What’s up Snoopy ….PGW share price in free fall ….down nearly 20% last week or so.
At $3.41 almost back to the good old days when everybody got excited if it hit 3 bucks ……and long way off recent high when it got close to 6 bucks
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What’s up Snoopy ….PGW share price in free fall ….down nearly 20% last week or so.
At $3.41 almost back to the good old days when everybody got excited if it hit 3 bucks ……and long way off recent high when it got close to 6 bucks
I can tell you now, look at the div trajectory and think seriously about the current rural situation. Most dairy farmers will make a loss this year and have bought the cost of production down already, how?
Don't worry Winner. The good thing about PGW is that they cover all aspects and categories of rural supplies. And they specialise on 'the essentials'. Not the nice to haves. I heard on the news this morning we are looking good for a "bumper* season of summerfruit. That is like a bumper year with plenty of cherries on top. Fruitfed is the jewel in the PGW crown. The don't call those growers 'haughtyculturalists' for nothing!
I also think the hesitancy of the banks towards their rural customers will provide a further tailwind for PGW's popular 'Go Livestock' line of finance offerings.
SNOOPY
Lets all be honest with ourselves, we will all still get excited when it hits $3
Just had a look at the PnL and wow didn’t realize PGW operates in such a low margin space.
I always get a little tetchy about companies that have had a 'golden run' and seemingly load themselves up with debt. What happens when the market conditions turn?
I feel it is worth having a closer look at PGW as weather events and commodity prices create a bit of 'on the ground' havoc. My first task is to look at how the GoLivestock 'don't call it a finance division Trev' loans, err I mean 'advances' are going.
Looking at AR2023, this 'GoLivestock' unit has 'advances' on the books of $71.829m+$2.570m = $74.399m (not accounting for the provision of $376k, ref AR2023 p81) as at the 30-06-2023 balance date.
Yet $74.399m is an overstatement of the loan, ahem advance book on an annual basis. Livestock advances are essentially seasonal (although I am curious to know where that $2,570m of non-seasonal GoLivestock balance has come from) . To get a representative 'advances' balance over the year, it is best to take an average of the three 'advances' balance data points across FY2023 that we have: 30-06-2022 ($66.019m) , 31-12-2022 ($43.011m) and 30-06-2023 ($74.023m):
The triangulated averaged GoLivestock balance over FY2023: ($66.109m+$43.011m+$74.023m)/3 = $61.048m
We should note -in passing- that the interest earned on these 'GoLivestock' 'advances' over FY2023 was $6.573m. Based on that averaged 'advances' balance, this represents a gross return to PGW shareholders of:
$6.573m/$61.048m = 10.8%
That is a very nice little income stream for we shareholders. BUT -and here is my very important learning point- it is not the income on that loan (darn it there is that word I wasn't allowed to use) that is taking the risk out of these loan transactions. It is the value of the livestock, that PGW still own, that is the security on this debt. And according to the auditors (AR2023 p104), the security on that livestock loan portfolio looks A.O.K.. (albeit with $375k of provisions taken out).
So a fairly strong asset position and strong income position may be found under PGW's GoLivestock umbrella over FY2023. Just don't call it a finance division Trev!
SNOOPY
We have established that the 'Go Livestock' receivables should not be considered as part of PGW company debt. So how does the underlying debt position of PGW stack up to scrutiny?
Debt Position PGW EOFY2023 Cash On Hand ($4.643m) add Short Term Bank Loans $19.960m add Long Term Bank Loans $50.000m add Net Defined Benefit Liability (Pension Plan deficit) $1.076m add Employee Entitlements $19.944m Total Bank and Worriesome Liabiliities $86.327m less Animal assets (annualised average) ($61.048m) Total Net Debt $25.279m
One tweak I might need to make on the above table is to put a 'fudge discount factor' on the value of PGW's animal assets. The above table is treating animals as 'cash in the bank' which might be a little optimistic. Then again that animal value is the value of the animal as bought at auction - not when it has been fed up six months down the track. So maybe I don't need any fudge factoring? I would welcome others comments on whether my overall picture of PGW debt is now more realistic. For me, accounting for the PGW animal assets in this way, puts the overall PGW debt picture in a more realistic light. $25.279m of net debt sounds a lot better than $86.327m! Nevertheless that $25.279m is a lot more net debt than the $10.119m that was on the books only a year ago, when the outlook for PGW was brighter.
SNOOPY