HGH - Heartland Group Holdings

[minimoke]

He got my money also with Cynotech.Reasonable company badly managed imo.If its any consolation I made truck loads out of Equiticorp and didnt invest in Cynotech (I have an aversion to convicted crims)

[ziggy415]

Woohoo how good is that and unlike HBL on a PE of 14 TRA scream "cheep cheep" like a budgie :)
Turners keep screaming to heartland *pick me pick me * but alas I think heartland are blinkered by udc at the moment

[winner69]

Don’t think this headline applies to Heartland as they have good relationship with their rural customers


MORE NZ FARMERS FEEL UNDER FINANCIAL PRESSURE AS BANK SATISFACTION DECLIN

http://www.sharechat.co.nz/article/6dceb90e/more-nz-farmers-feel-under-financial-pressure-as-bank-satisfaction-declines.html?utm_medium=email&utm_campaign=More%20NZ%20farmers%20feel%20under%20 financial%20pressure%20as%20bank%20satisfaction%20 declines&utm_content=More%20NZ%20farmers%20feel%20under%20f inancial%20pressure%20as%20bank%20satisfaction%20d eclines+CID_4d74f0c6614e62751973dede4f551b48&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle6dceb90emore-nz-farmers-feel-under-financial-pressure-as-bank-satisfaction-declineshtml

[Beagle]

Don’t think this headline applies to Heartland as they have good relationship with their rural customers


MORE NZ FARMERS FEEL UNDER FINANCIAL PRESSURE AS BANK SATISFACTION DECLIN

http://www.sharechat.co.nz/article/6dceb90e/more-nz-farmers-feel-under-financial-pressure-as-bank-satisfaction-declines.html?utm_medium=email&utm_campaign=More%20NZ%20farmers%20feel%20under%20 financial%20pressure%20as%20bank%20satisfaction%20 declines&utm_content=More%20NZ%20farmers%20feel%20under%20f inancial%20pressure%20as%20bank%20satisfaction%20d eclines+CID_4d74f0c6614e62751973dede4f551b48&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle6dceb90emore-nz-farmers-feel-under-financial-pressure-as-bank-satisfaction-declineshtml


I think now that we're looking at a forecast milk payout of $7 many banks will be saying to their customers..."you know that support we showed you when times were tough...guess what ?...we want our money back. Heartland probably different though...happy to show them even more support in good times...no worries.

[blockhead]

****e, I don't use Internet banking much for Heartland but what a frustrating exercise it is, I have 2 accounts so to go from one to the other I have to log out of one then log into the other, then it won't load up on Google Chrome so I have to change to IE, finally I get it all sorted and find because I am sending 30k to a car dealer I need to contact Heartland as this is over my preset limit. Ring Heartland and get the normal waffle waffle waffle on the phone, press a few buttons and discover "all our staff are helping clients", I'm sure they are, half will be moaning about internet banking, eventually I get the job sorted but it must frustrate the hell out of some to the point they head back to the Ozzie owned bank they came from originally. Heartland need to get their sh1t together !!

[winner69]

****e, I don't use Internet banking much for Heartland but what a frustrating exercise it is, I have 2 accounts so to go from one to the other I have to log out of one then log into the other, then it won't load up on Google Chrome so I have to change to IE, finally I get it all sorted and find because I am sending 30k to a car dealer I need to contact Heartland as this is over my preset limit. Ring Heartland and get the normal waffle waffle waffle on the phone, press a few buttons and discover "all our staff are helping clients", I'm sure they are, half will be moaning about internet banking, eventually I get the job sorted but it must frustrate the hell out of some to the point they head back to the Ozzie owned bank they came from originally. Heartland need to get their sh1t together !!

Bit rooted eh ....but they tell me it’s all been fixed up and this is the final product

Digital platforms one of their strategic strengths I’m told

But at the end of the day they don’t really want to do real banking ....really only want to lend money as a finance company should be doing.

[suse]

I have to admit I find their internet banking woeful and horrid to get around. And trying to get anyone to answer the phone is pretty bad as well. But they dont really have the money to spend on a good system like ANZ I suppose.

[percy]

****e, I don't use Internet banking much for Heartland but what a frustrating exercise it is, I have 2 accounts so to go from one to the other I have to log out of one then log into the other, then it won't load up on Google Chrome so I have to change to IE, finally I get it all sorted and find because I am sending 30k to a car dealer I need to contact Heartland as this is over my preset limit. Ring Heartland and get the normal waffle waffle waffle on the phone, press a few buttons and discover "all our staff are helping clients", I'm sure they are, half will be moaning about internet banking, eventually I get the job sorted but it must frustrate the hell out of some to the point they head back to the Ozzie owned bank they came from originally. Heartland need to get their sh1t together !!
Recently I brought a new house.
Money transferred from Craigs on time.
Went to transfer it from my Westpac a/c to my lawyer's ASB a/c.
Nice lady at Westpac told me to save me money, just pop over to ASB and deposit a cheque in lawyer's a/c.
ASB said 4 working days to clear.
Back to Westpac.
Nice lady said I should go home and do it on line.
No I said.I then told her the lovely lady next to her, told me last week they could do it on the day for $25.
Really.? After checking with the lovely lady,they did do it.
Took two of them 20 minutes.
I do note HBL use Westpac.??????

[percy]

"Special Answer" ie same day cleared funds, for a price of course!
See:
https://www.asb.co.nz/help/cheque-clearance-times-asb.html

Pity ASB staff at Barrington Mall did not mention that to me.
Maybe they are like the nice lady at Westpac and did not know.?

[100101]

I have both TSB and Kiwibank accounts and have never had a problem!

[Ggcc]

I have both TSB and Kiwibank accounts and have never had a problem!
I have noticed with banks over the years that things happen a lot faster for those who have money and banks are slower when you have none.

[blockhead]

I sent a letter noting my dissatisfaction to "Shareholder Relations" to see if anyone is interested in hearing me moan

[Miway]

I recently opened an "on Call" (2.5%) account with them on line. I had to have ID and proof of address etc. I was successful eventually but it took 4 days, I had to call them a couple of times to see what was happening as long delays between me submitting documents an them updating me. I guess when you are dealing with a web site the web site eventually has to ask questions and:eek2: get approval of a person.

[minimoke]

The bigger issue is poor performance in share price. Despite discounted share offer and dividend re-investment I am still down the gurgler a bit on this one. My stop loss hasn't been triggered but at some point I need to pull the plug and put the money into something that offers a return on the capital I have invested.

[Bjauck]

I recently opened an "on Call" (2.5%) account with them on line. I had to have ID and proof of address etc. I was successful eventually but it took 4 days, I had to call them a couple of times to see what was happening as long delays between me submitting documents an them updating me. I guess when you are dealing with a web site the web site eventually has to ask questions and:eek2: get approval of a person. Anti-money laundering requirements have increased. The Post Office has recently changed the post code for my address. A utility bill with the old postcode was rejected as proof despite number, street and town being the same!

[kiwico]

I recently opened an "on Call" (2.5%) account with them on line. I had to have ID and proof of address etc. I was successful eventually but it took 4 days, I had to call them a couple of times to see what was happening as long delays between me submitting documents an them updating me. I guess when you are dealing with a web site the web site eventually has to ask questions and:eek2: get approval of a person.

Only four days? Lucky you, mine took over a week. Then the password supplied didn't work. So not currently holding and not currently providing them funds.

[QOH]

Yes their systems seem archaic, took me days and goodness knows how many rejected photos, to open an investment account, finally it matured and is now in an online call account, but im still not able to get into it.
Because i dont have a printer they snail mailed me some more forms, i returned them, now i guess they will post me a password. If i wasnt a shareholder, id have given up trying to open an account.
I suspect many people would do.

[winner69]

Only four days? Lucky you, mine took over a week. Then the password supplied didn't work. So not currently holding and not currently providing them funds.

I just took everything like bills, passports etc in to one of their offices and the nice man did everything (i did have to fill in a few forms) in a few minutes and I left with an account number and a password ...along with a few pens and a cap.

They’ve closed that office now .....things more efficient online and by phone they say.

[Entrep]

The bigger issue is poor performance in share price. Despite discounted share offer and dividend re-investment I am still down the gurgler a bit on this one. My stop loss hasn't been triggered but at some point I need to pull the plug and put the money into something that offers a return on the capital I have invested.

I am in a similar situation with HBL, when you find something else, do let me know ;)

[percy]

The bigger issue is poor performance in share price. Despite discounted share offer and dividend re-investment I am still down the gurgler a bit on this one. My stop loss hasn't been triggered but at some point I need to pull the plug and put the money into something that offers a return on the capital I have invested.

Sell straight away and move on.
I good number of us who brought at between 60 cents and $1.00 love HBL's increasing fully imputed divies.No matter whether the share price goes up or down,they just keep on increasing,and will do so for the foreseeable future.

[minimoke]

the share price goes up or down,they just keep on increasing,and will do so for the foreseeable future.True to May 2017. Today we are in the same place.

[percy]

True to May 2017. Today we are in the same place.

Maybe the same place for awhile yet ?.
The Australian Govt Commission on Australian banks is tainting the waters for banks.
However, HBL's earnings are increasing,and will keep increasing, and so will their divies.
Current net dividend yield is 5.06% at $1.77.

[RTM]

Maybe the same place for awhile yet ?.
The Australian Govt Commission on Australian banks is tainting the waters for banks.
However, HBL's earnings are increasing,and will keep increasing, and so will their divies.
Current net dividend yield is 5.06% at $1.77.

Heartland are my biggest holding. Provided the earnings and divies keep increasing...so eventually will their share price. Not to concerned with current correction as my average buy 106. Maybe it got ahead of itself a bit a while ago when it stretched to 214.

Holding.

[ziggy415]

Maybe the same place for awhile yet ?.
The Australian Govt Commission on Australian banks is tainting the waters for banks.
However, HBL's earnings are increasing,and will keep increasing, and so will their divies.
Current net dividend yield is 5.06% at $1.77.
I see 5.5 cents for full year but 3.5 for interim, another .5 cents for full year makes things a little out of kilter..next increase maybe the interim next year

[Beagle]

Could it be time to line up for this one if you want the nice final divvy ? I think it got a bit ahead of itself 6 months ago at $2.14 but with the passage of time, earnings growth and the correction since then my sense is this is about fair value now on a forward, (very soon to be trailing) PE of 14, gross yield inclusive of imputation credits ~ 7% at $1.77. Reasonable metrics, growth and value in (what is otherwise with the odd exception) a fairly fully priced market.

[percy]

Could it be time to line up for this one if you want the nice final divvy ? I think it got a bit ahead of itself 6 months ago at $2.14 but with the passage of time, earnings growth and the correction since then my sense is this is about fair value now on a forward, (very soon to be trailing) PE of 14, gross yield inclusive of imputation credits ~ 7% at $1.77. Reasonable metrics, growth and value in (what is otherwise with the odd exception) a fairly fully priced market.

Agreed...…………...

[blockhead]

And look even further, a nice very helpful lady @ Heartland,

"Thank you very much for your email. Firstly, I have raised your query with our retail team, and they have informed me that for some reason your accounts were not linked under your profile. They are fixing this today and will give you a call when this is complete, so you will be able to access your accounts all under one login.

Our retail and IT team are certainly aware of the challenges customers are faced on our internet banking, and I have passed your comments on to help them identify areas of improvement. Could you please advise what version of Chrome you are using and this will help us identify why this is causing you problems?

In response to some of the feedback we have received on our internet banking, we are very excited about our new Heartland Mobile App which will be launched on Android in the coming weeks. The app has been created with simplicity and safety in mind. It’s simple and easy to use; it gives customers the freedom to open new accounts and manage their Call accounts and Term Deposits where and when they want. At this stage it is a tailored deposit app only to allow customers to manage their savings and deposits on the go – so you would be able to access your Direct Call account, but not your Everyday account on this app.

The five key functions of the app are:
1. View deposit accounts and transactions.
2. Open a Term Deposit, Direct and Business Call accounts, and Heartland Saver and Heartland Savings Optimiser accounts.
3. Reinvest, top-up and redeem a Term Deposit.
4. Pay your nominated account from your Direct Call account; and
5. Send us a secure message.

The Android version of the app will be launched first, followed by Apple. If you do have an Android device, let us know if you are interested and we will notify you as soon as this becomes available on the Google Play store. If you have an Apple device, we will also notify you as soon as this becomes available on the Apple store, but we are unsure of the Apple release date.

I hope this has been helpful, please let me know if I can help with anything else.

Regards,
Julia"

Good work Heartland Bank !!

[percy]

Good work Blockhead.
Thanks for sharing.

[ziggy415]

Could it be time to line up for this one if you want the nice final divvy ? I think it got a bit ahead of itself 6 months ago at $2.14 but with the passage of time, earnings growth and the correction since then my sense is this is about fair value now on a forward, (very soon to be trailing) PE of 14, gross yield inclusive of imputation credits ~ 7% at $1.77. Reasonable metrics, growth and value in (what is otherwise with the odd exception) a fairly fully priced market.
Udc worries me a wee bit , any announcement will come around the end of year and cash from shareholders will be required to get this off the ground...

[Joshuatree]

And look even further, a nice very helpful lady @ Heartland,

"Thank you very much for your email. Firstly, I have raised your query with our retail team, and they have informed me that for some reason your accounts were not linked under your profile. They are fixing this today and will give you a call when this is complete, so you will be able to access your accounts all under one login.

Our retail and IT team are certainly aware of the challenges customers are faced on our internet banking, and I have passed your comments on to help them identify areas of improvement. Could you please advise what version of Chrome you are using and this will help us identify why this is causing you problems?

In response to some of the feedback we have received on our internet banking, we are very excited about our new Heartland Mobile App which will be launched on Android in the coming weeks. The app has been created with simplicity and safety in mind. It’s simple and easy to use; it gives customers the freedom to open new accounts and manage their Call accounts and Term Deposits where and when they want. At this stage it is a tailored deposit app only to allow customers to manage their savings and deposits on the go – so you would be able to access your Direct Call account, but not your Everyday account on this app.

The five key functions of the app are:
1. View deposit accounts and transactions.
2. Open a Term Deposit, Direct and Business Call accounts, and Heartland Saver and Heartland Savings Optimiser accounts.
3. Reinvest, top-up and redeem a Term Deposit.
4. Pay your nominated account from your Direct Call account; and
5. Send us a secure message.

The Android version of the app will be launched first, followed by Apple. If you do have an Android device, let us know if you are interested and we will notify you as soon as this becomes available on the Google Play store. If you have an Apple device, we will also notify you as soon as this becomes available on the Apple store, but we are unsure of the Apple release date.

I hope this has been helpful, please let me know if I can help with anything else.

Regards,
Julia"

Good work Heartland Bank !!

Long time catchup coming.Great to hear though, i plan to finally have a look at this user friendly version and take advantage of what they have to offer if their platform is up with the big banks in simplicity and time saving..

[Beagle]

Udc worries me a wee bit , any announcement will come around the end of year and cash from shareholders will be required to get this off the ground...


If any takeover happens and that's a big IF, I would expect a ton of synergies between these two operations such that HBL could strip many many millions of dollars from the UDC cost structure.
As Percy reminds us Heartland directors have tons of skin in the game and there's no way they will take untoward risks or do any acquisition that's not EPS accretive.
Funds probably better in HBL shares at the current price earning 7%, (especially with the bulk of that annual return paid out in a new few months) than in their call account earning 2.75%. I think this correction in HBL shares is done and dusted or very very close to being so.

http://www.scoop.co.nz/stories/BU1806/S00148/heartland-banks-direct-call-account-gets-five-stars-again.htm

[minimoke]

Edging closer to where my tolerance runs out. Currently at $1.76 getting closer to the bonus issue price of $1.70 which I see as the floor for support. If it gets to this level thenI need to leave and find something that actually creates a return - a Dividend reinvestment Plan does not cover capital losses.

