PGW - PGG Wrightson

[Balance]

3 stocks speculated on as takeover targets by the Chinese following FPA :

1. Rakon
2. Wrightson
3. Skellerup

[Minerbarejet]

Heads up - One News has PGG as takeover target after Agria have over 50 %. ahem. Have A Nice Day

[Balance]

Heads up - One News has PGG as takeover target after Agria have over 50 %. ahem. Have A Nice Day

Just like FPA after Haier have 20%?

[Agrarinvestor]

The relevence of Agria's share price is the effect that might have on the price setting of any new Agria shares that might be issued to shore up Agria's balance sheet. It would be easier to raise new capital if the Agria share price was $1.20 as opposed to 74c, true enough. But I think you need to consider who would be lining up to put more capital into Agria. My pick is that small shareholders having seen their investment decline in market value by nearly 95% (Agria floated at a market price around $US14) would not be keen to dip their hands into their pockets again. The only big player I can see who does have the ability to bail out Agria is New Hope. Why would New Hope indulge in a campaign to boost the Agria share price? Would it not be better for New Hope to put up new capital at a deeply discounted price? It would be easier to dilute the equity of existing shareholders if done this way, would it not? As New Hope does not hold a meaningful stake in Agria USA, the maximum bang for their buck would be obtained by shafting existing Agria shareholders as much as they can. I see that as the logical way for New Hope to behave, as Alan Li is eased into graceful face saving retirement.

The problem is the above scenario is a nightmare for the existing small shareholders in Agria.

SNOOPY

What is about BCL and Mr. Lai. Mr. Lai owns about 60% of Agria, i think.
http://idc.api.edgar-online.com/efx_...NIS&ID=7037657
He has earned round about 80 million Dollar during the IPO of Agria. If Agria has to raise new capital, the shareprice doesn't play a large role for Agria.
The common shareholders has paid 16.5$ during the IPO. If we have the possibility to get new shares for 80 cent why not ? If no one has the the wish to order
these new share. Mr. Lai has the power to order all of them.
I am one of these small shareholders and i have no problems if AGRIA decide to raise new capital, as long as i have the possibility to order
my portion of the new shares. The looser are those who ordered 16.50% during the IPO, for the other is the low shareprice a opportunity.

Mr Lai conducts himself respectably to the board of directors at PGW, that is a good sign, that he is trying to avoid unfairness

[Snoopy]

Hi,
Can someone who is a registered shareholder, ask for a copy of the register of shareholders ?

It could be of interest if we see some neverheard funds and trusts collecting shares. I am sure that Agria has very good reasons why they bought 50,2% of PGW.

I did this the lazy way Agrinvestor, waiting for the PGW Annual report to come out. No doubt you have already checked yourself on line. But the key movements in shareholding since honest George's PGC share giveaway are like this:

HSBC Nominees: 2.77% -> 3.84%
ACC: 2.00% -> 2.39%
AMP Investments Strategic Growth: 1.60% -> 2.09%
National Nominees: 2.54% -> 2.04%
TEA Custodians: 0.68% -> 1.76%
First NZ Capital: 0.24% -> 1.10%
NZ Super Fund: 1.01% ->1.07%
Citibank Nominees: 1.46% -> 1.02%

New investors in the top 20 are:

Cogent Nominees: 2.76%
JP Morgan Chase: 2.02%
Philip Maurice Carter: 0.84%

All in all I would say the PGC holding has been widely distributed amongst the existing 'big boys', even though they are all 'small boys' in the overall shareholding stakes.

Of the newcomers, Philip Carter is a well known local rich lister. Cogent Nominees have positions in many NZ shares, although I know little about them. JP Morgan chase could be representing anyone but the stake is only 2%. I can't see any evidence that Agria now has a white knight for assistance on the share register.

SNOOPY

[Snoopy]

What is about BCL and Mr. Lai. Mr. Lai owns about 60% of Agria, i think.
http://idc.api.edgar-online.com/efx_...NIS&ID=7037657
He has earned round about 80 million Dollar during the IPO of Agria. If Agria has to raise new capital, the shareprice doesn't play a large role for Agria.

Yes but the lower the share price is, the more new shares will have to be issued.

The common shareholders has paid 16.5$ during the IPO. If we have the possibility to get new shares for 80 cent why not ?

One very good reason! The Agria share price fell over 5% yesterday down to 70c! Much cheaper to buy on market than pay 80c in a potential rights issue!

If no one has the the wish to order these new share. Mr. Lai has the power to order all of them.

Not necessarily. Mr. Lai may have taken $US80m out of Agria. That doesn't mean he has this capital for investment now. I am sure he has reinvested it since, in his brother construction company for example.

I am one of these small shareholders and i have no problems if AGRIA decide to raise new capital, as long as I have the possibility to order my portion of the new shares.

A significant share placement, instead of a pro-rata rights issue, may deny you that choice. That is the risk of being a small shareholder.

The loser are those who ordered $US16.5 during the IPO, for the other is the low share price a opportunity.

A better opportunity I would suggest is to buy PGW shares directly. Once Agria is delisted you may never be able to sell your Agria shares.

SNOOPY

[Agrarinvestor]

Hallo Snoopy,

many thanks for your answers, Do you agree that:
Mr Lai hold over 60% shares of Agria ?
That Agria has the power to force PGW to pay a dividend of 3 cent if it would be necessary for Agria ?

