PGW - PGG Wrightson

[Balance]

Balance, I still can't fathom how you missed selection for the Olympic team. You are that good with the long-bow.

Your theory is good IMO, but the timing is out. Agria started with a 19.9% shareholding in PGW, then when things turned good they did pounce, which is why they now hold just over 50%. But that was over a year ago! Agria want the PGW proprietary seed technology. They have access and control of that through their 50.22% PGW stake. You have to convince me why Agria would want any more of PGW for your theory to have further legs.

Once you have established a need to mop up the PGW share register, you will then have to demonstrate a means. Agria at US84c has a market capitalization of $US46.52m. PGW at US26c has a market capitalization of $US197m. Of course Agria has already swallowed half of that, but it still leaves $US98m in the hands of other PGW shareholders. Little fish cannot swallow big fish. That is how it works in the ocean and the same rules apply to the financial sharks.

SNOOPY

Do read about how China companies are accessing billions from the China government for overseas acquisitions.

If you want an idea of how well-connected Asian companies work, check out Olam of Singapore (Open Country Cheese and NZS). Olam was a small company when it started making acquisitions 6 years ago - had the market wondering how much debt the company could carry. Behind the scenes was of course the Singapore government with its hundreds of billions of dollars of investment funds.

[Agrarinvestor]

Do read about how China companies are accessing billions from the China government for overseas acquisitions.

If you want an idea of how well-connected Asian companies work, check out Olam of Singapore (Open Country Cheese and NZS). Olam was a small company when it started making acquisitions 6 years ago - had the market wondering how much debt the company could carry. Behind the scenes was of course the Singapore government with its hundreds of billions of dollars of investment funds.

@snoopy,
i don't understand your argument. You are saying, AGRIA has a market cap of 48 million dollar, and they own 50% of PGW.
That means in a fair market that the other 50% of PGW should not be more worth than 48 million dollar.
But it is more worth, shareholders are buying, volume is increasing. The market cap of AGRIA can double within one week. Look at other chinese Agrar Companies like AGFeed, it has tripled within 6 weeks. You should check the shareholder register at computershare, look for chinese based funds i think they are buying for AGRIA, and of course these low ball offer.

[Balance]

Very good point Belge, this is turning out to be a bad day for NZ Inc. Some of our best R&D work going offshore for a pittance.

Pittance because NZ Inc is so pre-occupied with property, is generally financially illiterate and so is also easy prey for the NZ world class born and bred con-artists (Mark Bryers, Rod Petricevic etc) out there.

Think of the billions tied up and lost in properties in coastal areas (because they do not create land anymore - yeah right) and in the finance companies.

Just a billion or two of that tens of billions of dollars tied up and lost - if that was invested into the share market, we will not lose companies like FAP, PGW or for that matter, Diligent.

Oh well, not much the likes of you and I can do, elZorro, save make sure we get a slice of the takeover action.

FAP has been a long time coming and must admit it was nerve racking when the sp got down to 34 cents last year.

But what did Warren Buffett say? Be brave when others are frightened, and be afraid when others are greedy? Wish I have his fortitude!

Oh well, it's PGW time next. Not if but when.

Agria is but a front in my view.

[Master98]

Pittance because NZ Inc is so pre-occupied with property, is generally financially illiterate and so is also easy prey for the NZ world class born and bred con-artists (Mark Bryers, Rod Petricevic etc) out there.

Think of the billions tied up and lost in properties in coastal areas (because they do not create land anymore - yeah right) and in the finance companies.

Just a billion or two of that tens of billions of dollars tied up and lost - if that was invested into the share market, we will not lose companies like FAP, PGW or for that matter, Diligent.

Oh well, not much the likes of you and I can do, elZorro, save make sure we get a slice of the takeover action.

FAP has been a long time coming and must admit it was nerve racking when the sp got down to 34 cents last year.

But what did Warren Buffett say? Be brave when others are frightened, and be afraid when others are greedy?

Oh well, it's PGW time next. Not if but when.

well pointed balance, time will tell.

[Balance]

Think of the hundreds of millions to be released soon from takeover of FPA- some of that money will be looking for the next takeover target.

[Balance]

Crossings now at 37 cents - just like HNZ, watch carefully.

500,000 just crossed at 37c.

Somebody wants volume.

[Snoopy]

Luckily NZ's two most successful businessmen don't know that.!!!!!!!
Graeme Hart's Rank Group brought out The govt print office using debt.Once he got the taste of eating big fish he set about eating bigger and bigger fish.
Alan Gibbs had a history of buying big businesses using none of his own money.Totally debt funded.
You should find Serious Fun The alan Gibbs story enlightening.


The question is Percy, could Hart and Gibbs do the same post 2007 financial crisis? Back in the first days after financial deregulation you could more or less get a loan for anything so desperate were the banks and finance companies to build up their loan portfolios. Hart in particular was able to buy a company with 'lazy assets' and sell them off to repay his huge debts.

Banks are not willing to lend like they did back then. And PGW does not have the lazy assets a would be 'little fish predator' can sell in a hurry. I still stick to my view that Agria will not be able to swallow PGW.

SNOOPY

[Snoopy]

i don't understand your argument. You are saying, AGRIA has a market cap of 48 million dollar, and they own 50% of PGW.
That means in a fair market that the other 50% of PGW should not be more worth than 48 million dollar.
But it is more worth, shareholders are buying, volume is increasing. The market cap of AGRIA can double within one week.


Agrainvestor, what you say would be correct if Agria had a long term future. The fact is Agria bought most of their PGW stake at 60c and the market price is now under 40c. Early next year the bank debt of Agria starts rolling over. Agria has lost a lot of money on their PGW shares and those hard nosed bank managers that lent to Agria are going to look at what Agria has done with their money and consider whether they will ever be repaid. Agria has almost no income so they cannot service their debts unless they are given back a near 0% loan. Agria is closing today near 78c, very close to the all time low.

By pricing Agria as it does, the market is saying that on balance Agria will not survive with its current capital structure. There may be some 'New Hope' of a Chinese government backed capital injection. But such a rescue will dilute the PGW equity stake held by existing Agria shareholders. Nevertheless such a rescue would be preferable to the even less palatable option of Agria receivership.

SNOOPY

[Snoopy]

Do read about how China companies are accessing billions from the China government for overseas acquisitions.

If you want an idea of how well-connected Asian companies work, check out Olam of Singapore (Open Country Cheese and NZS). Olam was a small company when it started making acquisitions 6 years ago - had the market wondering how much debt the company could carry. Behind the scenes was of course the Singapore government with its hundreds of billions of dollars of investment funds.


Balance I accept that the Chinese government could put money into a takeover of PGW. But you haven't come up with any reason why they should do it. PGW is already controlled by Agria, so why would Agria spend any more money for no additional benefit? The partnership between the Chinese government and Agria looks to me to be an uneasy one. Very different to the Singaporean government/Olam situation.

SNOOPY

[percy]

The question is Percy, could Hart and Gibbs do the same post 2007 financial crisis? Back in the first days after financial deregulation you could more or less get a loan for anything so desperate were the banks and finance companies to build up their loan portfolios. Hart in particular was able to buy a company with 'lazy assets' and sell them off to repay his huge debts.

Banks are not willing to lend like they did back then. And PGW does not have the lazy assets a would be 'little fish predator' can sell in a hurry. I still stick to my view that Agria will not be able to swallow PGW.

SNOOPY

Knowing Hart's and Gibb's history no one can say they could or couldn't do similar deals today.Be different,but they would find ways.
PGW takeover.Balance has answered that with his post 2150 which is correct.

[Balance]

Balance I accept that the Chinese government could put money into a takeover of PGW. But you haven't come up with any reason why they should do it. PGW is already controlled by Agria, so why would Agria spend any more money for no additional benefit? The partnership between the Chinese government and Agria looks to me to be an uneasy one. Very different to the Singaporean government/Olam situation.

SNOOPY

Good robust discussion, Snoopy.

I think it really is case of looking behind the scenes more when you are evaluating and analyzing China companies and how they operate.

The debt level of Agria is not an impediment to a takeover of PGW by the Chinese - New Hope is the one really in charge behind the scenes in my view. And they are a big bugger - but opaque as they are a private group.

New Hope and the China government will pay Agria a finder's fee for PGW - in the meantime, get set!

[Snoopy]

The debt level of Agria is not an impediment to a takeover of PGW by the Chinese - New Hope is the one really in charge behind the scenes in my view. And they are a big bugger - but opaque as they are a private group.

New Hope and the China government will pay Agria a finder's fee for PGW - in the meantime, get set!


Agria has continued to fall in share price. Last Thursday they fell nearly 8% in a single day down to an all time low of 68c, although they have since recovered to close the week at 74c. Nevertheless even at that closing price they are now valued at just $US41m, a 15% decline in value over the week. New Hope have shares in Agria Singapore, but they have a put option back to Agria USA that will require Agria to buy back those shares in Agria Singapore at issue price. Far from being the saviour of Agria , New Hope could tip them over the edge at any time. I thought Agria might have 2-3 months to live under their current capital structure, but things may be moving faster than even the pessimists thought likely. Perhaps Alan Lai only has a matter of days left at the Agria helm now?

Meanwhile the optimists have noted Alan Lai's rather large top hat and are speculating at the colour of the rabbit he has in there! A white fluffy bid for the rest of PGW almost inevitable now?

SNOOPY

[Balance]

Agria has continued to fall in share price. Last Thursday they fell nearly 8% in a single day down to an all time low of 68c, although they have since recovered to close the week at 74c. Nevertheless even at that closing price they are now valued at just $US41m, a 15% decline in value over the week. New Hope have shares in Agria Singapore, but they have a put option back to Agria USA that will require Agria to buy back those shares in Agria Singapore at issue price. Far from being the saviour of Agria , New Hope could tip them over the edge at any time. I thought Agria might have 2-3 months to live under their current capital structure, but things may be moving faster than even the pessimists thought likely. Perhaps Alan Li only has a matter of days left at the Agria helm now?

Meanwhile the optimists have noted Alan Li's rather large to hat and are speculating at the colour of the rabbit he has in there! A white fluffy bid for the rest of PGW almost inevitable now?

SNOOPY

Exactly as New Hope wants it to be.

And if Agria's share price is of any relevance, bid 2000 to buy at 60c and offer 1200 to sell at $1.20. So they could just buy 1000 shares and make the price $1.20!

[Snoopy]

Exactly as New Hope wants it to be.


Balance, you are speaking as though New Hope has set up Agria and Alan Lai as a kind of veneer front man, a layer that can been peeled away should things go bad. The thing that puzzles me is this. It was always going to take more that two years to get the PGW seeds business to have any meaningful scale in China. So Agria has to play the game with an extended time horizon in mind.

The value of PGW shares may indeed be 60c (the price Agria paid for control of PGW) each 'eventually'. But that 'eventually' was always going to be a longer time frame than the rolling over period of the Agria bank loans. The logical way to go would be for PGW Agriservices to be floated off to Mom and Pop kiwi investors as a separate company within two years of Agria gaining control of PGW. That would inject the cash back into PGW Agritech. In turn Agria could make a reverse takeover for PGW Agritech. That would effectively end Agria's balance sheet woes. The transfer of the primary listing of 'PGW Agritech' to Singapore would then be a straightforward matter.

Then the long grind to get rid of the remaining NZ shareholders would begin by cancelling dividends, analyst coverage would cease in NZ and eventually the NZ shareholders remaining on the register would be squeezed out at a pittance. Instead Agria has remained unusually polite, even supporting Sir John Anderson as a continuing independent Chairman of the company they control (PGW). OK we have many more Agria appointees to the board now, but where is their influence on the direction of PGW? I know the Chinese pay the long game. But those playing the long game must still hold onto their hands while the game is in progress. It looks to me as though Agria will run out of cards before the game is complete. I don't believe that New Hope is well enough positioned should Alan Lai be asked to leave the gaming table before the long game is over.

SNOOPY

[Snoopy]

And if Agria's share price is of any relevance, bid 2000 to buy at 60c and offer 1200 to sell at $1.20. So they could just buy 1000 shares and make the price $1.20!


The relevence of Agria's share price is the effect that might have on the price setting of any new Agria shares that might be issued to shore up Agria's balance sheet. It would be easier to raise new capital if the Agria share price was $1.20 as opposed to 74c, true enough. But I think you need to consider who would be lining up to put more capital into Agria. My pick is that small shareholders having seen their investment decline in market value by nearly 95% (Agria floated at a market price around $US14) would not be keen to dip their hands into their pockets again. The only big player I can see who does have the ability to bail out Agria is New Hope. Why would New Hope indulge in a campaign to boost the Agria share price? Would it not be better for New Hope to put up new capital at a deeply discounted price? It would be easier to dilute the equity of existing shareholders if done this way, would it not? As New Hope does not hold a meaningful stake in Agria USA, the maximum bang for their buck would be obtained by shafting existing Agria shareholders as much as they can. I see that as the logical way for New Hope to behave, as Alan Lai is eased into graceful face saving retirement.

The problem is the above scenario is a nightmare for the existing small shareholders in Agria.

SNOOPY

[Balance]

Balance, you are speaking as though New Hope has set up Agria and Alan Li as a kind of veneer front man, a layer that can been peeled away should things go bad. The thing that puzzles me is this. It was always going to take more that two years to get the PGW seeds business to have any meaningful scale in China. So Agria has to play the game with an extended time horizon in mind.

The value of PGW shares may indeed be 60c (the price Agria paid for control of PGW) each 'eventually'. But that 'eventually' was always going to be a longer time frame than the rolling over period of the Agria bank loans. The logical way to go would be for PGW Agriservices to be floated off to Mom and Pop kiwi investors as a separate company within two years of Agria gaining control of PGW. That would inject the cash back into PGW Agritech. In turn Agria could make a reverse takeover for PGW Agritech. That would effectively end Agria's balance sheet woes. The transfer of the primary listing of 'PGW Agritech' to Singapore would then be a straightforward matter.

Then the long grind to get rid of the remaining NZ shareholders would begin by cancelling dividends, analyst coverage would cease in NZ and eventually the NZ shareholders remaining on the register would be squeezed out at a pittance. Instead Agria has remained unusually polite, even supporting Sir John Anderson as a continuing independent Chairman of the company they control (PGW). OK we have many more Agria appointees to the board now, but where is their influence on the direction of PGW? I know the Chinese pay the long game. But those playing the long game must still hold onto their hands while the game is in progress. It looks to me as though Agria will run out of cards before the game is complete. I don't believe that New Hope is well enough positioned should Alan Li be asked to leave the gaming table before the long game is over.

SNOOPY

I think you should have a look at the shareholders' agreement between Agria and New Hope :

https://www.nzx.com/companies/PGW/announcements/210728

New Hope is poised and waiting.

[Snoopy]

I think you should have a look at the shareholders' agreement between Agria and New Hope :

https://www.nzx.com/companies/PGW/announcements/210728

New Hope is poised and waiting.


The way I see it we are up to Chapter 10 in the life story of Agria. The question is what happens with Agria in Chapter 11?

In your reference Balance there is the following quote:
"On 28 June 2011 Agria Group Limited and New Hope International entered into an agreement (Charge Agreement) giving New Hope International a charge over Agria Group Limited’s Agria Asia Investments Limited shares (Charge). The Charge is given to secure Agria Group Limited’s obligations under the Put Option."

If you now go back to my post 1916 on this thread, the FY2011 20F filing for Agria states:

"New Hope International has the right to sell its shares in Agria Asia to Agria Group Limited, or Agria Group, on the terms and conditions provided in the shareholders agreement at a certain repurchase price determined pursuant to a supplemental agreement entered into between Agria Group and New Hope International in June 2011. The obligation of Agria Group in connection with this put option held by New Hope International may be on terms that are not commercially favorable to us."

To me this illustrates the lop sided nature of the agreement between Agria and New Hope. But if Agria USA goes into Chapter 11, do these agreements still apply?

SNOOPY

[Balance]

The way I see it we are up to Chapter 10 in the life story of Agria. The question is what happens with Agria in Chapter 11?

In your reference Balance there is the following quote:
"On 28 June 2011 Agria Group Limited and New Hope International entered into an agreement (Charge Agreement) giving New Hope International a charge over Agria Group Limited’s Agria Asia Investments Limited shares (Charge). The Charge is given to secure Agria Group Limited’s obligations under the Put Option."

If you now go back to my post 1916 on this thread, the FY2011 20F filing for Agria states:

"New Hope International has the right to sell its shares in Agria Asia to Agria Group Limited, or Agria Group, on the terms and conditions provided in the shareholders agreement at a certain repurchase price determined pursuant to a supplemental agreement entered into between Agria Group and New Hope International in June 2011. The obligation of Agria Group in connection with this put option held by New Hope International may be on terms that are not commercially favorable to us."

To me this illustrates the lop sided nature of the agreement between Agria and New Hope. But if Agria USA goes into Chapter 11, do these agreements still apply?

SNOOPY

Hence, my assessment you have to look at New Hope (and China government behind the scenes) rather than Agria.

Minorities will be protected by the presence of Selwyn Cushing, Gould and Ngai Tahu on the Borad and share register until New Hope makes its move.

[Snoopy]

I think you should have a look at the shareholders' agreement between Agria and New Hope :

https://www.nzx.com/companies/PGW/announcements/210728

New Hope is poised and waiting.

From you reference balance:
"Under the terms of the Shareholders Agreement, if Agria Corporation wishes to transfer its Agria Group Limited shares to a third party it must first offer the shares to New Hope International."

The problem is Agria Asia has not been able to improve the price of the underlying asset (PGW) since purchase. So why would Agria want to sell their stake in Agria Asia now, and crystallize a huge loss? Surely Agria will be doing everything in its power not to sell its PGW stake to anyone?

SNOOPY

[Balance]

From you reference balance:
"Under the terms of the Shareholders Agreement, if Agria Corporation wishes to transfer its Agria Group Limited shares to a third party it must first offer the shares to New Hope International."

The problem is Agria Asia has not been able to improve the price of the underlying asset (PGW) since purchase. So why would Agria want to sell their stake in Agria Asia now, and crystallize a huge loss? Surely Agria will be doing everything in its power not to sell its PGW stake to anyone?

SNOOPY

Per your assessment of Agria's financial position, it may have no option or choice.

Don't forget that the Canadians (Agrium) are in the background too.

[Balance]

3 stocks speculated on as takeover targets by the Chinese following FPA :

1. Rakon
2. Wrightson
3. Skellerup

[Minerbarejet]

Heads up - One News has PGG as takeover target after Agria have over 50 %. :Dahem. Have A Nice Day

[Balance]

Heads up - One News has PGG as takeover target after Agria have over 50 %. :Dahem. Have A Nice Day

Just like FPA after Haier have 20%?

[Agrarinvestor]

The relevence of Agria's share price is the effect that might have on the price setting of any new Agria shares that might be issued to shore up Agria's balance sheet. It would be easier to raise new capital if the Agria share price was $1.20 as opposed to 74c, true enough. But I think you need to consider who would be lining up to put more capital into Agria. My pick is that small shareholders having seen their investment decline in market value by nearly 95% (Agria floated at a market price around $US14) would not be keen to dip their hands into their pockets again. The only big player I can see who does have the ability to bail out Agria is New Hope. Why would New Hope indulge in a campaign to boost the Agria share price? Would it not be better for New Hope to put up new capital at a deeply discounted price? It would be easier to dilute the equity of existing shareholders if done this way, would it not? As New Hope does not hold a meaningful stake in Agria USA, the maximum bang for their buck would be obtained by shafting existing Agria shareholders as much as they can. I see that as the logical way for New Hope to behave, as Alan Li is eased into graceful face saving retirement.

The problem is the above scenario is a nightmare for the existing small shareholders in Agria.

SNOOPY

What is about BCL and Mr. Lai. Mr. Lai owns about 60% of Agria, i think.
http://idc.api.edgar-online.com/efx_dll/edgarpro.dll?FetchFilingConvPDF1?SessionID=AVvrFoe M-2wgNIS&ID=7037657
He has earned round about 80 million Dollar during the IPO of Agria. If Agria has to raise new capital, the shareprice doesn't play a large role for Agria.
The common shareholders has paid 16.5$ during the IPO. If we have the possibility to get new shares for 80 cent why not ? If no one has the the wish to order
these new share. Mr. Lai has the power to order all of them.
I am one of these small shareholders and i have no problems if AGRIA decide to raise new capital, as long as i have the possibility to order
my portion of the new shares. The looser are those who ordered 16.50% during the IPO, for the other is the low shareprice a opportunity.

Mr Lai conducts himself respectably to the board of directors at PGW, that is a good sign, that he is trying to avoid unfairness

[Snoopy]

Hi,
Can someone who is a registered shareholder, ask for a copy of the register of shareholders ?

It could be of interest if we see some neverheard funds and trusts collecting shares. I am sure that Agria has very good reasons why they bought 50,2% of PGW.


I did this the lazy way Agrinvestor, waiting for the PGW Annual report to come out. No doubt you have already checked yourself on line. But the key movements in shareholding since honest George's PGC share giveaway are like this:

HSBC Nominees: 2.77% -> 3.84%
ACC: 2.00% -> 2.39%
AMP Investments Strategic Growth: 1.60% -> 2.09%
National Nominees: 2.54% -> 2.04%
TEA Custodians: 0.68% -> 1.76%
First NZ Capital: 0.24% -> 1.10%
NZ Super Fund: 1.01% ->1.07%
Citibank Nominees: 1.46% -> 1.02%

New investors in the top 20 are:

Cogent Nominees: 2.76%
JP Morgan Chase: 2.02%
Philip Maurice Carter: 0.84%

All in all I would say the PGC holding has been widely distributed amongst the existing 'big boys', even though they are all 'small boys' in the overall shareholding stakes.

Of the newcomers, Philip Carter is a well known local rich lister. Cogent Nominees have positions in many NZ shares, although I know little about them. JP Morgan chase could be representing anyone but the stake is only 2%. I can't see any evidence that Agria now has a white knight for assistance on the share register.

SNOOPY

[Snoopy]

What is about BCL and Mr. Lai. Mr. Lai owns about 60% of Agria, i think.
http://idc.api.edgar-online.com/efx_dll/edgarpro.dll?FetchFilingConvPDF1?SessionID=AVvrFoe M-2wgNIS&ID=7037657
He has earned round about 80 million Dollar during the IPO of Agria. If Agria has to raise new capital, the shareprice doesn't play a large role for Agria.


Yes but the lower the share price is, the more new shares will have to be issued.



The common shareholders has paid 16.5$ during the IPO. If we have the possibility to get new shares for 80 cent why not ?


One very good reason! The Agria share price fell over 5% yesterday down to 70c! Much cheaper to buy on market than pay 80c in a potential rights issue!



If no one has the the wish to order these new share. Mr. Lai has the power to order all of them.


Not necessarily. Mr. Lai may have taken $US80m out of Agria. That doesn't mean he has this capital for investment now. I am sure he has reinvested it since, in his brother construction company for example.



I am one of these small shareholders and i have no problems if AGRIA decide to raise new capital, as long as I have the possibility to order my portion of the new shares.


A significant share placement, instead of a pro-rata rights issue, may deny you that choice. That is the risk of being a small shareholder.



The loser are those who ordered $US16.5 during the IPO, for the other is the low share price a opportunity.


A better opportunity I would suggest is to buy PGW shares directly. Once Agria is delisted you may never be able to sell your Agria shares.

SNOOPY

[Agrarinvestor]

Hallo Snoopy,

many thanks for your answers, Do you agree that:
Mr Lai hold over 60% shares of Agria ?
That Agria has the power to force PGW to pay a dividend of 3 cent if it would be necessary for Agria ?

The fact that Mr. Lai does not intend to use his voting rights in PGW for his own advantage indicates that Agria is in a better shape as the shareprice suggest. (I hope so)
Mr. Lai has done nothing to increase the shareprice, He has not released anykind of news that give support. If Agria is in need of money, he has only to buy a few hundered k of shares, as an insider,
and the shareprice were liftet aboe 2$. Together with the turnaround of PGW it would be a good story for people to invest in PGW again.
I have suffered during the last months with AGRIA shares only seeing one way, but i am still hoping that the nightmare have an end in October.
Because of your arguments i have not bought additional shares during the last 2 month.
Maybe i have to say thank you in a few weeks, but hopefully not.

[Snoopy]

Do you agree that: Mr Lai hold over 60% shares of Agria ?


I would guess that Alan Lai still holds a controlling stake in Agria, yes. However it has been a long time since there has been any disclosure on shareholdings. I am not familiar with NYSE rules, and substantial shareholders updating their holdings with the NYSE.



That Agria has the power to force PGW to pay a dividend of 3 cent if it would be necessary for Agria ?


You are saying this because PGW earned approximately 3cps in the last financial year?



The fact that Mr. Lai does not intend to use his voting rights in PGW for his own advantage indicates that Agria is in a better shape as the shareprice suggest. (I hope so).


There is another explanation for the respectful behaviour of Alan Lai. PGW itself is not a strong company financially and is under the scrutiny of its bankers. When Agria acquired their initial stake, we PGW shareholders were told of two banking covenants that PGW had agreed to with their bankers.

The first concerned the Senior Debt Coverage Ratio = (senior bank debt)/EBITDA

This had to be reduced to under 3 before any excess cashflow becomes available for distribution. Using the figures at the end of the FY2012 financial year, I can calculate this figure as it stood on 30th June 2012.

SDCR= ($29.709m+$111.500m)/ $50.761m = 2.78

If the SDCR is under 3.0 but over 2.0, this means the banking syndicate will allow 50% of PGW excess cashflow to be paid out. However, you will note that once all of the FY2012 profits have been booked the SDCR is only just under 3. That means it is unlikely that any distribution to shareholders would have been allowed up until 30th June 2012.

My guess is that the 3cps earnings from PGW is not available to be paid out to shareholders. If that was done PGW itself would go into receivership, and that would be very unhelpful for all shareholders, Agria included.

SNOOPY

[Snoopy]

SDCR= ($29.709m+$111.500m)/ $50.761m = 2.78

If the SDCR is under 3.0 but over 2.0, this means the banking syndicate will allow 50% of PGW excess cashflow to be paid out. However, you will note that once all of the FY2012 profits have been booked the SDCR is only just under 3. That means it is unlikely that any distribution to shareholders would have been allowed up until 30th June 2012.

My guess is that the 3cps earnings from PGW is not available to be paid out to shareholders. If that was done PGW itself would go into receivership, and that would be very unhelpful for all shareholders, Agria included.


Let's go through a hypothetical exercise.

'Excess cash' is defined as EBITDA less bank loan interest payable, tax payable and approved capital expenditure.

IF PGW can match last years (FY2012) earnings this excess cashflow would be:

EBITDA - 'Bank Loan Payments' - 'Tax Payments' - ' Projected Capex'
=$50.761m - $15.073m - $7.861m -$8.425m = $19.402m

(Note: PGW have reported that expected Capex should match depreciation)

50.22% of that figure (the Agria share) comes out at $9.74m or near enough to $US8m (based on $NZ1= US82c)

The maturing bank loans I am concerned about in the Agria accounts are described thus:

• Loan facilities denominated in US Dollars of RMB369.7 million (US$57.2 million) that mature between January 23, 2013 and April 19, 2013 provided by two banks.

$US8m paid over to Agria during FY2013 will hardly make a dent in that loan. Any way you can play this, I can't see any way to use PGW cash to help pay off that looming Agria loan. Of course if nothing changes at Agria then it will be delisted by January 23rd 2013, so small shareholders will no longer need to be told about the parlous state of the Agria books from January 19th 2013, being six months from the date warning of suspension from the NYSE.

SNOOPY

[Snoopy]

The maturing bank loans I am concerned about in the Agria accounts are described thus:

• Loan facilities denominated in US Dollars of RMB369.7 million (US$57.2 million) that mature between January 23, 2013 and April 19, 2013 provided by two banks.

$US8m paid over to Agria during FY2013 will hardly make a dent in that loan. Any way you can play this, I can't see any way to use PGW cash to help pay off that looming Agria loan. Of course if nothing changes at Agria then it will be delisted by January 23rd 2013, so small shareholders will no longer need to be told about the parlous state of the Agria books from January 19th 2013, being six months from the date warning of suspension from the NYSE.


