Seeds of Destruction: Part 5.2 PE Ratio and Gross Yield calculations: PGW Rural Rump
Quote:
Originally Posted by
Snoopy
Reworking these calculations with the figures re'Balance'd
|
Scenario $100.5m debt repayment |
Scenario $118m debt repayment |
eps {A} |
2.49c |
2.60c |
PGW Rural Rump: Market Valuation {B} |
18.3c |
20.7c |
PE ratio {B}/{A} |
7.2 |
8.0 |
Gross Dividend Yield {A}/{B x 0.72} |
18.9% |
17.4% |
Notes
1/ In the gross yield calculation I am assuming that all earnings are paid out as dividends. With 'Agria' better capitalized following the capital repayment and with some potential investment to be made on 'PGW Rural Rump' going forwards, this might not happen.
2/ The PE ratios are looking fair for this type of business. But remember we are in a favourable time period in the rural cycle.
3/ The potential dividend yield looks fantastic, with the slightly better capitalized version of 'PGW Rural Rump' showing a lower yield. But perhaps that better capitalization could be handy in an industry notorious for 'rural downturns'. And in such downturns I would expect any dividend yield to drop .
4/ Have I missed anything else?
|
Scenario $157.5m debt repayment |
eps {A} |
2.19c |
PGW Rural Rump: Market Valuation {B} |
20.8c |
PE ratio {B}/{A} |
9.5 |
Gross Dividend Yield {A}/{B x 0.72} |
14.6% |
Notes
1/ In the gross yield calculation I am assuming that all earnings are paid out as dividends. With 'Agria' better capitalized following the capital repayment and with some potential investment to be made on 'PGW Rural Rump' going forwards, this might not happen.
2/ The PE ratios are looking fair for this type of business, because I have considered a business cycle average value of earnings.
3/ The potential dividend yield looks fantastic. The lesser than expected capital repayment looks to have made PGWRR debt free going forwards. This could be handy in an industry notorious for 'rural downturns'.
In this low interest rate environment I would be prepared to buy with a gross dividend return of 8.5%. This implies a post capital return share price of:
20.8c x 14.5/8.5 = 35.5c
Post 'capital repayment' and a couple of years down the track into more favourable farming times, I am therefore guessing a capital appreciation of around 15cps, plus dividends of 2cps per year, are on the table, with the share now trading at 52c.
SNOOPY
Seeds of Destruction Part 8.0: A new beginning PGWRR
Quote:
Originally Posted by
Snoopy
With the seed business gone, expectations will have to be reset. As an exercise I have gone through the last few years results and removed 'Seed & Grain' EBITDA from the Operating EBITDA. Here is the multi-year earnings picture that results:
1/ This period covers the 'modern' era where Mark Dewdney's 'One PGW' philosophy started to permeate the group.
Even for long term shareholders, 'PGGW Rural Rump' is now a new investment prospect. Sometimes to put in context where we are going, it is useful to look back on where we have come from. What follows is a condensed history of 'PGW Rural Rump', as if it had been a stand alone company for the last five years.
Year |
PGWRR EBITDA |
AR Commentary |
FY2014 |
$24.782m |
Record dairy payout Dec 2013. Challenging year for arable farmers - Sept 2013 windstorm damaging irrigators. Wet autumn challenges harvests.
Strong returns from grapes, apples and kiwifruit.
Strong livestock market for dairy and beef cattle with a better market for sheep (+20% yoy per stock unit, despite stock numbers reducing 3.2% yoy).
Wool volume down, profitability not offset by small increase in price.
Like for like revenue for new irrigation systems +4%.
Real Estate Revenue +25%, because of increase in farm sales including dairy conversions. |
FY2015 |
$29.125m |
Reduced dairy forecast from Dec 2014. Reduced arable sector demand for grain and dairy grazing by sheep and beef farmers.
Livestock EBITDA up 15% with export sales bounce back.
Improved returns for grapes, apples and kiwifruit. Summer drought in second half of the year.
Wool flat, higher prices offsetting lower volumes.
Irrigation and Water sales +32%, but margins lower.
Real Estate revenues down 8%. |
FY2016 |
$28.319m |
Extremely challenging for dairy farmers, with dairy commodity prices at ten year lows (below cost of production for most). Reduced demand for grain and low international prices for arable farmers.
In Livestock, high beef prices offset falling sheep meat prices. 'Go Lamb' and 'Go Beef' in house financing for livestock introduced.
Horticultural sales thriving, with good growing conditions and strong markets. (Sales +$12.9m over previous year record). Irrigation and Water sales well down with delayed or cancelled projects from the dairy downturn.
Wool increased revenue with higher wool prices on a smaller crop, while maintaining Operating EBITDA.
Real Estate increased revenue by 16% and had a 123% EBITDA increase with strong growth in Lifestyle and Residential, and Horticulture, despite limited dairy opportunities. |
FY2017 |
$37.454m |
Retail increasing market share, not so affected by wet conditions (two tropical cyclones in April 2017) in the final quarter.
Livestock: Record EBITDA due to sheep and cattle prices up on last year, because of sustained international demand for NZ Protein. Better dairy sales, offset by tough conditions for live exports.
Horticultural sales up on previous year, particularly in grapes, kiwifruit, apples and avocados.
Water and Irrigation revenue sank 30%, due to continued slowing of irrigation development on farms.
Collapse of wool crossbred price (price halved over 15 months) has meant less sales and the formation of a grower stock pile. But fine wool prices are up 30%
Good Real estate result similar to FY2016 with resurgence of rural property sales in Southland, Otago, Waikato and the Bay of Plenty, aided by good sales in horticulture, residential and lifestyle. |
FY2018 |
$34.567m |
Retail continues to target the science of soil management and crop production (agronomy), based on technical advice and service PGW can deliver, delivered at the right time. EBITDA increased by $2.25m.
Dairy export revenues were up 14%. Arable sector had a wet spring delaying planting and a dry hot summer lowering yields.
Meat and wool sector export revenues were up 12%. To date Mycoplasma Bovis has not affected performance of Livestock, which matched last years record EBITDA figures. There were strong beef and lamb prices throughout the year.
Horticulture export revenues increased 6%. Hot summer largely positive for kiwifruit and apples. Company revenues were up again thanks to pip fruit, kiwifruit, grapes and other subtropical crops, and retaining a high market share.
Water and Irrigation has increased EBITDA by $2.25m, despite the lack of on farm development.
Wool business bounced back with an increased number of bales transacted,. Crossbred wool growers are now prepared to reduce their stores to match the much lower market price of a year ago.
Real Estate down with new government regulations on overseas investment and tightened bank lending affecting the first six months, offset by renewed rural sector momentum in the second half. |
FY2019 |
$25m (est) |
Report not yet published. |
SNOOPY