HGH - Heartland Group Holdings

[janner]

Had a bit of a chuckle too.!!!..lol.

I am sure Snoopy did also..

[Beagle]

Snoopy

I think on a risk adjusted basis HBL is now a pretty reasonable hold but I think its pretty clear in the last two years shareholders have carried considerable risk, (whether they acknowledge it or not) and returns in that timeframe have been pretty modest. Maybe they get to $1.60 by Christmas 2017 ?, maybe not ? Dividend yield is pretty good though. Maybe the SP goes up in line with EPS from here, (I think the current PE is at full stretch) so on a 1 year view maybe a 10% capital gain and 8% gross divvy, possible 18% total shareholder return which isn't too shabby.

Risk has abated in my view. Prospective returns are reasonable relative to lower risk in my view so I've acquired a modest holding. I think HBL and the other banks got very lucky with the dairy recovery....proof that sweeping problems under the carpet sometimes works.

[winner69]

Risk has abated in my view. Prospective returns are reasonable relative to lower risk in my view so I've acquired a modest holding. I think HBL and the other banks got very lucky with the dairy recovery....proof that sweeping problems under the carpet sometimes works.

Welcome aboard

So hope is a good strategy

[Beagle]

Welcome aboard

So hope is a good strategy

Thanks and yes hope sometimes works.

[percy]

Thank you Chris Lee site for something I did not know;
Heartland Bank, via Heartland Seniors Finance, received "Best Reverse Mortgage" award in Australia for 2016.
Positive.

[Snoopy]

Scale is important for any business wanting to maintain a strong position in whatever market they operate in. If you don't have scale, you can carry on developing a business until the point that the 'big boys' notice you. If you continue to push ahead, those already dominating the market will act aggressively against you. This can severly limit any future growth and may end up being fatal for that part of the smaller expanding business. I am not saying that a small business can never match and get on equal terms with a bigger one. I am saying that when a small player starts to tread on the toes of a big player, then this introduces a significantly higher risk for those invested in the smaller player. if as an investor you can avoid such a risk, this is a good thing.

Heartland in their December 2016 presentation say that their mission statement is to:

"Pursue opportunities where they can provide innovative products in niche areas within the household, business and rural sectors, that are under-serviced by the major banks"

The Heartland mission statement is sensible, because the big four Aussie Banks are absolute gargantuans by Heartland standards. It wouldn't be too far of a stretch to say that to take on the big Aussie banks directly would be a suicide mission. But how secure is Heartland really in these market niches in which they choose to operate?

The specific target markets are listed below:

Millennials (People Reaching your Adulthood in the early 21st Century => Aged 25-35 today):

Provide a frictionless digital experience to the emerging millennial market, who value speed and ease.
e.g. Harmony joint venture, Motor Vehicle Loans, Online personal loans. Growing the consumer loan book has a lower ROE (because more capital is needed to support such loans) which needs to be balanced by a higher margin.

Current Gross Receivables: $844m, Average Loan Size $14k

Heartland vs Competitors (Motor Vehicle)
1/ Marac (Heartland Subsidiary): 12.95% to 19.95%: Finance and Insurance Loan Book $340m
2/ Motor Trade Finance: 13.75%: Finance Book $535m
3/ Turners Vehicle Finance 12.95%. Finance book $144m

Heartland vs Competitors (Consumer Peer to Peer)
1a/ Harmony (Heartland investment 10% equity): Loans from $1,000 to $35,000 (all unsecured). Interest rates depends on net assets, income and credit history. Loan Book Size : Up to $100m (approx)
2a/ Squirrel Money: target A and B grade borrowers (only approve 21% of land applications). Loans $3,000 to $30,000 (unsecured) OR $70,000 (secured). Interest rate - market base plus individual risk profile. Loan Book Size: $5m

Retired:

Provide a personalised service to the 65+ via reverse mortgages. This requires an accessible and friendly branch structure, as the retired like to be able to eyeball their bank manager. Nevertheless the information is there on line too. ( https://www.seniorsfinance.co.nz/ )
e.g. Seniors Finance (Australia and New Zealand). Growing the reverse mortgage business will result in higher ROE (lower Reserve Bank risk weighting for housing, less capital applied) but a more compressed margin.

Current Gross Receivables (NZ only): $374m, Average Loan Size (NZ Only) $94k

Heartland vs Competitors:
1/ Heartland Seniors current loan rate is 7.5%, compounding monthly, $10,000 minimum loan. 15% of house value available at age 60. 35% at age 80. 40% at age 85. maximum Loan amount $500,000
2/ SBS Bank ('Retirement Loan' floating rate of 6.74% (fixed rate no longer available). Total loan balance $61m (September 2013) Amount of loan offered from 5% of the value of your home at age 60, to 30% at age 80 (to a maximum of 50%).)
3/ ASB (closed down their HomePlus business to new customers on August 3rd 2015),

Small and Medium Enterprise:

To be a smart streamlined on-line lender in this neglected market, where 'big banks' prefer to deal with 'big companies.' Plant/Equipment and Working Capital Finance. The web portal for SMEs is https://openforbusiness.heartland.co.nz/

Current Gross Receivables: $942m, Average Loan Size $107k

Heartland vs Competitors:
1/ Heartland Business Funding rate 10%, Property and Business Services book: $405m
2/ ANZ Business Indicator rate 9.4% plus lending margin. Business and Property Services book: $14,275m
3/ ASB Business Lending fixed rate 10.15%. Property and Business Services: $7,439m
4/ Westpac Base rate of Interest + 'Customer margin.' (Indicative 13.95%) Property and Busines Services book: $2,284m


Rural:

Livestock Finance, Farm transition loans, Intermediate Finance with partner PGG Wrightson, Term loans to farmers in the sheep beef and dairy sectors whose debt needs are modest (my emphasis). The web portal for livestock loans is https://openforlivestock.co.nz. However farm equipment funding is only accessible by dealers. https://ofb.heartland.co.nz/ofadapplication/Account/Login?ReturnUrl=%2Fofadapplication%2F

Current Gross Receivables: $619m, Average Loan Size $209k

Heartland vs Competitors:
1/ Heartland Livestock: 100% finance available (for sheep, cattle, deer) secured against livestock purchased (not other farm assets). On line approval up to $500,000.
2/ ANZ $19,787m on loan ( 32x larger than Heartland! ) Agri Current Account "7.60% + (Lending margin)"
3/ Westpac $8,432m, Base rate of Interest + 'Customer margin.' (Indicative 13.95%)
4/ BNZ $2,210m on loan (includes fishing and forestry) Farm First rate 9.2%, secured over farm OR stock OR farming assets


Conclusion: Yes (see neighbouring discussions for reasoning)

SNOOPY

PS Base borrowing rates for various lenders can be found here

http://www.interest.co.nz/print/69150

on a page that appears to be regularly updated.

[Snoopy]

Conclusion: Open (so far)


Posting this discussion before I make my conclusion.

Looking at Heartland's four target markets, my impression is that they are strong in two and not so strong in the other two.

Strong 1: Millennials

Of the specialised motor vehicle retailers, Heartland are on par 'size wise' with 'Motor Vehicle Finance' and 'Turners'. However both Turners and MTF (through affiliated dealers) also sell vehicles themselves. Heartland do not. So it looks to me like Heartland have an inherent distribution channel disadvantage in this market. From the pricing information I can find, Heartland are prepared to meet 'market best' loan rates of 12.95% for their best prospective customers. Heartland have a high interest margin with respect to other banks. But Heartland fail the bank 'duck' test. Their finance company competitors have even higher interest margins. From a market size perspective Heartland are in a strong position. But I am unclear how they can match the cost structures and convenience of the competition going forwards.

Peer to peer is obviously in its infancy. But by grabbing a 10% stake in the first moving and largest player (Harmoney), Heartland is in a good position to learn about this new market, then perhaps ramp up their presence later.

While I can see some competitive pressures going forwards, Heartland's strong position in the 'Millennials' market today is not open to question.

Strong 2: Retired

Apart from SBS, Heartland are the only game in town for those wanting a reverse mortgage in New Zealand. Being about six times the size of their only remaining competition (I couln't find any current estimate for SBSs presence in this market) , the market strength of Heartland in the 'Retired' market is unquestionable.

Weak 1: Small and Medium Enterprise

There is some ambiguity as to how this business category is treated in the 'concentration of funding' section in the various accounts of the 'Big Banks'. Often the cheapest source of funding for small business owners is to take out a mortgage against their homes. These 'home loans' would not appear on the bank books as 'business loans', even though this is exactly what they are. Home loans are of course the domain of the big banks. Heartland does not want to take on the big banks directly! For the purpose of this exercise then, I have chosen to look at the big bank's 'Business and Property Service' loan books. Even though these probably under-represent the SME loan book of the big banks, they all dwarf what Heartland is doing by at least a multiple. Heartland's main point of difference appears to be 'ease of access' (getting loans approved fast, on line) and a relatively cheap loan rate. If you are a relatively small player, you do need to be price competitive, and remember that Heartland has an interest margin better than the bigger banks. But my impression is that Heartland does not have a sustainable long term advantage in this market. They are a minnow player and if a price war did break out between the big banks they could easily be squashed.


Weak 2: Rural

Despite being known as a 'rural specialist lender', in gross terms, even the relative minnow of the big banks -BNZ- has a rural loan book four times larger. The BNZ also has a lower base interest rate than Heartland, and will make rural loans against livestock and equipment, not necessarily land holdings. Making rural loans against livestock and equipment was, I thought, a Heartland exclusive. But this is not so. Heartland took a risk this year financing their farmer customers through loans that a major bank might have called in. The resultant goodwill among farmer customers might come back to help Heartland in future years. A further good point is that Heartland has a good and well established marketing channel through PGG Wrightson (Heartland own PGG Wrightson Finance).
Neverthless the bare facts of the situation show that Heartland is a relatively small player in Rural Loans. Furthermore, the emboldened acknowledgement from my 'Buffet Point 1' post

(We make) "Term loans to farmers in the sheep beef and dairy sectors whose debt needs are modest (my emphasis)"

speaks volumes.

Bear in mind that this was written in December 2016, after the worst of the dairy crisis appeared to be over. Bear in mind that this comment was written in the climate of investors questioning Heartland's exposure to dairy sector loans some months earlier. Given this background, I can understand why Heartland made this comment. The problem I can see going forwards is that if Heartland only lend to farmers whose 'debt needs are modest', that is aiming for a collision course with the big bank lenders. I see the comment as an admission by Heartland that they really don't have any competitive underlying advantage in Rural Lending compared to the big banks. And that, to me, spells potential trouible for growing Heartland's rural lending book going forwards.

Conclusion

'On the one hand' BUT 'on the other hand'. Anyone got a comment to make to help stop me wavering? I think that am going to have to sleep on this!

SNOOPY

[kappa]

https://customers.microsoft.com/en-US/story/heartlandbank

[percy]

https://customers.microsoft.com/en-US/story/heartlandbank

Kappa.
Welcome to Share Trader.
Thank you for the link.
A very interesting article.

[Bjauck]

I guess the way the SP has been creeping up, small shareholders are unlikely to get shares under the proposed placement as cheaply as were offered to the big investors under the placement. Does anybody have any idea as to when the SPP will take place? The new year is not so new now.

[Beagle]

I guess the way the SP has been creeping up, small shareholders are unlikely to get shares under the proposed placement as cheaply as were offered to the big investors under the placement. Does anybody have any idea as to when the SPP will take place? The new year is not so new now.
I believe the company said it will happen after the half year result on 21 February. I'd presume that details of the SPP will be announced contemporaneously with the half year result. I will subscribe and bought some more on market yesterday too.

[BlackPeter]

I guess the way the SP has been creeping up, small shareholders are unlikely to get shares under the proposed placement as cheaply as were offered to the big investors under the placement. Does anybody have any idea as to when the SPP will take place? The new year is not so new now.

I think they said small shareholders will either get the same price as the placement - or a 5 or 10 day average of the share price prior to SPP time, whatever is the cheaper. This means we still should get the new shares for the same price as the big investors. Just worried about the scaling - i.e. we probably don't get many of them ;);

Not sure about the timing, but would assume we learn more over the next couple of weeks when their board comes back from summer holidays ...

[Bjauck]

Thanks I thought about buying on market to add to my holding at time of the placement...oh well....scaled back crumbs from the spp better than nowt, I suppose.

[Snoopy]

Retired:

Provide a personalised service to the 65+ via reverse mortgages. This requires an accessible and friendly branch structure, as the retired like to be able to eyeball their bank manager. Nevertheless the information is there on line too. ( https://www.seniorsfinance.co.nz/ )
e.g. Seniors Finance (Australia and New Zealand). Growing the reverse mortgage business will result in higher ROE (lower Reserve Bank risk weighting for housing, less capital applied) but a more compressed margin.


Banks are required to hold capital against each category of exposure according to the relative riskiness of that type of exposure. The minimum capital ratio is fixed at 8 percent of risk-weighted assets; so the amount of capital required to be held against each loan is determined by the risk weighting for that type of loan. For every additional dollar lent on an exposure with a 100 percent risk weighting, a bank will be required to hold an additional 8 cents of capital, whereas for a less risky loan with a risk weighting of 50 percent, only 4 cents of additional capital will be required.

On the subject of using Reverse Mortgages to improve the 'capital efficiency' of Heartland. The following information is from Resrve Bank paper RS2A on 'capital adequacy'.

BS2A-capital-adequacy-framework-standardised-approach-oct-2015.pdf, From page 45.

The following risk weightings apply to mortgages not past 90 days due.



Loan to Valuation RatioNon-property investment Residential Mortgage LoanProperty investment Residential Mortgage LoanReverse Residential Mortgage Loan


<60%35%40%50%


>60% & <80%35%40%80%


<80%35%40%Various


>80% & <90%35%50%100%


>90% & <100%50%75%100%


>100%100%100%100%



For comparison, a 0% risk weighting applies to:

1/ Notes and coins held on site
2/ Gold Bullion held in own Vaults

OTOH the risk weighting for equity holdings are 300% if they are publicly traded, and 400% if they are not.

Small and Medium business loans and Rural Loans are not mentioned specifically. The paper says that:

"A 100% risk weight applies for an asset not specifically provided for."

A conventional mortgage will generally have a lower risk weighting that a reverse mortagage. But Heartland IIRC have contracted out all of their conventional mortgage business to Kiwibank.
Given the four key markets that Heartland are targeting, it seems the only way to reduce risk weighting for Heartland is to do more reverse mortgages!

SNOOPY

[Snoopy]

Conclusion

'On the one hand' BUT 'on the other hand'. Anyone got a comment to make to help stop me wavering? I think that am going to have to sleep on this!


When you are looking at a complicated business across several 'growth' sectors, one approach is to look at the size of the sector loan book, make an estimate of future loan book growth, then add everything together.



Market SectorLoan Book Size (A)Growth Rating (B) (A) x (B)


Millennials$844m10%$84.4m


Retired$377m20%$75.4m


Small & Medium Enterprises$942m-10%-$94.2m


Rural$619m-10%-$61.9m


Total+$3.7m



While some sectors of the Heartland business show real growth potential, others face real threats. Naturally I need to add that the size of the loan book does not directly imply profitability. But I do believe there is a correlation between 'sector loan book size' and 'sector profitability'.

The above analysis shows that over the sectors that Heartland managment is concentrating on, growth will be marginal.

One counter-argument to the above is that my analysis of the 'Rural' and 'SME business' sector is too broad. Accounting standards require loans that Heartland make to farmers and small businesses to be categorised. But Heartland is taking a much smarter approach of 'cherry picking' within these broad loan categories. So it is not accurate to say that Heartland are going 'head on' against other 'Agricultural' and 'SME' lenders.

