Yes that's the guts of it, (behind the paywall article).
Printable View
Come on, these guys are both building capacity to capture market share, just the goal posts arent moving. Poultry is a commodity - excess supply = lower value.
Back down she goes. Glad I sold out of this at $1.42 when there was a small bounce, even if it was at a decent loss.
I have very little confidence in Tegel and they have been so quiet since their IPO. Little to get excited about?
This could help our exports
South Korea culls 30m poultry to contain bird flu | Bangkok Post: news
http://www.nzherald.co.nz/business/n...ectid=11801111
Ingham's sees New Zealand's chicken oversupply persisting
SQUAAAWWRRK! Low feed prices still; have big part to play in this ?
I guess our dollar going down increases the feed costs. And if that's perceived as being permenant.
Should have followed Percy out the door.
"....challenging market, driven by reduced industry export volumes translating to domestic oversupply"
Doesn't relate well to the export growth story from the prospectus....
Tegels radio silence hasn't been a good sign and this is heading further down. If I was into shorting this would be one.
Very disappointing to see myself sucked into the IPO based on the initial forcasts!
https://www.nbr.co.nz/article/ingham...sting-b-199518
I never saw this stock flying from the get go.
I thought Tegel in their IPO documents said that prices were about to improve?
Private Equity at it again with their ambitious assumptions to try 'get it away'
Now trading at an all time low of $1.26 and probably headed lower...investors were sold a pup. Free lesson, (for those watching from the sidelines like me) and expensive lesson for anyone who subscribed to the IPO and is still holding, if Private equity are selling DO NOT BUY. Go swimming with sharks and guess what, you're more than likely to be their lunch !
PEquity had a fundamental flaw in their proforma numbers, they needed to increase volume in order to meet proforma revenue, you can't just increase the supply of a "commodity" product and get the same price also how do you think Ingham would respond to all of these projections! This mixed with a lower-than-usual cost in producing their "commodity" products encourages more volume.
Did PEquity purposefully draw attention away from this in their forecasts? Idk
Interesting to see the CEO increasing their stake/holding up the share price
Not too early mate, you nailed it with your comments. I have a big client with industry connections that told me to stay out so I did as I was told as he's a smart guy.
Private equity have seriously "plucked" investors and they're now in the process of getting thoroughly roasted in the oven of commercial reality.
Maybe $1.00 by Christmas.
Not really but it's the first IPO I've invested into so I feel like you need to be burnt once (or sometimes twice) before you learn a good lesson so I'll take it on the chin.
I also think Tegel said a lot of things which were full of crock. Going by the initial documents and forcasts it seemed like a good investment to me anyway (and Percy I might add!). Most analysts rated it as an outperform or buy at IPO time.
Anyway good lesson learned and I'm much happier in growth companies like HBL and THL with good leadership teams.
Creative marketing Hmmmmm....I think I know a certain private equity firm that are pretty good at that too.
http://www.sharechat.co.nz/article/2...cken-sizeshtml
Jeez !!!.The added labour and costs of marinading and stuffing a chicken makes the slightly different weight of the chicken irrelevant to this consumer and way more tastier to boot .
Now Injecting bacon with water and colouring would be a more reasonable thing to object about but no its quite acceptable it seems.ComCom justifying their fat salaries ehh ,don't think so.
Part of the normal curing process I am told JT. Have you tried expensive dry cured bacon....superb !
You make a good point about chicken being tastier with the stuffing...probably why the comcom only gave them a public censure rather than a prosecution.
An FYI....
The NZ poultry industry uses 'spin chillers' (quite unique compared to other countries) to chill down the carcases after slaughter - basically a big ice bath. It's known that the meat will absorb 10-15% in water weight from this process.
Ever notice chicken 'sweats', particularly after you defrost it?
Thanks for clueing me up guys. Have bacon rarely now as with all the sulphites etc added its on the unhealthiest food list now. When i do , i microwave between paper towels until crispy; removes all that fat.
So we lay this problem at the feet of " Big Pharma " .. :-)))
All time low at the moment
Probably about fair value
Promoters won't be getting as much as they first thought when they come to sell later in the year
So...another all time low, now down to $1.16. Investors must be feeling like they have been well and truly plucked by private equity corporate "spin". What a fowl deal this listing turned out to be, surely a few feathers must be ruffled on anyone still holding ! $1.00 soon enough I suppose ?
Absolutely not surprised.. NZ competing in the Chicken Market Export .. ???..
Only if we attempt for the higher end. Up against distance.. Ain't going to happen..
