PGW - PGG Wrightson

[percy]

I agree 2018 eps will be approx. 4.3 cents.At current share price of 56 cents, the forward PE is over 13.
With growth doubtfull, now added to the mix a "review",a lot of questions will need answers.
The dividend of 3.75 cents will not leave a great deal over for reinvestment.
Not sure what I would consider a fair PE to be, but I guess under 10.
Take care.

[Snoopy]

I have spoken to PGW and HBL,[at separate presentations both gave to Hobson Wealth clients.].
Neither will say much,other than they "are happy with the tie up,but it has not produced the result they expected".
I very much doubt either will say more publicly.
I expect the problem is HBL is focussed online,while PGW are physically close to their clients.

There is a reason I suggested someone should ask how 'PGW Finance' is going at the Heartland AGM. I am just as interested in the tone of the reply as what is actually said. The body language, and whether the Chairman even bothers to consult his staff in the front row or just dismisses the question out of hand. I reckon the question would be answered, even if Geoff had nothing to say!

I must say I was surprised as to the problems related from the PGW AGM about feedback on credit checks from Heartland being slow. I thought part of the thrust at Heartland was using their IT platform to give next to instant loan approvals (or not)!

SNOOPY

[Snoopy]

I do worry about PGW's business model.
On a Sunday down around Barrington Mall I usually see a couple of PGW 4 wheel drive vehicles on the road.
On my travels around the country side I always spot PGW vehicles.Must own hundreds of vehicles,which are not cheap to run,even on a Sunday.?
Premises.How many buildings do they need to operate out of.Amberly,Hawarden , Culverden,and Cheviot.Each would need stock,staff and tea ladies,and need power and have to pay rent,rates and insurance.This is repeated everywhere.Blenheim Road,Waterloo Road.Massive buildings in and around Ashburton.
Now farmers are savvy.If I was setting up the business I would have one massive distribution centre in ChCh to supply the South Island,and one in the North Island at Hamiltom.Do most of the business online. Would doubt PGW could compete.Farmers would love the prices I would be able to charge.

I think PGW need to appoint you as their 'retail transformation consultant' Percy. Sounds like you might do a better job than 'Credit Suisse' and maybe even charge a bit less for your services? I think part of the 'strategic review' is positioning the business for the next generation of farmers who are comfortable with interacting on line. Maybe in the longer term, PGW will not renew all the leases on those rural retail properties that have been selling over the last two years? Those PGW 4WD utes could become the new face of roaming retail?

SNOOPY

[Snoopy]

Good one snoops

No mention of the pension fund?

Many pensioners (Wrightson ones) turn up for the snack

Actually there was a question relating to the pension fund right at the end. Something about the auditor approving one set of results for FY2016 and then restating those same results in a different way while giving the big tick to both presentations. Which presentation was correct?

Bruce Irvine piped up and said there had been much discussion on the result presentation restatement with the Auditors. He wanted to revise the figures back to FY2014 which was apparently when the relevant change in law took place. But in the end they settled on the compromise of just updating the figures from last year. It almost sounded like all those accounting boffins within PGW had made a mistake (of course we all know they are paid beyond reproach so it couldn't be true) and it was the auditor that had instituted the result restatement 'from a slightly different point of view'. Who would have imagined that accounting isn't quite the exact science that some people think?

SNOOPY

[percy]

There is a reason I suggested someone should ask how 'PGW Finance' is going at the Heartland AGM. I am just as interested in the tone of the reply as what is actually said. The body language, and whether the Chairman even bothers to consult his staff in the front row or just dismisses the question out of hand. I reckon the question would be answered, even if Geoff had nothing to say!

I must say I was surprised as to the problems related from the PGW AGM about feedback on credit checks from Heartland being slow. I thought part of the thrust at Heartland was using their IT platform to give next to instant loan approvals (or not)!