I have been looking at the potential FY2013 $US8m dividend from PGW to Agria in another way. Could Agria refinance that $57m loan using the $US8m from PGW for paying interest?

$8m/$57m =14%. Suppose Agria could get a loan of 7%. That would leave the other 7% as a 'safety margin', which all bank loans have to have. Perhaps if PGW dividends are renewed, this is a possibility? Of course this is all assuming that those US loans due for renegotiation between January and April are the only loans uncoupled from PGW that Agria have. We really need to see those Agria accounts for FY2012 to confirm if this is the case.

Whatever happens I do expect some 'market action' in PGW as crunch time approaches for controlling shareholder Agria. If the PGW price goes up as a result I may sell my residual holding. If the PGW share price goes down I may just buy some more.

I have begun my own more detailed analysis of the PGW result, and I don't believe it was quite as bad as my initial impression when the result was announced. Agriservices really did remarkably well from an historical perspective and the South American side of the business put in a record after tax result.

But Agritech was a huge disappointment, and unfortunately all continuing divisional returns were still well below their cost of capital, even in this boom time for farming. That means the best thing for shareholders that PGW management could do would be to pay down their mountain of debt as fast as possible. But for reasons I have outlined, Alan Lai and Agria may not allow that to happen.

SNOOPY

[Balance]

Snoopy, me thinkth you are missing the wood for the trees.

The issue with Agria is its relationship with New Hope.

Watch that one carefully.

[Snoopy]

Snoopy, me thinkth you are missing the wood for the trees.

The issue with Agria is its relationship with New Hope.

Watch that one carefully.

Balance, I painted my possible 'get out of jail' scenario for Alan Lai for the benefit of Agrainvestor, and other Agria shareholders.

From a hard hatted PGW investor perspective, I am disinterested as to whether PGW enters China by the good grace of Alan Lai or Hopeful Hope, the CEO of New Hope. Actually from a medium term perspective I don't think China matters at all. Whatever pans out in Australia and South America is far more important to the medium term direction of PGW, even though there are many on this forum that think China is all that matters. It is going to take rather more than one guy with a PGW cap on in Shanghai to really get me interested in the Chinese market prospects.

SNOOPY

[Snoopy]

Snoopy on what basis do you come up with the idea that PGW should trade at 6-10 PE multiples in the future when over the past 9 years they have traded between 12 and 18 PE.


Have just had a look through by own library of PGW information. I have calculated the PE ratio as at 30th September for the following years using the information presented.

Year, Share Price 30th Sept ($), Underlying Profit, Quoted Profit, , eps (cps), PE

2012, 0.35, $24.0m, $24.5m, 3.2c, 10.9
2011, 0.40, $7.1m, -$30.7m, 1.0c, 40.0
2010, 0.56, $18.0m, $18.0m, $23.3m, 2.4c, 23.3
2009, 0.64, $30.2m, -$65.2m, 9.6cps, 6.6
2008, 1.60, $47.9m, $73.2m, 16.6cps, 9.6
2007, 1.93, $27.9m, $40.6m, 14.4cps, 13.4

The quoted profit from the annual report contains so many 'one offs' it is misleading in my opinion.

I have calculated my 'underlying profit' by using the divisional EBIT figures, then removing an allocation of interest in proportion to divisional revenue. Tax has been calculated at the appropriate rate assuming it is all paid in one year.

You can see that in the two 'good years' YE 30th June 2008, and YE 30th June 2012 the PE was 9.6 and 10.9 respectively.

The FY2011 bad year saw the PE rise to 40, in anticipation of course that profits would not be that low for long.

The low PE of 6.6 in FY2009 was a special case. It was known that a large capital issue was imminent and that always depresses the share price.

In summary I submit that a PE for PGW of 10 is reasonable in a good year. My idea of 6 was probably too low, unless another a capital raising is imminent.

On a PE of 10, the fair value for PGW shares is 32c

SNOOPY

[Snoopy]

Whatever happens I do expect some 'market action' in PGW as crunch time approaches for controlling shareholder Agria. If the PGW price goes up as a result I may sell my residual holding. If the PGW share price goes down I may just buy some more.


I think I have been a little obtuse in my PGW investment strategy. So to try and make my thoughts a little clearer...

1/ I do think that Agria needs to raise capital and that this will cause market uncertainty for PGW investors as the crunch point for Agria approaches 23rd January 2013. This may be usurped by the delisting of Agria on January 19th 2013 if they fail to get their share price back over $US1.

2/ I am not sure which way the market will take the Agria news, as I see two possible responses.

2a/ The market will sell down PGW as it perceives the China strategy has gone off the rails with the potential demise of Agria.
2b/ The market will bid up PGW as it realizes that whoever buys the Agria stake will be forced to make a bid for the entire company under NZ takeover code rules.

3a/ If the market sells PGW this will be an opportunity to buy PGW at bargain prices as I do believe the long term future of PGW is secure.
3b/ If the market buys PGW then the price if it gets above, say. 50c will be a PE of 15 and too high. I would sell my residual PGW stake on market in that situation, because there is go guarantee of a full bid for PGW at a fair price. The buyer of the majority Agria stake might make a low ball offer to ensure the balance of PGW remains listed

SNOOPY

[Balance]

Sorry, Snoopy, but I think you are still focused on the wrong thing - Agria is not the one to watch as much as New Hope.

Also, the moves by Haier to take out FPA and now, Olam taking out (trying) NZS tell you the Asian corporates have a different perspective on timeframe and value.

Dodgie Georgie's firesale stock at 32c still being absorbed but just like HNZ, will be absorbed.

A quick 10% gain by those who participated in the firesale gives those who cannot participate a chance to go for the next move by New Hope.

[Queenstfarmer]

Yes wouldn't that be just grand to see an offer of $1.20 just like FPA or even half that would get shareholders excited.

[Balance]

Watch out before too long for the cries of anguish, outrage and xenophobic distress about yet another iconic NZ company being bought by overseas interests etc.

Meanwhile, the market yawns and chases after yet more rental properties!

[Snoopy]

Sorry, Snoopy, but I think you are still focused on the wrong thing - Agria is not the one to watch as much as New Hope.

<snip>

A quick 10% gain by those who participated in the firesale gives those who cannot participate a chance to go for the next move by New Hope.

Here is the website of your PGW saviours Balance.

http://www.newhopegroup.com/EN/GlobalGoal.aspx?

Click on their overseas investment section and you can read all about their overseas investment plans - for poultry feed production in Indonesia.

SNOOPY

[Queenstfarmer]

Big volumes creeping up on the buy side of the table...perhaps that Black swan has a web or two in the water. :-)

[Balance]

Here is the website of your PGW saviours Balance.

http://www.newhopegroup.com/EN/GlobalGoal.aspx?

Click on their overseas investment section and you can read all about their overseas investment plans - for poultry feed production in Indonesia.

SNOOPY

PGW does not need New Hope as a savior now, Snoopy.

Agria does.

[Queenstfarmer]

Something is brewing....

[Snoopy]

Something is brewing....


Perhaps this?

"The notice of meeting records that Sir Selwyn Cushing, Bill Thomas and Tao Xie (XT) will retire from the board at the meeting. Guanglin Lai (Alan) will also retire by rotation and will stand for re-election."

XT is in theory the chief executive officer of Agria. So I am very surprised to hear he is standing down. As for the other two, I am a little less surprised the use by sticker has come up.

SNOOPY

[Snoopy]

Something is brewing....

Or maybe this?

-----------

PGG Wrightson gets government backing in $14.6M seeds research
Thursday 4th October 2012


PGG Wrightson, the New Zealand rural services group controlled by China's Agria, has won government backing for a $14.6 million research programme that aims to improve seed quality and plant species.

The government will invest $7.15 million over six years through its Primary Growth Partnership fund in a Wrightson-led initiative to lift animal productivity and reducing environmental impacts, the Ministry for Primary Industries said in a statement. The balance will be picked up by Wrightson and its research partners.

The programme seeks to establish faster and more reliable pasture, increase pasture productivity and persistence, cut greenhouse gas emissions, improve animal health and lower susceptibility to summer droughts.

"Co-funding of these projects by government and industry is what PGP is all about," Primary Industries Minister David Carter said in a statement. "Every New Zealander stands to gain from innovative investment in the primary sector because our food, fishing, fibre and forestry industries are pivotal to the success of the economy."

Wrightson's seeds business was widely seen as the attraction for China's Agria Corp taking a controlling 50.01 percent stake in the company in a $144 million deal. Its agri-tech unit, which has been building its seeds business, increased revenue 3.6 percent to $435 million, though earnings fell 21 percent to $30.1 million in the latest financial year.

Derek Woodfield, PGG Wrightson Seeds general manager of research and development, said the funding will let the company build a suite of new technology to keep New Zealand farmers internationally competitive.

----------

SNOOPY

[Balance]

Me thinkth none of the above - just Dodgie Georgie's firesle stock being absorbed by the short term traders to the longer term players.

Comes 2013, New Hope will make its move.

[Snoopy]

"The notice of meeting records that Sir Selwyn Cushing, Bill Thomas and Tao Xie (XT) will retire from the board at the meeting. Guanglin Lai (Alan) will also retire by rotation and will stand for re-election."

XT is in theory the chief executive officer of Agria. So I am very surprised to hear he is standing down. As for the other two, I am a little less surprised the use by sticker has come up.



In another directorial twist, the chief executive of Ngai Tahu Greg Campbell has quietly dropped off the PGW board after only a year on it. This I thought odd until I found Campbell had resigned as CE of Ngai Tahu. The new CE of Ngai Tahu is none other than Mike Sang. If that name isn't familiar to you it should be.

Sang was the former CFO of Wrightson under Craig Norgate. Reading between the lines he was forced to resign because he allowed the Silver Fern farm joint venture to go unconditional despite the small matter of the bank funding not being in place to complete the merger. This was of course a disaster for PGW and one of the factors behind the corporate bailout that brought Agria to the table. Imagine Sang back at PGG Wrightson but now on the board! What would I give to be a fly on the wall at Sang's first PGW board meeting!

SNOOPY

[Balance]

In another directorial twist, the chief executive of Ngai Tahu Greg Campbell has quietly dropped off the PGW board after only a year on it. This I thought odd until I found Campbell had resigned as CE of Ngai Tahu. The new CE of Ngai Tahu is none other than Mike Sang. If that name isn't familiar to you it should be.

Sang was the former CFO of Wrightson under Craig Norgate. Reading between the lines he was forced to resign because he allowed the Silver Fern farm joint venture to go unconditional despite the small matter of the bank funding not being in place to complete the merger. This was of course a disaster for PGW and one of the factors behind the corportae bailout that brought Agria to the table. Imagine Sang back at PGG Wrightson but now on the board! What would I give to be a fly on the wall at Sang's first PGW board meeting!

SNOOPY

Well spotted, Snoopy!

What does it really mean, however?

[percy]

Well spotted, Snoopy!

What does it really mean, however?

Means Ngai Tahu have a good insight to their investment.

[Snoopy]

Well spotted, Snoopy!

What does it really mean, however?

This is how I read the situation.

Sang has been brought on board because Ngai Tahu want to increase their rural assets beyond the token stake in PGW that they currently hold.

It also means 'New Hope' for Agria for a source of future funding. There may be someone else willing to bail them out who doesn't salute the red flag.

SNOOPY

[Balance]

I think you are right and truely believe the main reason for pgw current 35 cent sp is a overhang of short term profit taking, which by my calculations is just about done and dusted.

I can only think of more positives to your hypothesis that is to say the pgw brand is very strong, well established, now focusing in the right place's and current share price reflects that the stock is out of favour and sold down by impatient investors as well as profit takers.
The share price could also be suffering a hang over(out of favour) from the Allied farmers debacle as this company operates in the same industry.

I liken PGW to skellerup and fpa.
I own the stock and continue add to my holdings.

I can tell you that farming is going to have a great year(maybe not as good as last year).

Huge volumes being crossed in the last 2 weeks - could well be the end of all that stock sold down by PGC in July at 29 cents and then, 32 cents.

Lovely profit for the buyers at 29 cents = 20m shares x 6 cents profit = $1.2m or 20% plus profit in 3 months.

Who says you cannot make money out of Georgie?

[Snoopy]

There are some eerie parallels

- Former management suffering huge amounts of hubris after overseas acquisitions prove very expensive


PGW has been rather modest with their overseas acquisitions IMO. They have bought into a few seed companies in Australia and paid so little for them the buy in prices were not disclosed. Once new seed businesses are acquired, Agritech does not tell us which sales are from the new acquisitions and which are from the existing seed business. Agritech sales were $NZ356.7m in FY2008 and now they are $390.4m five years later in FY2012. The Agritech divisional NPAT story is more telling. $19.9m in FY2008 and $3.7m in FY2012.

One argument might be that however little PGW actually paid for their seed business acquisitions, it was far too much. Because the effects on Agritech profitability have been so devastating.

SNOOPY

[Snoopy]

There are some eerie parallels

- Chinese have a stake in the company


All Chinese are not equal! Haeir are a well established global giant. Agria are a minnow with plenty of Chinese competition. Read my excerpt from the Agria report on this thread (post 1918).

SNOOPY

[Snoopy]

There are some eerie parallels

- a "deep value play" at the 35c mark


Check out my post 2183 on PEs. At 37c (today's market price) PGW is on a PE of 12 and is trading at a premium of 20% to asset backing. That doesn't tick any of my deep value boxes. In historical terms PGW is actually rather expensive at 37c IMO.

SNOOPY

[Snoopy]

There are some eerie parallels

- A sense that "the worst is over". The company is not broken, but the stock remains troubled due to sentiment and fallout from a few years ago.


I certainly hope the worst is over! In historical terms Agriservices had a bumper result in FY2012, which was rather masked by the Agritech result being so terrible. Yet even in their best year, Agriservices did not earn their cost of capital.

Our farming insider Snapiti admits that although FY2013 will be good it won't match FY2012. So I would expect Agriservices earnings to decrease in FY2013 for that reason. If PGW can recover any kind of normalized (whatever that means) profitability from Agritech then despite farming fortunes being on the wane there is still room for profit growth at PGW in FY2013. But will this happen? PGW have restructured all of the Australian seed businesses under one umbrella now. But any upturn in profitability at Agritech could still be years away.

SNOOPY

[Balance]

All Chinese are not equal! Haeir are a well established global giant. Agria are a minnow with plenty of Chinese competition. Read my excerpt from the Agria report on this thread (post 1918).

SNOOPY

Snoopy, you are still missing the woods for the tree - New Hope, not Agria.

Just as in HNZ, it's the Christchurch old boys' not PGC or Georgie boy.

[Snoopy]

South America increased EBITDA contribution from $4.2m to $5.4m.


Yes I should have mentioned South America is looking reasonably promising. Albeit the whole operation is still relatively small compared to the NZ/Oz business.

SNOOPY

[Snoopy]

Snoopy, you are still missing the woods for the tree - New Hope, not Agria.


Look at the shareholders agreement between Agria and New Hope you quoted before Balance

https://www.nzx.com/companies/PGW/announcements/210728

in particular this bit

"The Shareholders Agreement further provides that New Hope International has the right to sell its Agria Asia Investments Limited shares to Agria Group Limited. The right to sell is subject to limits as to the number of shares New Hope International can sell from 29 April 2011 up to 29 April 2014. Further New Hope International may sell all of its shares, irrespective of the limits referred to, if Agria Corporation undergoes a change in control or Mr Xie Tao’s service agreement with Agria Corporation is unilaterally terminated by Agria Corporation (Put Option)."

I believe that XT has seen the writing on the wall at Agria, having resigned from the PGW board. I believe XT is on the brink of leaving Agria but out of courtesy to his friend Alan Lai has not put in his resignation yet because of the above clause.

It is XT that has the relationship with New Hope, not Alan Lai. New Hope have had many chances to put some serious money into Agria but have failed to do so. The only capital New Hope have put into Agria has an escape clause that will allow them to get it all back if things go bad. From the New Hope website they seem more interested in animal farming anyway, not plants.

If Agria has any hope now it will come from Ngai Tahu, not New Hope IMO.

SNOOPY

[Snoopy]

I believe that XT has seen the writing on the wall at Agria, having resigned from the PGW board.


I should note that the shareprice of Agria has improved by a few cents in recent days and is now nudging 80c. However to get an average share price of more than $1 over six months, the shareprice for Agria is going to have to rise to $1.20 very soon if Agria is to stop the NYSE delisting process. If the average share price over six months must be $1 or more over six months for Agria to remain listed, and it has already spent 3 months at just below 80c, the maths requires this kind of share price recovery. A 50% increase in the Agria share price (from 80c to $1.20) isn't going to happen once Agria announce their huge loss for the year.

SNOOPY

[Balance]

Look at the shareholders agreement between Agria and New Hope you quoted before Balance

https://www.nzx.com/companies/PGW/announcements/210728

in particular this bit

"The Shareholders Agreement further provides that New Hope International has the right to sell its Agria Asia Investments Limited shares to Agria Group Limited. The right to sell is subject to limits as to the number of shares New Hope International can sell from 29 April 2011 up to 29 April 2014. Further New Hope International may sell all of its shares, irrespective of the limits referred to, if Agria Corporation undergoes a change in control or Mr Xie Tao’s service agreement with Agria Corporation is unilaterally terminated by Agria Corporation (Put Option)."

I believe that XT has seen the writing on the wall at Agria, having resigned from the PGW board. I believe XT is on the brink of leaving Agria but out of courtesy to his friend Alan Lai has not put in his resignation yet because of the above clause.

It is XT that has the relationship with New Hope, not Alan Lai. New Hope have had many chances to put some serious money into Agria but have failed to do so. The only capital New Hope have put into Agria has an escape clause that will allow them to get it all back if things go bad. From the New Hope website they seem more interested in animal farming anyway, not plants.

If Agria has any hope now it will come from Ngai Tahu, not New Hope IMO.

SNOOPY

Full text of the shareholders' agreement include :

"Under the terms of the Shareholders Agreement, if Agria Corporation wishes to transfer its Agria Group Limited shares to a third party it must first offer the shares to New Hope International. This right does not apply to a transfer of Agria Group Limited shares to a company that is wholly owned or solely benefically owned by Agria Corporation (Right of First Offer)."

"On 28 June 2011 Agria Group Limited and New Hope International entered into an agreement (Charge Agreement) giving New Hope International a charge over Agria Group Limited’s Agria Asia Investments Limited shares (Charge). The Charge is given to secure Agria Group Limited’s obligations under the Put Option."

Why have you left out the first clause and last clause of the agreement between Agria and New Hope, Snoopy?

It's not like you to leave out half the picture!

[Agrarinvestor]

Put option. Does it mean New hope has the right to sell their shares to AGRIA for the current value, or for a value that AGRIA wishes to pay ?

>>The repurchase price (“Repurchase Price”) payable by Agria Group to New Hope upon exercise of the Put Option by New Hope shall be a price to be agreed upon in writing by Agria Group and New Hope.<<

http://www.sec.gov/Archives/edgar/data/1413257/000095012311062179/c19223exv4w55.htm


Therefore i ask myself, for what sense is this Put Option if Agria has to agree ?

[Agrarinvestor]

I should note that the shareprice of Agria has improved by a few cents in recent days and is now nudging 80c. However to get an average share price of more than $1 over six months, the shareprice for Agria is going to have to rise to $1.20 very soon if Agria is to stop the NYSE delisting process. If the average share price over six months must be $1 or more over six months for Agria to remain listed, and it has already spent 3 months at just below 80c, the maths requires this kind of share price recovery. A 50% increase in the Agria share price (from 80c to $1.20) isn't going to happen once Agria announce their huge loss for the year.

SNOOPY

Hallo Snoopy,

this is not correct. Agrias shareprice has only to be valued above 1$ for a period of 30 days. This should not be a problem after the annual report is out.

>>NYSE continued listing standard requiring a listed security to maintain a minimum average closing price of $1.00 per share over a consecutive 30-trading-day period. The NYSE noted that the minimum average closing price is the only listing criteria the Company is not in compliance with. The Company has six months from receipt of the notification to bring its ADS price and average ADS price back above $1.00. <<

Agria can not inspire shareholder to buy shares until the annual report is out.
After that, i am sure, they will take proper actions to bring the share price above 1,50$. In the meantime i am happy that they are keeping there powder dry.

[Balance]

The agria website makes reference to recieving their non compliance notice( this would be for having shares worth less than $1) on the 19 August 2012.
By my calculations this gives them til Feb 19th 2013 to have had a share price over a $1 for more than 30 days.

tick tick tick
However could they simply announce a cancellation of say 50% of the shares to inable them to achieve this.

Let's hope they do not meet the deadline.

[Snoopy]

The agria website makes reference to recieving their non compliance notice( this would be for having shares worth less than $1) on the 19 August 2012.
By my calculations this gives them til Feb 19th 2013 to have had a share price over a $1 for more than 30 days.


The Agria website lists the non compliance share price noted notice dated 19th July 2012. So by my reckoning 19th January is the deadline. And that means getting the share price up to $1 and more by 19th December if the shareprice is to average $1 for a month before the threatened delisting date.

In practice no respectable company would try to cut things that fine though.



tick tick tick
However could they simply announce a cancellation of say 50% of the shares to enable them to achieve this.


Yes you are right Agria could just cancel half their shares. However the problem as I see it is that Agria have no income to pay their interest bill. With no income and a significant debt to pay, you are bankrupt whatever the share price is. So I don't think canceling shares is going to work. However a special dividend from PGW even of 1c if it is announced at the PGW AGM might do it. Alan Lai is standing for re-election so he should be there!

SNOOPY

[Snoopy]

Snoopy,

this is not correct. Agrias shareprice has only to be valued above 1$ for a period of 30 days.

>NYSE continued listing standard requiring a listed security to maintain a minimum average closing price of $1.00 per share over a consecutive 30-trading-day period. The NYSE noted that the minimum average closing price is the only listing criteria the Company is not in compliance with. The Company has six months from receipt of the notification to bring its ADS price and average ADS price back above $1.00. <<


Thanks for the correction Agrainvestor. I had too many time frames spinning in my head! You were right and I was wrong.



This should not be a problem after the annual report is out.


If the annual report was going to save Agria, would it not make sense to expedite getting it out?

I am not sure that declaring a huge loss is going to inspire market confidence!

SNOOPY

[Snoopy]

Let's hope they do not meet the deadline.

I should point out that delisting from the NYSE would not necessarily mean the end of Agria. There are alternative secondary markets where Agria shares could trade. Telecom has moved to one of these markets when they left the NYSE voluntarily. It would certainly be a blow to the Agria ego though. I wonder how many companies have been delisted from the NYSE, and fought their way back?

IMO the real problem is the renegotiation of the Agria debt. The deadlines for doing that start on 13th January 2013 IIRC.

SNOOPY

[Snoopy]

Why have you left out the first clause and last clause of the agreement between Agria and New Hope, Snoopy?

It's not like you to leave out half the picture!


Sorry Balance, but I did put in the link so that those who read my quote could go back and check the context. I was not meaning to obfuscate things by leaving detail out. But I don't believe that making a full quote of the text would have enhanced my point. Namely that this Agria deal with New Hope is contingent on XT still being on the payroll at Agria.

At the moment PGW is far and away the biggest investment that Agria has. So why would XT the CEO of Agria quit the PGW board? It doesn't make sense. Unless XT is on the brink of leaving Agria. To leave now at AGM time would be far more honourable than suddenly quitting a few more months down the track.

SNOOPY

[Snoopy]

Put option. Does it mean New hope has the right to sell their shares to AGRIA for the current value, or for a value that AGRIA wishes to pay ?

>>The repurchase price (“Repurchase Price”) payable by Agria Group to New Hope upon exercise of the Put Option by New Hope shall be a price to be agreed upon in writing by Agria Group and New Hope.<<

http://www.sec.gov/Archives/edgar/data/1413257/000095012311062179/c19223exv4w55.htm


Therefore i ask myself, for what sense is this Put Option if Agria has to agree ?

Agrainvestor, refer to my post 1916 and particularly note the last piece of the quote:

"Furthermore, New Hope International has the right to sell its shares in Agria Asia to Agria Group Limited, or Agria Group, on the terms and conditions provided in the shareholders agreement at a certain repurchase price determined pursuant to a supplemental agreement entered into between Agria Group and New Hope International in June 2011. The obligation of Agria Group in connection with this put option held by New Hope International may be on terms that are not commercially favorable to us."

The price that New Hope will pay for Agria Asia shares was determined on June 2011. What that price is has not been disclosed to the market. But given that the put option price:

"may be on terms that are not commercially favorable to us" (from the Agria 20F filing)

This would suggest to me that it is probably not the market worth of Agria Asia shares today. Or alternatively the put option might be a market price, or a monthly average of market prices. But the timing of the purchase might not suit NYSE listed Agria. Whatever the actual arrangement, I believe it is unfavourable for Agria. I believe the price of the put option that will allow New Hope to exit from Agria Asia has been set by New Hope as a condition of bringing New Hope on board in the first instance.

SNOOPY

[Balance]

Sorry Balance, but I did put in the link so that those who read my quote could go back and check the context. I was not meaning to obfuscate things by leaving detail out. But I don't believe that making a full quote of the text would have enhanced my point. Namely that this Agria deal with New Hope is contingent on XT still being on the payroll at Agria.

At the moment PGW is far and away the biggest investment that Agria has. So why would XT the CEO of Agria quit the PGW board? It doesn't make sense. Unless XT is on the brink of leaving Agria. To leave now at AGM time would be far more honourable than suddenly quitting a few more months down the track.

SNOOPY

Picture becomes clearer or did they read your post and said "Snoopy is right"? Not written in jest either, Snoopy me ole mate!

http://www.nbr.co.nz/article/pgg-wrightson-parent-agrias-top-executives-depart-other-opportunities-bd-130564

[Snoopy]

Picture becomes clearer or did they read your post and said "Snoopy is right"? Not written in jest either, Snoopy me ole mate!
<snip>


Not really a good look to lose the CEO and CFO in one day is it? However Agria itself is only down 2c to US80c. PGW is also down 2c to 34c as I write this, although in percentage terms that 2c is a lot more. I guess only the faithful are on the Agria share register these days. More room to shock people on the PGW register!

I don't buy the whitewashed statement on the reason for departure of XT and John Layburn. I think they have been unable to renegotiate those Agria loans that are up for renewal from January next year. They made the call to launch their lifeboat early. Meanwhile Captain Alan Lai is on the bridge wondering what that small white thing is sticking out of the water on the horizon.

Strike One: The senior crew abandon ship.
Strike Two: Suspension from trading on the NYSE
Strike Three: Bankers take over their loans.

Another Steel & Tube on the way perhaps? What will the discounted PGW redistribution price be to institutional and private investors be? 29c has a nice bargain ring to it!

SNOOPY

[Agrarinvestor]

Thanks for the correction Agrainvestor. I had too many time frames spinning in my head! You were right and I was wrong.



If the annual report was going to save Agria, would it not make sense to expedite getting it out?

I am not sure that declaring a huge loss is going to inspire market confidence!

SNOOPY


>>I am not sure that declaring a huge loss is going to inspire market confidence!<<

2 Million loss is almost nothing. I thought you may be impressed, by that number. You told me that the falling shareprice of PGW would be
a big problem for AGRIA. After this question was positively solved for Agria, you are painting new horror on the wall.
I don't think that John Layburn leaves the ship because it is sinking. Maybe such a skilled person has better possibilities elsewere.
XT is going into retirement.

[Balance]

Not really a good look to lose the CEO and CFO in one day is it? However Agria itself is only down 2c to US80c. PGW is also down 2c to 34c as I write this, although in percentage terms that 2c is a lot more. I guess only the faithful are on the Agria share register these days. More room to shock people on the PGW register!

I don't buy the whitewashed statement on the reason for departure of XT and John Layburn. I think they have been unable to renegotiate those Agria loans that are up for renewal from January next year. They made the call to launch their lifeboat early. Meanwhile Captain Alan Lai is on the bridge wondering what that small white thing is sticking out of the water on the horizon.