If we look to compare the loan book size over a longer period:



YearCategoryGross Loan BookIncrementCategoryGross Loan BookIncrement


2016Agriculture$628.202m (+25.7%)Property & Business Services$405.469m (+26.6%)


2013Agriculture$499.942mProperty & Business Services$320.198m



We can see that Heartland are growing the loan book areas they are targeting. I believe that watching what a company does is a better guide to valuation than listening to what a company says they will do. Heartland have made progress in their most risky targeted areas. So who am I to say that increasing profits do not follow?

I do believe there are serious risks to growing the Heartland business from here. But given management's performance to date, we cannot assume that management will not be able to tackle those risks.

Accordingly to the question I posed on "Heartland having a top three market position in their chosen areas of operation', I have to answer 'yes'.

SNOOPY

[Snoopy]

This is the summary for those millennials who are 'attention span challenged'. Warren Buffett's scanning of the 'growth potential' of a company can be summarized in four quick questions.

Q1/ Does Heartland Bank have a top three market position in the markets in which it chooses to operate? (Ref: my post 8523)
A1/ Yes

Q2/ Does Heartland Bank have a 'normalised profit' increasing 'earnings per share trend'? (Ref: my post 8493)
A2/ Yes

Q3/ Does Heartland Bank have a record of earning a superior ( >15% ) return on shareholder equity? (Ref: my post 8495)
A3/ No

Q4/ Does Heartland Bank have the capability of operating at increasing Net Profit margins? (Ref: my post 8510)
A4/ Yes

Overall Conclusion

Heartland is not able to satisfy all the requirements to apply Warren Buffett's compounding growth model. This does not mean that Heartland is necessarily a poor investment going forwards. It just means that Heartland must be analyzed in a different way.

SNOOPY

[Snoopy]

Q3/ Does Heartland Bank have a record of earning a superior ( >15% ) return on shareholder equity? (Ref: my post 8495)
A3/ No


To put this into perspective I want to quote from the Mary Buffett authoered 'Buffetology Workbook' p53

-----

"Warren has figured out that high returns on shareholder's equity can produce great wealth for shareholders. Thu, Warren seeks to invest in companies that consistently earn high returns on shareholders equity.

To fully understand why Warren is so interested in high returns on shareholders equity let us work through a hypothetical scenario.

Shareholders equity is defined as a company's total assets less the company's total liabilities. Kind of like equity in your house. Let's say you bought a house as a rental property and paid $200,000 for it. To close the deal you invested $50,000 of your own money and borrowed $150,000 from a bank. The $50,000 you invested in the house is your equity in the property.

When you rent out your house, the amount of money that you earn from the rent, after paying your expenses mortgage and taxes would be your 'return on equity'. If you rented your house out for $15,000 per year and had $10,000 in total expenditures then you would be earning $5,000 on your $50,000 equity. The return on your $50,000 would be the $5,000 you earned. This equates to a 10% return on equity. ( $5,000/ $50,000 = 10%).

<snip>

The average return on equity for an American Corporation over the 1960 to 2000 period (book was published in 2001) was 12%. This means that , as a whole, year after year, American business only earns 12% on its shareholder equity base. Anything above 12% is above average. Anything below 12% is below average. And below average is not what we are looking for.

What Warren is looking for in a business is consistently higher than average returns on shareholder equity. We are not talking about 12% or 13% but a rate of 15% and above - the higher the better.


-------


We have to consider here is that these are American figures. NZ, for so long a 'commodity based' market, may have had historical return on 'overall market equity' figures that are slightly lower than the USA. Nevertheless the Heartland return on equity figures are damning.



Financial YearNet Sustainable Profit (A)Shareholder Equity EOFY (B)ROE (A)/(B)


2012$26.606m + 0.72($5.642m + $3.900m) =$30.476m$374.798m8.1%


2013$6.912m + 0.72($22.527m+ $5.101m)= $26.804m$370.542m7.2%


2014$36.039m$452.622m8.0%


2015$48.163m - 0.72(0.588m) = $47.743m$480.125m9.9%


2016$54.164m - 0.72(1.136m) = $53.346m$498.341m10.7%



Using ROE as a measure, Heartland is very definitely a below average business. I almost said 'well below average', but I knew that kind of talk would just upset 'the faithful' ;-P.

From my perspective as a potential 'growth' investor, this problem is serious. Part of the problem is regulatory. The reserve bank is requiring banks to back up their lending with more capital than has historically been required. Other banks address this hurdle by issuing such things as 'bank bonds', an alternative source of 'Tier 1' capital. Heartland has talked about doing this in the past, but so far has not issued "Heartland Bonds'. If they did, then return on shareholder equity could potentially be boosted. Yet with only a BBB credit rating, would there be enough corporate interest in Heartland Bank Bond to get an issue away?

If there is a case for investment in Heartland today, I feel as though it will be as a dividend play. So how does one fairly value Heartland from a dividend perspective?

SNOOPY

[Beagle]

If there is a case for investment in Heartland today, I feel as though it will be as a dividend play. So how does one fairly value Heartland from a dividend perspective?
.... http://www.investopedia.com/terms/d/ddm.asp

[Snoopy]

If there is a case for investment in Heartland today, I feel as though it will be as a dividend play.


I think it is worthwhile to look at the dividend history in dollar terms, verses the consummate funding requirements of management. I intend to leave out FY2012 as that was the year that Heartland established their capital base to move forward from. But what in dollar terms has happened since FY2012?



YearDividends PaidNew Capital SubscribedDividends Paid 'per share'


FY2013$13.951m$0m 1.5cps(sp) + 2.0cps

[/TR]

FY2014$19.930m$65.161m 2.5cps + 2.5cps


FY2015$30.188m$7.662m 3.5cps + 3.0cps


FY2016$37.690m$4.190m4.5cps + 3.5cps


FY2017(f)$39.485m(f)$30.000m(f)5.0cps + 3.5cps(f)


Total$141.244m$107.013m



(f) indicates forecast result. Dividends paid based on a constant eps from FY2016, but increased in proportion to the estimated number of new shares on issue at EOFY2017. New Capital subscribed based on the $20m + $10m capital raising programs already announced, but does not assume any contribution from the dividend reinvestment plan.

The interesting point about this table is that if you regard HBL as a 'dividend paying share', then the company has required the equivalent of just over 75% of that dividend to be reinvested so that management can carry on with their growth plans. There is nothing wrong with this of course, if you consider Heartland as a 'growth' investment. But as my post 8534 has shown, the utilisation of capital has been questionable.

So if growth, if measured by utilisation of capital is questionable, and net cash returns are questionable, what is the compelling reason to invest in Heartland from here?

SNOOPY

[noodles]

-------


We have to consider here is that these are American figures. NZ, for so long a 'commodity based' market, may have had historical return on 'overall market equity' figures that are slightly lower than the USA. Nevertheless the Heartland return on equity figures are damning.



Financial Year
Net Sustainable Profit (A)
Shareholder Equity EOFY (B)
ROE (A)/(B)


2012
$26.606m + 0.72($5.642m + $3.900m) =$30.476m
$374.798m
8.1%


2013
$6.912m + 0.72($22.527m+ $5.101m)= $26.804m
$370.542m
7.2%


2014
$36.039m
$452.622m
8.0%


2015
$48.163m - 0.72(0.588m) = $47.743m
$480.125m
11.9%


2016
$54.164m - 0.72(1.136m) = $53.346m
$498.341m
10.7%



Using ROE as a measure, Heartland is very definitely a below average business. I almost said 'well below average', but I knew that kind of talk would just upset 'the faithful' ;-P.

From my perspective as a potential 'growth' investor, this problem is serious. Part of the problem is regulatory. The reserve bank is requiring banks to back up their lending with more capital than has historically been required. Other banks address this hurdle by issuing such things as 'bank bonds', an alternative source of 'Tier 1' capital. Heartland has talked about doing this in the past, but so far has not issued "Heartland Bonds'. If they did, then return on shareholder equity could potentially be boosted. Yet with only a BBB credit rating, would there be enough corporate interest in Heartland Bank Bond to get an issue away?

If there is a case for investment in Heartland today, I feel as though it will be as a dividend play. So how does one fairly value Heartland from a dividend perspective?

SNOOPY

Snoopy,
HBL started with a low return on equity and has been growing the return on equity ever since.

In 2011, the profit was $7m. Now it is $54m. A 670% increase in NPAT.
In 2011, the equity was $296. Now it is $498. A 68% increase in equity

So you can see that the profit growth far exceeds the equity growth. That does not seem like a "below average" business to me. In fact it appears that the management of HBL are best of breed.

Your 15% baseline is for companies with a long track record. HBL is young and started with low profits and high equity. If you start on a low base, of course it is going to take time to get to 15%.

EDIT: Average return on equity for US banks is 9%. Looks like HBL is above average.

https://ycharts.com/indicators/us_return_on_average_equity_for_all_banks

noodles

[iceman]

Somewhat relative to previous discussion on this thread ! http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11789973

[Snow Leopard]

...
Your 15% baseline is for companies with a long track record. HBL is young and started with low profits and high equity. If you start on a low base, of course it is going to take time to get to 15%.

noodles

Whilst Snoopy has a nice shiny toolkit for evaluating companies it continually pains me to see him hammering nails into the wall with a screwdriver.

"Snoopy you are supposed to use this hammer" we tell him.

"But then I keep hurting my thumb" he replies "Anyway the nail is in".

We look at the badly bent nail and note that you can not hang your hat on it.

If HBL get past 13% ROE then I will be impressed. That will be one lean lending machine.

Best Wishes
Paper Tiger

[Snoopy]

Whilst Snoopy has a nice shiny toolkit for evaluating companies it continually pains me to see him hammering nails into the wall with a screwdriver.

"Snoopy you are supposed to use this hammer" we tell him.

"But then I keep hurting my thumb" he replies "Anyway the nail is in".

We look at the badly bent nail and note that you can not hang your hat on it.

If HBL get past 13% ROE then I will be impressed. That will be one lean lending machine.


A 15% hurdle on 'return on equity' has not in the past been an unsurmountable hurdle for the big Aussie bank 'competition'. Granted I haven't crunched my own normalised numbers for a few years on, for example, ANZ (make a mental note to myself to do this again). The big Aussie banks had been a place for stellar returns, at least until the GFC. Since that time banking regulations have tightened. More equity to back up the loan book has been required. It follows that ROE for the banking industry will have decreased. Commentators are on record as saying that the big Aussie banks are not going to generate the same returns going forwards as they once did.

If a 15% ROE hurdle strikes some as 'unrealistic', this is correlated with the lower growth outlook for banks. Not being able to meet this 15% ROE hurdle is a consequence of the lower profit outlook for banks. This doesn't mean investors should not invest in banks. The dividend yields in particular, in this time of low bank deposit rates, look particularly juicy.

Heartland has had an ROE average of just 9.2% over the last five years. Yes it is improving. But it is still a below average margin for an NZX listed business. And to requote Buffett form an investor perspective:

"Below average is not what we are looking for."

My reading is that this low return on assets leaves Heartland's earnings vulnerable to shock. This is not the same as saying earnings will definitely go down. But sticking your head in the sand won't make the shock potential go away.

SNOOPY

[Snoopy]

Snoopy,
HBL started with a low return on equity and has been growing the return on equity ever since.

In 2011, the profit was $7m. Now it is $54m. A 670% increase in NPAT.
In 2011, the equity was $296. Now it is $498. A 68% increase in equity

So you can see that the profit growth far exceeds the equity growth. That does not seem like a "below average" business to me. In fact it appears that the management of HBL are best of breed.


I think there is plenty for Heartland management to be proud of in their achievements since listing. What you have observed Noodles, ties in with my observations on the increasing earnings per share trend (a significant achievement) and increasing underlying profitability, in line with my 'ncreasing margin' observations (well done to management). My point is that these improvements have come off a low base. In absolute terms, taking into account the growth to date which is welcome, the ciurrent absolute position is still 'below average returns on shareholder equity'. IOW there is still some way to go before I see Heartland as even an 'average' business in absolute terms.



Your 15% baseline is for companies with a long track record. HBL is young and started with low profits and high equity. If you start on a low base, of course it is going to take time to get to 15%.


My recollection of Heartland history is a little different to this. Heartland started as an investment bucket that contained a number of difficult assets. Heartland was generously recapitalised by PGC amongst other shareholders at the time into a financial entity with a fighting chance. And come out fighting they did. There was no mention at the time that this first recapitalisation of Heartland was inadequate. Yes Heartland is a young company. But I don't think you can associate that statement with Heartland having a deprived start. Nevertheless I think it might be worth looking at ROE excluding the difficult loan book capital ( Heartland call their difficult loans 'investments' (sic) ) and see what difference that makes to the Heartland ROE figures.

I should add that a 15% ROE goal is not a statistic to be pursued at the expense of all others. Being undercapitalised and overleveraged are two ways of increasing ROE that I do not recommend!



EDIT: Average return on equity for US banks is 9%. Looks like HBL is above average.

https://ycharts.com/indicators/us_return_on_average_equity_for_all_banks


Interesting chart. But I think your comparison of putting a minnow bank from New Zealand into the US banking Sector as a comparative measuring stick is probably not representative.

SNOOPY

[percy]

A game of spot the difference.
Earnings per share,from www.4-traders.com
.................2014........2015.....2016.......2 017......2018.......2019..
ANZ............257.........257........189........2 35........245.........256.
CBA............519..........529.......530........5 58.........573.........592
NAB............215,,,,,,,,,,245.........15.5...... 243........247.........254
WBC...........237...........248........218........ 241........250.........254
Very difficult to spot any difference.Minimal if any growth.
Now should we add HBL's ???
HBL............9.............10...........11...... ....12.........13.1.........13.7.
And that is real eps growth.
EPS growth means HBL will have the capacity to continue to grow and pay increasing dividends.

[Snoopy]

Nevertheless I think it might be worth looking at ROE excluding the difficult loan book capital ( Heartland call their difficult loans 'investments' (sic) ) and see what difference that makes to the Heartland ROE figures.




Financial YearNet Sustainable Profit (A)Shareholder Equity EOFY (B)ROE (A)/(B)Investment Properties (C)ROE adjusted (A)/{(B)-(C)}


2012$26.606m + 0.72($5.642m + $3.900m) =$30.476m$374.798m8.1%$55.504m9.5%


2013$6.912m + 0.72($22.527m+ $5.101m)= $26.804m$370.542m7.2%$58.287m8.6%


2014$36.039m$452.622m8.0%$24.888m8.4%


2015$48.163m - 0.72(0.588m) = $47.743m$480.125m9.9%$24.513m10.5%


2016$54.164m - 0.72(1.136m) = $53.346m$498.341m10.7%$8.384m10.9%



I have already removed windfall profits from the sale of investment properties from the earnings picture. Removing the one off effects of the legacy investment property portfolio from the results show the improvement in ROE is 'not as great'. Is this 'flattening ROE adjusted trend' a sign that projected profit increases going forwards will likewise be 'not as great' as some shareholders hope?

SNOOPY

[winner69]

What would you say if someone offered you an investment with a promised real return of close to 15 per cent? You might say: “How much can I buy?” Alternatively, you might say: “What is the catch?” Sensible people must take the latter view. If you thought that you were being offered a reliable real return at such an exalted level, you would buy as much as you could.

Higher the banks ROE the greater the 'risk' they are taking?

[Snoopy]

What would you say if someone offered you an investment with a promised real return of close to 15 per cent? You might say: “How much can I buy?” Alternatively, you might say: “What is the catch?” Sensible people must take the latter view. If you thought that you were being offered a reliable real return at such an exalted level, you would buy as much as you could.


Just to be clear my ROE 15% return target is based on 'shareholder capital'. An investor today can only get that return on investment if they can buy that shareholder capital at a dollar for dollar rate. Unfortunately $1 spent on a bank share does not buy $1 work of 'bank shareholder capital'. So investors today will not get that 15% return on the investment capital they put in today buying bank shares.