SNOOPY

.
HBL doing credit checks takes a bit longer than," hey Bill,Trev from Barhill Station wants 50 grand for a few months,OK" ?
While Bill at PGW may have known Trev since back of the bike shed days,HBL have to do proper credit checks,which take time.That is why I said PGW are physically close to their clients,and the reason HBL have few problem loans.
No one at HBL is going to say anything other than they are very pleased with the arrangement they have with PGW.

[percy]

Actually there was a question relating to the pension fund right at the end. Something about the auditor approving one set of results for FY2016 and then restating those same results in a different way while giving the big tick to both presentations. Which presentation was correct?

Bruce Irvine piped up and said there had been much discussion on the result presentation restatement with the Auditors. He wanted to revise the figures back to FY2014 which was apparently when the relevant change in law took place. But in the end they settled on the compromise of just updating the figures from last year. It almost sounded like all those accounting boffins within PGW had made a mistake (of course we all know they are paid beyond reproach so it couldn't be true) and it was the auditor that had instituted the result restatement 'from a slightly different point of view'. Who would have imagined that accounting isn't quite the exact science that some people think?

SNOOPY

Irvine would be correct...........

[percy]

I think PGW need to appoint you as their 'retail transformation consultant' Percy. Sounds like you might do a better job than 'Credit Suisse' and maybe even charge a bit less for your services? I think part of the 'strategic review' is positioning the business for the next generation of farmers who are comfortable with interacting on line. Maybe in the longer term, PGW will not renew all the leases on those rural retail properties that have been selling over the last two years? Those PGW 4WD utes could become the new face of roaming retail?

SNOOPY

Yes their present business model of "being very close" to their customer does leave them open to being undercut,as they have very high overheads.
Yes the next generation of farmers are comfortable with interacting on line,but the savvy old farmers learnt their way around the internet years ago,finding the prices of oats,wheat,bulls,heffers and lambs.Most probably knew prices better than their PGW stock agent.!
Bit like buying shares from a full service broker,or an online discount broker.

[JBmurc]

Was actually thinking about buying one of those PGW buildings .... 10.5% net yield fixed for 10yrs, 5x3 rights to renew lease.(PGW pay all outgoings)
If they move out after the 10yrs they have to re-paint etc .. 67% NBS rating

was very keen ...but yes what the outlook is 10yrs out is a concern... is a risk I guess you have to take on board in ten years after being paid 105% of your Capital paid you might well be left with an empty 400sqm+ 67% NBS building on the main street of a back water rural town surrounded by muti-million $$$ farms....would anyone have a use for a industry/retail mix building +large yard in the location

[percy]

Was actually thinking about buying one of those PGW buildings .... 10.5% net yield fixed for 10yrs, 5x3 rights to renew lease.(PGW pay all outgoings)
If they move out after the 10yrs they have to re-paint etc .. 67% NBS rating

was very keen ...but yes what the outlook is 10yrs out is a concern... is a risk I guess you have to take on board in ten years after being paid 105% of your Capital paid you might well be left with an empty 400sqm+ 67% NBS building on the main street of a back water rural town surrounded by muti-million $$$ farms....would anyone have a use for a industry/retail mix building +large yard in the location

No.
One thing you would not have to worry about is the capital gain tax.
Most probably be able to claim a capital loss.!

[Joshuatree]

Was actually thinking about buying one of those PGW buildings .... 10.5% net yield fixed for 10yrs, 5x3 rights to renew lease.(PGW pay all outgoings)
If they move out after the 10yrs they have to re-paint etc .. 67% NBS rating

was very keen ...but yes what the outlook is 10yrs out is a concern... is a risk I guess you have to take on board in ten years after being paid 105% of your Capital paid you might well be left with an empty 400sqm+ 67% NBS building on the main street of a back water rural town surrounded by muti-million $$$ farms....would anyone have a use for a industry/retail mix building +large yard in the location

Sounds like great bet. PGW will be supplying traditional farms and insect farms in 10 years.