.........once that 600,ooo plus sell order is cleared away SPARKY I can see your 56c happening pretty quickly??
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.........once that 600,ooo plus sell order is cleared away SPARKY I can see your 56c happening pretty quickly??
Trading at 49c as I write this. However I won't be congratulating you Sparky until the first half year results are out. There have been no material earnings announcements from the company and I think a lot of this PGW share price rise is just speculation. Part of a Fonterra fueled 'rural share bubble' that is just waiting to burst.
It looks like extreme drought in Australia for the second half. Major shareholder Agria is set to be delisted from the NYSE next week. PGW are going to have to work very hard to match the FY2012 result in FY2013 I think.
SNOOPY
A last minute dance step played by Alan Lai of Agria last week, a desperate attempt to remain listed?
------
Agria Announces Reverse Split and ADS Ratio Change
Jan 08, 2013 (Marketwire via COMTEX) --Agria Corporation (NYSE: GRO) (the "Company" or "Agria") today announced that its Board of Directors has approved a combination, or reverse split, of the ordinary shares currently issued by the Company at par value of $0.0000001 per share such that the Company shall issue one (1) ordinary share (each a "New Share" and collectively the "New Shares") for every three (3) ordinary shares held by its shareholders ("Old Shares") (the "Reverse Split"). The par value of each New Share will be $0.0000003, equal to the aggregate of the par value of three Old Shares combined. Additionally, the Board of Directors also approved to change the ratio of its American Depositary Shares ("ADSs") to ordinary shares from 1:2 to 1:1 (the "ADS Ratio Change"). The Company is working with its ADS depositary, The Bank of New York Mellon, to effectuate the ADS Ratio Change.
The Reverse Split requires approval of the shareholders of the Company, and will be put up for vote at the next annual general meeting of the Company, which is expected to be held in April 2013. The Company will announce the exact date and agenda of the annual general meeting once they have been determined. The Company expects that the Reverse Split and ADS Ratio Change will be effectuated contingent and simultaneously upon shareholder approval of the Reverse Split.
As a result of the Reverse Split and ADS Ratio Change, the Company expects the price of its ADSs to increase proportionally. Although the purpose of the proposed Reverse Split and ADS Ratio Change is to regain compliance with the minimum average closing price continued listing standard of the NYSE, the Company can give no assurance that this goal will be achieved if the Reverse Split and ADS Ratio Change are approved.
-------
Translation: A 'reverse split' is really a share consolidation. But what a complicated way of doing things!
Why not say, a simple 10:1 consolidation and be done with it? Why the complication of of doing a 3:1 consolidation and halving the ADS ratio? That makes it a 1.5:1 NYSE consolidation as I see it. So if the Agria shares are at US70c, they will consolidate to $US1.05, barely above the $US1 cut off point. This doesn't add up to my way of thinking. What is Alan Lai playing at?
SNOOPY
@Snoopy,
you have made a lot of statements on sharetrader about Agria. All your statements have a negative undertone and were often proofed wrong. There is only one reason for the low valuation of Agrias shareprice and that is the fact that they are chinese, and all chinese companies are accused of unfairness and fraud. Therefore it is easy to unsettle their shareholders. This is unfair and not sportmanslike. A lot of shareholders had paid 16$ 5 years ago during the IPO.
@all
If you want to look how it works, go to yahoo finance message boards and look how shortsellers have tried to mislead about the ratio change.
http://finance.yahoo.com/mb/GRO/
I have bought during the last 3 weeks because of 2 facts:
1. PGWs shareprice has recovered about 30% and AGRIAs shareprice has declined for 60%.
2. PGW has anounced a dividend plan in december and that means the first half year must be a good one, if not they had not anounced a dividend plan
3. The anouncement in December about the collabaration with Chinese provincial governments in Shanxi, Guangzhou and Shandong. These are all key strategic forage opportunities for Agria in China.
4. The reverse split and the commitment to be listed at NYSE
5. The 1,5 to 1 reverse split, because they must have a reason for staying in the near of 1$
6. Try to find out about the success of foreign competitors (for example Monsanto) how much revenue they make in china and the difficulties they have.
7. Total Stockholder Equity is 228 Million US$ market capitalisation is 40 million US$
8. Undervalued stocks like Agria has the potential to triple within days
9. Agria with its 40 million market cap has control over PGW (362 million NZD)
>>Why not say, a simple 10:1 consolidation and be done with it? Why the complication of of doing a 3:1 consolidation and halving the ADS ratio? That makes it a 1.5:1 NYSE consolidation as I see it. So if the Agria shares are at US70c, they will consolidate to $US1.05, barely above the $US1 cut off point. This doesn't add up to my way of thinking. What is Alan Lai playing at? <<
I bet on Adam Lai. He has a plan. David Pascale has not described to me about the details of the plan. But i think (hope) we will see a concert of good news until the AGM in April and the shareprice is stable above 1,20$ without a reversesplit.
1.Question: During the last weeks i have seen large blocktrades of PGW shares. Why do you think that the buying interest comes from speculation about dividend or the weather in Australia. There is no discussion
about PGWs prospects in China. Why do you think it can not be about the AGRIA/PGW team play in china ?
2.Question is anyone here willing to bet a crate of beer against my 1,20$ at 1. April goal ?
Sparky, to get the recent Agria reports you have to go to the SEC filings page.
http://ir.agriacorp.com/phoenix.zhtm...cCat01.1_rc=10
Then you select the 20F document from 10/10/2012. 20F is US market speak for 'annual report'.
SNOOPY
I think I answered this before in my post 2485 posted on 22nd December 2012 Agrainvestor. I have no hang up about the Chinese and agriculture in general. I do think that Alan Lai's record with Agria has not yet left a positive legacy.
I think December 2012 did show two glimmers of hope for the future with:
1/ The 3rd December announcement of PGW developing the "The China Yangling - New Zealand Agriculture Showcase" - It will serve as a showcase for Agria, PGG Wrightson and other New Zealand agriculture-related businesses to promote New Zealand's advanced agriculture, science, technologies and innovative services. The Yangling Agricultural High-Tech Industries Demonstration Zone will promote industrialization of agriculture, with an emphasis on international cooperation.
2/ The 18th December announcement of two joint ventures:
2a/ To establish the China Guangdong - New Zealand Agriculture Showcase for the showcasing and promotion of innovative products, advanced agricultural technology, advanced plant species, and advanced agricultural production models;
To cooperate in the exchange and training of agriculture specialists;
To strengthen the cooperation in the development, production and promotion of new plant species including edible corn, forage and vegetable seeds;
To leverage and apply New Zealand's geographical and climate advantages by establishing a base in New Zealand for seed production of Guangdong Province; and
To jointly set up a working committee to coordinate the establishment of the project, with representatives from all parties, and to communicate and cooperate in other areas.
