PGW - PGG Wrightson [Archive] - Page 3

Snoopy

30-10-2008, 07:23 PM

From an operational perspective the Craig Norgate (Chairman) and Tim Miles (Managing Director) 'show' gave a bullish outlook.

With the first quarter results in, Rural Supplies and Fruitfed are well ahead of budget. This is thanks largely to increased demand for agricultural chemicals and seeds. The drought conditions earlier in the year made many farmers try the supplementary animal feed molasses based liquid. It worked so well that many farmers are continuing to use molasses now the drought is over.

The pumping division is either 'going great guns' or 'irrigation booming', depending on whether the dairy farm conversions and viticulture ventures go for a high pressure or a low pressure system respectively.

Finance on a quarter to quarter annual comparative basis is benefitting from the larger capital base built up over the year. The drop in the exchange rate can only work for farmers (and PGW) over the coming year. The one negative was real estate. This had been up over 70% in FY2008. But farm property sales have plunged this quarter to be 'well below budget', although PGW's market share at 30% has been maintained. Finance is anecdotally starting to become a problem.

The full year profit projection must be tempered by the uncertainty of autumn seeds and cow dairy herd sales which traditionally drive the full year result, and most of these sales do not occur until the second half. Given the turbulent world financial conditions, Norgate has maintained the PGW projected profit at $46m-$51m for PGW's underlying operations for FY2009.

There is likely to be a one off write-down on the carrying value of New Zealand Farming Systems (NZS), in which PGW has an 11.2% stake. But this loss is likely to be offset by the gain from selling Wrightson's wool handling business into 40% owned 'The Wool Company'. It was clear that a 'capital gain bonus' to PGW from managing NZS for this year is not likely. The NZS share price would have to average $1.75 from April 2009 to June 2009 for any such bonus to be paid to PGW.

Directors Sam Maling and Brian Joliffe made impassioned pleas for their re-election,as representatives of cornerstone 21.58% shareholder Pyne Gould Corporation. They did make it clear that both supported the Silver Fern Meats transaction. But they also made it clear that should PGCs plan to get a banking licence proceed, the reserve bank would probably demand PGC divest their interest in PGW.

There was a question from the floor as to how ''green" the company was. Norgate replied that he had been waiting for two years for somebody to ask him that as he had sympathy with certain green issues, even if the greenwill sometimes got ahead of the scientific evidence. He said that being a supplier, PGWs own carbon footprint is relatively low. MD Tim Miles jumped in and admitted PGW are not as green as they could be. Road miles travelled by reps may be one area where they can reschedule trips and/or use greener vehicles to reduce the PGW company carbon effect.

Contrary to what you might read in the 'official' AGM reports, Norgate is pulling out all stops to ensure the PGW/SilverFern joint venture meat merger goes ahead. Missing the 30th September 2008 deal funding target means that PGW are now incurring 'interest penalties' until such funding is repackaged and in place. And if the deal *is* called off, PGW will be up for a penalty break free.

Norgate was questioned extensively on the rationale behind the Silver Fern deal. He said it was driven largely by PGW customers the biggest proportion of whom are sheep and beef farmers, as was the 'Wool Partners' deal. He is as passionate as ever about the consumer driven plate to pasture strategy (as opposed to the pasture to plate supplier driven outlook). And farmers, after years of inactive frustration, were looking for a restructuring catalyst like PGW. The meeting closed with Norgate promising to announce new procurement and cash management initiatives in November.

SNOOPY

discl: hold PGW

Dr_Who

31-10-2008, 11:11 AM

Expect capital raising to acquire Silver Fern in the near future?

forest

31-10-2008, 02:27 PM

Snoopy

31-10-2008, 05:58 PM

I am wondering what this delay or cancellation of the deal with silver ferns is costing PGW. I understand there is a penalty interest charge because of delayed settlement (on perhaps as much as $145mil) and if the deal would be cancelled then you would expect a fee for breaking an unconditional contract.
Further you think there would be legal fees etc.
Could bite in PGW profits anybody care to put some numbers on them?

I will have a guess. $145m was due on the date of settlement (the missed date of 30th September), while the rest of the $220m ($75m) was due to be settled on 1st March 2009 *plus an interest rate of 10% on the outstanding balance*.

If none of the money is paid up until 1st March 2009, that means interest at 10% on the whole of the outstanding balance for 5 months:

0.1x $220m x 5/12= $9.2m

Provided PGW stitch this deal together, I would predict minimal additional legal fees.

There will be zero additional legal fees if PGW break the contract as well, for what happens in that event is already in the existing contract. There will however be compensation payable.

However, I wouldn't bet on the deal not going ahead. Norgate sounded pretty determined to get the deal done in some form. He used the phrase 'our word is our bond' when speaking on behalf of the board. If Norgate doesn't make the deal, then his deal making reputation will be in tatters. So I think provided the deal can be done using the overseas financiers, this Silver Fern Meats deal *will* go through.

The completely separate deal with cornerstone shareholder PGC becoming a bank throws another ingredient into the mix. If PGC unload their 21.6% stake to one buyer, that buyer will be obliged to make a takeover offer for the rest of the shares in PGW.

SNOOPY

discl: hold PGW

Mick100

31-10-2008, 06:04 PM

thanks for your report snoopy

forest

31-10-2008, 07:32 PM

Thanks Snoopy, 10% interest for not settling comercial contract could be bit hopefull.

Snoopy

31-10-2008, 10:46 PM

Thanks Snoopy, 10% interest for not settling comercial contract could be bit hopefull.

I didn't pull that 10% figure out of a hat Forest. That 10% per annum is the actual interest rate agreed in the contract with Silver Fern Farms (Meats). And just to make things quite clear, that interest rate on the outstanding balance *applies if the contract is settled* after 30th September 2008. Obviously it is now after 30th September 2008, so that interest rate applies.

If the contract is *not settled*, then we have another ball game entirely.

SNOOPY

Snoopy

31-10-2008, 11:29 PM

thanks for your report snoopy

Glad to hear you haven't thrown yourself under a combine harvestor Mick, what with all the market troubles. Are you still a PGW shareholder?

Here is a weekend puzzle for PGW shareholders to ponder (no I don't know the answer). I am trying to reconcile the divisional EBIT figures quoted throughout the operational review text with the segment reporting information on page 42.

The 'Segment net profit before tax' figures roughly tie in, except in 'Rural Services' where EBIT is $40.1m (p8) and 'Segment Net Profit before Tax' is $24.5m (p42). Why the difference?

SNOOPY

Lizard

01-11-2008, 09:46 AM

Here is a weekend puzzle for PGW shareholders to ponder (no I don't know the answer). I am trying to reconcile the divisional EBIT figures quoted throughout the operational review text with the segment reporting information on page 42.

The 'Segment net profit before tax' figures roughly tie in, except in 'Rural Services' where EBIT is $40.1m (p8) and 'Segment Net Profit before Tax' is $24.5m (p42). Why the difference?

Snoopy, the rural services business is allocated the bulk of liabilities under segment liabilities and I would think therefore incur considerable interest charges.

Financial services is probably less affected by interest on their liabilities as these are offset by interest income from financial assets.

Btw, here's something from the PGC agm yesterday.... I can't quite decide what that first paragraph means in terms of PGW - that PGC doesn't want to keep funding PGW? Or am I misunderstanding that?

Most of you will be aware that MARAC operates today with a high level of liquidity in its business. That has been the completely right strategy for us. But as we are presently configured, it is a strategy which creates tension for us because the initiatives in PGG Wrightson which we have supported as completely right for that business and its farmer clients, also make demands for capital.

And looking into the future we do not expect that situation to change. And so we have to rationalise things, but we are in no rush to do so. Our present timing contemplates that we will have the banking licence in place later in this financial year. But if events require it we have some flexibility around this timing. There has been some market speculation that we are about to offload our interest in PGGW. We have no such plans and divestment will not happen without a carefully thought through strategy which secures the best outcome for PGC shareholders.

One of the options we have is for some form of in specie distribution of those shares to PGC shareholders. We are still working through that possibility and others and it is too soon for me to confirm just what the outcome will be.

Snoopy

01-11-2008, 10:38 AM

Here's something from the PGC agm yesterday.... I can't quite decide what that first paragraph means in terms of PGW - that PGC doesn't want to keep funding PGW? Or am I misunderstanding that?

"Most of you will be aware that MARAC operates today with a high level of liquidity in its business. That has been the completely right strategy for us. But as we are presently configured, it is a strategy which creates tension for us because the initiatives in PGG Wrightson which we have supported as completely right for that business and its farmer clients, also make demands for capital."

"And looking into the future we do not expect that situation to change. And so we have to rationalise things, but we are in no rush to do so. Our present timing contemplates that we will have the banking licence in place later in this financial year. But if events require it we have some flexibility around this timing. There has been some market speculation that we are about to offload our interest in PGGW. We have no such plans and divestment will not happen without a carefully thought through strategy which secures the best outcome for PGC shareholders."

"One of the options we have is for some form of in specie distribution of those shares to PGC shareholders. We are still working through that possibility and others and it is too soon for me to confirm just what the outcome will be."

O.K. Liz, I think I can put those comments into context. Sam Maling the chairman of PGC is also a director of PGW and by co-incidence was up for re-election at the PGW AGM the day before the PGC AGM. In his PGW re-election speech, Maling launched into this long spiel on PGC and how their relationship with PGW, as regards PGW's expansion plans, has been misunderstood by the media.

As you know PGC has plans to become a bank and presumably they will use the 'Marac' brand to do so. I think what is being said is that having PGW, a company that is hungry for investors funds for new initaitives, as a 'client' of the new Marac bank would mean that Marac would not be able to maintain the high level of liquidity desired in today's financial markets.

PGWs industry meat and wool initiatives are long term. 'Marac Bank' could not fund such projects if a whole lot of deposit holders wanted their money 'out' in a years time. It is also possible that having such a large relationship with just one client might be a risk factor for the new 'Marac Bank', that the NZ Reserve Bank that oversees banking licences would not approve of.

My take on what was said at the PGC AGM is that PGC supports the initiatives that PGW is taking as 'right' for PGW and 'right' for major shareholder PGC. But that these plans are not compatible with PGC becoming a bank, given PGC's scale. Thus some form of amicable divorce will be necessary between PGCs future banking activities and PGW.

SNOOPY

Lizard

01-11-2008, 10:47 AM

Yes, that is how I read it too. That implies PGW will need to renew all or part of their financing at some point via an alternative bank or finance company, doesn't it?

What does this mean in terms of the likely interest rates and conditions they are likely to have? Obviously PGC will be wanting to manage this process so that PGW doesn't lose value in the process, as that affects PGC shareholders. But it sounds like a challenge!

In specie distribution seems like a way of avoiding a negative price spiral on PGW and consequently PGC as PGC tries to exit... but need to see re-financing well-executed to provide some stability for PGW shareholders beyond that?

Snoopy

01-11-2008, 12:06 PM

Snoopy wrote
"My take on what was said at the PGC AGM is that PGC supports the initiatives that PGW is taking as 'right' for PGW and 'right' for major shareholder PGC. But that these plans are not compatible with PGC becoming a bank, given PGC's scale. Thus some form of amicable divorce will be necessary between PGCs future banking activities and PGW."

Yes, that is how I read it too. That implies PGW will need to renew all or part of their financing at some point via an alternative bank or finance company, doesn't it?

'Financing' I understand in this context, to be referring to PGW's bank debt. PGW has term bank facilities of $304m and current bank facilities of $174m (AR2008 p28). None of these are with Marac, as Marac is not a bank yet. These facilities will from time to time come up for renegotiation. But these renegotiations will not be crystallised by Marac becoming a bank.

A wider view of 'financing' would see PGC as an 'equity financer' of PGW. If PGC sells down their holding in PGW, then the 'equity financing' of PGW will change. But this would only be a factor if PGW undertook a cash issue. I believe this is unlikely. That is because the largest PGW shareholder 'Rural Portfolio Investments' is heavily debt funded. RPI wouldn't be able to raise the money for a large cash issue. Principal Norgate, who also happens to be chairman of PGW, knows this. So he won't put RPI in a position of having to cough up cash. Equity funding will IMO be done by a placement of shares to institutions, as per the last (failed) offer that got pulled on September 30th.

What does this mean in terms of the likely interest rates and conditions they are likely to have?

No effect. See explanation above.

Obviously PGC will be wanting to manage this process so that PGW doesn't lose value in the process, as that affects PGC shareholders. But it sounds like a challenge!

In specie distribution seems like a way of avoiding a negative price spiral on PGW and consequently PGC as PGC tries to exit... but need to see re-financing well-executed to provide some stability for PGW shareholders beyond that?

I don't think PGC exiting necessarily means a downward price spiral for PGW. If PGC sell their holding in one block, it will mean a takeover offer for PGW by whoever acquires PGC's stake.

SNOOPY

discl: hold PGW

Lizard

01-11-2008, 01:56 PM

Thanks Snoopy. The way I read it, I assumed that some of PGW's borrowings must be with Marac. Good to know that is not the case or behind the need for separation.

Snoopy

03-11-2008, 02:50 PM

I wouldn't bet on the deal not going ahead. Norgate sounded pretty determined to get the deal done in some form. He used the phrase 'our word is our bond' when speaking on behalf of the board. If Norgate doesn't make the deal, then his deal making reputation will be in tatters. So I think provided the deal can be done using the overseas financiers, this Silver Fern Meats deal *will* go through.

Two surprises here:

-----

3 November 2008

Silver Fern Farms/PGW Partnership Agreement Terminated

Silver Fern Farms Limited advises that PGG Wrightson Limited's (PGW) failure to pay the first instalment of $145 million for Silver Fern Farms shares in terms of the partnership proposal agreed between the two companies, has left Silver Fern Farms with no alternative but to terminate the agreement relating to the proposal.

This follows continuous discussions and the inability by PGW to deliver any level of certainty as to a possible settlement date over an adequate period of time, following the settlement default on 1 October 2008.

Silver Fern Farms' Chief Executive Keith Cooper said: "Termination of the agreement was a necessary step to provide certainty to our shareholders and other stakeholders including employees and suppliers. It enables us to move on and see whether any alternative arrangements between Silver Fern Farms and PGW are feasible. We have not determined the amount or form of compensation we will seek to recover from PGW. We expect that if any alternative arrangement is agreed and implemented, then this issue will be addressed as part of those arrangements."

Mr Cooper said Silver Fern Farms' focus remained on making a difference to the future strategy and structure of the NZ red meat industry, with the ultimate aim of improving long term farmer returns. "Aggregation within the wider meat industry, in combination with integrating the supply chain, remains fundamental to achieving that outcome.

"Whilst the merits and value of the transaction in terms of synergies, supply chain management and capital for Silver Fern Farms were significant and unchallengeable, enabling us to expedite our strategy, Silver Fern Farms future is not dependant on the transaction" he said.

------

The first surprise is that Silver Fern has pulled the plug. What a curious thing to do to a 'good faith' partner. Does this mean there is an alternative deal with some other third party on the table? I am also curious that Silver Fern would consider seeking compensation from Norgate, when it is *they* who have pulled out- not him!

The second surprise is that there is not a fixed compensation clause laid down in the existing agreement should it fail.

The other point I note about the press release is that it is rather aggressive in note, yet conciliatory towards PGW in the sense that they are willing to look at an alternative ongoing relationship. IIRC the Grant Samual Report suggested that Norgate's offer was on the generous side of acceptable. Are Silver Fern trying to broker an even more attractive deal - for them? What will Norgate do now? *Can* Norgate do anything, or has the credit crisis permanently cropped his ambitions?

SNOOPY

discl: hold PGW

Dr_Who

13-11-2008, 10:57 AM

Why is PGW issuing $75m bond?

southernerx

13-11-2008, 11:12 AM

Its actually the Finance Company issuing the bond, and taking advantage of the Government's deposit guarantee they have just announced they have been approved for.

BRICKS

27-12-2008, 09:19 AM

Nevl

27-12-2008, 07:29 PM

PGW is in the same boat as all the other companies that borrow money it seems they forget
you have to pay back so when the market turns they yell "help"..
First Silver Fern and now starting a biz South America spells trouble why they cant stay
at home beets me and the good old profit forecast and say good bye share price so
who is game to BUY..

Yes this is a great time to buy. As far as I know the world has not stopped breeding yet so more mouths to feed every day.

Stock up now for the next rush. Beef and Lamb are both doing better than last year and will make up a little for the loss of Dairy income but remember last year PGW was slammed for not being exposed to enough dairy.

Dr_Who

27-12-2008, 07:34 PM

Whats PGW's debt to equity ratio?

winner69

27-12-2008, 07:51 PM

Whats PGW's debt to equity ratio?

As at June equity was $480m and 'core debt' was $312m. Core debt excludes PGGW Finance which has bank debt of another $140m

BRICKS

29-12-2008, 11:38 AM

Suppose 69 you will be BUYING more now that the price is RIGHT..

Dr_Who

13-01-2009, 10:21 AM

Why is PGW sp going up?

Stranger_Danger

13-01-2009, 12:24 PM

Because it has to.

Dr_Who

13-01-2009, 12:34 PM

Because it has to.

What do you mean?

Nevl

13-01-2009, 09:35 PM

Hope you all stocked up when you had the chance!! See post 27/12

winner69

07-02-2009, 07:22 PM

As at June equity was $480m and 'core debt' was $312m. Core debt excludes PGGW Finance which has bank debt of another $140m

Article in The Herald suggests PGW core debt now bout $400m and $180m needed to be refinanced in next month or 2. That Taylor guy from Macquaries didn't seem too impressed with state of play and suggest a pretty dilutive capital raising is likely ..... just another analyst rave or one that might actually be saying something the company doesn't really want to hear

Quote from http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10555525&pnum=0

In the wake of its rapid expansion PGG Wrightson and its 30 per cent owner, the Craig Norgate and McConnon family-owned Rural Portfolio Investments, have been talked about as an example of a group that is relatively highly geared.

A number of analysts have raised concerns about PGG Wrightson's debt levels, including Macquarie Equities' Lyall Taylor, who noted in December that its core debt was likely to approach $400 million this year and that it needed to refinance $180 million in debt by April, "against a backdrop of tight credit and earnings momentum slowing to a splutter".

"We see an increasing risk PGGW will need to undertake a dilutive equity raising."

PGG Wrightson chief executive Tim Miles declined to comment, citing the proximity of the company's half-year result later this month.

Taylor also raised concerns about the debt levels at RPI which relies on PGG Wrightson's dividends to service the interest obligations on the $102.5 million in redeemable preference shares it has on issue, $44.6 million of which will also mature in April.

There will, no doubt, be considerable interest in how PGG Wrightson and RPI negotiate the next few months.

duncan macgregor

07-02-2009, 07:42 PM

winner69

07-02-2009, 08:05 PM

Right now in the short term extreme high risk of more down side. This companies prospects have been on a roller coaster ride on the way down with more downside expected than upside. Farmers are struggleing in this environment, PGW follow on from there. Macdunk

If RPI rely on a PGW dividend to pay the interest on its debts then this all could be a pack of cards then MacDunk?

