Once the minimum debt repayment time gets above ten years, this is a very definite warning flag for me.


I posted the above on 31st October 2015



When looking at this whole creative accounting exercise one reaches the indicative conclusion they are selling off the silverware to prop up their pension scheme.

Its one thing to take capital profits on property and lease them back and effectively take gains to fund increasing liabilities and thereby apparently magically extinguish them them but here's some disturbing food for thought going forward. What happens in FY19 with the new accounting standard that requires accounting for lease liabilities ? It would appear that while they can temporarily craft an apparent extinguishment of an increased liability, (pension scheme)...the chooks will eventuallky come home to roost. Then what happens to their debt equity level !


An interesting question Roger. However most banking covenants seem to be based on 'cashflow'. Cashflow won't be affected by whether long term lease agreements becaome capitalised debt or not. Also these changes in accounting rules have been well signalled. So yes the debt on paper from FY2019 will look higher. But will bank managers be really worried about it?

I want to look at this PGW debt question from a slightly different angle than I did before. Banks often look at EBITDA as a measure of a company's ability to repay a loan. While this is probably the best short term indicator, depreciation and amortization, eventually do have to be paid for in 'cash' as reinvestment is required in software and motor vehicles (for example) if PGW is to keep operating. In the past the figure I have used is 'sustainable profit'. But whether the profit comes from normal customer activity or PGW selling properties and shares in businesses is neither here nor there to a bank manager - as long as the bank gets the money! So I am now thinking, maybe declared net profit after tax is the best figure to look at from a medium to longer term perspective?

The next question is, what company debt figures to use?

1/ Certainly long and short term debt to the bank should be included. BUT
2/ Short and long term derivative liabilities should come out in the wash the bank debt is rolled over. So taking the medium to long term view of PGW, my instinct is to exclude those.
3/ Employee entitlements tend to be paid out ahead of the bank being repaid. So I think the 'Defined Benefit Liability' , relating to the company pension scheme, should be included in the company debt burden. BUT
4/ 'Long Term Provisions' include all sorts of other things as well as current employee entitlements. So my instinct is to include only the current 'employee entitlements' over and above the debts I have listed above.

I am not sure if all my above inclusions and exclusions are 'right'. But I will assume that I am right for today. So what is the net result of measuring the company's ability to repay (declared net profit) against the liabilities I have set out above? Let's see.

SNOOPY

[Snoopy]

i am not sure if all my above inclusions and exclusions are 'right'. But i will assume that i am right for today. So what is the net result of measuring the company's ability to repay (declared net profit) against the liabilities i have set out above? Let's see.




FY2012FY2013FY2014FY2015FY2016


Short Term Bank Loans$29.709m$47.702m$35.573m$57.195m$36.623m


add Long Term Bank Loans$111.500m$62.000m$65.000m$66.000m$97.511m


add Net Defined Benefit Liability (Pension Plan deficit)$26.264m$20.819m$13.528m$14.655m$25.729m


add Employee Entitlements$17.531m$15.910m$20.837m$20.511m$20.98 2m


Total Bank Worriesome Liabiliities {A}$185.004m$146.431m$134.938m$158.361m$180.845m


NPAT (declared) {B}$24.5m$14.6m (*)$42.3m$32.8m$39.6m


Minimum Debt Repayment Time {A}/{B} (in years)7.5510.023.194.834.57



(*) Excludes Goodwill Write Down of $321m.

The above table shows that in absolute terms, 'worriesome debt' returned in FY2016 to a level not seen since just after the Alan Lai headed capital raising in FY2011 (that's bad). However the ability to service that debt, the declared Net Profit After Tax, has improved markedly since that time (that's good). Bring the two together and MDRT has improved from a worst of 10.02 (that's bad) to 4.57 today (that is acceptable, anything between 2 and 5 qualifies as 'medium level debt'). While I would prefer to see PGW pay down some of their debt, this isn't going to happen under the Alan Lai regime. Financial discipline will be required from here and fortunately for we shareholders CEO Mark Dewdney (aka 'the Dewd') has it.

The turning point was FY2014. So what happened in FY2014 to turn things around?

SNOOPY

[winner69]

Snoops, as a matter of interest do you do any economic added value stuff?

Why I ask is why does the market value $270m odd of equity at over $400m

[Snoopy]

The turning point was FY2014. So what happened in FY2014 to turn things around?


Going back to AR2014 p6, the high dairy payout (a record) and 'strong prices across many other agricultural categories' are listed as reasons for the big jump in NPAT.

The new ethos of PGW based around the 'One PGW' theme was taking hold in FY2014.

"At its core, the One-PGW 'way of thinking' encourages our people to consider our wider business from the customer's perspective. and to utilise the diverse resources within the company to to better service our customers needs."

IOW staff, keep your ear to the ground, and pass any leads on to the appropriate 'other' department. Staff Engagement Performance is listed at an all time high of 72% (AR2014, p7) (not sure what that means but it sounds good). Interestingly, no mention of this statistic has been made in subsequent reports that I can find! Has it dipped a bit? Customer satisfaction measured at 89% (so 11% of farmers are grizzlers, I guess we knew that!) During FY2014 the training spend was $1.469m up 283% on FY2010. So PGW are spending money on their staff, staff are feeling valued and performing.

Subsequent to FY2014, we have had the dairy bust, wool price collapse and beef prices not going so well. But horticulture has at least partially come the resucue. A key part of the PGW story is to be across all sectors so that PGW will not experience the same boom and bust cycle that seems evident when focussing on one rural sector alone.

To summarize, yes PGW debts are uncomfortably high in historical terms. But the step up in staff performance has enabled them to handle this debt. If you believe in the strategy of 'the Dewd', and the strict financial discipline imposed by Alan Lai, then I can see no reason why the PGW story cannot continue along current lines. This is one of the highest yielding shares on the market, not without risk, but one that can earn a place as part of a balanced share portfolio. And best of all you don't have to try and ride the waves of each agricultural sector as you agonise the best timing to buy and sell your agricultural share. Because PGW covers all sectors.

Of course if you believe that the whole ethos of 'the Dewd' will unravel in time, then you might have cause for concern.

SNOOPY

discL: holder, and not worried by the debt position of the company

[Snoopy]

Snoops, as a matter of interest do you do any economic added value stuff?


EVA = Net Operating Profit After Tax - (Capital Invested x WACC)

Capital invested is zero (all spare cash paid out to Alan Lai).

So all I need do is to consider NPAT (done).



Why I ask is why does the market value $270m odd of equity at over $400m


Because a 'high interest bond' is priced favourably in this market?

SNOOPY

[Snoopy]

Nevertheless a little look at the balance sheet for comparative periods is in order:



HY2017FY2016HY2016


Total Liabilities (A)$472.236m$412.917m$482.166m


Total Assets (B)$748.148m$687.216m$754.128m


Debt ratio (A)/(B)63.1%60.1%63.9%


Inventories$214.251m$244.074m$209.163m



Because PGW is a seasonal business, the first half of the year tends to be 'stock heavy'. Less inventory is on hand at the end of the financial year (June 30th) when the farming season is over, and the inventories have been cleaned out. However this was not true as at 30th June 2016. This might be reflecting excess stock from irrigation systems not installed, and seeds not sold due to flooding in South America, specifically Uruguay. The 'like for like' period HY2017 vs HY2016 shows a greater inventory in FY2017 (more of the irrigation system products from last season and more seeds still on hand?) but also a (slightly) lower debt ratio. Hmmmm.


I have decided that a look over a longer timeframe at the seasonality of the PGW business would be useful for shareholders.

Here is what PGW says about the seasonality of their business, the disclaimer printed in the annual report each year:

"The group is subject to significant seasonal fluctuations. In particular Livestock and Seeds activity are significantly weighted to the second half of the financial year. Seed revenues reflects the fact that the group operates in geographical zones that suit Autumn harvesting and sowing (March to May). New Zealand generally has spring calving and lambing and so livestock trading is weighted towards the second half of the financial year (January to June) in order for farmers to maximise their incomes. Other business units have similar but less material cycles. The group recognises that this is the nature of the industry and manages its business accordingly."

Expanding on the small table I have previously created:



HY2017FY2016HY2016FY2015HY2015FY2014HY2014FY2013HY 2013FY2012HY2012


Total Liabilities (A)$472.236m$412.917m$482.166m$385.585m$467.190m$3 64.800m$438.826m$363.402m$402.887m$402.698m$498.95 6m


Total Assets (B)$748.148m$687.216m$754.128m$652.953m$728.460m$6 34.502m$700.380m$619.508m$987.272m$980.472m$1,066. 012m


Total Assets {Goodwill write off removed} (C)$666.129m$659.329m$744.869m


Debt ratio (A)/(B)63.1%60.1%63.9%59.1%64.2%57.5%62.3%58.7%40.8%41 .1%46.8%


Debt ratio (A)/(C)60.5%61.1%67.0%


Inventories$214.251m$244.074m$209.163m$246.313m$20 2.551m$229.498m$210.108m$243.650m$202.643m$239.440 m$208.446m



There was a large write off of goodwill in 2HY2013. Projecting this write off back into previous results creates a better 'like with like' comparison picture. Contrary to my previous explanation, it seems that the higher indebtedness at financial half year (the end of December) is quite normal. In tandem with the higher indebtedness at half year is lower inventory. This seems counterintuitive, so what coudl the explanation be?

PGW explain that the two most seasonal effects are livestock sales and seed sales both weighted to the second half.

1/ Livestock are more often than not sold on an agency basis. PGW does not need to own whole herds of cows themselves to make sales. Some livestock get on the books as 'biological assets', but these are not part of inventory.
2/ Seeds although peaking in stock before autumn are largely 'grown' by PGW, not 'bought in'. If PGW grows seeds, do they appear as inventory on the books if no cash is laid out? I don't know the answer, but I would guess 'no'. If that is true, it means that the main 'inventory' on the books for the seed stock is the packaging, perhaps relatively low value in dollar terms compared to the money made from selling the seeds themselves.

Taking 1/ and 2/ together, this could explain why 'inventory' on the books appears seasonally low, just as PGW are entering their high sales period (January to June).

The second point to note from my table is that, when corrected for the 2HY2013 goodwill write off, the indebtedness of the company as measured by the debt rationo has not changed much outside of the seasonal variations since the Alan Lai headed recapitalisatiuon.

SNOOPY

[Snoopy]

an interesting question roger. However most banking covenants seem to be based on 'cashflow'. Cashflow won't be affected by whether long term lease agreements becaome capitalised debt or not. Also these changes in accounting rules have been well signalled. So yes the debt on paper from fy2019 will look higher. But will bank managers be really worried about it?




FY2011FY2012FY2013FY2014FY2015FY2016


Interest Payable: {A}$8.737m$5.537m$5.091m$6.768m$7.150m


Bank Facility Fees: {B}$4.937m$4.240m$2.440m$1.508m$0.945m


Financial Rearrangements during year1/ PGW Finance 1/ Goodwill $300m+1/ New Syndicated Loan1/ Syndicated loan1/ Reorganisation of


divestment to Heartlandwrite offnegotoiated Dec 2013extended to Dec 2018.Uruguayan loans:


2/PGW Rural Capital2/$20m of 31-07-2004(includes Term Debt2/ New Overdraft Facility(Logistic Centre


Limited repaymentsloan paid back earlyfacility $116m (+$6m)of $9.63m. Facility: $US11m)


(including Crafer Farms)3/ Amortizing facility & Working Capital3/ New Trade Finance(Committed


$38.98m repaid.facility $60m (same) )facility of $6.57m Facility: $US12m)


4/ Trade Finance facilityuntil December 2016.4/ Extra finance for(Unsecured


$34.16m wound upUruguayan operations Facility: $US16.34m)


$NZ11.76m + $38.32m


Loan Balance (Short Term) EOFY$52.194m$29.709m$47.702m$35.573m$57.195m


Loan Balance (Long Term) EOFY$124.500m$111.500m$62.000m$65.000m$66.000m


Loan Balance (Short Term) EOFY AR2016$57.411m$36.623m


Loan Balance (Long Term) EOFY AR2016$69.328m$97.551m


Average Total Loan Balance Over Year: {C}$158.952m$125.455m$105.138m$111.884m$130.437m


Charged Interest Rate Estimate: {A}/{C}5.50%4.41%4.84%6.05%5.48%


Bank Facility + Interest Rate Estimate: [{A}+{B}]/{C}8.60%7.79%7.16%7.40%6.97%



----

The important figure to look at (or so I thought) was the actual interest rate the bank syndicate was charging. However the supplementary 'Bank Facility Fees' are enormous. In FY2013 those fees almost matched the interest paid! I have tried to summarize any Financial Arrangements changed during the year that could explain these 'one off' charges. They are generally reducing over the years as PGW finds a more stable operating structure. So hopefully 'Bank Facility Fees' will not play as large a part in PGWs future as they have done in the past!

'PGW Rural Capital Limited' was a company set up to take over the remaining PGW Finance Loans that Heartland did not want. It is no surprise that a few extra bank fees were payable on the wind up of some of many of these loans in FY2012. Likewise the wind up of the 'Amortising Facilities' and 'Trade Finance facilities' in FY2013 look to be have been costly. FY2014 saw the former ANZ bank loan turned into a 'syndicated loan' involving Westpac and BNZ as well. This involved winding up the previous ANZ facility early. All that rearrangment was obviously costly! It is interesting that new 'trade facilities' were opened in FY2015. I thought that side of the business had been handed to Heartland? So is this a sign that Heartland ( PGW Finance owners) are not performing, with PGW having to establish new trade facilities again in their own right?

Here is hoping for stability in the loan arrangments going forwards!

SNOOPY

[Snoopy]

Here is hoping for stability in the loan arrangments going forwards!





FY2011FY2012FY2013FY2014FY2015FY2016


Financial Rearrangements during year1/ PGW Finance 1/ Goodwill $300m+1/ New Syndicated Loan1/ Syndicated loan1/ Reorganisation of


divestment to Heartlandwrite offnegotoiated Dec 2013extended to Dec 2018.Uruguayan loans:


2/PGW Rural Capital2/$20m of 31-07-2004(includes Term Debt2/ New Overdraft Facility(Logistic Centre


Limited repaymentsloan paid back earlyfacility $116m (+$6m)of $9.63m. Facility: $US11m)


(including Crafer Farms)3/ Amortizing facility & Working Capital3/ New Trade Finance(Committed


$38.98m repaid.facility $60m (same) )facility of $6.57m Facility: $US12m)


4/ Trade Finance facilityuntil December 2016.4/ Extra finance for(Unsecured


$34.16m wound upUruguayan operations Facility: $US16.34m)


$NZ11.76m + $38.32m


Charged Interest Rate Estimate: {A}/{C} (previous table)5.50%4.41%4.84%6.05%5.48%


Interest rates used for determining value (Receivables)13.6%14.4%%14.2%14.7%Not Mentioned%



I always get suspicious when statistics are dropped from the Annual Report with no explanation.

Note 21 in AR2016 is titled 'Financial Instruments'. The last five years of annual reports also have a section titled 'Financial Instruments'. There is some detail in there about listing values on the books at 'fair value'. The interest rate used in determining these 'fair values' of 'finanace receivables' is listed under sub-section 'e' (in previous years). I assume some value of 'determining value' interest rate was used in FY2016, even though management chose not to tell sharehodlers what that interest rate was.

I have displayed the offending interest rate (where available) alongside my calculated interest rate that our company has been paying to the bank. There is no reason for these interest rates to be the same. I might expect the trend of changes in value year to year to show some correlation though. The 'determining value' interest rate has not dropped significantly since FY2012 (actually it has gone up). In a climate over the last few years of declining interest rates I find this odd. The fact that it wasn't given for FY2016 leads me to suspect it might have gone even higher. Can anyone explain this apparent anomoly? Why would an interest rate be used to help determine the value of financial receivables in the first place?

SNOOPY

[Snoopy]

I think PGW is the highest yielding share on the NZX, at least among those shares that have any chance of a stable earnings profile going forwards. High yield is often a measure of market scepticism. The reason for this scepticism IMO is that:

1/ Commodity markets (most of PGW's customers farm commodities) are subject to price and exchange rate volatility AND
2/ PGW itself carries a not insignificant bank loan debt burden.

Unfortunately when interest rates eventually rise, PGW will get a double whammy from:

1/ Higher interest costs
2/ The ability of customers to purchase being reduced from a higher NZ exchange rate reducing commodity prices in NZD terms..