Higher the banks ROE the greater the 'risk' they are taking?


Yes quite true, the 'other side of the investment coin.' I would be very suspicious if ROE got too high.

SNOOPY

[percy]

' I would be very suspicious if ROE got too high.

SNOOPY

Only sensible statement you have ever posted on this thread.[and you have posted a good many].lol.

[winner69]

Just to be clear my ROE 15% return target is based on 'shareholder capital'. An investor today can only get that return on investment if they can buy that shareholder capital at a dollar for dollar rate. Unfortunately $1 spent on a bank share does not buy $1 work of 'bank shareholder capital'. So investors today will not get that 15% return on the investment capital they put in today buying bank shares.



Yes quite true, the 'other side of the investment coin.' I would be very suspicious if ROE got too high.

SNOOPY

Point was that banks making/targeting high ROEs not (always?) a good thing.

If Heartland achieved a ROE of 15% every year and paid no divies it's equity would double every 5 years. In no time they would be a multi billion company. Makes you wonder why they pay divies if returns on equity are so lucrative.

[Beagle]

http://www.interest.co.nz/news/85459/sp-downgrades-udc-bbb-following-its-sale-unrated-hna-group-it-remains-creditwatch

UDC to be sub investment grade later this year ?

I think UDC are going to have a real job in front of them to retain debenture funding support from investors with a sub investment grade credit rating. If this happens I would see this development as a real positive for HBL with the likelihood they'll enjoy a significantly enhanced competitive position against the new UDC under Chinese control.

[percy]

Yes HBL are certainly "well positioned."
Sorry I can not post the link but Brian Gaynor had a lot to say about the demise of UDC, in The Hearald.
Unlike you, he did not join the dots.!!...>>lol.

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11789973 There you go folks that's what Bryan Gaynor had to say yesterday.

Thanks for your post above with EPS number comparisons Percy, good stuff.

I note forecast earnings of 13.7 cps for 2019. All going well we'll see HBL make about 14.5 cps forecast for Fy20 so late 2019, (2.5 years from now) because the market is always forward looking HBL should be trading on about 12.5 - 13.0 times Fy20 earnings so 12.5 - 13.0 x 14.5 = $1.80 - $1.90.

In the meantime what interim and final dividend are you forecasting this year Percy ?

[Xerof]

While you're at it percy, when can we expect the SPP to be announced? ( and what will my scale factor be lol)

Mr market has tried it's best to hold the price down until it's announced - should be 1.75 by now, imo

[percy]

While you're at it percy, when can we expect the SPP to be announced? ( and what will my scale factor be lol)

Mr market has tried it's best to hold the price down until it's announced - should be 1.75 by now, imo

The half year result will be announced on 21st February.I expect details of the dividend,date the dividend will be paid,and price and timing of the SPP.Just guessing,but I would expect very heavy scaling.Be a lot of fun for you to work out drp price, and spp price.!!!..lol.

[percy]

This post was in reply to Roger's post #8550.
I note analysts are very conservative on earnings more than one year out,so perhaps we could be a bit more aggressive.?
HBL's eps growth,compared to the Aussie Banks is most probably seeing HBL's PE expand.
Also HBL now has "runs on the board" ,which together with their increasing dividend,is also helping the PE to expand.
What we do know is HBL has used up all of its excess capital,and is/has raised more to fund very strong organic growth.NZ is in good shape,which means HBL's digital products delivered online are set to gain market recognition.The appointment of an Australian director signals to me they are confident in further growth in their REL business there,and may perhaps take a product,such as "open for business" to Australia.
We share the same thoughts of the opportunities the demise of UDC will bring to HBL.
My projections of eps and divies have been thrown out the door,as I can see the day HBL hitting $2 being brought forward..!!! Who cares about $1.60,$1.80 $1.90? We will see them all on our way to $2...
Dividends this year? Increasing?!!.lol
Roger,Thanks for posting link to The Herald article.

[Beagle]

This post was in reply to Roger's post #8550.
I note analysts are very conservative on earnings more than one year out,so perhaps we could be a bit more aggressive.?
HBL's eps growth,compared to the Aussie Banks is most probably seeing HBL's PE expand.
Also HBL now has "runs on the board" ,which together with their increasing dividend,is also helping the PE to expand.
What we do know is HBL has used up all of its excess capital,and is/has raised more to fund very strong organic growth.NZ is in good shape,which means HBL's digital products delivered online are set to gain market recognition.The appointment of an Australian director signals to me they are confident in further growth in their REL business there,and may perhaps take a product,such as "open for business" to Australia.
We share the same thoughts of the opportunities the demise of UDC will bring to HBL.
My projections of eps and divies have been thrown out the door,as I can see the day HBL hitting $2 being brought forward..!!! Who cares about $1.60,$1.80 $1.90? We will see them all on our way to $2...
Dividends this year? Increasing?!!.lol
Roger,Thanks for posting link to The Herald article.

Thanks Percy, I bought more late last week. Not much point having money in the bank with today's low interest rates, might as well own a decent share of it :)

[percy]

Thanks Percy, I bought more late last week. Not much point having money in the bank with today's low interest rates, might as well own a decent share of it :)

A man after my own heart.!
Going back to future eps,and eps growth.Last year's growth was a higher than I expected.I really am awaiting HBL's interim, and may get a better handle on future prospects, from their commentary.As we know they do what they say they will do.
ps.I dare not buy anymore.!!lol.

[Beagle]

A man after my own heart.!
Going back to future eps,and eps growth.Last year's growth was a higher than I expected.I really am awaiting HBL's interim, and may get a better handle on future prospects, from their commentary.As we know they do what they say they will do.
ps.I dare not buy anymore.!!lol.

lol...yes I think I remember from a conversation we had when I was last down in Christchurch that you had "a few" already :D

[King1212]

HBL invested $20m in Spotcap oz

[Beagle]

HBL invested $20m in Spotcap oz

Official announcement, can't see any mention of $20m...maybe I have gone cross eyed already this morning and need another coffee ????

https://www.nzx.com/companies/HBL/announcements/296137

[winner69]

HBL invested $20m in Spotcap oz

Hope all this innovative fintech and algorithm stuff doesn't lead to another sub-prime type crisis - especially when they use words like unsecured business loans to SMEs

At least Heartland are only funding Spotcap by the looks of it - not taking on the loans directly?

[LAC]

Couldn't find it on NZX, but it's noted here:
http://www.advfn.com/news_Global-Online-Lender-Spotcap-Partners-with-Heartla_73726911.html

[King1212]

Official announcement, can't see any mention of $20m...maybe I have gone cross eyed already this morning and need another coffee ????

https://www.nzx.com/companies/HBL/announcements/296137

NBR paywall headline

[Beagle]

NBR paywall headline

Thanks. Brief summary. $A20m funding line for small business loans $10K - $250K. Customers must have turnover of at least $100K and have been operating for not less than 18 months.

[JeremyALD]

Seems like a good move to me, HBL not sitting back but looking to leverage a first mover advantage. Loving the focus on growth, I do some concerns in general that HBL is increasing its risks a bit in the event of an economic downturn.

I do think HBL has one of the best small business lending strategies around at the moment. It's gone quite digital and very easy to get a 50K+ approval in a day online.

[winner69]

Spotcap launched in NZ

Aren't they then competition for Hesrtland in NZ

Heartland funding NZ as well?

Or is that another story?

[percy]

Well W69,we know all stories end the same way.
Happy ever after with more profits going straight to HBL's bottom line.!
With so few details announced I can't see the point,yet.

[Beagle]

As an accountant I can attest that by and large many small business owners without real estate security can struggle to get business finance (asset finance over specific vehicle(s) is easier). There are other forms of lending like receivables factoring but can be very expensive. Plant and equipment is rarely viewed as a suitable asset so this niche lending (provided its based on well supported financial analysis) could prove to be quite lucrative and from my experience meets a genuine need in the market. The NBR article says pricing is based upon perceived risk so provided they have their systems well established pricing should more than cover the anticipated default rates assumed within their lending model. I doubt they would take this initiative if similar types of new initiatives through other channels hadn't already proved to be highly profitable.

[pierre]

Spotcap must be good news for HBL - it's the only share in my portfolio in blue among a sea of red today!

[percy]

Spotcap must be good news for HBL - it's the only share in my portfolio in blue among a sea of red today!

Can't complain,as my SEQ in Aussie are up 27.4% today.
Wonder how much they will be up "at the end of the day".?

[Snow Leopard]

Typical Spotcap interest rate about 17.5% what are HBL lending to Spotty at ?

$20M of newly minted equity as one loan to one company ?

Are they going to chuck the SPP $10M at SpotKiwi ?


Best Wishes
Paper Tiger

[silu]

I have joined some of you guys and bought some HBL at $1.55 yesterday. I am a small fish compared to many of you but I do love a good Dividend Reinvestment plan.

[kizame]

I have joined some of you guys and bought some HBL at $1.55 yesterday. I am a small fish compared to many of you but I do love a good Dividend Reinvestment plan.

Size doesn't really matter here,its the great choice you have just made.

[King1212]

8647


Mine is bigger than your:t_up: but who care with steady juicy dividend...HBL is a keeper!!

[silu]

Sometimes size doesn't always matter :)

[beetills]

Heartland to ener mortgage online lending .Floating rate only.
1 billion mentioned.

[trader_jackson]

Heartland to ener mortgage online lending .Floating rate only.
1 billion mentioned.

Please provide your source, thanks.

[sb9]

Please provide your source, thanks.

http://www.interest.co.nz/business/85786/heartland-targeting-residential-mortgage-borrowers-who-want-speed-certainty-not-best

Happened to tumble across this one on interest.co.nz, which I frequent quite regularly....

[Snow Leopard]

Sometimes size doesn't always matter :)

http://www.sharetrader.co.nz/attachment.php?attachmentid=8648&stc=1&thumb=1&d=1486070783


That is a Peel P50. I have a connection to the original manufacturers of these.

If you want, you can buy a new one: Peel Engineering (http://www.peelengineering.com/peels/peel-p50).


Best Wishes
Paper Tiger

Disc: I am not on commission.

[percy]

http://www.interest.co.nz/business/85786/heartland-targeting-residential-mortgage-borrowers-who-want-speed-certainty-not-best

Happened to tumble across this one on interest.co.nz, which I frequent quite regularly....

Thanks for the link.
Another market being serviced by existing staff and channels.
Worth a go.

[kizame]

Would be interesting to know what sort of person would be interested in such a loan, 1. it's floating 2. it's not the greatest deal as far as interest rate goes.
Maybe a short term bridging loan? Hmmn but good luck to them,there are all sorts of people out there in all sorts of situations.
Most banks these days are pretty damn quick to organise a loan if you have everything hbl wants,crikey I did it on my phone in no time.

[winner69]

NBR confused with reverse mortgages where HBL see good growth potential. They are definitely not interested in any other mortgage market.

Appear they are eh

[iceman]

Would be interesting to know what sort of person would be interested in such a loan, 1. it's floating 2. it's not the greatest deal as far as interest rate goes.
Maybe a short term bridging loan? Hmmn but good luck to them,there are all sorts of people out there in all sorts of situations.
Most banks these days are pretty damn quick to organise a loan if you have everything hbl wants,crikey I did it on my phone in no time.

This is what the Deputy CEO said about type of customers being targeted: "What we can see is if we can acquire customers cheaply, customers who don't want the best rate, and are not at the risk end of the curve in terms of high LVR, but do value speed and certainty, then we think we'll be able to provide them a service they'll value," Flood said.

This is definitely quite a big change in strategy for HBL who have consistently said they do not want to be in the residential mortgage market. Percy we can´t say anymore that they " always do as they say they will" :-)

I am not sure about this new direction but time will tell. At least it sounds like they will not be spending any money on this as all will be done with existing staff through existing channels.

[percy]

This is what the Deputy CEO said about type of customers being targeted: "What we can see is if we can acquire customers cheaply, customers who don't want the best rate, and are not at the risk end of the curve in terms of high LVR, but do value speed and certainty, then we think we'll be able to provide them a service they'll value," Flood said.

This is definitely quite a big change in strategy for HBL who have consistently said they do not want to be in the residential mortgage market. Percy we can´t say anymore that they " always do as they say they will" :-)

I am not sure about this new direction but time will tell. At least it sounds like they will not be spending any money on this as all will be done with existing staff through existing channels.

I made a mistake.I thought like Scotty,Jeff Greenslade was talking about RELs, not usual mortgages.
So HBL are positioning themselves, where they said they would.Digital products delivered online.
They have made it very clear they want margin,by keeping the cost of delivering the product using existing staff and systems,and by safe guarding themselves with only floating rates.
Yes it seems to fit their suite of products,and if they can add yet another product at no extra cost,and make a margin, it is worthwhile.They are not trying to go head to head,with the major players .

[iceman]

They are not trying to go head to head,with the major players .

Which is exactly the reason I have always liked the idea that they´ve stayed out of the residential mortgages and focused very successfully on niche products that the majors are not offering. It will be interesting to watch how this goes for us.

[Baa_Baa]

I made a mistake.I thought like Scotty,Jeff Greenslade was talking about RELs, not usual mortgages.
So HBL are positioning themselves, where they said they would.Digital products delivered online.
They have made it very clear they want margin,by keeping the cost of delivering the product using existing staff and systems,and by safe guarding themselves with only floating rates.
Yes it seems to fit their suite of products,and if they can add yet another product at no extra cost,and make a margin, it is worthwhile.They are not trying to go head to head,with the major players .

Digital or not, they're putting $ at risk in a market they haven't previously overtly targeted, let alone through this online channel. It may work out fine, but shareholders usually don't like surprises, eh Percy? Rationalise it any way you want, but keep an eye open on this experiment. Maybe it's chump change for HBL going after this new opportunity, but it's your money and it is an experiment.

[percy]

Digital or not, they're putting $ at risk in a market they haven't previously overtly targeted, let alone through this online channel. It may work out fine, but shareholders usually don't like surprises, eh Percy? Rationalise it any way you want, but keep an eye open on this experiment. Maybe it's chump change for HBL going after this new opportunity, but it's your money and it is an experiment.

RELs are great margin mortgages.
So if HBL can do a residential mortgage,online, and make a good margin, lets do it.
In fact the way they are approaching it is a very low, or little risk,which shareholders appreciate..
They know the market,having arranged residential loans for Kiwi Bank.
It is about choice.Most people will shop around for the best fixed rate mortgage.HBL have said they are not in that space.Other people will go online, with a floating rate.HBL will be in that space. Bit like people being happy to pay extra at New World, for a product that is cheaper at Pak'n Save.

[winner69]

I look forward in a few years time to Snoopy's analysis as to how residential mortgage lending has lowered Heartlands Net Interest Margin from the current lofty 4% plus to whatever it ends up at

Could lower NIM significantly if Flood's dream comes true ....... "The market is enormous. if we had $1 billion of residential mortgages suddenly then that's hugely transformational for Heartland and will make a real difference. And I kind of think $1 billion of residential mortgages, the market probably wouldn't notice."

[winner69]

I would hazard it a guess that Jeff still looks out his office window at the cranes on the skyline and then on the way home driving past new subdivisions salivates over the potential in lending to property developers just like the good old days.

Huge opportunity for Heartland and I believe finance getting harder to getbat the moment .....so becoming niche.

Could retask some not so busy people to make it worth while

Only a matter of time before Heartland back in this sector - just too tempting

[percy]

I would hazard it a guess that Jeff still looks out his office window at the cranes on the skyline and then on the way home driving past new subdivisions salivates over the potential in lending to property developers just like the good old days.

Huge opportunity for Heartland and I believe finance getting harder to getbat the moment .....so becoming niche.

