PGW vs SML

[nextbigthing]

If you had to choose one, which would it be and why? (Or split 50/50!)

PGW is potentially very cheap at the moment however growth prospects don't seem huge and management seems unstable.

SML seems to have a solid plan in place however is banking on a few things to happen ie product price rising and a few things to not happen ie China spit the dummy and make their life hard.

Thoughts?

[percy]

My wife has a small holding in PGW.I think it is a good second line business paying a dividend.
SML is a top line business.It has grown very quickly.It is in a growing sector.It is very focussed on what it wants to achieve,and has achieved what it set out to do.Being in Canterbury with irrigated farms supplying it milk,supply is stable.Their business plan is to move into higher margin proceesing.Profits will be reinvested in the company for a few years,so no dividends.
I am looking to add to our SML holdings,while retaining wife's PGW holding.I also hold REL on unlisted market and Tru Test shares [traded via the company].

[Snoopy]

My wife has a small holding in PGW.I think it is a good second line business paying a dividend.


You are beginning to sound like me Percy! Your defence of your heroes George Gould and Sir John Anderson is wilting. How many hundreds of millions will need to oversee wiped off shareholder value, before you are demanding Sir John turns in his knighthood? I can't recall the benchmark sent by Sir Douglas Graham.

SNOOPY

[Snoopy]

If you had to choose one, which would it be and why? (Or split 50/50!)

PGW is potentially very cheap at the moment however growth prospects don't seem huge and management seems unstable.


PGW has reasonable growth prospects in South America, a market where they have been quietly building their presence for ten years. I believe the controlling shareholder Agria may be unstable. But the within the company management I believe is sound.



SML seems to have a solid plan in place however is banking on a few things to happen ie product price rising and a few things to not happen ie China spit the dummy and make their life hard.

Thoughts?

SML is currently a one horse race, albeit that one horse is a thoroughbred. Good company but very fully priced so unlikely to be a good investment at this price IMO.

SNOOPY

[percy]

You are beginning to sound like me Percy! Your defence of your heroes George Gould and Sir John Anderson is wilting. How many hundreds of millions will need to oversee wiped off shareholder value, before you are demanding Sir John turns in his knighthood? I can't recall the benchmark sent by Sir Douglas Graham.

SNOOPY
Again you are wrong.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Sir Douglas "earned ?" his knighthood in politics.And proved ex politicans and business do not mix.
Sir John earned his in a brilliant business career.
I have always said Sir John and George Gould were the best people to put PGW on the right path.
Never said PGW is a "great" business.A "good" business,but not a great business.
At this stage I think SML has the makings of a great company.Brought more this morning at $2.62,so am "well positioned."

[baller18]

No doubt SML has the makings of a great company, however, bright diary has a large influence on the makings of SML.
So its not really just how well SML does, but how well both bright diary and SML do at the same time.

[nextbigthing]

Hi Belgarion,

I agree re dyor. Its just interesting to seek other peoples opinions.

I'd question the effectiveness of ramping on a forum such as this. Surely the only people to act on that sort of info would not have much money to invest with and if they did then probably not for long.

If they are reading however I heard MFT will be $20 by the end of the year :)

[Snoopy]

Stay well clear of PGW ... Their big competitors are mainly co-op. co-ops don't have shareholders. ... Anything IMNSHO is better than PGW!


Belgarian, if you have a look at the FY2012 (YE 30th June) for the co-operative Farmlands we had net profit of $5.536m on sales of $586.856m. That represents a margin of:

$5.536m / $586.856m = 0.943%

IIRC that margin is comparable to PGW. Total equity is $46.7m against assets of $135.5m. So it is very heavily indebted. (Equity ratio of 35.1%)

If you look at the FY2012 figures for Combined Rural Traders (CRT) co-operative, profit was $13.149m on revenue of $1,190.02m

That gives a margin of:

$13.149m / $1,190m= 1.1%

Total equity is $59.499m against total equity of $176.655m. That is an equity ratio of just 33.6%

PGWs position may not be strong, but I put it to you that the financial position of Farmlands and CRT is even weaker. In short I reject your argument Belgarian that the co-operatives are running rings around PGW. The figures tell me it just isn't true.

SNOOPY

[Snoopy]

discl: still trying to rid myself of a few PGW share. Probably the dumbest buy I've made in the last 10 years.


Could I suggest Belg that you have entirely the wrong attitude to PGW. I too have been punished as a PGW shareholder, possibly even harder than you (average entry price 45c). However that poor performance is largely due to the GFC and the Norgate empire coming unstuck. Put it down to the risks of investing.

In more recent times though, my PGW investment has done very well. I have more than doubled my holding in the company and paid only 30c for those shares. Oh and for some of those I harvested the bumper dividend as well. So I have been well pleased with the recovery of my PGW Investment (it owed me 60cps before my recent foray). I am sorry that you have had a different experience, but could I respectfully suggest that your main problem here is that you paid too much for your PGW shares!

SNOOPY

[Snoopy]

I agree re dyor. Its just interesting to seek other peoples opinions.


My opinion nextbigthing is that you should buy neither right now. SML looks far too dear. And there are a lot of uncertainties surrounding PGW which should be resolved within the month when the results for FY2013 are released. 34c might end up being a bargain, but you might get singed (if not burnt) too. I am playing the waiting game before I buy my next package of PGW shares. But then again I already own quite a few...

SNOOPY