HGH - Heartland Group Holdings

[Brain]

I remember when these were 76 c in March 2013. Heartland has been a very good investment for me and I am hopeful that it will continue to be so.

[Beagle]

Why its worth more.
1. We cannot ignore the fact that HBL has grown its EPS faster in recent years than the Aussie banks.
2. This trend is set to continue, see below therefore a PE premium is warranted compared to its peer group.
3. The following are the forecast PE's for its peer group for FY17, FY18 and FY19 followed by average analyst expected EPS growth in percentage terms bolded from FY17 to FY19 All data off average analysis forecast off 4 traders
Bendigo BEN 13.2, 13.1, 13.3, EPS growth expected -1%
NAB 13.6, 13.4, 13 4%
WBC 14.5, 14, 13.6 6%
ANZ 13.4, 13.2 12.5 7%
Bank of Queensland BOQ 12.9, 12.6 12.3 4.5%
HBL 13.8 12.6 11.9 14%

The average FY19 PE which takes into account average forecasted growth to FY19 is 12.77

4. Even if you make the case, (which I don't) that HBL will only enjoy two more years of abnormal growth before reverting to the very modest rates the Australian banks are "enjoying" for HBL to be trading at the average of its peer group the SP is likely to outperform its peer group by 12.77 / 11.9 = 7.3% over the next two years.

5. Even now based on average estimated 2017 earnings the peer group is trading at an average PE of 13.56 and HBL at 13.8 represents only a tiny premium which taking into account its historical growth outperformance and projected stronger growth and I think the current market PE premium is not properly recognizing this superior growth.

6. I think given the distinct possibility that HBL's growth will continue to outperform its peers post FY19 I think that a minimum further 7.3% rerating will happen over the foreseeable future, probably this year.

7. Relative to its peer group I therefore value HBL at 1.64 + 7.3% = $1.76.

8. I think you can easily make the case that relative to its peer group given its considerably stronger historical and projected growth a PE premium of 1 on FY17 projected earnings is warranted.
Average FY 17 PE for Aussie banks excl HBL is 13.52.
HBL's current PE 13.8 HBL should be trading on a FY17 PE premium of at least 1 = 14.52 14.52 / 13.8 = 5.2% increase from here = $1.73

9. Investment case summary: I therefore think fair value for HBL is between $1.73 and $1.76 on an ex dividend basis and note it currently trades on a theoretical ex dividend price of $1.60.5 ($1.64- 0.035) so we have another ~ 10% rerating to go and then from there the price should continue to drift up in line with the 14% earnings growth to FY 19. My 2 year target price is therefore 1.76 x 1.14 = $2.01 and in the meantime based on 8.5 cps in annual fully imputed dividends we will be enjoying a gross dividend yield of 7.36% (8.5 / 160.5) / 0.72.
Disc: Hold and fully subscribed to dividend reinvestment plan.

Beagle posted 20 March 2017. SP has tracked in line with my expectations and I continue to believe its a $2.00 stock but the question is when ? In this post I called it as $2.00 in two years time (March 2019), and I am inclined toward sticking with that point of view but will have another look at this after the annual result announcement and update my thinking.

[winner69]

Beagle posted 20 March 2017. SP has tracked in line with my expectations and I continue to believe its a $2.00 stock but the question is when ? In this post I called it as $2.00 in two years time (March 2019), and I am inclined toward sticking with that point of view but will have another look at this after the annual result announcement and update my thinking.

No - will go over $2 end of August when Jeff says F18 will be $66m to $70m

Yippee

[percy]

No - will go over $2 end of August when Jeff says F18 will be $66m to $70m

Yippee

We are "well positioned."
I note www.4-traders have $60.1 mil for 2017 ,$67.5mil for 2018, and $71.9mil for 2019.
Therefore, we await with Jeff's figure, with a sense of heightened arousal.

[Beagle]

No - will go over $2 end of August when Jeff says F18 will be $66m to $70m

Yippee

I love your enthusiasm mate

We are "well positioned."

Goes for your well positioned comment too mate...like a daily morning coffee, need a pick up sometimes

I am however a little more cautious than you well regarded gentlemen. On a trailing PE now of over 15 we will indeed need some good solid guidance for FY18 to get over the 2 hurdle. Great hold in the meantime, couldn't agree more with that sentiment.

[percy]

I love your enthusiasm mate



Goes for your well positioned comment too mate...like a daily morning coffee, need a pick up sometimes

I am however a little more cautious than you well regarded gentlemen. On a trailing PE now of over 15 we will indeed need some good solid guidance for FY18 to get over the 2 hurdle. Great hold in the meantime, couldn't agree more with that sentiment.

$2.00 this year,next year or the year after.???
Does not really matter to me,as all the time I am enjoying the increasing dividends.
www.4-traders.com..... 2017 ..8.87 cents per share ..2018.. 9.6 cps......2019..10.2cps.ie a steady 7% increase per year.

[Beagle]

$2.00 this year,next year or the year after.???
Does not really matter to me,as all the time I am enjoying the increasing dividends.
www.4-traders.com..... 2017 ..8.87 cents per share ..2018.. 9.6 cps......2019..10.2cps.ie a steady 7% increase per year.

Fair comment mate and no argument from me, I'm enjoying them too. $67.5m for FY8 gives 13.07 cps. At $1.79 that puts HBL on a 2018 PE of 13.7. SP seems fair and reasonable to me at the current level, a good hold for excellent fully imputed dividend yield and steadily increasing earnings and dividends. Based on average broker forecast for FY18 HBL provides a gross dividend yield inclusive of full imputation credits of 7.45% at $1.79 and in addition trades cum a circa 5 cps dividend due soon after the forthcoming annual result. This together with dividend growth going forward makes for a very sound case for a long term hold, in my opinion.

[iceman]

$2.00 this year,next year or the year after.???
Does not really matter to me,as all the time I am enjoying the increasing dividends.
www.4-traders.com..... 2017 ..8.87 cents per share ..2018.. 9.6 cps......2019..10.2cps.ie a steady 7% increase per year.

And that's what it is all about. Steady increases in profits, ROE and dividends. 9 months announcement confirmed 11-13% growth so clearly we will continue receiving increased dividends. As you said, the SP matters not so much on a short term basis while the business successfully motors ahead

[ziggy415]

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Udc finance buyers

[Beagle]

And that's what it is all about. Steady increases in profits, ROE and dividends. 9 months announcement confirmed 11-13% growth so clearly we will continue receiving increased dividends. As you said, the SP matters not so much on a short term basis while the business successfully motors ahead

$1.80 got cleaned out today...for what its worth I helped in that process. That's what happens when a silly dog talks himself into buying more as per post #9536.
PE seems very reasonable for the steady growth of HBL.