PGW sold off assets to cover huge debt lol
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PGW sold off assets to cover huge debt lol
Warning comes as producers seek aid, citing woes last year
By Bruce A. Mohl, Globe Staff | April 12, 2007
The price of milk and some other dairy products are headed for record highs this summer, with raw milk prices expected to jump as much as 40 cents a gallon since last year, according to industry officials.
Officials at H.P. Hood, the Chelsea-based dairy, said the price farmers receive for raw milk has been rising steadily and will rise at least another 25 cents during the summer . As a result, retail prices for milk, ice cream, and cottage cheese will increase, although by how much is unclear. Retailers declined to comment yesterday.
"We have an unprecedented situation," said Mike Suever , senior vice president for milk procurement at Hood.
The warnings about sharply higher raw milk prices come at a time when Massachusetts dairy farmers and their counterparts in several other Northeastern states are pushing hard for financial aid from state regulators. Dairy farmers say low prices and high production costs last year devastated their businesses. But Hood, other dairies, and supermarket chains say price supports are unnecessary, pointing to the sharp uptick in prices as evidence.
Senator Stephen M. Brewer , a Democrat from Barre who is seeking state financial help for Massachusetts' 167 dairy farmers, said the escalation in prices is good news. "But it doesn't obviate the need to deal with the debt these farmers have incurred over the last year," he said. Brewer said farmers need an immediate infusion of $3 million to $12 million from the state.
SNOOPY is this the loss you were talking about.Your old mate macdunk keeping you honest. MacdunkQuote:
quote:Originally posted by duncan macgregor
MICK, I can only say what i did. I sold out at $2-20 average when it hit my time line in dec and bought at $1-85 in feb. I find charts mixed with a bit of common sense the way to go. My time line told me to get out my common sense told me that the share was underpriced buy back in. Tread lines is no way to buy a share fundamental analysis is. The tech side of it comes into its own at the sell end. The herd had gone to far and was dithering about before running to far in the opposite direction. macdunk
No I'm talking about the shares you bought at $1.85 in February which you subsequently sold at what price?Quote:
quote:Originally posted by duncan macgregor
SNOOPY is this the loss you were talking about.Your old mate macdunk keeping you honest. MacdunkQuote:
quote:Originally posted by duncan macgregor
MICK, I can only say what i did. I sold out at $2-20 average when it hit my time line in dec and bought at $1-85 in feb. I find charts mixed with a bit of common sense the way to go. My time line told me to get out my common sense told me that the share was underpriced buy back in. Tread lines is no way to buy a share fundamental analysis is. The tech side of it comes into its own at the sell end. The herd had gone to far and was dithering about before running to far in the opposite direction. macdunk
SNOOPY
[quote]quote:Originally posted by Snoopy
To tell you the truth Macdunk, I wasn't watching. If the PGW share price really did get up to $2.30 I think it would have been before the 40% ongoing profit downgrade. So at the time $2.30 would have represented a P/E of 17-18. Not out of line for a growing company.Quote:
quote:Originally posted by duncan macgregor
Snoopy wrote
A lot of water has to flow under the bridge before NZ farmers conquer Asia. The one thing that is certain about farming is that the unexpected happens. If the weather beats down the price of PGW shares in the future, as it surely will, then I am a buyer. In the meantime I am quite happy to hang onto my holding. If PGW really is on a P/E of 21 a lot of the improvement over the next year or two is already built into the share price. Personally, I'll be chuffed if PGW hits $2 over the next twelve months.
SNOOPY, What a whole lot of guff you write. Are you expecting us to believe that you were holding shares in a company at $2-30 something watch them fall to $1-70 something then say you would be happy if they reach $2-00 in 12 months. Either you have no system at all or your real name is Mary Holm.
So even if I had been watching, I don't think that I would have sold.
What I do know, following the compulsory acquisition of my Carter Holt shares earlier this year, is that I now have only one direct exposure to NZs farming backbone - my shares in PGW. And if anything my relative holding in this sector is too low. I have looked at other ways of getting exposure to farming. IMO holding PGW is still the best way to do it. I don't think that quitting the sector completely, becaue of some transient movement in share price that does not go outside my fair value valuation range, is a sound long term investment strategy.
Short term you are right. F/A isn't necessarily a good predictor of the direction a share price will move. But I don't 'do' short term. I don't trade at all. Long term the market behaves like a weighing machine and that is where ongoing PE matters.Quote:
quote:
Fundamental analysis as you have proved, is as useless as tits on a bull. It all boils down to perception as i have told you in the past.
It is how the investors perceive the market, not the PE.
The market is controlled by emotion, not mathematics.
On the contrary. TEL and RBD continue to be good dividend paying shares. In the case of TEL in particular, I have been buying significant blocks of shares (well, significant for me) to the exrent that my shareholding has increased by nearly 40% (in share number terms) since the unbundling slump. I would not have had the confidence to do that without my F/A.Quote:
quote:
Look at your analysis on TEL, RBD, pages and pages of what turned into be useless tripe.
I know farming as a fickle business Macdunk. I have cousins who are farmers. I don'tQuote:
quote:
Understanding the investors next move has nothing to do with the PE of a company. This is a very good share to trade, it goes too high then drops to low with no risk of losing the lot. If you trade PGW you will make three times as much as your buy and hold method.
I take it you are still in denial then Macdunk?Quote:
quote:Originally posted by duncan macgregor
Read this thread Snoopy with an open mind. Your past is coming back to haunt you. The first share crash will see you down the gurgler with what you do. MacdunkQuote:
quote:Originally posted by Snoopy
discl: hold PGW, and surprised to see it up yet again to $1.87 this morning!
Both of us had PGW shares in in February at $1.85-$1.87 or whatever. The only reason I am getting at you is that your strategy requires you to sell assuming that Mr Market knows more than you do. My strategy requires me to sell only if a share becomes clearly overvalued. So although I suffered the same fate -as regards the short term decline in the PGW share price- as you did, I didn't sell. That's because I know that short term share price movements are not a useful predictor of medium and long term share price movements.
You saw the share price fall and got out. You thought the PGW share price was going down and so would continue to go down but you were wrong. You also thought that the trading range of PGW shares would be sufficient for you to buy back in at some future date and make huge profits. Yet so far you haven't bought back in, even though the share price is apparently already on the way back to fully valued levels. Your 'strategy' has lead to you churning your portfolio and dropping out of farming completely while you maximize your risk and put all of your money into nickel. It is an unsound way to do things by any measure.
OTOH I saw the share price fall and took the opportunity to buy some more PGW (at $1.60 and $1.59). Plus I have since banked a dividend of 4cps. You call it 'averaging down'. Actually I think I am still 'averaging up' because my average PGW entry price is far less than $1.60.
In reality it is not possible to average up or down. You can only 'average across' buying at whatever price Mr Market sets which is by default also the market value of each share you already hold. To find out if it is worth 'averaging across', you need to know something about the fundamentals of the company. The fundamentals of a company are not reflected by short term share price movements. That is why I basically ignore Mr Market when I make my investment decisions and intend to continue to do so. Meanwhile I watch you dancing to Mr Market's every whim with some amusement.
At the moment I am sitting on more cash than I have ever had before waiting for an investment home (thanks to repatriation of some overseas investments). So all I can say is that if there is a crash coming, 'bring it on'. I am ready and waiting with my cheque book.
SNOOPY
SNOOPY, You must be well aware that i only hold nickel stocks on the ASX at this moment in time. You seem to be under some delusion that having sold PGW was a mistake on my part. I sold all my NZ stocks in DEC moved the funds to the ASX. I bought agm at 59c now 84c, mcr that is the one i asked you to look over on sharechat [remember]at $2-15 now$3-80 plus a 6c fully imputed divi. SMY I bought at$2-39 now at $5-45 Thats over 100pc in four months with that one. Smm I bought at $3-20 and sold at $5-94,IGO I bought on the first of march at $4-60 now$7-00 so thats what I did. Look it all up snoopy you were told on the forums before and during the action. What have you done so far this year do you have one company in your portfolio that is equal to my worst one?. The farmer next door reckons your investment style is as good as tits on a bull. MACDUNK:D:D:D
You sold your PGW shares in December 2006. Then you rebought bought some PGW shares in February 2007 for $1.85 until a matter of days(?) later you sold at a loss at a price that you *still* haven't disclosed. Not that I'm suggesting that everyone should disclose everything that they do on this forum. It is just that you Macdunk, who make a big thing on being open and honest, go strangely quiet when you crystallize a loss.Quote:
quote:Originally posted by duncan macgregor
SNOOPY, You must be well aware that i only hold nickel stocks on the ASX at this moment in time. You seem to be under some delusion that having sold PGW was a mistake on my part.
Well yes actually. I haven't lost money on any of my shares this year like you did with PGW ;-P.Quote:
quote:
I sold all my NZ stocks in DEC moved the funds to the ASX. I bought agm at 59c now 84c, mcr that is the one i asked you to look over on sharechat [remember]at $2-15 now$3-80 plus a 6c fully imputed divi. SMY I bought at$2-39 now at $5-45 Thats over 100pc in four months with that one. Smm I bought at $3-20 and sold at $5-94,IGO I bought on the first of march at $4-60 now$7-00 so thats what I did. Look it all up snoopy you were told on the forums before and during the action. What have you done so far this year do you have one company in your portfolio that is equal to my worst one?.
Actually my best recent call has been to buy Telstra Installment Receipts which are up around 50% in four months. But I have never claimed any 'credit' for that pick because the speed of that price recovery surprised even me! I don't make any predictions about when any of my share selections will recover. I only know that by being on the register I will be there for the recovery ride when it happens.
SNOOPY
I think I know why macdunk is hounding you snoopy - your probably the only person left who still attempts to make an intelligent response to his nonsense - do yourself a favour and ignore him.
.
Mad MICK Strikes again. You pick on me for selling PGW you pick on me for selling SMM on the ASX forum. You give SNOOPY advice on what you dont do yourself[:o)].You both have a similar investing style buy all the way down and scatter your investments about like eagle sh*t over the countryside. We both know that the dollar is killing exporters your investment into PGW is in denial of that. Incidently I was right and you were wrong with SMM.Your old mate macdunk [Trying to educate the Irish].:D:D:DQuote:
quote:Originally posted by Mick100
I think I know why macdunk is hounding you snoopy - your probably the only person left who still attempts to make an intelligent response to his nonsense - do yourself a favour and ignore him.