Could retask some not so busy people to make it worth while

Only a matter of time before Heartland back in this sector - just too tempting

If there is a margin there,Jeff will be there.
No margin,no Jeff.

[Snow Leopard]

If there is a margin there,Jeff will be there.
No margin,no Jeff.

Bob Marley !!!

[Beagle]

Chris Lee likes Heartland in his latest newsletter today...excerpt
If you are a HBL lender (deposits) or shareholder I would encourage you to continue reading their press releases and presentations because they are in the midst of a reasonably dynamic second stage of their business strategy.

I think the residential floating mortgage thing is a fair call. They're probably awash with funds from their current offer of 3% on call which none of the other banks will match so there's a reasonable margin there for them to enjoy seeing as they're sticking to just the floating rate.

[kizame]

If only HBL could perform badly and have a growing share price of $72.50.
Assets of 219 million, a loss for 2016,and having to raise 3mil. Different side of the coin.

http://talkbusiness.net/2016/12/heartland-bank-of-little-rock-falls-under-federal-regulatory-scrutiny/

Ticker symbol hlan

[Snow Leopard]

If only HBL could perform badly and have a growing share price of $72.50.
Assets of 219 million, a loss for 2016,and having to raise 3mil. Different side of the coin.

http://talkbusiness.net/2016/12/heartland-bank-of-little-rock-falls-under-federal-regulatory-scrutiny/

Ticker symbol hlan

Crikey you scared me for a moment I thought you were talking about

Heartland Bank (http://www.heartlandbank.com/),
Heartland Bank (https://www.heartlandbanks.com/) or even
Heartland Bank (https://www.myheartland.bank/).

Best Wishes
Paper Tiger

[Bjauck]

Chris Lee likes Heartland in his latest newsletter today...excerpt

I think the residential floating mortgage thing is a fair call. They're probably awash with funds from their current offer of 3% on call which none of the other banks will match so there's a reasonable margin there for them to enjoy seeing as they're sticking to just the floating rate. Some of the new call money is mine...in a cash pie although the rate is 2.5%. My big Aussie bank has higher interest rates on the longer term (18mths+) deposits though. I would think that surprising given the comparative credit ratings.

[winner69]

Heartland share price couldn't break through 160 yesterday but global dairy prices up overnight so it'll shoot through that today. Its all honky dory, no worries here

Now that Jeff has moved away from disciplined growth to going anywhere where's there a buck to be made (under the guise of a digital strategy) the upside is enormous - blue sky stuff

I love it when Flood talks about billions of home mortgage lending - thats really step change stuff - as Flood says 'hugely transformational'

[percy]

HBL are using digital cautiously on new products such as "open for business",partnering with others such as Harmoney and Spotcap on areas they want to be in,while using digital to expand existing areas of expertise,such as RELs,residential mortgages,livestock and motor vehicle lending.
All a very disciplined approach, which shareholders appreciate.

[kizame]

They will also very cautiously and digitally (of course) move into property developement,a niche area not serviced enough by the big banks,and through experience they know what it's like to have to hold property.
So they have the experience,and I'm thinking at least a billion,but only lending to those whom are not too concerned about searching for the cheapest deal.
Haha bubble hear we come.

This WILL be transformational!

[percy]

They will also very cautiously and digitally (of course) move into property developement,a niche area not serviced enough by the big banks,and through experience they know what it's like to have to hold property.
So they have the experience,and I'm thinking at least a billion,but only lending to those whom are not too concerned about searching for the cheapest deal.
Haha bubble hear we come.

This WILL be transformational!

Certainly was last time they went into that sector.
Jolly near terminal.

[Joshuatree]

EVs and the impact on traditional fuel businesses (http://www.radionz.co.nz/national/programmes/ninetonoon/audio/201832397/evs-and-the-impact-on-traditional-fuel-businesses) Electric vehicle finance will be a massive winner too esp if Govt incentives increase although my cynic thinks about the $billions in fuel tax the Govt will not want to lose.

[BlackPeter]

EVs and the impact on traditional fuel businesses (http://www.radionz.co.nz/national/programmes/ninetonoon/audio/201832397/evs-and-the-impact-on-traditional-fuel-businesses) Electric vehicle finance will be a massive winner too esp if Govt incentives increase although my cynic thinks about the $billions in fuel tax the Govt will not want to lose.

Not sure whether losing fuel tax would be an issue. We do have in NZ an established (though arduous) system of Road User Charges for drivers of vehicles which are propelled by untaxed fuels. Effects currently mainly diesel vehicles, but why not including electric? Actually - they might be already included, but if not - adding them would be easy.

[Beagle]

Not sure whether losing fuel tax would be an issue. We do have in NZ an established (though arduous) system of Road User Charges for drivers of vehicles which are propelled by untaxed fuels. Effects currently mainly diesel vehicles, but why not including electric? Actually - they might be already included, but if not - adding them would be easy.

Electric vehicles have an exemption from road user charges until they amount to 2% of the volume of vehicles in N.Z. When that will be who can say but after that expect RUC to apply at current diesel car rates, about $60 per 1000 km's. HBL will need to be prudent with residual value assumptions in regard to funding electric vehicles as depreciation rates can be extremely high when new technology is rapidly evolving. So who's lining up their funds for the upcoming share purchase plan ? (I am).

[kizame]

Electric vehicles have an exemption from road user charges until they amount to 2% of the volume of vehicles in N.Z. When that will be who can say but after that expect RUC to apply at current diesel car rates, about $60 per 1000 km's. HBL will need to be prudent with residual value assumptions in regard to funding electric vehicles as depreciation rates can be extremely high when new technology is rapidly evolving. So who's lining up their funds for the upcoming share purchase plan ? (I am).

Havn't looked in great detail but I'm presuming this won't be at 1.46? Still to be announced.

[Beagle]

https://www.nzx.com/files/attachments/249951.pdf

That's all we know at this stage but it wouldn't surprise me if they announced more details of this as part of their half year result announcement on 21 February.

[percy]

Yes I will need to think about the SPP, and also take into consideration whether I accept a cash dividend, or DRP.I guess a lot will depend on whether the SPP comes before or after the dividend.If the SPP comes before the dividend,and includes the dividend, it may be a chance to double dip?
In the meantime the steadily increasing SP,although very nice,does mean the SPP will most probably be at a higher price than the $1.46,and the amount of shares I would receive via DRP will be fewer.!
I expect details of the SPP will be announced on the 21st, along with the interim result.

[kizame]

Yep most likely announced with the 6 mnth result,but I wouldn't expect the spp to include the dividend,and should probably happen before the divvy is paid.
They should be divvy exempt.

[Bjauck]

Yep most likely announced with the 6 mnth result,but I wouldn't expect the spp to include the dividend,and should probably happen before the divvy is paid.
They should be divvy exempt.
I think the SPP announced in February 2014 did not include the dividend and was at a 2.5% discount to the average share price during a period prior to allotment (but was not to be higher than the price paid in the prior placement.)

I do not know if they will follow the terms of that SPP but here's a link to it: https://shareholders.heartland.co.nz/media/news/HNZ%20Share%20Purchase%20Plan%20February%202014.pd f

[Under Surveillance]

Yep most likely announced with the 6 mnth result,but I wouldn't expect the spp to include the dividend,and should probably happen before the divvy is paid.
They should be divvy exempt.
If the institutions which got the shares issued at 146 get dividends on them, then small shareholders should get the same treatment for shares they acquire under the spp. And the shares under the spp should be issued at 146.

If not, a lot of the love gushed for HBL on this thread will evaporate.

[Bjauck]

If the institutions which got the shares issued at 146 get dividends on them, then small shareholders should get the same treatment for shares they acquire under the spp. And the shares under the spp should be issued at 146.

If not, a lot of the love gushed for HBL on this thread will evaporate. What if the SP had fallen? The book build was about two months ago, I would expect the terms to be different. HBL has had the use of the instos application funds. It would be unfair on the instos (and their members) to keep the terms the same.

However as in 2014, it would have been fairer to have had the placement and SPP closer in time. It would have been better still imo to have had a renounceable rights issue anyway.

[Jantar]

If the institutions which got the shares issued at 146 get dividends on them, then small shareholders should get the same treatment for shares they acquire under the spp. And the shares under the spp should be issued at 146.

If not, a lot of the love gushed for HBL on this thread will evaporate.
This could be a tough one for HBL. The offer price really needs to be at a discount to the ex div SP, or else we would just buy on market rather than trough the SPP.

[janner]

Sold down two tranches of a 100K because I felt over loaded..

Regret it..

Disc. Holder.

[JeremyALD]

I want to buy more, but is that kind of dumb if I could get a discount in a month or two? The share price seems to hit a lot of resistance around $1.58 and has been between 1.50 and 1.60 for a few months.

[percy]

I want to buy more, but is that kind of dumb if I could get a discount in a month or two? The share price seems to hit a lot of resistance around $1.58 and has been between 1.50 and 1.60 for a few months.

Being so close to the interim result due on the 21st Feb,I would wait until you have read it,and find out the details of the SPP.Being a holder already, you will be able to apply for $15,000 worth,if you decide to.
HBL's sp appears to be tracking sideways again,so I do n't think you need to rush your purchase.
Value.At current prices I don't think HBL shares are cheap.Appears the market is now prepared to pay a higher PE for them,seeing they have delivered on their promises..
On the other hand they are not excessively over priced, considering future "organic" growth and growing dividends,currently a 5.45% yield.

[kizame]

With all the developements lately and the fact they do deliver the profits they say they are going to make,the p/e should be sitting a bit above the other banks,as I think of HBL now as a growth stock.

[Beagle]

Being so close to the interim result due on the 21st Feb,I would wait until you have read it,and find out the details of the SPP.Being a holder already, you will be able to apply for $15,000 worth,if you decide to.
HBL's sp appears to be tracking sideways again,so I do n't think you need to rush your purchase.
Value.At current prices I don't think HBL shares are cheap.Appears the market is now prepared to pay a higher PE for them,seeing they have delivered on their promises..
On the other hand they are not excessively over priced, considering future "organic" growth and growing dividends,currently a 5.45% yield.

Fully imputed though eh mate so 5.45 / 0.72 = 7.57% gross. Pretty handy return I reckon plus as you suggest, plenty or organic growth so if the PE stays where it is which seems fair we should see the share price grow in line with organic growth. 7.57% + ~ 10% organic growth = 17.57% total projected shareholder return, not too shabby in this low interest rate environment :)

[BlackPeter]

With all the developements lately and the fact they do deliver the profits they say they are going to make,the p/e should be sitting a bit above the other banks,as I think of HBL now as a growth stock.

Depends whether you prefer to rate or ignore the risks. Not quite sure how I feel about HBL's new affection to risky-er mortgages - if lenders don't worry about getting the best interest rates, there might be a more sinister reason than just their desire to make HBL shareholders happy.

Its now nearly a decade, bit I still remember the GFC ... do you?

Still holding, but monitoring closely.

[winner69]

Fully imputed though eh mate so 5.45 / 0.72 = 7.57% gross. Pretty handy return I reckon plus as you suggest, plenty or organic growth so if the PE stays where it is which seems fair we should see the share price grow in line with organic growth. 7.57% + ~ 10% organic growth = 17.57% total projected shareholder return, not too shabby in this low interest rate environment :)

Could be higher (growth and dividend) if things didn't get put in the bottom drawer fora rainy day as the saying goes

[Snoopy]

If there is a case for investment in Heartland today, I feel as though it will be as a dividend play. So how does one fairly value Heartland from a dividend perspective?



.... http://www.investopedia.com/terms/d/ddm.asp

Roger here is referencing the 'Dividend Discount Model' for valuing shares which, according to investpedia, goes like this:

Value of Share = (Dividend per Share) / (Discount Rate - Dividend Growth Rate)

The reason why I value a share on dividends is that my alternative growth modelling looks to be unreliable. There are plenty of reasons why Heartland could grow that are well discussed here. But despite Heartland having a strategy and successfully executing it (so far) there are lots of things that could go wrong too, and these scenarios are almost never discussed: except in this post.

1/ UDC gets some Kung Fu fighting ability: Many assume that the acquisition of nearest competitor UDC by the Chinese HNA Group will see a mass exodus of UDC depositors and customers. It is very curious that HNA Group are prepared to stump up a premium to book value of $NZ235m, or 1.6 times book value at UDC's full year balance, just to watch such a disaster unwind. What never got mentioned is that ANZ has agreed to fund a loan facility for UDC so generous, that even if nearly all depositors pulled out before UDC was sold, none of the loans would be affected. Once sold, credit rating agencies will drop UDC to below invesment grade because the new parent HNA froup has a rating delow investment grade. But if HNA then chooses to finance the business using cheap Chinese money, the credit rating no longer matters. Dollars still talk in financial deals. Those people with loans on the UDC book may be offered a very low interest rate, undercutting the likes of Heartland. Heartland's loan book could collapse under relentless Chinese pressure.

2/ The Great Reverse Mortagage Reversal: Reverse mortgages are more attractive in an environment of rising house prices. I reckon that some of those who took out reverse mortages in the last two years in Sydney, Melbourne and Auckland will have more capital now than before (despite semi-punitive interest charges) they took out their reverse mortgage. But if property capital growth stalls, or worse, the housing market goes backwards, then those with a reverse mortage will see a double decline in value. Both from compounding interest AND the diminuition in value of their house security. I think reverse mortgage growth will be much harder in that kind of market.

3/ Cost Pressures: Heartland, despite their superior interest margins - a point often quoted here, are still behind the big banks in terms of 'Net Profit margin'. 'Net Profit margin' I take as:

'Net Sustainable Profit' / 'Gross Interest Revenue'

For example ANZ in FY2016 this was 22.8%, and Heartland was 20.1%. So the superior 'net interest margin' of Heartland was more than compensated for by higher costs in the other operating expenses of the business. Heartland is actually a 'high cost base bank' which is much smaller than the big four banks. Being small and high cost puts Heartland in a vulnerable position. This is why Heartland have steered away from competing head on with the big banks (a smart move) in teir earlier visions. But now Heartland are to move back into regular mortgages via their on-line platform. I predict Heartland will succeed, but only by whatever measure the big banks choose to constrain them to. I can't see this U turn back to the mortgage market ending well for Heartland.

4/ "The nicking of Heartland Niches." Heartland are proud to point out their loan offerings to SMEs, a neglected segment (so they say). But Westpac are also going hard after SME business. Likewise both Westpac and ANZ are investing in their own digital strategies going forwards. ANZ will lend against livestock and farm machinery directly (leaving farm land unencumbered) too. Heartland's unique offerings to the market, while not offered by every other bank, are far from unique. Heartland may be going after underserved market niches, but other banks are going after those niches too!

I am not predicting the demise of Heartland even if all of my above bullet points come to pass. I am suggesting that the future of 'Heartland banking' may be a lot more combative that some shareholders think. I would say a dividend growth rate of zero would be the appropriately conservative figure to put into any dividend valuation equation.


SNOOPY

[winner69]

Roger here is referencing the 'Dividend Discount Model' for valuing shares which goes like this:

Value of Share = (Dividend per Share) / (Discount Rate - Dividend Growth Rate)


SNOOPY

So Value of HBL Share = (8.5 cents) / (10% - 13%)

= 0.085 / -0.03

= - $2.83 according to my Samsung

= don't make sense


Or if we moderate the 13% growth rate to a modest 9% and still use the 10% discount rate the answer is $8.50 - YIPPEE

[h2so4]

So Value of HBL Share = (8.5 cents) / (10% - 13%)

= 0.085 / -0.03

= - $2.83 according to my Samsung

= don't make sense


Or if we moderate the 13% growth rate to a modest 9% and still use the 10% discount rate the answer is $8.50 - YIPPEE

Hang on you have to make some SD adjustments to make it work. See ANZ thread.

