PGC - Licenced to Bank

[Lizard]

Hi ETC,

Yes, the related party stuff does my head in a bit trying to tease it apart and segmented info is not as clear-cut as some.

Some comments...
Trustee services - seems to tick along fairly steadily with about $15-$16m of income, generating about $3m per year in profit. Unknown risk of legal action, but would expect some insurance cover as Winner has suggested. Possibly dented by sad & sudden loss of staff. I'd say worth $15m.

Funds Management - Growing FUMA, but $587m is tiny and not really break-even level for funds management, so a bit early to place much value on, but perhaps give it $10m for now.

Van Eyk - part of funds management, but an associate, not subsidiary, so only the value of the equity interest. Mostly provides subscription research service to investment advisors (maybe some similarities to NZ's IRG?). Have spent about $6m on it, although $1.6m sitting in liabilities still, so current value $4.4m.

EPAM - I'd rate at about $7m based on owning 11% of EPIC which had about $72m in equity at last September and has had to stump up with more funds ($12m borrowed from Torchlight) to support their investment in UK Moto. They are planning to sell down some of their UK investments and perhaps invest in NZ instead should the govt have any small assets they want to dispose of or P-P-P's on offer. Probably could even discount that $7m further in the circumstances, although that is still a big cropping of their initial investment in EPAM (which one broker estimates at $22.5m)

Torchlight - There's $15m in there of seed capital to count and it's probably still there and not much changed yet. The fee revenue counts under funds management and/or trustee services.

RECL - probably the most difficult. Best summary found so far is in the interim results presentation, where net assets are given at $61.8m. This is based on a direct ownership interest in 175 individual properties valued at $63.1m, property finance receivables of $9.4m and external loans of $10.7m. Impairments from here are probably mostly limited to the few remaining finance receivables, so perhaps another $5m of impairments to come? Leaves value of the ex-Marac portfolio at $56.8m. However, on top of the distressed "bad bank" assets, they now also have responsibility under the management agreement to manage Marac ($142m?) of property finance receivables. For this, they receive $11m up front, but (as I understand it) Marac can claim back losses of up to $33m. If anything, I would rate this deal as a negative transaction overall for PGC, but, for starters, give it a zero.

So that totals $108.2m. Leave it to Winner to add back the BSH, PGW shares, deduct MFSL loan, figure out whether to allow anything for tax assets, corporate cash and capitalised costs and divide by shares on issue...

[Lizard]

Oops, sorry Winner. Just saw you posted while I was slowly grinding out that post, so I may have missed the boat for your analysis...

[percy]

thanks winner69 and Lizard.
The sum of parts = $290mil.Where has $110mil gone?
Used to be a NTA of approx 50cents a share.ie with just over 800 mil shares $400mil of assets. Now only $290mil.One big difference.! ????

[Lizard]

To be honest, I have a suspicion that Winner is having us on a little - unless he's suddenly changed his colours from being Mr ROIC to the NAV Man... I'm sure he'd be the first to preach against relying on the value of illiquid assets held in a Pandora's Box to which you do not possess the key (though I think the Pandora's Box bit was one of PT's gems).

[winner69]

The level of acceptances for PGW mean PGC's percentage will get scaled back quite a bit so the numbers needs reworking ... again.

Assummed full acceptance of the Agria offer so as per ETC workings 38% at 60 cents and rest at market - off course the value will change day by day but that is the situation this week

Still going to have afair chunk left - will they just return them to PGC shareholders as they said they might ... or maybe they already have a buyer lined up - belg or the maoris?

[winner69]

Oops, sorry Winner. Just saw you posted while I was slowly grinding out that post, so I may have missed the boat for your analysis...

No it was good you posted what you thought without having an inkling of what i thought

Well well .... I said whats left after PGW and BSH goes is $90m and you say $109m ... different thinking but abouit the same result

As always when 2 great minds can quite disagree (but close) the real answer is generally in between ... so lets split the difference and say the ongoing PGC business is worth $100m (a nice round number)

A couple of brokers reports around suggest $120-$140m so factoring in their eternal optimism I think we have it about right - lets give ourselves a pat on the back

Percy won't like it though - wonder where the best part of $100m went?

As always

[winner69]

.....illiquid assets held in a Pandora's Box to which you do not possess the key (though I think the Pandora's Box bit was one of PT's gems).

Talking of Pandora .... and your other love jewellery ... the Pandora thing is an amazing marketing story - once the girls get some beads or worse still a charm they are hooked ..... can even buy them at Wellington airport at Silvermoon I think it is

What a brand

Liz - you hooked?

[percy]

No it was good you posted what you thought without having an inkling of what i thought

Well well .... I said whats left after PGW and BSH goes is $90m and you say $109m ... different thinking but abouit the same result

As always when 2 great minds can quite disagree (but close) the real answer is generally in between ... so lets split the difference and say the ongoing PGC business is worth $100m (a nice round number)

A couple of brokers reports around suggest $120-$140m so factoring in their eternal optimism I think we have it about right - lets give ourselves a pat on the back

Percy won't like it though - wonder where the best part of $100m went?

As always

Until soneone comes up with the answer it is still in PGC. PGC has had a recent recap,and with Marac looking for a banking licence we must take the previous NTA as honest.Banks ,finance companies the NTA is much more important then other type of companies.We look at banks trading at say 3 times NTA ,so when we see PGC/BSH trading at a discount ,we know either the market is wrong or we are. Over $100mil missing in company's looking for a banking licence? Yeah Right!!!

[Lizard]

Hi Percy,

So where it went - about $50m lost between equity transferred to CBS and that reflected in the value of their BSH holding. About $7m off PGW for lower sp. Another $5-$10m off the value of the property investments and receivables. Another $10m knocked off for what we are valuing EPAM at. Just about there... maybe some in intangibles, although I think what we allowed for perpetual would have covered that. Ignoring the tax assets of $20m.

[percy]

Not so.NTA of BSH 88cents.PGC ownes 72% so 300mil BSH shares x88cents x.72 =$190.08 mil.We were told assets going into BSH was less than half PGC's NTA so therefore still over $200mil in PGC.
I would accept $10mil lost,well maybe I wouldn't, but $50mil makes no sense to me. I think the CBS transaction was at near to their NTA so would have expected all parties did the deal at near NTA.