Originally Posted by
Roger
Who me :D :D
NBT - Dairy is a very small part of PGW's business and while it's true there will be some effect that already been factored into the SP the loss of a small percentage of sales is quite demonstrably different from the situation at HNZ.
If you read through the latest Tony Alexander report kindly posted by Winner69 in the HNZ thread you'll see the whole sector is under extreme duress and HNZ's loans at an average of a whopping 61% LVR are surely amongst the very highest in the sector.
As I said by PM to Winner this morning its alarming that HNZ even allowed average loan values to get this high and there's prima facie evidence to suggest some of their lending policies are simply too loose / imprudent...i.e. they chased loan growth too hard. IIRC there was a risk officer resigned last year ? Read between the lines there. There's also all their other lending that I've commented about many times before that I'm not comfortable with, unsecured and poorly secured consumer lending.
I think HNZ are under-playing the risks here and the potential for massive write-off's is very real. Apply whatever percentage loan losses you think are right to HNZ's exposure to this sector of circa $200m and interpret what effect on their circa $52m profit in FY16. That said analysts have pulled back their EPS estimate for FY16 for PGW too so your question is well considered with no easy and clear answer.
Bottom line is I think PGW's business is being run better with far more prudent management.
There's also the fact that on one hand PGW are executing attractively priced acquisitions whereas on the other hand despite much talk of acquisitions all HNZ have done is get rid of their director in charge of new product development...I will leave you to decide for yourself if some of their recently developed loan strategies like targeting sharemilkers and unsecured consumer loans through Harmoney and ifinance have worked well of it they've got enough problems to deal with already ? I think the fact that HNZ are not replacing that position in charge of new product development speaks volumes...