Mick100

07-02-2009, 08:37 PM

pgw don't seem to be having difficulty raising funds in this environment
Sheep and beef farmers (PGW's mian clients) are doing better this yr than last yr as far as prices for their production go

===============================================

PGW
23/12/2008
GENERAL

REL: 1433 HRS PGG Wrightson Limited

GENERAL: PGW: PGG Wrightson Finance Offer Closes Oversubscribed

Announcement
23 December 2008

PGG Wrightson Finance Offer Closes Oversubscribed

PGG Wrightson Finance Limited ("PGG Wrightson Finance") is pleased to
announce that its offer of Secured Bonds has closed oversubscribed with the
Company today allotting the maximum $100 million of Secured Bonds available
under the offer (the "Offer").

The interest rate for the Secured Bonds, which is fixed for their term, was
set on Monday 22 December 2008 at 8.25%.
Mark Darrow, head of PGG Wrightson Finance was delighted with the demand for
the Offer commenting "the level of support we received from brokers,
financial advisers and their investors together with our own shareholders and
clients is a sound endorsement of the quality and reputation of PGG Wrightson
Finance and our position as a leading rural financier in New Zealand".

The proceeds from the Offer will supplement the Company's debenture
programme, which grew more that $80 million this calendar year, and
additional wholesale funding lines that were secured from key banking
partners.

Mr Darrow further commented that "the Company is pleased to be going into
2009 with substantial cash resources, and with a mandate to further increase
our support for the rural community when other rural financiers have become
more constrained due to existing exposures and/or liquidity concerns".

"We would like to acknowledge the Lead Manager and Organising Participant to
the Offer, Forsyth Barr Limited and the Underwriter, Forsyth Barr Group
Limited. We would also like to recognise the support of our shareholders and
clients in achieving this outcome" Mr Darrow concluded.

PGG Wrightson Finance's Secured Bonds will be quoted on the NZDX on Wednesday
24th December 2008 under the security code "PWF030". The Secured Bonds will
join the Company's two other bond issues currently trading under the security
codes "WFL010" and "WFL020" which will, from tomorrow the 24th December 2008,
trade as "PWF010" and "PWF020" respectively.

-Ends-

southernerx

09-02-2009, 09:25 AM

pgw don't seem to be having difficulty raising funds in this environment Their finance company subsidiary has been able to raise money easily thanks to a government guarantee - thats very different from the parent company finding more money. They have separate balance sheets and limited ability to fund each other.

Snoopy

09-02-2009, 11:40 AM

Article in The Herald suggests PGW core debt now bout $400m and $180m needed to be refinanced in next month or 2.

The article you quoted said that debt might approach $400m "this year" Winner. I reckon we still have nearly 11 months to run. The article said nothing about the figure being $400m now.

Nevertheless the article was enough to get me scurrying to my most recent PGW annual report, FY ended June 2008. Under "Note 4, Segmented Reporting", it showed core Rural Services debt to be $483m. So my reading of this is that debt is currently being *reduced* at PGW right now. Not increased as a casual read of the Herald article might have the reader imply.

As for needing to refinance $180m by April 2009, I would like to know where that figure comes from. Even if true, as recently as August 2008, PGW were planning an debt/equity raising of $220m to acquire a half stake in Silver Fern Farms. So PGW must have been gauging the banks and the markets as a way of raising a similar quantum of funds for at least six months no, even though that particular $220m is no longer needed.

If we look at note 15 on "Cash and Bank Facilities", we note that "Current bank facilities" total $174.3m (is that where the $180m in the Herald article comes from?). Are these current bank facilities renegotiated every year? It all sounds dramatic, until you read that in FY2007 current group bank facilities were $242m. Yet under that strain (?) just one year ago PGW arranged for increased term debt from $74m to $304m. And as at the last balance sheet date, the PGW group was still $130m under their pre-approved debt ceiling, *excluding* the $39m in 15th August to 15th May seasonal facilities. So where is this ‘pressure’ on PGW coming from to renegotiate the full $180m?

Dairy may be in some trouble as unrealistic expansionary expectations are deflated. There will be a rub off in PGW real estate through reduced farm sales. But dairy farmers are not the core of PGW customers. As Mick has noted, those are sheep and beef farmers. And for them, this year is shaping up as rather better than last.

SNOOPY

Discl: hold PGW

duncan macgregor

09-02-2009, 07:21 PM

Snoopy, Dairy has taken a massive hit. Wool and beef are down farmers are finding it tough. When that happens they stop buying and tread water to survive. PGW depends on farm expenditure to survive. PGW must end up with a reduced profit level in the short term.
I would think the share price would trail farm incomes up or down by about six months. Macdunk

winner69

09-02-2009, 07:55 PM

The article you quoted said that debt might approach $400m "this year" Winner. I reckon we still have nearly 11 months to run. The article said nothing about the figure being $400m now.

Nevertheless the article was enough to get me scurrying to my most recent PGW annual report, FY ended June 2008. Under "Note 4, Segmented Reporting", it showed core Rural Services debt to be $483m. So my reading of this is that debt is currently being *reduced* at PGW right now. Not increased as a casual read of the Herald article might have the reader imply.
SNOOPY

Discl: hold PGW

PGW presentation June results had a slide that said core debt was $312m (which excludes PGGW Finance which has bank debt of another $140m) .... thats PGW figures

Is Taylor from Macquaries saying that this the $312m is increasing to $400m then? Would have thought that 'core debt' was 'core debt'

Shouldn't question analysts ... or did the papers just intepret it all wrong

micket

09-02-2009, 10:29 PM

also expect some deeply discounted equity propositions for dairy set ups in the SI. if these are cheap enough and you can stand treading water for a couple of years you should be well rewarded. Im talking 1000 for GOOD cows and 25000 max per ha for converted well irrigated ground.

Dr_Who

10-02-2009, 11:02 AM

PGW presentation June results had a slide that said core debt was $312m (which excludes PGGW Finance which has bank debt of another $140m) .... thats PGW figures

Is Taylor from Macquaries saying that this the $312m is increasing to $400m then? Would have thought that 'core debt' was 'core debt'

Shouldn't question analysts ... or did the papers just intepret it all wrong

Had a quick look at their books.

I think you are right to say the debt is $400m with $180m due to roll over in April. Their debt to equity ratio is over 100%. I am wondering how they will roll that debt over in this market. Maybe debt raising or selling off assets? It is a big ask to raise that kind of debt in this market.

Dr_Who

10-02-2009, 01:20 PM

There's been a flood of corp bonds issued recently and most have been oversubscribed. Its all about the yeild attached. PGG should be okay to roll 180 over.

There is a difference between the finance company and the holding company. The govt do not guaranty the holding company. Do you think they will use the funds raised in the finance company to prop up the holding company debt?

Snoopy

10-02-2009, 02:19 PM

There is a difference between the finance company and the holding company. The govt do not guaranty the holding company. Do you think they will use the funds raised in the finance company to prop up the holding company debt?

No they won't Doc. But remember they still have substantial shareholder the budding bank PGC

"Banking Application to the Reserve bank
Our application to the Reserve Bank for a banking licence is on track but we have
made no commitment as to when this will occur. In the present market we need to
maintain some flexibility around timing.
Likewise with our interest in PGG Wrightson. The business continues to trade well,
and although we have signalled our intention to divest, we would not do so into the
present market. We remain uncommitted to any single path to exit or timeframe."

Looks like PGC will put their plans on hold to support PGW if necessary.

SNOOPY

Dr_Who

10-02-2009, 03:59 PM

Snoopy

10-02-2009, 06:27 PM

Have you guys read the AWB profit downgrade? Their sp got hammered.

I wonder if AWB has any implications for PGW? I know their business is different, but maybe a rural sector trend?

Warning trashes AWB share price

http://www.theaustralian.news.com.au/business/story/0,28124,25034539-5018010,00.html

Historic PE was just over 7 for AWB before today's hammering. A 25% decline in share price will reduce that PE to just over 5 on last years earnings. However the reason for that plunge is that net profit is expected to fall by 45%-55%. That means the forecast AWB PE is now between 9.5 and 11.5.

PGW is still forecasting earnings of $39m. And with the share price at $1.30, PGW is trading on a forecast PE of 9.6, the lower end of the 9.5-11.5 'AWB' range. Based on this we can expect the PGW share price to *rise* on this AWB result, if indeed there is any connection.

SNOOPY

discl: hold PGW

Dr_Who

11-02-2009, 09:37 AM

Where did you get the $39 million forecast from Snoopy?

I am just trying to get the average analyst forecast.

Cheers

Deev8

11-02-2009, 10:07 AM

Where did you get the $39 million forecast from Snoopy? I am just trying to get the average analyst forecast.I believe that it was earnings guidance from PGG Wrightson (http://www.nzx.com/markets/NZSX/PGW/announcements/4795817) on 16th December rather than an analyst forecast.

The guidance said:
The Board of PGG Wrightson advises that it has reviewed the group’s net earnings guidance for the year ending 30 June 2009 based on financial performance to date and the current outlook for the remainder of the financial year.

The Board now believes that net earnings are likely to be within the range from $39 million to $45 million. The previous earnings guidance, provided at the Annual Shareholders Meeting in October 2008, was for a range from $46 million to $51 million.

biker

11-02-2009, 04:54 PM

....The Board now believes that net earnings are likely to be within the range from $39 million to $45 million. The previous earnings guidance, provided at the Annual Shareholders Meeting in October 2008, was for a range from $46 million to $51 million.

This could well just be downgrade number one......... A long time from Dec 16 to June 30.

Downgrades that far out have a habit of multiplying.

Dr_Who

13-02-2009, 01:22 PM

PGW suddenly drop 6% today.

Whats up?

Something negative maybe? :eek:

clips

13-02-2009, 07:59 PM

isn't that pgc that took a drop today, probably some old dear want a new car and cashed up.... imo there is something or some things negative hanging around pgw..
silverstream farms to be settled.. elders/crt gaining traction on pgw market share.. ++

beacon

15-02-2009, 12:16 PM

pgc in bit of hot water due to marac loans to developers...

Dr_Who

17-02-2009, 10:48 AM

You guys think PGW will need to do a rights issue to raise capital for debt reduction?

Snoopy

17-02-2009, 01:41 PM

You guys think PGW will need to do a rights issue to raise capital for debt reduction?

If they do, then Craig Norgates Rural Portfolio Investments won't be able to pay. My guess is no rights issue. I'm guessing that if they go this way they will place a block of shares with a cornerstone shareholder, then have a non-renouncable $5k offer to existing shareholders. IOW a mirror of the Silver Fern Farms deal in the way it would be structured.

SNOOPY

Dr_Who

17-02-2009, 02:35 PM

then have a non-renouncable $5k offer to existing shareholders. IOW a mirror of the Silver Fern Farms deal in the way it would be structured.

SNOOPY

Snoopy

Please explain further in detail.

I guess I am abit slow today with the hot weather.

Cheers
Doc

Snoopy

17-02-2009, 08:45 PM

Snoopy

Please explain further in detail.

I guess I am abit slow today with the hot weather.

Cheers
Doc

The new capital in the proposed SFF/PGW joint venture was effectively coming from the banks that Craig Norgate thought he had lined up before the credit crunch bit. As a sop to existing PGW shareholders, and to keep the balance sheet more respectable, the plan was to offer up to $5,000 worth of new PGW shares to every shareholder, regardless of how many shares they owned. That $5,000 offer was not renouncable or tradeable. That in turn meant that Norgate via Rural Portfolio Investments (RPI) only needed to front up with around $5,000 to be seen to be supporting the share issue, despite owning around 25% of the company. The net result of it all was that Norgate was looking to raise a significant amount of cash from PGW shareholders, without putting huge amounts of cash in via RPI.

This IMO will be the route Norgate will follow, with any future capital raising. It has to be this way because RPI is a house of cards that does not have the capacity to stump up large sums of cash.

SNOOPY

Dr_Who

18-02-2009, 07:57 AM

Snoopy

18-02-2009, 01:51 PM

Thanks Snoopy. This will be interesting to see. I will do more reading on the SFF/PGW proposal when I have time this weekend.

There is money to be made in PGW, but not sure which way, in long or short position.

You might have some interesting vitriol to read over the weekend Doc. I was very surprised at the extent of the spat between PGW and SFF that has broken out in the media today. SFF Chairman not happy and accusing PGW of negotiating a compensation deal through the media!

$10m has been put on the table in cash by PGW and rejected by SFF, even though actual costs incurred by SFF were $3.5m in pursuit of the merger. PGW wants mediation using an ex high court judge. SFF now claims PGW have lost most of their credibility because of this issue, and claims $10m compensation is grossly inadequate. I would have thought the credit crunch breaking out during the week agreements were going to be signed with overseas banks might have something to do with the agreement breaking down? How much of this is just staking out the starting ground before compensation negotiations begin I'm not sure. But it does seem that friendly relations will be difficult after this. Perhaps it was unwise for PGW to go to the media yesterday issuing a press release giving their view of the situation? Personally I think PGW did owe it to their shareholders to keep them fully and quantifiably informed.

SFF claiming that their farmer shareholders who voted overwhelmingly for the merger agreement some six months ago are now luke warm. Have these farmers gone mad or are higher lamb prices due to a declining currency luring them back to the boom bust cycle of thinking? Personally I would have thought an offer of $7m by PGW (double the actual loss) to SFF would have been more than adequate in current circumstances. Still it all explains the PGW share price weakness of the last couple of days.

SNOOPY

discl: hold PGW

southernerx

18-02-2009, 02:31 PM

Damages in a breach of contract case are not just about cost recovery. PGW wooed SFF with some pretty substantial benefits that they were going to deliver through a merger, and those benefits were, if I recall correctly, disclosed as a lot more than $10m - per annum.

southernerx

18-02-2009, 02:32 PM

....There is money to be made in PGW, but not sure which way, in long or short position. or as their lawyer
(see my last post)..

Xerof

18-02-2009, 03:15 PM

SFF are well practised at slaughtering lambs. This is one lamb which is about to get its throat cut, without facing east and receiving a Halal prayer

Dr_Who

18-02-2009, 03:17 PM

Looks like SFF is the nail in the coffin ontop of $400m debt. :eek:

southernerx

18-02-2009, 03:28 PM

On the other hand they have a dominant position servicing NZ's most important industry. They need to sort themselves out, soon.

Xerof

18-02-2009, 03:48 PM

Oh God, I feel another ICONIC company bailout candidate coming.....has Craig got Johns phone number? :D:D

Sideshow Bob

18-02-2009, 08:50 PM

$10m has been put on the table in cash by PGW and rejected by SFF, even though actual costs incurred by SFF were $3.5m in pursuit of the merger. PGW wants mediation using an ex high court judge. SFF now claims PGW have lost most of their credibility because of this issue, and claims $10m compensation is grossly inadequate. I would have thought the credit crunch breaking out during the week agreements were going to be signed with overseas banks might have something to do with the agreement breaking down? How much of this is just staking out the starting ground before compensation negotiations begin I'm not sure. But it does seem that friendly relations will be difficult after this. Perhaps it was unwise for PGW to go to the media yesterday issuing a press release giving their view of the situation? Personally I think PGW did owe it to their shareholders to keep them fully and quantifiably informed.

SFF claiming that their farmer shareholders who voted overwhelmingly for the merger agreement some six months ago are now luke warm. Have these farmers gone mad or are higher lamb prices due to a declining currency luring them back to the boom bust cycle of thinking? Personally I would have thought an offer of $7m by PGW (double the actual loss) to SFF would have been more than adequate in current circumstances. Still it all explains the PGW share price weakness of the last couple of days.

SNOOPY

discl: hold PGW

PGW did go unconditional on the deal, so presumably that means that they could go for $220m - however they couldn't stump up with that in the first place!

beacon

19-02-2009, 07:40 AM

Here's David hargreaves take on it:
http://www.stuff.co.nz/4851777a1865.html

duncan macgregor

19-02-2009, 07:45 AM

An unconditional deal is just that, with all conditions of purchase being agreed upon,
If one party or the other backs out then the injured party can lodge proceedings for the total ammount and more than likely win. PGW can and look like they are trying to come to another agreement over damages which tells me how stupid they were in the first place.
Farming is a peculuar industry which revolves round short lived cycles. When you see beef farms turned into dairy or visa versa you know its time to get out.
Farming in most countries is a peasant occupation, with very little real return on capital.
PGW set investors up in dairy farms overseas in competition with our own farmers, so for that i have very little sympathy for their plight, but feel sorry for the share holders that they succered in. Macdunk

Dr_Who

19-02-2009, 07:54 AM

The cost of setting up the farms in South America is very similar to NZ. There is alot of hidden cost that NZ investors do not know about and did not include in the numbers.

Snoopy

19-02-2009, 08:16 PM

The cost of setting up the farms in South America is very similar to NZ. There is alot of hidden cost that NZ investors do not know about and did not include in the numbers.

No really sure what you are on about Doc. It is w-a-a-a-y cheaper in South America to set up a dairy farm because of the land prices. Perhaps you were confused by the NZS announcement about needing to raise more debt to complete their farm developments? This is nothing to do with poor planning or misreading the cost of dairy farm conversion.

It is because NZS has scaled up their farm management program since the prospectus and capital raising was done. The problem NZS have is that managment have gone in boots and all and are developing a lot more land than they said they would. Thus the original amount of equity, while quite sufficient to carry out their original plans is now insufficient because of the upscaling of the whole company. Time will tell as to whether the upscaling was wise in hindsight or not.

SNOOPY

duncan macgregor

19-02-2009, 09:04 PM

I think you might find that the recent drought over there increased their costs above their expectation level. New country new problems for inexperienced players in a new country. Pgw should do well out of it flogging it off to the we know best brigade. Dairy has hit rock bottom Fonterra has a mountain of milk powder it is trying to sell. Farmers face a bleak time in the short term which filters down to their suppliers. Macdunk

winner69

20-02-2009, 02:08 PM

Jeez Wayne ... PGW now only a $200m market cap company

Priced for eventual demise .......... or cheap as

Let the market talk

Phaedrus

20-02-2009, 03:18 PM

I post this chart to illustrate how the crudest, simplest exit system is better than none at all. A 200 day moving is often used by conservative investors to keep them on the right side of major trends. The blue arrows mark entry and exit points as signaled by this indicator. You can see that while it is late to buy and late to sell, at least it protected some of the profits made over the previous 17 months. A 200 day moving average is a fairly blunt instrument, but in comparison with simply "buying and holding" it performs magnificently!

The Trailing Stop featured on the chart is derived from the Average True Range, but those of you without access to this indicator will find that a simple 13% trailing stop gives very much the same plot. A trailing stop is almost invariably quite late to trigger, but, again, infinitely better than no exit strategy at all.

I feel sorry for the poor sods that have been holding PGW all the way down this steep and on-going downtrend but that's what happens when you have no exit strategy and ignore market sentiment. There was plenty of warning and plenty of time to get out of PGW before the plunge.

http://h1.ripway.com/78963/PGW220.gif

duncan macgregor

20-02-2009, 03:21 PM

Jeez Wayne ... PGW now only a $200m market cap company

Priced for eventual demise .......... or cheap as

Let the market talk Looks like down over 28% today and dropping fast. Who in their wildest moments would have picked that?. Its only a question of will it go belly up or wont it and with that in mind what is the bargain price. Macdunk

scamper

20-02-2009, 04:07 PM

You can see where contrarians get their ... courage?
sp 60 c, p/e 2.34, div 26.7%.
Scamper lives in a kennel along with his portfolio, but pgw not among them...

Dr_Who

20-02-2009, 04:17 PM

Jeez Wayne ... PGW now only a $200m market cap company

Priced for eventual demise .......... or cheap as

Let the market talk

Ive been asking this same ques. The problem is that I dont have the numbers to value the net asset. If one can get a realistic number for a true net asset value, then there could be an entry point. Till then it is all free fall.

