HGH - Heartland Group Holdings [Archive] - Page 11

Snoopy

13-01-2014, 04:30 PM

Snoopy, The banking licence for heartland was granted last year. The company has stated that this has improved their profit and has given guidance. I think it would be much more accurate to assume the midpoint of their forecasts or the 1st quarter report as an input for profit. I suspect HNZ would beat ANZ once this is taken into account.

Fair point Noodles. I shall estimate an end of year return on assets for FY2014, based on more up to date information.

The first quarter result was an after tax profit of $8.668m. Multiply that by four and I get $34.672m. The end of year guidance was for NPAT of between $34m and $37m. So Heartland are on track to achieve this. NPAT after tax of $34-$37m translates to EBIT of $48-52m, assuming no term debt and a 30% tax rate.

I think it is also fair to assume that while Heartland is re-balancing their loan book and simultaneously paying out high dividends the total assets of the company on balance sheet are unlikely to change much by the end of FY2014. So I intend to use the EOFY2013 total assets as a proxy for the EOFY2014 total assets, and will take Heartland's own profit forecasts at face value. If I do this the operating margin on total assets I forecast as follows:

$48 to $52m / $2,504.627m = 1.9% to 2.1%

Interestingly that high figure is very close to what ANZ and Westpac are currently achieving in their own respective New Zealand operations. ANZ and Westpac are held internationally in very high regard. So if Heartland can match their performance by this metric, I would regard that as a considerable achievement. Assuming that Heartland can go even better than this in future years is probably too optimistic. So if a return on assets invested of 2.1% is as good as it gets for Heartland, what does this say about the likely Heartland share price going forwards?

SNOOPY

Snoopy

13-01-2014, 04:39 PM

So if a return on assets invested of 2.1% is as good as it gets for Heartland, what does this say about the likely Heartland share price going forwards?

The return on assets invested of 2.1% corresponds to a NPAT of $37m. Based on 388.7m Heartland shares currently on issue, that equates to earnings per share of:

$37m/ 388.7m = 9.5cps

Based on a PE of 10, which I think is appropriate for a small bank at the top of their earnings curve, that sees Heartland fully valued at 95c. To suggest it is worth more would be to assume it will significantly outperform ANZ and WBC, which IMO is an unrealistic expectation. The 95c also assumes a clean asset book, and Heartland is still working through their assets to clean them up. Until this happens Heartland will always trade at a discount to full value. I am therefore forced to conclude that 85c is a very fair price for HNZ.

SNOOPY

noodles

13-01-2014, 05:00 PM

Based on a PE of 10, which I think is appropriate for a small bank at the top of their earnings curve.
SNOOPY

Snoopy. Your assumption that Heartland is at the top of the their earnings curve is the key to your valuation. The AGM was very vague about where growth will come from for FY15. Acquisitions and product development were referred to. I suppose they don't want to give too much away.

For me, I'd be happy for HNZ to make the upper end of forecasts. This alone should spark a rerate. After that, I'd want to see some evidence that they can grow their loan book in FY15.

noodles

13-01-2014, 08:38 PM

One notes our friend(s) is(are) back dropping small parcels at the end of the day so the closing price seems to go nowhere while the VWAP is usually above the close. Okay, maybe just a crackpot conspiracy theory but what's the statistical likelihood of this happening?
It didn't happen today. Vwap 85.7 close 86

Snow Leopard

13-01-2014, 09:01 PM

The return on assets invested of 2.1% corresponds to a NPAT of $37m. Based on 388.7m Heartland shares currently on issue, that equates to earnings per share of:

$37m/ 388.7m = 9.5cps

Based on a PE of 10, which I think is appropriate for a small bank at the top of their earnings curve, that sees Heartland fully valued at 95c. To suggest it is worth more would be to assume it will significantly outperform ANZ and WBC, which IMO is an unrealistic expectation. The 95c also assumes a clean asset book, and Heartland is still working through their assets to clean them up. Until this happens Heartland will always trade at a discount to full value. I am therefore forced to conclude that 85c is a very fair price for HNZ.

SNOOPY

So not a raging buy as far as you are concerned then?

I agree that 85/86c is the price for HNZ, but that the value is higher which is why I hold, not only for the dividends, but for the eventual sustained appreciation in the share price.

Best Wishes
Paper Tiger

Wolf

13-01-2014, 10:00 PM

The sell depth seem's to be getting chewed through

Snoopy

14-01-2014, 02:12 PM

Snoopy. Your assumption that Heartland is at the top of the their earnings curve is the key to your valuation.

The problem with Heartland is that it hasn't been in existence in its current form for one business cycle yet. So who can really say where the top of the earnings cycle is? The best I can do is to look across the road to ANZ in New Zealand. They have a similar breakdown in loan allocations in their loan portfolio. IMO that gives some guide as to where Heartland might be going.

The parallel isn't so good in that ANZ are right into mortgages whereas Heartland seem to be trying to exit that market (?). I don't follow the need for a Heartland tie up with Kiwibank regarding mortgages. Went past Heartland Riccarton yesterday. They were advertising two year mortgages fixed at 5.95% via a poster in the window. So perhaps if you went into Heartland and begged, they might still make a mortgage loan to you?

My assessment is that Heartland are now going after business with greater profit margins (car loans, machinery loans. seasonal financing). But in a climate of rising interest rates those are just the kind of loans that are more likely to go bad. All would be well if the Heartland operating margin on assets was somewhere up near where Dorchester is. But it isn't.

The AGM was very vague about where growth will come from for FY15. Acquisitions and product development were referred to. I suppose they don't want to give too much away.

For me, I'd be happy for HNZ to make the upper end of forecasts. This alone should spark a rerate. After that, I'd want to see some evidence that they can grow their loan book in FY15.

According to the first quarter, HNZ are operating at the lower end of forecasts. They can only grow their earnings by:

1/ increasing operating margin, or
2/ increasing their capital base.

I concede that attaining the operating margin level of ANZ is certainly possible. In fact they probably need to do that to make up for the lower quality loan book. So let's assume Heartland can do that which is equivalent to coming in at the higher end of profit forecasts. To drive profits even higher they need to start outperforming the likes of ANZ and Westpac New Zealand. But how much blood can you squeeze from the same stone? This is why I can't see how the Heartland share price can increase if earnings come in at the top end of expectations, while the capital base remains the same.

So now we come to point 2. HNZ need to grow their capital asset base. But they can't do that if all their profits are paid out as dividends to appease shareholders. From where I sit, there is no easy way forwards. That is why I come to the conclusion that Heartland must be close to the top of their earnings cycle.

SNOOPY

percy

14-01-2014, 02:26 PM

Higher interest rates means greater margins to banks/finance companies.
People let their home loans get behind,but are more careful with their car loan, as they need their car to get to their work.No work,no money,no food.
HNZ loans to the productive sector means equipment,livestock,better security.Security is income generator.
Mortgage loans.HNZ clip the ticket by referring loans to Kiwi Bank.A commercial arrangement that suits both parties.

Snoopy

14-01-2014, 02:37 PM

Higher interest rates means greater margins to banks/finance companies.

If Heartland lend long and borrow short, increased profits will only come from higher interest rates if Heartland don't have to pay out more in higher rates offered to depositors. This year as declared in the annual report there is larger shortfall in term deposits required form the public than last year. So it follows that Heartland will have to pay more for the funds they need, on average, than last year.

People let their home loans get behind,but are more careful with their car loan, as they need their car to get to their work. No work,no money,no food.

Yes, but the low risk car loans are those tacked onto the house mortgage. The fact that you are forced to take out a higher interest rate car loan from Heartland is in itself a measure of such a customer's lower credit rating.

HNZ loans to the productive sector means equipment,livestock,better security.Security is income generator.

Higher interest rates => export demand is cramped => all industry payers in that sector under pressure => no market for second hand capital goods should one of the industry players go bung. Doesn't sound like a low risk lending environment to me.

Mortgage loans. HNZ clip the ticket by referring loans to Kiwi Bank. A commercial arrangement that suits both parties.

So what are you saying? HNZ is achieving scale by going in with Kiwibank and that is leading to lower input (cost of capital to bank) costs?

SNOOPY

percy

14-01-2014, 02:43 PM

If Heartland lend long and borrow short, increased profits will only come from higher interest rates if Heartland don't have to pay out more in higher rates offered to depositors. This year as declared in the annual report there is larger shortfall in term deposits required form the public than last year. So it follows that Heartland will have to pay more for the funds they need, on average, than last year.

Yes, but the low risk car loans are those tacked onto the house mortgage. The fact that you are forced to take out a higher interest rate car loan from Heartland is in itself a measure of such a customer's lower credit rating.

Higher interest rates => export demand is cramped => all industry payers in that sector under pressure => no market for second hand capital goods should one of the industry players go bung. Doesn't sound like a low risk lending environment to me.

So what are you saying? HNZ is achieving scale by going in with Kiwibank and that is leading to lower input (cost of capital to bank) costs?

SNOOPY

Nothing further to add as what I wrote is correct.

Snoopy

14-01-2014, 03:03 PM

Nothing further to add as what I wrote is correct.

AA the credit rating of ANZ in New Zealand means "Very strong ability to repay principal and interest." according to Standard and Poors and Fitch.

BBB the credit rating of Heartland means "Adequate ability to repay principal and interest. More vulnerable to adverse changes." according to Standard and Poors and Fitch.

From this we can conclude that Percy does not work for Standard & Poors nor Fitch!

SNOOPY

percy

14-01-2014, 03:25 PM

AA the credit rating of ANZ in New Zealand means "Very strong ability to repay principal and interest." according to Standard and Poors and Fitch.

BBB the credit rating of Heartland means "Adequate ability to repay principal and interest. More vulnerable to adverse changes." according to Standard and Poors and Fitch.

From this we can conclude that Percy does not work for Standard & Poors nor Fitch!

SNOOPY

I have always either worked for myself or reputable firms.

K1W1G0LD

14-01-2014, 04:19 PM

I have always either worked for myself or reputable firms.

Percy, where Snoopys concerned you have the patience of a saint. I really think snoopy has missed his calling. He would be better off spreading his message at the local retirement village, I'm sure he would go down a treat , the confused spreading the investing message to the befuddled . lol.
cheers kiwigold

percy

14-01-2014, 05:31 PM

Percy, where Snoopys concerned you have the patience of a saint. I really think snoopy has missed his calling. He would be better off spreading his message at the local retirement village, I'm sure he would go down a treat , the confused spreading the investing message to the befuddled . lol.
cheers kiwigold

Thank you KIWIGOLD.Yes, he has worn me out.I used to try to help him .Now I just can't be bothered.

percy

14-01-2014, 05:32 PM

You're not reputable ?

Correct.Tried,but failed.lol.

percy

14-01-2014, 05:39 PM

In support of Snoopy's analysis ... He's doing no more than compare two financial organisations using historical information. Those out there with crystals balls would do well to take a look backwards as well as forwards.

Agree,however should you drive with you eye solely on the rear vision mirror you are a fool.Same with investing.

born2invest

15-01-2014, 12:54 PM

percy

15-01-2014, 01:38 PM

Perhaps Snoopy thought rationally and realises a bank in a saturated market like NZ with no offshore growth and a lower ROA than the big banks should not be trading on a valuation of 40+ times earnings?

I do not think he is that silly.[I could be wrong!!! lol]
He is,or should be, fully aware the projected PE is under 10 and ROE is improving very quickly.
Astute investors are looking at future earnings.You could say they are keeping a careful eye on the road ahead.!

SCOTTY

15-01-2014, 01:41 PM

Perhaps Snoopy thought rationally and realises a bank in a saturated market like NZ with no offshore growth and a lower ROA than the big banks should not be trading on a valuation of 40+ times earnings?

Like Percy, I prefer to look ahead.

The valuation of 40+ which you are useing was after property write-downs last year of some $18m. Normalised earning were from memory $24m. Currently HNZ is on track to earn after tax profits between $34 to $37m which at today's price of 85c = 9 to 9.8 times earnings.

Snoopy

15-01-2014, 04:15 PM

Perhaps Snoopy thought rationally and realises a bank in a saturated market like NZ with no offshore growth and a lower ROA than the big banks should not be trading on a valuation of 40+ times earnings?

See my post 2968 0n this thread. I see others have corrected you on the forward PE. That 40+ PE figure was because of (hopefully) one off property write-downs. Despite what some may think, I am not here to beat up people for investing in HNZ. I believe that HNZ has a good future in NZ like others here. Where I do differ is what the suitable entry price for a new investor might be.

My main problem is determining where the competitive advantage of Heartland is. As a measure of how widespread the measure of opinion is on this, you see HNZ as "one player in a saturated market". Go back to post 2895 and hanth888 sees HNZ as

"a near monopoly position on the type of products it provides (i.e. high-margin livestock/personal/business lending - they're not battling it out with the big 4 to see who can write more residential mortgages)"

So which is it? Like any issue with a wide range of opinions, the truth probably lies somewhere in between. And that leads me back to trying to figure out what the competitive advantage of Heartland really is.

'No offshore growth' is not really an issue because compared to the big 5 banks, Heartland is a minnow. If Heartland can find their niche, they wouldn't have to take much business off the big 5 to greatly increase the size of the Heartland loan portfolio.

ROA is not a good comparative measure for banks, because the loan book base is theoretically proportional to total Tier 1 capital available. And net assets are just one component of this.

A very brief summary of my quest for a competitive advantage is as follows:

1/ Heartland do not seek to compete in the mortgage market by going head to head with the big banks. They are still advertising for mortgage business. But they aren't pushing hard where the big 5 banks do it better.

2/ Heartland do not earn as much margin as Dorchester Finance and Turners Auctions Finance when it comes to financing motor vehicle.

My best assessment of Heartland going forwards will be as a plodding minnow, outflanked on both sides. Nothing wrong with just being Mr Average Piggy in the Middle bank of course. But I want to invest in a Bank/Finance company that is on top of the game. So far I can't see the path for Heartland getting there.

SNOOPY

born2invest

15-01-2014, 04:28 PM

And that leads me back to trying to figure out what the competitive advantage of Heartland really is.

I could say the same question and ask you what is a competitive advantage of ANZ as opposed to WBC, CBA and NAB?

Snoopy

15-01-2014, 04:33 PM

I could say the same question and ask you what is a competitive advantage of ANZ as opposed to WBC, CBA and NAB?

ANZ gives you the biggest New Zealand exposure in the Australasian market of the big four Ozzie banks, and as part of that has a large rural lending portfolio in this country. With the Ozzie mining boom subsiding, that does give ANZ an advantage going forwards IMO.

SNOOPY

percy

15-01-2014, 05:14 PM

1. Local NZ owned bank whose operations are overseen by the RBNZ and rating agencies
2. A specialist lender able to assess risk better and therefore provide better loan rates
3. Competition in the form of opaque finance companies has evaporated
4. Owners and much the senior management are directly associated with the business types they lend too
5. Supportive shareholders who will be quite happy to support rights issues to let the company grow
6. Good cross-selling partnerships with other NZ entities

Snoopy, Surely a comparison between UDC and HNZ would be more appropriate? I mean ANZ is huge and complex and doing large amounts of business that is very, very different to HNZ. Was there a reason you didn't use UDC? Opaqueness of data being the one that springs to mind but it is there, e.g. companies office, prospectuses, etc.

Great post.
Yes I totally agree that HNZ should be compared with UDC.
TUA and DPC and ANZ is a waste of time for all of us.!!!

born2invest

15-01-2014, 05:15 PM

ANZ gives you the biggest New Zealand exposure in the Australasian market of the big four Ozzie banks, and as part of that has a large rural lending portfolio in this country. With the Ozzie mining boom subsiding, that does give ANZ an advantage going forwards IMO.

SNOOPY

Fair points. My favourite out of the big 4 is ANZ also for the Asian Growth strategy. I don't own any however.

Main concern I have with HNZ is how well they would do in a down economy. Since they rely heavily on rural lending and also car/smaller loans when a downturn happens people still need somewhere to live and will still buy groceries so need a traditional bank such as ANZ, but I'm not convinced HNZ will hold up well when the dairy pay-out is low and no one wants to upgrade their car on finance.

Snoopy

15-01-2014, 05:28 PM

Snoopy, Surely a comparison between UDC and HNZ would be more appropriate? I mean ANZ is huge and complex and doing large amounts of business that is very, very different to HNZ.

Actually I believe ANZ New Zealand stacks up very well as a measuring stick for HNZ. See my post 22 on the ANZ.NZX thread for the full explanation..

