PGW - PGG Wrightson [Archive] - Page 6

Balance

18-07-2010, 05:59 PM

[QUOTE=percy;312121][QUOTE=mouse;312116]
you only have to remember the very successful amalgamation of Pyne Gould Guiness with Reid Farmers.It is interesting to note that George Gould who oversaw it is now on the board of PGW.

Well I hope you are right and PGW can turn into a sucessful company. I hope George Gould can make a difference.
It seems PGW have many good parts such as the finance company, Fruit fed, the seed business yet the sum of the parts does not produce a good result.
They have a large turnover ( over $1 Billion)huge market share but produce minimal profits. Something is wrong and the board needs to fix it.
I hope with the annual report we see some leadership from the board on how they intend to improve the bottom line otherwise the share price will continue to slide

Just remember RBD - a company in transition is often ignored by the market and written badly of. PGW could be one ... it may be not. You have to do your homework.

percy

18-07-2010, 07:04 PM

[QUOTE=rabcat;312145][QUOTE=percy;312121]

Just remember RBD - a company in transition is often ignored by the market and written badly of. PGW could be one ... it may be not. You have to do your homework.

Rabcat,What Balance has posted is it in a nut shell.
What you have posted"They have a large turnover,huge market share but produce minimal profits "
is where I see the very strong board lead by Sir John Anderson,and now with George Kerr and Bruce Irvine will be able to give direction.What I do not know is how long it will take.
It will happen,but farmers are at present paying down debt rather than spending.Strong board,good balance sheet,good staff will produce good shareholder returns.The brand is the market leader.

Balance

19-07-2010, 09:00 AM

See Olam making a takeover offer for NZS? 34% premium to the last traded price.

Fundamental value does not disappear.

Balance

19-07-2010, 10:17 AM

Bal me old mate - this had me RAOTFLMAO - 140 down to 41? NTA reported on DB as 91 cents?

Those who have been accumulating NZS at 40c will be grinning from ear to ear. Guess who has been selling to them?

Unfortunately NZers do not appreciate value like offshore corporates do?

Remember Fletcher Energy? Sold to Shell for less than one third of its true worth, right at the bottom of the oil market.

winner69

19-07-2010, 11:40 AM

Those who have been accumulating NZS at 40c will be grinning from ear to ear. Guess who has been selling to them?

Unfortunately NZers do not appreciate value like offshore corporates do?

Remember Fletcher Energy? Sold to Shell for less than one third of its true worth, right at the bottom of the oil market.

Not just NZers who don't appreciate value

Didn't Hunter Hall, the aussies who call themselves the doyen of value investors, sell the best part of 35 million shares in the low 40's last August/Sept?

flyingfox

19-07-2010, 02:05 PM

Balance

19-07-2010, 02:16 PM

It's funny to see how much interest overseas investors have on NZ farms and the dairy industry compare to ourselves: lack of interest, lack of confidence, lack of fund to invest and the affordability to wait for recovery. Look at which is the best chart on NZX: junk food..Is that because many people only can afford KFC and pizza if lazy to cook since the crisis?

No - KFC is a global thing. Read the article in the NZ Herald re KFC in China.

It si because NZers are lousy at timing their investments - buying at the top and ably aided by the banks who love to lend big bucks when the market is feverishly hot.

GR8DAY

19-07-2010, 02:57 PM

.....so GURUs are we at the bottom of the PGW "trough" yet.......shall I start buying now........TA? FA?

GR8DAY

19-07-2010, 02:59 PM

.....anyone brave enough to make a call?

peat

19-07-2010, 03:05 PM

not brave enough to make a call
but to add to my comment about the possibility of this being an ending diagonal I will say there is no confirmation of a change of trend yet with lower lows still being made (16/07). Prudent players will wait for a higher low to show itself.

Doyle

19-07-2010, 07:01 PM

percy

19-07-2010, 07:53 PM

Results out on august 13th, market has priced in a pretty bad result. So if it is halfway decent watch this one take off. China is keen on deals with agriculture and PGW has a strong oppertunity to be a the forefront of this over the next decade. There is value here just waiting to be unlocked.

How can they do this to us?.No sense of fair play.i would have expected better of Sir.John.The 13th is a Friday!!!! No wonder the market has priced in a pretty bad result.The market knows full well what can happen on Friday the 13th.Have n't shareholders had enough bad luck!!!

Doyle

19-07-2010, 08:22 PM

How can they do this to us?.No sense of fair play.i would have expected better of Sir.John.The 13th is a Friday!!!! No wonder the market has priced in a pretty bad result.The market knows full well what can happen on Friday the 13th.Have n't shareholders had enough bad luck!!!

LOL had not noticed, I;m not normally superstitous but am suddently even more nervous. !!! recent trading would suggest things are not good, but there is a different between NZ and australia, lets just hope given what we have seen with elders and Nufarm that that difference is big.

frostyboy

19-07-2010, 09:18 PM

My first reaction without the market is NZS is worth more and PGW should know this and if they are selling out they must really need the cash and they might miss out on their management fee/s from NZS? couldnt NZS do tricks to decrease their assets like sell and lease back and do a capital dividend? which is why pgq had a 10% stake.
Anyhow the pgw went up despite the market going down, I think the the market has factored in the company having some serious cash problems.

Snoopy

21-07-2010, 10:35 AM

How much debt do PGW have and what is the banking covenants on those debt?

Unaudited liabilities for the PGGW group as at 31st December 2009, after the proceeds of the Agria placement and subsequent rights issue was $993.8m. "Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA

Senior Debt is bank Debt (held with ANZ National, BNZ and Westpac)=$197.9m+$75m(Working Capital)=$272.9m. Junior Debt is a $25m facility with South Canterbury Finance. Each year for >30days the Working Capital facility must reduce to zero.

SDCR<4.0 by 30-06-2010, SDCR<3.5 by 30-09-2010, SDCR< 3.00 by 31-12-2010 onwards.

SNOOPY

Snoopy

21-07-2010, 10:54 AM

SDCR<3.5 by 30-09-2010

I think FY2010 underlying EBITDA could be as low as $18m for PGW. If all that cash generated was put into reducing debt (all of it won't since some of those earnings have already gone into reducing debt in the first half year), then I calculate the best case SDCR as:

SDCR = ($197.9m-$18m)/$18m= 10.0

If EBITDA was $45m

SDCR = ($197.9m-$45m)/$45m= 3.4

PGW needs to be earning an EBITDA of $45m and quickly. This I think may have influenced PGW to sell their NZS shares now. Put crudely, despite the rebuilding of their balance sheet, PGW are now in desperate need of money to appease their bankers. NZS is a 'forced sale'. Frostyboy, you are onto it.

SNOOPY

Snoopy

21-07-2010, 11:45 AM

How much debt to PGW have and what is the banking covenants on those debt?

This info is taken from the 'simplified disclosure prospectus' on made for the 2009 rights issue, page 45, additional numbers from p66 and page 68. There is an additional banking covenant called the "Fixed Cost Coverage Ratio" (FCCR).

FCCR>1.85 by 30-06-2010, FCCR>2.0 by 30-09-2010, FCCR>2.0 by 31-12-2010 onwards.

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

=[$18m+$29.8m]/[$37.34+$29.8m]= 0.71 (if EBITDA= $18m)
=[$45m+$29.8m]/[$37.34+$29.8m]= 1.11 (if EBITDA= $45m)

I havn't quite figured out why lease expenses are in there (can anyone help here?). But it does look like PGW are in trouble by this measuring stick as well.

SNOOPY

Balance

21-07-2010, 12:19 PM

Snoopy, you need to look much closer than what you have done to date - what is the forecast EBITDA of PGW?

Meanwhile, John Anderson as new Chairman is not going to risk his reputation by not disclosing breach of banking covenants to the market.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10659930

BTW, note how Dr Who had no idea what debt levels and debt covenants NUF & ELD were operating under! And he asks the question of PGW?

percy

21-07-2010, 12:31 PM

Although I am happy to hold my NZS shares I see PGW sale as a sign that PGW are returning to being a "supplier" which i see as positive.

Balance

21-07-2010, 12:39 PM

I think FY2010 underlying EBITDA could be as low as $18m for PGW. If all that cash generated was put into reducing debt (all of it won't since some of those earnings have already gone into reducing debt in the first half year), then I calculate the best case SDCR as:

SDCR = ($197.9m-$18m)/$18m= 10.0

If EBITDA was $45m

SDCR = ($197.9m-$45m)/$45m= 3.4

PGW needs to be earning an EBITDA of $45m and quickly. This I think may have influenced PGW to sell their NZS shares now. Put crudely, despite the rebuilding of their balance sheet, PGW are now in desperate need of money to appease their bankers. NZS is a 'forced sale'. Frostyboy, you are onto it.

SNOOPY

For your benefit, Snoopy - read this and then, recalculate.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10628409

PGW is getting sold down because NUF and ELD have been thrashed by the market for multiple profit downgrades and misleading the market. Results will be out soon and market is pricing in a bad case scenario.

Snoopy

21-07-2010, 12:43 PM

John Anderson as new Chairman is not going to risk his reputation by not disclosing breach of banking covenants to the market.

From that referenced Herald article:
---------
PGG Wrightson spokesman Brent Melville said the $15.5 million that would be raised by selling the shares was not essential.
"Obviously it is a 'nice to have' as we can use it to reduce debt. We can use it for a number of things, we don't need it operationally at all," Melville said. "I would say that we believe in the future of it but at this moment in time it's opportune for us to divest our shares if we have the opportunity to do so."
---------

PGW may not need the NZS capital operationally, but do they need to to satisfy their banking covenants? The quote above does not rule out that possibility.

SNOOPY

bung5

21-07-2010, 12:54 PM

Snoopy

21-07-2010, 12:58 PM

For your benefit, Snoopy - read this and then, recalculate.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10628409

The article says this about PGW's FY2010:
"The company's forecasts in November, for full-year EBITDA of $73 million and profit from continuing operations of $24 million, "remain broadly consistent with the board's expectations" though with several key months to come, it is difficult to predict the full-year outcome, the company said."

SDCR = [$197.9m-($73m-$24.9m)]/$73m= 2.05 < 4.0 so O.K.
FCCR = [$75m+$29.8m]/[$37.34+$29.8m]= 1.56 < 1.85, so not good enough

Do you concur Balance?

SNOOPY

Balance

21-07-2010, 12:58 PM

From that referenced Herald article:
---------
PGG Wrightson spokesman Brent Melville said the $15.5 million that would be raised by selling the shares was not essential.
"Obviously it is a 'nice to have' as we can use it to reduce debt. We can use it for a number of things, we don't need it operationally at all," Melville said. "I would say that we believe in the future of it but at this moment in time it's opportune for us to divest our shares if we have the opportunity to do so."
---------

PGW may not need the NZS capital operationally, but do they need to to satisfy their banking covenants? The quote above does not rule out that possibility.

SNOOPY

As mentioned, you need to recalculate based upon what I have given you.

Don't knee-jerk to Dr Who's question - I mention this because he was so dismissiive of PGW when he bought aggressively into ELD & NUF.

Now it's clear he did not even bother to do some basic analysis and comparison before choosing NUF & ELD.

Otherwise, why would he ask such a basic question as to PGW's debt levels & covenants?

Balance

21-07-2010, 01:28 PM

The article says this about PGW's FY2010:
"The company's forecasts in November, for full-year EBITDA of $73 million and profit from continuing operations of $24 million, "remain broadly consistent with the board's expectations" though with several key months to come, it is difficult to predict the full-year outcome, the company said."

SDCR = [$197.9m-($73m-$24.9m)]/$73m= 2.05 < 4.0 so O.K.
FCCR = [$75m+$29.8m]/[$37.34+$29.8m]= 1.56 < 1.85, so not good enough

Do you concur Balance?

SNOOPY

Snoopy, finance company income and expense (mostly interest) are normally excluded from covenant calculations.

Snoopy

21-07-2010, 01:56 PM

SDCR = [$197.9m-($73m-$24.9m)]/$73m= 2.05 < 4.0 so O.K.
FCCR = [$75m+$29.8m]/[$37.34+$29.8m]= 1.56 < 1.85, so not good enough

Now let's rework the covenant figures for FY2011, assuming underlying earnings and costs are unchanged. That means $6.5 Depreciation & Amortization, $149.8mx0.08= $12m Interest and $24m x 0.3= $7.2m tax.
=> EBITDA= $24m+$6.5m+$12m+$7.2m= $49.7m

SDCR = [$149.8m-($24m+$6.5{D&A})m)]/ $49.7m= 2.4 < 3.0 so O.K.
FCCR = [$49.7m+$29.8m]/[($12m+$4m+$2.5m+$29.8m]= 1.64 < 2.00 , so not good enough

Looks like FY2011 is shaping up to be more challenging than FY2010, however you look at things.

SNOOPY

Snoopy

21-07-2010, 02:03 PM

Snoopy, finance company income and expense (mostly interest) are normally excluded from covenant calculations.

Balance, that term facility of $197.9m I am using in the calculations excludes the PGGWF finance company loan facilities. The $197.9m is underlying group senior debt, taking into account the $200m raised in the rights issue that has already been used to repay the banks $200m amortising facility.

SNOOPY

Balance

21-07-2010, 02:17 PM

Snoopy, I think your reference points should be pages 70 & 71 of the full rights prospectus.

Try :

http://www.pggwrightson.co.nz/assets/about%20wrightson/nov20/PGW%20Rights%20Offer%20Prospectus%20(SDP)%20-%2020%20November%202009.pdf

To be frank, I think you are spending too much time trying to calculate without getting the underlying infor in place first.

I look at the numbers and stress test the numbers against my own expectations - I believe PGW will be fine.

Snoopy

21-07-2010, 07:22 PM

Snoopy, I think your reference points should be pages 70 & 71 of the full rights prospectus. To be frank, I think you are spending too much time trying to calculate without getting the underlying info in place first.

Let's look at the underlying info. Why is the prospectus forecasting EBITDA of $56.7m (p70), when in the same month the new chairman was in the Herald forecasting $75m?

I look at the numbers and stress test the numbers against my own expectations - I believe PGW will be fine.

In fairness "Senior Debt Coverage Ratio" (SDCR) looks OK. But what about the "Fixed Cost Coverage Ratio" (FCCR)? You aren't concerned?

