PGW - PGG Wrightson

[Mick100]

Have heard of NZRPT but can't recall anything about it. I remember Tasman farms. They bought and converted quite a number of farms on the West Coast and in Southland. If I recall correctly, the shareholders who were holding the share when it got wound up in NZ (sold the NZ farms) done quite well - but up until the farms were sold noone made any money on this company - all the profits were spent on development and purchase of more farms - so the NTA was steadily increasing but was never reflected in the shareprice. Tasman farms is on the unlist6ed board - they still operate in Tasmania. I held shares in it for a while. I think the problem with Tasman farms is that it is run by farmers who have a habit of never showing a profit - even in a good season!
.

[COLIN]

NZRPT is still listed on the Unlisted market (is that an oxymoron?) I see that the shares are now around $2.10. I think I sold mine for just over $1, many years ago. Selwyn Cushing had some involvement at that stage, and a Maori Corporation also at some stage.

[Snoopy]

quote:Originally posted by Mick100


I remember Tasman farms. They bought and converted quite a number of farms on the West Coast and in Southland. If I recall correctly, the shareholders who were holding the share when it got wound up in NZ (sold the NZ farms) done quite well - but up until the farms were sold noone made any money on this company - all the profits were spent on development and purchase of more farms - so the NTA was steadily increasing but was never reflected in the shareprice.


I secretly fear the same thing could happen to NZ Farming Systems Uruguay. Norgate made mention of the fact that the 6% return on cash invested they are aiming to pay out 'long term' is to appease the bankers and finance companies who are lending to investors on this venture. After all what bank who would lend money on a farm (or corporate farm in this instance) with no projected cashflow ever coming back to the borrower! I got the impression that if the offer could have proceeded with no cash being returned to shareholders, with the cash 'not paid out' being ploughed straight back into the farms then NZFSU would have preferred that option. Nevertheless the intent on paying a dividend should support the share price when it eventually lists. But perhaps Tasman farms promised to pay a decent dividend too when they were starting out?


quote:
Tasman farms is on the unlist6ed board - they still operate in Tasmania. I held shares in it for a while. I think the problem with Tasman farms is that it is run by farmers who have a habit of never showing a profit - even in a good season!


Farmers never showing a profit in a good season? A tax related issue?

SNOOPY

[Snoopy]

quote:Originally posted by COLIN

NZRPT is still listed on the Unlisted market (is that an oxymoron?) I see that the shares are now around $2.10. I think I sold mine for just over $1, many years ago. Selwyn Cushing had some involvement at that stage, and a Maori Corporation also at some stage.


What caused you to get so frustrated that you sold out at $1 before the big push through to $2.10 Colin? Lack of confidence in the directorship of the company?

SNOOPY

[Mick100]

quote:Originally posted by Snoopy
[

Farmers never showing a profit in a good season? A tax related issue?

SNOOPY




Yes - exactly
,

[COLIN]

quote:Originally posted by Snoopy


quote:Originally posted by COLIN

NZRPT is still listed on the Unlisted market (is that an oxymoron?) I see that the shares are now around $2.10. I think I sold mine for just over $1, many years ago. Selwyn Cushing had some involvement at that stage, and a Maori Corporation also at some stage.


What caused you to get so frustrated that you sold out at $1 before the big push through to $2.10 Colin? Lack of confidence in the directorship of the company?

SNOOPY




It was quite a few years ago Snoopy, and I'm afraid my memory is rather hazy, but I seem to recall that the units were unlisted and could only be redeemed by giving several months' notice to the manager. In fact, I think that redemptions were frozen for quite a while, because of a "run" on them, due to falling prices, and the Trust had to sell properties to be in a position to meet redemption demands. (They even held a forestry block at one time, which was sold). Then along came this Maori Corporation with a price above the trend of redemption prices and investors jumped at the chance to bail out. I think that it was actually later than this that Selwyn Cushing engaged in some major exercise, and Williams and Kettle were also involved. The fact that the Trust is now a listed entity and sellers can offload to other buyers is of course a different - and better - ballgame. And the escalation in the share price no doubt reflects the upsurge in farm prices witnessed in recent years - but now falling off. I haven't researched what discount (or premium) there currently is, but suspect it would be a discount, perhaps quite a significant one.

Others may be able to verify, correct, or add to the above. I also seem to recall that there was an earlier listed corporate farming enterprise which was not a success and was privatised. The difficulty with trying to achieve sharemarket success with these corporate farming ventures is that they are generally dependent on capital growth rather than generation of cash surpluses sufficient to meet the regular dividend expectations of the average investor. (This impediment has been pointed out, of course, by earlier posters.)

[BRICKS]

WHO dares to CARE.. [8D]

[Bobby_Fischer]

NZRPT is majority owned by Cushing family interests, through Rural Equities Ld. REL also own the trust management company, which makes for a very cosy relationship, no doubt. I've owned NZRPT units from the very beginning. According to the latest report the trust's NTA is $3.40, so the last sale on unlisted is a 40% discount to NTA. Underlying value is probably somewhat greater, due to the rolling revaluation cycle used. Most of the trust's farms are leased out, rather than directly farmed. This has lead to ongoing cashflow problems, and very poor returns for unitholders: the managers remuneration is based on NTA, but increases in lease income tend to lag, quite significantly, increases in farm valuation (in the trust's early days, many of the farms were acquired in exchange for units in the trust, with former owners remaining as lessees. As a result I suspect lease terms were quite "friendly"). In the latest report management fees were $2.8M, which is not even covered by lease income at $2.3M. Over time, as leases expire, I expect more farms will move into direct ownership, improving the cashflow position, distributions from the trust, and hopefully the discount should start to disappear, but I think it's a long term play.

The very raison d'etre for NZFSU is to actively manage its own farms, so I don't think it can realistically be compared to NZRPT in its present situation. NZFSU intend to profit from bringing about a revolution in Uruguayan farming practices. All NZRPT will ever have achieved in this regard are the slow evolutionary changes that have occurred elsewhere in NZ over the time the trust has existed, with most value gains achieved through gradual land price inflation. If NZFSU are successful, they also stand to benefit from appreciation in Uruguayan land values (assuming the Uruguayans see for themselves what the Kiwis are achieving), but that is not part of the NZFSU value proposition, as I understand it.

[kittydashwood]

Seems like the bull is bolting on South American land values but PGW may not be too late...
from
http://www.mercopress.com
Land value in Uruguay soars 127% in four years

Price of land in Uruguay has soared in the two last years with the average going price for a plot of good grazing selling in the range of 1.400 US dollars a hectare, according to the latest report from the Uruguayan Landholdings Institute.

Uruguay has an estimated 16 million hectares of good farmland and in the first quarter of 2006 a total of 78.000 changed hands, 40% of which for forestry development. The 2006 first quarter average hectare price was 25% higher than in the same period a year ago.

The report also indicates that the price evolution continues to be bullish and if, as expected, the pulp industry takes root in Uruguay in spite of the controversy with Argentina, values can be forecasted to further increase.

According to Uruguay’s Landholdings Institute the average price for a hectare of grazing land increased 16/17% in 2005 over the previous year. This means that the average hectare last year was selling at 1.115 US dollars which in real value is among the highest in history in US currency.

Land in Uruguay actually dropped to a historic minimum in 2002 following the Argentine financial crisis and outbreaks of foot and mouth disease, but since then have rocketed to the current values which represent an average jump of 127%. In the first two quarters of 2005, land averaged 950 US dollars the hectare, but by the end of the year had reached 1.200 US dollars.

Another interesting point is that during the almost four years in consideration, land prices have experienced a sustained increase.

As in non subsidized agriculture countries, value of land in Uruguay is highly vulnerable closely linked to the international price of farm commodities and taxes on land and crops.

[kittydashwood]

Here's an interesting link to a German guy who might get a beer out of Craig.

http://www.agro.pvoss.de/
In a world of continued population growth,
rising purchasing power in emerging markets,
in a world of gradually disappearing trade barriers,
it becomes ever more important for the agricultural producer to choose country and location that can produce best at lowest cost.
WE OFFER FARM LAND
We believe that
the agro-investor finds the best combination between :

- fertile soils
- favorable climate
- local infrastructure
- proximity to roads and seaports
- low land prices
- unrestricted foreign landownership
- stable social and political environment

in Argentina (Pampa Humeda) and Uruguay.

We offer you, as intermediator, the farms listed to the right.
However, specify to us what you look for and we will try to offer it to you.

Peer Voss
pvoss@pvoss.de
Hamburg - Germany

.

.

+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Update Farmland Uruguay, September 2006
International investment funds have been present in Uruguay since one or two years, their investments in lands have so far been small scale
However, as a report of Uruguay newspaper ElPais states on 06.Sept.06, one Fund, Pergam Finance of France, has collected a pool of US$ 75 Mio from private investors to invest in farmland in Argentina and Uruguay.

While the aforementioned might apply upward pressure on prices, another development might have the opposite effect. From 2007 Sociades Anonimas (S.A.'s) will most probably not be allowed anymore to hold farmland, only companies who publish the identity of their shareholders will. This step is meant to slow down the structural change from family farm land holding to financial companies' farm land holding.

+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
Update Farmland Uruguay, July 2006
The rise of Uruguay’s farmland valuations, starting end of 2002 from an indeed extremely low bottom, is now in its 4th year.
At present you can expect prices as follows :

prices US$ per hectar (ha), 1 ha = 2,47 acre - July 2006
modest buildings and infrastructure in reasonable condition
water is no issue in Uruguay, you have sufficient water supply everywhere, creeks or subsurface
$ 400-800 marginal pasture land, (sheep, extensive cattle)
agriculture partly limited by topography (steep slopes, wetlands)
limited use for forestry due to lack of acces
Coneat 20-70
$ 800-1.400 marginal pasture land, (sheep, extensive cattle)
but apt for forestry (appropriate soils, proximity to paved roads, paper mills)
Coneat 40-90
$ 800-1.400 pasture land
apt for sheep, extensive to semi-intensive cattle breeding (feeding)
some fraction of surface should allow pasture improvements
Coneat 50-100
$ 1.200-2.000 farmland apt for crop/cattle.
Average or above average soil fertility (of high Uruguayan standards), allows intensive cattle feeding operation, at least half of surface should allow pasture improvements. At least 20% of surface should allow feed crop or cash crop.
Coneat 90-130
$ 1.800-3.000 farmland on rich agricultural (sedimentary) soils
apt for crops (corn, soya, wheat, sunflower etc), or crop/cattle rotation
Coneat 120-200
additional
$ 300-500 premium, if located in Uruguays southern, most developed belt, max 2h drive from either Colonia or Montevideo or Punta del Este

While us living in Uruguay are often surprised by the recent price increase, roughly 100% in the last 2 or 2 ½ years, foreigner who come with a fresh, unbiased view, still notice that the price/value is still quite good if compared to Argentina, Brazil, Chile, Australia, New Zealand etc.

And while it is certainly true that markets in Latin America tend to be quite cyclical, be it in properties or other assets, and that too positive a sentiment might rather be a reason to sell then to buy,
it is also true that the underlying fundamentals, gobal demand for agro commodities, global availability or far

[kiwi_on_OE]

I just did a quick search and found a couple of NZ diary farms going for about USD1600/ha and USD2400/ha if my maths is right. I'm sure there are experts out there that can give more accurate info. Intersting to compare the relative values. I have heard that NZ farms give a low cash return, but again I'm sure there are experts out there that confirm/deny that.

[nelehdine]

A good dairy farm in the Waikato with attached Fonterra shares will sell for up to $45,000 a hectare, even in Canterbury where dairying is relatively new a well set up farm with good irrigation will go for up to $36,000/ha. I am hearing thru the grape vine that there could be some serious investors in this Uruguay farming float, lots of demand and it wouldn't suprise if the over-subscription "kicks in" in a big way. I'm thinking of buying 200,000 shares for $100k now and $100k next Dec to diversify my NZ dairy farm interests. The potential capital gains look very attractive relative to buying NZ farms at current prices. I can't see NZ whole milk powder being able to command that big a premium to stuff sourced out of Uruguay ...

[rmbbrave]

Wrightson does the tango over overseas investments
19 November 2006

By ROD ORAM
Excitement and fear are two perfectly plausible responses to PGG Wrightson's plan to raise up to $150 million in a New Zealand stock market float to invest in farming in Uruguay.


Excitement about the apparently bright future for dairying there: a payout equal to Fonterra's, but from land one-quarter the cost of here and with no obligation to buy shares in Conaprole, the dominant local co-op.

Fear about the apparently dark future for dairying here: Fonterra's payout is stuck around $4 per kilogram of milksolids; the shares you have to buy if you want it to process your milk cost around $6.60 this season, up from $3.85 for the 2002/03; and the cost of land and other inputs are rising inexorably.

Logically, dairy farmers should sell out of Fonterra and New Zealand and invest with Wrightson in Uruguay.

And, indeed, some are thinking of shifting part of their investment overseas. On Tuesday, a group of 55 farmers left Auckland airport on a Wrightson-arranged trip to see for themselves. They were not large corporate farmers, but members of family businesses that are still the backbone of the industry here.

Judging by Wrightson's prospectus, they will have a good story to tell when they get home this week. Uruguay is two-thirds the size of New Zealand, but it has 11% more farmland. Its 11.7 million hectares of grazing land is very flat, fertile, well-watered and with a Northland-like climate suitable for year-round milking.

The land has been seriously under-used so far. But apply New Zealand pastoral farming techniques to it and the productivity gains are spectacular. Today, Uruguay's milk production is barely a 14th of ours. But a 150km x 150km slice of Uruguay could produce as much milk as all of New Zealand.

AdvertisementAdvertisementWrightson bought the first of its current three farms in 2001 and began trialing the technology. Dry matter, the feed for animals, has risen from 4500kg/ha to 14,500kg/ha and could reach 20,000kg/ha by adding irrigation. Animal live weight gains are up from 100kg/ha a year to 900kg/ha.

The impact on dairying economics is stunning. Wrightson thinks it can lift output from an average of 275kg of milksolids per hectare to 943kg - against a New Zealand average of 895kg. But total farm costs are 40% of New Zealand's, yet the payout is similar. So the economic surplus per hectare is $2384 versus $950 here.

Moreover, total farm assets per hectare are only $10,749 versus $36,084. Consequently, the return on assets, Wrightson forecasts, is 22.2% for a Uruguayan dairy farm compared to 2.6% for a New Zealand farm.

These prospects of large returns thanks to low land prices and big productivity gains should sound familiar to farmers with long memories. In some respects the Uruguayan dairy sector looks like New Zealand's 20 years ago. Essentially it is a cheap land-play like some farmers have made in Southland and the West Coast in the past decade. Some are now trying south Victoria, Australia, and a few brave ones, including a Fonterra director, are attempting it in Chile and elsewhere in South America.

They are participating in a significant global shift not just in dairying but across many agricultural sectors. The 10-year forecasts from the OECD show a big swing in production from OECD countries to less-developed ones. From 2005 to 2015, it expects skim milk production in the OECD to fall 12%, but rise 32% in non-OECD countries.

Whole milk powder production is forecast to be just as dramatic: up 7% in OECD members, but up 37% in other countries. By 2009, production from non-OECD countries will have overtaken that of OECD members.




Logically, dairy farmers should sell out of Fonterra and New Zealand and invest with Wrightson in Uruguay.




The rise in scale and capability of Conaprole, Uruguay's largest co-op, is typical of these trends. Founded in 1936, it ranks today about 20th in size in international dairy industry league tables. Its plants are

[duncan macgregor]

The grass is always greener on the other side of the fence, plus the farmer next door never gets it right, we know best. We dont even speak the bloody language, we could not for the life of us name three cities in the bloody country, or even know the prime ministers name, or political party. Yet we are going to clean up with our superior methods of farming investing our hard earned savings on the other side of the planet, in some one elses hands. What do I think about it?, what is my opinion if you want a :D. I think that investing in this is like going to the church. You gotta have faith not proof which makes investors a great bunch of [:o)][:o)][:o)]:D:D.MACDUNK

[kittydashwood]

A close over 1.70 could signal a break to the downtrend for PGW.
Still range bound imho

[Bling_Bling]

quote:Originally posted by duncan macgregor

The grass is always greener on the other side of the fence, plus the farmer next door never gets it right, we know best. I think that investing in this is like going to the church. You gotta have faith not proof which makes investors a great bunch of [:o)][:o)][:o)]:D:D.MACDUNK


I agree with you on this one MD. The stats for NZ firms doing well overseas does not look good. I hear they have great nachos over there. :D

[Snoopy]

quote:Originally posted by nelehdine

I'm thinking of buying 200,000 shares for $100k now and $100k next Dec to diversify my NZ dairy farm interests. The potential capital gains look very attractive relative to buying NZ farms at current prices. I can't see NZ whole milk powder being able to command that big a premium to stuff sourced out of Uruguay ...


I have stopped thinking and done it Nele. I sent my application in yesterday.

In a curious development, I received a letter from Barry Brook on PGW letterhead, urging me to invest in NZ Farming Systems Uruguay as a PGW shareholder. Our letters will have crossed in the post, so he would have no way of knowing that I had already applied for NZFSU shares. Nevertheless I presume all PGW shareholders would have got Brook's letter?

My question is, why is Brook soliciting interest from PGW shareholders at this late stage? Before the NZ farmers one week whirlwind tour of Uruguay, we were told by PGW the issue was already full, and the 100% oversubscription amount allowed was near to being full too. So why risk annoying existing applicants by getting their applications scaled back, as a result of more people getting on board? Any theories?

SNOOPY

[BRICKS]

WELL it would be safer buying AIR NEW ZEALAND at least you can see it and need it to fly THERE.. [8D]

[kittydashwood]

Support looking pretty exhausted but still selling volumes aren't historically heavy. In absence of a ten year chart for this company it would be hard to call a bottom in such a cyclical industry.
However with a yield of over 9% i'm sure the cullen fund is sniffing about.

[rmbbrave]

Kiwis plough into South America
Sunday Star Times | Sunday, 14 January 2007

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By KEITH WOODFORD
A recent article in Uruguay's leading daily newspaper talked of a coming Kiwi invasion. It was referring to the PGG Wrightson project to invest up to $150 million of New Zealand capital in Uruguayan pastoral farming. But the PGG Wrightson project is just one of several new agribusiness projects in South America that involve New Zealanders.


In the past 18 months, I have made three visits to South America. On each occasion on the flight over I have met Kiwis wanting to or already doing business over there. Kiwi packaging materials, dairy semen, sheep genetics, livestock, fencing materials, dairy sheds and pasture seeds. Plus investments in the land itself. New Zealanders have been making significant land purchases in Uruguay, Chile and Brazil. At least one group has invested in Paraguay and others have been looking at Argentina.

Some weeks ago, I spent several days in Uruguay with 58 prospective New Zealand investors, hosted by PGG Wrightson. Many of the prospective investors were NZ dairy and sheep farmers trying to figure out how to grow their businesses. Having ridden the wave of pastoral development in NZ, with its associated capital growth, they are now looking for the next wave. There was a feeling among this group that they must look beyond New Zealand.

The alternatives come down to Australia or South America. Australia is the easy option, but there is also a recognition that the "land of droughts and flooding rains" can bring its own grief. In contrast, the green but largely undeveloped plains of Uruguay look much like New Zealand's Southland of 40 years ago. Chile's Region 10 with its snow-capped volcanoes and volcanic soils could be in Taranaki. Parts of the Argentine pampas are reminiscent of dryland Canterbury back in the 1950s.

Most of the current NZ interest is in Chile and Uruguay. Both have stable governments. Both welcome foreign investment. And in both cases, Kiwi corporates are already present. In Chile it is Fonterra, with its majority holding in dairy processor and marketer Soprole, that has taken a lead. In Uruguay, it is PGG Wrightson, first with its majority shareholding in seed company Wrightson Pas, then with its direct investment in Uruguayan farms, and now with its promotion of investment company New Zealand Farming Systems Uruguay (NZFSU).

For many potential investors, the NZFSU project is attractive because it requires no active involvement. The alternative of directly buying land, individually or as part of a syndicate, is more daunting. But some are taking that step. A group of Waikato and Bay of Plenty dairy farmers is developing dairy farms in southern Chile. Another private group of investors which has members from Auckland to Southland, is developing 4000ha in eastern Uruguay. This 4000ha property has the potential for at least 12 large-scale dairy farms. It already has irrigation canals running through the property and the water will cost only $US16 ($23) per hectare annually. The land is clean of major weeds, is easily cultivated, but needs phosphate and improved pastures. In its undeveloped state it is worth about $3000 a hectare. As one Kiwi farmer said to me as we inspected the property: "I have just failed in an attempt to but a dairy farm in Taranaki at $45,000 per hectare. At only $3000 per hectare here I could afford to spend quite a lot on development."

There is nothing new about taking Kiwi technology to South America. Kiwi scientist Campbell Percy McMeekan from the Ruakura Research Station first visited Uruguay in 1953 and worked there with the World Bank in the 1960s. Many others, such as Albert Flay and Professor Sir James Stewart, then followed. New Zealand's Honorary Consul in Uruguay, Mac Herrera, has been dairy farming there for many years, applying the principles he learned in the 1960s at New Zealand's Lincoln University.

A stream

[scamper]

well, with today's volume at 85k, it seems fair to say that the SST article has caused not a single ripple...
I'm beginning to like the story. Does that put me in the 'too naive for words category'?
The chart says 'Wait!'
Scamper's full of New Year excitement.
Anyone got anything to say to an undisciplined puppy...

[COLIN]

To what extent is Uruguay at risk of catching the Chavez plague? He seems to have an increasing following in Latin America, beyond Venezuela, with his particular brand of Marxism, and his nationalising of the oil industry will be just the start.

[Snoopy]

quote:Originally posted by COLIN

To what extent is Uruguay at risk of catching the Chavez plague? He seems to have an increasing following in Latin America, beyond Venezuela, with his particular brand of Marxism, and his nationalising of the oil industry will be just the start.


The question of political risk within Uruguay was put to Norgate at the briefing for NZFSU that I attended. He acknowledged there was risk. 30 years ago Uruguay was a military dictatorship. But then again so was Spain. And no-one bats an eyelid about investing in Spain these days.

SNOOPY

[scamper]

Snoopy, does this indicate that you think this may be 'a good thing'?
I don't have much of a feel for the agricultural sector and would appreciate your views on the potential of this company. cheers, scamper

[kittydashwood]

Good prospects but don't expect liquidity.

[Snoopy]

quote:Originally posted by scamper

Snoopy, does this indicate that you think this (NZ Farming Systems Uruguay) may be 'a good thing'?
I don't have much of a feel for the agricultural sector and would appreciate your views on the potential of this company. cheers, scamper


From an investment perspective I believe NZFSU is a good thing, yes.
I will add two or three of riders to my statement though.

1/ NZFSU must be able to buy farms in Uruguay at the prices they say they can.
2/ Dairy prices must remain at around today's levels.
3/ When the portfolio of farms in Uruguay is complete, there is a reasonable geographic spread to guard against 'localised weather bombs'.

The main thing you need to keep in mind when investing in NZFSU (a hypothetical question at the moment of course because it isn't listed so you can't invest) is that NZFSU is a commodity business and it is tied to the fortunes of the United States dollar.

If our dollar rises against the $US, then the ultimate returns to kiwis will be lower than expected. If dairy prices collapse then so will the returns of this company (although in relative terms you should be better off 'in Uruguay'(sic) than NZ dairy farmers are here because the cost base is lower 'over there').

Personally I think it will be a rewarding investment and a useful bit of diversification for me, mainly because I am *not* a dairy farmer. I don't really agree with Norgate's sales line of marketing NZFSU as genuine diversification for NZ dairy farmers from what they are doing already. The main risk with NZFSU that I see is that:

1/ if NZ dairy farmers have a poor year next year, and..
2/ can't afford to take up their second part entitlement, then..
3/ we might see bridging finance taken out and NZFSU shares dumped on the market when the finally list to give farmers the cashflow to pay their bills.

Of course I will plan to have some cash around to pick up some cheap shares should this happen!