Was there a reason you didn't use UDC? Opaqueness of data being the one that springs to mind but it is there, e.g. companies office, prospectuses, etc.

Couldn't find a full balance sheet, or income statement or much disclosure at all for UDC. Of course ANZ New Zealand fully owns UDC. I do agree that UDC on its own would probably provide a better comparison with HNZ. But having poked around the UDC site this is the best I can come up with.

https://www.udc.co.nz/comm/about_us/media_article/article/17669/0/0/udc-finance-lifts-profit.html?type=borrowing

If you can point me in the direction of some more disclosure by UDC, I will happily analyse it.

SNOOPY

Snoopy

15-01-2014, 05:38 PM

1. Local NZ owned bank whose operations are overseen by the RBNZ and rating agencies

So more reliable, but as a consequence less profitable than a company like Dorchester on an operating basis.

2. A specialist lender able to assess risk better and therefore provide better loan rates

Not as specialized as Turners Auctions Finance or Dorchester

3. Competition in the form of opaque finance companies has evaporated

Dorchester and Turners Auctions Finance are there as is UDC under the cloak of the ANZ Bank.

4. Owners and much the senior management are directly associated with the business types they lend too.

You may have something there. Care to be more specific?

5. Supportive shareholders who will be quite happy to support rights issues to let the company grow

Wait till Percy goes to bed before mentioning the 'R I' words Belg. He will go bezerk if he reads that!

6. Good cross-selling partnerships with other NZ entities

You are referring to PGG Wrightson, who have just quit their Heartland stake and are now looking around for other finance partners?

Still looking for that killer competitive advantage Belg. Appreciate your attempt here though. It has given me and possibly others a little more to think about.

SNOOPY

percy

15-01-2014, 05:47 PM

Fair points. My favourite out of the big 4 is ANZ also for the Asian Growth strategy. I don't own any however.

Main concern I have with HNZ is how well they would do in a down economy. Since they rely heavily on rural lending and also car/smaller loans when a downturn happens people still need somewhere to live and will still buy groceries so need a traditional bank such as ANZ, but I'm not convinced HNZ will hold up well when the dairy pay-out is low and no one wants to upgrade their car on finance.
You may enjoy an article in www.theage.com.au/business headed "Good times end for bank profits."
The Australian Banks are very secure.
Heartland is a very small player when compared to them,yet they enjoy being well funded,have highest equity ratio,are very liquid,do not have exposure to mining,and reducing exposure to NZ residential property.

janner

15-01-2014, 05:57 PM

and reducing exposure to NZ residential property.

With the NZ economy expected to boom this year .. A wise move indeed .. As the RB is expected to raise interest rates quicker than previously thought.

This is when many chickens will come home to roost IMHO..

" Only a thousand dollars down ".. " you may have to put in a little ".. Yeah Right..

percy

15-01-2014, 06:57 PM

LOL ... He better not. And if he declines to take them up then I'll be quite happy too (at the discounted price of course :) ).

It is at times like this one is reminded of the famous John McEnroe quote; "You cannot be serious."

Snoopy

16-01-2014, 12:18 PM

On growth, UDC in the last 3 years NPAT has been ...

2010: 18m ...
2011: 29m ... 61%
2012: 37m ... 27%
2013: 42m ... 13%

Not bad, but declining but that'll pick up as confidence seems to be back now and I'd expect 2014 will show similar growth to circa 20-30%.

Will HNZ do the same? Yip, I think they will. Consequently, the PE ratio will go up to reflect the growth and divie % down but will climb year on year.

Belg, thanks for the UDC link. I have put my UDC comparison on the ANZ thread, because UDC is entirely owned by ANZ. It has certainly got me thinking!

SNOOPY

percy

16-01-2014, 12:55 PM

Belg, thanks for the UDC link. I have put my UDC comparison on the ANZ thread, because UDC is entirely owned by ANZ. It has certainly got me thinking!

SNOOPY

Taken far too long>!! lol.
Your lack of knowledge on banks/finance companies has cost you money.
It has also cost those people who read your posts, thinking you know what you were talking about money too.

percy

16-01-2014, 05:21 PM

That's very harsh, Percy. Everyone has their own style and everyone's learning. Credit, where credit is due. Snoopy has, IMNSHO, added a great deal to this thread and I admit that my valuation has been brought to more realistic levels (still over $1.00 by EOY tho) from some of the points he's raised.

You can't lay that on him. All posts on this site come with the implied caveat: DYOR - Do Your Own Research.

Guess you are right and I am being too harsh on him.
Apologies to Snoopy.
Agree with you posters must DYOR.

Onion

16-01-2014, 09:52 PM

percy

17-01-2014, 07:22 AM

K1W1G0LD

17-01-2014, 04:02 PM

I have found it enlightening to read Snoopy's analysis. It has certainly demonstrated to me the complexity of analysing company reports. Snoopy has tried to justify his opinions with facts whereas many of the posts on ST are pure speculation or wishful thinking.

Um, my 2cents worth, when it comes to investing there are many on this forum whose opinions are very sound , unfortunately Snoopy does not always fall into this catergory , I know he tries, but as Percy has proven countless times Snoopy is prone to making factual errors, so follow his advice at your peril . when your own money is on the line expert advice plus your own research is my choice. The more you read this forum you will discover whose opinions are reliable, I prefer a combination of my own research and cherry pick from some of the other wise heads on here.

Snoopy

17-01-2014, 05:52 PM

Um, my 2cents worth, when it comes to investing there are many on this forum whose opinions are very sound , unfortunately Snoopy does not always fall into this category , I know he tries, but as Percy has proven countless times Snoopy is prone to making factual errors, so follow his advice at your peril.

Just to reinforce the point, I have never claimed to be an expert on banks and finance companies, although I think I am gradually getting better! Yes I have made errors on this thread, but I like to think that I am correcting them as I go along. The number of errors on the way to getting the answer is immaterial. Getting the answer right in the end is what counts. And I am afraid there is till more for me to do on Heartland's FY2013 report, and the downstream effects, yet.

SNOOPY

Snoopy

17-01-2014, 05:54 PM

Taken far too long>!! lol.
Your lack of knowledge on banks/finance companies has cost you money.

No, my ANZ shares have done me very well thanks.

It has also cost those people who read your posts, thinking you know what you were talking about money too
.

Breaking news of the ANZ thread. The UDC advantage is completely explained by not having branch costs. So maybe UDC is not the shinging light to aspire to after all.

SNOOPY

percy

17-01-2014, 07:50 PM

Snoopy;
To go forward first you have to go back.!!!!
Reread the 1st November HNZ CEO presentation notes,that the CEO gave at the agm.
Would not agree with your use of the word "completely".I would have used "in part."
You can now understand why I posted very early on, on this thread, why you will not see Heartland Branches every where.
Some of "that" overhead may be legacy of the two building societies and Marac being merged to form HNZ.Interestingly enough Timaru is being serviced from Ashburton,which makes sense.
I would think it would also pay to bear in mind HNZ has been very much a work in progress,and it will not be until you see the next annual report,for the year ended 30/6/2014 that meaningful comparisons can be made with UDC.
By the way I think UDC and FPF are brilliant finance companies,and HNZ is well on the way to being one too,with the added bonus of the banking licence.Marac was always thought of in the same light as UDC and FPF until they lost their shirt [under ex UDC man Brian Jolliffe] in property lending.Both UDC and FPF kept to their knitting.HNZ have "world class knitters" on board so the future is positive.

K1W1G0LD

17-01-2014, 08:41 PM

Just to reinforce the point, I have never claimed to be an expert on banks and finance companies, although I think I am gradually getting better! Yes I have made errors on this thread, but I like to think that I am correcting them as I go along. The number of errors on the way to getting the answer is immaterial. Getting the answer right in the end is what counts. And I am afraid there is till more for me to do on Heartland's FY2013 report, and the downstream effects, yet.

SNOOPY

Snoopy, with respect you can analyse this report till the cows come home , but you've already missed the easy money that was to be made on the climb back from about 45 cents to 85 , and now the shareprice has well and truly stalled, and if there were any newbies following your advice on this stock they missed out as well . Strike while the iron is hot, he who hesitates is lost , buy in at the bottom of a cycle ring any bells??

Snoopy

18-01-2014, 03:38 PM

Snoopy, with respect you can analyse this report till the cows come home , but you've already missed the easy money that was to be made on the climb back from about 45 cents to 85 , and now the shareprice has well and truly stalled, and if there were any newbies following your advice on this stock they missed out as well . Strike while the iron is hot, he who hesitates is lost , buy in at the bottom of a cycle ring any bells??

Kiwigold, I agree with what you have written. The problem as I see it that relates to Heartland is that they haven't been in existence for a business cycle. So investing in HNZ at 45c is excellent 'with hindsight' advice. Of course this is not the same as saying you don't have any insight, because I have just pulled this quote of yours from the SML thread

K1W1G0LD wrote
"HNZ are going to take a lot longer to realise their goals and dispose of their troublesome bad loans, they are also in my opinion going to need a major credit re-rating for their shareprice to lift much over NTA."

The situation with Heartland at 45c, was somewhat akin to where the power generating companies are today. A national lead government from 2014 onwards should see the share price of power generators jump. A labour lead government should see the share price of those same companies fall. If National do lead the next government then buying power companies today, at the bottom of the cycle, will look clever by the end of the year. But today will only become 'the bottom of the cycle' if indeed a national lead government comes to power. That 'obvious bottom' buying point is only created by hindsight.

SNOOPY

K1W1G0LD

18-01-2014, 04:13 PM

Kiwigold, I agree with what you have written. The problem as I see it that relates to Heartland is that they haven't been in existence for a business cycle. So investing in HNZ at 45c is excellent 'with hindsight' advice. Of course this is not the same as saying you don't have any insight, because I have just pulled this quote of yours from the SML thread

K1W1G0LD wrote
"HNZ are going to take a lot longer to realise their goals and dispose of their troublesome bad loans, they are also in my opinion going to need a major credit re-rating for their shareprice to lift much over NTA."

The situation with Heartland at 45c, was somewhat akin to where the power generating companies are today. A national lead government from 2014 onwards should see the share price of power generators jump. A labour lead government should see the share price of those same companies fall. If National do lead the next government then buying power companies today, at the bottom of the cycle, will look clever by the end of the year. But today will only become 'the bottom of the cycle' if indeed a national lead government comes to power. That 'obvious bottom' buying point is only created by hindsight.

SNOOPY

Well Snoopy, I took the plunge , (with little risk attached I believe) on the way backup from 40 odd cents , Heartland were stable at the time and remain so. So I'm quite happy with the outcome from that , so it was'nt hindsight that determined that purchase, but belief in the company and the way it was performing and being run. Its still stable and well run and the fact that the shareprice has stalled well you know what I think the reasons are for that. Endless analysis and worrying about seemingly minor technical details seems to be your style of investing, not so mine and I have proved that with good investments in the local market. Some companies are good from the getgo, my instincts tell me that, plus what i have gleaned from other intelligent posters on this forum.

BlackPeter

19-01-2014, 10:58 AM

Hi folks, just wondering what's going on here ...

I like and appreciate the work Snoopy put into this analysis and I much appreciate that he is sharing this information with us (Thank you ...).

I like as well K1W1GOLD's contributions - and if you managed to buy HNZ at the absolute bottom, than why not feel just good about it? Congratulations - we would as well! Why do you feel so bitter about somebody who interpreted data in a different way? There is no absolute truth ... and already Niels Bohr (famous Danish physicist) said "Prediction is very difficult, especially about the future".

Any chance we could keep the great discussion going without starting to apportion blame and becoming personal?

Anybody on this forum is responsible for their own decisions - its all about DYOR (which might be triggered by discussions on this forum). No member of this forum is responsible for the success (or otherwise) of other forum members.

These forums live from sharing data and views, not from trying to shut people down because they interpret data in a different way!

cheers - and I hope to see many more great contributions from both of the contenders!

discl: hold HNZ (not that it should be relevant for this post, but who knows ...)

percy

19-01-2014, 11:10 AM

percy

22-01-2014, 02:09 PM

Are we on the edge of a breakout?

- bollies says yes
- OBV suggests accumulation still in progress
- MACD doesn't suggest any changes from here
- MFI still positive

Last year it came in the first week of Feb ... Could it be starting earlier this year? :)

discl: hold but recently stopped accum as other targets looks better.

While you have been looking at other targets The NZ Superannuation Fund has increased it's holding from 3.77mil shares to 9.6mil,and NZ Permanent have up theirs from 3.5mil to 6.3mil...............Harrowgate [Tomlinson] has also increased his holding from 36.7mil to 38.2mil.
Don't know whether they have bothered with other targets or not.!!!! lol.
Looks as though we all are "well positioned."

percy

22-01-2014, 06:58 PM

Percy, "recently stopped accumulating" means "very recently" ... may start again if sp gets to back to the low 80s range but not really worth it for a few cents lower buy-in when my portfolio is already amply stocked.

Nice to know you are "amply stocked"!

Master98

22-01-2014, 08:57 PM

janner

22-01-2014, 09:15 PM

Well Snoopy, I took the plunge , (with little risk attached I believe) on the way backup from 40 odd cents , Heartland were stable at the time and remain so. So I'm quite happy with the outcome from that , so it was'nt hindsight that determined that purchase, but belief in the company and the way it was performing and being run. Its still stable and well run and the fact that the shareprice has stalled well you know what I think the reasons are for that. Endless analysis and worrying about seemingly minor technical details seems to be your style of investing, not so mine and I have proved that with good investments in the local market. Some companies are good from the getgo, my instincts tell me that, plus what i have gleaned from other intelligent posters on this forum.

And ere indoors has the kitchen sink to prove it .. If my memory is correct :-))

percy

23-01-2014, 07:45 AM

Just to reinforce the point, I have never claimed to be an expert on banks and finance companies, although I think I am gradually getting better! Yes I have made errors on this thread, but I like to think that I am correcting them as I go along. The number of errors on the way to getting the answer is immaterial. Getting the answer right in the end is what counts. And I am afraid there is till more for me to do on Heartland's FY2013 report, and the downstream effects, yet.

SNOOPY
Yet Master98 post No.3025 thanks you for your detailed and high level analysis of HNZ.And it has given him confidence to buy into this stock again.
May pay to tell him he is jumping the gun as "and I am afraid there is till more for me to do".

Hoop

23-01-2014, 11:10 AM

Breathers are healthy after a big rally.....this breather is 6 months and counting....time to give HNZ a kick to get it moving again, because it is creating lost opportunities for its investors who are tied up in this lazy stock and missing out on the Bull market rally going on around it.

The trouble is now there's a dilemma, there are no TA signals and patience is wearing thin...do you sell out and rejoin the Bull Market Rally only to see HNZ spark back to life once you sell ,,,or ,,,,endure more patience by hanging in there with the risk of seeing it continuing to go nowhere and miss out on the Bull rally elsewhere....

Hoop is glad he has no dilemma ...took the Divvy and ran away last October...It is now on my watchlist...

Percy, "recently stopped accumulating" means "very recently" ... may start again if sp gets to back to the low 80s range but not really worth it for a few cents lower buy-in when my portfolio is already amply stocked.

Yes, accumulation is unattractive atm (no strong buy signals)

very nice solid sp platform has formed for HNZ.
IMHO will grow another leg soon.

Disc buying
Probably will ...but why leave the Bull market now and invest into a lazy trendless stock.
pre-empting the HNZ market carries a risk of exposing ones self to lost opportunities does it not?.....HNZ is not the only stock that will be announcing its half year report next month...

From the chart below (note :..medium/long term chart)
History which sometimes can turn out to be a repeating behavioural pattern has shown that at the end of HNZ previous breather February 2013 (around announcement time) the Momentum and rate of change fired up (blue circles) created medium /long term low risk buy signals,,,with a retest giving you a second chance to enter or accumulate...OK, you may lose the first rapid 10% but there's no real loss as your money pulled from a Bull market rally is used to buying into a hopefully bigger HNZ rally ...
This time a year later ...will that momentum return to kick start another HNZ rally...?

http://i458.photobucket.com/albums/qq306/Hoop_1/HNZ22012014.gif (http://s458.photobucket.com/user/Hoop_1/media/HNZ22012014.gif.html)

percy

23-01-2014, 11:15 AM

Breathers are healthy after a big rally.....this breather is 6 months and counting....time to give HNZ a kick to get it moving again, because it is creating lost opportunities for its investors who are tied up in this lazy stock and missing out on the Bull market rally going on around it.