Wonder if John Keys will bail this one out? Maybe he can bail our corner dairy out also.

beacon

20-02-2009, 05:01 PM

Certainly the candidates for bailouts are increasing... How much is shorting to blame for this? Incredible wealth destruction ...

Stranger_Danger

26-02-2009, 11:04 AM

"As advised in a separate release, the Board has amended its dividend policy
to maximise debt amortisation. To provide certainty to shareholders and to
enable an orderly transition to the new policy, an interim dividend of 5
cents per share will be paid to shareholders registered at the record date of
13 March 2009 issued in the form of taxable bonus shares (fully imputed) on 1
April 2009.

Speaking on behalf of the Board, Sam Maling said "The Directors wanted to
minimise disruption to shareholders whilst moving as quickly as prudent to
the new policy and believe this approach balances these issues. Whilst each
shareholder has different circumstances to manage, RPI in particular is
reliant upon the revenue recognition that a dividend provides. RPI has
options for managing the issue of the form of a dividend i.e. cash versus
shares but does require a dividend to be paid in some form. The Board
believes it is acting in the best interests of PGW by preserving cash whilst
enabling shareholders flexibility in how they manage the implications of the
new policy. The decision to pay the dividend and in the form of bonus shares
was taken without the RPI Board representatives being present."

Where were the RPI Board representatives? Outside the door, holding AK47's and the other directors families until the decision was voted on?

That is pretty outrageous, any illusion that the directors are working for PGW (ie, you, as shareholders) and not RPI (ie, not you) should be shattered by that.

Disc : None, mercifully.

Balance

26-02-2009, 05:59 PM

60 cents to 80 cents in 2 days. 33% gain or 6,000% per annum.

Beats leaving money in the bank! So who was brave enough to buy?

Dr_Who

26-02-2009, 06:03 PM

60 cents to 80 cents in 2 days. 33% gain or 6,000% per annum.

Beats leaving money in the bank! So who was brave enough to buy?

I was very close to buying some at the 60 cent level, but my broker talked me out of it. :confused:

biker

26-02-2009, 09:18 PM

Just wrote a spiel on PGW then went to post and was told not logged in.

So to cut a long story short, Norgate said in this mornings brief he announced the SFF 10 mil because when finalising the accounts, that was the amount they decided to allow and having made that decision they were obliged to announce it to the market. He also hinted at the value of posturing in the media.

The good thing about all this is that the SFF and RPI finance issue have driven the shareprice down to an attractive level. The RPI RPS financing is to be announced imminently and Norgate says they wont be selling shares to do it.
SFF will need to ensure they dont push their issue too hard and too far. Its a small country.
The brokers seem to hate PGW. In itself probably a good reason to buy.
Is it because they hate Norgate? I must say his manner isn't endearing, but doesnt the agriculture industry need smart, innovative and passionate investors?
I'm in at 75c

Xerof

27-02-2009, 08:48 AM

So who was brave enough to buy?

Probably those who had knowledge of the banking renewal before the general public

Billy Boy

27-02-2009, 10:57 AM

Probably those who had knowledge of the banking renewal before the general public

IG-ZAK-ALLY
BB :mad:

paul29

27-02-2009, 11:06 AM

I got a trade in or should i say a punt on 10,000 shares for 60 cents

nwood

02-03-2009, 11:06 AM

Seems be rebounding nicely on news of bank finance. Surely Silver fern is still a big grey cloud over them?

nwood

03-03-2009, 09:57 AM

Mediation agreed with Silver Fern Farms

PGG Wrightson and Silver Fern Farms have agreed terms on which a mediation process will
be conducted with a view to settling their dispute over the non-completion of the
partnership arrangement agreed in 2008.

The mediation will be conducted by former High Court judge Robert Fisher QC. Mr Fisher
has been in full-time practice as an arbitrator, mediator and consultant since leaving
the bench in March 2004.

The process will conclude by 18 April 2009, and will seek to achieve a full and final
settlement of the dispute.

The agreement to mediation was welcomed by PGG Wrightson chairman Craig Norgate as a
highly positive step towards settlement. â€œWe are very encouraged by the willingness of
Silver Fern Farms to engage in the most constructive path available at this point. The
involvement of a highly experienced and respected mediator will assist greatly in
identifying the issues between the companies and, hopefully, achieving an agreement.â€

The mediation agreement follows a formal admission by PGG Wrightson based on acceptance
that it breached the agreement with Silver Fern Farms by failing to settle the first
instalment of the transaction, that Silver Fern Farmsâ€™ subsequent cancellation was valid,
and that the only matter for determination is the amount of compensation to which Silver
Fern Farms is entitled.

No further comment will be made on the dispute, or on the mediation process, at this
point.

Looks to be some good news coming.

Nevl

05-03-2009, 03:34 PM

http://www.stuff.co.nz/business/analysis/1986593/Ripper-of-an-autumn-predicted

Got to be good news for PGW as well as the 16% jump in dairy price auction. Cocky's will probally save rather than spend for now but the longer term looks good.

nwood

19-03-2009, 05:40 PM

Sellers seem to have dried up completly

Balance

19-03-2009, 06:09 PM

Profit upgrades, bank debts sorted out and potential stock overhang out of the way.

Rural Portfolio funding deal good news for PGW
Duncan Bridgeman | Thursday March 19 2009 - 07:42am
Rich lister Baird McConnon will inject new equity into Rural Portfolio Investments – the investment vehicle he owns with PGG Wrightson chairman Craig Norgate – to cover payments to investors.

RPI had been facing a funding crisis as it relied on dividends from its 30% stake in PGG Wrightson to meet interest obligations on its two listed debt issues. RPI has $44.6 million in five-year redeemable preference shares maturing in April.

There were fears that because of PGG Wrightson’s own debt problems and sagging share price, RPI might have been forced to sell its stake to generate cash flow to cover its obligations.

But late yesterday RPI said it has negotiated new commitments – made up of equity and debt funding from Mr McConnon’s family company Aorangi Laboratories, and debt funding from New Zealand financial institutions.

Aorangi is also RPI’s parent company with a 50% shareholding.

The commitments are subject to completion of documentation between all parties. No other details were available last night.

RPI has a total of $102.5 million preference shares on issue.

News that Aorangi and institutions are willing to back the company further is good news for PGG Wrightson shareholders.

The consequences of RPI selling down its stake in PGG Wrightson at this stage of the economic cycle would have been awful. A selldown would have created a big overhang of shares and likely driven the PGW share price lower.

PGG Wrightson shares closed up 3.8% at $1.10 yesterday.

One point of interest is that institutions are willing to back this deal, while resins maker Nuplex struggles to gather support for its $110 million rights issue and share placement.

Snoopy

19-03-2009, 09:28 PM

Jeez Wayne ... PGW now only a $200m market cap company

Priced for eventual demise .......... or cheap as

Let the market talk

The market talked and the PGW share price has doubled from the low of 60 odd cents in a little over a month. I do feel sorry for those poor sods who panicked and sold out at the bottom, believing that 'the market must always be right'.

So what about those brave (or reckless?) who bought in at the bottom? I wasn't one of them. In truth this would have been IMO a very large gamble. Dr Who talks about the difficulty of establishing a net asset value, and being scared off buying because of that. Sorry, but with the possibility of a new capital raising and an associated unknown number of new PGW shares sold off at at 50c(?) is on the agenda, I don't believe anyone could have made a meaningful net asset value calculation, even with all of the hard 'facts' at your fingertips.

Similarly Scamper's historical p/e of 2.34, and dividend yield of 26.7% mean little when the number of shares that will be on issue in a years time might be a whole number multiple of the number showing on the share register right now.

Xerof was right. The only sensible buyers were the ones who had knowledge of the banking arrangement renewals before the general public.

So now that the market was 'proved' to be manic depressive by the subsequent PGW share price doubling, is now a good time to invest in PGW? I think there are still unknowns regarding the long term stability of cornerstone PGW shareholder RPI. Yes I read the newspaper quote:

"But late yesterday RPI said it has negotiated new commitments – made up of equity and debt funding from Mr McConnon’s family company Aorangi Laboratories, and debt funding from New Zealand financial institutions."

"Aorangi is also RPI’s parent company with a 50% shareholding."

"The commitments are subject to completion of documentation between all parties. No other details were available last night."

This is the same kind of announcement that came out when PGW announced the Silver Fern Farms merger as a 'done deal', and we all know what happened to that.

You see, we don't yet know the details of this new RPI funding. The above announcement was made from RPI's perspective with an understandably positive spin. If the institutions that are funding this deal had made the press release, who is to say it would not have been worded like this? :

"High flyer Craig Norgate has been exposed just like the Emperor of old and his new suit of clothes. His partners of substance the McConnen brothers have mortgaged all of their assets at our behest to put in capital and provide us with security should RPI fail in the future. Due to the high risk nature of the deal the interest we are charging RPI to allow RPI to just continue to operate is very high. This is a fantastic result for us the faceless institutions."

What do you think would have happened to the PGW share price if that was the press release that had hit the news stands?

SNOOPY

discl: hold PGW

Phaedrus

20-03-2009, 09:29 AM

The market talked and the PGW share price has doubled from the low of 60 odd cents in a little over a month.Snoopy, answer me this. How come you listen to the market talking when it goes up - but not when it goes down?

I do feel sorry for those poor sods who panicked and sold out at the bottom, believing that 'the market must always be right'.I, too, feel sorry for those that sold at the bottom, but these were most certainly NOT people who believe that "the market is always right". Those that respect and listen to the market would have sold out at around $2.70 when the market began downgrading PGW last September. Even those using the usual "super conservative" 200 day moving average would have been out at around $2.30.

Snoopy, buying well is nowhere near as important as selling well. Big money was made by those selling PGW at $2.70 - and big losses have been made by those that ignored the market and hung on. If nothing else, the sellers now have that much more money with which to buy back in to PGW is they so desire.

http://h1.ripway.com/78963/PGW320.gif

Balance

20-03-2009, 09:41 AM

P, I take it that the downtrend is broken and we have a 'Buy' signal?

nwood

20-03-2009, 10:54 AM

+15 already today

Snoopy

20-03-2009, 12:56 PM

Snoopy, answer me this. How come you listen to the market talking when it goes up - but not when it goes down?

Perhaps I should have put a winky face on that last post of mine. Better to judge people by what they do rather than what they say Phaedrus. You will note that I said that I *wasn't* buying those PGW shares at the bottom.

To my regret? No. It is always easy to look good 'after the event' when you trade the historical rising trend. But if those third party financiers had not come to the party we could have been looking at another Nuplex here. Next time you went down to the Auckland waterfront, you might have been throwing Craig Norgate a few coins to polish your boots Phaedrus!

I, too, feel sorry for those that sold at the bottom, but these were most certainly NOT people who believe that "the market is always right". Those that respect and listen to the market would have sold out at around $2.70 when the market began downgrading PGW last September. Even those using the usual "super conservative" 200 day moving average would have been out at around $2.30.

The price of PGW shares has been moving about so much you may have to rewrite those moving average rules Phaedrus. When the market price moves around between 60c and nearly five times that amount ($2.90) in just a few months and the share price is now sitting in the middle of that range, you know that something extraordinary is going on.

That extraordinary thing is not explained by the waxing and waning of dairy prices or the euphoria of the restructuring of the meat industry after all those years which ultimately ended up going down the Silver Fern Farms plughole. No, it was largely to do with the level of company debt and whether the big funders would cut PGW the slack to survive on its existing equity base.

If PGW had announced a 2:1 rights issue at say 40c, what would that have done to the historical charts? Effectively it would have flattened them out meaning that the ups and downs that we had seen were not as extreme. It would also greatly affect the historical 200 day moving average calculation. Since the capital raising didn't happen, all of that is *now* moot speculation. However just last month, a capital raising was a distinct possibility and the market was pricing in that real risk.

Snoopy, buying well is nowhere near as important as selling well. Big money was made by those selling PGW at $2.70 - and big losses have been made by those that ignored the market and hung on. If nothing else, the sellers now have that much more money with which to buy back in to PGW if they so desire.

Sorry I disagree Phaedrus. I have ignored almost every market sell signal with PGW, and especially all of the recent volatility. As of this morning, I am back in the black on my capital account - so no big losses. Of course I have also harvested many generous dividends along the way. My success has been largely due to selling to Craig Norgate when he first bought into the company (off market) and buying back as the share price fell back in 2004 in the subsequent downtrend. Selling into the off market offer was easy. But my secret was the subsequent buying back in at bargain prices, not the selling.
Of course this was five years ago now, showing that in *this* market as a largely passive investor, you need to be in for the long haul to show positive results.

As for those hypothetical cash holders buying into PGW if they so desire, the liquidity in PGW is not fantastic. The price moved up 15% on less than 20,000 shares this morning. And that was over six transactions averaging just over $3,000 each - all minimum economic parcels. Outside of the top ten, saying you can buy in at the price you want on a particular day and actually doing so is quite another matter.

SNOOPY

nwood

26-03-2009, 10:27 AM

Who's buying up $2,760,001 turnover at 10am

kura

26-03-2009, 04:34 PM

Who's buying up $2,760,001 turnover at 10am

To me the more interesting question is why would directors be selling (sold 2.3 mill shares via RPI today)

When I read their recent profit announcement, did I imagine that there was a spiel about the major shareholders being committed to PGW, and not intending to sell in current market ???

Bobby_Fischer

26-03-2009, 04:44 PM

Balance

26-03-2009, 08:59 PM

Snoopy

26-03-2009, 10:35 PM

To me the more interesting question is why would directors be selling (sold 2.3 mill shares via RPI today)

When I read their recent profit announcement, did I imagine that there was a spiel about the major shareholders being committed to PGW, and not intending to sell in current market ???

You were dead right Kura. On 26th February we got:

"PGW's major shareholders remain committed to PGW. Rural Portfolio Investments (RPI) has advised that it is well advanced on refinancing its redeemable preference shares that are due in April and Pyne Gould Corporation (PGC) has confirmed that it has no intention to be selling in the current market."

Now on 26th March we get

"15. Number of securities held prior, set out by class and type (as required
by regulation 8) 86,797,343
16. Number of securities subject to acquisition or disposal (as required by
regulation 11(1)(b)) 2,300,000

F. Extent of relevant interest
17. Number of securities held now, set out by class and type (as required by
regulation 6B or regulation 8) 84,497,343 ordinary shares"

What you have missed Kura is that it is now *a whole month later*. Thus we have a 'whole new market'! The situation is exactly akin to if you were an employee of PGG Wrightson. If your boss came out and said he was 100% committed to your continuing employment, that would mean your employment contract was cast in stone for 30 days, absolutely guaranteed. It is agreements such as these which show the firm commitment of management for the corporate security of all stakeholders in this difficult environment, employees and shareholders alike.

SNOOPY

discl: hold PGW

Snoopy

26-03-2009, 11:11 PM

Realising their dividend. RPI need cash not bonus PGW shares to meet their interest bill.

The original preference share issue was $85m, underwritten by ABN AMRO Rothschild. Half of that went into the April 2009 maturing issue. The interest rate was 10.5% paid semi annually. That means an interest payment due of:

[($85m/2) x 0.105]/2= $2.23m

Proceeds from todays share sale (before brokerage) was :

(86,797,343-84,497,343)x $1.20= $2.76m

McConnen and Norgate have done what any responsible adult would do when there are hungry mouths to feed but no food on the table. They have sold some family silver at $1.20 a piece.

And what is more compared to the:

$1.56 x 0.87= $1.35

that RPI paid for the WRI shares in 2004, the share sale has occurred at a minimal discount. No pressure then! But of course RPI didn't sell those 'average' shares. They only sold the bonus shares issued at no cost when Wrightsons and PGG came together to form PGW. So actually RPI have made a good profit on the deal! Right? :-)

SNOOPY

nwood

30-03-2009, 03:40 PM

PGW’s Chief Financial Officer to Resign

PGG Wrightson Limited [PGW] announced today that its Chief Financial Officer, Mike Sang, had decided to resign. Mr Sang is planning to take a break from work before pursuing new career opportunities. He has agreed that his resignation will be effective after he has seen the company through the completion of the financial year and its 2010 budgeting process.
PGW has commenced a search for his replacement.

PGW Managing Director, Tim Miles said, “Mike has played a critical role since he joined Wrightson as CFO in December 2003. Since the merger, he has overseen tremendous growth in revenue and profit across the company.”

“Mike has worked very hard to ensure our financial base is sound and he will be leaving PGW in good stead as a result of his endeavours. In particular, he played a key role in the recent successful renegotiation of PGW’s banking facilities in extraordinary times,” said Mr Miles.

“Mike leaves with our best wishes for the future and our thanks for the contribution he made during his time with PGW.”

Stranger_Danger

30-03-2009, 03:56 PM

A CFO leaving a company with financial difficulties. Never seen that before!

Sideshow Bob

30-03-2009, 07:37 PM

A CFO leaving a company with financial difficulties. Never seen that before!

Share price got nailed 10% today.

nwood

27-04-2009, 09:27 AM

PGG Wrightson Limited (PGW) and Silver Fern Farms Limited advise that as a
result of a recent mediation process they have agreed the terms of a full and
final settlement following PGW's default on the equity transaction agreed in
2008.

Under the terms of the agreement, PGW will provide Silver Fern Farms with a
mix of cash and PGW shares, and the two companies will continue to work on
initiatives to integrate the supply chain from 'plate to pasture' to improve
the strategic position of pastoral farmers.

The financial elements of the settlement are:
- $25 million paid today
- $5 million paid previously, of which $3.5 million was for costs incurred by
Silver Fern Farms
- 10 million ordinary shares in PGW (fully-paid and ranking equally with all
other PGW ordinary shares on issue).

The settlement was welcomed by PGW chairman Craig Norgate and Silver Fern
Farms chairman Eoin Garden as a successful resolution with which the boards
of both companies can be well satisfied.

"I am delighted that both companies will now be able to put the
disappointment of last year's events behind them," Mr Norgate said. "For PGG
Wrightson, the settlement provides certainty over the financial exposure
resulting from our inability to complete the transaction approved last year.
The terms of the
settlement have been approved by our banking syndicate and are well within
the company's capacity to manage financially. The settlement also establishes
the basis on which both parties can continue to work in their respective
clients' interests under an integrated supply chain model."

Mr Garden said the settlement provided significant redress to Silver Fern
Farms for the damages arising from PGW's inability to complete the 2008
transaction. "The resolution allows both companies to focus on optimising
outcomes in a challenging economic environment, rather than wasting resources
on protracted
litigation. This is a sensible and pragmatic 'NZ Inc' outcome."
Silver Fern Farms intends to remain a long-term shareholder of PGW.

kiwi_on_OE

02-05-2009, 08:02 PM

$40m is a pretty big payout to have to make. Out of a $220m deal it must've almost been worth proceeding with the deal no matter what it took to get it done. I'm surprised a few of the bosses at PGW haven't had to justify keeping their jobs. Is that why the CFO resigned?

nwood

02-05-2009, 08:07 PM

Share price seems strong

The BOWMAN

15-07-2009, 04:21 PM

A fairly large drop today. Must be some insider trading going go. Capital raising announcement this week?

Walfootrot

16-07-2009, 12:08 PM

Would you put more of your money into PGW if called upon to do so- not sure I would.