Strike One: The senior crew abandon ship.
Strike Two: Suspension from trading on the NYSE
Strike Three: Bankers take over their loans.

Another Steel & Tube on the way perhaps? What will the discounted PGW redistribution price be to institutional and private investors be? 29c has a nice bargain ring to it!

SNOOPY

Good - the day of reckoning gets closer and closer.

Me thinkth you are still missing the woods for the trees, Snoopy me-ole-mate.

Go through your Heartland thread postings and you will know what I mean.

[Snoopy]

The Agria website lists the non compliance share price noted notice dated 19th July 2012. So by my reckoning 19th January is the deadline. And that means getting the share price up to $1 and more by 19th December if the shareprice is to average $1 for a month before the threatened delisting date.


After reading through the Agria 2012 annual result I need to issue another correction. The non-compliance notice sent to Agria by the NYSE was informed to the market on 19th July. But it was issued to the company on 27th June 2012. That means D-day for compliance is actually 27th December 2012. The all important month before date for determining the monthly average share price is 27th November 2012. The timetable is looking very tight here.

SNOOPY

[Snoopy]

2 Million loss is almost nothing. I thought you may be impressed, by that number. You told me that the falling shareprice of PGW would be
a big problem for AGRIA.


Yes I did say that the falling PGW share price would be a big problem for Agria. I may have to admit now to being wrong. But I think Agria have been 'saved'(?) by the accounting standards, so please hear me out....

The 2011 accounts showed Agria "marking to market" their PGW holding. But it transpires that this "marking to market" only applied when PGW was classed as an investment for Agria. That was only for two months of the FY2011 financial year. Once the Agria shareholding moved above 50% PGW became a subsidiary and was consolidated into the Agria accounts. At that point the PGW share price was effectively frozen on the Agria accounts at the acquisition price of NZ60c/US46c.

Thus when Agria stated on page 53 of the FY2012 annual result filing that.

"We had no unrealized gain or loss on investments in the year ended June 30, 2012,"

that is only because accounting standards did not require them to declare it. The market value of the 50% of PGW that Agria owns is approximately $US165m (based on $NZ1=US80c, PGW sp= 35c, 754m shares on issue). With the share price for PGW now at US28c, Agria is sitting on a staggering paper loss of just over $US100m.

If Agria had to sell down their PGW holding even from 50.22% to 49.9% this loss would be have to be brought onto the books. IMO that would be the end of Agria.

I am sure Agrias bankers are not silly and realize the precarious nature of their investment. There is an old saying that if you owe the bank $US1m that is your problem but if you owe $US100m then it becomes the banks problem. Alan Lai is wealthy but he is not that wealthy. It would not be in the interest of Agrias bankers to force them out of business. But IMO Agria is dead already, despite what the accounts are telling you.

SNOOPY

[Snoopy]

Agria stated on page 53 of the FY2012 annual result filing that.

"We had no unrealized gain or loss on investments in the year ended June 30, 2012,"


A little more information on this subject. The value of PGW, even as an investment, can be reduced on the Agria books if it fails an annual goodwill test.


Quoting from p58 of Agrias annual result 20F filing.

-----

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired. In April 2011, the Company acquired a controlling interest in PGW, resulting in additional goodwill. In accordance with the provisions of ASC 350-20, “Intangibles - goodwill and other”, goodwill amounts are not amortized, but rather are tested for impairment at least annually, or more frequently if there are indicators of impairment present. If the carrying value of the reporting unit to which goodwill is allocated is less than the reporting unit's fair value, goodwill is considered to be impaired. A reporting unit's fair value is determined based on its expected cash flows. The amount of goodwill impairment loss is measured as the excess of the carrying value of goodwill over its implied fair value. Subsequent reversal of goodwill impairment loss is prohibited. Goodwill has been assigned to Beijing NKY Seeding Development Co., Ltd., a component of the Company's corn seeds operating segment, Beiao, a component of the Company's vegetable seeds operating segment, and PGW, a company engaged in rural services in New Zealand, for purposes of impairment testing. No impairment charges have been recognized for the years ended December 31, 2009 and 2010, the six months ended June 30, 2011, and the year ended June 30, 2012.

-----

So far so good. But what Agria didn't tell their shareholders is that on page 92 of the PGGW report for FY2012, the goodwill value of PGW has been tagged by the auditors in New Zealand! This makes the net asset position of Agria very precarious indeed, even if Agria have carefully not told their minority shareholders the full story!

SNOOPY

[Snoopy]

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2011 Balance sheet:

PGW Total Liabilities: $NZ844.685m
PGW Total Equity: $NZ604.341m
PGW Total L & E: $1,449.026m

Convert that to USD using $NZ1= US81.73c

PGW Total Liabilities: $US690.36m
PGW Total Equity: $US493.92m
PGW Total L & E: $US1,184.29m

Reduce value to allow for Agria owning 50.22% of shares as at 30th June 2011

Agria PGW Liabilities: $US346.69m
Agria PGW Equity: $US248.05m
Agria PGW L & E: $US594.75m

Now we go to the Agria Balance Sheet for the same 30th June 2011 date, which includes the 50.22% share of PGW as a consolidated entity.

Agria Liabilities: $US831.1m
Agria Equity: $US412.3m
Agria L & E: $US1243.4m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US484.4m
Underlying Agria Equity: $US164.2m
Underlying Agria L & E: $US648.6m

That means the underlying Agria itself has an equity ratio of:

$US164.2m /$US648.6m= 25.3%



Repeating this exercise for the FY2012 financial year...

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2012 Balance sheet:

PGW Total Liabilities: $NZ402.698m
PGW Total Equity: $NZ577.774m
PGW Total L & E: $NZ980.472m

Convert that to USD using $NZ1= US79.64c

PGW Total Liabilities: $US320.708m
PGW Total Equity: $US460.139m
PGW Total L & E: $US780.847m

Reduce value to allow for Agria owning 50.22% of shares as at 30th June 2012

Agria PGW Liabilities: $US161.060m
Agria PGW Equity: $US231.082m
Agria PGW L & E: $US392.141m

Now we go to the Agria Balance Sheet for the same 30th June 2012 date, which includes the 50.22% share of PGW as a consolidated entity.

Agria Liabilities: $US415.033m
Agria Equity: $US406.596m
Agria L & E: $US821.629m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US253.973m
Underlying Agria Equity: $US175.514m
Underlying Agria L & E: $US429.488m

That means the underlying Agria itself has an equity ratio of:

$US175.514m /$US429.488m= 40.8%

That is heavily indebted but manageable (perhaps), until you remember the $US100m in PGW share writedowns that have been shuffled off balance sheet

($US175.514m-$US100m) /$US429.488m= 17.6%

With no income to service a $US430m debt and an equity ratio of just 18% it is at this point that I declare Agria technically bankrupt.

SNOOPY

[Under Surveillance]

With no income to service a $US430m debt and an equity ratio of just 18% it is at this point that I declare Agria technically bankrupt.

SNOOPY
You certainly make a strong case.

On the other hand, I see from the 20-F filing that Agria Corporation says:
Debt owed by oursubsidiary, Agria Asia Investments :· acquisition debt denominated inNew Zealand dollars of NZ$25.0 million ($19.7 million) that matures on October31, 2012 provided by a bank. In September 2012, we received a credit approvedterm sheet from the bank to extend this loan to February 27, 2014.;
· acquisition debt denominated inNew Zealand dollars of NZ$10.0 million ($7.9 million) that matures on October31, 2012 provided by Livestock Improvement Company. If the bank which providedthe acquisition debt referred to above extends the NZ$25.0 million acquisitiondebt facility, Livestock Improvement Company is restricted in its ability to enforce security in the event of them not being repaid on October 31, 2012.

On the face of things a NZ bank is prepared to roll over its $25 million loan for 16 months, and hook in LIC to another $10 million roll over, to a financially shaky/technically bankrupt oufit. The term sheet might purposefully have conditions that can't be met, of course, or there might be guarantees or whatever offering comfort. Otherwise the bank is asleep.

[Under Surveillance]

If Agria has any hope now it will come from Ngai Tahu, not New Hope IMO.

SNOOPY

You could well be right, in the face of the posts here banging on about New Hope intending to do this or that, and offering up little but riddles to support the assertions.

New Hope's shareholding in Agria Asia is just 1.65 times larger that Ngai Tahu's, 11.95% versus 7.24%. Possibly more importantly, according to the 20-F filing, Agria Corp has entered into shareholder agreements with both New Hope and Ngai Tahu which contain provisions protecting the rights of New Hope and Ngai Tahu, including those that would require the unanimous shareholder approval for certain decisions.

Depending on the detail of those agreements Ngai Tahu could roar just as loudly as the larger mouse.

On the STU thread, I think it was, you (Snoopy) postulated a deeply discounted (29c nominated) dispersal of Agria's 50.22% holding in PGW. It might be fanciful, but what chance New Hope and Ngai Tahu will end up having first dibs on any dispersal? The ratio might not be 11.95:7.24, but whatever it were, China Inc would end up with less than 50% and Ngai Tahu with a stake sufficient to block a full takeover down the line. And China Inc would have to seek OIC approval to go back above 50%, in hopefully less desperate times than in the last instance.

[percy]

As we have seen with HNZ and STU recently it is the fundamentals of the company,rather than the strength/weakness of the major shareholder that we should be most concerned with.George Gould is doing an excellent job,the results of which will work through.

[Balance]

You could well be right, in the face of the posts here banging on about New Hope intending to do this or that, and offering up little but riddles to support the assertions.

New Hope's shareholding in Agria Asia is just 1.65 times larger that Ngai Tahu's, 11.95% versus 7.24%. Possibly more importantly, according to the 20-F filing, Agria Corp has entered into shareholder agreements with both New Hope and Ngai Tahu which contain provisions protecting the rights of New Hope and Ngai Tahu, including those that would require the unanimous shareholder approval for certain decisions.

Depending on the detail of those agreements Ngai Tahu could roar just as loudly as the larger mouse.

On the STU thread, I think it was, you (Snoopy) postulated a deeply discounted (29c nominated) dispersal of Agria's 50.22% holding in PGW. It might be fanciful, but what chance New Hope and Ngai Tahu will end up having first dibs on any dispersal? The ratio might not be 11.95:7.24, but whatever it were, China Inc would end up with less than 50% and Ngai Tahu with a stake sufficient to block a full takeover down the line. And China Inc would have to seek OIC approval to go back above 50%, in hopefully less desperate times than in the last instance.


Snoopy could well be right - this is the golden opportunity (or in the case of the Maoris, treaty opportunity) for Ngai Tahu to become the major rural servicing player in NZ. Would they not love that!

[upside_umop]

Repeating this exercise for the FY2012 financial year...

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2012 Balance sheet:

PGW Total Liabilities: $NZ402.698m
PGW Total Equity: $NZ577.774m
PGW Total L & E: $NZ980.472m

Convert that to USD using $NZ1= US79.64c

PGW Total Liabilities: $US320.708m
PGW Total Equity: $US460.139m
PGW Total L & E: $US780.847m

Reduce value to allow for Agria owning 50.22% of shares as at 30th June 2012

Agria PGW Liabilities: $US161.060m
Agria PGW Equity: $US231.082m
Agria PGW L & E: $US392.141m

Now we go to the Agria Balance Sheet for the same 30th June 2012 date, which includes the 50.22% share of PGW as a consolidated entity.

Agria Liabilities: $US415.033m
Agria Equity: $US406.596m
Agria L & E: $US821.629m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US253.973m
Underlying Agria Equity: $US175.514m
Underlying Agria L & E: $US429.488m

That means the underlying Agria itself has an equity ratio of:

$US175.514m /$US429.488m= 40.8%

That is heavily indebted but manageable (perhaps), until you remember the $US100m in PGW share writedowns that have been shuffled off balance sheet

($US175.514m-$US100m) /$US429.488m= 17.6%

With no income to service a $US430m debt and an equity ratio of just 18% it is at this point that I declare Agria technically bankrupt.

SNOOPY

Hi Snoopy,

Interesting you're looking at this too - I have before looked at this but maybe in not quite as much depth.

First thing...Agria has one ugly set of accounts don't they? They do disclose a bit however...

I'm not completely familiar with US GAAP (actually, not at all) but I do know it is a long standing goal between the IASB and FASB to converge the standards and they have been doing a bit of work over the years to do so. Therefore, can probably look at them "side by side" without too much problems. There may be some differences when you do some in depth analysis.

Looking at Agria's accounts, it appears they consolidate all of PGW's numbers. Per note 4: "The results of PGG Wrightson's Limited have been included in the consolidated financial statements since acquisition date.."

A quick check:

Total revenue recognised by Agria = $1,089,061 x 0.99* / 0.80** = $1,347,713. Per PGG Wrightsons Group accounts = $1,336,813. Difference is negligible, so yep, looks like they consolidate everything in.
*Per segment reporting note 22 / note 1 - "International" (or PGW) accounts for 99% of disclosed income.
** Average exchange rate over period.

They then disclose the "non-controlling interest" on their balance sheet and income statement, which effectively takes out the portion that's not attributable to them through their 50.22% holding.

So, in summary, I think if you were to subtract PGW's numbers directly off Agria's, you would get the underlying position of Agria. Be aware though, there are differences between US GAAP and NZ IFRS and certain assets may be directly comparable...I think you'll find Agria will have less equity, a higher debt ratio than previously thought and in desperate need of some dividends from PGW.

[Snoopy]

So, in summary, I think if you were to subtract PGW's numbers directly off Agria's, you would get the underlying position of Agria. Be aware though, there are differences between US GAAP and NZ IFRS and certain assets may be directly comparable...I think you'll find Agria will have less equity, a higher debt ratio than previously thought and in desperate need of some dividends from PGW.


upside_umop, thanks for rewminding us that US GAAP and NZ IFRS are not necessarily interchangable.

Snoopy previously wrote:
"Now use subtraction to look at the underlying Agria balance sheet."

I may not have been clear when I wrote the above, but basically I got hold of both the "Agria balance sheet" and the "PGW balance sheet" and did exactly the subtraction exercise you suggested. Of course I had to convert the PGW figures into US dollars so that I was treating all of the figures in one currency. I have left my figures on the forum just in case anyone wants to show me that I have done it incorrectly. But in lieu of any corrections, I stick with my original conclusion.

Agria Equity Ratio = ($US175.514m-$US100m) /$US429.488m= 17.6%

With no income to service a $US430m debt and an equity ratio of just 18% it is at this point that I declare Agria technically bankrupt.

SNOOPY

[Snoopy]

Yes I get the fact that PGW majority share holder share price is not performing well, but their current $ 2 million loss is not that bad.


My initial reaction was identical to yours Snapiti. In the grand scheme of things a $US2m loss was a lot less than I was expecting. But look at the result a little closer.

With all of Agria's own corn growing operations in China net profit was zero, within the margins of rounding error. So all of that declared profit was derived from Agria's share of PGW earnings.

PGW made around $NZ24m or $US19.2m. 50.22% of that profit (Agria's share) was $US9.6m.

Somehow Agria turned $US9.6m in earnings from PGW into a $2m loss! I think that is a dreadful result, but it is almost inevitable when you borrow money to invest in a business that does not return its cost of capital. I believe borrowing big time to invest in a business that is already heavy with borrowing is described a "pork on a pig" in accounting circles.

SNOOPY

[Snoopy]

Being delisted from the nyse who cares, they could easily avoid that if they wanted too.


The Agria shares as listed are actually American Depository Receipts (ADR) where each quoted share represents two underlying Agria shares. In theory Agria could just change their own ADR ratio so that each quoted share represents four underlying shares. That would double the NYSE listed Agria share price overnight.

However, ultimately unless shares have a positive underlying earnings stream, or the prospect of one, the share price will continue on a relentless downward price to zero, regardless of the level the price starts at. I don't see any fix for Agria unless they can get some cashflow to offset their leveraged debt. A dividend from PGW is I believe the only positive way out for Agria at this point.

SNOOPY

[Snoopy]

Do you think the PGW current share price(35 cents) is over valued ?
What do you think is fair value ?

Interesting to hear through the farming grape vine that cropping seed sales are booming and demand and price's for this years harvest in NZ are expected to be at record levels thanks to the US drought.

I am not acutely aware of how much of PGW business value is in seeds.

It is quite obvious that due to the drought in the US there is going to be a shortage of seed for them to replant next season.


In my post 2183, I settle on a PE of 10 to be about right in a good year. Looking forward you can get some idea of where profits might be going by looking at PGW management's own growth assumptions. See the top of page 66 in AR2012.

Management are predicting a big fall in earnings for FY2013 from Agriservices (excluding livestock) of 48%. They expect it to be largely made up by a 40% increase in EBITDA from Agritech. The net effect is to be a 1% increase in EBITDA earnings. Five years ago PGW derived nearly half their profits from seeds before they expanded madly into various loss making seed producers in Australia. There is room for seeds (Agritech) to perform much better.

Those assumptions are consistent your "grape vine" information Snapiti, although possible Agriservices may not decline as much as management think? I am thinking that a lift in after tax earnings for FY2013 to $26m is possible, if the PGW Agritech seed business does indeed start to get back into gear. Unfortunately PGW does not do any business in the United States that I know of. However maybe things are likely to go well in South America where PGW have an ever increasing seed marketing presence?

$26m/754m shares = 3.4cps (earnings) . Put on a PE of 10 and you get a fair value share price of 34c for PGW for FY2013. That is my best guess of where the share price should end up.

SNOOPY

[Snoopy]

· acquisition debt denominated in New Zealand dollars of NZ$10.0 million ($7.9 million) that matures on October 31, 2012 provided by Livestock Improvement Company. If the bank which provided the acquisition debt referred to above extends the NZ$25.0 million acquisition debt facility, Livestock Improvement Company is restricted in its ability to enforce security in the event of them not being repaid on October 31, 2012.


Why did Livestock Improvement Corporation provide a $10m loan to Agria? It seems to be nothing to do with any previous core business function they might have!

Agria seems a bit worried LIC will want to be paid out by October 31st and seems to be hoping that their other banking facilities in NZ will be extended to allow this loan to continue. Alan Lai dancing on the point of a knife? Let's hope for his sake he does not slip. If he has to sell down even a few PGW shares to repay that debt, then the $100m capital loss from Agria purchasing their PGW majority stake that he is sitting on will come out of the cupboard to haunt him.

SNOOPY

[Snoopy]

I think Percy makes a very strong point. How will PGW's seed sales be affected if Agria continue to have difficulties? Will PGW's real estate or insurance division strike sales issues? Will fewer farmers come in the door of their rural supply stores and buy less sheep dip?


I agree with both Percy and yourself Sparky. PGW is now sound and will remain in business despite what happens to their majority shareholder. However, any corporate disruption with Agria may result in some PGW share price volatility where canny PGW investors might take advantage. Patience!

Longer term difficulties for Agria might mean that selling seeds into China will not work for PGW, if Agria turns out to be the wrong partner. I am not sure that is necessarily a disaster. The PGW expansion in South America does at last seem to be gaining some traction. And South America is a very big place.

I think the jury is still out on George Gould. When his business units start earning more than their cost of capital, only then will I start singing his praises.

My main reason for going so heavily into the detail on Agria is to dispell any thoughts that a takeover offer for the rest of PGW from Agria is imminent. I think it would be very foolish to invest in PGW on that basis. I believe it is far more likley that Agria will be forced into selling down their PGW holding at a discount. That might represent another opportunity for canny NZ investors to pick up some PGW at bargain prices. More patience!

SNOOPY

[upside_umop]

Repeating this exercise for the FY2012 financial year...

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2012 Balance sheet:

PGW Total Liabilities: $NZ402.698m
PGW Total Equity: $NZ577.774m
PGW Total L & E: $NZ980.472m

Convert that to USD using $NZ1= US79.64c

PGW Total Liabilities: $US320.708m
PGW Total Equity: $US460.139m
PGW Total L & E: $US780.847m

Reduce value to allow for Agria owning 50.22% of shares as at 30th June 2012

Agria PGW Liabilities: $US161.060m
Agria PGW Equity: $US231.082m
Agria PGW L & E: $US392.141m

Now we go to the Agria Balance Sheet for the same 30th June 2012 date, which includes the 50.22% share of PGW as a consolidated entity.

Agria Liabilities: $US415.033m
Agria Equity: $US406.596m
Agria L & E: $US821.629m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US253.973m
Underlying Agria Equity: $US175.514m
Underlying Agria L & E: $US429.488m

That means the underlying Agria itself has an equity ratio of:

$US175.514m /$US429.488m= 40.8%

That is heavily indebted but manageable (perhaps), until you remember the $US100m in PGW share writedowns that have been shuffled off balance sheet

($US175.514m-$US100m) /$US429.488m= 17.6%

With no income to service a $US430m debt and an equity ratio of just 18% it is at this point that I declare Agria technically bankrupt.

SNOOPY

Snoopy, I'm saying you don't need to do this step highlighted above in bold as these are already 100% consolidated into Agria's accounts. Therefore, using your numbers:

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2012 Balance sheet:

PGW Total Liabilities: $NZ402.698m
PGW Total Equity: $NZ577.774m
PGW Total L & E: $NZ980.472m

Convert that to USD using $NZ1= US79.64c

PGW Total Liabilities: $US320.708m
PGW Total Equity: $US460.139m
PGW Total L & E: $US780.847m

Now we go to the Agria Balance Sheet for the same 30th June 2012 date, which includes the 100% share of PGW as a consolidated entity.

Agria Liabilities: $US415.033m
Agria Equity: $US406.596m
Agria L & E: $US821.629m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US94.325m
Underlying Agria Equity: - $US53.543m
Underlying Agria L & E: $US40.782m

The above shows basically what Agria has on their books and controls excluding PGW. They look to be in negative equity...when you back out the consolidation.

They have much less debt than you originally propose, but are in a worse equity ratio position than thought. Does this make sense?

[Agrarinvestor]

Snoopy, I'm saying you don't need to do this step highlighted above in bold as these are already 100% consolidated into Agria's accounts. Therefore, using your numbers:

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2012 Balance sheet:

PGW Total Liabilities: $NZ402.698m
PGW Total Equity: $NZ577.774m
PGW Total L & E: $NZ980.472m

Convert that to USD using $NZ1= US79.64c

PGW Total Liabilities: $US320.708m
PGW Total Equity: $US460.139m
PGW Total L & E: $US780.847m

Now we go to the Agria Balance Sheet for the same 30th June 2012 date, which includes the 100% share of PGW as a consolidated entity.

Agria Liabilities: $US415.033m
Agria Equity: $US406.596m
Agria L & E: $US821.629m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US94.325m
Underlying Agria Equity: - $US53.543m
Underlying Agria L & E: $US40.782m

The above shows basically what Agria has on their books and controls excluding PGW. They look to be in negative equity...when you back out the consolidation.

They have much less debt than you originally propose, but are in a worse equity ratio position than thought. Does this make sense?

>>They have much less debt than you originally propose, but are in a worse equity ratio position than thought. Does this make sense?<<

It makes no sense because you have a wrong number fort he assets
Agria Liabilities: $US415.033m 415,033
Agria Equity: $US406.596m <- (Wrong) 821,629 Page 116
Agria L & E: $US821.629m <- (Wrong) 1236662

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US 94.325m
Underlying Agria Equity: $US 361.490m
Underlying Agria L & E: $US 455.815m

That means DEBT/Equity ratio: 5,83 :)

Please compare that with US Heavyweights like IBM or HPQ
I think Agria is a safe bank. They have still credit to get money for the rest of PGW.

Here is a very nice overview in Yahoo:
http://finance.yahoo.com/q/bs?s=GRO+Balance+Sheet&annual

[upside_umop]

>>They have much less debt than you originally propose, but are in a worse equity ratio position than thought. Does this make sense?<<

It makes no sense because you have a wrong number fort he assets
Agria Liabilities: $US415.033m 415,033
Agria Equity: $US406.596m <- (Wrong) 821,629 Page 116
Agria L & E: $US821.629m <- (Wrong) 1236662

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US 94.325m
Underlying Agria Equity: $US 361.490m
Underlying Agria L & E: $US 455.815m

That means DEBT/Equity ratio: 5,83 :)

Please compare that with US Heavyweights like IBM or HPQ
I think Agria is a safe bank. They have still credit to get money for the rest of PGW.

Here is a very nice overview in Yahoo:
http://finance.yahoo.com/q/bs?s=GRO+Balance+Sheet&annual

Hi Agriainvestor,

I note you will be very interested in these numbers, being an "Agria Investor".

I haven't looked at yahoo, but take them with a grain of salt at times - it appears they have placed the minority interest under liabilities instead of in equity. This is incorrect. Here's the link to the NYSE release (http://www.nyse.com/about/listed/gro_news.html)s (http://secfilings.nyse.com/files.php?symbol=GRO) (the 20F is the one you're after) - you should really look at these when doing your research as they're originals.

If you look to the "balance sheet" on page 128/129 you will see the numbers above that I quoted.

The numbers I posted above make sense as Agria has only posted losses (negative retained earnings), and then invested all of it's spare change into PGW (which is consolidated - I backed this out per above). It took out extra debt itself to do this. The bankers won't be so worried (as long as they get cashflow soon) as the consolidation shows just that....the consolidated amount that Agria controls. Agria just need to control PGW to make a dividend payment to help their own cashflow out.

[Agrarinvestor]

Hi Agriainvestor,

I note you will be very interested in these numbers, being an "Agria Investor".

I haven't looked at yahoo, but take them with a grain of salt at times - it appears they have placed the minority interest under liabilities instead of in equity. This is incorrect. Here's the link to the NYSE release (http://www.nyse.com/about/listed/gro_news.html)s (http://secfilings.nyse.com/files.php?symbol=GRO) (the 20F is the one you're after) - you should really look at these when doing your research as they're originals.

If you look to the "balance sheet" on page 128/129 you will see the numbers above that I quoted.

The numbers I posted above make sense as Agria has only posted losses (negative retained earnings), and then invested all of it's spare change into PGW (which is consolidated - I backed this out per above). It took out extra debt itself to do this. The bankers won't be so worried (as long as they get cashflow soon) as the consolidation shows just that....the consolidated amount that Agria controls. Agria just need to control PGW to make a dividend payment to help their own cashflow out.

Hi upside_umop,

but the number you used for Assets must be wrong. I found on page 116 that the assets are worth $US821.629m, from these number i substracted te PGW Assets of
460.139 MIO PGW Assets, the result is in Germany :

Underlying Agria Equity: $US 361.490m

and if my calculation are correct,

i can say that the assets are 4 times higher than the debt !

And that means that Agria has the power to raise more money if they want.
If i made an error please point the finger on it. It is important for me, because i would like
to invest more. Thank you very much in advance, and also to all the others here. If i compare
the contribution on shareholders, with the contribution in yahoo, or in Germany, i must admit i am very impressed.

[upside_umop]

Agriainvestor,

I never quoted the assets number, but given liabilities + equity = assets, the numbers I previously posted agree to your $821m. See above, that I have quoted liabilities + equity = $821m.

PGW have assets of $980m NZD --> ~$784m USD @ 80 nzd/usd cross rate. See here for the link to PGG Wrightsons 2012 Annual Report. (http://www.pggwrightson.co.nz/Userfiles/files/Investors/Reports/PGW%20Annual%20Report%202012%20-%20FINAL%2020092012.pdf)

In summary, I believe that post 2249 is still the correct "underlying" position excluding consolidated amounts of PGW.

[Snoopy]

Snoopy, I'm saying you don't need to do this step highlighted above in bold as these are already 100% consolidated into Agria's accounts. Therefore, using your numbers:

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2012 Balance sheet:

PGW Total Liabilities: $NZ402.698m
PGW Total Equity: $NZ577.774m
PGW Total L & E: $NZ980.472m

Convert that to USD using $NZ1= US79.64c

PGW Total Liabilities: $US320.708m
PGW Total Equity: $US460.139m
PGW Total L & E: $US780.847m

Now we go to the Agria Balance Sheet for the same 30th June 2012 date, which includes the 100% share of PGW as a consolidated entity.