The trouble is now there's a dilemma, there are no TA signals and patience is wearing thin...do you sell out and rejoin the Bull Market Rally only to see HNZ spark back to life once you sell ,,,or ,,,,endure more patience by hanging in there with the risk of seeing it continuing to go nowhere and miss out on the Bull rally elsewhere....

Hoop is glad he has no dilemma ...took the Divvy and ran away last October...It is now on my watchlist...

Yes, accumulation is unattractive atm (no strong buy signals)

Probably will ...but why leave the Bull market now and invest into a lazy trendless stock.
pre-empting the HNZ market carries a risk of exposing ones self to lost opportunities does it not?.....HNZ is not the only stock that will be announcing its half year report next month...

From the chart below (note :..medium/long term chart)
History which sometimes can turn out to be a repeating behavioural pattern has shown that at the end of HNZ previous breather February 2013 (around announcement time) the Momentum and rate of change fired up (blue circles) created medium /long term low risk buy signals,,,with a retest giving you a second chance to enter or accumulate...OK, you may lose the first rapid 10% but there's no real loss as your money pulled from a Bull market rally is used to buying into a hopefully bigger HNZ rally ...
This time a year later ...will that momentum return to kick start another HNZ rally...?

http://i458.photobucket.com/albums/qq306/Hoop_1/HNZ22012014.gif (http://s458.photobucket.com/user/Hoop_1/media/HNZ22012014.gif.html)
As always thank you for your updated chart and comments.

Harvey Specter

23-01-2014, 11:17 AM

Breathers are healthy after a big rally.....this breather is 6 months and counting...Is that a breather or a hibernation?

Hoop

23-01-2014, 11:22 AM

Is that a breather or a hibernation?

Good point.......I think due to this length of time it should be considered a hibernation event,
EDIT: usually a hibernation event is referred to Bears...not sure what you call a sleeping bull........a sleeping bull????:cool: a bulldozer:p

Harvey Specter

23-01-2014, 11:55 AM

a bulldozer:pLove it!!!

percy

23-01-2014, 12:13 PM

Love it!!!

I hate it.!!!!!!!!!!!! lol.

Snoopy

28-01-2014, 05:02 PM

In your assessments of cash flows, and imaginings of the needs for extra capital, what allowance have you made for HNZ shareholders subscribing to the dividend reinvestment programme and its discount?
The payout total for the current dividend is $9.7M. Should holders of one third of HNZ shares subscribe to the DRP, HNZ's share capital will increase by almost 10%.

Just rereading the thread and I don't think I ever replied to this question on 19-09-2013. From the annual report, page 61.

"On 26 August 2013, the Directors resolved to pay a final dividend for the year ended 30th June 2013 of $9.7m, representing 2.5cps. The dividend is payable on 4th October 2013"

We then go to the NZX website and the 4th October release for what happened:

Number issued: 3,850,604. Issue price: $0.826. That adds up to $3.181m

$3.181m/ $9.7m = 33% (round numbers)

So it looks like owners representing one third of the shares on issue shares on issue took new shares rather than the cash dividend.

Total equity at balance date was $370.546m.

Total equity after the dividend was paid was therefore:

$370.546m - $9.7m + $3.181m = $364.027m

Any way you look at it, paying a dividend -with some of that reinvested- has resulted in a decrease in Heartland equity. You suggested that Heartland's capital might increase as a result of this process Under Surveillence? Sorry don't see where you were coming from there! Either way in the grand scheme of things this one off smallish dividend is immaterial in the grand capital structure of HNZ, IMO.

SNOOPY

Under Surveillance

29-01-2014, 02:25 PM

You really shouldn't have been at pains to respond now, Snoopy. Let's just agree that HNZ has $3.181m more total equity for dividend reinvestments than it would have had without them. And that punters who took shares under the DRP last October at 82.6 cents have reason to be congratulated given the price increase meantime. And that those who weren't in last time might usefully subscribe to the DRP for the final dividend due in a couple of months.

iceman

29-01-2014, 02:45 PM

And that punters who took shares under the DRP last October at 82.6 cents have reason to be congratulated given the price increase meantime. And that those who weren't in last time might usefully subscribe to the DRP for the final dividend due in a couple of months.

You are not wrong there US. I think us long term holders are pretty happy with the performance of HNZ and the DRP. Sadly, the last sentence in your post applies to Percy who did not subscribe to the last DRP. Hopefully he will be "better positioned"for the next one ;)

Snoopy

03-02-2014, 03:57 PM

FY2013 looks to be shaping up quite well for Heartland. Looking further forward than that the new basal 3 Capital Conservation Buffer adding 2.5 percentage points to the amount of capital that must be held, plus another 0-2.5 percent for the countercyclical buffer means very little if any spare capital. So no growth beyond FY2013 if current dividend levels are maintained. A PE of 10 sounds about right in those circumstances.

Round figures I will go for an 11% ROE on shareholders equity of 85c giving earnings of 9.35c. A PE of ten translates that to a share price of 94c. Sounds about right.

However, all that assumes no more bad property debts that would further reduce the equity base. I would discount the share price by 10% to take account of that risk, and that leaves fair value at 85c, exactly where Heartland trades today. Heartland, a good solid company that is fairly and fully priced at 85c.

Over the last few weeks I have been concentrating on Heartland's operational statistics. It is all very well being a good zookeeper, feeding out the straw and clipping the customers ticket as they come through the door. However, it can all mean very little if as a keeper you go home and find an elephant in your lounge. So I want to look again at Heartland's elephant.

Here is what Fitch said when they inspected Heartland's elephant on 3rd November 2013.

"The weak asset quality performance of HBL's non-core property assets remains a drag on profitability and capital. A change in strategy to reduce these loans, which totalled NZD107m at financial year end 30 June 2013 (FY13), is likely to support a faster run-off. Provisioning of the portfolio is high, covering a significant proportion of impaired assets. Should further provisioning be needed, HBL benefits from sound pre-impairment operating profits, providing some absorption capacity. Fitch views the legacy property portfolio as one of the main constraint to a higher rating."

Now that $107m figure surprised me. $107m represents 27.5cps of capital. That is around three years worth of normal operating profit which brings all the day to day Heartland zookeeping into perspective.

If you look at the 30th June 2013 balance date, you will see that Heartland value their "investment property portfolio" (problem property bucket) at only $58.287m. That still leaves some $49m unaccounted for. I can only assume that the 'missing' problem properties are still in the 'finance receivables' part of the balance sheet.

Of course that $107m does not mean that this capital is lost. It just means that some but hopefully not all will be difficult to recover. But something else caught my eye in the Fitch statement (my bold).

"The weak asset quality performance of HBL's non-core property assets remains a drag on profitability and capital."

I had presumed that Heartland will still be racking up interest on these risky loans. But does the drag on 'profitability' mean Heartland have given up collecting interest on part of this portfolio to the extent that even the interest they are still collecting is not enough to balance any loans that have already collapsed?

Heartland. From a public perspective they have been quite good zookeepers over FY2013. But nothing was done to address their elephant, apart from making it incrementally bigger.

SNOOPY

Snow Leopard

03-02-2014, 11:54 PM

Over the last few weeks I have been concentrating on Heartland's operational statistics....

...Now that $107m figure surprised me. $107m represents 27.5cps of capital. That is around three years worth of normal operating profit which brings all the day to day Heartland zookeeping into perspective.

If you look at the 30th June 2013 balance date, you will see that Heartland value their "investment property portfolio" (problem property bucket) at only $58.287m. That still leaves some $49m unaccounted for. I can only assume that the 'missing' problem properties are still in the 'finance receivables' part of the balance sheet.

Of course that $107m does not mean that this capital is lost. It just means that some but hopefully not all will be difficult to recover. But something else caught my eye in the Fitch statement (my bold)...

...I had presumed that Heartland will still be racking up interest on these risky loans. But does the drag on 'profitability' mean Heartland have given up collecting interest on part of this portfolio to the extent that even the interest they are still collecting is not enough to balance any loans that have already collapsed?

Heartland. From a public perspective they have been quite good zookeepers over FY2013. But nothing was done to address their elephant, apart from making it incrementally bigger.

SNOOPY

Weeks concentrating on this and this is your understanding?

Best Wishes
Paper Tiger

percy

04-02-2014, 07:27 PM

Heartland's 6 month result up to 31/12/2013, will be announced on Tuesday 25th February 2014.

vorno

05-02-2014, 07:46 AM

Heartland's 6 month result up to 31/12/2013, will be announced on Tuesday 25th February 2014.

Indeed... It should be a good read once released.

The results will be the primary factor for the 'probable' SP increase prior to dividend payment in.. April was it?
However even if results are bad, I don't think the SP will move much due to the dividend around the corner.

percy

05-02-2014, 09:16 AM

I am expecting the half year result to confirm they are on track to deliver $34mil to $37mil full year result.Although new lending growth is hard to achieve, Marac should be doing well considering motor vehicle sales have been at record levels.
Maybe more progress on legacy property sales.I have been looking forward to an announcement on an acquisition,but not rushing it is better for shareholders in the longer term,yet a lot of next year's growth will depend on a good acquisition.2.5cents per share or 3 cents dividend? Happy with either.

Snoopy

05-02-2014, 04:10 PM

However even if results are bad, I don't think the SP will move much due to the dividend around the corner.

Fitch mostly agrees with you Vorno. From their November 2013 credit assessment:

"HBL's focus on niche banking products and services where it can achieve a leading market share allows it to compete effectively against the larger New Zealand banks. It offers motor vehicle finance invoice and shorter-term asset finance for businesses and livestock for farmers in New Zealand. These are niche products in which HBL has been able to gain greater market share and price-setting powers. This in turn supports a strong NIM (Net Interest Margin) relative to peers, providing capacity to absorb potential adverse credit developments in its core loan book. Cost management is an area that could, if improved, support pre-impairment operating profitability further in FY14."

SNOOPY

Snoopy

05-02-2014, 04:49 PM

Weeks concentrating on this and this is your understanding?

Obviously my point was too obtuse PT. I have spent no time at all considering the net asset position of Heartland over the last two months, until three days ago.. The performance of HNZ going forwards depends on two largely unconnected questions.

1/ What is the real underlying Tier 1 capital behind Heartland?
2/ How well are Heartland executing their business strategy?

Banking is a competitve business. So if 15% of Heartland's capital disappears, the whole company shrinks regardless of how well their business strategy is executed.

The banking licence agreement for Heartland specifies that:

"the Tier 1 capital ratio of the banking group is not less than 12%"

This is more than the 8% required for the big four banks

http://www.rbnz.govt.nz/regulation_and_supervision/banks/policy/4572979.html

From 1st January 2014 an additional common equity buffer of 2.5% is required. Since all of Heartland's Tier 1 equity is common equity, the minimum amount of equity that must be held is now 12.5% of the loan book. Assuming the loan book has not changed in size significantly since balance date when it measured $2,010.4m, the share capital required to be held is now $251m (minimum). Share capital at balance date was $371m. So plenty of capital headroom there, or is there?

A net $6m in cash came out for the dividend. Hopefully, that has since been made up for in half year earnings. But take out the $107m in 'property investment' (dodgy property loans) that Fitch refers to and the capital cover above the reserve bank minimum is reduced to a skinny $20m. Some may counter that losing all of that $107m is absurdly pessimistic. But I would counter that the likelihood of loss depends on how skinny the customer equity is in those development projects. And this information is known only to Heartland and their customers. I don't believe it is in any way certain that Heartland will not need further capital injection if not to survive then to prosper. Whether the DRP is enough, I suppose time will tell.

Heartland can execute the perfect business strategy in their defined core markets (point 2). That will in no way mitigate the elephant debt burden effect that I have outlined (point 1).

SNOOPY

Snoopy

05-02-2014, 05:49 PM

If you look at page 21 of the shareholder presentation, Heartland were planning to reduce their $107m non-core profit portfolio by 7% by the time July 2014 rolls around. So if come the end of August 10% has already been removed from the books this is good progress. However, there really isn't enough information in this announcement to know if Heartland's non-core property sales are going to plan or not.

1/ Did they on sell the properties at book value or at a discount, or a premium?

2/ Were the properties sold Category 6, 7, 8 or 9? Why is that important? Because there would be pressure from management to get the non core property sell down done, and show progress. Human nature would suggest that to fulfill this the low hanging fruit would. be on sold first. So just because they are ahead of their sell down target now, does not mean they will continue to track in front of their targets.

But let's say the value of outstanding properties on the books is now $90m.

$90m/388m = 23cps

That is still quite a large potential write down still hanging over the shares which at 30th June had an NTA 0f 85c

I often find it useful to use other management's measuring sticks for evaluating a business. ANZ does not segment their loan portfolio into 'judgement loans' and 'behavioural loans' as Heartland does. Instead all loans, not just judgement loans, are evaluated on a 0-9 (or 1-10 in Heartlandese) scale. Probabilities of default according to loan class are summarized on my post 51 on the ANZ.NZ thread. Now what would happen if I used these probabilities of default on the Heartland judgement loan book? IOW, all things being equal, what sort of provisioning would ANZ management put on the Heartland judgement loan book? The calculation based on section 37e of the Heartland report is as follows:

Grades 8 & 9: ( $21.158m + $27.761m )x 0.1125 = $5,503m
Grade 7: $18.034m x 0.0267 = $482m
Grade 6: $198.370m x 0.0112 = $2,222m
Grade 5 & 4: ( $438.068m + $264.986m )x 0.0029 = $2,039m
Grade 1,2 & 3: ( $83.612m+$15.607m+$0.575m)x 0.001= $100m

That gives a grand total of $10,346m.

To this we need to add the confirmed write offs of $6.679m (table 37e AR2013), under the provision for 'individually impaired assets'. That is what Heartland call 'grade 10' loans ('reflects loss accounts written off') , page 55. So the grand bad debt total for all judgement loans is $10,352m.

The Heartland closing provision for individually impaired assets stands at $34.530m (table 37e again).

So one conclusion from that is that if ANZ, were running this finance company their provisioning would be somewhat less. Of course the proviso here is that all things are not equal, because the Heartland judgement loans contain up to $49m in residual loans from the bad property portfolio reacquired from PGC. Since Heartland are likely to know their own loan book far better than ANZ managers might, we might infer that the Heartland loan book quality is considerably below an equivalent UDC loan book quality that ANZ might expect to manage.

SNOOPY

percy

05-02-2014, 06:28 PM

Be a little careful comparing ANZ/UDC running of a finance company to Heartland's.
One must remember the person who led PGC/Marac into having to recap was ex ANZ/UDC man Brian Jolliffe.

janner

05-02-2014, 07:23 PM

Be a little careful comparing ANZ/UDC running of a finance company to Heartland's.
One must remember the person who led PGC/Marac into having to recap was ex ANZ/UDC man Brian Jolliffe.

There is your HNZ's Elephant in the room Snoopy.

It is percy.. with his Elephants memory... :-))

Snow Leopard

06-02-2014, 12:59 AM

Obviously my point was too obtuse PT.

From 1st January 2014 an additional common equity buffer of 2.5% is required. Since all of Heartland's Tier 1 equity is common equity, the minimum amount of equity that must be held is now 12.5% of the loan book. Assuming the loan book has not changed in size significantly since balance date when it measured $2,010.4m, the share capital required to be held is now $251m (minimum). Share capital at balance date was $371m. So plenty of capitalheadroom there, or is there?

OK Let me make my point this way.

All the details, including the true numbers, for the Capital Adequacy (which is what you are referring to above) calculations are available in the Disclosure Statements which you have read.

And yet you ignore them and post the above instead.

Paper Tiger

Snoopy

06-02-2014, 04:29 PM

OK Let me make my point this way.

All the details, including the true numbers, for the Capital Adequacy (which is what you are referring to above) calculations are available in the Disclosure Statements which you have read.

And yet you ignore them and post the above instead.

Paper Tiger

What disclosure statement might that be PT? Not the one signed off on 27th November 2013 that doesn't mention the January 2014 Basel 3 amendments by any chance? Nothing more recent has been issued via the NZX.

SNOOPY

percy

06-02-2014, 05:27 PM

PT, could I ask, as a favor to us all, that you provide Snoopy with a bit more than hints? Snoopy is trying really hard to get to the bottom of HNZ's value. In fact, far harder than I have, and I respect his efforts enormously. PT, you know I love you, bro. Just a bit more detail .... :)

Two and a half years he has been on a learning curve?
How much much longer do you expect us to put up with his rubbish.Never been right once.!!!!
Never been to an agm or a presentation.
Never bothered to phone the company and check the facts.
Never read what knowledgeable posters have posted.!!