What are the upsides and what are the downsides?:eek:

Dr_Who

16-07-2009, 12:23 PM

Would you put more of your money into PGW if called upon to do so- not sure I would.

What are the upsides and what are the downsides?:eek:

The question is, can Norgate afford to put more money into it?

Walfootrot

16-07-2009, 03:56 PM

Yes- has Norgates charismatic dynamism worn thin?:cool:

Snoopy

21-07-2009, 06:43 PM

Yes- has Norgates charismatic dynamism worn thin?:cool:

In today's announcement from PGC, about their upcoming cash issue, there was an update on that company's position with their 20% shareholding in PGW.

"PGC's approximately 20% stake in PGG Wrightson is to be retained and may be considered as a long term seed asset for a significant agri-business fund."

In my fast read haste, I thought the above announcement was the setting up of an 'Aggro' fund, specifically created for investors disenchanted with the managment direction of 'fund manager' Craig Norgate at PGW. Disenchanted investors in this new fund would then get a real chance to vent their spleen, while at the same stroke PGC would rid their balance sheet of a troublesome asset.

However, on further reflection I realised there are so many alternative 'Aggro funds' in the market already, that it would be foolish for PGC to go along this track as a "Johnny Come Lately".

SNOOPY

Lizard

21-07-2009, 07:17 PM

:D:D:D

Nice one Snoopy!

I thought the removal of the PGC overhang might have given PGW a lift today, but it appears not. Not at all sure about the overall PGC strategy though - is this a securitisation/investment banking model a la AFG, MFS etc? I'm not sure whether their timing is perfect or abysmal?

duncan macgregor

21-07-2009, 07:26 PM

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

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

SNOOPY

discl: A (very small) WRI shareholder since 1995, who has substantially increased my position in what is now PGW (particularly in the last four years). Your past disclosures are coming back to bite you on the bum SNOOPY. Macdunk will do an analysis of PGW when dairy farms start back into profit again which wont happen in the short trerm.
PGW will be one share that will go much lower before that happens which may see me join you in about twelve months. Macdunk

Dr_Who

21-07-2009, 07:38 PM

Madunk, you maybe able to pick up the shares for 1 cents a a years time.

Snoopy

21-07-2009, 10:13 PM

Your past disclosures are coming back to bite you on the bum SNOOPY. Macdunk will do an analysis of PGW when dairy farms start back into profit again which wont happen in the short term.
PGW will be one share that will go much lower before that happens which may see me join you in about twelve months. Macdunk

As of last month about 1/3 of PGWs customers are dairy farmers. If rival RDI's interest free loans take off, that could see a number of Dairy Farm customers from other Ag business suppliers move across. In a years time the number of PGW customers who are dairy farmers could become irrelevant.

Just to update, I haven't bought a serious number of PGW shares since February 2007. But I have acquired more through the dividend reinvestment scheme since that time. That means my average holding price is now $1.29. Cash dividends that I have pulled out of the company in the last 14 years amount to around $1.10 per share. That means even at the very bottom of this latest farm trough, I am stilll ahead.

So why if I believe in the direction of this company am I not stocking up on PGW shares while the price is low? Well I don't have an unlimited pile of capital. And in my judgement there are surer bets out there. Notice I said 'surer bets', not 'better bets'. If PGW 'comes right' it is likely to be my biggest winner. But if it doesn't, well I will just have to go to the bottom of the cliff and support a hypothetical PGW cash issue in the future.

You may yet prove me wrong about PGW Macdunk. But that is a gamble I am prepared to take.

SNOOPY

discl: hold PGW

duncan macgregor

22-07-2009, 07:54 AM

SNOOPY, Unlike you I dont gamble. Unlike you I only buy on an uptrend. Unlike you I take the small loss and get out in a downtrend. Farm service companies are the simplest to understand they follow farm gate prices up and down very similar to mining companies and metal ore prices. I fully expect the big downtrend in the PGW sp to continue which was very forseeable along with NZS which was always a high risk project. Dairy farming will make a come back when it does it will be reflected first of all in farm gate prices followed by a big spend up down at the farm service store. Macdunk

Dr_Who

22-07-2009, 07:59 AM

The rural sector will pick up, it is cyclical. The problem with PGW is the huge debt they have and the bank covenants. It also doesnt help that the people that have been supporting PGW have all run out of money and they may have to raise cash soon or go belly up. PGW reminds me of NPX and FPA.

elZorro

22-07-2009, 08:09 AM

I have to agree with the last two posts: if you tried at the moment to move new goods not normally stocked in the PGW (and other rural) stores nationwide, you'd be out of luck.

They're all getting their stock levels down, clamped by head office. Stores pull customer orders from other branches when they can, not the supplier. Fast-moving stock lines are still OK. Farmers seem to be generally clamped down by their banks. They have all their capital tied up, and could be more efficient, but will have to wait until farm gate prices improve.

-elZorro-

The BOWMAN

22-07-2009, 09:49 AM

When everyone is jumping out beating on a share, you know it is time to buy. Just like NPX and FPA. :D

elZorro

22-07-2009, 11:05 AM

Balance

22-07-2009, 01:29 PM

When everyone is jumping out beating on a share, you know it is time to buy. Just like NPX and FPA. :D

Agreed. Wait for the capital raising.

duncan macgregor

22-07-2009, 03:35 PM

The time to buy any share is when demand of the product starts to increase against availability. Farmers demand for the products being sold is at an all time low. This in time will change making PGW amongst others if still around over sold as far as buying position in the market. Dont waste time working out companies in a downtrending sector its almost as stupid holding shares in them. The time to do your home work is when the sector turns as it surely will in its own good time.
PGW jumpted in at the peak of the market taking on huge burdens of debt which might be its undoing but then being an oversold position might make it a really good prospect all being well. My own view is it will survive with the share price downtrending in the short term then be one of the success stories in the long term.
Right now only a fool would be bottom picking this share can go lower than you might think. Macdunk

COLIN

22-07-2009, 05:55 PM

I can't help but agree with Duncan.
(Good to see you are still around - having been absent for a long time myself, I was wondering as to your "status", i.e. whether you had given up on the rest of us or you had been robbed of all that cash hidden under your mattrass!)

nwood

23-07-2009, 08:52 AM

PGG Wrightson Chair Craig Norgate steps down

PGG Wrightson has announced that Craig Norgate has stepped down as Chairman today and has
been succeeded by independent director Keith Smith. Mr Norgate advised of his intention
last month and the Board accepted that decision yesterday and confirmed Mr Smith’s
appointment.

Mr Norgate will remain a director of PGG Wrightson and Managing Director of Rural
Portfolio Investments, which owns a 27.5 percent shareholding in the group.

Mr Smith has been a director of PGG Wrightson since its formation in 2005 through the
merger of Pyne Gould Guinness and Wrightson. He was previously chairman of Wrightson from
2004.

Mr Norgate said his decision to step down reflected the preference for an independent
chair given the listed status of the company and the fact that Managing Director Tim
Miles is now well established after 15 months in his role. "Tim now has a team that is
more than capable of leading the company forward," Mr Norgate said.

Mr Norgate said the change was a natural progression that would allow the company to
identify the governance platform best suited to its next stage of development. This would
be carried out through a formal process to review board composition, currently under way.

"PGG Wrightson is the product of a five-year campaign to revitalise the rural services
industry for the benefit of farmers throughout New Zealand. That process has involved
continuous change – in corporate structures, but more importantly in the way the industry
works with farmers to help them improve their performance and profitability.

"Tremendous progress has been made – in particular, the company has a stronger
operational platform and is therefore better placed to provide the support, advice,
services and products that farmers need. It has a management group with the range of
capabilities needed to build on the progress made to date.”

Mr Norgate was Chairman of PGG Wrightson from October 2007 and was previously Deputy
Chairman. He was a director of Wrightson at the time of the merger with Pyne Gould
Guinness in 2005. He will remain on the board of associated companies NZ Farming Systems
Uruguay and Wool Partners International.

southernerx

23-07-2009, 10:20 AM

Perhaps that's right Bowman, but this share at least, is one where you can do your homework quite easily. Have a look inside one of the stores and see if it's busy. Look at the books and figure out the profit margin for the average sale (it's low).

-elZorro-

And keep checking livestock prices (livestock commisions), farm sales (real estate commissions) and farm debt (PGW have a very profitable finance division). Store lamb prices have been very strong recently, which helps dampen the impact from dairy. At some point they will be a buy, and you can probably spot it coming.

Dr_Who

23-07-2009, 11:44 AM

Agreed. Wait for the capital raising.

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?

COLIN

23-07-2009, 02:17 PM

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?
And neither RPI nor PGC are likely to be taking up their respective percentages - they will have enough capital-raising challenges of their own to cope with.

JBmurc

23-07-2009, 02:26 PM

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?

I'm very glad I only held PGW for a couple weeks (was looking at a short term trade)
an only lost very few $$$ could have been alot worse

Also think my mate that had been hold for years will be happy he sold at an average of 1.31
after I told him what I thought of them...

Snoopy

23-07-2009, 05:20 PM

It will have to be one enormous capital raising and sh will be diluted to buggery.

Looks like some bad news coming out soon with Norgate stepping down?

I think Norgates position as Chairman has been untenable since the failure of the Silver Fern Farms merger deal. I don't see Norgate stepping down from the Chairman's role now as a forerunner of more bad news.

As for the balance sheet, 6 months ago PGGW renegotiated a $475m debt facility through the ANZ,BNZ and Westpac. Now if Norgate had negotiated at $475,000 facility with the banks he might be in trouble. But with potentially $475m in outstanding debt, it is the banks who have the problem. And I don't think ANZ,BNZ or Westpac see themselves as owner operators of a chain of rural supply stores.

We are told from HY Report 2008 that as at February 2009, debt drawn was $410m, down from $425m on the 31st December HY2008 balance sheet date.

If we inspect that balance sheet more closely there is more debt in the form of $213.2m of trade creditors (offset by $342.7m of trade receivables). That represents $130m of net money owed to PGW which is slightly up from the equivalent figures in FY2007 ($286.5m-$159.9m=$126.7m net PGW receivables outstanding). So there is definitely room for recovering some capital here.

Total liabilities are listed at $1.147m, with total equity of $413.7m. So let's say PGW was looking to raise another $413.7m in new capital by September 2011. If that capital was brought in today then earnings per share would halve. But even if total PGW earnings decline to $30m, then that still represents eps of $30m/(2x289.3m)= 5.2cps. Based on a share price of 95c that gives a diluted capital P/E of 18 at the low end of the business cycle.

I am not in the market to buy more PGW shares now (except through the dividend reinvestment scheme). But neither am I prepared to sell at today's prices.

SNOOPY

whatsup

23-07-2009, 08:19 PM

D.....M... wasnt the low .65 ---wayt2go yet!!!

Dr_Who

23-07-2009, 08:27 PM

With Norgate not in control, they can do a capital raising?

The bank debt contract must have a clause if the sp falls to a certain level it will breach covenants?

Snoopy

23-07-2009, 09:28 PM

With Norgate not in control, they can do a capital raising?

Sure. A capital raising will probably be easier now that Norgate is no longer in the top seat

The bank debt contract must have a clause if the sp falls to a certain level it will breach covenants?

We don't know the exact terms of the arrangements PGW have come to with their bankers.

The share price will affect the price PGW can go to the market for capital, if they need to go to the market for new capital, but that is all.

We know that the bankers are happy with PGWs plans to manage the business until September 2011.
We also know that the largest shareholder, Craig Norgates RPI, would be unwilling or unable to put more capital into the company.
We know that PGW are looking to unload some company property to strengthen their balance sheet.

So what is to stop PGW selling off another part of their business if the debt covenants become an issue? That is one way to get around new capital raising.

Generally banking covenants will relate to cash operational performance in the form of EBITDA/I (for example).

SNOOPY

Dr_Who

24-07-2009, 04:44 PM

Further downgrade by NUF is a good indication where the NZ and Aust farming sector is cureently. NUF have downgraded its profit by 15% or more.

Snoopy, PGW's debt is more than 6 times EBIDT.

Toddy

27-07-2009, 11:20 AM

Talk about inter related transactions.

Equity Partners walking away with a lump of cash in an illiquid market for selling assets at over inflated prices too................... yep, PGW shareholders.

From the Herald, Sunday.

Kerr is now involved in a large number of business ventures with John Darby, including property developments and Equity Partners Asset Management. Epam appears to be 50/50 owned by Kerr and Darby who are close neighbours near Lake Hayes, Queenstown.

Pyne Gould will purchase Epam from Kerr and Darby for $18 million.

The $18 million Epam purchase price, which appears to be far too high, will help bridge the gap between what Kerr paid for his Pyne Gould shares and what they are worth now.

Snoopy

27-07-2009, 04:15 PM

Talk about inter related transactions.

Equity Partners walking away with a lump of cash in an illiquid market for selling assets at over inflated prices too................... yep, PGW shareholders.

From the Herald, Sunday.

Pyne Gould will purchase Epam from Kerr and Darby for $18 million.

The $18 million Epam purchase price, which appears to be far too high, will help bridge the gap between what Kerr paid for his Pyne Gould shares and what they are worth now.

It is the 'other' Pyne Gould Corporation (PGC) that has purchased Epam Toddy, Not Pyne Gould Guinness Wrightson (PGW). Nice little stir of the pot though.
Yeah that deal stinks. But we PGW shareholders can take your PGC deal and raise you a worse one.

We wanted to merge with Silver Fern farms. Ended up paying that company $30m in cash plus giving away 10 million PGW shares. And we ended up with nothing! Nyah nyah nyah! Beat that you PGC whiners!

SNOOPY

Snoopy

29-07-2009, 10:16 PM

Talk about inter related transactions.

Perhaps there truly is magic in those PGW executives? This from Craig Norgates closing comments in the PGGW Finance Annual Report for FY2008

"We are pleased to have negotiated a new funding facility with one of the banks, that allows up to 90% of larger terms loans to be taken off balance sheet with no recourse, and ensures each residual on balance sheet amount is ring-fenced. The facility has allowed us to enhance our credit and liquidity risk management, while generating higher return for the company."

Did I read that right? Up to 90% of term loans have *disappeared* off the PGW balance sheet? David Copperfield eat your heart out. How is such a thing possible? Are there any finance types out there who are clever enough to explain what Norgate has done here?

SNOOPY

Xerof

30-07-2009, 08:21 AM

The most obvious answer is 'Securitisation'

Look here for a simple explanation

http://www.yieldcurve.com/Mktresearch/files/Teasdale_SecuritisationJan03.pdf

glennj

31-07-2009, 04:24 PM

I've noticed that the price of PGW has fallen almost 19% over the last month whilst most of the stocks I follow have risen. I sold down after the Siver Fern farms fiasco but unwisely? retained some stock.

It appears that a rights issue is being priced in though some commentators are saying they may squeak through without having to raise more equity. It appears that they are about 63% debt funded which is too high especially in this financial climate!

Chalkie in yesterday's copy of the Independent postulated that a 1 for 1 rights issue at 50c is required despite the probable reluctance of the larger shareholders to stump up with more cash.
Any thoughts on if a rights issue is going to happen within the next 12 months and if so what terms are likely?

Snoopy

31-07-2009, 07:04 PM

The most obvious answer is 'Securitisation'

Look here for a simple explanation

http://www.yieldcurve.com/Mktresearch/files/Teasdale_SecuritisationJan03.pdf

Thank's Xerof. That little pdf is the best explanation of Securitization I have yet seen.

Also, on studying the analysts presentation for FY2008, I notice that $100m of PGGW finance company debt is currently being held 'off balance sheet' with the ASB! So it looks like you are 100% right.

I still don't understand why ASB did it though. Wouldn't it be better for ASB if they simply had a secured debt with PGW Finance as per normal? What is the incentive for ASB to take on this risk as some kind of securitized bond?

SNOOPY

Xerof

31-07-2009, 09:33 PM

Snoopy

31-07-2009, 10:11 PM

Coz they can usually get the SPV rated by S and P or such-like, and flick the risk off as an investment grade bond to investors in that type of paper, even if the Originator is unrated.

Sound familiar? Well it should, as this is what the Wall Street Masters of the Universe had been doing with mortgages....

OK, say the ASB bank is charging PGW 9% as a normal interest rate on their borrowings.

PGW then figuratively wraps up this debt as a 'package' and gives it back to ASB. ASB then puts a new layer of paper on this package. ASB writes 'Sucker Bonds' on the new paper wrapper and 'passes the parcel' to some hapless American investors telling them they will pay them 5% interest to hold these 'brand new' 'Superior Under Close Keeping Earnings Rich' bonds (SUCKER for short). Americans who are used to getting 1% interest at the bank are very happy!

ASB then pockets the difference in the interest rate ( 9%-5%=4% ).

Is that how you see the deal working Xerof?

SNOOPY

Xerof

31-07-2009, 10:33 PM

Su'mat like that....

The ASB doesn't carry any risk, they probably only charge an arrangement fee, but the concept is that the PGW assets that are being hocked off as a SUCKER bond as you call it have a rating much better than if it was PGW debt, so they get it placed at a lower rate, off their balance sheet with no recourse. PWG benefits partially from the lower rate, but also has the debtors off their books up front

The bond purchasers are relying on the S&P rating as support, on the assumption the 'names' that are behind the debt (originally payable to PWG, but now payable to the SPV) are better credit risks than PWG.

This aspect of course is where it turned to custard in the US - relying on the rating was fatal, as the default rates on the individual debtors rose out of all expected proportion

Snoopy

01-08-2009, 10:48 AM

Su'mat like that....

The ASB doesn't carry any risk, they probably only charge an arrangement fee,

The bond purchasers are relying on the S&P rating as support, on the assumption the 'names' that are behind the debt (originally payable to PGW, but now payable to the SPV) are better credit risks than PGW.

This aspect of course is where it turned to custard in the US - relying on the rating was fatal, as the default rates on the individual debtors rose out of all expected proportion

Ah so I didn't pass the parcel enough. My understanding of getting rid of the debt was along the line of:

PGW ---> ASB ---> Hapless Investor

whereas I should have written

PGW ---> ASB ---> 'Special Purpose Investment Vehicle' ---> Hapless Investor

This way both PGW and ASB get to preserve their reputations. If something goes wrong the hapless investor only has recourse to the new owner of the debt, the SPV - which promptly disappears into a black hole. What a way to do business!

Of course what I didn't mention in my original example was that when the PGW parcel of debt was rewrapped for on-selling, other debt packages were wrapped up with that PGW debt. These other debt pacakges might include some Allied Farmers debt, RDI debt, Elders debt etc. on the presumption that taking debt from different market players then wrapping it up is 'spreading the risk'. But of course if all of those 'different market players' are actually operating in the *same* underlying market, the hoped for 'spreading the risk' effect is just a fallacy. And no nod from the likes of Standard and Poors can change that.

but the concept is that the PGW assets that are being hocked off as a SUCKER bond as you call it have a rating much better than if it was PGW debt, so they get it placed at a lower rate, off their balance sheet with no recourse. PWG benefits partially from the lower rate, but also has the debtors off their books up front

OK so as well as PGW being out of the legal gun if they default on their loan, they are probably also benefitting by paying a lower interest rate.

The interesting take on this situation is this. If you were PGW and got into debt repayment problems, would you not pay back your on the balance sheet bank debt your bankers first?

That would mean the SPV bonds would not only be paying a lower interest rate than other equivalent debt. They would be higher risk for the end line investor than normal bank debt! It makes you wonder why 'hapless investors' would bother chasing these 'SUCKER' bonds in the first place!