.
Timing the market - The PGW 'Staff Pension Fund Ltd' purchased 1,285,000 shares @ 1.49 on the 28th March 2007.
The share price has bounced about 10 percent since then .... must be all that negative talk that you can't make money farming in NZ or Uraguay with a high NZD
And if that wasn't the cause of the spike, I wonder
I'v noticed, in the past couple of weeks, that many companies that are adversely affected by the high NZD have seen good gains in thier shareprices ( air NZ, cdl hotels, tourism holdings, auck int airport and PGW)
Maybe the smart money thinks the NZD is heading lower - not higher - that's the conclusion I'v come to anyway.
.
Short fueled breakthrough in the US is running out of steam. The dollar decline looks very bleak, housing very weak the consumer defies belief
Look for a USD rally vs yen and euro to raise the inflation fear, if growth just won't die in NZ I imagine a similiar meme exists in the us. Besides there is sure to be an orderly withdrawl from the makets as we look to a post olympic chinese economy coolin it.
All up if the USD shows strength and the NZ dollar decline, PGW could be a good hedge.
Still PGW is essentially a retail outfit and their customers are tight ba5tards.
I'd like to see more PGW diversification in NZ. Maybe in sectors like forestry, fishing, sheep, cheese, maybe even refining ethanol or added value wood or packaging products.
You have to be joking if they dont stick to their knitting then its down hill all the way. The silliest they they could do is to diversify into other downtrending markets. Farmers can only spend what they earn, at the moment that is very little. To start up business in south America to compete against their customers wont find many friends in the farming community. They have a choice who they buy from, PGW will get a back lash. MacdunkQuote:
quote:Originally posted by kittydashwood
Still PGW is essentially a retail outfit and their customers are tight ba5tards.
I'd like to see more PGW diversification in NZ. Maybe in sectors like forestry, fishing, sheep, cheese, maybe even refining ethanol or added value wood or packaging products.
I own a few nominal PGW shares (1000), but Kittys suggestion that they diversify into ethanol would make me exit at any price.
Disc: As a farmer (northland) most of my merchandise type purchases are made through RD1, (believe part of Fonterra) as their prices are simply better than Wrightsons. But do admit that my livestock goes through a Wrightsons agent
Nah I agree with Kitty. An entrepenurial farming outfit looking for new markets and better products is exactly what we need. Exporting our farm models to bring the profits back to NZ is the right way to go. Maybe a variation of the Sharemilker system to get past the life style effect that MacDunk keeps going on about. PGW owns the farm and the locals own the cows!! Zespri has done it with Kiwifruit and owns orchards in Italy and Chile. Investing offshore while the Kiwi is high is also a good plan. I think Ethanol production is great if we export it to the USA. I prefer bio Diesel and Electric for NZ. We have cheaper sources for both though Biojoule could change that. One of the by products of dairy production is Ethanol and Fonterra is NZs largest ethanol producer. Bout time you got out of Fonterra then Kura!!
IF you want a good Bio diesel stock AU go to Natural Fuel Limited. NFL. @ about 83 cents they are building plants now and ready to GO.. [8D]
ASSET: PGW: Christchurch hort supplier comes into PGG Wrightson-Fruitfed
https://www.directbroking.co.nz/Dire...spx?id=1584832
The purchase price or size of the business being acquired aren't mentioned in this announcement, however the share price is up 5c today.
Quote:
quote:Overall there were significant synergies in combining the two operations through this purchase.
Reading that announcement, my inkling is that this acquisition is a well run family business that has been built up over many years. For the owners, selling out to PGW is a retirement strategy. It is all run from a single site in Christchurch so the acquisition price is unlikely to be material in PGW terms. In summary a good 'bolt on' unit to add to the PGW business, but insufficient IMO to cause a rerating of the shares.Quote:
quote:Originally posted by D_Pick
ASSET: PGW: Christchurch hort supplier comes into PGG Wrightson-Fruitfed
https://www.directbroking.co.nz/Dire...spx?id=1584832
The purchase price or size of the business being acquired aren't mentioned in this announcement, however the share price is up 5c today.
It is tempting to look for 'meaning' behind any jump in share price.
I'd be tempted to explain the jump in share price from $1.70 to $1.75 as 'market noise'.
When the shares moved from 160ish to 170ish a few weeks ago that was accompanied by a big spike in trading volumes. That might have been an institution taking a position in the company. I notice that outside of the Norgate/McConnen/Gould interests, the PGW share register is fairly bare of institutional holders. If you want a meaningful stake the only way to get it would be to push the price up and hope to shake out a few sellers.
I'm picking that the rise from $1.70 to $1.75 has probably triggered some signals for traders and any time soon we will be presented with graphical evidence that a 'new uptrend has started' for PGW. If you are going to be in an exporter (Ok I know that technically PGW is a merchant, but their fortunes rise and fall on the backs of our farmers) then IMO PGW is a good place to be. But be careful. I think, with the exception of dairy, our farmers are still hurting. I'm comfortable with my own PGW holding but I am not looking to buy any more, no matter where the share price trends to.
I'm feeling quite smug that I purchased my last tranche of shares at $1.60ish this February and last November. And I'm feeling relieved that the share price is creeping back up to where I purchased the previous tranche towards $1.80 in August/September 2006. No! Actually the assessment of my feelings in all of this paragraph is a lie! If you look back in this thread you will see that all of my purchases were made for 'portfolio reasons', even slightly reluctantly, to boost my holding in this share up towards the value of my other NZ holdings. I had no inkling that I would get my timing right, and in fact feared the reverse. Which just goes to shoe that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are (eh Macdunk - what was your loss on your last PGW trade again?).
SNOOPY
SNOOPY why dont you look it all up. I sold my last PGW share about nov last year i think. I traded REID FARMERS PGG, WRI, then PGW. Most times I won only once did I lose. I had some shares sitting there from PGG days so work it out from there. I think I had a one in eight bonus at amalganation plus an extra divi. I am more interested in todays shares my portfolio has increased in value by 71% in four months if you would like to comment on that.:DQuote:
quote:Originally posted by Snoopy
Which just goes to shoe that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are (eh Macdunk - what was your loss on your last PGW trade again?).
SNOOPY
AGM i bought at 59c last price 91.5c now in a trading halt try commenting on that. You are well aware of what I hold when I buy and sell so feel free to tell me where I go wrong. Your old mate MACDUNK
discL hold MCR, AGM, SMY, IGO sold SMM at$5-94 all on ASX
YOU must be very,very rich so why don't you jump in a boat[as you don't like airlines] and go and live off your WEALTH.. [8D]Quote:
quote:Originally posted by duncan macgregor
SNOOPY why dont you look it all up. I sold my last PGW share about nov last year i think. I traded REID FARMERS PGG, WRI, then PGW. Most times I won only once did I lose. I had some shares sitting there from PGG days so work it out from there. I think I had a one in eight bonus at amalganation plus an extra divi. I am more interested in todays shares my portfolio has increased in value by 71% in four months if you would like to comment on that.:DQuote:
quote:Originally posted by Snoopy
Which just goes to shoe that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are (eh Macdunk - what was your loss on your last PGW trade again?).
SNOOPY
AGM i bought at 59c last price 91.5c now in a trading halt try commenting on that. You are well aware of what I hold when I buy and sell so feel free to tell me where I go wrong. Your old mate MACDUNK
discL hold MCR, AGM, SMY, IGO sold SMM at$5-94 all on ASX
"I'm picking that the rise from $1.70 to $1.75 has probably triggered some signals for traders......" Snoopy!!!! Did you not notice the chart posted weeks ago on page 20 of this thread? The chart that showed PGW Buy signals at $1.49 and $1.52? Even if you don't like or don't trust trendlines, the On Balance Volume had given a Buy signal that would have been obvious even to 'Blind Freddy'. The chart below shows that plenty of other indicators triggered Buy signals at around the same time.
You go on to observe that "the share price is creeping back up to where I purchased the previous tranche towards $1.80 in August/September 2006" and that you "had no inkling that I would get my timing right, and in fact feared the reverse". Snoopy, you had very good reason to fear that your timing was wrong - [u]PGW was in a downtrend</u>. You have a position that has been underwater for the better part of a year, and is still underwater, yet I gather from your post that you do not consider this to constitute evidence that you got your timing wrong - quite the reverse, in fact!
Your parting shot intrigues me :- "(It) just goes to show that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are." Snoopy, it never pays to assume that you are smarter than the market, yet that is exactly what you are doing when you buy a stock in a downtrend. You are buying because you think the market is wrong and that you are right. Some would see this as misplaced confidence in your own abilities while others might see it as arrogance. Either way, anyone can see that you would have been far better off delaying any buying that you did over the last year until there was some technical evidence that the downtrend had ended.
http://h1.ripway.com/Phaedrus/PGW430002.gif
Oops actually Blind Freddy was overseas for a month and this small price movement didn't click during my infrequent cyber-returns. Guilty as charged - I missed all the signals. Although because I had already bought the shares I wanted by then, it didn't really matter!Quote:
quote:Originally posted by Phaedrus
"I'm picking that the rise from $1.70 to $1.75 has probably triggered some signals for traders......" Snoopy!!!! Did you not notice the chart posted weeks ago on page 20 of this thread? The chart that showed PGW Buy signals at $1.49 and $1.52? Even if you don't like or don't trust trendlines, the On Balance Volume had given a Buy signal that would have been obvious even to 'Blind Freddy'. The chart below shows that plenty of other indicators triggered Buy signals at around the same time.
Phaedrus, allowing for the dividends (I know there is that dreaded 'd' word again), my average purchase price over the last year was $1.61. So I am not underwater at all. My historic average purchase price is lower still. So I even avoided your dreaded bogeyman of averaging down too ;-P!Quote:
quote:
You go on to observe that "the share price is creeping back up to where I purchased the previous tranche towards $1.80 in August/September 2006" and that you "had no inkling that I would get my timing right, and in fact feared the reverse". Snoopy, you had very good reason to fear that your timing was wrong - [u]PGW was in a downtrend</u>. You have a position that has been underwater for the better part of a year, and is still underwater,
I think Phaedrus we can agree that, with the benefit of hindsight, Mr Market does become irrationally exhuberant and irrationally depressive at times. The real difference between your and my approach is that you use the charts to try and pinpoint exactly when Mr Market has his change of heart. I, on the other hand, am more concerned with picking up bargains in the 'irrationally depressive zone'.Quote:
quote:
Your parting shot intrigues me :- "(It) just goes to show that in 'timing this share' game, sometimes it doesn't pay to assume that you are smarter than you really are." Snoopy, it never pays to assume that you are smarter than the market, yet that is exactly what you are doing when you buy a stock in a downtrend. You are buying because you think the market is wrong and that you are right.