[Ggcc]

Don’t stress i think if all goes well Heartland should be about $1.90 by Christmas. Don’t take this as advice to purchase their shares DYOR.....

I am a patient shareholder

[Antipodean]

Been personally invested since April 2014. Noted that 2015 & 2016 had similar dips to what is being experienced at present. Holding throughout has proved beneficial in the long term in both cases. This one is very much a long game for me and I suspect will continue to be for a long time.

[horus1]

I continue to hold . Whole market is overpriced and people looking to where to get cash. I am holding thru any downturn especially HBL . Will top up if they drop too much.

[Food4Thought]

Long term outlook IMO still great to hold HBL. Proud of a NZ Bank, their achievements, a NZ work force and keeping profit in New Zealand. Glad they still have room for improvement too... which company doesn't?

[minimoke]

Don’t stress i think if all goes well Heartland should be about $1.90 by Christmas. Don’t take this as advice to purchase their shares DYOR.....

I am a patient shareholderThat is part of the problem. I have over paid for them with an average price of $1.92 (includes bonus issue and Div reinvestment)

So I am now down 8.7%. To break even I have to achieve a 9.5% increase on current price. If it gets to $1.70 I need to make 13% gain to break even. I dont see HBL having those legs beyond that level in medium term.

[Ggcc]

That is part of the problem. I have over paid for them with an average price of $1.92 (includes bonus issue and Div reinvestment)

So I am now down 8.7%. To break even I have to achieve a 9.5% increase on current price. If it gets to $1.70 I need to make 13% gain to break even. I dont see HBL having those legs beyond that level in medium term.
My average is about $1 so I understand your dilemma......... I also bought at $1.70 with their capital raise and added at $1.73. You should put this share in the bottom drawer and expect the healthy dividends to keep rolling in for the near future

[winner69]

My average is about $1 so I understand your dilemma......... I also bought at $1.70 with their capital raise and added at $1.73. You should put this share in the bottom drawer and expect the healthy dividends to keep rolling in for the near future

Near future? .....no no no no no ...forever .....and increasing

[minimoke]

My average is about $1 so I understand your dilemma......... I also bought at $1.70 with their capital raise and added at $1.73. You should put this share in the bottom drawer and expect the healthy dividends to keep rolling in for the near future
Dvi yield is currently 5.09% so I have to wait a while for divi's to repay loss. I have bought these with a long term view (5 years) so I could hang on. But I certainly do see any opportunity for doubling down on a cheap price or on a bonus issue. The current price suggests they have lost that right to share holder support

[iceman]

That is part of the problem. I have over paid for them with an average price of $1.92 (includes bonus issue and Div reinvestment)

So I am now down 8.7%. To break even I have to achieve a 9.5% increase on current price. If it gets to $1.70 I need to make 13% gain to break even. I dont see HBL having those legs beyond that level in medium term.

PM me when they hit $1.70 mate and I´ll happìly relieve you of them :-)

[winner69]

Back on topic .....Heartland year end not that far away

Doubt whether we’ll get to hear much before August as $68.4m profit is in the bad as they say

Come July/August the share price will get back into the $2.xx when it’s obvious F19 will be close to $75m profit

No worries

[percy]

Keep Calm & Ban Everyone

Thank you.

[percy]

Back on topic .....Heartland year end not that far away

Doubt whether we’ll get to hear much before August as $68.4m profit is in the bad as they say

Come July/August the share price will get back into the $2.xx when it’s obvious F19 will be close to $75m profit

No worries

Yes it will be a solid result,with a good outlook.
F19 will not be affected by the new system's issues, which took up everyone's time to work through,and the impairments it caused, should not be on going.
The share price still seems to be reacting to The Australian Government's Royal Commission.Even The Reserve Bank of NZ is getting in on the act.!
But in the end, eps growth leads to higher dividends,which in turn leads to a higher share price .

[iceman]

Keep Calm & Ban Everyone

Fair enough to warn people but I don´t see any reason to delete posts that are a little robust. It should be fine for people to have differing views and share them as long as they don´t involve personal abuse of other posters.

[minimoke]

Keep Calm & Ban Everyone

??????????????????

[couta1]

Fair enough to warn people but I don´t see any reason to delete posts that are a little robust. It should be fine for people to have differing views and share them as long as they don´t involve personal abuse of other posters. A storm must have passed through since I last looked on here.

[Joshuatree]

Yes it will be a solid result,with a good outlook.
F19 will not be affected by the new system's issues, which took up everyone's time to work through,and the impairments it caused, should not be on going.
The share price still seems to be reacting to The Australian Government's Royal Commission.Even The Reserve Bank of NZ is getting in on the act.!
But in the end, eps growth leads to higher dividends,which in turn leads to a higher share price .

Yes Heartland a core stock for me.Holding happily & tight here. Good reaffirmation there percy.
Financial institutions and some aus banks are really under the pump and worth looking at imo, they will recover as banks do.

[iceman]

A storm must have passed through since I last looked on here.

Haha. It did indeed and the funny thing is that you unintentionally started it, but missed it :-)

[couta1]

Haha. It did indeed and the funny thing is that you unintentionally started it, but missed it :-) Seems even a good sense of humour can turn things astray these days. Disc-Holding

[Beagle]

Back on topic .....Heartland year end not that far away

Doubt whether we’ll get to hear much before August as $68.4m profit is in the bad as they say

Come July/August the share price will get back into the $2.xx when it’s obvious F19 will be close to $75m profit

No worries

I am not nearly that optimistic. I think the current PE of 14 is about fair value but wouldn't rule out further contraction back to 13 if the economy and growth slows, mainly thanks to low business confidence caused by Labour's policies. If it stays at 14, which is by no means a given and we get ~ 7-8% EPS growth that suggests at $1.77 it won't be until Christmas 2020 when the SP will be back to $2.14 with 2 1/2 years of compound growth at that rate.


Looking at the dividend yield is where the case for holding is best made in my opinion. Foreseeable that the average annual dividend over the next two years could be about 10 cps fully imputed 13.89 cps gross = 7.8%.

[RTM]

I am not nearly that optimistic. I think the current PE of 14 is about fair value but wouldn't rule out further contraction back to 13 if the economy and growth slows, mainly thanks to low business confidence caused by Labour's policies. If it stays at 14, which is by no means a given and we get ~ 7-8% EPS growth that suggests at $1.77 it won't be until Christmas 2020 when the SP will be back to $2.14 with 2 1/2 years of compound growth at that rate.

You could well be correct Beagle. And if the economy and growth slows as you postulate...then it won't be just Heartland that suffers from some contraction of PE ratio. And then the exchange rate will go down...0.62 ?? and then.....and so it goes on.

[Beagle]

You could well be correct Beagle. And if the economy and growth slows as you postulate...then it won't be just Heartland that suffers from some contraction of PE ratio. And then the exchange rate will go down...0.62 ?? and then.....and so it goes on.


I've been reflecting on things a bit lately and the recent fracas on this thread which STMOD kindly cleaned up and subsequent emails I had with Percy and discussion with Couta1 provided further clarity. For quite some time I have felt bad that the way I conducted myself in this thread in particular during the dairy crisis and at times in other threads was inappropriate and conduct unbecoming of a professional. Even though I don't post in my professional capacity on here (and some may have noticed I try and avoid giving specific tax advice for professional reasons) there is still an obligation to conduct myself in a reasonable and fair manner and be respectful of others opinions and in a manner consistent with this sites terms and conditions and consistent with how a professional person should conduct themselves at all times.

I failed that standard miserably during the dairy crisis and was far too dogmatic, arrogant and opinionated and I really want to sincerely apologize to Tawawera publishing the owner of the site, Vince the administrator, STMOD for all the work I caused them and especially to loyal shareholders of Heartland for causing them angst and concern.
The way I dogmatically articulated my opinion was disgraceful, entirely inappropriate, disrespectful to others who held a different view and arrogant. The period of the dairy crisis in 2015 and through most of 2016 was a time of great stress for dairy farmers and I understand that it caused a lot of angst in the farming community. I should have been far more sensitive to that.

Without in any way trying to diminish or minimize the harm I caused by way of some explanation Mrs Beagle and I went through a torrid time during the GFC both at a family level with what our two kids were doing and the GFC had a profound effect on us both financially and from a psychological perspective it definitely left a huge scar. This left me hypersensitive to risk within financial institutions and I got carried away with the possible impact on banks and certainly got more than a little carried away with warning about the risks.

Even if the message is right, (and I'm not suggesting it was), if the manner in which the message is delivered is profoundly wrong then its becomes totally wrong.
Although a few people thanked me for pointing out the risks at the time and although HBL shares did underperform the NZX50 during the dairy crisis the inappropriateness of my actions may have caused a lot of stress for others and it is to them I wish to offer this sincere apology.

I don't wish to receive any support of credit for eventually making this apology which I should have done a very long time ago. If anyone has any concerns that I'm getting a bit "yappy" in regard to any particular subject in the future, please send me a pm expressing your concern as one thing I am sure of in life is that we all need checks and balances.

Heartland definitely did the right thing supporting dairy farmers through the crisis and dairy has recovered nicely. I was far too arrogant thinking I could predict the future in terms of predicting gloom and doom and accept that most commodities are cyclical in terms of their pricing.

Let me finish this post by thanking Tawawera publishing for providing this site free of charge to us all and I am sure countless people have learned a lot on here including myself and also thanking Vince and STMOD for the hard work they do to provide this wonderful site for us all to enjoy and learn for each other.

A special thank you to Percy and Joshuatree for having the courage to point out the error of my ways. Please feel free to pm me if I err again.

[percy]

We all have made mistakes.
A very brave apology.

[dabsman]

I don't personally think you should feel the need to apologize for a position you took. I think you need to be strong and voice your opinions even if unpopular. It's the state of the world now that anyone that holds an opinion outside of the populus views should be cut down. We are going backwards in free thought. Good on you for wanting to say something - that is your right. I always enjoy your opinion and on the back of your comments I've picked up ATM at $6 and SUM at an average at $4.60 after I was compelled to look closer at them. Cheers for all the opinion

[minimoke]

A storm must have passed through since I last looked on here.
It must have been quite the storm!

[CD_CHCH]

Hi Beagle - I'm a long-time lurker on here but this is my first ever post. It takes a big man to publicly apologise - kudos to you for doing so especially since you were simply stating your points of view. While I may not have always agreed with everything you posted it has been helpful to hear your thoughts and opinions even when they were contrary to others, even more so as I have a holding of HBL shares. I have viewed your thoughts and opinions on different companies with interest and overall feel your posts make ST a better and more valuable resource to newbie investors such as myself. Please keep posting your thoughts on various companies as opinions such as yours and Percy's help us newbies find our way as we attempt to navigate through the diverse and often confusing world of shares.

[Joshuatree]

The Beagle has landed:), a big hat tip to you . Growth and unfolding in action. Inspiring stuff thank you.
I write down quotes and stuff i value so i can learn from hopefully.heres one i like, no author unfort.

"I understand this old world resistance to change and accepting it, its one of the safety vests humans arm themselves with against the fear /risk of the new vs the security and perceived safety of the familiar, that dugout hole in the ground"

[davflaws]

Roger- I hit you with a rolled up newspaper once for yapping at one of my hobby horses. As I said at the time, I generally value and recognise your knowledge, professionalism and opinions. It is never easy to apologise, and I admire and respect your post above.
Very best wishes.

[RGR367]

Beagle might have posted something I've totally missed reading and/or comprehending at all being negative. Or is it because I got HBL big time when it was still less than 120 :) Whatever it was Beagle, carry on. The fact I noticed it not meant it wasn't at all harmful to my holdings. So TY still.

[Ggcc]

Beagle I never found what you said was inappropriate or sinister. Each person has their own opinion. I think apologies are not necessary

[couta1]

Beagle I never found what you said was inappropriate or sinister. Each person has their own opinion. I think apologies are not necessary As the saying goes, It's the putting right that counts. Beagle has taken this action according to his own conscience and to put out an olive branch to those he offended, that's a big balls effort right there.

[Ggcc]

As the saying goes, It's the putting right that counts. Beagle has taken this action according to his own conscience and to put out an olive branch to those he offended, that's a big balls effort right there.
If I offend one person I will surely apologise. In saying that, this is a forum where everyone will have a similar point of view, or a different point of view. We don't want to get personal and I hope I have not offended anyone personally.

At the end of the day if we all get wealthy and get along. I think beagle is very much necessary in this forum as much as you, Percy, bull, and snoopy and winner just to name a few.

[Brovendell]

Roger-I have no issues with your posts. I am full of admiration for the research that you do regarding different companies on the NZX. I am grateful for your willingness to share that research on this forum for the benefit of all sharetraders and investors. At times you can be forceful but -Hey- it is your opinion and most posters are surely aware of that.
It amazes me at times how sensitive some posters are and how they can react indignantly which is probably a mild word to use.
The poster I most admire on this forum is ElZorro who comments mainly in the Political threads. I disagree with most of what he writes but respect and am in awe of the always polite and very reasoned way that he states his case, in particular when he is responding to other posters' often vitriolic posts.
Keep up the good work Beagle. You are truly a great asset to this forum.

[Cricketfan]

Wow, maybe we can make this thread about HBL again?

[couta1]

Wow, maybe we can make this thread about HBL again? HBL is currently closed for business, please call us Monday to Friday during normal business hours.

[iceman]

We all have made mistakes.
A very brave apology.

I second that. Brave and honest Mr Beagle. Well done

[Jonboyz]

Wow, maybe we can make this thread about HBL again?

Good idea, even though I hate cricket...

[Beagle]

Thanks guys, you're far too kind.

Let's get back to HBL.

http://www.4-traders.com/HEARTLAND-BANK-LTD-11344518/financials/

I haven't looked for a while so was pleasantly surprised to see average analyst projections are forecasting some pretty impressive growth for FY19 from an estimated 12.1 cps this year about to be concluded shortly to 13.6 cps in 2019. WOW, that's 12.4% EPS growth and if achieved would be a huge year of growth for HBL !
At $1.75 that puts them on a forward PE of (175 / 13.6) of just 12.8 for a company growing nicely. Forecast growth for FY20 is 14.4 / 13.6 = 5.9% Average expected growth over the next two years is 9% which is north of what I was thinking the other day when I posted I think its fair value at $1.77.

Looks pretty good value to me in an otherwise (with a few notable exceptions) fully priced market.

[winner69]

Thanks guys, you're far too kind.

Let's get back to HBL.

http://www.4-traders.com/HEARTLAND-BANK-LTD-11344518/financials/

I haven't looked for a while so was pleasantly surprised to see average analyst projections are forecasting some pretty impressive growth for FY19 from an estimated 12.1 cps this year about to be concluded shortly to 13.6 cps in 2019. WOW, that's 12.4% EPS growth and if achieved would be a huge year of growth for HBL !
At $1.75 that puts them on a forward PE of (175 / 13.6) of just 12.8 for a company growing nicely. Forecast growth for FY20 is 14.4 / 13.6 = 5.9% Average expected growth over the next two years is 9% which is north of what I was thinking the other day when I posted I think its fair value at $1.77.

Looks pretty good value to me in an otherwise (with a few notable exceptions) fully priced market.

Something not quite right?

Reported (HBL Accounts) EPS F17 was 12. cents (NZX says 12.1 cents) and yet consensus F18 forecast is also 12.1 cents ....no growth in EPS

Just as well we look forward eh ...even if the future numbers are based on assumptions that are just big guesses or however you described it the other day.

[Beagle]

12.1 does seem a bit low doesn't it, I have them on 12.5 estimated. Time will tell which guess is better :)
P.S. I bought a few more today to add to my existing modest sized holding. Fair - Fairly good value at this price I think.