SNOOPY

Snoopy

21-07-2010, 07:35 PM

I look at the numbers and stress test the numbers against my own expectations - I believe PGW will be fine.

The banks are testing their covenants every quarter. So perhaps they are using a rolling year? The sale of NZS shares in September, may boost what is traditionally a 'low quarter' for EBITDA.

Sir John Anderson may not have disclosed any breach of bank covenants becasue they may not have the full June quarter information yet. In any case I think we need to concentrate on FY2011 earnings from now on. There are no numerical forecasts in the simplified disclosure Prospectus about that.

SNOOPY

Balance

21-07-2010, 08:32 PM

Let's look at the underlying info. Why is the prospectus forecasting EBITDA of $56.7m (p70), when in the same month the new chairman was in the Herald forecasting $75m?

In fairness "Senior Debt Coverage Ratio" (SDCR) looks OK. But what about the "Fixed Cost Coverage Ratio" (FCCR)? You aren't concerned?

SNOOPY

Page 62 gives a full breakdown of the $73.4m EBITDA.

Remember that PGW's debt (excluding finance co) is forecast to fall from $413m to $135m by June 2010. SHF will sit at $650m versus $390m. Banks are banks - they lend you money when you do not need it.

Note that PGW has to advise the bank on a monthly basis that its EBITDA is in line with forecasts?

Dr_Who

22-07-2010, 12:16 PM

Now let's rework the covenant figures for FY2011, assuming underlying earnings and costs are unchanged. That means $6.5 Depreciation & Amortization, $149.8mx0.08= $12m Interest and $24m x 0.3= $7.2m tax.
=> EBITDA= $24m+$6.5m+$12m+$7.2m= $49.7m

SDCR = [$149.8m-($24m+$6.5{D&A})m)]/ $49.7m= 2.4 < 3.0 so O.K.
FCCR = [$49.7m+$29.8m]/[($12m+$4m+$2.5m+$29.8m]= 1.64 < 2.00 , so not good enough

Looks like FY2011 is shaping up to be more challenging than FY2010, however you look at things.

SNOOPY

Thanks for the insightful breakdown Snoopy.

Balance

22-07-2010, 01:20 PM

Interesting performances by the agri stocks since beginning of the year :

ELD Down 73%
NUF Down 66%
PGW Down 14%
AWB Down 13%

XJO Down 9%

flyingfox

22-07-2010, 04:41 PM

Interesting performances by the agri stocks since beginning of the year :

ELD Down 73%
NUF Down 66%
PGW Down 14%
AWB Down 13%

XJO Down 9%

good sign, why highlight the first two?

Snoopy

22-07-2010, 07:44 PM

But what about the "Fixed Cost Coverage Ratio" (FCCR)? You aren't concerned?

No comment on this, but I want to put down some more thoughts. Fixed costs are defined to include the interest bills and lease expenses. (Aside question: Why not wages and rates?). The money in to cover these fixed outgoings is EBITDA plus lease expenses which in this context is a negative number. So re-estimating FCCR2011 (assuming a $12m senior interest bill, $4m special bank charges, $2.5m junior debt charges):

=[$49.7m-$29.8m]/[($12m+$4m+$2.5m+$29.8m]= 0.412 < 2.00 , so even worse news.

I really can't get PGW out of trouble with their bankers over FCCR.

SNOOPY

Balance

22-07-2010, 08:45 PM

No comment on this, but I want to put down some more thoughts. Fixed costs are defined to include the interest bills and lease expenses. (Aside question: Why not wages and rates?). The money in to cover these fixed outgoings is EBITDA plus lease expenses which in this context is a negative number. So re-estimating FCCR2011 (assuming a $12m senior interest bill, $4m special bank charges, $2.5m junior debt charges):

=[$49.7m-$29.8m]/[($12m+$4m+$2.5m+$29.8m]= 0.412 < 2.00 , so even worse news.

I really can't get PGW out of trouble with their bankers over FCCR.

SNOOPY

Wrong - suggest you try properly again. Not going to do your work for you since you choose to humor the bell-ringer.

Snoopy

22-07-2010, 09:15 PM

Wrong - suggest you try properly again. Not going to do your work for you since you choose to humor the bell-ringer.

Whatever the Doc's rural investment history Balance, his question on banking covenants and PGW was legitimate. If the Doc chooses to be 'humoured' by my answer, that is his business. My answer was not designed to encourage or annoy. It was just an answer, as I saw it, since no-one else saw fit to contribute an answer.

SNOOPY

Balance

22-07-2010, 11:19 PM

Whatever the Doc's rural investment history Balance, his question on banking covenants and PGW was legitimate. If the Doc chooses to be 'humoured' by my answer, that is his business. My answer was not designed to encourage or annoy. It was just an answer, as I saw it, since no-one else saw fit to contribute an answer.

SNOOPY

Snoopy, if you suffer fools, you become a fool. Have a quick look at this thread and you will see what I mean :

http://www.sharetrader.co.nz/showthread.php?7182-ELD-Elders-....-must-be-money-to-be-made-here/page7

The bell ringer has no idea what FA is about and when given proper numbers, tries and bs his way. It has cost him dearly with NUF and ELD.

For your benefit however, let me rehash your numbers :

You calculated - FCCR = [$49.7m+$29.8m]/[($12m+$4m+$2.5m+$29.8m]= 1.64 < 2.00 , so not good enough

It should be ($73.2+$24.4)/$42.9 = 2.27 as EBITDA is for total charging group. Not sure where you got your $29.8m from?

Cheers.

Dr_Who

23-07-2010, 10:56 AM

Did someone mentioned PVO, DPC, ALF and so on? I am certain, you have had your fair share of loses, no doubt. I have yet to see Balance make a thread and recommendation or disclose his holdings. Yet you come in an treat all the ST posters with contempt and mock those that loose money.

He who assume others are fools are the real fools himself. Get a life.

Snoopy

23-07-2010, 02:48 PM

Page 62 gives a full breakdown of the $73.4m EBITDA.

I realise EBITDA estimates are just that. But I do find it unusual when EBITDA forecasts vary within the same document (refering to the $56.7m on page 70). The $73.4m is what I would normally use. That is because as a long term investor I am interested in the operational performance of the ongoing business units. Banks however, have a different priority. They want to know that the interest payments will keep coming. If that means selling business units or surplus property and generating one off profits to improve a company's capital position, so be it. That means that when we are looking at bank covenants, I think that using the $73.4m EBITDA figure is the wrong thing to do. When calculating the "Senior Debt Coverage Ratio" (SDCR) and the "Fixed Cost Coverage Ratio" (FCCR) I think $56.7m is the correct figure to use.

SNOOPY

Snoopy

23-07-2010, 02:54 PM

Not sure where you got your $29.8m from?

Page 66 of the report, under operating expenses. Rental and leasing costs for FY2010 estimated to be $29.835m

SNOOPY

Snoopy

23-07-2010, 06:23 PM

I think that using the $73.4m EBITDA figure is the wrong thing to do. When calculating the "Senior Debt Coverage Ratio" (SDCR) and the "Fixed Cost Coverage Ratio" (FCCR) I think $56.7m is the correct figure to use.

My above post I think was logical, yet wrong. p45 says the banks specifically exclude extraordinary items and revaluation of capital assets. However, 'charging group' is defined as excluding PGGW Finance and the South American subsidiaries.

So the EBITDA for calculation purposes we need is: $73.4m-$16.6m-$4.1m= $52.7m

Closing in on the answer now. Stay tuned.

SNOOPY

Snoopy

23-07-2010, 06:41 PM

Closing in on the answer now. Stay tuned.

Here are the figures for FY2010

Senior Debt Coverage Ratio = Senior Debt /EBITDA= ($185.2m-$25.0m)/$52.7m=3.0 < 4.0 =>ok

Fixed Cost Coverage Ratio=( EBITDA+ Lease Expenses)/( Net Interest Cost + Lease Expenses)

=($52.7m+ $29.8m)/(0.08x $160.2m+ $29.8m)= 1.95 > 1.85 => ok (just)

That last figure is a bit close for comfort, but we will give PGW the benefit of the doubt.

SNOOPY

Snoopy

23-07-2010, 07:37 PM

Fixed Cost Coverage Ratio=( EBITDA+ Lease Expenses)/( Net Interest Cost + Lease Expenses)

=($52.7m+ $29.8m)/(0.08x $160.2m+ $29.8m)= 1.95 > 1.85 => ok (just)

3 months on, 30th September 2010 and things get tighter. Assuming a 'rolling year' the EBITDA from 1st July 2009 to 30th September 2009 drops out and the EBITDA from 1st July 2010 to 30th September 2010 comes in. If EBITDA does not alter year to year, around $12.5m in cashflow will be available to pay off debt this quarter. Assuming constant lease costs.

=($52.7m+ $29.8m)/(0.08x($160.2m-$12.5)+ $29.8m)= 1.98 < 2.00 => not ok

Do you feel the wobble on that tightrope yet Balance?

SNOOPY

Snoopy

23-07-2010, 07:45 PM

Fixed Cost Coverage Ratio=( EBITDA+ Lease Expenses)/( Net Interest Cost + Lease Expenses)

One more request. EBITDA/(Net Interest Cost) is interest cover, a ratio that makes sense.

For the life of me I still can't fathom why Lease Expenses are brought into the argument, Perhaps

( EBITDA)/( Net Interest Cost + Lease Expenses)

makes sense. But why put lease expenses in the numerator as well? A google search reveals very little information on FCCR. Has this ratio just been made up by NZ banks?

SNOOPY

frostyboy

23-07-2010, 09:52 PM

They are being more accurate in their meaning of ‘interest’ cost and you are being more conservative

Snoopy

24-07-2010, 04:26 PM

They are being more accurate in their meaning of ‘interest’ cost and you are being more conservative

Perhaps. But EBITDA is money in, and interest and lease costs is money out. It makes sense to compare the money going in against the money going out. It does not make sense to take EBITDA (money going in) and add to that lease costs (money going out) before you compare that total with the total money going out. What is so special about these lease costs? That is the bit I don't get.

SNOOPY

Snoopy

24-07-2010, 04:33 PM

If EBITDA does not alter year to year,

Just to be clear, I am forecasting some growth in earnings for the core PGW with this assumption. Long term I am a big fan of the PGGW finance division. Short term, PGW have told us they are shrinking it down. So with less profit from PGGW finance in 2011, the other divisions are going to have to 'step up' to keep overall earnings on an even keel.

SNOOPY

frostyboy

25-07-2010, 01:54 PM

Lease costs are included in EBIT it is categorised as a operating cost when really it is a financing cost. I think that is the same with the statement of cash-flow.

Snoopy

26-07-2010, 05:31 PM

I am forecasting some growth in earnings for the core PGW with this assumption.

Sharechat touting PGW as a buy today. Due to a quirk of IFRS the expectation is of a $15m 'profit' on their NZS shares. However with 770m PGW shares on issue, that equates to just 2c per share. I have just reread the Chalkie 'Pork on a Pig' Article on PGW as published on 30th July 2009. I am reminded of the balance sheet engineering that created Wool Partners International, which I think is still a 100% PGW owned company. The $15m 'extra profit' that appeared as a result must (still) be in doubt. No mention at all about potential further issues with the patched up balance sheet. Anecdotal evidence is that farmers are doing OK, but paying down debt - not buying stuff. I'm not convinced that PGW is an obvious 'buy', but we only have until 13th August for confirmation.

SNOOPY

Snoopy

26-07-2010, 06:08 PM

Sharechat touting PGW as a buy today

Sharechat touting a 66c valuation based on a sum of parts earnings valuation. I estimate FY2011 earnings of $39m, or 5.1cps. A share price of 66c implies a PE of 12.9. I would say that is too high. More realistic would be a PE of 10, which equates to a PE of 51c (today's price). RBD using the same advance PE ratio (10) would today be trading at around $2.50. And RBD has a stronger franchise and lower debt and better cashflow. I don't think PGW is an obvious bargain at 51c.

SNOOPY

Doyle

26-07-2010, 08:17 PM

PGW has obvious growth opertunities i.e. South America and China. RBD is in a realitively saturated market, so has to make most of its growth from increased competitiveness. In short I see PGW as easily being worth a PE of 12-13. However your net profit of 39 million for FY11 could be a little generous.

Snoopy

26-07-2010, 11:00 PM

PGW has obvious growth opertunities i.e. South America and China. I see PGW as easily being worth a PE of 12-13. However your net profit of 39 million for FY11 could be a little generous.

You may be right in that Agria could open up something in China, Doyle. However, I think PGW has stated before that they will be contributing intellectual capital rather than cash capital to such a venture. Perhaps some consultancy fees will flow? Argentina, Brazil and Chile are on the horizon, but how long have PGW been in Uruguay? Since 26th May 1999, would you believe! 11 years later and the after tax and interest contribution from Urugauy is a $NZ600,000 NLAT. Next year maybe a $NZ1m NPAT. Slow progress. The biggest improvement for FY2011 is likely to be the lower interest bill (down from $37m to $15m). That's why I think an NPAT of $39m is attainable in FY2011.

SNOOPY

GR8DAY

28-07-2010, 10:14 AM

......anyone else watching SP rising steadily?......just about back to what I paid....... 54c and a few at 49.......still cheap as chips.

root

28-07-2010, 10:19 AM

......anyone else watching SP rising steadily?......just about back to what I paid....... 54c and a few at 49.......still cheap as chips.

Some healthy buying going through today, lots of small sellers to match. Still just watching at the moment.

Snoopy

28-07-2010, 04:49 PM

......anyone else watching SP rising steadily.

I have been watching today rather surprised due to what happened, or rather didn't happen at the PGG Wrightson Finance bondholders meeting this morning.

"CEO for PGG Wrightson Finance, Mark Darrow who chaired today's meeting said it was always going to be a challenge getting a quorum at the first meeting given the high 50.1% requirement and the wide spread of bondholders around New Zealand and internationally. "While we narrowly missed the quorum today, the meeting would reconvene on 12th August which will allow the bondholder vote to be finalised at that point. A notice of adjournment would be sent to bondholders accordingly." "

If this was going to always be a close call, shouldn't PGWF have hired people to get on the phone and remind bondholders about sending their proxy votes it? Do PGW think their incompetance in being unable to get a quorum will mean more bondholders will vote the next time around? Perhaps it will, but why go to the expense of organizing a special meeting for what has turned into a publicity stunt? I wonder if the second meeting will require a lower voter threshhold, and the first one was effectively set up to fail?