Agria Liabilities: $US415.033m
Agria Equity: $US406.596m
Agria L & E: $US821.629m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US94.325m
Underlying Agria Equity: - $US53.543m
Underlying Agria L & E: $US40.782m

The above shows basically what Agria has on their books and controls excluding PGW. They look to be in negative equity...when you back out the consolidation.

They have much less debt than you originally propose, but are in a worse equity ratio position than thought. Does this make sense?


U.U. I find when calculating these equity ratios, you need to keep in mind what a ballpark answer might be. Your answer, that Agria excluding PGW has negative equity and negative cashflow makes no sense at all. Forget what I said before about Agria being 'technically bankrupt'. You propose that "net Agria" (Agria without PGW) has negative net assets, negative cashflow and large debts. That is bankrupt by any definition that I know. And yet, incredibly, after studying your post and looking at the accounts you have referenced, I do believe you are correct!

I must say I found the presentation of the Agria balance sheet when filed by them in 20F form like no balance sheet presentation I have seen before. Pretending you own all of PGW and backing out the non-controlling interest right at the end is at best ambiguous and at worst deceptive IMO.

I will say the balance sheet when interpreted your way U.U., with the resultant calculated lower debt of "Agria without PGW", reconciles better with other disclosures in the Agria accounts. Specifically the debts Agria have coming due. The negative equity I find it hard to get my head around. But as I said before U.U., I can find no fault with your reasoning!

I would welcome a third informed opinion on this!

SNOOPY

[upside_umop]

I know what you're saying Snoopy - these accounting standards are relatively complex and hard to understand at times. As I said before, I know NZ IFRS relatively alright but US GAAP not so well at all - all I know is there is a long term goal of convergence.

Under NZ IFRS you account for investments in companies the following way. I'm assuming the same is true for US GAAP under the "control" scenario:

Non-significant influence. IFRS has assumed this is if you own less than 20% voting rights - Simply record at cost or cost then fair value.

Significant influence. IFRS has assumed this is between 20% - 50% voting rights. You account for under the equity method. I.e. Record at cost and recognise the changes of the investors share of net assets and the investors share of profit through the profit and loss. See NZ IAS 28 for this standard (http://www.nzica.com/Technical/Financial-reporting/Standards-and-guidance/New-Zealand-IFRSs/2011.aspx)

Control. This is greater than 50% voting rights. You consolidate the accounts backing out a minority interest for the amount you don't control. See NZ IAS 27 for this standard. (http://www.nzica.com/Technical/Financial-reporting/Standards-and-guidance/New-Zealand-IFRSs/2011.aspx)

Now to your next point: Negative equity. To me, it makes sense that they are in negative equity as when you think of the history of Agria they:

1) Made a history of losses and therefore had negative "retained earnings."
2) They purchased their interest in PGW with all their spare change.
3) Raised more debt in the process of gaining control of PGW.

By doing this, they "lost" their assets from their balance sheet but kept the debt on it...combine this with their negative retained earnings, they are in negative equity position as a standalone company excluding PGW consolidated amounts.

That is why it is important for Agria to receive dividends from PGW...If you believe PGW will pay big dividends in the future, then Agria may be a good bet. However, they have nothing else going on ($10m Chinese revenue) and you are effectively supporting two corporate structures which makes the whole thing inefficient.

[Agrarinvestor]

I know what you're saying Snoopy - these accounting standards are relatively complex and hard to understand at times. As I said before, I know NZ IFRS relatively alright but US GAAP not so well at all - all I know is there is a long term goal of convergence.

Under NZ IFRS you account for investments in companies the following way. I'm assuming the same is true for US GAAP under the "control" scenario:

Non-significant influence. IFRS has assumed this is if you own less than 20% voting rights - Simply record at cost or cost then fair value.

Significant influence. IFRS has assumed this is between 20% - 50% voting rights. You account for under the equity method. I.e. Record at cost and recognise the changes of the investors share of net assets and the investors share of profit through the profit and loss. See NZ IAS 28 for this standard (http://www.nzica.com/Technical/Financial-reporting/Standards-and-guidance/New-Zealand-IFRSs/2011.aspx)

Control. This is greater than 50% voting rights. You consolidate the accounts backing out a minority interest for the amount you don't control. See NZ IAS 27 for this standard. (http://www.nzica.com/Technical/Financial-reporting/Standards-and-guidance/New-Zealand-IFRSs/2011.aspx)

Now to your next point: Negative equity. To me, it makes sense that they are in negative equity as when you think of the history of Agria they:

1) Made a history of losses and therefore had negative "retained earnings."
2) They purchased their interest in PGW with all their spare change.
3) Raised more debt in the process of gaining control of PGW.

By doing this, they "lost" their assets from their balance sheet but kept the debt on it...combine this with their negative retained earnings, they are in negative equity position as a standalone company excluding PGW consolidated amounts.

That is why it is important for Agria to receive dividends from PGW...If you believe PGW will pay big dividends in the future, then Agria may be a good bet. However, they have nothing else going on ($10m Chinese revenue) and you are effectively supporting two corporate structures which makes the whole thing inefficient.


If you look at AGRIAs Balance sheet in 2010, that was the time when they owned only the 20% Portion of PGW they had only 23 millions debt and 245 millions in assets. Then David bought Goliath (50,1%), after that they had a lot of debt. But is that a problem ?

David Pascale (SVP of Agria):
>>The investment by Agria and partnership with PGG has been and remains mutually beneficial, positive and productive.<<

I can only hope that he told the truth. Up to now it is difficult to say where the advantage is. If a German
enterprise has a cooperation with a chinese partner, it works that we provide the technology and the chinese provide cheap labor.
Maybe the same for PGW Agria. This is all speculation.

But i know that prices for food are on the raise:
http://www.indexmundi.com/commodities/?commodity=corn&months=60


and the chinese want to eat beef in the future and not only rice, you need 8kg of maize for 1kg beef

http://www.indexmundi.com/commodities/?commodity=beef&months=60

therefore i think it was good idea for AGRIA to make such large investments. China is still the most growing market, and for me as
a German it could be a good idea to have some money invested in China and New Zealand. I think You know about our problems with our currency.

[Snoopy]

I know what you're saying Snoopy - these accounting standards are relatively complex and hard to understand at times. As I said before, I know NZ IFRS relatively alright but US GAAP not so well at all - all I know is there is a long term goal of convergence.

Under NZ IFRS you account for investments in companies the following way. I'm assuming the same is true for US GAAP under the "control" scenario:

<snip>

Control. This is greater than 50% voting rights. You consolidate the accounts backing out a minority interest for the amount you don't control. See NZ IAS 27 for this standard. (http://www.nzica.com/Technical/Financial-reporting/Standards-and-guidance/New-Zealand-IFRSs/2011.aspx)


So U.U. what you are saying is if Agria was listed on the NZX and had to comply with NZ IFRS reporting standards then very probably the way Agria report their results would not be that different. When I think about it, there aren't too many shares on the NZX where one listed entity controls over 50% of another. So I am not used to reading those kinds of accounts.

I guess you have to draw the line somewhere. But it does strike me as somewhat artificial that the appearance of the Agria accounts would change so drastically if Agria were to reduce their percentage holding by a mere 0.23% (from 50.22% to 49.9%). The Agria report is written as though the financiers might go into a total panic if such an event occurred. Could financiers really be that fickle?

SNOOPY

[Snoopy]

Now to your next point: Negative equity. To me, it makes sense that they are in negative equity as when you think of the history of Agria they:

1) Made a history of losses and therefore had negative "retained earnings."
2) They purchased their interest in PGW with all their spare change.
3) Raised more debt in the process of gaining control of PGW.

By doing this, they "lost" their assets from their balance sheet but kept the debt on it...combine this with their negative retained earnings, they are in negative equity position as a standalone company excluding PGW consolidated amounts.


All right, I follow your explanation of how stand alone Agria transitioned into negative equity. What I don't follow is how their bankers allowed this to happen.

If I could make the housing analogy. What has happened seems akin to say I taking out a mortgage and buying a house. Then I chuck in my job (akin to Alan Lai buying out his original business partner and income stream from China) , borrow a whole lot more money against my house and proceed to spend it at the casino (hoping for a quick turnaround at PGW). Then the housing market collapses ( PGW share price goes from 60c to 35c).

Effectively then I now have no equity left in my house, no income and negative cashflow. I go back to my bank to get them to renew my mortgage. I know what the bank would say if I did that in New Zealand. Yet you expect me to believe that if I did the same in the USA, the bank manager's answer would be 'yes'?

SNOOPY

[Snoopy]

Why did Livestock Improvement Corporation provide a $10m loan to Agria? It seems to be nothing to do with any previous core business function they might have!


To answer my own question.

http://www.ruralnewsgroup.co.nz/dairy-news/dairy-agribusiness/dewdney-explains-lics-support-for-agria-bid

LIC were banking on an early breakup of PGW into Agriservces and Agritech. At that point they would be interested in putting some more capital into Agritech. They saw the breeding of new superior mixes of grass as a promising future avenue for Livestock improvement.

That is a fair enough explanation. The loan to Agria was to get a 'seat at the table' when the breakup of PGW happened. But their loan to Agria expires at the end of the month. With the initial controversy of the original move, how far will their farmer LIC shareholder's patience stretch?

SNOOPY

[Snoopy]

That is why it is important for Agria to receive dividends from PGW...If you believe PGW will pay big dividends in the future, then Agria may be a good bet. However, they have nothing else going on ($10m Chinese revenue) and you are effectively supporting two corporate structures which makes the whole thing inefficient.


Genuine PRC male professional dancing requires a combination of skills: Strength, discipline and timing. Alan Lai will need all of these attributes if he is to pull Agria back from the brink.

I have been running some numbers over the standalone Agria bank loans to see how precisely those dance shoes will have to move.

We are told that Agria is being charged interest at 4.5% above the base rate. For his US loans I am assuming this equates to 6.5%. The US domiciled loans mature between January 11th 2013 and April 19th 2013 and total US$58.2m. That gives an interest bill of $US3.78m.

The New Zealand loans mature(d) over October 2012. The larger bank loan ($US19.7m) has already been renewed, and the smaller loan linked to LIC ($US7.9m) matures at the end of the month (Loans converted assuming $1NZ= 80cUS). I am assuming the NZ interest rates are higher say 8.5%. I calculate the total NZ domiciled interest bill to be $US2.35m.

This gives a total annual interest bill of $US6.3m.

Now running a check on my assumptions. Interest and finance expenses from the consolidated Agria revenue statement are declared as $US18.660m.

From the PGW FY2012 Annual Report, interest and finance expenses are $NZ15.469m. Multiply that by 0.8 and I get $US12.375m. So the underlying Agria standalone finance expenses are:

$US18.660m - $US12.375m = $US6.285m

That is in close agreement with my estimate of Agria's interest bill above, so I conclude that I am in the ballpark with my figures.

Now the question arises, what size of dividend will Agria need from PGW to pay this? If we take $US6.285m to be equivalent to $NZ7.856m, and we know that there are 754.849m PGW shares on issue, this means the bankable dividend needed is.

$NZ7.856m/754.849m= 1c/share.

Of course Agria only controls half of PGW. So if we back out the 'non controlling interest' the dividend will need to be 2c per share. That definitely looks doable if PGW performs as forecast over FY2013, even if it does assume PGW will continue to go well ($NPAT25m for PGW with a 100% payout ratio) But you also need to factor in the cost of the corporate structure of Agria before Agria shareholders make any headway above their operational costs. Thus even a 3c share dividend from PGW will see Agria only just cover their costs. It really is knife edge stuff for Alan Lai.

So can Alan Lai dance? October 31st 2012 is the bow in date for the next domino in line dance partner. Watch Alan's shoes. ' The question' will be answered very soon.

SNOOPY

[upside_umop]

All right, I follow your explanation of how stand alone Agria transitioned into negative equity. What I don't follow is how their bankers allowed this to happen.

If I could make the housing analogy. What has happened seems akin to say I taking out a mortgage and buying a house. Then I chuck in my job (akin to Alan Lai buying out his original business partner and income stream from China) , borrow a whole lot more money against my house and proceed to spend it at the casino (hoping for a quick turnaround at PGW). Then the housing market collapses ( PGW share price goes from 60c to 35c).

Effectively then I now have no equity left in my house, no income and negative cashflow. I go back to my bank to get them to renew my mortgage. I know what the bank would say if I did that in New Zealand. Yet you expect me to believe that if I did the same in the USA, the bank manager's answer would be 'yes'?

SNOOPY

Interesting analogy and something that would be considered by the banks. I guess the security that the banks would be looking at is the potential for the business to generate cash-flow as it is Agria that controls what happens with PGW's cash.

On one side, you look at PGW reducing debt but on the other, you have Agria increasing their debt. Although it's getting better and not as bad situation as it was, it's akin to margin lending on a highly leveraged company (say Centro properties in Australia).

Re the share price: This will and has got attention. As you previously mentioned, the auditors flagged the carrying amount of goodwill. Note 26 of the annual report outlines (http://www.pggwrightson.co.nz/Userfiles/files/Investors/Reports/PGW%20Annual%20Report%202012%20-%20FINAL%2020092012.pdf) the assumptions used in support of the carrying value. I guess the bankers can look at this?

[upside_umop]

So U.U. what you are saying is if Agria was listed on the NZX and had to comply with NZ IFRS reporting standards then very probably the way Agria report their results would not be that different. When I think about it, there aren't too many shares on the NZX where one listed entity controls over 50% of another. So I am not used to reading those kinds of accounts.

I guess you have to draw the line somewhere. But it does strike me as somewhat artificial that the appearance of the Agria accounts would change so drastically if Agria were to reduce their percentage holding by a mere 0.23% (from 50.22% to 49.9%). The Agria report is written as though the financiers might go into a total panic if such an event occurred. Could financiers really be that fickle?

SNOOPY

Yep, that's what I'm saying. Perhaps look at Origin Energy in Australia? I haven't looked but assume it would be similar given their 51% shareholding in CEN.

I guess it's assumed that the financers should be aware of the treatment and take this into consideration. Further to the fickleness, there is an interesting Exposure Draft coming out in relation to what is control - from my understanding, it goes along the lines, that a company may have control if it owns 46% if only 90% of the shareholders have historically vote at an AGM. Therefore, consolidation might occur in the further if less than 50% voting rights. Don't quote me on that though...

[Snoopy]

I guess the security that the banks would be looking at is the potential for the business to generate cash-flow as it is Agria that controls what happens with PGW's cash.


Agria doesn't entirely decide what PGW does with their cash though does it? What about the banking covenants that PGW has signed with its own bankers? See my posts 1296 and 1298 and 2178.

SNOOPY

[Snoopy]

Re the share price: This will and has got attention. As you previously mentioned, the auditors flagged the carrying amount of goodwill. Note 26 of the annual report outlines (http://www.pggwrightson.co.nz/Userfiles/files/Investors/Reports/PGW%20Annual%20Report%202012%20-%20FINAL%2020092012.pdf) the assumptions used in support of the carrying value. I guess the bankers can look at this?


The NZ based auditors have tagged the PGW accounts with reference to the carrying value of goodwill in NZ , yes. However the US based auditors have not tagged the Agria accounts in a similar way, even though a goodwill writedown at PGW will affect the carrying value of PGW on the Agria books. I suspect there are only two Agria shareholders who know the PGW account goodwill has been tagged: Agrainvestor and Alan Lai!

SNOOPY

[Snoopy]

Yep, that's what I'm saying. Perhaps look at Origin Energy in Australia? I haven't looked but assume it would be similar given their 51% shareholding in CEN.


I haven't looked either, but last time I checked Origin Energy was not listed on the NZX! Nevertheless I take your point about the presentation of the fully consolidated PGW inside of Agria as not being unique.

SNOOPY

[Snoopy]

Further to the fickleness, there is an interesting Exposure Draft coming out in relation to what is control - from my understanding, it goes along the lines, that a company may have control if it owns 46% if only 90% of the shareholders have historically vote at an AGM. Therefore, consolidation might occur in the further if less than 50% voting rights. Don't quote me on that though...


I thought it was interesting that Michael Hill and family went to great lengths to to get their controlling shareholding of MHI above 50%, even though they already owned 47.63% of the shares. Perhaps if such a change came into law he need not have bothered! IMO any shareholding over around 35% gives effective control, provided the share register is otherwise reasonably open.

SNOOPY

[Snoopy]

If you look at AGRIAs Balance sheet in 2010, that was the time when they owned only the 20% Portion of PGW they had only 23 millions debt and 245 millions in assets. Then David bought Goliath (50,1%), after that they had a lot of debt. But is that a problem ?


To paraphrase one of your earlier quotes from Agria. No problem until the debt needs to be refinanced, which as far as the LIC loan is concerned is next week.



David Pascale (SVP of Agria):
>>The investment by Agria and partnership with PGW has been and remains mutually beneficial, positive and productive.<<

I can only hope that he told the truth.

Up to now it is difficult to say where the advantage is. If a German
enterprise has a cooperation with a Chinese partner, it works that we provide the technology and the Chinese provide cheap labor.
Maybe the same for PGW Agria? This is all speculation.


I don't believe a successful partnershp between Agria and PGW relies on cheap labour to make it work. For PGW they want to use their existing grass breeding expertise to breed new blends of grass for the Chinese climate. But having the right seed is not enough. They needs a partner who understands Chinese farming business structures and who know the right people in China. This is what Agria brings to the table for PGW. Agria do their own research in China but this seems to be about breeding corn, not grass.



But i know that prices for food are on the raise:
http://www.indexmundi.com/commodities/?commodity=corn&months=60


and the chinese want to eat beef in the future and not only rice, you need 8kg of maize for 1kg beef

http://www.indexmundi.com/commodities/?commodity=beef&months=60

therefore i think it was good idea for AGRIA to make such large investments. China is still the most growing market, and for me as
a German it could be a good idea to have some money invested in China and New Zealand. I think You know about our problems with our currency.


I believe the macreconomic reasoning of your investment strategy is sound Agrainvestor. My question is whether puutting your investment 'eggs' in the Agria 'basket' is the best way to do this?

SNOOPY

[upside_umop]

I haven't looked either, but last time I checked Origin Energy was not listed on the NZX! Nevertheless I take your point about the presentation of the fully consolidated PGW inside of Agria as not being unique.

SNOOPY

You're right that Origin is not on the NZX but they both NZ and Australia report under almost identical IFRS's. NZ has NZ specific clauses but mainly for PBE's. I'm sure there are some examples but I can't think of any off hand.

[upside_umop]

Agria doesn't entirely decide what PGW does with their cash though does it? What about the banking covenants that PGW has signed with its own bankers? See my posts 1296 and 1298 and 2178.

SNOOPY

It won't entirely decide but it does have control. They would have to comply with all PGW covenants...it might just be a balancing act!

[upside_umop]

The NZ based auditors have tagged the PGW accounts with reference to the carrying value of goodwill in NZ , yes. However the US based auditors have not tagged the Agria accounts in a similar way, even though a goodwill writedown at PGW will affect the carrying value of PGW on the Agria books. I suspect there are only two Agria shareholders who know the PGW account goodwill has been tagged: Agrainvestor and Alan Lai!

SNOOPY

The US auditors will review this and make their own assessment (and have). It would be unusual for them to put a statement in their report I'm guessing given an investor can view PGW's. I guess you can argue that a reasonable investor ....or the marginal investor should be able to review PGW's situation (give the public accessibility of statements). That is, that US funds would be able to control the marginal price based on their knowledge. Doesn't always work out that way though..

[Agrarinvestor]

To paraphrase one of your earlier quotes from Agria. No problem until the debt needs to be refinanced, which as far as the LIC loan is concerned is next week.



I don't believe a successful partnershp between Agria and PGW relies on cheap labour to make it work. For PGW they want to use their existing grass breeding expertise to breed new blends of grass for the Chinese climate. But having the right seed is not enough. They needs a partner who understands Chinese farming business structures and who know the right people in China. This is what Agria brings to the table for PGW. Agria do their own research in China but this seems to be about breeding corn, not grass.



I believe the macreconomic reasoning of your investment strategy is sound Agrainvestor. My question is whether puutting your investment 'eggs' in the Agria 'basket' is the best way to do this?

SNOOPY

>>They needs a partner who understands Chinese farming business structures and who know the right people in China.<<
Perhaps that is the reason for the new CEO.

Most of my eggs are in Australian Bonds. My Agria and CGA shares are a small aggressive bet on the chinese Agrar sector. I know this investment is not riskless but if PGW is successfull the risk could be rewarded during the next months and if the new CEO of Agria can develop Agrias homemarket this stock can explode.
What si the reason that you are so engaged in analysing Agria and PGW ? I don't think that you have a lot of Money in PGW. Are you a shortseller ?
I have nothing against shortsellers, it's more out of curiosity.

Here are some answers from David Pascale:


What kind of action is planned to bring the shareprice back to 1$ ? [ Results were released and 20-F filed. That was the first step. Management transition will be finalized. Growth will drive disclosure from there. ]

Will we see a share repurchase programm during the next weeks ? [ None has been disclosed to date. ]

During the next month you have to renew a lot of debt. Is it possible that AGRIA have problems with the banks ? [ Debt was related to PGG Wrightson investment. There is no issue anticipated with the company's bank syndicate. ]

[Balance]

Interesting.

Someone put on 400,000 PGW shares to sell at 36c.

But buyers are not scared and in fact, are piling up at 35 cents to buy.

Someone trying to keep the sp in check while something is worked on in the background?

[Balance]

I've been seeing the same and thinking something similar ... Oh to be the tea-lady ;)

Either that seller is plain ignorant (hard to imagine one like that with 400T to sell) or he/she is trying to achieve something.

[Queenstfarmer]

Either that seller is plain ignorant (hard to imagine one like that with 400T to sell) or he/she is trying to achieve something.


SP manipulation has been going on a while. What to achieve?? Keep as low as possible to justify a low offer for the other 49% when the time finally comes around.

[Snoopy]

What is the reason that you are so engaged in analyzing Agria and PGW ? I don't think that you have a lot of Money in PGW. Are you a short seller ? I have nothing against short sellers, it's more out of curiosity.


I have been a PGW shareholder since 1995 Agrainvestor. At first in a very small way, and then I sharply increased my holding in the Criag Norgate era. I have seen PGW through many business cycles now. And I feel I am in a position to warn people about the management of this company through many faces and many eras.

Firstly PGW have a long history of overpromising and underdelivering. They also seem not to be able to stick to a strategy, changing direction for no good reason.

Take the finance division, now given away. It was easily the most profitable part of PGW. Six months before it was sold PGW management wrote how it had ridden out the finance company crash very well and was poised to become a marketing trump card that no other rural related company had. Six months later it was apparently worthless. Now every company makes mistakes. But PGW do not seem to have learned from their mistakes. A decade before they sold their previous finance division which proved disastrous for the company, and now they have done it again.

Now look at the expansion in to South America via NZ Farming Systems Uruguay (NZS). PGW structured the management contract to reward themselves in proportion to the amount of land managed, regardless of profit. As a result NZS bought far too much land and the company was starved of funds to develop that land. This was rational from a PGW perspective, but nearly a disaster for NZS. You could say PGW were only exploiting the rules, but PGW made the rules!

Now PGW have changed direction again and have greatly expanded their seed division. But while revenue has increased profits have all but disappeared. They blame bad weather in Australia. But other rural servicing companies operating in the Australian market have managed to weather the weather.

For a decade PGW have been building their expansion in South America and just when it is turning the corner they have switched their attention to China. Close to a million dollars was lost when PGW just walked away from their purchase contract of the previously planned model farm in Brazil.

I am sure China has potential, but what are the credentials of their partner Agria? Agria cannot make money out of their wholly own stand alone Chinese business. So what chance of any profits filtering through to their new partner PGW? It would not surprise me if after two more years PGW closes their Chinese office.

The greatest success of PGW has been to transfer funds from long suffering shareholders to arrogant management. The previous CEO Tim Miles, cleared out with $NZ4m plus for less than a years work and the board were adamant that he had just written a good contact with them which they had to honour. The question is why has the judgment of the board been so poor as to draw up this contact in the first place? Why do the board change strategy every time the wind blows? I could go on outlining other events but I do not wish to make myself any more upset.

So why after all that have I not just sold out of PGW, I hear you ask? Well I have the philosophy that there is no such thing as a bad investment. It is just a question of waiting for the right price to enter. So here I am patiently waiting for the share price to come back to a sensible level. 36c by any historical metric is slightly overvalued, although it must be said no more than most of the NZX. Sorry for the rant. But I feel better now!

SNOOPY

[Snoopy]

Interesting.

Someone put on 400,000 PGW shares to sell at 36c.

But buyers are not scared and in fact, are piling up at 35 cents to buy.

Someone trying to keep the sp in check while something is worked on in the background?


400,000 shares is less than 0.2% of the shares PGW on issue. It is insignificant. Stop looking for conspiracies when there are none there!

SNOOPY

[percy]

I have been a PGW shareholder since 1995 Agrainvestor. At first in a very small way, and then I sharply increased my holding in the Criag Norgate era. I have seen PGW through many business cycles now. And I feel I am in a position to warn people about the management of this company through many faces and many eras.

Firstly PGW have a long history of overpromising and underdelivering. They also seem not to be able to stick to a strategy, changing direction for no good reason.

Take the finance division, now given away. It was easily the most profitable part of PGW. Six months before it was sold PGW management wrote how it had ridden out the finance company crash very well and was poised to become a marketing trump card that no other rural related company had. Six months later it was apparently worthless. Now every company makes mistakes. But PGW do not seem to have learned from their mistakes. A decade before they sold their previous finance division which proved disastrous for the company, and now they have done it again.

Now look at the expansion in to South America via NZ Farming Systems Uruguay (NZS). PGW structured the management contract to reward themselves in proportion to the amount of land managed, regardless of profit. As a result NZS bought far too much land and the company was starved of funds to develop that land. This was rational from a PGW perspective, but nearly a disaster for NZS. You could say PGW were only exploiting the rules, but PGW made the rules!

Now PGW have changed direction again and have greatly expanded their seed division. But while revenue has increased profits have all but disappeared. They blame bad weather in Australia. But other rural servicing companies operating in the Australian market have managed to weather the weather.

For a decade PGW have been building their expansion in South America and just when it is turning the corner they have switched their attention to China. Close to a million dollars was lost when PGW just walked away from their purchase contract of the previously planned model farm in Brazil.

I am sure China has potential, but what are the credentials of their partner Agria? Agria cannot make money out of their wholly own stand alone Chinese business. So what chance of any profits filtering through to their new partner PGW? It would not surprise me if after two more years PGW closes their Chinese office.

The greatest success of PGW has been to transfer funds from long suffering shareholders to arrogant management. The previous CEO Tim Miles, cleared out with $NZ4m plus for less than a years work and the board were adamant that he had just written a good contact with them which they had to honour. The question is why has the judgment of the board been so poor as to draw up this contact in the first place? Why do the board change strategy every time the wind blows? I could go on outlining other events but I do not wish to make myself any more upset.

So why after all that have I not just sold out of PGW, I hear you ask? Well I have the philosophy that there is no such thing as a bad investment. It is just a question of waiting for the right price to enter. So here I am patiently waiting for the share price to come back to a sensible level. 36c by any historical metric is slightly overvalued, although it must be said no more than most of the NZX. Sorry for the rant. But I feel better now!

SNOOPY

Yes a lot of wrong decisions at the right time,and a lot of right decisions at the wrong time.
With Sir John Anderson as chairman,and George Gould as MD,PGW have the leadership to get the best out of the business.From what I here Gould is making the right decisions.

[janner]

Bought 16/06/10 @ .54.. Sold a few weeks later @ .54.. Cost me the brokerage.. Thank goodness I woke up in time !!..

Still watching ... Not impressed.. Agree with Snoopy.. They appear to change their direction more often than their knickers..

[percy]

Bought 16/06/10 @ .54.. Sold a few weeks later @ .54.. Cost me the brokerage.. Thank goodness I woke up in time !!..

