PGW - PGG Wrightson

[Beagle]

Roger undershot on the dividend announcement. He bullishly predicted 2c. Instead we got 3.5c. Maybe he is being conservative over the 5c eps as well. And hats off to Roger for making that dividend call well before the announcement.


Actually, it is 3 dividend payments in the next 12 months and 2 weeks (not 18 months as you suggest). My 24% is a bit light actually.


I wish I had so much capital I could hold a loser for 17 years.

Thanks Noodles and you're dead right that I am extremely pleased with the final divvy of 2.5 cps which comfortably exceeded my expectations and the extra 1 cps special divvy was definitely not on my radar but it a very nice bonus.
I think this highlights an important attribute with PGW, something that many of us know already, but it shines the spotlight on the fact that the majority owner definitely likes high dividends.
I had a quick look at the balance sheet yesterday and it looks in good shape to me.
Broker forecasts are indicating 4.5 cps next year which is great but it wouldn't surprise me in the slightest if there's another 1 cps special divvy, I rate this as 50/50 chance depending if they have another good year of cash flow for a total of 5.5 cps but given the special is maybe 50/50 lets call it 5.0 cps

I'll have a more detailed look at the financials when I get more time but there's nothing leaping out of there that worries me. Abnormal items and tax look lower than the figures you've indicated Snoopy.

[Snoopy]

I wish I had so much capital I could hold a loser for 17 years.

A small correction to my previous commentary. I said I had owned PGW for 17 years, but this of course can't be right. PGW only came into existance in CY2005. Before that 'PGW' was two separate companies, Pyne Gould Guiness and Wrightsons. It was Wrightson's I held shares in all those years ago.

Noodles says I held a loser for 17 years. In terms of capital appreciation he is correct. But as I said before, that 'capital result' doesn't include the effect of dividends. Include those and the picture is very different.

SNOOPY

[Snoopy]

Noodles says I held a loser for 17 years. In terms of capital appreciation he is correct. But as I said before, that 'capital result' doesn't include the effect of dividends. Include those and the picture is very different.

With a cyclical share like PGW I prefer to look at dividends over a business cycle. Going back in history is a little complicated with PGW.

1/ There was a cash issue on 11th December 2009 (TaxYear2010 for me), where shareholders had the opportunity to apply for 9 new shares for every 8 they already owned. That means that looking backwards a PGW share today was only entitled to 8/(9+8) = 8/17s of the dividends paid before that date.

2/ Just before the above cash issue, Agria upped their stake in PGW by being issued 41m new shares which were added to the 289m shares already in existance before that time. That in turn means that looking backwards,any PGW share now is only entitled to 289/(41+289) = 289/330s of dividends declared on PGW shares before that date.

Combining theese two effects, any shares today would have been entitled to receive the declared historical dividend (as paid before 10th December 2009) multiplied by the appropriate equity dilution factor:

(289/330) x (8/17) = 0.4121

From my tax files (year ended 31st March) , I can pull out the following dividend information:

TY2008: 6c x 0.4121 = 2.5c
TY2009: 12c x 0.4121 = 5.0c
TY2010: 16c x 0.4121 = 6.6c
TY2011: 5c x0.4121 = 2.1c
TY2012: 0c
TY2013: 2.2c
TY2014: 1.0c
TY2015F: 5.5c

Average that over 8 years and I get a net yield of 3.1cps. Based on a market price of 45c that gives a business cycle net yield of:

3.1 / 45 = 6.9%, or a gross yield of 6.9/0.67= 10.3%

I think that a gross yield of 9% is the sort of figure I would be looking for over the business cycle.

Based on that fair value for PGW, on a vield basis is: 45c x (10.3/9) = 51.5c

Blimey, I am starting to agree with Roger! And Noodles, I don't think any investment that has returned 10.3% gross return each year (averaged over 8 years) can be called a 'loser'.