I think it is worthwhile 'stress testing' the company to see what might happen in practice under a higher interest rate scenario. FY2012 to FY2016 covers the last five years under Alan Lai's Chairmanship. I suggest that 'net profit after tax' is largely determined by the revenue turnover of the company in any particular year. This is because PGW has limited ability to respond to any 'weather event' or predict the timing of the commodity cycles, but must have stock on hand at the start of each farming season (particularly with seeds) to meet demand from farmers. Revenue form the last five years has been tabulated below. I have presented an adjusted revenue picture too, as explained by circumstances outlined in note 1.

A point of observation is that 'adjusted revenue' is surprisingly stable. $1,173.6m is the mean adjusted revenue figure. The highest and lowest revenue figures are less that 4% away from that mean figure. This can be attributed to PGW doing business across all rural sectors. When the different rural sectors are 'out of synch' this naturally smooths the overall revenue picture.



FY2012FY2013FY2014FY2015FY2016]Stressed Year



Revenue$1,336.8m$1,131.8mm$1,219.8mm$1,202.8m$1,18 1.6m


Revenue (adjusted)$1,131.8m$1,131.8mm$1,219.8mm$1,202.8m$1 ,181.6m$1,131.8m (-$50m)



Average Total Loan Balance$158.952m$125.455m$105.138m$111.884m$130.43 7m


over Year: {Snoopy post 4071}


Charged Interest Rate5.50%4.41%4.84%6.05%5.48%


estimate: {Snoopy post 4071}

Bank Facility + Interest Rate8.60%7.79%7.16%7.40%6.97%8.60% (+23%)


estimate: {Snoopy post 4071}
[/tr]


Notes

1/ Below is a quote from p5 of the PGW Annual Report for FY2013:

"Sales revenue for the group decreased, although this had no bearing on underlying business activity. Sale of the Agri-feeds molasses business resulted in it being accounted as ‘equity earnings from associates,’ meaning its revenue is no longer recognised in our accounts. In addition, a number of key product lines in the retail business are now transacted on an agency basis, meaning that,although gross profit generated by these transactions remains unchanged, only commission income is recorded as our revenue rather than the full transaction value."

SNOOPY

[arc]

Snoopy
Not being an accountant myself, your descriptions sounds like a bit of creative in-house cooking.
Do you think there is any need to be mildly concerned

[BlackPeter]

Snoopy
Not being an accountant myself, your descriptions sounds like a bit of creative in-house cooking.
Do you think there is any need to be mildly concerned

I think what Snoopy is saying is that the downward potential for the share might be currently higher than the upward potential. Cyclical stock at the top ...

Obviously - high leverage at the top of the cycle is not very clever and might point to a needy/greedy majority shareholder requesting a big dividend, no matter whether PGW could afford to pay or not. Moving now into the downcycle with high debt and in an environment of rising interest rate is not necessarily an advantage for the company and/or for holders.

30 cents - here we come again :eek2:?

Discl: don't hold;

[winner69]

F16 saw them use $$29m to pay out dividends

This wasn't funded from normal activities - $20m came from property sales and the rest was borrowed

I reckon pusing the limits of 'financial endineering' to keep shareholders (at least the majority one) happy

No wonder a high dividend yield

[arc]

Thanks guys, good feedback

Sell and borrow as well !!! just to fund divies...

Obviously the div level requires a major slash and burn


So what happens when you have sold off all the silverware to support the habit, and have just the blankets left...

planting a red flag here.

[Snow Leopard]

F16 saw them use $$29m to pay out dividends

This wasn't funded from normal activities - $20m came from property sales and the rest was borrowed

I reckon pusing the limits of 'financial endineering' to keep shareholders (at least the majority one) happy

No wonder a high dividend yield

Whilst I broadly agree with you I have underlined the bits that are plain wrong.

Best Wishes
Paper Tiger

[percy]

Whilst I broadly agree with you I have underlined the bits that are plain wrong.

Best Wishes
Paper Tiger

What a "classic" post.!.....lol.

[winner69]

Whilst I broadly agree with you I have underlined the bits that are plain wrong.

Best Wishes
Paper Tiger

You fallen in love again or something

Thanks for the generous praise anyway

Cheers

[Snow Leopard]

You fallen in love again or something

Thanks for the generous praise anyway

Cheers

It is precisely because I do not get emotionally attached to shares, neither loving or hating them, that I extract from the accounts what is there and not what would suit my preconceived notions.

Best Wishes
Paper Tiger

XXX

[Snoopy]

Snoopy
Not being an accountant myself, your descriptions sounds like a bit of creative in-house cooking.
Do you think there is any need to be mildly concerned.


I am not predicting what is going to happen over the next farming year, and by association what will happen to PGW. I am suggesting that as an investor in PGW, you should bear in mind what could happen as part of your own personal risk/return investment portfolio assessment.




Sell and borrow as well !!! just to fund divies...
Obviously the div level requires a major slash and burn

So what happens when you have sold off all the silverware to support the habit, and have just the blankets left...
planting a red flag here.


My own observations from a PGW shareholder perspective:

1/ PGW has sold off various properties from which their rural supplies division operates around the country over FY2016.
2/ PGW have been conducting their normal business over FY2016 and making profits from that.
3/ PGW have paid a full dividend over the FY2016 financial year.
4/ PGW's overall bank debt has increased over FY2016.
5/ The banking syndicate supporting PGW is aware of 1/, 2/, 3/ and 4/ and they are not overly concerned about it.

The PGW dividend has come with full imputation credits. Generally selling a property that you did not buy with the intent of making a capital gain on the ultimate sale is not a taxable activity. This suggests to me that the dividend was not funded from property sales directly. I also suspect that Winner, being a smart accounting type guy, knows this. However I don't think Winner is trying to make a technical point here, as PT seems to be assuming.

My take on what has happened is this. One interpretation would be that the money from PGW property sales could have been directed towards debt reduction, but it wasn't. In fact PGW debt increased over the year, because of high dividend payments. The cash used to pay those dividends came from the money bin that was filled up with normal trading profits as well as property sales. Money banked from property sales and money from trading profits becomes indistinguishable once it is mixed up and put into the PGW money bin. So the majority of the cash used to pay the dividend could have come from 'trading profits' or 'property sales + borrowing (to make up the shortfall). You can look at it either way, depending on what point you are trying to make.

So even if Winner's interpretation can be criticised from a technical perspective, I think the overall point he was making is valid. And furthermore, I think PT's observation is technically correct.

SNOOPY

Discl: hold PGW, but as a measured part of my whole portfolio fully aware of what a 9%+ yield coupled with a medium sized company debt implies from a risk perspective.

[Snoopy]

I am separating what might happen in a 'high stress year' from my 'data' post, because this post is highly subjective. People could use my data post numbers in a different way and come up with a rather different conclusion. Nevertheless this post represents what I think is highly likely to happen at some time over the next five years. But exactly what year I am forecasting this will happen, I can't predict.



Base Year (FY2016)Stress 1: 2% Revenue ReductionStress 2: 4% Revenue Reduction


Operating EBITDA$70.181m$70.181m$70.181m


less Stress EBITDA Adjustment$0m($25.000m)($50.000m)


less Interest Funding Expense($9.089m)($11.179m)($11.179m)


less Depreciation and Amortisation($9.170m)($9.170m)($9.170m)


Operating EBT$51.922m$24.832m-$0.168m


less Tax at 28%$14.538m$6.953m$0.000m


Operating NPAT {A}$37.383m$17.879m-$0.168m


No. Shares on Issue {B}754.848m754.848m754.848m


Earnings Per Share {A}/{B}5.0cps2.4cps0.0cps



If PGW maintains their high payout ratio, this means we might expect dividends to halve under the 2% reduction in revenue scenario and disappear completely under the 4% reduction in revenue scenario. So you have to ask yourself the question. Given PGW is a 'no growth' 'steady as she goes' company, how much would a dividend hound pay for a PGW share under those 'stressed' circumstances? Whatever the answer, it does appear that PGW is in a position to survive such a downturn. They pass my interest rate stress test!

SNOOPY

discl: hold PGW

[Snow Leopard]

The amount of dividend paid ($29M) was less than the NPAT ($39M)
The amount of dividend paid ($29M) was less than the operating cash flow ($35M)
And the cash received from the sale of PP&E ($20M) was less that the cash paid for PP&E ($31M)

Best Wishes
Paper Tiger

[winner69]

The amount of dividend paid ($29M) was less than the NPAT ($39M)
The amount of dividend paid ($29M) was less than the operating cash flow ($35M)
And the cash received from the sale of PP&E ($20M) was less that the cash paid for PP&E ($31M)

Best Wishes
Paper Tiger

.....but dividend paid was still $6.7m more than the cash generated

Make up the difference this year .....just a timing issue

[Snow Leopard]

.....but dividend paid was still $6.7m more than the cash generated

Make up the difference this year .....just a timing issue

You can take that argument to many a thread, mentioning no airlines, retirement village operators etc.

Best Wishes
Paper Tiger

[Agrarinvestor]

What is going on? PGW share price uptrend and no comments here. Is this a result of high revenue in PGW's businness?

regards Agrarinvestor

[arc]

What is going on? PGW share price uptrend and no comments here. Is this a result of high revenue in PGW's businness?

regards Agrarinvestor

Similar thoughts here too.

Complex internal strucutre for pgw, lots of things that could impact operations...
https://www.google.co.nz/search?client=firefox-b&q=Kahibah+Holdings+Pty.+Ltd.&stick=H4sIAAAAAAAAAOPgE-LSz9U3SC5MM7EsV-LVT9c3NEwuNjPOSUrP0tLMKLfST87PyUlNLsnMz9PPL0pPzMus SgRxiq2KS5OKM1MyE4syU4sBuGofokgAAAA&sa=X&ved=0ahUKEwje4rDpk9fTAhVJnZQKHXmGA40QmxMIzAEoATAY&biw=1832&bih=895

Personally the Agria portion is still an open question for me...

[Snoopy]

What is going on? PGW share price uptrend and no comments here. Is this a result of high revenue in PGW's businness?

regards Agrarinvestor


My take on it.

1/ Lower exchange rate (USD in particular) will help commodity prices.
2/ Lower exchange rate (UK in particular) will help lamb sales in the UK, under pressure since Brexit.
3/ Weather has been encouraging for growing everything. Even long standing North Canterbury drought over.
4/ Low interest rates in New Zealand means PGW debt costs will be lower than projected.

SNOOPY

discl: holder

[Bob]

Big volumes in market depth today Buy 700,000 approx at 59, sell 700,000 approx at 60

[arc]

Big volumes in market depth today Buy 700,000 approx at 59, sell 700,000 approx at 60


Yes, I saw that too. Sellers are lining up but the buyers are already there for top $. Which side will turn out to have made the correct move ?, Time will tell.

[Snow Leopard]

Touching $0.61 I notice

Best Wishes
Paper Tiger

[nzspeak]

Anyone read the First NZ Capital Securities Ltd – monthly outlook?
If you missed out. It's a 36 page analysis on the NZ/AUS sharemarket and the global economy by one of NZ biggest brokering firms.
They interviewed the CEO of PGW. These are the key takeaways (their key take-away's not mine)

Key take-aways

+
Mark has been moulded
by a variety of influences.
+
PGW’s key strength is
people – employees and
customers.
+
Technology is creating
risks and opportunities.

(my take-away)
Who ever produced this booklet should be shot

[BlackPeter]

Anyone read the First NZ Capital Securities Ltd – monthly outlook?
If you missed out. It's a 36 page analysis on the NZ/AUS sharemarket and the global economy by one of NZ biggest brokering firms.
They interviewed the CEO of PGW. These are the key takeaways (their key take-away's not mine)

Key take-aways

+
Mark has been moulded
by a variety of influences.
+
PGW’s key strength is
people – employees and
customers.
+
Technology is creating
risks and opportunities.

(my take-away)
Who ever produced this booklet should be shot


You make a compelling case for reading the document ... but cheers for sacrificing yourself on our behalf ;)!

[Blackrose]

Is now a good time to get in on it? $0.61 is nice ramp in. Also call me dumb but is it NZX PGG or NZX PGW?? What's in a name?

[hogiela]

Is now a good time to get in on it? $0.61 is nice ramp in. Also call me dumb but is it NZX PGG or NZX PGW?? What's in a name?

NZX PGW

Always a good time to get in to PGW if you're in for the long term (high dividends) ... I wouldn't invest at 61c for capital gains though ... it ain't exactly a growth stock.

[Pmdv77]

NZX PGW

Always a good time to get in to PGW if you're in for the long term (high dividends) ... I wouldn't invest at 61c for capital gains though ... it ain't exactly a growth stock.

It has grown very nicely in the last 12 months - is trading within its usual 10 to 13x earnings. Dewdney may yet be becoming a very astute CEO of a diverse and complex business. Having said that, not sure how it can get to 80c+ in the short term.

Disc. Holding

[Snoopy]

It has grown very nicely in the last 12 months - is trading within its usual 10 to 13x earnings. Dewdney may yet be becoming a very astute CEO of a diverse and complex business. Having said that, not sure how it can get to 80c+ in the short term.

Disc. Holding


Agree that 'The Dewd' is an astute CEO. My take is that the rise in share price has been because of the excellent growing conditions in NZ in any commodity you care to name. And Uruguay not have an extreme climate event growing season this year. The situation is the controlling shareholder, Agria, needs to suck all the cash they can out of PGW to service their debts. The good thing about this is that PGW have to be very careful with their deployment of their cash. The bad thing is that, long term, such a policy makes growth for PGW impossible.

PGW will remain a cyclical. And right now we are riding the 'up cycle'. I would dispute that a PE of 10-13 is 'normal' for PGW. Trading above a PE of 10 makes the price look high to me. But in these days of very low interest rates, a solid dividend yield can influence the share price. My take is that PGW is now near the top of its expected price range. The problem is, if you sold, and wanted to maintain your dividend income, where do you put the money? This is the reason that I haven't sold.

SNOOPY

discl: PGW shareholder, average entry price 42c

[Agrarinvestor]

Anyone read the First NZ Capital Securities Ltd – monthly outlook?
If you missed out. It's a 36 page analysis on the NZ/AUS sharemarket and the global economy by one of NZ biggest brokering firms.
They interviewed the CEO of PGW. These are the key takeaways (their key take-away's not mine)

Key take-aways

+
Mark has been moulded
by a variety of influences.
+
PGW’s key strength is
people – employees and
customers.
+
Technology is creating
risks and opportunities.

(my take-away)
Who ever produced this booklet should be shot


Can anyone help me on how to get this report?

[winner69]

Well, well - 'The Dewd' is on his way out

New CEO next year

[IAK]

Yep, I was in the same hostel as the Dewd at university. He's certainly done alright for himself although he's lagging behind another student villager Mark Wilson CE of Aviiva on $10m a year. Certainly better recompensed than a career in science lol.
http://www.stuff.co.nz/business/91132145/rotoruas-10-million-man-how-mark-wilson-scaled-the-world-to-head-finance-giant-aviva

[winner69]

Another optimistic forecast that isn't delivered on

So ebitda $70m last year but only $62m odd this year .....hmmm

But there are 'silver linings' and next year year will be all honky dory

Property sales will ensure a decent dividend again this year - that's good

So really no worries

https://www.nzx.com/files/attachments/259885.pdf

[winner69]

Suppose beauty is in the eye of the beholder

Alan says a credible result for F17

[Beagle]

April was incredibly wet mate...can't recall it being that wet, (at least in the Auckland area and by accounts I've read throughout much of N.Z.) for a VERY long time.
Key takeaway here is no matter how well diversified an agri stock is, it isn't ever worth more than the time honored PE of 10 for a cyclical stock.
Shares have got well ahead of themselves. Disc: Don't own but might consider holding on a pullback to ~ 50 cents.
Wonder how they're getting on with their huge legacy burden of their superannuation fund ?
Dewd leaving and now the guidance downgrade, notice how they could have announced both on the same day but chose not too ! Classic case of managing disappointing information flow. If they had of announced both on the same day the effect on the SP would probably have been more pronounced.

[James108]

The industry I work in can be very weather dependant. I believe we have had the wettest march and April on record. I know of a large infrastructure job where this has added a year to the completion of earthworks.

Would have been very surprised if this didn't affect farmers.

[arc]

So all those sudden sales at 60c were.... well timed ?

[sb9]

April was incredibly wet mate...can't recall it being that wet, (at least in the Auckland area and by accounts I've read throughout much of N.Z.) for a VERY long time.
Key takeaway here is no matter how well diversified an agri stock is, it isn't ever worth more than the time honored PE of 10 for a cyclical stock.
Shares have got well ahead of themselves. Disc: Don't own but might consider holding on a pullback to ~ 50 cents.
Wonder how they're getting on with their huge legacy burden of their superannuation fund ?
Dewd leaving and now the guidance downgrade, notice how they could have announced both on the same day but chose not too ! Classic case of managing disappointing information flow. If they had of announced both on the same day the effect on the SP would probably have been more pronounced.