I generally try to buy at historic 'support points' when a downtrend starts. Sure there is a risk the share price my crash through an historic support point and go lower. But generally share prices do not decline to zero. At some point, support for the share will 'kick in' and I am prepared to gamble on exactly when that is. Even if that means buying at historic support points all the way down if necessary. My penalty for being 'wrong' is often having to wait for a few months while the share price recovers. I don't need a stop loss system because I only ever consider buying the best bargain shares 'on sale'. That means if the shares fall, they are unlikely to plunge significantly. And since I don't mind waiting for a few months for any recovery to happen, there is little risk for someone like me operating a long term strategy.
I don't regard myself as 'smarter' than Mr Market. I am just less highly strung about newsworthy yet over-the-business-cycle 'trivial' events. When Mr Market acts as a voting machine, I don't mind voting against him. But when Mr Mark
Phaedrus, Could you post a chart of NAM (namoi cotton) on the ASX forum with your TA opinion please.
I bought in a couple of months ago when it appeared to break out of a downtrend - not sure whats going on with NAM now.
thanks
PS, snoopy, I bought some more PGW on the way back up @ 1.60 - Got my ave buy price down to $1.91 on PGW
.
Good news for dairy farmers today with next years payment forecast to be $5.50 per kg of milk solids, up from $4.30 this year despite the high exchange rate. I don't think it will be too long Mick before you are back 'in the money'.Quote:
quote:Originally posted by Mick100
PS, snoopy, I bought some more PGW on the way back up @ 1.60 - Got my ave buy price down to $1.91 on PGW.
Meanwhile those far more knowledgeable than us have been crowing about how clever they were in selling out of anything to do with farming (quote below pinched from the TUA thread).
"SNOOPY, We are in a good position to sell in a sudden down turn to investors like you. There is always someone that buys in times like this, you are confirming that. Get out at the top you lost money yesterday on PGW I sold out a long time ago at a higher price than you are clawing back. I really think you have lost the plot.
Macdunk."
Unfortunately in this game of sharemarket musical chairs some of those very intelligent people now don't have a seat. Still they say the mark of great intellect is being able to think on your feet, so I expect we will get some wise counsel soon. The thing that I just can't figure out is how I 'lost money' on PGW.
My average buy in price is $1.26 (forgetting about dividends). And my average holding time is 2.7 years. In the past 2.5 years I have received 20.5cps in dividends. So it seems my return has been:
1.26(1+i)^2.7=(1.79+0.205)
Solve for 'i' and it comes out at 18.5% compounding per year. How could I get it so wrong? Help ;-P!
SNOOPY
discl: hold PGW
SNOOPY, Let me remind you where my investment dollar went in 2007.:D:D:DQuote:
quote:Originally posted by duncan macgregor
Kitty, You can only call it as you see it. It has been on a confirmed downtrend since may of last year when it was $2-30 or near enough. To be left holding requires you to be blind to reality, stupid, or perhaps stuck them in the bottom drawer and forgot you had them. To bottom pick is not on until the sector starts to come right. The NZ dollar is killing the exporters, the farm gate prices are to low, PGW customers have cut their spending right back. If you have any system at all other than blind faith, you would have been out of this company last year. The money from PGW was invested in Australian nickel companies look it up on the other thread.:D:DMACDUNK
MCR, up 103.75%
AGM, up 83.89%
SMY, up 100%
IGO, up 70.61% bought in march
SMM,bought $3-20 sold april $5-94
I take it you think you are pretty smart averaging down getting a bounce at the bottom on PGW which is going nowhere. Macdunk
That will mean about $1.00 per kg solids straight to the bottom line giving the average dairy farmer an extra $100,000 to spend.Quote:
quote:Originally posted by Snoopy
Good news for dairy farmers today with next years payment forecast to be $5.50 per kg of milk solids, up from $4.30 this year despite the high exchange rate. I don't think it will be too long Mick before you are back 'in the money'.
I think meat prices will firm up before too long as well considering that animal feed (grain prices) have almost doubled over the past 12 months. Things are looking good for the ag sector.
quote
CommSec chief equities economist Craig James yesterday billed the agricultural sector as the "turnaround story" of the sharemarket in 2007, aided by drought-easing rains in eastern Australia and a resurgence of consolidation plays.
He said CommSec's index of nine agricultural stocks had risen 43 per cent this year, outpacing a 12 per cent gain in the broader sharemarket. The index includes Queensland Cotton, AWB, ABB Grain, GrainCorp, Nufarm, Ridley and Australian Agricultural Company.
Setting the pace was fertiliser giant Incitec Pivot, which has leapt 172 per cent since October on the back of cost savings and soaring world fertiliser prices which have benefited its recently acquired manufacturing operations.
That dairy payout of $5.50 has to put some growth into NZ property & retail markets, and hold the dollar up ... but then again hedge funds etc could do what they like.
I haven't been averaging down at all. On the contrary my most recent PGW purchases have raised my average holding cost significantly.Quote:
quote:Originally posted by duncan macgregor
SNOOPY, Let me remind you where my investment dollar went in 2007.:D:D:D
MCR, up 103.75%
AGM, up 83.89%
SMY, up 100%
IGO, up 70.61% bought in march
SMM,bought $3-20 sold april $5-94
I take it you think you are pretty smart averaging down getting a bounce at the bottom on PGW which is going nowhere. Macdunk
Funny though, I can't seem to find any of your investments listed on the NZX. Why have you done so poorly when if you had invested in China directly you would be up 150% over the same time period?
SNOOPY
ASB Commodities report
The CBA NZ Commodity Price Index rose in all denominations last week, boosted by increases in the Dairy, Sheep and Beef series. There was a slight dip in the Forestry series, and a revision to last week's data for the index.
The big news last week was RAIN. Significant rainfall has occurred across south-eastern Australia. The rain is timely for grain growers and will also help pasture growth for sheep, beef and dairy farmers. Some parts have now recorded the best falls for seven years. This is good news for Australian agricultural output going forward.
NZ meat prices look set to resume their seasonal increases, as slaughter numbers begin to decline. Rain in Australia will contribute to lower kill numbers there, as animals are retained to rebuild stock. ABARE reported De-stocking in southern Australia increased at the end of last year, reducing the national sheep flock by 6 percent and the cattle herd by 3 percent.
The major economic release last week was the Government Budget. FX and interest rate markets were unchanged by the release, but strong retail trade data released on Monday saw markets increase the chances of further rate hiking from the RBNZ, and long-term rates rose by 4 to 6 basis points. The NZD continues to trade around USD 0.73, and AUD 0.88. Against the Yen, the NZD continues to trade near the recent highs, at around JPY 88.5.
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PGW posted a profit down grade, as was to be expected by anyone with half a clue about farming in NZ. The good news is the fundies will still have a decent dividend as their capital erodes. The NZ dollar is still killing farm incomes until that reverses its all down hill down on the farm. MACDUNK
And very cunning the way they slipped the "market update" into the end of a longer and seemingly innocuous statement yesterday about DRP's, new staff appointments, etc., and right on market closing time. That's an old PR trick.
Not really a downgrade just saying they will be at lower end of expectations. I always work on the worst case and this is still pretty good.
Second downgrade fro PGG. Not a good sign. Bad things comes in threes?
http://www.stuff.co.nz/4080907a13.html
As others have said, this is not a profit downgrade. Merely a refinement of what has already been forecast some months ago, albeit towards the lower end of that profit range. I think the financial years ends in less than thirty days time. So I would say a further profit downgrade for FY2007 is unlikely.Quote:
quote:Originally posted by Bling_Bling
Second downgrade fro PGG. Not a good sign. Bad things comes in threes?
Of far more interest is what will happen in FY2008, as that is what will be driving the share price form now on. Dairy farmers should do well with the rest of the agricultural sector facing more of the same via high exchange rates and interest rates. Throw in the usual wild card of the weather and it would be hard to argue that PGW is cheap at $1.80. Still the PE is listed in the paper at 14.5 which could easily be justified with a modest projected decline in the NZD vs the USD.
I'd rate PGW as a hold, which is exactly what I will be doing with my own PGW shares.
SNOOPY
The greens are screwing the arms of labour and national to come up with a policy to penalise the dairy farmers. This will be a further hurdle in the near future, not only for dairy farms but PGW and similar companies bottom lines. I have all my investments in Australia, I dont think they are quite as stupid, [at the moment anyhow] to be so dumb. macdunk
SO as your a SCOT and not a real KIWI must be hard buying your MILK in Australia.. [8D]Quote:
quote:Originally posted by duncan macgregor
The greens are screwing the arms of labour and national to come up with a policy to penalise the dairy farmers. This will be a further hurdle in the near future, not only for dairy farms but PGW and similar companies bottom lines. I have all my investments in Australia, I dont think they are quite as stupid, [at the moment anyhow] to be so dumb. macdunk
BRICKS, By the tone of your posts I think I might have been here longer than you. Luv you like a drudder mate.[:o)]:D:D MACDUNK
BRICKS is in AUSTRALIA with all his investments and NO need for KIWI milk only come to NZ to live in my weekender and drive the NEW car just when i feel like IT.. [8D]Quote:
quote:Originally posted by duncan macgregor
BRICKS, By the tone of your posts I think I might have been here longer than you. Luv you like a [drudder] {not a word} mate.[:o)]:D:D MACDUNK
Commodities Report
Further NZD relief
Wednesday, 08 August 2007
--------------------------------------------------------------------------------
Global commodity prices generally strengthened last week, spearheaded by sheep and beef prices. The Foot and Mouth outbreak in the UK has restricted meat supply in Europe, boosting prices near term.
The global meat price increases come against generally supportive conditions for global sheep and beef prices with relatively low supply (in part on the slow recovery in Australian meat production following the recent drought) and falling product stock levels underpinning prices.
Global dairy prices eked out further gains last week, continuing its recent strong uptrend. Further falls in the NZD early last week complemented global price rises, seeing a 2.2% rise in the NZD denominated commodity price index.
