sharetrader
Page 458 of 563 FirstFirst ... 358408448454455456457458459460461462468508558 ... LastLast
Results 4,571 to 4,580 of 5626
  1. #4571
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,737

    Default

    Snoopy ...what’s that 10 year Govt bond rate now ...ouch
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  2. #4572
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,221

    Default

    Quote Originally Posted by winner69 View Post
    Snoopy ...what’s that 10 year Govt bond rate now ...ouch
    1.543%. So it has almost halved since EOFY2018 (was 2.85%) and more to come!

    At 19th May, the date of the pro-forma balance date, the rate was 1.77%. So it has come down a lot more, even in just six weeks.

    If it gets down to 1% then PGW might need a $20m (not $10m) capital injection into the pension scheme, assuming the earnings of the scheme remain flat. But if interest rates fall, then those fixed interest returns will fall as well. So even more money will have to be pumped in just to keep the future earnings stream steady.....ouch....ouch

    SNOOPY
    Last edited by Snoopy; 07-07-2019 at 11:27 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  3. #4573
    always learning ... BlackPeter's Avatar
    Join Date
    Aug 2007
    Posts
    9,497

    Default

    Quote Originally Posted by Snoopy View Post
    1.543%. So it has almost halved since EOFY2018 (was 2.85%) and more to come!

    At 19th May, the date of the pro-forma balance date, the rate was 1.77%. So it has come down a lot more, even in just six weeks.

    If it gets down to 1% then PGW might need a $20m (not $10m) capital injection into the pension scheme, assuming the earnings of the scheme remain flat. But if interest rates fall, then those fixed interest returns will fall as well. So even more money will have to be pumped in just to keep the future earnings stream steady.....ouch....ouch

    SNOOPY
    Actually - quite stupid method to determine the required capital for a pension schema. I am wondering what they are doing at the point in time the interest rate turns negative (as it already is in some parts of the world - i.e. this is a when, not an if)?

    Wouldn't they need in this case an infinite amount of money to fund their funny schema?
    ----
    "Prediction is very difficult, especially about the future" (Niels Bohr)

  4. #4574
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,737

    Default

    The most underfunded super fund in the country is the Government Superannuation Fund - the funds for government employees
    Last edited by winner69; 07-07-2019 at 01:19 PM.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  5. #4575
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,737

    Default

    Quote Originally Posted by BlackPeter View Post
    Actually - quite stupid method to determine the required capital for a pension schema. I am wondering what they are doing at the point in time the interest rate turns negative (as it already is in some parts of the world - i.e. this is a when, not an if)?

    Wouldn't they need in this case an infinite amount of money to fund their funny schema?
    Is a dilemma BP butthey will find a ways around it

    https://www.ipe.com/pensions/pension...016338.article

    “This is for a pure economic reason,” he adds. “If a pension fund makes a promise to stakeholders, it cannot pretend that the promise is as strong as government guarantee. Pension funds cannot print money. A promise a pension fund makes to stakeholders is no different from a promise made by a corporate to repay an investor. Pension funds’ strategies should reflect that dynamic when they think about discounting and matching.”
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  6. #4576
    Reincarnated Panthera Snow Leopard's Avatar
    Join Date
    Jul 2004
    Location
    Private Universe
    Posts
    5,853

    Default

    Quote Originally Posted by BlackPeter View Post
    Actually - quite stupid method to determine the required capital for a pension schema. I am wondering what they are doing at the point in time the interest rate turns negative (as it already is in some parts of the world - i.e. this is a when, not an if)?

    Wouldn't they need in this case an infinite amount of money to fund their funny schema?
    If they have a liability with positive interest rates then obviously it becomes an asset with negative interest rates.

    [Disc: probably left an important word out of this post like I did the last one]
    om mani peme hum

  7. #4577
    Member
    Join Date
    Oct 2002
    Location
    Tauranga NZ
    Posts
    311

    Default

    Quote Originally Posted by winner69 View Post
    The most underfunded super fund in the country is the Government Superannuation Fund - the funds for government employees
    That may be the case, but isn't the GSF banked rolled the government in office.

    PS A recipient of the fund.