2b/ According to the memorandum of understanding with Shandong Province Seeds Group Co., Ltd., the parties will cooperate in the following areas:
To strengthen the cooperation in the scientific research, production and promotion of plant species including corn, forage and vegetable seeds; and
To jointly set up a working committee to coordinate the establishment of the project, with representatives from all parties, and to communicate and cooperate in other areas.
The venture into the Guangdong Province seems the one that might lead to some positive sales for PGW in the shortest time frame. But it is still early days.
To balance these positives is the patchy record that Alan Lai has within Agria in relation to his own staff and business partners. He had to buy out his original business partner in China, and when left with what was close to a shell company Agria dived into PGW in New Zealand. Then late last year his CEO and CFO suddenly quit on the same day. Personal relationships are important in all business, but extremely so in China. From the outside it looks like Alan Lai's main claim to business fame is falling out with the people closest to him. This is the big worry for me with Agria. If Lai falls out with the senior people with which he has set up these joint ventures it could be back to square one for PGW in China.
SNOOPY
The US is much more a legal minefield than any other country. The 20F filing is I feel a way to tick all the legal boxes. To draft an 'annual report' independent of this might be open to misinterpretation. The other US company I am intimate with (YUM) also files a 20F each year under the same dreary format, which includes dire prewarnings about every possible risk factor. Yet all the information is there in the 20F if you look.
SNOOPY
I agree with you Sparky. The only comment I would add is that moving into China will be slow, although perhaps not quite as slow as it took to get up and running in South America. So I wouldn't have expected anything more from PGW/Agria at this stage.
SNOOPY
In this digital age people are used to getting instant results. Instant does not happen in China and it certainly does not happen in agriculture. Most Western companies that succeed in China do so because they have a strong Chinese partner. At the moment Agria makes no money at all in China itself (within rounding error). So it is unrealistic to expect the PGW share price to move when partnering deals with Agria are announced.
A half share of $0 is $0! When Agria starts to make money on its own account in China, only then will I believe PGW is on the cusp of something significant.
SNOOPY
Agrainvestor, Agria still has the serious matter of renewing their US loans within a few months. The reason why the Agria share price has declined is that Agria is losing money and is cashflow negative. This is the exact opposite to PGW which is profitable and cashflow positive.
You will also know that Agria's stockholder equity is based on PGW shares valued at NZ60c. Last time I did the calculation if Agria was forced to sell at market price then all of their equity would be wiped out.
I put it to you that a company with 'effective negative net assets', 'negative cashflow' and being 'loss making' could never be called 'undervalued'. To me it looks like the most expensive share on the NYSE!
You may say the price could triple in a few days. I would say Agria is much more likely to be declared bankrupt at short notice. Last year was a good one for PGW, yet Agria still made a loss on an operational basis. What do you think will happen to Agria should PGW, go forbid, have a bad year?
SNOOPY
@frostboy,
thats the point. Agria is similar as an option. If the underlying value is doing well it should rise. If PGW fails it should decrease. And if PGW has 2 bad years it can collapse. But PGW is doing well, and they have declare a dividend plan. Keep in mind, if anyone want to buy the majority stake in PGW he has to pay 40 million at the moment.
This is a Quote from "Hoop":
>>The market seldom operates at exact value (theoretical normal), history and market theory shows that markets spend most of their time operating either at an overvalued or undervalued state ....<<
That is the point why i said it could triple.
>>company with 'effective negative net assets', 'negative cashflow' and being 'loss making' could never be called 'undervalued'<<
a) they have 821 Million USD Assets and 593 Million USD Liabilities = 228 Million Stockholder Equity
http://finance.yahoo.com/q/bs?s=GRO+...e+Sheet&annual
b)Total Cash Flow From Operating Activities 28,753 Million USD
http://finance.yahoo.com/q/cf?s=GRO+Cash+Flow&annual
c) Income is a loss of 2,5 Million USD. Not so much for a company with 1 Billion USD Revenue
http://finance.yahoo.com/q/is?s=GRO+...atement&annual
Your statement about the loans is typical for you:
>>Agria still has the serious matter of renewing their US loans within a few months<<
You have done that in the past with the lic loans and ANZ loans. But it is only "hot air". Agria has reached an agreement with both of them.
Imagine you build a big house, your loan matured, what is normal and you have to renew. Your neighbours are saying :"Snoopy can not pay it back."
They had no problems to renew, they had not to sell stakes in PGW, but you will never stop making accusions. They had not even to sell PGW shares
where the shareprice was at 29 cent ! Remeber , has Snoopy ever making a buy recommendation of PGW, not even at 29 cent.
>> Instant does not happen in China and it certainly does not happen in agriculture. Most Western companies that succeed in China do so because they have a strong Chinese partner. At the moment Agria makes no money at all in China itself (within rounding error). So it is unrealistic to expect the PGW share price to move when partnering deals with Agria are announced. <<
The fact is, in China the majority of the competitors have a gross margin of 40%. Agrias Gross Margin is 47.8%. Operating profit is 0.3 million (page 42). This is not much but it is not a lost. Keep in mind that all the western companies like Monsanto are minority shareholders. I have tried to figure out Monsantos revenue and earnings for china, but i found no numbers. But i found some very nice presentations. This is a must read for every PGW shareholder.After reading you can imagine why the partnership of PGW/Agria is so important and why they have support of LIC, New Hope and Ngai Tahu. Think about what Monsanto has to do with their patents if they want to be succesful their. They don't want to share their knowledge and register their patents in china.
Page 14:
http://www.monsanto.com/investors/Do...esentation.pdf
look at 147 BU/AC versus 84 BU/AC and now look here for Agrarland per person in the states/china
if you multiply the 2 numbers you come to the conclusion, that china has to increase the efficience by 7. This is almost impossible.
But it is one of chinas government top goals in their current 5 year plan.
https://www.google.de/publicdata/exp...l=de&ind=false
If it doesn’t work go to:
https://www.google.com/publicdata/directory
Jan 15th close was at 75c on a mere 12,000 shares. If the NYSE is as good as their word, that was the last day of trading. However, 75c translates to $1.12.5 post the proposed consolidation in April. Is this enough to give Agria a reprieve? All will be revealed tomorrow!
SNOOPY
I prefer to deal with the actual 20F filing by Agria
http://media.corporate-ir.net/media_...wnload/pdf.gif
The balance sheet is labelled 'page F4'. However in this instance the figures have been correctly transcribed to yahoo and your quotes are correct. However, the actual underlying equity is calculated by revaluing the PGW shares on the Agria books at NZ60c to their current market value of NZ47c. There are 754m PGW shares on issue, and Agria owns half of them. So the 'overstatement of value' on the Agria books is:
(0.60-0.47) x 754m *0.5= $NZ49.1m, or $US41m (using NZD1 = US84c).
