Agria (GRO) could become Tuesday's hottest stock. It was just announced late this evening that New Zealand's largest agricultural company and the only nationwide provider to the NZ agricultural sector, PGG Wrightson (PGW.NZ), has appointed Alan Lai the Founder and CEO of NYSE traded GRO as its new Chairman of the Board. Almost nobody knows this but GRO's 80.81% owned Agria Asia subsidiary owns a 50.22% controlling stake in PGW.NZ, a company with nearly USD$1 billion in annual revenue. PGW.NZ's financials are now being consolidated into GRO, which currently has a market cap at $1.48 per share of only $82 million.
PGW.NZ previously reported a fiscal 2013 net loss due to one time non-cash writedowns of goodwill, but had positive EBITDA of $45.8 million. PGW.NZ this evening projected that EBITDA this fiscal year will be in the range of $52-$56 million, for growth of 14%-22%. PGW.NZ and GRO are likely to report huge net income this fiscal year. Analysts project PGW.NZ to earn fiscal 2014 EPS of NZ$0.04. PGW.NZ is currently NZ$0.39 per share on the NZX and hit a 6 month high right before its close this evening of NZ$0.40 on huge volume of 1.1 million.
GRO's 80.81% interest in 379.1 million PGW.NZ shares have a market value of USD$101.56 million. GRO has 55.38 million shares outstanding, valuing their PGW.NZ stake at $1.83 per share. New Hope, a China agriculture company with $8.8 billion in annual revenue, previously paid GRO USD$20 million for a 11.95% stake in Agria Asia. Based on what New Hope paid for 11.95% of Agria Asia, GRO's 80.81% stake has an implied value of $135.25 million or $2.44 per share.
GRO also owns 100% of a China seeds business, which saw fiscal 2013 revenues grow 98% to $17 million with an operating profit of $1.57 million. Including this business, GRO could potentially be worth $3+ per share, and appears to be a steal below $2 per share. Disclaimer: We own 550,000 shares of GRO and we intend to sell them after GRO rises substantially.