PGW - PGG Wrightson

[Getty]

Yes I have to say Winner that the $17 million is really bugging me. PGW said they had renegotiated their banking arrangements after the sale of the Seeds business. Hopefully they would have organised a call facility for short term borrowing and set tranches for the longer term borrowings:). So whoever is responsible for the daily cash management at PGW did not plan to have a spare $17 million in cash at a reporting date while having short term borrowings of $30 million. I know commentators here have said this should not be a problem and is either seasonal or poor timing of a tranche. I can partially accept this, but for it occur on a day that they airing their underpants to the world to see:ohmy:, in my mind smacks of incompetence:t_down:.
Not as concerned about the $45 million in GO money as this would be spread across many farmers and the risk of them all defaulting is not that great. If they do all default then wider New Zealand has got some rather serious problems.

All in All, its just another Brick in the Wall.

[Snoopy]

From AR2019 p7, we now have an indication of how the 'corporate structure review' will affect earnings going forwards.

"We expect to see the benefit of reduced costs flowing through progressively with savings in excess of $2.5m expected in FY2020"

With the seed business gone, expectations are reset. As an exercise I have gone through the last few years results and removed 'Seed & Grain' EBITDA from the Operating EBITDA. This time, I have added back in the recently announced 'corporate savings'.

Here is the multi-year earnings picture that results:




Combined EBITDA
less Seed & Grain EBITDA
add Corporate Savings
equals PGWRR EBITDA


FY2014$58.747m$33.965m$2.500m
$27.282m


FY2015$69.631m$40.506m$2.500m
$31.675m


FY2016$70.181m$41.862m$2.500m
$30.819m


FY2017$64.499m$37.045m$2.500m
$39.974m


FY2018$70.174m$35.607m
$2.500m
$37.067m


FY2019$2.500m
$26.925m



Average
$32.290m



1/ This period covers the 'modern' era where Mark Dewdney's 'One PGW' philosophy started to permeate the group.
2/ I have used only 'Operating EBITDA'. That metric Leaves out all 'Equity Accounted Investee Profit', and consequently removes the profit contribution from 'Agimol', representing the 50% interest in 'Agricentro' in Uruguay, an equity investment that was subsequently fully taken in house (FY2019) and latterly sold (EOFY2019). Equity accounted New Zealand based investments retained, being a 50% interest in 'Canterbury Saleyards' and a now 33% interest in 'Agri Optics New Zealand', I do not consider have contributed materially to EBITDA.


When you have a tough year, it pays to orient it within the wider business cycle.




Combined EBITDA
less Seed & Grain EBITDA
add Corporate Savings
equals PGWRR EBITDA


FY2014$58.747m$33.965m$2.500m
$27.282m


FY2015$69.631m$40.506m$2.500m
$31.675m


FY2016$70.181m$41.862m$2.500m
$30.819m


FY2017$64.499m$37.045m$2.500m
$39.974m


FY2018$70.174m$35.607m
$2.500m
$37.067m


FY2019$2.500m
$26.925m


FY2020



$23.446m


Average
$31.027m



1/ This period covers the 'modern' era from when ex-CEO Mark Dewdney's 'One PGW' philosophy started to permeate the group.
2/ I have used only 'Operating EBITDA'. That metric Leaves out all 'Equity Accounted Investee Profit', and consequently removes the profit contribution from 'Agimol', representing the 50% interest in 'Agricentro' in Uruguay, an equity investment that was subsequently fully taken in house (FY2019) and latterly sold (EOFY2019). Equity accounted New Zealand based investments retained, being a 50% interest in 'Canterbury Saleyards' and a now 33% interest in 'Agri Optics New Zealand', I do not consider have contributed materially to EBITDA.
3/ From FY2019, the New Zealand accounts are presented with the remaining NZ business trading as a compartmentalized entity.
4/ For consistency I have used the pre IFRS16 method of calculating EBITDA.

SNOOPY

[Snoopy]

When you have a tough year, it pays to orient it within the wider business cycle.


Below is the normalised earnings picture for FY2020





EBITDAless D&Aless Net Interestless Income Taxequals NPAT
add Property devaluationequals Adjusted NPAT {A} No. Shares on Issue {B} eps {A}/{B}


FY2020$23.446m $9.303m$1.906m $3.426m $8.811m
$0.200m $9.011m75.484m11.9c




Here is the equivalent whole earnings cycle picture:



EBITDAless D&Aless Net Interestless Income Taxequals NPAT
less Defined Benefit Adjustmentequals Adjusted NPAT {A} No. Shares on Issue {B} eps {A}/{B}


Business Cycle$31.027m$9.303m$1.906m$5.549m (4)$14.269m
$1.500m (5)$12.769m75.484m16.9c



(4) Income tax = 0.28 x ($31.027m - $9.303m -$1.906m) = $5.549m
(5) Defined Benefit Scheme is in IFRS deficit of $9.838m at EOFY2020. An adjustment of $1500 will clear this deficit within seven years. Management have said that such adjustments will not be necessary, but I prefer to align with the IFRS standard setters who would suggest that adjustments must come.

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

Capitalisation of averaged business cycle earnings at the rate of 9.5% gross, yields the following 'fair value' share price:

16.9c / (0.095 x 0.72) = $2.47

This evening PGW closed at $2.71 on the market. This price is higher than a pure earnings based valuation could justify in my view, particularly at the trough of the business cycle. With the outlook for FY2021 uncertain, this suggests to me that the share is carrying a 'takeover premium'. This is quite believable with BAIC from China having built a blocking stake earlier this year which they have already added to. However, I do not believe in investing hoping that a takeover offer will come. Right now, I am sitting on a stake that owes me rather less than $2.47 per share which I am comfortable to hold. I don't intend to add to my stake unless the price drops back below my new $2.47 price target.

SNOOPY

[Snoopy]

Time to look forwards to the current year to see if there is any ongoing substance to this 'debt issue'. The first step is to forecast a 'net profit after tax' assuming that the EBITDA figure of $30m for FY2020 becomes reality.



PGG Wrightson Rural Rump FY2020f


EBITDA$30.000m


less DA$9.632m


less I$3.826m


equals EBT$16.542m


x 0.72 equals NPAT {A}$11.910m
205m

No. shares on issue {B}75.484m


eps {A}/{B}15.7c



We have no clear idea of what the bank loan position, balance of money owing to employees or deficit of the pension plan will be on 30th June 2020. So I am using the indicative figures for PGW today after the capital return as estimates.




FY2019 (iter. 1)
FY2020f


Short Term Bank Lo]ans
$3.920m
$3.920m


add Long Term Bank Loans
$31.742m
$31.742m


add Net Defined Benefit Liability (Pension Plan deficit)
$5.883m
[td=align:right]$5.883m[]/td]


add Employee Entitlements
$16.821m
$16.821m


Total Bank and Worriesome Liabiliities {A}
$58.366m
$58.366m


NPAT + Impairment & Fair Value adj. {B}
$7.187m (i)$11.910m


Minimum Debt Repayment Time {A}/{B} (in years)
8.124.90



Notes

Iteration i (Assuming Profits from Seed Sales paid through to Shareholders)

(i) Calculation of NPAT and 'Impairment & Fair Value Adjustments' (representing available cashflow for FY2019) is as follows:

FY2019: $4.000m+$3.187m = $7.187m

------

My rule of thumb for the MDRT answer in years is:

years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern

So a figure of 4.9 is not a bad result, but neither is it good. It is better than the recent peak figure of the pre-split PGW from FY2018 (7.87), but worse than the four preceding years before that FY2017 (3.97), FY2016 (4.54), FY2015 (4.85) and FY2014 (3.28). I would describe PGWs current position as being 'one shock away from trouble'. Yes the potential gross dividend yield today may look attractive:

15.5c / ($2.46 x 0.72) = 8.8%

(Note: a 15.5c annual dividend represents a projected dividend payout ratio of 99%)

But this is not a bond substitute.

I would advise investors not to 'bet the farm' on PGW. But as part of a balanced income portfolio, where as an investor you are aware of what a farming downturn might do to this investment, I think a shareholding in PGW has its place.


When I make forecasts, like the post quoted above, I like to check back to see whether what I predicted actually eventuated,




FY2019 (iter. 1) (indicative forecast for FY2020)
FY2020 (as reported)


Cash On Hand
($1.160m)
($16.868m)


Short Term Bank Loans
$3.920m
$40.000m



add Long Term Bank Loans
$31.742m
$20.000m


add Net Defined Benefit Liability (Pension Plan deficit)
$5.883m
$9.838m


add Employee Entitlements
$16.821m
$13.960m


Total Bank and Worriesome Liabiliities {A}
$57.206m
$66.930m


NPAT + Impairment & Fair Value adj. {B}
$7.187m (i)$7.940m (i)


Minimum Debt Repayment Time {A}/{B} (in years)
7.968.43



Notes

Iteration i (Assuming Profits from Seed Sales paid through to Shareholders)

(i) Calculation of NPAT adjusting for 'Impairment & Fair Value' chnages (representing available cashflow for each year) is as follows:

FY2019: $4.000m+$3.187m = $7.187m
FY2020: $7.133m+$0.807m = $7.940m

------

My rule of thumb for the MDRT answer in years is:

years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern

My original FY2020f 'forecast post' was from 1st November 2019, well before the effects of the drought and Covid-19 were apparent. Nevertheless, not unexpectedly, the overall debt position of PGW has deteriorated over the year. And this is after updating my procedure to net off cash balances, which were substantial at EOFY2020. Reduction in interest rates have improved the ability of the company to service its debts. With interest rates set to go even lower I do not anticipate difficulty in debt servicing in the medium term.

Yet in terms of the ability to repay all debt, I would argue PGW is in its worst position since the GFC when it was bailed out by Alan Lai and Agria. Banks are being told to look upon their loans to business more kindly, so who knows how the bankers are reacting to PGW's position. But I can't see any adjective more suitable for describing PGW's debt position as 'high'.

To some extent this end of financial year debt position is artificially favourable, because it comes off a relatively buoyant first half, before the drought hammered the second half year into a loss. The long term weather outlook is more dry weather in the east of the country over the coming summer. That means up until December 2020, we might be looking with a calendar year with no net positive income for PGW. In the 19th July document outlining the proposed capital structure following the capital repayment, the forecast core debt level was to be between $25m and $50m (page 9). Taking the cash position in to account, that means we now have debt headroom of just:

$50m - ($40m + $20m - $16.868m) = $6.868m

This is not much. I would be fairly confident in predicting that as well as no final dividend for FY2020, there will be no interim dividend for FY2021 either. In my November 2019 review I said

"This is not a bond substitute."

No dividend for at least a year is a manifestation of that comment.

SNOOPY

discl: Shareholder, because I do believe the rural supplies sector will bounce back, eventually

[Snoopy]

FCCR= [EBITDA+Lease Expenses] / [Total Interest(less interest income in cash)+Lease Expenses]

= [$30m + $21.904m] / [$3.826m + $21.904m] = 2.0 > 2.0

The fixed cost coverage ratio just passes but with nothing to spare. More evidence that PGW is 'mortgaged to the max'



A reality check update for my November 2019 forecast projections for FY2020:

FCCR= [EBITDA+Lease Expenses] / [Total Interest(less interest income in cash)+Lease Expenses]

= [$23.446m + $19.617m] / [$0.849m + $19.617m] = 2.1 > 2.0

The fixed cost coverage ratio just passes but with little to spare. The evidence that PGW is 'mortgaged to the max' continues.

SNOOPY

[Snoopy]

Using my 'forecast data' from post 4701

Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
=( $3.920m + $31.742m ) / $30m = 1.18 < 3.00 (good)

That is the balance date figure. Things don't look quite so good with $70m of seasonal bank finance thrown in:

Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
=( $3.920m + $31.742m + $70m ) / $30m = 3.52 > 3.00 (bad)

This suggests to me that on current EBITDA forecasts, PGW is now 'geared to the max'. But perhaps banks are OK with seasonal breaches of their covenants?


A reality check update for my November 2019 forecast projections for FY2020:

Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
=( -$16.868m + $30.000m + $20,000m ) / $23.446m = 1.41 < 3.00 (good)

That is the balance date figure. The seasonal bank finance increment was restricted to $33.127m this year:

Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
=( -$16.868m + $30.000m + $20.000m + $33.127m(1) ) / $23.446m = 2.83 < 3.00 (good)

Notes

1/ See post 4995 for derivation of this increment figure.

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

So the seasonal borrowing increment was restricted below the maximum I had forecast to ensure that the compliance with the SDCR banking covenant was maintained.

SNOOPY

[winner69]

Hey balance — what does this mean

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/359307/330167.pdf

Just changing the letters around ir something

[Roberto the Brickie]

Thanks for the data analysis Snoopy, it is really useful to people who are looking at these complex financial statements that seem to keep accountants employed, while making it difficult for the majority of the readers (assuming people bother reading the results of their investments).:)
Your Senior Debt Coverage Ratio is a little confusing to me as you have included my worrisome $17 million of cash of hand as a deduction. I appear to be the only person thinking this large cash balance is a problem and some people have even suggested it is normal. Looking at the previous 4 years of financial statements, PGW has never had such a large cash balance at either 30 June or 31 December so I keep assuming this is a result of poor cash management. Some commentators on here have said that is normal and are not as concerned as myself. If this is normal should it be taken as a deduction of your total senior debt?:confused:

[Norwest]

Hey balance — what does this mean

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/359307/330167.pdf

Just changing the letters around ir something


It's a brand new company so I'm assuming they are just structuring how they have their holdings. The interesting part is that they are continuing to purchase PGW shares, with an additional 609,898 being purchased since the last notice.

[Balance]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/PGW/358582/329172.pdf

IMO, stock is underwritten by BAIC at $2.75 so $2.60 is good buying.


It's a brand new company so I'm assuming they are just structuring how they have their holdings. The interesting part is that they are continuing to purchase PGW shares, with an additional 609,898 being purchased since the last notice.

Well spotted, Norwest.

My comments above stand.

DYOR.

[Balance]

As my ex-boss kept reminding us when we were evaluating investment banking proposals - don’t lose focus on the big picture!

What’s the big picture here?

BAIC, China, Agria - they will determine what happens next with PGW.

Chess pieces being put in place imo.

Wake up one morning and it is entirely possible that a deal has been done with Agria & a full takeover offer is launched.

In Agria's position, I will be asking for $3.15 at least - if Beijing is prepared to pay $2.75 for 7%, they will expect to pay $3.15 at least for Agria's 44% which delivers control.

Meanwhile, anything under $2.75 is good buying for Beijing as they have showed with the latest SPH.

[Snoopy]

It's a brand new company so I'm assuming they are just structuring how they have their holdings.
The interesting part is that they are continuing to purchase PGW shares, with an additional 609,898 being purchased since the last notice.


How do you know "BCA New Continent Agri Hldg. Limited" is a brand new company? Granted I stuck the name into Google and nothing much came up. I searched the NZ Companies Registry and once again 'nothing'.

Breaking the name down down "New Continent" (Foods Company Limited) is a Chinese fish processing company.

Beijing Capital Agribusiness Co. Ltd (BCA) is a poultry breeding, food processing, biopharmaceutical production company.

Is this new company a way to bring two interests together, even if both are ultimately controlled by the Chinese government? I can't see much synergy between fish and chicken processing companies in China and supplying rural goods to NZ farmers.in New Zealand. So time to speculate.

My best guess is that the "BCA New Continent Agri Hldg. Limited" interest is related to PGW's 'Go Livestock' scheme which involves PGW funding lamb and beef purchases for farmers, while ensuring PGW retains the title over them while they are finished on farm. By controlling PGW, the Chinese government have title to beef and lamb livestock. So maybe they are looking to divert those animals into their own processing facilities? After all if PGW can mandate what sale yards those animals go through, it isn't much more of a step to dictate where those animals end up being processed as well?

SNOOPY

[Norwest]

How do you know "BCA New Continent Agri Hldg. Limited" is a brand new company?

Hi Snoopy, you can view the full details at the Hong Kong companies registry. It was registered on 16th June this year, after BAIC took a holding in PGW.