The NZD/USD consolidated between the 76-77c mark late last week after falling sharply from peaks around 81c in late July. Some hedge fund unwinding of large carry trades dominated falls early in the week as global risk appetite has waned amidst US mortgage market concerns.
This hedge fund unwind weighed heavily on the high yield Australasian currencies – some of the key investment destinations of the ‘carry trade’.
Further falls in global equity markets early this week highlight the continuing level of uncertainty surrounding this issue. Further global market uncertainty in this regard could further bias down the NZD/USD in the short term as long as nervousness remains close to the surface.
Nonetheless NZ’s relatively high interest rates should eventually provide the Kiwi dollar with a base.
Commodities Report
NZD feeling the pinch
Wednesday, 15 August 2007
- Global commodity prices generally strengthened again last week, as sheep and beef price gains were joined by further dairy price increases.
- Solid demand and product stock shortages are underpinning global lamb prices in particular, and restocking in US beef suppliers is helping to support global beef prices.
- USD denominated dairy prices continue to post fresh historical highs, boosted by rises in butter and casein prices over the past week.
- Sharp NZD depreciation over the past week complemented global price gains, sending the NZD denominated commodity price index up 2.0% on the week.
- Lingering market jitters surrounding the US mortgage market, and associated fall-out on global financial institutions, continues to put pressure on the NZD. Falling global risk appetite is weighing on the high-yield Australasian currencies – some of the key investment destinations of the ‘carry trade’.
- Recent signs of slowing in the NZ housing market and domestic spending – including lower than expected quarterly retail sales – have also dampened expectations for any further increases in NZ interest rates from the RBNZ.
- Further US mortgage-related global market uncertainty could further bias down the NZD/USD in the short term as long as nervousness remains close to the surface. Nonetheless NZ’s relatively high interest rates should eventually provide the Kiwi dollar with a base.
It has been a great year for PGW investors. I certainly didn't pick it, having almost doubled my holdings in the last twelve months more as a rebalancing exercise than any expectation of the great returns exceeding 20% per annum that I got. I guess it shows that sometimes it is better to be 'balanced' than 'too clever' picking winners.
I guess most investors would be patting themselves on the back about now. But analysis of the Annual Report leads me to believe that perhaps I have been more lucky than clever. I usually worry when companies make up new performance statistics to report. 'NPATBA' meaning 'Net Profit After Tax and Before Amortization' is what the PGW directors are crowing about. In this instance I think NPATBA is justified. That's because as of next year under new accounting standards, amortization of the goodwill which resulted from the Wrightson acquisition is not required. Thus NPATBA is the right statistic for 'like with like' comparison going forwards.
So how do the profit numbers stack up? Adjusting for one offs and goodwill I get 'ongoing profits' of:
$25.6m-$9.8m+0.67($15.1m)= $25.9m. based on shareholders equity of $410m. That gives an ROE of 6.3%. On sales of $991.7m I calculate a margin of 2.6%. These figures are well below what was predicted at the time of PGG/WRI merger where ongoing profits of some $40m were anticipated. Not good. But the difficult weather season and the resurgence of more co-op competition can explain it.
In the past the WRI share price has held up well because of the high dividend yield available. This years PGW payout was 12cps, on continuing earnings of 9.2cps (based on 281.3m shares on issue). 12cps based on a share price of $1.98 gives a gross yield of 9% - quite good. But the 'ongoing gross earnings yield' is only 6.9%, which doesn't compare favourably with bank interest rates. The ongoing earnings PE ratio of 22 is a further indication that the share price may have topped out - unless earnings improve by some 80% (reducing the PE to a more reasonable 12) for FY2008.
Recent rain is a portent to a productive growing season. But I'm picking that the necessary 80% earnings growth will not be achieved next year. It is very hard to see the overall return for FY2008 matching the 20% or so average of recent years. But I've been proved wrong before. And I am prepared to hang in there to see if Norgate's hand picked management team, which impressively didn't suffer mass resignations after the PGG/WRI merger, can work their magic.
SNOOPY
SNOOPY, I dont wish to burst your bubble but PGW was $2-40 in oct 2005. Its now less than $2-00 plus divedends, which probabely means your money has stood still for two years. I do think it will trend up very slowly, but nothing to write home about. Macdunk
My average entry price over the last year was $1.70. The price is now $1.98 plus a 12c dividend. So I made about 20% on those new shares.
Five years ago in the then WRI I was sitting on shares valued at $1.04 and since then dividends per shares have been around 60c cumulative over five years. So on average over five years I have made around 20% compounding every year.
What you say about the price in October 2005 is also true. But fortunately I didn't buy any shares at those inflated prices.
You have also done well on WRI/PGG/PGW over the years. But now you have no shares at all in PGW, while I have over twice as many shares as I had before (by carefully buying while the price was weak) *and* my rate of return has continued.
I think 'trending up slowly' is a realistic assessment. It certainly can't keep going up at 20% per year forever. Mind you this man Norgate is full of surprises. He wants to super size the expansion of NZFSU into South America, engineered by PGW. If the shakeout in the finance company sector continues, perhaps the finance arm of PGW will grow dramatically? The expansion into Australia and other South American markets is continuing incrementally so who knows exactly what will happen there? All in all PGW is still a company I would much rather be in than out of.Quote:
I do think it will trend up very slowly, but nothing to write home about.
SNOOPY
discl: hold PGW, NZFSU
Snoopy, It is pointless to say just because a share is recouping its share price from two years ago what a great share it is. The share price lost 19.58% in the last two years so if you take what the bull market in general gained in that time it has been a disasterous hold.
The point is with every share, is what the trend will be in the future.
Will it be one of the best or will it be one of the worst, with another 19.58% loss over the next two years. The dairy industry is destined to drop in margin next year according to the experts. The dollar is still to high for comfort, not dropping as fast as expected. Then we have this climate change stupidity, and the still might be fart tax or some other form of tax to destroy farming as we know it. I still think the trend will be slightly up but not steep enough for me to buy back with much better opportunities elsewhere. Macdunk
Macdunk, two years ago we were told that the annual ongoing profit would be about $40m. With that level of profitability a price of $2.40 was not excessive, so it wasn't an obvious sell.
It is easy with hindsight to pick some local high point and some local low point and claim you have had a disastrous time. I guess as someone who buys high and sells low -the likes of you- would not have done well.
Fortunately I do the opposite to you. I buy when shares are out of favour and sell when the price is high. My return on WRI/PGW has been over 20% per year compounding for five years straight. I made 20% over the last year as well, after reinvesting some of my Carter Holt payout which was again sold at a multi year high into PGW. Only a warped mind such as yours could interpret such a result as a 'disastrous hold'.
As for what happened over your artificially imposed two year timeframe, who cares, except those foolish enough to buy high and sell low like you? You were so convinced Mr Market was right you let him manipulate you into a loss, rather than the other way around which is how I played the game. Unlerss you *can* ignore Mr Market you will never make it as an investor. At least you now realise this Macdunk and have given up even a pretence of being an investor by 'freezing' your investment activities.
Quite right.Quote:
The point is with every share, is what the trend will be in the future.
If the share price goes lower I will look at buying more. If the share price goes higher I will consider reducing my holding. At today's price, around $2, I am happy to hold.Quote:
Will it be one of the best or will it be one of the worst, with another 19.58% loss over the next two years.
That's the first I've heard of that Macdunk. Can you provide a reference expert to back up your quote.Quote:
The dairy industry is destined to drop in margin next year according to the experts.
But if the dollar does drop the outlook for farming in general and PGW in particular gets very good.Quote:
The dollar is still to high for comfort, not dropping as fast as expected.
Farming does not have to take any account of their greenhouse gas emissions for at least five years! That is a massive tax holiday that somehow you have miscontrued as a negative point!Quote:
Then we have this climate change stupidity, and the still might be fart tax or some other form of tax to destroy farming as we know it.
There are risks with PGW, some five years out. But in my judgement nowhere near enough risks - yet - to sell out.Quote:
I still think the trend will be slightly up but not steep enough for me to buy back with much better opportunities elsewhere.
The finance arm is going great guns and will benefit from the demise of weaker players in the finance market.
The New Zealand Farming Systems Uruguay float, managed by PGW, seems to have been timed to perfection. It has effectively been upscaled in size with far more land being purchased at good prices than forecast in the prospectus.
I agree that investing in PGW has been so profitable over five years it is impossible that this level of success will continue into the future. But my feeling that the the party is not completely over and that -unlike some of your mineral investments Macdunk- the price is unlikely to fall by 50% within a month. PGW remains an attractive risk return investment on my books.
SNOOPY
discl: hold PGW
I think what Snoopy is saying is something along the lines of what is happening with Northern Rock
At 273 it is an absolute crap share because not long ago it was 1200 .... but for those who bought a few weeks ado at 112 Northern Rock is a stunner of a share.
Winner 69, I understand what Snoopy is saying, but what you have to take into account is yesterday is over, its what its worth today going forward that counts. I have been in and out of WRI a few times in the past, had PGG at the amalgamation, which was a better deal at the time resulting in extra shares, but that was then. Its what the shares are worth today going forward looking at their prospects going forward. SNOOPY says he has had a 20% return in the past but has reservations on holding that level of profit.
I expect when i buy a share to have a higher return than 20% simply because the good ones have to make up for the bad ones otherwise its not worth it. We can all buy a bad one so therefore you have to set your sights at a higher level.
Most all the farmers that i know never go to the PGW store myself included, because the RD1 store is cheaper and better. Infact i dont see with the limited custom how PGW can turn a profit at their two stores in the area. That puts me in a negative frame of mind when it comes to buying in to the company. Macdunk
Kind of, although even with today's recovery Northern Rock has more than halved in value over five years while PGW/WRI has doubled in value.
Northern Rock's fall from grace was significant in fundamnental terms. PGWs fall was not and generated an excellent buying opportunity that I took advantage of while all you traders were selling.
SNOOPY
As a WRI shareholder I got bonus shares as well, as a result of the merger
You also expect the market as a whole to go up by 20% every year, but that isn't going to happen. My capital preservation strategy is not selling when the market turns, it is buying something that even if it dips in the short term , I would be happy to hold for many years. Patience is often as good a tool at recovering your capital as panic is to losing it.Quote:
Its what the shares are worth today going forward looking at their prospects going forward. SNOOPY says he has had a 20% return in the past but has reservations on holding that level of profit.