Still watching ... Not impressed.. Agree with Snoopy.. They appear to change their direction more often than their knickers..

Wrong people at the right time running the business.Changes of direction,grand plans,came to nothing but huge problems.
With Sir John Anderson and George Gould you are seeing STABLE management,simple workable plans,great understanding of the business,and greater support from staff.

[janner]

Perc.. The staff can make or break a company.. As we all know.. How many staff did their best for you in your Woolly Pully search ??..

Need a litle more confidence before parting with my money in that direction..

[Under Surveillance]

An article in the Sunday Star Times today by Tim Hunter implicitly agrees with much on this thread as to the financial pickle Agria is in, and points out that PGW shareholders have the opportunity at the AGM to ask questions about Agria in the context of its chairman Alan Lai being up for reelection to the PGW board.

[Agrarinvestor]

An article in the Sunday Star Times today by Tim Hunter implicitly agrees with much on this thread as to the financial pickle Agria is in, and points out that PGW shareholders have the opportunity at the AGM to ask questions about Agria in the context of its chairman Alan Lai being up for reelection to the PGW board.

@Under Surveilance,

can you be so kind and provide the URL to the article you mentioned. I could not find it. I only found this:


http://www.stuff.co.nz/business/farming/7810532/Executives-resign-from-PGW-stakeholder

and they don't talked about financial problems.

Another article i found:
http://www.stuff.co.nz/waikato-times/farming/7787084/PGGW-board-to-be-cut-to-six

>>Forsyth Barr analyst John Cairns said the company signalled a while ago there were too many directors <<

cost saving is not bad, for PGW.


english grammar help is always welcome !

[Balance]

[QUOTE=Snoopy;383655]400,000 shares is less than 0.2% of the shares PGW on issue. It is insignificant. Stop looking for conspiracies when there are none there!

Wrong way of looking at the 400,000, Snoopy. Try what the 400,000 means as a way of placing a lid on the sp as an %tage of normal trades.

Just as you are assuming all along that Agria's stake in PGW is going to destabilize PGW's operations, others see it as the prelude to corporate activity.

There's New Hope, Ngai Tahu, Agrium etc waiting in the wings.

[Under Surveillance]

@Under Surveilance,

can you be so kind and provide the URL to the article you mentioned.

All I can provide is the newsprint reference, page D11.

[winner69]

All I can provide is the newsprint reference, page D11.

Suppose Fairfax will be saying go out and pay for this stuff with real money and don't expect Mr Hunter to write stuff so you can read for free ... paywall coming soon

[percy]

An article in the Sunday Star Times today by Tim Hunter implicitly agrees with much on this thread as to the financial pickle Agria is in, and points out that PGW shareholders have the opportunity at the AGM to ask questions about Agria in the context of its chairman Alan Lai being up for reelection to the PGW board.

You sum the article up correctly.
Fairfax have so few reporters,the article will be recycled and will appear on Stuff's site within a few days.

[Balance]

So much focus on Agria and really, it will be like George Kerr being the weak holder of Heartland shares.

Sure it resulted in Heartland shares being sold at a discount to the market the time when George was forced to sell. It is clear the market was anticipating a selldown. However, most of the stock went to well connected parties and the stock has recovered very well after the exit of George.

New Hope and Ngai Tahu will be rubbing their hands in glee as they wait for the ripen fruit of PGW to fall into their laps from Agria. Just like Tomlinson and Carter with Heartland.

[winner69]

I see the world is seeing to see the real strategic value embedded in companies that help feed the world ... companies that do something really tangible - unlike those institutions that dream up paper tranactions that make them zillions without creating anything of substance

Graincorp in OZ now recognised as being 'valuable' as the world still needs to eat no matter what happens ..... maybe PGW has some real strategic assets that the world could be interested in ... only the seeds bit cause the rest of the organisation is only a services company (pity)

[Agrarinvestor]

I see the world is seeing to see the real strategic value embedded in companies that help feed the world ... companies that do something really tangible - unlike those institutions that dream up paper tranactions that make them zillions without creating anything of substance

Graincorp in OZ now recognised as being 'valuable' as the world still needs to eat no matter what happens ..... maybe PGW has some real strategic assets that the world could be interested in ... only the seeds bit cause the rest of the organisation is only a services company (pity)

http://dealbook.nytimes.com/2012/10/21/archer-daniels-offers-2-8-billion-for-australian-rival/

The Archer Daniels Midland Company (http://dealbook.on.nytimes.com/public/overview?symbol=ADM&inline=nyt-org) has bid $2.76 billion for an Australian rival, GrainCorp, as the agricultural giant seeks to bulk up its global operations.
GrainCorp, which disclosed the offer in a press release (http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01345663) on Monday in Australia, said that Archer Daniels had offered 11.75 Australian dollars a share. That’s a 33 percent premium to the company’s Friday closing price.
Last week, Archer Daniels said that it had expanded its stake in GrainCorp (http://www.adm.com/en-US/news/_layouts/PressReleaseDetail.aspx?ID=449) to 14.9 percent from 4.9 percent. (The move was done through equity derivatives.)
Archer Daniels added that it wanted to hold talks about buying the Australian company in an all-cash offer. The move, according to the American food processor and commodities trader, was prompted by its a plan to expand its agricultural process and oilseeds businesses internationally.
“GrainCorp is a well-managed company, and together with ADM would be better positioned to connect Australia’s farmers with growing global demand for crops and food, particularly in Asia and the Middle East,” Patricia Woertz (http://topics.nytimes.com/top/reference/timestopics/people/w/patricia_a_woertz/index.html?inline=nyt-per), Archer Daniels’ chairman and chief executive, said in a statement at the time.
GrainCorp said that it is reviewing the proposal but hasn’t yet come to a decision about the offer. It is being advised by Credit Suisse (http://dealbook.on.nytimes.com/public/overview?symbol=CS&inline=nyt-org), Greenhill & Company (http://dealbook.on.nytimes.com/public/overview?symbol=GHL&inline=nyt-org) and the law firm Gilbert & Tobin.

[janner]

Hahaha.. You surprise me Percy.. I do not think of you as a cynic .. Agree with your comment.


You sum the article up correctly.
Fairfax have so few reporters,the article will be recycled and will appear on Stuff's site within a few days.

[janner]

" Archer Daniels Offers $2.8 Billion for Australia’s GrainCorp "..

That puts PGW into the minnow area..

Most of the players in this scenario are throwing Sprats to catch mackerals.. .

" There's New Hope, Ngai Tahu, Agrium etc waiting in the wings. "

Ha.... They are just " Berley " ..... ..

Yes there is a dollar to be made IMHO.. .. If watched and watched.. and.......

Interesting times ..

[Agrarinvestor]

" Archer Daniels Offers $2.8 Billion for Australia’s GrainCorp "..

That puts PGW into the minnow area..

Most of the players in this scenario are throwing Sprats to catch mackerals.. .

" There's New Hope, Ngai Tahu, Agrium etc waiting in the wings. "

Ha.... They are just " Berley " ..... ..

Yes there is a dollar to be made IMHO.. .. If watched and watched.. and.......

Interesting times ..

http://www.fool.com.au/2012/10/investing/graincorp-shares-soar-is-food-the-next-investment-boom/?source=aptyholnk3030001

As we mentioned (http://www.fool.com.au/2012/08/investing/graincorp-basically-bread-and-beer/) back in August, global grain demand is expected to grow by 1 billion metric tonnes or 50%, due to population growth, and Graincorp stands to benefit enormously from that fact.


The world’s population is expected to hit 9 billion people by 2050 – that’s a lot of mouths to feed.
Today’s takeover offer for one of Australia’s last listed agricultural companies, Graincorp Limited (ASX: GNC) should come as no shock then. The opportunities for companies involved in farming and food production are huge. The fact that Graincorp’s share price has surged well past the offer price of $11.75, suggests investors know how valuable the company is, and either expect a higher offer to come, or another bidder, which could trigger a bidding war.
As we mentioned (http://www.fool.com.au/2012/08/investing/graincorp-basically-bread-and-beer/) back in August, global grain demand is expected to grow by 1 billion metric tonnes or 50%, due to population growth, and Graincorp stands to benefit enormously from that fact.
The large size of Australia and low population per square metre, means the country is well suited for agriculture, which requires large amounts of land for growing crops, raising sheep, cattle and other animals. Well suited, yes. Perfect? No. Extreme weather conditions mean we have severe droughts and floods, which can wreak havoc on the farming industry.
ANZ recently released a report it had commissioned by Port Jackson Partners suggesting rising food demand could boost Australia’s and New Zealand’s agricultural exports by around $2.8 trillion by 2050. Demand is being driven by Asia’s growing population and expanding middle class, who can afford to eat more grain-intensive food, such as meat.
But cashing in on the boom in food demand is going to be difficult, according to the report. Australia’s agricultural industries have gone backwards, and needs an estimated $1 trillion of additional investment to kick start declining productivity growth. An aging rural population – the average age of an Australasian farmer is in their mid-50s – rising productivity costs, constraints from natural resources and competition for land could see newer agricultural powers, like Brazil and Indonesia elbow Australia out of the prize.
International companies have already recognised the potential – witness the Graincorp takeover, the Australian Wheat Board accepted a takeover bid from Canadian agricultural giant, Agrium in 2010 and recent buying of Australian sugar assets by Chinese companies. Now it’s up to Australians to come to the same conclusion.
For those Foolish investors looking for the next ‘Graincorp’, you might want to take a closer look at dairy company, Bega Cheese Limited (ASX: BGA), salmon farmer Tassal Group (ASX: TGR) or agricultural investment company PrimeAg Australia Limited (ASX: PAG).
If you only invest in one company this year, make it our “Top Stock for 2012-13 (http://www.fool.com.au/free-stock-report/top-stock-for-2012-13/)”. Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report. (http://www.fool.com.au/free-stock-report/top-stock-for-2012-13/)

[winner69]

Onlt thing wrong with putting PGW in the same category as Graincorp and cheese factories and salmon farmers is that PGW don't actually produce much food .... theya re more a services company .... but they do have a seeds businessof sort of there is ever goign to be any riches in PGW that has to be the platform

[Snoopy]

An article in the Sunday Star Times today by Tim Hunter implicitly agrees with much on this thread as to the financial pickle Agria is in, and points out that PGW shareholders have the opportunity at the AGM to ask questions about Agria in the context of its chairman Alan Lai being up for reelection to the PGW board.


It was a good article by Hunter on PGW/Agria. I hadn't caught up with the fact that Agria had not made all of the payments due to their Chinese research partner to allow themselves sole commercial rights to the intellectual property in corn seed they are jointly developing in China.

There was one small mistake, with Hunter saying that Agria will be suspended from the NYSE if they don't get the monthly average share price up over one dollar in January. In fact the d-date is 27th December this year, as 27th June 2012 is when the NYSE informed Agria they were in breach of their listing rules. It was Agria took until 19th July 2012 to tell the market this, which is probably the source of the date confusion. I initially made the same mistake that Hunter did in getting the date wrong.

I think if Agria want to remain listed they will leave it until the last minute (27th November) to do an ADR consolidation, probably 2:1. That should give them another six months breathing space provided the share price does not sink too rapidly, and give Agria an opportunity for dividends from PGW to start flowing. The announced profits (sic) for 2012 (a cash loss hiding a much larger undeclared capital loss) will surely not generate any positive investor interest. If Agria don't do an ADR consolidation, I don't see how Alan Lai can retain any NYSE investment credibility.

I also came to a different conclusion regarding the LIC loan due to mature next week. Hunter had the impression that Agria was trying to renew the LIC loan. My impression, reading between the lines, was that LIC (livestock Improvement Corporation) wanted their money back and that Agria, having already refinanced their existing NZ bank loan, were negotiating for that NZ bank loan to be enlarged so that they could pay LIC out. I guess we both agree that Agria is up against it either way.

SNOOPY

[Snoopy]

Graincorp in OZ now recognised as being 'valuable' as the world still needs to eat no matter what happens ..... maybe PGW has some real strategic assets that the world could be interested in ... only the seeds bit cause the rest of the organisation is only a services company (pity)


At the moment 'only a services company', the Agriservices division is holding the whole PGW operation together. If you need a reminder of how bad things are at the Agritech (seed) division, you only need look back at my post 1958. And then be reminded that things have gone downhill from there....

SNOOPY

[Snoopy]

400,000 shares is less than 0.2% of the shares PGW on issue. It is insignificant. Stop looking for conspiracies when there are none there!

Wrong way of looking at the 400,000, Snoopy. Try what the 400,000 means as a way of placing a lid on the sp as an %tage of normal trades.

Just as you are assuming all along that Agria's stake in PGW is going to destabilize PGW's operations, others see it as the prelude to corporate activity.

There's New Hope, Ngai Tahu, Agrium etc waiting in the wings.


Fair enough Balance. For my very low liquidity SCT investment I have to admit to only putting onto the market a share package that won't swamp the market, although in the case of SCT that translated to the minimum economically marketable parcel! But I can't agree with the comment about keeping a lid on the price. I believe that 36c is rather expensive, given PGW's prospects going forwards.

Canada's Agrium IIRC had a chance to trump the Chinese Agria's partial bid at 60c, did due diligence and elected to keep their hands in their pockets. Shareholders should not forget that the Agria bid left shareholders with around half their shares trading at around 45c after the bid closed. I would argue that the real value of the Agria bid was only 52.5c, not the 60c headline figure. If Agrium had made a counter offer of say 55c to acquire all of PGW's shares then it would certainly have got shareholders attention. But they did not do so. That leads me to believe that the value of PGW to Agrium was below 55cps. The finance division of PGW was subsequently given away. So I would argue that an absolute maximum bid for PGW, should Agrium still be interested would be 50c.

New Hope have been so quiet, and PGW seems to peripheral to their other agricultural interests, that it is hard to know what they will do if anything.

Withe the appointment of Mike Sang , with his PGW background, as CEO of Ngai Tahu, I belive a maori controlled PGW is the most likely ultimate outcome. And IMO it would probably be a good thing.

SNOOPY

[Snoopy]

Wrong people at the right time running the business.Changes of direction,grand plans,came to nothing but huge problems.
With Sir John Anderson and George Gould you are seeing STABLE management,simple workable plans,great understanding of the business,and greater support from staff.


I am not convinced PGW's path into China is the way to go. Don't get me wrong, I agree that there is money to be made in China. But I am not convinced that Agria is the right partner for PGW to do this.

Of course with Agria holding the reigns, planning a move into China must be top of the agenda. But that doesn't mean that if Agria was not there, that Sir John Anderson and George Gould mightn't choose to take the company in a different direction.

SNOOPY

[winner69]

I see that you guys discussion has been mentioned by Shoeshine in the NBR

Shoeshine also bought up how a $9.6m provision (bad) re the contract to supply Silver Ferns Farms in 2011 was revalued in 2012 and a $5.5m gain was booked - a turnaround of $15m and a reasonable chunk of the much touted $55 turnaround in PGW bottom line from 2011 to 2012 ..... yet they made no mention of it in the results announcements .... something Shoeshine finds puzzling

You investiagted this Snoopy

[Agrarinvestor]

Agrias cash and cash equivalent 25.955 US$ millions - Cash of PGW 12726 (15.911 NZ $ *0,8 = 12726 US$)

AGRIAS own cash is currently = 13 226 million US$

without any DIvidend from PGW, i believe Agria has no problems with its Debt.
The SVP (David Pascale)of Agria wrote to my questions about the bank loans:

During the next month you have to renew a lot of debt. Is it possible that AGRIA have problems with the banks ?
[ Debt was related to PGG Wrightson investment. There is no issue anticipated with the company's bank syndicate. ]

@Snoopy, you developed a small obsession with Agria going to collapse.
You never talk about the prospects. The world population will reach 9 Billions and AGRIA/PGW
are in the part of the world with a health and permanent growth.
Don'T focus to much on the Power of the dark side.
:)

[Balance]

Interesting but the 400,000 shares on offer were chipped away today and the buying is building up again. Let's see if that someone put on some more like that to sell.

[Agrarinvestor]

http://finance.yahoo.com/echarts?s=GRO+Interactive#symbol=gro;range=1d;comp are=;indicator=volume;charttype=area;crosshair=on; ohlcvalues=0;logscale=off;source=undefined;

today investors bought 150.000 shares of Agria, 5 times daily average. Shortly before the Bell 30.000 for 0,95.
1$ is comming soon. If i got a chance tomorrow to add shares for 85 cent i will take the risk.

[winner69]

Is that silver fern supply contract a costly burden going forward ....I never like reading things like expected costs being higher than returns

[Snoopy]

Is that silver fern supply contract a costly burden going forward ....I never like reading things like expected costs being higher than returns


The Silver Fern farm supply contract should have now been sorted Winner. PGW took a $10m hit in FY2011, before deciding it wasn't going to be so bad and wrote back $5m of that write off in FY2012. Should all be fully sorted now, and we shareholders can all thank Allied Farmers for scaring their own customers across the road to the PGW livestock yards. So yes, definitely fully sorted unless something changes in FY2013. Then IFRS will demand another write up or write down, but what chance of that? So all tied up then? Yes it must be...

SNOOPY

[Snoopy]

Agria's cash and cash equivalent 25.955 US$ millions - Cash of PGW 12726 (15.911 NZ $ *0,8 = 12726 US$)

AGRIAS own cash is currently = 13 226 million US$

without any Dividend from PGW, i believe Agria has no problems with its Debt.


Interesting point you raise about there being net cash in the kitty Agrainvestor. I agree with your calculation, but those figures applied at 30th June 2012. What is the cash situation four months on at the end of October 2012?

-------

If you look at Agria's 'Selling and General Admin Expenses', these were $US214.261m for FY2012.

From the PGW FY2012 annual report I get 'Selling and General Admin Expenses' of $NZ137.046m +$NZ102.224m = $NZ239.270m
Now, $NZ239.270m x 0.8 = $US191.416m.

That means the stand alone Agria 'Selling and General Admin Expenses' are: $US214.261m-$US191.416m = $US22.485m

-------

Back in the Agria FY2012 report, R&D expenses are $US5.043m.

From the PGW FY2012 annual report, R&D expenses are $NZ5.786m x 0.8 = $US4.628m

That means the stand alone Agria 'R&D Expenses' are: $US5.043m-$US4.628m = $US0.415m

-------

So now we can work out the stand alone Agria FY2012 annual running costs:

$US22.485m+ $US0.415m = $US23.260m.

Assuming those costs do not change year to year, then we might imagine the Agria running expenses for four months to be:

$US23.260m/3= $US7.753m

-------

Now go back to my post number 2260. There I estimate a stand alone Agria interest bill of $US6.3m. Over four months that is a cash outflow of $US2.1m.

------

So overall running costs for standalone Agria over four months are:

$US7.753m+ $US2.1m = $US9.853m

I estimate standalone Agria income as zero, within the margin of rounding error, as per FY2012.

-------

Now we have all the numbers we need to estimate the net cash position of Agria as at 31-10-2012.

$US13.226m +$US0m - $US9.853m = $US3.373m

Agria is continuing to burn cash. So I am guessing Agria has a couple of months at the most before they can no longer pay their employees wages or their interest bill.

Effectively Alan Lai will wake up on Christmas day, go straight to the foot of his bed and find a large empty stocking there with a hole in the end of it. All his Christmas cheer will have leaked away, and he will have to send any employees nominally on the payroll home. It will all be over.



The SVP (David Pascale)of Agria wrote to my questions about the bank loans:

During the next month you have to renew a lot of debt. Is it possible that AGRIA have problems with the banks ?
[ Debt was related to PGG Wrightson investment. There is no issue anticipated with the company's bank syndicate. ]



It was already on record that Agria had renegotiated their NZ bank loan. You didn't ask what happens at the end of October when LIC wants their money back or in January when the US loans have to be renegotiated.



@Snoopy, you developed a small obsession with Agria going to collapse.
You never talk about the prospects. The world population will reach 9 Billions and AGRIA/PGW
are in the part of the world with a health and permanent growth. Don't focus to much on the Power of the dark side. :)


This dream has only until Christmas day to come true Agrainvestor. That is when the money runs out. Without a cash injection that will be the end of Agria, IMO.

SNOOPY

[winner69]

They must have read shoeshine comments ......hardly mentioned in the annual report commentaries yet every man and dog talked about at the AGM

[winner69]

Snoopy ...those million shares you sold to lighten your exposure ..... Balance bought them

Nice

[Snoopy]

http://finance.yahoo.com/echarts?s=GRO+Interactive#symbol=gro;range=1d;comp are=;indicator=volume;charttype=area;crosshair=on; ohlcvalues=0;logscale=off;source=undefined;

Today investors bought 150.000 shares of Agria, 5 times daily average. Shortly before the Bell 30.000 for 0,95.
1$ is coming soon. If i got a chance tomorrow to add shares for 85 cent I will take the risk.


Someone bid the share up to 94c but it closed at 83c after trading as low as 75c. Plenty of shares available for you then Agrainvestor. There is a chance here for those who still hold Agria to sell to whoever is trying to manipulate the price upwards.
If you believe in the Agria story, why not just buy into PGW directly? That way you don't pay for the non productive Agria corporate costs and lose the risk of the dubious leverage. PGW has enough debt already without any more 'pork on a pig' IMO.

SNOOPY

[Agrarinvestor]

Someone bid the share up to 94c but it closed at 83c after trading as low as 75c. Plenty of shares available for you then Agrainvestor. There is a chance here for those who still hold Agria to sell to whoever is trying to manipulate the price upwards.
If you believe in the Agria story, why not just buy into PGW directly? That way you don't pay for the non productive Agria corporate costs and lose the risk of the dubious leverage. PGW has enough debt already without any more 'pork on a pig' IMO.

SNOOPY

>>to sell to whoever is trying to manipulate the price upwards.<<

Noboy is trying to manipulate Agria upwards.
Look at the last 10 trades of Agria on Oct 23td
22:03:09 0,83 3400
21:59:59 0,90 3200
21:59:59 0,91 100
21:59:59 0,90 100
21:59:59 0,90 1300
21:59:59 0,94 1800
21:59:56 0,94 10149
21:59:50 0,95 975
21:59:50 0,95 4025
21:59:49 0,94 400

Look at this:
http://finance.yahoo.com/echarts?s=GRO+Interactive#symbol=gro;range=1d;comp are=;indicator=volume;charttype=area;crosshair=on; ohlcvalues=0;logscale=off;source=undefined;

I haver seen someone manipulating this up! Remember only small volumes have put this stock down to 70 pence in the past. This was only possible because all chinese stocks are fraud in the eyes of most american investors.

>>If you believe in the Agria story, why not just buy into PGW directly?<<

Agrias Market Cap is 50 Million $ PGW has a Market Cap 264 Million$, that gives me 50% of PGW shares for 50Million instead of 132 Million$
Oh excuse me, it is not 50%. Agria has more than 50%. Agria is the controlling shareholder of PGW. That means the remaining shares have only the right to get a dividend. Why should Agria give them a dividend ?
As we have learned, it is unimportant for Agria how high the shareprice of PGW is. If someone else than AGRIA wants to takeover PGW he have to talk to AGRIA first.
We have seen huge volume the last 2 days, for AGRIA and PGW, that tells me that some has a better understanding of
Agrias balance sheet than we have.
You predicted that AGRIA is bankrupt. I predict 1,5US$ until Christmas.
Be a sportsmen, Snoopy, and calculate the possibility that you bet on the wrong scenario.

[Queenstfarmer]

Agrarinvestor...If Agria need funds in the near future, it can only come from a PGW dividend. Agria's xmas stocking is empty. So shareholders will benefit from this ...51% or not Agria won't have a choice.

[Agrarinvestor]

Agrarinvestor...If Agria need funds in the near future, it can only come from a PGW dividend. Agria's xmas stocking is empty. So shareholders will benefit from this ...51% or not Agria won't have a choice.


Agria has recovered 30% of there all time low. Do you really thing that big guys are buying if AGRIA is going bankrupt ?
They will pump this share above 1$, i beleave they will target a 2 Years high. PGW had a turnaround and Agrias chinese seed business is generating cash (300.000US$)
The only point is the interest rates for PGW, thats all. And with these success story of the last 12 month, they will get new loans.

[Agrarinvestor]

They must have read shoeshine comments ......hardly mentioned in the annual report commentaries yet every man and dog talked about at the AGM

PGG Wrightson shareholders have been told there is “zero chance” of Chinese half-owner Agria going under amid speculation about its financial health.

At PGW’s annual shareholders meeting in Auckland today, Agria chairman Alan Lai – also a PGW director up for re-election – was asked to reassure shareholders about his firm’s financial health.
He said twice there was “zero chance” of Agria being put into receivership

http://www.nbr.co.nz/article/pgw-shareholders-question-health-chinese-shareholder-dw-131185

[Snoopy]

You predicted that AGRIA is bankrupt. I predict 1,5US$ until Christmas.
Be a sportsmen, Snoopy, and calculate the possibility that you bet on the wrong scenario.


What I am saying to you Agrainvestor is that the published Agria accounts do not lie.

We do not know exactly what has happened to the Agria accounts since the June 30th balance date. But I think we can be sure that if anything materially positive had happened then Agria would let the market know. In the absence of such knowledge, it is realistic to assume that the interest on borrowings must be paid at the same rate it was in the year ending 30th June. Furthermore, in the absence of alternative announcements, we can only assume the running costs of Agria (staff and rent and utilities) have not changed either. I don't believe we can assume a sudden turnaround at Agria's Chinese domiciled investments is creating significant profit for Agria, when no profit, within the bounds of rounding error, was created last year (FY2012).

Around Christmas day Agria will run out of cash, all things being equal. I see no way around this scenario.

However, the banks in America will probably not want to own half of a rural supplies company in NZ. So maybe, just maybe they will extend those US loans and give Agria more cash so they can continue for another year? The other alternative is a cash injection from an existing large shareholder. This could happen but if it does then existing small Agria's shareholder interests will be diluted. Not a good situation for existing holders of Agria shares.

Your point about owning a controlling interest in PGW for less cash, due to Agria's leverage, is well made. However Criag Norgate, via Rural Portfolio Investments (RPI) tried to do the same thing to PGW, and RPI went broke once the divdend flow from PGW stopped. I do not believe that PGW is suitable for the leveraged investment approach that was tried by RPI and is now being repeated by Agria. Farming is just too volatile to make borrow and hope work.

SNOOPY

[Snoopy]

Agria is the controlling shareholder of PGW. That means the remaining shares have only the right to get a dividend. Why should Agria give them a dividend ?


Because it is the law. If PGW pays Agria a dividend then PGW must pay all other shareholders a dividend as well. There are no second class shareholders at PGW. Queenstfarmer is on the money with this.

SNOOPY

[Snoopy]

Snoopy, you developed a small obsession with Agria going to collapse.
You never talk about the prospects. The world population will reach 9 Billions and AGRIA/PGW
are in the part of the world with a health and permanent growth.


Even if on balance I believe that Agria will collapse, this does not necessarily mean that Agria is a bad investment.

If the payoff from a succesful Agria is high enough, then it could still be rational to invest in Agria even if it has a less than 50% chance of survival. So let's for a moment assume that the Chinese growth miracle will continue. Has Agria demonstrated the ability to generate a return above its cost of capital in China?

Unfortunately at the moment the answer is no. I would want to see at least some evidence that Agria can generate a return above its cost of capital in China before I would consider investing in Agria directly. Interestingly growth in China refers to an increase in spending in the overall Chinese economy. China is so economically powerful that they could sustain indefinitely a kind of cross subsidy arrangement where their exporters bolting and sewing together "stuff" earn the cash and the food producers operate at a loss. It is entirely possible that the food business in China will continue to "grow strongly" and yet contribute nothing in earnings to the companies that manage that growth.

SNOOPY

[Queenstfarmer]

Who knows...we may see a bit of robbing Peter to pay Paul.

[Balance]

Even if on balance I believe that Agria will collapse, this does not necessarily mean that Agria is a bad investment.

If the payoff from a succesful Agria is high enough, then it could still be rational to invest in Agria even if it has a less than 50% chance of survival. So let's for a moment assume that the Chinese growth miracle will continue. Has Agria demonstrated the ability to generate a return above its cost of capital in China?

