PGW - PGG Wrightson

[Snoopy]

Snoopy, you developed a small obsession with Agria going to collapse.
You never talk about the prospects. The world population will reach 9 Billions and AGRIA/PGW
are in the part of the world with a health and permanent growth.

Even if on balance I believe that Agria will collapse, this does not necessarily mean that Agria is a bad investment.

If the payoff from a succesful Agria is high enough, then it could still be rational to invest in Agria even if it has a less than 50% chance of survival. So let's for a moment assume that the Chinese growth miracle will continue. Has Agria demonstrated the ability to generate a return above its cost of capital in China?

Unfortunately at the moment the answer is no. I would want to see at least some evidence that Agria can generate a return above its cost of capital in China before I would consider investing in Agria directly. Interestingly growth in China refers to an increase in spending in the overall Chinese economy. China is so economically powerful that they could sustain indefinitely a kind of cross subsidy arrangement where their exporters bolting and sewing together "stuff" earn the cash and the food producers operate at a loss. It is entirely possible that the food business in China will continue to "grow strongly" and yet contribute nothing in earnings to the companies that manage that growth.

SNOOPY

[Queenstfarmer]

Who knows...we may see a bit of robbing Peter to pay Paul.

[Balance]

Even if on balance I believe that Agria will collapse, this does not necessarily mean that Agria is a bad investment.

If the payoff from a succesful Agria is high enough, then it could still be rational to invest in Agria even if it has a less than 50% chance of survival. So let's for a moment assume that the Chinese growth miracle will continue. Has Agria demonstrated the ability to generate a return above its cost of capital in China?

Unfortunately at the moment the answer is no. I would want to see at least some evidence that Agria can generate a return above its cost of capital in China before I would consider investing in Agria directly. Interestingly growth in China refers to an increase in spending in the overall Chinese economy. China is so economoically powerful that they could sustain indefinitely a kind of cross subsidy arrangement where their exporters bolting and sewing together "stuff" earn the cash and the food producers operate at a loss. It is entirely possible that the food business in China will continue to "grow strongly" and yet contribute nothing in earnings to the companies that manage that growth.

SNOOPY

You could say the same thing about Haier's investment in FPA a year ago.

[Balance]

Enough about Agria. I'm interested in PGW. At what level would the commenters here want more of it? Today's price of 35c? 32c on market should it drop to that? 29c if Agria tip over and ANZ then offer a placement?

Remember that New Hope has a first right of refusal over the shares.

[Snoopy]

I'm interested in PGW. At what level would the commenters here want more of it? Today's price of 35c? 32c on market should it drop to that? 29c if Agria tip over and ANZ then offer a placement?

I don't think you can discuss what is a fair buy in price for PGW, without having some kind of future scenario in mind in tandem with your price.

IMO the best thing PGW can do to improve their earnings is reduce debt. Unfortunately with Agria in control, I believe dividends will be reinstated in advance of what is prudent for all shareholders. Some small shareholders may cheer and drive the share price up to 40c. I would see PGW as a sell at that price.

35c to me says PGW are expecting a large increase in contribution from Agritech to offset the decline in Agriservices coming off a boom year. I was very disappointed to hear at the AGM that after Agritech hit a five year rock bottom in FY2012, their profitability has worsened yet again in the opening of the FY2013 year. At the moment I see the chance of a downside risk of the PGW share price as high, and greater than the possibility of missing a share price rally. Of course with any sub 50c shares, a movement of only one or two cents is quite a large percentage move. So if the share price got down to say 32c, I would look at PGW again.

Personally I do not buy the China expansion story. So whether Agria or New Hope stay involved with PGW does not affect my own valuation of PGW. Some may see that differently though. If Agria did start having to sell PGW shares to pay their debts, pushing the PGW share price down as a consequence, I would cetainly look at buying more PGW, maybe a lot more if I could get the shares for 30c....

SNOOPY

[Agrarinvestor]

I don't think you can discuss what is a fair buy in price for PGW, without having some kind of future scenario in mind in tandem with your price.

