PGW - PGG Wrightson

[Snoopy]

Everyone knows who is behind BAIC! Been fully disclosed & discussed and they have made it clear why they are interested in PGW.

https://www.nzx.com/announcements/352113

You make it sound like the government can willy nilly reject any deal just because it is an overseas buyer - it does not work like that as you should know.
It cannot as OIO decisions can be appealed as they have been in the past, and any unjustifiable rejection creates a precedent which is the last thing a government wants.

“BAIC have advised that their investment in PGW is strategic in nature and has been made with the aim of exploring future closer ties between New Zealand and China as a major export market for agriculture."

PGW is a retailer selling supplies to NZ farmers. All the IP went out of the door with the sale of the seed division. How will China owning a share of PGW help develop China as an export market for NZ farmers? To me the reason for acquisition by BAIC of the now 11% stake in PGW is vague and doesn't really stand up to scrutiny.

Beijing Capital Agribusiness and Foods Group (BCAG) is the parent of BAIC

I see information Beijing Capital Agribusiness Inc is to be found on the CITIC website.

http://www.agri.citic/html/en/Animal...Agribussiness/

"CITIC Group was established in 1979 by Mr. Rong Yiren with the support of late Chinese leader Deng Xiaoping. Since its inception, CITIC Group has been a pilot for national economic reform and an important window on China's opening to the outside world. It has blazed a new trail of development for China's Reform and Opening-up by raising foreign capital, introducing advanced technologies, and adopting advanced international practice in operation and management, thus building up good reputation both home and abroad."

So BAIC is for all effective investment purposes an arm of the Chinese government. Would our government be happy with the Chinese government controlling a large chunk of NZ's agricultural supply chain? What benefit to NZ would that offer?

Not sure why you are attempting to make mountains out of molehills, Snoopy - as has been the case now with PGW for the last 7 months. All cool though as it has certainly helped me get more PGW shares at very very nice prices!

I never knew I was powerful enough to control the market for PGW shares! But let's rewind the situation. The recent peak in PGW share price prior to the seed division divestment was 71c on 8th June 2018. Following the sale of the seed division, a 31cps capital distribution was made. So the equivalent highest PGG Rural Rump price was: 71c - 31c = 40c. There has been a 10:1 share consolidation since. So the PGG Rural Rump price at its highest was the equivalent of $4. At the time it was speculated that Elders might be interested in buying PGW. But that price was judged too high and no bid came.

I find it doubtful that BAIC would pay an equivalent price to what Elders would have paid as I can see fewer synergies. Take 20% off $4 (a price that Elders was not prepared to pay) and I get $3.20. To me that would be the upper bound of any takeover price from BAIC for PGW. With no takeover bid we might expect PGW to trade at a price 15-20% below $3.20. That translates to an indicative price range of $2.56 to $2.72. With PGW shares trading at $2.98 today, the risk/reward buying in at that price looks marginal.

SNOOPY

[Balance]

https://www.nzx.com/announcements/356553

One of the few companies to provide a positive update for F2020.

PGG Wrightson Limited* (PGW) announced today that it expected to report an Operating EBITDA** result for the full year to 30 June 2020 in the $23 to $24 million range (excluding the application of the new accounting lease standard, NZ IFRS 16).

PGW Chairman, Rodger Finlay said that “Whilst our results remain subject to completion and audit, this is a pleasing financial result in what has been an extraordinary year. To record a trading performance similar to last year in these circumstances demonstrates remarkable resilience given the very challenging operating conditions we have seen over the second half of the year including a global pandemic.”

“The business has responded to these challenges and has performed well through our dedicated staff who have risen to the challenges and supported our customers and the sector through the lock-down and the various alert levels we have seen over recent months.”

[winner69]

That’s a real positive announcement eh Balance

[percy]

Yes a reassuring update.
Rural community and suppliers certainly have a great deal to be proud of.
Never a easy sector,but will help lead NZ through Covid 19.

