Originally Posted by
Snoopy
I dug deep into PGW last year Moosie. I have set myself investment rules that limit the amount of capital I can put into shares outside of the NZX50. So I have no plans to dig deeper at this point, no matter how attractive the bone. But my instinct is to say this is probably as good as it gets.
A PE of 7-8 at the top of the farming cycle is in theory about where the share price should be in a cyclical business like this. Mr Market has a tendency to overshoot, so I don't rule out the share price heading higher. And I haven't made any allowance for the new managnement broom. All I am saying is, from here, the statistics are going to start to stack up against you IMO.
I have been looking at the PGW result though. $97.8m to $108.2m is a good rise in commission revenue (note 5). An sign of rising business through the Heartland bank connection? There is more than a million dollar drop in bad debts written off (note 8).
Much was made of the improved cashflow. Biut to me it looks like a marginal change in difference between too very big numbers. Profit margins remain low. So who knows if it will be sustainable? Meanwhile the asset base continues to shrink. Mark Dewdney has done a commendable job squeezing more profits out of a balance sheet that one might describe as a 'lazy lemon'. But if the lemon is getting smaller with time, there will be a limit to teh juice you can squeeze out of it.
SNOOPY