So the stockholder equity is down to $US228m - $US41m= $US187m
This is of course assuming that balance sheet is unaltered from 30th June 2012. This won't be correct, but until the half year results are out it is the best information that we have. Nevertheless $US593m worth of liabilities stacking up against $US187m worth of assets is a weak position.
Yes, but net cashflow used financing activities was $US43.167m. So the ongoing operational deficit is:Quote:
b)Total Cash Flow From Operating Activities 28,753 Million USD
http://finance.yahoo.com/q/cf?s=GRO+Cash+Flow&annual
$US23.753 - $US43.167m = -$US19.414m.
This is why I say that on an underlying basis, Agria is cashflow negative. PGW will have booked some profits for Agria since. But profits are split 1/3 2/3 between the interim and final result. So even though profits may improve on an annual basis, looking at the first six months the operating deficit will certainly not be less than $10m. And that doesn't include any payouts Agria made to the outgoing CEO and CFO on their quitting.
Being generous this means Agria shareholder equity was down to $US177m by 31st December
Maybe, but this 'profit' was boosted by one off cashflows from realizing investments of $27.631m. This is not a repeatable cashflow. So on an underlying basis Agria is losing around $US30m per year. At this rate Agria shareholder equity is shrinking rapidly. The banks of course will not allow situation to continue, which is why the renegotiation of the US based Agria debt starting in April is so critical.Quote:
c) Income is a loss of 2,5 Million USD. Not so much for a company with 1 Billion USD Revenue
http://finance.yahoo.com/q/is?s=GRO+...atement&annual
Yes but Agria has not told us how they raised the money to partially repay those loans. Given they on an underlying basis Agria is loss making, they must have sold something. What? Or did they somehow increase their other borrowings even more? All we do know is that they have agreed to pay higher interest rates on the outstanding balance.Quote:
Your statement about the loans is typical for you:
>>Agria still has the serious matter of renewing their US loans within a few months<<
You have done that in the past with the lic loans and ANZ loans. But it is only "hot air". Agria has reached an agreement with both of them.
I didn't buy at PGW at NZ29c, because at that time PGW had not revealed their final result. Once the big uptick in Agriservices was confirmed, I bought some PGW at NZ32cQuote:
Imagine you build a big house, your loan matured, what is normal and you have to renew. Your neighbours are saying :"Snoopy can not pay it back."
They had no problems to renew, they had not to sell stakes in PGW, but you will never stop making accusions. They had not even to sell PGW shares
where the shareprice was at 29 cent ! Remeber , has Snoopy ever making a buy recommendation of PGW, not even at 29 cent.
Agria has what amount to a couple of research projects under their own name in China. It is really stretching things to say they have any commercial business at all under the name Agria. Net margin is what is important. Not gross margin. I don't think it is realistic to suggest Agria will suddenly become as profitable as Monsanto. Agria is being crippled by the high interest payments on their substantial borrowings. The rise in the PGW share price from 30c to 47c may have bought some temporary relief. If even if underlying equity is no longer negative, Agria is still in a very serious position IMO.Quote:
>> Instant does not happen in China and it certainly does not happen in agriculture. Most Western companies that succeed in China do so because they have a strong Chinese partner. At the moment Agria makes no money at all in China itself (within rounding error). So it is unrealistic to expect the PGW share price to move when partnering deals with Agria are announced. <<
The fact is, in China the majority of the competitors have a gross margin of 40%. Agrias Gross Margin is 47.8%. Operating profit is 0.3 million (page 42).
SNOOPY
......"GUT-O-METER" right again and bailed last week! (sorry holders, but just gotta go with that gut instinct........proving to be very reliable) Probably nothing wrong with the company either....apart from too high a SP at the moment.
From buy to accumulate
Does that mean current shareholders can still buy, ie accumulate ....but if you don't own you shouldn't buy
Or does accumulate mean buy ....but not too many
Always wondered and never the fie print n the disclaimers
Thanks Sparky,
I like your conviction towards stocks. It's a quality I lack.
This recent decline just feels like a blow off after a hefty rise. I imagine the RSI was well over 70 and the negative report just accelerated things. Should be well supported with earnings at 4cps'ish.
I might even get in if the half year result is decent.
Do you expect to see eps over 2c for the half year?
Cheers
Do punters react when they hear news from NUF and sell their PGW ....even though one provides the seeds for things to grow while the other protect them from nasties and even kills them
Looks like NUF disappointed te market today cutting Aust NZ for the reason
PGW guilty by association?
Started firing sell signals a week ago...The rapid drop in momentum (red circle) is the reason for your gut feelings ...even the most insensitive guts would have felt this one...
I have this share so how could I not feel it..eh? :p .... Short termer will be out and after today's support breaks some medium termers may be gone as well.
Did I sell out? ..Nah, hasn't hit my stop/loss yet ....Its a Medium term investment for me as I think this is a bull market correction event. I tend to have loose stops during Bull markets.
My favourite indicator DMI hasn't triggered a sell signal as of yesterday :) Today price fall won't help:( but I'm hoping for a bottom above 40c...if I'm wrong and get chucked out for a small loss I'll take it on the chin, get over it and move on to my next adventure without fuss and fanfare. Tally ho!!!
http://i458.photobucket.com/albums/q...ps7e4266c4.png
I some times do .. actually, I usually forget about it as its not on my top best list but each to their own...you use the indicators that you have the most success with and those that best suits your discipline style........behavioural instincts shown up in a mathematical or chart format can be seen as spooky at times ...Fib is no exception.. eh? :)
I consider the Fib Retracement as another support line indicator and as you Moosie have pointed out this 50% line is around the 39.5c area...however Moosie you can't relax knowing this as nothing is confirmed that 40c is the bottom ..if all different TA and FA methods point to that 40c mark being the bottom then the odds of it being the bottom has increased..that's all....and...if those 38-40 lines of support is breached it gets technically ugly and you don't want to be exposed to this as there are other better performing stocks to invest in.....
Time to buy at 40c???....I don't know ...PGW has to get first, if it does, then we analyse again...if there are no buy signals it pays to wait (reduce the risk) patience is a virtue.
Below is todays depth snap shot of the state of play at 11.30am...So far today PGW is trading at 44 up 1c..That charted short term level at 44 - 45c is showing up clearly in todays depth diagram below.... It seems as of 11.30am that 44/45 is a very strong resistance zone and even though there is a lot of buying pressure it is at this moment not enough to break back though to 46+c ....interesting to see the depth support at 40,,,eh Moosie:).......Depth 40 point is agreeing with the chart's long term 40 support...so far all is going to plan. :)
http://i458.photobucket.com/albums/q...psf4a1f14c.png
u can tell how long a glazier has been a a glazier by how fingers they have
Animal herd behaviour and survival instincts to the fore....evidence that humans haven't evolved above other animals.....
A bigger animal has revived itself and now threatenting (PGW??) ...the smaller animal groups come together to form an overall bigger herd (safety in numbers) This bigger herd needs a leader...The leaders of the smaller groups commence the head butting stage.....