I expect when i buy a share to have a higher return than 20% simply because the good ones have to make up for the bad ones otherwise its not worth it.
Appreciate the observation Macdunk. It does surprise me that PGW have two stores very close - I thought all that was sorted out at the time of the merger(s). Perhaps they are just waiting for one of the leases to expire at which point they can rationalise their network without taking a one off lease write down?Quote:
We can all buy a bad one so therefore you have to set your sights at a higher level.
Most all the farmers that i know never go to the PGW store myself included, because the RD1 store is cheaper and better. In fact I dont see with the limited custom how PGW can turn a profit at their two stores in the area. That puts me in a negative frame of mind when it comes to buying in to the company.
Also surprised that RD1 is cheaper because I thought PGW had already cut prices to match the competition.
SNOOPY
SNOOPY, KUMEO and HELENSVILLE branches with an RD1 store at Helensville. PGW closed down its Helensville store, and reopened at new premises in Helensville. The Helensville store is less than half the size of the Kumeo store which is 20k down the road. They also have a store at wellsford in competition with RD1 which is just along the road from it. All the farmers that i know only go to RD1 as PGW wont come up with good deals. Example the lady next door rears weaner calves, but only wishes to buy one bag of milk powder at a time, so misses out on the bulk buy discount at PGW, even although she buys more than the bulk buy ammount during the season.
With RD1 its no problem, they give her the discount for the bulk buy. I really cant see them doing well against RD1 whose prices and selections of goods is far superior. Macdunk
I am not happy to hear that story Macdunk! Sounds like someone at PGW retail policy making level needs a gumboot up their Goretex pants. Nevertheless RD1 is owned by Fronterra and is no doubt particularly sensitive to the cattle scene in general. Perhaps someone could raise the issue at the AGM which IIRC is in Auckland this year?
Fortunately PGW doesn't face (much) competition from RD1 in the South Island.
SNOOPY
Sorry for being remiss in replying to you Snoopy (was having too much fun with tax questions) In Kaitaia there is both a PGW and a RD1 store (want to guess which is bigger ? )
I don't have a need for lots of merchandise, (other than fencing gear) however last summer I had quite a bit of "track work" done (spending sharemarket gains) and needed to buy a few dozen largish plastic culvert pipes (had to get bigger concrete ones elsewhere) As these culverts were reasonably significant, I compared prices, yep RD1 was approx 15% cheaper, than PGW, but what really made it for me was when the RD1 sales girl told me to come back and buy them next week, (was near end of month) and they were going to be on special next month, and price will be reduced by another 20% !
I'm sad, as a PGW holder, as I would like to think that it would be good to do your business with a firm you have an interest in, but sorry, it won't be regardless of costs.
On the bright side however, PGW have some really good livestock guys, and I would never consider changing them.
PGW at end of Mar-07 = $1.48, PGW at end of Oct-07 = $2.10
A little bit more than a half-decent return over a period of 7 months.
For how much longer can we expect the golden weather to last?
also a few divis in that time as well makes this one a good performer for me. I think it has a while to go or will not drop significantly from this level despite the the PE. The NZFSU is of major interest to me and I actually hope they hold on to more than 10% of the company. Also they seem to be making smart moves offshore in building up the business so i think I will hold for a while yet. The divi yield is nice and good prospects for the medium term. Would like to see the internation food production increased and a bit more agressiveness in the overseas markets
Here is an assortment of barometers that should give some warning of rain :-
http://h1.ripway.com/Phaedrus/PGW111.gif
Nice charts. Bought a wodge of PGW for my company back in early April but didn't pore over charts before deciding to buy. At yesterday's close the IRR for that parcel is 67.4%
Guess you feel your strategy with PGW has been somewhat vindicated Snoopy?
Wouldn't say PGW or farming has had golden weather except perhaps for dairying. Will be watching when to sell but hopefully I won't have to. Food seems to be being rerated and Norgate and co. seem to have a good vision that they are starting to execute.
Like many others I've had problems with the farm supplies arm of Wrightson's in the past but it hasn't stopped me buying and selling their shares. (Dealt with Farmlands in the NI after problems with Wrighties & deal with Westland Farm Center in the SI now) It must be remembered that this arm is only a small part of the business and it sounds as if they are making progress?
What strategy was that? The one where earlier on this thread I was a 'reluctant buyer'? I had thought that at $1.60 to $1.80 PGW had to be near the top, the way the exchange rate was going and the way the farmers (excluding dairy) were being hammered?
Or the strategy where I was away, missed the mail to elect my dividend in cash rather than bonus shares, and so ended up with a whole lot of shares I wasn't expecting that subsequently rose in value by 15% in less than a month?
Still perhaps it is a vote for being balanced and hands off, rather than trying to be too clever and pick the market.
Either way (some of) my cash from my CAH payout has found a good home and PGW has been a sensational performer. I don't think PGW is the kind of company that the likes of Warren Buffett would invest in, but haven't we all done well. Everyone that is except a certain trader who somehow managed to lose money trading PGW and as a result deserted to the ASX, apparently never to return....
If you have to outline what has made the difference to PGW in the last two years, I think you would have to say management. Norgate has outlined his vision for taking NZ farming technology global and now it is beginning to bear fruit.Quote:
Wouldn't say PGW or farming has had golden weather except perhaps for dairying. Will be watching when to sell but hopefully I won't have to. Food seems to be being rerated and Norgate and co. seem to have a good vision that they are starting to execute.
We have only a month or so to wait before NZ Farming Systems Uruguay lists. That should put PGW in the spotlight again. It has already been announced that NZFSU will not meet the prospectus forecasts. But that is only because the land purchase program has been accelerated beyond what was envisaged at the time of the NZFSU prospectus (from 7,000ha to 26,523ha) . Geographical risk has been greatly improved as a result with the land spread between western, central and eastern hubs in Uruguay. PGW has an 11.5% stake in this company and the management contract. Management fees have been set at 1.5% of the total assets of the NZFSU group which should boost PGWs bottom line by around $2.5m or 10% in FY2008. And that doesn't include any associated boost to the seeds business!
Farm supplies a small part of the business? Around 35% if judged on EBITA terms.Quote:
Like many others I've had problems with the farm supplies arm of Wrightson's in the past but it hasn't stopped me buying and selling their shares. (Dealt with Farmlands in the NI after problems with Wrighties & deal with Westland Farm Center in the SI now) It must be remembered that this arm is only a small part of the business and it sounds as if they are making progress?
It is a real worry that all of the benefits of the PGG/WRI/WAK amalgamation have had to be passed through to customers, with nothing left on the table for shareholders. I think that has to call into question the value of the goodwill on the PGW balance sheet relating to the merger of these three entities.
Still the outgoing chairman Bill Baylis said at the AGM:
"We recognised that, as well as having full service offerings on a divisional or functional basis, the interaction with clients at a local or regional level was all important. To this end 15 District Managers have been appointed with specific responsibility for ensuring that client relationships at a local level are given the attention they deserve."
I hope that will address some of the negative comments on the rural services unit expressed on this thread.
The big surprise to me has been the seed business, with EBITA up around 40% on last year despite the continuing drought problems in Australia. From the increase in profit in Uruguay (some $400,000) over 90% of the increase in profitability looks to have come from the core NZ market. Moisture falls have been good this spring, so if temperatures come up to the norm it all looks very good from here for the new season too.
SNOOPY
discl: hold PGW, NZFSU
Note today that Nufarm ( ASX:NUF ) which used to be listed in NZ and traded as Fernz has received a huge offer from a consortium based including a Chinese crop protection co. and the NY buyout specialists , Blackstone. Just shows that the world is slowly but surely realising that food will be THE biggest issue this planet faces over the next few decades ... sure we love our oil but we could survive without it ... no such luck with Food !!. NZ is going to be on the radar in an increasing way due to our ability to grow clean safe food in a relatively low cost manner .... go buy yourself a dairy farm .... quick .... before the Chinese and NY hedge funds buy them all !!!
Also note that Aussie bio-fuel stock ARW has effectively gone bust over the weekend ... even at US$90bbl for oil the feedstock is becoming to expensive to compete, they have just mothballed to bio-fuel plants which they only finished building a few months ago. Shares got up to 260 last year , less than 10c today .... now that is scary .... go buy yourself 2 dairy farms !!!!
sorry that should be two bio-fuel plants ... not "to" ...
Norgate is continuing to back his company. If you look at the 28th May 2008 disclosure, it would appear he has bought an interest in the company for his kids (?) It seems though that he has bought derivatives at $1.35. Anyone know what those are? I don't think they are listed on the NZX, as such.
SNOOPY
discl: hold PGW
Time to spend some time unravelling the current PGW and NZS interrelationship. As at 31st July 2007 "PGG Wrightson Investments" held 10.57% of NZS. The most recent disclosure for PGW was on 18th December 2007. That was following the closure of the November-December 2007 short form prospectus, and the final paying up of capital from the original share issue.
The 18th December declaration showed PGW with a total of 15.18% of the company. That included an 11.02% 'beneficial' stake and a '4.16%' 'non-beneficial' stake. An attached note informs us that 150,000 NZS shares are being held for Carlos Miguel de Leon, Chief Executive of PGG Wrightson Uruguay Limited by way of an executive incentive. This is nowhere near the 'extra' 4.16% of the NZS company, which amounts to 10.16 million shares. I am guessing that under IFRS accounting rules Carlos Miguel de Leon's incentive shares have been recorded as an expense and so have been 'written off' even though they are on paper still held by PGW.
I am unclear as to the significance is of the rest of these 10.16m-0.15m=10.01 million shares. It seems hard to believe they are all current executive incentives. Because there is no mention of a shareholding like this on the last published substantial shareholder list (31st July 2007), I can only conclude they must have been 'acquired' by PGW between 31st July 2007 and 18th December 2007. The only clue I can offer is that perhaps these shares haven't been bought at all but have become 'non beneficial' through the changing job designation of Craig Norgate. Craig Norgate is listed as having an associated party interest of 10.5m shares on 31st July 2008 when he was a mere 'director'. Perhaps his succession to the role of 'Chairman' following Bill Baylis's retirement has accounted for this classification change? Whatever the reason, I don't think I can account for these 'non-beneficial' shareholdings as representing any value to PGW shareholders. So we are back to the 11.02% 'beneficial' stake as the capital value of NZS that is controlled by PGW shareholders.
