PGW - PGG Wrightson

[Balance]

I apologise for accusing you of ramping PGW on 19th December 2012 Balance.

Having just doubled by holding a month or so before at 32c, I did consider the rise to 40c in just a month to be a case of too far too fast.

SNOOPY

Apology was accepted.

Just making the point that normally an investor buying a stock at 32 cents would be happy to see the stock rise to 40 cents (especially in a short time)?

[Agrarinvestor]

The above was written on 12th October 2012.

Four months on, one of the vacant positions has been filled.

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BEIJING -- (MARKETWIRE) -- 02/15/13 -- Agria Corporation (NYSE: GRO) (the "Company" or "Agria") today announced that it has appointed Patrick Wai Yip Tsang as Chief Financial Officer effective February 15, 2013. Mr. Tsang is currently a director of PGG Wrightson Limited (NZSE: PGW), the Company's majority-owned subsidiary listed on the New Zealand Stock Exchange, and a director of China Pipe Group Limited, a company listed on the Hong Kong Stock Exchange.

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However the name "China Pipe Group" rings a bell. This is the company of Lai Fulin, the younger brother of Alan Lai! This whole Agria thing is starting to look a bit incestuous.

SNOOPY

>>However the name "China Pipe Group" rings a bell. This is the company of Lai Fulin, the younger brother of Alan Lai! This whole Agria thing is starting to look a bit incestuous.

<<

You should keep in mind the history of Agria. Adam Lai has bad expirience with people in key positions. After the IPO a key executive tried to put his fingers into shareholders pockets. Mr. Lai prevented us from that rubbery but the result was a delay in the annual report and shareholder class actions against Agria. All claims were settled at the end and Agria has nothing to pay and was acquitted. Therefore i applause to that decision. And i am sure that Mr. Tsang will not be an overpaid greedy Wallstreet Junkie. I assume that he has worked for Agria in the background before Feb 15.th.

[winner69]

Good news is always worth putting out to the market, no matter how small or insignificant it is.

but as you said on another thread a warm fuzzy story just before a half year ann says punters expectations will not be met next week ...... and i never said oh bugger we are not on track to deliver what sparks and forbar think

[Snoopy]

Just making the point that normally an investor buying a stock at 32 cents would be happy to see the stock rise to 40 cents (especially in a short time)?

Obviously I did well out of the share price jump, but what about those that sold to me at 32c? I was concerned because I don't believe the underlying valuation of PGW changed that much in a month. So were those that bought at 40c Patsy's? Given the price went up still further, I guess no. But I am concerned when a share price bounces around as much as this in such a small timeframe.

I believed that 32c was a fair albeit slightly on the high side entry price. By my thinking then, it was all the higher price action that puffed the PGW share price above fair value. I don't think it is very healthy for the sharemarket. But with the reporting date a few days away, we will just have to see what comes out in the wash.

SNOOPY

[The Grinch]

Got to be good news for the PGW real estate division.

http://www.stuff.co.nz/business/farm...les-rise-13-pc

[Balance]

Obviously I did well out of the share price jump, but what about those that sold to me at 32c? I was concerned because I don't believe the underlying valuation of PGW changed that much in a month. So were those that bought at 40c Patsy's? Given the price went up still further, I guess no. But I am concerned when a share price bounces around as much as this in such a small timeframe.

I believed that 32c was a fair albeit slightly on the high side entry price. By my thinking then, it was all the higher price action that puffed the PGW share price above fair value. I don't think it is very healthy for the sharemarket. But with the reporting date a few days away, we will just have to see what comes out in the wash.

SNOOPY

Maybe the market was wrong at 32 cents, rather than the price at 32 cents reflecting fundamental value?
Market as you and I know is not driven by fundamental value in the short term but by fear, greed, emotions and other things.

What did the world's greatest investor said? Something about beauty contest and weighing machine.

[Snoopy]

Maybe the market was wrong at 32 cents, rather than the price at 32 cents reflecting fundamental value?
Market as you and I know is not driven by fundamental value in the short term but by fear, greed, emotions and other things.