Yawn ....wake me up when its over
Disc: Farmlands shareholder (very small)
Farmlands and CRT hardly compete against each other on the ground at the moment and I see the merger case as compelling & will certainly be voting for it. The extra buying synergies should be a big help even if there are no back office savings. PGW shareholders take note that a combined Farmlands/CRT will be formidable competition. Having lived in both islands and dealt with all three companies and been a shareholder in all three I have afew insights into them.
Back in the mid 1990's when I was representing a major potential new customer Wrightsons blew a new account opportunity where merchandise sales could have been around a million annually. Frankly they were shocking/lazy/ disinterested and I hope for PGW shareholders sakes things have improved. Farmlands ended up getting the account and they were excellent.
I'm currently invested in PGW as a turnaround play but if progress stalls I'll be out, especially if the Farmlands/CRT merger goes ahead.
So Farbar says that if I already own PGW I still can buy a few more cause there is a positive outlook anyway ..... but maybe not too many more
But if zi don't alraedy have PGW I shouldn't really buy any cause there a better things to buy (the BUY ones)
ACCUMULATE just seems an odd phrase ..... but heck what do I know anyway
Probably jsut a con to keep punters buying and selling to keep the money coming in
Remeber the rating of PGW in 2009. Price target 2.05$. The biggest joke here are these 5 cent. Why not simple 2$.
If these genius analyst of Goldman Su*** give PGW a accumulate it means nothing.
>>Goldman Sachs is not changing its earning estimates or neutral recommendation on PGG Wrightson. It has a 12-month target price of $2.05 on the stock.<<
http://www.nbr.co.nz/article/failed-...-damages-55247
In my opinion it is more important to observe market prices
Attachment 4289
http://www.indexmundi.com/commoditie...0¤cy=nzd
Since I wrote this there has been drought in South Australian and NSW and floods in Queensland. That means the expected boost in Agritech sales is IMO unlikely. I think PGW will have a real job to match last years earnings now. 40c a share representing a PER of 15 anyone? My FA analysis says that 40c is a fully stretched valuation for PGW in this market . But you TAers please keep believing that 40c is a really cheap entry point. I will need you there if I want to offload my shares after the half year result is out.
SNOOPY
Thxs for the FA update Snoopy much appreciated...
I curious..why wait until the results to sell...
This TA er just reads and reports on Mr Markets behaviour... Snoopy don't shoot the messenger
40c is just a chart theoretical support point that under that 40 should see buyer numbers drop significantly....In practice I've just looked at the depth and it is true..
Looking at the above depth (as of Friday close).There's a solid block of buyers and its increasing... so 43c seems supported now... good news for us Nervous Nellies...eh?
412,704https://www.directbroking.co.nz/Dire...ges/spacer.gif 14 43 851,447https://www.directbroking.co.nz/Dire...pth_before.gif 21 42 236,064https://www.directbroking.co.nz/Dire...pth_before.gif 10 41 420,380https://www.directbroking.co.nz/Dire...pth_before.gif 13 40 30,000https://www.directbroking.co.nz/Dire...pth_before.gif 3 39
".....But you TAers please keep believing that 40c is a really cheap entry point. I will need you there if I want to offload my shares after the half year result is out......"
Got some bad news for you Mate...if PGW gets to that point I'm going to be ahead of you in the selling queue...and I guess I won't be alone either :D.
Actually this is the 3rd stock in my portfolio that I nearly pushed the sell button on this week...kinda makes me wonder whether Mr Market has already priced in the anticipation of a good reporting season...Hmmmm
Droughts / floods...whatever hand Australia gets delt weatherwise...it can't go year in year out without requiring seed.
Actually if you know my style Hoop, you will know that I won't be selling for a while yet. I am a long term PGW investor who has only just increased their holding in anticipation of the return of dividends. My comment was more along the lines that some FA investors are more flighty. If PGW produces a poor result then they might sell, leaving some short term investors who believe that PGW is cheap at 40c to pick up their discards. I can tell you that I for one won't be buying more at 40c unless that half year result produces a hidden positive surprise. And if PGW does produce a surprise positive result I won't be buying either as that will be an unlikely trigger for a share price fall at all!
SNOOPY
Thanks for this chart Agrainvestor. The cynical may say NZ doesn't produce much maize, nor buy it in for stock feed. So the above chart is of little interest for NZ based agricultural businesses. However, I beg to differ.
This kind if chart is important because it represents the cost pressures on industrial scale farms like those found in the US which do have a feed cost issue. So what this chart represnts is a window on competitors costs in $NZ terms. NZ farmers as a rule do not have these costs. So the higher this chart goes, the better for NZ farmers because in relative terms our 'grass input' cost structure become more cost competitive with maize feed.
Despite the fall off since June, this chart indicates things are still looking good for NZ farmers.
SNOOPY
@ Question to the Farmers,
>>Buying seed is a voluntary action.
The farmers may have been saving their own seed from the previous years crop..<<
Is it realy what Farmers are doing. I have learned that it is more common oday to use Hybrid Seeds, than using their own seeds.
The reason is that Hybrid Seeds have 30% higher yield.
I would be very nice if some experts from the farmer section can answer this.
No, sometimes my fingers type faster than my brain works but not on this occasion.
I always look for value. 40c for PGW I regard as expensive, based on what is known in the market on PGW company performance. If the result is a surprise positive then I am betting the share price won't fall. So I won't be buying at 40c on a surprise positive result.
Scenario2 that is the result is a huge positive surprise and the share price goes up. Depending on how good the result is I may decide the share is now worth 40c. But with a share price well north of 40c, it would be difficult to see any value there for me at a higher price. So I will have 'missed the boat' and still won't be buying at 40c!
SNOOPY
Rogers is more bullish on agriculture than anything else currently
Markets Headed for Disaster in 2013?
Jim Rogers: 4200% Investing Returns Are Still Possible Lauren Lyster
Famed investor Jim Rogers is more bullish on agriculture than anything else, and he’s positive about Russia for the first time in 46 years.
http://finance.yahoo.com/blogs/daily-ticker/jim-rogers-4200-…
Famed investor Jim Rogers co-founded Quantum Fund with George Soros in the early 1970s, retired at age 37, and is perhaps best known these days for his market analysis in the media.
But since his new book Street Smarts: Adventures on the Road and in the Markets is a memoir, we decided to take a step back from the markets and look at the bigger picture.
Rogers, born and raised in the U.S., moved his entire family to Singapore in 2007 because he wanted his two young daughters to grow up speaking Mandarin.
“In my view, China is going to be the most important country in the 21st century,” Rogers tells The Daily Ticker.
Rogers is a long-time China bull but acknowledges that China's rise "is not going to happen overnight or straight up." He argues that the U.S. had many setbacks on its way to the top in the 20th century, and China is sure to have similar setbacks as well.