[Snoopy]

Thanks for the data analysis Snoopy, it is really useful to people who are looking at these complex financial statements that seem to keep accountants employed, while making it difficult for the majority of the readers (assuming people bother reading the results of their investments).:)
Your Senior Debt Coverage Ratio is a little confusing to me as you have included my worrisome $17 million of cash of hand as a deduction. I appear to be the only person thinking this large cash balance is a problem and some people have even suggested it is normal. Looking at the previous 4 years of financial statements, PGW has never had such a large cash balance at either 30 June or 31 December so I keep assuming this is a result of poor cash management. Some commentators on here have said that is normal and are not as concerned as myself. If this is normal should it be taken as a deduction of your total senior debt?:confused:

The way I look at it, if the problem is 'debt' then the solution is 'cash'. I can't see why a bank would not offset the amount of debt on the books against cash, when evaluating that company's financial position. I agree it is odd to have that much cash ($17m) on hand. But other years haven't had Covid-19. So there may be good reason for holding that money for quick dispatch. Remember a balance sheet is only a snapshot on one particular day. That $17m might no longer be there.

SNOOPY

[Snoopy]

I spoke to a friend in the Commercial Real Estate business who said that PGW were looking to sublease part of their new head office. They have not been able to find a subtenant and have instead moved staff from other offices into this site. :mellow: Therefore I suspect that the accountants at PGW would have taken an impairment on the part of the new head office they were looking to subtenant in the 2019 financial statements. Not having fulfilled this plan and having staff move in would reverse the impairment provision:) It would be useful to the readers of financial statements if each site they impaired was shown in full. I would also prefer the accounting team were focusing on cash management $17 million cash at balance date rather than finding ways to manipulate profits through fancy impairment provisioning.:p


I am sowing a new section of lawn this spring, so it was time for my annual visit to PGW on Blenheim Road in Christchurch to get some grass seed and low release fertilizer supplies. I found the assistant I dealt with very knowledgeable and helpful. But I noticed only half of the building was occupied and an 'available to lease' sign was out for the vacant half.

"Ah yes" said the shop assistant. "PGW management couldn't lease out the bottom floor of their new airport park headquarters, so all the office staff from 'here' have gone out 'there' to occupy it. I probed a bit further to see if there was any fall out from not having management on hand.

"We are still near enough to be summoned to HQ should they need us. " the assistant said. "But we don't really miss them here." "In my opinion there was too much yakking going on. They didn't really have enough to do." (all one person's opinion of course)

It looks like the lease impairment has shifted to Blenheim Road, at least for now!

SNOOPY

[sb9]

Current trading depth seems as though sell side is very thin and drying up quickly...

[Balance]

Current trading depth seems as though sell side is very thin and drying up quickly...

Only short termers selling a few stocks here and there out.

The big game here is that Beijing is effectively imo underwriting the stock at $2.75 and takeover price will be at least $3.00.

Then there’s the yield which is becoming ever more attractive with the precipitous drop in interest rates.

[sb9]

Only short termers selling a few stocks here and there out.

The big game here is that Beijing is effectively imo underwriting the stock at $2.75 and takeover price will be at least $3.00.

Then there’s the yield which is becoming ever more attractive with the precipitous drop in interest rates.

Wonder if there are any fireworks or unexpected turn of events from Beijing at ASM tomorrow morning.

[Balance]

Wonder if there are any fireworks or unexpected turn of events from Beijing at ASM tomorrow morning.

Profit upgrade & confirmation of dividend! 💃🏻🕺

https://www.nzx.com/announcements/361708

Trading & dividend update before AGM - EBIDTA projected to increase 30% and at least 8 cps dividend to be paid.

Can’t see Beijing being successful With a takeover if they come up with an offer of $3 per share now.

Enjoy!

[Balance]

I would be fairly confident in predicting that as well as no final dividend for FY2020, there will be no interim dividend for FY2021 either. In my November 2019 review I said

"This is not a bond substitute."

No dividend for at least a year is a manifestation of that comment.

SNOOPY

discl: Shareholder, because I do believe the rural supplies sector will bounce back, eventually

Time to revisit your assumptions, Snoopy.

Big picture to me is still the same however - what price will Beijing pay to takeover PGW.

Think it is going to have to be closer to $3.50 now than $3.00.

[Bjauck]

They noted a Rural and Lifestyle property uptick. Happy farmers; Happy Wrightson's. Good to see dividends are being resumed, all things remaining equal. Has it paid back the covid wage subsidy?

[Balance]

They noted a Rural and Lifestyle property uptick. Happy farmers; Happy Wrightson's. Good to see dividends are being resumed, all things remaining equal. Has it paid back the covid wage subsidy?

Why would & why should PGW pay back the wage subsidy?

The company lost $5m in the half year to 30 June 2020 due to the lockdowns. Reason why they did not pay a final dividend.

[Bjauck]

Why would PGW pay back the wage subsidy? If I understand the release correctly, annual FY2020 Ebitda is forecast to increase.

[Balance]

Forecast profit increase is for F2021, actually.

Note reply above - they lost $5m in second half of F20.

[Bjauck]

Forecast profit increase is for F2021, actually.

Note reply above - they lost $5m in second half of F20. You are right. I had my reporting periods confused.

[Jantar]

…. Has it paid back the covid wage subsidy? I would hope not. They went 7 weeks without being able to operate as normal and to begin with they had no idea how long it would last. The options were to accept the subsidy or lay off staff. They chose the correct option in retaining staff.

[Snow Leopard]

Nice announcement 8c plus interim likely. A real wallet warmer.

[Norwest]

Time to revisit your assumptions, Snoopy.

Big picture to me is still the same however - what price will Beijing pay to takeover PGW.

Think it is going to have to be closer to $3.50 now than $3.00.

I agree, they won't get my shares at $3.00


Nice announcement 8c plus interim likely. A real wallet warmer.

Absolutely, will be looking forward to this warming my wallet next April like you say!

I like how it was written
"...it is the expectation of the Board that an interim dividend of not less than 8 cents per share would be declared..."

Potential upside for sure.

[Roberto the Brickie]

Did anyone go to AGM yesterday? Very curious to know how it went, and if any interesting questions were asked.

[Norwest]

BCA (Beijing) buying up big again... over $2million splashed out to buy 766k shares at average of $2.73 last couple of weeks.


Did anyone go to AGM yesterday? Very curious to know how it went, and if any interesting questions were asked.

You can find the details on the PGW website.

[Snoopy]

Did anyone go to AGM yesterday? Very curious to know how it went, and if any interesting questions were asked.


There is a recording of the meeting on the PGW investor website. For your interest during questions the Chairman made a comment on the cash balance at the end of year balance date. He said that $50m of accounts receivable were collected in the five business days of the financial year, including $11m on the last day. IOW having large amounts of cash on the balance sheet on 30-06-2020 wasn't policy. It was a matter of circumstance.

SNOOPY

[forest]

Yea, I attended the meeting.
Meeting went well, I had the feeling that PGW is better focused on a realistic business model now the company is simpler, smaller and with a more robust balance sheet.
The question was ask of the Chair about offers and likely hood of takeover maybe by one of their 2 largest (overseas) share holders.
The answer was no offers and no straight answer on how likely it is for one in the future.
What I did found interesting that the Chair seemed a little uncomfortable or annoyed with this question. While answering it seemed to me that he changed body language in a way that makes me wonder what to think of his answer.
Add to this todays notice of more than 1 percent increase in share holding by BCA and Balance's expectation of a takeover for quite some time.
A takeover or scheme could well be on the horizon.

[iceman]

Yea, I attended the meeting.
Meeting went well, I had the feeling that PGW is better focused on a realistic business model now the company is simpler, smaller and with a more robust balance sheet.
The question was ask of the Chair about offers and likely hood of takeover maybe by one of their 2 largest (overseas) share holders.
The answer was no offers and no straight answer on how likely it is for one in the future.
What I did found interesting that the Chair seemed a little uncomfortable or annoyed with this question. While answering it seemed to me that he changed body language in a way that makes me wonder what to think of his answer.
Add to this todays notice of more than 1 percent increase in share holding by BCA and Balance's expectation of a takeover for quite some time.
A takeover or scheme could well be on the horizon.

Thanks for the observations forest

[Snoopy]

Time to revisit your assumptions, Snoopy.


I have to admit HY2021 is looking better than I expected. However that 'at least' 8c forecast interim dividend will not be finally confirmed until after the half year results are in next year. So let's hope everything holds up and wool comes back into the black. Storm clouds on the horizon for the livestock division in 2HY2020 though. The drought this year saw much slaughtering of stock was brought forward. So fewer beasts to go under the hammer this financial year.



Big picture to me is still the same however - what price will Beijing pay to takeover PGW.

Think it is going to have to be closer to $3.50 now than $3.00.


The Chairman admitted to giving a visiting delegation from the Chinese BAIC Limited a whistle stop tour of PGW's business in N.Z. earlier this year. But he was quite adamant that the investment was purely strategic when he asked BAIC representatives their plans. No evidence that BAIC have been buying above $2.75 yet. Until proven otherwise, I am assuming any post AGM share price flurry is due to NZ based yield chasers (now the dividend is forecast to return), not BAIC.

I won't be buying any more shares myself above $2.75. I don't think the business picture painted going forwards at the AGM justifies a further re-rating in the share price going forwards.

SNOOPY

[sb9]

Link to ASM presentation video as per below...

https://www.youtube.com/watch?v=U9UqCGEQY58&feature=youtu.be

[sb9]

BCA (Beijing) buying up big again... over $2million splashed out to buy 766k shares at average of $2.73 last couple of weeks.


Gotta wonder why anyone would be selling at current levels with BCA's of intent of keep buying on market...

[Balance]

Gotta wonder why anyone would be selling at current levels with BCA's of intent of keep buying on market...

Let them - scrip is getting ever tighter even as the PGW turnaround story gets better and better.

Been happy to top up whenever the opportunity arises - my last two top ups were at $2.71 and $2.59 (thanks to Snoopy!).

[sb9]

Let them - scrip is getting ever tighter even as the PGW turnaround story gets better and better.

Been happy to top up whenever the opportunity arises - my last two top ups were at $2.71 and $2.59 (thanks to Snoopy!).

Notice someone keeps replenishing at 2.95 or thereabouts and promptly gets taken out by bidder after few minutes. Until that seller has finished selling, it'll continue to hover around 2.95 or so...

[Balance]

Notice someone keeps replenishing at 2.95 or thereabouts and promptly gets taken out by bidder after few minutes. Until that seller has finished selling, it'll continue to hover around 2.95 or so...

Need Snoopy to get really really negative* like he did a few months ago to drive the sp towards $2.59 again - am happy to pick up as many as I can!

* Negative as in high debt levels, breaching banking covenants, profits heading south, drought, no dividends etc etc.

[Ant]

Any thoughts on whether the OIO will allow a full takeover of PGW ?

[Balance]

Any thoughts on whether the OIO will allow a full takeover of PGW ?

PGW is already overseas owned. It will simply be a transfer of ownership from one foreign shareholder to another. Main issue I believe is whether the new owner is a fit and proper owner.

[Snoopy]

Any thoughts on whether the OIO will allow a full takeover of PGW ?


I don't think that just because you can see BAIC holdings increasing their stake that implies they are on a takeover path. You have to think like a Chinese person, not a westerner. The Chinese understand 'long term'. BAIC would I am sure be quite prepared to sit there as a 20% shareholder for ten or twenty years. The Chinese also like partnerships with the west., like the 50/50 ownership deal they did with Silver Fern Farms. They are used to this at home where for a long while Western companies setting up in China had to set up a joint venture with a Chinese business partner. I think PGW would suffer if it became fully Chinese owned with farmers switching to the co-ops to do their business. At least as it is now, PGW still has a semblance of NZ ownership. As a marketing ingredient going forwards, I think the 100+ years of being a New Zealand company is key.

SNOOPY

[Snoopy]

As I predicted, the PGW pension plan continues to career out of balance. The ten year picture is shown below.

In the table below, I am effectively looking at the pension schemes as a 'black box' and observing the cashflow that comes in and out. The information in this table can be found in the respective annual reports under the header "Defined Benefit Asset/Liability" (e.g. Note 20 in AR2017).

PGW Pension Plan(s) External Cashflows



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


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


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


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


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


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


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


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


2017-$12.271m$5.920m$1.199m$7.119m($6.010m)$1.109m


2018-$7.722m$3.011m$1.170m$4.181m($8.914m)($4.773m)


2019-$5.883m$8.455m$1.268m$9.723m($14.044m)($4.321m)


2020-$9.838m$0.692m$0.832m$1.524m($5.301m)($3.777m)



At least the long term cash drain behind the scenes (the PGW contribution) has shored up the pension plan at long last -right?

Unfortunately not, because the ten year government bond rate, a key driver in calculating the required pension fund asset position since the balance date of 30th June 2019 has declined from 1.57% in AR2019 to 0.91% in FY2020. The pain hasn't stopped either because as of today, nearly two months on from the balance date, the ten year cash rate is down to just 0.67%!

Very importantly, the earnings capacity of the company has approximately halved due to the sale of the seeds division. In this drought year in particular, earnings have collapsed to just $5m. That means the pension scheme deficit of $9.838m (approximately $10m) will need two years of PGW profits to be diverted to close the funding gap. The effective position of the pension plan for PGW shareholders, and even pension plan beneficiaries, must now be of significant concern. Yet in June 2019, the Group announced that they had brought the Plan to an 'actuarial equilibrium position', because they have their own calculation standards that are better than IFRS standards (apparently).


I finally got the chance to listen to the AGM audio file and noted the details of the comments and subsequent discussion on the company pension scheme. The discount rate of just 0.91% (representing the 10 year government stock rate at balance date) was blamed for the $9.838m 'Pension Scheme balance blowout' deficit figure. Under the IFRS standards, the rules require the use of the ten year NZ government discount rate to determine the present value of future returns. Under the alternative Financial Market Authority (FMA) standards, the deficit figure was less than a quarter of that reported - or less than $2.5m.

Finally then, we see an admission that the pension fund is 'not quite' in actuarial FMA balance. Granted a deficit figure of $2.5m would not -to me- be a cause of major concern. But is that FMA deficit figure really more accurate than the IFRS deficit figure?

The Chairman noted that the board is onto the issue and he himself questions the performance of the scheme regularly. The Chairman acknowledges that higher returns are becoming more difficult to obtain too. But he also says that the board are at 'arms length' from the trustees that run the scheme, (and I say rightly so to that). He keeps exhorting the trustees to 'do better'. Yet after hearing that, I do wonder if the board understand the mechanics of running such a scheme?

The 'end of year' composition of the 'Defined Benefit Scheme' may be found in AR2020 under Note 18:



Asset ClassPercentage Holding

Work In Progress
Equities58%


Fixed Interest29%


Cash13%



I would break the boards mantra of 'better returns' into three sub questions:

Q1/ How do you get better returns from the cash piece of your portfolio?
A1/ You can't

Q2/ How do you get better returns on your fixed interest piece of your portfolio?
A2/ Invest in higher risk funding where those borrowing the money are charged a higher interest rate, but have a higher chance of default. I would question whether that is a wise course of action for investing pension money though.

Q3/ How do you get better returns on your fixed interest piece of your portfolio?
A3/ Try stock picking. Invest like Buffett in companies with 'beaten down valuations', and take advantage of takeover situations by 'buying ' as soon as a takeover is announced. However, I think PGW has tried to be clever like this in the past and has now moved to an 'index fund' rather than a 'stock picking' mentality. While an index fund should give a good 'market return', how do you convert that to an 'above average' market return? The answer, given the nature of an index fund, is that you can't.

As of 5th December, the ten year government bond rate is now 0.54% (down from 0.91% at balance date), and the NZX50 is up 5% in the same time frame. But fixed interest term rates have fallen significantly. I can't see that these changes will have improved the income position of the pension scheme since balance date.

I have had a prevailing view expressed to me that interest rates will stay low for the next couple of years and then go higher. But will they? Isn't such a low 10 year government bond rate an expression of a 'wider prevailing view' that interest rates will stay low for a long time? What happens if interest rates stay this low for twenty years, not two?

In summary, I am not convinced that the PGW pension scheme will be able to close any valuation gap for their 200 scheme members under the current scheme rules. ' Look for things to blow out further by 30-06-2021' is my prediction.

SNOOPY

[Snoopy]

The problem with estimating an 'interest rate equivalent paid' for the PGW debt is that company debt is quite seasonal. Shareholders were presented with a picture of this in Figure 6.1 on page 34 of the "PGG Wrightson Independent Report, (outlining the case for divesting the seed division, and dated October 2018). Disclosure to this level of detail is not available in the annual report. But we can make a 'triangulated approximation' to the variability of the debt via three data points that are in the annual and half year reports:

1/&2/ End of year net debt position of the current year and the previous year AND
3/ The half year net debt position in between.