[Snoopy]

So Value of HBL Share = (8.5 cents) / (10% - 13%)

= 0.085 / -0.03

= - $2.83 according to my Samsung

= don't make sense


Or if we moderate the 13% growth rate to a modest 9% and still use the 10% discount rate the answer is $8.50 - YIPPEE

Looking at the 'investorwords' example, in all cases the growth in the company's dividends is less than the company's cost of equity capital. So your overoptimistic inputs Winner, with a discount rate less than the divdend growth rate, are apparently, not allowed.

SNOOPY

[winner69]

Looking at the 'investorwords' example, in all cases the growth in the company's dividends is less than the company's cost of equity capital. So your overoptimistic inputs Winner, with a discount rate less than the divdend growth rate, are apparently, not allowed.

SNOOPY

So the model is nonsense then

Working backwards from a 155 share price and using my 13% growth rate the implied discount rate is 18.5%

Hmmm

[h2so4]

So the model is nonsense then

Working backwards from a 155 share price and using my 13% growth rate the implied discount rate is 18.5%

Hmmm

Yes but we haven't seen the all important SD adjustments.

[Beagle]

Snoopy I am sure it will not surprise you that I think they can grow dividends in line with EPS growth. Consensus analyst forecast on 4traders is for meaningful growth in EPS for the next 3 years and I am happy with their figures.

May I suggest you rework the dividend valuation model using average brokers consensus EPS growth figures for the next 3 years.

[Snow Leopard]

Yes but we haven't seen the all important SD adjustments.

What is SD ?

Best Wishes
Paper Tiger

[h2so4]

snoopy hound dog

[h2so4]

1/ Adjust growth to zero.

[Beagle]

1/ Adjust growth to zero.

LOL this hound feels like biting a chunk out of the other hound after reading that then the Tiger could give him a good clawing and send him back to his kennel in disgrace :D
Honestly to suggest this company can't grow dividends going forward is in my opinion a seriously flawed viewpoint. Far more likely that housing will continue to maintain close to its real current value and UDC will continue to do what its always done. Doomsday thinking way overdone Snooper.

[Snow Leopard]

For some reason whilst reading this Snoopy post (http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=654600&viewfull=1#post654600) I was reminded of this mildly enjoyable song:


https://www.youtube.com/watch?v=urglg3WimHA

Stay till the end.

Best Wishes
Paper Tiger

[Jantar]

........
Honestly to suggest this company can't grow dividends going forward is in my opinion a seriously flawed viewpoint........ In the 2 and bit years I have held HBL, the increase in dividend has been a fairly steady 1c per share per year, and looking forward at the increase in eps, I expect this to continue. On that basis I am expecting the interim divi to be 4 cps, and increase of 0.5 cps over last year's interim divi.

[Snoopy]

Roger here is referencing the 'Dividend Discount Model' for valuing shares which, according to investpedia, goes like this:

Value of Share = (Dividend per Share) / (Discount Rate - Dividend Growth Rate)



The choice of a discount rate will make a large difference to the end result. The preferred 'discount rate', in the referenced 'investopedia' model, seems to eqaute to the company's 'cost of equity capital'. Note that if the dividend growth rate is assumed to be zero (as I will be assuming), then the investopedia formula collapses to the same formula that I have been using before I looked up that reference.

Dividend per Share / Yield = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

So another way of looking at this situation is to consider the 'cost of equity capital' to be measured by the yield an investor might accept.

If we assume 'zero dividend growth' over a 'business cycle', then the yield that I would accept, depends on the quality of the underlying business. For companies in the finance sector, I would split finance businesses into three categories. I present an example from each of my categories below:



CategoryExampleAcceptable Yield


Tier 1 Finance Industry CompanyANZ Bank6.5%


Tier 2 Finance Industry CompanyHeartland Bank7.5%


Tier 3 Finance Industry CompanyGeneva Finance8.5%



Now there are most sophisticated techniques, such as ther capital sset pricing model, that can be used to get the 'cost of capital' for a company. But personally I prefer this simpler steadier approach. I am saying here that Heartland is in the middle of the finance company spectrum. Not as 'safe' as one of the big banks. But a cut above what might be considered today 'fringe lenders'. After the great finance company clean out, I am considering any company that calls itself a finance company a 'fringe lender' these days!

SNOOPY

[Snoopy]

In the 2 and bit years I have held HBL, the increase in dividend has been a fairly steady 1c per share per year, and looking forward at the increase in eps, I expect this to continue. On that basis I am expecting the interim divi to be 4 cps, and increase of 0.5 cps over last year's interim divi.

Past performance , in an environment that has enabled Heartland to extricate itself from its difficult property sector "investments', is no guarantee of future performance.

SNOOPY

[h2so4]

LOL this hound feels like biting a chunk out of the other hound after reading that then the Tiger could give him a good clawing and send him back to his kennel in disgrace :D
Honestly to suggest this company can't grow dividends going forward is in my opinion a seriously flawed viewpoint. Far more likely that housing will continue to maintain close to its real current value and UDC will continue to do what its always done. Doomsday thinking way overdone Snooper.

Yes no logic but snoops has to get a discount rate. Important to get the right rate aye.Lol!

[h2so4]

......think its going to be a long one. At least I'm doing something useful ATM.
cleaning tge bathroom.

[Snoopy]

Dividend per Share / Yield = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

So another way of looking at this situation is to consider the 'cost of equity capital' to be measured by the yield an investor might accept.

We assume 'zero dividend growth' over a 'business cycle'

Note that the financial year starts on 1st July of the previous calendar year and ends on 30th June.



YearDividends Paid 'per share'Significant Event During Year'


FY2013 1.5cps(sp) + 2.0cps17th December 2012: Heartland becomes a bank

[/TR]

FY2014 2.5cps + 2.5cps1st April 2014: Seniors 'Reverse Mortgage' Business Acquired


FY2015 3.5cps + 3.0cps10th September 2014: invests in Harmony P2P startup


28th October 2014: Credit rating upgraded from BBB- to BBB (Fitch Ratings)


FY20164.5cps + 3.5cps


FY2017(f)5.0cps + 3.5cps(f)


Average FY2015 to FY2017 inclusive7.66cps



(f) indicates forecast result.

I have chosen to use the last three years of operation as indicative, as these years include the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards.

SNOOPY

[Snoopy]

So the model is nonsense then


No, but it doesn't work well for high growth shares. And it doesn't work at all if no dividend is paid.



Working backwards from a 155 share price and using my 13% growth rate the implied discount rate is 18.5%


Yep, 18.5% is probably a realistic assessment of the combined risk of the good upside (covered extensively in this thread) and the bad downside (only covered in one post, my 8616) of Heartland going forwards.

SNOOPY

[Snoopy]

CategoryExampleAcceptable Yield



Tier 2 Finance Industry CompanyHeartland Bank7.5%







Note that the financial year starts on 1st July of the previous calendar year and ends on 30th June.



YearDividends Paid 'per share'Significant Event During Year'



Average FY2015 to FY2017 inclusive7.66cps



I have chosen to use the last three years of operation as indicative, as these years include the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards.


Plugging in a representative yield, one that represents the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

7.66c / 0.72 x 0.075 = $1.42

A reminder here that NTA was 91cps at balance date. This means my fair valuation is at a good premium to asset value, a credit to management from the rag tag of assets that they started with.

This $1.42 valuation is measured at the average point in the business cycle. One might argue that we are now riding high in the business cycle and that this $1.42 valuation is consequently too low given today's circumstances. I wouldn't argue with that. But, ever the bargain hound, neither would I look at buying any shares myself until that share price drifts down to that $1.42 level. Don't say that Snoopy didn't warn you!

SNOOPY

[Snow Leopard]

https://s-media-cache-ak0.pinimg.com/736x/0a/94/9b/0a949b7482dc92d9e475161f3da0a4e1.jpg

[Snow Leopard]

...(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

7.66c / 0.075 = $1.02...


You forgot to gross up the divvy

https://www.irononsticker.com/images/Kung%20Fu%20Panda's%20Tigress%202.jpg

Best Wishes
Paper Tiger

[Xerof]

I like the model Snoopdog, but using a gross Div of 9.8 and my own acceptable yield of 6.25, I get a share price of $1.56

I think currently the market agrees with me :t_up:

[JeremyALD]

HBL is as solid as they come. Things are looking good at least in the short term.

Does anyone know how much HBL borrows offshore compared to onshore? Rising interest rates overseas may sqeeuze their margins a bit.

[percy]

HBL is as solid as they come. Things are looking good at least in the short term.

Does anyone know how much HBL borrows offshore compared to onshore? Rising interest rates overseas may sqeeuze their margins a bit.

They have bank funding in Australia [from I think CBA] for their Australian Reverse Mortgages.
NZ lending is funded in NZ .
So you could say they have no offshore borrowings,

[JeremyALD]

They have bank funding in Australia [from I think CBA] for their Australian Reverse Mortgages.
NZ lending is funded in NZ .
So you could say they have no offshore borrowings,

Even better, thanks Percy.

[Snoopy]

Plugging in a representative yield, one that represents the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

7.66c / 0.72 x 0.075 = $1.42

A reminder here that NTA was 91cps at balance date. This means my fair valuation is at a good premium to asset value, a credit to management from the rag tag of assets that they started with.


It is always good to be able to cross check these valuations with another method.

The price paid for UDC was a 60% premium to net asset backing. The HLB asset backing was 91c

1.6 x $0.91 = $1.46

Of course this would include a premium for control. If that premium was between 10% and 20%, this would imply a daily trading valuation for HLB of $1.22 to $1.33.



This $1.42 valuation is measured at the average point in the business cycle. One might argue that we are now riding high in the business cycle and that this $1.42 valuation is consequently too low given today's circumstances. I wouldn't argue with that. But, ever the bargain hound, neither would I look at buying any shares myself until that share price drifts down to that $1.42 level. Don't say that Snoopy didn't warn you!


I should add to the above that Snoopy always likes to buy below fair value. For a bond like asset I look for a discount of 20%. So I would be looking to pick up HBL shares in the early $1.20s.

SNOOPY

discl: do not hold HBL

[percy]

You have had five and half years to buy into HBL.From 45 cents upwards.
You have believed your own poorly thought out posts , and missed the boat.
Your investment model has let you down,time and time again,while HBL shareholders have enjoyed the benefits from sound research, which works.
May be time for you to read "The Zulu Principle" by Jim Slater.Google it, and be prepared to learn how to invest profitably .You would have avoided from losing your capital with ARI,and made a healthy with HBL.
"Better to pay a fair price for a good company,than a good price for a fair company."

[Snoopy]

Snoopy I am sure it will not surprise you that I think they can grow dividends in line with EPS growth.


Roger, for my modelling I have used historical EPS figures. I said I was using a 'no growth' outlook. But I did not consider the increasing number of shares on issue every year. So even though I am assuming no EPS growth, I am not assuming no growth.



Financial YearNo. Shares on issue EOFYIncrease on Previous Year


2013388.704m0%


2014463.266m+13%


2015469.980m+6.7%


2016476.469m+1.4%


2017500m (f)+4.9%



(f) Forecast based on $20m shares issued at $1.46 (already placed) and $10m shares issued at $1.46 (signalled share purcahse plan) plus some DRP shares.

Over the five year period under consideration, the average number of shares on issue is:

388.704m x (1+g)^5 = 500m => g = 5.15%

This means that I was assuming in my model, earnings growth in dollar terms of 5.15% per year, through good times and bad. I think that is a more than fair assumption for earnings growth going forwards too.

Previously I was trying to figure out how I would tweak my 'no growth' assumption to incorporate some modest growth. Now that I have figured out that I have effectively alkready done just that, no more tweaking of my model will be required. I think my $1.42 valuation base for HBL is very fair.

Heartland closed at $1.56 on Friday. If we strip out from that a 3.5c upcoming dividend (the same as last year), then the underlying share price is $1.525. That is 7.4% overvalued by my calculations. Sounds about right given the rest of the market, on average., is probably overvalued too!

SNOOPY

[Snoopy]

I like the model Snoopdog, but using a gross Div of 9.8 and my own acceptable yield of 6.25, I get a share price of $1.56

I think currently the market agrees with me :t_up:


9.8c / $1.56 = 6.25% ?

I have never been a big fan of bonds. But years ago when Westfield was listed in NZ, I remember taking out a medium term ( 2 year IIRC ) bond and getting something like 8.5% and feeling very pleased with myself. I was pleased because 'big bank' deposit rates had declined to something between 6% and 7% at the time. This was all before the GFC of course, and the collapse of all those higher interest options like MARAC that was subsequently rescued and recycled into Heartland Bank. Back in the day if someone had offered me a MARAC bond at 6.25% I would have said (or did say) 'not a chance'.

Fast forward to today and ask me if I would like a descendent of that bond that pays 6.25%, let's just say I would be nervous about the 'risk reward' ratio. Granted interest rates are generally lower now, and maybe your 6.25% expectation that aligns with Mr Market is realistic Xerof? But buying a second tier finance 'bond' with such a low coupon rate does not sit well with this puppy.

Still this is not to say that you are wrong. Everyone is entitled to their own view of risk verses reward Xerof.

SNOOPY

[Snoopy]

You have had five and half years to buy into HBL.From 45 cents upwards.
You have believed your own poorly thought out posts , and missed the boat.
Your investment model has let you down,time and time again,while HBL shareholders have enjoyed the benefits from sound research, which works.
May be time for you to read "The Zulu Principle" by Jim Slater.Google it, and be prepared to learn how to invest profitably.
"Better to pay a fair price for a good company,than a good price for a fair company."


That last line reminds me of a Buffettism.

"Better to buy a wonderful company at a fair price, than a fair company at a wonderful price."

The question is what makes a wonderful company, or even a good company? I would argue 'a good company' is not a rag tag of assets with MARAC being stuck together with the Canterbury Building Society to bail it out, with George Kerr organizing a capital raising to make it viable. If anything 45c sounds like a wonderful price for a fair company at best.

You argue the Jim Slater approach. But this is all about building up industry specialisation knowledge with particular focus on small cap companies that fly under the radar. Granted Heartland ticked the small cap box in FY2013. But how did it stack up against other finance company investments? Most alternatives had gone bust during the GFC, but that does automatically make the survivors a good investment. I couldn't answer any comparative question at that time, because my knowledge of the banking and finance industry was insufficient. So your solution was that I should have dived into Heartland shares at the deep end? Since that time I have spent many hours building this specialist banking knowledge up. I think Jim Slater would be proud of me!

And how does Heartland stack up today? I would argue not particularly well with my own principal banking investment ANZ. This is what investing according to the Zulu principle is all about. Building up specialist knowkedge, independent of management spin, and applying it in a comparative sense.

SNOOPY

[percy]

Wrong as always on this thread.
According to our friends at Yahoo finance.Share prices
..................1 year....................2 year...................5 year.
ANZ...........29.85%.............minus 15.96%............36.84%
HBL............39.29%...................12.23%.... ...........231.91.
You keep your under performer,and I will keep my high achiever..
So $10,000 miss placed in ANZ 5 years ago would be worth $13,684.00
Same amount invested in HBL would be worth $23,191.00.

[Snow Leopard]

...Since that time I have spent many hours building this specialist banking knowledge up. I think Jim Slater would be proud of me!...

http://1.bp.blogspot.com/-8-m-QIQpdXA/UnoDMAu4NoI/AAAAAAAAA40/S_2LnWgX2cc/s1600/Laugh.jpg


...And how does Heartland stack up today? I would argue not particularly well with my own principal banking investment ANZ. This is what investing according to the Zulu principle is all about. Building up specialist knowkedge, independent of management spin, and applying it in a comparative sense.