SNOOPY

discl: hold NZFSU (now confirmed)

[scamper]

Many thanks, Snoopy.
I am thinking of moving into PGW, rather than nzfsu at the moment. must read more background.
Cheers, scamper.

[metro]

Snoopy posting on a thread is normally the "kiss of death" for any stock. PGW did not perform well in 2006 and Snoopy's "interest" is not a good omen for 2007

[Snoopy]

quote:Originally posted by scamper

Many thanks, Snoopy.
I am thinking of moving into PGW, rather than nzfsu at the moment. must read more background.
Cheers, scamper.


On the previous page of this thread I noted the effect of NZFSU on PGW.

"The initial impact on PGW will not be high however. One percent of a one hundred million investment is only 'one million', not hugely significant when the overall profit of PGW is some thirty times that, even in a 'bad year'!"

PGW and NZFSU, despite both being in the farming sector, are really quite different investments with differing risk profiles.

SNOOPY

[Snoopy]

quote:Originally posted by metro

Snoopy posting on a thread is normally the "kiss of death" for any stock. PGW did not perform well in 2006 and Snoopy's "interest" is not a good omen for 2007


Cart before the horse Metro. I am a value investor. It was the stale stench of the "kiss of death" that got my nose sniffing!

Last year I significantly increased my holding in PGW -after- the share price fell from $2.40 (or something). Of course it would have been better for me if I had sold out at $2.40. But I can't predict the timing of the weather and the downstream effects on farmers and hence PGW. I just roll with what the weather man gives me.

Or maybe I *can* predict the weather (my prediction being a contra-indicator) and it is really me that you guys should be blaming for your rotton summer! Back to my dog house to find those 'Mr Anonymous' 'Joe Cool' glasses.

SNOOPY

[Mick100]

quote:Originally posted by metro

Snoopy posting on a thread is normally the "kiss of death" for any stock. PGW did not perform well in 2006 and Snoopy's "interest" is not a good omen for 2007


I think one of the differences between Snoopy and the other 99% of contributors to this forum is that he is a long term holder of shares. A year of two of stagnating shareprice of a company won't bother snoopy too much and it does'nt bother me either.

Corn and wheat both hit 10 yr highs last friday.
It's only a matter of time before these record high grain prices start filtering through to global food prices. Dairy and meet prices will get dragged along in the near future - you can count on it.
I'm holding another ag company in australia - ACC - which has had a nice rise in shareprice over the past couple of weeks.

I think it may be a good yr for PGW.
.

[Bling_Bling]

The reason corn and wheat prices are at these levels cos they are used for biofuel in latin american countries and hopefully globally in the future. PGW would probably best to buy up land and convert it into corn or wheat farms .. LOL:D:D

[living2]

Pastarol farming must have a good long term outlook due to rising oil prices ($US100/barrel by 2010??? and increasing demand from asia for Dairy products.BUT why not invest in NZ Rural
Property Trust or Tasman Ag where shares can be brought at half asset value???In my view these have lower risk regarding political,management,disease(Foot & Mouth) and Market access
Remember Powdergate and the NZDG & Kiwi COOP merger.Look who gained value out of that.

[duncan macgregor]

quote:Originally posted by Bling_Bling

The reason corn and wheat prices are at these levels cos they are used for biofuel in latin american countries and hopefully globally in the future. PGW would probably best to buy up land and convert it into corn or wheat farms .. LOL:D:D
You have got to get back to reality when you say wheat farms. You simply cant grow wheat year in and year out in the same spot. The reality is one year in four for wheat, then back to grass to give the ground a rest, before the next crop.
South America has a foot and mouth problem that we dont have in NZ. The people investing in this want to make sure the insurance for foot and mouth is in place, and accounted for when they do their sums. I hardly think that the NZ farming community would invest in this even although PGW might do well out of it selling to the gullible. macdunk

[Snoopy]

quote:Originally posted by duncan macgregor


South America has a foot and mouth problem that we dont have in NZ. The people investing in this want to make sure the insurance for foot and mouth is in place, and accounted for when they do their sums.


From p27 of the NZFSU prospectus:

"Uruguay was declared FMD free in 1995. This opened up new markets that had until then been closed to non cooked meats. However, in April 2001 Uruguay suspended exports when new cases of FMD were discovered near the border with Argentina. Export markets began to reopen when no new cases were discovered after August 2001 and Uruguay was granted "FMD-free with vaccination" status by the world organization for animal health shortly after. In November 2001 it resumed exports to the EU and in June 2003 to the United States. Uruguay prohibits the import of live animals and/or genetic material from countries affected by FMD."

"The MGAP (Uruguayan Ministry of Agriculture and Fisheries) regulates the industry and is responsible for assuring food safety, quality control, animal welfare (all cattle are now vaccinated for FMD free of charge) and environmental control, issuing permits to slaughter houses."

According to Norgate, his view was that MGAP are even more strict than than Ag and Fish here in NZ. Spurred on by their unfortunate experiences in the 2001 FMD outbreak. Also NZFSU employs their own vet who is fully occupied optimising animal health on the three existing farms. there is no way a farmer in NZ could afford to do that! While nothing is a certainty, I would put my money on there not being a FMD outbreak in Uruguay in the next ten years - in fact I did which is why I own the shares.

SNOOPY

discl: hold NZFSU partly paids

[Snoopy]

quote:Originally posted by Snoopy


All the PGW bank loans are at 'overdraft rate' which for them is 7.2%. The total loan that they have from the banks is $253m. It is interesting to ponder that this makes PGW profitability quite sensitive to interest rates. For each 0.25% interest rates move the annual interest bill changes by $3m.

Let's look at 'borrowing interest'. If the 'nominal' interest bill is:

0.072x $377.3= $27m

Then, if we add the FY2006 ongoing operating profit of $20m to last years bank loan and 'overdraft interest paid' of $17m then we get interest cover of:

$37m/$27m= 1.4 times



OK, if Bollard 'goes' in March, that will be $3m off the bottom line at PGW next year.

I find it ironic that the main threat to farming in general is high interest rates caused by heavy borrowing against farmland which is only possible because farmers have been so successful in pulling cash from their land in recent years.

Last week PGW crashed through a long time support level of $1.60. That triggered my 'stop buy' which saw me topping up on PGW shares. I am not expecting a great PGW year for FY2007. But ironically weather wise I think things are shaping up well. The big farming areas of Canterbury and the Waikato and unnaturally green at this time of year. The areas of the country suffering a moisture deficit, Marlborough and Hawkes Bay, are where the largest concentrations of grape growers are, and 'dry' is good news for wine makers. By the time farmers start feeling rich again it could easily be FY2008. But I don't mind building up my holding in PGW early.

My broker has only issued one sell recommendation on top 50 shares in the last few months- get rid of PGW. I think they are focussing too much on the current year and not enough on FY2008 which is where the future share price driving factors for PGW will come from. PGW is in no way a sure bet. I think there is still 'broking suspicion' surrounding Norgate and the boys from Dunedin as 'newbies' to listed corporate culture. But there is a good chance that when the fund managers, almost absent from the PGW share register, figure out that PGW is a good place to invest they will pile in and push the price too high. That is why I am accumulating a decent position on the PGW share register now.

SNOOPY

[COLIN]

quote:Originally posted by Snoopy

[quote]Originally posted by Snoopy




Last week PGW crashed through a long time support level of $1.60. That triggered my 'stop buy' which saw me topping up on PGW shares.

SNOOPY






My dear SNOOPY:

Whenever will you learn that you are not going to maximise your investment returns by following a strategy like this! You must resist the urge to buy into a falling market. BUY INTO STRENGTH - write that on a large sheet of paper and paste it above your computer screen!
I do hope you take this piece of advice in the spirit it is given, from someone who has been in the investing game for many years and has learnt the hard way. I used to do daft things like that, and I still make mistakes of course, but the real winners for me have been the purchases on rising trends, such as IFT, GPG, KFL, ABA, FBU.

[duncan macgregor]

I think the downside is greater than the upside. The sp will increase only after the dollar drops. At the moment its all doom and gloom down on the farm. Why anyone would buy more, or even hold is beyond me at this time in the cycle. Stick to trends buy on rising trends, sell on declining trends. PGW has been going south for a long time now the pattern will reverse thats the only time to buy. I think the bottom still has not been reached. The company will come right later i will keep an eye on the dollar before even looking to see what the company is up to. macdunk

[Mick100]

Done some ratio analysis on PGW

Profitability

return on assets ratio = profit/average total assets
26896/1124158 = 2.4%
imo,low

profit margin ratio = profit/net sales
26869/848709 = 3.2%
imo, low

cash return on sales ratio = net cash provided by operating activities/net sales
12419/848709 = 0.015:1
imo,low

Liquidity

current ratio = current assets /current liabilities
616463/628801 = 0.98:1
imo,low

current cash debt coverage = net cash provided by operating activities / average current liabilities
12419/628801 = 0.019
imo,low

Solvency

debt to total assets = total liabilities / total assets
709130 / 1124158 = 63%
imo,high especially for a cylical business

cash debt coverage = net cash provide by operating activities/avsrage total liabilities
12419/1124158 = 0.011
imo,low


In summary it's not hard to see why the analysts don't like PGW
You would have to be very confident that commodity prices are going to improve (in NZD) and that last yrs performance was a low for PGW

I remain invested in PGW
I'm a commodities bull and I am becoming increasingly bullish on ag commodities due mainly to the increasing world grain prices - most of the world's poultry, pigs cattle and dairy cattle are grain fed.
,

[winner69]

Mick ... good work on the ratios but to some extent the lending arm (both the loans and debt)muddy the waters a bit .... if you want to get a clearer picture of the underlying core business have to take some of these out

[Mick100]

Thanks Winner - hadn't thought of that

[duncan macgregor]

Mick, PGW are in the box seat in NZ farming which is in the doldrums. Good company having a bad time its one where a little bit of technical analysis will go a long way to a happy outcome. Why go down with it to eventually come back up?. It will be a good sector to be in one day, but not today. The sp was over $2-20 or something now down to $1-60 or dropping a third near enough where was your stop loss?. Look at the NZ dollar first then the fundamentals of PGW second for the next play. MACDUNK

[Mick100]

quote:Originally posted by duncan macgregor

Mick, PGW are in the box seat in NZ farming which is in the doldrums. Good company having a bad time its one where a little bit of technical analysis will go a long way to a happy outcome. Why go down with it to eventually come back up?. It will be a good sector to be in one day, but not today. The sp was over $2-20 or something now down to $1-60 or dropping a third near enough where was your stop loss?. Look at the NZ dollar first then the fundamentals of PGW second for the next play. MACDUNK


Yes macdunk, I bought about a yr ago at $2.05
I usually have a fairly firm opinion about the future prospects of a company before I buy. Unless one or more of the assumptions that I made when I bought has changed I won't sell on a falling shareprice.
None of the assumptions that I made about the future prospects of NZ farm exports have changed - in fact I'm more bullish than I was a yr ago on ag commodities. Obviously I bought too soon with PGW - a mistake that I have made many times before - I'm no expert at timing the market. I'm not too concerned about the strength of the NZD - I think that in 5 yrs time NZ exporters may look back and wish the NZD was back at US 70c, ie the long term trend is a stengthening NZD in my opinion. Have a look at the link I'v posted below and you will see that NZ commodity exports have been increasing in US and NZ dollars - during this time the NZD has been strengthening against the USD, so the strong NZD is not a big problem in my opinion.

http://www1.asbbank.co.nz/reports/
(click on the commodties report and look at the top chart)

,

[duncan macgregor]

Mick, Its not timing the market that counts, it is realizing you will make an error of judgement once in every four or five times. I got caught out with NZO buying to high then waiting in hope at one stage, how dumb, lesson still being learned. PGW like you i thought would have come right by now, but my system taught me to only buy trending up, have a time line telling you when you are wasting time holding. Dealing with your mistakes taking the small loss in funds or time which is opportunity lost,is what it is all about. Pgw wont come good until farmers have improved profitability which is not even on the horizon. I keep Adding to my trending up shares by selling my trending down shares. macdunk

[Mick100]

Macdunk, being early to the party is a mistake that I don't beat myself up about. I don't cosider my investment in PGW to be a mistake at this stage. If I discover that an assumption that I'v made about PGW is wrong i will sell.

The difference between our approaches to the market macdunk is that you are looking for todays hot stocks which, for obvious reasons, must be in an uptrend - nothing wrong with that approach as long as you get out when the uptrend falters. I, on the other hand, am looking for tomorrows hot stocks which are usually drifting sideways and can sometimes take a long time to start moving upwards. I think my method is, both, more challenging and more rewarding than yours.
.

[duncan macgregor]

quote:Originally posted by Mick100


Macdunk, being early to the party is a mistake that I don't beat myself up about. I don't cosider my investment in PGW to be a mistake at this stage. If I discover that an assumption that I'v made about PGW is wrong i will sell.

The difference between our approaches to the market macdunk is that you are looking for todays hot stocks which, for obvious reasons, must be in an uptrend - nothing wrong with that approach as long as you get out when the uptrend falters. I, on the other hand, am looking for tomorrows hot stocks which are usually drifting sideways and can sometimes take a long time to start moving upwards. I think my method is, both, more challenging and more rewarding than yours.
.
Mick, nothing wrong with buying early if thats what you think. Your big mistake is watching the sp fall 20pc over a year still holding. The idea i find is when the market tells you that you are making a mistake, you do nothing about it. When i buy in to PGW, which i will, i can afford to wait for the sp to trend up then buy.
The time factor involved with missed opportunities elsewhere makes it a double loss. You dont have to continuousely buy and sell like a trader,trends can last for years. We all have our systems, some are better than others, its when you close your mind to change its a sign that you have stopped thinking. Back on the farm PGW will take a further drop in sp $1-40 might be my buy in price at the end of the year. MACDUNK

[Snoopy]

quote:Originally posted by COLIN


My dear SNOOPY:

Whenever will you learn that you are not going to maximise your investment returns by following a strategy like this! You must resist the urge to buy into a falling market. BUY INTO STRENGTH - write that on a large sheet of paper and paste it above your computer screen!


Thanks for the concern Colin. But I put my 'buy' order in for PGW before Christmas, after deciding with due consideration exactly what price I was prepared to pay. So I didn't buy last week on impulse. And I had absolutely no idea what the market would be doing four to six weeks after I placed the order.

SNOOPY

[Happy Camper]

This Happy Camper purchased his first tranche of PGW at $1.67 and has since tripled his holding at $1.62.

Now I am going to see how high the grass can grow before I feel the urge to hook up the caravan and head off to fresh pastures.

Cheers

[BRICKS]

quote:Originally posted by Happy Camper

This Happy Camper purchased his first tranche of PGW at $1.67 and has since tripled his holding at $1.62.

Now I am going to see how high the grass can grow before I feel the urge to hook up the caravan and head off to fresh pastures.

Cheers


HAPPY how was your Xmas trip to South Island after those two naughty M&Ms tried to whip up a story about Allied, think your pull a wrong rein there on PWG as the shareholders in this mob are not any BETTER.. [8D]

[duncan macgregor]

quote:Originally posted by Happy Camper

This Happy Camper purchased his first tranche of PGW at $1.67 and has since tripled his holding at $1.62.

Now I am going to see how high the grass can grow before I feel the urge to hook up the caravan and head off to fresh pastures.

Cheers
To buy in when the sp is in a prolonged downtrend must mean that you know something that we dont know, or that your system is run by emotion not logic. Farmers are having a bad time, they only buy what is absolutely necessary in bad times. PGW supplies farmers and logic tells me the sp is six months behind farmers profits good or bad. The PGW stores in my area tell me custom is down perhaps your area is different but i cant see it. I would have thought that the dollar might have dropped by now giving the farmers a bonus but not so. PGW sp is heading down i cant see it stopping for at least six months. Farms have a very poor profit margin about 3pc, in real terms. Its only the increase in farm prices that make it attractive as a family life style. macdunk

[BRICKS]

quote:Originally posted by duncan macgregor

[quote]Originally posted by kittydashwood

Still holding and still waiting for a sub 1.85 price to increase my holding.
Interesting to see PGW on a certain US hedge fund's list of investment targets.
Now how low will fatty let this go? He'll be in boots and all below 1.75 buying up Duncan's failed "investment".

KITTY, TUT, TUT, Tall poppy syndrome have we?. Macdunk bought WRI at 86c and sold out at $1-27 which was my very first trade. I have made similar trades all the way up in my trading portfolio.
In my investment portfolio i bought PGG at i think $1-84 as you did remember those extra shares we got brings the price down about another 23c. All the dividends etc makes it still a good investment holding long term. I loaded up kitty at about $2-00 so save your scorn for another day this company will trend up. macdunk
[/quote ]

STILL loaded at $2.00 as stated on ABOVE.. [8D]

[duncan macgregor]

quote:Originally posted by BRICKS

DONT forget ALF it has a big weather proof fiance company and not much butter to boot but very hard to BUY.. [8D]
THICK one i have been in and out of PGW a few times had PGG at the take over are you still ALFING ABOUT?.:D:D:DMACDUNK

[BRICKS]

quote:Originally posted by duncan macgregor


quote:Originally posted by BRICKS

DONT forget ALF it has a big weather proof fiance company and not much butter to boot but very hard to BUY.. [8D]
THICK one i have been in and out of PGW a few times had PGG at the take over are you still ALFING ABOUT?.:D:D:DMACDUNK


THE OLD brick story when your down and ALF shares are hard to BUY only ask a simple QUESTION becaue you never told us you where OUT or your current POSITION.. [8D]

[BRICKS]

DEAR Happy there you have it the Scot does not want to tell us his current position but still handed you lots of advice to you so do what you like with it or as you say watch the grass GROW.. Regards..[8D]

[duncan macgregor]

quote:Originally posted by BRICKS

DEAR Happy there you have it the Scot does not want to tell us his current position but still handed you lots of advice to you so do what you like with it or as you say watch the grass GROW.. Regards..[8D]
HEY BRICKS, I have lots of dealings with PGW, know lots of farmers Visit two of their stores on a regular basis. I dont have shares in the company but have in the past on a few occasions.
The sp wont rise until the farmers start spending, and that looks a pretty bleak prospect until the dollar drops.
MY position is ,AGM, SMY,MCR, SMM, all on the ANX. If you want to fall in love with something try a woman for a change.:D:D:D
Your old mate MACDUNK.

[BRICKS]

DEAR Happy there we have it again from the horses mouth the very rude Scot states he is friends with farmers who would not touch this stock with a barge pole so on this advice he would not put one single cent in PWG but stated he is off to AUSTRALIA to play with MCR.. [8D]

[Mick100]

Commodities report

=http://www1.asbbank.co.nz/reports/rural/report7.asp?idMessage=5847
,

[Steve]

Finding land for new cash cow (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10423277)
A New Zealand firm is growing gold kiwifruit south of Rome, PGG Wrightson is setting up farms in Uruguay and Fonterra has a big dairy project planned for China.

Kiwi farming is embarking on a big OE and senior agriculture figures say the overseas investment wave is ready to swell as available land here dwindles.

[BRICKS]

Steve you missed it a report yesterday in AU that PWG is moving into Melbourne to enlarge there office and are hiring new real estate personnel went on to say there going for the KILL, Yer just what Melb wants, for one thing in AU R/e men are coming out of your ears but PWG is going to show THEM.. [8D]

[duncan macgregor]

quote:Originally posted by BRICKS

Steve you missed it a report yesterday in AU that PWG is moving into Melbourne to enlarge there office and are hiring new real estate personnel went on to say there going for the KILL, Yer just what Melb wants, for one thing in AU R/e men are coming out of your ears but PWG is going to show THEM.. [8D]
Good on them first show those South American farmers a thing or two then those dodgy RE people in Melbourne how to sell the farm.
It looks like this prodigal son will come home with its fingers burned like the warehouse, RBD,TEL. to mention a few. :D:Dmacdunk

[Bling_Bling]

hmmm... sounds like PGW is heading in the wrong direction way too fast.

[duncan macgregor]

STUFF article today says that NZ sheep farmers have made no profit at all, and have closed their cheque books. The farming community is in deep recession due to the high dollar. Its not a good time to be in shares in companies selling to them. It will all come right one day but not today. macdunk

[roddy]

Hi M D
true sheep and beef farmers have put away the cheque book! The focus now is on positive cash flow
and not relying upon capital gain,beef has held up well this season and is forecast for an 8% increase this year,however lamb is not quite so pretty,with breeders not being rewarded for their effort,from oct - dec having values coming steadily down and virtually farming over this period for no return

cheers
roddy

[beacon]

I'll second that roddy, from what I'm observing. SI PGG stores didn't look too busy this Jan either.

[duncan macgregor]

The market still on a downtrend with this stock. I wonder how low it can go before it becomes oversold and reverses. My $1-40 buy price might be on the cards yet, especially if they play silly buggers overseas. I must admit i would never have picked it to get this low, I thought the dollar would have dropped with farmers incomes restored by now. I would think that PGW must be picking up a few bad debts along the way, that will hit the bottom line. It only shows you what a valueable tool a stop loss is what ya reckon MICK100?. Only having you on mate dont get your Irish up.:D:D macdunk

[scamper]

i thought i found an interrupted downtrend in december, and dreamed that it was oversold and about to reverse. sadly...
scamper sold today.

[Nevl]

Yep i think PGW is on a down trend but check out the economist and the IHT both are predicting higher food commodity prices in the next few years as the switch to ethanol causes food supply to fall plus the Aussie drought. I will be buying when this downtrend finishes ready for 2nd half 2008. The international press is pretty bullish about Food prices over the next few years. The joker being the DOHA round. Even a 10% fall in subsidies is good for NZ and both main players are going for more than that.

Will be looking to catch a falling knife here in the next 6 months or so

[scamper]

That sounds like a good watching brief Nev.
i'll will wait until the chart tells more than a couple of buy signals next time, however.
At four indicators minimum, scamper will be back!

[Nevl]

I don't have time for charts as a lot of time i am out of internet range. But have done a bit more research today and i will to look to invest later in the year I think. I am actually fairly positive about being food producing nation over the next decade. Moves to Biofuels are also great and NZ could easily become self sufficent with the right investment. As Steve Tindall says we can import Brazilian flex fuel cars and pretty much cut our Oil imports by 80% over the next 10 years. That would make a huge difference to our Current account deficit. Long term i am positive about Agriculture in NZ and this is a well run company.

Let me know when you see a sentiment change on the charts. My market timing usually sucks and I always invest 18 months too early.

[duncan macgregor]

NEVI,The results to dec 31st come out on the 26th of feb. It looks like a bad one, the rats are jumping overboard early on in the play.
Down to a $1-50 at one stage today, who would have thought that twelve months ago?. The cowboy exchange is alive and well the succers that dont see the signs end up paying the piper. The market will be right more often than you or I Nevi, get into charts. macdunk

[Nevl]

charts require pretty much daily attendence and i spend half my year sitting on a greek beach with no internet except once per week. It is just not practical. Better buy a good stock and hold. When i stop sitting on a beach and hiking in the outdoors then i will use charts.

[duncan macgregor]

quote:Originally posted by Nevl

charts require pretty much daily attendence and i spend half my year sitting on a greek beach with no internet except once per week. It is just not practical. Better buy a good stock and hold. When i stop sitting on a beach and hiking in the outdoors then i will use charts.
NEVI, In a situation like you are in a trailing ordered stop loss is a must. To buy and blindly hold is not on. Charts are very simple to get and read. once a week is enough for most things ;). long term investments can change over night set a stop loss level up and relax. macdunk

[Snoopy]

quote:Originally posted by duncan macgregor

NEVI,The results to dec 31st come out on the 26th of feb. It looks like a bad one, the rats are jumping overboard early on in the play.
Down to a $1-50 at one stage today, who would have thought that twelve months ago?. The cowboy exchange is alive and well the suckers that dont see the signs end up paying the piper. The market will be right more often than you or I Nevi. macdunk


Macdunk on page 13 of this very thread I wrote the following


quote:Originally posted by Snoopy


PGW is already guaranteed $7m in profit for FY2007 following the sale of a seeds research farm, Ceres Farm on 31st July 2006. I don't think there is any cause for alarm this financial year, as the full savings from the merger are yet to make themselves felt.