  8. #4578
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,221

    Default Seeds of Destruction: Part 3.5 - NPAT of 'PGW Rural Rump' going forwards

    Quote Originally Posted by Snoopy View Post
    I want to revisit my earnings projection, because the last one did not take into account the reduction in unallocated corporate costs. i am in two minds about doing this. The detail of corporate head office restructuring was meant to come out by the end of June. So far the only announcement has been the departure of former CEO Ian Glasson, to be replaced by Stephen Guerin, an internal appointee. If that is all the restructuring that happens, then my cost reduction assumptions will go to custard. However, if my ongoing corporate head office cost reduction is realistic it won't be a free lunch. There will be a capital cost in redundancy that I have not considered. Nevertheless in the interests of 'looking down the road' I think this is a worthwhile exercise to complete.

    From an end of May 2019 post capital repayment balance sheet perspective, the total bank debt on the books is:

    $3.920m + $31.742m = $35.662m.

    This is within the 'core debt' envelope of $25m to $50m forecast for FY2020 (p9 of the proposal). But this is only part of the debt of the company that is forecast to balloon out by way of an additional $70m for 'typical seasonal working capital'. This reality is somewhat different to the 'debt free' situation that I imagined PGW would be in all year round in 'Part 3.2'.

    A greater amount of debt outstanding means our indicative interest bill going forwards needs to be reworked.

    Using past debt balances and interest payments declared over FY2018, the indicative interest rate bill 'before' was $10.235m based on an average debt balance of $179.834m, this implies an indicative interest rate of:

    $10.235m / $179.834m = 5.7% (use in Step 2)

    That means we can calculate the indicative annual interest payments after debt repayment as per the steps below:

    Step 1/ Calculate the incremental peak seasonal debt multiplication factor:

    PGW has various seasonal funding requirements that are met by taking on extra debt. The seasonal funding requirements are outlined in p9 of the 'Special Meeting' explanatory documents for the date of Tuesday 23rd July 2019. Peak working capital (and hence peak debt) is forecast to be between October and January, in line with selling spring seasonal goods to farmers.

    Over FY2020, the minimum net working capital required is estimated to be $35.662m on July 1st 2019 peaking at $105.662m around November 2019.

    $105.662m / $35.662m = 2.9629 (an increment of 196%). Yet averaged over a financial year and using a linear model, the average increase in incremental debt is only half this:

    196% / 2 = 98% => Annual debt incremental factor = 1.98

    Step 2/ Calculate Annual Debt Interest Payment

    Using the liabilities in the balance sheet as presented on p10 of the Special General Meeting notice:

    0.057x [$31.742m+$3.920m-$1.160m] x 1.98
    = $3.894m

    Rural Services ($39.5m EOFY cash balance after debt repayment)
    EBITDA $29.875m
    add Unallocated S&G overhead $1.600m
    less DA $6.918m
    less I $3.894m
    equals EBT $20.663m
    x 0.72 equals NPAT {A} $14.877m
    No. shares on issue {B} 754.048m
    eps {A}/{B} 1,97c
    As we get closer to the capital return vote date, I am honing in on what kind of dividend we shareholders might expect going forwards. There has been discussion on the forum over the weekend on the significant funding deficit that exists within the PGW pension program. Interest rates are falling so fast that the shortfall balance is blowing out. PGW have been trying to fix this. But my expectation is that the five year program initiated in FY2016, to do so will have to be extended. I expect the approximately $3m annual top up cash contribution to continue indefinitely into the medium term. We need to build the loss of this cash from shareholders into the dividend model.

    From an end of May 2019 post capital repayment balance sheet perspective, the total bank debt on the books is:

    $3.920m + $31.742m = $35.662m.

    This is within the 'core debt' envelope of $25m to $50m forecast for FY2020 (p9 of the proposal). But this is only part of the debt of the company that is forecast to balloon out by way of an additional $70m for 'typical seasonal working capital'. This reality is somewhat different to the 'debt free' situation that I imagined PGW would be in all year round in 'Part 3.2'.

    Using past debt balances and interest payments declared over FY2018, the indicative interest bill 'before' was $10.235m based on an average debt balance of $179.834m, this implies an indicative interest rate of:

    $10.235m / $179.834m = 5.7% (use in Step 2)

    That means we can calculate the indicative annual interest payments after debt repayment as per the steps below:

    Step 1/ Calculate the incremental peak seasonal debt multiplication factor:

    PGW has various seasonal funding requirements that are met by taking on extra debt. The seasonal funding requirements are outlined in p9 of the 'Special Meeting' explanatory documents for the date of Tuesday 23rd July 2019. Peak working capital (and hence peak debt) is forecast to be between October and January, in line with selling spring seasonal goods to farmers.