SNOOPY

Dr_Who

01-08-2009, 10:50 AM

Chalkie in yesterday's copy of the Independent postulated that a 1 for 1 rights issue at 50c is required despite the probable reluctance of the larger shareholders to stump up with more cash.

There is a difference between reluctant and unable to stump up the cash.

It is obvious that the top shareholders have reached the bottom of the very dry barrel.

Do you have a link to the chalkie article?

Snoopy

02-08-2009, 10:51 AM

It appears that a rights issue is being priced in though some commentators are saying they may squeak through without having to raise more equity. It appears that they are about 63% debt funded which is too high especially in this financial climate!

"63% debt funded" is a debt:equity term. Although financial analysts are often concerned about this figure, the banks are much more concerned about whether a customer company can pay their debts. So the banks use quite different measures to measure a company's solvency. PGW have not told us what these statitisics/covenants are. But we can guess what they might be given the financial ratios that PGW see fit to report to analysts.

The figure that PGGW are concerned about in their reporting to analysts for the FY2008 year were:

Revenue: $1315m (FY2008), $1034m (FY2007)

Operating EBIT to Revenue: 7.7% (FY2008), 5.8% (FY2007)
Operating EBIT to Interest: 4.0 (FY2008), 3.3 (FY2007)

Core Debt (excluding PGGW Finance): $312m, $230m
Operating EBITDA: Core Debt 3.1 (FY2008), 3.8 (FY2007)

Chalkie in yesterday's copy of the Independent postulated that a 1 for 1 rights issue at 50c is required despite the probable reluctance of the larger shareholders to stump up with more cash.
Any thoughts on if a rights issue is going to happen within the next 12 months and if so what terms are likely?

The next hurdle for PGW is to pay back the outstanding balance of the debt facility maturing in December 2010, some $NZ65m. Debt repayments up to then are pretty much 'in the bag'. This is enough time to be able to sell assets not as a 'distressed seller'. PGW has 5.2ha up for sale in Napier (the old Williams and Kettle HQ?).

As at 30th June 2008 there are $38.158m in 'group disposal assets', such as the above, waiting to be sold If dairy prices rise they may be able to flog off some of their NZS holding. They can probably pay down another $40m or so by retaining earnings within the company, as per the new dividend plan.

A 1:1 issue at 50c would raise $144.5m - similar money to what I have suggested above. But would need to be underwritten to succeed. I predict that if there is a rights issue it won't be announced until February 2010 at the earliest.

SNOOPY

glennj

02-08-2009, 11:30 AM

Do you have a link to the chalkie article?

Not an online link. My source was, "The Independent" July 30 2009 page 12.

Snoopy thanks for your thoughts on the question of will there be a rights issue. I'm aware of what bank covenants often consist of and am sure interest cover will be part of it. I like to know the debt:equity figures and a couple of other ratios as their trends can be pointers to looming trouble.

It may be a close call as to whether there will be a rights issue or not! My take/question is does recent price performance indicate that the market is anticipating a rights issue? Agree that an issue would need to be underwritten.

Snoopy

02-08-2009, 09:25 PM

Snoopy thanks for your thoughts on the question of will there be a rights issue. I'm aware of what bank covenants often consist of and am sure interest cover will be part of it. I like to know the debt:equity figures and a couple of other ratios as their trends can be pointers to looming trouble.

You have to be a bit careful with debt:equity with PGW Glennj. Part of that debt is due to PGG Wrightson Finance. And it isn't the responsibility of PGWs other businesses to keep that finance debt in check. I notice that in more recent news releaseses, PGW have been quoting their debt as a sum of 'core debt' and 'finance company debt'. The figures they quote are as follows:

Core Bank Debt: 2008:$312m, 2007:$230m
Finance Company Bank Debt: 2008:$140m, 2007:$75m
Finance Liabilities: 2008: $312m, 2007: $276m
Other Liabilities: 2008:$201m, 2007:$159m

Total Core Debt: 2008:$513m, 2007:$389m
Total Finance Company Debt: 2008: $452m, 2007: $351m

Sum of All Debt: 2008: $965m, 2007: $740m

Then when working out core PGW assets, you would have to separate out PGW Finance receivables from the company's other assets.

Finance Receivables: 2008:$507m, 2007:$402m
Current Assets: 2008:$471m, 2007:$359m
Non Current Assets: 2008:$467m, 2007:$405m

Total Core Assets: 2008: $938m, 2007: $764m
Total Finance Company Assets: 2008: $507m, 2007: $402m

Sum of All Assets: 2008: $1445m, 2007: $1166m

PGW Core Debt:Equity : 2008:- 55%:45% 2007: - 51%:49%
PGW Finance Debt:Equity : 2008:- 89%:11% 2007:- 87%:13%

If you do the same calculation with the finance and core group figures mixed in together;

PGW Total Debt:Equity : 2008:- 67%:33% 2007:- 63%:37%

As you can see Glennj, depending on how you choose to calculate the debt:equity ratios you can get quite different answers. That in turn can make a mockery of many comparisons

It may be a close call as to whether there will be a rights issue or not! My take/question is does recent price performance indicate that the market is anticipating a rights issue? Agree that an issue would need to be underwritten.

I would say the share price decline reflects the general nervousness at the demotion of Craig Norgate. Perhaps you could argue that indirectly makes PGW more susceptable to the likelihood of a cash issue?

If 50c was the 1:1 cash issue price and the current share price is 90c (round figures) then you could expect the share price to sink to 70c [ (90c+50c)/2= 70c ] or possibly a bit less if a cash issue at 50c was imminent. By that reasoning, no the sharemarket is not anticipating a 1:1 cash issue at 50c is likely.

SNOOPY

winner69

03-08-2009, 06:48 AM

At least SCF didn't convert the $25m loan to PGW into PGW shares

http://www.stuff.co.nz/the-press/business/christchurch-business/2702906/SCF-to-have-a-game-plan-by-Christmas

glennj

03-08-2009, 07:43 AM

As you can see Glennj, depending on how you choose to calculate the debt:equity ratios you can get quite different answers. That in turn can make a mockery of many comparisons

I would say the share price decline reflects the general nervousness at the demotion of Craig Norgate. Perhaps you could argue that indirectly makes PGW more susceptable to the likelihood of a cash issue?

SNOOPY

Yes you do need to be careful with methadology especially if comparing different companies but if you are consistent with your approach analysing the same company trend info is still useful. A mixed approach similar to yours was used to come up with the debt figure I gave.

You may well be correct that general nervousness following Norgate's departure was the reason for last month's hefty share price decline? In time we will see if a capital raising goes ahead to satisfy the 2010 debt repayment schedule.

Phaedrus

03-08-2009, 10:50 AM

Glennj, you speak of "last month's hefty share price decline" as though this was an extraordinary event. It wasn't. PGW is in a nicely linear downtrend and has been dropping about 17% per month, every month, since the peak of early May.

The attached chart shows some interesting features. See how the OBV gave a Sell signal before PGW peaked at $2.95 a year ago? This is what leading indicators are supposed to do. The OBV had stopped rising and had started falling. Market sentiment toward PGW had changed. Prices followed volume and the confirmed trendline was broken giving an exit at around $2.70. PGW then went into a steep downtrend.

See how the uptrend following the March re-entry point was not accompanied by an on-going rise in the OBV? After an initial rise confirming the trendline break Buy signal, the OBV resumed its relentless slide. This uptrend (while profitable) was going nowhere. The confirmed trendline was broken 2 months later giving an exit at around $1.40 and PGW's downtrend resumed.

Very conservative investors often use a 200 day Moving average to keep them on the right side of major trends. See how even this very slow indicator signaled an exit at around $2.30. Note also that this same indicator has not yet signaled any re-entry into PGW.

See where some "big money" was getting out, as signaled by downward "steps" in the OBV. This is never a good sign. "Big money" is not always "smart" money, though - these guys were a bit slow pulling the plug don't you think? Better late than never, I guess!

See how the current downtrend is showing no sign of imminent reversal and of course the OBV is still falling.

http://h1.ripway.com/78963/PGW83.gif

PGW has fallen from $2.95 to just 93 cents. Apart from a single, short, very profitable trade, this has been a wonderful stock to be out of for the last year - regardless of dividends!

Snoopy

03-08-2009, 01:25 PM

Yes you do need to be careful with methadology especially if comparing different companies but if you are consistent with your approach analysing the same company trend info is still useful.

PGW is particularly difficult to get to grips with. Each time you blink the company goes off in a new direction. That makes defining the core business difficult, let alone sifting out the 'one off' profits that are obviously not repeatable from year to year.

Ironically the failure of the Silver Fern Farms merger and the cooling off of the credit markets that were fuelling the PGW expansion means that PGW may be entering a period of forced stability. Greatly improved segment disclosure for FY2008 (backdated to FY2007 for comparison purposes) means that I have made some progress at least in sorting out the underlying earnings. I am still refining my model. But according to my calculations and subsequent forecasts made by PGW concerning future years, the underlying profitability trend of PGW looks something like this:

FY2010: $33m to $39m (management forecast)
FY2009: $30m to $32m
FY2008: $34m
FY2007: $31m

Specifically I have not included in my FY2007 and FY2008 operating results the proceeds of any property sales. Nor have I included the $17.8m bonus payment received by PGW in FY2008 for the listing outperformance by New Zealand Farming Systems Uruguay. I have however considered the ongoing managment fees payable on the NZS farms as a legitimate ongoing earnings stream for PGW that are likely to continue. Other profitability changes relating to:

i/'marking to market' of interest rate hedges under International Financial Reporting Standards, and
ii/adjustment of defined benefit superannuation scheme surpluses, and
iii/costs associated with the settlement of the partnership agreement with Silver Fern Farms Limited

have all been omitted.

That means from an 'operating perspective' PGW is currently trading on a projected PE of 7.2 to 8.5 (based on 305.8m shares on issue and a share price of 92c). This is not a demanding PE range. Given the outlook for growth beyond FY2010, I think it is hard to argue much downside from here from a purely fundamentalist earnings perspective. Of course from a capital adequacy prespective, potential shareholders might have a different view of where the share price might be headed.

SNOOPY

discl: hold PGW

Snoopy

03-08-2009, 09:47 PM

See where some "big money" was getting out, as signaled by downward "steps" in the OBV. This is never a good sign. "Big money" is not always "smart" money, though - these guys were a bit slow pulling the plug don't you think? Better late than never, I guess!

'Pulling the plug'? Hardly. Those big investors 'getting out' of PGW were actually Norgate and McConnon, and their investment vehicle Rural Portfolio Investments. Except that they didn't get out at all. Rural Portfolio investments actually needed some money to pay RPI bondholders some interest. That payment would normally be funded by the cash dividend from PGW. But since the cash dividend was cancelled, they had to sell some PGW shares on market instead. That is why RPI's 30% holding of PGW, is now 28.5%. Big deal. There was no 'running for the exits' as you imply Phaedrus.

Very conservative investors often use a 200 day Moving average to keep them on the right side of major trends. See how even this very slow indicator signaled an exit at around $2.30. Note also that this same indicator has not yet signaled any re-entry into PGW.

The initial plunge in share price from $2.30 to around $1.80 was because there had been a share issue book build to institutions at $1.80 in September 2008. September 2008 was when the credit crunch was starting to bite. So it made perfect sense for institutions to book a profit on their newly acquired PGW shares. I don't think you can argue that the share sell off was necessarily a reflection on the prospects of PGW at that time.

SNOOPY

The BOWMAN

03-08-2009, 10:43 PM

PGW is particularly difficult to get to grips with. Each time you blink the company goes off in a new direction. That makes defining the core business difficult, let alone sifting out the 'one off' profits that are obviously not repeatable from year to year.

Ironically the failure of the Silver Fern Farms merger and the cooling off of the credit markets that were fuelling the PGW expansion means that PGW may be entering a period of forced stability. Greatly improved segment disclosure for FY2008 (backdated to FY2007 for comparison purposes) means that I have made some progress at least in sorting out the underlying earnings. I am still refining my model. But according to my calculations and subsequent forecasts made by PGW concerning future years, the underlying profitability trend of PGW looks something like this:

FY2010: $33m to $39m (management forecast)
FY2009: $30m to $32m
FY2008: $34m
FY2007: $31m

Specifically I have not included in my FY2007 and FY2008 operating results the proceeds of any property sales. Nor have I included the $17.8m bonus payment received by PGW in FY2008 for the listing outperformance by New Zealand Farming Systems Uruguay. I have however considered the ongoing managment fees payable on the NZS farms as a legitimate ongoing earnings stream for PGW that are likely to continue. Other profitability changes relating to:

i/'marking to market' of interest rate hedges under International Financial Reporting Standards, and
ii/adjustment of defined benefit superannuation scheme surpluses, and
iii/costs associated with the settlement of the partnership agreement with Silver Fern Farms Limited

have all been omitted.

That means from an 'operating perspective' PGW is currently trading on a projected PE of 7.2 to 8.5 (based on 305.8m shares on issue and a share price of 92c). This is not a demanding PE range. Given the outlook for growth beyond FY2010, I think it is hard to argue much downside from here from a purely fundamentalist earnings perspective. Of course from a capital adequacy prespective, potential shareholders might have a different view of where the share price might be headed.

SNOOPY

discl: hold PGW

Good analysis, Snoopy. Informative and useful. I am considering getting some at this level too. After recent rally, there is almost no good value shares out there anymore.

glennj

04-08-2009, 07:51 AM

That means from an 'operating perspective' PGW is currently trading on a projected PE of 7.2 to 8.5 (based on 305.8m shares on issue and a share price of 92c). This is not a demanding PE range. Given the outlook for growth beyond FY2010, I think it is hard to argue much downside from here from a purely fundamentalist earnings perspective. Of course from a capital adequacy prespective, potential shareholders might have a different view of where the share price might be headed.

SNOOPY

discl: hold PGW

Good stuff Snoopy. Yes the forward PE's look undemanding at 92 cents especially considering the much higher PE's that PGW traded at for much of 2007 & 2008. These projected PE's are subject to forecasts being met of course.

Your work tends to reinforce my views that capital adequacy concerns may be playing a part in the current share price weakness.

Snoopy

04-08-2009, 12:55 PM

Good analysis, Snoopy. Informative and useful. I am considering getting some at this level too. After recent rally, there is almost no good value shares out there anymore.

Careful Bowman. There is another option if you don't see any good value shares out there. And that is don't buy anything!

The statistic I don't like with PGW is what I term their 'minimum debt repayment time'. This is the answer to the hypothetical question:

"If PGW put all of their profit into paying off their debt, then how long would it take?"

If we take their 'core debt' of $513m as at 30th June 2008 and the normalised profit of $34m I get a minimum debt repayment time of 15.1 years. That is uncomfortably high. Since that time there has been a further blow out with $30m paid over to Silver Fern Farms as a result of the failed merger deal. And short term at least, PGW profitability has deteriorated.

To cut a long story short, I am not buying into PGW at the moment. But then again neither am I selling. PGW has become a 'wait and see' proposition for me.

SNOOPY

P.S. I have just topped up my shares in New Zealand Farming Systems Uruguay though. At the moment they are not as indebted as PGW (although that may change as they complete their fencing, irrigation and milk shed construction program). Of course they are not producing *any* profit and probably won't for a few years yet. Nevertheless I believe the reasons for setting up NZS are more relevent then ever today. IMO the primary reason the market has marked down these shares so heavily is because any projects that are not immediate cash generators are simply no longer fashionable in the current investment climate.

Superficially things look bad for NZS. They are coming off a drought in Uruguay. Milk prices are much lower than a year or so ago. And the threat of PGW dumping their NZS shareholding to raise some cash - not to mention their association with 'yesterday's hero' Craig Norgate - are all weighing on the share price. But experience has taught me that when things look their bleakest and there is no news in the market that would possibly make a company seem a good buy prospect, then that is usually the best time to move. Nevertheless the market for NZS could easily turn down from here. If it does I will be increasing my holding.

The BOWMAN

04-08-2009, 01:14 PM

Thanks Snoopy for the advice. I think PGW is doomed if their profit remains at the current level with the amount of debt they have got. I am interested because I wonder weather their profit can get a lift off like everything else during this recovery? US and EU won't subsidise their farmers forever. Dairy product price keeps drifting lower but like Oil, it will go back up again I think. I think I'll now wait for a clearer picture about the debt reduction.

Dr_Who

05-08-2009, 10:23 AM

Why dont PGW do a capital raising now? What are they waiting for, the sp to go to 50 cents before they announce a rights issue? It concerns me greatly that a large number of companies dont plan for the bad times when history clearly shows the good times dont last forever.

I would be interested in participating if they have a large enough capital raising to cover their debt. Too much debt = bad news in any market.

It is so obvious from looking at their books they need capital urgently.

whatsup

05-08-2009, 10:38 AM

DR if it did the raising that would IMHO bomb as that would signal to the market that things just were no quite right at "head office" .

Dr_Who

05-08-2009, 10:41 AM

DR if it did the raising that would IMHO bomb as that would signal to the market that things just were no quite right at "head office" .

Things have never been right for PGW for a long time, this is clearly reflected in the sp. Tell us something the public dont already know.

Snoopy

05-08-2009, 07:00 PM

To cut a long story short, I am not buying into PGW at the moment. But then again neither am I selling. PGW has become a 'wait and see' proposition for me.

PGG Wrightson is not a company that is entirely straightforward to understand. By their own admission they have:

a/ A Rural Services Division: comprising Livestock trading, Wool and Rural Supplies, Fruitfed Supplies and Irrigation & Pumping.
b/ Financial Services: comprising the operations of wholly owned subsidiary PGGW Finance, Real Estate, Insurance and Funds Management (the setting up of NZ Farming Systems Uruguay for farmer customers looking to invest).
c/ Technology Services: Seeds & Grain, Animal Nutrition and Training and Consultancy
d/ South America: Farm management, seeds, livestock and real estate.

From 2008 PGGW have significantly improved their segment reporting. So I have taken it one step further. I have allocated the costs of the head office (in PGW terms Corporate Services) amongst the cash generating divisions in proportion to the revenue of those divisions. We are given the segment liabilities. So I have allocated the funding costs (interest paid) among the four cash generating divisions in proportion to those liabilities.

The result is the table below:

http://img.villagephotos.com/p/2005-3/963787/PGWbit08.gif

The tables consist of black figures and blue figures. The black figures are taken directly from the FY2008 PGG Wrightson Annual Report and the FY2008 PGG Wrightson Financial Annual Report. The blue figures are those that I have calculated.

If you are reading this thread on or near 5th August 2009 when it was posted you will see two charts, the 'raw' version and the 'adjusted' version that are identical. There are some problems with the 'raw' version that I will enlarge on later which I hope to fix in the 'adjusted' version. I hope to get some inspiration from this group as to how to fix it up. When I have done that I will alter the adjusted version so readers can see both versions side by side. More details to follow

SNOOPY

winner69

06-08-2009, 11:41 AM

Snoopy - somebody mention an article in The Independent the other day

In that Chalkie restated the PGW balance sheet post the SFF settlement and only shows the finance company as a one line deconsolidated amount (looking at from an owners perspective?)