[Balance]

That’s a real positive announcement eh Balance

It's a good announcement against the backdrop of most of NZX companies going backwards, deferring/cancelling dividend payments and tapping shareholders for more capital.

Yes a reassuring update.
Rural community and suppliers certainly have a great deal to be proud of.
Never a easy sector,but will help lead NZ through Covid 19.

This government swallowing hard and attempting to embrace & acknowledge the rural sector as the backbone of NZ economy - no easy money in the sector, just hard yakka from our farmers.

[Snoopy]

For FY2020 the EBITDA forecast for PGW is for $30m (26th March market Update). I heard that under lockdown, Farmlands Retail Division is down 10-15% on turnover. I would expect the profit reduction to be deeper than that, and expect PGW Retail to be showing a similar downturn. FY2020 does look to be a 'low point' in an historical context. So if a takeover bid eventuates, it could be seen as opportunistic.

Here is the 21st July EBITDA update.

"PGG Wrightson Limited (PGW) announced today that it expected to report an Operating EBITDA result for the full year to 30 June 2020 in the $23 to $24 million range (excluding the application of the new accounting lease standard, NZ IFRS 16)."

That’s a real positive announcement eh Balance

Not really. The announcement is down $6m-$7m from what was anticipated in March. So that $6-7m shortfall occurred over the COVID-19 period. However farrmers were rather less affected by COVID-19 with most carrying on 'as normal'. Livestock sales being the exception of something that was definitely disrupted. So I suspect much of that sudden downturn was due to drought, and shows the very difficult position in which farming finds itself.

Let's just remind ourselves of the multi year picture:

	Combined EBITDA	less Seed & Grain EBITDA	add Corporate Savings	equals PGWRR EBITDA
FY2014	$58.747m	$33.965m	$2.500m	$27.282m
FY2015	$69.631m	$40.506m	$2.500m	$31.675m
FY2016	$70.181m	$41.862m	$2.500m	$30.819m
FY2017	$64.499m	$37.045m	$2.500m	$39.974m
FY2018	$70.174m	$35.607m	$2.500m	$37.067m
FY2019			$2.500m	$26.925m
FY2020f				$23.500m
Average				$31.035m

1/ This period covers the 'modern' era where Mark Dewdney's 'One PGW' philosophy started to permeate the group.
2/ I have used only 'Operating EBITDA'. That metric Leaves out all 'Equity Accounted Investee Profit', and consequently removes the profit contribution from 'Agimol', representing the 50% interest in 'Agricentro' in Uruguay, an equity investment that was subsequently fully taken in house (FY2019) and latterly sold (EOFY2019). Equity accounted New Zealand based investments retained, being a 50% interest in 'Canterbury Saleyards' and a now 33% interest in 'Agri Optics New Zealand', I do not consider have contributed materially to EBITDA.

So you can see we are right at the bottom of the multi-year picture. I also note that announcement today was for the 'Operating Result'. No mention of the difficult position that I believe the pension scheme to be in. There is no way to sugar coat this result. It is a bad one.

SNOOPY

[iceman]

It's a good announcement against the backdrop of most of NZX companies going backwards, deferring/cancelling dividend payments and tapping shareholders for more capital.

I think you will find winner69 was being facetious Balance, as you will see if you click on the link you posted.
But agree this looks like a decent result that we can be happy with.

[Balance]

I think you will find winner69 was being facetious Balance, as you will see if you click on the link you posted.
But agree this looks like a decent result that we can be happy with.

Haha - good catch, W69! Hard to get one pass the ever vigilant W69!

[winner69]

I think you will find winner69 was being facetious Balance, as you will see if you click on the link you posted.
But agree this looks like a decent result that we can be happy with.

Ha ha. ...I’m sure that link about Falloon wasn’t there when I replied ...well spotted

Only referring to the NZX announcement

[Balance]

Ha ha. ...I’m sure that link about Falloon wasn’t there when I replied ...well spotted

Only referring to the NZX announcement

What would we ever do without your sense of humour around here? 🤣