Surely they didn't want to put out two negative pieces of news on the same day...

PS - Like your new user name Roger (the "Beagle") :)

[Pmdv77]

March was an okay month but April absolutely hammered us - and we were some of the lucky ones farming in the Central North Island. The greater Waikato got hit bad and the commentary in the release lines up with reality. That said, I do not know how PGW intend to grow their earnings. It seems that they are relying on all stars being aligned to maximise earnings in each sector rather than any other strategy.

[Snoopy]

I do not know how PGW intend to grow their earnings. It seems that they are relying on all stars being aligned to maximise earnings in each sector rather than any other strategy.

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

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

SNOOPY

[Beagle]

If PGW can demonstrate that they can handle the ups and downs of the business cycle better, there is every chance they will be re-rated in PE terms. This, the consistent high yield, and lack of correlation with other shares in my portfolio is the reason I still hold.

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

[percy]

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

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

SNOOPY

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

[winner69]

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

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

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

[Beagle]

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

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

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

[Snoopy]

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


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

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

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



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

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

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

SNOOPY

[winner69]

Hey snoops

Christmas has come early for you

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

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

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

[sb9]

First off the block to report earnings...

[Beagle]

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

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

[winner69]

First off the block to report earnings...

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

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

[winner69]

Cash Flow Statement is what really matters

Operating cash flow down quite a lot on last year

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

[winner69]

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

Uruguay not making as much as they thought it would?

[winner69]

Super fund liability down to $16m. Good effort

I think it really nice that current shareholders front up to pay the pensioners - many who retired many years ago and many who worked for companies PGW don't even own now.

One day they should bite the bullet and wind the scheme up and just pay everybody out - ongoing liabilities won't go away in a hurry ...but they are hoping.

[winner69]

Going to make more money. That's good .....share price 70 cents next year

It's good to know that good old grit and determination will make that happen.

[Beagle]

Cash Flow Statement is what really matters

Operating cash flow down quite a lot on last year

And one could construe that that selling (unwanted) assets paid for the dividend - fair enough
A LOT...they can't keep selling the silverware indefinitely to fund the dividend. Classic case of lipstick on a ... ?

[Snow Leopard]

Actually quite a reasonable result, but underlying is not as good as last year.

As is usual with PGW you do have to read the accounts thoroughly in order to balance the pluses and minuses and get the true picture rather than cheery pick individual numbers out of the accounts.

Current fair value by the latest Tiger method is $0.541 + the dividend.

Depending upon how you like your trends they mainly look OK too.


Best Wishes & Do Your Own
Paper Tiger

[Out to lunch]

Have heard of huge supplementary feed volumes in the dairy sector given a wet peak milk season. Non-recurring so may not be a significant impact on share price.

[winner69]

Chance of La Nina this summer tripled recently

Is this good or bad for PGW

Last decent one was 2010/2011 and I don't think that was too good

[Snow Leopard]

Chance of La Nina this summer tripled recently

Is this good or bad for PGW

Last decent one was 2010/2011 and I don't think that was too good

Is La Ninja the wet one or the dry one?

I always get that and El Dorado mixed up!

Best Wishes
Paper Tiger

[Snoopy]

Chance of La Nina this summer tripled recently

Is this good or bad for PGW

Last decent one was 2010/2011 and I don't think that was too good




Is La Ninja the wet one or the dry one?

I always get that and El Dorado mixed up!

Best Wishes
Paper Tiger

The terms are Spanish and usually a noun that ends in 'a' is feminine and a noun that ends in 'o' is masculine. The odd letter, the 'n' with the thingie on top, is pronounced 'ny'.

La Niña is the girl and El Niño is the boy. It is the boy that usually causes the trouble -drought (in the NZ weather system at least). That is how I remember it.

SNOOPY

[Pipi]

Have heard of huge supplementary feed volumes in the dairy sector given a wet peak milk season. Non-recurring so may not be a significant impact on share price.

What happens in the diary sector probably won't have a huge effect on PGW, as a large percentage of dairy farmers don't use them. As far as the retail stores go, they service a lot of the sheep and beef sector and also the orchard. So the wet weather could definitely affect

[Rossimarnz]

My understanding is that El Nino leads to dry weather on the east coast of NZ and is more frequently occurring while La Nina leads to west coast dry weather and is less frequent. La Nina would increase the risk of very dry summer in areas like Waikato.

[percy]

What happens in the diary sector probably won't have a huge effect on PGW, as a large percentage of dairy farmers don't use them. As far as the retail stores go, they service a lot of the sheep and beef sector and also the orchard. So the wet weather could definitely affect

The dairy sector accounts for between 22% and 25% of PGW's revenue,so it is significant.

[winner69]

But when Winston has meddled with Monetary Policy and the NZD down to usd50 cents farmers will be creaming it.

[Snoopy]

My understanding is that El Nino leads to dry weather on the east coast of NZ and is more frequently occurring while La Nina leads to west coast dry weather and is less frequent. La Nina would increase the risk of very dry summer in areas like Waikato.

Living in Canterbury, I tend to be Canterbury-centric in my thinking Rossimarnz. So yes, I accept that 'La Niña' may not be ideal in the Waikato. However, in my experience the worst multi-year droughts do occur in the east (Canterbury and Hawkes Bay). Droughts in the Waikato tend to be shorter. And on the West Coast of the SI, a whole lot more rain, courtesy of El Niño, is generally not what West Coast farmers want.

So I stick with my claim that overall, El Niño is the weather event that does more damage to agriculture nationwide.

SNOOPY

[Snoopy]

Basic eps is stated at 6.1 cps but strip out the $9.6m gain on sale of property which the company has ostensibly admitted will not repeat to the same extent next year and we get eps of 4.86 cps.


Not sure where the other Beagle got his property sales profit $9.6m adjustment figure from. But property sales are certainly an issue and not something I would consider comes under the heading of 'Operating Earnings'. These property sales from the current sell down program have been happening over FY2015, FY2016 and FY2017. Looking at the 'Property Plant & Equipment' section of the respective Annual Reports over the last three years, I get the following property plant and equipment 'sales' and 'profits' figures:



FY2015FY2016FY2017Total


Assets disposed of$2.972m$22.390m$16.359m


Gain on disposal$0.96m$4.99m$8.74m$14.69m



That total gain on disposal ties in nicely with a comment made in AR2017 on page 8:

"Our property divestment program which began in 2015 is largely complete. So far we have realised $43m from the programme by selling (and in some cases leasing back) property that had a net book value of $29m."

I note that: $43.5m - $28.5m = $15m, which ties in with the the tabulated $14.69m gain.

It looks like I have some property adjustment sales to make to obtain the 'real' underlying operating earnings for the company for FY2015, FY2016 and FY2017. I fear that I have work to do on the superannuation plan adjustment too. The 'cashflow' didn't change, but the profit went up because this was an adjustment only made to 'reserves'? Financial engineering at its best?

SNOOPY

[Snoopy]

Super fund liability down to $16m. Good effort

I think it really nice that current shareholders front up to pay the pensioners - many who retired many years ago and many who worked for companies PGW don't even own now.

One day they should bite the bullet and wind the scheme up and just pay everybody out - ongoing liabilities won't go away in a hurry ...but they are hoping.


One important procedural change in the account statements this year is related to the PGW internal super fund(s). Whenever the presentation of the accounts changes for no "change in accounting rules" reason, this hound's nose gets into action. The official explanation for the change in presentation this year is reported as follows:

"Previous expensing of the return on plan assets for the 2014 through to the 2016 year (Snoopy note: if this expense ends up being negative then profits increase) have now been recognised through other comprehensive income."

That sounds quite technical. So to see what is going on, I think it is useful to look at a 'before' and 'after' example. I present the profit and loss statements for FY2016, first as presented in AR2017 and then the same result as presented in AR2016 (before the FY2017 presentation adjustment).



STATEMENT OF PROFIT OR LOSS (For the year ended 30 June 2016)From AR2017 ($m)DifferenceFrom AR2016 ($m)


Continuing operations


Operating revenue1,181.6241,181.624


less Cost of sales(854.871)(854.871)


equals Gross profit326.753326.753


add Other income0.7250.725


less Employee benefits expense(156.148)(156.148)


less Research and development(4.515)(4.515)


less Other operating expenses(96.390)(96.390)


add Equity accounted earnings (losses) of investees(0.244)(0.244)


equals Operating EBITDA70.18170.181


adjust for Non-operating items4.151+5.835(1.684)


less Fair value adjustments(0.232)(0.232)


less Depreciation and amortisation expense(9.170) (9.170)


equals EBIT64.93059.095


less Net interest and finance costs(10.474)(10.474)


equals Profit from continuing operations before income taxes54.45648.621

ave I highlighted the contributions of PGW to the pension plan over the last four years only? In the AR2017 report
less Income tax expense (10.466)-1.634(8.832)

[/TR]

Profit from continuing operations {D}43.990+10.6%39.789




Discontinued operations


Profit (loss) from discontinued operations (net of income taxes)(211)(211)


Net profit after tax {A}43.77939.578


Other comprehensive income/(loss) for the period


Items that will never be reclassified to profit or loss


add Changes in fair value of equity instruments5.4335.433


less Remeasurements of defined benefit liability(10.666)-5.835(4.831)


add Deferred tax on remeasurements of defined benefit liability2.987+1.6341.353


equals {B} (2,246)1.955


Items that are or may be reclassified to profit or loss


less Foreign currency translation differences for foreign operations(8.513)(8.513)


add Effective portion of changes in fair value of cash flow hedges3.8883.888


less Income/deferred tax on changes in fair value of cash flow hedges(1,088)(1,088)


equals {C}(5,713)(5,713)


Other comprehensive income/(loss) for the period, net of income tax {A+B+C} or {E}(7.959)(3.798)


Total comprehensive income for the period {D}+{E}35,82035,820



What we have here are two very long columns of figures both adding up to the same thing. This is the kind of thing that makes accountants smile. That's because generally when two long columns of figures add up to the same thing, it means they have done their job correctly. A nice little bonus is that 'Net Profit from Continuing Operations' has gone up by 10.6% with the new presentation format. That is sure to make the shareholders feel all warm and fuzzy. Yet, I wonder if some of that new warmth is at the expense of a little accounting fuzziness?

SNOOPY

[Snoopy]

Yet, I wonder if some of that new warmth is at the expense of a little accounting fuzziness?


Sometimes it is possible to prepare the accounts in two different ways to the same accounting standard, and both ways are equally valid. Which presentation that is best to accept is largely dependent on the perspective of the reader.

The new presentation makes sense, because the distortion of operating profits due to the movement of the underlying balances of the employee retirement schemes, is not related to that year's 'farm servicing environment'. It is nonsensical to criticise current operations management because of adverse movements in a multi-year future focussed retirement scheme. Yet there is something I find very uncomfortable about looking at the results in this new way.

What makes me feel uncomfortable is the movement of the change in 'defined benefit' (that means pension) liability to the section where it is 'never to be reclassified to profit or loss'. And I think that includes lump sum contributions from shareholders to defined benefit plans (Not made in FY2016, but a $7.551m lump sum contribution made in FY2017). The pension liabilities are real cash liabilities that must be met in the future. It doesn't seem right to group these with other etherial liabilities, like 'Foreign currency translation differences'' and 'Fair value adjustments' which generally have a long term zero sum expected value by the time the underlying financial arrangements run their course. In complete contrast pension liabilities are a real liability for current shareholders which won't be extinguished until the very last employee or spouse who draws a PGW pension becomes subterranean slow release fertilizer. Pension liabilities, unlike the interim 'mark to market' changes in value of financial arrangements are not something shareholders can back away from.

Of all the NZX listed companies that have in house pension plans, I don't know of one in a worse position than the PGG Wrightson plan. It has been underwater for the entire existence of PGG Wrightson.



Financial YearPension Plan Deficit EOFYPGW Contribution {A}Members Contribution {B}Total Contribution {A}+{B}Benefit Paid {C}Net Cash Movement {A}+{B}-{C}


2009-$13.680m$1.709m$1.556m$3.265m($11.111m)($7.846m)


2010-$18.206m$3.127m$1.651m$4.778m($5.631m)($0.853m)


2011-$16.970m$3.622m$1.378m$5.000m($4.980m)$1.398m


2012-$26.264m$2.727m$1.363m$4.090m($3.819m)$0.271m


2013-$20.819m$1.402m$1.364m$2.766m($6.412m)($3.646m)


2014-$13.528m$1.427m$1.337m$2.764m($4.709m)($1.945m)


2015-$14.665m$1.301m$1.300m$2.601m($5.304m)($2.703m)


2016-$20.715m$1.204m$1.254m$2.458m($3.482m)($1.024m)


2017-$12.271m$5.920m$1.119m$7.119m($6.010m)$1.109m



The pension plan deficit is a long tail of shame for shareholders, but also a long term worry for shareholders who must eventually meet the bill. Consequently it is a real underlying risk to shareholders as this debt is over and above the already substantial bank loan liabilities that PGW has. I don't think 'sweeping it under the carpet' by changing the profit presentation format is the right way for shareholders to look at the situation.

SNOOPY

[Snoopy]

For the sake of PGW shareholders - I'm not one - it's to be hoped that there are still a few PGW executives who remember the mistake they made several years ago in selling their then Finance division to Rabobank, only to discover that this loosened - and in some cases severed links with a lot of farmers and gave Rabobank the start they needed in becoming a strong competitor in rural finance.

They wouldn't make that mistake again, would they?

Picking up on Macduffy's question of January 2011, of course the finance division 'PGW Finance' was sold to Heartland. However, the PGW AR2017 contains a glowing reference to the new 'Go-Beef' and 'Go-Lamb' products created by PGW during FY2016 (from a zero base in November 2015 to an asset balance of $32 million as at 30 June 2017, yet not mentioned in AR2016) that:

"continue to grow strongly. During the year 187,964 lambs and 33,983 cattle entered the scheme." (AR2017 p2)

So what is 'Go-Beef' and 'Go-Lamb'? It is a scheme where farmers buy beef cattle and/or lamb through their local PGW Livestock Agent. However, in a novel twist, the farmer does not have to pay for these animals up front. Instead they truck them off to their farm to fatten them up and PGW puts the 'farmer bought' animals on their own books and the farmer 'rents' their new stock. A few months later the fattened livestock returns to the PGW saleyard, the lamb/cattle are on sold, and PGW clips the auction ticket - again.

For 'Go-Beef' beef cattle the average time spent on farm is 185 days, while for 'Go-Lamb' lambs it is 104 days. The business is not entirely seasonal and there is significant demand for this service over a rolling twelve month period. All this was explained by Mark Dewdney on the post result conference call following the release of FY2017 results. Mark also noted that the same service has been offered previously via the Heartland bank owned PGW Finance with very little take up.

Dewdney noted that 'Go-Beef' and 'Go-Lamb' were good business for PGW, because they locked the PGW Saleyards onto both ends of the deal, and made a commission increment on the borrowing rate they charged farmers, thus 'clipping the ticket' three times.

As a further point of reference there is this quote from AR2017 p6 is notable for its omission of any reference to the Heartland/PGW Finance agency unit:

"In terms of performance of other businesses within Agency of which Livestock and Wool form part, our Real Estate and Insurance referral businesses each performed well and broadly in line with the corresponding period last year."

And next from AR2017 p17 where Heartland is mentioned:

"Our Insurance and Finance businesses earn commissions from legacy businesses sold to Aon Insurance and Heartland Bank. We have placed increased emphasis on improving these working relationships and exploring opportunities to grow both partnerships through referrals for new business."

Am I reading too much into all of this to suggest that the agency arrangement with Heartland is not performing to expectations and not meeting the needs of farmers? Or is the alternative interpretation, that Heartland have evaluated the risk of the 'animal renting' business and have decided it is not worth encouraging. Consequently this implies Heartland might judge PGW's latest move into "fattening animal finance" as reckless! Is Heartland or PGW right? What do shareholders think?

'Go-Beef' and 'Go-Lamb' certainly look like "PGW Finance Chapter Three" to me!

SNOOPY

[winner69]

Snoops - do fattened cattle always sell more than they did 104 days prior?

[kiora]

Snoops - do fattened cattle always sell more than they did 104 days prior?

Typically .5 to 1 kg live weight gain per day,paid on carcass weight so half this gain /day.BUT typically this finance will be used by poorer performing farmers or farmers with higher leverage/riskier

[Snoopy]

Snoops - do fattened cattle always sell more than they did 104 days prior?

