PGW - PGG Wrightson

[Beagle]

Please get those brokers to forward the FY2016 long term weather forecast to farmers. It isn't really fair to keep that critical information within the broking community!

SNOOPY

I think global warming is very very gradually affecting the weather and yet PGW seem to be adapting and doing fine notwithstanding this.

http://www.welovebeagles.com/how-to-...of-your-house/ How to beagle proof your house ? Hounds can be very likeable, often, but not always clever, and yet quite troublesome creatures, (not too dissimilar to the resident snoopy hound), as you can see from this link.

How to beagle proof your investment portfolio ? When a snoopy beagle thinks he can predict the weather and its affects on an agri supply company in 2016, tell him he's barking mad

[noodles]

Noodles, the upper end 'guidance' was based on a repeat of the second half of last financial year this financial year. The lower end guidance was based on a repeat of the second half guidance from the previous year when there were a few drought problems. But what if the drought this year is worse than that two years ago? (it is).

SNOOPY

Snoopy,

I decided to do some research on the severity of the drought. My conclusion is that the drought of 2015 is far LESS severe than the drought of 2013. The image attached shows soil moisture deficit for 2013, 2014, and 2015. Clearly 2013 has the highest moisture deficit, but 2014 is worse than 2015. In 2013 MPI announced that the whole of the north island was in drought. This year it is some pockets in the south island. I appreciate that some farmers are doing it hard, but it seems to be a localised issue? With beef and lamb prices holding up from a year ago, what is all the fuss? Dairy is not that important to PGW.




combined.jpg

Sources:
http://www.mpi.govt.nz/document-vault/135
http://www.niwa.co.nz/static/climate/smd_map.png?1234

[kiora]

Snoopy,

I decided to do some research on the severity of the drought. My conclusion is that the drought of 2015 is far LESS severe than the drought of 2013. The image attached shows soil moisture deficit for 2013, 2014, and 2015. Clearly 2013 has the highest moisture deficit, but 2014 is worse than 2015. In 2013 MPI announced that the whole of the north island was in drought. This year it is some pockets in the south island. I appreciate that some farmers are doing it hard, but it seems to be a localised issue? With beef and lamb prices holding up from a year ago, what is all the fuss? Dairy is not that important to PGW.




combined.jpg

Sources:
http://www.mpi.govt.nz/document-vault/135
http://www.niwa.co.nz/static/climate/smd_map.png?1234

But as well as dairy lamb prices aren't flash either
http://www.interest.co.nz/Charts/Rural/Lamb%20Y
From what I,ve heard hill country sheep farmers will be lucky to average $85 for all their lambs (works & store lambs).Bare in mind most need $100/lamb to break even but depending on their debt levels.
While very few S & B farmers have breeding cows to benefit from higher beef prices
Central NI,HB & SI have been severely affected by drought this year.What will the ewe CS at tupping be ?,what will the lambing % be next spring ? Most likely lower ?
Facial eczema appears to be more prevalent this year as well so there will be a higher cost for treatment or if not prevented a lower lambing % next spring.

[noodles]

But as well as dairy lamb prices aren't flash either
http://www.interest.co.nz/Charts/Rural/Lamb%20Y
From what I,ve heard hill country sheep farmers will be lucky to average $85 for all their lambs (works & store lambs).Bare in mind most need $100/lamb to break even but depending on their debt levels.
While very few S & B farmers have breeding cows to benefit from higher beef prices
Central NI,HB & SI have been severely affected by drought this year.What will the ewe CS at tupping be ?,what will the lambing % be next spring ? Most likely lower ?
Facial eczema appears to be more prevalent this year as well so there will be a higher cost for treatment or if not prevented a lower lambing % next spring.

I'm not saying there aren't issues, but things aren't worse than 2013. Even the lamb price is higher in March 2015 than March 2013.
Snoopy was saying he thought that PGW earnings for 2h15 would be worse than 2H13.

[Master98]

because of the nature of uncertainty and high risk pgw business , the highest PE I can use is 8, assuming FY2015 earnings 5~6cps then pgw share price should be 40c~48c,44c is meddle price.

[couta1]

because of the nature of uncertainty and high risk pgw business , the highest PE I can use is 8, assuming FY2015 earnings 5~6cps then pgw share price should be 40c~48c,44c is meddle price.

Its all going to balance out with the increase in seed and irrigation sales to resow and water all those parched pastures so bring on 56c I say.

[kiora]

I'm not saying there aren't issues, but things aren't worse than 2013. Even the lamb price is higher in March 2015 than March 2013.
Snoopy was saying he thought that PGW earnings for 2h15 would be worse than 2H13.

Regarding lamb price in March 2015 vs 2013 .This will have little affect on profitability of av hill country S & B farmer as they would have sold all there lambs by then while the lamb finishers will have had higher costs from growing lambs in a drought and high risk & cost of facial eczema.

[kiora]

Its all going to balance out with the increase in seed and irrigation sales to resow and water all those parched pastures so bring on 56c I say.

But that doesn't help farmer profitability so will be cutting spending in other parts of their farming business.

[Beagle]

because of the nature of uncertainty and high risk pgw business , the highest PE I can use is 8, assuming FY2015 earnings 5~6cps then pgw share price should be 40c~48c,44c is meddle price.

Each to their own valuation criteria....to be honest I would have said that myself a couple of years ago but the management team are doing a good job and we have ultra low interest rates for the foreseeable future which is supportive of some of the market PE expansion we've seen. In a market where many stocks have really stretched PE's I think 10 is more than fair and reasonable for PGW. Analyst consensus forecast is 56 cents so I wouldn't hold your breath hoping to buy them at 44 cents

Noodles - Thanks mate for the NIWA images, puts the present climatic conditions into the proper perspective.

[couta1]

Is there anyone out there who has done enough study on this company to know things such as;

If there's a drought, do PGW do better overall through feed sales, irrigation units and more livestock movements etc or are they worse off due to reduced profits for farmers to spend and reduced livestock weights etc?

Over the long term it probably just averages out anyway, just the levels of debt etc for the farmer that change.

Exactly NB swings and round abouts a farmers debt levels are very fluid for this very reason, now if it was a nation wide drought that would be a different story.