Unfortunately at the moment the answer is no. I would want to see at least some evidence that Agria can generate a return above its cost of capital in China before I would consider investing in Agria directly. Interestingly growth in China refers to an increase in spending in the overall Chinese economy. China is so economoically powerful that they could sustain indefinitely a kind of cross subsidy arrangement where their exporters bolting and sewing together "stuff" earn the cash and the food producers operate at a loss. It is entirely possible that the food business in China will continue to "grow strongly" and yet contribute nothing in earnings to the companies that manage that growth.

SNOOPY

You could say the same thing about Haier's investment in FPA a year ago.

[Balance]

Enough about Agria. I'm interested in PGW. At what level would the commenters here want more of it? Today's price of 35c? 32c on market should it drop to that? 29c if Agria tip over and ANZ then offer a placement?


Remember that New Hope has a first right of refusal over the shares.

[Snoopy]

I'm interested in PGW. At what level would the commenters here want more of it? Today's price of 35c? 32c on market should it drop to that? 29c if Agria tip over and ANZ then offer a placement?


I don't think you can discuss what is a fair buy in price for PGW, without having some kind of future scenario in mind in tandem with your price.

IMO the best thing PGW can do to improve their earnings is reduce debt. Unfortunately with Agria in control, I believe dividends will be reinstated in advance of what is prudent for all shareholders. Some small shareholders may cheer and drive the share price up to 40c. I would see PGW as a sell at that price.

35c to me says PGW are expecting a large increase in contribution from Agritech to offset the decline in Agriservices coming off a boom year. I was very disappointed to hear at the AGM that after Agritech hit a five year rock bottom in FY2012, their profitability has worsened yet again in the opening of the FY2013 year. At the moment I see the chance of a downside risk of the PGW share price as high, and greater than the possibility of missing a share price rally. Of course with any sub 50c shares, a movement of only one or two cents is quite a large percentage move. So if the share price got down to say 32c, I would look at PGW again.

Personally I do not buy the China expansion story. So whether Agria or New Hope stay involved with PGW does not affect my own valuation of PGW. Some may see that differently though. If Agria did start having to sell PGW shares to pay their debts, pushing the PGW share price down as a consequence, I would cetainly look at buying more PGW, maybe a lot more if I could get the shares for 30c....

SNOOPY

[Agrarinvestor]

I don't think you can discuss what is a fair buy in price for PGW, without having some kind of future scenario in mind in tandem with your price.

IMO the best thing PGW can do to improve their earnings is reduce debt. Unfortunately with Agria in control, I believe dividends will be reinstated in advance of what is prudent for all shareholders. Some small shareholders may cheer and drive the share price up to 40c. I would see PGW as a sell at that price.

35c to me says PGW are expecting a large increase in contribution from Agritech to offset the decline in Agriservices coming off a boom year. I was very disappointed to hear at the AGM that after Agritech hit a five year rock bottom in FY2012, their profitability has worsened yet again in the opening of the FY2013 year. At the moment I see the chance of a downside risk of the PGW share price as high, and greater than the possibility of missing a share price rally. Of course with any sub 50c shares, a movement of only one or two cents is quite a large percentage move. So if the share price got down to say 32c, I would look at PGW again.

Personally I do not buy the China expansion story. So whether Agria or New Hope stay involved with PGW does not affect my own valuation of PGW. Some may see that differently though. If Agria did start having to sell PGW shares to pay their debts, pushing the PGW share price down as a consequence, I would cetainly look at buying more PGW, maybe a lot more if I could get the shares for 30c....

SNOOPY

I don't understand this
>>to offset the decline in Agriservices coming off a boom year.<< by Snoopy

In the script on Page 4 i read :
>>>Overall the AgriServices division is up 7% on the same period last year.<<< by George Gould

>>in FY2012, their (Agritech)profitability has worsened yet again in the opening of the FY2013 year.<< by Snoopy

on Page 5 i read:
>>>The Grain trading business has seen increased prices across wheat, maize and barley and is tracking ahead of this time last year. The AgriTech division is confident it will improve on last year’s performance.<<<

http://www.pggwrightson.co.nz/Userfiles/files/Market%20Announcements/2012/10/NZX%20Annual%20Meeting%20Script%2024%20Oct%202012% 20-%20FINAL.pdf

[Balance]

Tick .... tick ...

Agria delays $10m debt repayment
TIM HUNTER
Last updated 09:50 30/10/2012



Share
Industries NZ Oil & Gas September qtr revenue $29.6m Vodafone takeover approval expected NZ dollar 'not so over-valued' NZ firms 'complacent' about bribery overseas Government plans to make housing affordable Greymouth Petroleum owners talk tough Bathurst battles for mine in court Tiwai cuts hit firms Offshore survey boosts gas hopes Kirkcaldie shares jump on sale news
PGG Wrightson's controlling shareholder Agria has obtained an extension on a $10 million debt it was due to repay by tomorrow.

New Zealand company Livestock Improvement Corporation, which loaned the money, told the stock exchange late yesterday its talks with Agria about repayment were continuing.

"To enable these discussions to continue, and to give Agria time to source additional funds to enable repayment, the payment date for these amounts has been extended," LIC said.

Payment of at least half the money is now due by December 19, with the balance payable by March 2014.

Interest on the loan has been increased "to reflect the extension" LIC said. A company spokesman said the rate remained confidential.

Agria, a New York Stock Exchange listed, Cayman Islands registered, Singapore-controlled company with offices in China, borrowed the money to help finance its purchase of shares in rural services company, PGG Wrightson.

In NYSE filings Agria has said if it had to repay the loan on the due date it might have to sell part of its PGG Wrightson stake.

Agria owns 80.8 per cent of Agria Asia, which owns 50.22 per cent of PGG Wrightson.

LIC's loan ranks behind a $25m loan to Agria provided by ANZ, also due for repayment on October 31. Agria has said the bank has agreed terms to extend the loan.

LIC is a farmer owned co-operative providing scientific analysis services to dairy, beef and deer farmers. In the year to May 31 it reported a net profit of $24.4m on revenue of $177.2m.

Its shares were unchanged yesterday at $4.95, valuing the company at $146m.

An earlier version of this story incorrectly said the $25m loan due for repayment on October 31 was provided by BNZ.

Ad Feedback

- © Fairfax NZ News

[Master98]

Tick .... tick ...

Agria delays $10m debt repayment
TIM HUNTER
Last updated 09:50 30/10/2012


3 cps special dividend when crafar loan repayed on end of November or first of December used to pay half of LIC loan. I GUESS

[Under Surveillance]

3 cps special dividend when crafar loan repayed on end of November or first of December used to pay half of LIC loan. I GUESS

And no DRP option to be available, entirely because PGW has trifling debt and is awash with cash (not because Agria ownership would likely drop below 50%, yeah right).

Seriously, the independent directors would have to vote against a dividend to bail out Agria, the board having told the recent AGM they are allowing themselves up to 12 months to formulate and announce a dividend policy?

[Agrarinvestor]

Tick .... tick ...

Agria delays $10m debt repayment
TIM HUNTER
Last updated 09:50 30/10/2012



Share
Industries NZ Oil & Gas September qtr revenue $29.6m Vodafone takeover approval expected NZ dollar 'not so over-valued' NZ firms 'complacent' about bribery overseas Government plans to make housing affordable Greymouth Petroleum owners talk tough Bathurst battles for mine in court Tiwai cuts hit firms Offshore survey boosts gas hopes Kirkcaldie shares jump on sale news
PGG Wrightson's controlling shareholder Agria has obtained an extension on a $10 million debt it was due to repay by tomorrow.

New Zealand company Livestock Improvement Corporation, which loaned the money, told the stock exchange late yesterday its talks with Agria about repayment were continuing.

"To enable these discussions to continue, and to give Agria time to source additional funds to enable repayment, the payment date for these amounts has been extended," LIC said.

Payment of at least half the money is now due by December 19, with the balance payable by March 2014.

Interest on the loan has been increased "to reflect the extension" LIC said. A company spokesman said the rate remained confidential.

Agria, a New York Stock Exchange listed, Cayman Islands registered, Singapore-controlled company with offices in China, borrowed the money to help finance its purchase of shares in rural services company, PGG Wrightson.

In NYSE filings Agria has said if it had to repay the loan on the due date it might have to sell part of its PGG Wrightson stake.

Agria owns 80.8 per cent of Agria Asia, which owns 50.22 per cent of PGG Wrightson.

LIC's loan ranks behind a $25m loan to Agria provided by ANZ, also due for repayment on October 31. Agria has said the bank has agreed terms to extend the loan.

LIC is a farmer owned co-operative providing scientific analysis services to dairy, beef and deer farmers. In the year to May 31 it reported a net profit of $24.4m on revenue of $177.2m.

Its shares were unchanged yesterday at $4.95, valuing the company at $146m.

An earlier version of this story incorrectly said the $25m loan due for repayment on October 31 was provided by BNZ.

Ad Feedback

- © Fairfax NZ News

This is from the annual report:
We funded the acquisition of PGW partly through debt that matures between October 2012 and February 2014, and partly
through equity financing in Agria Asia Investments through New Hope International, which holds an option to require us to
repurchase its shares in Agria Asia Investments between May 2013 and May 2014. In order to meet these repayment and repurchase
obligations, we may need to extend our existing credit facilities or obtain new credit facilities. Additionally, with respect of our
acquisition debt that matures in October 2012, which was provided by a bank loan from a New Zealand bank and a subordinated loan
from Livestock Investment Corporation Limited, or LIC, we have received approval from the New Zealand bank to extend the terms
of our remaining loan and are in the process of negotiating suitable arrangements with LIC for the repayment of their subordinated
loan or otherwise extend the loan consistent with the terms of subordination arrangements between us, the New Zealand bank and
LIC. If we are unable to extend existing facilities or obtain new ones, we may be required to sell a portion of our shares in PGW


And this is an official answer from AGRIA's SVP David Pascale:

During the next month you have to renew a lot of debt. Is it possible that AGRIA have problems with the banks ?
[ Debt was related to PGG Wrightson investment. There is no issue anticipated with the company's bank syndicate. ]

.......................

We are not talking about new debt, it's only about renewing. Maybe Agria want to repay 5 million in december and don't want to
arrange new credit lines with other banks. It is possible that AGRIA pay the 5 millions out of their cash flow.
I think there are shortsellers out there who are in panic because AGRIAs share has recovered. I dont beleave that AGRIA has to sell PGW shares.
But if they have, i dont think that PGW shareprice will decline then.

[janner]

PGW has been flat lining for the past 3 years .. I have been in when i thought as so many do .. It has to change.. This is the time...

Got out quickly..

Agria is not an NZX company.. So .. Agrarinvester .. Why the enthusiastic PUMPING of Agria ??

[Agrarinvestor]

PGW has been flat lining for the past 3 years .. I have been in when i thought as so many do .. It has to change.. This is the time...

Got out quickly..

Agria is not an NZX company.. So .. Agrarinvester .. Why the enthusiastic PUMPING of Agria ??

I am from Germany. My reason why i have shares of Agria is because i have a different point of view. I try to understand the balance sheet like most of you,
and my interpretion was that there will not be
- a big loss for the fiscal year 2012
- there will be no impact in the balance sheet because of the flat shareprice of PGW

it comes out that both asumptions are true. That raise the question if an Idiot like me can come to that conclusion,
why have the experts a different understanding. Everybody talks about a potential bankrupty of Agria. Why ? Are all the others Idiots, and i am the genius or do they have an interest that Agrias and PGWs shareprice declines ? I don't know. Maybe they are looking for a cheaper entry point, or they are shortsellers .
I have learned that it is very difficult to buy for the lowest price and that shortselling can be vey dangerous for these experts.
Most investors think that Agria is a bad investment, if these debt questions are solved and AGRIA comes out with good news about their domestic market,
the shareprice will go through the roof. The market cap is still only 50 millions and they own half of PGW plus their chines market.

The only point what makes me worry is that Alain Lai own round about 70% of Agria, he can do what he want with Agria. That is a big problem if he is someone who wants to fool us. But i was not able to detect anykind of misconduct. Hopefully he is a honest man. And there is more than hope, there is the point of reputation. I think the management is trying hard to win back there reputation and we can count on their biggest investment. I can not imagine that they do anything what damage the brand name of PGW.

Here are some answers i got from investor relation:
30.oct
>>If there was a material development it would be disclosed to holders. In terms of the point on potentially selling shares of PGW, this
currently remains a long-term strategic investment for Agria which we plan to continue working together on to help build value for PGW,
Agria and our shareholders.<<

12.oct
>>During the next month you have to renew a lot of debt. Is it possible that AGRIA have problems with the banks ?
[ Debt was related to PGG Wrightson investment. There is no issue
anticipated with the company's bank syndicate. ]

And the answer from Alain Lai:
At PGW’s annual shareholders meeting in Auckland today, Agria chairman Alan Lai – also a PGW director up for re-election – was asked to reassure shareholders about his firm’s financial health. He said twice there was “zero chance” of Agria being put into receivership

Mr Lai owns 70% of AGRIA and has earnde 80 million during the IPO. I think he has the power and the wish that Agria will succeed.

I don't want to spam this board to much with my Agria related stuff, but if someone argument against Agria i feel the need to respond, because i own 30.000 shares of them.

[Snoopy]

Please feel the need to respond on a thread called "Agria" and not a thread called "PGW". I would rather this thread not bog down into the affairs of a shareholder in PGW where much of the discussion is unrelated to the earnings and balance sheet of PGW.

If there isn't a thread called Agria, perhaps you might draw your own conclusions, or more optimistically, perhaps start one in the international stocks thread.


Sparky, Agria has a small business in China related to corn which earns no money within rounding error. Agria is in effect the US listing vehicle for PGW and Agria controls the destiny of PGW through their 50.22% shareholding. I submit that the affairs of Agria are in fact critical to the future of the control of PGW, and that is highly relevant to PGW shareholders.

The fact that the balance sheet of PGW via the dividend policy of PGW are under the control of Agria I would have thought means that what Agria does is the most important driving factor in PGWs future. I sympathize with you not wanting this thread cluttered up with matters not related to PGW shareholders. I would suggest that that if Agria was renamed 'PGW NYSE' then you would not be complaining.

The fact that to all intents and purposes Agria is 'PGW NYSE' is I think something you should reflect on.

SNOOPY

[percy]

As per other posters I am keen to follow the future prospects of PGW.Are management making the right discissions? Is the weather right for them etc/?
However, as a shareholder who would possibly increase his holding, I find one must keep an eye on what the major shareholder is doing.I therefore want to record my thanks to SNOOPY and Agrainvestor for their full and frank postings.Although they drive me mad at times, I appreciate the time and trouble they take to share their thoughts with us.I have learnt a lot from their postings.

[Balance]

As per other posters I am keen to follow the future prospects of PGW.Are management making the right discissions? Is the weather right for them etc/?
However, as a shareholder who would possibly increase his holding, I find one must keep an eye on what the major shareholder is doing.I therefore want to record my thanks to SNOOPY and Agrainvestor for their full and frank postings.Although they drive me mad at times, I appreciate the time and trouble they take to share their thoughts with us.I have learnt a lot from their postings.

Hear! Hear!

[iceman]

As per other posters I am keen to follow the future prospects of PGW.Are management making the right discissions? Is the weather right for them etc/?
However, as a shareholder who would possibly increase his holding, I find one must keep an eye on what the major shareholder is doing.I therefore want to record my thanks to SNOOPY and Agrainvestor for their full and frank postings.Although they drive me mad at times, I appreciate the time and trouble they take to share their thoughts with us.I have learnt a lot from their postings.

I am totally with you on this one Percy.

[GRIFFIN]

Yes nice one Percy,you always have that sound and grounded response with some in depth knowledge of the company you are talking about.Is there any chance we could get you on the board of some of these companies.

[Morpheus]

[QUOTE=percy;384349]As per other posters I am keen to follow the future prospects of PGW.Are management making the right discissions? Is the weather right for them etc/?

Perhaps an answer to your second question Percy, for what its worth http://www.stuff.co.nz/national/7887780/Kiwis-in-for-a-hot-dry-summer (Kiwis in for a hot, dry summer).

I note the forecast is from Niwa and they said the same thing this time last year :) Any campers will tell you they were wrong :)

[percy]

I stand corrected then! (Bows humbly and takes two steps back).

Back to PGW then - the price of 34c looks very attractive. If they are good for a reinstated 2c dividend next year, then they represent a gross yield of 8.15%.

I am sorely tempted to try some opportunistic buying at this level.


I wouldn't expect you to take two steps back,as I always enjoy your posts and contributions,except your report on ABA AGM which was hopeless.!!!!
ps.Agree with you 34cents looks very attractive,

[percy]

Yes nice one Percy,you always have that sound and grounded response with some in depth knowledge of the company you are talking about.Is there any chance we could get you on the board of some of these companies.
Now that would be fun.Sharing a bit of inside information with my friends on sharetrader.

[percy]

I got in a bit late on the ABA AGM to be fair. I fly out of NZ today so may not be able to make Nuplex either, which is a shame. Could be some Shareholders Association fireworks....

Forgiven,have a safe trip,and reading NZ Herald NZ sharehoders assc and union did stir things up at NPX.Poor PR [again] for Nuplex.Always reads poorly putting off staff while increasing director's pay.

[Snoopy]

Give it up and leave this thread to be more of a PGW thread than a rant about agria.


Ok Snapiti. here is a chance to use your on the ground knowledge to contribute.

December 2009: A fateful date. For it was in that month that we long suffering shareholders put our hands in our pockets to bail out PGW by participating in their 45cps rights issue. With those shares I bought at 45c now trading at 35c and no dividends in the interim, I am far from pleased. I have a feeling that this 45c issue price is is still in the minds of many investors and that is why they consider PGW at 35c on the market today as "cheap". The question needs to be asked what happened to that missing 10c?

The jewel of the PGW portfolio was their expanding finance division. Certainly it hit tough times during the global financial crisis, although it must be said far less tough times than every other finance company. I went through the exercise of apportioning corporate running costs over the various PGW divisions and came up with the after tax profit of PGW Finance as a stand alone division. I came up with average earnings of $6.1m, $8.1m, $8.3m, $10.8m and $2.6m for the 2007 to 2011 financial years (inclusive). That averages out to $7.2m per year. Based on a PE ratio of 10 over the business cycle, I would value the PGW Finance division as worth $72m.

Now $72m divided by the 754.8m shares on issue works out at 9.5cps. Stick in the sale costs and you can make a case for 10cps (round figures). However the finance division was not sold, it was simply given away to Heartland NZ. PGW shareholders can blame their now mostly retired directors for this tremendous loss of wealth. 10cps of PGW worth, amounting to 3 to 4 years profits from PGW today, were lost to shareholders as a result of the directors grand plan to exit financing. A PGw share price of 35c then does not represent a bargain price in my eyes. It merely represents 'cash issue value' less the capital value given away by directors.

Some will say the situation was not that simple. PGW was cash strapped and had to make a decision as to how to allocate their resources. I would say they could have had a larger cash issue and kept finance. But let's go with the limited cash argument for a moment. What did PGW do post the cash issue? They spent time buying various loss making seed businesses in Australia and so far have only succeeded in eroding almost all after tax profits from Agritech. So I ask the rhetorical question, did they allocate their limited capital wisely?

The company has been "saved" by the good performance of Agriservices, making the most of FY2012 being a good farming year. But any merchandising idiot can survive when times are good. Whether Agriservices has really transformed will come into sharp focus in FY2013 when times are tougher. In theory PGW still have a financing arm with their association with Heartland NZ. PGW Finance, now part of Heartland is refocussing on providing seasonal bridging loans. If it works, and it needs to be stated that the previous in house financing arrangement with Rabobank did not work, the Agriservices might be in line for a good year in FY2013 if not a great one like last year. But is it working? Snapiti, I would be interested if you or any of your farming colleagues has an opinion on how well PGW Agriservices is shaping up in FY2013!

SNOOPY

[GRIFFIN]

Another thorn in PGWs side apart from the upwards shift in the kiwi $ is the competition, if Farmlands hook up with CRT this will provide us farmers with a full agriservice on a large scale nation wide of which farmers own and control as share holders.This will be one fairly powerful unit.

[Balance]

Another thorn in PGWs side apart from the upwards shift in the kiwi $ is the competition, if Farmlands hook up with CRT this will provide us farmers with a full agriservice on a large scale nation wide of which farmers own and control as share holders.This will be one fairly powerful unit.

What better motivation for PGW to perform!

[Snoopy]

Another thorn in PGWs side apart from the upwards shift in the kiwi $ is the competition, if Farmlands hook up with CRT this will provide us farmers with a full agriservice on a large scale nation wide of which farmers own and control as share holders.This will be one fairly powerful unit.


Good point Griffen. I know that if I was a farmer I would be right behind my own co-operatives. But I wonder, does CRT or Farmlands offer on the premises finance funding? Could this be the ace that PGW holds over CRT, Farmlands and RD1?

SNOOPY

[Master98]

Agria Reaches Agreement With New Zealand Bank Facilitating Repayment to Livestock Improvement Corp.
Hi, i'm not interested in talking about Agria in this thread, below link just supply to someone who want info for Agria. Have a wonderful weekend!

http://www.equities.com/news/headline-story?dt=2012-11-02&val=665078&cat=material (http://www.equities.com/news/headline-story?dt=2012-11-02&val=665078&cat=material)

[Snoopy]

Agria Reaches Agreement With New Zealand Bank Facilitating Repayment to Livestock Improvement Corp.


Thanks Master. I have to say I am impressed with Alan Lai's dance steps so far. LIC and kiwi banks charmed off their feet. Although I do wonder what NZ bank it was that gave them the loan. Might be a good shorting opportunity there!

Alan Lai's next problem will be how to deal with Agria running out of cash, I would guess within the next two months. That will require an increased loan from his US banking partners. How will he negotiate that from a negative equity, negative cashflow position? Those dancing shoes will require an extra shiny coat of polish, me thinks.

The problem with this dancing competition that Alan Lai has entered himself for is that he must successfully negotiate all dance partners to survive. Pulling off a couple of good moves, still means he is only one confidence vote away from going home.

SNOOPY

[Snoopy]

http://www.equities.com/news/headline-story?dt=2012-11-02&val=665078&cat=material


This quote from the above reference:

"Lai further commented, "Agria's investment and strategy with PGG Wrightson's investment is a long-term strategy. There is no intention to sell down any of our investment in PGG Wrightson in the foreseeable future. We are determined and committed to bring out the best both PGG Wrightson and Agria have to offer for the benefit of all shareholders, in all major strategic markets where we are well positioned, namely, New Zealand, South America and Greater China."

Carefully omitted from markets where PGW is well positioned was Australia. An oversight? Or maybe a sign that Lai is not happy with the boards push into the Australian seeds business that so far is delivering nothing but red ink!

SNOOPY

[Snoopy]

What better motivation for PGW to perform!


On a share price basis PGW is not performing. The closing price on Friday was 33c. Very nearly back to the 32c before the FY2012 annual result was announced. A pick up will require better seed sales in Australia. Reportedly the weather in South America is not conducive to an improved performance for PGW.

If you compare the share price in NZ over the last year with the US listed Agria the two shares are now back in synchronization, with PGW down 17.5% over the last year and Agria down 20.5%.

The Obama re-election has stopped the Agria rise, or more correctly share turnover of GRO has returned to 'normal' and the downward trend at Agria has resumed. Agria closed at US93c on Friday

SNOOPY

[Snoopy]

Agria Reaches Agreement With New Zealand Bank Facilitating Repayment to Livestock Improvement Corp.


Here is an excerpt from the above article

2nd November 2012 -- Agria Corporation (NYSE: GRO) (the "Company" or "Agria"), an agricultural company with operations in China and internationally, today announced that it has reached agreement with New Zealand bank, a senior creditor, that paves way for Agria to repay a junior subordinated NZ$10.0 million (RMB51.8 million, US$8.2 million) loan granted by a strategic partner, Livestock Improvement Corp. ("LIC") to Agria. Under the arrangement with the New Zealand bank, the subordination arrangement was resolved, whereby, Agria will repay LIC an amount equal to not less than 50 percent of the loan extended by LIC on December 19, 2012, with an equivalent amount being paid to the senior creditor. The balance due to LIC will be paid in March 2014, a date after maturity of a new facility agreed to be provided by the New Zealand bank.

Now here is the press release from LIC

12 Nov 2012 | GENERAL

Contrary to a report published by Fairfax Media at midday today, the $10 million loan made by Livestock Improvement (LIC) to Agria has not been repaid. Fairfax Media have apologised for the error.
The statement published by LIC on 29 October 2012 stands –
Further to the update provided to the market on 23 October 2012, Livestock Improvement Corporation (LIC) advises that discussions regarding repayment of amounts owed to it by Agria are continuing.
To enable these discussions to continue, and to give Agria time to source additional funds to enable repayment, the payment date for these amounts has been extended. The effect of that extension is that an amount equal to not less than 50% of the loan extended by LIC will fall due for payment on 19 December.
The balance of the outstanding amounts will fall due in March 2014, as required per the subordination to the senior lender, if not repaid earlier. Interest rates have been adjusted up on the loan to reflect the extension.

Agria claims an arrangement exists to repay their LIC loan. LIC says no such agreement exists and Agria has until December 17th to sort it out.

Someone is telling porkies. I wonder who? Possible clue: Agria share price down 3.58% yesterday to 89c.

SNOOPY

[Agrarinvestor]

Here is an excerpt from the above article

2nd November 2012 -- Agria Corporation (NYSE: GRO) (the "Company" or "Agria"), an agricultural company with operations in China and internationally, today announced that it has reached agreement with New Zealand bank, a senior creditor, that paves way for Agria to repay a junior subordinated NZ$10.0 million (RMB51.8 million, US$8.2 million) loan granted by a strategic partner, Livestock Improvement Corp. ("LIC") to Agria. Under the arrangement with the New Zealand bank, the subordination arrangement was resolved, whereby, Agria will repay LIC an amount equal to not less than 50 percent of the loan extended by LIC on December 19, 2012, with an equivalent amount being paid to the senior creditor. The balance due to LIC will be paid in March 2014, a date after maturity of a new facility agreed to be provided by the New Zealand bank.

Now here is the press release from LIC

12 Nov 2012 | GENERAL

Contrary to a report published by Fairfax Media at midday today, the $10 million loan made by Livestock Improvement (LIC) to Agria has not been repaid. Fairfax Media have apologised for the error.
The statement published by LIC on 29 October 2012 stands –
Further to the update provided to the market on 23 October 2012, Livestock Improvement Corporation (LIC) advises that discussions regarding repayment of amounts owed to it by Agria are continuing.
To enable these discussions to continue, and to give Agria time to source additional funds to enable repayment, the payment date for these amounts has been extended. The effect of that extension is that an amount equal to not less than 50% of the loan extended by LIC will fall due for payment on 19 December.
The balance of the outstanding amounts will fall due in March 2014, as required per the subordination to the senior lender, if not repaid earlier. Interest rates have been adjusted up on the loan to reflect the extension.

Agria claims an arrangement exists to repay their LIC loan. LIC says no such agreement exists and Agria has until December 17th to sort it out.

Someone is telling porkies. I wonder who? Possible clue: Agria share price down 3.58% yesterday to 89c.

SNOOPY

Hi Snoopy,

if you like to make Agria shareholders nervoús you should register on yahoo:
http://finance.yahoo.com/mb/GRO/

I could not find the article they are referring to. My understanding is they pay 5 Million on December 19th, and the rest in march 2014.
The decline in shareprice means nothing, it can be recoverd in 1 day, so be carefull !
Shortselling is a dangerous game. It would not be the firstime that Agria jumps 30% in one day. :)

[Queenstfarmer]

A 2 cents per share dividend...in the next month should help Agria out??

[Snoopy]

A 2 cents per share dividend...in the next month should help Agria out??

So would selling 10m PGW shares at 30c. That would raise $NZ3m. 20m shares would raise $NZ6m. Sounds about right. Get your cheque books at the ready folks. The great PGW summer sale might just be coming up?