SNOOPY

Phaedrus

29-07-2010, 11:47 AM

http://i602.photobucket.com/albums/tt102/PhaedrusPB/PGW729.gif

winner69

29-07-2010, 11:57 AM

is that a BUY then mate

GR8DAY

29-07-2010, 12:02 PM

......they've been a screeming buy for a month now Winner.......dont need charts to tell you that! $3.00 to sub 50c and I aint no brain surgeon!!

Phaedrus

29-07-2010, 12:05 PM

It is permission to buy, not a directive, W69!

root

29-07-2010, 01:01 PM

Already in, thanks for the confirmation Ph. Fingers crossed now.

Aaron

30-07-2010, 09:09 AM

http://i602.photobucket.com/albums/tt102/PhaedrusPB/PGW729.gif

The time periods you use in the chart can affect the Oscillators. How do you decide the time periods to use. Are they your personal preferences based on trial and error or are these pretty standard.

Without understanding infrastructure contracts and insurance companies wouldn't DOW and QBE be the same as PGW right now on a chart basis.

I would be still a bit nervous the financial world is going to fall off a cliff (or a second dip in this case).

DOW has a broker price of $6.10 and current market price of $5.00
QBE has a broker price of $26.40 and a market price of $16.58
Would you just buy and hold until some sell signals were generated on these companies? without any research and trying to understand the companies(what could be considered the lazy mans way to invest because it seems to simple)

PhaedrusFollower

30-07-2010, 10:06 AM

I can't deny all those buy signals...I'm in at 54c.

GR8DAY

30-07-2010, 10:16 AM

......65c in a month?

Phaedrus

30-07-2010, 10:48 AM

What's a "Class B" bullish divergence?The strongest Bullish divergences occur when the price makes lower lows, but the oscillator makes higher lows. These "Class A" divergences are the most reliable.
A "Class B" bullish divergence occurs when the price makes equal lows, but the oscillator makes higher lows.
"Class C" are the least significant bullish divergences and these occur when the price makes lower lows and the oscillator makes equal lows.

How do you decide the time periods to use for your oscillators? Are they your personal preferences based on trial and error or are these pretty standard?All oscillators have a standard "default" period. In the above chart all featured oscillators use periods much longer than the default values. This is to "detune" the indicator and make it less sensitive. Time periods are selected such that over the 2 years of the downtrend, the oscillator just failed to trigger a buy at price peaks. In other words, the oscillators are fitted to previous peaks just as you would draw a trendline.

I would be still a bit nervous the financial world is going to fall off a cliff. Me too. If you are of that opinion, that is reason enough not to act. These signals constitute permission for conservative investors to buy (for the first time in 2 years). The real value of TA and its prime use here lay in keeping you out of PGW as the price continued to fall. Whether you buy at this point or not is your call. These signals tell us that, technically, the bottom has perhaps been reached. PGW could of course now track sideways, going nowhere for years. Keep in mind, too, that all these buy signals were on minimal volume (and a flat OBV). Unless some meaningful volume kicks in, this little uptrend is going nowhere.

Would you just buy and hold until some sell signals were generated on these companies, without any research and trying to understand the companies?Would I ever act on TA alone and totally ignore fundamentals? Yes I would, particularly if I was only interested in a short-term trade. There is plenty of evidence, though, that using TA and FA in combination is more effective than either approach used alone.

Belg asked me for an excellent chart. I did my very best for him.

percy

30-07-2010, 12:19 PM

Phaedrus,
Thank you for your excellent chart.

Aaron

30-07-2010, 12:44 PM

DOW has a broker price of $6.10 and current market price of $5.00
QBE has a broker price of $26.40 and a market price of $16.58

Sorry QBE isn't showing the signs but DOW might be if I am doing it right

Phaedrus

30-07-2010, 01:35 PM

If you adjusted the oscillators and EMA to be just off the spike in the middle of Oct 09, wouldn't that have created very similar buy signals in mid Jan 10?That is, in fact, exactly what I did, using that mid Oct high to set the initial parameters for all of these indicators. Look back at the chart on Page 66 and you can see that at that time I was using 32 day oscillator periods and a 64 day ema. Here is an updated chart, but using those "old" parameters.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/PGW730.gif

You can see that most of these indicators were just over their trigger line in mid January, so at that point I needed to make a decision. There were 4 options :-
(1) Leave all parameters the same and Ignore such small indistinct signals.
(2) Raise the trigger thresholds from 50 to 50.95 to make the indicators very slightly less sensitive.
(3) Increase the time periods to make the indicators slightly less sensitive.
(4) Act on these small signals and BUY.

I elected to use this peak to further "finetune" the system using option (3), increasing the oscillator periods from 32 days to 35 days and the ema from 64 days to 70 days.

How are these most recent buy signals any different from the same basic set up in the middle of January, when 3 of the 4 oscillators were at/over the 50 line, the EMA70 line was hit and breached?The biggest single difference is in the price action. Look at the magenta lines and see how in mid Jan, those weak indistinct signals were NOT accompanied by a higher high. Neither was there any Bullish divergence. By way of contrast, the recent strong clear signals WERE accompanied by a higher high - AND a Bullish divergence.

BTW - are you interested in that used Zamboni?I'm afraid that was not the type of Streetsweeper I was referring to, YK. Protecting my bunker and its stash of food, water and Krugerrands would require a rather different implement.
http://i602.photobucket.com/albums/tt102/PhaedrusPB/Streetsweeper.gif

GR8DAY

03-08-2010, 10:31 AM

steady as she goes......SP firming nicely

mouse

06-08-2010, 08:35 PM

Balance

07-08-2010, 11:51 AM

LOL ... just noticed that the result is out a bit earlier than last year ... Now its Friday, 13th ... Someone at PGW with a quirky sense of humour? All good. I'd do the same, just for fun.

Usually a good sign when companies report early.

Balance

11-08-2010, 10:04 AM

Sp firming up towards reporting date ..... again a good sign that the result should be a good one.

Considering that PGW has kicked Elders, Allied Farmers and RD1 butts in the market - PGW need to now capitalize on the opportunity.

Snoopy

12-08-2010, 11:08 AM

Considering that PGW has kicked Elders, Allied Farmers and RD1 butts in the market

I think I missed that announcement. Any chance of a reference?

TIA

SNOOPY

mouse

12-08-2010, 08:43 PM

:mellow:Russia due to fires etc has banned the export of wheat. Russia was the bread-basket of Europe. Even Ancient Greece imported grain from Georgia. This ban on wheat exports must have an effect on our farms and food prices. Plus may affect sp of PGG-Wrightson.:D
According to the BBC, Russia accounts for one quarter of world grain exports. Interesting. Food price inflation is expected.

GR8DAY

13-08-2010, 10:07 AM

.......market not happy with results? Please explain.

Balance

13-08-2010, 10:25 AM

Buy the rumor, sell the fact.

Balance

13-08-2010, 10:36 AM

LOL ... The fact is that PGW ain't going anywhere fast.

From 47c to 57c in less than a month?

How many stocks have put on that kind of gain?

GR8DAY

13-08-2010, 10:59 AM

...now watch them give it all back to the market (bailed at 56)

root

13-08-2010, 11:30 AM

...now watch them give it all back to the market (bailed at 56)

Smart move, me too. Wonder where it will drift down to.

percy

13-08-2010, 11:53 AM

Well no surprises there.Top directors, strong balance sheet,good staff.I feel we are "well positioned for any upturn" in the rural sector.

rabcat

13-08-2010, 04:23 PM

Well no surprises there.Top directors, strong balance sheet,good staff.I feel we are "well positioned for any upturn" in the rural sector.

Yeah Right! Some people are eternal optimists. I guess Percy you are one of them.

There may be light at the end of the tunnel but i think it is a very long tunnel.

percy

13-08-2010, 04:39 PM

Yeah Right! Some people are eternal optimists. I guess Percy you are one of them.

There may be light at the end of the tunnel but i think it is a very long tunnel.

Maybe.NZ has water.Food production ie farming needs water.North China will need all its water for people,not food production.NZ very good farmers,so I see rural will be a good sector to be in.PGW as a supplier to this sector has a bright future.yes the tunnel looks very long at present.So my quote 'Well positioned for the upturn',may pay to wait until we are' poised'?
What I can see is the company is in good shape to take advantage of any opportunities.

Balance

13-08-2010, 04:51 PM

Maybe.NZ has water.Food production ie farming needs water.North China will need all its water for people,not food production.NZ very good farmers,so I see rural will be a good sector to be in.PGW as a supplier to this sector has a bright future.yes the tunnel looks very long at present.So my quote 'Well positioned for the upturn',may pay to wait until we are' poised'?
What I can see is the company is in good shape to take advantage of any opportunities.

It is darkest before dawn. Most investors cannot tell the difference between dusk and dawn.

Have a read of this :

http://www.sharetrader.co.nz/showthread.php?3228-RBD-Restaurant-Brands/page3&highlight=rbd

Snoopy hung on his conviction and is laughing.

rabcat

13-08-2010, 05:34 PM

It is darkest before dawn. Most investors cannot tell the difference between dusk and dawn.

Have a read of this :

http://www.sharetrader.co.nz/showthread.php?3228-RBD-Restaurant-Brands/page3&highlight=rbd

Snoopy hung on his conviction and is laughing.

It might be dawn but i think for an investor there will be no breakfast. Maybe no lunch either. And we dont really know what we are getting for dinner! It could be a long day!

At $23m profit with 750m shares on issue that is about 3 cents per share. Next year they are expecting the same level of profit.
Hmmmmmmm

Balance

13-08-2010, 05:50 PM

It might be dawn but i think for an investor there will be no breakfast. Maybe no lunch either. And we dont really know what we are getting for dinner! It could be a long day!

At $23m profit with 750m shares on issue that is about 3 cents per share. Next year they are expecting the same level of profit.
Hmmmmmmm

If there's one thing that we know about the agribusiness environment, it is that it is dynamic. Current forecasts do not = actual results next year. Companies upgrade and downgrade as the year progresses - that's what investors buy or sell on amongst other things.

One prefers management to be conservative and manage a company conservatively - that's where Craig Norgate went very wrong. So thumbs up to existing management.

Examples - RBD & NPX - upgrades after upgrades.

ELD - downgrades after downgrades.

Which one would you prefer to own?

mouse

13-08-2010, 07:26 PM

A report from the BBC on China. A new irrigation scheme to benefit North China which has 60% of the agricultural land but only 20% of the water. http://www.independent.co.uk/news/world/asia/biggest-relocation-in-china-since-three-gorges-2051297.html
The point being that NZ is well placed to benefit from the demand for agriculture and its products. :):):)

mouse

13-08-2010, 08:15 PM

percy

13-08-2010, 08:23 PM

But note! The water is destined for the cities, not agriculture as far as I can see.

Thank you for the link.I found article very interesting.

Balance

16-08-2010, 02:26 PM

Yeah Right! Some people are eternal optimists. I guess Percy you are one of them.

There may be light at the end of the tunnel but i think it is a very long tunnel.

LOL - when Agria makes a takeover offer to increase their shareholding to 50.1% at 75 cents, many here will be saying they are trying to steal the company.

Exactly like the shareholders in NZS who were happy to sell at 50 cents but are now complaining that the Singaporeans are trying to steal the company.

Or like the farmers who will not pay up for the Crafar farms but now accuse the Chinese of trying to steal the farms.

mouse

16-08-2010, 07:42 PM

PGGWrightson is our leading agricultural supplier. In a country where agriculture is our top export earner, (I think, alternative views welcome). So PGG must prosper providing agriculture is in demand around the world.
Further we have weather calamaties such as Europe, Pakistan, Russia and China. People have to eat. Unless the share price moves up we are looking at another company, PGG, being sold offshore. Overseas business people must be laughing at us, and waiting to pounce. As NZ Farming Systems etc. Sold to the highest, Overseas, bidder. We will end as Muzhiks.
So courage and Patriotic Duty please.

Snoopy

17-08-2010, 09:42 PM

Lease costs are included in EBIT it is categorised as a operating cost when really it is a financing cost. I think that is the same with the statement of cash-flow.

Thanks Frostyboy. Now the FY2010 results are out we can work out the 'Fixed Cost Coverage Ratio'

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($70.48+$26.4)/$36.5+$26.4)=1.54

This is less than the 1.85 figure on page 45 of the 'Simplified Disclosure Prospectus'. So by my calculations PGW are now in breach of their banking covenants.

SNOOPY

Snoopy

17-08-2010, 10:00 PM

Top directors, strong balance sheet,good staff..

FY2010 results show current PGW debt of $23.8m and long term PGW debt of $177.9m. (note I have left out the finance company debt this time Balance). Profit for the year a mere $23.3m, so we have a minimum debt repayment time of 8.5 years. Relative to profitability I would say PGW is best described as 'highly indebted', even after the so called balance sheet fix. Profits from the deferred sale of property was only half that planned ( $11.7m vs $20m). Total liabilities are $122.2m more than projected at 30th June balance date. Have I rocked a few shareholders out of Balance? How's that poise Percy?

SNOOPY

Balance

17-08-2010, 10:04 PM

Thanks Frostyboy. Now the FY2010 results are out we can work out the 'Fixed Cost Coverage Ratio'

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($70.48+$26.4)/$36.5+$26.4)=1.54

This is less than the 1.85 figure on page 45 of the 'Simplified Disclosure Prospectus'. So by my calculations PGW are now in breach of their banking covenants.

SNOOPY

Oh dear! And the banks have not noticed the breach! And the directors reported that they are in compliance with all banking covenants!

Heads must roll!

frostyboy

18-08-2010, 09:12 AM

Also count the preference share payments as interest expense.
Should you really be using the full value or that value of the lease expense in that cover ratio?
I think the market has an idea of these pgw problems as the day PGW announced a conditional sale of NZS the shareprice went up 2 cents

Snoopy

18-08-2010, 09:34 AM

Oh dear! And the banks have not noticed the breach! And the directors reported that they are in compliance with all banking covenants!

Heads must roll!

At the risk of more cynicisim, I will continue to report on this 'pinch period' as PGW wrestles with their bankers. When is the board meeting? These results were only released by management last week, so have the directors seen them?