From AR2019 p8

"PGW negotiated and entered into new bank facilities in July 2019.....It is pleasing to note that very competitive terms have been struck for these banking arrangements"

This interest rate renegotiation makes all of my indicative interest rate calculations up to now, including calculations based around AR2019, historical. However, exactly what 'very competitive terms' means has not been revealed. One thing we can assume is that PGW is now paying a lower interest rate compared to what they have done in the recent past. So let's dive back into last years PGW history and try to figure out what is the figure they were paying that, by way of comparison, makes the new terms so good.

Distorting the end of FY2019 capital picture is the gain on the sale of the seeds business on 1st May 2019 of $134.281m. If this gain had not happened, the debt position of the company at EOFY balance date would be very different. We don't know exactly the position of the company just before the seed sales proceeds came through. But I am guessing it was something like I have outlined in the table below:



30th April FY2019[/TD]EOHY2019EOFY2018EOHY2018EOFY2017


Cash
$0m$3.884m
$10.926m$24.247m$9.403m


less Short Term Debt
$2.680m (*)$79.635m
$30.806m$91.215m$26.719m


less Long Term Debt$134.281m
$130.000m$149.205m$130.634m$110.925m


equals Total$136.961m
$205.751m
$169.085m
$197.602m$128.241m


Half Year Increment
+$36.666m

+$69.361m



(*) This figure from EOFY is used as an estimate of the short term loan balance two months earlier.

For the purposes of calculating an 'average loan balance', I feel it is best to consider the financial year split into three time periods:

P1/ An intiial six months, WITH
P2/ an ensuing four months FOLLOWED BY
P3/ a final two months.

The calculation of the average loan balance over these three time periods, using a linear interpolation model, is as follows:

P1/ ($169.085m + $205.751m)/2 = $187.418m
P2/ ($205.751m + $136.961m)/2 = $171.856m
P3/ $0m (debt repaid)

The time proportional average debt of these three periods added together is as follows:

( 6 x P1 + 4 x P2 + 2 xP3 ) / 12 = ( 6x$187.419m + 4x$171.856m) / 12 = $150.994m

The Annual Report declared net interest bill for the year has been split into interest expense allocated to 'Seed and Grain' ($4.481m) and PGWRR ($6.067m), for a total of ($10.548m). This equates to an implied net interest rate for PGW over FY2019 of:

$10.548m / $150.994m = 7.0%

CEO Stephen Guerin has negotiated the new banking facilities so that there is an incremental seasonal funding amounts to $70m. Considering the business has now been roughly 'half sized', this seems a lot, although I guess it is prudent to allow for less than ideal weather circumstances. The reduction in interest rate paid also announced must be meaningful for Stephen Guerin to crow about it. A 10% reduction might be more in line with what is happening in the markets as a matter of course. I am picking Stephen has got a 20% reduction. That would take PGW net interest rates down to: 0.8 x 7% = 5.6% for FY2020.


Stephen Guerin crowed about the great refinancing deal he got for shareholders for the just finished financial year. But now the year is wound up, how well did he actually do?




EOFY2020
EOHY2020
14h August 2019EOFY201930th April FY2019
EOHY2019EOFY2018EOHY2018EOFY2017


Cash
$16.868m
$0.682m$0m]$210.491m$0m
$3.884m$10.926m$24.247m$9.403m


less Short Term Debt$30.000m
$40.000m$2.680m (2)$2.680m$2.680m (1)
$79.635m$30.806m$91.215m$26.719m


less Long Term Debt
$20.000m[
$20.000m$23.509m
$0m$134.281m
$130.000m$149.205m$130.634m$110.925m


equals Total Debt
$33.132m
$59.318m
$26.189m($207.811m)$136.961m
$205.751m$169.085m$197.602m$128.241m


Half Year Increment

+ $33.129m (3)



+$36.666m

+$69.361m




Notes

1/ 1st May 2019 was the settlement date for the sale of the seed division. This short term debt figure just before the payment was made is from EOFY2019 (used as an estimate of the short term loan balance two months earlier).
2/ 14th August 2019 was the seed division sale capital repayment date to shareholders. This short term debt figure just before the payment was made is from EOFY2019 (used as an estimate of the short term loan balance six weeks later).
3/ Half year debt increment after capital repayment (Comparison with previous full year position not meaningful).

For the purposes of calculating an 'average loan balance' over FY2020, I feel it is best to consider the financial year split into three time periods:

P1/ An intiial one and one half months, WITH
P2/ an ensuing four and one half months FOLLOWED BY
P3/ a final six months.

The calculation of the average loan balance over these three time periods, using a linear interpolation model, is as follows:

P1/ $0m (no debt)
P2/ ($26.189m + $59.318m)/2 = $42.754m
P3/ ($59.318m + $33.132m)/2 = $46.225m

The time proportional average debt of these three periods added together is as follows:

(1.5 x P1 + 4.5 x P2 + 6 x P3 ) / 12 = ( 0 + 4,5x$42,754m + 6x$46.225m) / 12 = $39.145m

The "Net Interest and Finance costs" over FY2020 sum to $5.032m (AR2020 p35). This implies an effective interest rate of:

$5.032m / $39.145m = 12.9%

That seems very high, more than double what I predicted, and in no way bears out Stephen Guerin's claim of a very competitive interest rate deal that he has negotiated. So how to explain what has gone wrong?

SNOOPY

[Snoopy]

For the purposes of calculating an 'average loan balance' over FY2020, I feel it is best to consider the financial year split into three time periods:

P1/ An intiial one and one half months, WITH
P2/ an ensuing four and one half months FOLLOWED BY
P3/ a final six months.

The calculation of the average loan balance over these three time periods, using a linear interpolation model, is as follows:

P1/ $0m (no debt)
P2/ ($26.189m + $59.318m)/2 = $42.754m
P3/ ($59.318m + $33.132m)/2 = $46.225m

The time proportional average debt of these three periods added together is as follows:

(1.5 x P1 + 4.5 x P2 + 6 x P3 ) / 12 = ( 0 + 4,5x$42,754m + 6x$46.225m) / 12 = $39.145m

The "Net Interest and Finance costs" over FY2020 sum to $5.032m (AR2020 p35). This implies an effective interest rate of:

$5.032m / $39.145m = 12.9%

That seems very high, more than double what I predicted, and in no way bears out Stephen Guerin's claim of a very competitive interest rate deal that he has negotiated. So how to explain what has gone wrong?


There are a couple of good reasons why the effective interest rate I have calculated will be higher than whatever terms CEO Guerin has negotiated with his bankers.

1/ PGW is a seasonal business. Our Chairman in his AGM address talked about a 'Seasonal Build up of Working Capital' from the end of year balance sheet position. I am modelling the seasonal debt peak to be 31st December (the publication date of the half yearly accounts). But the Chairman has said the actual peak is in February/March. This means the average quantum money borrowed will be greater than I have calculated. That means the dollar value of net interest payments will be spread over a larger debt base. And that means the real indicative interest rate paid by PGW will be lower. So if I knew all this, why did I not correct for it? PGW does not publish their accounts on the day of 'peak debt'. So any correction would only be a guess. My philosophy in these situations is to declare that my interest calculation is too high and let others decide on what correction to make for that, if any.

2/ I often take out foreign exchange corrections. Foreign exchange items form part of the annual interest charges. These have to be declared to reflect what would happen if those underlying foreign exchange contracts were discontinued over our one year operating window. However, there is no intention to ever realise these contracts until they have run their course. And often these year to year fluctuations balance out.

In this case the interest bill should be adjusted by (AR2020 p49): $0.502m - ($0.324m) = $0.178m (reduction in interest bill),

3/ IFRS16 introduces an 'interest on lease liabilities' into the overall annual interest charge. Lease liabilities are an accounting construct introduced with IFRS16,. Interest on these lease liabilities have no interest charge equivalent in previous year's accounts. Instead there is a roughly equivalent higher level of operating expenses in pre-IFRS accounts. The transfer of what was an 'operating expense' to an 'interest charge on lease liabilities' is nothing to do with any underlying bank loan for PGW. So my inkling is to remove the 'interest on lease liabilities' charge from the interest bill.

In this case the interest bill reduces by (AR2020 p49): $4.183m (reduction in interest bill)

Summary: The net effect of these changes is to reduce the indicative interest bill to:

$5.032m - ($0.178m + $4.183m) = $0.671m

That translates to an indicative loan interest rate of:

$0.671m / $39.145m = 1.7%

That figure seems astonishingly low, and Steve Guerin has performed a negotiating miracle if that is the underlying corporate interest rate he has negotiated. What is more my reference point 1/ above would suggest this estimate is on the high side. They say if something is too good to be true it isn't true. With the lowest fixed residential mortgage borrowing rate available being 1.99%, that 1.7% figure does seem to good to be true. Anyone like to volunteer where I might have gone wrong in my calculation?

SNOOPY

[Snoopy]

https://thespinoff.co.nz/business/23-07-2020/tourism-may-have-disappeared-but-demand-for-nz-food-is-stronger-than-ever/

$1 billion more in food exports despite pandemic.


Bad news for farmers is never good for PGW. But my ears pricked up this when I heard a news story about some of those combine harvester drivers from Europe being unable to get a spot in our quarantine hotels until February. Too late! Certain crops will be unharvestable by that stage. And one 'crop' that will be affected is silage and other stock feed. PGW sells supplemental feed. So we might find that these combine harvester drivers being locked out is actually positive for PGW over FY2021.

SNOOPY

[dibble]

Bad news for farmers is never good for PGW. But my ears pricked up this when I heard a news story about some of those combine harvester drivers from Europe being unable to get a spot in our quarantine hotels until February. Too late! Certain crops will be unharvestable by that stage. And one 'crop' that will be affected is silage and other stock feed. PGW sells supplemental feed. So we might find that these combine harvester drivers being locked out is actually positive for PGW over FY2021.

SNOOPY

Seems unhelpful to repeatedly blame immigration policy for lack of harvester drivers. Farm machinery isnt a doddle but, like anything mechanical, you get some confidence then just take it a bit slowly to start.
Perhaps farmers could think a little wider and put more effort into training a few locals who can already drive a tractor rather than continually whine about having to leave the crop to rot. All harvester drivers have to start somewhere, they've had many months to plan. If they are really simply moaning about a lack of cheap (if it is cheap?), ununionised labour then let it be called that.

[BlackPeter]

Seems unhelpful to repeatedly blame immigration policy for lack of harvester drivers. Farm machinery isnt a doddle but, like anything mechanical, you get some confidence then just take it a bit slowly to start.
Perhaps farmers could think a little wider and put more effort into training a few locals who can already drive a tractor rather than continually whine about having to leave the crop to rot. All harvester drivers have to start somewhere, they've had many months to plan. If they are really simply moaning about a lack of cheap (if it is cheap?), ununionised labour then let it be called that.

I hear that unemployed pilots make great harvester operators (well, after a bit of training - its like flying a new type of plane ....). Plenty of them around ...

[iceman]

I hear that unemployed pilots make great harvester operators (well, after a bit of training - its like flying a new type of plane ....). Plenty of them around ...

I had a coffee with an engineer friend yesterday. He was telling me about a couple of ex Air NZ pilots now driving tractors on farms. Very good operators but he said they spend too much time on pre take-off checks before they head out into the fields :-)

[Somebody Else]

They say if something is too good to be true it isn't true. With the lowest fixed residential mortgage borrowing rate available being 1.99%, that 1.7% figure does seem to good to be true. Anyone like to volunteer where I might have gone wrong in my calculation?

SNOOPY

Where to start? Note 5 on page 49 of the annual report seems a good place. In calculating your $671k you have included the interest income that PGW gets from charging overdue account fees to their customers. I'm not sure why you would bother calculating that number given they tell you they paid line fees of $683k and interest of $923k for a borrowing cost of $1.6m.

Applying $1.6m to your borrowing figure of $39.145m gives an interest rate of 4.1%. That seems a bit much, so there is likely a problem with the debt number. The first thing that stands out is that you included the $16.868m cash balance in your average debt calculation for the length of your P3 period. That seems like a big concession and likely makes your debt number $8.5m or so low ($16.868m x 6 months).

You could always try and reverse engineer the number by breaking it into components though this can be muddied up if PGW use interest rate swaps or other hedging tools. The facility looks to have a line fee component and an interest component, which will be a base rate + a margin. The line fee should be easy as it applies to the whole facility, so $683k / ($50m + $70m) = 0.57%.

The interest rate will be harder as it only applies to drawn funds, which is why you need the average funds drawn number you tried to calculate. $923k of interest over say $45m of average borrowings = 2.2%. Might be a little high but the base rate will be one of the BKBM numbers (grab whichever one you like from the Reserve Bank, but for the PGW financial year will likely average 1%) meaning the margin is maybe 1.2%. Thats probably reasonable so maybe $45m is the right number. $1.6m of borrowing cost over $45m = 3.6%. Thats higher than your residential mortgage rate, but they have line fees on undrawn facility headroom that a residential mortgage holder doesn't have.

[Snoopy]

Where to start? Note 5 on page 49 of the annual report seems a good place. In calculating your $671k you have included the interest income that PGW gets from charging overdue account fees to their customers. I'm not sure why you would bother calculating that number given they tell you they paid line fees of $683k and interest of $923k for a borrowing cost of $1.6m.


Ah thanks for this. I had no idea that interest charged to customers for overdue bills would likely end up as interest income in the 'net interest and finance costs' note. I had imagined, obviously wrongly, that any 'penalty interest recovered' would go straight towards offsetting bad debts and not appear on the books as interest at all. I also imagined that this interest received as declared was from the banks on short term funds at PGW waiting to be redeployed. So I am grateful to be educated out of my wrong assumptions.



Applying $1.6m to your borrowing figure of $39.145m gives an interest rate of 4.1%. That seems a bit much, so there is likely a problem with the debt number. The first thing that stands out is that you included the $16.868m cash balance in your average debt calculation for the length of your P3 period. That seems like a big concession and likely makes your debt number $8.5m or so low ($16.868m x 6 months).


You are quite right. In reality, as it was announced at the AGM, that cash balance totalling $16.868m only materialised in the last week of the financial year as a series of due accounts were paid up. That means the debt level over that last P3 period (see my post 5044) will be significantly higher than the figure I calculated. And for a given interest payment that means that the actual interest rate being paid is lower than the interest rate I calculate.

However, if one investor had not posed an AGM question to the directors regarding their large cash balance at EOFY2020, we shareholders would be none the wiser that it had all come onto the books within days of those books being drawn up. It would certainly be unusual for any company to disclose cashflow movement week by week. There would be no way to know, from just looking at the end of year accounts of another company, that a last minute cash injection had not happened. So I would go with your indicative interest rate figure of:

($683k + $923k) / $39.145m = 4.1%

This is for consistency of calculation over different periods, even though we know from extra information in this particular case, that this interest rate result will be too high. Perhaps we have different expectations. But I think a 4.1% interest rate charge for a cyclical rural company with not insignificant debt is actually a good figure.



You could always try and reverse engineer the number by breaking it into components though this can be muddied up if PGW use interest rate swaps or other hedging tools. The facility looks to have a line fee component and an interest component, which will be a base rate + a margin. The line fee should be easy as it applies to the whole facility, so $683k / ($50m + $70m) = 0.57%.


Yes that makes sense. Whether the money is drawn on or not at any particular moment, PGW can expect to pay for having that facility available, $50m for short term and $70m for long term (AR2020 p54).



The interest rate will be harder as it only applies to drawn funds, which is why you need the average funds drawn number you tried to calculate. $923k of interest over say $45m of average borrowings = 2.2%. Might be a little high but the base rate will be one of the BKBM numbers (grab whichever one you like from the Reserve Bank, but for the PGW financial year will likely average 1%) meaning the margin is maybe 1.2%. That is probably reasonable so maybe $45m is the right number.


If I stick to my figure of $39.145m of average borrowings (which we have already discussed is very likely too low) I get a borrowing rate of:

$923k / $39.145m = 2.36%

Add that to the 0.57% 'facility fee' calculated above and I get an overall interest rate of:

2.36% + 0.57% = 2.93%

BKBM stands for 'Bank Bill Benchmark Rate' as set by the Reserve bank. It is probably different for 'on call' or 'three monthly', but we can choose 1% if you like as a good guess.