'Traditionally' (if I can use that term for a firm that has only been going a year) the first half earnings of PGW are well below that of the second half. PGW have already booked $7m in HY2007 profit. So even if the underlying result is a loss of $2m, the result will still equal last years $5m.

Believe what you like about 'leaks' Macdunk. But whatever the result it will be historical and have little relevance on what happens from here on. Much more important will be the outlook for the rest of this year (both financial and the weather), and for FY2008. Of course the result should give us the first hint of the full cost savings possible under the 'PGG', 'Wrightson' merger, and I *will* pay attention to detail like that. But the headline profit figure, whatever it is, will be nearly meaningless

Of much more interest is the rising exchange rate. There must be some concern for FY2008 with Fronterra not hedging as many of its future sales using forward cover. IMO this is much more likely to be putting pressurre of the PGW share price than any 'leaks'. But the merger to form PGW was done to ride out tough times like this. I'm prepared to cut Norgate some slack and see how his management team performs under pressure. In a week we will all find out.

SNOOPY

discl: hold PGW

[duncan macgregor]

Snoopy as always you are defending a companies dropping share price.
You are oblivious to the fact that this is a very obvious result of low or nil profit margins to farmers. If you want to make a complete fool of yourself then buy on the way down. I will only buy on the way up, however long that takes, as long as the prospects are right. In our market the share price rises or falls before the pending announcement, i call that insider trading, you call it whatever. Bad announcement coming up snoopy, stop and start to think for a change. Try getting your fundamentals right for a change, talk to the store manager, then visit a couple of farms. Farming is only a 3pc play plus appreciation. There is not much room to move, they the PGW customers are making nothing, think about bad debts, plus decrease in custom, plus the overseas pie in the sky projects. The market will tell you right from wrong, there is no requirement to defend a losing position. Macdunk

[Mick100]

quote:Originally posted by Snoopy
[

'Traditionally' (if I can use that term for a firm that has only been going a year) the first half earnings of PGW are well below that of the second half. PGW have already booked $7m in HY2007 profit. So even if the underlying result is a loss of $2m, the result will still equal last years $5m.










I hope the result is a bit better than that snoopy.

I realise that the winter/spring weather conditions couldn't have been much worse than they were for 06 which will have had an impact on PGW's performance for the first half of financial yr 07.

The expected $25 m in cost savings from synergies will have to kick in to save the day. I agree with you snoopy - what's going to be interesting to see is how much of this "cost savings from synergies" makes it to the bottom line.
.

[Snoopy]

quote:Originally posted by duncan macgregor

Snoopy as always you are defending a companies dropping share price.


Talk about massaging the facts to suit your story! I don't know whether the PGW share price will go up or down when the results are announced. But I do know that in a falling market PGW was *up* 1c today to $1.58.


quote:
You are oblivious to the fact that this is a very obvious result of low or nil profit margins to farmers.


This is not news. Everyone knows that farmers have had a tough year - including Mr Market. You underestimate him.


quote:
If you want to make a complete fool of yourself then buy on the way down. I will only buy on the way up, however long that takes, as long as the prospects are right.


When PGW 'gets to the bottom', are you going to ring a bell?


quote:
In our market the share price rises or falls before the pending announcement, i call that insider trading, you call it whatever. Bad announcement coming up snoopy, stop and start to think for a change.


History shows that the market tends to over-react to bad announcements. I am ready with my cheque book. Are you?

Or maybe Mr Market has over-reacted already!


quote:
Try getting your fundamentals right for a change, talk to the store manager, then visit a couple of farms. Farming is only a 3pc play plus appreciation. There is not much room to move, they the PGW customers are making nothing, think about bad debts, plus decrease in custom, plus the overseas pie in the sky projects.


You have just written an epitaph for *every other* retail sector share *except* farm service companies. Do you really think farmers will let their soul, their land, go to weeds while they rush to town to buy their partner a fresh wardrobe of clothes and a new car?

SNOOPY

discl: hold PGW

[Bling_Bling]

One thing is for sure and that is the $NZ is not going down anytime soon. Everyone is expecting another interest rise pushing the dollar higher. Property market is keeping the rates up. Politics is killing our export sector. PGW is not looking good in the near future.

[Nevl]

fonterra payout increase was nicely timed. like i said the outlook for NZ farming is pretty good. when the charts change i will be in. I also like the Uraguay farms and sorry Macdunk but i have done well betting against you. WDT, MVN. Now if the doctor would come out against PGW i would mortage my house to invest

[duncan macgregor]

SNOOPY And to a lesser extent MICK100, This trading sector that PGW are in is having a very bad time, you both should be out of it. Tell all the boys and girls why you are so dumb to hold a share that drops from over $2-30 to its lowest trade yesterday of $1-50. Yes $1-50 that was the bottom trade yesterday it closed up a cent up at $1-58. Thats not the only reason look at the time you lost in a market, a market that increased as much as PGW went down. Its the market that will tell you when to buy back in, it is the market that tells you when to sell. All your fundamental analysis is as useless as tits on a bull if you fail to understand that. You really need to get out the office and ask a farmer a few things about reality. macdunk

[Snoopy]

quote:Originally posted by duncan macgregor

SNOOPY And to a lesser extent MICK100, This trading sector that PGW are in is having a very bad time, you both should be out of it. Tell all the boys and girls why you are so dumb to hold a share that drops from over $2-30 to its lowest trade yesterday of $1-50. Yes $1-50 that was the bottom trade yesterday it closed up a cent up at $1-58.


I have no idea why one small shareholder was so desperate to get out Macdunk that they accepted $1.50. Whereas if they had simply stopped for a cup of tea and a biscuit they could have got a 5% higher price one hour later. Perhaps there is a lesson there. If you trade, do not trade on the intraday prices - I don't think Phaedrus does! Nevertheless behind your exaggerated question there is a serious point to answer.

The reason I was prepared to hold PGW at $2.30 is that 'back then':

1/ I expected the synergies of the PGG/WRI merger to come through sooner than they did.
2/ I expected the exchange rate to be lower than it has turned out to be. And
3/ I was significantly underweight in PGW anyway at a time when I was looking to derisk my portfolio. Selling would have increased portfolio risk.

The currency where it is now has had a negative effect on farm incomes. The fact that I was wrong on the timing of the synergy benefits and the currency isn't necessarily a reflection on my wider judgement. Generally predictions in commodity markets, which farming certainly is, are more difficult to make than added value markets. I think I could make a fair guess at the profitability of a chain of beef burger bars in five years time, for example. But ask me what price farmers will be getting for their beef in five years time and I would be lost!

Back to PGW, if management are performing well one tends to believe their targets and projections. The excuse that the full PGG/WRI synergy benefits are delayed is not totally unexpected in a process of bedding two existing businesses together. That means I will have to wait longer for the full synergy benefits to be reflected in the PGW share price. But I am quite prepared to do just that, so no big deal.

As for the currency (and the weather for that matter), forecasters say many things but in the end as a farmer you just have to work with the cards you are dealt. The PGW share price did not fall from $2.30 to $1.58 in one easily foreseeable calamatous event. It was an unfolding situation whereupon a downward step did not necessarily imply the subsequent step would be downward. Mr Market didn't predict the currency or the weather over the last year or two. He simply reacted to it.

You say that I should have read the market signs and got out. But on many occasions the number of shares I hold in a second tier company exceeds the total number of shares historically traded on any given day. That means I couldn't enter the market myself without changing the buy/sell balance so significantly that I would have never been able to achieve the 'price the share closed at' anyway. The theoretical price I could have got out at is a fiction


quote:
Thats not the only reason look at the time you lost in a market, a market that increased as much as PGW went down.


Only a problem if your only investment was in PGW. In fact PGW was one of my smaller investments, although granted I was above 'index weighting' in it. I mainly increased my current shareholding *after* the share price had plunged to various historical support points. That means my 'losses' (sic, as I am actually well ahead on PGW), if I were to sell out, are not as great as you suppose.

<blockquot

[living2]

I am still in the dark(maybe I'm a mushroom!!!) but I doubt that the long term shareprice of Wrightson is dependant on exchange rates and the weather!!!!

[duncan macgregor]

SNOOPY, It is the market that lets you know when you have made a mistake. The market is telling me right now that there is a bad report due out on the 26th of this month. The market decides who is right or wrong, not you or i. When i see the fundamentals coming right according to macdunk, i first look at what the market thinks then add what i know to the analysis. The fundamentals of this sector are the easiest to understand it is all sign posted for the blind to see. When i see the farmers making a few dollars i know its time to see what the market thinks about the companies selling products to them. Last years figures are only toilet paper, it is next years potential figures and profit margins that i am interested in. The market seems to know in advance a good report from a bad one, learn to read the markets reaction to reports before they come out.
When i buy a share it is after my fundamental analysis good or bad take your pick. I look on what the market thinks, then if i buy i stick a five pc stop loss plus a 20pc time line on it thats how much i lose other than brokerage when i get it wrong. When it proves itself right i drop my stop loss and time line to a lower level.
The shares that i get wrong i lose 5pc plus brokerage with my money going into rising trends, other than the times that i am silly enough to let emotion run riot with common sense. PGW it was the market that told me to get out, the share was a loser, my gut feeling is it will come right I will return to you telling me how right you were all the time to hold at all costs.:D :Dmacdunk

[duncan macgregor]

quote:Originally posted by living2

I am still in the dark(maybe I'm a mushroom!!!) but I doubt that the long term shareprice of Wrightson is dependant on exchange rates and the weather!!!!
YOU SILLY MUSHROOM YOU. :D:D:D
Only kiddin. Macdunk

[shane_m]

mate who cares if chuks in Mcdunks farm not laying any eggs. Mcdunk is saying NZ farming sector going to go bust any time now.

PGW got a monopoly in NZ selling farming gear. I will closely monitor the upcoming ann and get in with a margin loan. PGW is one of the pre qualified stocks you can get margin loan.

[Mick100]

quote:Originally posted by living2

I am still in the dark(maybe I'm a mushroom!!!) but I doubt that the long term shareprice of Wrightson is dependant on exchange rates and the weather!!!!


I agree living2
Having spent a good portion of my life in farming I couldn't help noticing that the seasons (winter, spring, summer , autumn) usually cancelled each other out, ie good summer followed by a dry autumn or severe winter followed by a good spring. This time farmers have experienced a severe winter followed by a cold wet spring followed by a great summer and hopefully a good autumn. So the seasons usually even themselve out - like a reversion to the mean.

As far as the high NZD is concerned, in the short term it will have an adverse effect on farmers incomes. But think about it another way - commodities are traded in USD - the USD is depreciating against the NZD as well as other currencies - USD commodity prices are increasing partly because the USD is declining in value and partly because of the increase in demand for commodities - the end result is that commodity prices sre still increasing in NZD terms although not as rapidly as they are increasing in USD terms.


The point is that one of the reasons commodity prices are increasing is because the US dollar is declining in value - so it's a double edged sword - commodity prices increase in USD but at the same time the NZD appreciates against the USD

Hope people can understand that

.

[kura]

For what it'w worth I've just put in a buy order for 1000 shares, will review numbers in detail once they come out, and maybe make a more substantial purchase then.

Watchlists don't work for me, I have to have a couple of dollars on the line before I pay attention !

[duncan macgregor]

quote:Originally posted by shane_m

mate who cares if chuks in Mcdunks farm not laying any eggs. Mcdunk is saying NZ farming sector going to go bust any time now.

PGW got a monopoly in NZ selling farming gear. I will closely monitor the upcoming ann and get in with a margin loan. PGW is one of the pre qualified stocks you can get margin loan.
I never said farming will go bust they simply stop spending.
Good on you anyway the market needs people like you to borrow money to buy what we sell.
Hope you prove me wrong Shane wait till after the announcement though. :D:D:D macdunk

[Snoopy]

quote:Originally posted by Mick100


Having spent a good portion of my life in farming I couldn't help noticing that the seasons (winter, spring, summer , autumn) usually cancelled each other out, ie good summer followed by a dry autumn or severe winter followed by a good spring. This time farmers have experienced a severe winter followed by a cold wet spring followed by a great summer and hopefully a good autumn. So the seasons usually even themselve out - like a reversion to the mean.


Tell that to the Australians....

That's the other bit of the commodity pricing puzzle you missed out Mick. Crops over there, both vegetative and four legged are collapsing as farming overall hits a twenty year low. Demand hasn't collapsed, so who is in there ready to supply the missing merchandise - N.Z.! And there are many instances where we can take full advantage of the commodity price hikes


quote:
As far as the high NZD is concerned, in the short term it will have an adverse effect on farmers incomes. But think about it another way - commodities are traded in USD - the USD is depreciating against the NZD as well as other currencies - USD commodity prices are increasing partly because the USD is declining in value and partly because of the increase in demand for commodities - the end result is that commodity prices sre still increasing in NZD terms although not as rapidly as they are increasing in USD terms.


Dairy and beef seems to be following this rule. Lamb isn't though. And the reversion to the mean on the wool clip pricing hasn't happened to bail the sheep farmers out.

Oh, and don't mention timber....

SNOOPY

[living2]

When farmers incomes drop as they have done over the last 2 years they still need the services Wrightsons supply but farmers shop around more.Farm service suppliers margins get squeezed.&gt;Of all the farm supply companies IMHO Wrightsons lead the pack in dropping their margins to maintain their T/O.I anticipate their T/o to drop slightly and their profit to crap out unless the Leopard has changed it's spots. IMHO:NZ farming is sitting very pretty BECAUSE we are an exporter of commodities.Supply will be limited because of Aussie drought and grain prices around the world are going up dramatically bacause of poor growing seasons but also due to the use grain for ethanol production in the USA.This is likely to increase cost of production of milk and beef in the USA and drive up farm commodity prices.
What has this to do with Wrightson??ALOT IF the Leopard can change it's spots

[salsanova]

hi ,well i write in this forum very really.i'm a techy and look at very little fundamentals ,looking at my candlestick charts today and the nzx candlestick chart. i'm confident enough to have a punt for a couple of thousand at 2.60 on pgw ,rsi is looking good and a reasonable rise in volume today over the 20 day margin .macd is starting up the down side, so i'm in.this ones been running nowhere for sometime ,so could be in for a change of market sentiment
have decided to have a big buy up tommorrow, as cashed up last friday to take profits, others i am going to try and buy are(fre;pgw;ppl;ebo;stu;trh;nzr)1000 shares a pop wish me luck

[duncan macgregor]

quote:Originally posted by salsanova

hi ,well i write in this forum very really.i'm a techy and look at very little fundamentals ,looking at my candlestick charts today and the nzx candlestick chart. i'm confident enough to have a punt for a couple of thousand at 2.60 on pgw ,rsi is looking good and a reasonable rise in volume today over the 20 day margin .macd is starting up the down side, so i'm in.this ones been running nowhere for sometime ,so could be in for a change of market sentiment
have decided to have a big buy up tommorrow, as cashed up last friday to take profits, others i am going to try and buy are(fre;pgw;ppl;ebo;stu;trh;nzr)1000 shares a pop wish me luck
Welcome to the site wish you the best but i think you are due for some rude shocks. PGW have descended from $2-30 rough figures to $1-58. It does not matter if you use candlesticks snail trails, or chicken entrails to work it out, thats what it has done.
The technical analysis [I use simple charts[:o)]]tells me that there is no buy signal. The chart told me to sell i would wait if i were you for the chart to tell you the trend had changed. Whatever you do dont buy before the 26th of feb you will get a clear pointer on that date. All the best give me heaps when i get it wrong. Macdunk

[salsanova]

yeah mac d, sorry about that really late at night when i wrote that, realised after post, i meant 1.60 .anyway no movement so far ,so nothing has triggered the buy

[duncan macgregor]

quote:Originally posted by salsanova

yeah mac d, sorry about that really late at night when i wrote that, realised after post, i meant 1.60 .anyway no movement so far ,so nothing has triggered the buy
Good on you mate be carefull with this one, better opportunities on your side of the ditch. MACDUNK

[duncan macgregor]

The market finished on a low for PGW expecting a down grade in profits. On the bright side Fonterra are paying the farmers 10c a kg more than first expected for milk. To counteract that fuel prices more than ate that up. Going by what ALF reported it might not be good, but not quite as bad as first thought. ALF would have been much better if they had stuck to their knitting.
I never like when they throw the pattern away, and go it alone in strange markets without testing the water first [MHI style]. The farmers are making little or nothing, the spending is reduced to bare essentials. We will see tomorrow if the market picked it right or not, my opinion is, it will be bad, but could have been worse.
Sp forecast tomorrow night $1-50 with the dividend slightly reduced. macdunk

[Nevl]

mhi style? Starting with a few shops and slowly building up is throwing away the pattern and going blind???

[duncan macgregor]

quote:Originally posted by Nevl

mhi style? Starting with a few shops and slowly building up is throwing away the pattern and going blind???
The other companies to compare is RBD and TEL then the warehouse they all jumpted in boots and all, then found out they didnt know how to swim against the tide. :D:Dmacdunk
C-mon NEVI i said $1-50 monday night you say [?]

[Nevl]

Sorry Macdunk. i actually misread your post. I misread the Paranthesis and thought you were suggesting MHI got it wrong. Sunday arvo i guess.

I actually think that the share will stay around $1.50 to 1.60 for the next month and then start to edge up. Same reason as given before. Food prices are about to increase. Check article in SST today.

The Fonterra payout is the perfect example. Sheep farmers will hurt a bit long but Beef is looking ok. The cost of Feed grains will also increase. US farmers will start producing more corn for their cars and then pull back on Beef production.

The jokers in the pack are Doha and the Kiwi$. Both will probally have a postive effect on farm incomes from the end of 2007.

Also $4.15 for dairy was not such a bad payout 6 years ago. Just they have paid so much for their farms in the last 6 years it is probably hurting. But I remember when the payout hit $4.00. A lot of farmers I knew were dancing in the milking sheds.

Still a lot of farmers have being around for more than 6 years. Have got some great waterfront properties brought a few years ago and are relatively debt free after 5 years of excellent payouts.

[living2]

When is the paper profit on the Uruaguay JV going to be booked,maybe the only thing to shore up the profit??
Disclosure: never have and never will own these

[Nevl]

Results out. Actually a lot more positive than I expected. Hopefully they get rid of their Aussie assets and go more into South America. Will see where the bottom is and if people were expecting more. Anyway it could have being a lot worse and with the expect upturn I am pretty confident. Will be putting some cash in soon.

[duncan macgregor]

Little bit better than i expected as well NEVI. I wont be investing in them for a while, farm incomes have to come right first. I dont like all this overseas stuff i think they will get their fingers burned. Interested to see if my prediction of a $1-50 a share fronts up tonight. MACDUNK

[Bling_Bling]

[quote]Originally posted by living2

When is the paper profit on the Uruaguay JV going to be booked,maybe the only thing to shore up the profit??
Disclosure: never have and never will own these
[/quote


$1.30 is the next support level.

[Nevl]

Hanging about 1.55 to 1.56 at the moment. Still time to drop depth looks ok for now.

Maybe tomorrow

[beacon]

Result bettered my expectation, I bought today, though sentiment suggests weakness in the price short term

[beacon]

Bought more today thanks

[Nevl]

Macdunk got his 1.50. today is a great day to top up holdings
Kiwi $ dropped 3% again the yen. Some carry traders will be getting worried

[kittydashwood]

Yes the carry trade is beginning to see some pressure.
Liquidity may start to disappear from global markets and we may see increased volitility.
The US $ should strengthen from here contray to public opinion, so a few PGW might work out after we bottom out in the low 1.30's.

[Nevl]

Hmm Kiwi $ drops overnight but settles during the day. All good for PGW tho. Am a little more confident about this share now. Am not sure if it will hit the 1.30 mark. Not with the Kiwi beginning a down trend

[duncan macgregor]

Another kick in the guts for farmers today with the kiwi dollar about to go the wrong way. Pgw will now really be up against it to even stand still. My dollar fifty prediction is more likely to be a $1-40 now that the idiots threw a bucket of cold water over any hopes of a price increase. I cant see them doing any good in the short to medium term, thank god i had the brains to move to the ASX.
Whats is left?. The factories are all relocating to china, you get penalised if you cut your trees down, now they are doing their best to send the farmers broke. They even tried to have a fart tax:(Anyone out there going to admit voting for this crap?. macdunk

[COLIN]

I really worry about our friend, Snoopy, though. He seems such an earnest young chap, who "doggedly" (sic) defends his decisions to ride all the way down the curve with stocks such as PGW and SCT - he seems to have a lot of brainpower, so why does he do it?

[beacon]

I didn't macd

[kittydashwood]

Where's Brother Coy?
Interesting to see what happens after the dividend.
I'd wager this share is starting to look interesting to Pirate Equity
stateside.


Watch for the MCDU signal

[Westie]

Any able to elaborate on the following question:
Do NZ farmers (sheep & beef) use a great deal of supplementary feed (i.e. grains & corn derived feed)?

Wheat, corn etc is expected to rise in price over next few years due to supply constraints. Trying to get some thoughts together on how this will affect rural NZ.

Ridley Corp in Australia are expecting smaller herds in Australia in the next few years if grain inputs rise in price.

[duncan macgregor]

The short answer is no. Nz farmers grow hay to suppliment feed in times of shortage. Increased grain prices will benefit beef and sheep farmers in general, but will have the opposite effect on NZ chicken farmers. macdunk

[living2]

I agree with Mc D&gt;Sheep and beef farmers rarely feed grain unless there is a severe drought.Dairy farmers do feed suplements but mainly in the form of palm kernal,rarely in the form of grain.IMO NZ farmers will benefit if grain prices rise forcing up the cost of stock feed to non pastural farmers eg chicken price in the USA has increased 40%? due to lift in feed costs.

[Phaedrus]

New Low today. The downtrend continues.

http://h1.ripway.com/Phaedrus/PGW320002.gif

[duncan macgregor]

We all know the reason for the downtrend it follows the fortunes of the farmers. It is that simple. Farmers are the customers its not how good or how bad PGW are, it is how much farmers can spend first of all, then where they might spend it second. PGW fortunes follow behind the farmers profits which are very simple to follow. The dollar is to high the prices at the gate to low PGW will trend down until that changes. ITS SIMPLE YOU AINT GONNA SPEND WHAT YOU DONT HAVE. macdunk

[Bobby_Fischer]

They are trading XD (4 cents) today, chaps. So last sale effectively unchanged from Friday.

[duncan macgregor]

QUESTION FOR PHAEDRUS, Why do you show a chart of PGW when there was no such company at your start point?. I used to own PGG at your start point in the chart which you presume was WRI at that point. Surely with your charts you can at least start from the starting line. You are giving people false information PGG and WRI were completely separate companies before the joined At least show that point if you want to be realistic. Macdunk

[Phaedrus]

Woops! Sorry, I hadn't realised that PGW went ex today - I will post a corrected chart.

[beacon]

Looks like Im beginning to feel inclined to follow your advice mcd. Thanks in advance for the updated chart Phaedrus.

[duncan macgregor]

BEACON, The year 2007 was the year that i was completely out the NZX.
Like I said farmers are doing a starve, manufacturers cant compete, even foresters have it tough. The only shares that were worth holding was power generating companies, and old folks homes. NZ is in for a very tough time, we cant compete under these conditions,even at $1-40 the sp is to high, their customer base is being shot down in flames. One very large volcano will set us up in a repeat ice age wiping out farming as we know it, but we are to worried about the cow farting to give that a second thought. PGW are heading into very tough times, not for me to start a crusade better to jump the fence where the grass is greener. macdunk

[ragwort]

Okay, things are tough at the moment for farmers, and not too many of them are showing fantastic results for 2006 or 2007 ytd but as we all know, farming is cyclical and the prices farmers are receiving at the gate, although low compared to recent years, are still relatively stable compared to historical prices. In particular I'm talking about lamb & beef. When things get a little tough, farmers close the cheque books and cut back on the discretionary farm expenditure i.e. less new tractors, less capital development etc.

Adding to this is the restructure that PGG has been through post merger with the company putting on-road reps in many areas at a larger than modest cost. To date, I don't think they have realised the gains they were hoping for/expecting. Things are tough at the moment but farmers have been through these times many times before. They and PGG will bounce back but the question is how long before this happens.