The fact that Mr. Lai does not intend to use his voting rights in PGW for his own advantage indicates that Agria is in a better shape as the shareprice suggest. (I hope so)
Mr. Lai has done nothing to increase the shareprice, He has not released anykind of news that give support. If Agria is in need of money, he has only to buy a few hundered k of shares, as an insider,
and the shareprice were liftet aboe 2$. Together with the turnaround of PGW it would be a good story for people to invest in PGW again.
I have suffered during the last months with AGRIA shares only seeing one way, but i am still hoping that the nightmare have an end in October.
Because of your arguments i have not bought additional shares during the last 2 month.
Maybe i have to say thank you in a few weeks, but hopefully not.

[Snoopy]

Do you agree that: Mr Lai hold over 60% shares of Agria ?

I would guess that Alan Lai still holds a controlling stake in Agria, yes. However it has been a long time since there has been any disclosure on shareholdings. I am not familiar with NYSE rules, and substantial shareholders updating their holdings with the NYSE.

That Agria has the power to force PGW to pay a dividend of 3 cent if it would be necessary for Agria ?

You are saying this because PGW earned approximately 3cps in the last financial year?

The fact that Mr. Lai does not intend to use his voting rights in PGW for his own advantage indicates that Agria is in a better shape as the shareprice suggest. (I hope so).

There is another explanation for the respectful behaviour of Alan Lai. PGW itself is not a strong company financially and is under the scrutiny of its bankers. When Agria acquired their initial stake, we PGW shareholders were told of two banking covenants that PGW had agreed to with their bankers.

The first concerned the Senior Debt Coverage Ratio = (senior bank debt)/EBITDA

This had to be reduced to under 3 before any excess cashflow becomes available for distribution. Using the figures at the end of the FY2012 financial year, I can calculate this figure as it stood on 30th June 2012.

SDCR= ($29.709m+$111.500m)/ $50.761m = 2.78

If the SDCR is under 3.0 but over 2.0, this means the banking syndicate will allow 50% of PGW excess cashflow to be paid out. However, you will note that once all of the FY2012 profits have been booked the SDCR is only just under 3. That means it is unlikely that any distribution to shareholders would have been allowed up until 30th June 2012.

My guess is that the 3cps earnings from PGW is not available to be paid out to shareholders. If that was done PGW itself would go into receivership, and that would be very unhelpful for all shareholders, Agria included.

SNOOPY

[Snoopy]

SDCR= ($29.709m+$111.500m)/ $50.761m = 2.78

If the SDCR is under 3.0 but over 2.0, this means the banking syndicate will allow 50% of PGW excess cashflow to be paid out. However, you will note that once all of the FY2012 profits have been booked the SDCR is only just under 3. That means it is unlikely that any distribution to shareholders would have been allowed up until 30th June 2012.

My guess is that the 3cps earnings from PGW is not available to be paid out to shareholders. If that was done PGW itself would go into receivership, and that would be very unhelpful for all shareholders, Agria included.

Let's go through a hypothetical exercise.

'Excess cash' is defined as EBITDA less bank loan interest payable, tax payable and approved capital expenditure.

IF PGW can match last years (FY2012) earnings this excess cashflow would be:

EBITDA - 'Bank Loan Payments' - 'Tax Payments' - ' Projected Capex'
=$50.761m - $15.073m - $7.861m -$8.425m = $19.402m

(Note: PGW have reported that expected Capex should match depreciation)

50.22% of that figure (the Agria share) comes out at $9.74m or near enough to $US8m (based on $NZ1= US82c)

The maturing bank loans I am concerned about in the Agria accounts are described thus:

• Loan facilities denominated in US Dollars of RMB369.7 million (US$57.2 million) that mature between January 23, 2013 and April 19, 2013 provided by two banks.

$US8m paid over to Agria during FY2013 will hardly make a dent in that loan. Any way you can play this, I can't see any way to use PGW cash to help pay off that looming Agria loan. Of course if nothing changes at Agria then it will be delisted by January 23rd 2013, so small shareholders will no longer need to be told about the parlous state of the Agria books from January 19th 2013, being six months from the date warning of suspension from the NYSE.

SNOOPY

[Snoopy]

The maturing bank loans I am concerned about in the Agria accounts are described thus:

• Loan facilities denominated in US Dollars of RMB369.7 million (US$57.2 million) that mature between January 23, 2013 and April 19, 2013 provided by two banks.

$US8m paid over to Agria during FY2013 will hardly make a dent in that loan. Any way you can play this, I can't see any way to use PGW cash to help pay off that looming Agria loan. Of course if nothing changes at Agria then it will be delisted by January 23rd 2013, so small shareholders will no longer need to be told about the parlous state of the Agria books from January 19th 2013, being six months from the date warning of suspension from the NYSE.

I have been looking at the potential FY2013 $US8m dividend from PGW to Agria in another way. Could Agria refinance that $57m loan using the $US8m from PGW for paying interest?

$8m/$57m =14%. Suppose Agria could get a loan of 7%. That would leave the other 7% as a 'safety margin', which all bank loans have to have. Perhaps if PGW dividends are renewed, this is a possibility? Of course this is all assuming that those US loans due for renegotiation between January and April are the only loans uncoupled from PGW that Agria have. We really need to see those Agria accounts for FY2012 to confirm if this is the case.

Whatever happens I do expect some 'market action' in PGW as crunch time approaches for controlling shareholder Agria. If the PGW price goes up as a result I may sell my residual holding. If the PGW share price goes down I may just buy some more.

I have begun my own more detailed analysis of the PGW result, and I don't believe it was quite as bad as my initial impression when the result was announced. Agriservices really did remarkably well from an historical perspective and the South American side of the business put in a record after tax result.

But Agritech was a huge disappointment, and unfortunately all continuing divisional returns were still well below their cost of capital, even in this boom time for farming. That means the best thing for shareholders that PGW management could do would be to pay down their mountain of debt as fast as possible. But for reasons I have outlined, Alan Lai and Agria may not allow that to happen.

SNOOPY