Forum Archive Index - July 2000

["nick" <acummin@es.co.nz>]

         One question for you , considering you have rather a negative
view on wrightsons and are not seeming to be very confident of their
prospects
why are you a shareholder?
  nick

> Hi Nick,
>
> Interested in your comments being a holder (unfortunately for some
> time) in WRI myself.
>
> >
> > the company is now looking good for several reasons.
> >
> >  1. Farmers after years under the cosh are suddenly suffering from
> >  rare  optimism.
> > They are starting to spend up on new equipment etc and a supplier
> > like wrightsons will be a major benificiary. My partners relatives
> > are farmers and they  are very confident.
> >
>
> I notice you said a supplier *like* Wrightson's would be a
> beneficiary.   Why would farmers go to Wrightson's over and above
> other farm suppliers?
>
> Maybe because they already had existing financing with that company?
> Or at least they might have had before Wrightson's sold their finance
> arm!    I think selling that finance arm might prove to be a bit of a
> footshot from here on out.
>
> >
> >  2.  Guinness peat i believe have plans for the company in which
> >  they  have a sizable stake.
> > Could be in connection with a big australian rural company.
> >
>
> I wonder how you would integrate these businesses?   Would farmers
> buy from an Australian lead company, as opposed to a New Zealand
> one in which they already had a stake (PGG)?
>
> I am struggling a bit to find what is Wrightson's distinctive
> advantage now?
>
> >
> > 3. The price of shares has begun to rise, but is still way down on a
> > few  years ago.
> >
>
> Since they have sold their finance arm they are a different business
> to what they were a few years ago.    Not only in their business but
> their capital structure too.
>
> >
> > 4. The next result out soon is expected to be a
> > strong one.
> >
>
> Well, better than they have had in recent years I hope!
>
> >
> > These factors combined make wrightsons a good bet at
> > anything  under 50 c.
> >
>
>
> I am interested as to why *you* pick on this figure.
>
> If we look at the last year the agribusiness made a profit-  it was
> 1998.  The profit was $33.9million,
> but that included 27.3 million from the sale in their finance arm, so
> actual profit from ongoing businesses  was just $6.6million. There
> are 134,120,949 shares on issue, so this gives earnings of 5c per
> share.    Let's say they do a little better than this and lift their
> profits by 20%, which gives 6c per share.   Lets say they pay out 5c
> per share in dividend.    This gives a yield of 10%, and a P/E of
> 8.3.     Looking around at the current market this doesn't seem
> unreasonable, but I am a little concerned as to where the upside is
> from here.   It looks like with hindsight that GPG buying in at 40c
> was a good move.     I am not quite so sure WRI is still a bargain at
> 50c.
>
> Also I am a little concerned as to the composition of the board.   I
> don't see *anyone* from a retailing background in there.
>
> On a positive note market conditions are probably better than in
> 1998.   On a negative note there is the story of the contaminated
> seeds down in Southland.
> How has this affected the farming sectors confidence in Wrightson?  I
> would be very interested if anyone in the farming sector reading this
> would like to comment. SNOOPY
>
>
>
> ---------------------------------
> Message sent by Snoopy
> e-mail  tennyson@caverock.net.nz
> on Pegasus Mail version 2.55
> ----------------------------------
> "You can tell me I'm wrong twice,
> but that still only makes me wrong once."
>
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