[Beagle]

A very valuable resource.

https://buffett.cnbc.com/
Enjoy:)

[winner69]

A very valuable resource.

https://buffett.cnbc.com/
Enjoy:)

Thanks ...good stuff

Read this this morning:

Buffett’s Berkshire Hathaway, down 2% on year, has now underperformed SP500 YTD, 1yr, 5yr and 10yr. And just a bit better over 20yr.

[dabsman]

Thanks ...good stuff

Read this this morning:

Buffett’s Berkshire Hathaway, down 2% on year, has now underperformed SP500 YTD, 1yr, 5yr and 10yr. And just a bit better over 20yr.

Reversion to Mean a powerful thing...

[Onion]

Thanks ...good stuff

Read this this morning:

Buffett’s Berkshire Hathaway, down 2% on year, has now underperformed SP500 YTD, 1yr, 5yr and 10yr. And just a bit better over 20yr.

Luckily I sold all of mine at the peak of US$326,110 per share back in February. [:t_up: -- if only]

They are down to US$286,700 per share -- down $900 in a day. -- But still up 11.4% (vs 12.6% SP&500) over the last year so I wouldn't be complaining too much if I did hold one or two of them.

[Beagle]

Thanks ...good stuff

Read this this morning:

Buffett’s Berkshire Hathaway, down 2% on year, has now underperformed SP500 YTD, 1yr, 5yr and 10yr. And just a bit better over 20yr.

Hmmmm...maybe not such a valuable bone after all lol

[winner69]

Global Dairy Trade Auctions - prices down in 7 of the last 9 auctions / Heartland shareprice - down in 6 of the last 9 comparable periods.

The reasonable correlation between the two is still in place....but probably only a casual thing but interesting

Recently in its report on New Zealand's financial stability the Reserve Bank noted that most dairy farms are currently cash-flow positive, but remain vulnerable to any possible downturn in prices and agriculture shocks. "Reducing this bank lending concentration risk requires more prudent lending practices," they said

Just a few observations ...no conclusions made

[Beagle]

Global Dairy Trade Auctions - prices down in 7 of the last 9 auctions / Heartland shareprice - down in 6 of the last 9 comparable periods.

The reasonable correlation between the two is still in place....but probably only a casual thing but interesting

Recently in its report on New Zealand's financial stability the Reserve Bank noted that most dairy farms are currently cash-flow positive, but remain vulnerable to any possible downturn in prices and agriculture shocks. "Reducing this bank lending concentration risk requires more prudent lending practices," they said

Just a few observations ...no conclusions made

Interestingly and reasonably strong correlation that's existed for quite some time in my opinion. Disappointing to see HBL share price under quite a bit of pressure despite a very strong day on the NZX, spooky possums how dairy declines correlates to SP even though dairy farmers are all good now.

[winner69]

Interestingly and reasonably strong correlation that's existed for quite some time in my opinion. Disappointing to see HBL share price under quite a bit of pressure despite a very strong day on the NZX, spooky possums how dairy declines correlates to SP even though dairy farmers are all good now.

Some might be getting spooked about the economy ...GDP figures not that flash and GDP been declining for a few quarters now.

Jeff often says Heartland fortunes are tied to overall health of the Economics my (GDP growing or not)

But as long we get to the end of August without dropping any more we’ll be OK

[percy]

A comparable chart with ANZ.NZ,or WBC.NZ shows HBL is still suffering the rub off from The Australian banks,yet does not face their issues..

[Beagle]

A comparable chart with ANZ.NZ,or WBC.NZ shows HBL is still suffering the rub off from The Australian banks,yet does not face their issues..

Correlation of a different kind then :)

[percy]

Correlation of a different kind then :)

You can choose whatever correlation you want.
Just a matter of finding one that works for you...!!!....lol.
I know which one works for me.

[winner69]

A comparable chart with ANZ.NZ,or WBC.NZ shows HBL is still suffering the rub off from The Australian banks,yet does not face their issues..

Interesting 6 month comparisons

HBL done worse than ANZ and WBC

Must have different issues than those Aussie banks

[couta1]

You can choose whatever correlation you want.
Just a matter of finding one that works for you...!!!....lol.
I know which one works for me. Averaging down on fairly priced shares normally works well for me, I reckon I've got enough of these, but then again I could be wrong and may need more.

[percy]

Interesting 6 month comparisons

HBL done worse than ANZ and WBC

Must have different issues than those Aussie banks

Maybe I have a longer horizon.?
Try it over a year.

[percy]

Averaging down on fairly priced shares normally works well for me, I reckon I've got enough of these, but then again I could be wrong and may need more.

I have been spending a great deal of time looking for homes, for the proceeds from the sale of our previous house.
Not easy.Still a work in progress.
Dare not add to our HBL or TRA holdings.TRA is the only share on the NZ market I can find where the PE ratio is lower than their growth rate.
So far MEL and GNE look suspects because of their yields.Other possibilities are AIR,OCA,and SPK.
Companies must be paying a reasonable dive, and have the capacity to increase it.

[couta1]

I have been spending a great deal of time looking for homes, for the proceeds from the sale of our previous house.
Not easy.Still a work in progress.
Dare not add to our HBL or TRA holdings.TRA is the only share on the NZ market I can find where the PE ratio is lower than their growth rate.
So far MEL and GNE look suspects because of their yields.Other possibilities are AIR,OCA,and SPK.
Companies must be paying a reasonable dive, and have the capacity to increase it. All those companies would meet your requirements at the right buy price, the market is running pretty hot right now though so I'd be looking for cheaper entry prices for 3 of the above mentioned.

[percy]

All those companies would meet your requirements at the right buy price, the market is running pretty hot right now though so I'd be looking for cheaper entry prices for 3 of the above mentioned.

Agreed.Bit hard sitting on the sidelines while the market runs hot.!
What ever happened to "Sell in May and go away"????????

[minimoke]

Well HBL is trying my patience. Great day on the maket today with my portfolio now sitting on a 28% increase for the year. That includes the 9.7% loss I am carrying on HBL - my only loss maker. So its not only the HBL loss I am suffering - its also the opportunity cost. Oh well. Only 4 more cents to fall off and my stop loss is triggered

[percy]

Well HBL is trying my patience. Great day on the maket today with my portfolio now sitting on a 28% increase for the year. That includes the 9.7% loss I am carrying on HBL - my only loss maker. So its not only the HBL loss I am suffering - its also the opportunity cost. Oh well. Only 4 more cents to fall off and my stop loss is triggered

That is a great increase for the year.Well done.

[couta1]

Well HBL is trying my patience. Great day on the maket today with my portfolio now sitting on a 28% increase for the year. That includes the 9.7% loss I am carrying on HBL - my only loss maker. So its not only the HBL loss I am suffering - its also the opportunity cost. Oh well. Only 4 more cents to fall off and my stop loss is triggered I'm at 27.3% increase and 1.4% loss on HBL as of tonight, had a nice drink of some home made lemon liqueur(Vodka based)to celebrate, I'll have another shot on your behalf.

[Beagle]

I have been spending a great deal of time looking for homes, for the proceeds from the sale of our previous house.
Not easy.Still a work in progress.
Dare not add to our HBL or TRA holdings.TRA is the only share on the NZ market I can find where the PE ratio is lower than their growth rate.
So far MEL and GNE look suspects because of their yields.Other possibilities are AIR,OCA,and SPK.
Companies must be paying a reasonable dive, and have the capacity to increase it.

SUM - depends upon your definition of a reasonable dividend but I have them on a forward underlying PE of 17 with a CAGR of 45% per annum over the last 6 years ! This year I still expect growth of 20-25%. That said I share the general thrust of what you're saying, its pretty to find value especially now the NZX50 is over 9000 !. GNE after the last 2 days they have dropped about 8 cents to $2.42 and there may be a little value there or maybe look at AIR where analysts on 4traders expecting increasing divvies over the years ahead. FWIW I also have a modest stake in MEL.
I hold some GNE and bought a very modest extra parcel of AIR today.

I'm slightly underwater on my recent reentry into HBL and my policy is not to add to losing positions and there are no exceptions to that rule ! Averaging down is for people with better blood pressure than me LOL

[iceman]

I'm at 27.3% increase and 1.4% loss on HBL as of tonight, had a nice drink of some home made lemon liqueur(Vodka based)to celebrate, I'll have another shot on your behalf.

Out of interest when you and mini talk about "increase for the year", is that last 12 months, so far this calendar year, so far this financial year or ?

[couta1]

Out of interest when you and mini talk about "increase for the year", is that last 12 months, so far this calendar year, so far this financial year or ? For me it's over around 8 months as I must include HLG which I bought in October 2017 and which adds a portion to that % increase, the rest comes from this calendar year.

[iceman]

Thanks Couta and well done

[minimoke]

Out of interest when you and mini talk about "increase for the year", is that last 12 months, so far this calendar year, so far this financial year or ?
For me it's since 1 Jan 2018

[minimoke]

Out of interest when you and mini talk about "increase for the year", is that last 12 months, so far this calendar year, so far this financial year or ?


I'm at 27.3% increase and 1.4% loss on HBL as of tonight, had a nice drink of some home made lemon liqueur(Vodka based)to celebrate, I'll have another shot on your behalf.
I celebrated today's gains by going out and buying some trail shoes, going for a run and then opening a bottle of wine. Life in balance I reckon

[peat]

Isnt it interesting how Couta and Beagle have completely opposite strategies.

And as a comment its not usually a good idea to broadcast your stop loss level Minimoke

[iceman]

Isnt it interesting how Couta and Beagle have completely opposite strategies.

And as a comment its not usually a good idea to broadcast your stop loss level Minimoke

Maybe he did it well after he opened that bottle of wine so must be forgiven :-)

[RTM]

...... and my policy is not to add to losing positions and there are no exceptions to that rule ! Averaging down is for people with better blood pressure than me LOL

Depends on how confident you are about a company and how big a buy you need to make to average down in a meaningful way. Recently bought quite a few NZR @ 230 and sold most a week or so ago at 252. My target portfolio quantity now has the right cost. Yes, my initial entry was way to high. But you have got to have confidence in the stock and know that your average down purchase is low enough. I generally put in a low order and forget about it. Mostly a nice surprise when it’s filled. You also need to be prepared to have a bigger portion in your portfolio should the price not recover as fast as desired. So it helps if it pays an ok dividend while you wait.

[minimoke]

Out of interest when you and mini talk about "increase for the year", is that last 12 months, so far this calendar year, so far this financial year or ?


Isnt it interesting how Couta and Beagle have completely opposite strategies.

And as a comment its not usually a good idea to broadcast your stop loss level Minimokenot sure why. When it hits 1.70 I'm out and I don't think that will rattle the market

[minimoke]

Well, the wine was pleasant and cleared my head and caused me to break my rule. I've ignored the stop loss and helped lift the market today to $1.75. Well that's what I sold out at- and all holdings. I felt a need to preserve my capital

The rationale was that I was 9.7% down the gurgler so far. I gave them more money at bonus issue at $1.70 so a price now of $1.74 I didn't feel was appropriate reward for that faith. Only thing mitigating the loss was the dividend reinvestment plan - which in hindsight I should have taken the cash.

So being 9.7% down I now need to see a 10.75% increase in price to get back to break even. Given that I have to think - who is going to get me that 10.75% fastest. I could wait another year for HBL to deliver. Or perhaps I should put the money into someone that can return that lost capital earlier. I have plans for that and will let you know when my BUY has completed.

So a bit sad to sell. But bright side is I have cash again and remaining shares are showing a 32% (exc divi's) positive return this year.

[winner69]

Mini - spoken like an old hand Fund Manager

Get rid of the dogs and the returns go up ....survivorship bias interesting subject

[percy]

Mini - spoken like an old hand Fund Manager

Get rid of the dogs and the returns go up ....survivorship bias interesting subject

Always pays to sell your losers and add to your winners.
Funny enough, HBL is a big winner for a lot of us.

[couta1]

Always pays to sell your losers and add to your winners.
Funny enough, HBL is a big winner for a lot of us. Not a share I would be selling for a loss, even at 10% down, I've learnt the hard way quite a few times selling good stable divvy paying stocks ,only to see them bounce back above my original buy price.

[minimoke]

Not a share I would be selling for a loss, even at 10% down, I've learnt the hard way quite a few times selling good stable divvy paying stocks ,only to see them bounce back above my original buy price.I thought about the stability and the divi. And that's not going to get my 10% back in a hurry. If its stable its not going to go anywhere from here. Likely mooch along $1.75 - $1.90. With the only excitement a divi from time to time - after which SP will drop back again.

[RTM]

I thought about the stability and the divi. And that's not going to get my 10% back in a hurry. If its stable its not going to go anywhere from here. Likely mooch along $1.75 - $1.90. With the only excitement a divi from time to time - after which SP will drop back again.

If the share price increases at more than inflation and it keeps paying a steadily increasing dividend I’ll be really happy. Yep, it’s boring, what does one expect from a bank. I wish all my shares were as boring as Heartland. My biggest holding.

[Joshuatree]

272 pages of posting and you call it boring!!!?? .....lol agreed:D

[value_investor]

Happy to hold this one at what I would call fair value at the moment. Still in this tight holding pattern in the 1.7x range which is still a decent buy if you compare to the overvalued market.

If it drops in price following the announcement of the FY results I think it will be more a case of the new spending on the systems. I could see this happening if its closer to 65m on that guidance. I wouldn't mind that at all given the strong dividend. I would just get more shares on the DRIP.

[Snoopy]

Industry Group Risk

From AR2016 note 18c, the greatest 'business group' risk in dollar terms is agriculture, with $628.202m worth of assets. This represents an increase of $90.916m over the previous year.

$628.202m/ $3,461.292m = 18% of all loans


Regional Risk

From AR2016 note 18b, the greatest regional area of credit risk in dollar terms is 'Rest of the North Island' , with $888.080m worth of assets. This represents:

$880.080m/ $3,461.392m = 25% of all loans

The 'Rest of North Island' loans (which excludes Auckland and Wellington) have risen 12.5% in numerical terms over the year, outstripping the growth of the previous largest region Auckland which only grew by 2% in gross loan amounts (Auckland still covers 24.5% of all loans) . This is a significant change for all other years where Auckland has been the largest market. Given 'Agriculture' loans have grown by 17% over the year, this 'growth' could reflect the compounding of agricultural interest charges into existing loans. According to AR2016 p7, dairy represent 7% of Heartland's total loan book.

0.07 x $3,461.392m = $242m

At an interest rate of 8%, assuming no interest was actually paid, this would increase the value of the Heartland loan book by:

$242m x 0.08 = $19.3m

Since the actual agricultural loan balance increased by $90.9m, we can assume that more net new agricultural loans were taken out, rather than just rolling over the dairy loan book. This is very much a contrast to traditional market leader ANZ.NZ who kept their total rural loan book static over the similar period. Looked at just in agricultural terms, you could say that Heartland are compounding their own problems for the future. But because the loan book in total has grown, reducing Heartland's relative reliance on Auckland is probably a positive.

The multi-year picture is shown below:




20122013201420152016


Largest Regional MarketAuckland (30%)Auckland (30%)Auckland (25%)Auckland (26%)Rest of North Island (25%)


Largest Industry Group MarketAgriculture (24%)Agriculture (21%)Agriculture (16%)Agriculture (17%)Agriculture (18%)




Industry Group Risk

From AR2017 note 18c, the greatest 'business group' risk in dollar terms is agriculture, with $757.004m worth of assets. This represents an increase of $129.334m over the previous year.