I really think ( and said ) that punters were sold a pup ( sorry Roger ) from the beginning on this one
Fowl indeed.
Ogg posted on the 15/3/16..."this will be the next Dick Smith"...And yet some folk despair why kiwis put there dosh in property.
Like Fletcher Building....what a disgrace...Like a shortage/dearth of labour and supplies would not result in.......Like was it a surprise...
Disagree with the statement ..."this will be the next Dick Smith"...
It will survive.. Just will not come up to all the hype given it at IPO time.. Another lesson has been learnt ( maybe ) about IPO's
DYOR Aye !!!
Gosh I'm glad Percy and I got out as soon as the interim results were released. What a load of rubbish that report was with them praising 'fantastic' results the whole way through. They really annoy me Tegel.
Hard to believe I posted this just over a year ago.. glad I stuck with my original thoughts and didn't touch it. I even recall soon(ish) after when they started talking up how much interest they had received. It is high profile/large listings like this that do not help the NZX entice other companies listed.
Just be patient and let it settle to it's real platform..
A very limited growth company IMO..
Possibly a good dividend payer..
Diisc. Never a holder..
FWIW, in some parts of the world food with a "clean" reputation is very much in demand. Where I live, periodic health issues with poultry from across the border in the PRC is incentivisting Hong Kong consumers towards products imported from further afield or fresh local product. Anecdotally, the unfolding Brazilian meat scandal is also turning people away from Brazilian poultry.
So I wouldn't discount the potential to achieve at least some growth in export sales and, given where the share price has fallen to, I'm inclined to have a closer look at TGH. That said, I suspect that if I do put my hand up and buy some, it will be on he basis that they will pay a decent dividend rather than because I think it is a long term growth stock.
Disc: not held
Couldn't agree more and no need to feel sorry for me mate. I have never held and also called the veracity of IPO projections and investment case into question right from the start.
I suppose once it hits rock bottom it is worth something but its quite humorous to think at one stage the promotors tried to flog this thing off for $2.50 a share.
I guess greed has no bounds is the moral of the story. Let it settle until after the first full years result and we'll see where the true value lies...quite probably under $1 somewhere.
I hold some of these, I think that at $1-16 they are a reasonable hold. You cant rubbish all IPO's just because others go fut. At least Tegel has a product that is in demand. I dont think I would put in more than 20k just in case.
I agree that Tegel has a product that is in demand.
Surprisingly Tegel was underperforming the other listed poultry companies in global markets. Is it due to limited market share for their products or less growth opportunity here? Can they have some market share in export market?
Currently there are some few issues in global poultry markets such as Outbreaks of Avian Influenza in North America, Brazil’s meat scandal and some supply issues in EU etc. Asia’s appetite for chicken meat will dominate over the coming years, and demand for eggs will also be higher. Many believe the world’s consumption of poultry meat will have grown by 27 percent by 2023, and 40 percent of this growth will come from Asia. Their sales growth is much higher than developed markets. Even in the current financial year well-managed strong poultry companies should outperform broader markets especially during second half of this year.
http://www.nzherald.co.nz/business/n...ectid=11822320
http://www.meatpoultry.com/articles/...BB10F%7D&cck=1
Can it build a mid and long term sustainable business model like some other well established global poultry companies in developed and development world?
Thats why the market is penalising them by 37 cents per share from the IPO. Which translates to nearly $132 mill in market capitalisation. Thats why I would sink my life savings into it.
14 doesnt sound too bad, just the same sold down some on friday. With all that goodwill, I see it settling down at just below a dollar. Disc Still a holder.
Yeah net total assets minus intangibles equals 86 cents per share so could see it drop just below a dollar.
agree to separately marketing the free range products, Inghams does this with their Waitoa brand. It's a bit tricky if you're targeting both "value" and welfare customers with the same brand name.
Obviously the Tegel branding is actually worth squat all if esteemed people like yourself can't spell it correctly
I wouldn't call Tegel a 'budget' brand but then we are both entitled to our opinios
The Tegel Turkey Breast Roasts are pretty nice - they are cage free and a bit cheaper than the so called free range ...wouldn't call them economy and I don't think the Tegel branding detracts from the product.
That's a rather complicated assessment. Keep the same product, call it something different, and the outcomes will change?
Anecdote is often fraught, nevertheless I think Tegel are a fine company, they have excellent product at competitive prices and they can produce reliably at volume. The fringe brands are really just chipping away at the edges, for the folks who are prepared to pay significant premium prices for largely intangible benefits.
