It looks like the SP is coming under a bit of pressure again.
I wonder how low it can go.
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It looks like the SP is coming under a bit of pressure again.
I wonder how low it can go.
0 would be a silly answer lol , but farmers are going to struggle for quite some time. was talkling to a farmer yest saying input costs making it very difficult combined with lower returns.
Yes, the farmers I talk to are trying to diversify their risk and income streams. A new fence post that gives them zero revenue versus buying Infratil shares with 20 percent returns and most of that tax free.
On farm maintenance costs can be delayed for years with a bit of number eight wire.
I read two positive articles on the rural sector today in business Desk. From the headlines, more than $1b to be injected into rural sector from increased farmgate prices.
It is always darkest before dawn...
I would dearly love to drop into the market today and double the size of my holding. Actually I could rustle up the cash to do just that. The problem I see is those banking covenants that PGW does not want to talk about. I am encouraged that the banks have extended extra credit to PGW, and that these renegotiated banking facilities are free to be used right up to February 2026 (HYR2024 p26). So this is no Synlait. Yet they share price is being punished like Synlait.
The 'What if' factor here is (quoting from the same page)
"The (financial) agreement contains various financial covenants and restrictions that are standard for facilities of this nature, including maximum permissible ratios for debt leverage and operating leverage together with limits on 'GoReceivables' , capital expenditure and asset disposals."
I think the Senior Debt Coverage Ratio - the debt leverage covenant - ( (SDCR) ="Senior Debt"/EBITDA ) could be in trouble. Reference here.
https://www.sharetrader.co.nz/showth...=1#post1044248
In addition the Fixed Cost Coverage ratio - the operating leverage covenant - could be in trouble as well.
FCCR= [(EBITDA - 'GoLivestock Interest Cost'] / [(Total Net Interest Paid+ Banking Facilities Charge)+(Lease Expenses)]
https://www.sharetrader.co.nz/showth...=1#post1044651
I think both SDCR and FCCR covenant compliance will be waived come PGW FY2024 result time. An increase in EBITDA should fix both. But when will it happen? And will the banks force a capital raise if that covenant re-compliance date is pushed out too far? The worst case imaginable is that the banks call in the receivers. But we also have to remember that despite PGWs issues, they are still in a better position than their co-operative competition 'Farmlands' which has declared it is losing money already, even before the farming recession has deepened. So will the banks tip that into receivership as well?
I am fairly sure the banks do not want a bar of owning rural businesses like these themselves. So they will work something out with PGW. The only question is, will the banks require shareholders to tip in some money in the form of a discounted share issue to get PGW over the line, sometime in 2025? I am picking that when FY2024 winds up on 30th June, and we get the report a couple of months down the track, the banks will have told the board where this company stands, and we shareholders will get the answers to these sticky questions.
SNOOPY
$1.49!
http://<a href="https://www.youtube....uvPJJVHCLg</a>
SNOOPY
Found this interesting - sheep farming continues to decline as wool prices remain low. New Zealand now has fewer sheep (24.4m) than it did in 1914 and the ratio of sheep to humans is the lowest since records began in 1858.
Sorry, prob nothing to do with PGW
Snoopy - how much decline in top line revenues are you forecasting / estimating?
My projected NPAT for FY2025, where I forecast an increase in (some) revenues over FY2024, may be found in post 5715. Post 5709 then shows most of the assumptions that go into that post. In short I am assuming no recovery in livestock, a 35% revenue lift in horticulture and a small drop in interest payments as some long term borrowings are paid back. I am also assuming interest rates do not fall in FY2025. Whether you agree with such assumptions is of course up to you.
Post 5715 was enough to silence the Sailor who seemed quite keen on the company up to that point, so he must have absorbed it, and decided to end his PGW quest there and then. I can't remember anyone having successfully silenced the Sailor so swiftly before that!
SNOOPY
Thanks but I had seen those earlier posts - but not necessarily absorbed them. I noticed you jump straight to EBITDA. Have you modelled revenues? I know that is introducing more inputs (and the potential for more errors) but I am not alone in seeing significant drops in top line revenues for some companies selling to farmers. When I say significant, I mean 'life changing' and not in a good way (e.g. directors selling their home). Maybe Mr Market has wind of this...? So whilst you have done the work on EBITDA - did you model any decline in revenues?
P.S. Modelling EBITDA using 3 inputs isn't hard as it sounds....top line revenues less variable costs less fixed costs. IMO it will be much more accurate than starting with EBITDA.