Equity................................ 389

Net debt ......................... 435
Pension Liability .....................21
Fianancial derivatives/other...... 1
Total liabilities ..................... 852

Net assets finance business .....53
Other investments ................. 90
Working capital ................... 268
Plant / biological assets............86
Other................................... 26
Goodwill / intangibles .............329
Total assets ........................852

Interestingly she pointed out that the finance business and other investments of 143 are tied up in investments that have their own gearing ... pork on pig she calls

Her main point is that PGW has 256 of free equity to support 435 of debt ... far too much

She was also concerned how PGW booked $15m of profit when they sold off wool operations to Wool Growers .... when PGW is the only one to have injested any capital into the new company

Thought you would be interested

Snoopy

06-08-2009, 11:53 AM

The tables (5th August 2009 post) consist of black figures and blue figures. The black figures are taken directly from the FY2008 PGG Wrightson Annual Report and the FY2008 PGG Wrightson Financial Annual Report. The blue figures are those that I have calculated.

I want to answer the question, what use is a table like I have published? In a word, it is to put things into perspective.

Suppose you hear that profits have doubled in South America (largely Uruguay). That sounds good until you see that profits from Uruguay in FY2008 were only $1m after tax. That means 'doubling profits' will only add $1m or 2% to the overall PGW after tax profit. We can see from this that what happens in South America is largely irrelevent to the overall profitability of PGW. When the media is full of sensationalised stories about PGW 'getting in wrong' in South America, something like this is very useful to know.

Probably the most important information in this table is the 'check figure' column. That is where we can check how the assumptions of my model stack up to reality.

If we start with 'Operating Earnings' or EBIT, this is listed as $101.6m on page 5 of AR2008. However on page 42 the 'Total Segment Net Profit Before Tax' is $96.4m. I don't know why this difference exists. Hopefully some bright reader can figure out why the difference. As far as I can figure this 'error' is not caused by me.

Next we go down to the tax figure. My calculated figure is $22.3m verses the actual figure of $23.2m. My tax paid figure is unlikely to exactly match the tax actually paid. One reason is that a real company will pay provisional tax and terminal tax in a year that does not necessarily correspond to when the income is earned. So in this instance I would deem the agreement between my model and reality satisfactory.

Finally go to the net profit figures. My calculated figure is $45.5m verses the actual figure of $73.2m. This should ring some alarm bells. So what has gone wrong? For the answer you have to look at the consolidated Income Statement on page 26. There you will find a net gain on property sale of $6.3m and a 'fair value adjustment' (mainly the on paper gain in value of NZS shares from $1 to $1.60) of $17.5m. Then there is $3.4m of what is termed 'finance income' which is mostly 'interest earned on interest swaps'. None of these sophisticated financial tools are used for gambling by PGW. They are used to manage real interest rate and exchange rate risks. When let run to maturity, these financial instruments should not put at risk the profits of PGW. Yet along the way to their destiny these instruments on paper can lose or make money. New accounting standards force these multi year transient effects onto the annual bottom line as a declared profit or loss. These are not part of any particular divisional earnings though, which is why they are not generally reported in the divisional results. Lastly the segment results do not include the results of PGW's discontinued wool operations $3.1m. So that is a total of $30.3m in unsegmented earnings. That goes a long way to explaining the difference between the $73.2m declared profit and my $45.5m calculated figure.

So taking everything into account, I think my table is close to painting a true picture. There are still problems though, which I shall expand on later.

SNOOPY

Snoopy

06-08-2009, 01:52 PM

Snoopy - somebody mention an article in The Independent the other day

Thought you would be interested

I appreciate the information Winner. I am not an "Independent" subscriber. But when I saw the reference at sharetrader I thought I might go out and get a copy. The problem was I couldn't find one anywhere! Had a look around a few stores in Christchurch and couldn't see one copy for sale. Went to the library but they only had the previous week's issue. The 30th July issue either sold out really quickly, or there was some distribution problem In Christchurch last week.

She was concerned how PGW booked $15m of profit when they sold off wool operations to Wool Growers .... when PGW is the only one to have injested any capital into the new company

You know how the creation of new combination companies (such as Wool Growers) works Winner. I would imagine there was some independent valuation of what the new combined entity would be worth, assuming certain founding partners contributed certain things. The different contributors put what they had to offer the new company on the table. Then after the merger PGW took their share of that value in proportion to their ownership of Wool Growers. The fact that PGW ended up put money into what was the old "Wool Equities", -resulting in the new combined entity 'Wool Growers' being 'worth more' to PGW than if they hadn't done so- is what doing business is all about. Isn't it?

Or are you Winner/Chalkie arguing that the independent valuers were wrong. So therefore PGW shouldn't not have booked a profit on the formation of Wool Growers?

Chalkie restated the PGW balance sheet post the SFF settlement and only shows the finance company as a one line deconsolidated amount (looking at from an owners perspective?)

Equity................................ 389

Net debt ......................... 435
Pension Liability .....................21
Fianancial derivatives/other...... 1
Total liabilities ..................... 852

Net assets finance business .....53
Other investments ................. 90
Working capital ................... 268
Plant / biological assets............86
Other................................... 26
Goodwill / intangibles .............329
Total assets ........................852

Interestingly she pointed out that the finance business and other investments of $143m are tied up in investments that have their own gearing ... pork on pig she calls

Those 'Other Investments' are:

1/ 'Biopacific Ventures', an investment fund established for the investment in food and agricultural life sciences. There is no mention of there being any debt in that and

2/ NZ Farming Systems Uruguay, which is incurring debt as the farms are developed. But NZS is ultimately very definitely designed to be a cash generator, not a cash syphon.

I am not quite sure what Chalkie is saying here. Is it that if you are a subsidiary company, do not borrow to invest in anything?

I have to admit I am not the world's greatest expert on finance businesses. But is collapsing it to a one liner of 'net assets' a fair way to represent PGGW finance?

You saw what I did before Winner, using the 2008 results to determine net debt. Depending on how I ringfenced the PGGW Finance assets and liabilities I was able to calculate quite different answers as to what the debt:equity ratio was. Chalkie may be 100% accurate in what she has calculated. But has she taken an unnecessarily pessimistic view on the way those debts and assets are split betwen PGW Finance and the rest of PGW?

Last year I calculated

PGW Core Debt:Equity : 2008:- 55%:45%
PGW Finance Debt:Equity : 2008:- 89%:11%

Then I did the same calculation with the finance and core group figures mixed in together; and it made the whole group look much worse.

PGW Total Debt:Equity : 2008:- 67%:33%

Her main point is that PGW has $256m of free equity to support $435m of debt ... far too much

Perhaps the debt is too much. But are we nevertheless in a better position that FY2008?

PGW Total Debt:Equity (Chalkie Estimate) 2009:- 64%:36%

SNOOPY

winner69

06-08-2009, 02:33 PM

Snoopy - heres a portion from the article (spelling mistakes are my typing) and hoping Chalkie don't mind me quoting her but seeing you couldn't find a copy she should be pleased with the publicity-

.....PGW sold its wool operations into a joint venture with a farmer owned company called Wool Growers Holdings? (for a gain of $15m). All well and good but Wool Growers Holdings, some 14 months after the announcement, has yet to raise any shareholder capital from farmers. The $37.5m 'paid' by joint venture company Wool Partners International (WPI) has been financed by a $10m equity injection by PGW, a $17.5m preference share issue by PGW and a $10m loan by PGW to Wool Grower Holdings (still a $100 company) which used the money to 'buy' half the the ordinary shares in WPI. No one bar PGW has injected money of substance into WPI, yet PGW has shunted it off the balance sheet and booked a large profit. Nice accounting if you can get away with it.

Press reports have suggested a prospectus from Wool Groer Holdings was due in July but there is nothing on the Companies Office website. Given PGW wool operations made only $3.1m EBIT in 2008 the purchase price should make the targeted farmers shareholders relatively cautious.....

winner69

06-08-2009, 05:15 PM

I have to admit I am not the world's greatest expert on finance businesses. But is collapsing it to a one liner of 'net assets' a fair way to represent PGGW finance?

SNOOPY

What I think Chalkie has done in that 'deconsolidation' process (a bit like your ring fencing) is to assess what capital PGW has (notionally) put in as capital if that finance business was leveraged 10:1. She did mentioned 10:1 as an OK sort of figure.

In other words the figure of $53m on the restated balance sheet is the 'investment' PGW has in its finance business.

Re that wool business sale chalkie did go on say that if she was the auditor she would insist that PGW reverse that transaction and account for the wool operation as an 'in substance subsidiary' -- thereby reducing shareholders funds by the $15m and putting about $20m of debt on the balance sheet that resides insides WPI.

If what I copied early has happened economically the wool business is all PGWs anyway isn't it so Chalkie does have a point

As an aside FPA are a lot more transparent with their finance arm - their accounts show a balance sheet breakdown (including an equity figure) between the manufacturing arm and the finance arm.

There has also been talk on the street that maybe Marac should buy the PGW finance arm as part of all the shuffling around that PGC is doing at the moment .... maybe it was all too hard and they even couldn't understand the PGW business .... but very probable that may happen one day I would think

Any clearer ... no!

Snoopy

06-08-2009, 08:25 PM

hoping Chalkie don't mind me quoting her

".....PGW sold its wool operations into a joint venture with a farmer owned company called Wool Growers Holdings? (for a gain of $15m). All well and good but Wool Growers Holdings, some 14 months after the announcement, has yet to raise any shareholder capital from farmers. The $37.5m 'paid' by joint venture company Wool Partners International (WPI) has been financed by a $10m equity injection by PGW, a $17.5m preference share issue by PGW and a $10m loan by PGW to Wool Grower Holdings (still a $100 company) which used the money to 'buy' half the the ordinary shares in WPI. No one bar PGW has injected money of substance into WPI, yet PGW has shunted it off the balance sheet and booked a large profit. Nice accounting if you can get away with it.

Given PGW wool operations made only $3.1m EBIT in 2008 the purchase price should make the targeted farmers shareholders relatively cautious....."

So let me get this straight....

PGW have made up a company hoping that others in the industry will join up so that the industry consolidates (yet no other company has joined and there has been no consolidation). PGW have structured things so farmers can join what is in effect a co-operative. (But no farmers have yet joined.)

So the effective difference between what they had before, the Wool Business Unit and the new "Wool Company Limited" is effectively zilch. Not only does the Emporer who is leading the parade have no clothes. He has no parade following behind him either! And somehow our Emporer has convinced himself that the clothes he is not wearing are magically worth more. So who is pulling the wool over who's eyes here?

If the $3.1m EBIT is indicative and the interest payable (using the company cash interest rate of 8.7%) on those preference shares of $17.5m is $1.52m, and that of the $10m loan is $0.87m then after tax net profit using a 30% tax rate = $0.495m. That means that PGW's $10m equity in the business was bought at a PE ratio of 10/0.495= 20.2. That couldn't be overvalued could it? Good stuff eh!

SNOOPY

winner69

06-08-2009, 08:40 PM

So let me get this straight....

PGW have made up a company hoping that others in the industry will join up so that the industry consolidates (yet no other company has joined and there has been no consolidation). PGW have structured things so farmers can join what is in effect a co-operative. (But no farmers have yet joined.)

So the effective difference between what they had before, the Wool Business Unit and the new "Wool Company Limited" is effectively zilch. Not only does the Emporer who is leading the parade have no clothes. He has no parade following behind him either! And somehow our Emporer has convinced himself that the clothes he is not wearing are magically worth more. So who is pulling the wool over who's eyes here?

If the $3.1m EBIT is indicative and the interest payable (using the company cash interest rate of 8.7%) on those preference shares of $17.5m is $1.52m, and that of the $10m loan is $0.87m then after tax net profit using a 30% tax rate = $0.495m. That means that PGW's $10m equity in the business was bought at a PE ratio of 10/0.495= 20.2. That couldn't be overvalued could it? Good stuff eh!

SNOOPY

So elegantly put it must be true ... good one Snoopy

But PGWs $10m is only half the new company isn't it? ... effectively making the PE higher?

Seems PGW is all about financial wizardry, collecting management fees etc etc instead of actually getting out there day in and day out working hard on making real money ..... no wonder you have trouble trying to work it all out .... just seems to lead yo more and more unanswered questions

Look forward to see what you come up with next Snoopy

winner69

06-08-2009, 08:43 PM

Snoopy

Wool Partners International Ltd have an interesting line up of directors

GATTUNG, Theresa Elizabeth 18-JUL-2008
Baypoint Apartments, 2A/172 Oriental Parade, Oriental Bay, Wellington
MCCONNON, Alan Evan 18-JUL-2008
17 Granville Terrace, Belleknowes, Dunedin 9011
NORGATE, Michael Craig 18-JUL-2008
4B/154 St Stephens Ave, Parnell, Auckland 1052
PERRIAM, John Charles 10-JAN-2008
Bendigo Station, R.D. 3, Cromwell
SKILLING, Michael 28-JAN-2009
282 Hurstmere Road, Takapuna, North Shore City
SUTTON, Keith Graham 10-JAN-2008
164 Boom Rock Road, Ohariu Valley, Wellington
WATSON, John Charles

winner69

06-08-2009, 08:59 PM

winner69

06-08-2009, 09:10 PM

Snoopy -- if you look at the last financial statements for PGW Finance Shareholder Equity or Book Value was $53.892m (June 2008) .... so that figure of Chalkies looks pretty good and sort of confirms that insofar as a balance sheet for PGW she is treating the finance arm as an investment

biker

07-08-2009, 08:57 AM

17/2/09 ..................The brokers seem to hate PGW. In itself probably a good reason to buy.
Is it because they hate Norgate? I must say his manner isn't endearing, but doesnt the agriculture industry need smart, innovative and passionate investors?
I'm in at 75c

DISC. In at 75c out at 1.15. Changed my mind on Norgate. Can see another fiasco coming up and realise the guy is IMO too much of a loose cannon to be invested with. Now standing well clear and waiting for what could be a huge cloud of dust, to settle.

Snoopy

07-08-2009, 10:54 AM

(Quote)Norgate said the $46 million valuation of the wool division had been worked out on the basis of a standard multiple of earnings, but declined to say what those earnings have been.

http://www.nzfarmersweekly.co.nz/article/7394.html

Nice sleuthing Winner. That article was posted in May 2008. Since that time the Wool Division earnings have been released as part of the PGW 2008 annual report. on page 49.

EBIT was $3.11m. So $46m => 14.8 x EBIT earnings (14.8 is the multiple)

OR based on sales

Revenue = $97.368m. So $46m valuation => 2.1 x sales (2.1 is the multiple)

Do those multiples sound reasonable?

SNOOPY

COLIN

07-08-2009, 11:20 AM

DISC. In at 75c out at 1.15. Changed my mind on Norgate. Can see another fiasco coming up and realise the guy is IMO too much of a loose cannon to be invested with. Now standing well clear and waiting for what could be a huge cloud of dust, to settle.
My sentiments are similar, Biker. I got rid of all my PGW as well as my PGC involvement several months ago. Too much "smoke and mirrors", creative accounting, double-dipping, etc - very reminiscent of what we saw in the 80's. I admire Snoopy's exhaustive analytical research and his tenacity in trying to justify holding onto his ever-diminishing stake but I fear it could end horribly in tears.
I do believe that the agricultural sector in NZ has a bright future, and I also believe that the Government wouldn't stand aside and let PGW go to the wall, as that would shake the confidence of the NZ farming sector mightily, on top of all the other trials and tribulations they are at present experiencing. (If FPA is regarded by our political leaders as too important an NZ icon to allow to fail, PGW would probably be seen in the same light). But I certainly won't be putting any of my hard-earned funds in this direction at this stage.

duncan macgregor

07-08-2009, 11:36 AM

elZorro

07-08-2009, 12:50 PM

Hi Macdunk, thanks for the tip on MCR. I'd like a time machine to go back to March 2009 though. If that share rises any steeper it'd be doubling back on itself..

duncan macgregor

07-08-2009, 01:26 PM

Hi Macdunk, thanks for the tip on MCR. I'd like a time machine to go back to March 2009 though. If that share rises any steeper it'd be doubling back on itself.. You dont require a time machine all you require is a chart of a rising sector then jump in on a buy signal. The company analysis comes last, which always in any good solid company will follow the sector up and down. Nothing lasts for ever, have a stop loss in a falling sector. The people like me who did that with PGW are the winners I had them at four different stages three being good winners one being a small loss. If they are still around later then the time to buy is when farmers start spending, and the SP shows a buy signal.
Fundamental analysis is as use full as tits on a bull in comparison to market sentiment.

Macdunk

The BOWMAN

07-08-2009, 02:16 PM

Fundamental analysis is as use full as tits on a bull in comparison to market sentiment.

Macdunk

Market sentiment can change any minute. Don't overstate the usefulness of tech analysis. Tech analysis are based on theories and formulas that are public knowledge. If they are as accurate as you are saying, money will be too easy to be made. And the top 100 rich person in the world should be full of share investors.

elZorro

07-08-2009, 02:42 PM

Market sentiment can change any minute. Don't overstate the usefulness of tech analysis. Tech analysis are based on theories and formulas that are public knowledge. If they are as accurate as you are saying, money will be too easy to be made. And the top 100 rich person in the world should be full of share investors.

Now I'm really confused Bowman, is tech analysis the same as market sentiment, just public knowledge?

winner69

07-08-2009, 02:48 PM

Nice sleuthing Winner. That article was posted in May 2008. Since that time the Wool Division earnings have been released as part of the PGW 2008 annual report. on page 49.

EBIT was $3.11m. So $46m => 14.8 x EBIT earnings (14.8 is the multiple)

OR based on sales

Revenue = $97.368m. So $46m valuation => 2.1 x sales (2.1 is the multiple)

Do those multiples sound reasonable?

SNOOPY

14 times EBIT really high for most businesses - like even if I = zero it's a PE of 20 eh

But then they prob did some whizz bang DCF with some good assumed growth built in

One thing .... one day farmers are going to have to stump with capital for the Wool Grower Co .... and many prob are going to be the same farmers that are going to be asked for capital in SFF, PGC and maybe PGW itself .... hardly seems the right environment to get cash strapped farmers to open their wallets

duncan macgregor

07-08-2009, 04:12 PM

Now I'm really confused Bowman, is tech analysis the same as market sentiment, just public knowledge? Market sentiment shows you what is in or out of favour today. Tech analysis shows you what was leading up to that point with an insight to what might happen in tomorrows market, and further down the track with charting. Fundamental analysis is the accountants view of things, based on truths half truths and down right lies. PGW are in the mist and mirrors league, with figures hard to find which makes for falling market sentiment.

elZorro

07-08-2009, 04:33 PM

Market sentiment shows you what is in or out of favour today. Tech analysis shows you what was leading up to that point with an insight to what might happen in tomorrows market, and further down the track with charting. Fundamental analysis is the accountants view of things, based on truths half truths and down right lies. PGW are in the mist and mirrors league, with figures hard to find which makes for falling market sentiment.

Thanks for that macdunk, I guess safety in numbers is the rule. Applying the MACD filter to MCR shows buying pressure at the moment. I'll have to use these ideas on some other shares I know a bit more about. Regards.