SNOOPY

http://1.bp.blogspot.com/-8-m-QIQpdXA/UnoDMAu4NoI/AAAAAAAAA40/S_2LnWgX2cc/s1600/Laugh.jpg

:)
Paper Tiger

[winner69]

Wrong as always on this thread.
According to our friends at Yahoo finance.Share prices
..................1 year....................2 year...................5 year.
ANZ...........29.85%.............minus 15.96%............36.84%
HBL............39.29%...................12.23%.... ...........231.91.
You keep your under performer,and I will keep my high achiever..
So $10,000 miss placed in ANZ 5 years ago would be worth $13,684.00
Same amount invested in HBL would be worth $23,191.00.

If that 231.91 is meant to be 231.91% you need to redo your sums again percy

[Snow Leopard]

The past has passed us by.

The value is in the future and while I expect real EPS growth, I do expect 'moderate' (~5%) EPS growth over the next few years.
I hope for better and have allowed for worse (an attack by dinosaurs in spaceships and similar).

Best Wishes
Paper Tiger

[Bjauck]

If that 231.91 is meant to be 231.91% you need to redo your sums again percy HBL/HNZ was at a SP of about 45c five years ago?

[percy]

If that 231.91 is meant to be 231.91% you need to redo your sums again percy

Figures quoted are as per Yahoo Finance.
The 231.91% increase is from 13th Feb 2012 to 6th Feb 2017.
Bjauck.The HBL sp was 43 cents on 27th Feb 2012.

[horus1]

bought them all the way up and will keep buying .They do what they say and do not overhype. Love them and have alot

[percy]

Capital only and Capital + Dividend(*) returns for HBL (formerly HNZ) for the yearly periods to 11-Jan.

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20170111.png

Best Wishes
Paper Tiger

(*) Cap&Div prices are dividend adjusted prices using the definitive Tiger Method.

Time for us to focus on clarity.Thanks Paper Tiger for all the actual figures.

[percy]

bought them all the way up and will keep buying .They do what they say and do not overhype. Love them and have alot

Clear thinking is the way to profitable investing.
No pages of dribble.
Well done.

[janner]

Still holding from the beginning

Sold down on the way up.. Much to my regret.. Still hold a few ..

[winner69]

Figures quoted are as per Yahoo Finance.
The 231.91% increase is from 13th Feb 2012 to 6th Feb 2017.
Bjauck.The HBL sp was 43 cents on 27th Feb 2012.

so what's $10,000 worth now as per the rest of your post?

[Xerof]

Snoop dog, I was merely extracting the urine. I fudged my numbers to equate to Fridays closing price

[percy]

so what's $10,000 worth now as per the rest of your post?

Choices.
1] Yahoo finance,capital $23,191.00
2] Paper Tigers,capital $22,128.00
3] Paper Tiger's capital plus dividends,$31,713.00.
All rather compelling.!
NB.Refer to post #8654.

[winner69]

Wrong as always on this thread.
According to our friends at Yahoo finance.Share prices
..................1 year....................2 year...................5 year.
ANZ...........29.85%.............minus 15.96%............36.84%
HBL............39.29%...................12.23%.... ...........231.91%
You keep your under performer,and I will keep my high achiever..
So $10,000 miss placed in ANZ 5 years ago would be worth $13,684.00
Same amount invested in HBL would be worth $23,191.00.

The $23,191.00 should be $33,191.00 (giving your 231.91% return) ....yes?

Snoopy even worse off eh

[percy]

The $23,191.00 should be $33,191.00 (giving your 231.91% return) ....yes?

Snoopy even worse off eh

Whatever way you look at it HBL's share price has left ANZ's for dead!
And it looks to me he will be further behind in future,as HBL's eps growth will out match ANZ's.This will give HBL the capacity to keep paying increasing dividends,while ANZ's will be flat.

[winner69]

Percy, see your mate Chris Lee this week mentioned the vexed question of how to fund property development seeing banking lines are being withdrawn.

Time for Heartland to step up - market void not being serviced by the big boys, niche, not too labour intensive and all that ......and had some experience in this sector

NZ needs subdivisions and apartment blocks - what an opportunity for Heartland. Betcha Jeff salivating thinking of what could be,

Where's there a buck to be made Heartland should go

[percy]

Percy, see your mate Chris Lee this week mentioned the vexed question of how to fund property development seeing banking lines are being withdrawn.

Time for Heartland to step up - market void not being serviced by the big boys, niche, not too labour intensive and all that ......and had some experience in this sector

NZ needs subdivisions and apartment blocks - what an opportunity for Heartland. Betcha Jeff salivating thinking of what could be,

Where's there a buck to be made Heartland should go

Maybe no.
Leave a sector for your Co-Op mates.

[iceman]

Whatever way you look at it HBL's share price has left ANZ's for dead!
And it looks to me he will be further behind in future,as HBL's eps growth will out match ANZ's.This will give HBL the capacity to keep paying increasing dividends,while ANZ's will be flat.

Just looked back at my spreadsheets and see that the majority of my holding HBL (HNZ at the time & some CBS before that) was bought in September 2011 at prices ranging from 48c-56c. My calculations show a 301% capital gain on my shares since then. Think I have received about 28c divies. So I think you are under estimating it mate :-)

[percy]

Just looked back at my spreadsheets and see that the majority of my holding HBL (HNZ at the time & some CBS before that) was bought in September 2011 at prices ranging from 48c-56c. My calculations show a 301% capital gain on my shares since then. Think I have received about 28c divies. So I think you are under estimating it mate :-)

Extremely happy to agree with you.
Trust Winner69 and Snoopy read your post.
Thanks for sharing.

[winner69]

Extremely happy to agree with you.
Trust Winner69 and Snoopy read your post.
Thanks for sharing.

Cmon percy - its Sunday and I'm on your side and get grumpy with the inference i'm just as bad as Snoopy. I have HBL and Snoops doesn't to start with.

I was just correcting your maths in an earlier post

$10,000 in Heartland 5 years ago now worth $33,191 and not $23,191 as you said. Same calculation for ANZ is $13,684

[percy]

Cmon percy - its Sunday and I'm on your side and get grumpy with the inference i'm just as bad as Snoopy. I have HBL and Snoops doesn't to start with.

I was just correcting your maths in an earlier post

$10,000 in Heartland 5 years ago now worth $33,191 and not $23,191 as you said. Same calculation for ANZ is $13,684

No inference meant.
A basic mistake on my part.You were right to be grumpy.
Included you, so as to be helpful, as I thought Iceman's spreadsheet figures were of interest.
Apologises.

[Snoopy]

bought them all the way up and will keep buying .They do what they say and do not overhype. Love them and have alot

Nothing wrong with falling in love. Might not be so wise to fall in love with a share though.

SNOOPY

[Snoopy]

Wrong as always on this thread.
According to our friends at Yahoo finance.Share prices
..................1 year....................2 year...................5 year.
ANZ...........29.85%.............minus 15.96%............36.84%
HBL............39.29%...................12.23%.... ...........231.91.
You keep your under performer,and I will keep my high achiever..
So $10,000 miss placed in ANZ 5 years ago would be worth $13,684.00
Same amount invested in HBL would be worth $23,191.00.

I meant ANZ looks the better investment from today. Never said the same five years ago. Not much point in investing looking backwards from what I can see.

I notice you left out dividends (yet again). Of course it doesn't matter from a Heartland perspective, because more capital has been poured into that business structure than has come out as dividends over the last five years.

SNOOPY

[percy]

I meant ANZ looks the better investment from today. Never said the same five years ago. Not much point in investing looking backwards from what I can see.

I notice you left out dividends (yet again). Of course it doesn't matter from a Heartland perspective, because more capital has been poured into that business structure than has come out as dividends over the last five years.

SNOOPY

Dividends.
My post # 425 on ANZ thread.
Dividend growth since 2014.
ANZ....Minus 4.5%..............
HBL.......Up....71.66%.
EPS growth,ROE growth,dividend growth means HBL has had outstanding share price growth,which you have missed.
Strong organic growth has seen HBL use up their excess capital.New capital will see further growth,while ANZ has had to sell of bits to shore up their balance sheet,which means they have little or no eps growth,so there certainly will be no increased dividends.

[winner69]

I reckon H1 profit will be $28.8m (they did do $14.2m in the first quarter) ..... and Jeff will say FY will be at top end of previous guidance

FY really should be over $60m but they'll manage to keep it to that $60m plus or minus a fraction - remember they always deliver on want they said they will do. Wouldn't want to go overboard would they

[Snoopy]

9.8c / $1.56 = 6.25% ?




Snoop dog, I was merely extracting the urine. I fudged my numbers to equate to Fridays closing price.


I thought as much. But what you did:

1/ Find a yield you are happy with.
2/ Multiply (1) by a gross dividend in cents that you choose

to obtain

3/ The share price

is a legitimate way to use the Dividend Capitalisation Valuation method. The yield that you choose is a judgement call. The dividend you use could be historical, forecast or some kind of multi-year average. So the dividend is a judgement call as well. And that means the whole valuation method is a judgement call. But there is nothing wrong with that, provided you sincerely believe that your own judgements are representative.

SNOOPY

[Snoopy]

Plugging in a representative yield, one that represents the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Yield) = Share Price (an algebraeic manipulation of: Dividend per Share / Share Price = Yield )

7.66c / 0.72 x 0.075 = $1.42

A reminder here that NTA was 91cps at balance date. This means my fair valuation is at a good premium to asset value, a credit to management from the rag tag of assets that they started with.

This $1.42 valuation is measured at the average point in the business cycle. One might argue that we are now riding high in the business cycle and that this $1.42 valuation is consequently too low given today's circumstances. I wouldn't argue with that. But, ever the bargain hound, neither would I look at buying any shares myself until that share price drifts down to that $1.42 level. Don't say that Snoopy didn't warn you!





I should add to the above that Snoopy always likes to buy below fair value. For a bond like asset I look for a discount of 20%. So I would be looking to pick up HBL shares in the early $1.20s.

discl: do not hold HBL


I have a bit more to say about my $1.42 valuation. This will be obvious if you understand what 'business cycle average' means. But time to state the obvious.

Assuming my valuation is correct, the chances of Heartland trading at that value on any particular day is very small. If $1.42 is the average, then about half the time the share should be trading above that average and half the time the share should be trading below that average (as a general rule of thumb). Whether it trades above or below depends, where potential shareholders see Heartland going in the next couple of years in relation to the business cycle. A business cycle is not something with a smooth upward and downward progression. So it is not unusual to have lumpy share price movements over time that reflect this.

Just because I wouldn't buy Heartland today at $1.55, that doesn' t mean that I would sell it if I already owned it. For a start, Heartland is a good dividend payer. Sticking Heartland money in a 2% cash account is not a great alternative strategy. And although I regard Heartland as overvalued at present, it is not noticibly more overvalued than the rest of the market. My strategy, if I held Heartland, would be to keep holding. It would only be if the overvaluation became excessive that I would consider selling down. I would add on the upcoming dividend (3.5cps it was last year) to the fair value share price ($1.42 + 20%) and look at lightening my holding if Heartland became 20% overvalued from that figure.

That corresponds to a price of ($1.42 x 1.2) + $0.035 = $1.74

That's the figure I would be selling down from.

SNOOPY

[nextbigthing]

That corresponds to a price of $1.58.5 x 1.2 = $1.90

That's the figure...

SNOOPY

You're finally starting to see the light Snoopy. Well done.

[Snow Leopard]

Definitely makes sense having a sell price 20% higher than whatever the current share price is. :confused:

Though I would not complicate it by adding in the theoretical next dividend.

Best Wishes
Paper Tiger

[Beagle]

I have a bit more to say about my $1.42 valuation. This will be obvious if you understand what 'business cycle average' means. But time to state the obvious.

Assuming my valuation is correct, the chances of Heartland trading at that value on any particular day is very small. If $1.42 is the average, then about half the time the share should be trading above that average and half the time the share should be trading below that average (as a general rule of thumb). Whether it trades above or below depends, where potential shareholders see Heartland going in the next couple of years in relation to the business cycle. A business cycle is not something with a smooth upward and downward progression. So it is not unusual to have lumpy share price movements over time that reflect this.

Just because I woudln't buy Heartland today $1.55, that doesn' t mean that I woudl sell it if I already owned it. For a start Heartland is a good dividend payer. Sticking Heartland money in a 2% cash account is not a great alternative strategy. And although I regard Heartland as overvalued at present, it is not noticibly more overvalued than the rest of the market. My strategy, if I held Heartland, would be to keep holding. It would only be if the overvaluation became excessive that I would consider selling down. I would add on the upcoming dividend (3.5cps it was last year) to the fair value share price ($1.42 + $0.035 = $1.45.5) and look at lightening my holding if Heartland became 20% overvalued from that figure.

That corresponds to a price of $1.45.5 x 1.2 = $1.75

That's the figure I would be selling down from.

SNOOPY

We're almost barking off the same hymn sheet. I think they're fair value at present and the divvy yield plus growth in dividend in line with growth in EPS makes them a good hold.

[Snoopy]

Definitely makes sense having a sell price 20% higher than whatever the current share price is. :confused:

Though I would not complicate it by adding in the theoretical next dividend.

Best Wishes
Paper Tiger

Sorry should have used the 'fair value share price' as a bas, not the current share price! Have corrected my post (sell down price now $1.74).

SNOOPY

[h2so4]

Sorry should have used the 'fair value share price' as a bas, not the current share price! Have corrected my post (sell down price now $1.74).

SNOOPY

I don't understand why you have a sell price for a share that you don't even own.

[trader_jackson]

So you wouldn't consider selling till it at $1.74, yet you think it is overvalued at $1.55?
So how overvalued does a share have to be until you decide to sell it?

[Snoopy]

I don't understand why you have a sell price for a share that you don't even own.


Two answers to that.

1/ I study HBL as a 'value benchmark' for the finance sector shares I do own: ANZ and WBC. So knowing where the value of HBL is in the market, relative to the other two, is useful to me.

2/ The 'Capitalisation of Dividends Valuation' that I did produced:

2a/ an 'average value' AND
2b/ a 'buy value' (as a non-owner that is of interest to me) AND
2c/ a 'sell value'

all as outputs of a single analysis.

IOW, it wasn't really any extra work to produce the 'sell value', which might be of interest to those that do hold. So I printed it.

SNOOPY

[h2so4]

Two answers to that.

1/ I study HBL as a 'value benchmark' for the finance sector shares I do own: ANZ and WBC. So knowing where the value of HBL is in the market, relative to the other two, is useful to me.

2/ The 'Capitalisation of Dividends Valuation' that I did produced:

2a/ an 'average value' AND
2b/ a 'buy value' (as a non-owner that is of interest to me) AND
2c/ a 'sell value'

all as outputs of a single analysis.

IOW, it wasn't really any extra work to produce the 'sell value', which might be of interest to those that do hold. So I printed it.

SNOOPY

Well I'm impressed SD.

[davflaws]

Well I'm impressed SD.

Me too,and would probably be even more so if I knew what IOW meant

[Jantar]

Me too,and would probably be even more so if I knew what IOW meant
In other words are you saying you do not understand common abreviations?

[Snow Leopard]

Me too,and would probably be even more so if I knew what IOW meant

IOW = Institut für Ostseeforschung Warnemünde (https://www.io-warnemuende.de/)

IOW = Isle Of Wight (https://www.visitisleofwight.co.uk/)



In other words it can mean many things

Best Wishes
Paper Tiger

[Snoopy]

So you wouldn't consider selling till it at $1.74, yet you think it is overvalued at $1.55?
So how overvalued does a share have to be until you decide to sell it?


Actually I said I would be selling down from $1.74 (cum dividend) because the share would be 20% above my fair valuation. I didn't say I wouldn't consider selling at a lesser price.

I might sell at a price less than $1.74, but above $1.42 (my fair value price) if I found something better to invest in. The problem is, in this market, really good investment opportunities are hard to come by. Selling something above fair value, only to buy something else above fair value, doesn't necessarily make me better off.

