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  1. #2911
    Speedy Az winner69's Avatar
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    He did have 173k before he came CEO as well ....what a good guy

  2. #2912
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    Quote Originally Posted by snapiti View Post
    go you good thing.
    me thinks if it breaks through 35cps it will go real close to 40cps real fast.
    what do the chartist say
    Yeah that's roughly what I reckon, except I think it just needs to break above 34cps. I became an accidental owner today. I saw the SSH and while I know it was for a relatively small parcel of shares as far as CEOs go, I think it may be just what the farmer ordered to push the stock on. It's quite a difficult stock to chart with the normal the indicators. This is my rough drawing of where things sit just with basic trendlines:
    Attachment 4730

  3. #2913
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    Default Altman Z test for PGW for FY2013

    Quote Originally Posted by Snoopy View Post
    Altman Z test for PGW for FY2012

    Now, Z= 1.2A+1.4B+3.3C+0.6D+1.0E

    Where:
    A= (Working capital/Total Assets)
    B= (Retained earnings/Total Assets)
    C=( EBIT/ Total Assets)
    D= (Market value of Equity/Total Liabilities)
    E= (Sales/Total Assets)

    This is the first time I have done one of these 'Z' calculations, so you might want to check if I have got it right:

    I have assumed 'Working capital' to be the amount of cash tied up in the business as a result of normal operations at the end of the financial year.

    So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($239.4m+$20.7m)+($228.1m-$207.1m)= $281.1m

    So A = $281.1m/$980.5m = 0.287

    ----

    B= (Retained earnings/Total Assets)

    Now PGW have retained all of their earnings and not paid a dividend. So Retained earnings is equivalent to NPAT

    $24.243m/$980.472m= 0.025

    --------

    C= (EBIT/ Total Assets) = $42.438m/$980.472m = 0.043

    --------

    D= (Market value of Equity/Total Liabilities) = (0.37 x 754.85m)/$402.698m = 0.694

    --------

    E= (Sales/Total Assets) = $1,336.8m/$980.472m = 1.363

    -------

    So putting everything together:

    Z= 1.2A+1.4B+3.3C+0.6D+1.0E
    = 1.2(0.287)+1.4(0.025)+3.3(0.043)+ 0.6(0.694)+1.0(1.363)= 2.30

    A Z-score of lower than 1.8, in particular, indicates that the company is heading for bankruptcy. Companies with scores above 3 are unlikely to enter bankruptcy. Scores in between 1.8 and 3 lie in a grey area.

    That means by Z-score PGW is far from a safe investment, and will require further work by management.

    Altman Z test for PGW for FY2013

    Now, Z= 1.2A+1.4B+3.3C+0.6D+1.0E

    Where:
    A= (Working capital/Total Assets)
    B= (Retained earnings/Total Assets)
    C=( EBIT/ Total Assets)
    D= (Market value of Equity/Total Liabilities)
    E= (Sales/Total Assets)

    I have assumed 'Working capital' to be the amount of cash tied up in the business as a result of normal operations at the end of the financial year.

    So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($243.7m+$4.2m)+($222.7m-$217.8m)= $252.8m

    So A = $252.8m/$619.5m = 0.408

    ----

    B= (Retained earnings/Total Assets)

    PGW have paid out more in dividends than they earned. So 'Retained earnings' is a negative value. The excess of dividends paid out over NPAT

    -$22.65m/$619.5m= -0.0366

    --------

    C= (EBIT/ Total Assets) = $39.64m/$619.5m = 0.064

    --------

    D= (Market value of Equity/Total Liabilities) = (0.34 x 754.85m)/$363.4m = 0.706

    --------

    E= (Sales/Total Assets) = $1,131.8m/$363.402m = 3.114

    -------

    So putting everything together:

    Z= 1.2A+1.4B+3.3C+0.6D+1.0E
    = 1.2(0.408)-1.4(0.0366)+3.3(0.064)+ 0.6(0.706)+1.0(3.11)= 4.18

    A Z-score of lower than 1.8, in particular, indicates that the company is heading for bankruptcy. Companies with scores above 3 are unlikely to enter bankruptcy. Scores in between 1.8 and 3 lie in a grey area.

    That means by Z-score PGW is now out of danger of going bankrupt. Rather different to the Winner result on post 3410. Did I make a mistake?