So my margin calculation is:

2.36% - 1% = 1.36%

You say 1.2% as a margin sounds reasonable. I say 1.36% as a margin sounds reasonable (even if I have doubtful ability to make such a judgement). Actually I would consider the interest margin to be the difference between a bank reference rate and the sum of the interest rate charged and the facility fee rate:

(2.36%+0.57%) - 1% = 1.93%

(Mind you I am thinking from a customer perspective not a banking perspective, so I may not know what I am talking about here.)



$1.6m of borrowing cost over $45m = 3.6%. That's higher than your residential mortgage rate, but they have line fees on undrawn facility headroom that a residential mortgage holder doesn't have.


2.2% - 0.57% = 1.6% ?

Sorry getting a bit confused on your last line. The 0.57% is calculated from the $683k facility fees is it not? Why are you subtracting that from the 2.2% derived from the $923k interest charge? Or have a got that wrong? Lost in the home stretch!

SNOOPY

[Somebody Else]

2.2% - 0.57% = 1.6% ?

Sorry getting a bit confused on your last line. The 0.57% is calculated from the $683k facility fees is it not? Why are you subtracting that from the 2.2% derived from the $923k interest charge? Or have a got that wrong? Lost in the home stretch!

SNOOPY

Yes the 0.57% is calculated from the $683k of facility fees. It doesn't get subtracted from the 2.2% rate, but nor does it get added to it while it is a percentage. To use the apples and oranges analogy the line fee is an orange because it applies to the whole facility. The interest charge is an apple because only applies to drawn funds. The only point to breaking them out is to see that they both look reasonable because it is the 2 numbers combined that are important.

Your starting point was the equation Average Debt x Interest Rate = Interest Expense. For PGW it is hard to work out because you only know the Interest Expense part of that equation, which is the $683k plus the $923k that they gave you in the annual report. You are trying to reverse engineer the other 2 numbers from it. $45m x 3.6% = $1.6m is where I came out. If you want to use a $39m debt figure, go right ahead, you just end up with a different interest rate.

[Leftfield]

Upgrade good news for holders....... see here. (https://www.nzx.com/announcements/364588)

[Balance]

Upgrade good news for holders....... see here. (https://www.nzx.com/announcements/364588)

Indeed - another profit upgrade.

Looks like the turnaround is not only gathering pace but is now in full swing.

https://www.nzx.com/announcements/364588

Guidance raised by another 17% and interim dividend guidance raised by 25% (8c to at least 10cps)

So guidance is for profit to increase by 50% in F21 over F20.

[Snoopy]

I will now continue my rework on the now realised capital repayment scenario. I have removed from this iteration a previously stated $3m contribution towards the pension scheme that continued into the future. This is because over FY2019, new CEO Stephen Guerin authorized a one off $10.274m contribution to the Defined Benefit Pension Scheme that brings it into actuarial balance.






PGWRR FY2019 (EBITDA as reported plus forecast corporate savings)
PGW Rural Rump: Multi Year Average Scenario (excluding Pension Scheme Repair)


eps {A}
12.8c18.0c
]

dps {B}15.0c
]

PGW Rural Rump: Market Valuation {C}$2.42$2.42


PE ratio {C}/{A}18.913.4


Gross Dividend Yield {B}/{C x 0.72}8.6%


Gross Earnings Yield {A}/{C x 0.72}7.3%10.3%



Notes

1/ The PE ratio is now looking looking more reasonable for this type of business, as we seem to be in a lower part of the earnings cycle (that means PE can be higher). Nevertheless a PE of 18.9 is at the upper end of my comfort zone for cyclical agricultural retailer.
2/ The potential dividend yield looks O.K, but is IMO low for this kind of business.. The lesser than expected capital repayment has not made PGWRR debt free after all. This is no doubt because PGWRR has elected to keep spending to invest in the business.

In this low interest rate environment I would be prepared to buy with a gross earnings yield of 8.5%. This implies a 'post capital return and 10:1 consolidated' share price of:

$2.42 x 7.3/8.5 = $2.08

This is a significant fall from the market price of $2.42. I believe this means there is a fair amount of 'earnings recovery' already built into the PGW share price today. If an earnings recovery does not happen this year, then we shareholders might expect to lose around 14% of our invested capital in PGW (the downside risk).

OTOH, if earnings recover to more of a mean value from 'years recent past', that means the fair value share price for a gross earnings yield might rise up to:

$2.08 x 18/12.8 = $2.93

That represents a rise in value from today's quoted price of 21% (the upside risk)

Overall then, given the upside and downside risks, I would judge today's market price of $2.42 as not a bargain, but not overpriced either. $2.42 the epitome of 'fair value'? Looks like Mr Market might have it right with this one.


The above, I wrote in October 2019. It does look like we have since transitioned from a low point in the business cycle to a high point in the business cycle. With the share price closing at $2.88 yesterday (before today's profit upgrade) my upside price forecast of $2.93 looked pretty good too.

With today's announcement we have moved into a trading situation that has exceeded the historical average of recent years. Some may think this is a good time to get on the bandwagon and buy more. Whether that is a good idea or not will depend if this bullish update is a baked in reflection of improved trading from now on, or simply riding the high crest of the top of the business cycle. If the latter then buying today could be thought of as taking an extreme investment risk. I suspect that those buying today on the assumption that 'this is the beginning of a wave of endless growth' will find there are better entry points a few years down the track.

I won't be buying more because I have been bitten by PGW in past cyclical downturns. But neither will I be selling. However, I don't need to buy more because I have already accumulated a balanced stash (OK I am probably a little overweight) at well south of today's prices.

SNOOPY

[Balance]

The above, I wrote in October 2019. It does look like we have since transitioned from a low point in the business cycle to a high point in the business cycle.

High point?

Try reading 'turnaround' story now gathering growth momentum.

Profit growth

plus

high yield

plus

takeover potential

Few stocks in the NZX meet the above criteria.

Thanks for all the scare-mongering, Snoppy - been great picking up stock at $2.55! :t_up:

[Leftfield]

High point? Try reading 'turnaround' story now gathering growth momentum.....
Thanks for all the scare-mongering, Snoppy - been great picking up stock at $2.55! :t_up:

Well done Balance. I like turnaround stores. How long have you been collecting this one (and what prompted you?)

[sb9]

High point?

Try reading 'turnaround' story now gathering growth momentum.

Profit growth

plus

high yield

plus

takeover potential

Few stocks in the NZX meet the above criteria.

Thanks for all the scare-mongering, Snoppy - been great picking up stock at $2.55! :t_up:

Could well get close to $3.50+ in the near term, nice gains on my pick up price of $2.28+ dividends along the way...

[Balance]

Well done Balance. I like turnaround stores. How long have you been collecting this one (and what prompted you?)

I have had PGW for a while and added on more since the capital return and then, since BAIC buy in.

[DDog]

Lack of sellers

[Balance]

Article below points to PGW firing on all cylinders and well positioned to provide a couple more profit upgrades in the new year imo.

2020 - a good year for the agricultural & horticultural sectors in NZ

&

2021 - shaping up to be another good year.

https://www.stuff.co.nz/business/farming/opinion/300189307/why-it-was-good-to-be-a-farmer-in-2020

Excerpts :

"Overall, 2020 turned out to be a strong year for New Zealand’s commodities. Food and fibre producers have continued to help feed the world and bring much needed income into the New Zealand economy."

"We’re also seeing more creativity in the market, creating a stronger and more diverse industry as a result. Sheep milking, quinoa and hemp are increasing in popularity, while collaboration between the local farming and horticulture sectors is on the rise as some agri customers divest sections of land traditionally used for grazing to horticulture."

"Demand for productive land is also getting stronger which is encouraging for the future of farming. Data released in November reveals a 45 per cent increase in farm sales in the three months to October 2020 versus the same period in 2019."

In the meantime, as we head into a summer forecast to be wet and warm, we’re expecting the good times for our commodities to keep rolling well into 2021."

[Balance]

https://www.pggwre.co.nz/real-estate-news/property-report-the-rural-market-boom

And it looks like Wrightson Real Estate has been doing very well and will reap the boom in rural market.

Excerpt of how this division underperformed in the last financial year (30 June 2020) :

Real Estate

The rural real estate market continued to face difficult market conditions with declining volumes in all sectors throughout the year. However, the lifestyle and residential markets in the provinces remained relatively positive.

The pandemic affected the real estate market leading up to our peak autumn selling period, but the business did see encouraging signs returning during
late May and June 2020. An outcome from COVID-19 was a strong shift from traditional print media to digital channels where we saw increased website traffic and social media use.
Notwithstanding the challenging macro conditions, PGG Wrightson Real Estate improved market share in its key lifestyle segment and rural regions.

[JohnnyTheHorse]

A nice bull flag forming on the weekly chart. A break of $3.35 would confirm this continuation of the strong uptrend. Expecting a rerate too once a hefty profit and dividend are confirmed.

Also holding out to see what game the Chinese (BCA) are playing on this one. I suspect they have heavy interest in the genetics side of the business.

[Balance]

A nice bull flag forming on the weekly chart. A break of $3.35 would confirm this continuation of the strong uptrend. Expecting a rerate too once a hefty profit and dividend are confirmed.

Also holding out to see what game the Chinese (BCA) are playing on this one. I suspect they have heavy interest in the genetics side of the business.

Earnings growth

+

High dividend yield

+

Strong financial position

+

Takeover potential

Happy holder & incrementally adding to my holding whenever sp experiences weakness (thanks, Snoopy!)

[Agrarinvestor]

If there are any Investors of Agria arround please send me a private Message. I want to make some Action this year.

[Balance]

If there are any Investors of Agria arround please send me a private Message. I want to make some Action this year.

You do need to take action before Agria sells out - after a sale, you will have little leverage to do anything if Richina Pacific is a guide to what happens.

Act while Agria still has a shareholding in PGW and has a local subsidiary.

Wishing you & other Agria shareholders the best.

[Balance]

Meanwhile PGW's sp powers on to another post capital repayment high.

Bravo for NZ's agricultural sector.

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/resilience-kept-nz-agriculture-strong-through-pandemic

"Researchers found that the ability to cope with adversity, finding new ways of doing things and getting on with the job, were important in how the NZ agriculture sector performed so well during the pandemic.

“Although the outlook is more positive now with access to vaccines looming, many of those we heard from expect impacts of the pandemic to linger for some time. We will be interested to see how those impacts change over time, and that is where further research will be valuable.”

Snow told Rural News that there is no reason to think that this resilience would dissipate in 2021."

[Balance]

Escellent prospects in 2021 for sheep & beef farmers.

Looking good therefore for the rural servicing sector in 2021 - laying the groundwork for another substantial profit upgrade for PGW in F21 imo.

If PGW can do well in a very challenging year for agriculture in 2020, a good year in 2021 should see the company doing exceptionally well.

https://www.stuff.co.nz/business/farming/123915277/sheep-and-beef-farmers-dodged-a-nuclear-warhead-in-2020

"Prospects at the start of last year were looking bleak for farmers with one of the worst droughts of a generation and sudden, massive disruption brought on by Covid-19.

Now fresh into 2021 with lots of grass and high market demand for meat products, the sheep and beef sector has experienced a remarkable turnaround."

"Central Hawke’s Bay farmer Sam Robinson said after enduring the third-worst drought of his lifetime, farmers now had an “incredible amount of feed” going into the dry season and prospects were looking good."

[Snoopy]

Excellent prospects in 2021 for sheep & beef farmers.

Looking good therefore for the rural servicing sector in 2021 - laying the groundwork for another substantial profit upgrade for PGW in F21 imo.

If PGW can do well in a very challenging year for agriculture in 2020, a good year in 2021 should see the company doing exceptionally well.

https://www.stuff.co.nz/business/farming/123915277/sheep-and-beef-farmers-dodged-a-nuclear-warhead-in-2020

"Prospects at the start of last year were looking bleak for farmers with one of the worst droughts of a generation and sudden, massive disruption brought on by Covid-19.

Now fresh into 2021 with lots of grass and high market demand for meat products, the sheep and beef sector has experienced a remarkable turnaround."

"Central Hawke’s Bay farmer Sam Robinson said after enduring the third-worst drought of his lifetime, farmers now had an “incredible amount of feed” going into the dry season and prospects were looking good."


I don't wish to diminish the problems that drought brought to the Hawkes bay and the far north. But actually FY2020 was a pretty good year for farmers. Marlborough enjoyed all time record fruit and wine profitability. Post Covid, the northern drought eased. And sheep and lamb farmers enjoyed decent returns, albeit with the fat trimmed off the top because of the sinking demand for high end cuts with Northern hemisphere restaurants being closed.

I think it is too early to say if the outlook for the coming twelve months is better or worse than the twelve months we have just seen. I don't see the restaurant demand coming back this year. By my perspective PGW is a potential 'value trap'. The rising NZD-USD exchange rate is bad news for farmers. Possibly a time to trim my overweight holding is coming? The share price is getting to that $3.50 level that Balance postulated a Chinese lead takeover would need to be pitched at. I was always sceptical about $3.50, but am even more surprised to see the $3.50 'takeover' offer being put on table by 'Mr Market' no less. What about it Balance? Are you preparing to offload to meet the insatiable demand of our good friend 'Mr M'?

SNOOPY

[Balance]

I think it is too early to say if the outlook for the coming twelve months is better or worse than the twelve months we have just seen. I don't see the restaurant demand coming back this year. By my perspective PGW is a potential 'value trap'. The rising NZD-USD exchange rate is bad news for farmers. Possibly a time to trim my overweight holding is coming? The share price is getting to that $3.50 level that Balance postulated a Chinese lead takeover would need to be pitched at. I was always sceptical about $3.50, but am even more surprised to see the $3.50 'takeover' offer being put on table by 'Mr Market' no less. What about it Balance? Are you preparing to offload to meet the insatiable demand of our good friend 'Mr M'?

SNOOPY

Now, Snoopy - why would I offload at $3.50 to meet the insatiable demand of 'Mr M'?

Market conditions have changed very positively for the agricultural sector and for PGW. Valuations change as well - that's fairly obvious, right?

Would you sell your house at last year's price?

As mentioned before, I must thank you for your postings - been happy to top up during the dips. :t_up:

[Balance]

Great to read that our farmers are in good heart this summer! Obviously good for PGW too.

https://farmersweekly.co.nz/section/agribusiness/view/rain-secures-feed-surplus

"Warm temperatures and frequent summer rain have led to a bumper season for summer feed crops and pasture covers for livestock farmers in most regions up and down the country.

It’s been a remarkable turnaround compared to 12 months ago, where severe drought had written off feed crops and farmers around the North Island were burning through their feed reserves to keep their stock healthy."

Not surprising that PGW's sp has powered on to another post-capital-repayment high.

[Balance]

From the grapevine :

PGW's livestock online auction going so well that they are expanding the team. Actively recruiting more staff.

[Balance]

https://issuu.com/farmersweeklynz/docs/fw_01-02_issuu/1?ff&showOtherPublicationsAsSuggestions=true

Looking good for a profitable year ahead for the agricultural sector - but watch for the bumps.

[Balance]

https://www.nzx.com/announcements/367040

Farmgate payout lifted for milk solid - another positive for agricultural sector and for PGW.

[JohnnyTheHorse]

Half year results announced on Tuesday. With the way the industry is performing I'm expecting another profit upgrade. They have indicated a minimum of 10cps interim dividend and I wouldn't be surprised to see increased given the certainly provided in the 2.5 months since the last update.

Disc: been accumulating further the last few days.

[JohnnyTheHorse]

As I suspected dividend increased to a fully imputed 12cps! NPAT up a whooping 41% on pcp. Forward PE must be around or just under 10 now?

Key highlights of the first six months to 31 December 2020 included:
 Revenue of $499.3 million (up 6%)
 Operating EBITDA** of $42.1 million (up $7.4 million or 21%)
 Net Profit after Tax (“NPAT”) of $18.0 million (up 41%)
 Fully imputed interim dividend of 12 cents per share
 Very strong performances from our Retail, Livestock and Real Estate businesses
 Strong balance sheet and improvement in cash flows from the prior comparative period
 Reconfirmed full year Operating EBITDA guidance of around $57 million

[sb9]

As I suspected dividend increased to a fully imputed 12cps! NPAT up a whooping 41% on pcp. Forward PE must be around or just under 10 now?