If they don't then PGW could take a leaf out of the Heartland book when it looked like their cow loans were going bad last year. Was it Geoff who suggested they just kill the dairy cows to get the meat? Effectively moving the 'below market' cows up the value chain? Is Mark Dewdney handy with a butcher's knife?

SNOOPY

[Snoopy]

Typically .5 to 1 kg live weight gain per day,paid on carcass weight so half this gain /day.BUT typically this finance will be used by poorer performing farmers or farmers with higher leverage/riskier


I am pleased you made the distinction between 'poorly performing farmers' and 'farmers with higher leverage'. They are of course quite different things.

A well performing farmer who knows how best to turn paddock into animal mass may be able to get away with more leverage, than a farmer without the favourable land type or knowledge to make it work. By contrast a poor farmer, who doesn't know how to get the best out of their land, might still do OK if the financial leverage on the farm is not too high.

I do wonder about 'Go-Beef' and 'Go-Lamb' though. Sometimes what seems to be a good idea on paper can have unintended consequences.

Example 1/ If PGW are financing the buying of stock at a price that ordinarily a farmer bidding for that stock cannot afford, then you will drive the stock price at the PGW Saleyard higher than it would otherwise be. Superficially that sounds good for PGW. But why would another farmer who didn't need to 'borrow to buy stock', buy there? Why not go down the road and buy your stock at the Allied Farmers Saleyard where you aren't bidding against others who can't afford to bid? Aren't PGW just driving the smart farmers away to the competition, when those smart farmers realise they don't have to pay as much for their cattle beef and lamb if they shop elsewhere?

Example 2/ A farmer uses the PGW 'Go-Beef' or 'Go-Lamb' finance package, to 'rent' an extra paddock of animals. But suppose growing conditions get difficult with too much rain and pugging. Wouldn't it make sense for this farmer to feed up their own title animals first ahead of those animal rented from PGW? After all, PGW have an arrangement to buy back 'their rented animals though the saleyards no matter what weight they end up at at a certain time. Whereas the farmer who feeds up his own animals first can sell them at any time through any channel and can choose to whom and to where they sell to maximise profits. Furthermore if any animal gets sick you can bet the farmer will call the vet to their own animals first, and leave PGW to take any consequential disease loss on the rented animals.

SNOOPY

[kiora]

You're pretty close to summing it up Snoppy. Good when beef/lamb prices are increasing,risky when dropping. PGG one would assume would know the risk,facted it in and still win.Its the farmer who will have the lower margin.

[Snoopy]

Well, well - 'The Dewd' is on his way out

New CEO next year

Or maybe this year? Ian Glasson is taking over after the AGM:

------

PGG Wrightson Limited ("PGW") a leading provider of agricultural products, services and solutions to growers, farmers and processors in New Zealand, Australia and South America, today announced that Ian Glasson has been appointed Chief Executive Officer. Mr Glasson's appointment takes effect from 1 November 2017 and completes the leadership succession plan following the resignation of current CEO, Mark Dewdney.

Mr Glasson is an experienced executive with significant career experience in the agribusiness and branded food sectors across several international markets. He joins PGW from his previous position as CEO of Gold Coin Group/Zuellig Agriculture where he was responsible for running a portfolio of agricultural businesses with sales in excess of a billion dollars that included animal feed operations and farming ventures throughout South-East Asia (including in China) and CB Norwood, a farm equipment business in New Zealand and Australia.

PGW Chairman, Alan Lai stated: "Ian brings impressive qualifications for leading an agricultural business such as PGW and we are pleased to have him join the Company." In addition to his record of success at Gold Coin, Ian was CEO of Sucrogen (formerly CSR Sugar) for seven years and has held Managing Director roles with Goodman Fielder and Gresham Rabo. He spent the first 16 years of his career in the oil and gas sector with Esso and Exxon Mobile in Australia and the US.

"Ian will remain an external Director of SunRice one of the largest branded rice food companies in the world, and is looking forward to relocating to Christchurch with his family for his role at PGW."

------

Am slightly disappointed an internal candidate didn't get the job this time. Bosses have been parachuted into PGW for as long as I can remember, and this time we get an Aussie to boot! I am far from convinced the business needs yet another shake up at this point. Yet Glasson sounds an able guy from the CV, so we must give him a honeymoon. I still reckon they should have recalled former CEO Tim Miles, while he is still on the payroll. to work through the tail of the ten year contract the board at the time gave him.

SNOOPY

[Snoopy]

You're pretty close to summing it up Snoopy. Good when beef/lamb prices are increasing, risky when dropping. PGG one would assume would know the risk, factored it in and still win. It's the farmer who will have the lower margin.

I am not sure that is quite what I am saying Kiora. Is 'knowing the risk' enough compensation for 'not knowing the outcome'? Let me see if I can make my point more clearly.

If lamb and /or cattle prices are rising this should be good for all farmers, very true. But are the prices for all lambs (I'll use this as my example) rising equally?

-----

CASE 1/ If a farmer has:

i/ fully owned lambs and rented lambs AND
ii/ there is plenty of cheap feed available THEN
iii/ there is every reason to believe that the owned lambs and rented lambs will do equally well. This scenario will be good for PGW as they will get higher prices for their lambs at first sale time and prices as good as farmer owned lambs at resale time. OTOH.....

--------

CASE 2/ If a farmer has:

i/ fully owned lambs and rented lambs AND
ii/ feed on farm is limited and/or expensive to buy in THEN
iii/ there is every reason to believe that the owned lambs will do better than the rented lambs. So PGW will do worse when the rented lambs are resold, because their sell weight will be lower. If PGW had sold the lambs outright the first time those lambs came into the PGW saleyards, then the lower 'first sale price' might have been offset by a higher 'resale price'. So in this case the 'Go Lamb' financing has probably not increased PGW profits.

--------

CASE 3/ If a farmer has:

i/ fully owned lambs and rented lambs AND
ii/ the situation changes between buying and reselling the lambs in a way that that feed becomes scarce THEN
iii/ there is every reason to believe that neither the owned lambs nor the rented lambs will do well.

If the result of the weather deterioration is that the farmer has to sell lambs, then PGW will probably insist that the farmer sells those rented lambs first. As the owner of those lambs PGW could lose 'biological capital' even if that loss is offset by auction fees at both ends of the transaction. However, the farmer will be most beholden to their bankers, not PGW. Bankers may insist that the farmer sell down their own lambs, but at another (e.g. Allied Farmers) saleyard where the lamb price isn't so depressed by all the in 'in house' PGW lamb sales. This could leave our farmer in a much weaker position unable to take advantage of PGW's lamb rental scheme in the future.

--------

So in summary:

1/ PGW could lose the support of the well capitalised farmers who will go to other saleyards to buy their lambs at less inflated prices (Case 1, Case2 and Case 3).
2/ PGW could lose the support of the less well capitalised farmers, because they have become substantially weakened by buying into lambs on a leveraged basis at the wrong time (Case 3).
3/ PGW could suffer a 'capital loss' on their biological assets (lambs they have rented out). (Case 3)

For PGW, Case 3, looks like a 'lose', 'lose' 'lose' scenario, not uncommon in any leveraged business when the market tide goes against you. Perhaps our hapless farmer may even end up with a greater margin on their 'owned lambs' verses the margin PGW got on the 'rented lambs'? But if all the lamb sales result in losses, whether our hapless farmer has done 'better' or 'worse' than PGW, won't help our farmer recover. PGW has in effect leveraged our hapless farmer one step closer to bankruptcy through their 'Go lamb' finance scheme.

'Go Lamb' and 'Go Beef' looks to me like it is no different to any other form of leveraged financing, with all the 'good' and 'bad' that can come from such schemes. Due to good farmers potentially moving their business, it may not be positive for PGW shareholders even in good times.

SNOOPY

[Snoopy]

(The underfunded pension plan) is a real underlying risk to shareholders as this debt is over and above the already substantial bank loan liabilities that PGW has. I don't think 'sweeping it under the carpet' by changing the profit presentation format is the right way for shareholders to look at the situation.


I have come to the conclusion that I should reverse the change in result presentation of the pension liabilities when I judge the future prospects of this company. But to do that I need to fully understand how the changes were made.

It was in AR2016 p61 that PGW stated:

"During the period, the group made a commitment to provide certain contributions to the 'Defined Benefit Liability' over a five year period (FY2017, FY2018, FY2019, FY2020 and FY2021). As a result of this commitment, the defined benefit liability now includes the impact of ESCT (Employer Superannuation Contribution Tax) on the committed contributions."

The committed contributions on ESCT were listed as follows:



ESCT on committed contributions - short term($2.642m)


ESCT on committed contributions - long term($2.372m)



If we regard 'short term' as within twelve months, how does this tie up with the actual payments made into the scheme by PGW?

The cashflow statement in AR2017 (being the ensuing 12 months after the above commitment was made) shows the "Lump sum contributions to the defined benefit plan (ECST inclusive) totalled $7.551m. If I assume that this payment was fully taxable at the company tax rate of 28%, then :

$7.551m x 0.28 = ($2.114m)

This falls short of the ($2.642m) I might have expected from AR2016. Does this mean that PGW, at EOFY2016, were going to put more money in this year? But for some reason scaled their contribution back from what was originally envisaged? Or does that tax 28% rate not apply for superannuation payments, because those superannuation payments will ultimately pass to individuals who have a higher marginal tax rate? Working the numbers from the other direction:

(Forecast tax paid)/(Actual tax Payment) = ($2.642m)/($7.551m) = 35%

That seems quite a high tax rate for superannuitants. So perhaps my theory of a higher tax rate applying to these funds is not right?

Returning to the AR2016 results, the differences noted in my post 4135 under 'non-operating items' and the apparently related 'income tax adjustment' would indicate that the defined benefit Scheme(s) over FY2016 made a NPAT of $5.835m and produced an associated income tax liability of $1.634m.

I note that: $1.634m/$5.835m = 28%, which is the company tax rate.

Yet the fair value of plan assets actually went down over FY2016, from $57.498m to $ $52.702m (note 19, AR2016). How do I reconcile those two positions?

It seems that those in the scheme who are not yet retired, despite it being closed to new participants, are still able to add to their scheme positions. Likewise those that are already retired are receiving payouts from the scheme.

SNOOPY

[Snoopy]

Returning to the AR2016 results, the differences noted in my post 4135 under 'non-operating items' and the apparently related 'income tax adjustment' would indicate that the defined benefit Scheme(s) over FY2016 made a NPAT of $5.835m and produced an associated income tax liability of $1.634m.

I note that: $1.634m/$5.835m = 28%, which is the company tax rate.

Yet the fair value of plan assets actually went down over FY2016, from $57.498m to $ $52.702m (note 19, AR2016). How do I reconcile those two positions?

It seems that those in the scheme who are not yet retired, despite it being closed to new participants, are still able to add to their scheme positions. Likewise those that are already retired are receiving payouts from the scheme.


p63 in AR2016 provides more details on the profit and loss factors that moved the pension scheme balance about over FY2016. Using this I will try to reconcile what happened.



Opening Fair value of Plan Assets$57.498m


less Benefits paid by the Plan($3.482m)


add PGW Top Up Contribution$1.204m


add Member Contributions$1.254m


add Current Service Costs and Interest$2.063m(This is odd because I would expect 'service costs' to be a negative value. Could it be they have been offset by 'interest earned? (1))


less Expected Return on Plan Assets($5.835m)(A very strange piece of jargon IMV. Why would the expected investment return be negative? Was the actual return negative?) (2)


equals Closing Fair value of Plan Assets$52.702m



(1) The line below shows 'Current Service Costs' to be $1.083m and 'Interest' of $0.529m adding to $1.612m. This is not in agreement with 'Current Service Costs and Interest' being $2.063m. However both of these are listed as positive 'expenses' which should add negatively to the plan asset total as I might have expected.

(2) This negative return appears to be unique to FY2016. The 'Expected return on plan assets' both over FY2015 and FY2017 are both positive as I might expect. What was it that 'apparently' caused this huge loss in FY2016, when investment markets were so favourable?

The total movement in plan assets was:

$57.498m - $52.702m = -$4.796m

Yet the figures from the profit and loss statement that I derived were a profit of $5.835m together an associated income tax liability of $1.634m, which doesn't tie up. I must say that I am finding this pension scheme representation in the books all rather baffling....

SNOOPY

[winner69]

Awfully complicated isn't it snoops but I'm sure its clear as mud to the PGW finance team (and actuary)

Like that ($5.835m) is the difference between expected returns (the long term return assumption) and actual returns. Now that's got you confused eh

What you trying to show anyway?

[percy]

Awfully complicated isn't it snoops but I'm sure its clear as mud to the PGW finance team.

What you trying to show anyway?

.Classic.Looking forward to Snoopy's answer,,,,,,,,,,,,,,,,,,,,,,,if he knows??...lol

[Snow Leopard]

...

add Current Service Costs and Interest
$2.063m
(This is odd because I would expect 'service costs' to be a negative value. Could it be they have been offset by 'interest earned? (1))


less Expected Return on Plan Assets
($5.835m)
(A very strange piece of jargon IMV. Why would the expected investment return be negative? Was the actual return negative?) (2)


...

...
(1) The line below shows 'Current Service Costs' to be $1.083m and 'Interest' of $0.529m adding to $1.612m. This is not in agreement with 'Current Service Costs and Interest' being $2.063m. However both of these are listed as positive 'expenses' which should add negatively to the plan asset total as I might have expected.

(2) This negative return appears to be unique to FY2016. The 'Expected return on plan assets' both over FY2015 and FY2017 are both positive as I might expect. What was it that 'apparently' caused this huge loss in FY2016, when investment markets were so favourable?...



...Like that ($5.835m) is the difference between expected returns (the long term return assumption) and actual returns. Now that's got you confused eh...

I am just going to keep quiet, occasionally look in on how this is 'progressing' and possibly allow myself a few smug moments.

Best Wishes
Paper Tiger

[Snoopy]

Awfully complicated isn't it snoops but I'm sure its clear as mud to the PGW finance team (and actuary)

Like that ($5.835m) is the difference between expected returns (the long term return assumption) and actual returns. Now that's got you confused eh


Yes :-(



What you trying to show anyway?


I think the cash liability of the pension plan is a risk issue for PGW. I think one way to account for this is to take this potential cash liability and subtract it from the operating profit (as was in effect done in FY2016 and previous years). The cash liability may not completely align with the 'hit on profit' liability. But at least the cash liability is easier to understand. I have amended my post 4186 to show what has happened in 'cash terms' to the pension plan since FY2019. It is fairly obvious that in general cash has been bleeding out of the plan over the years, while the expected final deficit of the plan remains stubbornly high. My objective is to figure out what the cash drain for PGW shareholders is likely to be in the future. I will then make some suitable adjustment to operating profit going forwards.

SNOOPY

[Snoopy]

I must say that I am finding this pension scheme representation in the books all rather baffling....


I am taking another dive into AR2017 to make some sense of things.

Various 'Actuarial Assumptions' (p62) are made about valuing the pension scheme assets. The present value of plan assets is $71.105m. This I expect is discounted by the listed discount rate of 2.97%. However we are told that inflation (and hence they say pension payments?) are forecast to increase at 2% each year. This means the apparent book value of the pension scheme will be eaten up faster in the future. So we need an additional discount factor to account for this.

We are told that the 'weighted average duration of the defined benefit obligation' is 8.5 years.

This means the undiscounted current balance should be calculated as follows:

UCB x [(1-0.0297)(1-0.02)]^8.5 = $71.106m => UCB x (0.9509)^8.5 = $71.106m => UCB = $109.09m

It seems reasonable to assume that this 'cash balance' will include some assumptions on likely earnings of the portfolio into the future, before it is ultimately redeemed. However, although we are told the superannuation investment has gone from a 79%/19%/2% Equities/Fixed Interest/Cash to 64%/28%/8% Equities/Fixed Interest/Cash, there is no mention of what the expected return on any of these investment categories is.

$109.09m - $71.106m = $37.984m

So take out the 'time value of cash' adjustments and we are looking at a percentage increase in portfolio value of around 50% over 8.5 years. That sounds do-able, albeit investment conditions would have to remain favourable for 8.5 years to achieve such a target. Perhaps this is why the actuarial calculations are telling PGW to top up? Or perhaps I have got the whole thing completely wrong!

SNOOPY

[winner69]

I am taking another dive into AR2017 to make some sense of things.

Various 'Actuarial Assumptions' (p62) are made about valuing the pension scheme assets. The present value of plan assets is $71.105m. This I expect is discounted by the listed discount rate of 2.97%. However we are told that inflation (and hence they say pension payments?) are forecast to increase at 2% each year. This means the apparent book value of the pension scheme will be eaten up faster in the future. So we need an additional discount factor to account for this.