SNOOPY

Balance

18-08-2010, 09:40 AM

There is no doubt that agriculture is the now the focus for corporate activity - BHP for Potash, Agrium move on AWB and on the local front, Olam and UAG on NZS.

Natural Dairy move on Crafar farms (and then, Carter Holt's farms) , Synlait capital injection, Vinamilk jv with the Maoris up north - heaps of activities and all beneficial for the rural sector.

Cashed up corporates are going to move on undervalued well-positioned agri companies being sold down by short term nervous shareholders.

You just have to figure out which agi company to buy into to participate in the flurry of activities.

A few months ago, NZS was selling at 40 cents because there were grave fears about its debt position. Today it's 63 cents (up over 50%) because Olam and UAG see NZS as a golden opportunity. Olam did not see RPI's debt problem as a problem - it was an outstanding and unique chance for them to buy at 41 cents. Hunter Hall sold out at 41 cents after getting in at over $1. Who is a smart boy then?

percy

18-08-2010, 09:46 AM

I would love to be a fly on the wall when the bank tells Sir,John that PGW is in breach of their banking covenants! Be a bit like telling you grandmother how to suck eggs!!!

Snoopy

18-08-2010, 09:47 AM

And the banks have not noticed the breach!

Perhaps the banks have noticed? The fix is to get shareholders to stump up for more share capital, pay down some more debt and reduce that interest bill. But wait, didn't PGW do just that last year? The nub of the issue is that FY2010 covered a significant number of months before this capital restructuring was bedded in. The net interest bill reflects that. So another way of looking at this is that the interest bill is historical and has already been fixed. If I take an adjusted net interest bill into the calculation:

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($70.48+$26.4)/$17+$26.4)=2.23

2.23 is > 1.85, which is OK. That is only because I fiddled the numbers though.

SNOOPY

Snoopy

18-08-2010, 09:53 AM

Cashed up corporates are going to move on undervalued well-positioned agri companies being sold down by short term nervous shareholders.

You just have to figure out which agi company to buy into to participate in the flurry of activities.

I agree Balance that there is value in the agri sector. I don't agree that the easy way to riches is to buy what is down and hope. You may well get rich that way. I just wanted to point out that such a strategy is not risk free, when you have a company sailing as close to their banking covenants as PGW is.

SNOOPY

Snoopy

18-08-2010, 10:13 AM

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($70.48+$26.4)/$17+$26.4)=2.23
2.23 is > 1.85, which is OK. That is only because I fiddled the numbers though.

The next quarterly testing pinch point coming up is 30th September 2010. PGW earnings are lumpy, and I suspect the first quarter to be traditionally weak. EBITDA for HY2010 was $21.3m, which means an EBITDA of $49.1m for 2ndHY2010 to make up the FY2010 EBITDA of $70.4m. However, the guidance is that things on the farm are not improving quickly and I pick a 10% deterioration. I estimate lease costs to be modestly higher.

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($68.27+$27.7)/$17+$27.7)= 2.1

2.1>2.0, but this is getting uncomfortably close to the wire.

SNOOPY

Balance

18-08-2010, 10:33 AM

Snoopy, me ole hound dog - happy to play along for a while but :

http://www.nzx.com/markets/NZSX/PGW/announcements/4020624/PGW-Back-on-Track-with-2010-Financial-Results

As at 30 June 2010 PGW was compliant with all banking covenants. All major ratio covers were comfortably within agreed parameters.

Sir John Anderson & his board of directors are going to put their names onto something like the above for the fun of it?

GR8DAY

18-08-2010, 10:48 AM

......B that's what I understood also ....."balance sheets SUBSTANTIALLY improved........." Snoopy have you also factored in balance sheet improvements from exiting NZS plus the $4m they're are picking up from sale of Management Rights? Im no accountant and cant be bothered reading most of above but have you allowed for all this in your estimates.......Im keen to buy into this AgriBusiness thing going on at the mo which I expect to strengthen over months and years?

Snoopy

18-08-2010, 11:19 AM

Snoopy have you also factored in balance sheet improvements from exiting NZS plus the $4m they're are picking up from sale of Management Rights?

No, any NZS sell out has not been factored into my calcs. 28.1m NZS shares sold at 60c will allow PGW to reduce their debt by $16.9m. However, with total bank debt at $23.8m+$177.9m=$201.7m, a $16.9m reduction won't make that much difference to the interest bill.

SNOOPY

Snoopy

18-08-2010, 11:29 AM

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($68.27+$27.7)/($17+$27.7)= 2.1
2.1>2.0, but this is getting uncomfortably close to the wire.

PGW's NZS shares were listed as being worth $15.478m in the 30th June accounts. If 28.1m shares sell for 60c the PGW profit from the deal will be: (28.1m x $0.6) - $15.478= $1.382m
Add in the $4m 'profit' from the NZS management contract cancellation, and the EBITDA goes up:

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($73.65+$27.7)/($17+$27.7)= 2.3

2.3>2.0, so that should buy PGW another 6 months of comfort, before those bank hounds start yapping around the board table again.

SNOOPY

GR8DAY

18-08-2010, 11:42 AM

PGW's NZS shares were listed as being worth $15.478m in the 30th June accounts. If 28.1m shares sell for 60c the PGW profit from the deal will be: (28.1m x $0.6) - $15.478= $1.382m
Add in the $4m 'profit' from the NZS management contract cancellation, and the EBITDA goes up:

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($73.65+$27.7)/($17+$27.7)= 2.3

SNOOPY
..........but aren't they locked into 50c a share or do they have an "out".........anyone know??

percy

18-08-2010, 11:52 AM

..........but aren't they locked into 50c a share or do they have an "out".........anyone know??

Don't know,but I would expect there is an escallation clause.Such an experienced board would make sure of it.

Snoopy

18-08-2010, 12:44 PM

..........but aren't they locked into 50c a share or do they have an "out".........anyone know??

PGW are locked into the Olam offer, which is currently 55cps. That means they can't sell to UAG at 60c. But there is nothing to stop Olam increasing their offer that PGW are locked into. If this happens PGW will get a higher price. And with a competing offer in the market, I am willing to bet Olam will lift their offer to at least 60c. If Olam do not and let their offer lapse, then PGW will be free to sell to UAG at 60c as will all other shareholders who have already accepted the Olam offer.

SNOOPY

Snoopy

19-08-2010, 02:17 PM

Simla on another thread wrote
"PGW, for instance, has certainly had some dramas. But is the current low share price even remotely sensible?"

At 54c and with 770m share on issue and a $23.3m profit declared, PGW is on a PE of 16.2, very high for this industry. PGW is fully priced.

Do people seriously think they will not make it back?

There is next to no chance of PGW making it back to even $1 ever, let alone $2.50. Too many new shares have been issued. There is a significant chance that even more shares will have to be issued, further diluting eps.

SNOOPY

Snoopy

19-08-2010, 02:34 PM

Simla on another thread wrote:
"Do they seriously have to make a 10% return for shareholders even during a tough patch - thus forcing a low share price - or should they be cut some slack."

In their very best year of late, FY2008, PGW made 8.2% on shareholder funds. If PGW were to make 10% I'd be jumping up and down so hard you would be feeling it in your corner of the planet! Shareholders 'selling out' can best be thought of as a game of 'pass the parcel' (of shares in this case). The parcel itself is not affected by the selling, and neither is the running of the underlying PGW business.
The share price going down means that on balance people selling see better uses for their capital elsewhere. But the capital within the PGW company is not affected at all by general buying and selling of PGW shares.

SNOOPY

percy

19-08-2010, 03:00 PM

Some thoughts from Craigs on PGW.
Given uncertainties around near term trading,management understandably adopted a cautious tone in its outlook statement.PGW offers a relatively rare exposure to seemingly positive medium term agricultural industry dynamics.Craigs Net Profit projections are 2011 ...30mil; 2012 39mil,....2013 47mil.

Balance

19-08-2010, 05:35 PM

So at 2013 the PE will be down to about 8 if sp stays at 54c... At a PE of 10 that'd place the sp at about 61c and you'd wait 3 years to get there. What a bargain! (Not!)

PGW Mgt have to work some miracles to get a far better return on shareholders funds that Craigs currently believe they can to make PGW worth buying into. Can they work the miracles? Its a pretty strong and expirienced mgt team. Perhaps they can.

No need for miracles, Belg-me-ole-mate.

PGW is a turnaround story and that's what investors are buying or avoiding - have a look at the earnings and share prices of RBD and even, Wrightson, as their operations were turned around in the past. Who would believe RBD's sp would go back to above $1.00, let alone $2.00+. Likewise, who believed Wri would go from 40 cents at one time to over $2.50. That is the beauty of the market!

The market and analysts will always be several steps behind - on the way down as well as on the way up.

Meanwhile, I am having some decent laughs at the poor attempts at trying to calculate, double calculate and triple calculate PGW's financial position. That's not what financial analysis is about! You either know how to do it or you don't.

h2so4

19-08-2010, 06:57 PM

No need for miracles, Belg-me-ole-mate.

PGW is a turnaround story and that's what investors are buying or avoiding - have a look at the earnings and share prices of RBD and even, Wrightson, as their operations were turned around in the past. Who would believe RBD's sp would go back to above $1.00, let alone $2.00+. Likewise, who believed Wri would go from 40 cents at one time to over $2.50. That is the beauty of the market!

The market and analysts will always be several steps behind - on the way down as well as on the way up.

Meanwhile, I am having some decent laughs at the poor attempts at trying to calculate, double calculate and triple calculate PGW's financial position. That's not what financial analysis is about! You either know how to do it or you don't.

I think PGW has a long way to go before it "is a turnaround story"

GR8DAY

19-08-2010, 08:02 PM

.....My 2pennies worth.....I believe the turn-around story is happening now. I suggest some of the number crunchers here will have it right and things as they stand could perhaps be better for PGW. Personally I dont get into that side of things and work more from a common sense angle and use of my now well tuned "gutometer".....my only interest is seeing the share price head north and I believe this will come about because of PGWs intrinsic link to the food/agri business. Food supply to the world will be THE industry of the near future..and the future is now. China in particular needs the expertise and hands-on knowledge that PGW is a world leader of.......thus Agri's 19% stake. I wouldnt be at all surprised to see them increase their holding.....esp with the SP languishing at these levels......what an amazing opportunity for them. China is awash with cash and needs to secure it's food/farming future. The market in general does not number-crunch to the extent of some of our experts on this forum.......if it did most listed co's wud be trading at under half what they currently are. Sentiment will rule and be reflected in the SP at some stage....possibly sooner than some wud expect. Amen

kiwi_on_OE

19-08-2010, 09:30 PM

percy

19-08-2010, 09:52 PM

Gr8day/Snoopy - Reading the release to the exchange from PGW regarding their sale of NZS shares - no comment about the price escalating if Olam increases their offer, only that it is conditional on Olam getting 50%. Is it a poorly worded/defined msg? Or is there no escalation clause? Given the brevity of the release, I couldn't even be sure about the complete accuracy of the '50%' statement, I wonder if Olam could purchase the stake if they held less than 50%. Could it be tempting for them to buy the PGW stake at 55c and flick it to UAG for 60c?

Percy - Still sure about your 'experienced' board comment?

Yes.Very experienced,Sir John Anderson,Bruce Irvine,George Gould have all been there before.I doubt were will see the agreement,but I donot recall any previous takeover where the company in PGW's position did not have escalator clauses.I would expect PGW board would have sort legal advice.And George Gould has a law degree.

Snoopy

19-08-2010, 11:05 PM

Gr8day/Snoopy - Reading the release to the exchange from PGW regarding their sale of NZS shares - no comment about the price escalating if Olam increases their offer, only that it is conditional on Olam getting 50%. Is it a poorly worded/defined msg? Or is there no escalation clause?

Kiwi , there is no separate 'escalation clause' because there is no need of one. It is all covered in the takeovers code. 55c is Olam's first offer. At the offeror's discretion the code allows Olam to increase that original offer but not to decrease it. Sir John Anderson can huff and puff all he likes. But neither he nor any of the directors can change the takeover's code.

SNOOPY

Snoopy

19-08-2010, 11:15 PM

I wonder if Olam could purchase the stake if they held less than 50%?

Anyone can legally buy shares up to 20% of those on issue without invoking the takeover code. But they cannot hold between 20 and 50 percent, which is why the offer has a minimum acceptance condition of 50.1%.

Could it be tempting for them to buy the PGW stake at 55c and flick it to UAG for 60c?

This is legally possible, but Olam would have to gain acceptances from 50.1% of NZS shareholders first. But this is very unlikely with another higher bid on the table already.

SNOOPY

root

20-08-2010, 09:08 AM

The offer is subject to required regulatory approval and Olam obtaining not less than a 50% shareholding. Surely the only party with an "out" is Olam? i.e. letting the offer lapse

Snoopy

20-08-2010, 09:31 AM

The offer is subject to required regulatory approval and Olam obtaining not less than a 50% shareholding. Surely the only party with an "out" is Olam? i.e. letting the offer lapse

The offer will lapse anyway after a prescribed time. Olam has certain rights to extend this time if they so desire. Once the offer lapses then PGW will be released from any share sale obligation to Olam as a matter of course, unless of course they have already sold their NZS shares to Olam during the offer period.

SNOOPY

Snoopy

20-08-2010, 09:42 AM

....my only interest is seeing the share price head north and I believe this will come about because of PGWs intrinsic link to the food/agri business. Food supply to the world will be THE industry of the near future..and the future is now. China in particular needs the expertise and hands-on knowledge that PGW is a world leader of.......thus Agri's 19% stake. I wouldnt be at all surprised to see them increase their holding.....esp with the SP languishing at these level. Sentiment will rule and be reflected in the SP at some stage...

FWIW GR8DAY, I agree with you. But you and I are not the only people that know this. The question is how much of this share price rise you are looking for has already happened? The market is telling me a 50% rise in profit is already priced into PGW. Agria further boosting their stake would mean a bid for control (50.1%).

SNOOPY

GR8DAY

20-08-2010, 09:53 AM

........thanks Snoop dog, yes i guess a bid for control and/or full takeover can't be ruled out either.....what did Agria pay PShare for their 19%??

Snoopy

20-08-2010, 11:35 AM

.... i guess a bid for control and/or full takeover can't be ruled out either.....