However if something is very clearly overvalued to a significant degree, and I would argue Heartland at $1.74 would fit that category, then I would consider reducing my holding and putting that money in a 2% call account until another opportunity arose somewhere else in the market.

SNOOPY

[JeremyALD]

Wow that last page was a painful read.

The SP has been extremely stable for the last 6 months, even through the elections saga. People obviously see fair value in this share around its current value.

Looking forward to the results, they're delivering nicely at the moment and out of most banks in New Zealand have the most room for growth and profit expansion over the next 5 years.

[tim23]

Think they would have been firmer but for the share placement lingering expecting announcement with result this week

[beetills]

HBL have taken a 25% SHAREHOLDING IN ONLINE LENDER FUELLED.

[Joshuatree]

Looks like a great move ;adding another financial area/arm ,and great linkage to Xero ; Smart Heart,moving with the times. imagine a great takeup here.

Heartland Bank Limited (Heartland) (NZX: HBL) advises that it has taken a 25% shareholding in Fuelled Limited, an online small-to-medium business (SME) lender (www.fuelled.co.nz). The shareholding has been provided alongside a committed debt facility enabling Fuelled to accelerate its Australasian growth plans.
Fuelled is a New Zealand-based business whose simple on-demand service enables SMEs to receive an immediate cash advance on their outstanding invoices, rather than waiting up to 90 days for their customers to pay. Fuelled is the first of its kind in New Zealand and has been selected by Xero as its first alternative lender in Xero’s recently launched Financial Web. This tight integration with Xero enables Fuelled’s advanced credit assessment engine to make real time credit and financing decisions. The Fuelled customer experience is fully online and the entire process takes just a few minutes.

[winner69]

Still can't do simple banking transactions on a mobile phone ...great digital strategy

[winner69]

Looks like a great move ;adding another financial area/arm ,and great linkage to Xero ; Smart Heart,moving with the times. imagine a great takeup here.

Heartland Bank Limited (Heartland) (NZX: HBL) advises that it has taken a 25% shareholding in Fuelled Limited, an online small-to-medium business (SME) lender (www.fuelled.co.nz). The shareholding has been provided alongside a committed debt facility enabling Fuelled to accelerate its Australasian growth plans.
Fuelled is a New Zealand-based business whose simple on-demand service enables SMEs to receive an immediate cash advance on their outstanding invoices, rather than waiting up to 90 days for their customers to pay. Fuelled is the first of its kind in New Zealand and has been selected by Xero as its first alternative lender in Xero’s recently launched Financial Web. This tight integration with Xero enables Fuelled’s advanced credit assessment engine to make real time credit and financing decisions. The Fuelled customer experience is fully online and the entire process takes just a few minutes.

Good thing about that sort of lending is that it's usually high margin stuff - ie pretty expensive for h SME

[Beagle]

Wow that last page was a painful read.

The SP has been extremely stable for the last 6 months, even through the elections saga. People obviously see fair value in this share around its current value.

Looking forward to the results, they're delivering nicely at the moment and out of most banks in New Zealand have the most room for growth and profit expansion over the next 5 years.

Agreed. Sums it up quite nicely. Not quite so sure about all this digital SME lending, (bean counters like to see hard copies of things) but time will tell.

[BlackPeter]

Agreed. Sums it up quite nicely. Not quite so sure about all this digital SME lending, (bean counters like to see hard copies of things) but time will tell.

Had the same concern when I heared at their last AGM about this online credit approval. However - it is not as bad as it sounds. Yes, they do give you online approval, but this is subject to sufficient evidence ... and if they do approve a credit, than there is a human checking the evidence prior to them paying out the credit facility.

I guess what they save this way is the need for humans to check evidence for credits they would anyway not approve. Makes sense to me.

[RTM]

Still can't do simple banking transactions on a mobile phone ...great digital strategy

Yes...most frustrating isn't it. They will get there tho.
I am advised that when they switch to their new system Samsung phones will work well with their internet banking platform. Apple phones will also work.
And that that will be in March. So not long to go. Hardly leading edge tho, is it. I find the BNZ mobile site really nice to use, especially like that it can use my fingerprint for authentication. Fingers crossed there isn't to much slippage.
Cheers, RTM

[Baa_Baa]

Agreed. Sums it up quite nicely. Not quite so sure about all this digital SME lending, (bean counters like to see hard copies of things) but time will tell.

Online invoice factoring/discounting without the rigorous checks and balances or securities, which is why the real Banks don't do it like this. Heartland obviously comfortable with the risks though.

[Beagle]

Had the same concern when I heared at their last AGM about this online credit approval. However - it is not as bad as it sounds. Yes, they do give you online approval, but this is subject to sufficient evidence ... and if they do approve a credit, than there is a human checking the evidence prior to them paying out the credit facility.

I guess what they save this way is the need for humans to check evidence for credits they would anyway not approve. Makes sense to me.

Thanks for that.

[percy]

I guess it is a fact of life a good number of businesses have to wait far too long to be paid.
In the book trade if you did not pay by the 20th of the following month suppliers stopped supply.
Today the "majors" take 60 days to pay.So suppliers have to carry an extra month's debt.
Having only a quick look at www.fuelled.co.nz it appears the cost to suppliers carrying the extra month'd debt is substantial.
Yet in my modest business I get paid by schools so quickly,thanks to the internet, I can pay my suppliers on invoice.

[winner69]

I guess it is a fact of life a good number of businesses have to wait far too long to be paid.
In the book trade if you did not pay by the 20th of the following month suppliers stopped supply.
Today the "majors" take 60 days to pay.So suppliers have to carry an extra month's debt.
Having only a quick look at www.fuelled.co.nz it appears the cost to suppliers carrying the extra month'd debt is substantial.
Yet in my modest business I get paid by schools so quickly,thanks to the internet, I can pay my suppliers on invoice.

Said earlier should be good margin in this for both fuelled and Heartland .....SME might get his money the net day but it costs him heaps.

And if the debt goes bad ........

[percy]

Said earlier should be good margin in this for both fuelled and Heartland .....SME might get his money the net day but it costs him heaps.

And if the debt goes bad ........

Even bigger problems,!.

[nicknz125]

Half Year Results are out!
https://www.nzx.com/files/attachments/253359.pdf

[winner69]

Half Year Results are out!
https://www.nzx.com/files/attachments/253359.pdf

What you reckon nick - good, bad or what?

[winner69]

I reckon H1 profit will be $28.8m (they did do $14.2m in the first quarter) ..... and Jeff will say FY will be at top end of previous guidance

FY really should be over $60m but they'll manage to keep it to that $60m plus or minus a fraction - remember they always deliver on want they said they will do. Wouldn't want to go overboard would they

Must have added $300k just to prove me wrong ....but did say the magic words 'upper end'

C'mon Jeff - come clean. With H1 $29.1m anything less than $60m is woeful ...but no doubt it will somehow come in at around that number

[trader_jackson]

I'll summarize it in 2 words for you all to save you the time reading: Excellent Result

For what it's worth, ahead of Forsyth forecasts as well

I also hear they are getting quite a few UDC customers...
I'm expecting a strong 2nd half, with profit above $60m for the year

[Beagle]

You can't argue with a good solid result like that.
14% profit growth through strong organic growth across all divisions is a very sound increase on last year.
Net interest margin remains very high at 4.44% compared to 4.52% in pcp

Very nice touch for shareholders to be able to subscribe for new shares under the share purchase plan at the same price as the institutions did in December ($1.46), notwithstanding SP growth since then and an extra nice touch that the size of the SPP pool has been expanded from $10m to $20m again matching the terms of the institutional placement.

To be honest I am slightly disappointed that the interim dividend of 3.5 cps wasn't increased in line with profit growth. 4 cps would have been nice and would have reflected the 14% growth in EPS but who can be bothered quibbling over half a cent per share in dividend considering the solid organic growth the company is achieving.

[RTM]

Agreed...would have been nice to have had a wee bit more on the dividend side of things. Maybe that will come with the final.
What is nice is that our new shares which will not cost more than $1.46 will be eligible for the 3.5c dividend.
Unfortunately I think I am going to have to sell some that I have at some stage....as they are getting to be to big a proportion of my portfolio.
I guess this is a good problem.
Cheers all
RTM

[kizame]

Regarding the SPP, and I'm only wanting to hear fellow investors opinions,but would you not be a bit ticked off if you had say 500,000 shares and you could still only apply for $15,000 worth compared to myself with only 30,000 and effectively(if I obtained the full $15,00 worth) increasing my shareholding by a third at a very good price. That would drop my average purchase price nicely.But for someone with a much larger holding, only a smidgeon.

[BlackPeter]

Regarding the SPP, and I'm only wanting to hear fellow investors opinions,but would you not be a bit ticked off if you had say 500,000 shares and you could still only apply for $15,000 worth compared to myself with only 30,000 and effectively(if I obtained the full $15,00 worth) increasing my shareholding by a third at a very good price. That would drop my average purchase price nicely.But for someone with a much larger holding, only a smidgeon.

Don't forget that institutional investors got already a free pick ...ahead of anybody else. I am sure they are quite happy with us getting some crumbs as well. I don't think anybody should expect to get the full $15k allocation ... even after the increase of the pool there will be very heavy scaling.

[forest]

If HBL thinks it can have a good return on increased capital, why pay any dividend?

[RTM]

Regarding the SPP, and I'm only wanting to hear fellow investors opinions,but would you not be a bit ticked off if you had say 500,000 shares and you could still only apply for $15,000 worth compared to myself with only 30,000 and effectively(if I obtained the full $15,00 worth) increasing my shareholding by a third at a very good price. That would drop my average purchase price nicely.But for someone with a much larger holding, only a smidgeon.

Agreed...I am a little surprised by this as well. The SPP will increase my average purchase price, but I can live with that.

[Jantar]

..... That would drop my average purchase price nicely.But for someone with a much larger holding, only a smidgeon. I am another small holder, but buying the full $15000 worth will increase my average purchace price considerably. And yes I will do just that.

[iceman]

I am sort of more with you Forest although I don' t think they should stop paying a dividend. But I think it is very prudent of them NOT to increase the dividend while active with capital raisings through institutional placement and SPP.
At first reading, this sounds like a very solid results.

Kizame, you should direct your question to Percy and see how he feels as he's close to your example given :-)

[Beagle]

Regarding the SPP, and I'm only wanting to hear fellow investors opinions,but would you not be a bit ticked off if you had say 500,000 shares and you could still only apply for $15,000 worth compared to myself with only 30,000 and effectively(if I obtained the full $15,00 worth) increasing my shareholding by a third at a very good price. That would drop my average purchase price nicely.But for someone with a much larger holding, only a smidgeon.

My thoughts are that if someone was holding 500,000 shares they would probably already have heard from their broker regarding the institutional placement last December.


If HBL thinks it can have a good return on increased capital, why pay any dividend?

Let me answer that rhetorical question with another, why do you think they have the dividend reinvestment scheme ?

[RTM]

If HBL thinks it can have a good return on increased capital, why pay any dividend?

I for one would not own them then Forest. I have no desire to live off capital gains. I want to live off the dividends from my stocks.
I don't want the drama of having to sell and rebuy something else....or at least....I want to minimise that going forward.
What I am looking for in my share portfolio are stocks that will appreciate nicely over time, and pay a reasonable steady dividend. At the moment Heartland is meeting those requirements very nicely.

[BlackPeter]

If HBL thinks it can have a good return on increased capital, why pay any dividend?

Why do you think they should waste all these nice imputation credits? Given their DRP shareholders can get the best of both worlds ...

[JeremyALD]

Has anyone else got an email from HBL offering the SPP - I noticed it said documentation has been sent electronically but I haven't received anything. Want to make sure I don't miss out!

[percy]

Yes pleasing to have the SPP price set,and that shares issued will receive the dividend.
For me it looks as though my best course of attention is to apply for the SPP for both my wife and myself,and take the cash option for the dividend.This is because I will need to dip into our rainy day funds to take part in the SPP.
The result shows Heartland's strategy is on course.All through the result, it is pleasing to see the huge growth they are already achieving with DIGITAL LOAN ORIGINATION;"Open for business"up 142%.I-finance up 26%,Harmoney up 69%.
Interesting to note 25% of Australian REL origination is on line,and taking "open for business" to Australia makes sense.
Taking a cautious approach with their support of Spotcap, and paying $1mil for 25% holding of Fuelled ,and providing them with a $2mi debt facility,will be appreciated by shareholders.
Getting the ROE up to 11.6% is a very good achievement.
Overall Heartland can be proud of this result,as it continues to prove they achieve what they say they will do.
Shareholders can look forward to the future as Heartland Bank remains "well positioned"

[Turtle2]

How much would you expect to get when subscribing for the $15k?

[Beagle]

LOL Percy No surprise you mentioned your favorite words... "Well Positioned" indeed :)

[enzed staffy]

exactly what I was wondering- might be better to take the DRiP and subscribe SPP assuming its scaled back....???

[percy]

How much would you expect to get when subscribing for the $15k?

Pig in Poke.!
With the SPP price set at $1.46 I would expect massive scaling.
An off the top of my head figure would be, apply for $15,000 worth and be lucky to get $5,000.
I really don't know.
Last one I did not bother with was TIL.Mistake as their allocations were generous.

[Turtle2]

Your guess is as good as anybodys! Think I'd better go for the $15k then...

[iceman]

Harmoney confirms launching in Australia (Brisbane) https://www.nbr.co.nz/article/harmoney-launches-australia-faces-competition-cs-p-199747

[percy]

LOL Percy No surprise you mentioned your favorite words... "Well Positioned" indeed :)

Had to.!
Keeping the faith.
Yet well positioning themselves digitally was sound.
Looking back when HBL was formed,and the number of people who could not understand why HBL were not openning hundreds of branches,seems funny today.

[iceman]

From memory there were just over 10,000 shareholders stated in the last Annual Report. They will be fighting for the $20M. If 50% of them applied for the full $15k, each would get 4k. I would not be surprised to see it scaled back to that level or even bigger scaling. These SPP are always difficult to decide on as one has a lot of money tied up for a long time just to have most of it returned without interest. At least this time we know the price so that's a bonus :-)

[oldtech]

No email received to participate in the SPP, but on NZX there is an offer document, with a link to apply online at www.heartlandshareoffer.co.nz.

Unfortunately, heading to this link brings up a page stating "This form is currently unavailable" and asks for a password to view the website ... not a good start. :mad ;:

[Bjauck]

From memory there were just over 10,000 shareholders stated in the last Annual Report. They will be fighting for the $20M. If 50% of them applied for the full $15k, each would get 4k. I would not be surprised to see it scaled back to that level or even bigger scaling. These SPP are always difficult to decide on as one has a lot of money tied up for a long time just to have most of it returned without interest. At least this time we know the price so that's a bonus :-)

Smaller small shareholders are perhaps less likely to have $15,000 available for the SPP application, so in a way there is a hit-and-miss inbuilt scaling factor in these SPPs.

The fairest way to raise equity capital would be via renounceable rights issues, so that those shareholders who do not have readily available funds can sell their rights. However unfortunately it must be quicker and cheaper to drop a placement with the big participants and give crumbs to small shareholders via a lolly scramble.

[Beagle]

Smaller small shareholders are perhaps less likely to have $15,000 available for the SPP application, so in a way there is a hit-and-miss inbuilt scaling factor in these SPPs.

The fairest way to raise equity capital would be via renounceable rights issues, so that those shareholders who do not have readily available funds can sell their rights. However unfortunately it must be quicker and cheaper to drop a placement with the big participants and give crumbs to small shareholders via a lolly scramble.

Agree with that although to be fair I remember as a kid that lolly scrambles can be a lot of fun and at least they've doubled the amount of lollies :)
Share purchase plan details here https://www.nzx.com/files/attachments/253364.pdf

[Snow Leopard]

EPS growth (period on period) less than 11%

On current profit guidance of up to $60M - FY EPS growth would be less than 5%. We need an upgrade ($63M please) .