What did the world's greatest investor said? Something about beauty contest and weighing machine.

Perhaps Balance. But I also do homework on PGW, although I prefer a more stand offish approach. Unlike Sparky, I don't ring up the management because I don't want to end up believing their own hype. I am not saying Sparky is wrong to do what he is doing. It is just a different style of research. With results coming up, I am prepared to put up my own case for 32c.

SNOOPY

[Snoopy]

Got to be good news for the PGW real estate division.

http://www.stuff.co.nz/business/farm...les-rise-13-pc

Is it good news though? Here is a cut and paste from the middle of the article

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The median price per hectare for all farms sold in the three months to January was $23,980 - up 18.1% on $20,299 for the same period last year.

The REINZ All Farm Price Index eased by 3.2 per cent to 3039.77 in the three months to January compared to the same period last year. The index is designed to provide a more accurate measure of farm price movements.

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This seems to be saying that the Real estate Institute data is selective and not representative across the full spectrum of farming, or pulling out spikes in monthly data as representative of a trend. Overall farm prices seem to have declined over the year. This is an example of what I mentioned in post 2680 about talking to industry people then believing their own hype.

SNOOPY

[Snoopy]

I raided my own PGW database this morning to reveal the historical picture since PGW has existed in its current form (following the merger of Pyne Gould Guinness and Wrightson.). I am using the share price as at 30th September of each year. Why pick that date? Because I have that data readily available from my income tax file! But nevertheless I believe it is a representative date.

30th September is about a month after the results for the financial year are released to the market. So analysts have had time to digest the result, but any immediate 'gut reaction' to the result has died away. Also the end of September is early enough in the new financial year for the prospects of that year to be 'weather neutral' in terms of the outlook. Getting into spring it is normally too early to tell if the rest of the year will be subject to droughts or floods.

For years 2009 to 2012 inclusive I have assumed 754.8m PGW shares are on issue. This wasn't true at the end of FY2009, but the large cash issue had been announced and the market was already pricing the share assuming that number of shares would shortly exist. In FY2008 and FY2007 I have used 289.3m as the number of shares on issue.

The earnings figures I have used strip out all of the one off write downs and conversely one off gains that have occurred. I have done this to represent a more normalised earnings picture. Also included in these earnings are those from the now disposed of finance division.

OK with all of those caveats out of the way, time to roll out a few figures...

SNOOPY

[Snoopy]

OK with all of those caveats out of the way, time to roll out a few figures...

Using: Price Earnings Ratio= (Share Price) / [(Normalised earnings)/(No. Shares on Issue) ]

2007: $1.93 / [$27.9m/289.3m] = 19.6
2008: $1.60/ [$47.9m/289.3m] = 9.7
2009: $0.64/ [$19.3m/754.8m] = 25.0
2010: $0.56/ [$18.0m/754.8m] = 23.4
2011: $0.40/ [$7.1m/754.8m] = 42.5
2012: $0.35/ [$24.0m/754.8m] = 11.0

My forecast for FY2013 was a Normalised NPAT of $24.2m. I have used EBITDA figures from FY2012 and modified them by the growth (and where appropriate shrinkage) factors noted on page 26 of the FY2012 annual report. figures But that was before all the floods and the droughts exchange rate appreciation and all the rest of the turmoil that our farmers have to put up with. And yes that $24.2m does include a reduced interest bill thanks to the paying back of the Crafar Loans.

Given what has happened I would be very surprised if that $24.2m figure for the full year will be reality, even if the first half year earnings come in at just above the $8m that I expect (traditionally profits have been earned 2/3 in the second half).

FY2012 was quite a benign year weatherwise in New Zealand. While FY2013 may be better than expected, I don't expect Agriservices to match their FY2012 earnings. But mostly I don't think Agritech Australia will recover as budgeted. With this kind of outlook I still see the PE of 2012 ( 11.0 ) as appropriate.

SNOOPY