SNOOPY

[percy]

So would selling 10m PGW shares at 30c. That would raise $NZ3m. 20m shares would raise $NZ6m. Sounds about right. Get your cheque books at the ready folks. The great PGW summer sale might just be coming up?

SNOOPY

Holding myself at the ready.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Agrarinvestor]

So would selling 10m PGW shares at 30c. That would raise $NZ3m. 20m shares would raise $NZ6m. Sounds about right. Get your cheque books at the ready folks. The great PGW summer sale might just be coming up?

SNOOPY
Agria wíll never ever sell shares of PGW. They could no longer consolidate PGWs results if they do.

[percy]

From Livestock Improvement's AGM;
"ANZ loaned Agria $53m,of which $28m had been repaid,Dewdney [LIC CEO] said.Before the loan fell due,Agria asked ANZ and LIC to extend the loans.ANZ were prepared to do this for a further period to April 2014 and,as the subordinated lender,LIC were required to do the same."
www.stuff.co.nz

[percy]

Percy - you are suggesting that they (Agria) seem to be ok then.

Not suggesting anything,other than loans now due April 2014.

[percy]

Have been accumulating shares in this company between 32-34c. I stand ready to buy more should they get cheaper. I think this company has been grossly oversold, and the potential overhang with Agria represents as much an opportunity as a handbrake.

I have met with senior management in the last two months, done lots of homework, and crunched a number of figures. Should they not reinstate a dividend, the stock might only naturally rise to 40c over time, but if they do bring in a 2c dividend in the middle of 2013, then I see a healthy 54c as an intrinsic value for the share price.

Also, the Australian weather patterns have been unusually rainy the last few years. This has depressed sales of seeds on the east coast of Australia. Should Australia revert to more normal, or even better, drier weather patterns in the next few years, PGW will sing.

I have been wondering for some time how to play NZ's strengths in agricultural services and produce. The Fonterra float was momentarily interesting until it looked oversubscribed and therefore overpriced. It made it easier to focus attention on PGW, which I see as a real deep value play that is too cheap.

Forsyth Barr place a DCF valuation at 56c.

Thank you for taking your time sharing your thoughts with us.
An excellent well thought out post.
I have heard very good reports on what George Gould is doing,and with having Sir John Anderson as Chairman,I think we have the right people at the right places, at the right time.I also hold.

[Snoopy]

I have met with senior management in the last two months, done lots of homework, and crunched a number of figures. Should they not reinstate a dividend, the stock might only naturally rise to 40c over time, but if they do bring in a 2c dividend in the middle of 2013, then I see a healthy 54c as an intrinsic value for the share price.


Sparky, I do agree that the margins in the PGW business are so poor it makes no sense for them to reinvest their profits. Far better to pay those profits out to shareholders in the way of dividends. In this way I can see why your spreadsheet might show you that with no dividend PGW might creep to 40c and with a 2c dividend fair value might increase to 54c.

But I have to ask the question, what about PGW's significant debt?

If I go to page 56 in the FY2012 annual report, Note 15 tells us that net debt has reduced from a horrendous $176m to a merely gigantious $125m. So average debt over the year we could average out as around $150m. Note 11 tells us that net interest paid was $13.8m.

$13.8m/$150m= 9.2%

My divisional analysis since 2007 (the year PGW was formed in its current iteration) tells me the best ever return that PGW has achieved from any division, bar the now sold finance, was from seeds in 2007. And that return was 6.5%. This was before the so far ill fated foray into Australia, buying existing Australian businesses to boost seed sales across the Tasman.

You will need to explain to me how borrowing at 9.2% to generate returns at 6.5% makes business sense.
I have concluded it doesn't and the best thing PGW can do for shareholders is pay down their debt as fast as possible. Any other plan, as I see it, will result in PGW earnings deteriorating over the short , medium and long term. Once the PGW debt is paid off, only then does paying dividends make financial sense.

I suppose it is possible that the rag tag of in receivership seed companies that PGW purchased in Australia, may eventually become profitable under a grand unified Aussie strategy. But it requires an additional leap of faith to believe these units can ever return 9.2% on their assets. 9.2% is half as much again above what PGW have ever achieved selling seeds to date.

SNOOPY

[Snoopy]

Also, the Australian weather patterns have been unusually rainy the last few years. This has depressed sales of seeds on the east coast of Australia. Should Australia revert to more normal, or even better, drier weather patterns in the next few years, PGW will sing.


I think this is called climate change. Too much rain and the land turns to a quagmire and seeds are washed away. Too little rain and whatever crops are there wither, leaving farmers short of cash to buy the next years seed crop. Normal weather patterns and farmers can let some of their crop go to seed to provide next years seeds for free. The seed market is a difficult one to get right.

Floods and droughts in Australia are, I am afraid, the new normal.

But even if you don't buy that story what about recent acquisition Keith Seeds in South Australia, where the climate was more favourable? It seems there was no money to be made there either!

SNOOPY

[ratkin]

I think this is called climate change. Too much rain and the land turns to a quagmire and seeds are washed away. Too little rain and whatever crops are there wither, leaving farmers short of cash to buy the next years seed crop. Normal weather patterns and farmers can let some of their crop go to seed to provide next years seeds for free. The seed market is a difficult one to get right.

Floods and droughts in Australia are, I am afraid, the new normal.

But even if you don't buy that story what about recent acquisition Keith Seeds in South Australia, where the climate was more favourable? It seems there was no money to be made there either!

SNOOPY

Was going to mention the same thing , Weather round the world , is no longer "Normal"
Im particularly avoiding anything to do with insurance , agriculture a close second.
Having spent the summer in the UK which was their wettesst ever , i wouldnt be suoprised at anything the weather gods through at us.

Been reading up plenty on the north west passage recently , could be a real economic gamechanger.

[Snow Leopard]

Forgive me for now talking my book, but my weekly Forsyth Barr update has some PGW thoughts of interest.

Hi

You saying it is a buy is a positive :t_up:

Your broker saying it is a buy is a negative :t_down:

best wishes & have a good one
Paper Tiger

[Snoopy]

I don't NEED to explain anything to anyone, Snoopy. I am happy to share my thoughts and share in the thoughts of others in order to be a better investor.


Fair enough Sparky, you don't even have to be a member of sharetrader at all , although I amongst others am glad that you do share your thoughts here. My overdemanding request was in reaction to the overdose of bullishness that to my eyes is present in your assessment of PGW, such as the one below from a previous post.



Oh, and on the clown's spreadsheet of distortions and lies, it says buy on every indicator.


While I do agree with you that PGW a buy at the right price, I also believe your assessments for PGW's prospects are significantly above where they are going to end up, and that there are some serious and real risks in the execution strategy that I will attempt to detail.

SNOOPY

[Snoopy]

If the company felt they've forecasted it was better resume a dividend in 1H 2014 rather than 2H2013, then I would be quite relaxed.

I see this as a deep value play much like F&P was in late 2011, when I bought at 35c. There are some similarities (Pre GFC hubris by directors, painful deleveraging over time, Chinese cornerstone shareholder, but underneath it, a good business that is "out of favour" beyond the challenges it faces. A broken stock, but not a broken company, in my opinion.


Around the start of the year Balance got onto this thread declaring that PGW was the new RBD in waiting. I didn't believe that then and I don't believe PGW is the new FPA now. Haier was a strong cornerstone shareholder for FPA. Agria is not a strong cornerstone shareholder for PGW. For example, did you know that within the margin of rounding error Agria makes no profit at all from their ventures in China? Agria's only profit comes from PGW and that is reduced by the interest costs they are paying for borrowing heavily to buy the stake. Agria is in a battle for survival, and there is no indication of how they will draft a business plan that will allow PGW to even earn a single cent in China.

As for being out of favour, well if we believe the 2cps dividend payout for FY2013 (and personally I do), then at 34c PGW is on a gross yield of 8.5%. Good, but no better than say Telecom or Restaurant Brands which I believe have more stable earnings outlooks and much better margins. PGW looks to me about where it should be on a yield basis, and is certainly not a broken stock. rather than a deep value play I would categorize PGW as a 'paddle pool play'. You might get a bit of a splash from the in pool activity but there is little hope of tripping over buried treasure in the deep.

SNOOPY

[Balance]

Around the start of the year Balance got onto this thread declaring that PGW was the new RBD in waiting. I didn't believe that then and I don't believe PGW is the new FPA now. Haier was a strong cornerstone shareholder for FPA. Agria is not a strong cornerstone shareholder for PGW. For example, did you know that within the margin of rounding error Agria makes no profit at all from their ventures in China? Agria's only profit comes from PGW and that is reduced by the interest costs they are paying for borrowing heavily to buy the stake. Agria is in a battle for survival, and there is no indication of how they will draft a business plan that will allow PGW to even earn a single cent in China.

As for being out of favour, well if we believe the 2cps dividend payout for FY2013 (and personally I do), then at 34c PGW is on a gross yield of 8.5%. Good, but no better than say Telecom or Restaurant Brands which I believe have more stable earnings outlooks and much better margins. PGW looks to me about where it should be on a yield basis, and is certainly not a broken stock. rather than a deep value play I would categorize PGW as a 'paddle pool play'. You might get a bit of a splash from the in pool activity but there is little hope of tripping over buried treasure in the deep.

SNOOPY

Just like HNZ, one should not look too much at short term one or two shareholders' distress, and miss the woods for the trees.

Happy holder and accumulator, just like with FPA.

[Snoopy]

my weekly Forsyth Barr update has some PGW thoughts of interest.


In The Spotlight: PGG Wrightson (PGW) - Prepare for Harvest

With its “back to basics” strategy, we believe PGW has positioned itself strongly to grow earnings in the medium term. We also believe the current risk discount being applied to PGW’s share price, with regard to Agria’s partial loan repayments falling due in December, appears to be overdone. The current share price offers investors an excellent opportunity to take a position in the stock, and given that our expected 12 month return to our target price of NZ$0.54 is in excess of 60%, our recommendation is BUY.

Underlying operating performance strong


Agria loan repayment risk discount overdone

We believe there is contention surrounding PGW’s cornerstone shareholder’s balance sheet, and the extension of a NZ$10m loan to Livestock Improvement Company (LIC) to a 50% minimum payment (NZ$5m), due 19 December 2012. We believe Agria Corporation will be able to pay off the loan on either the merits of its balance sheet, or by negotiating a further facility with ANZ or another senior creditor. On this basis we feel the risk discount being factored in to PGW’s price is too large and presents an opportunity for investors.




I can't believe the person at Forsyth Barr who wrote this has a full understanding of Agria's position. How do they think Agria will leverage off their balance sheet to repay this loan? Will they look to increase their negative assets or just boost their negative cashflow?

Why do FB believe that Agria will be able to negotiate a further facility with ANZ, when they failed to negotiate such a facility with their NZ bankers only a month ago?

Indeed, these very same bankers, part of PGWs own banking syndicate, are the same ones that have the screws on PGW itself, because PGW is on the cusp of breaching their 'Fixed Cost Coverage Ratio' as outlined in their banking covenants. On the one hand the bankers are keeping a tight rein on PGWs assets position overseeing a paying down of debt to more conservative levels. It would make no sense for these same banks to approve an increased mortgage over these same assets while the underlying financial strength of PGW itself was in question.

I think Agria's best chance for survival is another equity injection from either New Hope or Ngai Tahu. The closer the December repayment date gets to the wire, the less favourable any deal will look like from Agria's perspective. Alan Lai himself mentioned the possibility of a PGW sell down in the Agria annual filing for 2012 if nothing better could be arranged.

I would personally rate the market's assessment of Agria's prospects more highly than the opinion of Forsyth Barr. On a day (last Friday) when the DOW rose by 173 points, Agria was down 7.4% to US86c.

Could this FB bullishness of PGW be a cover for a coming 'pump and place' of PGW shares?

SNOOPY

[Snoopy]

Just like HNZ, one should not look too much at short term one or two shareholders' distress, and miss the woods for the trees.

Happy holder and accumulator, just like with FPA.


HNZ faces exactly the same issues it faced six months ago. Some shareholders have bid up the price in anticipation of HNZ getting a banking licence. A banking licence will not fix HNZ. The lack of capital and the potential for existing loans to go bad are still a problem for HNZ. The only thing that has changed IMO, is that HNZ is a worse buy now than it was six months ago. Like PGW, I do consider HNZ a worthy investment prospect at the right price. But I will be waiting for the next HNZ cash issue before I climb aboard.

SNOOPY

[Snoopy]

PGW is trading on a 12 month forward PE of 8.0x, which is at a significant discount to its 5-year average of 10.5x, and the market PE of ~14.0x. We are forecasting PGW to pay a dividend of 2cps next year, implying a net dividend yield of 6.1%. Combined with an expected total 12 month return in excess of 60% we are upgrading our recommendation from ACCUMULATE to BUY.

The above analysis by Forsyth Barr was surely written in a bubble bath?

The suggestion here is that PGW should be trading at a five year average PE of 10.5 and that at 54c (forecast) the expected earnings of PGW are 5.67cps? That equates to a net profit of $43m.

Now have a look at note 26 in the PGW annual report for 2012 which was tagged by the auditors.

Management are forecasting EBITDA growth of 1% for FY2013, which hardly squares with the implied FB prediction of a 72% (assuming NPAT for FY2012 was $25m) increase in NPAT! There are more implicit warnings in that Note 26. PGW is carrying $216.6m worth of goodwill on the books at Agritech. They are budgeting on a 40% increase in EBITDA at Agritech. If the increase in EBITDA at Agritech is only 38% then PGW is still OK. But anything less than that and PGW is looking at some major writedowns of goodwill, in the tens of millions and in the worst case stretching into hundreds of millions.

My feeling is that farmers in NZ are going to have a slightly better year than predicted and that the forecast (note 26) 48% plunge in EBITDA for Agriservices is overstated. But there is still a risk of an increase in underlying profits at PGW overall accompanied by a large write down of goodwill at Agritech.

Is PGW a good investment at 34c? It might be. Is investing at 34c a sure fire way to investment success? Definitely not!

SNOOPY

[Balance]

HNZ faces exactly the same issues it faced six months ago. Some shareholders have bid up the price in anticipation of HNZ getting a banking licence. A banking licence will not fix HNZ. The lack of capital and the potential for existing loans to go bad are still a problem for HNZ. The only thing that has changed IMO, is that HNZ is a worse buy now than it was six months ago. Like PGW, I do consider HNZ a worthy investment prospect at the right price. But I will be waiting for the next HNZ cash issue before I climb aboard.

SNOOPY

I am happy to have made my first 30% already on HNZ - 54 cents to 70 cents.

[Snoopy]

The key restriction on overall growth will be the success of the Australian seed business. My understanding is that in recent years this has not met budget, however, assuming reasonable climate, we should see a turnaround in earnings to above the lack-lustre breakeven reported in FY12.


I absolutely agree with this. I do wonder though, how PGW will integrate their disparate Australian interests under a 'One PGW' brand. It looks to me that managing Queensland and South Australia under one Crocodile Dundee hat would be about as easy as integrating a seed selling business with branches in England and Italy. That is a similar example in terms of climatic variation and geographical distance.



The Aussie seed business lacks a vertically integrated retail chain pushing PGW’s product like in NZ, thus the product it sells trades at lower overall margins versus NZ.


Good point.



My understanding though is that PGWs rural services division is kicking a$*e and taking names, much better than this time last year.

I certainly hope so, as I can't think of any other reason why the share price would leap from 32c to 37c in just a few days. No doubt management will say that PGW is a game of two halves with 2/3 of the action happening in the second half. So it would be too soon to make any profit forecasts for FY2013 based on a buoyant spring in NZ.

SNOOPY

[Snoopy]

have my order in @ 31 cents, great top up bargain

Have managed to buy back those shares I sold to Agria at 60c, at a mere 32c over the last week Snapiti. I was about to post that since I have done this you should be right on the mark with your 31c bid as normally when I buy the share price falls within a few days. It seems for once I have managed to pick the bottom! However, overall I am still not looking so smart as my average buy price is 61c (ouch).

Personally I would not be comfortable adding shares to my holding at more than 32c though. I bought on the presumption of the seed business in Australia coming a bit right (a gamble) and the Agriservices side of the business not slumping as much as forecast. My target price for next year was 35c and a 2c divvy. Since PGW is already trading at 37c maybe I should just everything sell up!

I won't be selling up for a couple of reasons.

1/ My exposure to agriculture is about to be lessened significantly as I am forced out of NZ Farming Systems. And I don't want to reduce it even more.

2/ In my experience the rural sector is often countercyclical to the rest of the sharemarket. With everything else looking fairly and fully priced (as a general statement), I am thinking that possibly now is the time to get more exposure to Agriculture. Those Fonterra shares look ridiculously overpriced. So PGW was probably the best option.

Time as always will be the judge.

SNOOPY

[Xerof]

Promoted to Forbar clients on the back of the research note they put out. Once they offload the in-house holdings, it'll most likely fade

[Snoopy]

Promoted to Forbar clients on the back of the research note they put out. Once they offload the in-house holdings, it'll most likely fade

Yes I saw Sparky's transcript of the Forbar note. Forbar are betting that Agria will be getting out of their pickle.

Today (27th November in the USA) is a very important one for Agria, because today is the day the countdown to delisting starts. The Agria share price must average over $1 for the next month, otherwise the NYSE will turn the lights out. As at 4pm EST 27th November, Agria is down again to 80c. With negative cashflow and negative net assets it is up to the banks how long they wish to keep Agria alive.

Given the banks will lose big time if Agria folds, no doubt they will allow Alan Lai some more rope. But surely any other shareholder would have to class themselves as a philanthropist to put more money into Agria now. Ngai Tahu, with their recent top up treaty settlement from the government might have the cash to help. They could put more money into Agria Asia. The other Agria Asia shareholder New Hope may even have an incentive to allow Agria to go under, so I don't expect any help from that quarter. Alan Lai while a wealthy man has the rest of his fortune (outside Agria shares) tied up. The odds of it being all over for Agria are increasing the day IMO.

A fire sale of some PGW shares to repay the first half of the LIC loan could prolong the agony though. This is what Craig Norgate did when his Rural Portfolio Investments first started getting into trouble.

SNOOPY

[percy]

I won't be selling up for a couple of reasons.

1/ My exposure to agriculture is about to be lessened significantly as I am forced out of NZ Farming Systems. And I don't want to reduce it even more.

2/ In my experience the rural sector is often countercyclical to the rest of the sharemarket. With everything else looking fairly and fully priced (as a general statement), I am thinking that possibly now is the time to get more exposure to Agriculture. Those Fonterra shares look ridiculously overpriced. So PGW was probably the best option.
SNOOPY
I would be interested to know your views on Rural Equities on the Unlisted market.

[Agrarinvestor]

So I might be able to by more PGW cheaper than today? That sounds ok to me.

snoopy is right that Agria is in a difficult position, but I don't see this affecting the underlying business. I'm not buying Agria shares, I'm buying PGW shares which in my business were oversold relative to their business prospects, and while they are by no means ready to explode out into 2013 like a Rocket, I see a company that has licked it's wounds, has a plan to repay debt and focus on strengths, and may catch a tailwind or two from improving markets and climate.

At the pricing I've been buying, I believe I'm derisked should Agrias holding be placed to institutions and the market. I might be wrong and maybe such a placement could be at 28c, or conceivably lower, but that's ok. I'll buy more should I be so lucky. Such a placement at a low price would be VERY temporary. I won't be buying any if above today's pricing, now 37c. It is conceivable that PGWs price will rise over the next few weeks and months, and so any Agria placement will be at today's prices or higher.

Snoopys position is interesting as he has lost half his investment but still believes that PGW represents NZs best investment in listed agriculture. I think he's right. Not because it is the best agriculture company out there, but because I think is too damn cheap.

I will be pleased to cheer Snoopys PGW recovery along with my own rise in this holding...

Hi together,

it doesn't fit together. You can not rate PGW as a high potential stock and give AGRIA a sell rating.
AGRIA is holding the majority in PGW and therefore the remaining PGW shares are only entitled to
receive a dividend ! AGRIA, as the 50.22% controlling owner of PGW were valued with only 45 Mio USD and
PGWs Market Cap is 231 USD. That alone means that AGRIAs shares have 200% upside potential .
I can not believe how you come to the conclusion that AGRIA has a problems to get new loans.
You should look at balance and Income Statement and compare it with the past:

http://finance.yahoo.com/q/is?s=GRO+Income+Statement&annual

look and the Assets:

http://finance.yahoo.com/q/bs?s=GRO+Balance+Sheet&annual

and the cash Flow:

http://finance.yahoo.com/q/cf?s=GRO+Cash+Flow&annual

The chance for Agria going bankrupt is only 1%, look what the experts are saying:
.
http://www.macroaxis.com/invest/ratio/GRO--Probability_Of_Bankruptcy

Another Argument if you think about the possibility for Agria going bankrupt. Is this:
http://www.theaustralian.com.au/national-affairs/chinese-secure-northern-foodbowl-as-row-over-ord-river-lease-continues/story-fn59niix-1226516223693

China is shopping around for raw materials and Know How. Chinese Government will not allow Agria going bankrupt.

Despite all the facts i have learned now about the chinese seed market and AGRIAs
potency, you should always think about chinese culture. If Alain Lai has not the power
to bring Agria to success, he will lose his face. And loosing his face is an issue in China.
In my Opinion he is a man of honour and i believe his statement:

>>He said twice there was “zero chance” of Agria being put into receivership.<<

http://www.nbr.co.nz/article/pgw-shareholders-question-health-chinese-shareholder-dw-131185

PGW shareprice rose 15% the last days and AGRIAs shareprice declines 20% this is not
logical . The last sale is always a small amount on the ask site. This is manipulation from short sellers.
I am sure they will burn their fingers during the next days.

[GRIFFIN]

How ever you look at it PGW is still one of our long term rural stayers and Agria may yet pull a Hobbit out of the hat, the one thing i have noticed recently is that there is an increasing amount of Farmers joining Farmlands and if they hook up with CRT which they are working through at the moment this Co op could gobble up a lot of rural funds and put a big dent in its competitors balance sheet.

[Snoopy]

How ever you look at it PGW is still one of our long term rural stayers and Agria may yet pull a Hobbit out of the hat, the one thing i have noticed recently is that there is an increasing amount of Farmers joining Farmlands and if they hook up with CRT which they are working through at the moment this Co op could gobble up a lot of rural funds and put a big dent in its competitors balance sheet.


I agree Griffen. Forbarr said that a possible merger of Farmlands and CRT might be disruptive and cause farmers to flock back to PGW. This does seem unlikely IMO. I would imagine that most farmers who are customers of Farmlands and CRT joined because the like the co-operative model. If Farmlands and CRT join forces, we will simply have a larger co-operative. Farmers who joined a co-operative will surely stay under a combined CRT/Farmlands umbrella. Presumably a combined CRT/Farmlands could be in a position to negotiate lower prices from suppliers too. That would put pressure on PGW.

Also, and perhaps you can confirm Griffen, Farmlands are basically North Island based and CRT are basically South Island based. So there would be very little cannibalization of each other's sales if these two co-operatives combined.

SNOOPY

[Snoopy]

I think you might be on to something there, Sparky. There's an awful lot of money to be made by investing in a company with a solvable problem.

The problem is David B at 37c, PGW are sitting on a PE of 37/3.3 of nearly 12. I would say that almost all the money that was to be made last week when the share price was 32c has already been made.

SNOOPY

[Snoopy]

Also, if Agria collapsed, then PGW continues along, it's underlying business in services and seeds unaffected. Sure, the short term share price of PGW might tumble, but that's a buying opportunity. But if PGW collapsed, Agria collapses with it. That tells me that PGW is the safer of the two to own.


Safer of the two does not been safe though. Since Agrainvestor mentioned it, I have calculated the Z score for PGW.

Now, Z= 1.2A+1.4B+3.3C+0.6D+1.0E

Where:
A= (Working capital/Total Assets)
B= (Retained earnings/Total Assets)
C=( EBIT/ Total Assets)
D= (Market value of Equity/Total Liabilities)
E= (Sales/Total Assets)

Now would you like to guess what happens?

SNOOPY

[Snoopy]

Now, Z= 1.2A+1.4B+3.3C+0.6D+1.0E

Where:
A= (Working capital/Total Assets)
B= (Retained earnings/Total Assets)
C=( EBIT/ Total Assets)
D= (Market value of Equity/Total Liabilities)
E= (Sales/Total Assets)



This is the first time I have done one of these 'Z' calculations, so you might want to check if I have got it right:

I have assumed 'Working capital' to be the amount of cash tied up in the business as a result of normal operations at the end of the financial year.

So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($239.4m+$20.7m)+($228.1m-$207.1m)= $281.1m

So A = $281.1m/$980.5m = 0.287

----

B= (Retained earnings/Total Assets)

Now PGW have retained all of their earnings and not paid a dividend. So Retained earnings is equivalent to NPAT

$24.243m/$980.472m= 0.025

--------

C= (EBIT/ Total Assets) = $42.438m/$980.472m = 0.043

--------

D= (Market value of Equity/Total Liabilities) = (0.37 x 754.85m)/$402.698m = 0.694

--------

E= (Sales/Total Assets) = $1,336.8m/$980.472m = 1.363

-------

So putting everything together:

Z= 1.2A+1.4B+3.3C+0.6D+1.0E
= 1.2(0.287)+1.4(0.025)+3.3(0.043)+ 0.6(0.694)+1.0(1.363)= 2.30

A Z-score of lower than 1.8, in particular, indicates that the company is heading for bankruptcy. Companies with scores above 3 are unlikely to enter bankruptcy. Scores in between 1.8 and 3 lie in a grey area.

That means by Z-score PGW is far from a safe investment, and will require further work by management.

Have I got that right?

SNOOPY

[winner69]

Mr Altman said this about his scores

Z-SCORE ABOVE 3.0 –The company is considered 'Safe' based on the financial figures only.

Z-SCORE BETWEEN 2.7 and 2.99 – 'On Alert'. This zone is an area where one should 'Exercise Caution'.

Z-SCORE BETWEEN 1.8 and 2.7 – Good chances of the company going bankrupt within 2 years of operations from the date of financial figures given.

Z-SCORE BELOW 1.80- Probability of Financial embarassment is very high.

http://www.creditguru.com/cgi-bin/calculator/calcAltZ.pl

Your calc came to 2.30

I do it and get 2.18 - main difference is I use the retained earnings number on the balance sheet - in this case -$34m (negative)

Never mind the detail - Mr Altman would say PGW has a good chance of going broke in the next 18 months

But never mind .... Belg says Mr Altman is a load of **** -- HBY was in same position once and he made heaps by having faith in them .... but then HBY did some serious stuff about fixng themselves up. Can PGW?

But Mr Altman was right when ot came to Feltex and a few others .... if Belg had listened to me he could have saved hundreds of thousands by not building hsi pyramid. Another disaster waiting to happen but many said they would never go broke was ION in Australia but Mr Altman got that one right

So the red flags are out ..... one needs to see real signs of PGW doing something about their financial position (and some gurus would say rather urgently) ..... and that is more than people saying whoever the head honcho is (forgot his name bugger it) is a good bloke and doing the right things

Can anybody see some tangible / hard things that PGW are doing .... and hope is not a strategy

Whoops got carried away

And by the way this tirade should be on the Investing Strategies thread - just a dig for those who think forum titles are so precious

[Snoopy]

Your calc came to 2.30

I do it and get 2.18 - main difference is I use the retained earnings number on the balance sheet - in this case -$34m (negative)


Winner, thanks and I accept your correction for term 'B':

So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($239.4m+$20.7m)+($228.1m-$207.1m)= $281.1m

So A = $281.1m/$980.5m = 0.287

----

B= (Retained earnings/Total Assets)

-$34.30m/$980.472m= -0.035

--------

C= (EBIT/ Total Assets) = $42.438m/$980.472m = 0.043

--------

D= (Market value of Equity/Total Liabilities) = (0.37 x 754.85m)/$402.698m = 0.694

--------

E= (Sales/Total Assets) = $1,336.8m/$980.472m = 1.363

-------

So putting everything together:

Z= 1.2A+1.4B+3.3C+0.6D+1.0E
= 1.2(0.287)+1.4(-0.035)+3.3(0.043)+ 0.6(0.694)+1.0(1.363)= 2.22

Not exactly what you got, but close enough within the bounds of rounding error. Dialed up your on-line calculator but it was not available to me.

