Forum Archive Index - November 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi philip, Nick, Macdunk et. al

>
> Does anyone have a view on WRI’s latest downgrade?
>

nick wrote:
> What is your position on WRI?
>
>  From memory you raved about the company for a while.  Do you still > hold?  
>Can you put a positive spin on this one a-la RBD?
>

Sorry nick, no can do.   It was me that caused the WRI share price to
plunge.    I have just sold all my WRI shares and bought gold......

Hmmm,  well maybe not, but I somehow think you will keep badgering
me about WRI until I announce that I actually have done what I just
'announced'.

I could, of course, point out that in USD terms the price of WRI has
never been higher.     But since I don't live in the USA and spend USD,
I suspect this observation is largely irrelevant......

Macdunk wrote:
> Sept 2002 I sold Wri shares and posted that I expected their
>profits to take a tumble I was wrong In one regard
>It took longer than I anticipated.
>

It seems some people are so tuned into their share price charts, they
have forgotten what actually happened.   WRI profit for FY2002
$24.2m.  WRI profit for FY2003 was $21.7m.  So you weren't wrong
Macdunk at all.  You were dead right.   The thing you were wrong
about was that you expected the share price to go down when the
profit went down.    In fact quite the opposite happened.    The share
price went up on the profit reduction just as *I* predicted.

mixtrader wrote:
> I believe that fundamentally the company is in good health, the current
> state of the high dollar and somewhat depressed export market are what I
> think is slowing them down a bit.
>

Yes, I have a feeling the the $NZ/$US cross rate is reaching the upper
limits of what WRI management were expecting.    It could get worse,
but then this might even be good for WRI longer term.   With some of
the banks up north making rumblings about the level of loans to
farmers and getting nasty, what a great time for an alternative lenders
such as WRI to be getting back into the farmer finance market!

>
>I would love to hear others views on this company, particularly the
>current governance and management and what they are doing to
>shareholder wealth.
>

I know the exercise of options by senior management at only 57c
raised some eyebrows.   However, I think this is a legacy issue caused
by the very rapid appreciation of the WRI share price in the last five
years.  I don't object to senior management having share options.
And the pricing of 57c was right at the time they were issued.

And now the real issue.  The recent profit downgrade announcement.

"At our Annual Meeting in October we advised that our earnings before
interest and tax (EBIT) for the year to date was approximately 10 per
cent behind last year. This downward trend has continued, and the
Group's EBIT performance for the six months to 31 December is
expected to be around 20 per cent behind the same period last year,"
said Chairman, John Palmer.

Last years first half profit was  $4.1m.    Because WRI is a low debt
company we will assume that the reduction in EBIT will be reflected
directly in a reduction of profit.  A 20% reduction in profit brings that
down to $3.3m.

Last years second half profit was $21.2m-$4.1m= $17.1m.  If we
assume second half profit is reduced by 10%, in line with the long term
outlook at the AGM, then second half profit will be:

0.9x$17.1m= $15.4m, or adding those up:

$15.4m+$3.3m= $18.7m for the full year.

Based on the 138,697,202  shares currently on issue, that gives a
profit of 13.5c per share.  Dividend paid out last year was 11.5cps.

IOW, the dividend looks safe to me, and the current yield is around
13% (gross) based on a share price in the low $1.30s.  WRI looks like
a 'buy' to me on fundamentals.    And I haven't even talked about the
Craig Norgate factor.  My pick is that he will be back to shake out a few
more 'weak sellers'.

SNOOPY

discl:  hold WRI






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