PGW - PGG Wrightson

[Snow Leopard]

You fallen in love again or something

Thanks for the generous praise anyway

Cheers

It is precisely because I do not get emotionally attached to shares, neither loving or hating them, that I extract from the accounts what is there and not what would suit my preconceived notions.

Best Wishes
Paper Tiger

XXX

[Snoopy]

Snoopy
Not being an accountant myself, your descriptions sounds like a bit of creative in-house cooking.
Do you think there is any need to be mildly concerned.

I am not predicting what is going to happen over the next farming year, and by association what will happen to PGW. I am suggesting that as an investor in PGW, you should bear in mind what could happen as part of your own personal risk/return investment portfolio assessment.

Sell and borrow as well !!! just to fund divies...
Obviously the div level requires a major slash and burn

So what happens when you have sold off all the silverware to support the habit, and have just the blankets left...
planting a red flag here.

My own observations from a PGW shareholder perspective:

1/ PGW has sold off various properties from which their rural supplies division operates around the country over FY2016.
2/ PGW have been conducting their normal business over FY2016 and making profits from that.
3/ PGW have paid a full dividend over the FY2016 financial year.
4/ PGW's overall bank debt has increased over FY2016.
5/ The banking syndicate supporting PGW is aware of 1/, 2/, 3/ and 4/ and they are not overly concerned about it.

The PGW dividend has come with full imputation credits. Generally selling a property that you did not buy with the intent of making a capital gain on the ultimate sale is not a taxable activity. This suggests to me that the dividend was not funded from property sales directly. I also suspect that Winner, being a smart accounting type guy, knows this. However I don't think Winner is trying to make a technical point here, as PT seems to be assuming.

My take on what has happened is this. One interpretation would be that the money from PGW property sales could have been directed towards debt reduction, but it wasn't. In fact PGW debt increased over the year, because of high dividend payments. The cash used to pay those dividends came from the money bin that was filled up with normal trading profits as well as property sales. Money banked from property sales and money from trading profits becomes indistinguishable once it is mixed up and put into the PGW money bin. So the majority of the cash used to pay the dividend could have come from 'trading profits' or 'property sales + borrowing (to make up the shortfall). You can look at it either way, depending on what point you are trying to make.

So even if Winner's interpretation can be criticised from a technical perspective, I think the overall point he was making is valid. And furthermore, I think PT's observation is technically correct.

SNOOPY

Discl: hold PGW, but as a measured part of my whole portfolio fully aware of what a 9%+ yield coupled with a medium sized company debt implies from a risk perspective.

[Snoopy]

I am separating what might happen in a 'high stress year' from my 'data' post, because this post is highly subjective. People could use my data post numbers in a different way and come up with a rather different conclusion. Nevertheless this post represents what I think is highly likely to happen at some time over the next five years. But exactly what year I am forecasting this will happen, I can't predict.

	Base Year (FY2016)	Stress 1: 2% Revenue Reduction	Stress 2: 4% Revenue Reduction
Operating EBITDA	$70.181m	$70.181m	$70.181m
less Stress EBITDA Adjustment	$0m	($25.000m)	($50.000m)
less Interest Funding Expense	($9.089m)	($11.179m)	($11.179m)
less Depreciation and Amortisation	($9.170m)	($9.170m)	($9.170m)
Operating EBT	$51.922m	$24.832m	-$0.168m
less Tax at 28%	$14.538m	$6.953m	$0.000m
Operating NPAT {A}	$37.383m	$17.879m	-$0.168m
No. Shares on Issue {B}	754.848m	754.848m	754.848m
Earnings Per Share {A}/{B}	5.0cps	2.4cps	0.0cps

If PGW maintains their high payout ratio, this means we might expect dividends to halve under the 2% reduction in revenue scenario and disappear completely under the 4% reduction in revenue scenario. So you have to ask yourself the question. Given PGW is a 'no growth' 'steady as she goes' company, how much would a dividend hound pay for a PGW share under those 'stressed' circumstances? Whatever the answer, it does appear that PGW is in a position to survive such a downturn. They pass my interest rate stress test!

SNOOPY

discl: hold PGW

[Snow Leopard]

The amount of dividend paid ($29M) was less than the NPAT ($39M)
The amount of dividend paid ($29M) was less than the operating cash flow ($35M)
And the cash received from the sale of PP&E ($20M) was less that the cash paid for PP&E ($31M)

Best Wishes
Paper Tiger

[winner69]

The amount of dividend paid ($29M) was less than the NPAT ($39M)
The amount of dividend paid ($29M) was less than the operating cash flow ($35M)
And the cash received from the sale of PP&E ($20M) was less that the cash paid for PP&E ($31M)

Best Wishes
Paper Tiger

.....but dividend paid was still $6.7m more than the cash generated

Make up the difference this year .....just a timing issue

[Snow Leopard]

.....but dividend paid was still $6.7m more than the cash generated

Make up the difference this year .....just a timing issue

You can take that argument to many a thread, mentioning no airlines, retirement village operators etc.

Best Wishes
Paper Tiger

[Agrarinvestor]

What is going on? PGW share price uptrend and no comments here. Is this a result of high revenue in PGW's businness?

regards Agrarinvestor

[arc]

What is going on? PGW share price uptrend and no comments here. Is this a result of high revenue in PGW's businness?

regards Agrarinvestor

Similar thoughts here too.

Complex internal strucutre for pgw, lots of things that could impact operations...
https://www.google.co.nz/search?clie...w=1832&bih=895

Personally the Agria portion is still an open question for me...

[Snoopy]

What is going on? PGW share price uptrend and no comments here. Is this a result of high revenue in PGW's businness?

regards Agrarinvestor

My take on it.

1/ Lower exchange rate (USD in particular) will help commodity prices.
2/ Lower exchange rate (UK in particular) will help lamb sales in the UK, under pressure since Brexit.
3/ Weather has been encouraging for growing everything. Even long standing North Canterbury drought over.
4/ Low interest rates in New Zealand means PGW debt costs will be lower than projected.

SNOOPY

discl: holder

[Bob]

Big volumes in market depth today Buy 700,000 approx at 59, sell 700,000 approx at 60