On the same note, he’s not claiming the U.S. is going down the tubes tomorrow.
“When the UK went into decline - which was the greatest country in the 19th century - it took a long time,” he notes. “So America is not about to fall off the face of the Earth, but had you moved to New York in 1907 from the UK, you would have done a very smart thing, so that’s the way I’m looking at this now.”
Positive economic data won't shake his negative U.S. thesis. According to Rogers, “the U.S. is the largest debtor nation in the world while China is the largest creditor nation in the world."
Related: Jobhttp://images.intellitxt.com/ast/adTypes/icon1.png Market ‘Making Slow and Steady Progress Every Month’: Jack Ablin
Rogers has also been critical of U.S. higher education. He cites the rising price of tuition (a 1120% increase since 1978 according to Bloomberg) and the staggering studenthttp://images.intellitxt.com/ast/adTypes/icon1.png loan debt load (topping $1 trillion according to the CFBP) as reasons why.
“You have to follow your own passions,” he says. “But...tertiary education in America is a bubble. There's no question about that.”
As for investing advice, Rogers is more bullish on agriculture than anything else currently, and he’s positive about Russia for the first time in 46 years. He even sees positive developments on the horizon for North Korea (he invests in the communist nation via stamps and coins). He argues that the North Korean generals and leaders have been influenced by the progress they’ve seen in Moscow and Beijing, and has predicted North Korea will merge with South Korea in the next few years.
Looking at the U.S., Rogers is not enthusiastic about the recent rally in the U.S. stock market, which drove the Dow Jones Industrial Average (DJI) to close last Friday at 14,000 for the first time since October 2007. In his book, Rogers writes “there’s nothing quite like a bull market to make people feel smart.” And intelligence, Rogers argues, is not what has been driving these moves.
Related: Dow 14,000: The More Things Change, The More They Stay the Same
“The market is going up because the BOJ said two months ago we’re going to print unlimited amounts of money,” Rogers quips. “And Mr. Bernanke didn’t want to be outdone. It’s gonna end badly for all of us - we’re all going to wake up one day with a horrible headache - probably in 2014-2015, or the end of 2013.”
Related: Don’t Bet on Fed ‘Exit’ in 2013…or Even 2014: Alan Blinder
Rogers reminds us repeatedly in his book that he is not very good at market timing. He writes, “I am not very good at figuring out the moment when suddenly everybody else realizes that what is happening is insane.”
And while Rogers and Soros may have been pioneers in hedge funds and international investing in the U.S. when they started Quantum Fund back in 1973, he believes the staggering 4200% returns the fund delivered over 10 years is still possible, despite today’s more crowded investing world.
“Anything is possible if you do your homework,” Rogers asserts. “There were smart people then and I’m sure there’s lots of smart people now.”
Here are some statements from Syngenta about the effect of drought to seed selling:
>>Latin American farmers have snapped up Syngenta's products to make up for shortfalls in the wake of the worst drought in over 50 years in North America, which sent U.S. corn and soybean prices to record highs.<<
>>"Our confidence in the coming season is reinforced by the fourth quarter business strength, notably in North and Latin America, as well as robust commodity crop prices,"<<
>>High crop prices have driven demand for crop protection products and advanced seeds and equipment as farmers faced with increasingly erratic and extreme weather conditions turn to technology to boost yields.<<
http://www.reuters.com/article/2013/...etsNews&rpc=43
From Snoopy down many thanks for your thoughts,im joining a few dots both ways:).
I think you have to look through those one off write offs, if you want to gauge the future performance of PGW.
A PE of 12 already factors in a lot of future growth.Quote:
If the company is turning around then it deserves a higher share price.
Very true. However, I won't be one of those overpaying and pushing the price up. I would suggest those who are planning this take a good look at their chest , just to see what they might look like shirtless!Quote:
Last time the company reported well the SP hit 39 cents, so I can see it going much higher than 40 cents. Remember, the market does not always act in rational ways, especially in such a bull market. People are willing to pay what they are willing to pay for a stock.
SNOOPY
You are saying that you want the share price right down at the botton, because you are a little bit unhappy that you have not bought enough
shares when the shareprice was low. There is a enough space for PGWs shareprice to raise. Compare PGW with Monsanto:
PGW MONSANTO P/E 12 23 Price/Book 1,3 4.3
I believe that "PGW Agritech" may use Monsanto as a long term measuring stick. But to say the whole of PGW is an equivalent company to Monsanto is I would suggest not being honest with yourself.
By my modelling, the net after tax profit of Agritech alone over FY2012 was $3.7m. With 754.8m shares on issue, this represents earnings per share of 0.490cps.
Revenue at Agritech was $390m out of a total divisional revenue for PGW of $1400m. So Agritech represents:
$390m/$1400m = 27.86% of the PGW empire by revenue.
I would argue the partial share price attributable to Agritech, based on the total PGW being worth 43cps is therefore:
0.2786 x 43c = 12.0c
That means the market currently attributes an implied earnings multiple of Agritech alone of:
12.0/0.490 = 24.4
This is above your quoted PE of 23 for Monsanto Agrainvestor. I would argue therefore that this provides more evidence that PGW is overvalued at 43c.
SNOOPY
An interesting consequence of this is the oft reported dream of Agria to split PGW into Agriservices and Agritech , then list Agritech on the Singaporean Stock Exchange. Here are the SGX stock exchange rules for main board listings
http://rulebook.sgx.com/en/display/d...lement_id=4869
Under rule 210 section 2 (Quantitative listings) we see that a minimum pretax profit of $S30m (currently $NZ29m) is required.
A $NZ3.7m after tax profit represents a pre tax profit of $NZ5.1m. So in order for Agritech to be considered for listing on the SGX, profit would have to improve by more than 500%. Some improvement could be gained by bringing down the very high debt levels of PGW. But since Agria has no spare cash to do this, I think this route is unlikely. So all of the required profitability gains would have to be operational.
Historically 'Agtriech' as a stand alone entity has made more than $15m per year, so operational improvement is possible. But to take the best ever year for Agritech, and ask thenm to improve profits by 100% on that is a very big ask. Thus my conclusion is, if Agritech were to separate and move their primary listing to Singapore, this would be ten or more years out into the future. In today's terms, 'Agria Asia' as the Southern Hemispheres answer to Monsanto is an unrealistic dream.
SNOOPY
"well under $100 million" to me means some figure between $90m and $100m. With most sales in the second half, I can see debt going out again to $100m. After all PGW will need to spend to restock their branches.
Whether the true figure is $90m or $100m, this debt is still high when the company is earning some $25m NPAT when farm conditions are at their most favorable.
The article in 'Stuff' today was a profit warning in all but name. Of course the company is under no obligation to issue any profit warnings because they have not made any earnings forecasts.