We are told that the 'weighted average duration of the defined benefit obligation' is 8.5 years.

This means the undiscounted current balance should be calculated as follows:

UCB x [(1-0.0297)(1-0.02)]^8.5 = $71.106m => UCB x (0.9509)^8.5 = $71.106m => UCB = $109.09m

It seems reasonable to assume that this 'cash balance' will include some assumptions on likely earnings of the portfolio into the future, before it is ultimately redeemed. However, although we are told the superannuation investment has gone from a 79%/19%/2% Equities/Fixed Interest/Cash to 64%/28%/8% Equities/Fixed Interest/Cash, there is no mention of what the expected return on any of these investment categories is.

$109.09m - $71.106m = $37.984m

So take out the 'time value of cash' adjustments and we are looking at a percentage increase in portfolio value of around 50% over 8.5 years. That sounds do-able, albeit investment conditions would have to remain favourable for 8.5 years to achieve such a target. Perhaps this is why the actuarial calculations are telling PGW top top up? Or perhaps I have got the whole thing completely wrong!

SNOOPY

Snoops me old mate, you need to read things are bit more carefully

The $71.506m mentioned is not an asset - it’s the liability the fund has which has been calculated by the actuaries using the assumptions listed.

Problem is the fund has only $58m of assets to fund that liability

Did you notice the fund has disposed of the $1.6m of PGW shares they had a year earlier.

[Snow Leopard]

I am just going to keep quiet...
http://publishing.andrewsmcmeel.com/images/default-source/assets/hobbes_eating.gif?sfvrsn=2

[Snoopy]

Snoops me old mate, you need to read things are bit more carefully

The $71.506m mentioned is not an asset - it’s the liability the fund has which has been calculated by the actuaries using the assumptions listed.


That depends on whose point of view you are looking at it from does it not? From the beneficiaries of the pension scheme , that $71.506m is an asset....



Problem is the fund has only $58m of assets to fund that liability


...even if PGW only has $58m in the pot to fund that asset. The point is, which ever way you look at things - according to the actuarial rules at least - there is not enough capital there to fund the pensions. But yes you are right, from the PGW perspective that $71.506m is a liability.



Did you notice the fund has disposed of the $1.6m of PGW shares they had a year earlier.


Yes I did see that. Not sure about the ethics of using the super fund to pump up the value of your own shares. Although in this instance by selling the shares they had, maybe they have pushed the PGW share price down? However, given the recovery in share price over the last year, it is probably a good idea to lock in some gains. I think PGW must be close to 'fully valued'. Then again you can say the same for most listings on the NZX.

SNOOPY

[winner69]

That depends on whose point of view you are looking at it from does it not. From the beneficiaries of the pension scheme , that $71.506m is an asset....



...even if PGW only has $58m in the pot to fund that asset. The point is which ever way you look at things, according to the actuarial rules at least, there is not enough capital there to fund the pensions

OK I’ll believe you re first point

Second point if all the assumptions made play out in reality yes they don’t have enough to pay the benefits out

One good outcome for shareholders would be if a lot of these pensioniors succumbed to a flu epidemic to eliminate a lot of the future liability ......take a punt and buy heaps of ATM shares so the gains could wipe out the ‘deficit’

Still think it’s funny (and ironic) shareholders are paying a decent pension to many who worked for companies PGW haven’t owned for ages. Not only company with this ‘problem’

[Snoopy]

Second point if all the assumptions made play out in reality yes they don’t have enough to pay the benefits out


But what are the growth assumptions for the funds under management Winner? Is there sufficient information in the annual report to calculate a guesstimate?

SNOOPY

[winner69]

Back to reality and leaving the worries about the pension fund behind us I take this is a profit warning

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/309451/268658.pdf

Think it says we are behind last year after Q1 but have hope, optimism, confidence and all nice things and remain well positioned to catch up over the rest of the year and do heaps better next year

[percy]

Back to reality and leaving the worries about the pension fund behind us I take this is a profit warning

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/309451/268658.pdf

Think it says we are behind last year after Q1 but have hope, optimism, confidence and all nice things and remain well positioned to catch up over the rest of the year and do heaps better next year
NPAT without property sales will be approx. 30% lower.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/309493/268690.pdf

So...with Net profit after tax 30% lower, and having largely completed hocking off the family silverware to try and top up the pension fund, and despite a huge bull run in local and overseas markets that must surely have provided really strong tailwinds for that fund, (tailwinds that must come to an end at some stage) one wonders how they are going to maintain dividends and continue to fund this expensive legacy superannuation fund ? Those dividend hounds assuming they can continue to pay the current levels of dividend might get a very unpleasant surprise in due course.

[iceman]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/309493/268690.pdf

So...with Net profit after tax 30% lower, and having largely completed hocking off the family silverware to try and top up the pension fund, and despite a huge bull run in local and overseas markets that must surely have provided really strong tailwinds for that fund, (tailwinds that must come to an end at some stage) one wonders how they are going to maintain dividends and continue to fund this expensive legacy superannuation fund ? Those dividend hounds assuming they can continue to pay the current levels of dividend might get a very unpleasant surprise in due course.

Agree and that's why I exited this one again a couple of weeks ago

[Beagle]

Agree and that's why I exited this one again a couple of weeks ago

Wise move my friend. If you'd ever seen a beagle's face when presented with a half sized meal you'd never forget it :)

[traineeinvestor]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/309493/268690.pdf

So...with Net profit after tax 30% lower, and having largely completed hocking off the family silverware to try and top up the pension fund, and despite a huge bull run in local and overseas markets that must surely have provided really strong tailwinds for that fund, (tailwinds that must come to an end at some stage) one wonders how they are going to maintain dividends and continue to fund this expensive legacy superannuation fund ? Those dividend hounds assuming they can continue to pay the current levels of dividend might get a very unpleasant surprise in due course.

Agree with this and thanks for posting. It's hard to see how the dividend can be sustained for too much longer and without that dividend I don't see a reason for holding. I'm another ex-shareholder who has enjoyed the dividends but is now looking for somewhere else to invest.

[Snoopy]

Major Review Announced

The principal announcement from the AGM was made by Deputy Chair of PGW, Trevor Burt (who also happens to chair the South Island Maori business powerhouse Ngai Tahu Holdings Corporation). The PGW board has appointed ‘Credit Suisse’ to conduct a wide ranging strategic review of the business. This review will neatly dovetail with the appointment of new CEO Ian Glasson who starts work today (1st November 2017). Credit Suisse will not review the performance of the existing business units. The board are very happy with the senior management team already in place. No, the purpose of this review is to look at the capital structure of the group, to see if it is appropriate to maximise the opportunities of the group going forwards. In many companies this would be code for an upcoming ‘cash issue’. But in the case of PGW, I think this is doubtful. Parent Agria has its own capital restrictions. And I don’t think Agria and PGW Chairman Alan Lai will tolerate his Agria parent holding in PGW dipping below 50.1%. My guess is we will see another capital injection by Ngai Tahu into the intermediate holding company ‘Agria Asia’ - where Trevor Burt’s Ngai Tahu are already shareholders. And a mechanism to allow this money to trickle down to PGW itself will be found. Either that, or shareholders will see the partial sell down of existing growth business units to strategic growth partners. But I am getting ahead of myself, and maybe fantasising a bit too much!

Trevor identified the ‘full digitisation of the customer offering’ to rural service customers as an opportunity for new capital spend – more on this later. Trevor further identified the underutilised IP in the seed business, which he believes could be leveraged globally rather than just regionally. During question time, we learned that the seed division spends 12% of its revenue on R&D, amounting to $15m annually across Australasia and South America. Today’s product idea from this R&D pipeline might take 10 to 15 years to emerge. But because the R&D pipeline is well established, there are new opportunities emerging from the R&D pipeline every year right now!

The Outlook for FY2018

FY2018 forecast: Operating EBITDA is predicted to be similar to FY2017 at $64-$65m. But operating NPAT will be 30% below FY2017, which equates to $32.4m. Yet $32.4m still represents an ‘eps’ of 4.3cps (That should allow the current annual dividend rate of 3.75cps ‘fully imputed’ to be retained.) The reasoning behind this lower profit forecast is that, during the first quarter, NZ has been wetter and colder than normal. Summer is ‘late’ this year. This in turn means more stock feed has been sold than expected. But offsetting that, less pasture seed and agricultural chemicals were sold. In addition, PGW expects a slower and lower grain crop harvest, resulting in less downstream drying and handling and ultimately less product for the seed division. Last year 25-30% of the maize crop was lost. Poor growth and wet weather conditions meant it wasn’t able to be harvested. FY2017 was the worst grain harvest year within PGW institutional memory. While PGW management now expects this ‘growing year’ to be ‘below average’, it shouldn’t be as bad as FY2017.

In Australia, the confidence of dairy farmers is very low, due to the local dairy co-operative Murray Goulburn being unable to pay a competitive farm gate price for milk to farmers. This has been brought about by MG overpaying farmers during the previous season. Last week MG was sold to a Canadian company ‘Saputo’. PGW hopes this will result in more confidence from Australian dairy farmers going forwards.

As of the end of Q1 FY2018, PGW is $2m behind in EBITDA compared with Q1 FY2017.

Further business unit market share gains on what has been achieved to date are going to be more difficult to come by. Furthermore most of the assets that were worth selling - to redeploy the released working capital - have been sold.. So future growth will largely come from working the existing capital base harder. This begs the question, what will be the growth drivers going forwards?

The vision going forwards for ‘Retail and Water’ can be summed up under the buzz acronym ‘Project RoBuSt’. This stands for the ‘Retail Business Transformation Project’. ‘RoBuSt’ involves an overhaul of all point of sale (POS) systems and greater use of mobile devices ‘on the spot’ in the sales process. This will continue the deeper, faster acquisition of sales data and open the possibilities of more cross selling across the PGW business units. The Water sub-unit of ‘Retail & Water’ will look to recover by ‘breaking even’, or even making a small profit, in FY2018.

‘Go Beef’ and ‘Go Lamb’ are a recent innovation in the Livestock subsection of the Agency Sector. Livestock is trading at all time record levels, helped by this innovation ‘Go Beef’ and ‘Go Lamb’ apply PGW company borrowings to ‘rent’ animals out to farmers who:

a/ are creditworthy AND
b/ have the on farm skills needed to efficiently grow the weight of a weaner.

PGW clips the ticket at both animal sale and purchase time, while collecting ‘rent’ by way of interest from the 100 or so days over which the animals are being fattened. I see ‘Go Lamb’ and ‘Go Beef’ as a ‘finance’ operation, but PGW sees those initiatives as just part of selling livestock. We will have to differ on this point. But we shareholders did learn more on the fate of ‘PGW Finance’, the formerly fully owned finance division now owned by ‘Heartland Bank’ during question time.

EBITDA from Heartland commissions were described by outgoing CEO Mark Dewdney as ‘almost negligible’. When pressed, he qualified this to mean about $200k per year. Now I am going to start making a few figures up...

1/ If this $200k represents an up front commission of one percentage point on the loan granted AND
2/ the average rate the farmer is paying is 8%, THEN
3/ Our combined farmer/borrowers total interest rate bill on new business for the year will be $1.6m. The capital value of new loans issued by PGW Finance during the year will therefore have been:

$1.6m/0.08 = $20m

4/ Traditionally PGW Finance had been 25% seasonal finance (3-6 months) and 75% longer term finance. It is likely that the longer term financing will still be, on average, over a shorter time period loan than a traditional bank loan. So I am going to assume an average duration of all PGW Finance loans to be 2.5 years (based on 3 years being half a business cycle, the time a farmer might need before conditions recover). This implies a total PGW Finance loan book size of:

$20m x 2.5 = $50m

By way of comparison, the PGW in house ‘Go Lamb’ and ‘Go Beef’ loan book (just don’t call it a loan book when you speak to PGW management!) sits between $30m-$33m. This is getting up to the loan level that ‘PGW Finance’ has (probably) shrunk to.

Readers, please feel free to challenge my assumptions above. But the balance of the loan book when PGW Finance was sold to Heartland was documented at $490m. So it looks like the hoped for synergistic relationship between the old ‘PGW Finance’ and PGW itself has broken down. Mark Dewdney noted that the process of waiting to get the result of the Heartland credit checks back to the PGW rural shop front was frustratingly slow. Hence the reason Heartland commissions had ‘slowed to a trickle’.

Other paths to profit growth

There are typically 5,000 tonnes of grower owned crossbred wool in the PGW wool stores nationwide. All wool in the stores is grower owned. At present that volume has ballooned to 25,000 tonnes. PGW will ‘clip the ticket’ when the wool is eventually sold. And that will be when the wool price heads above $3 per kilogram. That revenue is coming for PGW, while the cost of capital tied up in the meantime is largely borne by the farmer.

Moving to another business unit, Horticulture remains a highlight with market share and margins higher than the animal based rural side of the PGW business.

The high tech ‘Agri Optics’, recently a 51% owned subsidiary, has received a further capital injection from CB Norwood Distributors Limited, seller of sprayers and tractors. The current Agri Optics shareholding is now split ‘one third each’ between ‘McKemzie family’/ PGW/ CB Norwood. We now have three useful partners to advance the prospects of ‘smart cropping’ in for the future.

Board Composition

A shareholder, noting the high tech path charted for the future, questioned the lack of obvious ‘tech’ expertise on the board. Trevor Burt responded that Ronald Seah is currently Chair of ‘Nucleus Connect Pte Ltd.’ a fibre broadband company in Singapore, and has worked on the ‘computer front end’ of the managed fund investment industry. A further observation was made that there was little ‘hands on’ farm management experience on the board. Trevor Burt suggested that both he, after being on the board at Silver Fern Farms and Landpower Holdings and fellow director John Nichol, who has been on the board of Fortex Group, The New Zealand Salmon Company Limited, Alpine Dairy Products Limited, Craigpine Timber Limited and the New Zealand Dairy Board had vast experience in governing primary sector businesses. Furthermore, experience in ‘agricultural governance’ was more important experience than hands on ‘operational farm experience’ when becoming a PGW director. Another shareholder asked if there was a retirement age for directors. Trevor Burt replied that this would be illegal in NZ and that age does not necessarily wither directorial performance. A supplementary question on ‘company profit’ and the link to ‘performance pay’ yielded the information directors do not have a performance pay component. But sales people have a 20-30% boost to their income available from outperforming their sales targets.

I managed a brief word with Alan Lai after the meeting, and thought of you if you are still out there Agrainvestor. I didn’t ask the question directly but gave Alan plenty of chance to speak about the future of Agria. Without breaking any confidences, I think it is fair to say that what Alan has experienced with Agria’s US delisting is still pretty raw. And there is still no solution on the horizon for Agria shareholders who want out to cash out their Agria positions.

The meeting ended with a cup of tea/coffee and a good spread of Club sandwiches (including egg and asparagus, ‘yum’) , sausage rolls, and mini pie savouries. To cap the spread were freshly baked date scones to which shareholders could add NZ farmer bred butter or cream and NZ horticulturalist originated raspberry jam.

SNOOPY

[percy]

Good work Snoopy.
New CEO is ex C.B.Norwood.
Life is still "difficult" for any agricultural based business/supplier.
The HBL/PGW tie up has not delivered the results either party expected.
The trust I help out with sold out yesterday.

[Snoopy]

Good work Snoopy.
New CEO is ex C.B.Norwood.
Life is still "difficult" for any agricultural based business/supplier.
The trust I help out with sold out yesterday.

Thanks Percy. Life is always difficult for Agriculturally based businesses. Sorry to lose you from the supporters team, even if you were a coach rather than a direct player.

Could you do me a favour? Ask how 'PGW Finance' is going at the Tuesday 21 November 2017 Heartland AGM! I would be fascinated at the view from 'the other side'.

Notwithstanding the superannuation fund top up issue, and after hearing the AGM presentation, I do expect a steady dividend fully imputed dividend of 3.75c from PGW for FY2018. Even with the 'profit downgrade' (can you have a downgrade if you haven't drawn a line in the sand previously?) eps is still 4.3c, so the dividend looks covered to me.

SNOOPY

[percy]

[QUOTE=Snoopy;690941]Thanks Percy. Life is always difficult for Agriculturally based businesses. Sorry to lose you from the supporters team, even if you were a coach rather than a direct player.

Could you do me a favour? Ask how 'PGW Finance' is going at the Tuesday 21 November 2017 Heartland AGM! I would be fascinated at the view from 'the other side'.

I have spoken to PGW and HBL,[at separate presentations both gave to Hobson Wealth clients.].
Neither will say much,other than they "are happy with the tie up,but it has not produced the result they expected".
I very much doubt either will say more publicly.
I expect the problem is HBL is focussed online,while PGW are physically close to their clients.

