PGW - PGG Wrightson

[winner69]

Here is my understanding of it:

EBITDA accounts for all costs except for:

1/ Net interest paid.
2/ Income tax paid.
3/ Depreciation not accounted for.
4/ Amortization not accounted for.

However, some banks regard 'lease expenses' (already deducted from EBITDA) as part of the finance costs. And finance costs should be part of the interest paid. So:

1/ We have to add the lease costs back into EBITDA to get a true measure of earnings before any finance costs are deducted.
2/ We have to add lease costs onto the rest of the interest due, to get a true measure of how much effective interest the company is paying

Not complicated at all.



Not sure what you are getting at here. The 'Rental and Lease Finance Expense Costs' are part of the 'Other Operating Expenses' detailed in Note 3 in AR2019. The 'Finance Cost' is separately listed in the 'Profit & Loss Statement' under 'Net interest and finance costs' as a stand alone item. IOW they are already reported separately.

SNOOPY

I thought the other day I sort of understood what you were trying to say but now I’m totally confused....seems even more complicated

So I asked myself ‘does it really matter’ and answered ‘no, it doesn’t really matter’

Sorry Snoops

[winner69]

Stuff bright analysts come up with

[Snoopy]

Stuff bright analysts come up with

"Invest in Tennis balls. They have a high rate of return."

Not if I'm down the other end of the court they don't :-P !

SNOOPY

[Snoopy]

I thought the other day I sort of understood what you were trying to say but now I’m totally confused....seems even more complicated

It seems quite straightforward from where I sit.

1/ A lease cost is a finance cost. Such payment liabilities should be added to that other finance cost: interest payments, to get a true 'interest cost'.

2/ It follows that you should add lease costs back onto EBITDA to get a true picture of earnings before all finance costs.

It really is that simple.

So I asked myself ‘does it really matter’ and answered ‘no, it doesn’t really matter’

Sorry Snoops

Not really up to you or I to pass judgement on that. But my logic is, if the bank thinks it matters, then it matters.

SNOOPY

[Snoopy]

Increasing eps.

You and one analyst hope.

Underlying dividends for the whole of PGW was about 3.75cps, equating to 37.5cps post consolidation. But that includes the seed division which made up around half the profits. So you could say normalised earnings for PGWRR are only 18.75cps. So the interim and dividend could grow to around 9cps each, at the top of business cycle? Mind you those figures are from the days when installing irrigation systems was a good business to be in.

Increasing fully imputed divie [over 9% gross yield].

They have committed to increasing the next interim divie to at least 8cps, provided there are no unexpected market shocks. Whether the final divie for FY2020 will be 8cps and above is yet to be confirmed.

Excellent directors/management. I like Cushing and Findlay..

Agree

Very strong balance sheet.

I disagree. The balance sheet is at best adequate. The 'Fixed Cost Coverage Ratio' is right on the edge. But I am using the standard that the banks used ten years ago. Perhaps the banks have changed their thinking on this?

The above means I agree with the market, that buying PGW under $2.50 is good buying.

For every buyer there is a seller. I wonder if those selling their shares for $2.46 agree?

SNOOPY

[percy]

I have enjoyed two brokers' research.
Buyers other than me appear to be directors and management.

[percy]

I note another director added to their holding yesterday at $2.46.

[sb9]

I note another director added to their holding yesterday at $2.46.

Yes noticed that too. Small on-market purchase, nevertheless nice endorsement by insider.

[Snoopy]

Me thinks that Snoopy is deliberately down-ramping this so that he can fill his bowl up on the cheap.

PGW accounts have always been fun (and I use that word in a sarcastic way) to work through.
Add in the ever changing accounting standards and the recent drastic transformation into a smaller and hopefully leaner company and I expect extracting the true underlying performance will be as interesting (sarcasm again) in the future.

Maybe I should hope that someone buys the rest of the company off us and saves me a few hours ever year.

Well my 'down ramping plan' didn't work. PGW was trading at $2.45 on 28th October when Snow Leopard made his comment, and it is trading at $2.45 today. So I have been forced to top up my PGW shares at 'fair market value' ;-(. Not sure why the plan failed. Is it possible that there are animals out there that do not take everything written on sharetrader as gospel? Or maybe it was because I never even had a plan at all ;-P? However, having announced that I have finally bought some more PGW shares on this forum, that is about the best thing I can do to collapse the share price going forwards. There should be an opportunity for others to top up at a discount from here.

Added to my holding today at $2.46."Interim dividend of not less than 8 cents ps" remains the catalyst.
Still have not added to the wife's.

Here is your wife's opportunity Percy. BTW anyone going to and from ChCh Airport notice the large edifice with PGW Branding on it in the business park area? It seemed to have people in it. How does this fit with the new slimmed down PGW corporate structure?

For me, questions on the debt level of the company remain. But Adrian Orr seems determined to keep spending up by having very low interest rates long term. So I am more relaxed about holding companies with more debt than I think is ideal at the moment. I may have underestimated Stephen Guerin's attempt to reign in costs too, so I want to give him a year to see what he can do in this area. I am still nervous about the cracking down on rural loans by the big banks and the likely flow on effect to rural spending. But if the share price does sink further, I have retained enough powder to buy more.

SNOOPY

discl: holding at an average buy price of $1.60 following my recent purchases.

[winner69]

Snoopy:

For me, questions on the debt level of the company remain ...

Seeing the neighbour mentioned PGW to me I thought I better find out a bit more about Them.

I still can’t fathom why you have concerns Snoops ....PGW has never been so well capitalised and is the balance stronger than it has been for yonks.

PGW on neighbours and his bowling mates radar ....he was excited yesterday when he told me OCA is showing really positive signs and if they continue at this rate they could be ‘in the money’ sometime next year. Still under water with TRA though.