[beacon]

And it is that question of "how long" that I am contemplating. Reduced holding

[kittydashwood]

PGW won't be ripe to bounce back until all optimism for the future of the primary sector has evaporated and the BOJ have finished raising rates. So the remaining third of my long term holding was stopped out at 1.62, (2.14, 1.77 previous tranches) I did get sucked back in a little at 1.80 on the bounce but I caught myself and forced a wash sale.

What is the rural supply cycle? Two years up, Two years shoulder and four years down? Are commodity prices steady rise enough to counter the melting US dollar? Debt defaults in South America?
NZUSD .80 crossrate could hurt even if it's only a quarter or three.
Who wants to bet on strength of the US dollar?
Hmmm Maybe but only if inflation gets out of hand and breaks up into Bernake's pain threshold and by then all the farmers will be paying 80$ per barrel oil.
Might be the perfect storm for Craig's Amigos:(
Back to 1.24 with a long two year dead cat bounce?
I'll be watching this one closely for a very oversold entry on the ten year chart. I am confident in the ability of this mangement to ride it out and continue to bed down the merger benifits, but in this environment

[living2]

Merger benefits?????Wrightsons now have more reps driving through farmers gates giving more of their potential profit away more like it!!!!!!at a cost of $60,000? to put a rep on the road.
e.g.I have now confirmation they are giving away 10% discounts on drench sales and other services when the GP% was only 7%????
So are they out of their tinny little minds or not!!!
They are just price leaders at discounting to drive the animal health market down.They're not interested in preserving their bottom line

[Mick100]

Ag COMMODITIES REPORT

http://www1.asbbank.co.nz/reports/default.asp?link=http://www1.asbbank.co.nz/reports/rural/report7.asp?idMessage=5933

Extract;

Dairy Comment - Fonterra payout expectations
This week we review what the considerable increase in dairy prices means for the dairy payout - both this season, and next. (Comments from Professor William C Bailey will resume next week)

Dairy prices for all the main export commodities have risen dramatically over the 2006/7 season. Prices for all products are now trading at record high spot prices, as shown in the Dairy Commodity Prices chart. The increase in USD prices has more than offset the strengthening local currency.
When estimating the final payout for the season, there are several components. Firstly, the "Value Added Component", which has ranged between 45 and 48 cents since the 2002/3 season.
Secondly, Fonterra enters into supply contracts, where sales are negotiated at prices that could be outside the range of current spot prices.
Finally, the conversion rate into New Zealand dollars must be estimated.
On 20 February, Fonterra lifted the total forecast payout for the current season by 10 cents to $4.15 kg/ms, with the milk price component of payout increasing from $3.60 to $3.70 and the value add component remaining unchanged at 45c.
This lift is quite reasonable, given that the increases in dairy prices have come quite late in the season, and Fonterra would have been committed to contracts set at lower rates. Fonterra forecast a payout of $4.05 in September 2006, but has benefited from strong prices offsetting the higher than expected New Zealand dollar. If a favourable set of conditions continue, there is potential for Fonterra to lift the payout slightly (5 to 10 cents) as they did last season. For the 2007/8 season, we expect that the New Zealand dollar will remain relatively strong, and have a forecast conversion rate of 0.68 cent US for the season. We expect that the current spot prices in part reflect short-term supply shortages, and are likely overstating the prices negotiated by Fonterra in the future for the next season. We expect dairy prices are likely to be slightly lower, and are using prices that are between the 2006 season to date estimates, and the current spot prices for our forecast. For the purpose of our forecast, we assume no change to the Value Added Component.
Given this mix of conditions, which we caution are subject to sudden change, we are comfortable to estimate the total forecast payout for the 2007/8 season of $4.60. Fonterra will confirm this season's payout at the end of the current season (June) and are expected to provide preliminary estimates for 2007/8 over the next quarter.

As I have stated before, the outlook for farmers is no where near as gloomy as some of the "non holder" contributors to this thread make out it is - even this season is shaping up quite well for the "average" farmer. Expectations of increased incomes next season will no doubt increase farm spend

As usual, some contributors are so focussed on the PGW shareprice, they can't see the wood from the trees.
.
,

[duncan macgregor]

JEEZE MICK, You fallen in love again?. Sell the bloody things. macdunk

[BRICKS]

quote:Originally posted by duncan macgregor

JEEZE MICK, You fallen in love again?. Sell the bloody things. macdunk


IN your case you cant SELL something you do not OWN so another failed CASE.. [8D]

[duncan macgregor]

quote:Originally posted by BRICKS


quote:Originally posted by duncan macgregor

JEEZE MICK, You fallen in love again?. Sell the bloody things. macdunk


IN your case you cant SELL something you do not OWN so another failed CASE.. [8D]
Bricks, Dont be so thick you can only be a failed case watching them go down from $2-30 to under $1-50 without getting out.
You are not that thick surely BRICKS to have done that are you?.
:D:D:Dyour old mate Macdunk

[BRICKS]

quote:Originally posted by duncan macgregor


quote:Originally posted by BRICKS


quote:Originally posted by duncan macgregor

JEEZE MICK, You fallen in love again?. Sell the bloody things. macdunk


IN your case you cant SELL something you do not OWN so another failed CASE.. [8D]
Bricks, Don't be so thick you can only be a failed case watching them go down from $2-30 to under $1-50 without getting out.
You are not that thick surely BRICKS to have done that are you?.
:D:D:Dyour old mate Macdunk


JUST talking history again that every one knows and your burped before like over and over so how thick will be your next STATEMENTE be.. [8D]

[kittydashwood]

Duncan's sell is a excellent leading buy signal however I have not back tested throughly. PGW have to move from a retail emphasis to a rural emphasis. If the company can make this move and continue to moderate the cyclical nature of it's income the long range future is bright despite the intermediate Forex dangers. The question is how fast will ponzi scheme unravel, or are the US treasury creditors faced with a hobson's choice on commitment to the US dollar. In this light PGW would be a good contrary play on US dollar weakness.
I'm sure there are many buyers coaxing this one down however, Yield investors beware the stability of the PGW dividend should not be taken for granted. Although the lower we go the more likely private equity could target the company, or maybe a South American competitor of Fonterra....

Still cash looks pretty good to me at the moment as NZ is poorly represented in the material and energy sectors and they seem to be the most resilient globally.

[duncan macgregor]

Kitty, You can only call it as you see it. It has been on a confirmed downtrend since may of last year when it was $2-30 or near enough. To be left holding requires you to be blind to reality, stupid, or perhaps stuck them in the bottom drawer and forgot you had them. To bottom pick is not on until the sector starts to come right. The NZ dollar is killing the exporters, the farm gate prices are to low, PGW customers have cut their spending right back. If you have any system at all other than blind faith, you would have been out of this company last year. The money from PGW was invested in Australian nickel companies look it up on the other thread.:D:DMACDUNK

[kittydashwood]

Stopped out of IGO on Friday. Insiders keep selling and nickel has a potential double top developing.

[duncan macgregor]

quote:Originally posted by kittydashwood

Stopped out of IGO on Friday. Insiders keep selling and nickel has a potential double top developing.

KITTY, Nickel and uranium are all my holdings at the moment with AGM going up 8pc today. My portfolio Over Fifty pc up in three months it surely beats farming. I dont like PGW buying farms in south America, farming is a family business they will come back with their tail between their legs, like lots of NZ companies before them.
Farming is a low profit life style business, with a good capital gain at the end. Its not a good company business, as they will find out. macdunk

[croesus]

Jess my Huntaway, and Whippett my Foxy/greyhound/jack/russell cross agree withyou Dunc.

[Bling_Bling]

There will come a time to buy this stock, but not right now. HAve to wait for the dollar and interest rate to show a sign of turning. PGW management going overseas does worry me. Bling still waiting and watching the show as they are unfolding.

[Mick100]

NZ ag commodities report

The New Zealand dollar has displayed impressive strength over the last couple of months, and is now trading around $US 0.715. This strength is expected to continue, providing a head wind for many exporters. However, for dairy farmers the pain from a high dollar looks like it will be more than offset by high global prices next season. Fonterra is holding meetings with farmers around New Zealand this week, and is reported as saying it will pay at least $4.50 a kilogram of milk solids to its farmer shareholders next season. (Our forecast is $4.60 for the 2007 2008 season). Last week dairy prices rose a staggering 4.9 percent in USD terms, more than offsetting the 1.9 percent appreciation in the NZ dollar. Beef and sheep prices were little changed in NZD terms over the week. Sheep prices are generally unchanged with prices still weak. A positive for beef exporters is the fact that the number of livestock on feedlots in the US had decreased from last year by around 4 percent which will significantly affect the volumes of beef available in the US market. In the medium-term this will likely result in higher prices being paid for imported beef (Source Agri-fax).
NZ interest rates picked up last week, reflecting increased borrowing demand from fixed rate mortgage book hedging.




Guest Dairy comment from Professor William C Bailey, Chair, Department of Agriculture, Western Illinois University
.
World dairy prices continued to strengthen. While prices will, eventually, peak and then weaken, there is no sign yet when that might happen. From the supply side, the world milk production situation holds no surprises - drought in Australia, seasonally slowing production in New Zealand slightly accelerated by a lack of moisture and the Northern Hemisphere season off to a good start. Despite the lack of supply uncertainty, prices have continued up, with each increase adding a risk premium. How high prices must go before they start limiting demand is not clear.

ASB economists believe prices will remain near current levels for at least one year and, as a result, have forecast New Zealand dairy co-operative Fonterra's payout next season to reach $4.60 per kilo of milk solids - about 10% above this year's payout. World dairy prices have been in new territory for several months, making price predictions challenging. Underscoring the difficulty in forecasting prices, take a look at 2007 price predictions, made in 2006 by a very well recognized and respected forecasting organization:
.

[Nevl]

Another report about food shortages.

http://news.bbc.co.uk/2/hi/south_asia/6495733.stm

[duncan macgregor]

Farming in general has a return on average of 3pc on capital. It gives a good livelyhood to resident working farmers, but is a bad investment for absentee farmers, or companies that invest in farms. If you borrowed all the money to buy a farm, and worked 16 hrs a day you would go broke regardless of how hard you tried. The farmer that has little debt, can expect to make a good living, have an excellant life style, plus a good capital gain when they sell.
PGW are setting you up into this in south America, It gives them nice overseas trips, plus a shop window for their products, but the worst thing of all, it shows the competition how best to compete with the farmers in NZ that might just have an edge on them.
Unless they are in the business of buying farms setting them up to resell, they are doomed to failure. I expect they will have enough pie in the sky investors who know nothing about rural life to give them the funds to squander. Macdunk

[kura]

quote:Originally posted by duncan macgregor
I expect they will have enough pie in the sky investors who know nothing about rural life to give them the funds to squander. Macdunk


That's rather negative of you MacD, look at the positives, firstly it would be a good ethical investment (ie sustainable, helping less devoleped part of the world ) and secondly I'm sure they will have lots of nice glossy photos in the annual return. :)

[Mick100]

[i]Milk Prices Expected to Rise 9 Percent
Friday March 30, 7:42 am ET
By Genaro C. Armas, Associated Press Writer
With Dairy Farmers Feeling the Pinch, Consumers Expected to Pay More for Milk This Fall


STATE COLLEGE, Pa. (AP) -- Dairy economists predict the retail price of milk could rise as much as 30 cents per gallon -- a 9 percent jump -- by fall. The reasons include rising fuel and feed costs for farmers and increasing demand for milk products around the globe.



The average retail price of whole milk could rise to $3.35 per gallon by October, up from $3.07 in January, said Ken Bailey, an agricultural economist at Penn State University who specializes in the dairy industry.

A U.S. Department of Agriculture forecast also predicts an increase in the price that processors pay to farmers for raw milk. That is typically an indicator that the retail price of milk also will rise.

Yet seesawing milk prices seem to have little effect on the buying habits of consumers like Celesta Powell.

Powell buys four gallons of milk every week for her four children, and even with milk prices expected to rise, she says she has no plans to cut back.

"You can't look at cutting your kids back on milk," she said after loading several bottles of milk from Meyer Dairy store into her minivan recently. "What are you going to give them, soda?"

When the average price of milk rose 19 percent in the spring of 2004, milk purchases declined less than 4 percent, said Stephanie Smith, a Denver-based nutritionist and spokeswoman with the National Dairy Council.

Habit and nutritional concerns appear to loom large, Smith said. USDA nutritional guidelines, for instance, recommend that most Americans drink 3 cups of skim or low-fat milk a day, or the equivalent amount of cheese.

The price of milk swings by classic supply-and-demand economics, said Douglas Eberly, counsel for the Pennsylvania Milk Marketing Board. When prices dip, it makes it harder and more expensive for farmers to make milk.

If demand remains constant, but the supply of milk goes down, prices tend to increase. That may allow farmers to ramp up milk production again, which increases supply and in turn likely lowers the retail cost of milk.

Logan Bower, president of the Professional Dairy Managers of Pennsylvania, said costs for farmers have risen so much recently that he is unsure whether even the predicted price increases will help.

Costs have surged for fuel and petroleum-based products and for the corn used to feed dairy cows, a side effect of increases in the production of ethanol.

Bower said he now pays about $180 a ton to feed his 500 dairy cows, up from $115 a ton a year ago, an increase of more than 50 percent.

There is also a growing demand for products like skim milk powder, dry whey and whey protein concentrates, which are exported for feeding programs in areas including the Middle East, Asia and Cuba, Bailey said. Whey powder is used in animal livestock feed.

"The result is that domestic supplies of these milk protein products are limited and global market prices are rising," he said. "That feeds back to the farm price of milk."

Federal legislators recently have drawn up bills seeking relief.

Sen. Bob Casey, D-Pa., earlier this week introduced an amendment that would pay Pennsylvania dairy farmers a subsidy for milk produced over the past six months.

Casey said the amendment would provide about $125 million in aid to help dairy farmers deal with higher energy, feed and other production costs.

"Without relief, more dairy farms may join the 250 to 350 dairy farms that go out of business every year in Pennsylvania," he said in a statement.

But Phoebe Bitler, vice president of Pennsylvania Dairy Stakeholders, an industry group that includes farmers, producers and grocery stores, said the price of milk should not be so dependent on subsidies for farmers so consumers get an accurate gauge of costs.

"We've made it so that the farmer has to produce it cheaper and cheaper all the time," said Bitl

[Bobby_Fischer]

Heavy turnover over the last 2 days and another 1.6 M traded this morning. Someone building a stake perhaps?

[Mick100]

Ag commodities report


* For all indices 1997 average = 100
** Percentage change since same week last year

The New Zealand dollar has strengthened further over the last week, and has broken through 0.72 cents US again. And at the risk of sounding like a broken record, dairy prices also gained last week, repeating the theme of the last few weeks. The gains last week were less staggering than the previous week's 4.9% gain in USD terms, but once again more than offset the currency strength. Ongoing prices, and solid demand growth is providing more reason to be confident in Fonterra's ability to lift the payout next season. We remain confident with our $4.60 payout forecast for the 2007 2008 season.
Sheep prices were down in US and NZD terms over the last week. Lamb slaughter is slowing, and this should support the seasonal increase in prices in the coming months. Prices for beef cuts were little changed in our main export markets last week. In sum, this saw the sheep/beef schedule fall in NZD and USD terms over the week.
Long-term NZ interest rates have consolidated as borrowing demand from fixed-rate mortgage book hedging moderated last week. Marginally below-expectations NZ economic growth (GDP) data saw markets pare back RBNZ tightening expectations a fraction. Current market pricing is consistent with around 40% probability of an OCR rate rise in April.


Guest Dairy comment from Professor William C Bailey, Chair, Department of Agriculture, Western Illinois University
This writer has exhausted superlatives to describe the continuing rise in world dairy prices. Recent price data from a widely watch source show both Oceania and European prices increasing last week, not just a little bit, but significantly. The percentage price increases, since the start of the year, follow:

Prices at 30 March vs. January 2007:

========== Oceania==== Western Europe
Butter====== 11% ==========10%
Skim Milk==== 19%========== 22%
Whole Milk==== 15% ==========25%
Cheese =======7% ==========N/A



Comparing this year's prices to last year's at this time, the percentage changes are:

________ Oceania__ Western Europe
Butter_____ 14%_____ 15%
Skim Milk _ 52% _____67%
Whole Milk _48% _____76%
Cheese _____12%_____ N/A



Eventually the higher ingredient prices, particularly skim milk and whole milk powders, will be passed along to consumers. The higher prices will work to reduce consumer demand and eventually, prices. However, as dairy input costs such as feed and energy increase, reductions in prices will be difficult. One well respected analyst sees US fluid milk retail prices increasing almost 10% over the next 6 months. When, and if, the higher ingredient prices are passed along to the consumer, markets will begin to retreat from their extremely high levels.
Comment:
Of importance to New Zealand is how the currently high global prices translate into the dairy payout. ASB recently forecast a 2007/2008 season payout of $4.60. Comments from Fonterra over the last week have confirmed this outlook. Fonterra's head of strategy and growth, Graham Stuart has commented on the company's latest forecasts, describing them as "the most optimistic demand forecast that we've ever put together as an industry." The latest forecast shows demand growing at 2.7% a year for the next 10 years, vs. 2% over the last 10 years. Chairman Henry van der Heyden said the "very, very positive" outlook meant Fonterra was likely to deliver a higher payout to farmers next year. The Chairman stated as long as the dollar remained stable, Fonterra was on track to deliver a payout closer to $5/kg [than $4] of milk solids in the 2007/08 season. (sources NZ Herald, Fonterra)


http://www1.asbbank.co.nz/reports/rural/report7.asp?idMessage=5952

[Nevl]

Starting to get metal type price increases in food. All postive for the Uraguay farms I guess. Just need sheep and Deer prices to improve as well. PGW are still making good progress and I am in the game. Phadreus does this jump represent a trendline break?

Will be fun to see how it goes as with the Divi I am looking good now.

What share are you down on now McDunk? Need to add it too my watchlist!!

[hods]

Hey Nevl ... I am an ex Fletcher employee who was offered shares in PGW back in the late 1990's ... price was $1.35, now over a decade later I have made 19% or so, hardly much to crow about as I have made those sort of increases on metals stocks in less than a month !!

[duncan macgregor]

quote:Originally posted by Nevl
What share are you down on now McDunk? Need to add it too my watchlist!!

NEVI, MCR, SMM, AGM, SMY, IGO. I am only over 50pc up with my portfolio this year. BUGGER that will teach me to get out of PGW at a much higher price than they are now to go mining.[:o)][:o)][:o)]Your old mate macdunk

[BRICKS]

quote:Originally posted by duncan macgregor


quote:Originally posted by Nevl
What share are you down on now McDunk? Need to add it too my watchlist!!

NEVI, MCR, SMM, AGM, SMY, IGO. I am only over 50pc up with my portfolio this year. BUGGER that will teach me to get out of PGW at a much higher price than they are now to go mining.[:o)][:o)][:o)]Your old mate macdunk


PLAY IT AGAIN SAM.. [8D]

[Phaedrus]

Nevl, the trendline break came well before yesterdays big jump. (green arrow on chart) Conservative investors waiting for OBV confirmation would not have bought until 3/4/07, giving them an entry at around $1.52.
http://h1.ripway.com/Phaedrus/PGW45001.gif

[Nevl]

Cheers guys. But McDunk I need to know which shares you don't like. Am up 10% on this one in less than 3 weeks and the uptrend has just started.

[duncan macgregor]

quote:Originally posted by Nevl

Cheers guys. But McDunk I need to know which shares you don't like. Am up 10% on this one in less than 3 weeks and the uptrend has just started.


Nevi good luck with your uptrend hope it continues. The nz dollar dictates to over the gate prices that farmers receive. The over the gate prices farmers get dictates how much goes over the counter at PGW stores. That is the harsh reality, not how good or bad PGW is as a company. The leader of the opposition says that the NZ dollar will go higher, which if that happens wipe out all the small gains from exporters prices, and seriously put at risk manufacturing, agriculture, and forestry exporters. PGW are exporting our systems to our competitors, setting them up in competition. I think they will end up coming home with their tail between their legs, you think otherwise. To me it dousnt matter i am not investing in them, to you it does so good luck i think you will need it. macdunk

[Bling_Bling]

PGW sold off assets to cover huge debt lol

[Mick100]

Warning comes as producers seek aid, citing woes last year
By Bruce A. Mohl, Globe Staff | April 12, 2007

The price of milk and some other dairy products are headed for record highs this summer, with raw milk prices expected to jump as much as 40 cents a gallon since last year, according to industry officials.

Officials at H.P. Hood, the Chelsea-based dairy, said the price farmers receive for raw milk has been rising steadily and will rise at least another 25 cents during the summer . As a result, retail prices for milk, ice cream, and cottage cheese will increase, although by how much is unclear. Retailers declined to comment yesterday.

"We have an unprecedented situation," said Mike Suever , senior vice president for milk procurement at Hood.

The warnings about sharply higher raw milk prices come at a time when Massachusetts dairy farmers and their counterparts in several other Northeastern states are pushing hard for financial aid from state regulators. Dairy farmers say low prices and high production costs last year devastated their businesses. But Hood, other dairies, and supermarket chains say price supports are unnecessary, pointing to the sharp uptick in prices as evidence.

Senator Stephen M. Brewer , a Democrat from Barre who is seeking state financial help for Massachusetts' 167 dairy farmers, said the escalation in prices is good news. "But it doesn't obviate the need to deal with the debt these farmers have incurred over the last year," he said. Brewer said farmers need an immediate infusion of $3 million to $12 million from the state.

[duncan macgregor]

quote:Originally posted by duncan macgregor

MICK, I can only say what i did. I sold out at $2-20 average when it hit my time line in dec and bought at $1-85 in feb. I find charts mixed with a bit of common sense the way to go. My time line told me to get out my common sense told me that the share was underpriced buy back in. Tread lines is no way to buy a share fundamental analysis is. The tech side of it comes into its own at the sell end. The herd had gone to far and was dithering about before running to far in the opposite direction. macdunk
SNOOPY is this the loss you were talking about.Your old mate macdunk keeping you honest. Macdunk

[Snoopy]

quote:Originally posted by duncan macgregor


quote:Originally posted by duncan macgregor

MICK, I can only say what i did. I sold out at $2-20 average when it hit my time line in dec and bought at $1-85 in feb. I find charts mixed with a bit of common sense the way to go. My time line told me to get out my common sense told me that the share was underpriced buy back in. Tread lines is no way to buy a share fundamental analysis is. The tech side of it comes into its own at the sell end. The herd had gone to far and was dithering about before running to far in the opposite direction. macdunk
SNOOPY is this the loss you were talking about.Your old mate macdunk keeping you honest. Macdunk


No I'm talking about the shares you bought at $1.85 in February which you subsequently sold at what price?

SNOOPY

[duncan macgregor]

quote:Originally posted by Snoopy

[quote]quote:Originally posted by duncan macgregor

Snoopy wrote
A lot of water has to flow under the bridge before NZ farmers conquer Asia. The one thing that is certain about farming is that the unexpected happens. If the weather beats down the price of PGW shares in the future, as it surely will, then I am a buyer. In the meantime I am quite happy to hang onto my holding. If PGW really is on a P/E of 21 a lot of the improvement over the next year or two is already built into the share price. Personally, I'll be chuffed if PGW hits $2 over the next twelve months.

SNOOPY, What a whole lot of guff you write. Are you expecting us to believe that you were holding shares in a company at $2-30 something watch them fall to $1-70 something then say you would be happy if they reach $2-00 in 12 months. Either you have no system at all or your real name is Mary Holm.


To tell you the truth Macdunk, I wasn't watching. If the PGW share price really did get up to $2.30 I think it would have been before the 40% ongoing profit downgrade. So at the time $2.30 would have represented a P/E of 17-18. Not out of line for a growing company.
So even if I had been watching, I don't think that I would have sold.