$757.004m/ $3,931,239m = 19% of all loans

Regional Risk

From AR2017 note 18b, the greatest regional area of credit risk in dollar terms is 'Rest of the North Island' , with $1,037.873m worth of assets. This represents:

$1,037.873m/ $3,939.231m = 26% of all loans

The 'Rest of North Island' loans (which excludes Auckland and Wellington) have risen 18% in numerical terms over the year, outstripping the growth of the previous largest region Auckland which grew by 13% in gross loan amounts (Auckland still covers 24.0% of all loans) . Given 'Agriculture' loans have grown by 21% over the year in dollar terms, this 'growth' could reflect the compounding of agricultural interest charges into existing loans. According to Heartland, dairy represent 8% of Heartland's total loan book (but still under the 10% to one customer group earnings cap that I use as a volatility risk indicator).

0.08 x $3,931.239m = $314m

At an interest rate of 8%, assuming no interest was actually paid (i.e it was all capitalised), this would increase the value of the Heartland Agricultural loan book by:

$314m x 0.08 = $25.1m

Since the actual agricultural loan balance increased by $129.334m, we can assume that more net new agricultural loans were taken out, rather than just rolling over the dairy loan book. This is logical when by 30th June 2017, it was becoming clear the dairy crisis was past its worst.

This is very much a contrast to traditional market leader ANZ.NZ who kept their total rural loan book static over the similar period ($NZ19.205m @ 30th September 2017 vs $NZ19.226m @ 30th September 2016)

Looked at just in agricultural terms, you could say that Heartland are potentially compounding their own problems for the future. Or is it just a case a putting more emphasis on their rural roots? Yet because the loan book in total has grown, reducing Heartland's relative reliance on Auckland is probably a positive.

The multi-year picture is shown below:




201220132014201520162017


Largest Regional MarketAuckland (30%)Auckland (30%)Auckland (25%)Auckland (26%)Rest of North Island (25%)Rest of North Island (26%)


Largest Industry Group MarketAgriculture (24%)Agriculture (21%)Agriculture (16%)Agriculture (17%)
Agriculture (18%)Agriculture (19%)



SNOOPY

[winner69]

Snoops

You want to have a look at ‘Capitalised Interest

[Snoopy]

Snoops

You want to have a look at ‘Capitalised Interest.'


I had a look at the 'Reconciliation of profit after tax and net cash flows from operating activities' p16 AR2017 and got a big shock Winner. It is very shocking when you line up those figures against 'net profit after tax'.



FY2016FY2017


Capitalised Net Interest income$25.548m$32.221m


Net Profit After Tax$48.108m$62.240m



Am I reading this right? Only about half of Heartland's profit translates to cash from operating activities while the rest will be collected 'later' (assuming - amongst other capitalised assets - those property assets securing the reverse mortgage cash outflows can indeed be cashed up at today's 'market price' in the future )?

Percy reckons that Heartland doesn't have the exposure to the overinflated housing market that the other big banks have. But looking at these figures, could he be wrong?

SNOOPY

PS Why are these capitalised interest payments not itemised in AR2016 report? Has there been a change in accounting standard that suddenly sees these figures disclosed?

[Beagle]

We can all huddle up safely in our kennels tonight and try and stay warm safe in the knowledge that Heartland's loan to valuation ratio's on reverse mortgages is extremely conservative.

[percy]

Snoopy.
Do some research on RELs [reverse equity loans].
Maybe start by reading HBL's presentations.Everyone of them over the past few years refers to them.
Loan security,reasons for loans [ a few surprises],length of time loans taken out[ more surprises],and interest rates charged on RELs [no surprises lol] .
Then compare those results with standard mortgages.
Answers will tell you why HBL are in this secure ,profitable growth sector.

[winner69]

I had a look at the 'Reconciliation of profit after tax and net cash flows from operating activities' p16 AR2017 and got a big shock Winner. It is very shocking when you line up those figures against 'net profit after tax'.



FY2016FY2017


Capitalised Net Interest income$25.548m$32.221m


Net Profit After Tax$48.108m$62.240m



Am I reading this right? Only about half of Heartland's profit translates to cash from operating activities while the rest will be collected 'later' (assuming - amongst other capitalised assets - those property assets securing the reverse mortgage cash outflows can indeed be cashed up at today's 'market price' in the future )?

Percy reckons that Heartland doesn't have the exposure to the overinflated housing market that the other big banks have. But looking at these figures, could he be wrong?

SNOOPY

PS Why are these capitalised interest payments not itemised in AR2016 report? Has there been a change in accounting standard that suddenly sees these figures disclosed?

Bugger ...meant to delete that post of mine but never mind. Didn’t think it would shock you though Snoops

The capitalised interest is related to the RELs but could include some of those rural loans you were concerned about where interest is added to the loans

This amount on this line on that reconciliation will only get larger over time as RELs grow. Might need more capital eh.

[minimoke]

Mini - spoken like an old hand Fund Manager

Get rid of the dogs and the returns go up ....survivorship bias interesting subjectLatest round of deck share shuffling completed this morning. Having bit the bullet and secured a loss on HBL I had to figure out how best to make up that money. I still wanted a finance exposure so I've bought more TRA at $3.10. I see more potential in making a 10% gain in TRA than I do in HBL. I was also carrying a gain on my prior TRA purchase so i figured that would help offset the loss. Its bought my average TRA price to $3.04 so at the moment I am still showing positive territory in TRA - and there is a divi to come, with resultant drop in SP to be expected. With market moves in the last few days but cash now back in the market Portfolio is showing a 29.3% overall gain this year. I'l review in 6 months to see if this was the right decision.

[Beagle]

Not getting at HBL here, quite the opposite as they don't have a branch network and are not stooping to these lows.
http://www.scoop.co.nz/stories/BU1806/S00581/banks-pushing-insurance-policies-annoys-customers.htm I think its reprehensible behavior that these Australian owned banks are trying to leverage their business by selling customers insurance. The stat's are alarming and the so called bank of new Zealand appears to be the worst offender with a whopping 93% of staff saying they feel under pressure to sell financial products to customers.

Isn't it great that a bank really owned by Kiwi's doesn't have to stoop to these sort of "underarm bowling tactics" to grow its business !

[kiwico]

Not getting at HBL here, quite the opposite as they don't have a branch network and are not stooping to these lows.
http://www.scoop.co.nz/stories/BU1806/S00581/banks-pushing-insurance-policies-annoys-customers.htm I think its reprehensible behavior that these Australian owned banks are trying to leverage their business by selling customers insurance. The stat's are alarming and the so called bank of new Zealand appears to be the worst offender with a whopping 93% of staff saying they feel under pressure to sell financial products to customers.

Isn't it great that a bank really owned by Kiwi's doesn't have to stoop to these sort of "underarm bowling tactics" to grow its business !

I think you'll find all the local banks (including KiwiBank (https://www.kiwibank.co.nz/personal-banking/insurance/)) sell insurance with the insurer behind most being IAG, whose brands include State and AMI. In my past dealings with banks and insurers there have always been targets, even if set at the request of the insurer.

[RTM]

https://www.youtube.com/watch?v=wvAui0vUT88


Now...who wouldn't trust Tom ?

[couta1]

Acting like a lead balloon of late, the red arrow on my portfolio is going down at the same rate the blue arrow is going up on my TRA holding.

[winner69]

Acting like a lead balloon of late, the red arrow on my portfolio is going down at the same rate the blue arrow is going up on my TRA holding.


That’s what happens when so many punters switch from one (seen as a struggler) to the other (the hot favourite)

Lost count of how many have said they’ve done this

But jeez ...be big moves for both if percy decided to play that game eh

[minimoke]

Latest round of deck share shuffling completed this morning. Having bit the bullet and secured a loss on HBL I had to figure out how best to make up that money. I still wanted a finance exposure so I've bought more TRA at $3.10. I see more potential in making a 10% gain in TRA than I do in HBL. I was also carrying a gain on my prior TRA purchase so i figured that would help offset the loss. Its bought my average TRA price to $3.04 so at the moment I am still showing positive territory in TRA - and there is a divi to come, with resultant drop in SP to be expected. With market moves in the last few days but cash now back in the market Portfolio is showing a 29.3% overall gain this year. I'l review in 6 months to see if this was the right decision.
A few days later and its the end of the month so time for a moments reflection.

Sold all holdings in HBL for $1.75 due to losses already incurred. Market closed today at $1.70

Put all sales proceeds into TRA at $3.10. Market closed today at $3.20

So happy that TRA have now recouped approx. 50% of my HBL losses. I start the July month in a good position.

[percy]

Been playing unsuccessful funny games on my own all week,until 4.50 pm this afternoon.
Brought the GNE and MEL I thought had got away from me, at the 5pm washup.

HBL weakness is due to research out today.
Basically Aussie bank issues,means the bank multiples have been lowered,yet HBL's eps and divies are projected to grow.
"On a comparative basis for the next few years,HBL is likely to grow its earnings at a faster rate than its Australian peers and improve its ROE."
????????????????????????????????????????????

[Beagle]

Been playing unsuccessful funny games on my own all week,until 4.50 pm this afternoon.
Brought the GNE and MEL I thought had got away from me, at the 5pm washup.

HBL weakness is due to FNZC research out today.
Basically Aussie bank issues,means the bank multiples have been lowered,yet HBL's eps and divies are projected to grow.
"On a comparative basis for the next few years,HBL is likely to grow its earnings at a faster rate than its Australian peers and improve its ROE."
????????????????????????????????????????????

So what's FCNZ's target price Percy ?

[percy]

So what's FCNZ's target price Percy ?

$1.66...……………………………………………..

[Beagle]

Thank goodness for the healthy fully imputed dividend yield of about 7.8% then ! which should grow a bit each year (based on estimated dividends on 9.5 cps fully imputed in FY19). Trades cum approx 5.5 cps fully imputed final divvy so about fairly priced in my opinion.

[percy]

………………………..2017...……...2018...………...2019...………..20 20.
DPS...……………...9 cents......9.5 cents...…...10 cents.....10.5 cents.

So HBL have the capacity to keep paying increasing fully imputated divies.
I can't ask for more .

[Benny1]

I had a cheeky order in for a few more ( actually doubles my holding) for a while and was surprised to see it was filled right at the end of the day.. and for a cent less too!
Roll on those divies, got to be better than the paltry 2.75% the Heartland call account is paying..

Calls for a red wine...and time to watch the almighty warriors!!

[RupertBear]

I have been waiting and tempted but the chart looks freeking ugly and I remember being told "dont buy in a downtrend" so I am still waiting ;)

[couta1]

I have been waiting and tempted but the chart looks freeking ugly and I remember being told "dont buy in a downtrend" so I am still waiting ;) Who told you that nonsense, I buy in all trends, but my favourite is downtrends when the company is solid and pays good divvies. PS-If your worried about the chart just extend the time frame.

[iceman]

………………………..2017...……...2018...………...2019...………..20 20.
DPS...……………...9 cents......9.5 cents...…...10 cents.....10.5 cents.

So HBL have the capacity to keep paying increasing fully imputated divies.
I can't ask for more .

And that´s exactly why I´ve started accumlating, aiming to get back the number of shares I sold back in December and January. Reliable, juicy and steadily growing dividends will continue to keep me happy with HBL as a core part of my portfolio

[Baa_Baa]

I have been waiting and tempted but the chart looks freeking ugly and I remember being told "dont buy in a downtrend" so I am still waiting ;)

$2.14 to $1.70 is a cautionary tale, one might argue it's a great buy while others would sleep better if they paid a bit more for a confirmed reversal back to a uptrend.

Put it this way; if you could know for certain months ago that it would be $1.70 now, would you have held just for the story and the dividends?

Downtrends provide certainty until they are an uptrend, and vice versa. Hence the wisdom in the saying "don't buy downtrends" .. it's just a guess, or a gamble.

[Beagle]

………………………..2017...……...2018...………...2019...………..20 20.
DPS...……………...9 cents......9.5 cents...…...10 cents.....10.5 cents.

So HBL have the capacity to keep paying increasing fully imputated divies.
I can't ask for more .
Looks like a good sound investment case at this level to me. At 10 cps for FY19 fully imputed that's 10 / 0.72 = 13.89 cps gross. 13.89 / 170 = 8.2% forecast gross dividend yield + growth in future years. Further, HBL presently trade cum the forthcoming final dividend to be announced in due course which as everyone knows is usually much bigger than the interim one.

Agree Iceman - My sentiments exactly...all aboard the reliable juicy dividend train... toot toot :)

[Onion]

Who told you that nonsense, I buy in all trends, but my favourite is downtrends when the company is solid and pays good divvies. PS-If your worried about the chart just extend the time frame.

Love it. Couta does it Couta's way! Keep it up.

[Snow Leopard]

So on a dividend adjusted basis the 1 year net gain on HBL is {drumroll}:

slightly less than nothing :eek2:.


$2.14 ?

Has HBL released it's own cryptocurrency ?

...

More than 6 months since I last posted on this thread.
If it goes down far enough I will post again.

Now off to the bar to meditate.

[iceman]

So on a dividend adjusted basis the 1 year net gain on HBL is {drumroll}:

slightly less than nothing :eek2:.



More than 6 months since I last posted on this thread.
If it goes down far enough I will post again.

Now off to the bar to meditate.

Yes last 12 months have been poor. Sharesight tells me +1.92% total return in the last 12 months and 30.77% if I go back 24 months. You win some and you lose some but sure has been a very good stock to hold long term over the last many years.
But like couta1 said above, all depends on the time frame one looks at

[percy]

Craig's research dated 30th June has HBL target price of $1.90.
We live in interesting times.?..
I would think the growing dividend will under pin the share price.
Comes a point, others like myself will decide they can't help themselves ; "I will have a bit more of that juicy divie,thank you.".

[Beagle]

NZX is a difficult market to find value in...Yeah, NAH...not for those that look hard enough. I agree Percy. 8.2% gross yield for FY19 plus growth in the years ahead should underpin the SP at around the current level. I wonder if yesterday's drop on close was something to do with end of financial year tax loss selling by Australian investors ? Reason I wonder this is the shares were over $2 six months ago so some Australians would be able to sell and claim a tax deduction for their loss if they'd bought north of the current price. Wouldn't surprise me if those canny investors buying at the close yesterday at $1.70 bought either at the bottom of this correction or very, very close to it.

Thanks for sharing Craigs assessment. That gives an average of $1.66 + 1.90 / 2 = $1.78.
That's right around where I see fair value and when I bought back in recently at $1.75 average I thought it was just a smidgen under fair value at that price.
I for one am okay to buy more if it gets irrational to the downside from here. I don't normally add to a slightly underwater position but I think I'll make an exception in this case. Self imposed rules are make to be broken on the odd occasion aren't they ! I blame the Beagle dividend hound that lurks within, he can't resist big dividend feeds :)

[fish]

Online bidding at close can be exciting as well as rewarding.
I only get the top ten bids and sells online which if there is a lot of trading makes it difficult to work out the close price.
With Heartland yesterday it was easy to see the close was going to be 1.70 so a bid for 171 ensures you get the share for 1.70.
I will have no hesitation buying more if it drops further.

[RupertBear]

Who told you that nonsense, I buy in all trends, but my favourite is downtrends when the company is solid and pays good divvies. PS-If your worried about the chart just extend the time frame.

Aww Mr Couta you are a special breed who is happy to buy in all trends and I am sure you do very well out of it :D I have a big aversion to big red arrows so I am trying to be less impulsive and more patient about when I enter a stock. I am still in the red with HLG :(

So I am weighing up buying some more TRA which seems to be in a nice upward trend, some HBL which appears to be in an ugly downtrend ( even looking at the two year chart) or doubling down and buying some more MPG which has been a horrible share for me but appears to be showing more potential of late. Hmmm the jury is still out on what to do but I fear the impulsive bear will dive into one of them come Monday :D

[janner]

Hmmm the jury is still out on what to do but I fear the impulsive bear will dive into one of them come Monday :D

Justice can not come from an impulsive " Jury " RB.
Give plenty of thought to the standing of those, giving " evidence " of their behaviour over an extended period.
Who has "proven " that they can do what they say they will ????