SNOOPY

[Snoopy]

So putting everything together:

Z= 1.2A+1.4B+3.3C+0.6D+1.0E
= 1.2(0.287)+1.4(-0.035)+3.3(0.043)+ 0.6(0.694)+1.0(1.363)= 2.22

Not exactly what you got, but close enough within the bounds of rounding error. Dialed up your on-line calculator but it was not available to me.


Buoyed my new found ability as a 'Z' expert :-P, I have decided to run the same test on Agria. Dollar figures this time are in USD, as per the Agria 20F filing for FY2012

So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($207.5m)+($152.8m-$133m)= $227.3m

So A = $227.3m/$821.6m = 0.277

-------

B= (Retained earnings/Total Assets)

-$3.095/$821.629m= -0.004

--------

C= (EBIT/ Total Assets) = $22.431m/$821.629m = 0.027

--------

D= (Market value of Equity/Total Liabilities) = (0.78 x 55.36m)/$415.033m = 0.104

--------

E= (Sales/Total Assets) = $1,089.1m/$821.629m = 1.325

--------

Z= 1.2A+1.4B+3.3C+0.6D+1.0E
= 1.2(0.277)+1.4(-0.004)+3.3(0.027)+ 0.6(0.104)+1.0(1.325)= 1.80

--------

1.8 is the critical figure that Altman lists as the point of "Probability of Financial embarrassment is very high." The fat lady has the final whistle in her mouth, as far as the Altman Z factor is concerned.

SNOOPY

[Snoopy]

You can not rate PGW as a high potential stock and give AGRIA a sell rating.


I think what many here are saying Agrainvestor, is that PGW is a high potential stock with high risk. Agria is an even higher potential stock and the risk is even higher. The Agria risk is too high I think for most PGW investors.



AGRIA is holding the majority in PGW and therefore the remaining PGW shares are only entitled to
receive a dividend ! AGRIA, as the 50.22% controlling owner of PGW were valued with only 45 M USD and
PGWs Market Cap is 231 USD. That alone means that AGRIAs shares have 200% upside potential.


True but Agria have borrowed heavily to gain their PGW controlling position. And Agria have no cashflow to service their loan. In order to realise the 200% upside potential Agria must pay their interest bill in the meantime. The simple fact is Agria have no income to allow them to do this.



I can not believe how you come to the conclusion that AGRIA has a problems to get new loans.
You should look at balance and Income Statement and compare it with the past:


In the past Agria was not obliged to roll over their loans. It is only when the loans are up for renegotiation (now) that refinancing becomes an issue.



look and the Assets:


Assets are stated with the PGW holding valued at 60c per share. Revalue this to market price and Agria has negative assets.



and the cash Flow:


Cash flow is only positive because of the positive cashflow from the controlled entity PGW. As 50.22% shareholder, Agria would normally control this cashflow. But they can't because PGW itself is in trouble and PGWs own banking syndicate is demanding that PGW pays down debt first. The underlying Agria has negative cashflow.



The chance for Agria going bankrupt is only 1%, look what the experts are saying:
.
http://www.macroaxis.com/invest/ratio/GRO--Probability_Of_Bankruptcy


This is intriguing, but the manual check of this calculation suggests that they have used the wrong figures. By my calculation the Z factor (Z=1.8) shows that Agria is actually in imminent chance of failure.

SNOOPY

[winner69]

Buoyed my new found ability as a 'Z' expert :-P, I have decided to run the same test on Agria. Dollar figures this time are in USD, as per the Agria 20F filing for FY2012

So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($207.5m)+($152.8m-$133m)= $227.3m

So A = $227.3m/$821.6m = 0.277

-------

B= (Retained earnings/Total Assets)

-$3.095/$821.629m= -0.004

--------

C= (EBIT/ Total Assets) = $22.431m/$821.629m = 0.027

--------

D= (Market value of Equity/Total Liabilities) = (0.78 x 55.36m)/$415.033m = 0.104

--------

E= (Sales/Total Assets) = $1,089.1m/$821.629m = 1.325

--------

Z= 1.2A+1.4B+3.3C+0.6D+1.0E
= 1.2(0.277)+1.4(-0.004)+3.3(0.027)+ 0.6(0.104)+1.0(1.325)= 1.80

--------

1.8 is the critical figure that Altman lists as the point of "Probability of Financial embarrassment is very high." The fat lady has the final whistle in her mouth, as far as the Altman Z factor is concerned.

SNOOPY

Well done Snoopy .... red card for Agria eh?

As somebody said really only a screening tool but to me an useful one ..... and with all things that have probabilities associated with it just because it comes out at 1.8 doesn't mean IT IS going to be broke soon .... just saying unless things change there is a high probability they will be broke .... and that change has to occur through real action and not hope

Snoopy - probably the difference in our PGW numbers is that the cheats way is to say WC = Current Assets less Current Liabilities

[Snoopy]

Despite all the facts i have learned now about the chinese seed market and AGRIAs
potency, you should always think about chinese culture. If Alain Lai has not the power
to bring Agria to success, he will lose his face. And losing his face is an issue in China.
In my Opinion he is a man of honour and I believe his statement:

>>He said twice there was “zero chance” of Agria being put into receivership.<<


Agrainvestor, you are right about this honour thing being very important in China. But i have a different view of this episode.

The Chinese Government does not want to lose face. So when a risky opportunity comes up they can use a Chinese entrepreneur, like Alan Lai, to try it. If the venture fails then Alan Lai loses face, but the Chinese government keep their face.

The Chinese Government, via 'New Hope' have an agreement to buy the Agria assets should Agria in the USA fail. So the Chinese government wins whatever happens to Alan Lai. Clever eh?

SNOOPY

[Agrarinvestor]

>>Assets are stated with the PGW holding valued at 60c per share. Revalue this to market price and Agria has negative assets.<<
That is not correct. You find the difference in Goodwill. The current PGW shareprice is irrelevant. Maybe it reflects the power of a potential Dividend. As long as AGRIA holds the majority of PGW the upper shareprice level of PGW is limited.

[Snoopy]

>>Assets are stated with the PGW holding valued at 60c per share. Revalue this to market price and Agria has negative assets.<<
That is not correct. You find the difference in Goodwill. The current PGW shareprice is irrelevant. Maybe it reflects the power of a potential Dividend. As long as AGRIA holds the majority of PGW the upper shareprice level of PGW is limited.

There will be goodwill on the books at Agria from the purchase of PGW. This is because for the majority of their holding, Agria paid NZ60c. If at the time of the partial takeover, the PGW net tangible assets were worth less than 60c, then the difference becomes goodwill on Agria's books.

Once Agria got their 50.22% holding in PGW, then in the big picture view I agree with Agrainvestor. The PGW share price doesn't matter in the sense that no one else can now control PGW. The PGW cashflows are controlled by Agria, albeit with certain rights for the minority shareholders remaining.

However, if Agria were sell down their PGW holding to below 50% then suddenly the PGW share price matters again. If Agria were to sell their PGW shares for less than the 60c+ they paid, then suddenly the whole remaining holding of PGW shares must be 'marked to market' at the end of the current reporting period. If this were to happen, then I contend that Agria would have negative assets. Agrainvestor has pointed out that this would never happen. I agree that if Agria had the choice it would never happen. What I contend is that Agria may not have the choice.

The value of the goodwill on the Agria books is I believe a separate issue.

SNOOPY

[Snoopy]

Does anyone know if the banks are going to get all that is owed to them, principal and all outstanding interest and associated legal fee's.
Payment of the Crafer debt will only further strengthen the PGW books.


Some long awaited "strengthening of the PGW books" occurred today. This could be worth around $2m to PGW's net profit as I believe PGW are paying around 9% on their borrowings and they won't be getting any income on that from the Crafer receivers.

------

03/12/2012 08:46
GENERAL

REL: 0846 HRS PGG Wrightson Limited

GENERAL: PGW: Crafar Farms Loan Repaid

PGG Wrightson has today received repayment of the outstanding Crafar Farms
loans of approximately $25 million. The amount is slightly above
expectations previously indicated and represents settlement of the Crafar
Farms debt, subject to small residual receipts as farm cash flows are
finalised.

Crafar Farms was placed into receivership in 2009 to a syndicate of lenders,
including PGG Wrightson. Following a protracted sale process the receivers
have now concluded the sale of the Crafar Farms assets and have distributed
proceeds to the syndicate of lenders.

The Crafar Farms loans represent the bulk of the $29 million of outstanding
loans retained by PGG Wrightson under its subsidiary PGW Rural Capital,
following the sale of PGG Wrightson Finance last year.

--------

I am curious what the press release means when it says the $25m paid back is 'slightly above expectations'. Did PGW not consider they would get all their loaned capital back? Did the receivers charge less than PGW budgeted for? What have the 'small residual receipts from farm cash flows' to do with the amount recovered?

SNOOPY

[Agrarinvestor]

Like I said, this repayment is indicative of how PGW is getting its house in order. I hope it all goes to paying back debt, and not some kind of special dividend to placate Agria. However, by the tenor of the NZX release, it doesn't look like a dividend is on the way for now...

So we have 2 good new for PGW,
and for Agria:)

http://finance.yahoo.com/news/agria-pgg-wrightson-develop-high-103000643.html;_ylt=As1t37XmtBdjENNt06NlSi2iuYdG;_ ylu=X3oDMTIxb2ZoOWc4BG1pdANXaWRlIFF1b3RlcyBNb2R1bG UEcG9zAzE4BHNlYwNNZWRpYVJlY2VudFF1b3Rlc1BvcnRmb2xp b3NXaWRl;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNl bi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ ylv=3

and

http://www.interest.co.nz/rural-news/62312/crafar-lender-pgg-wrightson-gets-nz25-mln-payment-receivers-sale-chinese-firm-final

I know you are hating Agria, but maybe sometimes in the next years, PGW shareholders change their minds.

[Agrarinvestor]

I don't want to insult anyone here. For me as an non native english speaker it is not so easy for me to find always the right words for what i want to say.
Does this mean you have bought shares of Agria:
>>represents an opportunity for me to buy more shares in what would be a short term blip, hopefully even cheaper than I have been buying already. Agrias potential success means I am succeeding too.<<

[Snoopy]

So we have 2 good new for PGW,
and for Agria:)

http://finance.yahoo.com/news/agria-pgg-wrightson-develop-high-103000643.html;_ylt=As1t37XmtBdjENNt06NlSi2iuYdG;_ ylu=X3oDMTIxb2ZoOWc4BG1pdANXaWRlIFF1b3RlcyBNb2R1bG UEcG9zAzE4BHNlYwNNZWRpYVJlY2VudFF1b3Rlc1BvcnRmb2xp b3NXaWRl;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNl bi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ ylv=3



At last, the Agria connection becomes useful for PGW!

------
The China Yangling - New Zealand Agriculture Showcase will benefit from Agria and PGG Wrightson's extensive experience and resources in advanced technical development planning, management philosophy and skills, combined with the support of the Provincial and Administrative Authorities governing China's Yangling Demonstration Zone. It will serve as a showcase for Agria, PGG Wrightson and other New Zealand agriculture-related businesses to promote New Zealand's advanced agriculture, science, technologies and innovative services. The Yangling Agricultural High-Tech Industries Demonstration Zone will promote industrialization of agriculture, with an emphasis on international cooperation.
------

Of course any profits are still years away. I hope that now Alan Lai has achieved this he will get back to figuring out how to pay his bills.

Like Sparky I have been neutral about whether Agria survives or not. But if this deal comes to anything, perhaps Agria will have some positive spin off for PGW after all...

SNOOPY

[Master98]

The China Yangling - New Zealand Agriculture Showcase could be a good platform for pgw to promote their services ,technologies and products into china.

[Snoopy]

I hope that now Alan Lai has achieved this he will get back to figuring out how to pay his bills.


A rather rapid response from Alan and he has put three new faces on the PGW board:

Newly appointed to the board are Wai Yip (Patrick) Tsang, Kean Seng U and Lim Siang (Ronald) Seah. Retiring as directors are Dr Zhi-Kang Li and Wah Kwong (WK) Tsang who will each remain involved with Dr Li continuing as an expert member of the (new) AgriTech Committee and WK as an alternate director.

Brief biographies for the new directors follow:

------

Wai Yip (Patrick) Tsang

Mr Tsang began his career with PricewaterhouseCoopers as an auditor. He has held finance roles in a number of companies listed on the main board of Hong Kong Stock Exchange, including China Resources Enterprises Limited and Tianjin Development Holdings Limited. Mr Tsang is currently a director of China Pipe Group Limited, a Hong Kong listed company. He has over 20 years of experience in auditing, accounting, investor relations and corporate finance including initial public offerings, restructuring and merger and acquisition transactions. Mr Tsang holds a Bachelor's degree in accountancy (Honours) and is a fellow member of the Hong Kong Institute of Certified Public Accountants, a fellow member of Association of Chartered Certified Accountants and a member of the
Institute of Chartered Accountants in England and Wales.

Lim Siang (Ronald) Seah

Mr Seah is a Singaporean with a background in banking and funds management and spent much of his career working for the AIG group of companies in Singapore, serving as Chairman of AIG Global Investment Corporation (Singapore) Ltd until 2005. He is currently director of a number of listed Singaporean companies including Yanlord Land Group Ltd, for which he is also chairman of the Audit Committee, Global Investments Ltd, Telechoice International Ltd and Invenio Holdings Pte Ltd (a subsidiary of Olam International).
Mr Seah holds a Bachelor's degree in Economics (Honours) from the University of Singapore.

Kean Seng U

Mr U is Head of Corporate and Legal Affairs for Agria Corporation, a role he has held since December 2008. He has extensive experience in advising multi-national corporations and sovereign entities on direct investments in The People's Republic of China as well as offshore mergers and acquisitions of foreign assets by entities of The People's Republic of China. Mr U previously practiced as a partner at Singaporean law firm, Shooklin & Bok LLP, focused on East Asia, and he led a corporate finance team in Allen & Overy Shooklin & Bok, JLV, an international law venture partnership with London based Allen & Overy LLP.

Mr U sits as independent and non-executive director of several public listed corporations. He received a Bachelor of Laws (Honours) degree from Monash University (Australia). He is a Barrister and Solicitor, Supreme Court of Victoria, Australia; Advocate & Solicitor, Supreme Court of Singapore and Solicitor of England and Wales. In addition to his extensive legal knowledge, Mr U is also a qualified economist, having completed his degree majoring in Economics and Accounting, B Ec at Monash University, Australia.

------

Those bold highlights of the relevant experience are mine. It looks like the splitting of PGW into 'Agriservices' and 'Agritech' with the subsequent transferral of 'Agritech' to becoming domiciled in Singapore and working the Chinese market from there is on!

SNOOPY

[Master98]

Would it be a bad thing for "Agritech" to be Asian based?

why do you think Agritech to be asian based?

[Snoopy]

It looks to me like Lai is grooming it [PGW] for a takeover at some stage.


Not possible David B. Lai doesn't have the money to take over PGW. In fact he doesn't even have the money to hold onto the PGW shares he has right now. A more likely plan is a 'float' of Agriservices that would bring in cash. He could use the cash from that to make a special dividend to bail out Agria. They fold Agritech into Agria Asia and he has a dual listed world class seed producing company. Job done.

SNOOPY

[Snoopy]

It looks like the splitting of PGW into 'Agriservices' and 'Agritech' with the subsequent transferral of 'Agritech' to becoming domiciled in Singapore and working the Chinese market from there is on!


A denial in 'The Press' today from PGW. The aim of the Agritech sub committee is to get a better handle on the Agritech side of the business. The board need to get a better handle on inventory and stock turn etc. That raises the question. When there were about 20 on the board, following the Pyne Gould Guiness and Wrightson merger, why was there no-one there who knew what Agritech was doing?

SNOOPY

[Agrarinvestor]

Here is an article from chinadaily about "fake seeds". That is one reason why the Agria/PGW project will finally succeed and help both of them.

http://www.chinadaily.com.cn/bizchina/2011-01/08/content_11812908.htm

[Snoopy]

Here is an article from chinadaily about "fake seeds". That is one reason why the Agria/PGW project will finally succeed and help both of them.

http://www.chinadaily.com.cn/bizchina/2011-01/08/content_11812908.htm

I would bet for the Agria/PGW joint venture succeeding, eventually. The question is will existing small shareholders benefit from it? I see Agria fell another 5% yesterday and is now trading at 74c. Only days remain before that first part of the debt repayment to LIC is due.

Trevor Burt from Ngai Tahu has been appointed to the PGW board as of yeaterday. I guess new CEO Mike Sang would have been too controversial!

But wait, just as I write this the PGW white knight, Sir John Anderson, has ridden into the picture:

-------

PGG Wrightson Dividend Policy

It was foreshadowed at the PGG Wrightson’s annual shareholders meeting on 24 October 2012 that it was the intention of the board of directors to announce a dividend policy during the current financial year. The Chairman of PGG Wrightson, Sir John Anderson said that the board of directors intend to recommence dividends and have resolved to adopt a dividend policy geared towards providing a consistent dividend stream while maintaining financial flexibility through the business cycle. The dividend policy is as follows:

The PGG Wrightson board will determine to pay cash dividends (both interim and final) as appropriate taking into account relevant considerations at the time including:
working capital requirements;
capital expenditure requirements;
the cyclical nature of agricultural business recognising that the majority of revenue is generated in the second half of the financial year;
the interests of shareholders;
free cash-flow available for distribution; and
relevant market practice.

------

Perhaps a hint of a dividend in the last half of FY2013? Or a little less sweat on the brow of Alan Lai?

SNOOPY

[janner]

Slaika tolja.. hahahaaa..

[janner]

Slaika tolja.. hahahaaa..

Agrarinvestor.. English is your second language and you do very well with it..

Can you interpret this one ??.. If you can... You should never have any worries about how you are in English..

[Queenstfarmer]

At least give our friend from deutschland a clue there Janner.

[janner]

Clue !!..

Drink more than a few Stienlagers Before pronoucing it !!..

[janner]

stEinlagers.. Excuse.. I do not drink the ****..

[Queenstfarmer]

Haha...I don't need the clue but our German friend might. so steinlager not your poison then? Anyway movin on.

[janner]

Haha...I don't need the clue but our German friend might. so steinlager not your poison then? Anyway movin on.

I feel sure that our German friend would be drinking better than steinlager.. But the pronounciation and understanding would be the same by all parties at the time..

Hic !!..

[ENP]

PGW, along with SkyCity, Ryman, Mainfreight and Skellerup, have been named Forsyth Barr's top five stock picks for 2013.

From their propaganda:

PGW has made progress in improving the underlying operating performances of itscore rural services businesses. Its proprietary seed business remains in a strongposition with a competitive advantage in its significant R&D facilities. PGW remainsfocused on reducing its debt through the final monetisation of its loan portfolio andtargeting working capital. Assuming no further drastic climatic condition issues inAustralia and NZ, we believe PGW is well positioned to achieve solid earningsgrowth over the medium term.

Hi Sparky,

Just out of interest, do you find information only to support your ideas about companies or do you seek out information that conflicts with your ideas.

[ENP]

I 'll often (but not always) go and visit the company and speak with various representatives, from C-level through to staff on the ground.

Thanks for the reply. I was trying a little to provoke you.

Very interesting that you go and see the operations and talk to employees. I don't do this but I do get my investment ideas from personal experiences. From walking through the supermarket, going to the hospital or pharmacy, talking to my grandmother, dealing with other companies in my work (I work in logistics and deal with Mainfreight, The Warehouse, Port of Tauranga, Woolworths, Toll, etc which is a good insight into the industry).

[Agrarinvestor]

I feel sure that our German friend would be drinking better than steinlager.. But the pronounciation and understanding would be the same by all parties at the time..

Hic !!..

Indeed. That's my object of preference, Lem eshohya!

http://www.jever.de/images/html_produkt_pilsener.jpg

Maybe you try it if you have the chance.

[Queenstfarmer]

Well oil beef hooked no clues required Janner!

[janner]

[QUOTE=Agrarinvestor;387697]Indeed. That's my object of preference, Lem eshohya!

Touche.. :)

[Agrarinvestor]

Hopefully we are on Christmas above 1$ and PGW breaks 0,40 Wall

BEIJING--(Marketwire - Dec 18, 2012) - Agria Corporation ( NYSE : GRO ) (the "Company" or "Agria") and its New Zealand listed subsidiary PGG Wrightson ( NZSE : PGW ) ("PGW") today announced that the operating entities of Agria and PGW have signed two memoranda of understanding with PRC agricultural partners in Guangdong Province and Shandong Province.
According to the memorandum of understanding with Guangdong Academy of Agricultural Sciences, Crops Research Institute, and Guangdong Golden Crops Agricultural Sciences & Technology Co., Ltd, the parties will develop a high-profile agriculture showcase under the name of "The China Guangdong - New Zealand Agriculture Showcase" in Guangdong Province. The parties will cooperate in the following areas:


To establish the China Guangdong - New Zealand Agriculture Showcase for the showcasing and promotion of innovative products, advanced agricultural technology, advanced plant species, and advanced agricultural production models;
To cooperate in the exchange and training of agriculture specialists;
To strengthen the cooperation in the development, production and promotion of new plant species including edible corn, forage and vegetable seeds;
To leverage and apply New Zealand's geographical and climate advantages by establishing a base in New Zealand for seed production of Guangdong Province; and
To jointly set up a working committee to coordinate the establishment of the project, with representatives from all parties, and to communicate and cooperate in other areas.

According to the memorandum of understanding with Shandong Province Seeds Group Co., Ltd., the parties will cooperate in the following areas:


To strengthen the cooperation in the scientific research, production and promotion of plant species including corn, forage and vegetable seeds; and
To jointly set up a working committee to coordinate the establishment of the project, with representatives from all parties, and to communicate and cooperate in other areas.

Alan Lai, Agria's Chairman of the Board, commented, "The cooperation between Agria and PGW has enhanced the complementary strengths of both sides and boosted the future plan for joint development of Asia and China markets. Agricultural and seeds economy has been highly recognized by the Chinese government and investors. With nearly 40 ranches each with over ten-thousand cattle under construction, China is marching into large-scale breeding in this area. Development and promotion of grass seeds is currently one of the most needed agricultural technologies in China. With world-leading seeds technologies and ranch management experience, we can bring valuable experience for the construction of large-scale ranches in China. I believe, our cooperation with PGW will generate significant investment return for shareholders in the near future."
The two projects will benefit from Agria and PGW's extensive experience and resource in advanced technical development planning and their management philosophy and skills, combined with the advanced new agricultural production technology provided by the Guangdong and Shandong agricultural partners. The two projects will serve as platforms for Agria and PGW to promote agricultural technology and innovative services for PRC clients and show Agria and PGW's dedication to international cooperation.
About Agria Corporation
Agria Corporation ( NYSE : GRO ) is an agricultural company with operations in China and internationally. Agria operates three principal business lines: China seeds, international seeds and agriservices. In China, Agria engages in research and development, production and sale of seed products, including field corn seeds, edible corn seeds and vegetable seeds. Agria owns through Agria Asia a 50.22% equity interest in PGG Wrightson, New Zealand's largest agricultural services company. For more information about PGG Wrightson, please visit www.pggwrightson.co.nz (http://www.pggwrightson.co.nz/). For more information about Agria Corporation, please visit www.agriacorp.com (http://www.agriacorp.com/).

[Balance]

One last big seller left to be taken out and PGW will breach the 40 cents mark.

[Balance]

One last big seller left to be taken out and PGW will breach the 40 cents mark.

Last big seller is backing off, moved his offer to 39 cents.

Does not look to me like he/she/fund has much left. Otherwise, will not back off like that.

Buyers now getting more aggressive - over 500T now bid at 38 cents.

I would say definitely 40 cents by end of this week.

You gotta buy when the big seller is there.

PGW is one of the top picks by some of the brokers for 2013.

[Balance]

Interesting to see PGW hype its future seeds business.

However, we do not applaud the tenor for merely clearing its throat.

It's profits that potential investors will respond to - not a memorandum of understanding.

Don't get me wrong, I love this company, have researched it, and have a good holding in my portfolio. But I still have my BS detectors on....

Agreed. MOUs with China companies are not worth a packet of rhubarb seeds.

[Master98]

Interesting to see PGW hype its future seeds business.

However, we do not applaud the tenor for merely clearing his throat.

It's profits that potential investors will respond to - not a memorandum of understanding.

Don't get me wrong, I love this company, have researched it, and have a good holding in my portfolio. But I still have my BS detectors on....

I see these agreements as very positive step for PGW towards future significant profits( dont expect these things just happen overnight), and market like it. Buy side already 39c.

[Snoopy]

Last big seller is backing off, moved his offer to 39 cents.

Does not look to me like he/she/fund has much left. Otherwise, will not back off like that.

Buyers now getting more aggressive - over 500T now bid at 38 cents.

I would say definitely 40 cents by end of this week.

You gotta buy when the big seller is there.

PGW is one of the top picks by some of the brokers for 2013.


All a true story Balance, but there are a few chapters of this story you have left out. Even as PGW now trades at 40c as I write this.

PGW was one of the brokers top tips at 33c, but on the latest list of recommended shares I see it has now been dropped as a recommendation. Hardly surprising when it rises by 25% in just a few days. Could your blatant ramping be an attempt to draw in the unsophisticated while you dump your own shares?

Could the reason the big seller having dried up be because Alan Lai has finished his sell down in preparation for paying of the $NZ10m Agria owes by the end of the day? What will the market reaction be when they realize Agria has sold down?

SNOOPY

[Snoopy]

Snoopy, I think I need to haul you up on some of the above

- Which latest list of recommended shares? It might be helpful if you indicated precisely whom is no longer recommending this stock, and what their reasons are.



Sparky, I am not doubting your integrity and here is what you wrote on this very thread on your post 2435, dated 13th December although obviously the recommendation was made before then


"PGW, along with SkyCity, Ryman, Mainfreight and Skellerup, have been named Forsyth Barr's top five stock picks for 2013."

Now we move on to our old mate Darrens FY2013 summary: http://www.*************blog.com/, dated 18th December 2012.

and under Forsyth Barr we see

Forsyth Barr
* Fletcher Building
* F&P Appliance
* Chorus
* Sky TV
* Ryman

Looks like PGW has gone missing to me.

SNOOPY

P.S. Although on closer inspection FPA is there which seems odd as it is now delisted. Maybe Darren has got it wrong?

[Master98]

Could the reason the big seller having dried up be because Alan Lai has finished his sell down in preparation for paying of the $NZ10m Agria owes by the end of the day? What will the market reaction be when they realize Agria has sold down?

SNOOPY

if my memory is right Agria dont need to sell down its PGW holding to pay 10m loan to LIC, this stuff has been solved last month which 5m extended and 5m transferred to loan to ANZ.

[Snoopy]

if my memory is right Agria dont need to sell down its PGW holding to pay 10m loan to LIC, this stuff has been solved last month which 5m extended and 5m transferred to loan to ANZ.

Breaking news on Stuff!

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

Agria repays $5m on time
TIM HUNTER Last updated 14:34 19/12/2012


PGG Wrightson's controlling shareholder, Agria, has repaid half the $10 million it borrowed last year from New Zealand company Livestock Improvement Corporation.

The full amount was due to be repaid two months ago, but Agria negotiated a deal to pay $5m plus interest by today and the other $5m by March 5, 2014.

LIC, a listed co-operative specialising in agricultural technology, anounced the $5m repayment to the stock exchange today.

Agria also obtained an extension to a $25m bank loan, due at the same time, until February 2014.

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

So that should mean that ANZ, also owed $5m by today, has been repaid. The question that is still unanswered is, with negative assets and negative cashflow, how did Agria raise the money? The only obvious answer is by selling PGW shares. In due course all be be revealed I guess.

SNOOPY