PGW - PGG Wrightson

[Snoopy]

@snoopy,

we had already financial year end . You are saying that Agria has a loss of $US54 Million because of the declining shareprice. That means that the senior vice president of Agria is lying to me, or do i have misinterpretet his statement ?

David Pascaöe, SVP of AGRIA:
>>In terms of your questions on, PGG Wrightson, Agria consolidates PGG Wrightson's results and then backs out the non-controlling portion. A declining share price does not impact such treatment on the income statement nor would it on the balance sheet. It would impact the valuation if there was some type of liquidity event. <snip> David<<

I don't think what I have said and what David Pascaöe has said is inconsistent. When Agria took out their loan(s) to buy shares in PGG Wrightson, the loan would have been for a fixed term, greater than one year The first of those loans are due to be renewed on 23rd January 2013. This is a 'liquidity event' of the kind that David was referring to.

The decline in PGW share price is not a cash event for Agria. I think this is probably what David means when he says a declining share price won't affect the income statement.

SNOOPY

[Snoopy]

PGW is a subsidiary of Agria, so PGW's debt should be consolidated into Agria's balance sheet.

Time to try and disentangle the PGW debt from the underlying Agria debt.

From the PGW FY2011 Balance sheet:

PGW Total Liabilities: $NZ844.685m
PGW Total Equity: $NZ604.341m
PGW Total L & E: $1,449.026m

Convert that to USD using $NZ1= US81.73c

PGW Total Liabilities: $US690.36m
PGW Total Equity: $US493.92m
PGW Total L & E: $US1,184.29m

Reduce value to allow for Agria owning 50.22% of shares as at 30th June 2011

Agria PGW Liabilities: $US346.69m
Agria PGW Equity: $US248.05m
Agria PGW L & E: $US594.75m

Now we go to the Agria Balance Sheet for the same 30th June 2011 date, which includes the 50.22% share of PGW as a consolidated entity.

Agria Liabilities: $US831.1m
Agria Equity: $US412.3m
Agria L & E: $US1243.4m

Now use subtraction to look at the underlying Agria balance sheet.

Underlying Agria Liabilities: $US484.4m
Underlying Agria Equity: $US164.2m
Underlying Agria L & E: $US648.6m

That means the underlying Agria itself has an equity ratio of:

$US164.2m /$US648.6m= 25.3%

SNOOPY

[Snoopy]

Underlying Agria Liabilities: $US484.4m
Underlying Agria Equity: $US164.2m
Underlying Agria L & E: $US648.6m

That means the underlying Agria itself has an equity ratio of:

$US164.2m /$US648.6m= 25.3%

David Pascaöe, SVP of AGRIA:
"In terms of your questions on, PGG Wrightson, Agria consolidates PGG Wrightson's results and then backs out the non-controlling portion."

This is the quote and the above calculation is putting David's statement into numbers. From this I make the following observations.

1/ The underlying Agria is very heavily indebted, far more so than PGW which is itself constantly sailing to the lay line of its banking covenants.
2/ The underlying Agria has almost no income.
3/ The underlying Agria is facing a 'liquidity event' when it has to renew its US loans starting on January 23rd.

Trying to imagine myself as a 'management consultant' it is hard to know how to proceed from this position. Perhaps approach Harry Houdini to ask if he might take up a seat on the board?

SNOOPY

[Snoopy]

Underlying Agria Liabilities: $US484.4m
Underlying Agria Equity: $US164.2m
Underlying Agria L & E: $US648.6m

That means the underlying Agria itself has an equity ratio of:

$US164.2m /$US648.6m= 25.3%

I should add that these figures are from 30th June 2011. If we add in the $US50m write down that marking PGW shares to market in the Agria accounts will produce at 30th June 2012, I estimate the equity ratio will be looking even sicker.

$US114.2m /$US598.6m= 19.1%

The wider problem here is that with a market capitalization of only $US50m, the chances of Agria raising the amount of capital to make their underlying balance sheet even passably respectable is slim. A 'New Hope' bail out for Agria is possible if the Chinese government can be convinced of its worth. But that will mean a massive share dilution for existing shareholders.

With such risk, the idea of Agria being used as an arbitrage agent when the hidden PGW share price differs widely from the NZX quoted value of PGW does not seem credible.

SNOOPY

[Xerof]

http://www.stuff.co.nz/business/opin...ddy-the-waters

Adds petrol to the fire......

[percy]

The surprise may be Wrightson Real Estate division?

Full page ad in today's Sunday Star Times page D17.PGC Wrighton Real Estate;
"Our sales in the past year are up over 54% and we are now seeking listings for spring."

[Balance]

Full page ad in today's Sunday Star Times page D17.PGC Wrighton Real Estate;
"Our sales in the past year are up over 54% and we are now seeking listings for spring."

Unfortunately, there may be a surprise as well on the bad loan book.

But then again, the CRafar farm situation could see a recovery?

All will be answered on 22 Aug.

Meanwhile, place your bets by buying or selling your shares.

"Who dares, wins!"

[winner69]

Maybe real estate doing OK .... but will the commissions cover any losses from distressed sellers

[janner]

QUOTE=percy;378795]Full page ad in today's Sunday Star Times page D17.PGC Wrighton Real Estate;
"Our sales in the past year are up over 54% and we are now seeking listings for spring."[/QUOTE][I][/

Dollars or volume Perc ??

[Balance]

Maybe real estate doing OK .... but will the commissions cover any losses from distressed sellers

If you notice, the banks and mortgage financiers are holding fast to their farm security and working with the defaulting farmers to manage their way out of the mess that is the farming sector?

Hence, very few mortgagee sales.

The latest move is by real estate firms like Wrightson and Bayleys to bundle up farms to sell to overseas interests to maximise returns for the banks and financiers.