At the time of the Agria buy in, PGW Chairman Keith Smith was forthright in saying the Agria buy in was the start of a partnership - not a takeover by the Chinese.

what did Agria pay PShare for their 19%??

41m PGW shares were placed with Agria at 88c. These qualified for the right to purchase additional shares at 45c in a ratio of 9 for every 8 existing. This gives a total of 41m + 46.125m= 87.125m shares purchased for 0.88x41+0.45x46.125= $56.836m. That gives an average purchase price of 65.2c per share.

SNOOPY

GR8DAY

27-08-2010, 07:46 AM

frostyboy

27-08-2010, 11:27 PM

Perhaps the banks have noticed? The fix is to get shareholders to stump up for more share capital, pay down some more debt and reduce that interest bill. But wait, didn't PGW do just that last year? The nub of the issue is that FY2010 covered a significant number of months before this capital restructuring was bedded in. The net interest bill reflects that. So another way of looking at this is that the interest bill is historical and has already been fixed. If I take an adjusted net interest bill into the calculation:

=(EBITDA+Lease Expenses)/(Net Interest+Lease Expenses)=($70.48+$26.4)/$17+$26.4)=2.23

2.23 is > 1.85, which is OK. That is only because I fiddled the numbers though.

SNOOPY

Snoopy how did you estimate the interest for YE 30/6/2010? I am estimating YE 30/6/2011 to be 18 million. If the YE 30/6/2011 dosn't have any increase in EBIT I estimate a P/E of 11.54 at the SP off 55cents. Below are my crude workings to check for value. So its all about are management being conservative in saying the EBIT for YE 30/6/2011 will be the same as YE 30/6/2010

http://iforce.co.nz/i/3r0m2um2.png (http://www.iforce.co.nz/View.aspx?i=3r0m2um2.png)

root

09-09-2010, 05:51 PM

Have looked at charts after seeing your post this morning. Can see an ascending triangle over the last 30 days but not sure what to make of it considering the short timeframe. Not sure how to apply this continuation pattern given the previous short upwards blip in SP.

peat

09-09-2010, 06:44 PM

my previous post back in mid July suggested an ending diagonal and if so it would rise quickly
http://www.sharetrader.co.nz/showthread.php?2923-PGG-Wrightson-(-PGW-)&p=311794&viewfull=1#post311794
that would appear to have occurred to some extent with the old one-two (up, down) back into the diagonal to (re)test
and the new pattern detection s/w confirms with green box target - not much in it for those entering now (as 1st target is only 0.61) unless you hang on for 2nd target 0.71

frostyboy

09-09-2010, 08:24 PM

Do you believe they have no 'grand plan'
http://www.stuff.co.nz/business/farming/3895564/PGGW-looks-to-rejig-operations
I look at things like
http://www.stuff.co.nz/business/industries/agribusiness/3391842/Super-grass-aims-to-boost-milk-production
This suggests upper management are focusing on strategy and are a bit secretive about it so they can do it. Their NZ Silver Fern Farms thing didn't work out but I speculate that they are trying to set up some co-operative vertical intergration thing and Craig Norgate leaded such thinking at PGW. Of course this is all speculation that could take a couple of years to prove right but I don't see much downside in speculating on this and there are probably better opportunities if you want to speculate like that.

Peat, I wouldn’t count that low in early/mid may as Craig Norgate announced selling out and it wasn’t so much normal market movement it was one person being forced to sell out suddenly.

Balance

09-09-2010, 10:17 PM

mikew

10-09-2010, 05:49 PM

Closed steadily at 59c, any thoughts?

Balance

10-09-2010, 06:38 PM

Agriculture = NZ's backbone

PGW = NZ's premier restructured agriculture servicing company

Try to find another combination like that.

mikew

10-09-2010, 07:03 PM

Balance, compare to this strong combination, the present sp is very low, do you think this uptrend is sustainable or just temporary. cheers

Balance

10-09-2010, 11:20 PM

Balance, compare to this strong combination, the present sp is very low, do you think this uptrend is sustainable or just temporary. cheers

I would also add that NZ agriculture + water + international competitiveness = irresistible to international players.

Allow farm prices to drop to realistic levels will prompt a deluge of reinvestments into the sector as well.

If a mickey mouse outfit like Allied Farmers is looking forward to a better year, then PGW cannot but benefit even more and race ahead decisively.

"Allied Farmers does however see some strong signals for recovery coming out of the dairy sector, with forward sales figures into 2011 for dairy herds well up on the previous season," he said."

I expect PGW to issue multiple upgrades over the next few years (just like RBD and Nuplex) - it's good to have conservative and level-headed directors and management in PGW now.

So go for the ride!

mikew

11-09-2010, 07:35 AM

I agree with you Balance, for medium and long term this dog can running very well, I bought a large chunk of pgw share(210k), I can hold it for next few years.

Balance

13-09-2010, 08:43 PM

I agree with you Balance, for medium and long term this dog can running very well, I bought a large chunk of pgw share(210k), I can hold it for next few years.

Many investors sold out of RBD at under 70 cents - including AMP (with all their PHDs and MBAs) who sold out at 58 cents.

A year and half later, sp is $2.40 plus.

That's what a turnaround story is about - with multiple profit upgrades driving the sp.

I expect PGW will be similar.

mikew

13-09-2010, 08:54 PM

Many investors sold out of RBD at under 70 cents - including AMP (with all their PHDs and MBAs) who sold out at 58 cents.

A year and half later, sp is $2.40 plus.

That's what a turnaround story is about - with multiple profit upgrades driving the sp.

I expect PGW will be similar.

I hold tightly my pgw share.

kiora

13-09-2010, 08:56 PM

Balance

14-09-2010, 04:10 AM

I expect the leopard can't change it's spots and underperforms the market year after year !!!!!! What has this Co done for shareholders in the last 10 + years

Oh dear, bad bad question.

Anyone who bought in Jan 2000 made over 350% until August 2008.

Your question should be - what has the company done for shareholders in the last 2 years?

Then, the all important question - can the company repeat what it did between 2000 and 2008 in the years ahead?

Next time, do some homework before writing. Showing your ignorance so publicly is not a good thing.

winner69

14-09-2010, 07:46 PM

[QUOTE=Balance;319196]Oh dear, bad bad question.

Anyone who bought in Jan 2000 made over 350% until August 2008.

Your question should be - what has the company done for shareholders in the last 2 years?

Then, the all important question - can the company repeat what it did between 2000 and 2008 in the years ahead?

Next time, do some homework before writing. Showing your ignorance so publicly is not a good thing.[/QUOTE/]

I feel you patience is starting to show some rewards here Balance

Shareprice up over 60 cents now and the positive signs on P's chart well and truly confirmed

Maybe now PGW have realised that future success is based on working on what they now best and rolling their sleeves up and getting stuck in and just doing it .... forgetting about all those grandiose ideas they had.

Maybe there is a similarity with RBD .... start doing the things you need too and things can turn around

Balance

15-09-2010, 12:57 AM

...now watch them give it all back to the market (bailed at 56)

Time to buy back - break above 60 cents.

flyingfox

27-09-2010, 03:58 PM

Any thoughts on the suddenly lack of buy interest?Is this s normal adjustment on long term uptrend or sign of turnaround?

mikew

27-09-2010, 08:39 PM

I am not a trader, so i don't care the short term sp movements, i look at the sp for next two to three years, i do believe pgw is on right track now.

frostyboy

28-09-2010, 11:13 PM

http://iforce.co.nz/i/rpu2rsrw.gif (http://www.iforce.co.nz/View.aspx?i=rpu2rsrw.gif)

At the moment, the chart by itself looks like it could just be a pull back.
Consider the markets have been going up on this pullback and the depth has looked weak for a couple of weeks as well. This dosn't reinfore the chart is a pullback. However I am on the long on this stock at the moment.

bung5

15-10-2010, 08:53 AM

Oh dear, bad bad question.

Anyone who bought in Jan 2000 made over 350% until August 2008.

Your question should be - what has the company done for shareholders in the last 2 years?

Then, the all important question - can the company repeat what it did between 2000 and 2008 in the years ahead?

Next time, do some homework before writing. Showing your ignorance so publicly is not a good thing.

The problem with that growth in the later years leading up until 2008 was that it was unsustainable with huge amounts of debt.
Looking forward to the feburary resutls. PGW have really milked NZS out of a lot of money. 20 mil of managment fees due this year. 4.6mil to end the mgmt contract and another 20 mil sale of their stake in the company. Once we see this divvie returned along with some solid profits should get the share price moving along.

mikew

15-10-2010, 09:58 AM

Looking forward to the feburary resutls. PGW have really milked NZS out of a lot of money. 20 mil of managment fees due this year. 4.6mil to end the mgmt contract and another 20 mil sale of their stake in the company. Once we see this divvie returned along with some solid profits should get the share price moving along.[/QUOTE]

5c div next year?

flyingfox

15-10-2010, 11:00 AM

5c dividend? is it based on any ground or just a wish?

mikew

15-10-2010, 12:29 PM

5c dividend? is it based on any ground or just a wish?

Compare to last year, 20 mil saved from paying down debt plus 20 mil from sale of nzs stake and 24.6 mil performance fees, 3c-5c div suppose no problem.

bung5

15-10-2010, 01:21 PM

I'll think they'll retain it to fund the new strategy initatives. I don't have a problem with that as their margins are so low its almost operating as a charity/mutual.

How can you be happy with that. no divve and price hasn't moved in the last year.

Snoopy

15-10-2010, 01:37 PM

Compare to last year, 20 mil saved from paying down debt plus 20 mil from sale of nzs stake and 24.6 mil performance fees, 3c-5c div suppose no problem.

Mikew, that $24.6m in fees (which includes accrued interest because the debt was turned into a high coupon bond) from NZS is the total fees since the NZS project started. It wasn't earned this year, even if it will be finally paid this year. Operating income for PGW was only $23.3m for FY2010, which translates to 3.1cps. With all the weather troubles in Southland, and farmers not on the dairy wave continuing to struggle, I would guess a dividend of 3cps would be the very upper limit of expectation. However, given the way PGW is struggling with their very high debt burden, I would bet on that 3cps going straight into the pockets of their bankers. No dividend is my prediction for FY2011.

SNOOPY

mikew

15-10-2010, 01:53 PM

Dividend is a question need to be asked at this AGM.

bung5

15-10-2010, 02:33 PM

If they can only make Operating income of $23.3m for 2011 they have got some serious issues.

Snoopy

15-10-2010, 07:29 PM

Compare to last year, 20 mil saved from paying down debt plus 20 mil from sale of nzs stake

Debt EOFY09 $455m, Debt EOFY10=$201.7m-$20m (NZS stake) =$181.7m.

Average debt over FY2010 = ($455m+$201.7m)/2= $328.3m. Net interest paid $25.3m over FY2010.
Estimated interest bill FY2011= $25.3m( $181.7m/$328.3m )= $14m

Boost to net profit because of lower interest bill = $14m(1-0.28)= $10.0m
=> projected profit (everything else equal)=$23.3m+$10.0m=$33.3m or $33.3/758.4= 4.4cps.

SNOOPY

Snoopy

15-10-2010, 07:56 PM

Dividend is a question need to be asked at this AGM.

My first answer was perhaps was a bit hasty mikew. I would (now) say eps of 3c to 5c is possible. Debt of $180m perhaps manageable on profits of $30m. EBITDA for FY2011 estimated at say:

$30m (NPAT) + $7.3m (depreciation & amortization)= $37m

Senior Debt Coverage Ratio = (Senior Bank Debt)/ EBITDA = $180m/$37m= 4.9

While the SDCR is > 3.0 the banks have dictated no dividend. So if looking at old multiple norms, the PGW might consider a dividend is possible. But the banks have determined this will not be so in FY2011. Interestingly if my figures are right PGW are in breach of their banking covenants (SDCR must be 3.5 or less) on 30th September 2010. Cash issue in lieu of a dividend anyone?

SNOOPY

Snoopy

15-10-2010, 08:25 PM

SNOOP me old number cruncher........can you run your calculator over the latest numbers for PGW? This new (and not to mention last) takover for NZ Farming systems@70c must now be making a reasonable and positive impact for PGW(compared to 55c)......add in the $4m from the sale of Management Rights and things shud be looking a lot healthier...........hows it panning out m8??

PGW selling 28,137,844 shares sold to Olam at 55c gives PGW $15.5m.

PGW selling 28,137,844 shares sold to Olam at 70c gives PGW $19.7m.

Termination of the management agreement with Olam now give PGW $4.6m. $24.3m in cash will please PGWs bankers. But is it enough?

SNOOPY

Snoopy

15-10-2010, 09:35 PM

YE 30/6/2010 I am estimating YE 30/6/2011 to be 18 million. If the YE 30/6/2011 dosn't have any increase in EBIT , a P/E of 11.54 at the SP off 55cents. So its all about are management being conservative in saying the EBIT for YE 30/6/2011 will be the same as YE 30/6/2010

Frostboy, I like your style. But I think you have to separate out long term PWF debt from core debt and also include the PGW core debt due in < 1 year. I get PGW core debt as $177.868m+$23.809m= $201.7m, perhaps by chance close to the figure you used! I would also use the 'interest on bank loans and overdraft' figure of $25.3m for the interest charge. That gives an interest cost of $25.3m/$350.8m= 7.2%. NZS share sale and contact termination will now bring in $20m + $4.6m= $24.6m. Tax rate now 28%. Do you agree or disagree?

SNOOPY

Snoopy

16-10-2010, 09:57 AM

I know that PGW and their competitors were killing each other a few years back trying to maintain sales growth. This situation was unsustainable and all groups are quite happy to let sales growth stagnate (or fall) to get better margins.

The main consolidation in the last decade or so of 'merger fever' for PGW came in the South Island. Dunedin centered Reid Farmers got taken out by Pyne Gould Guinness who subsequently merged with Wrightsons, giving us today's PGG Wrightson. My superficial observation is that the South Island co-operative Combined Rural Traders (CRT) has become prortionately stronger and now provides stiffer competition to PGW, wiping out much of that expected post-merger gross margin improvement. Of course Pyne Gould Guiness was a South Island institution. Is Auckand/Waikato a very different story?

SNOOPY

Snoopy

16-10-2010, 10:14 AM

ll in all, more cash. (Throw these effects into a spreadsheet and do some conservitive "what-ifs". Your thoughts appreciated.)

