PGW - PGG Wrightson

[Balance]

Snoopy, me thinkth you are missing the wood for the trees.

The issue with Agria is its relationship with New Hope.

Watch that one carefully.

[Snoopy]

Snoopy, me thinkth you are missing the wood for the trees.

The issue with Agria is its relationship with New Hope.

Watch that one carefully.

Balance, I painted my possible 'get out of jail' scenario for Alan Lai for the benefit of Agrainvestor, and other Agria shareholders.

From a hard hatted PGW investor perspective, I am disinterested as to whether PGW enters China by the good grace of Alan Lai or Hopeful Hope, the CEO of New Hope. Actually from a medium term perspective I don't think China matters at all. Whatever pans out in Australia and South America is far more important to the medium term direction of PGW, even though there are many on this forum that think China is all that matters. It is going to take rather more than one guy with a PGW cap on in Shanghai to really get me interested in the Chinese market prospects.

SNOOPY

[Snoopy]

Snoopy on what basis do you come up with the idea that PGW should trade at 6-10 PE multiples in the future when over the past 9 years they have traded between 12 and 18 PE.

Have just had a look through by own library of PGW information. I have calculated the PE ratio as at 30th September for the following years using the information presented.

Year, Share Price 30th Sept ($), Underlying Profit, Quoted Profit, , eps (cps), PE

2012, 0.35, $24.0m, $24.5m, 3.2c, 10.9
2011, 0.40, $7.1m, -$30.7m, 1.0c, 40.0
2010, 0.56, $18.0m, $18.0m, $23.3m, 2.4c, 23.3
2009, 0.64, $30.2m, -$65.2m, 9.6cps, 6.6
2008, 1.60, $47.9m, $73.2m, 16.6cps, 9.6
2007, 1.93, $27.9m, $40.6m, 14.4cps, 13.4

The quoted profit from the annual report contains so many 'one offs' it is misleading in my opinion.

I have calculated my 'underlying profit' by using the divisional EBIT figures, then removing an allocation of interest in proportion to divisional revenue. Tax has been calculated at the appropriate rate assuming it is all paid in one year.

You can see that in the two 'good years' YE 30th June 2008, and YE 30th June 2012 the PE was 9.6 and 10.9 respectively.

The FY2011 bad year saw the PE rise to 40, in anticipation of course that profits would not be that low for long.

The low PE of 6.6 in FY2009 was a special case. It was known that a large capital issue was imminent and that always depresses the share price.

In summary I submit that a PE for PGW of 10 is reasonable in a good year. My idea of 6 was probably too low, unless another a capital raising is imminent.

On a PE of 10, the fair value for PGW shares is 32c

SNOOPY

[Snoopy]

Whatever happens I do expect some 'market action' in PGW as crunch time approaches for controlling shareholder Agria. If the PGW price goes up as a result I may sell my residual holding. If the PGW share price goes down I may just buy some more.

I think I have been a little obtuse in my PGW investment strategy. So to try and make my thoughts a little clearer...

1/ I do think that Agria needs to raise capital and that this will cause market uncertainty for PGW investors as the crunch point for Agria approaches 23rd January 2013. This may be usurped by the delisting of Agria on January 19th 2013 if they fail to get their share price back over $US1.

2/ I am not sure which way the market will take the Agria news, as I see two possible responses.

2a/ The market will sell down PGW as it perceives the China strategy has gone off the rails with the potential demise of Agria.
2b/ The market will bid up PGW as it realizes that whoever buys the Agria stake will be forced to make a bid for the entire company under NZ takeover code rules.

3a/ If the market sells PGW this will be an opportunity to buy PGW at bargain prices as I do believe the long term future of PGW is secure.
3b/ If the market buys PGW then the price if it gets above, say. 50c will be a PE of 15 and too high. I would sell my residual PGW stake on market in that situation, because there is go guarantee of a full bid for PGW at a fair price. The buyer of the majority Agria stake might make a low ball offer to ensure the balance of PGW remains listed

SNOOPY

[Balance]

Sorry, Snoopy, but I think you are still focused on the wrong thing - Agria is not the one to watch as much as New Hope.

Also, the moves by Haier to take out FPA and now, Olam taking out (trying) NZS tell you the Asian corporates have a different perspective on timeframe and value.

Dodgie Georgie's firesale stock at 32c still being absorbed but just like HNZ, will be absorbed.

A quick 10% gain by those who participated in the firesale gives those who cannot participate a chance to go for the next move by New Hope.

[Queenstfarmer]

Yes wouldn't that be just grand to see an offer of $1.20 just like FPA or even half that would get shareholders excited.

[Balance]

Watch out before too long for the cries of anguish, outrage and xenophobic distress about yet another iconic NZ company being bought by overseas interests etc.

Meanwhile, the market yawns and chases after yet more rental properties!

[Snoopy]

Sorry, Snoopy, but I think you are still focused on the wrong thing - Agria is not the one to watch as much as New Hope.

<snip>

A quick 10% gain by those who participated in the firesale gives those who cannot participate a chance to go for the next move by New Hope.

Here is the website of your PGW saviours Balance.

http://www.newhopegroup.com/EN/GlobalGoal.aspx?

Click on their overseas investment section and you can read all about their overseas investment plans - for poultry feed production in Indonesia.

SNOOPY

[Queenstfarmer]

Big volumes creeping up on the buy side of the table...perhaps that Black swan has a web or two in the water. :-)

[Balance]

Here is the website of your PGW saviours Balance.

http://www.newhopegroup.com/EN/GlobalGoal.aspx?

Click on their overseas investment section and you can read all about their overseas investment plans - for poultry feed production in Indonesia.

SNOOPY

PGW does not need New Hope as a savior now, Snoopy.

Agria does.