Forum Archive Index - May 2003

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

Hi Mick,
 
>
> 
> Being an ex farmer I follow this sector quite closely.
> I have limited  contact with farmers themselves but I still manage to
> pick up bits and pieces. I know that farmers are very concerned about
> the stength of the kiwi dollar. The number of farmers affected by
> drought is no higher than usual as far as I can tell. The difference
> this year is that an area not prone to drought is suffering
> (West-coast of the N.I.) and so we are hearing more about drought
>  than is usual.
>
>

Yes, my own impressions come not from talking to farmers directly but 
observing how green the country is (or not) as I travel around it.   I've 
heard that Otago has been hit harder than most years by lack of 
moisture.   In Canterbury it hasn't been a great year, but neither has it 
been a disaster.   I accept that farming this year is tougher than last 
but that isn't enough to make me think that things are that bad.


>
> 
> IMO the next season starting in June will be a harder year than the
> current year.
>
>


I accept that is possible, although a good weather season might 
change that outlook.


> 
> As far as WRI is concerned I would be  interested in it if it's price
> were to drop below 90c. 
>


Well, if you bought today at $1.15 and raked in the next three 
dividends of 8c, 3.5c and 6c (est), that adds up to an imputed payment 
of 26c.    Take that off today's price of $1.15 and you can see that by 
buying today at $1.15 your purchase price 18 months out is the 
equivalent of 89c.


>
>WRI is heading in a new direction with it,s
> newly aquired stake in Genisis whereas PGG have recently
> an  acquired outfit supplying irrigation pumps and equipment.
>  
>You could say that PGG is sticking to it's knitting 
> which I happen to like. 
>


While on the subject of Genesis Research and WRI, I did make a 
mistake in my assessment of the percentage of WRI capital 'at risk' if 
GEN were to fail completely.

The actual figure should have been 

0.1532 x 26126802 x $1.31 = $5.243m

I had neglected to allow for the share split that occurred before 
Genesis moved to the main board.

Spread this over the 134.2m WRI shares and I get 4c per share.   That 
is a higher risk than the 1c per share that I previously stated was the 
risk from the investment in GEN.    But 4c still only represents a few 
months earnings fror WRI.  It is no big deal really,  as 4c seems to be 
within the normal fluctuation band for the WRI share price.   On the 
upside there may be some real value for WRI in better integration of 
the GEN research into WRI's own agricultural research.

I guess whether WRI is 'sticking to its knitting' by investing in GEN 
might be a matter of opinion.   WRI have had their own research efforts 
for years and the aim of any agricultural research in which they have 
an interest is to improve the profitability of their own core agricultural 
business.    If such research can show the market that that WRI is no 
longer a commodity business, then an associated accompanying lift in 
the P/E ratio will be just reward for patient shareholders.   Even if 
actual profits from these research efforts are years away.

>
>
>WKL is probably the most progressive of the three companies.
> They are expanding quickly throughout the North Island.
>  A merger between PGG and  WKL would make a
> very strong company for WRI  to compete with.
> 
> 

You think such a merger is likely?    By the way you phrased that 
paragraph I think you have acknowledged that as things stand at the 
moment WRI is the strongest player.  And in yield terms WRI is still the 
cheapest of the four companies you talk about.

SNOOPY



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