It's a fairly simple spreadsheet Belg, as at 31st December.

Senior Debt Coverage Ratio = (Senior Bank Debt)/ EBITDA < 3.0

If the SDCR is at 4.9, there are only two ways to get things right. Reduce core bank debt to $110m (c.f. $180m now). Boost cashflow to $60m (c.f $37m now). Or a combination of the two that has the same effect. Boosting cashflow can of course reduce debt. But a 20% boost in cashflow to $44m would only reduce debt to $136m. $136m/$44m= 3.06. Not quite enough.

SNOOPY

Snoopy

16-10-2010, 10:21 AM

There's a real chance that PGW has been able to drop the i-rate bill more than we know. All in all, more cash.

The rights issue rescue package was inked in October 2009. I don't know whether it would be at a fixed interest rate or if there is a floating rate component. I would guess that PGW management would want certainty and interest rates are fixed. But I could be wrong.

SNOOPY

frostyboy

19-10-2010, 11:18 AM

Another manager has quit

PGG Wrightson advises Resignation of Managing Director

PGG Wrightson (PGW) advises that Tim Miles has tendered his resignation as Managing Director effective immediately. Tim joined PGW in February, 2008, and has led it through its restructure post the global financial crisis. This included strengthening the Company's balance sheet, the introduction of new shareholders and a refreshed Board, and delivery of last year’s results in line with prospective financial information.

Recently PGW announced a new business model and direction underpinned by the establishment of two operating divisions. In considering the new strategy and environment it is apparent that the Managing Director’s role would be different to that envisaged when Tim first joined the company. Accordingly Tim and the Board have agreed that this would be an appropriate time for a change.

A process will commence shortly to identify a replacement and in the interim period the senior management team will work closely with the Chairman and Board.

Sir John Anderson
Chairman

Snoopy

19-10-2010, 11:29 AM

Another manager has quit
PGG Wrightson (PGW) advises that Tim Miles has tendered his resignation as Managing Director effective immediately.

Not 'just another manager'. The top man! PGW share price down 7% on the news.
Miles was a Norgate/McConnan appointment IIRC. Trouble with the bankers as I predicted and Tim is the fall guy? Or just a reflection of the Chinese new broom? I reckon Tim was pushed. Golden parachutes are by nature silent. I wonder if there will be any rustles in the air at the AGM?

SNOOPY

Snoopy

19-10-2010, 11:55 AM

Frostboy, I like your style. I would also use the 'interest on bank loans and overdraft' figure of $25.3m for the interest charge. That gives an interest cost of $25.3m/$350.8m= 7.2%. Do you agree or disagree?

Referring to Note 11 in the annual report. My reason for using -$25.3m, not your $36.5m Frostyboy is that I am assuming the -$7.469m 'Bank Facility Fees' are a one off, other interest income +$5.491m is connected with NZS (now done and dusted and not to be repeated) and -$7.829m a reflection of what would happen if the interest rate swaps were closed out now (required under international accountimng rules), even if there is no intention to close out the hedges before the designed time. Likewise the paper 'loss' of $1.419m on foreign currency loans, like the hedging is not an operational expense. That's how I see things. YMMV.

SNOOPY

rabcat

19-10-2010, 06:29 PM

I always wondered how, Tim, a guy with senior appointments in the Telco sector and a technology background, would get on at PGW. Now we know.

Is Allan Freeth still at Telstra? I wonder if he's getting itchy feet?[/QUOTE]

I have wondered for a long time how Tephlon Tim managed to survive this long. I hope this is a sign that Sir John is stamping his authority on the company and we start to get strong mangement.

Perhaps Paul Renyolds could take over?

mikew

19-10-2010, 06:57 PM

I have same feeling that Tim leaving is good for PGW future. Sir John is action now.

felldownagain

19-10-2010, 07:19 PM

I know Tim and I agree. And Alan F is well placed at Telstra.

mikew

19-10-2010, 08:32 PM

I reckon this coming AGM will be very interesting. Give Us A Surprise Sir John.

flyingfox

19-10-2010, 08:57 PM

asb rec is avoid from buy?just because of this news?

mikew

19-10-2010, 09:21 PM

asb rec is avoid from buy?just because of this news?

ASB recommendation is rubbish.

POSSUM THE CAT

20-10-2010, 10:29 AM

mikew ASB is Dead Right do you want to sell yours. It has gone Woof Woof for Months. Now going Woof Woof Woof Woof!

mikew

20-10-2010, 04:40 PM

percy

20-10-2010, 05:55 PM

I keep my holding at least for next two to three years, maybe extend to five years. I think Tim's leaving is good for PGW, this men get paid 1.6m pa, but had leaded the pgw to hell last couple of years, all old guys from Norgate regime should gone, pgw board need fresh blood under sir john leadership, that's why i said asb recommendation is rubbish.

Yes,Good to see the board doing their job.Would like to see George Gould as MD.I take it as a positive step forward,with the board not accepting second best.A good sign.

GR8DAY

21-10-2010, 07:55 AM

flyingfox

26-10-2010, 10:02 AM

oops deleted my question

bung5

28-10-2010, 01:53 PM

No divvie for next year .

percy

29-10-2010, 07:26 AM

Felt it is too hard ,and will take too long for me.Sold.

GR8DAY

29-10-2010, 09:36 AM

..............welcome to the club Percy.

mouse

29-10-2010, 09:41 AM

mikew

29-10-2010, 10:32 AM

if anyone heavely relay on dividend, my suggestion is sell, don't put any hope on this stock in short time, but if you can hold for next two to three years, you will be happy.

h2so4

29-10-2010, 11:57 AM

No dividend means no cash, none, zip, nada. PGW has very serious negative earnings problems.

I hope that smarty pants management can turn it around.

Good luck you talented and experienced team you.:)

Snoopy

29-10-2010, 12:01 PM

Percy, taking too long is what it is about at present. Even with Pike. What will you do with that? We have XT our new director from China pointing out in the AGM yesterday that PGGW have real technology in grass seeds. And China has a lot of grasslands waiting for them.

XT saw PGW Agritech as rivalling Monsanto and Syngenta as a global arable force in twenty years. Even though those two are more oriented toward seeds and crops. I didn't realise that PGW Agritech was the largest supplier of seeds in the Southern Hemisphere - the largest in the world if considering just forage and grass. Unfortunately NZ investors have much shorter timeframes. I don't think PGW will go very far in the next 12 months. But after that, as the debt straightjacket is loosens, we could see the share price move in about a year. Sadly it seems one year is far too long a timeframe in the New Zealand context.

SNOOPY

percy

29-10-2010, 12:10 PM

yes mouse I have sold my PRCOAs.beldarion.I have been a long term shareholder in PGC.I well remember then {yes I know that was years ago}chairman Sir Miles Warren stating the return Pyne Gould Guiness was returning was very little,however it was greater than their farmer customers.I think times are tough and if farmers are not earning,and are paying down debt, it will be a long time before before PGW have good earnings.I also see they will have to pay down a lot of bank debt before shareholders see a divie. If you compare the chairmans comments to those of the chairman of POT you understand more why I sold one and brought the other.I am just sick of poor performer shares,and poor performing companies who want money off me.I like good companies who pay me a divie and retain enough to fund further growth.Here I am thinking ABA.I see snoopy has posted since I started writing.Snoopy should they get it right I will gladly buy back in.

Snoopy

29-10-2010, 12:16 PM

No dividend means no cash, none, zip, nada. PGW has very serious negative earnings problems.

Too harsh SSD. PGW needs to work better at turning 'earnings' into 'cash' I agree. But PGW earnings are not negative. The cash that is being generated is going towards reducing debt. That will ultimately benefit shareholders when the cash tap can be redirected towards them. Had a word to the new CFO after the meeting. He was very aware that in the past PGW has been paying out dividends based on earnings not free cashflow and that this has to change. PGW are on target for underlying long term group debt to drop to $NZ131m by 31-12-2010. The next target debt target is $NZ100m if the CFO gets his way.

SNOOPY

h2so4

29-10-2010, 12:39 PM

Snoopy

Well I hope he is right. I sit on the opposite side of the fence. I only see cash burn here and a shrinking business in the future.

mouse

29-10-2010, 08:25 PM

This was pointed out at the PyneGould AGM today. See Annual Report, note 21, page 34. :cool:
Carrying amount of PGGWrightson, 30 June 2010 was $113.7m. Market value at same date was $$69.4m. ...not fair value. An independent valuation was used as an alternative value. There are no impairment issues necessitating a write down. :)
So the value of Wrightson is calculated at 82cents a share, not the current market value of 55cents a share. A 25 cent difference which must be due to either the market being wrong or PyneGould valuation being wrong. :confused:
Take your choice, if PyneGould is wrong then their share price is too high. If Pyne are right then Wrightson are undervalued by 25 cents at least. I think PyneGould are right on this one. :p

percy

29-10-2010, 08:52 PM

Snoopy

30-10-2010, 09:39 AM

Carrying amount of PGGWrightson, 30 June 2010 was $113.7m. Market value at same date was $69.4m. ...not fair value. An independent valuation was used as an alternative value. There are no impairment issues necessitating a write down. So the value of Wrightson is calculated at 82cents a share, not the current market value of 55cents a share.

Under IFRS 9 Telecom chose to value their investment in Hutchison at fair value using the observable market share price. It seems most odd that PGC should declare the value of their stake in PGW at wildly different from market value under the same rules, with PGW being acceptably liquid. Perhaps PGC considers that as a potential bank, they can make their own rules?

SNOOPY

GR8DAY

30-10-2010, 11:50 AM

....at the end of the day there's only one valuation that counts and that's the market............currently 54c annnnnnnnnnnnnnnnnd dropping!

mouse

30-10-2010, 08:18 PM

Sorry I missed you at the meeting.Will be interesting to see who is right as the difference is huge.PGC board will be aware of this now that it has been mentioned at the agm.They will need to comment in the interim report.You may be right,and the market may rerate PGW.
The point about PGGWrightson is their seed business seems to fit in with the Chinese grassland problem. As XT said, China arable land is not sufficient to feed their population, but they have large amount of grasslands which have to be developed.
The other point of course is that with Pyne holding 18% of PGGWrightson then it is a very strategic holding which could easily be sold overseas for $113.7m. Pyne are very reluctant to take that step and may therefore hold until the share price improves. They could then distribute the PGGWrightson shares to Pyne Gould investors. All conjecture of course.
Will hopefully catch up with you at the November PyneGould meeting.

mouse

31-10-2010, 07:55 PM

I disagree with you. The Market is NEVER right. If it was share prices would not move up or down apart from minor adjustments. Shareholders seek to find underpriced shares and buy them in the knowledge that the price must improve over time. For example, PyneGould was 40 cents last week. They have now announced a dividend of 1.5cents and should therefore improve this week to say 45cents at the minimum. If The Market sold all shares in a company every week, then the market could be said to possibly give a correct value to the shares. But The Market only sells a very small proportion of the shares each week. The Chinese 20% holding is not for sale, nor is the Pyne 18% holding for sale. Both companies obviously value their holding at more than the market valuation.
The Pyne holding must be worth more due to the quantity of shares they hold. It is a significant holding and would therefore under our present rules attract a premium. So fair price could well be 67.5cents as suggested by Belgarion. I am sure the present price is well undervalued. Having said that, the sellers of PGGWrightson may be looking to put their cash into investments paying a dividend. The holders are prepared to hold knowing PGGWrightson is far more than a Blue Chip Company, it is Heartland NZ.
I went to the AGM of PGGWrightson the other day, I went to the AGM of Farmers Mutual Insurance a couple of weeks before our earthquake. The General Manager there told us that Canterbury was due for an earthquake and the theme of the meeting was 'Breaking New Ground!' I shall go to the Christchurch A & P Show in a couple of weeks and chat to the staff of PGGWrightson. You get information on companies from the Annual Reports and chatting to people. Chatting is more important. Are the company vehicles newish is a simple observation. It tells you how the company is doing.

....at the end of the day there's only one valuation that counts and that's the market............currently 54c annnnnnnnnnnnnnnnnd dropping!

GR8DAY

01-11-2010, 09:22 AM

Mouse...I didnt say wether it (the market) was right or not I said it's the only one that counts at the end of the day.....like it or lump it........unless of course you just dont care what value the market places on your shares......personally i prefer to know I can get out of any share at a profit rather than a loss!!

mouse

01-11-2010, 09:39 AM

Because you bought at a lower price than the market now says the share is worth. The Market for years for example considered General Motors to be worth US$40.00. Actually it was worth 40cents! We have to find shares where the market is wrong. You may have to hold for a few years to make the profit. For example I sold NZFarming Systems for 40 cents. Only a few months ago. In hindsight it was totally foolish since the NTA was $1.00 a share. I am barmy sometimes, but I think not with PGGWrightson.

Mouse...I didnt say wether it (the market) was right or not I said it's the only one that counts at the end of the day.....like it or lump it........unless of course you just dont care what value the market places on your shares......personally i prefer to know I can get out of any share at a profit rather than a loss!!

winner69

21-11-2010, 03:49 PM

I bailed yesterday at 55c (yes another loss).......not looking too flash at the mo, might consider re-entering at the 45c mark if they go that low...........but then knowing my luck they will spike up today!

You are a guru mate with that call mate

All the way down from a recent high of 61 to 48 on Friday is pretty dramatic ... esp when the NZX hasn't been doing too badly in the same period .... just imagine what the shareprice would be if the markets had tanked

Chalkie mentioned not many seem to knoe how many millions it is costing to get rid of Mills ... and then he mentioned that they still have the problem of the accounting around the wools business and that could cost zillions

Maybe your 45 will come soon .... but probably that ain't going to be the bottom the way everything is going at the moment

Seems that any stock with a ticker starting with P is a disaster at the moment ,,,, esp those with Pyne connections

frostyboy

23-11-2010, 05:53 PM

I have sold half my pgw at 48cents. It looks good on fundamentals but I have to respect the price action, like why havn't insiders being buying. On the trades over the last few days I don't see big buyers taking the selling price.