Anyone who has a better understanding of this cross shareholding, please enlighten me!
SNOOPY
There are currently 281.304m PGW shares on issue, and 244.236m NZS shares on issue. PGW has a beneficial interest in 11.02% of NZS. So we can derive a 'per share' expression of the value tied up in NZS for PGW shareholders as follows.Quote:
Snoopy wrote:
"So we are back to the 11.02% 'beneficial' stake as the capital value of NZS that is controlled by PGW shareholders."
(PGW holding)= 0.1102(244.236/281.303)(NZS) = 0.09568(NZS)
With an NZS share price of $1.95, that equates to a PGW holding value of 18.7cps.
SNOOPY
discl: hold PGW, NZS
Based on a share price for PGW of $2.26, we can attribute the value of:
$2.26-$0.187=$2.073 to the underlying value of PGW, excluding NZS. The forecast Net Profit After Tax excluding capital gains and one off items, the NZS performance fee and the NZS share price appreciation (which has to be equity accounted as 'profit' under the new accounting rules) is still $39m, or
$39m/281.3m= 13.9cps
That gives an 'underlying PGW' PE of: $2.07/0.139= 14.9
By any traditional measure I would say PGW is fully priced. But 'tradition' does not include any 'Norgate' factor. The reorganization of the PGW wool business, giving the whole industry a more 'national focus' is a development that shows promise. But there is not enough disclosure to quantify this from a profit perspective
Financial services must be a good growth opportunity, given that PGW was about the only listed company with a finance arm that responded positively to the recent NZX enquiry on financial sustainablity of finance companies. Financial services revenue was up some 66% in the last half year report (31st December 2007). Even excluding the NZS performance fee results of $11.9m that is still a revenue increase of:
($65.78m-$11.9m)/$39.5m= a 36.4% increase.
Lastly Norgate is betting his kids fortune on the share price of PGW going up substantially from here. If he has that kind of confidence, it is hard to argue that we as shareholders should think any differently.
SNOOPY
discl: hold PGW
Good analysis to answer your own question! PS: Thanks for sharing... :)
Thanks Steve. It is sometimes hard to keep track of these multifaceted companies in an objective way. Some people go to a PGW store and judge the total prospects of the company based on that experience. While that 'on the ground' research is relevant, it is important you do not judge a company's ability to manage a wholesale wool marketing co-operative, by the stock of gumboots on the shelves.
To go back to the PGW, NZS relationship:
(PGW holding)= 0.09568(NZS)
In practical terms a 10c rise in the price of NZS translates to a 1c rise in the value of PGW.
SNOOPY
I have been watching PGW for a while now, and recently bought some PGWIZB (for leverage). Norgate knows where he is going - he's sorting out wool; he gets fat fees for managing Uruguay; he's no doubt got constructive thoughts on meat; and today's Fonterra announcement must also be a positive.
Another useful means of entry is via PGC, which is selling on a much lower PE; their main investment is of course MARAC, but they still hold a significant slice of PGW. (And MARAC is one of the three top finance companies - UDC and SCF being the other two - that will survive and prosper into the future. The PGC share price is being unduly held down by the prevailing pessimism towards the finance company sector, but it looks to me as if it is about to bounce off its bottom.)
Thanks for identifying that Warrant for me Colin. I see it is an ABN Amro 'rolling installment warrant' with a $1 call due on 28th March 1989. I presume that means for a small fee, as we get near excise date, you can 'roll it over' rather than stump up with the full dollar.
PGWIZB hit $1.43 on Friday, which is equivalent to a share price of $2.42, a premium of the PGW closing price ($2.31) of 5.2%. I also see you have to take the dividend cash buyback option, so you cannot retain your bonus shares.
Norgate has made his vote of confidence in these products but only to the extent of 4000 units. 4000 units is milk money to a guy like Norgate. I think Norgate is using the PGWIZB warrants to put some funds into his kid's family trust in a cost effective way. If he loses his bet and the share price is less than $2.35 on 28-03-2009, then the loss isn't great to someone like him. If he wins then he manages to legitimately pay less gift duty.
I have confidence in Norgate. But I'm not sure that 'the market' will mirror that confidence by the 28-03-2009 excise date. For that reason, plus the tax efficiency of the bonus shares I intend to stay in the head shares only. Good luck to you though Colin.
Yes I agree. The reason I wouldn't buy PGC myself is that I have a significant chunk of funds tied up with Aussie banks. And I don't want to become (more) overexposed to the finance sector.Quote:
Another useful means of entry is via PGC, which is selling on a much lower PE; their main investment is of course MARAC, but they still hold a significant slice of PGW. (And MARAC is one of the three top finance companies - UDC and SCF being the other two - that will survive and prosper into the future. The PGC share price is being unduly held down by the prevailing pessimism towards the finance company sector, but it looks to me as if it is about to bounce off its bottom.)
Hey Colin, what is the 'equation' for PGC shares in terms of PGW? By that I mean what does a 10c rise in PGW share price (say) do to the underlying value of PGC? If you don't know post the number of PGC shares on issue, the number of PGW shares on issue and the percentage holding that PGC has in PGW and I will work it out.
SNOOPY
I have also considering PGC as opposed to PGW because PGC allows that little bit moew in the way of diversification.
OK, PGW has more shares on issue than PGC. So if PGC owned *all* the shares in PGW then each PGC share would represent nearly 3 PGW shares (or 289m/98m= 2.95 to be exact). However, PGC does not own all the PGW shares. It only owns 22% of them. So the expression becomes:
PGC:A= 0.22(289m)/(98m)PGW = 0.65PGW
where 'PGC:A' represents the 'agricultural' component of PGC - in other words their shareholding in PGW. That means for every 10c rise in the price of PGW, we can expect the price of PGC to increase by 6.5c.
As another way of looking at things, if there are 289m PGW shares on issue, and the share price is $2.31, that gives PGW a market capitalisation of:
$2.31 x 289m= $668m
22% of that (the PGC holding) is:
0.22 x $668m= $147m
There are 98m PGC shares on issue, so the PGC:A component is:
$147m/98m = $1.50 per share
The PGC share price is $3.45. So the market valuation of the rest of PGC (principally Marac) is:
$3.45-$1.50= $1.95
Whether you think that is 'value' or not depends on the future earnings of Marac.
SNOOPY
Thanks, Snoopy. Knowing that you are a super analyst I accept your calculations and am greatly cheered by them. The market is applying an unduly harsh discount to PGC in relation to the value of its investment in MARAC.
For FY2007 PGC achieved a return of 15.8% (Net operating profit [equates to NPAT] of $26.5m) on its stated $168m investment in MARAC (PGC total net operating profit was $30.6m). The percentage contribution from PGW will no doubt be greater this year, but MARAC is weathering the current finance company storm in great style - latest half-year profit was up 11% over the previous comparable period, total receivables rose 14% during the six months, reinvestment rates remain within normal historical ranges, it has one of the rare (for the sector) Investment Grade credit ratings from Standard & Poors, has a $480m syndicated bank facility with NZ's five major banks, and a securitisation facility of around $300m. Apart from the ANZ-owned UDC and South Canterbury Finance, you won't find another NZ finance company as well-placed as MARAC.
Using your $1-95 attribution of per-share value, this places a market cap of (98m X $1-95) = $191m on MARAC, and a historical P/E ratio of 7.2 - not bad, even in today's conditions, given that they are still on a good profit growth path.
Would be tempted to buy a few more PGC, were it not for the fact that I have to garner cash for conversion of my NZO options.
I wonder how many have taken the trouble to find out how much PGW really makes from Uruguay?
The PGW half year report 2007 is telling. On page 1 we find:
* NZFSU Performance Fee (based on a $1.50 share price) - $8m
* NZFSU share price appreciation (based on $1.50 share price) - $9m
We know all about the second bit. That is based around the NZS part farm ownership. And that has been covered by the equation I previously derived.
"To go back to the PGW, NZS relationship:
(PGW holding)= 0.09568(NZS)
In practical terms a 10c rise in the price of NZS translates to a 1c rise in the value of PGW."
I want to go back to the first bit. For that I need to go back to the original NZFSU prospectus. From page 17 of the original NZFSU prospectus:
"The Manager will be paid a Management fee of 1.5% per annum on the gross asset value of the company until 30th June 2008, thereafter reducing to 1.0% per annum. The gross asset value of the company will be calculated by the manager in accordance with generally accepted accounting standards (based on the market value of farm assets which are subject to revaluation each year)."
As at 30th June 2007, the annual reporting date for NZS, 26,523ha had been purchased and these agricultural assets are listed in the NZS balance sheet at $NZ72.4m. 1.5% of that figure amounts to:
(0.015)($72.4m)= $1.09m (1)
The NZFSU prospectus continues:
"In addition the manager will be paid a performance fee calculated as 20% of the amount by which share price growth and gross distributions exceeds 10% per annum compounded. An adjustment will be made to ensure that total performance fees paid to the manager over time are not enhanced by share price volatility. Share price growth is calculated as the percentage change in a 12 month period in the volume weighted average price of the shares for the quarter to 30th June."
That means we won't know what the final performance fee is until 30th June. However, let's use an $1.50 NZS share price figure (as assumed in the PGW half year report). The original shares were subscribed to at $1. A 10% premium on that price would be $1.10. So the bonus payment on a per share basis on the share price gain would be:
0.2[$1.50-$1.10]= 8cps (that's per NZS share held.)
In that original tranche, PGW took up 17.934m shares. So that means the bonus payment due will be:
$0.08 x 17.9= $NZ1.4m (2)
Adding up (1) and (2) I get a total performance fee of $NZ2.4m, which is well short of the $NZ8m that PGW claim they are going to get. I don't think I have made a mistake in those calcs, so what is going on? Perhaps the performance fee gain has been taken on the price of the original 50c warrants, which effectively rose in price to $1?
If that was done the fee can be recalculated as:
0.2[$1.00-$0.55]= 9cps
$0.09 x 17.9= $1.6m
Still not nearly enough. So where does the $8m forecast performance fee come from? Anyone?
SNOOPY
discl: hold PGW, NZS
Thanks Colin, I think you might be right. In that case the gross asset management fee is:
(0.015)($72.4m)= $1.09m (1) -as before.