[percy]

I do worry about PGW's business model.
On a Sunday down around Barrington Mall I usually see a couple of PGW 4 wheel drive vehicles on the road.
On my travels around the country side I always spot PGW vehicles.Must own hundreds of vehicles,which are not cheap to run,even on a Sunday.?
Premises.How many buildings do they need to operate out of.Amberly,Hawarden , Culverden,and Cheviot.Each would need stock,staff and tea ladies,and need power and have to pay rent,rates and insurance.This is repeated everywhere.Blenheim Road,Waterloo Road.Massive buildings in and around Ashburton.
Now farmers are savvy.If I was setting up the business I would have one massive distribution centre in ChCh to supply the South Island,and one in the North Island at Hamiltom.Do most of the business online. Would doubt PGW could compete.Farmers would love the prices I would be able to charge.

[iceman]

Thanks for a good summary Snoopy

[Beagle]

Adding my thanks too. Appreciate the time you have taken to give a full synopsis of the event.

[winner69]

Good one snoops

No mention of the pension fund?

Many pensioners (Wrightson ones) turn up for the snack

[percy]

I agree 2018 eps will be approx. 4.3 cents.At current share price of 56 cents, the forward PE is over 13.
With growth doubtfull, now added to the mix a "review",a lot of questions will need answers.
The dividend of 3.75 cents will not leave a great deal over for reinvestment.
Not sure what I would consider a fair PE to be, but I guess under 10.
Take care.

[Snoopy]

I have spoken to PGW and HBL,[at separate presentations both gave to Hobson Wealth clients.].
Neither will say much,other than they "are happy with the tie up,but it has not produced the result they expected".
I very much doubt either will say more publicly.
I expect the problem is HBL is focussed online,while PGW are physically close to their clients.


There is a reason I suggested someone should ask how 'PGW Finance' is going at the Heartland AGM. I am just as interested in the tone of the reply as what is actually said. The body language, and whether the Chairman even bothers to consult his staff in the front row or just dismisses the question out of hand. I reckon the question would be answered, even if Geoff had nothing to say!

I must say I was surprised as to the problems related from the PGW AGM about feedback on credit checks from Heartland being slow. I thought part of the thrust at Heartland was using their IT platform to give next to instant loan approvals (or not)!

SNOOPY

[Snoopy]

I do worry about PGW's business model.
On a Sunday down around Barrington Mall I usually see a couple of PGW 4 wheel drive vehicles on the road.
On my travels around the country side I always spot PGW vehicles.Must own hundreds of vehicles,which are not cheap to run,even on a Sunday.?
Premises.How many buildings do they need to operate out of.Amberly,Hawarden , Culverden,and Cheviot.Each would need stock,staff and tea ladies,and need power and have to pay rent,rates and insurance.This is repeated everywhere.Blenheim Road,Waterloo Road.Massive buildings in and around Ashburton.
Now farmers are savvy.If I was setting up the business I would have one massive distribution centre in ChCh to supply the South Island,and one in the North Island at Hamiltom.Do most of the business online. Would doubt PGW could compete.Farmers would love the prices I would be able to charge.

I think PGW need to appoint you as their 'retail transformation consultant' Percy. Sounds like you might do a better job than 'Credit Suisse' and maybe even charge a bit less for your services? I think part of the 'strategic review' is positioning the business for the next generation of farmers who are comfortable with interacting on line. Maybe in the longer term, PGW will not renew all the leases on those rural retail properties that have been selling over the last two years? Those PGW 4WD utes could become the new face of roaming retail?

SNOOPY

[Snoopy]

Good one snoops

No mention of the pension fund?

Many pensioners (Wrightson ones) turn up for the snack


Actually there was a question relating to the pension fund right at the end. Something about the auditor approving one set of results for FY2016 and then restating those same results in a different way while giving the big tick to both presentations. Which presentation was correct?

Bruce Irvine piped up and said there had been much discussion on the result presentation restatement with the Auditors. He wanted to revise the figures back to FY2014 which was apparently when the relevant change in law took place. But in the end they settled on the compromise of just updating the figures from last year. It almost sounded like all those accounting boffins within PGW had made a mistake (of course we all know they are paid beyond reproach so it couldn't be true) and it was the auditor that had instituted the result restatement 'from a slightly different point of view'. Who would have imagined that accounting isn't quite the exact science that some people think?

SNOOPY

[percy]

There is a reason I suggested someone should ask how 'PGW Finance' is going at the Heartland AGM. I am just as interested in the tone of the reply as what is actually said. The body language, and whether the Chairman even bothers to consult his staff in the front row or just dismisses the question out of hand. I reckon the question would be answered, even if Geoff had nothing to say!

I must say I was surprised as to the problems related from the PGW AGM about feedback on credit checks from Heartland being slow. I thought part of the thrust at Heartland was using their IT platform to give next to instant loan approvals (or not)!

SNOOPY
.
HBL doing credit checks takes a bit longer than," hey Bill,Trev from Barhill Station wants 50 grand for a few months,OK" ?
While Bill at PGW may have known Trev since back of the bike shed days,HBL have to do proper credit checks,which take time.That is why I said PGW are physically close to their clients,and the reason HBL have few problem loans.
No one at HBL is going to say anything other than they are very pleased with the arrangement they have with PGW.

[percy]

Actually there was a question relating to the pension fund right at the end. Something about the auditor approving one set of results for FY2016 and then restating those same results in a different way while giving the big tick to both presentations. Which presentation was correct?

Bruce Irvine piped up and said there had been much discussion on the result presentation restatement with the Auditors. He wanted to revise the figures back to FY2014 which was apparently when the relevant change in law took place. But in the end they settled on the compromise of just updating the figures from last year. It almost sounded like all those accounting boffins within PGW had made a mistake (of course we all know they are paid beyond reproach so it couldn't be true) and it was the auditor that had instituted the result restatement 'from a slightly different point of view'. Who would have imagined that accounting isn't quite the exact science that some people think?

SNOOPY

Irvine would be correct...........

[percy]

I think PGW need to appoint you as their 'retail transformation consultant' Percy. Sounds like you might do a better job than 'Credit Suisse' and maybe even charge a bit less for your services? I think part of the 'strategic review' is positioning the business for the next generation of farmers who are comfortable with interacting on line. Maybe in the longer term, PGW will not renew all the leases on those rural retail properties that have been selling over the last two years? Those PGW 4WD utes could become the new face of roaming retail?

SNOOPY

Yes their present business model of "being very close" to their customer does leave them open to being undercut,as they have very high overheads.
Yes the next generation of farmers are comfortable with interacting on line,but the savvy old farmers learnt their way around the internet years ago,finding the prices of oats,wheat,bulls,heffers and lambs.Most probably knew prices better than their PGW stock agent.!
Bit like buying shares from a full service broker,or an online discount broker.

[JBmurc]

Was actually thinking about buying one of those PGW buildings .... 10.5% net yield fixed for 10yrs, 5x3 rights to renew lease.(PGW pay all outgoings)
If they move out after the 10yrs they have to re-paint etc .. 67% NBS rating

was very keen ...but yes what the outlook is 10yrs out is a concern... is a risk I guess you have to take on board in ten years after being paid 105% of your Capital paid you might well be left with an empty 400sqm+ 67% NBS building on the main street of a back water rural town surrounded by muti-million $$$ farms....would anyone have a use for a industry/retail mix building +large yard in the location

[percy]

Was actually thinking about buying one of those PGW buildings .... 10.5% net yield fixed for 10yrs, 5x3 rights to renew lease.(PGW pay all outgoings)
If they move out after the 10yrs they have to re-paint etc .. 67% NBS rating

was very keen ...but yes what the outlook is 10yrs out is a concern... is a risk I guess you have to take on board in ten years after being paid 105% of your Capital paid you might well be left with an empty 400sqm+ 67% NBS building on the main street of a back water rural town surrounded by muti-million $$$ farms....would anyone have a use for a industry/retail mix building +large yard in the location

No.
One thing you would not have to worry about is the capital gain tax.
Most probably be able to claim a capital loss.!

[Joshuatree]

Was actually thinking about buying one of those PGW buildings .... 10.5% net yield fixed for 10yrs, 5x3 rights to renew lease.(PGW pay all outgoings)
If they move out after the 10yrs they have to re-paint etc .. 67% NBS rating

was very keen ...but yes what the outlook is 10yrs out is a concern... is a risk I guess you have to take on board in ten years after being paid 105% of your Capital paid you might well be left with an empty 400sqm+ 67% NBS building on the main street of a back water rural town surrounded by muti-million $$$ farms....would anyone have a use for a industry/retail mix building +large yard in the location

Sounds like great bet. PGW will be supplying traditional farms and insect farms in 10 years.

[winner69]

How does PGW fare in really dry, if not drought, conditions

Looking pretty dry in a lot of the country

[JBmurc]

No.
One thing you would not have to worry about is the capital gain tax.
Most probably be able to claim a capital loss.!

That’s if you sell .. I see a very low inflation cycle over the next few decades another GFC and rates will head lower ..some countries it now costs u to have money on the bank ...
Now the question for me is will PGW still want to rent in 10yrs if I had crystal ball and knew they would be there for full 25yr lease rights it’s a great buy

[percy]

That’s if you sell .. I see a very low inflation cycle over the next few decades another GFC and rates will head lower ..some countries it now costs u to have money on the bank ...
Now the question for me is will PGW still want to rent in 10yrs if I had crystal ball and knew they would be there for full 25yr lease rights it’s a great buy

I think back to hundreds of 4-Square shops close to their customers.
Now days just a few Pak'N saves.
PGW have reps who call on their customers.Farmers are savvy users of the internet following grain and livestock prices.
They will not think twice about buying their supplies online,when cheaper.
I would expect the day of the "local" PGW store is nearly over.
Don't get caught when the music stops.

[JBmurc]

I think back to hundreds of 4-Square shops close to their customers.
Now days just a few Pak'N saves.
PGW have reps who call on their customers.Farmers are savvy users of the internet following grain and livestock prices.
They will not think twice about buying their supplies online,when cheaper.
I would expect the day of the "local" PGW store is nearly over.
Don't get caught when the music stops.

I here what your saying percy ..really one could say the same right across retail ..funny your saying about 4-Square shops as there was one right across the road from the PGG building I'm keen on..

As to farmers buying online ...sounds good in practice but you can imagine the logistics in some locations 500kms by road from say chch the deep south etc ....farmer needs some products asap ..he could travel to his local store 20mins away etc (the store I'm looking at is surrounded by many hundreds of farms in the deep south) and support his local cummunity store or buy from some guys he's never meet way up north ? and hope the freight company can find his farm down doz of gravel roads >>>

In talking with PGG staff at the store today they did laugh at the idea(on working out of chch one day etc) ..the manager did state no way they would be getting closed down with the amount of money they bring in for PGW and see's no reason why PGG wouldn't be there in 20-30yrs+ ...farmers love to support their local store ..

[percy]

I here what your saying percy ..really one could say the same right across retail ..funny your saying about 4-Square shops as there was one right across the road from the PGG building I'm keen on..

As to farmers buying online ...sounds good in practice but you can imagine the logistics in some locations 500kms by road from say chch the deep south etc ....farmer needs some products asap ..he could travel to his local store 20mins away etc (the store I'm looking at is surrounded by many hundreds of farms in the deep south) and support his local cummunity store or buy from some guys he's never meet way up north ? and hope the freight company can find his farm down doz of gravel roads >>>

In talking with PGG staff at the store today they did laugh at the idea(on working out of chch one day etc) ..the manager did state no way they would be getting closed down with the amount of money they bring in for PGW and see's no reason why PGG wouldn't be there in 20-30yrs+ ...farmers love to support their local store ..
Yes it is the same right across retail.Travel around NZ or Aussie, and note the huge number of empty shops in small towns.
Now that is interesting about the amount of money they bring in, as I have never seen customers at Oamaru,Greymouth,Palmerston,Hawarden or Cheviot stores.The odd ute at Amberley,and Timaru.
I guess the 4-square staff said the same things twenty years ago.
Watch PGW model in Uruguay as they are starting with a cleanish sheet of paper.
Most books and greeting cards are supplied to NZ stores from Australia.
Freighting from ChCh to Mossburn ,piece of cake.Saves having to hold 40 stores [or more] stock in the SI. So 2 or 3 staff at each store,rates ,rent,power for each store.Adds up to closures.

[JBmurc]

Yes it is the same right across retail.Travel around NZ or Aussie, and note the huge number of empty shops in small towns.
Now that is interesting about the amount of money they bring in, as I have never seen customers at Oamaru,Greymouth,Palmerston,Hawarden or Cheviot stores.The odd ute at Amberley,and Timaru.
I guess the 4-square staff said the same things twenty years ago.
Watch PGW model in Uruguay as they are starting with a cleanish sheet of paper.
Most books and greeting cards are supplied to NZ stores from Australia.
Freighting from ChCh to Mossburn ,piece of cake.Saves having to hold 40 stores [or more] stock in the SI. So 2 or 3 staff at each store,rates ,rent,power for each store.Adds up to closures.

Yes another one is home building store's ...placemakers,carters etc how much money do they cost to run ? , travel stores ....flight centre who books hoildays in store these days ?

Talking of the "4-square" the one across the road from the PGG building .. friendly staff ....asked how busy PGG was across the road ..she stated it was usually pretty busy (of course tiny rural town busy compared to city busy etc)

I noticed the PGG store had 5 staff ! all looked pretty busy .... just 200m down the road in this one horse rural town a huge
RD1 recently built 2011

[Snoopy]

How does PGW fare in really dry, if not drought, conditions

Looking pretty dry in a lot of the country


Horticulture seems to be going gangbusters with some fruit crops maturing the earliest ever. All good for the winemakers with more flavour in the grapes. There is a backlog in repairing pasture from the wet winter and soggy spring. This is still to feed through to rural supply companies, but maybe we PGW shareholders will have to wait until Autumn 2018 now?

Short term more supplementary feed sales to feed the animals farmers keep. While the PGW saleyards clip the ticket on the stock that is sold, with the farmers suffering with the depressed sale prices of the animals. Longer term less money in the farmers pocket is not good for PGW though. A drought will put the need for irrigation foremost in the farmers mind (good for PGW Water), but will the banks comes to the party to finance such irrigation? I am predicting tough times for irrigation going forwards.

SNOOPY

[Out to lunch]

Horticulture seems to be going gangbusters with some fruit crops maturing the earliest ever. All good for the winemakers with more flavour in the grapes. There is a backlog in repairing pasture from the wet winter and soggy spring. This is still to feed through to rural supply companies, but maybe we PGW shareholders will have to wait until Autumn 2018 now?

Short term more supplementary feed sales to feed the animals farmers keep. While the PGW saleyards clip the ticket on the stock that is sold, with the farmers suffering with the depressed sale prices of the animals. Longer term less money in the farmers pocket is not good for PGW though. A drought will put the need for irrigation foremost in the farmers mind (good for PGW Water), but will the banks comes to the party to finance such irrigation? I am predicting tough times for irrigation going forwards.

SNOOPY

Some other favourable conditionsL Feed grain prices increasing - nearly $400t, weak NZD, high lamb prices 6.50kg, high beef prices <5.50kg. Just some drought risk.

Also the ocean around NZ is up to 6 degrees warmer than usual, I don't know what this means for weather. It does mean I can bring out the budgie smugglers.

[moka]

Some other favourable conditionsL Feed grain prices increasing - nearly $400t, weak NZD, high lamb prices 6.50kg, high beef prices <5.50kg. Just some drought risk.

Also the ocean around NZ is up to 6 degrees warmer than usual, I don't know what this means for weather. It does mean I can bring out the budgie smugglers.

Wow 6 degrees warmer than usual! Warm seas means more wind. Summer is going to be windy, wet and hot according to the forecasters.

[Snoopy]

Some other favourable conditions Feed grain prices increasing - nearly $400t, weak NZD, high lamb prices 6.50kg, high beef prices <5.50kg. Just some drought risk.


High feed grain prices are good for farmers who grow the grain but bad for farmers who have to buy it in! So overall, for a company exposed to all sectors of the agricultural economy (like PGW) probably a neutral effect. I think I heard on one of those early morning weekend farming radio shows that stock prices are coming back significantly in those areas where the grass stopped growing (Canterbury and Otago IIRC).