Snow Leopard

06-02-2014, 09:12 PM

What disclosure statement might that be PT? Not the one signed off on 27th November 2013 that doesn't mention the January 2014 Basel 3 amendments by any chance? Nothing more recent has been issued via the NZX.

SNOOPY
Why would they mention January 2014 Basel 3 in the September 2013 DS when it does not apply?

PT, could I ask, as a favor to us all, that you provide Snoopy with a bit more than hints? Snoopy is trying really hard to get to the bottom of HNZ's value. In fact, far harder than I have, and I respect his efforts enormously. PT, you know I love you, bro. Just a bit more detail .... :)

Snoopy will never get to the bottom of HNZ while he persists in his blinkered attitude to them and the link to disclosure statements as been provided on this thread before.

Best Wishes
Paper Tiger

Snoopy

07-02-2014, 05:41 PM

Why would they mention January 2014 Basel 3 in the September 2013 DS when it does not apply?

PT I think you and I are talking cross purposes here. I actually have little interest in the September 2013 Heartland Disclosure Statement, or even the December 2013 Disclosure Statement (when that comes out with the February announcement). Heartland still exists and is trading and has not been sanctioned by the Reserve Bank, and the credit rating remains at investment grade (just). So obviously all Tier one equity conditions as required with the Reserve Bank have been met as of the latest repoprting period. I am however, very interested in the current equity position of HNZ and how that relates to Reserve Bank requirements. And I will use historic declarations to help forecast that.

To forecast the current position, I have to use the most recently declared Reserve Bank Requirement position (30th September 2013) and add on to that any subsequent legal requirements that come to pass. That includes the January 2014 adoption by the Reserve bank of New Zealand of the new 2.5% Capital Buffer Ratio, which as you correctly observe is not in the September 2013 declaration, (because it did not apply at that date). That 'added on' bit was I think the piece you were castigating me for in my post 3044, perhaps bceause I hadn't clearly explained why it was there.

Accordingly I believe my post 3044 contains my best estimate of the Reserve bank capital requirements that Heartland must comply with right now, which is the time period that concerns me. I hope that clears things up.

SNOOPY

Snoopy

07-02-2014, 05:58 PM

Heartland's 6 month result up to 31/12/2013, will be announced on Tuesday 25th February 2014.

Just to add to this, the half year result disclosure does not contain all the detail of full year report, as regards the risk analysis on outstanding loans. So I do not expect it to be all that useful in seeing how Heartland is progressing with their problem loans. However, one figure that we can check out will be the 'Investment Properties' as listed on the balance sheet. We know that Heartland are ahead of their own schedule in selling down these problem loans. But have the loans sold down come from here, or have they come from the regular loans outstanding? And have the loans been wound up at a profit or a loss? Those questions at least should be answered.

SNOOPY

Snow Leopard

07-02-2014, 07:12 PM

There are two certainties with the HNZ Half Year results.

1) The results will be fine and the Capital Adequacy will be adequate :).
2) Snoopy will disagree with 1)

Best Wishes
Paper Tiger

percy

07-02-2014, 08:36 PM

Yes the half year result will be fine,and the Capital ratios will be MORE than adequate.
My concern is;if it took Belgarion the best part of ten years to fully understand bank's balance sheets,how long will it take Snoopy?

percy

07-02-2014, 09:49 PM

Not fair, I cry a foul. :)

Been in insurance and banking for the bulk of my ICT career ... If you just knew ... The GFC came as NO surprise for us ... The biggest surprise is that it came as surprise to so many others given the warnings we'd posted and the internal emails we've sent!

Snoopy is doing it right.

He may do a little better with your guidance?
I seem to remember the last time he was quoting The Reserve Bank,Heartland would take years to get a banking licence.Then his wonderful nonsense that Heartland only had a "learners licence." Wasn't funny at the time either.!!

percy

08-02-2014, 07:05 AM

No.
All banks that operate in NZ have to report to The Reserve Bank.
This adds an extra margin of safety for bank investors.

percy

10-02-2014, 05:45 PM

Nice to see an aggressive seller of HNZ shares.Wonder whether he will let his 90 shares go at 88cents, or will he meet the buyers at 87cents who want 121,488 shares?Or will one of the buyers who want 239,958 shares at 86cents decide to jump the que?.!!
Or maybe the sellers, who have 58,682 shares for sale at 89cents will drop them off?!!
We live in interesting times!?
I don't really mind as I added to my holding at 88cents today.

Arbitrage

11-02-2014, 11:52 AM

Well Percy you will be pleased that they have reached a 52 week high of 89c, with on-going buyer interest..

percy

11-02-2014, 12:23 PM

Well Percy you will be pleased that they have reached a 52 week high of 89c, with on-going buyer interest..

I just love new highs.!!!!! Yes I am pleased.HNZ sp has been in a channel between 84 cents and 88 cents for months,so where it goes to now will be interesting,and enjoyable.!!!!~ lol.
7 buyers lining up at 88cents wanting 140,542 way out number the 4 sellers wanting to sell 58,203.
Managed somehow to change my requirements with Link yesterday,so have all of my HNZ shares on dividend reinvestment.
Wife still likes to see the money,however.
Love it.Spoke too soon.100,000 just gone through at 88cents.lol

Arbitrage

11-02-2014, 12:45 PM

Yes the price trend looks like an uptick in recent weeks. The anticipation of a good half year announcement on 25 February may be helping. A breakthrough of the psychological 90c barrier may help too.

noodles

11-02-2014, 01:25 PM

I don't really mind as I added to my holding at 88cents today.
Percy, it seems you have got your hand on depth info. Have you added an on-line broker?

I'm interested in your decision to add HNZ at this point. You could have got a cheaper price many times in the last 6 months. There is no new info in the market. Was it macro? Did you use market depth to time your trade?

percy

11-02-2014, 02:51 PM

I had a big sell up of shares in November and have the money earning under 4% in an online call a/c.I did not sell any HNZ as I thought the forward PE of under 10 and the dividend yield would support the share price.For the last 6 months I have kept an eye on depth using my friend's online a/c with DB.Some times there was nearly 1mil shares for sale and only 100,000 wanted.
I thought the support was at about 84 cents.No,I don't know whether I would have sold or not?!Well it looked to me as though the sellers on HNZ had gone on holiday,or given up.A great deal more buyers wanting more shares. I am expecting a good half year result in a couple of weeks time, and continuation of the dividends,so finally I brought yesterday..Maybe we will hear sometime of an acquisition?.
I knew I had my Kiwi Saver payout coming.So rather than put that money on call I felt it would earn a lot more with HNZ.
I had thought of adding to one of my Aussie shares,but at the end of the day I do rather enjoy Heartland's fully imputed dividends.

percy

11-02-2014, 03:00 PM

Recently I have bought HNZ share's,

I like that the share price, after many months of rising, has formed solid consolidation between 84-88cps around the highs.
This tells me that the market excepts that after months of rising in value that the rise was justified.

I believe a price platform that will become the next support level has been created in readiness for the next rise up.

Exactly how I feel too.!!!

percy

11-02-2014, 03:01 PM

percy

11-02-2014, 03:02 PM

Jay

11-02-2014, 03:08 PM

Wow you must excited percy, cannot contain your excitement:)

percy

11-02-2014, 03:28 PM

Wow you must excited percy, cannot contain your excitement:)

Sorry I don't know how I do that.!!!

noodles

11-02-2014, 05:25 PM

hell Percy you better take your heart pills cause with the buy depth so strong when compared to sell depth and shareholders looking forward to the next announcement the sp is going to have a 9 in front of it real soon.

Closed at 90

percy

11-02-2014, 05:38 PM

Harvey Specter

12-02-2014, 10:13 AM

Looking very good here guys!! After being stagnant for so long (6 months or so) the SP finally looks like it is going to gap up a bit. Will we hit $1 soon? Congrats holders!Gap up is a bit over enthusiastic but it does look set for a steady climb upwards. 1c at a time is fine as long as it doesn't drop back.

percy

12-02-2014, 10:22 AM

Harvey Specter

12-02-2014, 10:31 AM

If you look back over time though, there have been several times where the SP has trended (not gapped) up. Eg 55c to 70c and then 70c to 85c so I'm thinking maybe this is the start of a further 15c climb from 85c to $1 over the next month or so??Yip - that is what I am hoping for. An update on the NTA figures and how the non core property is doing will be interesting but I hope we dont see it in the 80's again.

Xerof

12-02-2014, 11:27 AM

The resistance at 87/88 cents will most probably become the support level.
Taking so long to come out of the oblong pattern,makes me think the direction upwards will be strong.
New highs I see as very positive,as well as being most enjoyable for us shareholders.

Remember 88 was the "price" everyone paid for these shares at the re-organisation, so that overhang of stale PGC holders was always going to take a long period of time to be worked through (by those heathen non-believers percy) :)

So now you are seeing clear air, and the next announcement is being priced in in the lead-up to the release date.

Well done percy et al for holding, accumulating.

Still not my cup of tea, I'd like to see some growth, but I am a depositor, so hoping they are lending that out into safe hands!

percy

12-02-2014, 03:32 PM

Remember 88 was the "price" everyone paid for these shares at the re-organisation, so that overhang of stale PGC holders was always going to take a long period of time to be worked through (by those heathen non-believers percy) :)

So now you are seeing clear air, and the next announcement is being priced in in the lead-up to the release date.

Well done percy et al for holding, accumulating.

Still not my cup of tea, I'd like to see some growth, but I am a depositor, so hoping they are lending that out into safe hands!

Thanks for your comments,as always well thought out.
Yes clear air now.Time is the friend of a good business ,and the enemy of a poor business.
Heartland are looking to play a part in the growth of the productive sector of NZ.
Growth from 30//2114 will come from organic growth,but real growth will depend on an acquisition.

vorno

12-02-2014, 04:06 PM

And indeed a good week for Heartland. Currently running 92cents although sellers have clicked with the new price and are starting to appear - most sitting at the .93 cent mark (Although I call them chasers) :)

Snow Leopard

12-02-2014, 08:43 PM

percy

12-02-2014, 09:08 PM

I note that this wondrous breakout is not accompanied by any significant volume, indeed it is currently below the long term average.

Still up is up and it adds a dollar or two to the net worth.

Best Wishes
Paper Tiger

Yes a dollar or two to the net worth.!!!!
According to ft.com the average volume is 250.12k, so today's 282.77k is above average??!!

Snow Leopard

12-02-2014, 09:31 PM

Yes a dollar or two to the net worth.!!!!
According to ft.com the average volume is 250.12k, so today's 282.77k is above average??!!

I have today: 282,779
Exponential 256: 290,938.41
Exponential 64: 249,584.12
Exponential 16: 232,824.92

5461
About six months of volume (using the Tiger method)

Best Wishes
Paper Tiger

percy

12-02-2014, 09:35 PM

Looks as though you are well ahead of ft.com.
Thanks. lol.

PartyPooper

12-02-2014, 10:20 PM

Great to see some good movement shame I've been dumping all my money into SUM and ATM... oh well hopefully they'll have their run later.

K1W1G0LD

13-02-2014, 03:51 PM

Very quiet on this thread today........................reality bites!!
I know the feeling!:D

percy

13-02-2014, 04:14 PM

Very quiet on this thread today........................reality bites!!
I know the feeling!:D

Reality came to me when I rang Garador to get a couple of new remotes for our garage door.After ringing to make sure they had arrived in at 12.20pm,I was told they were going for lunch at 1pm.Mad dash to Bromley,only to find they had moved to Sockburn. Back home to find location,then out to Sockburn.Arrived at 1.45pm to see the notice,back from lunch 2pm.
So 20 minutes turned out to be nearly two hours REALITY.NB.Google Garador and note the address is Bromley.!!!
No surprises with HNZ share price,but go straight to my next post.

percy

13-02-2014, 04:20 PM

Well great news for New Zealand Shareholders Association Auckland Branch;
MD of Heartland, Jeffrey Greenslade, will be your quest on Wednesday 19th February,7.30pm,Hobson Room,Level 4,Alexandra Park Functions Centre,Greenlane.
May I say you will enjoy listening to him.A straight shooter, who is interesting to listen to as he knows his subject so well.

vorno

13-02-2014, 05:14 PM

Well great news for New Zealand Shareholders Association Auckland Branch;
MD of Heartland, Jeffrey Greensland, will be your quest on Wednesday 19th February,7.30pm,Hobson Room,Level 4,Alexandra Park Functions Centre,Greenlane.
May I say you will enjoy listening to him.A straight shooter, who is interesting to listen to as he knows his subject so well.

Don't suppose there's an "online meeting" as well? - Working from Wellington ATM!

Jim

13-02-2014, 05:33 PM

Don't suppose there's an "online meeting" as well? - Working from Wellington ATM!

At least post it on the NZSA members' site.

vorno

13-02-2014, 07:03 PM

At least post it on the NZSA members' site.

NZSA? What is that good sir?

noodles

13-02-2014, 07:49 PM

NZ shareholders Association
http://www.nzshareholders.co.nz/shar...D=2&branchID=1 (http://www.nzshareholders.co.nz/shareholders-branchesDetail.cfm?contactID=2&branchID=1)

noodles

14-02-2014, 08:49 AM

TRADING HALT!!!

Any speculation? Takeover, non-core debt issues resolved, Profit Upgrade/downgrade?, S&P rating change, Capital raising?

Master98

14-02-2014, 09:00 AM

TRADING HALT!!!

Any speculation? Takeover, non-core debt issues resolved, Profit Upgrade/downgrade?, S&P rating change, Capital raising?

nervous!!! just a couple of weeks away from interim report.finger cross

Balance

14-02-2014, 09:01 AM

TRADING HALT!!!

Any speculation? Takeover, non-core debt issues resolved, Profit Upgrade/downgrade?, S&P rating change, Capital raising?

Sp steadily going up, especially in the last week, says it will be a positive announcement.

Merger most likely scenario?

RTM

14-02-2014, 09:05 AM

Hope Percy's pulse rate is OK over next few hours....

Harvey Specter

14-02-2014, 09:16 AM

Merger most likely scenario?Given its Valentines day, no doubt someone is courting this very attractive stock. Or is it them doing the courting?

Do doubt it will be a match made in heaven with the deal being consummated once they are well positioned.

Cool Bear

14-02-2014, 09:44 AM

better be good. most of my eggs are in that basket. dis bear needs the honey to go into hibernation over winter.

winner69

14-02-2014, 10:09 AM

Sp steadily going up, especially in the last week, says it will be a positive announcement.

Merger most likely scenario?

Agree mate

Upward movement in share price = good news

Amazing how many can guess this sort of stuff a few days out from the announcement .....some really canny investors

winner69

14-02-2014, 10:21 AM

Unlikely to be anything to do with profit situation or ratings They would have just come out and said this without a halt

Something that requires a bit more detail to finalise (with 3rd party involvement)

stoploss

14-02-2014, 10:55 AM

GENERAL: HNZ: Acquisition and Financial Forecasts - Summary
10:48a.m.

HNZ

14/02/2014 10:48

GENERAL

REL: 1048 HRS Heartland New Zealand Limited

GENERAL: HNZ: Acquisition and Financial Forecasts - Summary

NZX Release

14 February 2014

ACQUISITION AND FINANCIAL FORECASTS - SUMMARY

Acquisition

Heartland New Zealand Limited ("Heartland") (NZX: HNZ) advises that it has

entered into a Sale and Purchase Agreement with Seniors Money International

Limited ("SMI") for the acquisition of its New Zealand and Australian Home

Equity Release mortgage businesses. The consideration for the acquisition is

NZ$87 million. The Sale and Purchase Agreement is subject to a number of

conditions being satisfied prior to settlement on 1 April 2014, including SMI

obtaining shareholder approval to proceed with the transaction. See the full

release attached to this announcement for further details of the acquisition.

Capital Raising

Heartland is raising NZ$20 million to partially fund the acquisition. The

capital raising comprises a NZ$15 million equity placement and a NZ$5 million

share purchase plan. Under the share purchase plan, each Heartland

shareholder with an address in New Zealand on the register at 5pm on 27

February 2014 will be eligible to invest up to $15,000 in new Heartland

shares. Further details of the placement and share purchase plan are

included in the attachments to this announcement.

Forecast

Heartland will shortly be releasing its results for the first half of FY2014.

Net profit after tax is expected to be around $16.5 million and in line with

the forecast full year outcome of $34-$37 million for FY2014. Heartland's

forecast for FY2015 is yet to be finalised and more detailed financials will

be available sometime following settlement of the acquisition. Taking all

relevant factors into consideration including acquisition and integration

costs expected to be incurred in FY2015, the underlying business, together

with the contribution from the acquisition, is likely to produce a full year

result for FY2015 of between $42-44 million of net profit after tax. See the

full release attached to this announcement for further details of Heartland's

forecast financial information.

