PGW - PGG Wrightson

[Snoopy]

Nearly there snoopy except you have used total liabilities instead of total assets in E

Wil bring it back to about 2

Sigh! Why is it that the mistakes that are hardest to spot are those staring you right in the face? I will correct my attempt 2 rather than chew up webspace with another full iteration. Thanks Winner.

SNOOPY

[winner69]

Snoopy ...we always knew PGW were pulling themselves with the value of the company in the books eh ..... Shareholders never really owned $600m company did they.

To show things are actually better and in case you want to do this exercise again next year why not pretend that the massive write down happened in 2012 and so had the large retained earnings back then.

Comparing apples to apples then and we can monitor a real trend.

[winner69]

Just bear in mind the part with retained earnings in it is measure that reflects the company's age and earning power.


So why shouldn't this be a 'drag' on PGW when doing this exercise? Like saying once a dog always a dog ....or a leopard never changes it spots or whatever the phrase is

[Snoopy]

Just bear in mind the part with retained earnings in it is measure that reflects the company's age and earning power.

So why shouldn't this be a 'drag' on PGW when doing this exercise? Like saying once a dog always a dog ....or a leopard never changes it spots or whatever the phrase is

Why is PGW not a dog? I think if you look carefully enough all companies have doggy edges.

Captain Craig shaped the PGW ship to conquer the world, but unfortunately ran into the GFC iceberg. By that stage Captain Tim was all set to come on board but coastal cruising didn't suit his global ambitions. So he became PGWs first highly paid onshore gardener. Then it was Captain George who got the job of cleaning the ship up. Everything ship shape and SS PGW is all ready for a new start he reports to Admiral Sir John. Job done George joined the onshore gardening elite. But as soon as successor Captain Mark came on board, what does he find? A $300m skeleton in the closet! Maybe George should have listened to his cleaners/auditors after all?

All captains have come on board with only the best intentions, and now there are no skeletons left on the ship manifest - goodwilling. So PGW no longer a dog, because there are no more bones to gnaw on.

But whether the SS PGW is really ship shape or not, one thing is certain. Somewhere within a a gangways swagger of the PGW home port, there are a couple of very impressive gardens....

SNOOPY

[Snoopy]

Snoopy ...we always knew PGW were pulling themselves with the value of the company in the books eh ..... Shareholders never really owned $600m company did they.

To show things are actually better and in case you want to do this exercise again next year why not pretend that the massive write down happened in 2012 and so had the large retained earnings back then.

Comparing apples to apples then and we can monitor a real trend.

Winner, I have this vision of the distant future where you are wheeled out from your retirement village to get your 100th birthday telegram from King William, whereupon a nurse thrusts a J-pad and holographic pencil in front of you and says.
"All right Mr Winner, time for you to do your annual Altman Z calculation on PGW."

What I was considering, is that given Mr Lai's intention to milk PGW for all the dividends he can (IOW no retained earnings for PGW into the future, so we are stuck with that $359m accumulated loss forever) what kind of a scenario could I imagine where Mr Altman is satisfied that PGW is OK? Or are we destined to carry out this Altman Z dodgeeness rating calculation forever?

Taking a leaf out of Sparky's book I have reverse engineered some of those Altman factors to find out.

The sum we need to lift the Altman rating to 3, the safety zone is 0.8604. If we are to get this factor based on a single factor changing, here are the options.

a/ Sales Increase: ( Sales/ $619,508m ) = (1.827 + 0.8604) => Sales = $1,665m

b/ Share Price: (0.6)( SPx 754.8m )/ $363.402m )= (0.7062 + 0.8604) => SP = $1.27

c/ EBIT: (3.3)( EBIT/ $619.508 ) = ( 0.064 + 0.8604 ) => EBIT= $174m

On the face of things this doesn't look very likely. However, maybe a lesser improvement by all three Altman factors, might yield a possible scenario in which you could live your dotage in peace?