Key highlights of the first six months to 31 December 2020 included:
 Revenue of $499.3 million (up 6%)
 Operating EBITDA** of $42.1 million (up $7.4 million or 21%)
 Net Profit after Tax (“NPAT”) of $18.0 million (up 41%)
 Fully imputed interim dividend of 12 cents per share
 Very strong performances from our Retail, Livestock and Real Estate businesses
 Strong balance sheet and improvement in cash flows from the prior comparative period
 Reconfirmed full year Operating EBITDA guidance of around $57 million

Pretty neat result and happy with increased divvy (fully imputed) as well.

[Roberto the Brickie]

Great to see they are not carrying $16 million of cash at a reporting date while still having debt. My question is why have the banking facilities increased by an additional $10 million? The company will be paying line fees on the additional $10 million for two years yet debt has reduced and all the commentary is about good times ahead. Still not convinced about the competencies of the cash management team given that large pot of cash last year, however happy to get a 12 cent dividend. Yet I would still prefer a lesser dividend now and to not see the loan facility increasing, not many assets left to sell if debt starts increasing AGAIN.

[iceman]

Seems to be a good result across all of their businesses which is great to see. Long may it to continue and good to see a healthy fully imputed divie being paid in this financial year.

[Snoopy]

Great to see they are not carrying $16 million of cash at a reporting date while still having debt. My question is why have the banking facilities increased by an additional $10 million? The company will be paying line fees on the additional $10 million for two years yet debt has reduced and all the commentary is about good times ahead.


There was talk in the interim report of ramping up the 'Go Livestock' funding of sheep and cattle. Perhaps the additional borrowing headroom is associated with that?



Still not convinced about the competencies of the cash management team given that large pot of cash last year, however happy to get a 12 cent dividend. Yet I would still prefer a lesser dividend now and to not see the loan facility increasing, not many assets left to sell if debt starts increasing AGAIN.


It is good to see the 'defined benefit liability', associated with the company's in house pension plan, down around $4.5m from the June 2020 deficit of $9.5m. Albeit this is still up from the December 2019 comparative period. I agree with you Roberto though. When times are good, pay down your debt. PGW and Wrightson's before have had a couple of debt mandated assets sales and capital raises in the last twenty years. You would think they would have learned their lesson. However, PGW do have Agria still on the share register. I bet those two Agria nominated directors maintain a big say on the level of dividend payment.

SNOOPY

[Balance]

Earnings growth

+

High dividend yield

+

Strong financial position

+

Takeover potential

[/COLOR]

Sector rotation taking place out there - PGW has to be one of the best stocks for investors to switch from yield sensitive stock (like the utilities) into.

[iceman]

Sector rotation taking place out there - PGW has to be one of the best stocks for investors to switch from yield sensitive stock (like the utilities) into.

Is that a hint for Snoopy :p

[Roberto the Brickie]

[QUOTE=Snoopy;873241]There was talk in the interim report of ramping up the 'Go Livestock' funding of sheep and cattle. Perhaps the additional borrowing headroom is associated with that?

I failed to spot that Snoopy, so thanks that provides some reassurance that debt is not increasing without a tangible matching asset which has happened in the past. Happy to remain a collector of nice dividends however would prefer to get a lesser dividend while that balance sheet is strengthened.

[Snow Leopard]

As I suspected dividend increased to a fully imputed 12cps! NPAT up a whooping 41% on pcp. Forward PE must be around or just under 10 now?....

....Reconfirmed full year Operating EBITDA guidance of around $57 million

FY EBITDA $57m I calculate will produce a NPAT of approximately $16m, call it 22cps.

That 12c divvy seems a little n the generous side. :mellow:

[Norwest]

FY EBITDA $57m I calculate will produce a NPAT of approximately $16m, call it 22cps.

That 12c divvy seems a little n the generous side. :mellow:


This was asked on the analysts call today about why the increase in dividend given guidance. They answered it in a diplomatic way, but I think Snoopy is right when he said whilst Agria are on the board they will pump as much dividends as possible.


PGW do have Agria still on the share register. I bet those two Agria nominated directors maintain a big say on the level of dividend payment.

[JohnnyTheHorse]

Anyone have any insight into the auditor resignation?

[peat]

Anyone have any insight into the auditor resignation?

yeh saw that announcement this morning and went wtf?

[Snoopy]

Anyone have any insight into the auditor resignation?


I recall something at the AGM was said about the current person at KPMG, who was doing PGW's auditing, retiring. In FY2007 KPMG replaced Price Waterhouse Coopers as auditors at PGW. So KPMG have been PGW's auditors for fourteen years, a marathon stretch. I suspect rather than bring a new KPMG bod up to speed, it was mutually agreed that now would be a good time to transition to a new auditor. I don't think there is anything more sinister than that with this change.

SNOOPY

[forest]

I recall something at the AGM was said about the current person at KPMG, who was doing PGW's auditing, retiring. In FY2007 KPMG replaced Price Waterhouse Coopers as auditors at PGW. So KPMG have been PGW's auditors for fourteen years, a marathon stretch. I suspect rather than bring a new KPMG bod up to speed, it was mutually agreed that now would be a good time to transition to a new auditor. I don't think there is anything more sinister than that with this change.

SNOOPY

Thanks Snoopy, that is comforting.

[Balance]

Thanks Snoopy, that is comforting.

Under auditors’ convention, an incoming auditor (or accountant) has to confirm with the outgoing auditor (or accountant) if there is any reason why the transfer/assignment cannot be accepted.

[winner69]

Say EBITDA going to be $56m

Allowing for the $2m impact of change in accounting guidance in line with what they said previously

https://announcements.nzx.com/detail/375948

[Balance]

Say EBITDA going to be $56m

Allowing for the $2m impact of change in accounting guidance in line with what they said previously

https://announcements.nzx.com/detail/375948

Market consensus by the few analysts covering the stock was $46m. Shows how far out of touch the market is with this stock.

Looking forward to yet another nice dividend comes Sept.

Meanwhile, the agribusiness sector is on very good heart when it comes to farm profitability, protests against government interference notwithstanding.

[winner69]

in the Herald this morning

Analysts at Forsyth Bar expect seven companies to make a loss: Auckland Airport, Air New Zealand and Tourism Holdings as well as A2 Milk, Refining NZ, PGG Wrightson and Synlait Milk.

Can't be right .....can it

https://www.nzherald.co.nz/business/financial-reporting-season-what-to-expect-from-companies-results/YJYA2UXDZP5FAYOK5EE5BJ2ZPY/

[mondograss]

Seems unlikely given the announcement only a couple of weeks ago.

[JohnnyTheHorse]

in the Herald this morning

Analysts at Forsyth Bar expect seven companies to make a loss: Auckland Airport, Air New Zealand and Tourism Holdings as well as A2 Milk, Refining NZ, PGG Wrightson and Synlait Milk.

Can't be right .....can it

https://www.nzherald.co.nz/business/financial-reporting-season-what-to-expect-from-companies-results/YJYA2UXDZP5FAYOK5EE5BJ2ZPY/

Jeez not a list of companies you want to be associated with eh? Defamation...

[Balance]

in the Herald this morning

Analysts at Forsyth Bar expect seven companies to make a loss: Auckland Airport, Air New Zealand and Tourism Holdings as well as A2 Milk, Refining NZ, PGG Wrightson and Synlait Milk.

Can't be right .....can it

https://www.nzherald.co.nz/business/financial-reporting-season-what-to-expect-from-companies-results/YJYA2UXDZP5FAYOK5EE5BJ2ZPY/

From the broking firm which brought to the NZX:

Credit Sails, Intueri, CBL, Feltex, Wynyard but to name 5,

Forsyth ‘catch flies with honey’ Barr must be right.

[Snow Leopard]

in the Herald this morning

Analysts at Forsyth Bar expect seven companies to make a loss: Auckland Airport, Air New Zealand and Tourism Holdings as well as A2 Milk, Refining NZ, PGG Wrightson and Synlait Milk.

Can't be right .....can it

https://www.nzherald.co.nz/business/financial-reporting-season-what-to-expect-from-companies-results/YJYA2UXDZP5FAYOK5EE5BJ2ZPY/

I expect them to make a loss for the second half taking the HY $18m NPAT down to $16m at FY.

[mike2020]

I expect them to make a loss for the second half taking the HY $18m NPAT down to $16m at FY.
Hi, do you mind if I ask why? I can't think of a division that won't be doing well, what am I missing?

[Balance]

Hi, do you mind if I ask why? I can't think of a division that won't be doing well, what am I missing?


I expect them to make a loss for the second half taking the HY $18m NPAT down to $16m at FY.

Half year results to 31 Dec 2020 :

 Operating EBITDA** of $42.1 million (up $7.4 million or 21%)
 Net Profit after Tax (“NPAT”) of $18.0 million (up 41%)

Guidance provided on 21 July :

 Wrightson Limited* (PGW) today announced that following strong trading over the second half of the fiscal year it expects its full year to 30 June 2021 Operating EBITDA** to be around $56 million.

So Snow Leopard is expecting an EBITDA of $13.9m in the second half to produce a loss of $2m NPAT?

Let's wait for his reply - will be very insightful!

[Snow Leopard]

From that 2H EBITDA of $14m subtract the DA & the I and see what you get, add back a little T

My working were based on 2020FY & 2021HY accounts and the then forecast $57m.

Would be more than happy to be proved overly negative.

[sb9]

Bullish price action ahead of FY results tomorrow.

[iceman]

Bullish price action ahead of FY results tomorrow.

Not really surprising after the negative discussion recently, that I think is way out of line. Pleased to have picked up a few more in last couple of weeks in anticipation (bet) of a better resultthan recent talk of what we are about to see.

[Sideshow Bob]

Annual Results Announcement to 30 June 2021 - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/377359)

Annual Results Announcement to 30 June 2021

17/8/2021, 8:30 amFLLYRPGG Wrightson delivers impressive FY21 result
Group Performance

PGG Wrightson Limited* (PGW) today announced its results for the financial year ended 30 June 2021.

Key highlights of the financial year to 30 June 2021 included:

 Revenue of $847.8 million (up $59.8 million or 7.6%)
 Operating EBITDA** of $56.0 million (up $13.8 million or 33.0%)
 Net Profit after Tax (NPAT) of $22.7 million (up $15.0 million)
 Fully imputed final dividend of 16 cents per share
 Very strong performances from our Retail, Fruitfed Supplies, Livestock, Wool and Real Estate businesses
 Strong balance sheet and operating cash flows leading to a low net interest bearing debt balance at 30 June 2021
 Continuing solid demand and pricing for New Zealand produce underpinning outlook confidence for farmers and growers, and in turn agri-services

PGW Chairman, Rodger Finlay said that “…our team and the business have again proved that they are leaders in the field in supporting our customers, the agri-sector, and rural communities to deliver an excellent result. The financial year started and finished strongly with year-end Operating EBITDA at $56.0 million, up $13.8 million or 33.0% on last year’s COVID-19 impacted result.”

“PGW also delivered a NPAT of $22.7 million which was up $15.0 million. These results further vindicate the decisions taken over the last two years in divesting the Seeds business and with the concomitant recalibration of our cost base and systems.”

“Based upon the strong full year earnings the Board declared a fully imputed final dividend of 16 cents per share. The dividend will be paid on 4 October 2021 to shareholders on PGW’s share register as at 5pm on 10 September 2021. This will effectively bring the total fully imputed dividends paid for the year up to an impressive 28.0 cents per share which I am sure all shareholders will be delighted about.”

“The Directors are particularly pleased that the business has backed up its strong first half result and has continued to trade well over the second half. This result reflects the collective efforts of the dedicated team that we have who are passionate about agriculture, supporting our customers and the role the sector plays for New Zealand. We have seen just how important and critical to New Zealand’s success the primary sector is and this has come into stark focus through the global pandemic.”
“As a business PGW is clear about its strategy of driving for growth through providing our customers with sector leading expertise and innovative solutions for their farming and production needs. We look to lead the market through the specialist knowledge and technical expertise of our people. We do this through investing in their capability and in identifying and bringing to market new products that we source and prove in New Zealand conditions. Our customers value PGW’s technical offering and see this as a distinguishing strength that we will continue to develop and foster. Our strong balance sheet allows us to contemplate earnings accretive growth ambitions, both internal and external.”

Turning now to comment on the performance of our Business Units.

Retail & Water Group

PGW CEO, Stephen Guerin said, “Retail & Water’s Operating EBITDA was a very pleasing $37.5 million and was up $4.3 million on the prior year’s result; an increase of 13.0%.”

“Both our Rural Supplies and Fruitfed Supplies businesses traded extremely well. We continue to increase our market share and much of this growth can be attributed to the superior technical expertise of our staff backed up by our leading product range. We have a very stable rep force who are well supported by our specialist technical and R&D teams.”

“A significant challenge that we and many other businesses face is around the much publicised supply chain disruption that is being felt around the world. This will continue to have an impact on the timelines for sourcing product and grower inputs as well as exports to offshore markets. Our team continues to work assiduously to proactively minimise supply disruption to our businesses and customers.”

“Our teams have been working collaboratively with our key suppliers, securing and taking product into stock earlier, and working with customers to lock in their seasonal requirements three to six months earlier than would ordinarily be the case.”

“Our Rural Supplies business experienced particularly strong growth this year which is a fantastic result in a highly competitive market. This success is attributable to both new customers who have shifted business to PGW and also growth in our market share as customers respond positively to our value-added technical offering and advice.”

“We have employed some great new talent in our business who have brought fresh ideas, and in some instances, new business. Our sales culture has grown through increased investment in our people and by providing more training opportunities across all levels of our business with the focus on sales and service.”
“Our Fruitfed Supplies business has again registered another record year for both Operating EBIDTA and revenue. This business is diversified across a number of crops and we continue to adapt to customer and market needs. The horticulture sector is growing and remains buoyant, and we are continuing to see investment and development.”

“We enjoy impressive market share across a broad range of horticultural crops and with particular strengths in the grape, pip fruit, stone fruit, and kiwifruit, and we continue to grow in the avocado and cherry sectors.”

“Our core focus remains to add value to our clients’ businesses through the technical ability of our Technical Horticultural Representatives (THR) and by supplying specialist products and services. Our technical expertise offering is differentiated by our expert Technical and R&D teams who support our field and store staff. This team conducts a number of trials across the industry investigating new products and chemistry to assist our growers and engage with industry bodies and prove products in New Zealand conditions.”

“Our wholesale subsidiary, Agritrade, which manufactures, sells, and distributes products continues to demonstrate positive momentum.”
“Maintaining inventory during the worldwide supply chain disruption created by COVID-19 caused Agritrade to place orders and receipt stock earlier than usual. Whilst the inability to travel internationally has hampered product development opportunities, it is nevertheless pleasing to note that five new products were registered during the year and are being commercialised.”

“We have reshaped the Water business to align with market conditions. This has resulted in an improvement in EBITDA compared to the previous year. Our full-service water and irrigation packages to customers through Rural Water has seen an increase in sales. However, shipping delays will likely push out some delivery timelines in the short to medium term.”

Agency Group

“Our Agency group incorporates the Livestock, Wool and Real Estate businesses. Trading for this group is weighted towards the second half of the financial year. Operating EBITDA was $25.2 million and was up $9.5 million on the prior year’s result; an impressive increase of approximately 60.6%.”
“Our Livestock business has maintained market share throughout the country with the South Island achieving a very solid result, especially within the sheep and beef sector. During the year strong values were achieved for sheep farmers, and dairy farmers also received increased pay-outs which in turn supported our Livestock business. Our Deer business experienced a good velvet season where values offset lower venison prices.”

“We expanded our GO-BEEF and GO-LAMB product offering and launched GO-DEER. Next year we expect to add to our GO-STOCK range with GO-DAIRY, which we anticipate will be well received and grow our GO-STOCK offering further.”

“bidr®, our virtual saleyard has run over 400 auctions and sold more than $50 million worth of livestock since its launch in June 2019. bidr® continued its significant software development and in FY22 live streaming from Fielding, Stortford, Wellsford, and Frankton saleyards will be launched with others to follow as we roll out this technology. Excellent Livestock Genetics results throughout the year culminated in the bull sales auction series where bidr®’s hybrid platform came to the fore.”
“PGW Wool has done a good job navigating through the ongoing challenges that have been accentuated by COVID-19. Our team worked closely with growers to reduce their stockpiles of crossbred wool and did see some benefit from improved pricing in the second half. Our export subsidiary, Bloch & Behrens worked diligently with overseas customers to ensure contracted obligations to our growers were fulfilled.”