    SNOOPY
    Last edited by Snoopy; 20-08-2013 at 03:18 PM. Reason: Correcting maths calculation
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  4. #2914
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    Default Senior Debt Coverage Ratio for Fy2013

    Quote Originally Posted by Snoopy View Post
    Senior Debt Coverage Ratio = (senior bank debt)/EBITDA

    This had to be reduced to under 3 before any excess cashflow becomes available for distribution. Using the figures at the end of the FY2012 financial year, I can calculate this figure as it stood on 30th June 2012.

    SDCR= ($29.709m+$111.500m)/ $50.761m = 2.78

    If the SDCR is under 3.0 but over 2.0, this means the banking syndicate will allow 50% of PGW excess cashflow to be paid out. However, you will note that once all of the FY2012 profits have been booked the SDCR is only just under 3. That means it is unlikely that any distribution to shareholders would have been allowed up until 30th June 2012.
    Last year I did this under post 2178 (above)

    Senior Debt Coverage Ratio = (senior bank debt)/EBITDA

    This had to be reduced to under 3 before any excess cashflow becomes available for distribution. Using the figures at the end of the FY2013 financial year, I can calculate this figure as it stood on 30th June 2013.

    SDCR= ($47.702m+$62.000m)/ $45.797m = 2.40

    If the SDCR is under 3.0 but over 2.0, this means the banking syndicate will allow 50% of PGW excess cashflow to be paid out. Thre is a significant improvement from FY2012, but the SDCR is still within the 2-3 range. That means it is unlikely that more than 50% of profits will be paid out to shareholders. However, Alan Lai must have twisted the banks arms as it looks like 100% of profits are being paid out.

    SNOOPY
    Last edited by Snoopy; 20-08-2013 at 03:12 PM.
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  5. #2915
    Speedy Az winner69's Avatar
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    Snoopy - I think Mr Altman uses the Retained Earnings number on the balance sheet. This is the accumulated Retained Earnings over time, not just for the current year as you have used

    Ouch what was that number for PGW again

    Rationale of that ratio is twofold. One being to see if borrowings fund growth and the other an indication of the long term profitability of the company. In this case PGW gets penalised on the Z Altman Score because of its long tradition of losing money (or not making very much), in other words if push comes to shove how would PGW extract themselves from a sudden tight situation.

    And just remember its just a screening tool and a load of bull**** .... but one that is used by real lenders of money (along with other ratios)


    Trend is the key .... is the ratio getting better worse or better. Hard to say as PGW just stuffed up previous calculations by making that huge writeoff. Maybe the EBIT we use should be the real number ... not the (ab)normalised one ha ha

    Does seem a dangerous game cutting it so fine with the overdraft limit at the end of an accounting period though ..... a sign that management not on top of things?

  6. #2916
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    Quote Originally Posted by winner69 View Post
    Snoopy - I think Mr Altman uses the Retained Earnings number on the balance sheet. This is the accumulated Retained Earnings over time, not just for the current year as you have used

    Rationale of that ratio is twofold. One being to see if borrowings fund growth and the other an indication of the long term profitability of the company. In this case PGW gets penalised on the Z Altman Score because of its long tradition of losing money (or not making very much), in other words if push comes to shove how would PGW extract themselves from a sudden tight situation.

    And just remember its just a screening tool and a load of bull**** .... but one that is used by real lenders of money (along with other ratios)
    Just a screening tool as you say, so no point in getting too worked up about it. However Winner, it looks to me as though there is a conceptual inconsistency in the Altman Z formula as highlighted by this PGW result.

    $300m in losses casts a very long shadow into the future. PGW will take ten years or more to eradicate that cumulative earnings deficit. So another way of interpreting Altman in the PGW case is to say.

    "Don't invest in this company until that one off loss has been erased by positive earnings"

    In the case of PGW that means 'avoid investing' for ten years, all because of this one off 'mistake' of recognizing all that goodwill with the merger of Pyne Gould Guinness and Wrightson in 2006. IOW for a decision taken in 2006, you should not invest until 2023! Eighteen years is a very long shadow to cast, when all the other metrics that make up the ALTMAN formula (sales, ebit, market value of equity and working capital) are measured on a single year basis.

    I am inclined to think that by just using the current years retained earnings, and looking at the annual trend in this modified Altman statistic rather than going for the long shadow effect that Altman is suggesting, I will get a far more useful set of figures. Maybe a call to that Altamn guy is in order? What do you think?