SNOOPY

[Snoopy]

What I was considering, is that given Mr Lai's intention to milk PGW for all the dividends he can (IOW no retained earnings for PGW into the future, so we are stuck with that $359m accumulated loss forever) what kind of a scenario could I imagine where Mr Altman is satisfied that PGW is OK? Or are we destined to carry out this Altman Z dodgeeness rating calculation forever?

The sum we need to lift the Altman rating to 3, the safety zone is 0.8604. If we are to get this factor based on a single factor changing, here are the options.

a/ Sales Increase: ( Sales/ $619,508m ) = (1.827 + 0.8604) => Sales = $1,665m

b/ Share Price: (0.6)( SPx 754.8m )/ $363.402m )= (0.7062 + 0.8604) => SP = $1.27

c/ EBIT: (3.3)( EBIT/ $619.508 ) = ( 0.064 + 0.8604 ) => EBIT= $174m

On the face of things this doesn't look very likely. However, maybe a lesser improvement by all three Altman factors, might yield a possible scenario?

OK time to spread the increase needed in the Altman factor around. 0.4302 on sales, 0.3302 on EBIT and 0.1 on the share price. The shared calculation based on those adjustments works out as follows:


a/ Sales Increase: ( Sales/ $619,508m ) = (1.827 + 0.4302) => Sales = $1,398m

b/ Share Price: (0.6)( SPx 754.8m )/ $363.402m )= (0.7062 + 0.1) => SP = 69c

c/ EBIT: (3.3)( EBIT/ $619.508m ) = ( 0.064 + 0.3302 ) => EBIT = $74m

The question is, are the above company metrics in the plausible space of possible? I conclude, yes they are, but the company will have to work hard to achieve these figures. If we take the actual results from Agriservices from 2012 and 2013 and combine them with the actual results from Agritech from 2007 to 2009, then these are the kind of total EBIT and sales figures we might expect. Given that profitability would roughly double, then we might expect the share price to double and 69c is about twice the price of where PGW trades now. So this is good news, as relief form Altman is attainable. The problem as I see it is that what I have presented here is a 'perfect paddock' scenario. Quite a lot of executive sweat will have to be expended to achieve it. Nevertheless, there is hope.

SNOOPY

[Snoopy]

Here's a good sign with the CEO buying up.

While generally I would agree with majorbarejet that CEOs buying shares in their own company is a good sign, in this instance I beg to differ. Don't get me wrong. I am very glad that Mark has seen fit to increase his holding, and I believe it does send the right signals to the market. My caution is because Mark has only just got his legs under the CEOs desk. I don't believe he has spent enough time at PGW to really get a handle on prospects going forwards. If some of his other senior officers bought I would take notice. If Mark himself bought more shares in six months time I would take notice. But Mark investing in 100k additional shares now, is I feel too soon to be taken as a signal for other investors.

SNOOPY

[percy]

While generally I would agree with majorbarejet that CEOs buying shares in their own company is a good sign, in this instance I beg to differ. Don't get me wrong. I am very glad that Mark has seen fit to increase his holding, and I believe it does send the right signals to the market. My caution is because Mark has only just got his legs under the CEOs desk. I don't believe he has spent enough time at PGW to really get a handle on prospects going forwards. If some of his other senior officers bought I would take notice. If Mark himself bought more shares in six months time I would take notice. But Mark investing in 100k additional shares now, is I feel too soon to be taken as a signal for other investors.

SNOOPY

What we learn from Mark's buying, is that he has found out very quickly what good shape George has left the company in.!!! lol.

[Minerbarejet]

I would take notice too -lets see if he does it again any time soon.

[winner69]

yes, it's hardly a significant amount. I would be more impressed with $100k of shares, than $33k.

Dare I say its the kind of purchase he can make that's relatively risk free and satisfies the shareholders that he cares about the company?

Give him his due he has got a lot more than the Chairman seems to have