And the share performance bonus fee would be:
0.2[$1.50-$1.10]x169.6m = $13.6m (2)
That gives a total performance fee of:
$13.6m+$1.09m=$14.8m, or $10.4m after tax. That is higher than the $8m that PGW are claiming. But it could be that the 'management fee' is accounted for somewhere else in the finance division and is not part of the 'performance fee', and it may be that tax is payable at the old company rate of 33%, not 30%. Make those adjustments and the performance fee payable is:
0.67 x $13.6m= $9.1m
That is getting closer. There may be some write offs carried forward from previous years, and Uruguayan taxes that cannot be offset that reduce the true figure to the $8m estimated. If that sounds like a windfall, don't forget that PGW also faced the cash call on the full payment of their partly paid NZS shares during the year, which amounted to $12.8m. Even taking into account all the fees scraped in by PGW, on a cashflow basis PGW are down for the year. Heavily down when you consider the performance fee will be taken as paid in new NZS shares.
As it happens, I think PGW are underestimating their bonus payment because NZS shares are doing much better than was predicted six months ago. If the volume weighted average price is closer to the $1.75 that I estimate, then the 'bonus fee' goes up like this:
0.2[$1.75-$1.10] x 170.9m= $22.2m
Plus there will also be a contribution from the December non-renouncable bonus issue, which was made at $1.50 (and hence wouldn't have qualified for the PGW bonus if the shares were only worth $1.50 over the valuation period.)
1/2 x0.2[$1.75-$1.65] x 73.33m= $1.5m
Add those up and you get a 'bonus payment' of $23.7m, or $15.9m after tax. That is $6.8m more than the $9.1m I calculated before on the same basis. So with any luck we PGW shareholders are in for an 'extra bonus' of $6.8m.
Adding that $6.8m to the $8m that PGW has forecast gives a total bonus of $14.8m. Based on NZS shares being worth $1.90 at the time the bonus is earned, that means PGW shareholders can expect an extra 7.8m NZS shares. That would raise the total number of NZS shares owned by PGW to something over 25m, only just shy of 15% of the company. That is nice for we PGW shareholders, but not so good for the existing holders of NZS.
SNOOPY
discl: hold PGW, NZS
You make the case well for PGC Colin. But with today's announcement of a new $100m facility with the ASB for 'child' PGW to expand their own financing arm, perhaps we no longer need to own 'parent' PGC shares to have a solid foot in the finance camp? I say 'perhaps' because 'the finance arm' of PGW is a fairly broad church. It includes most of the associated income related to 'New Zealand Farming Systems Uruguay', as well as the income from lending to New Zealand farmers.
The PGW interim results included within operating earnings 'NZS management fees' and a performance fee of $11.9m which had an impact of $8m on net earnings. Take that away from the financial services segment net profit of $15.4m (p20 PGW interim report Dec 2007) and we find the New Zealand continuing farming related finance arm net profit was:
$15.4m-$8.0m = $7.4m
From the balance sheet on page 8 of the PGW interim report, the total 'finance receivables' are $335m (current) + $124m (non current), which makes a total of $459m. That means we can calculate PGW's New Zealand finance based annualised return on funds over the six months July 2007 to December 2007 to be:
$7.4m/[$459m x (1/2)]= 3.2%
3.2% isn't a bad lender's margin. If another $100m of loan funds (from the ASB) were available, then annualised NZ based finance profits for FY2009 could be as high as:
$7.4m x2 + $100m x 0.032= $18.0m
What is more with the demise of alternative sources of finance, this kind of income looks 'reliable' going forwards.
However, it is possible that this $100m extra funding is being targeted at the expansion of the NZ Farming System's Uruguay company instead. If PGW do indeed end up owning 15% of NZS (25m shares out of some 170m), and NZS carry out another round of capital raising then PGW may need that new line of credit. Still even a 1:1 offer at $2 would only consume half of the available money, if PGW took up all of their own rights.
The market certainly liked the news today with PGW share price surging to an all time high of $2.61. Still, I would have to consider some of that surge currency related, as the NZD drops into the US75c domain. Where to from here for PGW? I keep thinking the dream run must end. But if the currency depreciation trend gains any legs, can anyone say that a $3 share price by the end of the year is impossible? I don't think it is quite time to roll back those PGW shareholdings yet!
SNOOPY
discl: hold PGW, now my second largest NZX holding by a good margin, and second only to NZS.
Snoopy:
I agree, entirely, that the PGW uptrend is unlikely to peter out for a while yet. A lot of positive news is coming through, i.e. the positive Uruguay story (against my earlier negative assessment, I must admit); wool being "sorted" (microns now, as well as crossbreds); expansion of the Wrightson Finance funding and business levels; the easing of the Kiwi dollar; the high values being realised by their rural property sales business (individual farm sales in the $20/30 million price range must produce considerable commissions income for PGW); apparently improving outlook for meat export sales prices; and the increasing global demand for agricultural produce. Now is definitely not the time to bail out of PGW, and I only wish I had taken a greater interest when they were around the $2 mark.
Interesting to see that the bid price for the AAD warrants (PGWIZB) is 175 this morning. My modest foray into those is returning a handsome yield.
Regarding the financing business: I could never understand why the old Wrightsons Company decided to get out of financing in the Alan Freeth/ Simon White era, when they sold out this part of their business to Rabobank. Seasonal financing is such a core part of Stock and Station Agency business. Re PGC versus PGW: I think you will find that Marac is able to fund itself at cheaper rates than Wrightson Finance. Wrightsons has debt issue quoted on the NZDX. Marac is coming out with a $100m 5-year bond issue which will probably be set at a yield close to the recently successful South Canterbury issue (they have the same S & P ratings). We will then be able to compare Marac with Wrightson Finance, on the secondary NZDX market.
I would like to have a greater direct investment in PGW but my holding in PGC gives me a bit more insurance by way of spreading risk.
$2? Macdunk would have sold you his for $1.60 only 18 months ago! And of course because Macdunk made a loss on that trade (despite profiting on his several PGW trades before that), he will never invest in PGW again - even though PGW has been one of the top two or three best perfrorming shares on the NZX since! My own average entry price to PGW is $1.33, and I have always added to my increasing holding when the share price is going down. Of course my average holding time is something like six years, so I haven't made quick money. And as an extra 'punishment' over those six years I have been forced to bank 47.5cps in dividends. Such are the 'trials' of the long term investor!
Those warrants are 'in the money' already! PGW shares traded up to $2.75 late this morning!Quote:
Interesting to see that the bid price for the AAD warrants (PGWIZB) is 175 this morning. My modest foray into those is returning a handsome yield.
I think of that as the Greg Kay era. Now there is a name from the past! I wonder whatever became of Greg? Perhaps after his, erm, 'defining era' holding the reins at dear old Wrightsons (as it was in those days) a career back under the radar in corporate law was the forced career path forwards?Quote:
Regarding the financing business: I could never understand why the old Wrightsons Company decided to get out of financing in the Alan Freeth/ Simon White era, when they sold out this part of their business to Rabobank. Seasonal financing is such a core part of Stock and Station Agency business.
'Lest we forgot', the 1998 balance sheet (after the finance arm sale) showed no term debt, and WRI declared a profit (excluding the sale of the finance division) of $6.6m. Take away from that the seven months of profit from PGW finance ($4.1m) and the net profit attributable to the remaining rump of the Wrightson business was $2.5m.
The previous balance sheet had shown over $86m in bank loans due to be repaid/renegotiated) over a tight two year time window. With a mere $2.5m in underlying profits how do you suppose WRI would have serviced this debt in the future? The answer of course is that they couldn't have. It took the sale of the highly profitable Wrightson finance arm to stave off probable bankruptcy for Wrightsons (although naturally enough it wasn't put in those terms to shareholders at the time).
SNOOPY
discl: A (very small) WRI shareholder since 1995, who has substantially increased my position in what is now PGW (particularly in the last four years).
I picked up a copy of last weeks NBR. In there was a story about PGWs real estate arm having increased their turnover by 65% this year! This does not mean that real estate profits have increased by 65% of course. PGW have bought a small real estate company in Victoria and rebranded that as PGW. Furthermore there will have been costs in opening up new real estate branches within New Zealand. Rather frustratingly, the exact dollar value earned when declared will be submerged in the 'finance sector' sub result. Nevertheless it all builds on the wall of good news for PGW.
Did anyone else see the PGW announcement made to the stock exchange this morning? Rural Portfolio Investments (aka Baird McConnon and Craig Norgate with their cornerstone stake) increased their holding in PGW by 88,660 shares on Tuesday and Wednesday. Granted this is not significant compared to the 86,038,258 shares that RPI held before that. But it is always good to see the insiders buying - or is it? I though that insiders could only buy shares in a fairly narrow window around when company results were announced. The PGW annual result will be at least two months away. So how can RPI get away with this?
SNOOPY
Snoopy: Thanks for your two contributions (above).
The other announcement today, about their 61% interest in the leading Stock and Station Agency in Uruguay, should also be a positive move, although the sp slipped back a bit.
The rural servicing sector can't be very big in Uruguay, though, if this company has an annual turnover of only US$30m. It depends what services they provide.
Craig Norgate has certainly put some fire-power into PGW. (I agree that, on the face of it, RPI's latest share purchases do seem "out of time" but I am sure there is a satisfactory explanation - is it something to do with a management contract, or other services to PGW, perhaps? Taking such payments in PGW shares, if provided in the contract, would not be "insider trading".)
You and I have a slightly different investing philosophy. I have been in and out of the old Wrightsons company two or three times over the years, and also PGG and PGW. (I regard myself as an "Active Investor" - certainly not a trader - and, if ever the IRD challenged me on that, my defence would be that I am constantly re-positioning my portfolio according to changing circumstances. )
One of my emerging basic investment principles, in recent years, is to "Buy into Strength, Sell into Weakness". It was many years before I could bring myself to sell shares at a loss to the original purchase price - and it is still hard to do this at times - but you have to rake over your portfolio regularly and ask yourself the question: "If I wasn't in this share today, would I still buy it today?" If the answer is "No" then why hang onto it? Easier said than done, though, and I do admit that I have bailed out of one or two prematurely.
However, as we all know, there is no one fool-proof method of investing, and we must all keep our minds open to other views.
I get the impression that you steer clear of energy stocks? Thats a pity, because there's plenty of fertile ground there (in Australia) for some excellent rewards. Try dipping your toe in the water there, sometime, you'll find the chase exhilarating. Coal Seam Gas is all the rage, but there is also plenty of hype and you need to do careful research, of course.