What I do know, following the compulsory acquisition of my Carter Holt shares earlier this year, is that I now have only one direct exposure to NZs farming backbone - my shares in PGW. And if anything my relative holding in this sector is too low. I have looked at other ways of getting exposure to farming. IMO holding PGW is still the best way to do it. I don't think that quitting the sector completely, becaue of some transient movement in share price that does not go outside my fair value valuation range, is a sound long term investment strategy.


quote:
Fundamental analysis as you have proved, is as useless as tits on a bull. It all boils down to perception as i have told you in the past.
It is how the investors perceive the market, not the PE.
The market is controlled by emotion, not mathematics.


Short term you are right. F/A isn't necessarily a good predictor of the direction a share price will move. But I don't 'do' short term. I don't trade at all. Long term the market behaves like a weighing machine and that is where ongoing PE matters.


quote:
Look at your analysis on TEL, RBD, pages and pages of what turned into be useless tripe.


On the contrary. TEL and RBD continue to be good dividend paying shares. In the case of TEL in particular, I have been buying significant blocks of shares (well, significant for me) to the exrent that my shareholding has increased by nearly 40% (in share number terms) since the unbundling slump. I would not have had the confidence to do that without my F/A.


quote:
Understanding the investors next move has nothing to do with the PE of a company. This is a very good share to trade, it goes too high then drops to low with no risk of losing the lot. If you trade PGW you will make three times as much as your buy and hold method.


I know farming as a fickle business Macdunk. I have cousins who are farmers. I don't

[Snoopy]

quote:Originally posted by duncan macgregor


quote:Originally posted by Snoopy
discl: hold PGW, and surprised to see it up yet again to $1.87 this morning!
Read this thread Snoopy with an open mind. Your past is coming back to haunt you. The first share crash will see you down the gurgler with what you do. Macdunk


I take it you are still in denial then Macdunk?

Both of us had PGW shares in in February at $1.85-$1.87 or whatever. The only reason I am getting at you is that your strategy requires you to sell assuming that Mr Market knows more than you do. My strategy requires me to sell only if a share becomes clearly overvalued. So although I suffered the same fate -as regards the short term decline in the PGW share price- as you did, I didn't sell. That's because I know that short term share price movements are not a useful predictor of medium and long term share price movements.

You saw the share price fall and got out. You thought the PGW share price was going down and so would continue to go down but you were wrong. You also thought that the trading range of PGW shares would be sufficient for you to buy back in at some future date and make huge profits. Yet so far you haven't bought back in, even though the share price is apparently already on the way back to fully valued levels. Your 'strategy' has lead to you churning your portfolio and dropping out of farming completely while you maximize your risk and put all of your money into nickel. It is an unsound way to do things by any measure.

OTOH I saw the share price fall and took the opportunity to buy some more PGW (at $1.60 and $1.59). Plus I have since banked a dividend of 4cps. You call it 'averaging down'. Actually I think I am still 'averaging up' because my average PGW entry price is far less than $1.60.

In reality it is not possible to average up or down. You can only 'average across' buying at whatever price Mr Market sets which is by default also the market value of each share you already hold. To find out if it is worth 'averaging across', you need to know something about the fundamentals of the company. The fundamentals of a company are not reflected by short term share price movements. That is why I basically ignore Mr Market when I make my investment decisions and intend to continue to do so. Meanwhile I watch you dancing to Mr Market's every whim with some amusement.

At the moment I am sitting on more cash than I have ever had before waiting for an investment home (thanks to repatriation of some overseas investments). So all I can say is that if there is a crash coming, 'bring it on'. I am ready and waiting with my cheque book.

SNOOPY

[duncan macgregor]

SNOOPY, You must be well aware that i only hold nickel stocks on the ASX at this moment in time. You seem to be under some delusion that having sold PGW was a mistake on my part. I sold all my NZ stocks in DEC moved the funds to the ASX. I bought agm at 59c now 84c, mcr that is the one i asked you to look over on sharechat [remember]at $2-15 now$3-80 plus a 6c fully imputed divi. SMY I bought at$2-39 now at $5-45 Thats over 100pc in four months with that one. Smm I bought at $3-20 and sold at $5-94,IGO I bought on the first of march at $4-60 now$7-00 so thats what I did. Look it all up snoopy you were told on the forums before and during the action. What have you done so far this year do you have one company in your portfolio that is equal to my worst one?. The farmer next door reckons your investment style is as good as tits on a bull. MACDUNK:D:D:D

[Snoopy]

quote:Originally posted by duncan macgregor

SNOOPY, You must be well aware that i only hold nickel stocks on the ASX at this moment in time. You seem to be under some delusion that having sold PGW was a mistake on my part.


You sold your PGW shares in December 2006. Then you rebought bought some PGW shares in February 2007 for $1.85 until a matter of days(?) later you sold at a loss at a price that you *still* haven't disclosed. Not that I'm suggesting that everyone should disclose everything that they do on this forum. It is just that you Macdunk, who make a big thing on being open and honest, go strangely quiet when you crystallize a loss.


quote:
I sold all my NZ stocks in DEC moved the funds to the ASX. I bought agm at 59c now 84c, mcr that is the one i asked you to look over on sharechat [remember]at $2-15 now$3-80 plus a 6c fully imputed divi. SMY I bought at$2-39 now at $5-45 Thats over 100pc in four months with that one. Smm I bought at $3-20 and sold at $5-94,IGO I bought on the first of march at $4-60 now$7-00 so thats what I did. Look it all up snoopy you were told on the forums before and during the action. What have you done so far this year do you have one company in your portfolio that is equal to my worst one?.


Well yes actually. I haven't lost money on any of my shares this year like you did with PGW ;-P.

Actually my best recent call has been to buy Telstra Installment Receipts which are up around 50% in four months. But I have never claimed any 'credit' for that pick because the speed of that price recovery surprised even me! I don't make any predictions about when any of my share selections will recover. I only know that by being on the register I will be there for the recovery ride when it happens.

SNOOPY

[Mick100]

I think I know why macdunk is hounding you snoopy - your probably the only person left who still attempts to make an intelligent response to his nonsense - do yourself a favour and ignore him.
.

[duncan macgregor]

quote:Originally posted by Mick100


I think I know why macdunk is hounding you snoopy - your probably the only person left who still attempts to make an intelligent response to his nonsense - do yourself a favour and ignore him.
.
Mad MICK Strikes again. You pick on me for selling PGW you pick on me for selling SMM on the ASX forum. You give SNOOPY advice on what you dont do yourself[:o)].You both have a similar investing style buy all the way down and scatter your investments about like eagle sh*t over the countryside. We both know that the dollar is killing exporters your investment into PGW is in denial of that. Incidently I was right and you were wrong with SMM.Your old mate macdunk [Trying to educate the Irish].:D:D:D

[D_Pick]

Timing the market - The PGW 'Staff Pension Fund Ltd' purchased 1,285,000 shares @ 1.49 on the 28th March 2007.

The share price has bounced about 10 percent since then .... must be all that negative talk that you can't make money farming in NZ or Uraguay with a high NZD

[beacon]

And if that wasn't the cause of the spike, I wonder

[Mick100]

I'v noticed, in the past couple of weeks, that many companies that are adversely affected by the high NZD have seen good gains in thier shareprices ( air NZ, cdl hotels, tourism holdings, auck int airport and PGW)

Maybe the smart money thinks the NZD is heading lower - not higher - that's the conclusion I'v come to anyway.
.

[kittydashwood]

Short fueled breakthrough in the US is running out of steam. The dollar decline looks very bleak, housing very weak the consumer defies belief

Look for a USD rally vs yen and euro to raise the inflation fear, if growth just won't die in NZ I imagine a similiar meme exists in the us. Besides there is sure to be an orderly withdrawl from the makets as we look to a post olympic chinese economy coolin it.

All up if the USD shows strength and the NZ dollar decline, PGW could be a good hedge.
Still PGW is essentially a retail outfit and their customers are tight ba5tards.
I'd like to see more PGW diversification in NZ. Maybe in sectors like forestry, fishing, sheep, cheese, maybe even refining ethanol or added value wood or packaging products.

[duncan macgregor]

quote:Originally posted by kittydashwood
Still PGW is essentially a retail outfit and their customers are tight ba5tards.
I'd like to see more PGW diversification in NZ. Maybe in sectors like forestry, fishing, sheep, cheese, maybe even refining ethanol or added value wood or packaging products.

You have to be joking if they dont stick to their knitting then its down hill all the way. The silliest they they could do is to diversify into other downtrending markets. Farmers can only spend what they earn, at the moment that is very little. To start up business in south America to compete against their customers wont find many friends in the farming community. They have a choice who they buy from, PGW will get a back lash. Macdunk

[kura]

I own a few nominal PGW shares (1000), but Kittys suggestion that they diversify into ethanol would make me exit at any price.

Disc: As a farmer (northland) most of my merchandise type purchases are made through RD1, (believe part of Fonterra) as their prices are simply better than Wrightsons. But do admit that my livestock goes through a Wrightsons agent

[Nevl]

Nah I agree with Kitty. An entrepenurial farming outfit looking for new markets and better products is exactly what we need. Exporting our farm models to bring the profits back to NZ is the right way to go. Maybe a variation of the Sharemilker system to get past the life style effect that MacDunk keeps going on about. PGW owns the farm and the locals own the cows!! Zespri has done it with Kiwifruit and owns orchards in Italy and Chile. Investing offshore while the Kiwi is high is also a good plan. I think Ethanol production is great if we export it to the USA. I prefer bio Diesel and Electric for NZ. We have cheaper sources for both though Biojoule could change that. One of the by products of dairy production is Ethanol and Fonterra is NZs largest ethanol producer. Bout time you got out of Fonterra then Kura!!

[BRICKS]

IF you want a good Bio diesel stock AU go to Natural Fuel Limited. NFL. @ about 83 cents they are building plants now and ready to GO.. [8D]

[D_Pick]

ASSET: PGW: Christchurch hort supplier comes into PGG Wrightson-Fruitfed

https://www.directbroking.co.nz/DirectTrade/dynamic/announcement.aspx?id=1584832


The purchase price or size of the business being acquired aren't mentioned in this announcement, however the share price is up 5c today.


quote:Overall there were significant synergies in combining the two operations through this purchase.

[Snoopy]

quote:Originally posted by D_Pick

ASSET: PGW: Christchurch hort supplier comes into PGG Wrightson-Fruitfed

https://www.directbroking.co.nz/DirectTrade/dynamic/announcement.aspx?id=1584832


The purchase price or size of the business being acquired aren't mentioned in this announcement, however the share price is up 5c today.


Reading that announcement, my inkling is that this acquisition is a well run family business that has been built up over many years. For the owners, selling out to PGW is a retirement strategy. It is all run from a single site in Christchurch so the acquisition price is unlikely to be material in PGW terms. In summary a good 'bolt on' unit to add to the PGW business, but insufficient IMO to cause a rerating of the shares.

It is tempting to look for 'meaning' behind any jump in share price.
I'd be tempted to explain the jump in share price from $1.70 to $1.75 as 'market noise'.

When the shares moved from 160ish to 170ish a few weeks ago that was accompanied by a big spike in trading volumes. That might have been an institution taking a position in the company. I notice that outside of the Norgate/McConnen/Gould interests, the PGW share register is fairly bare of institutional holders. If you want a meaningful stake the only way to get it would be to push the price up and hope to shake out a few sellers.

I'm picking that the rise from $1.70 to $1.75 has probably triggered some signals for traders and any time soon we will be presented with graphical evidence that a 'new uptrend has started' for PGW. If you are going to be in an exporter (Ok I know that technically PGW is a merchant, but their fortunes rise and fall on the backs of our farmers) then IMO PGW is a good place to be. But be careful. I think, with the exception of dairy, our farmers are still hurting. I'm comfortable with my own PGW holding but I am not looking to buy any more, no matter where the share price trends to.

I'm feeling quite smug that I purchased my last tranche of shares at $1.60ish this February and last November. And I'm feeling relieved that the share price is creeping back up to where I purchased the previous tranche towards $1.80 in August/September 2006. No! Actually the assessment of my feelings in all of this paragraph is a lie! If you look back in this thread you will see that all of my purchases were made for 'portfolio reasons', even slightly reluctantly, to boost my holding in this share up towards the value of my other NZ holdings. I had no inkling that I would get my timing right, and in fact feared the reverse. Which just goes to shoe that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are (eh Macdunk - what was your loss on your last PGW trade again?).

SNOOPY

[duncan macgregor]

quote:Originally posted by Snoopy
Which just goes to shoe that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are (eh Macdunk - what was your loss on your last PGW trade again?).

SNOOPY

SNOOPY why dont you look it all up. I sold my last PGW share about nov last year i think. I traded REID FARMERS PGG, WRI, then PGW. Most times I won only once did I lose. I had some shares sitting there from PGG days so work it out from there. I think I had a one in eight bonus at amalganation plus an extra divi. I am more interested in todays shares my portfolio has increased in value by 71% in four months if you would like to comment on that.:D
AGM i bought at 59c last price 91.5c now in a trading halt try commenting on that. You are well aware of what I hold when I buy and sell so feel free to tell me where I go wrong. Your old mate MACDUNK
discL hold MCR, AGM, SMY, IGO sold SMM at$5-94 all on ASX

[BRICKS]

quote:Originally posted by duncan macgregor


quote:Originally posted by Snoopy
Which just goes to shoe that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are (eh Macdunk - what was your loss on your last PGW trade again?).

SNOOPY

SNOOPY why dont you look it all up. I sold my last PGW share about nov last year i think. I traded REID FARMERS PGG, WRI, then PGW. Most times I won only once did I lose. I had some shares sitting there from PGG days so work it out from there. I think I had a one in eight bonus at amalganation plus an extra divi. I am more interested in todays shares my portfolio has increased in value by 71% in four months if you would like to comment on that.:D
AGM i bought at 59c last price 91.5c now in a trading halt try commenting on that. You are well aware of what I hold when I buy and sell so feel free to tell me where I go wrong. Your old mate MACDUNK
discL hold MCR, AGM, SMY, IGO sold SMM at$5-94 all on ASX


YOU must be very,very rich so why don't you jump in a boat[as you don't like airlines] and go and live off your WEALTH.. [8D]

[Phaedrus]

"I'm picking that the rise from $1.70 to $1.75 has probably triggered some signals for traders......" Snoopy!!!! Did you not notice the chart posted weeks ago on page 20 of this thread? The chart that showed PGW Buy signals at $1.49 and $1.52? Even if you don't like or don't trust trendlines, the On Balance Volume had given a Buy signal that would have been obvious even to 'Blind Freddy'. The chart below shows that plenty of other indicators triggered Buy signals at around the same time.

You go on to observe that "the share price is creeping back up to where I purchased the previous tranche towards $1.80 in August/September 2006" and that you "had no inkling that I would get my timing right, and in fact feared the reverse". Snoopy, you had very good reason to fear that your timing was wrong - [u]PGW was in a downtrend</u>. You have a position that has been underwater for the better part of a year, and is still underwater, yet I gather from your post that you do not consider this to constitute evidence that you got your timing wrong - quite the reverse, in fact!

Your parting shot intrigues me :- "(It) just goes to show that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are." Snoopy, it never pays to assume that you are smarter than the market, yet that is exactly what you are doing when you buy a stock in a downtrend. You are buying because you think the market is wrong and that you are right. Some would see this as misplaced confidence in your own abilities while others might see it as arrogance. Either way, anyone can see that you would have been far better off delaying any buying that you did over the last year until there was some technical evidence that the downtrend had ended.
http://h1.ripway.com/Phaedrus/PGW430002.gif

[Snoopy]

quote:Originally posted by Phaedrus

"I'm picking that the rise from $1.70 to $1.75 has probably triggered some signals for traders......" Snoopy!!!! Did you not notice the chart posted weeks ago on page 20 of this thread? The chart that showed PGW Buy signals at $1.49 and $1.52? Even if you don't like or don't trust trendlines, the On Balance Volume had given a Buy signal that would have been obvious even to 'Blind Freddy'. The chart below shows that plenty of other indicators triggered Buy signals at around the same time.


Oops actually Blind Freddy was overseas for a month and this small price movement didn't click during my infrequent cyber-returns. Guilty as charged - I missed all the signals. Although because I had already bought the shares I wanted by then, it didn't really matter!


quote:
You go on to observe that "the share price is creeping back up to where I purchased the previous tranche towards $1.80 in August/September 2006" and that you "had no inkling that I would get my timing right, and in fact feared the reverse". Snoopy, you had very good reason to fear that your timing was wrong - [u]PGW was in a downtrend</u>. You have a position that has been underwater for the better part of a year, and is still underwater,


Phaedrus, allowing for the dividends (I know there is that dreaded 'd' word again), my average purchase price over the last year was $1.61. So I am not underwater at all. My historic average purchase price is lower still. So I even avoided your dreaded bogeyman of averaging down too ;-P!


quote:
Your parting shot intrigues me :- "(It) just goes to show that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are." Snoopy, it never pays to assume that you are smarter than the market, yet that is exactly what you are doing when you buy a stock in a downtrend. You are buying because you think the market is wrong and that you are right.


I think Phaedrus we can agree that, with the benefit of hindsight, Mr Market does become irrationally exhuberant and irrationally depressive at times. The real difference between your and my approach is that you use the charts to try and pinpoint exactly when Mr Market has his change of heart. I, on the other hand, am more concerned with picking up bargains in the 'irrationally depressive zone'.

I generally try to buy at historic 'support points' when a downtrend starts. Sure there is a risk the share price my crash through an historic support point and go lower. But generally share prices do not decline to zero. At some point, support for the share will 'kick in' and I am prepared to gamble on exactly when that is. Even if that means buying at historic support points all the way down if necessary. My penalty for being 'wrong' is often having to wait for a few months while the share price recovers. I don't need a stop loss system because I only ever consider buying the best bargain shares 'on sale'. That means if the shares fall, they are unlikely to plunge significantly. And since I don't mind waiting for a few months for any recovery to happen, there is little risk for someone like me operating a long term strategy.

I don't regard myself as 'smarter' than Mr Market. I am just less highly strung about newsworthy yet over-the-business-cycle 'trivial' events. When Mr Market acts as a voting machine, I don't mind voting against him. But when Mr Mark

[Mick100]

Phaedrus, Could you post a chart of NAM (namoi cotton) on the ASX forum with your TA opinion please.

I bought in a couple of months ago when it appeared to break out of a downtrend - not sure whats going on with NAM now.

thanks

PS, snoopy, I bought some more PGW on the way back up @ 1.60 - Got my ave buy price down to $1.91 on PGW
.

[Snoopy]

quote:Originally posted by Mick100


PS, snoopy, I bought some more PGW on the way back up @ 1.60 - Got my ave buy price down to $1.91 on PGW.


Good news for dairy farmers today with next years payment forecast to be $5.50 per kg of milk solids, up from $4.30 this year despite the high exchange rate. I don't think it will be too long Mick before you are back 'in the money'.

Meanwhile those far more knowledgeable than us have been crowing about how clever they were in selling out of anything to do with farming (quote below pinched from the TUA thread).

"SNOOPY, We are in a good position to sell in a sudden down turn to investors like you. There is always someone that buys in times like this, you are confirming that. Get out at the top you lost money yesterday on PGW I sold out a long time ago at a higher price than you are clawing back. I really think you have lost the plot.
Macdunk."

Unfortunately in this game of sharemarket musical chairs some of those very intelligent people now don't have a seat. Still they say the mark of great intellect is being able to think on your feet, so I expect we will get some wise counsel soon. The thing that I just can't figure out is how I 'lost money' on PGW.

My average buy in price is $1.26 (forgetting about dividends). And my average holding time is 2.7 years. In the past 2.5 years I have received 20.5cps in dividends. So it seems my return has been:

1.26(1+i)^2.7=(1.79+0.205)

Solve for 'i' and it comes out at 18.5% compounding per year. How could I get it so wrong? Help ;-P!

SNOOPY

discl: hold PGW

[duncan macgregor]

quote:Originally posted by duncan macgregor

Kitty, You can only call it as you see it. It has been on a confirmed downtrend since may of last year when it was $2-30 or near enough. To be left holding requires you to be blind to reality, stupid, or perhaps stuck them in the bottom drawer and forgot you had them. To bottom pick is not on until the sector starts to come right. The NZ dollar is killing the exporters, the farm gate prices are to low, PGW customers have cut their spending right back. If you have any system at all other than blind faith, you would have been out of this company last year. The money from PGW was invested in Australian nickel companies look it up on the other thread.:D:DMACDUNK
SNOOPY, Let me remind you where my investment dollar went in 2007.:D:D:D
MCR, up 103.75%
AGM, up 83.89%
SMY, up 100%
IGO, up 70.61% bought in march
SMM,bought $3-20 sold april $5-94
I take it you think you are pretty smart averaging down getting a bounce at the bottom on PGW which is going nowhere. Macdunk

[Mick100]

quote:Originally posted by Snoopy


Good news for dairy farmers today with next years payment forecast to be $5.50 per kg of milk solids, up from $4.30 this year despite the high exchange rate. I don't think it will be too long Mick before you are back 'in the money'.










That will mean about $1.00 per kg solids straight to the bottom line giving the average dairy farmer an extra $100,000 to spend.
I think meat prices will firm up before too long as well considering that animal feed (grain prices) have almost doubled over the past 12 months. Things are looking good for the ag sector.

quote
CommSec chief equities economist Craig James yesterday billed the agricultural sector as the "turnaround story" of the sharemarket in 2007, aided by drought-easing rains in eastern Australia and a resurgence of consolidation plays.

He said CommSec's index of nine agricultural stocks had risen 43 per cent this year, outpacing a 12 per cent gain in the broader sharemarket. The index includes Queensland Cotton, AWB, ABB Grain, GrainCorp, Nufarm, Ridley and Australian Agricultural Company.

Setting the pace was fertiliser giant Incitec Pivot, which has leapt 172 per cent since October on the back of cost savings and soaring world fertiliser prices which have benefited its recently acquired manufacturing operations.

[lakeside]

That dairy payout of $5.50 has to put some growth into NZ property & retail markets, and hold the dollar up ... but then again hedge funds etc could do what they like.

[Snoopy]

quote:Originally posted by duncan macgregor


SNOOPY, Let me remind you where my investment dollar went in 2007.:D:D:D
MCR, up 103.75%
AGM, up 83.89%
SMY, up 100%
IGO, up 70.61% bought in march
SMM,bought $3-20 sold april $5-94
I take it you think you are pretty smart averaging down getting a bounce at the bottom on PGW which is going nowhere. Macdunk


I haven't been averaging down at all. On the contrary my most recent PGW purchases have raised my average holding cost significantly.

Funny though, I can't seem to find any of your investments listed on the NZX. Why have you done so poorly when if you had invested in China directly you would be up 150% over the same time period?

SNOOPY

[Mick100]

ASB Commodities report

The CBA NZ Commodity Price Index rose in all denominations last week, boosted by increases in the Dairy, Sheep and Beef series. There was a slight dip in the Forestry series, and a revision to last week's data for the index.
The big news last week was RAIN. Significant rainfall has occurred across south-eastern Australia. The rain is timely for grain growers and will also help pasture growth for sheep, beef and dairy farmers. Some parts have now recorded the best falls for seven years. This is good news for Australian agricultural output going forward.
NZ meat prices look set to resume their seasonal increases, as slaughter numbers begin to decline. Rain in Australia will contribute to lower kill numbers there, as animals are retained to rebuild stock. ABARE reported De-stocking in southern Australia increased at the end of last year, reducing the national sheep flock by 6 percent and the cattle herd by 3 percent.
The major economic release last week was the Government Budget. FX and interest rate markets were unchanged by the release, but strong retail trade data released on Monday saw markets increase the chances of further rate hiking from the RBNZ, and long-term rates rose by 4 to 6 basis points. The NZD continues to trade around USD 0.73, and AUD 0.88. Against the Yen, the NZD continues to trade near the recent highs, at around JPY 88.5.
.

[duncan macgregor]

PGW posted a profit down grade, as was to be expected by anyone with half a clue about farming in NZ. The good news is the fundies will still have a decent dividend as their capital erodes. The NZ dollar is still killing farm incomes until that reverses its all down hill down on the farm. MACDUNK

[COLIN]

And very cunning the way they slipped the "market update" into the end of a longer and seemingly innocuous statement yesterday about DRP's, new staff appointments, etc., and right on market closing time. That's an old PR trick.