[RupertBear]

Justice can not come from an impulsive " Jury " RB.
Give plenty of thought to the standing of those, giving " evidence " of their behaviour over an extended period.
Who has "proven " that they can do what they say they will ????

Thanks Janner, Percy comes to mind when you say "who has proven that they can do what they say they will do???" MPG no, HBL maybe, TRA yes :)

[janner]

Percy has them both as far as I know. :-)))))

Always the choice is yours..

[RupertBear]

Percy has them both as far as I know. :-)))))

Always the choice is yours..

Yes I think you are right. Thank you for helping me clarify my thought processes. I think I will go with HBL for some diversity! :)

[Baa_Baa]

There is never a need to time-stamp an investment decision.

Like, on Monday I'll do this or that. Baloney. Things change, it looks likely today but the next day circumstances change. Act only when the criteria match ones buy or sell conditions. That's called having a trading strategy, it's not just about choosing what to buy or sell, it's also about when,

The FA's reckon it's fair value and the chart says it's sitting on decent support. Buying now is a gamble that both may be right. A few cents higher would confirm both, but a few cents lower would also confound their optimism.

Let it unfold, as it will, and have a strategy that you can execute at the moment in time that it is triggered. Not before.

[janner]

There is never a need to time-stamp an investment decision.

Like, on Monday I'll do this or that. Baloney. Things change, it looks likely today but the next day circumstances change. Act only when the criteria match ones buy or sell conditions. That's called having a trading strategy, it's not just about choosing what to buy or sell, it's also about when,

The FA's reckon it's fair value and the chart says it's sitting on decent support. Buying now is a gamble that both may be right. A few cents higher would confirm both, but a few cents lower would also confound their optimism.

Let it unfold, as it will, and have a strategy that you can execute at the moment in time that it is triggered. Not before.

Good post... Take heed RB. You are in control of your decisions ... No one else....

[Food4Thought]

Good post... Take heed RB. You are in control of your decisions ... No one else....

Yeah your choice. A bank stock under $2 and a kiwi bank. ... keeping profits in kiwi land... I wish it was slightly cheaper yet it's a good gamble isn't it

[janner]

Yeah your choice. A bank stock under $2 and a kiwi bank. ... keeping profits in kiwi land... I wish it was slightly cheaper yet it's a good gamble isn't it

GAMBLE.. ????.. I think you are in the wrong play ground...

[RupertBear]

There is never a need to time-stamp an investment decision.

Like, on Monday I'll do this or that. Baloney. Things change, it looks likely today but the next day circumstances change. Act only when the criteria match ones buy or sell conditions. That's called having a trading strategy, it's not just about choosing what to buy or sell, it's also about when,

The FA's reckon it's fair value and the chart says it's sitting on decent support. Buying now is a gamble that both may be right. A few cents higher would confirm both, but a few cents lower would also confound their optimism.

Let it unfold, as it will, and have a strategy that you can execute at the moment in time that it is triggered. Not before.

Thanks Baa Baa your comments are much appreciated. I still have a lot to learn and need to be much more patient.

[Food4Thought]

It's all a bit of a gamble isn't it? I don't have a future ball and don't have many certainties about what happens tomorrow and in the future. Thank you for pointing it out that I am, in your view, in the wrong play ground.

[Snoopy]

Yeah your choice. A bank stock under $2 and a kiwi bank. ...


The fact that the Heartland share price is under $2 ($1.70 as I write this) is not indicative of anything. Have a bonus issue of shares such that the number of shares increase to ten times the number we have now and the share price would drop to 17c. Cancel shares to the extent that the number on issue is only one tenth of what we have now and the share price would jump to $17. Keep the business the same, change the number of shares on issue and the share price can be engineered to be anything you like. But all such changes have no effect on the underlying business, or a new investors expected returns.



keeping profits in kiwi land...


Not entirely true. Many of those retained profits are being used to expand Heartland's business in Australia



I wish it was slightly cheaper yet it's a good gamble isn't it


Cheaper is always better from a new investment perspective. In my view $1.70 is within the fair value range, but not particularly cheap.

I need to qualify what I just said then. If Percy's increasing dividend projections come to pass, then you could argue HBL is now good value. But IMO you have to consider other possible future scenarios as well.

For example, what would happen if the milk priced tanked again? A couple of years back when this happened, Heartland issued a special press release explaining that their dairy exposure was only 7% of the portfolio. As it happened Heartland backed their farmer customers, the milk price recovered and any potential problem never materialised But now the dairy portfolio is up to 8% of all company loans. And there is no guarantee that if there was another milk price fall that things would recover as quickly. I am not suggesting here that the milk price will definitely tank again. Nevertheless you might want to invest in Heartland, assuming there is a one in ten chance (say) that it will. Even if the chance is small, the effect could be significant. So this is one scenario you cannot ignore IMO.

Another scenario is that Heartland could bid for UDC. They have already said they would need to issue new capital to do that. It is likely that new capital would be discounted below the current share price. When you invest, all the possible alternative outcomes need to be considered.

SNOOPY

[janner]

It's all a bit of a gamble isn't it? I don't have a future ball and don't have many certainties about what happens tomorrow and in the future. Thank you for pointing it out that I am, in your view, in the wrong play ground.

Yes it is a bit of a gamble.. Also I do not have a future ball.. My response to RB was an answer to him.. Not promising him any certainties.. Just hopefully giving him some of my many years of experiences..
Do not understand how or when I even mentioned you... !!!!..

[Ggcc]

Wasn't heartland planning on another cash issue? If so would the future dividend not be diluted? I do think HBL is a fair price for now, but who knows what the future will bring for the share price.

[iceman]

Wasn't heartland planning on another cash issue? If so would the future dividend not be diluted? I do think HBL is a fair price for now, but who knows what the future will bring for the share price.

Not sure if HBL is on record planning another "cash issue". But for me it is clear that a significant portion of their growth is from Reverse Mortgages where, at this early stage in that business, the cash flows out faster than it flows in. Winner69 & Snoopy have pointed out the "capitalised interest" in recent posts and worried about it. But I think it is mainly from the fast growth in RM and perfectly understandable.
Time will tell how HBL will fund the fast growth in RM. Cash issue, bonds, DRP, SPP or a mixture of all ? Who knows ? But they will need cash to grow the business. No doubt.

[winner69]

Wasn't heartland planning on another cash issue? If so would the future dividend not be diluted? I do think HBL is a fair price for now, but who knows what the future will bring for the share price.

Wanting more capital is good. It means growth, particularly the HERs, is still happening.

Borrowing more is one option but got to watch those equity ratios

They pay too much of profits out in dividends

[percy]

Wanting more capital is good. It means growth, particularly the HERs, is still happening.

Borrowing more is one option but got to watch those equity ratios

They pay too much of profits out in dividends

Yes should they continue to achieve very strong growth they will require more capital in the not to distant future.
Low growth, and more capital will not be required for some time.
The dividend policy is a strong attraction for investors relying on dividends.
So it is six of one, and half a dozen of the other.

[winner69]

Yes should they continue to achieve very strong growth they will require more capital in the not to distant future.
Low growth, and more capital will not be required for some time.
The dividend policy is a strong attraction for investors relying on dividends.
So it is six of one, and half a dozen of the other.

A person who doesn’t understand the mysteries of finance and how it all works might ask a simple question like ‘what’s the point of asking shareholders for $59m and then paying them back $50m in dividends?’

That’s HBL over the last 12 months

[percy]

A person who doesn’t understand the mysteries of finance and how it all works might ask a simple question like ‘what’s the point of asking shareholders for $59m and then paying them back $50m in dividends?’

That’s HBL over the last 12 months

Perhaps they may,then again perhaps they may not.!

[iceman]

A person who doesn’t understand the mysteries of finance and how it all works might ask a simple question like ‘what’s the point of asking shareholders for $59m and then paying them back $50m in dividends?’

That’s HBL over the last 12 months

Fair point. But many will understand and join the DRP to avoid undue dilution. A difficult line to tread

[Snoopy]

I didn't think my post would be outdated in just ten days. But with the announcement of today's (foreshadowed) capital raising in Australia for 'about $A20m', which at $NZ1= =$A0.909c is equivalent to $NZ22m, it is time to update the Heartland 'capital flow' table.



Financial YearCapital Notes Issued during FYNew Shares Issued during FYTotal Shares on the Books EOFYNet Money Raised During FY (excl. Capital Notes)
Dividends PaidROEshareholders teat


20130 m0 m388.704m$0m$13.951m7.2%


20140 m75,562 m463.266m$64.774m$19.930m8.0%


20150 m6,624 m469.980m$9.163m$30.188m9.9%


20160 m6,579 m476.469m$6.798m$37.690m10.7%


2017$22.000m (f)30.973m+512.902+ m$45.277m+$39.485m (f)tbc


Total Cash Raised$22.000m$126.012m +


Total Cash Returned$141.244m



(f) indicates forecast result.

The picture this table draws is truly astonishing. If you add up the amount of capital that stakeholders have put into the business over the last five years, it now exceeds the total dividend flow that Heartland has paid out over that same time period!

Put another way, those mother shareholders who put their capital into Heartland probably expected this 'growing baby' to suckle at the parent shareholders' teat, while it built up its strength to prosper as a fully fledged 'grown up' Company. However, this aggressive little Heartland pup clearly did not want to make that break with Mum and Dad shareholder investor. While apparently distributing a generous flow of dividends, the aggressive Heartland jaws subsequently latched back onto those shareholder funds again by way of DRPs and cash issues. And now, from a total stakeholder perspective (including the new Aussie bondholders) those aggressive jaws have not only sucked the stakeholders dry. They have taken a solid bite out of the teat that feeds it!

Plenty here have claimed over the years that Heartland was not 'short of capital'. At one stage even Heartland themselves talked about the possibility of a capital return. However, following a 'look at what I do ' method rather than the 'look at what I say' method of investment, it is now clear what Heartland's true capital appetite was. Heartland have been very clever to raise all of this new capital at what were largely premium prices. Kudos to Heartland management for that. But those stakeholders looking for a 'solid net dividend return' may have to pause for thought.


Winner has looked at what Heartland has asked of their funding stakeholders over the last year. It must be time to update the Heartland hunger for 'capital flow' table for the last five years:



Financial YearCapital Notes Issued during FYNew Shares Issued during FYTotal Shares on the Books EOFYNet Money Raised During FY (excl. Capital Notes)
Dividends PaidROEshareholders teat


20130 m0 m388.704m$0m$13.951m7.2%


20140 m75,562 m463.266m$64.774m$19.930m8.0%


20150 m6,624 m469.980m$9.163m$30.188m9.9%


20160 m6,579 m476.469m$6.798m$37.690m10.7%


2017$22.000m40.215m516.684m$50.991m$41.977m10.6%


Total Cash Raised$22.000m$131.726m


Total Cash Returned$143.736m



Notes

1/ The Australian 2017 'Subordinated Unsecured Capital Notes' issue for $A20m, which at $NZ1= =$A0.909c is equivalent to $NZ22m, was confirmed on April 7th 2017, and therefore issued in FY2017.
2/ ROE figures calculated using normalised earnings based on equity on the books at the end of the financial year.

If you add up the amount of capital that 'funding stakeholders' (bondholders and shareholders) have put into the business over the last five years, it exceeds the total dividend flow that Heartland has paid out over that same time period by $10m. Note that the five year time period I have chosen deliberately excludes the establishment capital raising that was used to create Heartland in the first place. Winner says that Heartland should pay out less of their profit as dividends, and so reduce their need to raise new capital at the same time. But as this table shows, Heartland have been quite adept at raising new capital to the extent that all of the capital paid out as dividends (and $10m more) over the last five years has now been 'reclaimed'.

Heartland management has been quite clever at pandering to the dividend hounds. Probably there are several holders of Heartland today who would not invest in Heartland if there was no dividend on offer, Some of the generous dividend is reclaimed immediately via the DRP. The rest is taken back later (not necessarily from the same individuals it was paid to) via share cash issues and bond issues. The net effect is that in the five years ended June 30th 2017 Heartland has paid out a net nothing. Yes the underlying business base has grown over that time, even if no net cash has been generated. So what we have here is a share with 'ponzi type' characteristics. As long as there are confident funding stakeholders willing to put up more cash, the Heartland business will continue to grow, But as soon as Heartland loses the confidence of its funding stakeholders, the cash needed to expand the business will dry up and growth will stop. And we all know what would happen to the share price if that were to happen. This is the primary reason I don't invest in Heartland. A great business will generate lots of cash. Heartland generates none.

SNOOPY

[fish]

Snooopy much as I respect your posts I feel its a step too far to link Heartland to Ponzi type characteristics.

The capital raising as I understand it is to enable more money to be lent so that real profits can grow.
Reverse mortgages by their very nature requires capital to be raised so it can be lent against the family home.
Only a small percentage of the value of the family home can be lent so the repayment should never be in doubt.The uncertainty is when that repayment will be made.Until this starts to happen and if they want to grow this they will need money.
Therein lies the risk-but the possible returns on the margin they make is massive.

So yes the investment-as all are is a risk-and this is riskier than the average bank.
It has no resemblance to a Ponzi scheme imho

[winner69]

Love it Snoops when you can you can use 'pandering to dividend hounds' and 'ponzi' in the same post

[Snoopy]

Snoopy much as I respect your posts I feel its a step too far to link Heartland to Ponzi type characteristics.

<snip>

It has no resemblance to a Ponzi scheme imho

Just to clarify what I said fish, I never said that I considered Heartand a ponzi scheme. It was you who put those two words together, I do not consider Heartland bank to be a ponzi scheme, and just to be clear.

I said 'ponzi type chacteristics' and to clarify what I meant I showed that:

1/ Over the last five years, Heartland has taken in more cash than it has paid out. (ponzi schemes do that).
2/ The growth of the business is dependent on a net injection of new capital over time (ponzi schemes require that).

However, where Heartland is very different from a ponzi scheme is that the new capital contributed to the Heartland business remains there, albeit in an illiquid form, whereas in an actual ponzi scheme the new capital paid into the ponzi scheme is paid out to existing members, leaving the ponzi asset cupboard bare.

The reason I consider Heartland falls short of being a great business are the same two reasons I have outlined as above:

1/ Over the medium term, Heartland has yet to demonstrate that it can generate cash from 'normal operations'.
2/ Heartland requires continual injection of new capital to grow.

Ponzi schemes are undesirable and illegal. What Heartland does is perfectly legal. What new investors have to decide is this: Is the Heartland business model, as regards cashflow, 'desirable' from an investor perspective?

SNOOPY

[Beagle]

Snooopy much as I respect your posts I feel its a step too far to link Heartland to Ponzi type characteristics.

The capital raising as I understand it is to enable more money to be lent so that real profits can grow.
Reverse mortgages by their very nature requires capital to be raised so it can be lent against the family home.
Only a small percentage of the value of the family home can be lent so the repayment should never be in doubt.The uncertainty is when that repayment will be made.Until this starts to happen and if they want to grow this they will need money.
Therein lies the risk-but the possible returns on the margin they make is massive.

So yes the investment-as all are is a risk-and this is riskier than the average bank.
It has no resemblance to a Ponzi scheme imho

Great post and agree with all that except for the highlighted part. Snoopy, drawing a parallel / analogy with Ponzi schemes is both harsh and inappropriate in my opinion. Banks all have their niche's of operation. I think this is less risky than for example the major Australian trading banks entering into multi billion dollar syndicated lending on mining projects with no guarantee whatsoever on future commodity prices. At least reverse equity lending is on real estate is at a very low LVR ratio and is lending upon an asset which has over a very long period of time demonstrated it generally holds its value extremely well.

