PGW - PGG Wrightson

[Balance]

Does anyone know if the banks are going to get all that is owed to them, princable and all outstanding interest and associated legal fee's.
Payment of the crafer debt will only further strengthen the PGW books.


Current PE of 11 looking very cheap.

Totally agree with you master98 the overhang of 40m shares sold at 29 cents p/s may or may not be an issue but I have never let what a minority shareholder may or may not be thinking sway my investment decisions. THAT WOULD BE CRAZY !!!

In my opinion given the current share price and company performance minority share holders should be topping up. Still think 40 cents p/s with in 4 weeks.

Have a close look at the price action of RBD after AMP sold off its 10% shareholding at 58 cents.

The sp initially ran up strongly to 66 cents and then, was hit by profit taking back down to 63/64 cents and was at that level for a while while those lucky enough to get stock at 58 cents took their quick 10% to 15% profits.

Even luckier were those who bought off them beacause they were able to get stock which made them 100% to 200% later.

PGW has the same potential - thanks to Dodgie Georgie.

[Master98]

Have a close look at the price action of RBD after AMP sold off its 10% shareholding at 58 cents.

The sp initially ran up strongly to 66 cents and then, was hit by profit taking back down to 63/64 cents and was at that level for a while while those lucky enough to get stock at 58 cents took their quick 10% to 15% profits.

Even luckier were those who bought off them beacause they were able to get stock which made them 100% to 200% later.

PGW has the same potential - thanks to Dodgie Georgie.

Sadly, Snoopy didn’t realize such potential at least yesterday

[Balance]

Sadly, Snoopy didn’t realize such potential at least yesterday

That's why it is called a market! Buyers and sellers, believers and doubters.

PGW could take just a little longer than RBD to really move along as the stench from PGC and Dodgie Georgie will take a little while longer to clear.

The stench from rotten fish gets into everything - carpets, wraps, etc - will need a few spring cleans to freshen the room! Meanwhile, the blue-arse blowflies will still buzz around even though the offending decomposing objects have been removed.

[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.

A fair question Snapiti. I make the following observations.

1/ PGW has not existed in its current form for nine years.

2/ The PGW that was formed from the merger or Wrightsons and Pyne Gould Guiness is a very different animal to the PGW that exists today. The finance division has gone. The global ambition to conquer the world with NZ farming practices (such as NZS) has been stopped and NZS has been cut loose. It makes sense that the PE multiple of the seasonal businesses that are left should be less.

3/ My 6-10 PE estimate for PGW comes from the yield I would expect in a good year. I would expect something like 8% net that equates to:

8/0.7= 11.4% gross

That means for every $1 (P) I spend I want 11.4c gross(E) back. So we immediately have an implied PE of ;

1/0.114= 8.75

Of course this assumes the company will pay out all of its earnings in dividends every year. That is probably unlikely. Lets say the company pays out 90% of its earnings. That means the PE on my prospective 'agricultural share' investment will be lower as my 'income demands' are now only for 90% of earnings.

0.9 x 8.75 = 7.9, close enough to 8.

Of course PEs are never constant. On good years they tend to be lower (in anticipation of the inevitable earnings drop). In bad years they are higher (because bad times do not last forever.)

Therefore I come to my 6-10 range about my PE of 8 average.

SNOOPY

[Snoopy]

Sadly, Snoopy didn’t realize such potential at least yesterday

What nonsense. My PGW shares rose the same amount as yours did Master. The shares are now worth more because of the good performance of Agriservices. The question is should I now add to my holding because of the potential for Agritech to do well in China.

I would argue the results do not support such an investment. I wouldn't right off the chances of PGW, which is why I still hold the shares.

But I am not a buyer either. I require a discount for a margin of safety. By my judgement, that is not there.

SNOOPY

[Master98]

What nonsense. My PGW shares rose the same amount as yours did Master. The shares are now worth more because of the good performance of Agriservices. The question is should I now add to my holding because of the potential for Agritech to do well in China.

I would argue the results do not support such an investment. I wouldn't right off the chances of PGW, which is why I still hold the shares.

But I am not a buyer either. I require a discount for a margin of safety. By my judgement, that is not there.

SNOOPY

Calm down snoopy, if your posts are true, i am sure my shares rose different amount from yours, my average share price just under 30cps, yours is still red.

[Master98]

master98 you are doing slightly better than me my average buy in is 32.5 cents but this includes a doubling of my shareholding @ 34 cents just after their announcement.
Share price and the trades are making the right noises, roll on 40 cents, maybe as soon as next week, but I dont mind waiting cause it well get there.

I sold my holding at 40c (41c?) just after half year report, and buyback at 30c and 29c. finger cross.

[Snoopy]

Calm down snoopy, if your posts are true, i am sure my shares rose different amount from yours, my average share price just under 30cps, yours is still red.

Ah I wondered what that little red sticker was on the top of my PGW share certificate. Now I know!

SNOOPY

[Snoopy]

Snoopy most of what you say is reasonable, but expecting an 8% dividend yield from any company in todays climate is sadly optimistic.

I hadn't reviewed the market yield on my 'income shares' for a while Snapiti, so I took your post as a signal to do so.

With the Friday valuation adjustment (SP=$2.52) and cum dividend Telecom does offer an 8% net yield cum an 11c dividend. Turner's Auctions (SP= $1.78) is also very close at 7.3% cum a 7c dividend. Restaurant Brands (SP= $2.26) is yielding a net 6.85%. Earlier this years all of these were yielding over 8% net, so an 8% net yield is not the impossible dream you think it is.

However it must only be a matter of time before those bruised by low bank rates realize they could double their income by investing in a basket of conservative income shares. Perhaps the process has already started and 7% is now the 'good as it gets' figure?

SNOOPY

[Snoopy]

Perhaps the process has already started and 7% is now the 'good as it gets' figure?

OK lets roll with the above assumption and see what happens.

7/0.7= 10% gross

That means for every $1 (P) I spend I want 10c gross(E) back. So we immediately have an implied PE of ;

1/0.1= 10

Of course this assumes the company will pay out all of its earnings in dividends every year. That is probably unlikely. Lets say the company pays out 90% of its earnings. That means the PE on my prospective 'agricultural share' investment will be lower as my 'income demands' are now only for 90% of earnings.

0.9 x 10 = 9, close enough to 9 ;-).

So assuming this is a mature business we might expect a PE of 7 at the top of the earnings cycle and a PE of roughly 11 at the bottom. Agriservices is at the top of the business cycle and I certainly hope Agritech is at the bottom! Historically they have made near equal contributions to the bottom line so probably a PE of 9 is about right for PGW at the moment. At 36c the PGW share price looks to be 20% overvalued to me.

SNOOPY