SNOOPY

[Snoopy]

Was actually thinking about buying one of those PGW buildings .... 10.5% net yield fixed for 10yrs, 5x3 rights to renew lease.(PGW pay all outgoings)
If they move out after the 10yrs they have to re-paint etc .. 67% NBS rating

was very keen ...but yes what the outlook is 10yrs out is a concern... is a risk I guess you have to take on board in ten years after being paid 105% of your Capital paid you might well be left with an empty 400sqm+ 67% NBS building on the main street of a back water rural town surrounded by muti-million $$$ farms....would anyone have a use for a industry/retail mix building +large yard in the location

Despite not being a 'property investor' at heart, I too have been thinking about these juicy rural property yields. I had to look up some of the jargon. 67% NBS relates to the earthquake standards? Had dinner on Saturday night after a long road trip at Rangiora at a place called 'Joe's Garage'. The building is basically a barn that I am not sure even existed pre-earthquakes. There was some Rugby League on the TV. But I couldn't help my own gaze wandering to the ceiling and looking at those strong steel girders interconnected with steel tensioning rods. It struck me that an older equivalent building might not be too difficult to bring up to full earthquake strength. I felt pretty safe sitting in there. Perhaps the worst problem could be those 1960s to 1970s unreinforced brick walls. But maybe when it comes time to replace the roof, just hire a big crane and lift up the roof truss framing and stick some steel rods down the middle of the bricks. OK I am not a civil engineer and I might be simplifying things. But strengthening such buildings does look do-able. Particularly if you can get together with some other barn owners and amortise your engineering professional fees across more than one building.

And to pinch a page from Joshuatree. If PGW pulls out, you have an ideal location for a insect farm. Or with all those dairy farm workers from the pacific, maybe a Filipino church?


That’s if you sell .. I see a very low inflation cycle over the next few decades another GFC and rates will head lower ..some countries it now costs u to have money on the bank ...
Now the question for me is will PGW still want to rent in 10yrs if I had crystal ball and knew they would be there for full 25yr lease rights it’s a great buy

I respect Percy's lifetime of retail experience and his resulting 'insider knowledge'. But I can't see farmers ordering forage grain by mail order, with courier van man stacking them on the roadside by the rural delivery letterbox. Like Pizza stores and hairdressers, I think a 'rural retail presence ' will be less affected by the march of the internet than most. One trick I use with 'yield assets' to to evaluate them on the second best use of that asset. IOW, if PGW pulled out, what would the yield another store operator might pay for the same location? If PGW wanted to upgrade their market presence, they might want to up sticks and start with a brand new development down the road, for instance.

SNOOPY

[Out to lunch]

High feed grain prices are good for farmers who grow the grain but bad for farmers who have to buy it in! So overall, for a company exposed to all sectors of the agricultural economy (like PGW) probably a neutral effect. I think I heard on one of those early morning weekend farming radio shows that stock prices are coming back significantly in those areas where the grass stopped growing (Canterbury and Otago IIRC).

SNOOPY

PGW also sells the grain https://www.pggwrightsongrain.co.nz/Grain-Marketing
The seasonal decline will start occurring for lamb, beef might be a different story given Chinese demand.

[Snoopy]

PGW also sells the grain https://www.pggwrightsongrain.co.nz/Grain-Marketing


Yes I did know that PGW sells grain. My point was that if farmers buy grain that is money they could have put towards debt repayment, or building an irrigation system. The net result is that they have less money to spend on 'other stuff' which is bad for PGW. That is what I meant when I said selling grain feed was neutral for PGW. Sorry for ambiguity.



The seasonal decline will start occurring for lamb, beef might be a different story given Chinese demand.


I think that if you don't have the means to feed your animals then you will have to sell them at whatever price you can get. It doesn't matter what demand in China is doing. Again this will be good for PGW Livestock in the short term. But it would have been better for farmers and PGW Livestock if the farmers had been able to keep their animals, feed them up more and sell them through the saleyards later.

SNOOPY

[JBmurc]

Despite not being a 'property investor' at heart, I too have been thinking about these juicy rural property yields. I had to look up some of the jargon. 67% NBS relates to the earthquake standards? Had dinner on Saturday night after a long road trip at Rangiora at a place called 'Joe's Garage'. The building is basically a barn that I am not sure even existed pre-earthquakes. There was some Rugby League on the TV. But I couldn't help my own gaze wandering to the ceiling and looking at those strong steel girders interconnected with steel tensioning rods. It struck me that an older equivalent building might not be too difficult to bring up to full earthquake strength. I felt pretty safe sitting in there. Perhaps the worst problem could be those 1960s to 1970s unreinforced brick walls. But maybe when it comes time to replace the roof, just hire a big crane and lift up the roof truss framing and stick some steel rods down the middle of the bricks. OK I am not a civil engineer and I might be simplifying things. But strengthening such buildings does look do-able. Particularly if you can get together with some other barn owners and amortise your engineering professional fees across more than one building.

And to pinch a page from Joshuatree. If PGW pulls out, you have an ideal location for a insect farm. Or with all those dairy farm workers from the pacific, maybe a Filipino church?



I respect Percy's lifetime of retail experience and his resulting 'insider knowledge'. But I can't see farmers ordering forage grain by mail order, with courier van man stacking them on the roadside by the rural delivery letterbox. Like Pizza stores and hairdressers, I think a 'rural retail presence ' will be less affected by the march of the internet than most. One trick I use with 'yield assets' to to evaluate them on the second best use of that asset. IOW, if PGW pulled out, what would the yield another store operator might pay for the same location? If PGW wanted to upgrade their market presence, they might want to up sticks and start with a brand new development down the road, for instance.

SNOOPY

Yes NBS% at 67 basically means I can get earthquake cover as the 1960,s built retail building had major upgrade a few years ago ——strong steel girders interconnected with steel tensioning rods etc

Another shed out the back was built 2010 ... I’m talking with a mate that’s been building sheds housing for decades he stated you would be doing well to build for under $1200 per square in the current environment for a mix of retail /storage not including gravel yards and fences gates etc so to replace 500k+

As too upgraded can always Reno in 10yrs if PGG want nicer retail space etc ...

Putting the numbers into a Morg calc if I borrow the total amount with zero deposit the property would be paid back in 20yrs with 125,000 free cashflow (that’s using current res rates lease payment etc)

But if I can have another year like 2017 in the asx I plan to pay off a large chunk later next year and in turn pay off within 10yrs

[winner69]

Farmers not feeling as upbeat as before

http://www.sharechat.co.nz/article/eadf9833/farmer-confidence-drops-on-concern-new-government-policies-will-dent-output-rabobank-says.html?utm_medium=email&utm_campaign=Farmer%20confidence%20drops%20on%20co ncern%20new%20government%20policies%20will%20dent% 20output%20Rabobank%20says&utm_content=Farmer%20confidence%20drops%20on%20con cern%20new%20government%20policies%20will%20dent%2 0output%20Rabobank%20says+CID_c8170bd955f061c09140 0b5ec69ff08c&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticleeadf9833farmer-confidence-drops-on-concern-new-government-policies-will-dent-output-rabobank-sayshtml

[Snoopy]

Agria is the 50.1% shareholder but plays no part in the day to day running of PGW. I wouldn't expect any affect on the PGW share price as a result of Agria shares being suspended.

Agria will not be able to sell any shares they own in PGW because if they do, they will no longer be able to consolidate the PGW accounts within Agria. Agria selling down their PGW stake at this stage would cause a multi-million dollar loss for Agria as any remaining PGW stake was 'marked to market'. Last time I looked Agria was still highly indebted. So writing down that PGW stake might cause Agria to collapse. Agria have no other investments of any meaningful size outside of their stake in PGW.

It looks grim for Agria in the headlines now. But Chariman Alan Lai is the master of dance. I wouldn't discount his ability to waltz out of trouble just yet. A 2:1 share consolidation at Agria is all that it would take to fix things with the NYSE listing requirments.


The dance ended and Agria was not so quietly delisted. But now it looks like Alan Lai will need to once again put on his dancing shoes, this time in New Zealand...

-----

The Overseas Investment Office (OIO) is investigating whether Agria Corporation, the Chinese company which half owns New Zealand produce company PGG Wrightson (PGW), is of "good character".

If it is declared not to be of good character, its 50.22 per cent stake in PGW could be under question.

Individuals or companies rarely fail the test. Last year United States investor Charles Banks, who headed the buyout of Hawke's Bay's Trinity Hill winery and was sentenced to four years in prison for fraud, was stripped of his rights as an investor. PGG Wrightson's activities are widespread, including its livestock agency business.

In a statement, the OIO confirmed Hands was the only person or company who had ever failed the test, although it was not able to comment on matters that were under either surveillance or investigation. US broadcaster Matt Lauer's good character is also being queried after he was fired from his job for allegations of sexual misconduct. He paid a rumoured $13 million for the lease of Hunter Valley Station near Hawea.

In late 2016 Agria was delisted from the New York Stock Exchange after the NYSE announced it allegedly uncovered evidence a "top executive and other intermediaries" artificially inflated the company's stock price. While Agria initially said it would fight the delisting, it later changed tack, with chief executive Alan Lai floating the possibility of it becoming a private company or relisting elsewhere.
In July last year, in an out-of-court settlement, it agreed to pay out US$1.3m to aggrieved shareholders who threatened a class action over the fall in value of their shares. The Campaign Against Foreign Control of Aotearoa (CAFCA) said it had asked the Overseas Investment Office (OIO) 13 months ago to investigate whether Agria was of "good character" - one of the requirements for foreigners or foreign companies investing in New Zealand.


This week the OIO confirmed it was investigating Agria's good character given: its delisting by the New York Stock Exchange; Agria's public statements that it had received subpoenas from the US Securities and Exchange Commission; and allegations made against Agria and some of its directors in related class action lawsuits.

A PGW spokeswoman said independent directors Bruce Irvine, John Nichol and Ronald Seah had considered the implications, if any, that the matters might have for PGW. They would update the market if there were any material developments that might require consideration by PGW shareholders, the spokeswoman said. An Agria spokesman said the company had always made full disclosure to the OIO and would assist it fully with any enquiries.

Agria was founded in 2004 by Alan Lai, the chairman of both Agria and PGW. There are four Agria directors on the PGW board.

It is registered in the Cayman Islands for tax purposes and its major asset is PGW which had an annual turnover last year of $1.13 billion and employed 2200 staff. PGW made an after-tax profit last year of $46.3m.

- Stuff

------

PGW was the biggest loser on the NZx today, down 3.3%. I do note that no announcement has been made by PGW to the NZx as yet regarding the OIO investigation!

SNOOPY

[emveha]

Is this "good character" a requirement for having a majority share, or for having any share, do you know?

[Snoopy]

Is this "good character" a requirement for having a majority share, or for having any share, do you know?


I am guessing a 'majority share' is the sticking point because that gives the majority shareholder, if they have "bad character", control of the company. However selling down from 50.1% to 49.9% is not a solution as explained in my previous post. For the record, I don't expect Alan Lai to fail the "good character" test because of any failings of Agria. When an investment doesn't go to plan there are always disgruntled investors. That doesn't necessarily mean the original promoter of the investment was a crook. I think the record of Alan Lai supporting PGW in New Zealand over the last ten years has been good.

SNOOPY

[Sideshow Bob]

Is this "good character" a requirement for having a majority share, or for having any share, do you know?

That would rule out most here!! :eek2::p:t_up:

[peat]

Roughly, The OIO must approve all significant investments in NZ
significant is 25% or more in a company , or $100 Mill

see this if you are really interested

https://www.simpsongrierson.com/attachments/Law-guides/SimpsonGriersonDoingBusinessinNewZealand-December2017.pdf

[Agrarinvestor]

I am guessing a 'majority share' is the sticking point because that gives the majority shareholder, if they have "bad character", control of the company. However selling down from 50.1% to 49.9% is not a solution as explained in my previous post. For the record, I don't expect Alan Lai to fail the "good character" test because of any failings of Agria. When an investment doesn't go to plan there are always disgruntled investors. That doesn't necessarily mean the original promoter of the investment was a crook. I think the record of Alan Lai supporting PGW in New Zealand over the last ten years has been good.

SNOOPY


Hi all,

i hope that Alan is of good character. I know very well that Agria has never inflated the stock price. They provided us a calculation about the fair value of Agria. This calculation
was based on the assets in PGW. They came to the fair value of 1.6$. This calculation does not include tha land use right of 60 million US Dollar. I expect a fair offer above 1.6US$
The delisting is now 14 month old. We still miss a solution for us minority holders. The communication from the company is poor.

greetings from Germany

Agrarinvestor

[Agrarinvestor]

I just found what Agra will offer us. It looks like nothing! We have to pay if we want change our ADS into ordinary shares. An we have NO rights if we are owners of ordinary shares. Alan Lai can
eat all the dividends that came from PGW, and we will receive nothing.

http://markets.businessinsider.com/news/stocks/Agria-Corporation-Notifies-Holders-of-ADR-Program-Termination-1011643699

[Snoopy]

I just found what Agra will offer us. It looks like nothing! We have to pay if we want change our ADS into ordinary shares. An we have NO rights if we are owners of ordinary shares. Alan Lai can
eat all the dividends that came from PGW, and we will receive nothing.

http://markets.businessinsider.com/news/stocks/Agria-Corporation-Notifies-Holders-of-ADR-Program-Termination-1011643699


I must say I am horrified that you (and Agria shareholders in general) have to pay money to get your own shares back and following that procedure there is no market in which to sell them!

I sympathize with you in all respects Agrainvestor, except one. You should have known that Agria was a 'high debt' share and would therefore 'eat all the PGW dividends' to service their own debts. The leveraged shell that Agria is, was always a gamble in this respect.

SNOOPY

[Agrarinvestor]

Snoopy,
I believed the story that AGRIA will sell and produce PGW quality seeds in china. I thought that this will be a win win situation for both companies.
Despite that, the Assets of PGW are worth 1.6 Dollar per AGRIA ADS. They gave us an offer for a going private of 1.2$. They told us that 1.6$ plus chinese assets is the fair value .
I will try to talk to the OIO if we soes not here positive news from Agria this week.
9400

[theace]

I've decided to pull out of this one for now. Find another place to park the $.

[Snoopy]

I've decided to pull out of this one for now. Find another place to park the $.


Ironically if Alan Lai is judged as being of bad character and is forced to sell his PGW stake, any buyer will have top make an offer for all the rest of PGW as well. In that instance minority shareholders could be up for a big payday!

SNOOPY

[Brain]

That is if the stake was sold to one entity. Isn’t it more likely there would be a number of prospective purchasers?

[macduffy]

That is if the stake was sold to one entity. Isn’t it more likely there would be a number of prospective purchasers?

Yes, I would think so. Would it be too hard for a broker to organise a placement in current market conditions?

[Lola]

I've decided to pull out of this one for now. Find another place to park the $.

Think ALF?

[Agrarinvestor]

Dear PGW Investors,
be careful with your investments in PGW. AGRIA was delsited at NYSE. Shareholder Interest of minority shareholders are completely ignored. We are now minority owners into
a chinese based company.

[waikare]

Dear PGW Investors,
be careful with your investments in PGW. AGRIA was delsited at NYSE. Shareholder Interest of minority shareholders are completely ignored. We are now minority owners into
a chinese based company.

Is this because of Alan Lai whom Snoopy has described as being of "bad character", having been a holder since June 1994, just how concerned should we all be, Agrarinvestor.

[Snoopy]

Is this because of Alan Lai whom Snoopy has described as being of "bad character", having been a holder since June 1994, just how concerned should we all be, Agrarinvestor.

I didn't describe Alan Lai as being of bad character. I mentioned the OIO is investigating whether Alan Lai fails the 'bad character' test. I leave it to readers to form their own opinion on Alan Lai's character. Obviously those who invested into Agria on the NYSE have cause to feel aggrieved. But plenty of successful business people have had business ventures go bad in the past and used that failure as a bridge to future success. The facts are that when PGW was in dire straits ten years ago, it was only Alan Lai who came put forward with the money to recapitalise them. Other Shareholders got a bite at a cash issue later. And PGW has had quite a successful ten years since.

SNOOPY

discl: hold PGW and happy with my investment

[winner69]

OIO investigating Agria’s ‘bad character’ status ...not Mr Lai’s status

Just saying

[Snoopy]

OIO investigating Agria’s ‘bad character’ status ...not Mr Lai’s status

Just saying

Thanks for the clarification. So all Alan Lai has to do is transfer his holding from the 'tainted' Agria to the untainted 'Agria2' and the investigation will go away! That is a real relief to PGW shareholders, albeit little consolation for Agria shareholders.

SNOOPY

[Agrarinvestor]

@Snoopy,

>>with the money to recapitalise them<<

with our money. PGW was saved with our money. I can tell you a long story about CEO Alan Lai. It took years for me to come to conclusion that this guy doesn't keep care about minority shareholder interest.

