Forum Archive Index - July 2000

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

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



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