It will affect pgw. They stated this in their conf call. However, it is a small part of their business that they are gearing up to grow. I guess it just won't grow as much.
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Probably splitting hairs mate but perhaps worth noting that $42.3m represents EPS of 5.6 cps so payout ratio was 98% although they did make the point in the announcement that the final dividend includes a special dividend of 1 cps due to the extremely strong cash flows from operating activities of $54.8m (7.25 cps). (i.e. effectively they paid out 76% of operating cash flows).
I guess i'm just making the point that this sort of dividend is potentially sustainable going forward but perhaps investors would be more prudent to expect about 5 cps next year given 1 cent of the 5.5 cps this year is a special divvy.
Good to see that the pension fund shortfall has fallen $13m. Was a problem a couple of years ago when close to $30m. Wouldn't want to honour that liability in a hurry even though the underfunding is significant relative to the size of the fund.
Suppose all the old timers deserve their pension, after all they made the company.
I've spent a bit of time pondering if the SP is going to settle back a bit.
I was hoping it would and had a buy in the market at 41 but got to thinking.
1. Stock trades cum a great divvy of 3.5 cps and is ex very shortly on 26 August.
2. Based on ex stock price of 39.5 cps, (cum 43), you're paying a multiple of only 7 times last years earnings and the company sounds confident it'll grow current years earnings !!
3. Based on ex divvy price of 39.5 cps and assuming next year's dividend is 5 cps (fully imputed) PGW trades on a 2015 net dividend yield of 12.66%, gross of 18.9% for those on a 33% tax rate.
4. PGW beat the top end of market guidance.
I backed my own thinking by adding more today.
So why would it go back to 40 cps cum dividend....well let me put it this way, I'll be backing up the truck if it does :)
Worth noting, today's volume is more than 10 times daily average for this stock.
Wrong, its heavy buying. Stock up 9% in one day :t_up:
You calling it a tax dodge, that's a good laugh. Selling more than one investment property and not paying tax on the gain and thinking a simple excuse will hold you in good stead...I don't want to appear to be mean but the I.R.D. love having a crack at that sort of thing so it wouldn't surprise me in the slightest if you have a battle on your hands there.
Yeah I've been a holder before too but you never know they might finally be getting their act together. Every dog has its day :t_up:
just wondering if it is possible or when PGW will back to NZX50.
Well, PGW's market cap ($332m) is certainly significant higher than of the recently to NZX50 advanced (and since then dropping) starlet PEB ($216m). However not sure, whether the full PGW market cap counts for NZX50 entry (given Agrias predominant position - not all shares are freely available).
I don't really follow this stock so sorry if this is an oversimplification, but isn't the large rise in shareprice a little short sighted given the rapidly falling dairy prices and therefore spending power of farmers?
I dug deep into PGW last year Moosie. I have set myself investment rules that limit the amount of capital I can put into shares outside of the NZX50. So I have no plans to dig deeper at this point, no matter how attractive the bone. But my instinct is to say this is probably as good as it gets.
A PE of 7-8 at the top of the farming cycle is in theory about where the share price should be in a cyclical business like this. Mr Market has a tendency to overshoot, so I don't rule out the share price heading higher. And I haven't made any allowance for the new managnement broom. All I am saying is, from here, the statistics are going to start to stack up against you IMO.
I have been looking at the PGW result though. $97.8m to $108.2m is a good rise in commission revenue (note 5). A sign of rising business through the Heartland bank connection? There is more than a million dollar drop in bad debts written off too (note 8).
Much was made of the improved cashflow at announcement time. But to me it looks like a marginal change in difference between two very big numbers. Profit margins remain low. So who knows if it will be sustainable? Meanwhile the asset base continues to shrink. Mark Dewdney has done a commendable job squeezing more profits out of a balance sheet that one might describe as a 'lazy lemon'. But if the lazy lemon balance sheet is getting smaller with time, there will be a limit to the juice you can squeeze out of it.
SNOOPY
What Mark actually said in the press release was:
“PGW was confident that it could deliver further increases on this year’s Operating EBITDA result through the delivery of its strategy. However, given the volatility in the forecast dairy price at the current time, and the need to assess the likely impact for PGW’s clients and the sector it was the company’s intention to provide a forecast for the current fiscal year at the time of the Annual Shareholders Meeting in October."
That means Mark is confident of further operational improvements at PGW. But he is not yet in a position to forecast a profit increase. Indeed another interpretation of what he said was that macro-economic factors may yet cause the PGW annual net profit to fall in FY2015
Now if we move onto the profit figure for FY2014, you will see that it was padded out with a lot of favourable 'one offs'. If you look at the ongoing business I get a very different NPAT compared to the $42.3m headlined in the press release.
Operating EBITDA: $58.7m
Equity accounted earnings of associates: +$2.5m
Depreciation & Amortization: -$11.2m
Net Interest & finance cost: -$7.9m
=> NPBT = $42.1m
Using a tax rate of 28%, NPAT is $42.1m x (1-0.28) = $30.3m
With 754.8m shares on issue that makes eps of: $30.3m/754.8m = 4.0cps
Based on an ex-dividend share price of 39.5c, we are looking at a PE of 10.1. 10.1 is not a no growth PE. Mark is going to have to work hard to grow earnings growing forward and the market is already pricing in that he will succeed. As an an investment prospect I would argue PGW is now a dividend play only at an ex-dividend price of 39.5c.
SNOOPY
You can be a sceptic if you like just like with HNZ but I'm happy mate. According to Reuters of the three analysts covering it two rate it as outperform and one as a buy with a target price of 53 cents.
The market is clearly impressed with the result and prospects. I'll have a good look at the full accounts in due course but in the meantime I'm looking forward to the very substantial dividend :)