Anyway, lets enjoy our PGW involvement while it lasts.
Cheers!
I would actually be more worried if the PGW share price hadn't taken a dip Colin! When a share price rises as hard and fast as PGW has, I believe some corrections along the way are healthy.
The radio report I heard this morning said that PGW's Barry Brook was previously sharing an office building with the now 51 per cent owned Romualdo Rodriguez Limited (livestock, wool and rural real estate)! I get the impression that all of rural business in Urugauy is quite close knit. The corporate culture that PGW is breathing into Uruguay must be quite a shock to them.
According to PGW:
"Romualdo Rodriguez is highly regarded and has established a leadership position from 43 years of involvement in servicing the needs of farmers in Uruguay. Annual sales in the livestock business alone amount to around US$30 million."
That $US30m turnover they were talking about related to the livestock size of the business only Colin. Interestingly exactly ten years ago, from the WRI annual report, the Wrightson livestock business had $NZ34m in sales. Mergers and an increase in livestock value will have boosted that figure since. But the Romualdo Rodriguez business does seem to be of significant size. It is also good to see the Romualdo Rodriguez family holding onto a minority stake in the company, at least in the meantime.
Of course. Even I (partially - it was only a partial offer) sold out to Craig Norgate when RPI made their takeover foray into WRI. There were better dividend opportunities for income earning elsewhere, so I sold. Then when the WRI share price dropped back 'post takeover' the dividend yield improved so I once again boosted my WRI holding. All legitimate income investor activity. This is what income investors do.Quote:
You and I have a slightly different investing philosophy. I have been in and out of the old Wrightsons company two or three times over the years, and also PGG and PGW. (I regard myself as an "Active Investor" - certainly not a trader - and, if ever the IRD challenged me on that, my defence would be that I am constantly re-positioning my portfolio according to changing circumstances. )
I have holdings in CEN and BHP (who own substantial petroleum assets) Colin. Actually I think BHP is my largest single global holding, so I wouldn't say I steer clear of energy stocks. But I don't consider myself an expert in energy. So I just sit on those holdings and let the existing company management do it for me. I read my first article on Coal Seam Gas in the popular media this week. When hot (pardon the pun) areas like this start to generate interest from the inexpert, this is normally a sign for me to get out rather than jump in! When the next energy price collapse comes, I might start picking over those energy coals again. IIRC I made good money on Transalta about ten years ago, when that looked like a dog.Quote:
I get the impression that you steer clear of energy stocks? Thats a pity, because there's plenty of fertile ground there (in Australia) for some excellent rewards. Try dipping your toe in the water there, sometime, you'll find the chase exhilarating. Coal Seam Gas is all the rage, but there is also plenty of hype and you need to do careful research, of course.
SNOOPY
Trading halt on PGC, PGW and SFF (the old PPCS).
Looks like some rationalisation on the meat industry front. Whatever it is, PGW will be sitting on top. Craig Norgate would not accept a subsidiary role.
A 50% interest in Silver Fern Farms! Getting in on the ground level of a fresh new meat co-operative sounds good. Just imagine if Norgate had instead tied himself to one of those tired old industry players like PPCS ;-P. Now that would not have looked so good!
'Managing meat from the pasture to the plate.' is a great slogan, but I fear 'achievement' will be harder than 'recitation'.
The meat industry in NZ has needed sorting out for a long time. Perhaps the entry of Norgate to the meat industry table will be the long awaited catalyst for actually getting things moving?
I see the deal will see $220m of PGW money go into acquiring 50% of the SFF co-operative, which will then become a 'half co-operative' 'half corporate' (Hmm, do I feel a feel a new Tui beer billboard coming on?). The $100m new banking facility PGW negotiated with ASB only three weeks ago won't go anywhere near covering this deal. Whether the deal goes ahead or not is still be be decided by July and August meetings from the existing co-operative's members. But given the failure of the meat industry to consolidate voluntarily, do the existing SFF holders have a real alternative? Also the PGW bankers will have to agree. PGW is relatively highly geared, given the volatility of its underlying earnings base. I think those bankers may agree more readily if shareholders stump up some more money as well. IMO we are looking at a cash issue for PGW in the next three months or so. Whether substantial shareholder PGC will need a cash issue as well is something I don't know.
SNOOPY
discl: hold PGW
Agree, a cash issue by PGW seems inevitable. RPI (Norgate/McConnon investment vehicle) may also need to raise extra cash to fund their share, if they are to retain their existing proportion of PGW equity, but they may find it difficult to go to the public for this, given the current climate. (Not too sure about RPI's ability to roll over their existing public debt issues, but thats another matter. [Haven't checked the maturity dates of these]). PGC could probably fund from existing resources.
The structure of the new SFF Board may be a contentious issue, with a 50/50 split between PGW and the growers, with the inevitable "cleavage" issues. Farmers can be a most obstinate, obdurate, lot, as witness the struggles with trying to bring the big meat processors together, and the Fonterra battles with getting farmer approval to new capital structures. It would seem to hinge on who is to be the Chairman and whether he or she is to have a casting vote. There will doubtless be a Shareholders Agreement drawn up to cover this, but as things stand I can see long drawn out battles on getting the terms of that Agreement settled. But eventually, one way or another, the farmer-producers will come to see the sense of amalgamation, if a clear-cut case for the benefits (which undoubtedly exist) can be made to them, and will reluctantly accept that they may have to agree to something short of their most desirable outcome. And, as I expected, the market already sees the benefits for SFF by dropping the yields on the SFF debt issues on the NZDX.
Overall, I see this as a long-term positive development for PGW - and hence PGC.
"Food and Fuel" are the investment sectors to be in, these days, with little doubt.
DISC: Hold PGC, PGW, PGWIZB, SFF030
Go back to the PGW press release on this matter Colin. Here is an excerpt:
----------
The partnership is based on a mix of financial and organisational elements.
- The procurement operations of SFF and PGW will be integrated under an
agreement between the two companies.
- PGW will subscribe $220 million ($145 million on completion, and $75
million plus interest by 1 March 2009) for a 50 percent shareholding in SFF.
----------
$75m is what PGW are 'subscribing' initially. Not the amount of new equity required, at least according to the press release. PGW will have to decide what proportion of equity and debt is in that $75m they 'subscribe'. Also the $75m is only a 'downpayment'. So your comment Colin that it is
"A bit less than I expected."
is spot on. The actual figure is $220m, to be fully paid up by some unspecified later date.
Am I right? Or is there some other source that says Norgate will be raising only $75m in new equity?
SNOOPY
My understanding of the financial arrangement is that Wrightsons put up 145m upon 'completion' of the agreement, which is subject to gaining 75% shareholder (of PP) approval, followed by a further 75m plus interest by March 09.
So the 145m is required on/before October 08.
How it is funded is a moot point, but it will be an equity stake of 220m
The logic of this initiative escapes me - "pasture to plate" is not a new concept in this industry - the real issue is overcapacity at the processing stage, and (as usual) fragmented marketing with (as usual) competitive underselling, to push the product out the doors.
If PGW intend to now simply guide livestock supply through PP plants (and clip the ticket along the way), the rest of the processors will just force up prices (as usual) to retain their own market share, leaving the industry (as usual) with it's traditional lousy return on capital.
Sideshow Bob might have a few positive comments to make on this but I can't get enthused
Thanks Xerof. That interpretation makes more sense than mine. I think I heard the $75m figure mentioned on the radio as well by some broker. It looks like they misinterpreted when the payments were to be made.
As I understand it the idea is to gain a premium price by offering what the big overseas customers want, when they want it. Get rid of the seasonal blips by adopting a Fonterra style model for meat. That means supplying from overseas farms (remember PGW associate NZS has quite a bit of Uruguayan land suitable for grazing) to fill the gaps if necessary.Quote:
The logic of this initiative escapes me - "pasture to plate" is not a new concept in this industry - the real issue is overcapacity at the processing stage, and (as usual) fragmented marketing with (as usual) competitive underselling, to push the product out the doors.
If PGW intend to now simply guide livestock supply through PP plants (and clip the ticket along the way), the rest of the processors will just force up prices (as usual) to retain their own market share, leaving the industry (as usual) with it's traditional lousy return on capital.
The NZ farmers will have to accept that from now on they will have to grow their meat on Sainsbury's schedule and not their own. There won't be any more underselling to the end line customer because PPCS will be looking for 'multi-seasonal deals'. If the big overseas buyers don't sign up, then they won't get their year round guaranteed quality supply contract.
The injection of capital into PPCS (sorry it will take me a long time before I can think of that organization under another name) means the automation program (using Scott Technology joint venture meat boning robots) will move into another gear. Thus PPCS will be able to cut costs and pass more margin through to farmer owners - or alternatively PPCS will have more funds with which to outbid competing meat plants. Either way the farmers win.
SNOOPY
discl: hold PGW, NZS, SCT
Snoopy: Here is the exact quote from today's "The Press", which I was relying on:
"Chairman Craig Norgate said PGG Wrightson would raise up to $75m via a share-based capital raising and also use debt to pay for the $220m stake."
If "The Press" have correctly quoted Norgate then my original statement stands. It is quite unrelated to the timing of the actual payments to SFF.
I note the that partnership with Silver Fern Farms starts 1st of October:
World Vegetarian Day!! :D
Maybe that is the reason that settlement won't be happening today ???
Gee, they have been having a rough time of it lately, first they have placement, with underwritten SPP (wonder if underwriters have an "out" clause for market turmoil ?
No doubt if PGC have their "in specie" distribution of their PGW holding, on becoming a bank, you could expect even more weakness in share price.
How do the fundamentals for the PGW empire stack up right now? I'm not too clear about what the whole silver fern thing means, but I'm actually tempted to have a stab with PGW approaching support.
NZS made a new low unfortunately, no touching with a barge pole.
AMR the trouble with empire builders is the ammount of risk that they must take on board. Norgate is all over the place building his empire, which is extreme high risk in troubled times.
The PGW sp has dropped from an august high of 250c to an oct low of 171c. That is a crash caused mainly by bad timing. The idea might be right, but the timing wrong. PGW is still going to downtrend, making this into a real bargain later on. I would think dairy produce will downtrend, making the PGW sp under further pressure. We still have the American economy in deep strife, this is no time to buy anything. Figures and numbers count for very little when the herd stampedes its best to stand aside. Macdunk