I've only been trading for a year but this is certainly my best performing stock. Bought in at $1.18 and it's been up ever since with little to no turbulence (unlike my AIR holding!). Thanks Percy and Roger for helping me ignore Snoopy's pessimism in this one Winner your faith in $1.60 by Christmas last year also helped!
I am probably going to regret this post, but today was the day I sold out of HBL.
At just after 2pm today my sell order was executed at $1.71.
In about 20 months, I had made a very good return, and have enjoyed being on the Heartland train during this period, but I believe, in the short term, there is now more chance of the share price going down, than what there is of it going up.
I also will likely (ie not 100% sure yet) require funds for another upcoming IPO , which, depending on the price, I believe will give a higher return than HBL, at least in the short term.
It is likely one day I will be back on the HBL train, and I will be watching with interest.
It is likely I may also consider SUM other investments as well.
I am probably going to regret this post, but today was the day I sold out of HBL.
At just after 2pm today my sell order was executed at $1.71.
In about 20 months, I had made a very good return, and have enjoyed being on the Heartland train during this period, but I believe, in the short term, there is now more chance of the share price going down, than what there is of it going up.
I also will likely (ie not 100% sure yet) require funds for another upcoming IPO , which, depending on the price, I believe will give a higher return than HBL, at least in the short term.
It is likely one day I will be back on the HBL train, and I will be watching with interest.
It is likely I may also consider SUM other investments as well.
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.
Since posting this on 16 March 2017 the basket of 5 comparative banks I follow in Australia has increased by 3.8% and I therefore have lifted my valuation which h is based on my assessment of a fair PE relative to the Aussie banks by a commensurate amount $1.76 x 1.038 = $1.83. When it gets to $1.83 I'll reassess again.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
I am probably going to regret this post, but today was the day I sold out of HBL.
At just after 2pm today my sell order was executed at $1.71.
In about 20 months, I had made a very good return, and have enjoyed being on the Heartland train during this period, but I believe, in the short term, there is now more chance of the share price going down, than what there is of it going up.
I also will likely (ie not 100% sure yet) require funds for another upcoming IPO , which, depending on the price, I believe will give a higher return than HBL, at least in the short term.
It is likely one day I will be back on the HBL train, and I will be watching with interest.
It is likely I may also consider SUM other investments as well.
You sold out on the new high,but if it's one lesson I have learnt, it is ride the trend until it isn't.
The amazing run and rerating of Heartland continues
A rerating of ginormous proportions - I would hazard a guess we have never been seen such a rerating before of a finance stock on the NZX (or even the ASX or maybe even the whole world)
Price Book multiple is many analysts preferred multiple.
Since last June Heartland Book Value has increased by a miserly 4% odd but the share price has increased more than 40%. Heartland on a PB currently of about 1.6. What it looks like on a chart is below.
If Heartland was still trading on the same multiple as last June it's share price would be only 120 - thats 50 cents of rerating for you.
And if you run with Roger's number heaps more to go. Maybe he should put up the PB ratios of BOQ and BEN for starters (probably better to compare than against the big 4)
Just as Percy as said repeatedly for years and years Heartland is truly a world class bank. The market is finally beginning to redognise how good it really is.
Wow - exciting times - almost euphoric
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
I don't think its a book value story mate. Its EPS and EPS growth both historical and forecast that's driving the SP together with a brighter outlook for the N.Z. economy after the dairy recovery.
PB only tells part of the story. Net interest margin that HBL enjoys relative to its peers tells another compelling part of the story.
I am happy with my analysis and think relative to its peers $1.83 is good value, (I think their superior EPS growth both historical and projected is worth more than a PE premium of 1 but $1.83 is with just a PE premium of 1 so that's fairly conservative considering their strong relative growth progress and outlook).
For what its worth Price to Book Value off 4 traders is as follows, (I have not checked these back to their respective balance sheets to double check their workings)
BOQ 1.27
BEN 1.06
HBL 1.48
NAB 1.71
WBC 1.91
ANZ 1.54
Sector average 1.5.
Fair enough selling for TJ and if he's redirecting funds to SUM he'll do very well. Others of us have a fulsome allocation to SUM already and have cash sitting at call at a miserly 1.5% call account rate with ANZ securities....makes a 5% net yield or ~ 7% gross assuming full imputation credits and 8.5 cps in total this year + dividend growth in future years still look like a compelling case to hold.
You could say we are well positioned
Last edited by Beagle; 11-04-2017 at 06:27 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Originally Posted by winner69
Reply With Quote
Winner your faith in $1.60 by Christmas last year also helped!
, which, depending on the price, I believe will give a higher return than HBL, at least in the short term.
Bookmarks