[Nevl]

Not really a downgrade just saying they will be at lower end of expectations. I always work on the worst case and this is still pretty good.

[Bling_Bling]

Second downgrade fro PGG. Not a good sign. Bad things comes in threes?

http://www.stuff.co.nz/4080907a13.html

[Snoopy]

quote:Originally posted by Bling_Bling

Second downgrade fro PGG. Not a good sign. Bad things comes in threes?


As others have said, this is not a profit downgrade. Merely a refinement of what has already been forecast some months ago, albeit towards the lower end of that profit range. I think the financial years ends in less than thirty days time. So I would say a further profit downgrade for FY2007 is unlikely.

Of far more interest is what will happen in FY2008, as that is what will be driving the share price form now on. Dairy farmers should do well with the rest of the agricultural sector facing more of the same via high exchange rates and interest rates. Throw in the usual wild card of the weather and it would be hard to argue that PGW is cheap at $1.80. Still the PE is listed in the paper at 14.5 which could easily be justified with a modest projected decline in the NZD vs the USD.

I'd rate PGW as a hold, which is exactly what I will be doing with my own PGW shares.

SNOOPY

[duncan macgregor]

The greens are screwing the arms of labour and national to come up with a policy to penalise the dairy farmers. This will be a further hurdle in the near future, not only for dairy farms but PGW and similar companies bottom lines. I have all my investments in Australia, I dont think they are quite as stupid, [at the moment anyhow] to be so dumb. macdunk

[BRICKS]

quote:Originally posted by duncan macgregor

The greens are screwing the arms of labour and national to come up with a policy to penalise the dairy farmers. This will be a further hurdle in the near future, not only for dairy farms but PGW and similar companies bottom lines. I have all my investments in Australia, I dont think they are quite as stupid, [at the moment anyhow] to be so dumb. macdunk


SO as your a SCOT and not a real KIWI must be hard buying your MILK in Australia.. [8D]

[duncan macgregor]

BRICKS, By the tone of your posts I think I might have been here longer than you. Luv you like a drudder mate.[:o)]:D:D MACDUNK

[BRICKS]

quote:Originally posted by duncan macgregor

BRICKS, By the tone of your posts I think I might have been here longer than you. Luv you like a [drudder] {not a word} mate.[:o)]:D:D MACDUNK


BRICKS is in AUSTRALIA with all his investments and NO need for KIWI milk only come to NZ to live in my weekender and drive the NEW car just when i feel like IT.. [8D]

[Mick100]

Commodities Report
Further NZD relief
Wednesday, 08 August 2007

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

Global commodity prices generally strengthened last week, spearheaded by sheep and beef prices. The Foot and Mouth outbreak in the UK has restricted meat supply in Europe, boosting prices near term.
The global meat price increases come against generally supportive conditions for global sheep and beef prices with relatively low supply (in part on the slow recovery in Australian meat production following the recent drought) and falling product stock levels underpinning prices.
Global dairy prices eked out further gains last week, continuing its recent strong uptrend. Further falls in the NZD early last week complemented global price rises, seeing a 2.2% rise in the NZD denominated commodity price index.
The NZD/USD consolidated between the 76-77c mark late last week after falling sharply from peaks around 81c in late July. Some hedge fund unwinding of large carry trades dominated falls early in the week as global risk appetite has waned amidst US mortgage market concerns.
This hedge fund unwind weighed heavily on the high yield Australasian currencies – some of the key investment destinations of the ‘carry trade’.
Further falls in global equity markets early this week highlight the continuing level of uncertainty surrounding this issue. Further global market uncertainty in this regard could further bias down the NZD/USD in the short term as long as nervousness remains close to the surface.
Nonetheless NZ’s relatively high interest rates should eventually provide the Kiwi dollar with a base.

[Mick100]

Commodities Report
NZD feeling the pinch
Wednesday, 15 August 2007

Global commodity prices generally strengthened again last week, as sheep and beef price gains were joined by further dairy price increases.
Solid demand and product stock shortages are underpinning global lamb prices in particular, and restocking in US beef suppliers is helping to support global beef prices.
USD denominated dairy prices continue to post fresh historical highs, boosted by rises in butter and casein prices over the past week.
Sharp NZD depreciation over the past week complemented global price gains, sending the NZD denominated commodity price index up 2.0% on the week.
Lingering market jitters surrounding the US mortgage market, and associated fall-out on global financial institutions, continues to put pressure on the NZD. Falling global risk appetite is weighing on the high-yield Australasian currencies – some of the key investment destinations of the ‘carry trade’.
Recent signs of slowing in the NZ housing market and domestic spending – including lower than expected quarterly retail sales – have also dampened expectations for any further increases in NZ interest rates from the RBNZ.
Further US mortgage-related global market uncertainty could further bias down the NZD/USD in the short term as long as nervousness remains close to the surface. Nonetheless NZ’s relatively high interest rates should eventually provide the Kiwi dollar with a base.

[Snoopy]

It has been a great year for PGW investors. I certainly didn't pick it, having almost doubled my holdings in the last twelve months more as a rebalancing exercise than any expectation of the great returns exceeding 20% per annum that I got. I guess it shows that sometimes it is better to be 'balanced' than 'too clever' picking winners.

I guess most investors would be patting themselves on the back about now. But analysis of the Annual Report leads me to believe that perhaps I have been more lucky than clever. I usually worry when companies make up new performance statistics to report. 'NPATBA' meaning 'Net Profit After Tax and Before Amortization' is what the PGW directors are crowing about. In this instance I think NPATBA is justified. That's because as of next year under new accounting standards, amortization of the goodwill which resulted from the Wrightson acquisition is not required. Thus NPATBA is the right statistic for 'like with like' comparison going forwards.

So how do the profit numbers stack up? Adjusting for one offs and goodwill I get 'ongoing profits' of:

$25.6m-$9.8m+0.67($15.1m)= $25.9m. based on shareholders equity of $410m. That gives an ROE of 6.3%. On sales of $991.7m I calculate a margin of 2.6%. These figures are well below what was predicted at the time of PGG/WRI merger where ongoing profits of some $40m were anticipated. Not good. But the difficult weather season and the resurgence of more co-op competition can explain it.

In the past the WRI share price has held up well because of the high dividend yield available. This years PGW payout was 12cps, on continuing earnings of 9.2cps (based on 281.3m shares on issue). 12cps based on a share price of $1.98 gives a gross yield of 9% - quite good. But the 'ongoing gross earnings yield' is only 6.9%, which doesn't compare favourably with bank interest rates. The ongoing earnings PE ratio of 22 is a further indication that the share price may have topped out - unless earnings improve by some 80% (reducing the PE to a more reasonable 12) for FY2008.

Recent rain is a portent to a productive growing season. But I'm picking that the necessary 80% earnings growth will not be achieved next year. It is very hard to see the overall return for FY2008 matching the 20% or so average of recent years. But I've been proved wrong before. And I am prepared to hang in there to see if Norgate's hand picked management team, which impressively didn't suffer mass resignations after the PGG/WRI merger, can work their magic.

SNOOPY

[duncan macgregor]

SNOOPY, I dont wish to burst your bubble but PGW was $2-40 in oct 2005. Its now less than $2-00 plus divedends, which probabely means your money has stood still for two years. I do think it will trend up very slowly, but nothing to write home about. Macdunk

[Snoopy]

SNOOPY, I dont wish to burst your bubble but PGW was $2-40 in Oct 2005. Its now less than $2-00 plus dividends, which probably means your money has stood still for two years.


My average entry price over the last year was $1.70. The price is now $1.98 plus a 12c dividend. So I made about 20% on those new shares.

Five years ago in the then WRI I was sitting on shares valued at $1.04 and since then dividends per shares have been around 60c cumulative over five years. So on average over five years I have made around 20% compounding every year.

What you say about the price in October 2005 is also true. But fortunately I didn't buy any shares at those inflated prices.

You have also done well on WRI/PGG/PGW over the years. But now you have no shares at all in PGW, while I have over twice as many shares as I had before (by carefully buying while the price was weak) *and* my rate of return has continued.



I do think it will trend up very slowly, but nothing to write home about.


I think 'trending up slowly' is a realistic assessment. It certainly can't keep going up at 20% per year forever. Mind you this man Norgate is full of surprises. He wants to super size the expansion of NZFSU into South America, engineered by PGW. If the shakeout in the finance company sector continues, perhaps the finance arm of PGW will grow dramatically? The expansion into Australia and other South American markets is continuing incrementally so who knows exactly what will happen there? All in all PGW is still a company I would much rather be in than out of.

SNOOPY

discl: hold PGW, NZFSU

[duncan macgregor]

Snoopy, It is pointless to say just because a share is recouping its share price from two years ago what a great share it is. The share price lost 19.58% in the last two years so if you take what the bull market in general gained in that time it has been a disasterous hold.
The point is with every share, is what the trend will be in the future.
Will it be one of the best or will it be one of the worst, with another 19.58% loss over the next two years. The dairy industry is destined to drop in margin next year according to the experts. The dollar is still to high for comfort, not dropping as fast as expected. Then we have this climate change stupidity, and the still might be fart tax or some other form of tax to destroy farming as we know it. I still think the trend will be slightly up but not steep enough for me to buy back with much better opportunities elsewhere. Macdunk

[Snoopy]

Snoopy, It is pointless to say just because a share is recouping its share price from two years ago what a great share it is. The share price lost 19.58% in the last two years so if you take what the bull market in general gained in that time it has been a disastrous hold.


Macdunk, two years ago we were told that the annual ongoing profit would be about $40m. With that level of profitability a price of $2.40 was not excessive, so it wasn't an obvious sell.

It is easy with hindsight to pick some local high point and some local low point and claim you have had a disastrous time. I guess as someone who buys high and sells low -the likes of you- would not have done well.

Fortunately I do the opposite to you. I buy when shares are out of favour and sell when the price is high. My return on WRI/PGW has been over 20% per year compounding for five years straight. I made 20% over the last year as well, after reinvesting some of my Carter Holt payout which was again sold at a multi year high into PGW. Only a warped mind such as yours could interpret such a result as a 'disastrous hold'.

As for what happened over your artificially imposed two year timeframe, who cares, except those foolish enough to buy high and sell low like you? You were so convinced Mr Market was right you let him manipulate you into a loss, rather than the other way around which is how I played the game. Unlerss you *can* ignore Mr Market you will never make it as an investor. At least you now realise this Macdunk and have given up even a pretence of being an investor by 'freezing' your investment activities.



The point is with every share, is what the trend will be in the future.


Quite right.



Will it be one of the best or will it be one of the worst, with another 19.58% loss over the next two years.


If the share price goes lower I will look at buying more. If the share price goes higher I will consider reducing my holding. At today's price, around $2, I am happy to hold.



The dairy industry is destined to drop in margin next year according to the experts.


That's the first I've heard of that Macdunk. Can you provide a reference expert to back up your quote.



The dollar is still to high for comfort, not dropping as fast as expected.


But if the dollar does drop the outlook for farming in general and PGW in particular gets very good.



Then we have this climate change stupidity, and the still might be fart tax or some other form of tax to destroy farming as we know it.


Farming does not have to take any account of their greenhouse gas emissions for at least five years! That is a massive tax holiday that somehow you have miscontrued as a negative point!



I still think the trend will be slightly up but not steep enough for me to buy back with much better opportunities elsewhere.


There are risks with PGW, some five years out. But in my judgement nowhere near enough risks - yet - to sell out.

The finance arm is going great guns and will benefit from the demise of weaker players in the finance market.

The New Zealand Farming Systems Uruguay float, managed by PGW, seems to have been timed to perfection. It has effectively been upscaled in size with far more land being purchased at good prices than forecast in the prospectus.

I agree that investing in PGW has been so profitable over five years it is impossible that this level of success will continue into the future. But my feeling that the the party is not completely over and that -unlike some of your mineral investments Macdunk- the price is unlikely to fall by 50% within a month. PGW remains an attractive risk return investment on my books.

SNOOPY

discl: hold PGW

[winner69]

I think what Snoopy is saying is something along the lines of what is happening with Northern Rock

At 273 it is an absolute crap share because not long ago it was 1200 .... but for those who bought a few weeks ado at 112 Northern Rock is a stunner of a share.

[duncan macgregor]

Winner 69, I understand what Snoopy is saying, but what you have to take into account is yesterday is over, its what its worth today going forward that counts. I have been in and out of WRI a few times in the past, had PGG at the amalgamation, which was a better deal at the time resulting in extra shares, but that was then. Its what the shares are worth today going forward looking at their prospects going forward. SNOOPY says he has had a 20% return in the past but has reservations on holding that level of profit.
I expect when i buy a share to have a higher return than 20% simply because the good ones have to make up for the bad ones otherwise its not worth it. We can all buy a bad one so therefore you have to set your sights at a higher level.
Most all the farmers that i know never go to the PGW store myself included, because the RD1 store is cheaper and better. Infact i dont see with the limited custom how PGW can turn a profit at their two stores in the area. That puts me in a negative frame of mind when it comes to buying in to the company. Macdunk

[Snoopy]

I think what Snoopy is saying is something along the lines of what is happening with Northern Rock

At 273 it is an absolute crap share because not long ago it was 1200 .... but for those who bought a few weeks ado at 112 Northern Rock is a stunner of a share.

Kind of, although even with today's recovery Northern Rock has more than halved in value over five years while PGW/WRI has doubled in value.

Northern Rock's fall from grace was significant in fundamnental terms. PGWs fall was not and generated an excellent buying opportunity that I took advantage of while all you traders were selling.

SNOOPY

[Snoopy]

Winner 69, I understand what Snoopy is saying, but what you have to take into account is yesterday is over, its what its worth today going forward that counts. I have been in and out of WRI a few times in the past, had PGG at the amalgamation, which was a better deal at the time resulting in extra shares, but that was then.


As a WRI shareholder I got bonus shares as well, as a result of the merger



Its what the shares are worth today going forward looking at their prospects going forward. SNOOPY says he has had a 20% return in the past but has reservations on holding that level of profit.
I expect when i buy a share to have a higher return than 20% simply because the good ones have to make up for the bad ones otherwise its not worth it.


You also expect the market as a whole to go up by 20% every year, but that isn't going to happen. My capital preservation strategy is not selling when the market turns, it is buying something that even if it dips in the short term , I would be happy to hold for many years. Patience is often as good a tool at recovering your capital as panic is to losing it.



We can all buy a bad one so therefore you have to set your sights at a higher level.
Most all the farmers that i know never go to the PGW store myself included, because the RD1 store is cheaper and better. In fact I dont see with the limited custom how PGW can turn a profit at their two stores in the area. That puts me in a negative frame of mind when it comes to buying in to the company.

Appreciate the observation Macdunk. It does surprise me that PGW have two stores very close - I thought all that was sorted out at the time of the merger(s). Perhaps they are just waiting for one of the leases to expire at which point they can rationalise their network without taking a one off lease write down?

Also surprised that RD1 is cheaper because I thought PGW had already cut prices to match the competition.

SNOOPY

[duncan macgregor]

SNOOPY, KUMEO and HELENSVILLE branches with an RD1 store at Helensville. PGW closed down its Helensville store, and reopened at new premises in Helensville. The Helensville store is less than half the size of the Kumeo store which is 20k down the road. They also have a store at wellsford in competition with RD1 which is just along the road from it. All the farmers that i know only go to RD1 as PGW wont come up with good deals. Example the lady next door rears weaner calves, but only wishes to buy one bag of milk powder at a time, so misses out on the bulk buy discount at PGW, even although she buys more than the bulk buy ammount during the season.
With RD1 its no problem, they give her the discount for the bulk buy. I really cant see them doing well against RD1 whose prices and selections of goods is far superior. Macdunk

[Phaedrus]

PGW's fall .... generated an excellent buying opportunity that I took advantage of while all you traders were selling.

Ah, but Snoopy, traders don't just sell, you know.

They also buy.

Take a look at the chart on page 27 of this thread!

[Snoopy]

SNOOPY, KUMEO and HELENSVILLE branches with an RD1 store at Helensville. PGW closed down its Helensville store, and reopened at new premises in Helensville. The Helensville store is less than half the size of the Kumeo store which is 20k down the road. They also have a store at wellsford in competition with RD1 which is just along the road from it. All the farmers that i know only go to RD1 as PGW wont come up with good deals. Example the lady next door rears weaner calves, but only wishes to buy one bag of milk powder at a time, so misses out on the bulk buy discount at PGW, even although she buys more than the bulk buy ammount during the season.
With RD1 its no problem, they give her the discount for the bulk buy. I really cant see them doing well against RD1 whose prices and selections of goods is far superior.


I am not happy to hear that story Macdunk! Sounds like someone at PGW retail policy making level needs a gumboot up their Goretex pants. Nevertheless RD1 is owned by Fronterra and is no doubt particularly sensitive to the cattle scene in general. Perhaps someone could raise the issue at the AGM which IIRC is in Auckland this year?

Fortunately PGW doesn't face (much) competition from RD1 in the South Island.

SNOOPY

[Snoopy]

Ah, but Snoopy, traders don't just sell, you know.

They also buy.

Take a look at the chart on page 27 of this thread!

Nice work Phaedrus, if you bought in at between $1.50 and $1.60 earlier this year. But are you on board with us? Or were you chasing better(?) opportunities elsewhere?

SNOOPY

[kura]

SNOOPY, KUMEO and HELENSVILLE branches with an RD1 store at Helensville. PGW closed down its Helensville store, and reopened at new premises in Helensville. The Helensville store is less than half the size of the Kumeo store which is 20k down the road. They also have a store at wellsford in competition with RD1 which is just along the road from it. All the farmers that i know only go to RD1 as PGW wont come up with good deals. Example the lady next door rears weaner calves, but only wishes to buy one bag of milk powder at a time, so misses out on the bulk buy discount at PGW, even although she buys more than the bulk buy ammount during the season.
With RD1 its no problem, they give her the discount for the bulk buy. I really cant see them doing well against RD1 whose prices and selections of goods is far superior. Macdunk

Sad to say it's the same story with me (Far North) while I am a PGW shareholder, most of my purchases are through RD1.

[Snoopy]

Sad to say it's the same story with me (Far North) while I am a PGW shareholder, most of my purchases are through RD1.

Would you care to expand on the situation in the 'Far North' Kura? I am interested in building up a 'bigger picture'.

TIA

SNOOPY

[kura]

Would you care to expand on the situation in the 'Far North' Kura? I am interested in building up a 'bigger picture'.
TIA
SNOOPY
Sorry for being remiss in replying to you Snoopy (was having too much fun with tax questions) In Kaitaia there is both a PGW and a RD1 store (want to guess which is bigger ? )
I don't have a need for lots of merchandise, (other than fencing gear) however last summer I had quite a bit of "track work" done (spending sharemarket gains) and needed to buy a few dozen largish plastic culvert pipes (had to get bigger concrete ones elsewhere) As these culverts were reasonably significant, I compared prices, yep RD1 was approx 15% cheaper, than PGW, but what really made it for me was when the RD1 sales girl told me to come back and buy them next week, (was near end of month) and they were going to be on special next month, and price will be reduced by another 20% !

I'm sad, as a PGW holder, as I would like to think that it would be good to do your business with a firm you have an interest in, but sorry, it won't be regardless of costs.

On the bright side however, PGW have some really good livestock guys, and I would never consider changing them.

[living2]

Sorry for being remiss in replying to you Snoopy (was having too much fun with tax questions) In Kaitaia there is both a PGW and a RD1 store (want to guess which is bigger ? )
I don't have a need for lots of merchandise, (other than fencing gear) however last summer I had quite a bit of "track work" done (spending sharemarket gains) and needed to buy a few dozen largish plastic culvert pipes (had to get bigger concrete ones elsewhere) As these culverts were reasonably significant, I compared prices, yep RD1 was approx 15% cheaper, than PGW, but what really made it for me was when the RD1 sales girl told me to come back and buy them next week, (was near end of month) and they were going to be on special next month, and price will be reduced by another 20% !

I'm sad, as a PGW holder, as I would like to think that it would be good to do your business with a firm you have an interest in, but sorry, it won't be regardless of costs.

On the bright side however, PGW have some really good livestock guys, and I would never consider changing them.

In the past I have said PGW have made a hash of their business by slashing their rural business margins to zilch.I take my hat off to them now from what I'm hearing from you posters .Maybe their margins and profit will finally improve !!!!

[E C K Witty]

PGW at end of Mar-07 = $1.48, PGW at end of Oct-07 = $2.10

A little bit more than a half-decent return over a period of 7 months.

For how much longer can we expect the golden weather to last?

[Nevl]

also a few divis in that time as well makes this one a good performer for me. I think it has a while to go or will not drop significantly from this level despite the the PE. The NZFSU is of major interest to me and I actually hope they hold on to more than 10% of the company. Also they seem to be making smart moves offshore in building up the business so i think I will hold for a while yet. The divi yield is nice and good prospects for the medium term. Would like to see the internation food production increased and a bit more agressiveness in the overseas markets

[Phaedrus]

For how much longer can we expect the golden weather to last?

Here is an assortment of barometers that should give some warning of rain :-

http://h1.ripway.com/Phaedrus/PGW111.gif

[glennj]

Nice charts. Bought a wodge of PGW for my company back in early April but didn't pore over charts before deciding to buy. At yesterday's close the IRR for that parcel is 67.4%
Guess you feel your strategy with PGW has been somewhat vindicated Snoopy?

Wouldn't say PGW or farming has had golden weather except perhaps for dairying. Will be watching when to sell but hopefully I won't have to. Food seems to be being rerated and Norgate and co. seem to have a good vision that they are starting to execute.

Like many others I've had problems with the farm supplies arm of Wrightson's in the past but it hasn't stopped me buying and selling their shares. (Dealt with Farmlands in the NI after problems with Wrighties & deal with Westland Farm Center in the SI now) It must be remembered that this arm is only a small part of the business and it sounds as if they are making progress?

[Snoopy]

Nice charts. Bought a wodge of PGW for my company back in early April but didn't pore over charts before deciding to buy. At yesterday's close the IRR for that parcel is 67.4%
Guess you feel your strategy with PGW has been somewhat vindicated Snoopy?


What strategy was that? The one where earlier on this thread I was a 'reluctant buyer'? I had thought that at $1.60 to $1.80 PGW had to be near the top, the way the exchange rate was going and the way the farmers (excluding dairy) were being hammered?

Or the strategy where I was away, missed the mail to elect my dividend in cash rather than bonus shares, and so ended up with a whole lot of shares I wasn't expecting that subsequently rose in value by 15% in less than a month?

Still perhaps it is a vote for being balanced and hands off, rather than trying to be too clever and pick the market.

Either way (some of) my cash from my CAH payout has found a good home and PGW has been a sensational performer. I don't think PGW is the kind of company that the likes of Warren Buffett would invest in, but haven't we all done well. Everyone that is except a certain trader who somehow managed to lose money trading PGW and as a result deserted to the ASX, apparently never to return....



Wouldn't say PGW or farming has had golden weather except perhaps for dairying. Will be watching when to sell but hopefully I won't have to. Food seems to be being rerated and Norgate and co. seem to have a good vision that they are starting to execute.


If you have to outline what has made the difference to PGW in the last two years, I think you would have to say management. Norgate has outlined his vision for taking NZ farming technology global and now it is beginning to bear fruit.

We have only a month or so to wait before NZ Farming Systems Uruguay lists. That should put PGW in the spotlight again. It has already been announced that NZFSU will not meet the prospectus forecasts. But that is only because the land purchase program has been accelerated beyond what was envisaged at the time of the NZFSU prospectus (from 7,000ha to 26,523ha) . Geographical risk has been greatly improved as a result with the land spread between western, central and eastern hubs in Uruguay. PGW has an 11.5% stake in this company and the management contract. Management fees have been set at 1.5% of the total assets of the NZFSU group which should boost PGWs bottom line by around $2.5m or 10% in FY2008. And that doesn't include any associated boost to the seeds business!