People get all fidgety about the birds, being caged, penned, allowed out, free ranging etc. Really to be honest, my birds which roam the property would be a real fright for the majority of punters. They have purple/blue flesh, are tough as old boots unless veeeery slooooow cooked (yummy), and the poor buggers don't hit the pot until they are definitely beyond laying.
Country folk vs city folks. Maybe my chooks are 'Old McDonald's Barren Layers'. Tasty though🐔🍴. Yeah, that'd go down well in the city supermarkets LOL!.
Here's Tegel's " premium" brand anyway http://www.rangitikeichicken.co.nz
For what it's worth I'd say Tegel has a powerful brand in the NZ marketplace.
Tegel is definitely not a budget brand, but then again when it comes to chicken I don't think people really care about the brand, as long as it's yummy and cheap.
Like who cares if it is called Silly beer if it tastes good:
http://silly-beer.com
especially if you can get two for one :).
Meanwhile the downtrend is very definitely trending down and one day it may turn and be worth buying *.
Best Wishes
Paper Tiger
*refering to tegel shares, not the beer.
Intangible assets get a bad rap. As an example Alphabet has relatively few tangible assets but Google is an intangible asset, likewise licences, franchises, patents, copyright and software all create 'value' if used appropriately.
Describing the Tegel brand as a liability is overreaching though - again as I point out, just because you individually as a consumer don't consume 'value' or 'mass consumer brands' doesn't mean that a significant part of population thinks similarly.
Not everyone wants, cares or more importantly allocates sufficient value to buying the heirloom breed, organic, free farmed product you may desire - which is why Tegel and for that matter Inghams branded products still take the majority of the consumer dollar vote in FMCG.
Similarly I am not a 'heavy regular consumer' of Restaurant Brands stable of QSR brands - but I invested in shares there because I think it is has demonstrated it's a reasonably well run company and their client base is large enough that they should continue to make a lot of profit out of the populace that do frequent their stores.
The question around Tegel's intangible value is whether the value that is sitting on their books is sustainable - does the carrying value of the business (fixed and intangible assets) exceed the present value of the expected cashflow stream (at Tegel's weighted average cost of capital)? If it doesn't then those intangibles should be impaired... it doesn't sound like that at the moment, it's on anybody's radar, but this will largely depend on whether management's projections of the expected cashflow stream are deemed realistic by their board and then by their auditors. Given that the prospectus projections haven't been met, then what does management now project and what do their board and auditors do to satisfy themselves that the projections are realistic.
IMHO, there have been a lot of retailers and other listed entities who haven't signalled any impairments before heading belly up - and there are questions being asked about whether there is enough scrutiny of the carrying value and management projections of cashflow streams being done by boards and auditors particularly around some recent IPOS...
If they can make the lower end of their guidance $33m after tax, (I don't think this is "a given" taking into account the "creative" way this company was floated), on 409.3m shares that gives 8.07 cents per share EPS.
Now what PE to use ?
We need to consider that transport and feed costs have been at or very close to cyclical lows.
We need to keep the PE low because this company has a VERY long way to go to build credibility with the investment community and has next to no runs on the board so its almost anyone's guess how this company will perform over the medium term.
I don't see any compelling reason taking into account what amounts to a forecasting fiasco to date and the above to ascribe a PE of more than 10 so maybe this stock bottoms out somewhere around 80 cents per share ? Time will tell...
Not the clearest of Notes in the AR but assumptions supporting the intangible number are EBITDA growth of 6% pa for the next 5 years and then 3% pa forever. They used a cost of capital of 9.3%
Seeing H217 EBITDA is expected to be +20% on H216 assumptions look conservative eh
Yeah the NZX/ANZ calculations also factor in liabilities which my calculation did not. Just noticed ANZ securities reuters tab say NTA is $1.10 per share... hmm.
I don't normally have anything against intangibles but i find the amount of goodwill on Tegel's books to be excessive and used as a tool to justify such a high price on IPO day. However, i'm not saying it should be zero either.
The intangibles go back to the time when Ross Group acquired NZ Poultry in 2011 for $250m odd (plus debt)
It has been subject to review each year since and found to be 'acceptable' each time ....at least from a private company point of view.
It was not jacked up to support the IPO - been the carrying value for a few years. Some may think it was too high but punters were aware of what they were offered.
Fy17 should see a ROIC of about 8% - not that flash (if they reckon cost of capital of 9%) but sort of justifies the asset values reported
Just read an old article about the IPO. "The first shares of Tegel will sell for $1-55, well short of the $2-50 high it predicted, but the IPO has been oversubscribed". Predicted, perhaps wishing for, or talking it up. Just how did they expect to get $2-50, That would have included a further massive amount of Goodwill.
