PGW - PGG Wrightson

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Good old cider eh .... when I was young there wasn't much choice outside of Rochdale but a bottle of that was much cheaper than wine and slightly more expensive than beer but packed a lot more punch (in other words got you pissed faster and cheaper and less bloated). It was a value investment, best return for cheapest price ha ha

Mind you you cant beat the real stuff down Somerset way .... that's real bad for you

Occasionally have a Old Mout - the Scrumpy stuff, I am old fashioned but they seem to blend all sorts of fruits into the cider as well .... probably a 4% job for the sissys

What sort you got in the fridge tonight

Being from Devon.. and having ridden the horse around and around in circles ( Hmm that might explain much ) driving the Cider press..
I can tell you Old Mout is like drinking Moet.. compared to real Scrumpy..

[winner69]

I had some Bulmers, a Gisborne sourced drop. It was nice, but I agree Old Mout is superb.

Back to PGW - I'm not sure I've seen enough to leap back in again, but agree that at the right price it becomes very tempting.

I don't think you will get that right price sparks

PGW has enough supporters now which will keep the price up ...priced at level which reflects what should happen

But what should and what actually does happen is often different things with PGW

[Snoopy]

know how you feel. Have been crunching my value formulas all over the place as the rain hits the big glass window.

PGW comes up strongly as a value buy on the Graham 22.5 score.

(P/E X P/B must be <=22.5)

I think it is probably best if you use this Graham score as a screen, as Graham intended. What this formula tells me is that Graham makes no distinction between different PE ratios and different price to book ratios across different industry groups. When using this formula you have to think about whether PGW justifies an 'average' PE ratio. I would argue that due to the cyclical nature of farming it does not. Also PGW has traded around the price to book ratio for a considerable period in its history. That is more than enough time for outsiders to buy into the company and make those lazy assets work hardrer. Craig Norgate couldn't do it, and neither so far has Alan Lai with his five year involvement. I would take this as evidence that working those lazy assets harder is more difficult than we observers think.

The problem I see with reverse engineering the formula, as Sparky has done, to derive a shareprice for a given PE and Price to book ratio, is that this approach embeds the assumption of a 'normal' PE and a 'normal' Price to Book ratio. I would argue that these normalised assumptions do not apply to PGW, so the Sparky formula will give potential investors a wrong (overoptimistic) answer on PGW share price value.

SNOOPY

[Snoopy]

I actually feel more positive about the potential for share price growth from here. However, it is still hard to see more than 20-50% in it, so not a lot to get excited about.

As my alter ego Percy has already said, 20% to 50% is quite enough to get me excited in this climate of full valuation just about everywhere you look. But the thing that appeals to me about PGW having offended so many new investors to the company already is that it is hard to imagine a scenario where the PGW share price will go significantly lower as there is no lower sharemarket shelf than the one labelled 'utter contempt'. Investor protection on the downside is just as important as looking at the potential upside!

SNOOPY

[Snoopy]

EBITDA at high end of expectations so not a disappointing result ..... but at the end of the day no matter what Percy has said about John and George for all things they are involved in and their market position it really is a pathetic result.

Not much left at the end of the day after selling 1.1 billion of stuff

Another thing I always worry about companies that feel they need to report ebitda as Operating Profit .... isn't things like interest a reality of life?

I have always found that when I have an interest bill I have to pay it as well Winner. My preferred method of analyzing companies is net profit after both interest and tax has been paid, on a divisional basis. Having updated my spreadsheet for the FY2013 results, here is the picture it gives me.

That column on the right represents divisional earnings in millions of dollars, but I haven't figured out how to get the 'm' behind the number yet. To me there are three clear messages in this divisional profit sketch.

1/ Agriservices in total had a great year, much better than I expected.
2/ The light blue Agritech continues in what seems to be an unending slump.
3/ The South American growth engine has stalled, which is very disappointing.

SNOOPY

[Snoopy]

To me there are three clear messages in this divisional profit sketch.

1/ Agriservices in total had a great year, much better than I expected.
2/ The light blue Agritech continues in what seems to be an unending slump.
3/ The South American growth engine has stalled, which is very disappointing.

One thing I forgot to mention was that the biggest driver of 'growth' was actually the lower interest bill. Net interest payable dropped from $13.835m to $6.102m. Unfortunately with Alan Lai siphoning off as much cash as he can to keep cornerstone shareholder Agria afloat, this biggest driver of 'growth' has now stalled as well.

SNOOPY

[winner69]

Which column has got seeds in it Snoopy

Must have boosted whatever one it is in

[Snoopy]

Which column has got seeds in it Snoopy

Must have boosted whatever one it is in

Seeds is part of Agritech Winner. It has gone from star performer in FY2008 to perennial non-performer.

SNOOPY

[Snoopy]

Seeds is part of Agritech Winner. It has gone from star performer in FY2008 to perennial non-performer.

I know that correlation does not necessarily imply causation, but I thought this more detailed examination of Agritech over several years does tell a story. The graph shows that while overall revenue is on a weak growth path, revenue from Agritech Australia is on a much stronger growth path. Unfortunately this strength seems to have come from buying a significant number of barely profitable or unprofitable bolt on acquisitions in Australia. The result has seen a sharp fall off in profits overall from the days when PGWs biggest income stream in Australia was NZ developed turf mix. Now the whole Agritech division is a mess and a far cry from the Monsanto of the southern hemisphere that Alan Lai envisaged when he seized control.

SNOOPY

P.S. On 1 August 2012 the Group entered into an incorporated joint venture in New Zealand, 4Seasons Feeds Limited. This joint venture company operates in the sale and distribution of
molasses liquid feed. The transaction involved the Group divesting certain assets including intangibles from Agri-feeds into the joint venture company 4Seasons Feeds Limited to create a supply chain to import, transport and distribute molasses through the former Agrifeeds channel.

Under the terms of the agreement Agri-feeds manages the operations of the joint venture company in return for a management fee. A loss on sale of assets of $2.9 million
was incurred with $2.8 million of this loss pertaining to a loss on the sale of goodwill. This JV entity is an associate and is accounted for using the equity method.

This has affected the revenues of Agritech, by transferring those earnings to earnings via an associate, 50% owned 4Seasons Feeds Limited. However I am not clear if the Agrifeeds division of Agritech no longer exists, or that declared on the books is just a remaining rump of the old whole business.

[bulltrap]

Or maybe there is hefty takeover premium built into the price!!!

I've been mulling this one over, especially since I'm kicking myself for bailing too soon on FPA last year. (I was in for a full takeover, but once the share price recovered and levelled off I figured it wasn't happening - wrong!)

If I were strategizing a foreign takeover of a local company, my #1 rule would be this: Make sure the locals have skin in the game.

With the Ngai Tahu partnership and 50% non-controlling shares outstanding (an unfathomable percentage of which are assumed to be locally-owned), I'd say Agria have this spot-on already. Any more could trigger a firestorm of xenophobia in the local media and in their client base (Crafar farms anyone??).

So on that basis, I've recently thrown in the towel on what I hoped was another value/takeover play.

But in hindsight, what was different for FPA? Well, the #1 rule above would still apply, unless you could determine that the company wasn't the subject of nationalistic pride anyway. New Zealand is after all, in its own view, a '100% pure' agriculture producer, and someone else can take care of smokestacks and churning out widgets thanks.