SNOOPY

discl: hold PGW

[BIRMANBOY]

Being a dividend bloodhound, I am always looking for good dividend yields. However, reality should remind us that there is no long term history yet for reliability and consistency of dividends here. Four or five years of consistent dividends would be more desirable to my way of thinking. However I'm rooting for you all (in a metaphorical sense of course).

Thanks Noodles and you're dead right that I am extremely pleased with the final divvy of 2.5 cps which comfortably exceeded my expectations and the extra 1 cps special divvy was definitely not on my radar but it a very nice bonus.
I think this highlights an important attribute with PGW, something that many of us know already, but it shines the spotlight on the fact that the majority owner definitely likes high dividends.
I had a quick look at the balance sheet yesterday and it looks in good shape to me.
Broker forecasts are indicating 4.5 cps next year which is great but it wouldn't surprise me in the slightest if there's another 1 cps special divvy, I rate this as 50/50 chance depending if they have another good year of cash flow for a total of 5.5 cps but given the special is maybe 50/50 lets call it 5.0 cps

I'll have a more detailed look at the financials when I get more time but there's nothing leaping out of there that worries me. Abnormal items and tax look lower than the figures you've indicated Snoopy.

[winner69]

I'll have a more detailed look at the financials when I get more time but there's nothing leaping out of there that worries me. Abnormal items and tax look lower than the figures you've indicated Snoopy.

The Annual Accounts are really an annual reminder how much wealth has been destroyed over the years

Shareholders have put $606 million into the company (real cash at some point in time)

Its only worth $$270 million now (and don't kid me into believing that the $336 million difference has been dividends ....its noted as accumulated losses)

Amazing eh

So just as well that Mark has inherited the dog that has had a decent groom and got of rid of its fleas and is looking very sleek in a shiny healthy coat.

See things can be 'different this time'

[percy]

Being a dividend bloodhound, I am always looking for good dividend yields. However, reality should remind us that there is no long term history yet for reliability and consistency of dividends here. Four or five years of consistent dividends would be more desirable to my way of thinking. However I'm rooting for you all (in a metaphorical sense of course).

Four or five years of consistent dividends from PGW will mean the sp will adjust upwards and the yield downwards and you will have missed the excellents SP growth as well as the high yields.
In the meantime keep metaphoricaly rooting! lol.

[percy]

The Annual Accounts are really an annual reminder how much wealth has been destroyed over the years

Shareholders have put $606 million into the company (real cash at some point in time)

Its only worth $$270 million now (and don't kid me into believing that the $336 million difference has been dividends ....its noted as accumulated losses)

Amazing eh

So just as well that Mark has inherited the dog that has had a decent groom and got of rid of its fleas and is looking very sleek in a shiny healthy coat.

See things can be 'different this time'

Not so Winner69.Sir John Anderson and George Gould got the dog groomed and in good shape.Mark is now taking the dog to dog shows.and collecting the prizes.!! lol.

[Snoopy]

Abnormal items and tax look lower than the figures you've indicated Snoopy.

I calculated tax payable for FY2014 at $11.8m, based on NPBTx (1-0.28), which is assuming a 28% tax rate. The actual tax payable was $8.472m. How can a company continue to pay tax a rate lower than the NZ corporate rate? In the long term it can't. There are all sorts of reasons why the actual tax paid was less than my 'Continuing Profit' calculation in FY2014.

What I am implying (and now saying) is that going forwards PGW looks like it will be paying more tax than it does now. That isn't good for PGW shareholders.

SNOOPY

[Snoopy]

Four or five years of consistent dividends from PGW will mean the sp will adjust upwards and the yield downwards

Yes and that will happen after four or five years of consistent good years for the farmer, with the promise of more to come. And that will never happen. And Birmanboy will never join the PGW share register :-(.

SNOOPY

[winner69]

Four or five years of consistent dividends from PGW will mean the sp will adjust upwards and the yield downwards and you will have missed the excellents SP growth as well as the high yields.
In the meantime keep metaphoricaly rooting! lol.

Oh percy - I did say Mark had inherited the champion dog - Best in Show this year

Just didn't want to mention Sir John and George again ... think of the future