Attached:

1. Acquisition and Financial Forecasts - NZX Release

2. Appendix 7 Notice of Event Affecting Securities

3. Investor Presentation

- Ends -

For further information please contact:

Jeff Greenslade

Managing Director

Heartland New Zealand Limited

DDI 09 927 9149

End CA:00247013 For:HNZ Type:GENERAL Time:2014-02-14 10:48:37

luigi

14-02-2014, 11:06 AM

Some interesting background on SMI/Sentinel from 2012:

http://www.stuff.co.nz/business/industries/7416902/Debt-deal-halts-Sentinel-lending

luigi

14-02-2014, 11:08 AM

From the announcement:

"The weighted average loan to value ratio (“LVR”) of the New Zealand HER loan portfolio is approximately 32.7%, while the weighted average LVR of the Australian portfolio is approximately 31.8%. "

False Profit

14-02-2014, 11:08 AM

First time in the 90cents for HNZ. There you go.

Harvey Specter

14-02-2014, 11:17 AM

Hold onto your hats people. With a SPP at 88c (or lower) the shareprice will be volatile as everyone plays their games.

Does anyone know how many NZ shareholders HNZ has? probability of scaling?

winner69

14-02-2014, 11:22 AM

Great niche to be a leader in if managed properly, as hnz will probably do.

I hate it when companies rave about acquisitions being EPS accretive. Seems to be a message don't worry about the dilution

So 65 million new shares.

Using the top end of their forecasts EPS in FY14 is 9.4 cents / EPS in FY15 is 9.6 cents

Yes - that is EPS accretive so good news, but not really that exciting

But then again HNZ going to be bigger

stoploss

14-02-2014, 11:22 AM

Harvey Specter

14-02-2014, 11:24 AM

Does anyone know how many NZ shareholders HNZ has? probability of scaling?I love quoting myself so sorry for not just editing my post. Anyway:

Per the 2013 stats, they have 8,092 shareholders. So if they 50% apply for the minimum, then

8092 x 50% x $2,500 = 10,115,000

Which will need to be scaled by more than 50% to get to the target of $5m. Will they accept over-subscriptions as it is pretty mean to scale those who apply for the minimum?

Cool Bear

14-02-2014, 11:26 AM

Hold onto your hats people. With a SPP at 88c (or lower) the shareprice will be volatile as everyone plays their games.

Does anyone know how many NZ shareholders HNZ has? probability of scaling?

From their annual report, as at 1 August 2013 (I presume a few of our members on ST is in the last category)
10.0
Shareholder
Information
Size of Holding Number of Shareholders Total Number of Shares % of Issued Shares
1–1,000 shares 1,064 650,147 0.17
1,001–5,000 shares 2,449 6,512,552 1.68
5,001–10,000 shares 1,433 10,856,025 2.79
10,001–50,000 shares 2,310 53,726,289 13.82
50,001–100,000 shares 506 36,190,334 9.31
100,001 shares and over 330 280,768,628 72.23
TOTAL 8,092 388,703,975 100%
Rank Shareholder Total Shares % of Total Shareholders
1 Harrogate Trustee Limited 36,695,489 9.44
2 Accident Compensation Corporation 21,254,284 5.47
3 Philip Maurice Carter 20,973,492 5.4
4 PGG Wrightson Limited 13,333,333 3.43
5 Oceania & Eastern Limited 12,285,439 3.16
6 Cogent Nominees Limited 12,008,764 3.09
7 Gould Holdings Limited 7,417,427 1.91
8 HSBC Nominees (New Zealand) Limited 6,719,424 1.73
9 Citibank Nominees (NZ) Limited 6,664,221 1.71
10 Leveraged Equities Finance Limited 6,518,340 1.68
11 National Nominees New Zealand Limited 5,959,666 1.53
12 FNZ Custodians Limited 5,753,163 1.48
13 Jarden Custodians Limited 4,500,000 1.16
14 Investment Custodial Services Limited 4,464,273 1.15
15 Investment Custodial Services Limited 4,028,738 1.04
16 New Zealand Superannuation Fund Nominees Limited 3,776,134 0.97
17 Heartland Trust 3,420,197 0.88
18 New Zealand Permanent Trustees Limited 3,150,000 0.81
19 Custodial Services Limited 2,906,391 0.75
20 Forsyth Barr Custodians Limited 2,799,787 0.72
TOTAL FOR TOP 20 HOLDERS 184,628,562 47.50

Cool Bear

14-02-2014, 11:29 AM

sorry, that cut and paste is quite difficult to read but it is available on page 68 of their annual report. 8092 shareholders! quite well spread out.

winner69

14-02-2014, 11:29 AM

The bigger ones already topped up as part of the 15 mil raised

But yes a pathetic amount to offer the likes of Percy, unless he became sophistated and was part of that 15 mill

Banksie

14-02-2014, 11:40 AM

Will they accept over-subscriptions as it is pretty mean to scale those who apply for the minimum?

According to https://www.nzx.com/files/attachments/189274.pdf they will not be accepting over-subscriptions.

"If Heartland receives applications in excess of $5 million, it will scale back all applications on a proportionate basis."

winner69

14-02-2014, 11:42 AM

Why only $5m going to us holders? Seems a bit skinny.

FY15 ... 42-44m ... None too dusty but need to see a bit more detail.

With 65 million more shares

Harvey Specter

14-02-2014, 11:45 AM

According to https://www.nzx.com/files/attachments/189274.pdf they will not be accepting over-subscriptions.

"If Heartland receives applications in excess of $5 million, it will scale back all applications on a proportionate basis."Will be interesting to see if the official information (that comes with the application form) also states that. From memory SNK accepted oversubscriptions of 3x the amount it sought.

RTM

14-02-2014, 11:52 AM

Banksie

14-02-2014, 12:02 PM

Will be interesting to see if the official information (that comes with the application form) also states that. From memory SNK accepted oversubscriptions of 3x the amount it sought.

Are they allowed to change information already released to the market? Also, I can see no reason for them to accept over-subscriptions - what would they do with the additional funds?

It appears to me that the $5 million is just a nod to small investors, giving them a foot in the door, rather than a serious capital raising exercise. I am sure they could have raised all $20m through placements.

percy

14-02-2014, 12:07 PM

True. (work got in the way of that post so hadn't finished). From a holder's point of view a bit more diversity makes the company stronger and therefore IMO worth more.

Agree with you there.Positive.
Missed everything driving down to Oamaru.Lovely day here.Back home tonight.
Raising $20 mil,so not too many shares will be issued.
Positive outlook for 2015.

winner69

14-02-2014, 12:19 PM

Agree with you there.Positive.
Missed everything driving down to Oamaru.Lovely day here.Back home tonight.
Raising $20 mil,so not too many shares will be issued.
Positive outlook for 2015.

It's the 43 million being issued to the vendors ats the dilution

At least they can't sell them for a year

Then everybody can start talking about overhangs and things

winner69

14-02-2014, 12:21 PM

Good hing about his type of acquisition it will give Snoopy plenty more to analyse

I preempt him ..a large exposure to residential mortgages and the exposure to people dying wen they not meant too

Harvey Specter

14-02-2014, 12:54 PM

w69, most will be re-insured (re-assured, people still use that term?). HNZ will be the "retailer" and others will be carrying the major risks (for a sizeable fee no doubt).
Do they re-insure them. I thought the idea behind these were you charged a higher interest rate but only allowed them to have a low LVR - the reason being the higher risk of having to deal with the property when they 'go to the farm in the sky'. So no extra risk, just extra admin.

winner69

14-02-2014, 01:13 PM

Do they re-insure them. I thought the idea behind these were you charged a higher interest rate but only allowed them to have a low LVR - the reason being the higher risk of having to deal with the property when they 'go to the farm in the sky'. So no extra risk, just extra admin.

Right there harvey .....not always the most favourable for the oldies but they don't care as they want to spend it all before they go to that farm in the sky or wherever

Harvey Specter

14-02-2014, 01:22 PM

No one has commented on the expansion into the Australian market with this acquisition. I wonder what the plan for that is.

Harvey Specter

14-02-2014, 02:34 PM

So they're pure reverse mortgages with the oldie potentially chucked out when mortgage value exceeds the property value?They dont get chucked out, that is guaranteed provided the meet the conditions (insurance etc). There is also a no negative equity guarantee though I am sure they have actuarial staff on hand to ensure that never happens. A 60yo cant borrow more than ~20% of the value of their house (a 90yo has a LVR of 45%), but get charged a 1.5-2% premium to normal floating rates.

Arbitrage

14-02-2014, 02:37 PM

No one has commented on the expansion into the Australian market with this acquisition. I wonder what the plan for that is.

It seems that will be kept as a separate entity. It could act as a foot in the Australian door or is set up to sell. My guess is a the latter at this stage of the companies growth. However, it will bring the company to the notice of Australian financial institutions.

Harvey Specter

14-02-2014, 03:01 PM

It seems that will be kept as a separate entity. It could act as a foot in the Australian door or is set up to sell. My guess is a the latter at this stage of the companies growth. However, it will bring the company to the notice of Australian financial institutions.I assume they couldn't get the NZ business without the Australian business. Options would be to:

- run it as a stand alone (distracting to management?)
- run it but hold for resale (best option?)
- use this as a springboard to expand to Australian focusing on their niche products (difficult and will increase the risk fo the company)
- Wind it down (worst option?)

Snow Leopard

14-02-2014, 03:06 PM

Woke this morning to find a layer of ash on the ground and more falling, Mount Kelud over 200km east of us erupted last night and we are getting some it. The rain means we are surrounded by mud and it has forced the closure of lots of local institutions. Ash is still falling.

And then Heartland go buy some bits of SMI.

I notice that the front page of the Australian Seniors Website reads:

Unfortunately due to funding limitations we are unable to assist with new loans at this time. We are in the process of rectifying this issue and expect this situation to be temporary

So guess some cash will be going into there.

Bit more research to do before I decide whether to be happy or not, but have higher priorities today.

Best Wishes
Paper Tiger

Cool Bear

14-02-2014, 03:12 PM

http://www.heartland.co.nz/_upload/news/NZX%20Release%20-%20Acquisition%20and%20Financial%20Forecasts%20-%2014%2002%2014.pdf

quote " Margins are better than those available from conventional residential mortgages and the risks as measured by loss rates are reasonably similar"

However, I would have thought that risk are much smaller than conventional residential mortgages, their max LVR is only 45% and that is for someone at 90 yrs old. So property prices has to crash by more than half for that loan to make a loss. And weighted LVR is only 32.7%. If property prices go down by 68%.....

Harvey Specter

14-02-2014, 03:29 PM

However, I would have thought that risk are much smaller than conventional residential mortgages, their max LVR is only 45% and that is for someone at 90 yrs old. So property prices has to crash by more than half for that loan to make a loss. And weighted LVR is only 32.7%. If property prices go down by 68%.....The 45% LVR would be the drawdown. They interest is then capitalised to the loan, at a rate above floating. Should that 90yo live till they are 120, then they may well be able to envoke the no negative equity guarantee. Normally you would expect house price inflation to keep you safe but the oldies dont always look after their houses as well as they should.

winner69

14-02-2014, 03:42 PM

Did Quadrant (private equity) own a large chunk of Seniors?

Cool Bear

14-02-2014, 03:49 PM

The 45% LVR would be the drawdown. They interest is then capitalised to the loan, at a rate above floating. Should that 90yo live till they are 120, then they may well be able to envoke the no negative equity guarantee. Normally you would expect house price inflation to keep you safe but the oldies dont always look after their houses as well as they should.
A quick calculation - for negative equity after 30 years from an initial LVR of 45%, the interest charged or capitalised has to be more than 2.7%pa above the house price inflation rate.

Snoopy

14-02-2014, 05:00 PM

Shareholder
Information
Size of Holding Number of Shareholders Total Number of Shares % of Issued Shares

1–1,000 shares 1,064 650,147 0.17
1,001–5,000 shares 2,449 6,512,552 1.68
5,001–10,000 shares 1,433 10,856,025 2.79
10,001–50,000 shares 2,310 53,726,289 13.82
50,001–100,000 shares 506 36,190,334 9.31
100,001 shares and over 330 280,768,628 72.23
TOTAL 8,092 388,703,975 100%

Cool Bear, I can't improve on the formatting. But I think I can make the above table a little easier to follow

Shareholder
Information

Size of Holding, Number of Shareholders, Total Number of Shares, % of Issued Shares

1–100,000 shares (Scum Shareholders) 7762, 107,934,747, 27.77%
100,001 shares and over (Sophisticated Shareholders), 330, 280,768,628, 72.23%
TOTAL, 8,092, 388,703,975, 100%

Oh and a small change to one of the sophisticates

------

Rank Shareholder Total Shares % of Total Shareholders

4 PGG Wrightson Limited 13,333,333 3.43

------

PGW is not PGG Wrightson as you have assumed. They sold out last year. By a process of elimination the PGW in the shareholder list must be the 'Percy Greater Wealth' trust.

Not everyone on the shareholder list can be a Percy and participate in the $15m sophisticated investor placement. But even so I bet all the scum shareholders out there are none to happy over the favouring of the big boys in the upcoming capital raising!

SNOOPY

noodles

14-02-2014, 05:26 PM

But even so I bet all the scum shareholders out there are none to happy over the favouring of the big boys in the upcoming capital raising!

SNOOPY
i might have been a bit miffed if the placement was at a big discount, but at 88c, it is well priced. The bigger issue for me is whether hnz can make fy14 guidance.

I'm a scum shareholder.

pierre

14-02-2014, 05:56 PM

Bugger! Always thought I was sophisticated but missed out by one share. Oh well, never mind, scum often floats to the top so I guess that's some consolation.

Harvey Specter

14-02-2014, 06:05 PM

i might have been a bit miffed if the placement was at a big discount, but at 88c, it is well priced. The bigger issue for me is whether hnz can make fy14 guidance.

I'm a scum shareholder.placement at 88c, shares to the vendor at 90c and SPP capped at 88c.

The SPP will ensure the amount of scum continues to build:)

percy

14-02-2014, 06:37 PM

Paper Tiger;I trust you are safe and OK.
Winner69.I remain, as always, an unsophisticated punter,sorry investor.
I was expecting a modest $20 to $30 mil acquisition,so a $87mil certainly moves the goal posts a lot quicker.
To find a "niche" where they will be "a market leading position" is great news.With the ageing population it is very much a growing sector.[not keen on Aussie though].
Being on the road since 5.30 this morning means I missed all the action,with only a short time checking emails etc at Oamaru library.So nice to get home and catch up.
Paper Tiger.Good volume today?! lol.

Longhaul

14-02-2014, 07:25 PM

This from Sentinel's website:

"When it is time for you to leave your home our No Negative Equity Guarantee means that, so long as all conditions of the loan have been met, what you will be required to repay following your death or moving to permanent long-term care will not exceed the sales proceeds of the property."

I wonder what conditions are placed on the vendor when it's time to sell? How does Sentinel (now HNZ) control what is a fair price? Can my brother buy my house off me for $1, leaving Sentinel to take a large loss?

I'm sure this doesn't happen, but it would be good to know what prevents it.

noodles

14-02-2014, 07:57 PM

Being on the road since 5.30 this morning means I missed all the action,with only a short time checking emails etc at Oamaru library

Percy. Time to get a smart phone.

janner

14-02-2014, 08:06 PM

Percy. Time to get a smart phone.

Smart man.. Not allowed to use phone when driving :-))

Snoopy

16-02-2014, 04:54 PM

No funding problems eh?

What about when Heartland took over the PGW finance loans? Part of the deal was PGW had to subscribe new capital to Heartland to help shore it up before they would take any PGW Finance loans on. Even then Heartland wouldn't take on all the PGW Finance loans without a PGW guarantee on one difficult chunk of loans.

Still given Heartland have only been in existence in their current form for two years, I would argue that is not enough time to build an operational history either good or bad.

It is not great that Heartland have had any funding problems given their history is so short.

Just to remind people about the Heartland capital raising program so far:

"On 31 August 2011, the Company issued 23,257,528 new shares at $0.52 per share to existing shareholders under a share purchase plan, issued 34,164,396 new shares at $0.65 per share to underwriters of the share purchase plan, placed 4,615,385 new shares at $0.65 per share and placed 26,666,666 new shares at $0.75 per share to institutions and investors. The total new capital raised was $57,346,857."