[beetills]

Strange but methinks Heartland shareholders are waiting with anticipation for some of these reverse mortgage takers to kick the bucket.
On the other hand some children of these reverse mortgage takers may not be so happy.
Just a thought.

[percy]

Strange but methinks Heartland shareholders are waiting with anticipation for some of these reverse mortgage takers to kick the bucket.
On the other hand some children of these reverse mortgage takers may not be so happy.
Just a thought.

Not so.
One of the main reasons it took time for HBL's RELs to gain traction was they were being repaid early.
A lot of loans were taken out for bringing houses up to scratch to be sold[ie new kitchen/bathroom]..Once sold the loan was repaid.
Others such as loans for a large medical expense,travel,etc were also repaid early.Then people having to go into care meant their house was sold,and loan repaid.
It is hard to judge the "normal" length of time or "average" size of RELs,which makes trying to work out HBL's capital requirements for REL's near impossible.[well for me.]
What we do know is the market for them is expanding,the security is sound, and the margins are better than usual mortgages,so capital is being wisely allocated to this sector by HBL..

[winner69]

Home equity release lending is very good business for Heartland

[Snoopy]

The capital raising as I understand it is to enable more money to be lent so that real profits can grow.
Reverse mortgages by their very nature requires capital to be raised so it can be lent against the family home.
Only a small percentage of the value of the family home can be lent so the repayment should never be in doubt.The uncertainty is when that repayment will be made.Until this starts to happen and if they want to grow this they will need money.
Therein lies the risk-but the possible returns on the margin they make is massive.


I have been looking at last years presentation to investors just before the rights issue (presentation dated 9th November) and the FY2017 Annual Review. I have pulled the following information from these sources.

--------

Q/ What is a Reverse Mortgage?

A/ A reverse mortgage allows home owners over 60 to access a portion of equity in their home. What sets it apart from the usual home loan is that no regular repayments are required because the debt is repaid from the future sale of the property. And importantly, the homeowner continues to own the home. The funds are able to be used for a range of purposes including home improvements, travel, medical insurance and aged care or for extra cashflow in retirement.

-------


Although the loan is designed to last for as long as you are able to remain in your home, you may repay all or part of it at any time without penalty providing you with flexibility. The amount borrowed plus any interest and fees is repaid when you move permanently from your home.




Reverse Mortgages EOFY2017AustraliaNew Zealand


Finance Receivables$516m$405m


Average Loan Size$112k$97k


YOY Growth (Finance Receivables)19%12%



Notes

1/ Broker distribution network expanding significantly in Australia.
2/ The banking group has an Australian bank facility totalling $600m, drawn to $440m secured over the shares in Australian Seniors Finance (Heartland's Australian reverse mortgage operation).
3/ Total Concentration of credit risk in Australia: $522m. This means that just $6m of receivables in Australia are not reverse mortgages.
4/ Overall finance receivables growth over FY2017 for the whole Heartland business is +14.4%. Australian Reverse Mortgage growth is substantially above this. New Zealand slightly below.



Scale of Mortgages to Property Valuation


Reverse Mortgage <= 60% LVR$885.278m


Reverse Mortgage 60% <= 80% LVR$32.829m


Reverse Mortgage 80% <= LVR$4.641m



The problem that I have with the Reverse Mortgage Business is that it is highly cashflow negative until the maturing mortgages start to equal the new ones being taken out each year, So eventually this cashflow 'problem' should fix itself. Having new mortgages coming on matched by old mortgages will do it. But if new mortgages coming on exactly equal old mortgages coming off, then that means the business is not growing. Yet Heartland is priced on a 'growth multiple'. So if the business is not growing, the PE ratio should reduce and the share price should fall accordingly.

The way I see it:

1/ If Heartland is priced for growth AND
2/ There is a push to increase reverse the mortgage business to meet shareholder growth expectations THEN
3/ The number/value of new reverse mortgages coming on will always exceed the number/value of old reverse mortgages coming off.

This means the Reverse Mortgage business is set to be perpetually cashflow negative.

SNOOPY

PS I wouldn't feel that 60% of any home value would be classified as a 'small proportion'.

[RTM]

Fair point. But many will understand and join the DRP to avoid undue dilution. A difficult line to tread

But unfortunately many need the dividend to buy our groceries. So this is not an option.

[winner69]

Hey Snoops .....with these HER loans have you ever thought of considering the time value of the cash flows of say a 10 year duration?

Could be an interesting exercise for you on a cold winters afternoon after the chores have been done

[Snoopy]

Hey Snoops .....with these HER loans have you ever thought of considering the time value of the cash flows of say a 10 year duration?

Could be an interesting exercise for you on a cold winters afternoon after the chores have been done.


Without doing the maths, the gist of your proposal is that earnings from reverse mortgages in the future should be discounted back to the present day because cash back in the future is worth less than cash today. I agree with that in principle, but the mechanics of 'coming up with a number' seems more difficult. Let me outline what I do know as a starting point.

1/ Reverse Mortgages are lumped in with the 'Households' financial receivables. Those total $1,717.407m at balance date, of which $516m + $405m = $921m (just over half) are Reverse Mortgages.
2/ Reverse mortgages income is 'booked' year to year but not collected until the homeowner moves out. This means a reverse mortgage payment is always 'on time' and any non payment trouble will only be booked when the homeowner moves out at the end of the contract.
3/ For assessment of credit worthiness, Reverse Mortgages are part of the 'behavioural portfolio' of loans. Because of the way these loans are structured, I imagine they are always classed as 'Not in Arrears'.

I imagine the Reverse Equity 'income' must be accumulating as an asset on the Heartland balance sheet. Is it under 'Capitalised Net Interest Income' (not separately listed as a balance sheet item, but mentioned in the 'Reconciliation of Profit after tax to net cash flows from Operating Activities')? That was $32.221m over FY2017 (AR2017 p16).

The average Australian reverse mortgage balance over the year was:

($516m + $434m)/2 = $475m

The average New Zealand reverse mortgage balance over the year was:

($405m + $362m)/2 = $384m

So the average interest rate charged over all these reverse mortgages was:

$32.221m / ($475m + $384m) = 3.75% !??!??!!!!!

That can't be right!

SNOOPY

[winner69]

Hope Heartland aren’t going to do this to me

They’ve never asked me to fill in any forms ......been a pain doing it for other banks

https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12081478

[percy]

Hope Heartland aren’t going to do this to me

They’ve never asked me to fill in any forms ......been a pain doing it for other banks

https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12081478
Well I certainly trust they will.
Hate for them to loose their banking licence because of you..!!!! …..lol.

[winner69]

Well I certainly trust they will.
Hate for them to loose their banking licence because of you..!!!! …..lol.

I take it you have already disclosed you not a foreign taxpayer

I was a bit surprised they have never asked me ...a bit slack maybe

Didn’t the Risk Officer (usually in charge of such things) leave recently

[percy]

I take it you have already disclosed you not a foreign taxpayer

I was a bit surprised they have never asked me ...a bit slack maybe

Didn’t the Risk Officer (usually in charge of such things) leave recently

Recently we shifted houses.
Had to supply Craigs with proof of address.Not easy when I do not have a printer and most accounts are now sent via email.
Also had to sign a new form for trading on NZ Unlisted market,virtually stating I realised Unlisted was still the wild west.!
So forms are still very much of everyday life.

[peat]

Recently we shifted houses.
Had to supply Craigs with proof of address.Not easy when I do not have a printer and most accounts are now sent via email.
Also had to sign a new form for trading on NZ Unlisted market,virtually stating I realised Unlisted was still the wild west.!
So forms are still very much of everyday life.

Indeed Percy, same boat here
The council obligingly sent me a notification of rates costs via the post so I used that.

I personally think HBL will go a bit lower yet, (though I have some, and wont sell them)
Possibly as low as $1.40 though maybe only $1.60

[RTM]

I personally think HBL will go a bit lower yet, (though I have some, and wont sell them)
Possibly as low as $1.40 though maybe only $1.60

As long as the dividend per share is maintained or increased....I really can’t see the SP dropping a lot further. Well.... that’s what I’m hoping anyway. They are to big a part of my portfolio to double down on should they reach < $1.50. Maybe I’ll turn off my computer for a couple of months.
Yeah right !

[percy]

Indeed Percy, same boat here
The council obligingly sent me a notification of rates costs via the post so I used that.

I personally think HBL will go a bit lower yet, (though I have some, and wont sell them)
Possibly as low as $1.40 though maybe only $1.60

I am sure the HBL share price will fluctuate over the next year or two.
The only certainty is the increasing fully imputated divies……………….lol.

[couta1]

I am sure the HBL share price will fluctuate over the next year or two.
The only certainty is the increasing fully imputated divies……………….lol. Irrational/Loopy equals overdone fluctuations.

[Snoopy]

Hey Snoops .....with these HER loans have you ever thought of considering the time value of the cash flows of say a 10 year duration?

Could be an interesting exercise for you on a cold winters afternoon after the chores have been done

This is the most recent report on Weighted Average Cost of Capital that I could find Winner

https://www.pwc.co.nz/pdfs/2017pdfs/deals-insights-nz-winter-2017.pdf

WACC for Heartland was 7.4%

Heartland's current variable rate applied to Reverse Mortgages can be found here:

https://www.seniorsfinance.co.nz/reverse-mortgage-calculator

The rate is 7.82%, is very close to the Heartland WACC discount rate.

So charging for future interest in the 'mid sevens' and discounting that future year income by a factor in the 'mid sevens' means the present value of that future income is close to zero. Using 'present value' accounting the cashflow from the Reverse Mortgage business is a product of a fractional difference' and is almost worthless. Is that how you see it Winner?

SNOOPY

[Brain]

Snoopy your last post seems to have been met by silence perhaps stunned silence. Is the WACC of 7.4% realistic?

[percy]

Snoopy your last post seems to have been met by silence perhaps stunned silence. Is the WACC of 7.4% realistic?

It seemed to be a discussion between Winner69 and Snoopy,where Snoopy is awaiting a reply from Winner69.

[winner69]

Snoops ...I don’t think you can compare WACC and interest rates charged as you have done

Don’t forget the IRR on a HER loan where interest and principle is collected at the end of the loan is the same as an interest only loan (same rate and duration) where interest is collected along the way with principle collected at the end.

It seems that HER loans on average have a much longer duration than a lot of their other lending and I was wondering what you thought about the capital implications are when these loans are repaid allowing for inflation.

As we seem to ‘bore’ people with these conversations I’m don’t expect you to reply on this thread.

[winner69]

Dairy prices down overnight with the key WMP down more than 7%

Down 7 of the last 9 auctions ...bit like Heartland share price

Just as well as NZD tumbling else farmers might be getting a bit glum

[Snoopy]

It seemed to be a discussion between Winner69 and Snoopy,where Snoopy is awaiting a reply from Winner69.


It is a forum discussion. Anyone is welcome to join in, as you have ;-)



Snoopy your last post seems to have been met by silence perhaps stunned silence. Is the WACC of 7.4% realistic?


Calculating WACC is a mechanical process based on defined input data and mathematical rules. I would class the good folks at PWC who did the calculation as highly competent. So I believe the 7.4% figure for WACC to be accurate. But your question is slightly different as you asked if 7.4% was realistic.

That 7,4% WACC for Heartland is a year old. One of the inputs into calculating this is 'share price volatility'. Between two and three years ago, the HBL share price increased from about $1.15 to $1.75. Perversely that 'volatility' (which I am sure no shareholders who held over that period would complain about) is likely to have increased the WACC of the company. Over the last year, the share price has overall gone nowhere. But with quite a large spike up and down to about $2,15 in between. So in my judgement, the share has been quite volatile over the year, even if the end result is little overall movement. In an updated calculation of WACC, I would therefore expect to show a WACC value not too different to 7.4%.

Winner is an accounting wiz. So I have little doubt that when he set me the exercise of looking at the time value of cashflows over a ten year duration for a reverse mortgage loan, he would have known what the result would be. So there would be no need for him to comment further.

I still haven't answered your point though. I personally don't like using WACC, as calculated by PWC because I don't believe that a 'suddenly increasing share price' is a risk that investors should try to avoid. So I personally would use my own judgment on what a suitable 'industry norm' 'equivalent discount factor' taking into account current market position might be. For Heartland I think it should be about 6.5%. At the current spot interest rate Reverse Mortgage charge of 7.82%, there is a difference of 1.32 percentage points. And that would not give a 'zero value' to the reverse mortgage portfolio.

SNOOPY

[davflaws]

Snoops ...

As we seem to ‘bore’ people with these conversations I’m don’t expect you to reply on this thread.

I am often totally out of my depth -but I am never "bored". Please continue to contribute

[peat]

Please continue to contribute
Absolutely, anything relevant is appreciated

[RupertBear]

I am often totally out of my depth -but I am never "bored". Please continue to contribute

My thoughts exactly. It would be boring if you guys didnt contribute, keep the posts coming as it helps us less experienced investors to learn more. :)

[percy]

. Is that how you see it Winner?

SNOOPY

That was very clear whose opinion was asked for.
Clarity would have been.is that how others see it?

[Snoopy]

Snoops ...I don’t think you can compare WACC and interest rates charged as you have done

Don’t forget the IRR on a HER loan where interest and principal is collected at the end of the loan is the same as an interest only loan (same rate and duration) where interest is collected along the way with principal collected at the end.


Ok, cutting through the 'accounting speak', if I lent some money out to an old crusty home owner at say 7.4% p.a., for ten years, would I like it better if:

1/ I got that 7.4% in interest paid back to me each year OR
2/ I got that interest paid into a bank account for ten years, then picked up all the interest in one hit at the end.

The preferable scenario is clearly 1/. However, in the case of a Heartland 'reverse mortgage agreement', the interest that you are 'not collecting' each year is itself collecting interest along the way at the same 7.4% rate. So although you are sacrificing the liquidity of your interest income for ten years, you are getting paid well for making that sacrifice. Thus in the case of a reverse mortgage agreement there ends up being no difference in the present value of the return, whether you choose scenario 1/ or 2/. And a reverse mortgage is scenario 2/.

Using a WACC 'hurdle' to evaluate the cashflows from a potential future investment, I would have thought, is fairly orthodox accounting practice. If a potential return is only equal to the WACC then that, to me, is a signal not to proceed with that investment. Or to put it even more bluntly: If Heartland were only charging 7.4% for their reverse mortgage interest cashflow and the weighted cost of capital was 7.4%, you would have to question whether the reverse mortgage interest charges properly reflected the risk from a Heartland shareholder perspective.



It seems that HER loans on average have a much longer duration than a lot of their other lending and I was wondering what you thought about the capital implications are when these loans are repaid allowing for inflation.


I imagine that over the 'long term' houses will trend up in value, living costs will trend up in value, and those who take out reverse mortgages will take out larger loans in dollar terms to fill their larger living requirement bills, All affordable because of the higher value of the houses.

I can also imagine that there are times when house prices increase a lot faster than the cost of living and there may be times of low to no house price growth even as the cost of living goes higher. In those cases, crusty homeowners may think twice about that reverse mortgage. I think it makes a difference borrowing $50,000 if your house price has just moved up by that amount in a year (psychologically you are borrowing new windfall capital that you didn't have a year previously) , verses borrowing $50,000 in a year that your house value remains the same (in this instance you are mortgaging your past hard earned nest egg.) Looked at objectively there is really no difference between the two transactions. But home owners do not always think objectively.



As we seem to ‘bore’ people with these conversations I’m don’t expect you to reply on this thread.