IMO the best thing PGW can do to improve their earnings is reduce debt. Unfortunately with Agria in control, I believe dividends will be reinstated in advance of what is prudent for all shareholders. Some small shareholders may cheer and drive the share price up to 40c. I would see PGW as a sell at that price.

35c to me says PGW are expecting a large increase in contribution from Agritech to offset the decline in Agriservices coming off a boom year. I was very disappointed to hear at the AGM that after Agritech hit a five year rock bottom in FY2012, their profitability has worsened yet again in the opening of the FY2013 year. At the moment I see the chance of a downside risk of the PGW share price as high, and greater than the possibility of missing a share price rally. Of course with any sub 50c shares, a movement of only one or two cents is quite a large percentage move. So if the share price got down to say 32c, I would look at PGW again.

Personally I do not buy the China expansion story. So whether Agria or New Hope stay involved with PGW does not affect my own valuation of PGW. Some may see that differently though. If Agria did start having to sell PGW shares to pay their debts, pushing the PGW share price down as a consequence, I would cetainly look at buying more PGW, maybe a lot more if I could get the shares for 30c....

SNOOPY

I don't understand this
>>to offset the decline in Agriservices coming off a boom year.<< by Snoopy

In the script on Page 4 i read :
>>>Overall the AgriServices division is up 7% on the same period last year.<<< by George Gould

>>in FY2012, their (Agritech)profitability has worsened yet again in the opening of the FY2013 year.<< by Snoopy

on Page 5 i read:
>>>The Grain trading business has seen increased prices across wheat, maize and barley and is tracking ahead of this time last year. The AgriTech division is confident it will improve on last year’s performance.<<<

http://www.pggwrightson.co.nz/Userfi...0-%20FINAL.pdf

[Balance]

Tick .... tick ...

Agria delays $10m debt repayment
TIM HUNTER
Last updated 09:50 30/10/2012



Share
Industries NZ Oil & Gas September qtr revenue $29.6m Vodafone takeover approval expected NZ dollar 'not so over-valued' NZ firms 'complacent' about bribery overseas Government plans to make housing affordable Greymouth Petroleum owners talk tough Bathurst battles for mine in court Tiwai cuts hit firms Offshore survey boosts gas hopes Kirkcaldie shares jump on sale news
PGG Wrightson's controlling shareholder Agria has obtained an extension on a $10 million debt it was due to repay by tomorrow.

New Zealand company Livestock Improvement Corporation, which loaned the money, told the stock exchange late yesterday its talks with Agria about repayment were continuing.

"To enable these discussions to continue, and to give Agria time to source additional funds to enable repayment, the payment date for these amounts has been extended," LIC said.

Payment of at least half the money is now due by December 19, with the balance payable by March 2014.

Interest on the loan has been increased "to reflect the extension" LIC said. A company spokesman said the rate remained confidential.

Agria, a New York Stock Exchange listed, Cayman Islands registered, Singapore-controlled company with offices in China, borrowed the money to help finance its purchase of shares in rural services company, PGG Wrightson.

In NYSE filings Agria has said if it had to repay the loan on the due date it might have to sell part of its PGG Wrightson stake.

Agria owns 80.8 per cent of Agria Asia, which owns 50.22 per cent of PGG Wrightson.

LIC's loan ranks behind a $25m loan to Agria provided by ANZ, also due for repayment on October 31. Agria has said the bank has agreed terms to extend the loan.

LIC is a farmer owned co-operative providing scientific analysis services to dairy, beef and deer farmers. In the year to May 31 it reported a net profit of $24.4m on revenue of $177.2m.

Its shares were unchanged yesterday at $4.95, valuing the company at $146m.

An earlier version of this story incorrectly said the $25m loan due for repayment on October 31 was provided by BNZ.

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[Master98]

Tick .... tick ...

Agria delays $10m debt repayment
TIM HUNTER
Last updated 09:50 30/10/2012

3 cps special dividend when crafar loan repayed on end of November or first of December used to pay half of LIC loan. I GUESS

[Under Surveillance]

3 cps special dividend when crafar loan repayed on end of November or first of December used to pay half of LIC loan. I GUESS

And no DRP option to be available, entirely because PGW has trifling debt and is awash with cash (not because Agria ownership would likely drop below 50%, yeah right).