The slide continues....
disc-like their chicken not their shares though :p
Liking their shares better as time goes by. Always liked their chicken.
Jeepers cheepers Balance you better get your health sorted if you want to live longer, suppose you wash the licking good down with a 20 teaspoon sugar 1 litre of diet pepsi too!!. Do you know what floating stools mean? Get in balance manthoseshares are looking cheap. Just wait till the cycle changes and chicken feed prices go up and boy will there be some gains to be had as long as you are healthy to enjoy them.;)
http://www.bing.com/videos/search?q=...53&FORM=VRDGAR
A ways to go to get to my target price 80 cents.
https://www.nzx.com/files/attachments/256304.pdf
Presentation in Sydney at Credit Suisse/FNZC Conference.
Not a single sentence on the profit downgrade and why they may yet reach prospectus forecast.
Mostly repeats of the same propaganda as at the IPO - no credibility.
Conclusion : Another downgrade coming.
FWIW, Craig's latest "News and Views" has Tegel as Overweight, with a target price of $1.60. I don't hold TGH and have no view on the "View".
Macduffy. I'd say Craig's view is worth jack sh1t. They were the lead broker for the IPO and sold this into there client base at $1.55 so hard for them to come out with the view it's only worth $1.30 or so a year later.
My personal view is around $1.10 it may well be worth picking them up as at that price the risk reward is better for what is still a heavily commodity cycle type business.
At current prices, I'm planning to make Heston Blumenthal's (At Home with Heston) brown chicken stock recipe over the weekend... roast some chicken wings sprinkled with skim milk powder (caramelises and creates a bunch of Maillard reaction flavours), saute some carrots, onions and celery till soft in the bottom of the pressure cooker then add some sliced mushrooms and brown, add the wings and a roast chicken carcass, cold water and then pressure cook for about 2 hours. Release pressure, run through a strainer lined with cheese cloth and cool quickly in a bowl in the sink filled with ice cubes.
There's an easy way to make consomme in the book as well from the stock... it will be tastier than the share price has been since IPO. Wondering if a rise in freight costs and potentially feed would do to their margins right now...
Thursday: Investors and analysts told Tegel is well-positioned for export growth and reiterated its full year guidance.
http://www.newshub.co.nz/home/money/...gets-fail.html
Chicken nuggets shortage. :(
TGH's full year guidance is so wide ($33m to $41m), a truck can drive through comfortably with meters to spare on both sides!!!
*********************
From NBR market wrap on Friday : "Tegel dropped 2.5 percent to $1.16 after government food price data for March showed chicken prices fell 6.5 percent for the year, extending a trend of annual declines since June 2015. Chicken has become more investible in Australia and New Zealand, with Inghams Group listed on the ASX, but the two companies are also battling for market share. "There's lots of competitive tension between Tegel and Inghams," said Peter McIntyre, an investment adviser at Craigs Investment Partners. "There's a bit of a price war going on" and the poultry price figures had also weighed on the stock. Craigs expects Tegel to post full-year profit at the lower end of its $33 million to $41 million guidance."
*********************
With the benefit of reading industry news, seems like Tegel and Ingham have both embarked on a major production increase and upgrade in the last 2 years and demand has not been there.
Agree with that. I never put much stock in the lead brokers valuation recommendation as their primary client is the company itself, from whom they extracted many millions in fees.
Agree with your assessment although I think the chicken glut doesn't end anytime soon so there's the distinct possibility we'll see $1.00 at some stage.
I still worry the current profit is predicated off cyclical lows in transport and feed costs so even at $1.00 I will probably just avoid it altogether.
[QUOTE=Balance;663001
With the benefit of reading industry news, seems like Tegel and Ingham have both embarked on a major production increase and upgrade in the last 2 years and demand has not been there.[/QUOTE]
Catalyst for the increase was part driven by lower feed prices.Just seen a piece on TV re global grain prices to stay low for some time and that re 160 to 190 MILIION EXTRA ACRES(770,000 sq kilometres) have been planted around the world in grains that are now being produced more cheaply then the vast farms in USA.
Hopefully Tegel can increase their mkt and the mkt grows organically during this glut but in the meantime things are pretty flat.
Birds in’flu’ence Asian grain markets The last paragraph hopefully optimistic for Tegel.
https://www.nzx.com/companies/TGH/announcements/300692
Profit downgrade next?
Something really really smells when the Chairman of a company listed only for 1 year resigns immediately and without further notice.
Get the feeling that Mr Ogden is not happy about the last profit downgrade and the dent it put on his credibility?