COLIN

07-08-2009, 05:45 PM

PGW, who cares right now?. Over burdened with debt in a downtrending sector. The future looks like the downtrend will continue with farm incomes at almost zero. They are showing all the signs of a high risk company, manipulating, and hiding the numbers from the punters. The charts tell it all, no requirement to try and work out the reality of the situation. Incidently, the nickel price is in a steep uptrend, now is the time to jump into MCR which has no debt, and trending up in a steep uptrend. The object of the excercise is to make money, and the only way to do that is when to know when to get rid of downtrending stocks like this before they drag you down with them. I give you MCR which is a share i doubled my money in 2007 and got out, and have now bought back at a cheaper buy price than my first purchase then. PGW if it survives will go much lower than its SP today before it comes right so whats the point of holding?. Macdunk

SELL INTO WEAKNESS, BUY INTO STRENGTH. Its a lesson that has taken me many years to learn. I used to find it very hard to make the decision to cut my losses (and let profits run) and there is always the temptation to average down, but I know from experience that it almost invariably pays to cut loose in that situation. One only needs to look back on the FTX thread for some clear object lessons in this regard.
Interesting that you also have latched onto MCR. My original flirtation in 2007 was a bit of a flop - didn't apply the above-outlined approach but rode them down the hill. But my fresh foray a few weeks ago is proving much more rewarding.

Snoopy

07-08-2009, 09:49 PM

I couldn't help notice the pearls of wisdom being passed off over the last day or so on this thread by many of the regulars. But how wise are they with respect to PGW? Perhaps it is time to have a look.

Cut my losses (and let profits run) and there is always the temptation to average down, but I know from experience that it almost invariably pays to cut loose in that situation. One only needs to look back on the FTX thread for some clear object lessons in this regard.

People keep bringing up Feltex when another company looks weak. But there is a huge difference between FTX and PGW. Firstly on a day to day basis PGW is profitable, whereas Feltex wasn't. And PGW has a year and four months to sort out it's banking issues. Not the six months or whatever it was that Feltex had.

Fundamental analysis is the accountants view of things, based on truths half truths and down right lies. PGW are in the mist and mirrors league, with figures hard to find.

The figures aren't that hard to find. Thanks to the sleuthing around by people like Chalkie and Winner the figures *have* been found. That some of the details on the balance sheet are unclear is a reason to do your homework. Not just take the easy route and give up.

If they are still around later then the time to buy is when farmers start spending, and the SP shows a buy signal.

The share price will move in anticipation of what the farmers are going to do. By the time farmers actually start spending, it will be far too late to get into PGW.

PGW if it survives will go much lower than its SP today before it comes right so whats the point of holding?.

Ther are two forces at work here. On a valuation (PE) perspective, PGW is quite modestly valued. Often in a cyclical industry the PE can go very high in the depths of a downturn. At 7 to 9 the PE is not high at all. You could argue from a day to day business perspective the PGW price is already at rock bottom.

OTOH from a capital investment perspective, if there really is going to be a 1:1 share issue at 50c you could argue that the share price is too high. Why buy shares now when you night be able to pick them up in a rights issue at 60 or 70 cents? The problem is despite what Chalkie says a share issue is not inevitable. To be successful you will need at least one major shareholder to underwrite it. And I can't see either PGC or RPI doing so.

Personally I think the share price might go lower. But I am not sure about that. And in the short term the upcoming traditionally large end of year dividend should support the share price.

Oh and the survival of PGW is not in doubt. What is in doubt is a potential dilution of equity of the existing shareholders. Companies that are making profits generally do not go bust, no matter what direction the share price is moving.

Changed my mind on Norgate. Can see another fiasco coming up and realise the guy is IMO too much of a loose cannon to be invested with. Now standing well clear and waiting for what could be a huge cloud of dust, to settle.

This is where you need to get things into perspective Biker. Norgate has stepped down from the chair. IMO it is extremely unlikely Norgate will be driving the direction of PGW for quite a while. While waiting for that 'dust to settle', perhaps you might ponder the 'divisional profit chart' that I published on 5th August on this thread. In there you will see that by far the biggest contributor to profits is the seeds business. And Norgate has never had anything to do with that.

SNOOPY

shasta

07-08-2009, 10:43 PM

I couldn't help notice the pearls of wisdom being passed off over the last day or so on this thread by many of the regulars. But how wise are they with respect to PGW? Perhaps it is time to have a look.

People keep bringing up Feltex when another company looks weak. But there is a huge difference between FTX and PGW. Firstly on a day to day basis PGW is profitable, whereas Feltex wasn't. And PGW has a year and four months to sort out it's banking issues. Not the six months or whatever it was that Feltex had.

The figures aren't that hard to find. Thanks to the sleuthing around by people like Chalkie and Winner the figures *have* been found. That some of the details on the balance sheet are unclear is a reason to do your homework. Not just take the easy route and give up.

The share price will move in anticipation of what the farmers are going to do. By the time farmers actually start spending, it will be far too late to get into PGW.

Ther are two forces at work here. On a valuation (PE) perspective, PGW is quite modestly valued. Often in a cyclical industry the PE can go very high in the depths of a downturn. At 7 to 9 the PE is not high at all. You could argue from a day to day business perspective the PGW price is already at rock bottom.

OTOH from a capital investment perspective, if there really is going to be a 1:1 share issue at 50c you could argue that the share price is too high. Why buy shares now when you night be able to pick them up in a rights issue at 60 or 70 cents? The problem is despite what Chalkie says a share issue is not inevitable. To be successful you will need at least one major shareholder to underwrite it. And I can't see either PGC or RPI doing so.

Personally I think the share price might go lower. But I am not sure about that. And in the short term the upcoming traditionally large end of year dividend should support the share price.

Oh and the survival of PGW is not in doubt. What is in doubt is a potential dilution of equity of the existing shareholders. Companies that are making profits generally do not go bust, no matter what direction the share price is moving.

This is where you need to get things into perspective Biker. Norgate has stepped down from the chair. IMO it is extremely unlikely Norgate will be driving the direction of PGW for quite a while. While waiting for that 'dust to settle', perhaps you might ponder the 'divisional profit chart' that I published on 5th August on this thread. In there you will see that by far the biggest contributor to profits is the seeds business. And Norgate has never had anything to do with that.

SNOOPY

You stick to your guns Snoopy, i for one appreciate your posts & as you well know TA ain't the only way to make some $$$.

People have to realise those who stick to there systems tend to do better than those who chop & change!

It's hard to go against herd mentality

Balance

07-08-2009, 11:03 PM

You stick to your guns Snoopy, i for one appreciate your posts & as you well know TA ain't the only way to make some $$$.

People have to realise those who stick to there systems tend to do better than those who chop & change!

It's hard to go against herd mentality

But against the herd you must go to make the real bucks. Read 'Slow Day today' to get a blinding example of the herd at work. Instead of taking the opportunity to load up on cheap shares on bargain to sell later, the buggers were moaning and groaning about slow days.

http://www.sharetrader.co.nz/showthread.php?t=6964&page=4

glennj

08-08-2009, 12:21 PM

FA & TA again
I use both with mainly FA for the buy & a combo for the sell. It is us FA practitioners plus perhaps insiders that give you TA / momentum traders your early signals. I'm happy to be in early before the herd join if a stock is undervalued & pays a sustainable dividend. Likewise if I deem a stock overvalued I'll sometimes sell before a downtrend starts but I'm starting to use TA as an additional sell aid.

With PGW it is a no brainer to recognise it is in a down trend but is the down trend justifiable in FA terms? I sold two parcels in June & July after FA got me concerned
about debt levels & details of some deals. So yes the downward pressure on the price probably was justified. This company, as Snoopy has illustrated, is unlikely to fail. I've concluded high debt is a problem tho & like others are now just waiting to see how things go and if there will be a rights issue.

Like others I think Agricultural stocks will have their day in the sun again. It'll be FA used to try & get in at bargain prices.
[have been investing in ag & other stocks since 1978 with between 60 & 85% of purchases being profitable. managed to retire while in 40's due to investment successes. So FA does work. What suits me about it is you don't need to be following prices all the time, in fact I only record stock prices once a month]

Snoopy

08-08-2009, 02:55 PM

What I think Chalkie has done in that 'deconsolidation' process (a bit like your ring fencing) is to assess what capital PGW has (notionally) put in as capital if that finance business was leveraged 10:1. She did mentioned 10:1 as an OK sort of figure.

In other words the figure of $53m on the restated balance sheet is the 'investment' PGW has in its finance business.

I would like to restate what you said on a subsequent post Winner. If you go to page 9 of the PGGW Finance Report for FY2008 you will see that the total equity of PGGW Finance as at 30th June 2008 was $53.892m. Call that $53m in round figures.

Now look on page 34 of the PGGW parent company's 'Result's Briefing' for the analysts on that same financial year ended 30th June 2008. There you will see the bank debt attributed to PGGW finance as $140m, out if a facility of $180m.

If you go back to the Balance Sheet on page 9 of the PGGW Finance Annual Report, other money that PGGWF can lend comes from PGGWF company issued bonds ($44.751m), secured debentures ($172.928m), and $91.804m of deposits and other borrowings.

That gives the maximum amount of money 'able to be lent' out of current resources at:

$53.892m+$180m+$44.751m+$172.928m+$91.804m= $543.375m

Compare that to shareholders equity at $53.892m and you get a ratio of:

$543.375m/ $53.892m = 10.1 (or 10:1 in round ratio figures).

The way I read that Winner, is that here is nothing 'notional' about these figures. The amount of capital that PGW has committed to PGGW Finance really is $54m (round figures). And the real amount of money they can lend taking into account all avenues of funding is $540m (round figures). The 10:1 figure, far from being made up as 'about right', is the *actual* amount available for loan! Or is what we have here a case of blind luck: That actual amount available for loan just happens to correspond to the figure that is 'about right'?

SNOOPY

winner69

08-08-2009, 03:26 PM

Hi Snoopy

When i used the word notional (in brackets you note) I was reading Chalkies mind as to what she was trying to show - PGWs investment in finance.

The I looked at the PGW Finance Balance Sheet which confirmed that number (even though Chalkie was deconsolidating a Dec 08 PGW balance shhet and the PGW Finance financials were June 08)

Then you did your numbers and came up with the same number

A consultancy term is triangulation - if you look at something 3 ways and get the same answer it must be right. Anyway how can the combined brains of Chalkie Winner and Snoopy be wrong - so the conclusion we have come to is right eh

Gets back to Chalkies main point that PGW (exc finance) has $256m of free equity supporting $435m of debt ..... which she says a 1 for 1 at 50 cents is needed to right-size ) a Chalkie term) the balance sheet ... $150m seems a lot of dosh though

Snoopy

08-08-2009, 03:53 PM

Snoopy wrote:
[i]If the $3.1m EBIT is indicative and the interest payable (using the company cash interest rate of 8.7%) on those preference shares of $17.5m is $1.52m, and that of the $10m loan is $0.87m then after tax net profit using a 30% tax rate = $0.495m. That means that PGW's $10m equity in the business was bought at a PE ratio of 10/0.495= 20.2. That couldn't be overvalued could it?[i]

But PGWs $10m is only half the new company isn't it? ... effectively making the PE higher?

In the PGGW half year 2008 report (31st December 2008) under note 6 it says:

"PGG Wrightson entered into a transaction with a new wool growers group co-operative on 1 July 2008 , Wool Grower Holdings Limited, to form The Wool Company Limited (since renamed Wool Partners International Limited). This joint venture will be owned 60% by Wool Grower Holdings Limited and 40% by PGG Wrightson. PGG Wrightson's 40% will dilute as other industry participants join the new venture."

"On 1 July 2008 The Wool Company Limited (now Wool Partners International Limited) purchased PGG Wrightson's wool operations"

At the moment Wool Grower Holdings has not come up with any money for their 60%. In lieu of this farmer shareholder capital my impression was that PGGW put up the $10m loan. I could be wrong about this. But why otherwise would PGW support the new WPI by putting up $17.5m in preference shares AND $10m as a loan? Why not make it $27.5m in preference shares and be done with it?

It looks like when other industry players (eventually?) come on board they will do so by 'buying out' a portion of PGW's 40% stake. Because if new shares/capital were issued that woudl dilute Wool Grower Holdings 60% stake. And there is no mention of this as a possibility.

SNOOPY

winner69

08-08-2009, 05:08 PM

Wool Grower Holdings Ltd is a $100 company with Messers Petersen and Shadbolt the joint shareholders

The borrowed from / or PGW lent them the $10m to buy their shares in Wool Partners International

According to the Companies Office the ither 27,5 million odd shares in WPI are owned by PGW

A year has passed and PGW are still essentially the economic owners of the wool operations .... wonder how much money they made or lost ... borad fees alone must be zillions

winner69

08-08-2009, 05:19 PM

But why otherwise would PGW support the new WPI by putting up $17.5m in preference shares AND $10m as a loan? Why not make it $27.5m in preference shares and be done with it?

SNOOPY

I think the $27;5m is $10m ordinary shares and $17.5m preference shares .... probably something to keep the ratios in line to keep from reporting as a subsidiary or something clever

winner69

08-08-2009, 05:26 PM

Snoopy

08-08-2009, 05:30 PM

Hi Snoopy

When I used the word notional (in brackets you note) I was reading Chalkie's mind as to what she was trying to show - PGWs investment in finance.

The I looked at the PGW Finance Balance Sheet which confirmed that number (even though Chalkie was deconsolidating a Dec 08 PGW balance shhet and the PGW Finance financials were June 08)

Then you did your numbers and came up with the same number

A consultancy term is triangulation - if you look at something 3 ways and get the same answer it must be right. Anyway how can the combined brains of Chalkie Winner and Snoopy be wrong - so the conclusion we have come to is right eh

What conclusion is that Winner?

I wasn't looking for any particular conclusion myself. I was really just trying to understand how the PGGW Finance business works. And unlike you I was using an 'off balance sheet' amount of bank debt in my calculation. To repeat:

That maximum amount of money 'able to be lent' out of current resources at:

$53.892m+$180m+$44.751m+$172.928m+$91.804m= $543.375m

(That includes the $180m bank borrowing ceiling).

BUT the *actual amount of money lent out* on the balance sheet is:

$53.892m+$140m+$44.751m+$172.928m+$91.804m= $503.375m

Take the ratio of $503.375m/$53.892m and you get 9.3:1 (not 10:1)

Chalkie in a different context later in the article used the phrase.

"In practice no company can afford to run this close to its debt security ceiling."

What I am wondering is:

"Can PGGW Finance afford to run this close to its equity facility ceiling?"

I was wondering whether this 10:1 number that Chalkie quotes was in fact a hypothetical ceiling on how much debt any finance company could cope with? With the actual number (in this instance) being 9.3:1.

As I understand it, "in theory" you could run a finance company with no capital at all. All you have to do is find some borrowers who are willing to pay 9% interest. Then find some investors who are keen to receive 7% interest. Then as a reward for matching the willing borrowers and willing investors, you pocket the difference of 2% as your 'finance company profits'.

In practice of course, you could never operate a business like this. Suppose one of your investors needed an urgent operation and wanted to withdraw his investment. OK such an investor would suffer an interest penalty for withdrawing. But the capital to repay that investor would have to be available from somewhere. And in the short term that capital would have to come either from the owner equity capital of the finance company itself (difficult if the owner had not put any equity into the business) or from borrowing facilities that the finance company owner had agreed to with his bank (I would say impossible if the finance company owner had no equity in the business himself). So the question I am posing is, just how much capital does a finance company *need*, in relation to its lending?

I think Chalkie's answer is 10%. But even that amount won't protect the finance company if they get a 'run on funds'. Basically it was only the government's capital guarantee that prevented a run on funds on the remaining finance companies last year. So, how much capital does PGGW Finance need when the government deposit guarantee system runs out? Might it not be rather more than 10% of the loan book ($53m)?

SNOOPY

Snoopy

08-08-2009, 06:07 PM

Snoopy - I don't really understand why I bother be interested in such things with PGW or PGC because I never envisage myself owning shares in them

Probably a long standing inherent morbid fascination I have as to how companies shuffle stuff around and come up with 'innovative' ways of financial engineering .... and what company accounts are really telling us

Is a fascinating study really and one can learn a lot .... and gives some wonderful insights into how companies think and behave.

Colin said in an earlier post on this thread
"I do believe that the agricultural sector in NZ has a bright future."

Well I agree with him. And I think that somewhere in all of this PGW/NZS/Silver Fern Farms/SCT/PGGW Finance/PGC 'mix and mash' there is a buck to be made.

While I to an extent share your fascination with all of the financial engineering that is going on Winner, I am probably less altruistic in my motives. That's because it is (some) of my money that is on the line, albeit by choice.

I am particularly interested in PGGW Finance because I think it may yet go on the block. Possibly to be floated off to the New Zealand public. Those of us with long memories will know that when Wrightson (as it was then) got into debt problems they flogged off their finance division (in a trade sale to Rabobank). And I reckon such a thing could happen again. There is currently a dearth of finance companies on the NZX, so investors may have an appetite for such a share to 'round out their portfolios'. Perhaps PGW could even bury the "cash issue issue" by fully or partially floating off PGGW Finance?

SNOOPY

Dr_Who

08-08-2009, 07:17 PM

I am particularly interested in PGGW Finance because I think it may yet go on the block. Possibly to be floated off to the New Zealand public.

SNOOPY

Are you serious? Floating a finance company in this market?

Who in their right mind will invest in a IPO finance company in this market?

Snoopy

08-08-2009, 08:13 PM

Are you serious? Floating a finance company in this market?

Who in their right mind will invest in a IPO finance company in this market?

I don't think it is an ideal time to float a finance company Doc. But then, I don't think it is an ideal time for PGW to raise money in a cash issue either. What I am saying is that where there is necessity (the need to raise cash), then the lesser of two evils will prevail.
And if you as a potential shareholder have the money on hand, you will be able to profit from the distressed circumstances of the seller.

I know the recent history of finance companies in N.Z. So I know that any IPO would have to be very attractive to get interest from the public. You think it sounds unattractive at all costs? Let me try to woo you to the idea then.

5th November 2009 - NZPA

"PGW Today announced the partial float of their subsidiary PGGW Finance today at $1 per share. PGW will retain a 25% stake in the business and 25% will go to Rabobank at AAA rated company with a credit rating higher than the New Zealand government. PGW has a put option on their 25% stake to sell to Rabobank in two years time at $1.25. Under New Zealand's substantial shareholder rules that will trigger a compulsory buy out offer of minority shareholders should this put option be invoked.

The new PGWF company will agree to the covenant of having 20% of the total loans outstanding on hand within the company as shareholders equity. This is twice the level of security as has been the norm in finance companies. Dividends of 7c per share annually are projected. This is twice the return available from bank term deposits since Alan Bollard cut the key cash rate to 1.5% in September 2009. It is anticipated that PGG Finance will have the highest investment grade credit rating of any independent finance company in New Zealand."

What do you think Doc? Interested?

SNOOPY

winner69

08-08-2009, 08:27 PM

You forgot to use the word ICONIC .... that'll get a few punters excited ... spose the Pyne and Wrightson names are iconic

COLIN

08-08-2009, 11:17 PM

[QUOTE

I am particularly interested in PGGW Finance because I think it may yet go on the block. Possibly to be floated off to the New Zealand public. Those of us with long memories will know that when Wrightson (as it was then) got into debt problems they flogged off their finance division (in a trade sale to Rabobank). And I reckon such a thing could happen again. There is currently a dearth of finance companies on the NZX, so investors may have an appetite for such a share to 'round out their portfolios'. Perhaps PGW could even bury the "cash issue issue" by fully or partially floating off PGGW Finance?

SNOOPY[/QUOTE]

This won't happen, Snoopy, for the simple reason that Wrightson soon realised that it had been a mistake to hive off their then finance company. For decades farmers have been accustomed to using their stock and station agency for their seasonal finance requirements - the whole process is interwoven. That's why they didn't waste much time in getting back into the financing business again.