At least a couple have indicated that they are 'not bored', so I guess you are out voted on that Winner ;-P. If I owned Heartland shares, and reverse mortgages are highlighted as a big part of future growth, I sure as heck would think it worthwhile putting some effort into figuring out how to value them.

SNOOPY

[Snoopy]

Snoopy wrote "Is that how you see it Winner?"
That was very clear whose opinion was asked for.
Clarity would have been.is that how others see it?

Ok fair point. Other contributors views are definitely welcome, and I am sorry if I have hinted otherwise.

SNOOPY

[winner69]

Snoops

Some reckon ANZ cost of capital is about 8.5%

So one of your sentences above could read ......ANZ charging 4.5% for a residential mortgage and the weighted cost of capital was 8.5% you would have to question whether mortgage lending charges properly reflected the risk from a ANZ shareholder perspective.

As I said above you can’t really compare the two rates ..maybe in the ANZ context above you can see why.

[Snoopy]

Snoops

Some reckon ANZ cost of capital is about 8.5%

So one of your sentences above could read ......ANZ charging 4.5% for a residential mortgage and the weighted cost of capital was 8.5% you would have to question whether mortgage lending charges properly reflected the risk from a ANZ shareholder perspective.

As I said above you can’t really compare the two rates ..maybe in the ANZ context above you can see why.

O.K. so maybe I am looking at this the wrong way.

You have a whole office load of guys and gals at Seniors Finance. Someone in the Northern Territory wants a new reverse mortgage. Seniors check with their Ozzie bankers CBA to see if they will pay out the money in cash, while Seniors (Heartland) takes out a first mortgage on the house. "Sure" say CBA "$440m borrowed already, but borrowing headroom doesn't max out until $600m". "Go right ahead"

So Seniors hands over the reverse mortgage loan to our 'Crusty NT Couple'. But no more guys or gals had to be hired to do the deal. No more office space had to be rented out to do the deal. So although the Heartland WACC was 7.4%, the actual cost of writing out that new deal was a phone call and a couple of e-mails - close to zilch. And because the overheads have not increased, the difference between what CBA charge Seniors, say 4.5% and what the end line NT customer ends up paying say 7.8% - (7.8%-4,5%=) 3.3% is all 'profit' for Heartland. 3.3% profit may not sound like much. But 3.3% profit over a zero incremental asset/cost base is one heck of a return. And it doesn't take too many deals like this to really ramp up the return on the original Seniors asset base.

However, if Heartland wanted to sell Seniors to another company that did not have a finance operation, then you would have to look at things differently. In this instance you would have to look at the whole Seniors asset base as a cost centre, to be cost allocated across all the Senior's loans. So in this instance using the WACC of Heartland as an estimate to measure the efficiency of a whole business unit is valid.

Does that make sense?

SNOOPY

[percy]

NZ REL's are financed by HBL.

[winner69]

Snoops .....third paragraph good ...fourth paragraph says a prospective would look at it as a business and see if returns exceed their hurdle rate (maybe their cost of capital)

Back to Heartland it’s good they make a 11% ROE when WACC is about 7.4% eh .....excessive returns over and above their cost of capital which are rewarded in its share price being significantly above its book value.

I would hazard a guess that the HER business is one of Heartlands better ‘value creating’ bits ...but have no numbers to support that

[percy]

Snoops .....third paragraph good ...fourth paragraph says a prospective would look at it as a business and see if returns exceed their hurdle rate (maybe their cost of capital)

Back to Heartland it’s good they make a 11% ROE when WACC is about 7.4% eh .....excessive returns over and above their cost of capital which are rewarded in its share price being significantly above its book value.

I would hazard a guess that the HER business is one of Heartlands better ‘value creating’ bits ...but have no numbers to support that

It is...…………….

[Snoopy]

Hey Snoops .....with these HER loans have you ever thought of considering the time value of the cash flows of say a 10 year duration?

Could be an interesting exercise for you on a cold winters afternoon after the chores have been done


Five O'Clock and the lawn is still too wet to mow. Don't want to substitute other chores, so time to rip into Winner's exercise.

Seniors interest rate is 7.82%. It is variable but since we don't know how it will vary in the future I will keep it fixed for the purpose of this exercise. To keep the figures easy, Mr & Mrs Crusty will look to take out a $100,000 reverse mortgage loan.



Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10Total


Interest Payable$7,820$8,432$9,091$9,802$10,568$11,395$12,2 86$13,247$14,282$15,399$112,332


Time Discount FactorFace Value7.4%7.4%^27,4%^37,4%^47.4%^57.4%^67.4%^77.4%^ 87.4%^9


Time Discounted Interest$7,820$7,851$7,881$7,912$7,935$7,974$8,005 $8,037$8,068$8,099$79,582



Here is a graphic demonstration of compound interest. Mr & Mrs Crusty end up paying back $112k interest on top of the $100k that they borrowed! Or put another way each dollar they spend in their ten years of retirement costs them $2.12. Just as well the Crusty kids weren't banking on much of an inheritance then!

Now we look at the adjusted income on a per year basis: $79,582 /10 = $7,958 averaged per year.

And on loan capital of $100,000, that equates to an annual interest rate of 7.95%

And that proves, I am not sure what?

SNOOPY

[percy]

Payable $212,322 plus exit fees.
The power of compounding interest.

ps.It is not The Crusty kids' money.It is their parents.
pps.If you borrow at 4.5% and lend at 7.82% you are making nearly 74% gross .
Leaves a bit of room for a few overheads,??.Think NIM.
ppps.Better to own a bank than having money in the bank.?...lol.

[Snoopy]

Snoopy wrote "And that proves, I am not sure what?"
Payable $212,322 plus exit fees.
The power of compounding interest.


Well I got that wrong then! I had thought the answer might be "the greed of Heartlanders."

From:

https://www.stuff.co.nz/business/money/105029374/consumer-affairs-minister-kris-faafoi-reveals-plan-to-cap-loan-interest-rates

-------

Consumer Affairs Minister Kris Faafoi has unveiled proposals to cap the amount lenders can earn off loans.

Faafoi is on a mission to reduce the damage "predatory" lenders do in poorer communities, and released a consultation document with three options for capping borrowing costs.

The first, dubbed "Cap Option A" would be to limit the total accumulation of interest and fees over the life of the loan to 100 per cent of the original loan principal.

---------

Well a $212,000 payment is more that 100% of the loan principal. So could Heartland be looking at a government imposed cap on its lending arrangements?



ps.It is not The Crusty kids' money.It is their parents.


In this case it is neither the parents nor the kids money. It has become Heartland's money.



pps.If you borrow at 4.5% and lend at 7.82% you are making nearly 74% gross .
Leaves a bit of room for a few overheads,??.Think NIM.


Well 7.82 - 4.5 = 3.32 percentage points. That makes a NIM of 3.32 percentage points. But wait, Heartlands overall net interest margin was 4.34 percentage points over FY2017. So doesn't that indicate that Heartland's REL business could actually be lower margin than the other business units?

SNOOPY

[percy]

HBL do a bit of magic...….lol.

ps.TRA's NIM is over twice HBL's.

NB.TRA and HBL are the good guys.!

[Timesurfer]

[QUOTE=percy;
ps.It is not The Crusty kids' money.It is their parents.[/QUOTE]

I have to agree. It is better to use your equity than to see out your retirement in poverty.
However, you also have to consider that it doesn't neccessarily have to be Mr & Mrs Crusty eating away the equity in their forever home.

This model is also suggested to property investors with a portfolio of properties. Take the increase in equity out on one house a year to fund retirement. Assuming properties double in value every 7 years it should self fund. If the market crashes catastrophically you might want a plan B. And shares in the banking industry might not be it? Not that I am predicting that kind of global market failure.

[percy]

I have to agree. It is better to use your equity than to see out your retirement in poverty.
However, you also have to consider that it doesn't neccessarily have to be Mr & Mrs Crusty eating away the equity in their forever home.

This model is also suggested to property investors with a portfolio of properties. Take the increase in equity out on one house a year to fund retirement. Assuming properties double in value every 7 years it should self fund. If the market crashes catastrophically you might want a plan B. And shares in the banking industry might not be it? Not that I am predicting that kind of global market failure.

A few years ago SCOTTY did the same exercise, and came to the same conculsions as you.
Good analysis.

[Beagle]

Looks like it was the Australian tax loss selling that smacked it down to $1.70 last Friday. Those cunning enough to get some off our Australian friends appear to have done rather well :)

[Benny1]

Looks like it was the Australian tax loss selling that smacked it down to $1.70 last Friday. Those cunning enough to get some off our Australian friends appear to have done rather well :)

Have to try and remember that little trick for next year ! :t_up:

[Snoopy]

Looks like it was the Australian tax loss selling that smacked it down to $1.70 last Friday. Those cunning enough to get some off our Australian friends appear to have done rather well :)

Given that:

1/ Heartland is not listed in Australia AND
2/ There has been no announcement to the stock exchange on any Australian based company selling AND
3/ There appear to be no Australian based shareholders in the top 20 largest shareholders at the last balance date

I wonder how you reached the conclusion that 'Australian Tax Loss Selling' has been responsible for the drop in share price?

SNOOPY

[winner69]

HBL - Market Update

Jeff saying full year $70m after all

No ...just the date when they will announce something

Bugger

[waikare]

HBL - Market Update

Jeff saying full year $70m after all

No ...just the date when they will announce something

Bugger


For those who are wondering. Full year results released 15 August

[suse]

just recalling Heartlands commitment to diversity and maori. Just noticed this on the end of an email from ANZ today
Tō ao, na tō Ara – Kei te whakanui a ANZ i Te Ao Māori.
Your World, Your Way – ANZ is supporting all things Māori

[Beagle]

Given that:

1/ Heartland is not listed in Australia AND
2/ There has been no announcement to the stock exchange on any Australian based company selling AND
3/ There appear to be no Australian based shareholders in the top 20 largest shareholders at the last balance date

I wonder how you reached the conclusion that 'Australian Tax Loss Selling' has been responsible for the drop in share price?

SNOOPY


Certain Australian investors can claim a tax deduction for losses incurred on their share portfolio but they must be sold on or before end of financial year, (which for them is 30 June, last day of trading here 29 June). Given the shares were north of $2.10 six months ago its quite conceivable that some investors decided to crystalize their loss and claim the loss back. Its just a theory Snoopy, could just be coincidence it got smacked down to $1.70 on the last day of the financial year for Australian investors.

On a brighter note I see the American banks had a big day on Wall Street. Maybe seeing as HBL has done a fair bit of "work" in the low 170's it's built a base here and we can look forward to brighter days ahead, what with the company reporting next month ? Cheap PE stocks not exactly in vast abundance on the NZX are they !

[winner69]

Small is beautiful. ...and I’ll leave it to others to point out the wow NIM

KPMG's quarterly financial institutions performance survey showed small locally-owned banks have expanded their loan books at a faster pace than the big four Australian-owned lenders and state-owned Kiwibank, with Heartland, SBS Bank, and TSB all logging double-digit expansion in the year through March.

(From sharechat)

[percy]

Small is beautiful. ...and I’ll leave it to others to point out the wow NIM

KPMG's quarterly financial institutions performance survey showed small locally-owned banks have expanded their loan books at a faster pace than the big four Australian-owned lenders and state-owned Kiwibank, with Heartland, SBS Bank, and TSB all logging double-digit expansion in the year through March.

(From sharechat)

Yes WOW indeed for HBL's NIM.

[Beagle]

Small is beautiful. ...and I’ll leave it to others to point out the wow NIM

KPMG's quarterly financial institutions performance survey showed small locally-owned banks have expanded their loan books at a faster pace than the big four Australian-owned lenders and state-owned Kiwibank, with Heartland, SBS Bank, and TSB all logging double-digit expansion in the year through March.

(From sharechat)

Have you got a link mate ?

[winner69]

Have you got a link mate ?

https://assets.kpmg.com/content/dam/kpmg/nz/pdf/July/FIPS-March-2018-Quarterly.pdf

[percy]

https://assets.kpmg.com/content/dam/kpmg/nz/pdf/July/FIPS-March-2018-Quarterly.pdf

Thanks for the link.
I spent a lot of time trying to find it,without success.
Good to see HBL's strong organic growth continues.

[winner69]

Thanks for the link.
I spent a lot of time trying to find it,without success.
Good to see HBL's strong organic growth continues.

Their ‘filing system’ a bit obtuse percy ....don’t blame you for not finding

I had to ask a mate who works for them for the link and even he went hmmm

[Beagle]

Thanks Winner. My goodness that impressive growth in the loan book and net interest margin growth is awesome too ! Organic growth is tremendous, no nitrogen or acquisitions required :)

[freddagg]

So net profit will be $67 million?

[winner69]

So net profit will be $67 million?

No...a bit more but not quite $70m

Leaving some for a rainy day as they say in the trade

[Beagle]

So..what final dividend are we expecting folks ?

[percy]

Thanks Winner. My goodness that impressive growth in the loan book and net interest margin growth is awesome too ! Organic growth is tremendous, no nitrogen or acquisitions required :)

The continuing strong organic growth makes me wonder about UDC, and how interested HBL are in it.Yes it would be a great fit,but I really think it would have to be on HBL's terms,in which case ANZ would be better to float,hold,or sell it to someone else.
When this year's result is announced in a few weeks time, we must remember HBL went through 2 months of share hell getting their new systems running properly.Was main reason for the increase in impairments.Jeff Greenslade called it an own goal,so that being corrected,[I think it has] and their out look commentary will be very important,for us to try and project future earnings/ratios,and dividends.

[peat]

they would appear to be in the lead for containing costs as well

[freddagg]

So..what final dividend are we expecting folks ?

6 cents - for sure

[pierre]

they would appear to be in the lead for containing costs as well

...and for increasing fee income. They are now whacking me $40 for a same day cleared funds transfer from my company's Business Call account that they used to do for nothing.

I could transfer all the funds required myself if it wasn't for their self-imposed $$ transfer limit that requires me to phone or email them to get the job done.

Feels a bit like operating in the dark ages.

I've moaned and requested a limit increase - but no response. That was only 17 days ago, so guess there's still time before this month's trnsfer is required.

[777]

I have a call account (not the business one) and can transfer as much as I want with no fees.

[winner69]

6 cents - for sure

Yes 6 cents for sure

Even with all those new shares issued (44 million of them)

[Beagle]

Yes 6 cents for sure



That will of course be fully imputed so 6 / 0.72 = 8.3333 cents gross which is just on 4.9% return back within a couple of months. My goodness you'd have to have your money in their 2.75% call account for nearly 2 years to get that sort of return ! An important reminder to ensure which side of the ledger one's money is deposited on :)
Then there's the distinct possibility that this is headed back to $2 next year :t_up:

[Ggcc]

I have a call account (not the business one) and can transfer as much as I want with no fees.
General consumers don’t pay many fees. The banks make most of their profits from businesses. Same as councils, telephones companies, sky television if you use it. Electricity.. the list goes on.... of course maybe not for Heartland

[Bobdn]

That will of course be fully imputed so 6 / 0.72 = 8.3333 cents gross which is just on 4.9% return back within a couple of months. My goodness you'd have to have your money in their 2.75% call account for nearly 2 years to get that sort of return ! An important reminder to ensure which side of the ledger one's money is deposited on :)
Then there's the distinct possibility that this is headed back to $2 next year :t_up:

So much enthusiasm for this stock and yet, out of the 15 individual stocks I own, this is the only one in the red today. Still as Meatloaf used to sing 14/15 ain't bad.

https://www.youtube.com/watch?v=k5hWWe-ts2s

[Beagle]

So much enthusiasm for this stock and yet, out of the 15 individual stocks I own, this is the only one in the red today. Still as Meatloaf used to sing 14/15 ain't bad.

https://www.youtube.com/watch?v=k5hWWe-ts2s

Shouldn't look a gift horse in the mouth...so they say.... so I didn't, I topped up some more at $1.71.