Seriously, the independent directors would have to vote against a dividend to bail out Agria, the board having told the recent AGM they are allowing themselves up to 12 months to formulate and announce a dividend policy?

[Agrarinvestor]

Tick .... tick ...

Agria delays $10m debt repayment
TIM HUNTER
Last updated 09:50 30/10/2012



Share
Industries NZ Oil & Gas September qtr revenue $29.6m Vodafone takeover approval expected NZ dollar 'not so over-valued' NZ firms 'complacent' about bribery overseas Government plans to make housing affordable Greymouth Petroleum owners talk tough Bathurst battles for mine in court Tiwai cuts hit firms Offshore survey boosts gas hopes Kirkcaldie shares jump on sale news
PGG Wrightson's controlling shareholder Agria has obtained an extension on a $10 million debt it was due to repay by tomorrow.

New Zealand company Livestock Improvement Corporation, which loaned the money, told the stock exchange late yesterday its talks with Agria about repayment were continuing.

"To enable these discussions to continue, and to give Agria time to source additional funds to enable repayment, the payment date for these amounts has been extended," LIC said.

Payment of at least half the money is now due by December 19, with the balance payable by March 2014.

Interest on the loan has been increased "to reflect the extension" LIC said. A company spokesman said the rate remained confidential.

Agria, a New York Stock Exchange listed, Cayman Islands registered, Singapore-controlled company with offices in China, borrowed the money to help finance its purchase of shares in rural services company, PGG Wrightson.

In NYSE filings Agria has said if it had to repay the loan on the due date it might have to sell part of its PGG Wrightson stake.

Agria owns 80.8 per cent of Agria Asia, which owns 50.22 per cent of PGG Wrightson.

LIC's loan ranks behind a $25m loan to Agria provided by ANZ, also due for repayment on October 31. Agria has said the bank has agreed terms to extend the loan.

LIC is a farmer owned co-operative providing scientific analysis services to dairy, beef and deer farmers. In the year to May 31 it reported a net profit of $24.4m on revenue of $177.2m.

Its shares were unchanged yesterday at $4.95, valuing the company at $146m.

An earlier version of this story incorrectly said the $25m loan due for repayment on October 31 was provided by BNZ.

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- © Fairfax NZ News

This is from the annual report:
We funded the acquisition of PGW partly through debt that matures between October 2012 and February 2014, and partly
through equity financing in Agria Asia Investments through New Hope International, which holds an option to require us to
repurchase its shares in Agria Asia Investments between May 2013 and May 2014. In order to meet these repayment and repurchase
obligations, we may need to extend our existing credit facilities or obtain new credit facilities. Additionally, with respect of our
acquisition debt that matures in October 2012, which was provided by a bank loan from a New Zealand bank and a subordinated loan
from Livestock Investment Corporation Limited, or LIC, we have received approval from the New Zealand bank to extend the terms
of our remaining loan and are in the process of negotiating suitable arrangements with LIC for the repayment of their subordinated
loan or otherwise extend the loan consistent with the terms of subordination arrangements between us, the New Zealand bank and
LIC. If we are unable to extend existing facilities or obtain new ones, we may be required to sell a portion of our shares in PGW


And this is an official answer from AGRIA's SVP David Pascale:

During the next month you have to renew a lot of debt. Is it possible that AGRIA have problems with the banks ?
[ Debt was related to PGG Wrightson investment. There is no issue anticipated with the company's bank syndicate. ]

.......................

We are not talking about new debt, it's only about renewing. Maybe Agria want to repay 5 million in december and don't want to
arrange new credit lines with other banks. It is possible that AGRIA pay the 5 millions out of their cash flow.
I think there are shortsellers out there who are in panic because AGRIAs share has recovered. I dont beleave that AGRIA has to sell PGW shares.
But if they have, i dont think that PGW shareprice will decline then.