1.) Land use rigt. Agria purchased farming Land in China. China has to feed 20% of World population, but has only 7% of World agriculture Land. The land was original aquired for sheep breeding.
Agria changed business modell from sheep breeding into Seeed business. So far i can be true that it is not the best for seeds. Agria has written of these land use right from US$ 58 million to 0$.
The still maintain the rights, and we have waited that they will sell these parcels. Can you imagine that 13.500 acres in differrent area can be suddenly worthless?
2.) US SEC has started an investigation against AGRIA. Agria has not notified shareholders about that. They notified us several month later after trading halt. They announced s share repurchase. But they make no use of it for
several month. Shareholders were told it will be performed "soon". Agria has announced that they will appeal SEC decision. A few month later they told us that they will not appeal the SEC decision.
3.) We are now delisted since 12 month. AGRIA has not told us anything about their intention what they want to do with our shares. I can transmit my ADS shares into Ordinary Shares and have to pay for it. But there are no rights for minority holders in china
4.)AGRIA CEO is a networker with connection to government in China. I thought that this will also be a guarantor for fair play.

5.) CEO Alan Lai has a second listing in Hong Kong. We had a trading halt today. https://xueqiu.com/S/00380


There is only one reason why i have trusted AGRIA, and that is the fact that their main business is in New Zealand. Second, it was comforting that Agrias CFO is John Fulton is based in New Zealand.
We are a team of 10 shareholders that are frustrated because of Alain Lais "dancing shoes". Agria has to find a solution for us minority shareholders. The communication style has to be changed.
If you have relation to PGW's management, please help us.

regards

Agrarinvestor

[Agrarinvestor]

The majority shareholder of Agria was delisted. The question of "Good Charater" of ALan Lai is in the room. The OIO has the power to enforce Agria to sell their holdings.
Anyone here who is asking himself why the share price of PGW is so stable?

[Hectorplains]

The majority shareholder of Agria was delisted. The question of "Good Character" of ALan Lai is in the room. The OIO has the power to enforce Agria to sell their holdings.
Anyone here who is asking himself why the share price of PGW is so stable?

Share price is underpinned by dividend yield and positive noises coming out of dairy and seed divisions. Who knows a majority ownership struggle may even push the price up, in the short term anyway.

I sold at 60c, fully valued at the point for me.

[Agrarinvestor]

Agria is currently in talks about seling their stake of Agria to ...
Will there be a complete takeover of all PGW shares?

[percy]

How costly will the wrong Swede seeds fiasco be to PGW.?

[Sideshow Bob]

How costly will the wrong Swede seeds fiasco be to PGW.?

I would say it will be quite costly. 556 farmers have the wrong swedes, cows dying etc. If nothing else will lose a lot of goodwill and the confidence of those farmers. Front page news on the ODT this morning.

https://www.odt.co.nz/rural-life/rural-life-other/error-has-farmers-growing-crop-linked-cow-deaths

[freddagg]

How costly will the wrong Swede seeds fiasco be to PGW.?

Here are some estimates of losses based on the only information I have seen which is that 556 farms are involved.
How much of that PGW will be liable for I do not know.

556 farms at say 10 hectares each = 5560 hectares.
Average crop 15000 kg dry matter per hectare worth 40 cents a kg fed to a dairy cow = $33.3 million worth of crop
Since it is not suitable for dairy cow feed the value of the crop is likely halved giving a loss to farmers of $16.7 million.

[percy]

Here are some estimates of losses based on the only information I have seen which is that 556 farms are involved.
How much of that PGW will be liable for I do not know.

556 farms at say 10 hectares each = 5560 hectares.
Average crop 15000 kg dry matter per hectare worth 40 cents a kg fed to a dairy cow = $33.3 million worth of crop
Since it is not suitable for dairy cow feed the value of the crop is likely halved giving a loss to farmers of $16.7 million.
Thank you.

[Sideshow Bob]

For a company that made $46m net profit last year - it is likely to be significant.

Results due Tuesday coming - will be interesting to see what commentary they have around the issue.

[Sideshow Bob]

Glance over gives reasonably positive reading. Best 1HY in a decade.

[Agrarinvestor]

Do you, or anyone else understood who has aked a question about Agria, at the end of the conference call?

[iceman]

Do you, or anyone else understood who has aked a question about Agria, at the end of the conference call?

Agrarinvestor, there is an article written by Tim Hunter behind the paywall in the National Business Review today https://www.nbr.co.nz/opinion/stage-set-action-pgg-wrightson
The headline is "What's going on at PGG Wrightson". It talks about a transfer of $10 million between related parties of Softpower International in Hong Kong. I think you will find the article interesting to read but you may have to buy a 1 month subscription. Anyway, thought I'd let you know as you are obviously following these developments closely

[Snoopy]

Agrarinvestor, there is an article written by Tim Hunter behind the paywall in the National Business Review today https://www.nbr.co.nz/opinion/stage-set-action-pgg-wrightson
The headline is "What's going on at PGG Wrightson". It talks about a transfer of $10 million between related parties of Softpower International in Hong Kong. I think you will find the article interesting to read but you may have to buy a 1 month subscription. Anyway, thought I'd let you know as you are obviously following these developments closely


Alan Lai has long had an interest in trading pipes and plumbing supplies in Hong Kong, via a company called 'Brothers Capital Limited' that controls 'Softpower' (http://www.softpower.hk) the plumbing suppliers. 'Brothers Capital' is not by co-incidence also the controlling entity of 'Agria Corporation'. The fact that this company 'Softpower' is now described as an 'investment company' as well is a bit of a surprise to me. Softpower’s main businesses include "the wholesaling, retailing and logistics operation of pipes and fittings in Hong Kong and Macau". I am guessing that describing 'Softpower' an investment company legitimizes transfers of capital from one 'Brothers capital' controlled entity to another?

The up to $US10m loan to Softpower as referred to by NBR's Tim Hunter (http://www.aastocks.com/en/stocks/news/aafn-content/now.733987/latest-news) seems to have been set up originally on 12-05-2016. 'China Victory International Holdings' was the lender. But after the more recent Softpower transaction (proposed 05-02-2018, voted on 23-02-2018) (http://www.softpower.hk/UserFiles/File/5edd616a-a6a9-4473-8213-2394d3e48b8e.pdf) it seems that Agria is now the lender to Softpower. At least Agria should be getting a good return for taking over this loan!

"The interest rate for each interest period shall be prime rate plus 7% per annum."

The net effect of this 'loan transfer' looks to have strengthened the positive cashflow into Agria. But this impression would be wrong. 'China Victory International Holdings' was already an Agria subsidiary, whose operating asset is "an enterprise established in the People's Republic of China principally engaged in the research production and marketing of corn seeds." So all that has happened is that the loan has been transferred from a subsidiary of Agria Group to the parent. Why this was done is unexplained. But it does mean that the potential sale of these Chinese assets by Agria has become an easier task.

If we look at the declared historical debts of Agria, we must consider that PGW is a full subsidiary of Agria, So the PGW debt is consolidated into the Agria accounts. To get the true underlying debt position of Agria, we have to take out the PGW debt. The last date for which this was declared for both companies was FY2017 balance date (30-06-2017). The figures in the table below are a snapshot from that date.

Agria Corp USA report filings can be found here:

https://www.last10k.com/sec-filings/gro

(Note 15 in Agria 20-F net interest bearing debt was $US117.823m)



Balance Date 30-06-2017NZDExchange Rate (30-06-2017)USDReference


Agria Net Interest Bearing Debt$US117.823mAgria 20F filing FY2017, note 15


PGW Net Debt$NZ128.241m0.7330$US94.000mPGW AR2017, note 10


Underlying Agria Debt$US23.823m



Tim Hunter highlights the $US25.8m former 'New Hope' 'shareholding' - representing 12% of the company 'Agria Asia'. That shareholding 'New Hope' sold back (date 30-06-2017) to 'Agria Corporation' (the formerly listed US parent of Agria Asia) -was also a defacto paying back of a loan, if you consider the 'supplemental agreement' that was attached to it.

" Under the supplemental agreement, Agria Group agreed to provide a guarantee to New Hope International for a minimal level of dividends to be distributed by Agria Asia Investments to New Hope International." (p19, 20F filing for Agria for FY2017)

I got the impression at the time that New Hope was always a 'headline shareholder', brought on board to bring more legitimacy to Agria's operations, because of 'New Hope's connection to the Chinese government. The 'New Hope' 'shareholding' seemed to be more akin to a preference share arrangement with regular cash payments from Agria to New Hope being required.

Alan Lai's selling down of 25% of his 'Softpower' stake on 25-01-2018, raised $US15.4m ($HK120m, converted at $US1- $HK7.818), an amount that if shifted to Agria could go a long way to paying back 'New Hope', albeit belatedly (the sell down by New Hope was some time ago on 30-06-2017). But there is no reason that Alan Lai should shift this money to Agria.

I was at last years PGW AGM and got quite a different impression of PGW's proposed 'capital review' to that of Tim Hunter. I certainly didn't see such talk as referring to Agria's PGW stake. The comment at the AGM was made IIRC, in the context of selling surplus property to reinvest in the PGW business over FY2017. Now that nearly all surplus PGW property has been sold, my take was that raising new capital to continue to invest in the PGW business was to be looked at seriously. Could it be that Alan Lai is simply positioning himself, via the Softbank share sale, to take part in a small upcoming cash issue at PGW without diluting/losing Agria's 50.1% controlling stake in PGW? Perhaps I am naive. But I don't see anything sinister in these 'behind the scenes' transactions, highlighted by Tim Hunter, involving Mr Lai's holding companies.

SNOOPY

[iceman]

All way to messy for me Snoopy. Happy to have sold out completely some months ago and no intention to reinvest

[Snoopy]

All way to messy for me Snoopy. Happy to have sold out completely some months ago and no intention to reinvest


I have rewritten my 'Softpower Connection' post because I couldn't understand it. This was a bit of a worry, considering I wrote it! So what was 'unfathomable' has now become only 'mildly incomprehensible'. I think I have the implications right, but would welcome any other thoughts on the matter.

I agree that 'behind the scenes' at PGW sounds confusing, but none of this effects the underlying business at PGW itself. It is just like if you 'iceman' did not return from one of your many visits to the South Pole, when you were still a shareholder. Very sad for friends and family it would be no doubt. But ultimately your shares would be disposed of with no effect on the day to day running of the business. Exactly the same situation applies to Mr Lai's stake. I have tried not to think about the Agria stake implications for the last couple of years (that is until Tim Hunter brought it to the forefront again) and it has worked for me.

Sorry you are not still a shareholder. I still see PGW as a good 'set and forget' rural sector investment with a great dividend yield.

SNOOPY

[winner69]

Pgw on the block ...looking for buyers ...sharechat.co.nz

[iceman]

Pgw on the block ...looking for buyers ...sharechat.co.nz

And behind paywall at NBR

[Snoopy]

And behind paywall at NBR

But not behind a paywall at the Herald

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12013517

I am interested to read that article in the context of the rumoured split in the Seed / Rural Supplies business, that looked all on before Mark Dewdney introduced the 'One PGW' philosophy. I see "CK Life Sciences" based in Hong Kong is said to be interested in PGG Wrightson's seeds business. I wonder if they were the party that Alan Lai had in mind when he brought up the idea of carving out the seed business all those years ago?

I haven't done the exact maths. But with the controlling stake of 37% bought for 60cps and the initial stake of 13% bought for $36m (over 754.8m shares on issue, this means the equivalent of 0.13 x 754.8m = 98.1m 'post capital reconstruction' shares were bought) maybe Alan Lai might get his money back in a bidding war for PGW? Of course there is no guarantee that the required offer to all shareholders would be at a market premium. I don't follow them closely. But my memory of those touted Australian 'suitors', particularly Elders, is that they are not in a strong financial position to make a PGW bid!

SNOOPY

[freddagg]

Here are some estimates of losses based on the only information I have seen which is that 556 farms are involved.
How much of that PGW will be liable for I do not know.

556 farms at say 10 hectares each = 5560 hectares.
Average crop 15000 kg dry matter per hectare worth 40 cents a kg fed to a dairy cow = $33.3 million worth of crop
Since it is not suitable for dairy cow feed the value of the crop is likely halved giving a loss to farmers of $16.7 million.

https://www.stuff.co.nz/southland-times/news/102892662/farmers-can-claim-for-costs-after-swede-seed-mixup

Here is more info on the swede problem.
A lot more hectares than I guessed in February.
No more clarity on the cost to PGW . It could be after winter before farmers know their actual losses and can finalize a claim.

[winner69]

Elders on the prowl they reckon

[winner69]

Punters loving that rumour about Elders ...must be going to happen

What price ... 80 cents

[Snoopy]

Punters loving that rumour about Elders ...must be going to happen

What price ... 80 cents

I ran a preliminary ruler over PGW using EBITDA multiples and came up with a price of 70c, including a 20% premium for control. Take away the takeover premium and I got a fair value of 56c. You have to remember that PGW is at the peak of its earnings cycle, so the earnings multiple used would not be as great as some think.

I figured private equity wouldn't be interested because all the family silver has been sold and PGW is already loaded with debt. I thought Elders might be stretched to do a takeover because of their own problems in the not too recent past. However, I looked at the chart for the last five years and it seems Elders has been a ten bagger over that time! Not sure how that slipped under my radar. Even the current Elders debt burden seems modest. So maybe an Elders takeover could be on?

SNOOPY

discl: PGW holder

[Beagle]

Looking for a fast and easy feed, at least a 20% profit...must be a trait of all hounds :) Best not tell anyone the economy is looking like tanking into a recession eh :ohmy:

[Snoopy]

Looking for a fast and easy feed, at least a 20% profit...must be a trait of all hounds :)


More like a chance at a quick fortune after slumbering for twenty years in the waiting room kennel Beagle! Ok my average hold time isn't that long. But I bought to lap up the dividends, not to make a quick buck. In many ways I will be annoyed if a takeover offer comes as it is hard to get dividend yields like this. But I will probably accept, if such an offer comes at a premium (there is no guarantee of that of course!), as at 66c and above I think PGW is very fully valued.



Best not tell anyone the economy is looking like tanking into a recession eh :ohmy:


Have you noticed that often agricultural shares don't follow the rest of the economy? This was another reason for holding what some may see as a serial underperformer. PGW actually smoothes out my portfolio returns!

SNOOPY

[Snow Leopard]

Mildly surprised that I have acheived a near doubling of my investment in PGW over the last couple of years!

[nzspeak]

Do we have a pgw trainspotter on site? Massive SP swings but no word on here or in the media. Obviously there is takeover talk. Anyone plugged in?

[bull....]

Do we have a pgw trainspotter on site? Massive SP swings but no word on here or in the media. Obviously there is takeover talk. Anyone plugged in?

price might be to high now to attract anyone

https://www.afr.com/street-talk/pgg-wrightson-bidders-sow-seeds-of-doubt-20180625-h11uno

[percy]

https://www.stuff.co.nz/southland-times/news/102892662/farmers-can-claim-for-costs-after-swede-seed-mixup

Here is more info on the swede problem.
A lot more hectares than I guessed in February.
No more clarity on the cost to PGW . It could be after winter before farmers know their actual losses and can finalize a claim.

I doubt any takeovers will be made before this problem is qualified.

[Snow Leopard]

Even as I have been wandering around the world I have heard a few rumours concerning some sort of takeover of PGW. They vary widely.

While the current SP is not one that has me looking to buy more, I am happy enough to hold what I have and hope that somebody does not force them from my paws.

[Snow Leopard]

9785

Watch that volume trend.

[Baa_Baa]

9785

Watch that volume trend.

Did you buy PT's charting software, or are you PT?

[Hectorplains]

Did you buy PT's charting software, or are you PT?

Yeah, how about some explanation regarding the Tiger to Leopard situation? The adage goes you felines can't just change spots / stripes, eh?

[Snoopy]

Yeah, how about some explanation regarding the Tiger to Leopard situation? The adage goes you felines can't just change spots / stripes, eh?


Maybe a Leopard can't change its spots...but I've never read anything about a Tiger not being able to change its stripes...particularly after a season of hibernation.....

THE RED BARON

[macduffy]

Today's AFR carries a story headlined "Elders rejects reports that it has made a bid for PGG Wrightson." Article is behind a paywall, of course.

[Hectorplains]

Today's AFR carries a story headlined "Elders rejects reports that it has made a bid for PGG Wrightson." Article is behind a paywall, of course.

Not much to it. Elders has its own issues and doesn't have a spare $450m sitting around. Ruralco might want the services ops but not the seeds division. Arrange the words; "likely", "it's" and "not" to form a sentence.

[Agrarinvestor]

Many years ago i bought Agria because they want to sell PGW seeds into chinese market. I thought that this will be a good idea.
Why was this idea buried?