Added to this is the DRP plan operating on the 1st October 2013, and for the earlier April 2013 dividend. Add to that the $20m of capital being raised for the purchase of Seniors Money International Limited (“SMI”), the dividend reinvestment plan for the April 2014 dividend. All in all quite a lot of capital being raised for a bank that ostensibly has plenty of capital....

SNOOPY

percy

16-02-2014, 05:03 PM

Had a look at market caps,to see what one can buy for the $87mil acquisition Heartland have made.
Came in between Turners Auctions, market cap$70.08mil, and Dorchester Pacific at $123.49 mil. Scott Technology is $73.49 mil.and AWF is $68.38mil.
So it is a substantial business.

vorno

16-02-2014, 05:03 PM

There appears to be a bug in this thread? I can't go past page 200.

winner69

16-02-2014, 05:08 PM

winner69

16-02-2014, 05:10 PM

There appears to be a bug in this thread? I can't go past page 200.

At this stage the thread doesn't goes past page 200 ...yet

They are just waiting to be filled up with meaningful posts

Bit confusing though preempting page numbers

Snow Leopard

16-02-2014, 05:34 PM

There appears to be a bug in this thread? I can't go past page 200.

I can not go back more that 3000 posts which for me is 150 pages

At this stage the thread doesn't goes past page 200 ...yet

They are just waiting to be filled up with meaningful posts

Bit confusing though preempting page numbers

Under General Settings is the option to set the number of posts per page so your view of the Sharetrader Universe can be different to other equally valid views. I for instance have chosen the newest first option so that newer posts are higher up the page.

Best Wishes
Paper Tiger

Snow Leopard

16-02-2014, 05:43 PM

Snoopy I only understand the point of your post if I assume that you do not understand the difference between funding ongoing operations and funding acquisitions.

Basic stuff

Best Wishes
Paper Tiger

percy

16-02-2014, 05:44 PM

janner

16-02-2014, 06:38 PM

Still think they will be paying 2.5 cents per share divie.

Would prefer they did not pay a Divie perc..

Those funds could have better use in their New Venture. IMHO..

percy

16-02-2014, 06:51 PM

Would prefer they did not pay a Divie perc..

Those funds could have better use in their New Venture. IMHO..

Well I have joined all those shareholders who have elected to go for dividend re-investment,yet I feel it is a good discipline that they pay a divie.Makes directors realise the point of being in business,ie they act on the owners behave.The owners can then chose cash or reinvest.

winner69

16-02-2014, 06:59 PM

The acquisition is making good use of the $28.3 mil Heartland had sitting in their "petty cash tin".
So the acquisition price is paid by $28.3 mil petty cash,Cap raising, modest, $20 mil and the issue of $38.7mil worth of shares to the vendor at 90cents per share.
Looking very good.
Now we have to watch that the eps grows.
Still think they will be paying 2.5 cents per share divie.

They said EPS accretive so EPS accretive it is

(Note record of companies saying eps accretive and not delivering doesn't seem that good ....but I know this time it is different)

Pity the share price wasn't over a buck .... would not have had to issue that many

percy

16-02-2014, 07:41 PM

EPS accretive is excellent news.!!!
The record shows they do what they say they will.
In an earlier post I said I was looking forward to an acquisition before the interim result announcement.Got it,!!!! and a lot better acquisition than I was expecting.
At $1.25 or more they would have issued even fewer.!!!

janner

16-02-2014, 08:09 PM

As usual perc.. You are correct.. I am in the DRP.. So my divie will be re-invested..

Those that invested for returns will be happy..

Shed a third late last year.. Not unhappy about that.. Made a good percentage ..

Will be looking to accumulate when full figures and facts come to light..

janner

16-02-2014, 08:15 PM

Oh !!.. Did you enter in this years comp Perc ??

:-)))))))))))))

percy

16-02-2014, 08:49 PM

Oh !!.. Did you enter in this years comp Perc ??

:-)))))))))))))

Yes coming 12th.That is the Australian comp.!!! lol. Embarrassed to look at the NZ comp.!!!!
Pleasing that you retained two thirds of your holding.Selling a third would have brought down your average cost nicely.
My average cost is increasing with each new purchase.

janner

16-02-2014, 08:58 PM

Yes coming 12th.That is the Australian comp.!!! lol. Embarrassed to look at the NZ comp.!!!!
Pleasing that you retained two thirds of your holding.Selling a third would have brought down your average cost nicely.
My average cost is increasing with each new purchase.

Yes it did perc.. It was in a channel 86 88 86 88 sold at 87..

Made a good percentage ( which it is what it is all about ).. on the re-investments..

Face it .. HNZ has gone up .05 cents at most since sale.. .87

$5000.. Made more than that..

BUT !!.. Time to re-consider.. Will be accumulating ;-)

percy

16-02-2014, 09:14 PM

Yes that channel went on for a very long time.At times so more sellers than buyers, even I got nervous.!!
And the old saying" time is the good company's friend" turned out to be so true.

janner

16-02-2014, 09:16 PM

Yes that channel went on for a very long time.At times so more sellers than buyers, even I got nervous.!!
And the old saying" time is the good company's friend" turned out to be so true.

Time to accumulate IMHO :-))

noodles

16-02-2014, 09:32 PM

winner69

16-02-2014, 09:41 PM

I surprised no one on this forum(not even snoopy) has commented on the half year result, 16.5 million.

This does not even put them on target for the lower end of the target range, 34 million.

Are hnz seasonal? If not, i fear a profit warning coming.

Stop upsetting the faithful ...they will get mad

HNZ said - Net profit after tax is expected to be around $16.5 million and in line with the forecast full year outcome of $34-$37 million for FY2014.

janner

16-02-2014, 09:42 PM

Has there been a half year result ??

Master98

16-02-2014, 09:58 PM

Snow Leopard

16-02-2014, 10:15 PM

I surprised no one on this forum(not even snoopy) has commented on the half year result, 16.5 million.

This does not even put them on target for the lower end of the target range, 34 million.

Are hnz seasonal? If not, i fear a profit warning coming.

Given the historical seasonality of Heartlands profit (over the last two years at least) we are surprised you have commented on the tentative first half result.

If the prior years 43%/57% profit split is maintained then the full year would be expected to be about $38m on this basis.
But of course we will have 3 months of this new stuff and 'one-offs' around the acquisition to muddy the waters a little :mellow:.

As for the first half dividend this will be paid on a larger number of shares (the $15M equity placement and effectively through the reduced price of the SPP shares) so I consider $0.02 to be the most likely amount.

Best Wishes
Paper Tiger

noodles

16-02-2014, 10:20 PM

Stop upsetting the faithful ...they will get mad

I thought i was part the faithful. Hnz is one my my longer held stocks. More than 6 whole months!

I also wish they would narrow the range. They made that forecast ages ago. Surely they must have a better idea now.

noodles

16-02-2014, 10:35 PM

Given the historical seasonality of Heartlands profit (over the last two years at least) we are surprised you have commented on the tentative first half result.

If the prior years 43%/57% profit split is maintained then the full year would be expected to be about $38m on this basis.

I'm not sure if the last 2 years can be relied on. There have been significant costs being taken out of the business including the banking licence effect. Obviously i need to dig into this a bit more.

EDIT: Ok digging more
Here are the last 2 year "Profit before impaired asset expense and income tax"

1h12
9400

2h12
19937

1h13
20200

2h13
16340

Definitely seasonality in FY12, but the opposite seasonality on FY13. It's all over the place.

EDIT:
Do I need to add 6.1 back to 2h13 to reflect the "prepaid expenses written-off as a result of the Change in Strategy. Specifically, the termination of the RECL management agreement as part of that Change in Strategy"?

Thus the new table is

1h12
9400

2h12
19937

1h13
20200

2h13
22440

This could indicate a seasonal bias, growth, or cost savings.

We can compare 1H14 (16500) with 1H13 by taking off tax 20200*.72= 14544.

This is good growth in profit. However, HNZ were not a bank until the end of 1h13.

There is also seasonality in Net Interest Income (NIO)
1h13 46,760
2h13 48,694
Fy13 95,454

This is slightly seasonal.

noodles

16-02-2014, 10:38 PM

I think at least PGW Finance is seasonal most of profit is from second half.
Thanks. Can anybody quantify this from a profit perspective? i've seen no comment on this in recent annual reports etc.

noodles

16-02-2014, 10:52 PM

Thanks. Can anybody quantify this from a profit perspective? i've seen no comment on this in recent annual reports etc.

Something from the 1h13...

"Rural The low seasonal demand in livestock trading reflectedminimal growth in the rural receivables book – an increaseof $2m. NOI was $11.5m, an increase of $3.6m from thePrevious Corresponding Reporting Period due to a full sixmonths’ earnings from the PWF book.
On an average balance comparison, the rural receivablesbook grew for the Current Reporting Period compared tothe year ended June 2012. "

But looking at last year:
1H13 Rural interest income =23545
FY13 Rural interest income =45762

So no real seasonality there. Maybe I just don't know how to interpret the results?

Snow Leopard

17-02-2014, 12:10 AM

I'm not sure if the last 2 years can be relied on. There have been significant costs being taken out of the business including the banking licence effect. Obviously i need to dig into this a bit more.

EDIT: Ok digging more
Here are the last 2 year "Profit before impaired asset expense and income tax"

1h12
9400

2h12
19937

1h13
20200

2h13
16340

Definitely seasonality in FY12, but the opposite seasonality on FY13. It's all over the place.

Now if you were Snoopy I would invoke Note 36(e) [2013FY Financials] on you :scared:. This adds back in another $6M1 to your 2h13 figure.
But you are not so I will not :).

I understand that Snoopy is busy staring at the 'Significant Reduction in Non‐Core Property' slide of the Acquisition Presentation and trying to find an interpretation that fits his belief.

Best Wishes
Paper Tiger

noodles

17-02-2014, 12:34 AM

Now if you were Snoopy I would invoke Note 36(e) [2013FY Financials] on you http://www.sharetrader.co.nz/images/smilies/scared.gif. This adds back in another $6M1 to your 2h13 figure.

Thanks PT,
I did find the 6.1mill eventually. See my recent edits to the post.
I'm glad the volcano has not affected your insightful posts.
Cheers,
Noodles

percy

17-02-2014, 07:00 AM

Has there been a half year result ??

Half year result will be announced on Tuesday 25th February,so not far away.

winner69

17-02-2014, 08:37 AM

Xerof

17-02-2014, 08:51 AM

HeartstarterBank?
:cool:

This seems like a good bolt on product. But with market dominance already established, where will growth come from. I didn't see any mention of it in the ann

noodles

17-02-2014, 08:52 AM

So 'many' of our depositors are old, the ageing demographics are a compelling case to enter the HER market (and most of our shareholders are ageing)

Is HNZ moving to position themselves as the old folks Bank?

Absolutely, Heartland sponsors the National Bowls Championships

percy

17-02-2014, 10:01 AM

So 'many' of our depositors are old, the ageing demographics are a compelling case to enter the HER market (and most of our shareholders are ageing)

Is HNZ moving to position themselves as the old folks Bank?

HNZ are going to where the money is [and big profits].!!
Watch for a change on name in your bank, as they follow suite "Geriatric Co-Op Pensioner's Bank." !!

Jay

17-02-2014, 11:17 AM

I did see adverts (on TV) on the field side hoardings at eden park NRL 9's in the weekend - not so many "oldies" there I would have thought
Good to get their name out there

Captain Dan

17-02-2014, 12:34 PM

An article on Interest.co.nz this morning below for those who can't log-in to view it. Seemingly good news regarding the legacy property portfolio, but looking forward to confirmation that the contracts are unconditional.

Heartland boss Jeff Greenslade confident victory over dud legacy property portfolio is near (http://www.interest.co.nz/simplenews/statistics/click?p=eNoBu1wwRP9zOjE3ODpcIn7lAn0bB2huu5xOTvjNOz rZKlwiVrUHCClcMFOphWjTkc9cXJ33-XfV-HPgQ7nCYzNswWFHXaCIsJpBvxRMw9sSFPsgQ4WSe78_S0GAaBr pXSanj7r4N4bGTZLm8PtlmaRyYXR6rcG48eSxejnoOD8_0Pv5n 4ZcMFu4Ulwi12bRnk-3z_uHkoKhMqnyZKgx5uZ7eyDaZcpbwkVbxW2XyZYNxug3dw-cwCm9RM25Ee7wPezzrUsq8lwiO2_NYDY,&h=eNortjI2slIyTjRONjQwS7I0NzFMNTJPSUxMMk5JtUhNNk8x NjIwNlSyBlww2swKqg,,) Gareth Vaughan, 0 comments

By Gareth Vaughan
Heartland Bank CEO Jeff Greenslade appears confident victory has been won over the bank's dud legacy property portfolio.
Geeenslade told interest.co.nz that, if conditional contracts come to fruition, Heartland will only have to use $5 million of a $15 million provision for the loans by June 30. Heartland had been able to shift the assets "quite effectively," he said.
"You may recall we set up a provision of just under $15 million to assist in this process. If all those conditional contracts come to fruition by the end of June, we will have only tapped into $5 million out of that $15 million. That’s ahead of expectations," Greenslade said.

"Pleasingly for us the impairment line is no longer the one to watch out for."
The non-core property portfolio comprises loans and investment properties inherited from Marac Finance when the previously Pyne Gould Corporation (PGC) owned finance company merged with building societies CBS Canterbury and Southern Cross Building Society to create Heartland in January 2011. The portfolio was valued at $107.4 million at June 30 last year.

Last June Heartland revealed a $24 million hit because of the property portfolio. This stemmed from a one-off non-cash asset write-down of $18 million before tax, plus a pre-tax hit of $6 million from writing off the balance of an $11 million fee being paid to a unit of the George Kerr controlled PGC as management of the portfolio was brought in-house. (http://www.interest.co.nz/simplenews/statistics/click?p=eNoBulwwRf9zOjE3NzpcIn7lAn0bB2huu5xOTvjNOz rZKlwiVrUHCClcMFOphWjTkc9cXJ33-XfV-HPgQ7nCYzNswWFHXaCIsJpBvxRMw9sSFPsgQ4WSe78_S0GAaBr pXSanj7r4N4bGTZLq8vxmmaNnaWhnrs77_ayyZz73dDs-m_-1lp8WE7VTK9Jr1tpAsdXkw5GIqjWp6GSlIKTzZzk9y2WVHcNCT cV1k8WSHZK1KHAOiIgru1KQrAzo_Xbl86FXb1wiO9e6Xb8,&h=eNortjI2slIyNLJIM7dMNjZOM7Q0NjVLNTQxT0k2M0kyMk4x MDQyS1WyBlwwzRwJ_w,,)
'Even the ugly stuff is shifting'
At that time Heartland said the loan portfolio had been split into three categories labelled "performing", "accelerating" and "extend". Performing loans or assets would be held unless an attractive offer was received, the stuff classed as "acceleration" would be exited within 18 months, and loans in the "extend" portfolio would be converted over time to real estate to be better positioned for sale and held for up to five years.
"Even the rump, which is the bad stuff which was $11 million when we started, we’ve got that down to $7 million" Greenslade said. "We thought that was the bit we were going to be left with. So even the ugly stuff is actually shifting."
Charts provided by Heartland in its reverse equity mortgage deal presentation (see below) detail progress with the portfolio. As of June 30 last year the portfolio was valued at $122.3 million, excluding general provisions of $14.9 million. Based on conditional contracts, the portfolio is forecast to be valued at $67.9 million at June 30 this year. The drop in value sees its "rump" decline from $11.1 million to $7 million, the "performing loans" rise slightly in value to $28.9 million from $28.6 million, and the "for sale" portion fall to $32 million from $82.5 million.
High capital requirements 'something to think about'
Meanwhile, Greenslade said Heartland was "comfortable" with its Reserve Bank capital requirements being higher than those for other banks, but this would be something "we will be thinking about in the future."
Heartland's conditions of bank registration set out that it must have a minimum total capital ratio equivalent to 12% of total risk-weighted exposures, minimum tier one capital ratio of 12%, and common equity tier one capital ratio of 10%. Other banks have a minimum total capital ratio of 8%, minimum tier one capital ratio of 6%, and minimum common equity tier one capital ratio of 4.5%.
"We’re comfortable where we are, it hasn’t caused us any problems," Greenslade said. "And I think generally speaking all banks are going to be carrying more capital going forward, so we don’t feel alone in that regard."
"That is something between us and the Reserve Bank but that’s not an issue right now."