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From CEO George Gould:
"Cattle's been pretty steady but sheep values are down, they're around half of what they were a year ago (caused by) supply and demand. The schedule prices published by meat companies are down, market prices in the UK are down."
"They actually notched back a bit even more last week, so we're getting in some cases less than half"
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The above is George's profit warning for the Livestock division
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"About 80 per cent of our grain seed revenue and sales occur in the second half, January to June," Gould said.
"In New Zealand we're pretty confident about our position, we've got a pretty good robust business here. In Australia it's newer and the climate changes are more extreme. The worry we have, which we have every year, is just how will Australia pan out. It does look quite promising to the extent that there have been some early recent rains in some very dry areas."
For those not aware of Agritech's history, it has always done well in New Zealand. It was when they made the big push into Australia adding all sorts of bolt on loss making businesses to their existing Australian presence that profits in Agritech collapsed. The above is George's profit warning for Agritech in Australia.
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Of course the superbulls out there will ignore all of this and continue to proclaim that PGW is undervalued. I will be waiting for the share price to dip once the half year results are made public.
SNOOPY
The Heartland shares were subscribed to at 75c by PGW IIRC. So I think management would be looked on dimly for selling them at less than that price.
I estimate the interest bill for FY2013 to be $9.5m, accounting for the repayment of those Crafer loans. FY2014 will be the first year that the repayment of the Crafer loan effect flows across the full year. I am estimating a net interest bill of $8m for FY2014.
I agree that superficially $577m of equity verses $100m of debt doesn't sound too bad. The problem I see is the wafer thin margins that PGW operates on make for a high business sensitivity risk. And the fact that if underlying profits fall to under $20m this year, that $100m debt would still take many years to repay.
SNOOPY
Like I said before Sparky, it is impossible to issue a 'profit warning' if you haven't made a 'profit forecast'. PGW has made no profit forecast for FY2013. Gould is doing the right thing, keeping shareholders informed of current market conditions. It is up to individual shareholders to decide what effect those market conditions will have on profits.
I still see value in Agritech from a long term perspective. Even if that means pulling out of the Australian market by simply walking away from PGW's investment there. So I will continue holding PGW until that value is unlocked. I don't see any Agritech value being unlocked in FY2013, in fact it may well get worse. If PGW shares get cheaper in the meantime, then so much the better. I have already declared my intention to buy more, but only at the right price. If I am wrong, well I will still have the PGW shares that I own already.
SNOOPY
6m shares changed hand at 45c today, very encouraging volume.:t_up:
from NZ herald article, more investors interesting in agricultural sector.
http://www.nzherald.co.nz/business/n...ectid=10864594
Before anyone else gets too excited about this, I would like to point out that if you add investment cashflow and financing cashlow then PGW is strongly cashflow negative. More specifically adding the three numbers:
$58.5m - $32.4m -$82.0m = -$55.9m
Of course FY2012 was an unusual year in that PGW in that they were divesting PGW finance to Heartland. Incredibly PGW turned even that into a negative cashflow event. My assessment of PGW is that they are extremely bad managers of cash, and they have in fact become experts in frittering cash away rather than paying down debt. There is certainly no spare cash in the company and no easy way to generate it.
Nevertheless FY2013 is a new year.
SNOOPY
I think I get the gist of your argument David B. What you are saying is that at an operational level PGW are generating cash. So that means that underneath all the manure of recent years there should be a good cash generating business here.
The first point I would make is that, is that not akin to someone saying:
"Well, I have a really great income, a nice new house and a mortgage." "If I didn't have to make those mortgage repayments I would be making so much cash I would be wallpapering my bedroom with it."
The problem with the above yuppie attitude is that the mortgage does have to be paid. Imagining a scenario where the financing of debt is optional is somewhat spurious. However having said that the debt repayments by PGW will be lower in FY2013. I am forecasting interest payments to go down from $9.5m in FY2013 to $8m in FY2014.
The next point I want to make is the idea of ignoring the investment cashflow. I should point out that even if PGW had received a financing holiday from the banks and didn't pay back any interest or capital, that the negative investment cashflow alone puts a $32.4m hole in your highlighted operating cashflow of $58.5m.
I think the phrase 'investment cashflow' is unfortunate, as some might take it that if PGW has a small 'investment holiday' then they would suddenly be generating lots of operating cash. I don't think this is right, as much of this investment is stuff needed for the normal operation of the business that nevertheless cannot be written off in the year of purchase.
Furthermore one item of investment cashflow was $32.2m on the sale of investments. Remove that from the sum of operating cashflows and investing cashflows and you can see that the underlying business of PGW, before any finance charges are paid, is actually cashflow negative.
I would argue that far from being on the cusp of being able to deliver large cashflows to shareholders, PGW is in fact in a very serious position because in underlying business terms it is desperately short of cash.
SNOOPY
Balance, this that post of mine was made on 28th October 2012. Since that time I have reduced my farming investment exposure, thanks to Olam breaking the spine of the resistance group of which I was a member and acquiring my NZS shares.
In my total portfolio picture, this made me less reluctant to sell PGW at 45c, even though if I had followed my own advice I probably should have. The good thing about this share investing game is that you don't have to be right every time. A large part of it is having the patience to hang on until you are right. I am still on the PGW register with my holding, without any of the anxiety suggested by others.
In fact in this instance, despite the share price drop from the recent high of the late 40s, and despite being wrong on where the share price is now, I am being well rewarded!
SNOOPY
Interesting to consider the possibility of Agritch eventually listing on the Hong Kong stock exchange. here are the listing requirements:
http://www.hkex.com.hk/eng/listing/l...q/equities.htm
With $NZ1 = $HK6.50 as I write this.
There are three alternative tests for new entrants listed there. Not all require the company to be profitable, but if not then the market capitalization must be at least $HK2billion, or $NZ307m. Perhaps this is possible?
However with 754.8m shares on issue at 45c, that gives a total PGW market capitalization of $NZ340m. If Agritech is worth half of that share price (and it probably isn't right now) hen it will have a standalone market capitalization of only $170m. There is a long way to go for Agrtitech to go down the HK listing path!
SNOOPY
Is PGW movingin the right direction ? YES
Jun 10 Jun 11 Jun 12 3 years Gross Margin 23 22 22 22,7 Operating Margin 4,9 2,48 3,4 3,6 Net Profit Margin 1,4 (2,82) 1,9 0,16 Interest Coverage 1,04 3,0 2,0
Net Profit is small but climbing. Interest Coverage is climbing. if you compare PGW with Monsanto
you see the US Giant valuating with 4 times higher then the Book Value and a P/E of 23.
How much room for improvement , for PGW. If they archive the Gross Margin of Monsanto they will have a net Profit that is 10 times higher. I am sure they can do it.!
- I think they will their Australia business
- I think they will make use of AGRIAs prepaid land use rights in china and produce seeds there. That will improve the operating margin. Remember AGRIA has Operating margin above 40%. That meany the business is profitable if they had more money in the pockets.