So going to do a small A$15M Tier 2 thing with the Aussie's then!

Dividend of 3.5c and a plea to take the DRiP.

Bank obviously struggling what with the constant need to find real money :t_up:.

Best Wishes
Paper Tiger

[percy]

I am surprised they have not done a decent Tier 2 in NZ. Say $60 to $80 mil.
Yes the growth has to be real eps growth.I don't see why it can't be.
Strong Digital loan origination should tranlate into solid eps growth.

[forest]

Let me answer that rhetorical question with another, why do you think they have the dividend reinvestment scheme ?

Roger I understand that the DRP is to retain earnings and this goes partly towards increasing profits on retained earnings.
I also understand that the purpose of share investing is dividend collecting.
What I like to see however if a company expect to be able to make good returns on retained earnings it should retain those earnings.
If not pay a (large) dividend and use up the imputation credits.

But what is happening now does not seem to be fair to all share holders or cost efficient to HBL.

Not fair because some larger share holders get a first dip at a discounted price and the very small share holders are getting a disproportional increase in their holding.
Not cost efficient because the cost of contracting the transfer agent to pay out the dividend and organising the share purchase plan can both be eliminated / reduced.

[forest]

I am surprised they have not done a decent Tier 2 in NZ. Say $60 to $80 mil.
Yes the growth has to be real eps growth.I don't see why it can't be.
Strong Digital loan origination should tranlate into solid eps growth.

Me too, one would think there would be plenty of support for this.

[Beagle]

Roger I understand that the DRP is to retain earnings and this goes partly towards increasing profits on retained earnings.
I also understand that the purpose of share investing is dividend collecting.
What I like to see however if a company expect to be able to make good returns on retained earnings it should retain those earnings.
If not pay a (large) dividend and use up the imputation credits.

But what is happening now does not seem to be fair to all share holders or cost efficient to HBL.

Not fair because some larger share holders get a first dip at a discounted price and the very small share holders are getting a disproportional increase in their holding.
Not cost efficient because the cost of contracting the transfer agent to pay out the dividend and organising the share purchase plan can both be eliminated / reduced.

Its not about what you or I want forest, in my opinion its about respecting individual shareholders rights to chose whether they want dividends or shares in lieu of dividend.
I am sure you would have noticed the sea of grey hair at many companies annual shareholders meetings. In my opinion many small shareholders are relying of dividend income to support their retirement lifestyle.
I think keeping the dividend at 3.5 cps, (rather than increasing it in line with the 14% earnings growth to 4.0 cps) strikes a good balance this year considering the company is experiencing such strong organic lending growth across all divisions. Regarding the share purchase plan in my opinion a renounceable rights issue would have been fairer to all parties but it would appear on the face of it this option may be more expensive. I guess its only natural that holders of (for example), a six figure number of shares feel a bit miffed that someone holding as few as say 1000 shares enjoy the same rights under the share purchase plan. It is what it is, life isn't fair all the time but I think the terms of the SPP for smaller shareholders are very fair considering institutions paid $1.46 back in December when the share price was quite a bit less.

[forest]

Its not about what you or I want forest, in my opinion its about respecting individual shareholders rights to chose whether they want dividends or shares in lieu of dividend.
I am sure you would have noticed the sea of grey hair at many companies annual shareholders meetings. In my opinion many small shareholders are relying of dividend income to support their retirement lifestyle.
I think keeping the dividend at 3.5 cps, (rather than increasing it in line with the 14% earnings growth to 4.0 cps) strikes a good balance this year considering the company is experiencing such strong organic lending growth across all divisions. Regarding the share purchase plan in my opinion a renounceable rights issue would have been fairer to all parties but it would appear on the face of it this option may be more expensive. I guess its only natural that holders of (for example), a six figure number of shares feel a bit miffed that someone holding as few as say 1000 shares enjoy the same rights under the share purchase plan. It is what it is, life isn't fair all the time but I think the terms of the SPP for smaller shareholders are very fair considering institutions paid $1.46 back in December when the share price was quite a bit less.

I agree with you, as far that the way capital raising is carried out and dividend is paid could well be the most pragmatic way of doing it.

But as far as that every share holder is treated the same as it should, this is definitely not the case.
And this not being the case were are the boundaries?

[BlackPeter]

I agree with you, as far that the way capital raising is carried out and dividend is paid could well be the most pragmatic way of doing it.

But as far as that every share holder is treated the same as it should, this is definitely not the case.
And this not being the case were are the boundaries?

You are right ... a renounceable rights issue would have been much fairer. I think it as well appropriate to communicate this to the board. Feel free to send them a friendly message - or tell them next AGM. I am trying to get the NZSA interested to raise this with HBL ... and definitely intend to raise it at the next AGM (which is however still 9 months away ..).

[Snoopy]

I agree with you, as far that the way capital raising is carried out and dividend is paid could well be the most pragmatic way of doing it.

But as far as that every share holder is treated the same as it should, this is definitely not the case.
And this not being the case were are the boundaries?


I think all of this dates back a few years when the law was changed to allow fast track capital raising. The Restaurant Brands capital raising last year was also fast track. However in that instance the non tradable rights were issued pro-rata. While it was not possible to trade the rights, any rights not taken up were bundled up and sold by tender to the institutions. Any premium above the strike price was then passed back to the shareholders who had not taken up their rights, in proportion to their pre-rights shareholding. This seems to be a much fairer way to do things, and it was still fast track.

While the way Heartland did their capital raising was good for small shareholders, I reckon those of you with a medium size parcel that will see your shareholding diluted as a result of the coming capital raising have a genuine grievance with Heartland management.

SNOOPY

[forest]

I think all of this dates back a few years when the law was changed to allow fast track capital raising. The Restaurant Brands capital raising last year was also fast track. However in that instance the non tradable rights were issued pro-rata. While it was not possible to trade the rights, any rights not taken up were bundled up and sold by tender to the institutions. Any premium above the strike price was then passed back to the shareholders who had not taken up their rights, in proportion to their pre-rights shareholding. This seems to be a much fairer way to do things, and it was still fast track.

While the way Heartland did their capital raising was good for small shareholders, I reckon those of you with a medium size parcel that will see your shareholding diluted as a result of the coming capital raising have a genuine grievance with Heartland management.

SNOOPY

I have discussed HBL type of capital raising with directors of different companies in the past, and they would acknowledge the unfairness of a raise like HBL. There reosoning was usually as you said 'but it saves time'. I would have thought that in this case HBL and indeed most companies if they are organised have sufficient time to carry out a capital raising fair to all share holders.

[weasel]

Has anyone else got an email from HBL offering the SPP - I noticed it said documentation has been sent electronically but I haven't received anything. Want to make sure I don't miss out!

I realise I can't participate because my address is overseas.

[Beagle]

Full year guidance looks pretty conservative to me.

[lawson]

The www.heartlandshareoffer.co.nz (http://www.heartlandshareoffer.co.nz/) link is working but they ask for your holder number and your entitlement code. The letter containing the latter is I believe to be emailed/mailed out by Link and to date I don't believe the email has gone. I got the Tourism Holdings announcement through from Link via email today - all my comms are set to email for all my holdings - so it all seems to work but no email from HBL has appeared from the ether just yet.

[hamish]

email received 2:35pm today with CSN and Entitlement # to use.

[lawson]

email received 2:35pm today with CSN and Entitlement # to use.

Ah thanks for that, well then I guess I'll have to try contacting Link to find out why I have not had one. I hope they aren't like computershare - last time I rang them I was on hold so long I almost lost the will to live :)

[percy]

Ah thanks for that, well then I guess I'll have to try contacting Link to find out why I have not had one. I hope they aren't like computershare - last time I rang them I was on hold so long I almost lost the will to live :)

I think both must have been trained by Westpac.

[Turtle2]

Ah thanks for that, well then I guess I'll have to try contacting Link to find out why I have not had one. I hope they aren't like computershare - last time I rang them I was on hold so long I almost lost the will to live :)

Have not received an email either. Please let me know how you get on!:)

[n908671]

Is there any benefit in subscribing now or should I wait until the 10th March? The way I see if I I sign up now they'll debit my account $15k sooner so I'll pay more interest on that. May as wait until the last possible moment.

[Jantar]

......
While the way Heartland did their capital raising was good for small shareholders, I reckon those of you with a medium size parcel that will see your shareholding diluted as a result of the coming capital raising have a genuine grievance with Heartland management.
SNOOPYMedium and large shareholders have already had one bite at placement, now they get a second go at it. So while not pro rata, it is not as one sided as you make it sound

[Snow Leopard]

Is there any benefit in subscribing now or should I wait until the 10th March? The way I see if I I sign up now they'll debit my account $15k sooner so I'll pay more interest on that. May as wait until the last possible moment.

I would wait, but do try and do it a couple of days before the deadline just in case something goes wrong and you need to sort it.

As for all the gripes, as Jeff might say:
"You can please all of the shareholders some of the time and some of the shareholders all of the time but you can not please all of the shareholders all of the time".


Personally I am torn between the

'do not buy more of any share which is already over your portfolio % limit'

and

'rules are meant to be broken'.


Best Wishes
Paper Tiger

[kizame]

I would wait, but do try and do it a couple of days before the deadline just in case something goes wrong and you need to sort it.

As for all the gripes, as Jeff might say:
"You can please all of the shareholders some of the time and some of the shareholders all of the time but you can not please all of the shareholders all of the time".


Personally I am torn between the

'do not buy more of any share which is already over your portfolio % limit'

and

'rules are meant to be broken'.


Best Wishes
Paper Tiger

In circumstances like this rules need to be broken,sometimes there are offers just too good,but with scaling,what are you going to end up with anyway.

[oldtech]

My email came through at 2:48 pm yesterday and yes the www.heartlandshareoffer.co.nz link is now working. Time to raid the cookie jar. I have a very very small holding so as far as my shareholding being diluted it's little more than a rounding error in the overall scheme. Don't think it can be diluted any further ...

[JeremyALD]

All the details came through and I'm now setup! Hopefully it ends up being at least 5K of shares after scaling, otherwise it's a bit pointless.

[Bjauck]

...Personally I am torn between the
'do not buy more of any share which is already over your portfolio % limit'
and
'rules are meant to be broken'.

Best Wishes
Paper Tiger I am a happy long term holder and with on market additions, DRIP and its (more or less) steady SP growth, it's now one of my largest holdings. I will probably apply for less than $15,000 but not because it is a less worthy investment than some of my other (but more roller-coaster like) shareholdings. I will make my decision closer to the final date.

[beetills]

Only a small shareholder (8K SHARES) so with holdings to be diluted,how many would i be required to receive to maintain my %.
I presume it would be very few but i have no idea.

[lawson]

Have not received an email either. Please let me know how you get on!:)

Well I got through straight away. saints be praised. Link didn't have me down to receive email for HBL just for my other holdings I'm not quite sure why but as a result they are sending the information out to me snail mail but that'll be fine as I won't be putting in my application until March anyway.

[Onion]

Only a small shareholder (8K SHARES) so with holdings to be diluted,how many would i be required to receive to maintain my %.
I presume it would be very few but i have no idea.

220 shares!

... based on paragraph 17 in the documentation that indicates that 5% becomes 4.866% after dilution.

[Beagle]

I would wait, but do try and do it a couple of days before the deadline just in case something goes wrong and you need to sort it.

As for all the gripes, as Jeff might say:
"You can please all of the shareholders some of the time and some of the shareholders all of the time but you can not please all of the shareholders all of the time".


Personally I am torn between the

'do not buy more of any share which is already over your portfolio % limit'

and

'rules are meant to be broken'.


Best Wishes
Paper Tiger

Go on do "a Percy", you know you want too :)

[Onion]

Thoughts on the SPP...

Current SP settling around $1.57 - $1.58 -- 8% higher than the $1.46 maximum SPP price.

I'm quite surprised at that premium -- I thought the SP might settle closer to the offer price, but instead has crept up over the last couple of days.

I assume that there will be a bit of a sell-off on the 15th as those that become over-committed during the SPP rebalance their holding (as I will be unless scaling is vicious); but even so it is looking promising that the SP will hold. With a maximum allocation of just over 10,000 shares there will be no single big-sellers -- and large holders wanting to unload would probably be using the current strength to unload now.

[Snow Leopard]

Only a small shareholder (8K SHARES) so with holdings to be diluted,how many would i be required to receive to maintain my %.
I presume it would be very few but i have no idea.


220 shares!

... based on paragraph 17 in the documentation that indicates that 5% becomes 4.866% after dilution.

Remember that $20M as already been issued to institutional shareholders and this is the second $20M.

So we are going from 485M467 before 15-Dec to 512M864 after this is done and dusted.

On that basis you need 451.5 shares to maintain your %.
(That is one SPP share for every 17.72 shares you already own).

Best Wishes
Paper Tiger

[King1212]

Hi guys...if I sell my current holding, then apply to buy spp...am I still entitled? Thanks.

[Onion]

Hi guys...if I sell my current holding, then apply to buy spp...am I still entitled? Thanks.

Record date is 20 February ("The date on which Eligible Shareholders are determined") so you can sell your whole lot now and still be entitled to apply for $15,000 worth.

[Beagle]

Hi guys...if I sell my current holding, then apply to buy spp...am I still entitled? Thanks.

Beware of potential for heavy scaling. Might be such a serious scaling it cuts into some fish's flesh and they'll end up wishing they didn't sell :)

[tim23]

Thought share price would have been higher reckon its been held back in last 2 months because of the offer
Thoughts on the SPP...

Current SP settling around $1.57 - $1.58 -- 8% higher than the $1.46 maximum SPP price.

I'm quite surprised at that premium -- I thought the SP might settle closer to the offer price, but instead has crept up over the last couple of days.

I assume that there will be a bit of a sell-off on the 15th as those that become over-committed during the SPP rebalance their holding (as I will be unless scaling is vicious); but even so it is looking promising that the SP will hold. With a maximum allocation of just over 10,000 shares there will be no single big-sellers -- and large holders wanting to unload would probably be using the current strength to unload now.

[beetills]

Nice interview on INTEREST.CO.NZ today with Laura Byrne CFO .

[Beagle]

http://www.interest.co.nz/business/86127/heartland-bank-moves-bolster-distribution-and-grow-australia-it-keeps-eye-harmoney-vs

[russbus]

Hey guys, im planning on participating in this SPP. Quick question, does the standard cash management account that ASB offer with their sharetrading accounts allow a direct debit payment for SPPs? I cant say I've ever used it for anything but buying shares online.

[winner69]

Pages discussing the SPP but little comment on Heartland's actual result

Maybe that was Heartland's ploy - distract the punters attention so not too much attention paid to the detail.

[percy]

http://www.interest.co.nz/business/86127/heartland-bank-moves-bolster-distribution-and-grow-australia-it-keeps-eye-harmoney-vs

Thank you for the link.
An interesting informative article.

[trader_jackson]

I'll summarize it in 2 words for you all to save you the time reading: Excellent Result

For what it's worth, ahead of Forsyth forecasts as well

I also hear they are getting quite a few UDC customers...
I'm expecting a strong 2nd half, with profit above $60m for the year

I already told you winner69 how the results were ;) everyone wants to talk about the SPP as this is far more exciting for us shareholders to get in on, you know with great growth and ever increasing profits etc ;)

[winner69]

I already told you winner69 how the results were ;) everyone wants to talk about the SPP as this is far more exciting for us shareholders to get in on, you know with great growth and ever increasing profits etc ;)

I find these SPP things rather boring - if you like the comapny just send the cheque off and see what happens and if you don't really fancy the company (why holding then) just ignore it

What yoiu make of the NTA not increasing from June to December?