    SNOOPY
    Last edited by Snoopy; 20-08-2013 at 08:25 AM.
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  7. #2917
    Speedy Az winner69's Avatar
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    Snoopy ....we just need to look at the trend ...is the z score getting better or not and we can't really do that until next year can we as this year was really the starting point after all the write downs eh to give a more real picture of what shareholder funds are. Just like old ROE numbers are useless. The point that Altman makes is that retained earnings does say something about how the company operates and is a sort of proxy for long term performance ...in this case years of underperformance which would worry a lender ( and remember this is a solvency test)

    Good exercise but agree a bit meaningless at the moment.

    question .....that $360m .....is what shareholders have lost over the years isn't it?

  8. #2918
    Speedy Az winner69's Avatar
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    Sparky ...yes Beinish is useful. Not to assess solvency but whether earnings are being manipulated

    We did the Beinish thing on PGW a while ago and they were given the green light ....no signs of manipulation.

    Then again when a company is in a steady state of poor performance (equilibrium almost) I don't think one would need Beinish to work out if the numbers were being fiddled.

    I'd be more inclined to recheck the numbers using Beinish if PGW suddenly improved profits .....now there's a low blow

  9. #2919
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    Default Altman Z Test for PGW for FY2013 - Attempt 2

    Quote Originally Posted by Snoopy View Post
    Winner, thanks and I accept your correction for term 'B':

    So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($239.4m+$20.7m)+($228.1m-$207.1m)= $281.1m

    So A = $281.1m/$980.5m = 0.287

    ----

    B= (Retained earnings/Total Assets)

    -$34.30m/$980.472m= -0.035

    --------

    C= (EBIT/ Total Assets) = $42.438m/$980.472m = 0.043

    --------

    D= (Market value of Equity/Total Liabilities) = (0.37 x 754.85m)/$402.698m = 0.694

    --------

    E= (Sales/Total Assets) = $1,336.8m/$980.472m = 1.363

    -------

    So putting everything together:

    Z= 1.2A+1.4B+3.3C+0.6D+1.0E
    = 1.2(0.287)+1.4(-0.035)+3.3(0.043)+ 0.6(0.694)+1.0(1.363)= 2.22
    OK the above is quoted from post 2401, when Winner had to correct my same mistake last year. Looks like I am a bit of a slow learner with this Altman Z! Now I will incorporate Winner's correction of including all retained earnings on the books (not just this years normalised less abnormals and dividend paid) into the calculation.

    Altman Z test for PGW for FY2013

    Now, Z= 1.2A+1.4B+3.3C+0.6D+1.0E

    Where:
    A= (Working capital/Total Assets)
    B= (Retained earnings/Total Assets)
    C=( EBIT/ Total Assets)
    D= (Market value of Equity/Total Liabilities)
    E= (Sales/Total Assets)

    I have assumed 'Working capital' to be the amount of cash tied up in the business as a result of normal operations at the end of the financial year.

    So WC= (Inventory+Biological assets)+(Trade Payables-Trade Receivables)= ($243.7m+$4.2m)+($222.7m-$217.8m)= $252.8m

    So A = $252.8m/$619.5m = 0.408

    ----

    B= (Retained earnings/Total Assets)

    'Retained earnings' is a negative value (in the case of PGW!) as displayed on the balance sheet under the 'Equity' header.

    -$359.28m/$619.5m= -0.5800

    --------

    C= (EBIT/ Total Assets) = $39.64m/$619.5m = 0.064

    --------

    D= (Market value of Equity/Total Liabilities) = (0.34 x 754.85m)/$363.4m = 0.706

    --------

    E= (Sales/Total Assets) = $1,131.8m/$619.5m = 1.827

    -------

    So putting everything together:

    Z= 1.2A+1.4B+3.3C+0.6D+1.0E
    = 1.2(0.408)-1.4(0.5800)+3.3(0.064)+ 0.6(0.706)+1.0(1.827)= 2.139

    A Z-score of lower than 1.8, in particular, indicates that the company is heading for bankruptcy. Companies with scores above 3 are unlikely to enter bankruptcy. Scores in between 1.8 and 3 lie in a grey area.

    Altman Z is telling now me that things are worse than last year. Yet the only one of the five terms within the formula that has actually deteriorated is the one relating to retained earnings. The other four performance metrics have got better. The past is certainly casting an ugly shadow on PGW, at least as far as Mr Altman is concerned.

    SNOOPY
    Last edited by Snoopy; 21-08-2013 at 09:11 AM. Reason: Correct factor E, as per Winner's suggestion
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  10. #2920
    Speedy Az winner69's Avatar
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    Nearly there snoopy except you have used total liabilities instead of total assets in E

    Wil bring it back to about 2

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