“The Real Estate business has seen particularly strong demand across all sectors of the rural property market, which has also been fuelled by low interest rates. This resulted in the Real Estate business experiencing its best returns in over a decade at both an Operating EBITDA and gross commission income level.”
“We also see early signs of a positive spring for rural sales, with higher than normal appraisals taking place along with earlier spring listings occurring, which we expect will turn into continuing solid demand for the first six months of FY22. With strong commodity values in rural we anticipate a number of retirement and succession initiated listings coming to the market. The shortage of residential and lifestyle listings may continue with the current low interest rate environment a contributing factor.”

Cashflow and Debt

Mr Finlay noted that “PGW experienced strong operating cash flows during the year which benefited from the good Operating EBITDA performance and a focus on working capital management and receivables in particular. This focus has seen PGW’s overdue debtors balance continuing to track to historically low levels with our book in very good shape.”

“Capital expenditure of $6.8 million was $2.3 million lower than FY20 and was impacted by a slowing in the implementation of projects as a consequence of COVID-19 related disruption.”

“Net interest-bearing debt was approximately $6.5 million as at 30 June 2021 and is the lowest recorded at 30 June in over a decade, excluding 30 June 2019 when the proceeds from the sale of its Seeds business were held.”

Outlook

Mr Finlay said, “The outlook is positive in the rural sector with strong farm gate and commodity prices. Robust demand is expected to continue for lamb and sheep meat and cattle prices are anticipated to remain high. There is also confidence in dairy with a positive outlook into next year and a solid pay-out predicted.”
“Looking ahead, the Board is confident that the PGW is well placed to continue to grow. We have recently undertaken an internal review of our PGW Group strategy and have reset our Group objectives and priorities and we are rolling this out within the business currently. This exercise has served to reconfirm a number of the key themes that are continuing to drive improved performance for the business. Key in this is our continued focus on the technical expertise of our people and technical offering which differentiates us from our competitors.”

“There remains a degree of uncertainty globally with increasing geopolitical risks and as new variants of COVID-19 emerge. Implications from the pandemic will continue to impact consumer markets and the global supply chain. PGW is committed to supporting our customers through these ongoing challenges and has demonstrated that it can do this effectively and profitably.”

“We would hope to be in a position to provide guidance about our expectations for FY22 at our Annual Shareholders’ Meeting in October.”

All media enquiries to:

Julian Daly
General Manager Corporate Affairs
PGG Wrightson Limited
Mobile: +64 27 553 3373

[sb9]

Keep collecting those juicy divvies, 12c interim+16c final now. Total of 28c for FY21, not too shabby...

[Balance]

Keep collecting those juicy divvies, 12c interim+16c final now. Total of 28c for FY21, not too shabby...

Indeed!

Spectacularly good results which blow market expectations out of the park.

To put the final fully imputed dividend of 16cps in perspective, market expectations (there are only 2 brokers covering the stock) were for full year dividend to be 16 cps.

Debt level down to bugger all ($6.5m vs $33.1m in 2020).

Best of all, outlook positive on all fronts.

[Balance]

I expect them to make a loss for the second half taking the HY $18m NPAT down to $16m at FY.

As for expectations of a loss by Forsyth 'catch flies with honey' Barr & Snow Leopard - guess they did not have a clue.

[Snoopy]

Indeed!

Spectacularly good results which blow market expectations out of the park.

To put the final fully imputed dividend of 16cps in perspective, market expectations (there are only 2 brokers covering the stock) were for full year dividend to be 16 cps.

Debt level down to bugger all ($6.5m vs $33.1m in 2020).

Best of all, outlook positive on all fronts.

I did expect a good result from PGW, but this is better than I expected. Technically I am a bit 'overweight' in PGW shares ( I significantly increased my holding in the months following the capital return), and have been for a while. So I may end up 'a little more overweight' in terms of dollars by the end of the trading day today :-). I do like the comments about gaining market share and cementing those gains by upping the technical knowledge of their staff. A cursory look through the accounts does throw up a few questions though:

1/ In the cashflow statement there was an incoming "Receipt for the termination of partnering contract, net of costs" of $3.934m. Someone has paid PGW off to get out of a partnering arrangement. Who were they? And what was the arrangement?

2/ Very bullish talk about expanding the 'Go-Receivables' finance business to 'Go-deer' and 'Go-dairy' in the future. Yet the 'Go-Receivables' balance is actually down to $45.869m from $48.111m. This in the time of rising values of livestock. Huh?

3/ Very pleasing to see the defined benefit plan for historic employees in the black, for the first time ever! This has obviously been helped by a good year on the equities market. But the main gain has been a change in assumptions. The 10 year bond rate assumption has gone up to 1.99%, from just 0.91%. Increasing that discount rate decreases the present value of future obligations. But until interest rates rise, the ability to ultimately pay the gross value of those operations does not improve. Lump sum contributions by the company to defined benefit plans (Employee Superannuation Contribution Tax inclusive) of $0.563m have helped square things up over FY2021. So I am not assuming that now the pension plan has a positive actuarial balance, is equivalent to saying there will be no need for the company to contribute further. Will there be a few more twists yet in the pension plan saga?

SNOOPY

[Norwest]

Bullish price action ahead of FY results tomorrow.

It should be noted that massive jump yesterday evening was on $200 of shares at auction! Great result, but I've just sold out on this news as I think its overshot.

[Balance]

It should be noted that massive jump yesterday evening was on $200 of shares at auction! Great result, but I've just sold out on this news as I think its overshot.

Good on you.

I am a happy holder - will enjoy the 10.5% gross yield with more to come in future years.

[Snow Leopard]

Note 4 & Note 5 = +$6.3m. :eek2:

[Snoopy]

Good on you.

I am a happy holder - will enjoy the 10.5% gross yield with more to come in future years.


So you have given up on the imminent Chinese takeover and getting your cash out Balance? I knew you would come around to just appreciating PGW for what it was - eventually. I am very relieved to see the PGW balance sheet in such good shape. Because, to my way of thinking, building a low to no debt capital scenario in good times gives you the resilience to make it through the next farming cycle downturn which will inevitably come. The last few years has seen the debt position a bit tight, compounded by the decision not to relieve that tension - by prioritizing paying out capital to shareholders over paying down debt from the seed division sale. But that debt position also resulted in a laser focussed discipline on running the company better. Now for the first time in ages the board is starting to look outwards....

"Our strong balance sheet allows us to contemplate earnings accretive growth ambitions, both internal and external.”

On the prowl for acquisitions at the top of the business cycle? Their last big expansion doubling up -into water and irrigation- , when that market was looking all rosy, has not gone well. But that was under 'the Dewd'. And just enough time has elapsed and changes in leadership have come through for institutional memory to be diluted. I wonder what the next ill timed acquisition will be? I did shudder a little when I read the sentence I quoted above. Personally I would rather see PGW continuing to invest in their own people. I hope that is the way the growth goes. Otherwise Norwest may yet prove to be the smartest one here.

SNOOPY

[Balance]

So you have given up on the imminent Chinese takeover and getting your cash out Balance? I knew you would come around to just appreciating PGW for what it was - eventually. I am very relieved to see the PGW balance sheet in such good shape. Because, to my way of thinking, building a low to no debt capital scenario in good times gives you the resilience to make it through the next farming cycle downturn which will inevitably come. The last few years has seen the debt position a bit tight, compounded by the decision not to relieve that tension - by prioritizing paying out capital to shareholders over paying down debt from the seed division sale. But that debt position also resulted in a laser focussed discipline on running the company better. Now for the first time in ages the board is starting to look outwards....

"Our strong balance sheet allows us to contemplate earnings accretive growth ambitions, both internal and external.”

On the prowl for acquisitions at the top of the business cycle? Their last big expansion doubling up -into water and irrigation- , when that market was looking all rosy, has not gone well. But that was under 'the Dewd'. And just enough time has elapsed and changes in leadership have come through for institutional memory to be diluted. I wonder what the next ill timed acquisition will be? I did shudder a little when I read the sentence I quoted above. Personally I would rather see PGW continuing to invest in their own people. I hope that is the way the growth goes. Otherwise Norwest may yet prove to be the smartest one here.

SNOOPY

No, I am enjoying the yield while waiting for the Chinese to make their move. Agria has to sell sometime and that will trigger the full takeover imo.

As I have articulated before, PGW stands out imo as one of the few NZX stocks which offers :

1. Yield
2. Growth
3. Takeover potential

[mfd]

Note 4 & Note 5 = +$6.3m. :eek2:

Lucky someone paid to terminate a contract with them and they decided their stuff is worth a little more than they thought, would have been a million dollar loss for the second half otherwise.

I presume the business is pretty seasonal though, is second half generally well down on first?

[Roberto the Brickie]

I am much happier with the closing cash position at balance date although $3.4million still seems a big number while still having debt. Does highlight that last years cash on hand of $16.8million was a big error by someone, hopefully they are in gainful employment for another business.
A good result that seems inflated by some reversals of prior years "cooking" of the books especially the reversal on right-of-use assets.

[mike2020]

After a quick look at todays results on FBU and SPK I have decided PGW is well undervalued when you look at NTAs and divs. Is there a simple reason why? The other two have had their issues along the way. I started buying a couple of months ago and I am thinking of making it a bigger part of my portfolio.

[BlackPeter]

After a quick look at todays results on FBU and SPK I have decided PGW is well undervalued when you look at NTAs and divs. Is there a simple reason why? The other two have had their issues along the way. I started buying a couple of months ago and I am thinking of making it a bigger part of my portfolio.

PGW will do well, when the farmers do well. Given that agriculture is currently our main earner of overseas income, they better do.

However - PGW used to be in the past very cyclical ... good times are followed by bad times. Just to calibrate the picture - at the moment we have good times ;):

Just throw one of these now twice a decade arriving "hundred year droughts" or some untimely floods and frosts at the wrong places into the game and it all might look quite soon quite different.

But hey - hard enough to predict what stocks are doing, who is able to predict the weather?

I think what I am saying is - they might be a good dividend earner in the portfolio, but I probably would not wave my diversification rules for them ...

[mike2020]

Thanks. I think I get tunnel vision sometimes.

[winner69]

Hey Snoops, the health of the Defined Benefit Pension Scheme seems a lot healthier

I still think its nice of current shareholders to give the oldies their pension - no doubt even for some who once worked for divisions that PGW have hocked off

[Snoopy]

3/ Very pleasing to see the defined benefit plan for historic employees in the black, for the first time ever! This has obviously been helped by a good year on the equities market. But the main gain has been a change in assumptions. The 10 year bond rate assumption has gone up to 1.99%, from just 0.91%. Increasing that discount rate decreases the present value of future obligations. But until interest rates rise, the ability to ultimately pay the gross value of those operations does not improve. Lump sum contributions by the company to defined benefit plans (Employee Superannuation Contribution Tax inclusive) of $0.563m have helped square things up over FY2021. So I am not assuming that now the pension plan has a positive actuarial balance, is equivalent to saying there will be no need for the company to contribute further. Will there be a few more twists yet in the pension plan saga?



Hey Snoops, the health of the Defined Benefit Pension Scheme seems a lot healthier

I still think its nice of current shareholders to give the oldies their pension - no doubt even for some who once worked for divisions that PGW have hocked off


Winner, you may have missed my comment on that, above. As you said it is good to see those Wrightson bloodstock horses, already put out to pasture, having a secure supply of hay in their old age!

SNOOPY

[nztx]

After a quick look at todays results on FBU and SPK I have decided PGW is well undervalued when you look at NTAs and divs. Is there a simple reason why? The other two have had their issues along the way. I started buying a couple of months ago and I am thinking of making it a bigger part of my portfolio.


a bit more than that - FBU - no Imputation credits = you pay the tax
SPK - static imputed div going nowhere upwards fast- okay consistent / mature

PGW can be volatile .. but there is opportunity of the large tigers coming out to play
later from hibernation, when the 'who wants all of the cake' games start .. ;)

could be a good ride - enjoy the dividend & tax credits


I remember PGW pre the 10:1 consolidation, then after that & haven't they bounced since then .. :)

[sb9]

Someone happy to dump them CD (18c fully imputed) at 3.45.

[nztx]

Someone happy to dump them CD (18c fully imputed) at 3.45.

interesting .. perhaps Robertson's over $180k tax hike may have something to do with it ? ;)

why otherwise dump bits of a perfectly goose spitting out pretty good golden eggs ? ;)

[sb9]

interesting .. perhaps Robertson's over $180k tax hike may have something to do with it ? ;)

why otherwise dump bits of a perfectly goose spitting out pretty good golden eggs ? ;)

Yeah not sure why would they do that, unless of course they know something we don't.

[sb9]

David Cushing, former director seem to be disposing on market. He's still got fair few to go..

[Balance]

David Cushing, former director seem to be disposing on market. He's still got fair few to go..

Cushing family doing a portfolio rebalancing exercise it seems. They have just lightened up on SKL as well.

Good on them.

[sb9]

Cushing family doing a portfolio rebalancing exercise it seems. They have just lightened up on SKL as well.

Good on them.

I'm sure they can arrange block trades with market participants instead of drip feeding them on market.

[JohnnyTheHorse]

Cushing family doing a portfolio rebalancing exercise it seems. They have just lightened up on SKL as well.

Good on them.

I took the opportunity to take some more off his hands yesterday.

[Snoopy]

David Cushing, former director seem to be disposing on market. He's still got fair few to go..


According to the NZX release David Cushing has changed his name by deed poll to "David Gushing". I can't shake the image of the newly renamed 'David Gushing' walking around with a giant boil on his body. Then he suddenly decides to lance it and those excess PGW shares start 'gushing out'!. Ah well, as he is off the board now, I don't see it as a warning sign for the business that our Mr Gushing is cashing up.

SNOOPY

[Getty]

Cushing family doing a portfolio rebalancing exercise it seems. They have just lightened up on SKL as well.

Good on them.

Could be preparing a war chest, to take THL over?

[sb9]

Could be preparing a war chest, to take THL over?

Or pour more into SVR :ohmy:

[sb9]

I took the opportunity to take some more off his hands yesterday.

I did score some too (top up on my original from last year), too good an opportunity to miss out when you see price basically back at pre-results level.

[Balance]

I did score some too (top up on my original from last year), too good an opportunity to miss out when you see price basically back at pre-results level.

You did well - the 'big' seller has disappeared for whatever reason this morning. There were around 15000 shares left from yesterday at $3.45 but when bids for 16,000+ were put in, the seller turned tail & disappeared.

[mike2020]

Yes I had a bid in front expecting a top up. Maybe later? My two best div payers are PGW and HGH, I have enough of that one. I am tempted to take a little bit of ZEL but if it does not sell I wont enjoy owning it. PGW I know well.

[Davexl]

PGW on a roll today up 3.5% to $3.85

People might have figured out it's offering a nice 16c final dividend and are chasing it to 9 Sep ex date?

Disclosure: Held

[Balance]

Was great buying just the other week when someone was selling at $3.45. :t_up:

[mike2020]

PGW on a roll today up 3.5% to $3.85

People might have figured out it's offering a nice 16c final dividend and are chasing it to 9 Sep ex date?

Disclosure: Held
7% net @ $4 would still be hard to beat at the moment it should run higher.

[Davexl]

7% net @ $4 would still be hard to beat at the moment it should run higher.

My calcs have it at 10.8% Gross when I bought, now down to 10.2% Gross which was rather encouraging...

[JohnnyTheHorse]

Was great buying just the other week when someone was selling at $3.45. :t_up:

An absolute treat. The day trader in me says take profit, but it was a top up to longer term holding. Patience should be rewarded.

[sb9]

An absolute treat. The day trader in me says take profit, but it was a top up to longer term holding. Patience should be rewarded.

Same here, topped as an addition to my long term parcel, tucked away safely now.

[Roberto the Brickie]

Just wondering if the Board of PGW curse previous directors who sold several of the retail stores to be leasing them back at rates that would be higher than current interest rates. I looked at buying a couple of the retail stores but didn't as thought the return of 8% could be better achieved elsewhere and didn't fancy that for 10 years of leasing to them. Hindsight is a wonderful thing but I would have done better renting to PGW than collecting dividends from PGW. Guess the need to pay Agria a dividend was the price they are know paying for renting their stores.

[sb9]

$4 beckoning..

[sb9]

Looks like the Cushing sale hangover is gonna be with us for a while yet.

[Balance]

Looks like the Cushing sale hangover is gonna be with us for a while yet.

That's ok - they sold most of their stock at $2.75 to the Chinese last year, and prior to that Cushing had been lightening up their stake at lower prices.