Snoopy

08-08-2009, 11:42 PM

This won't happen, Snoopy, for the simple reason that Wrightson soon realised that it had been a mistake to hive off their then finance company. For decades farmers have been accustomed to using their stock and station agency for their seasonal finance requirements - the whole process is interwoven. That's why they didn't waste much time in getting back into the financing business again.

I tend to agree Colin. That wouldn't stop them doing a partial sell off of the finance division though.

SNOOPY

Dr_Who

09-08-2009, 10:47 AM

Hey Snoopy, I would not touch any finance company in this market, especially one being floated by PGW with all sort of magic tricks involved. I do recall Robobank involvement in WRI many years back.

I will be very tempted to participate in a rights issue by PGW if they raised enough capital to reduce debt to a sustainable level and give the market a direction and their strategy. PGW was very lucky not to be caught with Silver Ferns.

It is good to see Norgate stand down as chairman. Lets bring on a capital raising soon, I feel one coming.

disc: not a shareholder

Snoopy

10-08-2009, 09:57 AM

You stick to your guns Snoopy, I for one appreciate your posts & as you well know TA ain't the only way to make some $$$.

People have to realise those who stick to there systems tend to do better than those who chop & change!

It's hard to go against herd mentality

Just read your post again Shasta. You probably didn't think about it consciously, but it is interesting to see that reading through a few pages on the PGW thread could lead you to make such a post.

I think it is particularly tellling that you have gained the impression that I am 'going against the herd' by investing in PGW. PGW is one of the few ways the ordinary New Zealander who does not own a farm can invest in the rural sector in this country. The rural sector is responsible for something like 60% of New Zealand's exports. To suggest that someone who invests in the the very largest sector of the economy, and in export receipt terms is the backbone of the economy is somehow in a minority position seems to be patently absurd. Surely it is not possible to take an investment position that is more mainstream than the position I adopt?

I guess my rationale for investing in the rural economy 'right now' is this. Even if you don't think right now that the rural sector is the place to be, because the rural sector is so large it will largely drive other sectors of the NZ economy. If you don't have some 'skin in the game' in the rural sector, how are you going to understand where to make your investments within the rest of the economy?

SNOOPY

Snoopy

12-08-2009, 10:57 AM

Chalkies main point that PGW (exc finance) has $256m of free equity supporting $435m of debt ..... which she says a 1 for 1 at 50 cents is needed to right-size ) a Chalkie term) the balance sheet ... $150m seems a lot of dosh though.

$150m would shore up the balance sheet so that the 'free equity':'debt' is approximately 1:1. Traditionally that has been a kind of intersector standard. Even with that $150m level of capital being raised, PGW would still have a high debt burden - given the sector it is in, IMO. I still remember, around the turn of the century, going to an Air New Zealand AGM in Christchurch where Sir Selwyn Cushing proudly stood up and said that Air NZ had more than adequate capital when compared to comparable airlines all around the world. That may have been true. But shortly afterwards Air New Zealand was only saved by a government equity bail out, and most of the strong global airline players that Sir Selwyn was comparing Air NZ to went broke.

While on the subject of industry 'rules of thumb', Chalkie makes the following comment on investing in businesses that are themselves invested in geared industries, the so called 'pork on a pig':

"Pointy-headed analysts have a way of looking at at companies like this by attributing 1:1 an amount of shareholders funds to the geared investments and asking the question, what level of 'free' or residual shareholders funds is left to support the debt on the balance sheet. For PGW this calculation gives $389m of equity, less $143m in geared investments, leaving $256m of free equity supporting $435m of net debt."

That paragraph would suggest that no matter what the level of subsidiary debt, the parent company should provide on the balance sheet a guarantee of capital equal to half the underlying investment value. I don't believe that applying a rule of thumb like this is the best way to decide on the capital adequacy of the parent company. I want to do some more homework on this point.

SNOOPY

winner69

12-08-2009, 11:08 AM

.....

turn of the century, going to an Air New Zealand AGM in Christchurch where Sir Selwyn Cushing proudly stood up and said that Air NZ had more than adequate capital when compared to comparable airlines all around the world. SNOOPY

The infamous $1 billion in the bank eh .... but what he forgot was that most of it was prepaid fares anyway (so not really their money) and they still had to incur the cost of flying all those people around

Even today AIR touts the nearly $2 billion of cash as wonderful ... same story

Dr_Who

12-08-2009, 11:10 AM

modandm

13-08-2009, 10:12 PM

The infamous $1 billion in the bank eh .... but what he forgot was that most of it was prepaid fares anyway (so not really their money) and they still had to incur the cost of flying all those people around

Even today AIR touts the nearly $2 billion of cash as wonderful ... same story

that $2bn does not represent the prepayments. that 2bn is part govt capital injection 'liquidity warchest defence mechanisim' and part earmarked for the new fleet purchases. These funds are 100% invested in liquid investments of a maturity <1year

IN FACT - the treasury policy states that the target cash is 500m.
which is interesting considering the point you have made and the fact that according to recent statements:
http://www.airnewzealand.co.nz/resources/interim_results_09.pdf
we can see that revenue in advance usually represents a liability of around $800m.

v interesting business airlines

all interesting stuff

upside_umop

16-08-2009, 10:03 PM

Some nice analysis Snoopy, Winner et al.

I'm doing a bit of research report for stock competition and trying to pick as many holes in PGW as possible.

Another thing you guys may be interested in is RPI.

RPI have notes issued on the debt exchange with a sell yield to maturity of 33%! Buy yield is 50%! Debt holders are getting a little nervous even when these bonds mature in 20 months time!

Things arent looking rosey for PGW, and I suspect a cornerstone shareholder will be sought to bail it out a bit. Why another cornerstone shareholder? Clearly, Norgate is not going to be able to take up his share at 1:1 issue and if say, an issue was made at 50 cents, it wouldnt be quite enough to get them out of the poos.

The question is, will this cornerstone shareholder seek a massive discount? Is PGW classed as 'Iconic'?

winner69

27-08-2009, 03:26 PM

In summary full result reads like -

In the worst market conditions for 70 years the guys at the coal face doing the the day to day hard yakka did a fantastic job and ptofits were $30m ..... but the overpaid fat cats who have all the brains and business acumen went and wasted $96m .... net loss $66m

Sad really .... and they are proud that the head count was down 10% ... but wage bill down 6% sort of suggests that the those doing the hard yakka suffered more

Dr_Who

27-08-2009, 03:33 PM

EBITDA is not too bad. Abnormals kicked them into the red.

Interesting comment in cap raising.

Any equity raising is likely to involve both existing
shareholders and new investors, and may also include the introduction of a new
cornerstone shareholder.

Are they current in talks with cornerstone shareholder? Will this be another FPA? How much will they seek to raise?

I am keen to buy PGW, just have to get the timing right. :)

Dr_Who

28-08-2009, 07:37 AM

Looks like PGW For Sale sign is up.

Maybe the Chinese can pick this one up for cheap?

Balance

28-08-2009, 08:29 AM

Why would the Chinese want to buy a NZ based rural servicing company employing thousands of people? Resources or brands - that's what the Chinese are looking for.

PGW is now in deep deep financial strife. Banks have given the company until 31 March 2010 to repay $200m.

glennj

28-08-2009, 08:34 AM

"Leading rural services firm PGG Wrightson is planning to raise capital and wants a new cornerstone investor after its banks put the heat on for repayment of $200 million of debt by next March."

Wasn't difficult to see more capital is required. Wonder what transpires?
Another Nuplex type opportunity?

Dr_Who

28-08-2009, 09:40 AM

PGW is a very good business and substantially very valuable if it wasnt for the high debt level and the recent stuff up by management.

It is still a very valuable company and business if they can get it all sorted. Imagine if PGW can get an investor who can propel them offshore using their existing experiences and extensive knowledge.

Phaedrus

28-08-2009, 10:37 AM

The MetaStock software that I use provides over 200 technical indicators. Who needs 'em? Use of just a couple of the simplest indicators gives excellent results, getting you out of PGW nice and early and well before the big plunge. These same indicators clearly signaled a very profitable entry/exit in March/May. In the absence of anything better, even a Trailing Stop would have got you out of PGW before you gave too much of your profit back to the market.

The bluntest instrument in the TA toolbox is perhaps the 200 day Moving average as used by very conservative investors. This got you out of PGW at around $2.30 - and has kept you out.

ANY exit strategy is better than none at all.

http://h1.ripway.com/78963/PGW828.gif

Balance

28-08-2009, 10:38 AM

Who is going to put money now into PGW? RPI is going to lose an absolute bundle and PGC has its own problems.

This is the second time Wrightson is in deep trouble.

GPG?

upside_umop

28-08-2009, 11:02 AM

Exactly balance, I stated this earlier re norgate and along with with PGC thats ~50% of share register who cant participate in an equity raising. PGC are after one of their own!

Cornerstone shareholder is inevitable.

PGW is a big avoid with so much uncertainty. It has been for a while...TA shows this.

COLIN

28-08-2009, 11:11 AM

A good company, wrecked by Norgate's ego. He never could accept being dumped by Fonterra, and set out to "get his own back" via Wrightsons.

PGGW will rise again, from the ashes, but in a distinctly different form.

BRICKS

28-08-2009, 11:21 AM

IF PGW is in the sh*t the is there Hope for Allied Farmers ALF, you know GPG has 4% of them and they are very good PICKERS..

kizame

28-08-2009, 11:23 AM

Pheadras: If it is one thing you have taught me,and probably the most important to me, is to keep it simple.I have tried all sorts of bar charts etc. indicators etc. but common sense must prevail when you think about it.

I have gone back to line charts and OBV,MACD,RSI but ocasionally look at others for confirmation,you just can't beat simple trendlines and volume indicators,although I have been whipsawed out on some very good trades nonetheless nothing was lost.

Do you use a standard trailing stop loss indicator or do you modify to a specific stock?

It is excellent this forum has someone like you on here,it is all very well the nay sayers talk of hindsight being a wonderful thing,but TA gives you a good idea of the probable direction of a stock and you just can not beat that.Even if you are a fundamentalist,you much the wiser for looking at charts first,before making your investment.

Cheers.

Balance

28-08-2009, 11:34 AM

IF PGW is in the sh*t the is there Hope for Allied Farmers ALF, you know GPG has 4% of them and they are very good PICKERS..

GPG good pickers? You mean like Capral, CSR etc?

winner69

28-08-2009, 12:19 PM

The bell tolls at PGW

By DAVID HARGREAVES - BusinessDay Last updated 10:55 28/08/

OPINION: Craig Norgate is clearly not one prone to sulking.

When he was humiliatingly replaced as Fonterra chief executive in June 2003, Norgate could have been forgiven for licking his wounds and quietly retreating from public life.

He didn't. Less than six months later there he was with a sharemarket raid on rural services company Wrightson, which turned into a full-blown endeavour to lead rationalisation in the rural sector.

The unspoken fact to emerge from the disaster that was yesterday's PGG Wrightson annual result was that Norgate's dream is in tatters.

He has already stood down as the company's chairman. Next will come the surely unpalatable fact that he is about to lose his always tenuous position as the company's main shareholder.

Norgate has maintained a nearly 30 percent stake in PGG Wrightson with the assistance of the wealthy South Island McConnon family and through a company that borrows money directly from the public to fund the stake.

This company, Rural Portfolio Investments, would already be stressed by the fact it is not getting dividends from PGW - as this is how it meets the interest payments to the public.

So, unless Norgate can mysteriously find millions of dollars from somewhere there seems little chance he will be able to participate in the capital raising that PGW, for all the apparently casual way it has raised the subject as a possibility, is clearly going to need.

PGW has to repay its bankers $200 million by March. Unless it sells some chunky assets - and doing so would undermine the whole rationale of the business - it is to be imagined the company will need a capital raising of somewhere in the order of $150 million.

Based on current share prices it would be difficult to see any share offer being pitched at anything more than about 50 cents a share. This would mean issuing about 300 million new shares. The company has just 315.8 million at the moment.

If you assumed a capital raising on such terms, and supposing that Rural Portfolio Investments does not take part, its 88.5 million shares would end up representing only about 14 percent of the diluted capital base.

What you have got then is a big investment of questionable strategic value.

A lot will depend on what the current 20 percent shareholder Pyne Gould Corporation decides to do. PGC has its own serious issues and is also expected to seek about $150 million. We might find out more about that later today.

If the parties that collectively control about 50 percent of PGW's capital are not able to participate in a capital raising then PGW will simply have to find a new major shareholder from somewhere.

Ad Feedback Clearly the door would be open now for a party to make an opportunistic takeover bid for PGW.

But it is actually doubtful if either RPI or PGC would be in a position to sell at such depressed prices. More likely they would hang in there with the thought that a successful recapitalisation will ultimately see the PGW price attain much better levels than at the moment.

They would take encouragement in this regard from resins maker Nuplex, which is now enjoying a big sharemarket renaissance after raising $159.5 million earlier this year.

The downside of course is that you can't directly compare the two companies. Nuplex is a provider of an essential input in a massively wide range of products and applications. PGW is in a very cyclical business. It is all a bit of a mess and a happy ending for PGW would appear far from guaranteed.

For Norgate, lightning has struck twice. What sort of financial shape he will be in at the end of this will be interesting to see.

Will he have the appetite to have a go at making it third time lucky in New Zealand business life?

http://www.stuff.co.nz/business/2811116/The-bell-tolls-at-PGW

BRICKS

28-08-2009, 12:45 PM

GPG good pickers? You mean like Capral, CSR etc?

Above you have just got NO sense of HUMMOR..

POSSUM THE CAT

28-08-2009, 02:26 PM

Maybee SCF has no choice but to be the Cornerstone Shareholder of Wrightsons

winner69

29-08-2009, 07:55 AM

Balance

29-08-2009, 08:46 AM

PGW did bloody well in making $30m odd operating profit .... the rest of the result was essentially non cash and/or abnormal items ... so the attitude is not to really worry eh .. they are only non cash items

Not just for PGW (many other companies inc banks and property companies) but these non cash items were cash once ... bit ironically these non cash items are the reason for having to have a cpaital injection .... ie we want cash ... and plenty of it

Ignore these non cash items when assessing performance at your peril

Well stated, W69.

Management makes bad decisions - investing cold hard cash put in by investors/shareholders/borrowings and blowing the money into smoke.

But it's just non-cash items now so come give us some more.

Freaking hell - the ignorance and naivety of some people. No wonder management have such contempt for shareholders.

Balance

29-08-2009, 08:58 AM

winner69

30-08-2009, 10:00 AM

Balance

30-08-2009, 10:16 AM

Most probably guessed it anyway but interesting that PGW only disclosed that they were in breach of banking convenants in the ir annual results announcement ... and then only to expalin/justify why they were producing 2 balance sheets for analysts - one showing most of the debt as short term due in next 12 months and the other reflecting their 'successful' negotations with the bank in getting due dates pushed past June 2010

There seems to be a concerted plan to drip feed more and more pieces of bad news into the market with the hope that the share price will keep on falling ... falling ... falling

I'd say there is somebody in the wings waiting to swoop on PGW ... and maybe its all tied up with PGC and SCF as well ... and be the white knight / hero that saves the day

And we all know what happens to small shareholders in these circumstances ... it all
ends in tears

W69, would tend to agree except that SCF and PGC themselves are so buggered. IMO, they need rescuing themselves and PGW is not an easy company to reinvigorate. Been buggered too many times.

SCF's first priority is to survive without the govt guarantee when it expires - not take on a problem child like PGW?

PGC's best asset is Marac which needs a massive recapitalisation - then there's PGW crying out for more capital.

What a sorry mess.

Tee

30-08-2009, 08:59 PM

That's what it says in the National Bank Share and Bond Trading website. I'm not a shareholder now as I had cashed out months ago. At the current share price - its looking attractive.

beacon

31-08-2009, 12:17 PM

That's what it says in the National Bank Share and Bond Trading website. I'm not a shareholder now as I had cashed out months ago. At the current share price - its looking attractive.

Old data, or really bad error

31-08-2009, 02:39 PM

NTA is $14.87? That's what it says in the National Bank Share and Bond Trading website. I'm not a shareholder now as I had cashed out months ago. At the current share price - its looking attractive.

Direct Broking shows NTA/Share: 14.87 cents.

Tee

31-08-2009, 04:34 PM

Direct Broking shows NTA/Share: 14.87 cents.

Sorry my typing error, it ought to be 14.87 cents. Anyway I can't reconcile this with the Aspect Huntley's valuation of $1.80 per share (even if its an old one).

COLIN

31-08-2009, 05:53 PM

Sorry my typing error, it ought to be 14.87 cents. Anyway I can't reconcile this with the Aspect Huntley's valuation of $1.80 per share (even if its an old one).
"Valuations" mean absolutely nothing when a company is in the hands of its bankers.

macduffy

02-09-2009, 04:37 PM

PGW now an acquisition target.

But who would be interested?

http://www.stuff.co.nz/business/2825978/PGG-seeks-new-shareholder

Dr_Who

03-09-2009, 10:02 AM

I just love how the PGW is trying to talk up the sp using the media.. LOL

winner69

03-09-2009, 06:47 PM

So did they breach banking convenants or not. In the results announcement they let slip "In June 2009 the Company notified its banking syndicate of a potential
breach of its financial covenants as at 30 June....."

Because rverybody (including the media) is obviously confused and got it wrong PGW come out with a clarification today and said 'The receipt of waivers from the Company's lenders ensured that no breach occurred" .... which sort of reads that breaches occurred under the old convenamts but when the convenants were changed there was no breach .... so its all OK Jake ... no worries eh

And by the way we couldn't tell you until new arrangements were in place because it could have been potentially misleading.

Never mind ... the more they try to explain it the deeper the hole becomes .... and the shareprice falls further

Probably Colin is right when he said earlier valuations mean nothing when the compnay is in the hands of its bankers .... and that is not a good place to be

We'll see what happens eh ... probably another few stories in the press tomorrow ... and another clarification from the Board

What a shambles PGW has got itself into ... and the $94m abnormals one off were only non cash eh

Of course they were abnormals .... I note that PGC treated them as abnormals as well in their recent analyst presentation

winner69

04-09-2009, 10:39 AM

I just love how the PGW is trying to talk up the sp using the media.. LOL

and even more good news today

http://www.nzx.com/news/markets/2834339/PGG-Finance-plays-it-safe

winner69

10-09-2009, 05:18 PM

I just love how the PGW is trying to talk up the sp using the media.. LOL

Chairman Smith all pissed off with media and commentators who just don't get it - using words like "uninformed" "wildly inaccurate" "speculation" is hard hitting stuff indeed

So to clarify it .... listen carefully ..... we not selling businesses that were part of its core business ... so seeds etc are safe.

So to clarify it .... listen carefully ......we did not breach banking covenants .... (but I must apologise i didn't really make it clear in the original announcement)

So to clarify it .... listen carefully ..... we actually made $30m .... even though the accounts say we lost $66m

So to clarify it .... listen carefully ........ The $50 cost of the failed merger with Silver Fern Farms and the $39.2m fall in the value of its stake in New Zealand Farming Systems Uruguay are only a mirage .... not our fault ... irrelevant ... forget about it

OK Chairman Smith -- I now get it .... clear as mud .... just like your announcements ... clear as

My apologies to jumping to the wrong conclusions