Since January 1 this year banks also require a buffer ratio for common equity tier one capital of at least 2.5%. This buffer ratio is described by the Reserve Bank as a counter-cyclical capital buffer that can be applied in times of excessive credit growth. It's part of the Reserve Bank's version of the global Basel III bank capital adequacy standards, which have been endorsed by the G20. Heartland isn't required to maintain this buffer.
Heartland provided the following chart (from here (http://www.interest.co.nz/simplenews/statistics/click?p=eNoBklwwbf9zOjEzNzpcIn7lAn0bB2huu5xOTvjNOz rZKlwiVrUHCClcMFOphWjTkc9cXJ33-XfV-HPgQ7nCYzNswWFHXaCIsJpBvxRMw9sSFPsgQ4WSe78_S0GAaBr pXSW8lK_uapbaBMWrqb950KV7ZXUhicW3572_dCT_MGdq3_Oin YcRUaQEfIZyxtZfvc_pj4KOoCiq9GmtXCI7k5JIuA,,&h=eNortjI2slKyTLOwNDMxMzI0Nk9ONrYwNzA3MTNINjQ1TUk1 MEk2T1SyBlwwxxsJ2A,,)) on the reduction of its non-core property holdings
file:///C:\Users\dah\AppData\Local\Temp\msohtmlclip1\01\cl ip_image001.gif
Heartland says both the June 30, 2014 forecast and the value of its total property book at December 31, 2013 are based on conditional contracts.
The value of its total property book given above excludes general provisions of $14.9 million at June 30, 2013), $12.1 million at December 31, 2013, and about $10 million at June 30, 2014.

Banksie

17-02-2014, 02:13 PM

Confirmation that the planned acquisition has no affect on their Standard & Poor and Fitch credit ratings.
https://www.nzx.com/companies/HNZ/announcements/247068 (https://www.nzx.com/companies/HNZ/announcements/247068)

Fitch give a nice summary of what they perceive as the potential risks:

As most of New Zealand's population holds its wealth and future pension in property, Fitch believes there is reasonable potential for further growth. Potential risks are mostly, but not exclusively, of an operational nature. HBL has put in place tight guidelines to limit these risks and protect its reputation. Fairly strict loan-to-value (LVR) limits should protect HBL from any potential house price corrections. However, longer life expectancy could create repayment pressure.

As the transfer will take place over time, the impact on HBL's capital should be manageable, and Fitch expects HBL will improve its retained earnings. The loan book is well seasoned and diversified, with Sentinel's average LVR standing at 32.7% in December 2013

winner69

17-02-2014, 06:30 PM

Mike what's his name on his weekly note on chrislee.co.nz is suggesting inside trading / leaks last week that saw the rise in hnz shares

Probably came from other side as hnz run a really tight ship

Harvey Specter

17-02-2014, 07:59 PM

Mike what's his name on his weekly note on chrislee.co.nz is suggesting inside trading / leaks last week that saw the rise in hnz shares

Probably came from other side as hnz run a really tight shipWould have been lots of professional firms involved too -2 accountants, lawyers, investment banks - each with a big team.

1leon

17-02-2014, 10:44 PM

Would have been lots of professional firms involved too -2 accountants, lawyers, investment banks - each with a big team.
With $15m going in placements there plenty are more than professional advisers involved.

percy

18-02-2014, 12:01 PM

http://www.interest.co.nz/personal-finance/68502/heartland-boss-says-constraints-reverse-equity-mortgages-nz-have-been-supply-

Surfersteve,
thank you for posting the very interesting article.Reading it together with the Heartland presentation on the acquisition makes me think the acquisition is a cracker.!

percy

18-02-2014, 12:38 PM

we are looking at putting up a new kind of forum which combines data and forums where the threads are based on a system that filters content based on types, if a posting is considered to be utter rubbish by the members it is voted on. statistical information content is not voted on but general rubbish is voted on and its type if not statistical is then ranked into a lower display type and can then be filtered out by members creating there own views of the forums where the junk can be removed to a lower lever of display... i very rarely come on these forums as the content is simply to varied... so often i just post a silly thread and remove it when protest mounts ... :)

I lost a lot of money and my confidence during GFC.
Posters on NZ thread such as Phaedrus,Papertiger, Lizard,Ratkin,Winner69,Xerof,StrangerDanger,Sauce, Forest,Balance,Roger, and others have helped me regain both my confidence and my money.I will also mention the fantastic help I have received on Australian threads.
Yes,some of the recent posters are a concern [some I don't read],yet overall I think I am still learning and making money by reading most posts.
What does concern me is the posters who leave after being subjected to stupid comments.

percy

18-02-2014, 01:43 PM

Offcourse I forgot to thank Sparky The Clown and Belgarion and the many others whom I have learnt so much from.

Master98

18-02-2014, 01:44 PM

what is figure of NTA after accquition? i guess would be between $0.95-$1.0.

Master98

18-02-2014, 02:11 PM

Thanks Snoopy's detailed and high level analysis of HNZ financial position give me more confidence of buy in this stock again, methinks HNZ should worth of at least 90 cps if 2014 earnings guidance of 34m-37m is true. Finger Cross.

I know Snoopy is not your guys favourite, but his thinking from different angle did valueable, I bought into HNZ at $0.85 and did enjoy my decision.

Snow Leopard

18-02-2014, 02:12 PM

what is figure of NTA after accquition? i guess would be between $0.95-$1.0.

Edited because I got the original NTA wrong by about 4cps :blush: (Deferred tax asset is not tangible?)

I think that is too high.

NTA at 30 June 2013 was about $0.85 (originally said $0.89!)
Add in $16.5M profit 4.2cps and subtract the 2.5cps dividend and call it $0.87 at 31 Dec 2013

So roll forward another three months to 31 Mar 2014 and say 2.1cps profit and subtract 2c dividend paid (cash and new shares) so still $0.87 ish.

Acquistion is a swap of cash for other assets possibly including some goodwill?

So call it around $0.87.

Roll forward again to 30 Jun 2014 and add another 2.1c profit and NTA will be $0.88 to $0.90

Best Wishes
Paper Tiger

Master98

18-02-2014, 02:27 PM

I think that is too high.

NTA at 30 June 2013 was about $0.89
Add in $16.5M profit 4.2cps and subtract the 2.5cps dividend and call it $0.91 at 31 Dec 2013

So roll forward another three months to 31 Mar 2014 and say 2.1cps profit and subtract 2c dividend paid (cash and new shares) so still $0.91 ish.

Acquistion is a swap of cash for other assets possibly including some goodwill?

So call it around $0.91.

Roll forward again to 30 Jun 2014 and add another 2.1c profit and NTA will be $0.93 to $0.94

Best Wishes
Paper Tiger

the vendor will buy $38m HNZ shares at 90cps,that's capital injection.

Harvey Specter

18-02-2014, 02:35 PM

the vendor will buy $38m HNZ shares at 90cps,that's capital injection.But also shares issued.

Snow Leopard

18-02-2014, 02:49 PM

the vendor will buy $38m HNZ shares at 90cps,that's capital injection.

Sorry perhaps I should have said "Acquistion is a swap of cash and new shares for other assets possibly including some goodwill?"

I doubt whether the new shares are getting more than $0.90 of new net tangible assets each and with 65M new shares adding to the existing 392M it is not going to drop the overall NTA much (hopefully!)

Best Wishes
Paper Tiger

winner69

18-02-2014, 02:49 PM

Wasn't NTA June 13 only 85 cents

Snow Leopard

18-02-2014, 03:08 PM

Wasn't NTA June 13 only 85 cents

Damn! They did say that didn't they? - so knock 4c off all my NTA numbers then: instead of $0.93 to $0.94 lets us say $0.88 to $0.90.

Update: amended original calculation post. I am so ashamed at myself for getting it wrong - I will never be sarcastic to Snoopy ever again this week. ;)

Best Wishes
Paper Tiger

percy

18-02-2014, 03:22 PM

I am happy with NTA of 88cents to 90 cents.

winner69

18-02-2014, 04:21 PM

So for those who believe NTA drives the share price the acquisition does nothing

So hope becomes the strategy .....hope that hnz will trade at a decent premium to NTA ...is hope a strategy?

percy

18-02-2014, 04:21 PM

should get our PGC money back in say 10 years? Thats the time im holding for here on this one

Yes certainly on track.
Interestingly enough, director Bruce Irvine told me he paid about $5 for some PGC shares.So he has a lot of skin in the game to.Must admit I am well in the money by buying the majority of my shares at about 53 cents.My average cost is quickly increasing with more recent purchases.I find adding to my winners is paying off really well.

janner

18-02-2014, 05:25 PM

Yes certainly on track.
.I find adding to my winners is paying off really well.

I lost a lot of money and my confidence during GFC.

Come on perc.. You remember the 87 fiasco.. To go again in 08 !!!... Hmmmm..

Piling money into " Winners ".. ( Sorry 69 ) is not the best strategy...

When are you going to get out of Xero :--))

there are Newbies watching this very good site..

I think you mean .. Placing more into Proven Companies .. Al HNZ..

Oops Snoopy is now going to say that they have not Proven themselves..

But they are a far better long term bet than Equity Corp :-)

Disc.. Burnt by Equity Corp et al.. Learnt a little from that..

Snoopy

18-02-2014, 05:34 PM

Heartland provided the following chart (from here (http://www.interest.co.nz/simplenews/statistics/click?p=eNoBklwwbf9zOjEzNzpcIn7lAn0bB2huu5xOTvjNOz rZKlwiVrUHCClcMFOphWjTkc9cXJ33-XfV-HPgQ7nCYzNswWFHXaCIsJpBvxRMw9sSFPsgQ4WSe78_S0GAaBr pXSW8lK_uapbaBMWrqb950KV7ZXUhicW3572_dCT_MGdq3_Oin YcRUaQEfIZyxtZfvc_pj4KOoCiq9GmtXCI7k5JIuA,,&h=eNortjI2slKyTLOwNDMxMzI0Nk9ONrYwNzA3MTNINjQ1TUk1 MEk2T1SyBlwwxxsJ2A,,)) on the reduction of its non-core property holdings
file:///C:\Users\dah\AppData\Local\Temp\msohtmlclip1\01\cl ip_image001.gif
Heartland says both the June 30, 2014 forecast and the value of its total property book at December 31, 2013 are based on conditional contracts.
The value of its total property book given above excludes general provisions of $14.9 million at June 30, 2013), $12.1 million at December 31, 2013, and about $10 million at June 30, 2014.

All looks good but struggling to see how this reduction in bad property debt ties in with the credit risk grading segmentation shown in the annual report (note 37d).

The Heartland press release dated 14th February 2014 (page 5) has reclassified assets into "specialized and low contestability", "bank overlap" and "non-core property". The notes at the bottom of the graph define "bank overlap" as "residential mortgages and 50% of business and rural".

The "non-core property" includes "investment properties". But in the annual report the investment properties are separated out and the remainder are mixed into the 'judgement portfolio' in an unspecified way.

I am always suspicious when the basis of comparison is changed between reporting periods. You can't help wondering what whoever did it might be trying to hide.

Move on to page 6 and we can see the 'bad rump' has reduced by $1.9m as at December 31st and the 'for sale group' has reduced by $21.4m, all since the 30th June balance date. That is good but what does it mean? Has $21.4m + $1.9m of underlying equity been freed up for new investments? Or has one form of income stream potentially made way for another? Many questions, but that will do for now.

SNOOPY

Snow Leopard

18-02-2014, 05:45 PM

All looks good but struggling to see how... ...Many questions, but that will do for now.

SNOOPY

...I will never be sarcastic to Snoopy ever again this week. ;)...

I am a Tiger of my word.

Best Wishes
Paper Tiger

percy

18-02-2014, 06:30 PM

Come on perc.. You remember the 87 fiasco.. To go again in 08 !!!... Hmmmm..

Piling money into " Winners ".. ( Sorry 69 ) is not the best strategy...

When are you going to get out of Xero :--))

there are Newbies watching this very good site..

I think you mean .. Placing more into Proven Companies .. Al HNZ..

Oops Snoopy is now going to say that they have not Proven themselves..

But they are a far better long term bet than Equity Corp :-)

Disc.. Burnt by Equity Corp et al.. Learnt a little from that..

I like to do my research before buying any company.Saves any nasty surprises.
Once I have a holding, I then watch the company to make sure they are doing what I thought they would do.If they do something I don't like I sell.Should they do what I thought they would do,I hold.Should they perform better than I thought they would do,I buy more.!!
.

janner

18-02-2014, 06:52 PM

I like to do my research before buying any company.Saves any nasty surprises.
Once I have a holding, I then watch the company to make sure they are doing what I thought they would do.If they do something I don't like I sell.Should they do what I thought they would do,I hold.Should they perform better than I thought they would do,I buy more.!!

.

Old age and cunning will always win through aye perc ??

percy

18-02-2014, 06:55 PM

Old age and cunning will always win through aye perc ??

I think we are getting there.A great team.My old age,your cunning.!!!
"Poised."!!

janner

18-02-2014, 07:04 PM

I think we are getting there.A great team.My old age,your cunning.!!!
"Poised."!!

Hahaha.. Wrong way around Perc.. but this is not the site to discuss that ;-

A room some where some time :-))

Harvey Specter

19-02-2014, 08:36 AM

Quick Q guys. I've had a quick look through the details of the SPP and I just want to confirm that if you hold any number of shares, you are entitled to apply for $15k worth at 0.88c? My main question relates to any kind of minimum holding in order to be eligible? Thanks in advance.
I dont think the detail has been released but going on other companies SPP, provided you hold more than the minimum amount (ie about $500) you should be fine. Remember however that you may not get your full $15k worth. Looking at the current shareprice, the SPP is a great offer so expect it to be many times oversubscribed based on shareholder numbers, and thats before speculators like you buy in $500 worth to apply for the full amount. ;)

Note that even a the minimum application ($2500), if all shareholders apply, it will need to be heavily scaled!!!

zigzag

19-02-2014, 12:26 PM

According to the presentation. the SPP closes on 18 February. i.e. Yesterday.

zigzag

19-02-2014, 12:34 PM

When ABA had their SPP a while ago, it was scaled back in proportion to the number of shares held on the record date. This is a lot fairer, because it means people can't just pick up a minimum holding, and go for the max. amount under the SPP. Like these people are jumping the queue. Not that I actually blame them as I have taken advantage of this situation myself in the past.

percy

19-02-2014, 12:36 PM

According to the presentation. the SPP closes on 18 February. i.e. Yesterday.

That should have read Placement,not SPP.
SPP dates;
25th Feb, Shares ex SPP.
27th Feb, Record date.
28th Feb, opening date.
18th March, closing date.
20th March, SPP price announced.
25th March,Allotment date.

zigzag

19-02-2014, 12:38 PM

That should have read Placement,not SPP.
SPP dates;
25th Feb, Shares ex SPP.
27th Feb, Record date.
28th Feb, opening date.
18th March, closing date.
20th March, SPP price announced.
25th March,Allotment date.

Yeah. I figured that Percy. I am just nit-picking.

percy

19-02-2014, 12:46 PM

Yeah. I figured that Percy. I am just nit-picking.

Not like you.
Trust you are going along to NZ Shareholders Assn meeting tonight to hear Jeff Greenslade's presentation?

RTM

19-02-2014, 01:25 PM

So I guess I just sit back and Heartland will send me the appropriate paperwork ?
Or do I need to go and look for something ?
Does anyone here have a quick answer.....don't want to miss out.
Thanks in advance.

stoploss

19-02-2014, 01:38 PM

winner69

19-02-2014, 06:42 PM

Interest.co.nz

Nothing like a bit of competition ....everybody might win

First NZ Capital suggests niche player Heartland Bank faces competition from big banks looking to replace earnings lost due to LVR restrictions

http://www.interest.co.nz/business/68535/first-nz-capital-suggests-niche-player-heartland-bank-faces-competition-big-banks-loo

Can't elaborate as haven't paid the 365 bucks togetthissort of info

SimonHouse

19-02-2014, 07:51 PM

At the NZSA meeting. Jeff Greenslade gave a great presentation. Very confident and upbeat. Impressive how they exited uncompetitive mortgages and now sell profitable Kiwibank mortgages with commission and trail income. Strong variable cost model. Simon Owen their CFO also spoke well. Non core properties looking much much better. More business with higher margins now. Asset quality is much better, impairment ratio decreasing

SCOTTY

19-02-2014, 08:47 PM

percy

20-02-2014, 07:10 AM

noodles

20-02-2014, 08:47 AM

Snoopy

23-02-2014, 03:30 PM

Just to remind people about the Heartland capital raising program so far:

"On 31 August 2011, the Company issued 23,257,528 new shares at $0.52 per share to existing shareholders under a share purchase plan, issued 34,164,396 new shares at $0.65 per share to underwriters of the share purchase plan, placed 4,615,385 new shares at $0.65 per share and placed 26,666,666 new shares at $0.75 per share to institutions and investors. The total new capital raised was $57,346,857."

