Forum Archive Index - September 2003

["Fiona Phibbs" <fibz@xtra.co.nz>]

Bang on Snoopy

If I could add anything I would probably spend more time examining cashflows
than the accruals (management lies), especially trends.  In the end it all
seems to show up in cashflow (from operations) if the business is making any
money.  Cashflow analysis might (and I say might) have got you out of TWR
and AMP, before their meltdown if you were quick and suspicious.  WRI have
good cashflows, and I also like their future thinking. Also despite all the
doom and gloom predictions revenues only fell 0.6% - farmers still buy it
seems, but perhaps they insist on home delivery, or a free pair of gumboots
when times are tough?  - hope you are right about the price prediction!

Dean

disc hold WRI

----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Thursday, 11 September 2003 17:41
Subject: [sharechat] WRI 2003 report looks VG to me


>
> I have eagerly perused the just released annual report and I must say,
> there are a couple of positive surprises in there.
>
> Profit was down for FY2003 as previously announced.  However, that
> reduced profit includes a $4.2m charge for strategic and restructuring
> initiatives.   If we consider a 'normalised profit' and add $3m after tax
> back into the result because of it, then profit comes out at $17.9m -
> virtually fat with the previous record year.   It has been well flagged
> that farming times were tougher over the last year, so I see maintaining
> a flat underlying profit in that climate as a great result.
>
> Last year is now ancient history and what really drives the share price
> from here on in is the outlook for the following years.   The Fronterra
> announcement of the boosted milk payout of $3.90 is one indicator that
> the coming year will be better than this one (payout $3.65).    Of more
> concern is the indicator estimate for FY2005 of $3.20,    Farmers know
> that they have to keep up the spending on their land in 'lean' years so
> my prediction is that of all the retailers WRI (and other rural service
> companies) will suffer the least in any FY2005 downturn.
>
> Normalised WRI profit is 16.4cps.   If the FY2005 is reduced in
> proportion to the milk fat payout ( $3.20/$3.90 ) then NPAT drops to
> 13.5cps.   In other words the dividend of 11.5cps is still well covered.
>
> Completely left out of all this reckoning is the agreement to market
> financial products in partnership with Rabobank which expires in
> November 2003.   WRI have dipped their toe back into farmer
> financing in 2003.   But reading between the lines in the annual report I
> think we can look forward to an all out assault on the farming financial
> loan market from WRI, while Rabobank has to look elsewhere for a
> sales outlet to maintain their profile in New Zealand.    This is
> wonderful news for WRI shareholders as back in the 'old days'  their
> finance arm was a real cash cow.  The company has no term debt
> which is a very good base to start building up a financial arm again
> from.
>
> ROE in 2003 was $18.475m/$125.118m= 14.7%.  Add back in the after
> tax effect of $3.0m in restructuring initiatives and ROE jumps to 17.1%.
>
> Long term policy is to pay out 60-80% of profit as dividend.    WRI
> currently pays out more than that, so I don't see the prospect of the
> dividend being raised in the foreseeable future.   But now that the
> dividend looks sustainable through 2005, I wouldn't be surprised to see
> the yield drop to around 8%, which means a share price of around $2.
>
> Meanwhile the broad brush trend followers will only see the reducing
> returns on commodity prices, and predict doom and gloom for the WRI
> share price.   As the share price rises they will shake their heads in
> disbelief, claim that the market is behaving irrationally and miss out -
> again.  Oh dear!   When will they ever learn to recognize a bargain.
>
> SNOOPY
>
> hold WRI
>
> --
> Message sent by Snoopy
> on Pegasus Mail version 4.02
> ----------------------------------
> "Stay on the upside of the downside,
> Anticipate the anticipation!"
>
>
>
>
> --------------------------------------------------------------------------
--
> To remove yourself from this list, please use the form at
> http://www.sharechat.co.nz/chat/forum/
>
>


----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/