Yesterday I think a seller sold 600,000 just before the close to the buy orders. Now the buy orders look real weak. Could be a double bottom at 45cents.

http://iforce.co.nz/i/einbd55s.png (http://www.iforce.co.nz/View.aspx?i=einbd55s.png)
http://iforce.co.nz/i/3kmfcnmj.png (http://www.iforce.co.nz/View.aspx?i=3kmfcnmj.png)

Nice announcement today as below, but no buyers on it

ASSET: PGW: PGG Wrightson Continues Expansion in Australia

PGW
23/11/2010 14:00
ASSET

REL: 1400 HRS PGG Wrightson Limited

ASSET: PGW: PGG Wrightson Continues Expansion in Australia

PGG WRIGHTSON CONTINUES EXPANSION IN AUSTRALIA

PGG Wrightson Seeds Australia Pty Ltd, a subsidiary of PGG Wrightson Ltd, has
purchased the assets of Keith Seeds Pty Ltd, effective 22 November 2010.

The Group General Manager of PGG Wrightson's, AgriTech Division, John
McKenzie, said the purchase would extend the growth of the company's
operations in Australia, where PGG Wrightson Seeds have been established for
almost seventy-five years. "It will build on our existing presence in South
Australia, and bring further technical and logistical capability that will
complement our other operations."

Keith Seeds Pty Ltd is located in the town of Keith in South Australia.
Keith is the centre of the largest small seeds production area in the
Southern Hemisphere.

PGG Wrightson Seeds Australia's Keith-based business will be built around
three key market segments:

- Pasture seed production and marketing of proprietary and commodity
Lucerne and Annual Legume products. Keith Seeds exports approximately 40% of
all the Lucerne grown in Australia.

- Food grade pulses (peas, beans, lentils) production, processing and
distribution into international markets, primarily Asia.

- Seed processing, cleaning and logistics through a new purpose built
4,800m2 processing facility in Keith.

This acquisition comes after the recent announcement that PGG Wrightson Seeds
have purchased the Corson Grain maize seed business in New Zealand. The
Corson maize seed business complements the existing New Zealand forage seed
and maize businesses and now with Keith Seeds provides PGG Wrightson Seeds
with enhanced food and pasture seed export opportunities, while boosting the
Australian business' domestic distribution capabilities.

PGG Wrightson Seeds will be employing a range of South Australia-based
production, processing and logistics personnel following the purchase. "We
are expanding our production capability in South Australia to reflect our
growing requirement for pasture and pulse seeds."

For further information contact:

John McKenzie
Group General Manager
PGG Wrightson - AgriTech Division
+64 3 372 0822

Snoopy

23-11-2010, 07:05 PM

It looks good on fundamentals but I have to respect the price action, like why havn't insiders being buying.

1/ PGW debt position tight, so to take on more debt to buy Keith Seeds might be questionable. I imagine due diligence would have been done and maybe a deal signed before the Southland snows reduced prospective PGW income.
2/ Previous 'Keith' acquisitions (Keith Smith) have not been positive for earnings.
3/ With no EBIT earnings growth forecast perhaps that prospective PE with the share price above 50c is just too high?

SNOOPY

frostyboy

23-11-2010, 07:55 PM

Snoopy
Their debt position dosn't look that bad,
1. Snoopy I agree the debt position is really tight when you add in the lease costs
26.4 lease costs + my 2011 estimated 18.4 interest costs
=44.8 financing costs.

2,3. Announcements of 2 managers leaving - it hasn't been long enough since, so the EBIT forecast could still be unreal. What are management doing, making purchases. Shouldn't they be paying off debt? maybe the market dosn't like the unknown.
Their long term strategy seems like it is size for market power for profits especially in the seeds, anyhow they havn't or the share price proved this. I think the fundamentals are good longer term, so I am wrong and too early on this. I think I sold half at 48cents instead of 55cents as I have more cash than stock, mind tricks you know.

rabcat

23-11-2010, 08:37 PM

1/ PGW debt position tight, so to take on more debt to buy Keith Seeds might be questionable. I imagine due diligence would have been done and maybe a deal signed before the Southland snows reduced prospective PGW income.
2/ Previous 'Keith' acquisitions (Keith Smith) have not been positive for earnings.
3/ With no EBIT earnings growth forecast perhaps that prospective PE with the share price above 50c is just too high?

SNOOPY

Yes their debt position is tight. I thought the strategy was to pay down debt. Well that was the line a couple of weeks ago at the annual meeting.

Do they have a strategy or is there a lack of discipline within the company?
I hope they have not brought another asset which makes no profit.
This company has a large turnover ( over $1 Billion) but only makes $20m (less than 2% on turnover.)

PGW need to concentrate on making what they have efficient and learn how to make a profit with what they have. Just buying more and more assets will not solve the issues they have. In fact as we saw with Craig Norgate it can make the situation worse.

bung5

23-11-2010, 09:37 PM

48 cents is looking like a very good buy but at the moment waiting for this downtrend to stop. Very few buyers at the moment , I think the statement about not paying a dividend until at least 2012 has made a lot of sellers and few buyers. I sold out after that comment.

mikew

24-11-2010, 05:47 PM

seems to me pgw share going to complete a perfect "W" recovery.http://findata.co.nz/markets/nzx/pgw/chart.htm

winner69

29-11-2010, 02:35 PM

You are a guru mate with that call mate

All the way down from a recent high of 61 to 48 on Friday is pretty dramatic ... esp when the NZX hasn't been doing too badly in the same period .... just imagine what the shareprice would be if the markets had tanked

Chalkie mentioned not many seem to knoe how many millions it is costing to get rid of Mills ... and then he mentioned that they still have the problem of the accounting around the wools business and that could cost zillions

Maybe your 45 will come soon .... but probably that ain't going to be the bottom the way everything is going at the moment

Seems that any stock with a ticker starting with P is a disaster at the moment ,,,, esp those with Pyne connections

Looks like 45 this week .... jeez that was quick .... andif the world markets start to panic before Xmas than maybe 35 is the next step down as well

B

Snoopy

01-12-2010, 04:06 PM

Looks like 45 this week .... jeez that was quick .... andif the world markets start to panic before Xmas than maybe 35 is the next step down as well

There has been a lot of fascination with the PGW share price on this forum. Not all of it I think well informed. So here is my own PGW chart to try and correct some of what I see as 'misinterpretations', like thread post 1355.

3079

This chart I created as part the review of my income portfolio. I am sorry that I have only plotted annual data points, although co-incidently this five year period covers more or less completely the time that PGW has existed in its current form.

First point to note is that the chart starts at the high point of $1.25. Hang on you say. I am fairly sure the PGW share price was much higher than that five years ago! If that is what you remember, then I am pleased to say your memory is good. The market price of Wrightson shares, as they were then, on 30/09/2005 was actually $2.49. However on 7th October 2005 the first day of trading in shares of merged entity PGG Wrightson, there was a capital reconstruction.

'Free bonus shares' in a ratio of 0.1163 free shares for every WRI share held were issued to WRI shareholders in advance of the merger. As a result the pre merger share price of $2.40 was adjusted to a post merger $2.15. The dollar value change of shareholding for WRI shareholders was of course zero as a result of this transaction. WRI shareholders has a few more of the new PGW shares that were worth less, the increase in number of shares held and decrease in share price completely balancing out.

The second event of note was the late 2009 cash issue in the ratio of 9 new shares at 45c for every 8 held. Looking forwards from the perspective of shareholders as at 30/09/2005 this issue was four years into the future and unknowable. But looking backwards, from a charting perspective, this cash issue makes a big difference. For every 8 shares held after the merger on 7th October 2005, every shareholder who continued to hold their PGW shares over that time got got 9 free options at 45c. Once this cash issue was fulfilled those new shares ranked equally with the existing shares.
The equivalent share price (ESP) based on the historical share price after the PGG/WRI merger can be calculated as follows:

ESP= (8SP+9x0.45)/17

Take both of these factors into consideration and the today's equivalent share price back in 30/09/2005 was only $1.25. This is in stark contrast to those share price charts that have been posted on this thread before showing a stark decline in value implying shares holder have lost 80% of their capital as the published share price declined from around $2.50 to 50c. Shareholders have lost capital, but nothing like that 80% figure. Such charts are mischevious and an inaccurate portrayal of what happened.

The pink line on the chart at 80c, represents my own average buy price since 30/09/2005. Most of my buying occurred as a result of the rights issue in 2009. Sad to say I made 8 other PGW share purchases over that time frame, mainly as a result of the PGW share reinvestment plan. It should be obvious that these purchases were not well timed, at least so far. But then again with a share price in decline since PGW was created, this is exactly what you would expect. One thing that doesn't change, no matter what chart you look at. PGW has not been a good investment since 30/09/2005

SNOOPY

Snoopy

03-12-2010, 04:42 PM

More interpretations of this chart.

3079

My weighted average purchase time of PGW shares acquired after 30th September 2005 was 30th June 2008. This date is represented as the second vertical line on the chart. A pink line extends to the right of that second vertical line. This represents the weighted average holding period for all of those PGW shares purchased between 30th September 2005 and 30th September 2010.

Initially the pink line is below the black market price line. This is good as it means the average price that I paid for those shares was less than the market price. As time goes on though, the black line crosses below the pink line. Now my average purchase price is above market price, and you can see that at times end (as far as the graph goes anyway) the pink line remains above the black line. This means that after five years the average price of my PGW share purchases is still above the market price. This is not good news as it means I have lost capital on these purchases.

Ever the optimist, there is one positive thing I can saw about five years of PGW 'top ups'. The amount of money that I have lost was less than if I had simply 'bought and held' those shares over five years. You can see this because over the period of interest the share price dropped from and equivalent $1.25 to $0.58, whereas my 'recently purchased' shares only dropped from $0.8 to $0.58. Thus in overall terms my PGW loss was reduced over 'buy and hold' because I held those shares for only 2 years and 3 months (not 5 years) and the overall value did not drop as much.

SNOOPY

mikew

09-12-2010, 11:05 AM

Seems market is halted waiting for the appointment of new MD, maybe PGW don't need this role as each group has its own GM,at least in short term.

mikew

09-12-2010, 05:05 PM

up and running!

winner69

10-12-2010, 02:29 PM

up and running!

sure is .... downhill

mikew

10-12-2010, 03:04 PM

try positive, look at the bright side:)

Snoopy

10-12-2010, 06:31 PM

sure is .... downhill

up and running!

You guys are following PGW far too closely! The declared drought at the top of the North Island probably has as much to do with the share price volatility as anything else. It will be interesting when the final price paid for Keith Seeds is disclosed. I see it was bought off receivers, so perhaps it was just an opportunistic purchase for not much money?

SNOOPY

Snoopy

17-12-2010, 02:24 PM

try positive, look at the bright side

After today's profit downgrade and a share price of 44c (below last years rights offer price), I would pick many shareholders if handed a whip would be looking for some PGW director's backsides, which with a modified rouge tone could also double as their bright sides. I can't help feeling PGW today is more about the market catching up with reality. There are a lot of farmers out there under debt pressure. There is going to be no farmgate spendup until there is a bit more equity built up in farmer's land nationwide. In the meantime it is leantime for farmer suppliers. PGW still poised for that recovery.

SNOOPY

JayRiggs

19-12-2010, 03:52 PM

Hi all,
I'm a relatively new investor. Been doing stocks for about 6 months.
I bought 10,000 PGW shares at 0.53 back in July. Things were looking good back then. Sharechat rated them at Buy (http://www.sharechat.co.nz/article/a652a838/daily-sharechat-pgg-wrightson.html), ASB Securities rated them as Buy as well. The stock price rose to 61c in September and I was feeling pretty pleased about my investment.
Then all of a sudden, 2 managers leaving and the recent profit downgrade dumping the stock down to 0.44. So I'm feeling pretty stink at the moment, wishing I sold out long ago. I'm trying to take a long term approach to this and hold.

What do you guys think of all these recent PGW events? Where do you see the company going in 1 or 2 years time?
Any thoughts would be greatly appreciated.

Phaedrus

19-12-2010, 07:23 PM

Jay, it's good to seek others opinions here on ShareTrader and fundamentals are important too, but neither of these are anywhere near as important as what the Market thinks of the stock in question. Technical analysis and charts make it relatively easy to monitor market sentiment. The chart below utilises a range of technical indicators with their parameters optimised for PGW. It is easy to see that this stock is in a downtrend and has been for about 3 months, so far.

Note the excellent Sell signals back in 2009. Plenty of people here on ST were holding PGW at that point - and still hold, having given the lion's share of their profits back to the market.
Lessons :-
No uptrend lasts forever.
It is important to have an exit strategy.
Buying and Holding "to take a long term approach" is not always a good idea.

Note the raft of Buy signals in July. These began firing before Jenny Ruth gave the ShareChat "Buy" recommendation that you refer to above.

Note the raft of recent Sell signals. These began triggering before ASB changed their recommendation from "Buy" to "Avoid".

When/if PGW stops falling and starts rising, these same indicators will again provide objective "Buy" signals. It is easy to see that none of them are anywhere near signalling any re-entry into this stock.

Take a look at the chart I have just posted on the NZSX50 Good News thread. See how poorly a longterm "Buy and Hold" strategy has performed over the last 8 years.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/PGW1219.gif

Balance

24-12-2010, 08:40 AM

Yet another NZ company moving into overseas ownership - and they will get it too as NZers show they have no appetite for long term investments.

http://www.stuff.co.nz/business/farming/4492513/Chinese-bid-for-PGG-Wrightson

root

24-12-2010, 09:21 AM

I was expecting a long slow recovery with PGW but if people are willing to pay 60 something now I'll be taking it, sorry Balance but I have an appetite for taking the profit when it's there.

Balance

24-12-2010, 09:31 AM

I was expecting a long slow recovery with PGW but if people are willing to pay 60 something now I'll be taking it, sorry Balance but I have an appetite for taking the profit when it's there.

Not at all - profits are there for the taking. I am referring here to those who have had PGW shares for decades.

But before taking your profit, consider - NZS all over again though?

This could very well flush out another player who will take the opportunity to make a higher offer now that Agria & PGC have shown their hands?

Meanwhile, there was a crossing of 5m shares at 48c a few weeks ago - that's $600,000 less for the seller and $600,000 profit for the buyer. Case of the transfer of wealth from the impatient to the patient?

Xerof

24-12-2010, 10:05 AM

For a company thats been in virtual terminal decline, and very poorly managed, this is a 'get out of jail free' opportunity for a lot of frazzled and dazed long termers.