Gives those who are looking for a stock with a great yield with growth & takeover potential a cheaper entry point (eg. me).

Cushing sale will not last forever.

Be at least $4 when they finish selling imo.

[Sideshow Bob]

Cushing family cash in $2.4m worth of PGG Wrightson shares - NZ Herald (https://www.nzherald.co.nz/business/cushing-family-cash-in-24m-worth-of-pgg-wrightson-shares/Z6OZPGXF34NGTIDNFZYDMTKPRU/)

[sb9]

Cushing family cash in $2.4m worth of PGG Wrightson shares - NZ Herald (https://www.nzherald.co.nz/business/cushing-family-cash-in-24m-worth-of-pgg-wrightson-shares/Z6OZPGXF34NGTIDNFZYDMTKPRU/)

Still depressing the sp by the looks. I'm sure Mr Cushing can organise a block trade off market with one or two big boys.

[Norwest]

Still depressing the sp by the looks. I'm sure Mr Cushing can organise a block trade off market with one or two big boys.

No chance it's them on this small volume.

[Balance]

Still depressing the sp by the looks. I'm sure Mr Cushing can organise a block trade off market with one or two big boys.


That's ok - they sold most of their stock at $2.75 to the Chinese last year, and prior to that Cushing had been lightening up their stake at lower prices.

Gives those who are looking for a stock with a great yield with growth & takeover potential a cheaper entry point (eg. me).

Cushing sale will not last forever.

Be at least $4 when they finish selling imo.

And there she pops - $3.83 ex 16c fully imputed dividend.

[sb9]

And there she pops - $3.83 ex 16c fully imputed dividend.

Yep, nice to see price getting close to $4 mark slowly and in the meantime juicy divvy just hit the bank a/c :t_up:

[Balance]

Yep, nice to see price getting close to $4 mark slowly and in the meantime juicy divvy just hit the bank a/c :t_up:

Yup, 28c fully imputed dividends in the last 7 months - absolutely outstanding contribution asa an income stock with capital growth too!

Gross dividend yield of 18% on my entry price.

Did not buy enough! :(

[sb9]

Yup, 28c fully imputed dividends in the last 7 months - absolutely outstanding contribution asa an income stock with capital growth too!

Gross dividend yield of 18% on my entry price.

Did not buy enough! :(

There she POPS....$4 :D

[sb9]

There she POPS....$4 :D

Take two for $4 nearly a week later...see if it can break and hold above that level this time around.

[Sideshow Bob]

Looking like same again....

PGW Guidance Update - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/381182)

[sb9]

Looking like same again....

PGW Guidance Update - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/381182)

I'll be more than happy to collect another 28c fully imputed divvies for FY22. Although cautious, reading between the lines looks as though they didn't want upgrade guidance at this stage and leaving room for another surprise later on.

[iceman]

I'll be more than happy to collect another 28c fully imputed divvies for FY22. Although cautious, reading between the lines looks as though they didn't want upgrade guidance at this stage and leaving room for another surprise later on.

Indeed. Very healthy divies coming again. Looking forward to the February update

[Balance]

I'll be more than happy to collect another 28c fully imputed divvies for FY22. Although cautious, reading between the lines looks as though they didn't want upgrade guidance at this stage and leaving room for another surprise later on.

SP has been steadily rising higher so word must have leaked out amongst suppliers, customers and farmers as to how well PGW is doing.

Good of the company to update so everyone is on the same page.

[RGR367]

Looking like same again....

PGW Guidance Update - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/381182)

"The Board is confident that the company is well positioned to continue to perform well and deliver on our PGW Group Strategy to grow the business.”

Hackneyed but yes for the big divvie again.

[Balance]

Rising commodity prices & food shortages emerging as the world opens up - PGW is very well positioned indeed!

Happy holder from when they announced the sale of the seed business to reduce debt & focus on growing earnings.

[iceman]

Mr Market is liking the update. SP up 3.5% this morning :-)

[sb9]

Mr Market is liking the update. SP up 3.5% this morning :-)

Sure does. Thanks to Mr Cushing for selling some back in Aug @3.45 CD to add to my long term holding from last year.

[Balance]

Sure does. Thanks to Mr Cushing for selling some back in Aug @3.45 CD to add to my long term holding from last year.

Likewise!

He is a generous man is old Cushing. Or is it young Cushing these days?

[Balance]

Great to see PGW powering on beyond $4.00 which is a key resistance point imo.

Rising agricultural & food prices globally mean NZ’s farming sector is in good heart and PGW will continue to benefit, now that it has left most of its its problems and overgearing behind.

https://modernfarmer.com/2021/10/rising-global-food-prices/

[Balance]

Likewise!

He is a generous man is old Cushing. Or is it young Cushing these days?

Cushing sold some shares in Oct 2019 at $2.32 and the majority of their remaining stake at $2.75 in April 2020. Company has paid 37c fully imputed dividend since March 2020.

Sp was $4.18 yesterday so those who bought off the Cushings at $2.32 & $2.75 have made 96% & 62% respectively in that time.

Point being that the market always tend to assume that a large shareholder selling down can be bad news when it is not always the case .

[Rawz]

Cushing sold some shares in Oct 2019 at $2.32 and the majority of their remaining stake at $2.75 in April 2020. Company has paid 37c fully imputed dividend since March 2020.

Sp was $4.18 yesterday so those who bought off the Cushings at $2.32 & $2.75 have made 96% & 62% respectively in that time.

Point being that the market always tend to assume that a large shareholder selling down can be bad news when it is not always the case .

I agree and applies to funds as well. Salt Funds sold lots of TRA at $3.30 then SP powers onto $4.40. ACC sold lots of MHJ at $0.70 and SP powers onto $1.05.

[sb9]

Great to see PGW powering on beyond $4.00 which is a key resistance point imo.

Rising agricultural & food prices globally mean NZ’s farming sector is in good heart and PGW will continue to benefit, now that it has left most of its its problems and overgearing behind.

https://modernfarmer.com/2021/10/rising-global-food-prices/

Powering ahead strongly today again, looks like market has fully understood what’s ahead with big season of spring coming up.

[Dassets]

Hey VCT sold NWF at 10 cents after 1 dividend and I sold quite a few at 13 as a Director. Look at Zero. But then look at ATM I suppose. You have to try to understand why the selling has happened if an insider or recent insider has sold some. The ATM case will be fascinating. And why did everyone sell at the same time??

[Balance]

https://www.nzx.com/announcements/381528

Farmgate milk price forecast up another 40c - all good stuff for farmers and PGW.

[iceman]

We've hit an ATH of $4.40. Looks like Mr Market expects positive downstream effect for PGW from Fonterra's higher milk payout

[percy]

We've hit an ATH of $4.40. Looks like Mr Market expects positive downstream effect for PGW from Fonterra's higher milk payout

Certainly seems that way with PGW up 3% today and ALF up 5.8%.

[nztx]

Div yield doesn't look too shabby ;)

[Balance]

We've hit an ATH of $4.40. Looks like Mr Market expects positive downstream effect for PGW from Fonterra's higher milk payout

$4.50 - so thanks to the Cushing again for supplying stock at $3.45 for my last top up. :t_up:

Yummy!

[Snoopy]

$4.50 - so thanks to the Cushing again for supplying stock at $3.45 for my last top up. :t_up:

Yummy!


1/ Agria founder Alan Lai announces he has sold his PGW stake for $3.20 per share to the Chinese Government, in return for all CCP charges against him being dropped.

2/ Northington Partners announced as independent valuers on the deal, and conclude that fake milk pricing is distorting the market trading in PGW shares, and that the intrabusiness cycle full and fair valuation of PGW shares is $3.

3/ Directors, from an independently managed hotel in Hong Kong where they may be staying for a few years, declare the 6.66% premium offer of $3.20 to fair value as 'devilishly high' and recommend shareholders accept - or else!

4/ Balance and the rest of us sell out, and the directors are released.

5/ Jacinda praises 'shareholder kindness' and the former shareholding Cushings are shown to have come out the winners - again!

SNOOPY

[JohnnyTheHorse]

$4.50 - so thanks to the Cushing again for supplying stock at $3.45 for my last top up. :t_up:

Yummy!

Was an absolute gift (and wish I'd got more). You've certainly been calling this one right for the last 12+ months.

[sb9]

Div yield doesn't look too shabby ;)

Still has more legs to run before the yield looks reasonable.

[Balance]

Highest milk solids payout ever by Fonterra.

More tailwind & favourable conditions for PGW.

https://www.rnz.co.nz/news/country/457110/fonterra-lifts-payout-forecast-to-record-high

[winner69]

Six weeks ago they said expect Operating F22 EBITDA** to be broadly in line with last year’s impressive performance at around $53 million.”

Today they say PGW was raising its full year guidance to around $58 million at an Operating EBITDA** level.” .... better than last years $56m

Nothing like growing profits

That's pretty good eh

[iceman]

Six weeks ago they said expect Operating F22 EBITDA** to be broadly in line with last year’s impressive performance at around $53 million.”

Today they say PGW was raising its full year guidance to around $58 million at an Operating EBITDA** level.” .... better than last years $56m

Nothing like growing profits

That's pretty good eh

A great announcement. The huge milk payout from Fonterra will ensure this guidance will be met and we can look forward to juicy dividends. Just a shame HGH shareprice hasn't positively reacted to the milk price announcement :-)

[sb9]

A great announcement. The huge milk payout from Fonterra will ensure this guidance will be met and we can look forward to juicy dividends. Just a shame HGH shareprice hasn't positively reacted to the milk price announcement :-)

Nice touch in time for ASM in an hour's time (virtual), hopefully more positive commentary from Chair and CEO.

[iceman]

Nice touch in time for ASM in an hour's time (virtual), hopefully more positive commentary from Chair and CEO.

Look forward to comments about it on here. Am travelling so unable to log in and listen so all comments appreciated

[sb9]

Look forward to comments about it on here. Am travelling so unable to log in and listen so all comments appreciated

My thought on the meeting, pretty solid performance across all divisions with wool being the only laggard.
No DRIP in foreseeable future, reason being very strong balance sheet meaning continued returns to shareholders through fully imputed divvies, love it.
Actively looking for strategic acquisitions that are core to the business and also earnings accretive from get go.

I think we're "well positioned" :t_up:

[maclir]

My thought on the meeting, pretty solid performance across all divisions with wool being the only laggard.
No DRIP in foreseeable future, reason being very strong balance sheet meaning continued returns to shareholders through fully imputed divvies, love it.
Actively looking for strategic acquisitions that are core to the business and also earnings accretive from get go.

I think we're "well positioned" :t_up:

I agree. They also hammered the point about the importance of their staff's techncial expertise.

I have to say I'm glad Guerin's better at running the company than he is at presenting.

[sb9]

I agree. They also hammered the point about the importance of their staff's techncial expertise.

I have to say I'm glad Guerin's better at running the company than he is at presenting.

Haha couldn't agree more, he mumbles a lot when presenting.

[winner69]

Hey Snoops me old mate …..have you the last 5 years Operating Ebitda on a like for like basis …ie adjusting for the change in accounting of leases (which effectively increased ebitda by quite a lot

I’m after F16 and f17 and F19 to complete the series X, Y, Z, 48.2m, 56.0m and F22 58.0m

Just being lazy

Cheers

[Snoopy]

Hey Snoops mebold mate …..have you the last 5 years Operating Ebitda on a like for like basis …ie adjusting for the change in accounting of leases (which effectively increased ebitda by quite a lot

I’m after F16 and f17 and F19 to complete the series X, Y, Z, 48.2m, 56.0m and F22 58.0m

Just being lazy

Cheers

Hi Winner,

Two points.

1/ I tend to work on NPAT for my comparative figures. Those figures are not affected by the change in accounting lease standards, so I don't have the comparative EBITDA figures you ask for at hand.

2/ Where I have looked at doing this before (in another company), I have always adjusted the current EBITDA figures back to what they would have been under the old standard. What you are proposing is the other approach of adjusting the old figures up to the new standard. To my mind that is the better way to go (always better to be forward looking). The problem I run into is finding a practical way to do that.

The lease change standard effectively replaces an expense called 'rent', with two new expenses, those being:

a/ Depreciation of a 'right of use asset'
b/ An interest charge on lease liabilities.

The 'rent expenses' for want of a better broad umbrella term, sum match over the total term of a lease contract(s) under each method. But on a year to year basis they do not match, due to different accounting discounting rules.

The problem is in the old accounts, the split between depreciation of a 'right of use asset' and 'interest lease expense' is not declared, because under the old accounting standard such a separated construct did not exist. Sure you can make some estimates of what the historical split might be. But that sort of stuff is beyond my accounting pay grade. Is there a way to practically do this? You Winner, are probably one of the few people on this forum qualified to answer that question.

SNOOPY

[winner69]

Thanks Snoopy …thought it would be hard trying to get adjusted (fiddled) numbers

Was trying asses whether this is a good trend and where it might head seeing F22 58m isn’t much more than F21 56m.


Trend:

F22 58m guidance
F21 56.0m
F20 42.2m
F19 24.4m but includes leases
F18 34.5m including leases

[winner69]

Snoopy …so this impressive looking chart they showed at the ASM isn’t really the truth ……lemons some years and apples other years

Never mind …the market doesn’t care ..just focusing on 2021 and 2022

[mike2020]

Snoopy …so this impressive looking chart they showed at the ASM isn’t really the truth ……lemons some years and apples other years

Never mind …the market doesn’t care ..just focusing on 2021 and 2022

Looks like it matches up to me. I am happy to buy a few more at todays prices.

[Balance]

Record earnings for the primary sector - a restructured and now well managed & well positioned PGW cannot but benefit.

More profit upgrades for PGW to come.

https://www.1news.co.nz/2021/12/14/nz-food-fibre-exports-forecast-hit-record-508-billion/

The revenue from food and fibre sector exports are projected to surge to a record $50.8 billion.

[sb9]

Record earnings for the primary sector - a restructured and now well managed & well positioned PGW cannot but benefit.

More profit upgrades for PGW to come.

https://www.1news.co.nz/2021/12/14/nz-food-fibre-exports-forecast-hit-record-508-billion/

The revenue from food and fibre sector exports are projected to surge to a record $50.8 billion.

Got them tucked away safely in the bottom drawer and happy to keep collect the future divvies and capital gains along the way. Update from the ASM earlier in the month confirmed their balance sheet strength and upbeat trading pattern.

[winner69]

Got them tucked away safely in the bottom drawer and happy to keep collect the future divvies and capital gains along the way. Update from the ASM earlier in the month confirmed their balance sheet strength and upbeat trading pattern.

You'll need a bigger bottom drawer the way things are going

[sb9]

You'll need a bigger bottom drawer the way things are going

I think so, offer side is looking bit frail :t_up:

[Balance]

I think so, offer side is looking bit frail :t_up:

Powering on towards $5.00 by March 2022?

[sb9]

Where are all sellers gone :eek2::D

[sb9]

Powering on towards $5.00 by March 2022?

Could get there by Xmas..

[mike2020]

Could get there by Xmas..
Could get there this afternoon the way this weeks been. Why? I know why I like it but why the sudden willingness to chase it up?

[Balance]

Could get there this afternoon the way this weeks been. Why? I know why I like it but why the sudden willingness to chase it up?

Nothing but good news on the agricultural front - rising commodity prices, NZ$ heading lower and farmers upgrading farming practices & infrastructure to maximise yields & returns.

PGW is well positioned.

[mike2020]

I have always enjoyed dealing with PGW and it's people. Now enjoying being a shareholder, do we need a new target? I had been thinking maybe there was some background activity.

[Balance]

I have always enjoyed dealing with PGW and it's people. Now enjoying being a shareholder, do we need a new target? I had been thinking maybe there was some background activity.

There had been talk that the Chinese are keen to get PGW to help set up a network of rural servicing branches in China to modernise & upgrade China’s rural servicing sector.

If something like that goes ahead under a licensing & management agreement, it would be a huge boost to PgW’s fortunes.

Not keen on PGW putting any money outside of NZ. So must only be an expertise arrangement - not investment.

[mike2020]

Having experienced first hand Chinese investment as Fonterra shareholder I'd be completely against any capital flowing east. There was a time when Fonterra did well with management contracts with overseas Dairy companies. Maybe before Fonterra, NZDG.

[tommy_d]

and hit five dollars...
and 10% of portfolio
i haven't been buying since $3.37 in january, until a few more in August, and then again on Tuesday at what felt steepish at $4.74 ;)

[Agrarinvestor]

1/ Agria founder Alan Lai announces he has sold his PGW stake for $3.20 per share to the Chinese Government, in return for all CCP charges against him being dropped.