@Snoopy,
cash level is higher as before. In the annual report you see 15.09 million instead of 0.2 one year earlier.
The cashflow is negative because they have reduced loans. I don't understand you. Why are you always complaining. Do you really think you know more then the people who purchased these large Blocks of shares during the last weeks. And with Agria you will see a large surprise in the next months.
I think with cash concerns you should be analyzing the position of the company today. It is all very well looking at three year averages. But as you know, PGW today is a very different company to PGW three years ago. If PGW does not have the cash it needs today it matters not one jot that they did have the cash in 2010, or that in an average year they would have had the cash. If bankers want a loan repaid, they want it repaid this year.
PGW have largely done the selling off of unwanted assets now. They do not have another PGW Finance to sell off in future years, although given this transaction generated negative cashflow when they unloaded the business unit to Heartland, perhaps this is just as well!
I agree that things would improve dramatically if the profitability in Agritech Australia improved to the level of a Monsanto. But given this business is probably loss making right now, this would be a huge leap of faith and could take a decade. In the meantime PGW must survive until that time. It seems much more likely to me that a further injection of capital of some kind will be necessary.
This would be a good idea, but I have to ask 'what seeds'? Has anything come of PGWs China specific R&D yet? While Agria is congratulating itself with joint venture university research projects, have these projects come up with anything commercial yet?Quote:
- I think they will make use of AGRIAs prepaid land use rights in china and produce seeds there.
But Agria don't have money in their pockets. All they have is a non value adding management overhead, which is not adding value to a marginally profitable investment - PGW. This is why Agria are losing money.Quote:
That will improve the operating margin. Remember AGRIA has Operating margin above 40%. That means the business is profitable if they had more money in the pockets.
SNOOPY
True the paying back of loans is producing negative cashflow. And I think the picture will become much clearer when we see the half year balance sheet. However based on the EOFY2012 cashflow statement and leaving out all financial cashflows (i.e. only considering operating cashflows and investing cashflows) and leaving out one off inflows of cash from other asset sales (a sub header of investing cashflows) the cashflow position of PGW for FY2012 was still negative overall. This has to be a worry.
The large blocks of shares you refer too are not really that large when there are 754.8m shares on issue! And yes given I have been on the share register of PGW for more than ten years and have lost money on my investment overall (there is nothing like losing money to focus your attention as you try to understand the company better) I probably do have a better business cycle view of PGW than those who are following the 'rural bubble' who have bought in over the last year.Quote:
I don't understand you. Why are you always complaining. Do you really think you know more then the people who purchased these large Blocks of shares during the last weeks. And with Agria you will see a large surprise in the next months.
SNOOPY
I learned my lesson, and my subsequent judgment was improved by holding PGW shares through the Norgate era.
If you recall, I did buy most of my PGW shares in precisely the time period you state Sparky, at a price of 32cQuote:
It is hard to believe your better business cycle view is better than someone who bought in at 25-35c, when PGW traded at its lowest point in 2012. In my opinion, this was the point to buy precisely when it was de-risked - when it had already turned the corner but investors didn't realize.
I don't wish to criticise you too much Sparky, because when it comes down to it your view and mine of where we think PGW is going are not too different.Quote:
I hate to break it to you Snoops-me-ole-mate, but PGW is not a risky stock for me, precisely because I researched it well and bought it cheaply, prior to this so called rural bubble you are referring to. If there is indeed a rural bubble, which until your post above, I was unaware was in effect.
Where I differ with you is that you have swallowed your favourite brokers view on where PGW is going and swept the caveats under the carpet.
Anyone who has had any involvement in agriculture, and that may or may not include the pointy head who compiled your brokers report, knows that a straight line growth path in earnings for any agricultural business will not happen. The fine print which says "barring any unforseen events", like drought, floods, significant upward movement in the NZ dollar, farms slumping in value (relevant to the real estate division) and price turmoil in overseas markets is all happening right now. Yet you steadfastly believe that PGW is on track and that this years earnings will be 8% higher than last year.
Short of flogging you with a docked lambs tail, is there any way to wake you from your tunnel visioned path?
SNOOPY
OK, I think your view on the debt position of PGW is reasonable.
Yes and the key issue that PGW faces, by not earning their cost of capital, is that the best way to improve earnings is to repay their debt as fast as they can. However, it is doubtful that controlling shareholder Agria will allow this to happen.Quote:
Of course the less debt the better,
Yes like the proceeds from sale of investments, a $32.532m one off gain that won't be repeated. Remove that to the -$32.461m sum of the investing cashflows and I get a 'normalised' investing cashflow of -$65m.Quote:
although I do point out that some of that negative investing cash flow y/e 2012 is a one off,
That more than wipes out the $58.578m of operating cashflow!
Last years normalised income was $25m though. Not the $60m you are implying here that was operating cashflow.Quote:
So how much is too much debt for a business to carry? Taking your mortgage analogy, the way I would judge PGW on that score is, if I owned a house that was worth $600,000, and I had borrowed $100,000 mortgage from the bank, and my income (operating cash flow) was $60,000, (i.e., sufficient that if I applied very cent of that to my loan I could pay it all back in 20 months, am I over extended? And the answer to that, I would suggest, is clearly no. So long as I keep my other costs under control, my mortgage level is affordable.
SNOOPY
From mid November 2012 I was buying PGW at 32c, over a period of several days. And no I didn't buy millions of shares. Liquidity was so tight at the price that my ordinary sized order took several days to fill.
Curse all those 'block special crossing' guys that jumped the queue ahead of me!
SNOOPY
I have to admire your due diligence Sparky.
I have some sympathy with your 'history is bunk' view. Except when history is forgotten it has a tendency to be repeated.Quote:
As for swallowing the analyst's view, I can also say that when their reports came out in November and again in January, I picked up the phone and also traded emails to ask questions of the analyst. I have been impressed with their thoroughness, which is why I liked the report.
Hence why I am optimistic about PGW's future, and disinterested in their past which you have suffered for many years.
I don't agree that Agria should be consigned to the history books. This is very much a live issue as far as PGW are concerned. Granted Agria does not affect the day to day running of PGW. But they do control PGW and could rob it of cash when without Agria there, the cash could be put to better use inside PGW, by paying off debt!Quote:
For example, there has been oodles of angst, some of it (but not all) written by you on this post about Alan Lai and Agria's problems. In fact, little of this had anything to do with the underlying business of PGW in the last quarter of 2012. Even if Agria tips over, then the PGW shares they hold will be placed on market by the banking consortium largely controlled by ANZ. All this angst did, typical of PGW's commentary over 2H2012, was to cause a cheaper entry price in the shares, one which both you and I enjoyed.