I suspect they'll be swamped........especially with the PGC fella's, bottling on their investment, leading the charge for the exit

Balance

24-12-2010, 10:08 AM

JayRiggs

24-12-2010, 10:14 AM

Wow that was quick. I was expecting PGW to take at least a year to recover due to the tough economic and farming conditions.

iceman

24-12-2010, 10:15 AM

I agree Balance, it is sad to see this company be lost into overseas ownership, being in such a fundamental (for NZ) industry. A difficult choice whether to sell or not as I just re-entered the share registry last week at 44 cents after 18 months absence from it. Does one take a quick profit or stay in for the long haul with a fairly unknown majority shareholder ?! Something to ponder over the holidays !

iceman

24-12-2010, 10:46 AM

LOL ... With the big boys on holiday the action has been slow indeed with plenty of time for small players to pick up a few at open. And now just 54 cents with trading being light indeed. If it wasn't Christmas Eve I'd conclude that Mr Market just doesn't believe the offer.

Yes absolutely irresistable :)

Balance

24-12-2010, 10:55 AM

Yes absolutely irresistable :)

Mr Market probably wondered why he sold out at 44c last week after the lesson of NZS.

Balance

24-12-2010, 11:12 AM

Someone(s) creating a big overhang with 1.2 mill @ 55 cents ... I guess they don't believe the TO offer story.

On a side note ... Mr Gould's roll in all this seems a bit confused. Too many foots in too many camps? Surely there's some conflict of interest?

Look at George's track record - it's all about grooming something for sale.

Beagle

24-12-2010, 11:19 AM

Yes absolutely irresistable :)

Agreed. I also agree with the Chineese assessment in their statement that this company needs restructuring.

From what I hear there are far to many middle managers creaming off bloated salary packages.
The Chineese generally know how to keep an eye on the bottom line, something us accountants are rather fond of too.

54 cents looks like a good point to get on for the ride to me. I'm in.

root

24-12-2010, 11:31 AM

Someone(s) creating a big overhang with 1.2 mill @ 55 cents ... I guess they don't believe the TO offer story.

On a side note ... Mr Gould's roll in all this seems a bit confused. Too many foots in too many camps? Surely there's some conflict of interest?

2 big sellers of about 400k in that 1.2 mil, will definitely be the hump to get over. Bit of an arm wrestle developing.

Balance

24-12-2010, 11:33 AM

2 big sellers of about 400k in that 1.2 mil, will definitely be the hump to get over. Bit of an arm wrestle developing.

No arm wrestle - just needs one player to join the fray and it's 61 cents.

NZS all over again.

root

24-12-2010, 11:44 AM

No arm wrestle - just needs one player to join the fray and it's 61 cents.

NZS all over again.

Good call - onwards and upwards. :)

iceman

24-12-2010, 11:49 AM

2 big sellers of about 400k in that 1.2 mil, will definitely be the hump to get over. Bit of an arm wrestle developing.

They are gone now so up and up she hopefully goes !

JayRiggs

24-12-2010, 11:54 AM

A question. If Agria are buying more PGW shares, who's selling it to them?
Will it be PGC selling their lot, shareholders like us, or both?
I'm not familiar with this takeover thing. Cheers.

root

24-12-2010, 11:57 AM

A question. If Agria are buying more PGW shares, who's selling it to them?
Will it be PGC selling their lot, shareholders like us, or both?
I'm not familiar with this takeover thing. Cheers.

The offer will allow PGW shareholders other than Agria to sell up to 38.3 per
cent of their holding into the offer. Furthermore, shareholders can lodge
additional acceptances for any further shares they wish to sell. If the total
number of shares tendered in the offer exceeds the 235.0 million being
sought, then scaling will apply. The offer is conditional on Agria obtaining
a 50.01 per cent shareholding and on relevant regulatory approvals including
New Zealand Overseas Investment Office and approval by the relevant
authorities in China.

The takeover offer document is expected to be sent to all PGW shareholders in
late January 2011.

Beagle

24-12-2010, 11:57 AM

Good call - onwards and upwards. :)

Yeah, should have been in boots and all at 54 cents, crikey its easy with hindsight isn't it.

percy

24-12-2010, 12:52 PM

Yeah, should have been in boots and all at 54 cents, crikey its easy with hindsight isn't it.

With foresight I still do not see it.You could be left with 61.7% of shares brought.Should the SP far back to the 48cents it was, there is no money to be made.
Remember a long term shareholding is often a short term one that did not work out right.!!!

Beagle

24-12-2010, 01:09 PM

With foresight I still do not see it.You could be left with 61.7% of shares brought.Should the SP far back to the 48cents it was, there is no money to be made.
Remember a long term shareholding is often a short term one that did not work out right.!!!

Percy, I think the way the Chineese are talking about restructuring and opening up access to China for PGW will be a good thing. From a long term perspective this company has a truly appalling track record and therefore deserves to be taken over, (if anyone's in need of a quick refresher, just bring up the chart for the last five years), its badly in need of some hard core restructuring and serious cost cutting, so I'm not afraid to be left with some or most of my shares purchased this morning.

Who's next for the Chineese NZO ? LOL

percy

24-12-2010, 02:01 PM

Percy, I think the way the Chineese are talking about restructuring and opening up access to China for PGW will be a good thing. From a long term perspective this company has a truly appalling track record and therefore deserves to be taken over, (if anyone's in need of a quick refresher, just bring up the chart for the last five years), its badly in need of some hard core restructuring and serious cost cutting, so I'm not afraid to be left with some or most of my shares purchased this morning.

Who's next for the Chineese NZO ? LOL

For anybody buying for the long term I agree with you.I also think it is very positive that George Gould has been appointed MD.From a personel view I am disappointed that New Zealander's are letting control go overseas,however as you correctly point out we have badly miss-managed this company.How you can put so many good companies[Dalgety.NMA,Reid farmers,PGG,Fruitfed,Williams and Kettle,Wrightsphensons,etc] together and still get it wrong does not say much for NZ directors,or management.

mikew

24-12-2010, 02:44 PM

60c is definitely not acceptiable, i definitely will not sell my one at this price.

Balance

24-12-2010, 02:54 PM

Good call - onwards and upwards. :)

Easy, Root - NZ investors are the most short-sighted and nervous of any investors in the world - one third spook out of shares at the first sign of short term negatives and then, half bail out when an offer is made after the sp has been trashed by the first third!

That's why there's fewer and fewer NZ owned listed companies every year.

tim23

24-12-2010, 03:19 PM

60c is definitely not acceptiable, i definitely will not sell my one at this price.

Mikew - your 1 share won't sway things too much!!

Beagle

24-12-2010, 03:53 PM

How you can put so many good companies[Dalgety.NMA,Reid farmers,PGG,Fruitfed,Williams and Kettle,Wrightsphensons,etc] together and still get it wrong does not say much for NZ directors,or management. Last edited by percy; Today at 02:07 PM. That hits the nail squarely on the head.

Soolaimon

25-12-2010, 09:01 AM

I have held for years and certainly won't be selling either.

Snoopy

29-12-2010, 01:15 PM

Liz, Snoopy, Got a value handy for now? And maybe a range in 12 month?

Mine: Now ~64 ... 12 Months.. 65-75

The takeover makes no difference to my valuation of post 1332 in this thread Belg, which I will repeat below:

"Sharechat touting a 66c valuation based on a sum of parts earnings valuation. I estimate FY2011 earnings of $39m, or 5.1cps. A share price of 66c implies a PE of 12.9. I would say that is too high. More realistic would be a PE of 10, which equates to a PE of 51c (today's price)."

Of course since this post there has been a big earnings downgrade. So my FY2011 earnings estimate must now roll over to FY2012. I reckon that on any fundamental valuation anything over 50c for PGW must be regarded as fully valued. Throw in a 20% premium for control and 60c looks to be right at the top end of my valuation range. So why are the Chinese buying? Perhaps because they have an investment horizon longer than two years?

SNOOPY

discl: hold PGW, and probably will not be selling inot the offer. (Will be digesting carefully that forthcoming Grant Samuel valuation report)

rabcat

29-12-2010, 08:05 PM

I have held for years and certainly won't be selling either.

I cant see how anyone can refuse the offer unless they sell out completely at 56 cents.

If you think about it, PGC have said they will sell all their shares to Agria. But under the terms of the offer will probably only sell half to 2 thirds of their shares to Agria. PGC have also said they will divest themselves of all their PGW shares. So chances are that once the offer closes the price of PGW shares will fall to some where below 50cents.

So even if you want to continue holding all your PGW shares, it seems you need to sell now to Agria and buy back in latter on.

Beagle

30-12-2010, 11:36 AM

Thanks for the reply, Snoopy. Yes, The chinese are reknown for their investment horizon which can span generations! Unlike Kiwis (exceptions being our greenies who think in terms of eterities!). I'll be holding too ... at least until the GS report comes out (which I expect to rubber stamp the offer) ... or another bidder (livin' in hope!) appears.

I have little faith in GS reports but 60 cents seems a cheap price for control of the company taking a long term view.
The Chineese will kick the s#it out of overheads and run the business hard and efficiently, something few New Zealand managers seem capable of doing. They're not numb nuts and will get this company very cheaply based on the profit its capable of making. Happy to hang on for the full ride in the hope the company will finally be managed properly.

mikew

31-12-2010, 04:50 PM

60c is definitely not acceptiable, i definitely will not sell my one at this price.

Mikew - your 1 share won't sway things too much!!

tim23, i know my 1 share won't sway anything, but use your common sense why chinese want to control this company, because currently this company just like working for charity,they have over 1b revenue with only about 20m net profit,after successfully take over i believe chinese will be running this company more efficiently, i am very happy chinese take over this company, but 60c offer for controlling is far too cheap, i will hold my stake, i know chinese will make PGGW better and better. Hope you had a good new year!!!

Snoopy

09-01-2011, 12:19 PM

The new $2.2 billion lender formed by Marac Finance and two building societies – for now, called Building Society Holdings (BHSL) – is interested in buying the rural lending business of PGG Wrightson Finance, chairman-designate Bruce Irvine confirms.
http://www.stuff.co.nz/business/industries/4521209/New-entity-already-banking-on-bulking-up/

And an Agria lead PGW is interested in selling!

-----------

13 Likelihood of Changes in PGW
13.1 If the Offer is successful, Agria will seek appropriate board representation
on the PGW board including representatives of Agria Corporation and New
Hope. Agria will participate in decisions relating to PGW and its strategy
with a view to improving operations and profitability in PGW as soon as
possible.
13.2 The changes likely to be made by Agria in respect of the business activities
of PGW and its subsidiaries will involve a particular focus on PGW's core
AgriServices and AgriTech businesses. In that regard, Agria is in principle
supportive of the divestment of PGG Wrightson Finance Limited’s finance
book following an appropriate sales process and subject to any
shareholders’ and other approvals that may be required by law.

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

Haven't we been here before? Isn't this what PGW did last time they had crippling debt on their balance sheet? It certainly did not work out well for WRI (as they were then) subsequent to the sale of their finance business last time!

Also I see the offer is for only 38.3% of the outstanding shares in PGW. That means shareholders will be left with 61.7% of the PGW shares they own after the offer, should everyone accept for all their shares.

I also see the offer will be dropped if the NZX goes below 3000 level as happened in August last year. I wonder if this is just another leveraged buyout, financed by the sale of the PGW Finance division? I have to admit without a finance division, I don't see a very good future for PGW in New Zealand.

SNOOPY

winner69

09-01-2011, 12:34 PM

I have to admit without a finance division, I don't see a very good future for PGW in New Zealand.

SNOOPY

Isn't it amazing that iconic NZ names like Pyne Gould Guiness Wrightson and Fisher and Paykel Appliances are currently being kept afloat by pretty well run finance arms

Certain irony in this when you think about what has happened within the financial industry over the last few years

winner69

09-01-2011, 12:36 PM

percy

09-01-2011, 06:25 PM

The Chinese are only after the seeds business.I would not be surprised to see them out of rural service business.Without financing customers you are not in the business.
I had a laugh as a couple of weeks ago the Press reported PGC was looking to buy PGW finance.It makes good sense for "THE BANK" to buy PGW finance.
I enjoyed your yeah right comment winner 69.About right I would think.No chinese walls here.?

Sideshow Bob

09-01-2011, 07:53 PM

I heard a while ago (probably 2-3 months) that PGW were looking to sell their finance division - but took this as pub talk. But isn't it where they make most of their money??

Snoopy

09-01-2011, 08:51 PM

But isn't (the finance division) where they make most of their money??

p50 A/R2010: Profit From Continuing Operations FY2010

Merchandising $6.0m, Livestock $5.6m, Finance $8.9m, Other Agriservices -$7.6m, Agritech $11.2m, Corporate -$0.8m

Take away Finance and PGW profit drops from $24.3m to $15.4m, assuming no synergical cross divisional effects.

SNOOPY

macduffy

09-01-2011, 09:42 PM

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

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

percy

09-01-2011, 10:15 PM

Balance

10-01-2011, 08:35 AM

Just as PGW was put together from a series of mergers and acquisitions, it will be dismantled via a series of divestments.

Watch the value emerge as assets and operations are divested - we have seen NZS sold, next on the block will be PGW Finance and then the overseas operations etc.

Don't make the mistake of thinking that the Chinese are dumb investors - to date they have certainly shown the Japanese how NOT to invest - eg. Nufarm.

They are also giving the Australians a good run for their money :http://mychinaviews.com/2010/12/assertive-shougang-rings-alarm-bells-in-perth/

h2so4

10-01-2011, 09:16 AM

Management concerned with mounting debt. Selling assets to pay down debt maybe their only option. It's all part of a shrinking businesses cycle.

Doyle

10-01-2011, 10:04 AM

Don' get me wrong, I don't want the finance business sold, however rural finance is not wha it used to be. Once upon a time everyone had seasonal finance from their suppliers, these days most farmers work wih a large bank overdraft at suprisingly compeitive rates to keep things simple. Most the people using wrightsons etc for seasonal type finance now are the ones whose od is maxed.

Financing herds and land and bulding is sill profitable but hardley essential to wrightsons business, they will only really pick up cusomers who fail bank lending criteria. I'm no longer of the view that a finance business is still essential to a rural services operation, however it is sill a well run profitablefinance unit and I would prefer them to keep it.