Added to this is the DRP plan operating on the 1st October 2013, and for the earlier April 2013 dividend. Add to that the $20m of capital being raised for the purchase of Seniors Money International Limited (“SMI”), the dividend reinvestment plan for the April 2014 dividend.

While rear vision mirror analysis is interesting, far more important is what is happening out of the front windscreen. On 17th December 2012 Heartland achieved bank registration. But the earliest reference to becoming a bank was some time around May 2011, when what was to become Heartland was still called Building Society Holdings. Just because Heartland became a bank on 17th December 2012, doesn't mean it was structurally deficient to become a bank on 16th December 2012. All of the necessary balance sheet requirements must have been with the Reserve Bank much earlier than that. The latest published officially available figures to the Reserve Bank were those on 30th June 2012. So I think it is a reasonable assumption that the Reserve Bank were in retrospect happy with the balance sheet at that time.

Why is the above of interest? Because management are not silly and they will have made sure the latest acquisition has not upset Heartland Bank's creditworthiness with the Reserve Bank. So perhaps a little reverse engineering of the figures related to the purchase Sentinel New Zealand (Sentinel) and Australian Seniors Finance (ASF) businesses, with combined assets of approximately NZ$760m might give us a good over the shoulder look of what looks OK in the mind of a Reserve Banker.

SNOOPY

percy

23-02-2014, 03:56 PM

Go to the top of the class.!
Don't take your books as you will be back. lol.

Snoopy

23-02-2014, 04:02 PM

Management are not silly and they will have made sure the latest acquisition has not upset Heartland Bank's creditworthiness with the Reserve Bank. So perhaps a little reverse engineering of the figures related to the purchase Sentinel New Zealand (Sentinel) and Australian Seniors Finance (ASF) businesses, with combined assets of approximately NZ$760m might give us a good over the shoulder look of what looks OK in the mind of a Reserve Banker.

Most of the relevant information is on page 27 of the February 2014 investor presentation:

------

Acquisition price $87m
First full year NPAT from acquisition ~$8‐9m
Integration costs ~$2m (post tax)
HNZ forecast FY14 NPAT $34‐$37m
HNZ forecast FY15 NPAT (after acquisition costs and expenses associated with integration) $42‐44m

-----

I note that if you add the first full year NPAT of $8m to $9m from the acquisition onto the FY2014 NPAT of $34-$37m you get $42m to $43m. This is very close to the $42m-$44m that Heartland is forecasting for FY2015.

The date for the settlement of the purchase is 1st April 2014. That means that FY2014 will only carry 3 months of earnings from this acquisition. I do note that the Heartland forecast of a profit of $34m to $37m for FY2014 was made as early as 5th June 2013, well before the Home Equity Release Portfolio acquisition. So that means the Home Equity release business will contribute a net nothing to the Heartland FY2014 result (underlying quarterly earnings of $8m/4= $2m, less $2m integration costs, so it all adds up).

OK, so forecast for NPAT for FY2014 is unchanged by acquisition. Incremental earnings of new division fully account for profit growth expected in FY2015. That means net underlying growth in FY2015 for the existing Heartland business, as forecast by Heartland themselves is nothing at all.

SNOOPY

noodles

23-02-2014, 04:10 PM

That means net underlying growth in FY2015 for the existing Heartland business, as forecast by Heartland themselves is nothing at all.

Snoopy, The Heartland FY15 forecast is qualified with the following statement...
"Heartland’s forecast for FY2015 is yet to be finalised and more detailed financials will be available sometime following settlement of the acquisition."

So it could mean that some underlying growth will be added.

noodles

winner69

23-02-2014, 04:26 PM

Most of the relevant information is on page 27 of the February 2014 investor presentation:

------

Acquisition price $87m
First full year NPAT from acquisition ~$8‐9m
Integration costs ~$2m (post tax)
HNZ forecast FY14 NPAT $34‐$37m
HNZ forecast FY15 NPAT (after acquisition costs and expenses associated with integration) $42‐44m

-----

I note that if you add the first full year NPAT of $8m to $9m from the acquisition onto the FY2014 NPAT of $34-$37m you get $42m to $43m. This is very close to the $42m-$44m that Heartland is forecasting for FY2015.

The date for the settlement of the purchase is 1st April 2014. That means that FY2014 will only carry 3 months of earnings from this acquisition. I do note that the Heartland forecast of a profit of $34m to $37m for FY2014 was made as early as 5th June 2013, well before the Home Equity Release Portfolio acquisition. So that means the Home Equity release business will contribute a net nothing to the Heartland FY2014 result (underlying quarterly earnings of $8m/4= $2m, less $2m integration costs, so it all adds up).

OK, so forecast for NPAT for FY2014 is unchanged by acquisition. Incremental earnings of new division fully account for profit growth expected in FY2015. That means net underlying growth in FY2015 for the existing Heartland business, as forecast by Heartland themselves is nothing at all.

SNOOPY

That's how I read it the first time as well.

Didn't say anything cause everybody was excited and didn't want to get Percy thinking h should delete himself from Sharetrader (like packing a sad like Sparky)

Nothing at all is ZILCH Snoopy but maybe not as all bad as it seems.

Could be 2014 HNZ is 34m (lower end) and acquisition delivers 6m (8m less costs 2m) giving 40m .....meaning HNZ profit could be up 2m to 4m

Maybe a profit downgrade hidden in this - even though the Nuplex man says coming in at lower end of guidance is NOT A PROFIT DOWNGRADE

I think we both go to bottom of class again

Snoopy

23-02-2014, 04:28 PM

Most of the relevant information is on page 27 of the February 2014 investor presentation:

------

Acquisition price $87m
First full year NPAT from acquisition ~$8‐9m
Integration costs ~$2m (post tax)
HNZ forecast FY14 NPAT $34‐$37m
HNZ forecast FY15 NPAT (after acquisition costs and expenses associated with integration) $42‐44m

Please forgive my foray into reflecting on the rest of Heartland into FY2015. Back to the acquisition.

From page 29 of the February 2014 presentation:

----

The acquisition consideration of NZ$87m is being funded by Heartland:

• To the extent of NZ$48.3m in cash. Heartland is conducting a capital raising of $20m (via a Placement and SPP) to
partially fund the NZ$48.3m cash component and will fund the balance with existing balance sheet cash; and
• By issuing 43m shares to the vendor at a price of $0.90 each. All shares issued to the Vendor are subject to a minimum
12 month lock‐up escrow arrangement

Heartland has this morning successfully completed a NZ$15m equity placement.

--------

43m shares at 90c works out at $38.7m in share value. Add the $48.3m in 'cash' being paid to the seller and I get $87m, the acquisition consideration.

Heartland say they are funding the $28.3m cash component of their purchase over and above the $20m capital raising from existing cash (by definition surplus or the Reserve bank would not allow them to do it) on their balance sheet.

Now go back to page 14 of the February 2014 acquisition presentation. The portfolio size is listed as $NZ340m plus $A380m ($NZ420m at prevailing exchange rates). So the total in $NZ terms is around $760m.

The underlying capital used to support this acquisition is $NZ87m.

So the loan value to underlying capital ratio is $87m/$760m= 11.4%

Given that Heartland has undertaken to maintain capital at somewhere near this ratio anyway, and given that the rest of Heartland is by their own forecast not growing, where is the capital going to come from if they want to expand the reverse mortgage side of the business?

SNOOPY

winner69

23-02-2014, 04:30 PM

Snoopy, The Heartland FY15 forecast is qualified with the following statement...
"Heartland’s forecast for FY2015 is yet to be finalised and more detailed financials will be available sometime following settlement of the acquisition."

So it could mean that some underlying growth will be added.

noodles

Why bother even come up with a guidance then?

Did say eps accretive so must be OK ... But on these numbers might add 0.1 cents to eps if you round upwards.

percy

23-02-2014, 04:38 PM

winner69

23-02-2014, 04:50 PM

And no doubt the 2014 numbers will include a part year for Sentinel so everything will all get mixed and people will analyse to death what grew and what contributed and what was one off or non-recurring and all that sort if crap.

The only number you can tie them down to is this EPS accretive promise.at least this takes into account the 60m new shares.

I give the benefit of the doubt and will assume they would have made $35.7m this year (no acquisition). That is 9.1 cents per share (not counting new shares the other day)

Anything less than this in 2015 (I'll forgive them fr 2014) means the EPS claim was rubbish.

But then again we will get into time weighted average number of shares to calculate EPS and that can hide a few sins anyway

Maybe just grin and bear it and don't worry about things. It'll all turn out OK

winner69

23-02-2014, 04:58 PM

I am not buying into this argument.!!
Forecasts over one year out are "pie in the sky" to me.
What I see is Marac,PGWFinance being joined by another substantial business,Sentinel.This purchase adds bulk to Heartland.
Two very strong parts of Heartland being joined by a third strong part.
Heartland just got a lot better.Good businesses [which these are] in growing sectors, will reward shareholders,this year,next year,and for years to come with increasing dividends.
Well done Heartland.Great acquisition.

I hear what you saying Percy - there is more to the future than one years forecast eh

However with all due respect you have quoted the 34m to 37m forecast many times to remind us all what wonderful progress HNZ is making. That didn't seem "pie in the sky" to you

Never mind .....this time next year HNZ will be touting $55m for 2016. That be good news eh

percy

23-02-2014, 05:40 PM

.

So the loan value to underlying capital ratio is $87m/$760m= 11.4%

Given that Heartland has undertaken to maintain capital at somewhere near this ratio anyway, and given that the rest of Heartland is by their own forecast not growing, where is the capital going to come from if they want to expand the reverse mortgage side of the business?

SNOOPY
So $10mil net profit will allow Sentinel to grow loan book by approx. $90mil.[which from memory is the amount they said they intended to grow the book by per year.]
As Heartland's net profit will be nearly four times this amount,they may decide to grow the loan book even more.!!

Xerof

23-02-2014, 06:33 PM

Exactly, percy, exactly

Snoopdog, compounding retained earnings is a powerful leverage tool

you should always leave a couple of those dog biscuits in your foodbowl

:D

Snow Leopard

24-02-2014, 03:26 AM

See Slide 11 of the recent acquisition presentation (http://www.heartland.co.nz/_upload/news/Investor%20Presentation%20140022013.pdf)

Heartland New Zealand Limited, known to its friends and shareholders as HNZ, is not a bank, but it does own one (via a not shown intermediary company).

This new HER stuff will exist outside of the bank and its subsidiaries, at least initially.

HNZ purchased $30M5 of NZ HER Loans in December 2013 (footnote on slide 9 & 14) which should thus be in the Dec 2013 half year accounts for HNZ due to be released soon, but may not be obvious.

It is unlikely that the HER Loans will appear anywhere in the Dec 2013 Disclosure Statement for Heartland Bank, as presumably they are not held by the banking group.
Once HER Loans are brought into the banking group we will find what the Risk Weighting of such assets is and thus what capital backing they need.

The future guidance suggests that this years result will be at the lower end of that $34M to $37M range.

I am not at all sure that I understand the rational for buying the Australian bit.

Best Wishes
Paper Tiger

noodles

24-02-2014, 07:46 AM

I am not at all sure that I understand the rational for buying the Australian bit.

Best Wishes
Paper Tiger

Jeff said the Aussie part came as part of the deal. Could not have acquired nz on its own. He did follow-up by saying that the business was very good. Cash flow positive.

percy

24-02-2014, 07:53 AM

Jeff said the Aussie part came as part of the deal. Could not have acquired nz on its own. He did follow-up by saying that the business was very good. Cash flow positive.

Being a very good business hopefully will attract an Aussie buyer.!
Chairman Geoff Ricketts is well connected in Aussie,so maybe he will find an aggressive buyer?!

noodles

24-02-2014, 07:57 AM

Being a very good business hopefully will attract an Aussie buyer.!
Chairman Geoff Ricketts is well connected in Aussie,so maybe he will find an aggressive buyer?!
I'm desperately trying to remember the presentation, but I got the impression they really liked the Aussie business and they saw growth in that area. So perhaps they would keep up.

winner69

24-02-2014, 08:11 AM

Paper Tiger -The future guidance suggests that this years result will be at the lower end of that $34M to $37M range.

That's how I see it as well.

But all 'pie in the sky' so all OK with this company that has a bank in its stable of businesses

Australia was part of the package

percy

24-02-2014, 11:03 AM

That's how I see it as well.

But all 'pie in the sky' so all OK with this company that has a bank in its stable of businesses

Australia was part of the package

I will be happy with any figure between $34mil and $37mil this year.A great achievement on year end 31/6/2013.
18 months out figure is the "pie in the sky" to me.
Australian business I may have to reserve judgement?

noodles

24-02-2014, 11:09 AM

I will be happy with any figure between $34mil and $37mil this year.A great achievement on year end 31/6/2013.
18 months out figure is the "pie in the sky" to me.
Australian business I may have to reserve judgement?

You see this is where we are quite different Percy. If management give a range, I want them to deliver at the top half of that range. So for me, anything below $35.5mil will be a reduce signal. If they miss $34mil and I'm still holding, it won't be for long.

DISC: Still holding some(albeit at a reduced level)

SCOTTY

24-02-2014, 11:29 AM

Jeff said the Aussie part came as part of the deal. Could not have acquired nz on its own. He did follow-up by saying that the business was very good. Cash flow positive.

I do not have a problem with HNZ owning and retaining a good solid profitable Aussie business. Would be very good for the long-term banking profile. Who knows what might emerge from this connection. :)

K1W1G0LD

24-02-2014, 04:43 PM

Would you really want to be taking one of these, does'nt sound like such a great idea to me . Remember Banks don't have morals....................just the desire to earn money , lots of it, without worrying about the personal costs to their customers.

5 Reasons to Avoid a Reverse Mortgage

Watch out for these drawbacks of using a reverse mortgage to fund retirement.

One of the retirement planning resources that has gained interest in recent years is the reverse mortgage. For many retirees, it seems like a solid idea. You get access to the equity in your home, and the bank makes a mortgage payment to you. It turns your home into a source of income.

It’s a nice thought, but the truth about reverse mortgages is far from ideal. In fact, there are a few reasons to avoid getting a reverse mortgage as part of your retirement plan. Most of these reasons revolve around the fact that this type of income stream is actually a loan against your home’s equity that has to be paid back.

Here are five reasons to think twice about getting a reverse mortgage:

1. The fees are often high. Since a reverse mortgage is a loan, you are going to have loan-related fees. Origination fees and other fees on a reverse mortgage are typically rather high. A reverse mortgage is a home equity loan that isn’t decided based on your income or your credit score. As a result, there are unique risks to the lender, and some of those risks are offset by charging higher fees at the outset.

2. High interest rate. The interest rate on a reverse mortgage is often higher than the rate for a more traditional home equity loan. Between the up-front fees on the reverse mortgage and the high interest charges, you might be surprised at how little money you actually end up getting. It’s your equity, but the bank gets an awful lot of it.

3. Your heirs might not get the house. When you get a reverse mortgage, you aren’t expected to make payments on the loan. Instead, the loan is paid off when you sell your home. So, if you die, the home is supposed to be sold so that it can cover the loan amount. This means your heirs can’t have the house. It is possible for your heirs to keep the house if they pay off the reverse mortgage after you die. However, this usually means that the money has to come out of the estate, reducing the total that your children and grandchildren end up with. For someone hoping to leave a legacy, this can be a real drawback.

4. You have to repay the loan when you move out. Dying isn’t the only way that repayment on a reverse mortgage is triggered. In order to avoid making payments on the loan, you have to be living most of the time in your primary residence. You are considered “moved out” if you haven’t lived in the home for a year. This includes if you enter a long-term care facility. So, if you are no longer able to stay in your home, but you haven’t died, you have to start repaying your reverse mortgage—at a time when money is likely already tight. This can put a real strain on your budget.

5. You’re still responsible for home costs. Throughout all of this, you are still responsible for your home costs. You have to pay property taxes, keep up with the homeowners insurance, and pay for regular maintenance on the home. If you have enough equity, you can get a reverse mortgage big enough to cover all these expenses, but it can be a difficult situation nonetheless