PGW - PGG Wrightson

[Master98]

An article from STUFF:Ideal conditions result in high yields

http://www.stuff.co.nz/business/farm...in-high-yields

any meaning to PGW?

[Snoopy]

An article from STUFF:Ideal conditions result in high yields

http://www.stuff.co.nz/business/farm...in-high-yields

any meaning to PGW?

A long dry Canterbury summer may have been good for arable farmers growing crops and silage. It was not so good for those with animals.

SNOOPY

[Snoopy]

What I do know from a farming perspective is that PGW have sold a lot, way more than normal, of seeds to re sow pasture and crops in the last 2 months.

As a PGW shareholder this is good to hear. The question is are PGW selling 40% more seeds than last year, over the whole year? Because if you look at the base case PGW were projecting for FY2013 (note 26 of FY2012 annual report) , a 40% increase in Agritech EBITDA is already in the budget as the 'base case'. If the actual EBITDA increase is less than this, then the PGW share price could be marked down when the results are announced.

The other question is how localised is the upturn you are seeing Snapiti? It would make my day if you said you lived in Hawkes Bay.

No matter how well the NZ seed division has done in FY2013, in recent years the results of Agritech have been spoiled by their Australian arm. There is still the potential for this to happen again.

There has also been a large correction in stock price's recently.

At 37c and earnings of 4cps ($30m) the PE is 9. At 37c and earnings of 3.3cps ($25m) the PE is 11. I would argue the large correction has just brought PGW back to reality. In historical PE terms 37c is not cheap. And the drought has already hampered the FY2014 results, with the share price always looking ahead to future years. With a good result a modest re-rating is possible though.

PGW have also been involved in supplying (middleman) massive amounts of supplement feed to farmers.

More potential good news. The question is, what margin are PGW making as middle men for supplements?

I believe as a shareholder that the company is performing very well in most if not all of the key area's.

Certainly Agriservices in NZ had a good first half. If there is a surprise on the upside (AR 2012, Note 26 budget figure for 2013 is an EBITDA decrease of 48%) , I am picking it will be in Agriservices.

SNOOPY

[Snoopy]

The state of livestock numbers in NZ will of course be a challenge as many farmers sent their livestock off early given the big dry. It doesn't really impact on 2H2013 for PGW, but will be a risk for 1H2014 if farmers are unable to boost their numbers. It will be interesting to see if PGW can step in and boost supply of livestock from their sources.

I wonder if live export of livestock might be re-routed back into domestic animal purchase? Just a thought.

A vision popped into my head of Alan Lai with a shepherds crook running up and down the hills of peasant farmed China doing a pied piper. Chinese sheep shipments to NZ could be just around the corner !

SNOOPY

[Snoopy]

I still anticipate PGW selling their Heartland shares in the next few months, perhaps by years end, to reduce debt further by at least $10m.

Not another PGW investment sold at a loss pleeeaase! Just as well PGW aren't a Chinese business, as to make losses like that in China would lead to a serious loss of face...... Oh wait a minute, where did majority owner Alan Lai come from again?

SNOOPY

PS The word is that Heartland after being given the PGG Wrightson Finance loan book, has not boomeranged any of those doubtful PGW Finance loans back onto PGG Wrightson. So PGW may not need the level of debt finance that might have been budgeted for after 30th June after all. Perhaps that means PGW can hang onto those Heartland shares a bit longer?

[Snoopy]

Snoopy, I would humbly point out in a good nature way that Heartland is currently at 78c, which is more than the 75c they bought the shares for, and is higher than the 70-75c band that some posters felt that Heartland would be trapped within for some time....

You are quite right Sparky, PGW did buy those HNZ shares at 75c. However, given they have $10m odd worth of shares in what is a $300m company it remains to be seen if they could quit those shares at market prices. The stake isn't big enough to be strategic. So I would say those shares would have to be placed at a discount.

They have also been extracting some dividends out as well. I suspect they will get out for what they paid for it or slightly more, if they sell in the next few months.

True PGW has received a dividend stream from their HNZ shares. However, because PGW have corporate debt, this debt servicing cost should be offset against the cost of holding those HNZ shares.

As for Mr Lai, well, there may or may not be loss of face involved. Mr Lai is happy to see some dividends coming through and will be pleased with Gould and Anderson's direction setting.

Better to lose some face than go bankrupt, I would agree.

SNOOPY

[Agrarinvestor]

I have read in the past that some of you are interested and already have a lot of compentence in Value Investing. I remeber you talked about Altman Z Score and Piotroski.
Here you can find a listing of stocks with NCAV values, ALtmann Z score. You can sort that list for market cap and look for the larger companies that are undervalued regardind NCAV.
I think Snoopy must love the tool:
http://www.grahaminvestor.com/screen...r-ncav-screen/
Unfortunately i have not found PGW, and off course Agria does not reach the NCAV criteria

[winner69]

I have read in the past that some of you are interested and already have a lot of compentence in Value Investing. I remeber you talked about Altman Z Score and Piotroski.
Here you can find a listing of stocks with NCAV values, ALtmann Z score. You can sort that list for market cap and look for the larger companies that are undervalued regardind NCAV.
I think Snoopy must love the tool:
http://www.grahaminvestor.com/screen...r-ncav-screen/
Unfortunately i have not found PGW, and off course Agria does not reach the NCAV criteria

Well well ....unless I done my sums wrong pgw wouldn't even come up on mr grahams radar

PGW NCAV is 16 cents share ...graham wound only look at pgw at 10 cents

If I read it right mr graham would say TRU VALUE PGW IS 16 CENTS.if so must be a optimism built in if shareprice is high 30's




Or have I got it wrong

[winner69]

Snoopy wil love the site you linked eh ...he might even refer to it when talking about PGW

Maybe graham not a good person to follow

[winner69]

Even under the scenario of more debt reduction or even the sale of their hnz shares no way is PGW a DEEP VALUE play under mr Graham's criteria

Interesting that bens intrinsic value concept gives a much different view of value than this NCAV concept. Can't recall what Ben said in his book about both ....dud he buy things at a deep discount to intrinsic value or NCAV ....or has the story got a bit confused over the years