    Over FY2020, the minimum net working capital required is estimated to be $35.662m on July 1st 2019 peaking at $105.662m around November 2019.

    $105.662m / $35.662m = 2.9629 (an increment of 196%). Yet averaged over a financial year and using a linear model, the average increase in incremental debt is only half this:

    196% / 2 = 98% => Annual debt incremental factor = 1.98

    Step 2/ Calculate Annual Debt Interest Payment

    Using the liabilities in the balance sheet as presented on p10 of the Special General Meeting notice:

    0.057x [$31.742m+$3.920m-$1.160m] x 1.98
    = $3.894m

    Rural Services ($39.5m EOFY cash balance after debt repayment)
    EBITDA $25.000m
    add Unallocated S&G overhead $1.600m
    less DA ($6.918m)
    less I ($3.894m)
    equals EBT $15.788m
    x 0.72 equals NPAT {A} $11.367m
    less Pension Scheme Top Up ($3.000m)
    equals Funds available for dividends {C} $8.367m
    No. shares on issue {B} 754.048m
    dps {C}/{B} 1.11c
    eps {A}/{B} 1.51c

    SNOOPY
    Last edited by Snoopy; 01-11-2019 at 07:39 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  9. #4579
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,221

    Default Seeds of Destruction: Pt 5.4 PE Ratio and Gross Yield calculations: PGW Rural Rump

    Quote Originally Posted by Snoopy View Post
    Continuing my rework of the post capital repayment scenario, this time with $1.6m in unallocated head office costs removed.

    Scenario $157.5m debt repayment and new FY2020 Investment
    eps {A} 1.97c
    PGW Rural Rump: Market Valuation {B} 54c - 31c = 23c
    PE ratio {B}/{A} 11.7
    Gross Dividend Yield {A}/{B x 0.72} 11.9%

    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 ratio is now looking looking high for this type of business, despite the fact I have considered a business cycle average value of earnings.

    3/ The potential dividend yield looks O.K.. The lesser than expected capital repayment has not made PGWRR debt free after all. This is no doubt because PGWRR has elected to keep spending to invest in the business. But, conservatively, I haven't modelled the effect of any of this increased earnings coming through.

    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:

    23c x 11.9/8.5 = 32.2c

    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 (32.2c -23c =) 9cps, plus dividends of 2cps per year, are on the table, with the share now trading at 54c. Given we shareholders are currently in a dip in the earnings curve, and that means a rather higher PE than I have calculated above, patience may be required. I see still no immediate bargain available for new shareholders buying in at 54c.
    Continuing my rework of the post capital repayment scenario, now based on an actual FY2019 earnings expected, and with a $3m contribution towards the pension scheme adjusted for.

    Scenario $157.5m debt repayment and new FY2020 Investment
    dps {A} 1.11c
    PGW Rural Rump: Market Valuation {B} 54c - 31c = 23c
    PE ratio {B}/{1.51c} 15.2
    Gross Dividend Yield {A}/{B x 0.72} 6.7%

    Notes

    1/ In the gross yield calculation I am not assuming that all earnings are paid out as dividends. This is because i believe a constant flow of earnings will be needed to bail out the company superannuation scheme which is persistently technically insolvent,
    2/ The PE ratio is now looking looking reasonable this type of business, as we are in a lower part of the earnings cycle (that means PE can be higher)
    3/ The potential dividend yield looks O.K, but is IMO low for this kind of business.. The lesser than expected capital repayment has not made PGWRR debt free after all. This is no doubt because PGWRR has elected to keep spending to invest in the business, even if they haven't fixed their superannuation scheme issues.

    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:

    23c x 6.7/8.5 = 18.1c

    This is a significant fall from the implied market price of 23c. Thus there is now a significant risk of shareholders losing up to 20% of their remaining capital once the entitlement to the long awaited capital repayment has been released.

    As an aside at 18.1c PGWRR would be trading on a PE of:

    18.1c / 1.51c = 12

    At a lowish point in the business cycle, this sounds about right.

    SNOOPY
    Last edited by Snoopy; 08-07-2019 at 06:26 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  10. #4580
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,221

    Default

    18.1 cents or 23 cents.?
    The market says 23 cents.
    Yet 18.1 cents could be right.?
    Either makes sense to me.?
    We continue to live in interesting times.

Tags for this Thread

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •