PGW - PGG Wrightson

[Snoopy]

Seeing the neighbour mentioned PGW to me I thought I better find out a bit more about Them.

I still can’t fathom why you have concerns Snoops ....PGW has never been so well capitalised and is the balance stronger than it has been for yonks.

Things look very rosy for PGW, from a debt perspective, in the FY2019 report. But that was before the capital repayment.

The forecast position for FY2020 does not look so bright.

	FY2012	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020f
Short Term Bank Loans	$29.709m	$47.702m	$35.573m	$57.195m	$36.623m	$26.719m	$30.806m	$3.920m	$3.920m
add Long Term Bank Loans	$111.500m	$62.000m	$65.000m	$66.000m	$97.511m	$110.925m	$149.205m	$31.742m	$31.742m
add Net Defined Benefit Liability (Pension Plan deficit)	$26.264m	$20.819m	$13.528m	$14.655m	$25.729m	$15.827m	$10.574m	$5.883m	$5.883m
add Employee Entitlements	$17.531m	$15.910m	$20.837m	$20.511m	$20.982m	$22.946m	$31.163m	$16.821m	$16.821m
equals Total Bank and Worriesome Liabiliities {A}	$185.004m	$146.431m	$134.938m	$158.361m	$180.845m	$175.967m	$221.748m	$58.366m	$58.366m
NPAT + Impairment & F.V. Adj. (declared) {B}	$27.013m (2)	$19.769m (1)(2)	$41.128m (2)	$32.634m (2)	$39.810m (2)	$44.358m (2)	$28.166m (2)	$113.876m (2)	$11.910m (2)
Minimum Debt Repayment Time {A}/{B} (in years)	6.85	7.41	3.28	4.85	4.54	3.97	7.87	0.51	4.90

Notes

(1) Excludes Goodwill Write Down of $321.143m.
(2) Calculation of NPAT and 'Impairment & Fair Value Adjustments' (representing available cashflow for that year) is as follows:

FY2020f: ($30.000m-$9.632m-$3.826m)x0.72 = $11.910m (I am not assuming any impairment or fair value adjustments for FY2020)

FY2019: $131.806m+$3.187m- ($20.667m +$0.450m) = $113.876m
FY2018: $27.080m+$3.877m = $30.957m
FY2017: $46.311m-$1.953m = $44.358m
FY2016: $39.578m+$0.232m = $39.810m
FY2015: $32.611m+$0.023m = $32.634m
FY2014: $42.258m-$1.130m = $41.128m
FY2013: ($306.525m)+$321.143m+$5.151m = $19.769m
FY2012: $24.453m+$2.560m = $27.013m

I have a policy of looking at a company's financial position at balance date. Yet in the case of PGW this grossly underestimates the debt position over the year. I think PGW are on record as planning for seasonal finance requirements of up to $70m. Technically we should probably add about half that amount to the end of year debt to get a representative debt position. But I haven't done this in the above table. If I do make this adjustment for my FY2020 forecast, the MDRT figure rises significantly:

MDRT = ($58.366m+$35.000m) / $11.910m = 7.84

I agree with your assessment that the balance sheet is in the best shape for 'yonks' , if 'yonks' means two years ago. But other than that, the debt position of the company to me looks worse than it has been at any time over the last seven years.

My rule of thumb for the MDRT answer in years is:

years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern

So if we ignore the 'seasonal debt effect' ( but should I? ) I would say PGW has a medium level of debt. On balance I have decided this is not a sufficient debt burden to put me off investing more into PGW. Indeed I have upped my holding in PGW in the last few weeks. But rural earnings are volatile. So I would encourage all serious investors in PGW to keep that 'PGW debt burden' at the forefront of your mind. Calling PGW 'well capitalised' I would say is a stretch description of the debt position. "Adequately capitalised' (for now) is probably a more realistic description of PGW's balance sheet.

PGW on neighbours and his bowling mates radar .....

Market signals come in many forms. Thanks for the warning!

SNOOPY

[percy]

Seeing the neighbour mentioned PGW to me I thought I better find out a bit more about Them.

I still can’t fathom why you have concerns Snoops ....PGW has never been so well capitalised and is the balance stronger than it has been for yonks.

PGW on neighbours and his bowling mates radar ....he was excited yesterday when he told me OCA is showing really positive signs and if they continue at this rate they could be ‘in the money’ sometime next year. Still under water with TRA though.