Like many others I've had problems with the farm supplies arm of Wrightson's in the past but it hasn't stopped me buying and selling their shares. (Dealt with Farmlands in the NI after problems with Wrighties & deal with Westland Farm Center in the SI now) It must be remembered that this arm is only a small part of the business and it sounds as if they are making progress?


Farm supplies a small part of the business? Around 35% if judged on EBITA terms.

It is a real worry that all of the benefits of the PGG/WRI/WAK amalgamation have had to be passed through to customers, with nothing left on the table for shareholders. I think that has to call into question the value of the goodwill on the PGW balance sheet relating to the merger of these three entities.

Still the outgoing chairman Bill Baylis said at the AGM:

"We recognised that, as well as having full service offerings on a divisional or functional basis, the interaction with clients at a local or regional level was all important. To this end 15 District Managers have been appointed with specific responsibility for ensuring that client relationships at a local level are given the attention they deserve."

I hope that will address some of the negative comments on the rural services unit expressed on this thread.

The big surprise to me has been the seed business, with EBITA up around 40% on last year despite the continuing drought problems in Australia. From the increase in profit in Uruguay (some $400,000) over 90% of the increase in profitability looks to have come from the core NZ market. Moisture falls have been good this spring, so if temperatures come up to the norm it all looks very good from here for the new season too.

SNOOPY

discl: hold PGW, NZFSU

[The Great Gold Guru]

Note today that Nufarm ( ASX:NUF ) which used to be listed in NZ and traded as Fernz has received a huge offer from a consortium based including a Chinese crop protection co. and the NY buyout specialists , Blackstone. Just shows that the world is slowly but surely realising that food will be THE biggest issue this planet faces over the next few decades ... sure we love our oil but we could survive without it ... no such luck with Food !!. NZ is going to be on the radar in an increasing way due to our ability to grow clean safe food in a relatively low cost manner .... go buy yourself a dairy farm .... quick .... before the Chinese and NY hedge funds buy them all !!!

Also note that Aussie bio-fuel stock ARW has effectively gone bust over the weekend ... even at US$90bbl for oil the feedstock is becoming to expensive to compete, they have just mothballed to bio-fuel plants which they only finished building a few months ago. Shares got up to 260 last year , less than 10c today .... now that is scary .... go buy yourself 2 dairy farms !!!!

[The Great Gold Guru]

sorry that should be two bio-fuel plants ... not "to" ...

[Snoopy]

If you have to outline what has made the difference to PGW in the last two years, I think you would have to say management. Norgate has outlined his vision for taking NZ farming technology global and now it is beginning to bear fruit.


Norgate is continuing to back his company. If you look at the 28th May 2008 disclosure, it would appear he has bought an interest in the company for his kids (?) It seems though that he has bought derivatives at $1.35. Anyone know what those are? I don't think they are listed on the NZX, as such.

SNOOPY

discl: hold PGW

[Snoopy]

Time to spend some time unravelling the current PGW and NZS interrelationship. As at 31st July 2007 "PGG Wrightson Investments" held 10.57&#37; of NZS. The most recent disclosure for PGW was on 18th December 2007. That was following the closure of the November-December 2007 short form prospectus, and the final paying up of capital from the original share issue.

The 18th December declaration showed PGW with a total of 15.18% of the company. That included an 11.02% 'beneficial' stake and a '4.16%' 'non-beneficial' stake. An attached note informs us that 150,000 NZS shares are being held for Carlos Miguel de Leon, Chief Executive of PGG Wrightson Uruguay Limited by way of an executive incentive. This is nowhere near the 'extra' 4.16% of the NZS company, which amounts to 10.16 million shares. I am guessing that under IFRS accounting rules Carlos Miguel de Leon's incentive shares have been recorded as an expense and so have been 'written off' even though they are on paper still held by PGW.

I am unclear as to the significance is of the rest of these 10.16m-0.15m=10.01 million shares. It seems hard to believe they are all current executive incentives. Because there is no mention of a shareholding like this on the last published substantial shareholder list (31st July 2007), I can only conclude they must have been 'acquired' by PGW between 31st July 2007 and 18th December 2007. The only clue I can offer is that perhaps these shares haven't been bought at all but have become 'non beneficial' through the changing job designation of Craig Norgate. Craig Norgate is listed as having an associated party interest of 10.5m shares on 31st July 2008 when he was a mere 'director'. Perhaps his succession to the role of 'Chairman' following Bill Baylis's retirement has accounted for this classification change? Whatever the reason, I don't think I can account for these 'non-beneficial' shareholdings as representing any value to PGW shareholders. So we are back to the 11.02% 'beneficial' stake as the capital value of NZS that is controlled by PGW shareholders.

Anyone who has a better understanding of this cross shareholding, please enlighten me!

SNOOPY

[Snoopy]

Snoopy wrote:
"So we are back to the 11.02% 'beneficial' stake as the capital value of NZS that is controlled by PGW shareholders."


There are currently 281.304m PGW shares on issue, and 244.236m NZS shares on issue. PGW has a beneficial interest in 11.02% of NZS. So we can derive a 'per share' expression of the value tied up in NZS for PGW shareholders as follows.

(PGW holding)= 0.1102(244.236/281.303)(NZS) = 0.09568(NZS)

With an NZS share price of $1.95, that equates to a PGW holding value of 18.7cps.

SNOOPY

discl: hold PGW, NZS

[Snoopy]

We can derive a 'per share' expression of the value tied up in NZS for PGW shareholders as follows.

(PGW holding)= 0.09568(NZS)

With an NZS share price of $1.95, that equates to a PGW holding value of 18.7cps.


Based on a share price for PGW of $2.26, we can attribute the value of:

$2.26-$0.187=$2.073 to the underlying value of PGW, excluding NZS. The forecast Net Profit After Tax excluding capital gains and one off items, the NZS performance fee and the NZS share price appreciation (which has to be equity accounted as 'profit' under the new accounting rules) is still $39m, or

$39m/281.3m= 13.9cps

That gives an 'underlying PGW' PE of: $2.07/0.139= 14.9

By any traditional measure I would say PGW is fully priced. But 'tradition' does not include any 'Norgate' factor. The reorganization of the PGW wool business, giving the whole industry a more 'national focus' is a development that shows promise. But there is not enough disclosure to quantify this from a profit perspective

Financial services must be a good growth opportunity, given that PGW was about the only listed company with a finance arm that responded positively to the recent NZX enquiry on financial sustainablity of finance companies. Financial services revenue was up some 66% in the last half year report (31st December 2007). Even excluding the NZS performance fee results of $11.9m that is still a revenue increase of:

($65.78m-$11.9m)/$39.5m= a 36.4% increase.

Lastly Norgate is betting his kids fortune on the share price of PGW going up substantially from here. If he has that kind of confidence, it is hard to argue that we as shareholders should think any differently.

SNOOPY

discl: hold PGW

[Steve]

Good analysis to answer your own question! PS: Thanks for sharing... :)

[Snoopy]

Good analysis to answer your own question! PS: Thanks for sharing... :)


Thanks Steve. It is sometimes hard to keep track of these multifaceted companies in an objective way. Some people go to a PGW store and judge the total prospects of the company based on that experience. While that 'on the ground' research is relevant, it is important you do not judge a company's ability to manage a wholesale wool marketing co-operative, by the stock of gumboots on the shelves.

To go back to the PGW, NZS relationship:

(PGW holding)= 0.09568(NZS)

In practical terms a 10c rise in the price of NZS translates to a 1c rise in the value of PGW.

SNOOPY

[COLIN]

I have been watching PGW for a while now, and recently bought some PGWIZB (for leverage). Norgate knows where he is going - he's sorting out wool; he gets fat fees for managing Uruguay; he's no doubt got constructive thoughts on meat; and today's Fonterra announcement must also be a positive.
Another useful means of entry is via PGC, which is selling on a much lower PE; their main investment is of course MARAC, but they still hold a significant slice of PGW. (And MARAC is one of the three top finance companies - UDC and SCF being the other two - that will survive and prosper into the future. The PGC share price is being unduly held down by the prevailing pessimism towards the finance company sector, but it looks to me as if it is about to bounce off its bottom.)

[Snoopy]

I have been watching PGW for a while now, and recently bought some PGWIZB (for leverage). Norgate knows where he is going - he's sorting out wool; he gets fat fees for managing Uruguay; he's no doubt got constructive thoughts on meat; and today's Fonterra announcement must also be a positive.


Thanks for identifying that Warrant for me Colin. I see it is an ABN Amro 'rolling installment warrant' with a $1 call due on 28th March 1989. I presume that means for a small fee, as we get near excise date, you can 'roll it over' rather than stump up with the full dollar.

PGWIZB hit $1.43 on Friday, which is equivalent to a share price of $2.42, a premium of the PGW closing price ($2.31) of 5.2%. I also see you have to take the dividend cash buyback option, so you cannot retain your bonus shares.

Norgate has made his vote of confidence in these products but only to the extent of 4000 units. 4000 units is milk money to a guy like Norgate. I think Norgate is using the PGWIZB warrants to put some funds into his kid's family trust in a cost effective way. If he loses his bet and the share price is less than $2.35 on 28-03-2009, then the loss isn't great to someone like him. If he wins then he manages to legitimately pay less gift duty.

I have confidence in Norgate. But I'm not sure that 'the market' will mirror that confidence by the 28-03-2009 excise date. For that reason, plus the tax efficiency of the bonus shares I intend to stay in the head shares only. Good luck to you though Colin.



Another useful means of entry is via PGC, which is selling on a much lower PE; their main investment is of course MARAC, but they still hold a significant slice of PGW. (And MARAC is one of the three top finance companies - UDC and SCF being the other two - that will survive and prosper into the future. The PGC share price is being unduly held down by the prevailing pessimism towards the finance company sector, but it looks to me as if it is about to bounce off its bottom.)


Yes I agree. The reason I wouldn't buy PGC myself is that I have a significant chunk of funds tied up with Aussie banks. And I don't want to become (more) overexposed to the finance sector.

Hey Colin, what is the 'equation' for PGC shares in terms of PGW? By that I mean what does a 10c rise in PGW share price (say) do to the underlying value of PGC? If you don't know post the number of PGC shares on issue, the number of PGW shares on issue and the percentage holding that PGC has in PGW and I will work it out.

SNOOPY

[COLIN]

Thanks for identifying that Warrant for me Colin. I see it is an ABN Amro 'rolling installment warrant' with a $1 call due on 28th March 1989. I presume that means for a small fee, as we get near excise date, you can 'roll it over' rather than stump up with the full dollar.

PGWIZB hit $1.43 on Friday, which is equivalent to a share price of $2.42, a premium of the PGW closing price ($2.31) of 5.2%. I also see you have to take the dividend cash buyback option, so you cannot retain your bonus shares.

Norgate has made his vote of confidence in these products but only to the extent of 4000 units. 4000 units is milk money to a guy like Norgate. I think Norgate is using the PGWIZB warrants to put some funds into his kid's family trust in a cost effective way. If he loses his bet and the share price is less than $2.35 on 28-03-2009, then the loss isn't great to someone like him. If he wins then he manages to legitimately pay less gift duty.

I have confidence in Norgate. But I'm not sure that 'the market' will mirror that confidence by the 28-03-2009 excise date. For that reason, plus the tax efficiency of the bonus shares I intend to stay in the head shares only. Good luck to you though Colin.



Yes I agree. The reason I wouldn't buy PGC myself is that I have a significant chunk of funds tied up with Aussie banks. And I don't want to become (more) overexposed to the finance sector.

Hey Colin, what is the 'equation' for PGC shares in terms of PGW? By that I mean what does a 10c rise in PGW share price (say) do to the underlying value of PGC? If you don't know post the number of PGC shares on issue, the number of PGW shares on issue and the percentage holding that PGC has in PGW and I will work it out.

SNOOPY

Snoopy: Firstly, a small correction to your first para - date should be 28/3/2009 of course. (You have correctly stated this later).

PGC has 98m shares on issue, PGW 289m. PGC holds 22% of PGW. Thanks for your offer to do the calcs!

[Steve]

I have also considering PGC as opposed to PGW because PGC allows that little bit moew in the way of diversification.

[Snoopy]

PGC has 98m shares on issue, PGW 289m. PGC holds 22% of PGW. Thanks for your offer to do the calcs!


OK, PGW has more shares on issue than PGC. So if PGC owned *all* the shares in PGW then each PGC share would represent nearly 3 PGW shares (or 289m/98m= 2.95 to be exact). However, PGC does not own all the PGW shares. It only owns 22% of them. So the expression becomes:

PGC:A= 0.22(289m)/(98m)PGW = 0.65PGW

where 'PGC:A' represents the 'agricultural' component of PGC - in other words their shareholding in PGW. That means for every 10c rise in the price of PGW, we can expect the price of PGC to increase by 6.5c.

As another way of looking at things, if there are 289m PGW shares on issue, and the share price is $2.31, that gives PGW a market capitalisation of:

$2.31 x 289m= $668m

22% of that (the PGC holding) is:

0.22 x $668m= $147m

There are 98m PGC shares on issue, so the PGC:A component is:

$147m/98m = $1.50 per share

The PGC share price is $3.45. So the market valuation of the rest of PGC (principally Marac) is:

$3.45-$1.50= $1.95

Whether you think that is 'value' or not depends on the future earnings of Marac.

SNOOPY

[COLIN]

OK, PGW has more shares on issue than PGC. So if PGC owned *all* the shares in PGW then each PGC share would represent nearly 3 PGW shares (or 289m/98m= 2.95 to be exact). However, PGC does not own all the PGW shares. It only owns 22% of them. So the expression becomes:

PGC:A= 0.22(289m)/(98m)PGW = 0.65PGW

where 'PGC:A' represents the 'agricultural' component of PGC - in other words their shareholding in PGW. That means for every 10c rise in the price of PGW, we can expect the price of PGC to increase by 6.5c.

As another way of looking at things, if there are 289m PGW shares on issue, and the share price is $2.31, that gives PGW a market capitalisation of:

$2.31 x 289m= $668m

22% of that (the PGC holding) is:

0.22 x $668m= $147m

There are 98m PGC shares on issue, so the PGC:A component is:

$147m/98m = $1.50 per share

The PGC share price is $3.45. So the market valuation of the rest of PGC (principally Marac) is:

$3.45-$1.50= $1.95

Whether you think that is 'value' or not depends on the future earnings of Marac.

SNOOPY
Thanks, Snoopy. Knowing that you are a super analyst I accept your calculations and am greatly cheered by them. The market is applying an unduly harsh discount to PGC in relation to the value of its investment in MARAC.
For FY2007 PGC achieved a return of 15.8% (Net operating profit [equates to NPAT] of $26.5m) on its stated $168m investment in MARAC (PGC total net operating profit was $30.6m). The percentage contribution from PGW will no doubt be greater this year, but MARAC is weathering the current finance company storm in great style - latest half-year profit was up 11% over the previous comparable period, total receivables rose 14% during the six months, reinvestment rates remain within normal historical ranges, it has one of the rare (for the sector) Investment Grade credit ratings from Standard & Poors, has a $480m syndicated bank facility with NZ's five major banks, and a securitisation facility of around $300m. Apart from the ANZ-owned UDC and South Canterbury Finance, you won't find another NZ finance company as well-placed as MARAC.
Using your $1-95 attribution of per-share value, this places a market cap of (98m X $1-95) = $191m on MARAC, and a historical P/E ratio of 7.2 - not bad, even in today's conditions, given that they are still on a good profit growth path.
Would be tempted to buy a few more PGC, were it not for the fact that I have to garner cash for conversion of my NZO options.

[Snoopy]

I have been watching PGW for a while now, and recently bought some PGWIZB (for leverage).

Norgate knows where he is going - he gets fat fees for managing Uruguay


I wonder how many have taken the trouble to find out how much PGW really makes from Uruguay?

The PGW half year report 2007 is telling. On page 1 we find:

* NZFSU Performance Fee (based on a $1.50 share price) - $8m
* NZFSU share price appreciation (based on $1.50 share price) - $9m

We know all about the second bit. That is based around the NZS part farm ownership. And that has been covered by the equation I previously derived.

"To go back to the PGW, NZS relationship:

(PGW holding)= 0.09568(NZS)

In practical terms a 10c rise in the price of NZS translates to a 1c rise in the value of PGW."

I want to go back to the first bit. For that I need to go back to the original NZFSU prospectus. From page 17 of the original NZFSU prospectus:

"The Manager will be paid a Management fee of 1.5&#37; per annum on the gross asset value of the company until 30th June 2008, thereafter reducing to 1.0% per annum. The gross asset value of the company will be calculated by the manager in accordance with generally accepted accounting standards (based on the market value of farm assets which are subject to revaluation each year)."

As at 30th June 2007, the annual reporting date for NZS, 26,523ha had been purchased and these agricultural assets are listed in the NZS balance sheet at $NZ72.4m. 1.5% of that figure amounts to:

(0.015)($72.4m)= $1.09m (1)

The NZFSU prospectus continues:

"In addition the manager will be paid a performance fee calculated as 20% of the amount by which share price growth and gross distributions exceeds 10% per annum compounded. An adjustment will be made to ensure that total performance fees paid to the manager over time are not enhanced by share price volatility. Share price growth is calculated as the percentage change in a 12 month period in the volume weighted average price of the shares for the quarter to 30th June."

That means we won't know what the final performance fee is until 30th June. However, let's use an $1.50 NZS share price figure (as assumed in the PGW half year report). The original shares were subscribed to at $1. A 10% premium on that price would be $1.10. So the bonus payment on a per share basis on the share price gain would be:

0.2[$1.50-$1.10]= 8cps (that's per NZS share held.)

In that original tranche, PGW took up 17.934m shares. So that means the bonus payment due will be:

$0.08 x 17.9= $NZ1.4m (2)

Adding up (1) and (2) I get a total performance fee of $NZ2.4m, which is well short of the $NZ8m that PGW claim they are going to get. I don't think I have made a mistake in those calcs, so what is going on? Perhaps the performance fee gain has been taken on the price of the original 50c warrants, which effectively rose in price to $1?

If that was done the fee can be recalculated as:

0.2[$1.00-$0.55]= 9cps

$0.09 x 17.9= $1.6m

Still not nearly enough. So where does the $8m forecast performance fee come from? Anyone?

SNOOPY

discl: hold PGW, NZS

[COLIN]

I wonder how many have taken the trouble to find out how much PGW really makes from Uruguay?

The PGW half year report 2007 is telling. On page 1 we find:

* NZFSU Performance Fee (based on a $1.50 share price) - $8m
* NZFSU share price appreciation (based on $1.50 share price) - $9m

We know all about the second bit. That is based around the NZS part farm ownership. And that has been covered by the equation I previously derived.

"To go back to the PGW, NZS relationship:

(PGW holding)= 0.09568(NZS)

In practical terms a 10c rise in the price of NZS translates to a 1c rise in the value of PGW."

I want to go back to the first bit. For that I need to go back to the original NZFSU prospectus. From page 17 of the original NZFSU prospectus:

"The Manager will be paid a Management fee of 1.5% per annum on the gross asset value of the company until 30th June 2008, thereafter reducing to 1.0% per annum. The gross asset value of the company will be calculated by the manager in accordance with generally accepted accounting standards (based on the market value of farm assets which are subject to revaluation each year)."

As at 30th June 2007, the annual reporting date for NZS, 26,523ha had been purchased and these agricultural assets are listed in the NZS balance sheet at $NZ72.4m. 1.5% of that figure amounts to:

(0.015)($72.4m)= $1.09m (1)

The NZFSU prospectus continues:

"In addition the manager will be paid a performance fee calculated as 20% of the amount by which share price growth and gross distributions exceeds 10% per annum compounded. An adjustment will be made to ensure that total performance fees paid to the manager over time are not enhanced by share price volatility. Share price growth is calculated as the percentage change in a 12 month period in the volume weighted average price of the shares for the quarter to 30th June."

That means we won't know what the final performance fee is until 30th June. However, let's use an $1.50 NZS share price figure (as assumed in the PGW half year report). The original shares were subscribed to at $1. A 10% premium on that price would be $1.10. So the bonus payment on a per share basis on the share price gain would be:

0.2[$1.50-$1.10]= 8cps (that's per NZS share held.)

In that original tranche, PGW took up 17.934m shares. So that means the bonus payment due will be:

$0.08 x 17.9= $NZ1.4m (2)

Adding up (1) and (2) I get a total performance fee of $NZ2.4m, which is well short of the $NZ8m that PGW claim they are going to get. I don't think I have made a mistake in those calcs, so what is going on? Perhaps the performance fee gain has been taken on the price of the original 50c warrants, which effectively rose in price to $1?

If that was done the fee can be recalculated as:

0.2[$1.00-$0.55]= 9cps

$0.09 x 17.9= $1.6m

Still not nearly enough. So where does the $8m forecast performance fee come from? Anyone?

SNOOPY

discl: hold PGW, NZS

Snoopy - I'm in a bit of a hurry (must tackle my tax returns today) and I don't have printed copies of PGW or NZS Accounts, but wouldn't the Performance Fee be calculated on ALL the NZS shares, i.e. not just those held by PGW?

Regards.

[Snoopy]

Snoopy - I don't have printed copies of PGW or NZS Accounts, but wouldn't the Performance Fee be calculated on ALL the NZS shares, i.e. not just those held by PGW?


Thanks Colin, I think you might be right. In that case the gross asset management fee is:

(0.015)($72.4m)= $1.09m (1) -as before.

And the share performance bonus fee would be:

0.2[$1.50-$1.10]x169.6m = $13.6m (2)

That gives a total performance fee of:

$13.6m+$1.09m=$14.8m, or $10.4m after tax. That is higher than the $8m that PGW are claiming. But it could be that the 'management fee' is accounted for somewhere else in the finance division and is not part of the 'performance fee', and it may be that tax is payable at the old company rate of 33%, not 30%. Make those adjustments and the performance fee payable is:

0.67 x $13.6m= $9.1m

That is getting closer. There may be some write offs carried forward from previous years, and Uruguayan taxes that cannot be offset that reduce the true figure to the $8m estimated. If that sounds like a windfall, don't forget that PGW also faced the cash call on the full payment of their partly paid NZS shares during the year, which amounted to $12.8m. Even taking into account all the fees scraped in by PGW, on a cashflow basis PGW are down for the year. Heavily down when you consider the performance fee will be taken as paid in new NZS shares.

As it happens, I think PGW are underestimating their bonus payment because NZS shares are doing much better than was predicted six months ago. If the volume weighted average price is closer to the $1.75 that I estimate, then the 'bonus fee' goes up like this:

0.2[$1.75-$1.10] x 170.9m= $22.2m

Plus there will also be a contribution from the December non-renouncable bonus issue, which was made at $1.50 (and hence wouldn't have qualified for the PGW bonus if the shares were only worth $1.50 over the valuation period.)

1/2 x0.2[$1.75-$1.65] x 73.33m= $1.5m

Add those up and you get a 'bonus payment' of $23.7m, or $15.9m after tax. That is $6.8m more than the $9.1m I calculated before on the same basis. So with any luck we PGW shareholders are in for an 'extra bonus' of $6.8m.

Adding that $6.8m to the $8m that PGW has forecast gives a total bonus of $14.8m. Based on NZS shares being worth $1.90 at the time the bonus is earned, that means PGW shareholders can expect an extra 7.8m NZS shares. That would raise the total number of NZS shares owned by PGW to something over 25m, only just shy of 15% of the company. That is nice for we PGW shareholders, but not so good for the existing holders of NZS.

SNOOPY

discl: hold PGW, NZS

[Snoopy]

For FY2007 PGC achieved a return of 15.8% (Net operating profit [equates to NPAT] of $26.5m) on its stated $168m investment in MARAC (PGC total net operating profit was $30.6m). The percentage contribution from PGW will no doubt be greater this year, but MARAC is weathering the current finance company storm in great style - latest half-year profit was up 11% over the previous comparable period, total receivables rose 14% during the six months, reinvestment rates remain within normal historical ranges, it has one of the rare (for the sector) Investment Grade credit ratings from Standard & Poors, has a $480m syndicated bank facility with NZ's five major banks, and a securitisation facility of around $300m. Apart from the ANZ-owned UDC and South Canterbury Finance, you won't find another NZ finance company as well-placed as MARAC.
Using your $1-95 attribution of per-share value, this places a market cap of (98m X $1-95) = $191m on MARAC, and a historical P/E ratio of 7.2 - not bad, even in today's conditions, given that they are still on a good profit growth path.