2/ Northington Partners announced as independent valuers on the deal, and conclude that fake milk pricing is distorting the market trading in PGW shares, and that the intrabusiness cycle full and fair valuation of PGW shares is $3.

3/ Directors, from an independently managed hotel in Hong Kong where they may be staying for a few years, declare the 6.66% premium offer of $3.20 to fair value as 'devilishly high' and recommend shareholders accept - or else!

4/ Balance and the rest of us sell out, and the directors are released.

5/ Jacinda praises 'shareholder kindness' and the former shareholding Cushings are shown to have come out the winners - again!

SNOOPY

Hallo Snoopy,

does that mean Alain Lai has sold all PGW shares? Do you have a source for me? I still own 70.000 shares in Agria and can not sell them.

regards

Agrarinvestor

[Snoopy]

Hallo Snoopy,

Does that mean Alain Lai has sold all PGW shares? Do you have a source for me? I still own 70.000 shares in Agria and can not sell them.

regards

Agrarinvestor

That post of mine you refer to is best described as 'satire' Agrainvestor.

http://www.agriacorp.com/

The website has been updated to reflect the fact that it is now 2022. But it looks like the 'global reach' map (http://www.agriacorp.com/business.asp?id=21) has not been updated since the sale of PGGW Seeds, even though we are told that Agria's proceeds from that sale have been used to repay debt. Given the shored up capital position of Agriacorp and the recent PGW share price gains, Agriacorp must be sitting in a good space. So it doesn't look like your underlying Agriacorp value has disappeared, even though you cannot realise it Agrainvestor.

SNOOPY

[Agrarinvestor]

Dear Snoopy,

I wrote Agria and asked for an offer for a repurchase of my shares. They don't want to bus back, but they said:
"If you are interested to sell your shares, you may do so at your convenience. From time to time, we do have inquiries from third party(s) expressing interest to purchase shares of the company which we refer them directly to shareholders who are interested to deal. With your consent, we would be happy to pass your contact to such third party(s) for you and them to deal directly,
"

I am asking myself, why should a third person, with no insights and relation to AGRIA, buy my shares?
Do I have any rights in China that I can enforce, because I am an owner of the company and they are violating my rights?

regards

Agrarinvestor

[Snoopy]

Dear Snoopy,

I wrote Agria and asked for an offer for a repurchase of my shares. They don't want to bus back, but they said:
"If you are interested to sell your shares, you may do so at your convenience. From time to time, we do have inquiries from third party(s) expressing interest to purchase shares of the company which we refer them directly to shareholders who are interested to deal. With your consent, we would be happy to pass your contact to such third party(s) for you and them to deal directly,
"

I am asking myself, why should a third person, with no insights and relation to AGRIA, buy my shares?
Do I have any rights in China that I can enforce, because I am an owner of the company and they are violating my rights?

regards

Agrarinvestor

From

http://www.agriacorp.com/

"Agria Corporation is an investment holding company,incorporated in Cayman Islands. We have deregistered our securities with the Securities Exchange Commission as from June 18, 2019"

So the entity you have invested in, the one that used to be listed in the United States, is a Cayman Island's company. I suspect there is nothing anyone in China can do about a Cayman Island company.

Also, (playing devil's advocate here), what rights of yours have been violated? You still own your shares in Agria. When the shares were listed the principal business of Agria was as a holding company for PGG Wrightson shares. This is still the case. There has been no substantial change in the Agria business since it has been delisted. So your position in Agria has technically not changed.

The only thing that has changed is that there is no public platform on which you can exchange your shares. But, according to the correspondence that you have revealed, Agria is open to trading your shares if a buyer can be found. But you do not have a right to have a buyer for your Agria shares. A buyer must be a voluntary player in any share sale transaction.

As to why anyone should buy Agria shares? Possibly because they could obtain a stake in PGW at a discount because of the lack of market liquidity of Agria shares. But the person supplying that discount would be you - the seller of the Agria shares in question.

I have sympathy for the minor shareholders in Agria, including yourself. But I see no easy or current resolution to the Agria minor shareholder dilemma.

SNOOPY

[percy]

I would let Agria know you are happy for them to put a buyer in touch with you.
Then if a buyer gets in contact with you,you can ask what price they are prepared to pay.
Then you can decide whether to sell .

[sb9]

Inching up few cents day by day, could be $6 soon if there aren't that many sellers.

[Balance]

Inching up few cents day by day, could be $6 soon if there aren't that many sellers.

Agriculture is on a surge out there on just about every front - why sell PGW when it is one of the few stocks to give excellent exposure to the sector?

[sb9]

Agriculture is on a surge out there on just about every front - why sell PGW when it is one of the few stocks to give excellent exposure to the sector?

Looks like not many willing to part with their holdings here...

[sb9]

What the $%^# :scared::D:t_up:

[maclir]

What the $%^# :scared::D:t_up:

I'm pondering the irony of my PGW shareholding increasing in value as my CO2 does the same...

[sb9]

Heading back to where we were 2 weeks back...

[nztx]

Are these getting scarce now ? Who's hoarding them all ? ;)

[sb9]

Are these getting scarce now ? Who's hoarding them all ? ;)

Donno, but willing buyers keep propping up higher highs..

[Snoopy]

Donno, but willing buyers keep propping up higher highs..


I would suggest it is just a falling currency effect. The more our dollar drops, the better it gets for our farmers growing our world class produce.

SNOOPY

[sb9]

I would suggest it is just a falling currency effect. The more our dollar drops, the better it gets for our farmers growing our world class produce.

SNOOPY

Agree, that's one side of it. I'm sure there's bit more than just the currency effect atm.

[iceman]

Agree, that's one side of it. I'm sure there's bit more than just the currency effect atm.

She just keeps on creeping up and atm a healthy level of bids in the 560-570 range. I'm a bit like you sb9, I'm starting to suspect there is more to this than just the FX rate !!

[sb9]

She just keeps on creeping up and atm a healthy level of bids in the 560-570 range. I'm a bit like you sb9, I'm starting to suspect there is more to this than just the FX rate !!

Someone is happy to keep mopping them up whatever is on offer even at slightly premium price. Wouldn't be surprised if we hit $6 before HY results announced later this month.

[Balance]

Agree, that's one side of it. I'm sure there's bit more than just the currency effect atm.

https://www.rnz.co.nz/news/business/460836/main-commodity-exports-remain-at-record-highs-soft-nz-dollar-boosts-returns

Record prices for our commodities (dairy, meat etc) with the lower NZ$ providing a further boost.

Happy times down at the farm.

Meanwhile, what’s brewing at PGW in their talks with the Chinese?

[Snoopy]

She just keeps on creeping up and atm a healthy level of bids in the 560-570 range. I'm a bit like you sb9, I'm starting to suspect there is more to this than just the FX rate !!





https://www.rnz.co.nz/news/business/460836/main-commodity-exports-remain-at-record-highs-soft-nz-dollar-boosts-returns

Record prices for our commodities (dairy, meat etc) with the lower NZ$ providing a further boost.


The peak within the last 6 months for the NZD top USD exchange rate came about the end of October 2021 and was US0.72c= NZD1, and it has subsequently fallen around 10% from that peak.

The Global Dairy Price Index, priced in USD, has moved from 1250 to 1450 over the same period, a rise of 16%. In NZD terms that is a rise of (1450/1250 x (72/65) = 28.5%

The PGW share price over that same period rose from around $4.50 to $5.70 today, a rise of 26%. So you might argue the PGW share price is only reflecting current commodity price trends. But then again, despite the ups and downs of farm output prices, a share price reflects the medium future outlook as well, and that continues to be good. So maybe the recent share price rise is not unexpected?



Happy times down at the farm.


You know better than that Balance. Farmers are never happy, only less grumpy ;-P



Meanwhile, what’s brewing at PGW in their talks with the Chinese?


Probably nothing. Alan Lai has his 'get out of jail free card', with the underlying price of PGW shares offsetting any debt that remains at Agria, while utilising the strong PGW dividend flow to pay down debt further. The Chinese government seem content with their own 12.928% stake of 9,758,754 shares (as at 20-10-2020). Looking at the share price chart as regards shares volumes traded only exceeded 50k for one day over the last two months. No evidence here of any meaningful further accumulation that I can see.

SNOOPY

[maclir]

According to The Economist's​ latest “burgernomics” update, a Big Mac cost NZ$7 in New Zealand and US$5.81 in the United States, making the implied exchange rate $1.20.


But the real exchange rate was $1.52, suggesting the New Zealand currency was 20.9 per cent undervalued against the greenback.


How's that change the model, Snoopy

[Snow Leopard]

The peak within the last 6 months for the NZD top USD exchange rate came about the end of October 2021 and was US0.72c= NZD1, and it has subsequently fallen around 10% from that peak.

The Global Dairy Price Index, priced in USD, has moved from 1250 to 1450 over the same period, a rise of 16%. In NZD terms that is a rise of 16% x (72/65) = 18%
....


(1450 / 1250 ) * ( 72 / 65 ) = 1.285

A 28.5% increase :)

[winner69]

(1450 / 1250 ) * ( 72 / 65 ) = 1.285

A 28.5% increase :)

PGW share price +26% and GDT prices +28% in same period

That’s spooky possums ….really spooky

[Snoopy]

According to The Economist's​ latest “burgernomics” update, a Big Mac cost NZ$7 in New Zealand and US$5.81 in the United States, making the implied exchange rate $1.20.


But the real exchange rate was $1.52, suggesting the New Zealand currency was 20.9 per cent undervalued against the greenback.


How's that change the model, Snoopy

You have a 'beef' with my figures ;-P? (Actually you should have, but fortunately SL has corrected them!)

SNOOPY

[maclir]

You have a 'beef' with my figures ;-P? (Actually you should have, but fortunately SL has corrected them!)

SNOOPY

No beef! We all know PGW has got the special sauce.

[Balance]

https://www.stuff.co.nz/national/127710888/dairy-farmers-sue-real-estate-firm-over-misrepresentation-of-rock-star-farm

Couple awarded $1.7m damages from PGG real estate over farm misrepresentation.

[Sideshow Bob]

Record FY22 half year result and guidance upgrade - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/387635)

Results Summary & Dividend
PGG Wrightson Limited (“PGW”)* today announced its results for the first half of FY22.
Highlights of the first six months to 31 December 2021 included:
 Revenue of $552.4 million (up $53.0 million or 11%)
 Operating EBITDA** of $47.4 million (up $7.8 million or 20%)
 Net Profit after Tax (“NPAT”) of $22.5 million (up $5.5 million or 32%)
 Total Shareholder Returns*** of +55%
 Increased fully imputed interim dividend of 14 cents per share
 Record first half year result with very strong performances from our Retail and Real Estate businesses
 Strong balance sheet that continues to support growth ambitions for the business and renewed and extended bank facilities
 Increased Operating EBITDA guidance for the full year of around $62 million

[winner69]

Last year ebitda was $56m ....a month or so said 'around $58m' ...and now its going to be 'around 62m'

Probably end up at $66m plus

[percy]

An excellent result.
Rural sector is doing NZ proud.

[sb9]

Interim divvy last year 12c and final 16c, current year interim 14c and based on upgraded outlook can expect final to be 18c. Nice stock to hold :t_up:

[Beagle]

Operating EBITDA over $47m in the first half but full year guidance of only $62m ? WOW, that's some serious seasonality to the business right there !

[winner69]

Operating EBITDA over $47m in the first half but full year guidance of only $62m ? WOW, that's some serious seasonality to the business right there !

You can see why they HAD to increase full year guidance from $58m to $62m eh

Could say that is an upgrade of 40% (h2 from 11 to 15m)

[Rawz]

Is this a cyclical stock?

Or are PGW on a path to glory?

[Davexl]

God I love this company!

[iceman]

Stunning result whichever way one looks at it. Guidance upgrade as well :-)
Very happy holder.

[Master98]

people are dumping pgw shares given strong first half year result and fat dividend, must be something unusual.

[see weed]

people are dumping pgw shares given strong first half year result and fat dividend, must be something unusual.
People taking early div. It has had a good run up in last few months. I bought some at 4.75 half hour ago. Will top up on any more lows from here.

[Davexl]

People taking early div. It has had a good run up in last few months. I bought some at 4.75 half hour ago. Will top up on any more lows from here.


Hi See Weed. Can you explain what you mean by 'people taking early div', do you mean selling on the run-up before going ex? It's dropping like a stone...Thanks.

[mike2020]

Yes I think he means profit taking off earlier rises. It has dropped off a brief high in the mid 5s and represents a good return so he is buying more which makes sense to me, cheaper today and a div due.

[Davexl]

Yes I think he means profit taking off earlier rises. It has dropped off a brief high in the mid 5s and represents a good return so he is buying more which makes sense to me, cheaper today and a div due.

Just struggling to understand why the SP is dropping before the Div - it usually appreciates...

[winner69]

Share price drop lately pretty brutal ....and down nearly 20% in last 6 weeks .... even after announcing record profit and a profit upgrade

Maybe this has something to do with it

Feds survey: Farmer confidence at lowest ebb since 2009
https://www.fedfarm.org.nz/FFPublic/Media-Releases/2022/Feds_survey_Farmer_confidence_at_lowest_ebb_since_ 2009.aspx

[Davexl]

Share price drop lately pretty brutal ....and down nearly 20% in last 6 weeks .... even after announcing record profit and a profit upgrade

Maybe this has something to do with it

Feds survey: Farmer confidence at lowest ebb since 2009
https://www.fedfarm.org.nz/FFPublic/Media-Releases/2022/Feds_survey_Farmer_confidence_at_lowest_ebb_since_ 2009.aspx

That helps to explain at least some of it, farmers like to moan about something despite the highest price in years in meat & dairy...Thanks Winner

[winner69]

That helps to explain at least some of it, farmers like to moan about something despite the highest price in years in meat & dairy...Thanks Winner

Yep they getting high prices but jeez input costs / labour probably going up faster

Funny they don't get much out of reduced RUC charges ..... they hardly pay any in first place but government needs to to help them out somehow or PGW shareholders might suffer more ;)

[Snoopy]

Yep they getting high prices but jeez input costs / labour probably going up faster


Since PGW sales are 'input costs', That may be no bad thing for we PGW shareholders?

SNOOPY

[winner69]

Since PGW sales are 'input costs', That may be no bad thing for we PGW shareholders?

SNOOPY

Thought that as well but didn’t want tornam PGW too much ……but there was a suggestion that higher cost might mean farmers cut back on how many things they buy

[Master98]

https://www.nzx.com/announcements/389072
Retirement of Chair Rodger Finlay, the cause of recent share dumping?

[Rawz]

https://www.nzx.com/announcements/389072
Retirement of Chair Rodger Finlay, the cause of recent share dumping?

Sounds like he is getting out while on top

[maclir]

Sounds like he is getting out while on top

He hs just taken on major repsonsibilities at the Reserve Bank. Looking at this https://www.rbnz.govt.nz/about-us/board-of-directors/rodger-finlay I don't know where he finds the time or energy for half of it.

[Davexl]

Could this be part of it, excerpt from Thomas Manch about new sanctions regime at Stuff newsletter:

But what's concerning for New Zealand is the suggestion that China may provide Russia military aid. The US has threatened to respond to such a move, and such support would bring China within the remit of New Zealand's new Russia sanctions law - a prospect that will strike fear into the hearts of our exporters.

[Master98]

Could this be part of it, excerpt from Thomas Manch about new sanctions regime at Stuff newsletter:

But what's concerning for New Zealand is the suggestion that China may provide Russia military aid. The US has threatened to respond to such a move, and such support would bring China within the remit of New Zealand's new Russia sanctions law - a prospect that will strike fear into the hearts of our exporters.
unlikely given both synlait and a2 directly involved in china, synlait up 5% and a2 up 1.6% today.

[iceman]

Could this be part of it, excerpt from Thomas Manch about new sanctions regime at Stuff newsletter:

But what's concerning for New Zealand is the suggestion that China may provide Russia military aid. The US has threatened to respond to such a move, and such support would bring China within the remit of New Zealand's new Russia sanctions law - a prospect that will strike fear into the hearts of our exporters.

That would be disastrous for NZ Inc and many listed entities would be much more severly affected than PGW.

[sb9]

Just wondering if Cushing still off loading his stake...got stuck in the 4.40s range for a while now.