I was so confident about PGW until you posted that they are on your neighbours and his bowling mates radar.!!!!!
How can they be still under water with all quarterly fully imputed divies they have received from TRA.?
Agree with your comments about PGW's balance sheet.

[sb9]

I was so confident about PGW until you posted that they are on your neighbours and his bowling mates radar.!!!!!
How can they be still under water with all quarterly fully imputed divies they have received from TRA.?
Agree with your comments about PGW's balance sheet.

Bit of upward movement today on sp albeit on low volume...

[Balance]

Bit of upward movement today on sp albeit on low volume...

Strange how all the sellers disappeared?

[Agrarinvestor]

Any reasons for the drop since summer?
Do you have some NZ based Article about PGW and his former majority shareholder AGRIA?

[percy]

Any reasons for the drop since summer?
Do you have some NZ based Article about PGW and his former majority shareholder AGRIA?

No news.
Think we will have to wait for the half year result in February.

[Snoopy]

Any reasons for the drop since summer?

There was a big drop in the whole and skim milk powder price in the December Auctions.

https://www.nzherald.co.nz/business/...ectid=12294780

"The latest GDT dairy auction wasn't so flash, with a larger fall than expected," Jason Wong, senior market strategist at BNZ in Wellington, said in a note."

"Whole milk powder slumped 6.7 per cent to US$3,099 a tonne, its lowest since September, having reached a three-year high in the previous auction.

"Skim milk powder shed 6.3 per cent to US$2,867 a tonne, from a five-year high two weeks ago."

Although dairy is only one part of the NZ farming market, these price falls could signal a surprise 'end of a trend' upwards move. Dairy farmers, although only a part of the market serviced by PGW, are traditionally big spenders. They need to spend on supplementary feed and equipment to justify the high prices they pay for their dairy land. The unexpected drop in price of what is NZs biggest export commodity will not have helped farm service spending sentiment into the future. That is my take on the share price weakening.

SNOOPY

[Snow Leopard]

Turnover of PGW shares has dropped off to the point where I have an orange flag (average of less than $60,000 per day) being waved at me by the laptop.

Price wise it is also in the orange zone. But it did bounce off the $2.30 boundary of the red zone which is useful and is still defined as up-trending.

Now I am sure I was promised a good profit and reasonable dividend by the board and a guaranteed takeover bid for the bit left after the partial takeover by Balance.

So partly I am wondering whether or not to sell some down now because of the low liquidity.

But mostly I an wondering why is this page so friggin' wide!

[Snoopy]

Turnover of PGW shares has dropped off to the point where I have an orange flag (average of less than $60,000 per day)
being waved at me by the laptop.

Turnover for all shares usually drops of the Christmas / New Year / School Holiday period in NZ. If someone wants to sell they may push the price down. Wait until February and things will return to normal.

Price wise it is also in the orange zone. But it did bounce off the $2.30 boundary of the red zone which is useful and is still defined as up-trending.

I guess the 10:1 consolidation would have helped the uptrend? It sure looks great on the stocknessmonster chart!

https://stocknessmonster.com/charts/pgw.nzx/

Now I am sure I was promised a good profit and reasonable dividend by the board

And have the board let you down?

and a guaranteed takeover bid for the bit left after the partial takeover by Balance.

That was a Balance fantasy based on a potential West Island takeover. Those most likely to make an offer are otherwise engaged. And PGW has far too much debt now to make it a tasty target. Forget about a takeover. PGW is worth buying today at $2.36 on a pure business cycle earnings case. I topped up myself today.

So partly I am wondering whether or not to sell some down now because of the low liquidity.

Sell sell sell! But please wait until I have some more funds on hand in the call account before you do so.

But mostly I an wondering why is this page so friggin' wide!

Because getting wide points of view on what is happening is useful :-P? Or maybe the dog did it....

SNOOPY

[percy]

Turnover of PGW shares has dropped off to the point where I have an orange flag (average of less than $60,000 per day) being waved at me by the laptop.

Price wise it is also in the orange zone. But it did bounce off the $2.30 boundary of the red zone which is useful and is still defined as up-trending.

Now I am sure I was promised a good profit and reasonable dividend by the board and a guaranteed takeover bid for the bit left after the partial takeover by Balance.

So partly I am wondering whether or not to sell some down now because of the low liquidity.

But mostly I an wondering why is this page so friggin' wide!

Seems we will have to wait for February's result,before we can pass judgement.
Going from the prices the supermarkets are charging for beef and lamb,PGW's "core" farmers are getting very good prices for their stock..