You make the case well for PGC Colin. But with today's announcement of a new $100m facility with the ASB for 'child' PGW to expand their own financing arm, perhaps we no longer need to own 'parent' PGC shares to have a solid foot in the finance camp? I say 'perhaps' because 'the finance arm' of PGW is a fairly broad church. It includes most of the associated income related to 'New Zealand Farming Systems Uruguay', as well as the income from lending to New Zealand farmers.

The PGW interim results included within operating earnings 'NZS management fees' and a performance fee of $11.9m which had an impact of $8m on net earnings. Take that away from the financial services segment net profit of $15.4m (p20 PGW interim report Dec 2007) and we find the New Zealand continuing farming related finance arm net profit was:

$15.4m-$8.0m = $7.4m

From the balance sheet on page 8 of the PGW interim report, the total 'finance receivables' are $335m (current) + $124m (non current), which makes a total of $459m. That means we can calculate PGW's New Zealand finance based annualised return on funds over the six months July 2007 to December 2007 to be:

$7.4m/[$459m x (1/2)]= 3.2%

3.2% isn't a bad lender's margin. If another $100m of loan funds (from the ASB) were available, then annualised NZ based finance profits for FY2009 could be as high as:

$7.4m x2 + $100m x 0.032= $18.0m

What is more with the demise of alternative sources of finance, this kind of income looks 'reliable' going forwards.

However, it is possible that this $100m extra funding is being targeted at the expansion of the NZ Farming System's Uruguay company instead. If PGW do indeed end up owning 15% of NZS (25m shares out of some 170m), and NZS carry out another round of capital raising then PGW may need that new line of credit. Still even a 1:1 offer at $2 would only consume half of the available money, if PGW took up all of their own rights.

The market certainly liked the news today with PGW share price surging to an all time high of $2.61. Still, I would have to consider some of that surge currency related, as the NZD drops into the US75c domain. Where to from here for PGW? I keep thinking the dream run must end. But if the currency depreciation trend gains any legs, can anyone say that a $3 share price by the end of the year is impossible? I don't think it is quite time to roll back those PGW shareholdings yet!

SNOOPY

discl: hold PGW, now my second largest NZX holding by a good margin, and second only to NZS.

[COLIN]

Snoopy:
I agree, entirely, that the PGW uptrend is unlikely to peter out for a while yet. A lot of positive news is coming through, i.e. the positive Uruguay story (against my earlier negative assessment, I must admit); wool being "sorted" (microns now, as well as crossbreds); expansion of the Wrightson Finance funding and business levels; the easing of the Kiwi dollar; the high values being realised by their rural property sales business (individual farm sales in the $20/30 million price range must produce considerable commissions income for PGW); apparently improving outlook for meat export sales prices; and the increasing global demand for agricultural produce. Now is definitely not the time to bail out of PGW, and I only wish I had taken a greater interest when they were around the $2 mark.
Interesting to see that the bid price for the AAD warrants (PGWIZB) is 175 this morning. My modest foray into those is returning a handsome yield.
Regarding the financing business: I could never understand why the old Wrightsons Company decided to get out of financing in the Alan Freeth/ Simon White era, when they sold out this part of their business to Rabobank. Seasonal financing is such a core part of Stock and Station Agency business. Re PGC versus PGW: I think you will find that Marac is able to fund itself at cheaper rates than Wrightson Finance. Wrightsons has debt issue quoted on the NZDX. Marac is coming out with a $100m 5-year bond issue which will probably be set at a yield close to the recently successful South Canterbury issue (they have the same S & P ratings). We will then be able to compare Marac with Wrightson Finance, on the secondary NZDX market.
I would like to have a greater direct investment in PGW but my holding in PGC gives me a bit more insurance by way of spreading risk.

[Snoopy]

Snoopy:
I agree, entirely, that the PGW uptrend is unlikely to peter out for a while yet. A lot of positive news is coming through, i.e. the positive Uruguay story (against my earlier negative assessment, I must admit); wool being "sorted" (microns now, as well as crossbreds); expansion of the Wrightson Finance funding and business levels; the easing of the Kiwi dollar; the high values being realised by their rural property sales business (individual farm sales in the $20/30 million price range must produce considerable commissions income for PGW); apparently improving outlook for meat export sales prices; and the increasing global demand for agricultural produce. Now is definitely not the time to bail out of PGW, and I only wish I had taken a greater interest when they were around the $2 mark.


$2? Macdunk would have sold you his for $1.60 only 18 months ago! And of course because Macdunk made a loss on that trade (despite profiting on his several PGW trades before that), he will never invest in PGW again - even though PGW has been one of the top two or three best perfrorming shares on the NZX since! My own average entry price to PGW is $1.33, and I have always added to my increasing holding when the share price is going down. Of course my average holding time is something like six years, so I haven't made quick money. And as an extra 'punishment' over those six years I have been forced to bank 47.5cps in dividends. Such are the 'trials' of the long term investor!



Interesting to see that the bid price for the AAD warrants (PGWIZB) is 175 this morning. My modest foray into those is returning a handsome yield.


Those warrants are 'in the money' already! PGW shares traded up to $2.75 late this morning!



Regarding the financing business: I could never understand why the old Wrightsons Company decided to get out of financing in the Alan Freeth/ Simon White era, when they sold out this part of their business to Rabobank. Seasonal financing is such a core part of Stock and Station Agency business.


I think of that as the Greg Kay era. Now there is a name from the past! I wonder whatever became of Greg? Perhaps after his, erm, 'defining era' holding the reins at dear old Wrightsons (as it was in those days) a career back under the radar in corporate law was the forced career path forwards?

'Lest we forgot', the 1998 balance sheet (after the finance arm sale) showed no term debt, and WRI declared a profit (excluding the sale of the finance division) of $6.6m. Take away from that the seven months of profit from PGW finance ($4.1m) and the net profit attributable to the remaining rump of the Wrightson business was $2.5m.

The previous balance sheet had shown over $86m in bank loans due to be repaid/renegotiated) over a tight two year time window. With a mere $2.5m in underlying profits how do you suppose WRI would have serviced this debt in the future? The answer of course is that they couldn't have. It took the sale of the highly profitable Wrightson finance arm to stave off probable bankruptcy for Wrightsons (although naturally enough it wasn't put in those terms to shareholders at the time).

SNOOPY

discl: A (very small) WRI shareholder since 1995, who has substantially increased my position in what is now PGW (particularly in the last four years).

[Snoopy]

Snoopy:
I agree, entirely, that the PGW uptrend is unlikely to peter out for a while yet. A lot of positive news is coming through, i.e. the positive Uruguay story (against my earlier negative assessment, I must admit); wool being "sorted" (microns now, as well as crossbreds); expansion of the Wrightson Finance funding and business levels; the easing of the Kiwi dollar; the high values being realised by their rural property sales business (individual farm sales in the $20/30 million price range must produce considerable commissions income for PGW); apparently improving outlook for meat export sales prices; and the increasing global demand for agricultural produce.


I picked up a copy of last weeks NBR. In there was a story about PGWs real estate arm having increased their turnover by 65&#37; this year! This does not mean that real estate profits have increased by 65% of course. PGW have bought a small real estate company in Victoria and rebranded that as PGW. Furthermore there will have been costs in opening up new real estate branches within New Zealand. Rather frustratingly, the exact dollar value earned when declared will be submerged in the 'finance sector' sub result. Nevertheless it all builds on the wall of good news for PGW.

Did anyone else see the PGW announcement made to the stock exchange this morning? Rural Portfolio Investments (aka Baird McConnon and Craig Norgate with their cornerstone stake) increased their holding in PGW by 88,660 shares on Tuesday and Wednesday. Granted this is not significant compared to the 86,038,258 shares that RPI held before that. But it is always good to see the insiders buying - or is it? I though that insiders could only buy shares in a fairly narrow window around when company results were announced. The PGW annual result will be at least two months away. So how can RPI get away with this?

SNOOPY

[COLIN]

Snoopy: Thanks for your two contributions (above).
The other announcement today, about their 61&#37; interest in the leading Stock and Station Agency in Uruguay, should also be a positive move, although the sp slipped back a bit.
The rural servicing sector can't be very big in Uruguay, though, if this company has an annual turnover of only US$30m. It depends what services they provide.
Craig Norgate has certainly put some fire-power into PGW. (I agree that, on the face of it, RPI's latest share purchases do seem "out of time" but I am sure there is a satisfactory explanation - is it something to do with a management contract, or other services to PGW, perhaps? Taking such payments in PGW shares, if provided in the contract, would not be "insider trading".)
You and I have a slightly different investing philosophy. I have been in and out of the old Wrightsons company two or three times over the years, and also PGG and PGW. (I regard myself as an "Active Investor" - certainly not a trader - and, if ever the IRD challenged me on that, my defence would be that I am constantly re-positioning my portfolio according to changing circumstances. )
One of my emerging basic investment principles, in recent years, is to "Buy into Strength, Sell into Weakness". It was many years before I could bring myself to sell shares at a loss to the original purchase price - and it is still hard to do this at times - but you have to rake over your portfolio regularly and ask yourself the question: "If I wasn't in this share today, would I still buy it today?" If the answer is "No" then why hang onto it? Easier said than done, though, and I do admit that I have bailed out of one or two prematurely.

However, as we all know, there is no one fool-proof method of investing, and we must all keep our minds open to other views.
I get the impression that you steer clear of energy stocks? Thats a pity, because there's plenty of fertile ground there (in Australia) for some excellent rewards. Try dipping your toe in the water there, sometime, you'll find the chase exhilarating. Coal Seam Gas is all the rage, but there is also plenty of hype and you need to do careful research, of course.
Anyway, lets enjoy our PGW involvement while it lasts.
Cheers!

[Snoopy]

The other announcement today, about their 61% interest in the leading Stock and Station Agency in Uruguay, should also be a positive move, although the sp slipped back a bit.
The rural servicing sector can't be very big in Uruguay, though, if this company has an annual turnover of only US$30m. It depends what services they provide.


I would actually be more worried if the PGW share price hadn't taken a dip Colin! When a share price rises as hard and fast as PGW has, I believe some corrections along the way are healthy.

The radio report I heard this morning said that PGW's Barry Brook was previously sharing an office building with the now 51 per cent owned Romualdo Rodriguez Limited (livestock, wool and rural real estate)! I get the impression that all of rural business in Urugauy is quite close knit. The corporate culture that PGW is breathing into Uruguay must be quite a shock to them.

According to PGW:
"Romualdo Rodriguez is highly regarded and has established a leadership position from 43 years of involvement in servicing the needs of farmers in Uruguay. Annual sales in the livestock business alone amount to around US$30 million."

That $US30m turnover they were talking about related to the livestock size of the business only Colin. Interestingly exactly ten years ago, from the WRI annual report, the Wrightson livestock business had $NZ34m in sales. Mergers and an increase in livestock value will have boosted that figure since. But the Romualdo Rodriguez business does seem to be of significant size. It is also good to see the Romualdo Rodriguez family holding onto a minority stake in the company, at least in the meantime.



You and I have a slightly different investing philosophy. I have been in and out of the old Wrightsons company two or three times over the years, and also PGG and PGW. (I regard myself as an "Active Investor" - certainly not a trader - and, if ever the IRD challenged me on that, my defence would be that I am constantly re-positioning my portfolio according to changing circumstances. )


Of course. Even I (partially - it was only a partial offer) sold out to Craig Norgate when RPI made their takeover foray into WRI. There were better dividend opportunities for income earning elsewhere, so I sold. Then when the WRI share price dropped back 'post takeover' the dividend yield improved so I once again boosted my WRI holding. All legitimate income investor activity. This is what income investors do.



I get the impression that you steer clear of energy stocks? Thats a pity, because there's plenty of fertile ground there (in Australia) for some excellent rewards. Try dipping your toe in the water there, sometime, you'll find the chase exhilarating. Coal Seam Gas is all the rage, but there is also plenty of hype and you need to do careful research, of course.


I have holdings in CEN and BHP (who own substantial petroleum assets) Colin. Actually I think BHP is my largest single global holding, so I wouldn't say I steer clear of energy stocks. But I don't consider myself an expert in energy. So I just sit on those holdings and let the existing company management do it for me. I read my first article on Coal Seam Gas in the popular media this week. When hot (pardon the pun) areas like this start to generate interest from the inexpert, this is normally a sign for me to get out rather than jump in! When the next energy price collapse comes, I might start picking over those energy coals again. IIRC I made good money on Transalta about ten years ago, when that looked like a dog.

SNOOPY

[COLIN]

Trading halt on PGC, PGW and SFF (the old PPCS).
Looks like some rationalisation on the meat industry front. Whatever it is, PGW will be sitting on top. Craig Norgate would not accept a subsidiary role.

[Snoopy]

Trading halt on PGC, PGW and SFF (the old PPCS).
Looks like some rationalisation on the meat industry front. Whatever it is, PGW will be sitting on top. Craig Norgate would not accept a subsidiary role.

A 50% interest in Silver Fern Farms! Getting in on the ground level of a fresh new meat co-operative sounds good. Just imagine if Norgate had instead tied himself to one of those tired old industry players like PPCS ;-P. Now that would not have looked so good!

'Managing meat from the pasture to the plate.' is a great slogan, but I fear 'achievement' will be harder than 'recitation'.

The meat industry in NZ has needed sorting out for a long time. Perhaps the entry of Norgate to the meat industry table will be the long awaited catalyst for actually getting things moving?

I see the deal will see $220m of PGW money go into acquiring 50% of the SFF co-operative, which will then become a 'half co-operative' 'half corporate' (Hmm, do I feel a feel a new Tui beer billboard coming on?). The $100m new banking facility PGW negotiated with ASB only three weeks ago won't go anywhere near covering this deal. Whether the deal goes ahead or not is still be be decided by July and August meetings from the existing co-operative's members. But given the failure of the meat industry to consolidate voluntarily, do the existing SFF holders have a real alternative? Also the PGW bankers will have to agree. PGW is relatively highly geared, given the volatility of its underlying earnings base. I think those bankers may agree more readily if shareholders stump up some more money as well. IMO we are looking at a cash issue for PGW in the next three months or so. Whether substantial shareholder PGC will need a cash issue as well is something I don't know.

SNOOPY

discl: hold PGW

[COLIN]

A 50&#37; interest in Silver Fern Farms! Getting in on the ground level of a fresh new meat co-operative sounds good. Just imagine if Norgate had instead tied himself to one of those tired old industry players like PPCS ;-P. Now that would not have looked so good!

'Managing meat from the pasture to the plate.' is a great slogan, but I fear 'achievement' will be harder than 'recitation'.

The meat industry in NZ has needed sorting out for a long time. Perhaps the entry of Norgate to the meat industry table will be the long awaited catalyst for actually getting things moving?

I see the deal will see $220m of PGW money go into acquiring 50% of the SFF co-operative, which will then become a 'half co-operative' 'half corporate' (Hmm, do I feel a feel a new Tui beer billboard coming on?). The $100m new banking facility PGW negotiated with ASB only three weeks ago won't go anywhere near covering this deal. Whether the deal goes ahead or not is still be be decided by July and August meetings from the existing co-operative's members. But given the failure of the meat industry to consolidate voluntarily, do the existing SFF holders have a real alternative? Also the PGW bankers will have to agree. PGW is relatively highly geared, given the volatility of its underlying earnings base. I think those bankers may agree more readily if shareholders stump up some more money as well. IMO we are looking at a cash issue for PGW in the next three months or so. Whether substantial shareholder PGC will need a cash issue as well is something I don't know.

SNOOPY

discl: hold PGW
Agree, a cash issue by PGW seems inevitable. RPI (Norgate/McConnon investment vehicle) may also need to raise extra cash to fund their share, if they are to retain their existing proportion of PGW equity, but they may find it difficult to go to the public for this, given the current climate. (Not too sure about RPI's ability to roll over their existing public debt issues, but thats another matter. [Haven't checked the maturity dates of these]). PGC could probably fund from existing resources.
The structure of the new SFF Board may be a contentious issue, with a 50/50 split between PGW and the growers, with the inevitable "cleavage" issues. Farmers can be a most obstinate, obdurate, lot, as witness the struggles with trying to bring the big meat processors together, and the Fonterra battles with getting farmer approval to new capital structures. It would seem to hinge on who is to be the Chairman and whether he or she is to have a casting vote. There will doubtless be a Shareholders Agreement drawn up to cover this, but as things stand I can see long drawn out battles on getting the terms of that Agreement settled. But eventually, one way or another, the farmer-producers will come to see the sense of amalgamation, if a clear-cut case for the benefits (which undoubtedly exist) can be made to them, and will reluctantly accept that they may have to agree to something short of their most desirable outcome. And, as I expected, the market already sees the benefits for SFF by dropping the yields on the SFF debt issues on the NZDX.
Overall, I see this as a long-term positive development for PGW - and hence PGC.
"Food and Fuel" are the investment sectors to be in, these days, with little doubt.

DISC: Hold PGC, PGW, PGWIZB, SFF030

[biker]

(Not too sure about RPI's ability to roll over their existing public debt issues, but thats another matter. [Haven't checked the maturity dates of these]). DISC: Hold PGC, PGW, PGWIZB, SFF030

Maturity dates RPI020 15/4/09 and RPI010 15/4/2011

[COLIN]

Maturity dates RPI020 15/4/09 and RPI010 15/4/2011
Thanks.
$75m of new equity required. A bit less than I expected. They seem confident of raising that, plus the necessary additional debt. I'm sure that Norgate has thought all this through, and got his ducks lined up.

[Snoopy]

$75m of new equity required. A bit less than I expected. They seem confident of raising that, plus the necessary additional debt. I'm sure that Norgate has thought all this through, and got his ducks lined up.

Go back to the PGW press release on this matter Colin. Here is an excerpt:

----------

The partnership is based on a mix of financial and organisational elements.
- The procurement operations of SFF and PGW will be integrated under an
agreement between the two companies.
- PGW will subscribe $220 million ($145 million on completion, and $75
million plus interest by 1 March 2009) for a 50 percent shareholding in SFF.

----------

$75m is what PGW are 'subscribing' initially. Not the amount of new equity required, at least according to the press release. PGW will have to decide what proportion of equity and debt is in that $75m they 'subscribe'. Also the $75m is only a 'downpayment'. So your comment Colin that it is

"A bit less than I expected."

is spot on. The actual figure is $220m, to be fully paid up by some unspecified later date.

Am I right? Or is there some other source that says Norgate will be raising only $75m in new equity?

SNOOPY

[Xerof]

My understanding of the financial arrangement is that Wrightsons put up 145m upon 'completion' of the agreement, which is subject to gaining 75% shareholder (of PP) approval, followed by a further 75m plus interest by March 09.

So the 145m is required on/before October 08.

How it is funded is a moot point, but it will be an equity stake of 220m

The logic of this initiative escapes me - "pasture to plate" is not a new concept in this industry - the real issue is overcapacity at the processing stage, and (as usual) fragmented marketing with (as usual) competitive underselling, to push the product out the doors.

If PGW intend to now simply guide livestock supply through PP plants (and clip the ticket along the way), the rest of the processors will just force up prices (as usual) to retain their own market share, leaving the industry (as usual) with it's traditional lousy return on capital.

Sideshow Bob might have a few positive comments to make on this but I can't get enthused

[Snoopy]

My understanding of the financial arrangement is that Wrightsons put up 145m upon 'completion' of the agreement, which is subject to gaining 75% shareholder (of PP) approval, followed by a further 75m plus interest by March 09.

So the 145m is required on/before October 08.

How it is funded is a moot point, but it will be an equity stake of 220m


Thanks Xerof. That interpretation makes more sense than mine. I think I heard the $75m figure mentioned on the radio as well by some broker. It looks like they misinterpreted when the payments were to be made.



The logic of this initiative escapes me - "pasture to plate" is not a new concept in this industry - the real issue is overcapacity at the processing stage, and (as usual) fragmented marketing with (as usual) competitive underselling, to push the product out the doors.

If PGW intend to now simply guide livestock supply through PP plants (and clip the ticket along the way), the rest of the processors will just force up prices (as usual) to retain their own market share, leaving the industry (as usual) with it's traditional lousy return on capital.


As I understand it the idea is to gain a premium price by offering what the big overseas customers want, when they want it. Get rid of the seasonal blips by adopting a Fonterra style model for meat. That means supplying from overseas farms (remember PGW associate NZS has quite a bit of Uruguayan land suitable for grazing) to fill the gaps if necessary.

The NZ farmers will have to accept that from now on they will have to grow their meat on Sainsbury's schedule and not their own. There won't be any more underselling to the end line customer because PPCS will be looking for 'multi-seasonal deals'. If the big overseas buyers don't sign up, then they won't get their year round guaranteed quality supply contract.

The injection of capital into PPCS (sorry it will take me a long time before I can think of that organization under another name) means the automation program (using Scott Technology joint venture meat boning robots) will move into another gear. Thus PPCS will be able to cut costs and pass more margin through to farmer owners - or alternatively PPCS will have more funds with which to outbid competing meat plants. Either way the farmers win.

SNOOPY

discl: hold PGW, NZS, SCT

[COLIN]

Go back to the PGW press release on this matter Colin. Here is an excerpt:

----------

The partnership is based on a mix of financial and organisational elements.
- The procurement operations of SFF and PGW will be integrated under an
agreement between the two companies.
- PGW will subscribe $220 million ($145 million on completion, and $75
million plus interest by 1 March 2009) for a 50 percent shareholding in SFF.

----------

$75m is what PGW are 'subscribing' initially. Not the amount of new equity required, at least according to the press release. PGW will have to decide what proportion of equity and debt is in that $75m they 'subscribe'. Also the $75m is only a 'downpayment'. So your comment Colin that it is

"A bit less than I expected."

is spot on. The actual figure is $220m, to be fully paid up by some unspecified later date.

Am I right? Or is there some other source that says Norgate will be raising only $75m in new equity?

SNOOPY

Snoopy: Here is the exact quote from today's "The Press", which I was relying on:
"Chairman Craig Norgate said PGG Wrightson would raise up to $75m via a share-based capital raising and also use debt to pay for the $220m stake."
If "The Press" have correctly quoted Norgate then my original statement stands. It is quite unrelated to the timing of the actual payments to SFF.

[Sideshow Bob]

I note the that partnership with Silver Fern Farms starts 1st of October:

World Vegetarian Day!! :D

[kura]

I note the that partnership with Silver Fern Farms starts 1st of October:

World Vegetarian Day!! :D

Maybe that is the reason that settlement won't be happening today ???

Gee, they have been having a rough time of it lately, first they have placement, with underwritten SPP (wonder if underwriters have an "out" clause for market turmoil ?

No doubt if PGC have their "in specie" distribution of their PGW holding, on becoming a bank, you could expect even more weakness in share price.

[AMR]

How do the fundamentals for the PGW empire stack up right now? I'm not too clear about what the whole silver fern thing means, but I'm actually tempted to have a stab with PGW approaching support.

NZS made a new low unfortunately, no touching with a barge pole.

[duncan macgregor]

How do the fundamentals for the PGW empire stack up right now? I'm not too clear about what the whole silver fern thing means, but I'm actually tempted to have a stab with PGW approaching support.

NZS made a new low unfortunately, no touching with a barge pole. AMR the trouble with empire builders is the ammount of risk that they must take on board. Norgate is all over the place building his empire, which is extreme high risk in troubled times.
The PGW sp has dropped from an august high of 250c to an oct low of 171c. That is a crash caused mainly by bad timing. The idea might be right, but the timing wrong. PGW is still going to downtrend, making this into a real bargain later on. I would think dairy produce will downtrend, making the PGW sp under further pressure. We still have the American economy in deep strife, this is no time to buy anything. Figures and numbers count for very little when the herd stampedes its best to stand aside. Macdunk