I do believe your and your brokers long term view of PGW is possible. But my feeling is that the ride will be a lot more bumpy than you both think. For example I don't think earnings will grow by 8% this year. But I believe that it is highly possible that earnings will have grown by a compounding cumulative rate of 8% per year in two years time. So why make a fuss if I agree with you that earnings in FY2014 could be 16.6% higher than the FY2012 figures? Because I believe the earnings volatility should be reflected in a lower PE for the company. By my reckoning a PE of 12-13 is already building in a substantial recovery by Agritech in Australia. I want to see some evidence that PGW will achieve this before I commit any more money to the cause. And yes I do realsie that I will very likely be paying a higher price for my next purchase of PGW shares should this come to pass. The trade off is that I will avoid buying PGW shares should the problems in Australia take longer to sort out than management hopes.Quote:
So I am optimistic about their future. They won't be the standout corporate performer of 2013. Rather, they will do better than the market will have thought they would do when I bought. They will be delivering business as usual and meet budgets, with an opportunity to really do well if weather treats them favourably. That's what my homework tells me.
SNOOPY
The above was written on 12th October 2012.
Four months on, one of the vacant positions has been filled.
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BEIJING -- (MARKETWIRE) -- 02/15/13 -- Agria Corporation (NYSE: GRO) (the "Company" or "Agria") today announced that it has appointed Patrick Wai Yip Tsang as Chief Financial Officer effective February 15, 2013. Mr. Tsang is currently a director of PGG Wrightson Limited (NZSE: PGW), the Company's majority-owned subsidiary listed on the New Zealand Stock Exchange, and a director of China Pipe Group Limited, a company listed on the Hong Kong Stock Exchange.
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However the name "China Pipe Group" rings a bell. This is the company of Lai Fulin, the younger brother of Alan Lai! This whole Agria thing is starting to look a bit incestuous.
SNOOPY
>>However the name "China Pipe Group" rings a bell. This is the company of Lai Fulin, the younger brother of Alan Lai! This whole Agria thing is starting to look a bit incestuous.
<<
You should keep in mind the history of Agria. Adam Lai has bad expirience with people in key positions. After the IPO a key executive tried to put his fingers into shareholders pockets. Mr. Lai prevented us from that rubbery but the result was a delay in the annual report and shareholder class actions against Agria. All claims were settled at the end and Agria has nothing to pay and was acquitted. Therefore i applause to that decision. And i am sure that Mr. Tsang will not be an overpaid greedy Wallstreet Junkie. I assume that he has worked for Agria in the background before Feb 15.th.
Obviously I did well out of the share price jump, but what about those that sold to me at 32c? I was concerned because I don't believe the underlying valuation of PGW changed that much in a month. So were those that bought at 40c Patsy's? Given the price went up still further, I guess no. But I am concerned when a share price bounces around as much as this in such a small timeframe.
I believed that 32c was a fair albeit slightly on the high side entry price. By my thinking then, it was all the higher price action that puffed the PGW share price above fair value. I don't think it is very healthy for the sharemarket. But with the reporting date a few days away, we will just have to see what comes out in the wash.
SNOOPY
Got to be good news for the PGW real estate division.
http://www.stuff.co.nz/business/farm...les-rise-13-pc
Maybe the market was wrong at 32 cents, rather than the price at 32 cents reflecting fundamental value?
Market as you and I know is not driven by fundamental value in the short term but by fear, greed, emotions and other things.
What did the world's greatest investor said? Something about beauty contest and weighing machine.
Perhaps Balance. But I also do homework on PGW, although I prefer a more stand offish approach. Unlike Sparky, I don't ring up the management because I don't want to end up believing their own hype. I am not saying Sparky is wrong to do what he is doing. It is just a different style of research. With results coming up, I am prepared to put up my own case for 32c.
SNOOPY
Is it good news though? Here is a cut and paste from the middle of the article
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The median price per hectare for all farms sold in the three months to January was $23,980 - up 18.1% on $20,299 for the same period last year.
The REINZ All Farm Price Index eased by 3.2 per cent to 3039.77 in the three months to January compared to the same period last year. The index is designed to provide a more accurate measure of farm price movements.
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This seems to be saying that the Real estate Institute data is selective and not representative across the full spectrum of farming, or pulling out spikes in monthly data as representative of a trend. Overall farm prices seem to have declined over the year. This is an example of what I mentioned in post 2680 about talking to industry people then believing their own hype.
SNOOPY
I raided my own PGW database this morning to reveal the historical picture since PGW has existed in its current form (following the merger of Pyne Gould Guinness and Wrightson.). I am using the share price as at 30th September of each year. Why pick that date? Because I have that data readily available from my income tax file! But nevertheless I believe it is a representative date.
30th September is about a month after the results for the financial year are released to the market. So analysts have had time to digest the result, but any immediate 'gut reaction' to the result has died away. Also the end of September is early enough in the new financial year for the prospects of that year to be 'weather neutral' in terms of the outlook. Getting into spring it is normally too early to tell if the rest of the year will be subject to droughts or floods.
For years 2009 to 2012 inclusive I have assumed 754.8m PGW shares are on issue. This wasn't true at the end of FY2009, but the large cash issue had been announced and the market was already pricing the share assuming that number of shares would shortly exist. In FY2008 and FY2007 I have used 289.3m as the number of shares on issue.
The earnings figures I have used strip out all of the one off write downs and conversely one off gains that have occurred. I have done this to represent a more normalised earnings picture. Also included in these earnings are those from the now disposed of finance division.
OK with all of those caveats out of the way, time to roll out a few figures...
SNOOPY
Using: Price Earnings Ratio= (Share Price) / [(Normalised earnings)/(No. Shares on Issue) ]
2007: $1.93 / [$27.9m/289.3m] = 19.6
2008: $1.60/ [$47.9m/289.3m] = 9.7
2009: $0.64/ [$19.3m/754.8m] = 25.0
2010: $0.56/ [$18.0m/754.8m] = 23.4
2011: $0.40/ [$7.1m/754.8m] = 42.5
2012: $0.35/ [$24.0m/754.8m] = 11.0
My forecast for FY2013 was a Normalised NPAT of $24.2m. I have used EBITDA figures from FY2012 and modified them by the growth (and where appropriate shrinkage) factors noted on page 26 of the FY2012 annual report. figures But that was before all the floods and the droughts exchange rate appreciation and all the rest of the turmoil that our farmers have to put up with. And yes that $24.2m does include a reduced interest bill thanks to the paying back of the Crafar Loans.
Given what has happened I would be very surprised if that $24.2m figure for the full year will be reality, even if the first half year earnings come in at just above the $8m that I expect (traditionally profits have been earned 2/3 in the second half).
FY2012 was quite a benign year weatherwise in New Zealand. While FY2013 may be better than expected, I don't expect Agriservices to match their FY2012 earnings. But mostly I don't think Agritech Australia will recover as budgeted. With this kind of outlook I still see the PE of 2012 ( 11.0 ) as appropriate.
SNOOPY