[Bobdn]

I got back in at 1.77 a few weeks back. I sold awhile back at 1.50 odd and used the proceeds to buy AIR at 2.19 to get that monster dividend. Still have that Air holding.

All a bit swings and round about. Worked out ok overall (at this stage :)

[Beagle]

I got back in at 1.77 a few weeks back. I sold awhile back at 1.50 odd and used the proceeds to buy AIR at 2.19 to get that monster dividend. Still have that Air holding.

All a bit swings and round about. Worked out ok overall (at this stage :)

Ahhhh yesss...was a while ago but I remember that monster 35 cent dividend feed rather fondly...they say Beagles have a liking for monster glutinous feeds and they're not wrong lol...always living in hope of "nothing sweeter than a repeater"

[winner69]

Whole Milk Powder up in overnight auction

That’s good

[oldtech]

Shouldn't look a gift horse in the mouth...so they say.... so I didn't, I topped up some more at $1.71.

Interesting, and thanks for sharing. I must admit, I've been watching the chart since February and wondering whether to sell while it's dropping, hoping to buy back in. Only thing is, usually when I do that it's far too late and the SP immediately rockets skywards.

I am ashamed to admit, I don't have a stop loss set for this share. Still in the green though :)

[janner]

[QUOTE=oldtech;721813

I am ashamed to admit, I don't have a stop loss set for this share. Still in the green though :)[/QUOTE]

Why be ashamed ???.. Regrets you will have many... As we all do.... My HBL shares are WELL into the green.

As are more than a few others who have placed this one into the bottom drawer.

DYOR. :-)))

[King1212]

anyone cares to share why the sp tumble from high $2.14? Sorry, I have not been following it the last couple months.

[winner69]

anyone cares to share why the sp tumble from high $2.14? Sorry, I have not been following it the last couple months.

The share price just got too far ahead of itself and has drifted (not really tumbled) back to a more reasonable price (more reasonable valuation multiples)

There was a suggestion hbl got caught up in the relating down of Oz banks ..maybe so but most Oz banks have recovered a bit but hbl not followed suit

Nothing to do with hbl performance ...that’s still going gangbusters

[ziggy415]

The share price just got too far ahead of itself and has drifted (not really tumbled) back to a more reasonable price (more reasonable valuation multiples)

There was a suggestion hbl got caught up in the relating down of Oz banks ..maybe so but most Oz banks have recovered a bit but hbl not followed suit

Nothing to do with hbl performance ...that’s still going gangbusters
I do wonder if it's the udc uncertainty.....if heartland does a deal there will be a cash raising and if floated people will want to swap some of heartland to udc...outcome can't be far away

[ziggy415]

I do wonder if it's the udc uncertainty.....if heartland does a deal there will be a cash raising and if floated people will want to swap some of heartland to udc...outcome can't be far away
2nd thoughts maybe turners will be affected more than heartland if udc floats....same sort of area maybe...and turners seem to be doing ok

[King1212]

The share price just got too far ahead of itself and has drifted (not really tumbled) back to a more reasonable price (more reasonable valuation multiples)

There was a suggestion hbl got caught up in the relating down of Oz banks ..maybe so but most Oz banks have recovered a bit but hbl not followed suit

Nothing to do with hbl performance ...that’s still going gangbusters




Thanks winner!! what do u think is the reasonable price??

[Snoopy]

The promised capital note issue never happened. So once again this calculation is straightforward with all 'Tier 1 and Tier 2 capital' being shareholder equity.

Total Heartland Equity at balance date was $498.341m,

Total Heartland liabilities at balance date were $3,048.840m

So: Equity / Total Liabilities
= $498.341m / $3,048.840m = 16.3% < 17% (*)

Result: FAIL TEST

Note that I have changed my equity target for Heartland to the 17% equity (down from my 20% target) that Heartland had when Governor Wheeler originally approved Heartland as a bank. I had previously used 20% as the figure appropriate for a more marginal finance company without a strong history. Even so, Heartland has did not have the amount of equity on the books to support a loan book of the current size in my judgement. However the December 2016 equity raising has no doubt addressed this issue for now.

The historical picture of this ratio is tabulated below.



FY2012FY2013FY2014FY2015FY2016Target

[
Total Tier Capital/ Loan Book19.3%17.7%17.6%16.6%16.4%>17%





In April 2017, Heartland had a subordinated capital note issue of $A20m. Approximately 72% of the face value of the Notes will be recognised as Tier 2 Capital by our banking regulators. So we must add the 'Tier 1 capital' (being shareholder equity) to 72% of the 'Tier 2 capital' to obtain the total recognised 'tier' capital for liquidity purposes



Total Heartland Equity at balance date was$569.595m, PLUS


Tier 2 capital as apportioned$14.975m EQUALS


Total Tier Capital $584.570m



Total Heartland liabilities at balance date were $3,465.076m

So: Equity / Total Liabilities
= $584.570m / $3,465.076m = 16.9% < 17% (*)

Result: PASS TEST

I have been a little generous in 'passing' Heartland here, because I am not convinced that using 'only' 72% of the Tier 2 capital is justified (if 100% of Tier 2 capital was used the 17% pass figure would be achieved). I have also included 'intangible assets' as equity. This is because a financial institution is 'punished' for spending on having up to date computer software (software is an intangible asset), when I see up to date software as a really good idea in keeping track of troublesome loans. Nevertheless, whether you agree with my reasoning or not, no one can dispute that Heartland was in a better loan security position at EOFY2017, than at the end of the previous two financial years.

{Note that I have changed my equity target for Heartland to the 17% equity (down from my 20% target) that Heartland had when Governor Wheeler originally approved Heartland as a bank. I had previously used 20% as the figure appropriate for a more marginal finance company without a strong history.}

The historical picture of this ratio is tabulated below.



FY2012FY2013FY2014FY2015FY2016FY2017Target

[
Total Tier Capital/ Loan Book19.3%17.7%17.6%16.6%16.4%16.9%>17%



SNOOPY

[Snoopy]

In April 2017, Heartland had a subordinated capital note issue of $A20m. Approximately 72% of the face value of the Notes will be recognised as Tier 2 Capital by our banking regulators. So we must add the 'Tier 1 capital' (being shareholder equity) to 72% of the 'Tier 2 capital' to obtain the total recognised 'tier' capital for liquidity purposes

<snip>

I am not convinced that using 'only' 72% of the Tier 2 capital is justified (if 100% of Tier 2 capital was used the 17% pass figure would be achieved).


I got a sudden brain zonc during the day. Tax will be due on this subordinated capital note. The note lasts for ten years. So there will be quite a large tax bill to pay over the existence of the bond. And if Heartland were to get into capital strife, the IRD would likely get first dibs at recovering their money ahead of other creditors. The current NZ tax rate is 28%, which leaves 72% of what is left to be divvied up amongst other creditors. Could that be the reason that only 72% of this 'Tier 2' subordinated capital note issue may be counted as 'capital' for bank capital stability purposes?

SNOOPY

[Snoopy]

Updating for the full year result FY2016:

The EBIT figure is not in the financial statements. So I will use 'interest income' as an indicator for EBIT, once I have taken out the selling and administration costs

EBIT (high estimate) = $265.475m - $68.872m= $196.603m

Interest expense is listed as $118.815m.

So (EBIT)/(Interest Expense)= ($196.603m)/($118.815)= 1.65 > 1.20

Result: PASS TEST

The historical picture of this ratio is tabulated below. Despite the shakey start, the trend is very pleasing.



FY2012FY2013FY2014FY2015FY2016Target

[
EBIT/ Interest Expense1.151.221.441.521.65>1.2





Updating for the full year result FY2017:

The EBIT figure is not in the financial statements. So I will use 'interest income' as an indicator for EBIT, once I have taken out the selling and administration costs

EBIT (high estimate) = $278.279m - $71.684m= $206.595m

Interest expense is listed as $115.169m.

So (EBIT)/(Interest Expense)= ($206.595m)/($115.169m)= 1.79 > 1.20

Result: PASS TEST

The historical picture of this ratio is tabulated below. Despite the shakey start, the trend remains very pleasing.



FY2012FY2013FY2014FY2015FY2016FY2017Target

[
EBIT/ Interest Expense1.151.221.441.521.651.79
>1.2



SNOOPY

[Snoopy]

The underlying debt of the company (debentures and other loan supporting borrowings removed) is the first factor in an attempt to assess the underlying shareholder owned skeleton upon which all the recivables that are loaned ultimately sit.

According to the full year (FY2016) statement of financial position the debt excluding borrowings is:

$42.099m + $6.754m = $48.853m (1)

-----

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the 'Investment Properties' (the rump of the problem property portfolio) and the unspecified 'Investments' (held on behalf of policy beneficiaries) from that total:

$3,571.181m - ($3,113.957m +$8.384mm + $236.435m) = $188.405m (2)

We are then asked to remove the intangible assets from the equation as well:

$188.405m - $57.755m = $130.650m

----


Now we have the information needed to calculate the 'underlying company debt' (skeletal picture) net of all Heartland's lending activities:

$48.853m/$130.650m= 37.4% < 90%

Result: PASS TEST

The historical picture of this ratio is tabulated below.



FY2012FY2013FY2014FY2015FY2016Target

[
Underlying Gearing Ratio20.2%14.7%40.5%58.4%37.4%< 90%





The underlying debt of the company (debentures and other loan supporting borrowings removed) is the first factor in an attempt to assess the underlying shareholder owned skeleton upon which all the receivables that are loaned ultimately sit.

According to the full year (FY2017) statement of financial position the debt excluding borrowings is:

$25.479m + $9.856m = $35.335m (1)

-----

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the 'Investment Properties' (the rump of the problem property portfolio) and the unspecified 'Investments' (held on behalf of policy beneficiaries) from that total:

$4.034.671m - ($3,545.897m +$4.909m + $318.698m) = $165.167m (2)

We are then asked to remove the intangible assets from the equation as well:

$165.167m - $71.237m = $93.930m

----


Now we have the information needed to calculate the 'underlying company debt' (skeletal picture) net of all Heartland's lending activities:

$35.335m/$93.930m= 37.6% < 90%

Result: PASS TEST

The historical picture of this ratio is tabulated below.



FY2012FY2013FY2014FY2015FY2016FY2017Target

[
Underlying Gearing Ratio20.2%14.7%40.5%58.4%37.4%37.6%< 90%



SNOOPY

[Snoopy]

Updating this number for the full year FY2016. The equity ratio is an assessment of the balance sheet risk of the total company, with all finance receivables and the supporting borrowings (whether they be from debenture holders or parent supporting banks) included.

Equity Ratio = (Total Equity)/(Total Assets)

Using numbers from the Heartland AR2016

= $498.341m/ $3547.181m = 14.1%

The customer loan base has once again increased a little faster than the company equity. This means the balance sheet is being worked a little harder. This isn't a problem if the risk of loans becoming distressed is going down.

The significant increase in share capital over the year was therefore from (reference "Statement of Changes in Equity")



1/ Retained Earnings: $49.108m - $37.690m = $11.418m


2/ Dividend Reinvestment Plan: $7.300m


3/ Share Based Payments to staff: $1.888m


4/ Treasury Shares Bought: $2.390m


Total $22.996m



This is a reduction in the new capital generated within the existing Heartland in FY2015 ($27.503m)


The historical picture of this ratio is tabulated below.




FY2012FY2013FY2014FY2015FY2016Target

[
Equity Ratio16.0%14.6%15.0%14.3%14.1% -





Updating this number for the full year FY2017. The equity ratio is an assessment of the balance sheet risk of the total company, with all finance receivables and the supporting borrowings (whether they be from debenture holders or parent supporting banks) included.

Equity Ratio = (Total Equity)/(Total Assets)

Using numbers from the Heartland AR2017

= $569.595m/ $4034.671m = 14.1%

The customer loan base year on year has once again increased a little faster than the company equity (+14.4%). This means the balance sheet is being worked a little harder. This isn't a problem if the risk of loans becoming distressed is going down.

The significant increase in share capital over the year was therefore from (reference "Statement of Changes in Equity")



1/ Retained Earnings: $62.240m - $41.977m = $20.263m


2/ Dividend Reinvestment Plan: $10.590m


3/ Share Based Payments to staff: $1.053m


4/ Issue of Share Capital: $40.003m - $0.655m = $39.348m


Total $71.254m



This is a big increase on the 'new capital generated within the existing Heartland in FY2016' ($22.996m), with most of that increase accounted for in the capital raising undertaken over the year.

The historical picture of this ratio is tabulated below.




FY2012FY2013FY2014FY2015FY2016FY2017
Target

[
Equity Ratio16.0%14.6%15.0%14.3%14.1%14.1%
-



SNOOPY

[Snoopy]

I have spat out quite a few numbers over the last few days. Now I am going to try and 'bring it all together' with no numbers.

No one wants to invest in a financial institution that isn't sound. The Reserve Bank of New Zealand set their own standards that any financial institution operating in New Zealand must have to keep to. In particular the amount of equity that must be held 'on the books' to stand behind the loan portfolio is specified. However, as an investor, I do not consider the reserve bank capital adequacy requirements for second tier financial institutions to be good enough. To me a much more worthwhile standard is what a top tier bank would require to loan to a second tier finance institution (i.e. a lending organization with 'skin in the game'). The top tier banks don't widely publicise what this figure might be. Suffice to say it is well above reserve bank minimum requirements though.

Irrespective of all this, investors can see that Heartland management hold their own Total Tier Capital/ Loan Book relatively steady, and well above reserve bank minimum requirements.

Not all loans are equally profitable. One measure of 'underlying loan profitability' is to compare the institutions cash incomings with interest payment outgoings. If there wasn't a decent amount of net positive cash headroom between these two cash streams, then the profitability of the whole operation would come into question, no matter how adequate the capital base of the company appears to be at any snapshot in time.

The next risk for the unsuspecting investor is the 'house of cards' finance company. This is something that appears at face value to have sufficient capital on hand and has a good profit margin. But much of the underlying source of funds has come from a third source, like company debenture holders. If the debenture holders timing for return of their cash does not match the cash repayment profile of the loans those debentures support then the financial institution could run out of cash. A innate financial strength independent of the loan book is needed to minimise this possibility.

Finally the 'equity ratio' is normally closely related to measuring the robustness of the loan book. But it encompasses all other borrowing arrangements, that contribute to the capital structure of the financial group.

To summarize, in my assessment, the fundamental underlying strength of Heartland has never been sounder, to the extent that I could even see myself on the share register at some point in the future (!). My stumbling point right now remains price. Where the share trades on the market today, I judge it to be at the upper end of full valuation. Granted it is probably no more overvalued than half the shares on the NZX main index. But I have never done well by buying overvalued assets, and truth be told I am not stocking up on those other NZX main index companies either.

SNOOPY

[Valuegrowth]

We find some valuable information here. Thank you. We have to study why some financial institutions had to bail out or went into receiverships in the past? I myself had some bad experience in the sector. Some financial institutions went into receivership mainly as a result of overexposure to the property sector. By going by their business model, HBL doesn't look like a failed institution.

[winner69]

Maybe I’m the zonc but I don’t get this bit at all — I got a sudden brain zonc during the day. Tax will be due on this subordinated capital note.

[percy]

Maybe I’m the zonc but I don’t get this bit at all — I got a sudden brain zonc during the day. Tax will be due on this subordinated capital note.

Please note I have not entered this conversation...Zonc'd too.!!!!.....lol.
I will leave it to you W69, to explain the fact of life on companies deducting interest payments on loans as an expense,and having to repay loans in full,otherwise people will think I am picking on him.!!

[Snow Leopard]

For I have trod the lands of Qomolangma.
I have bowed in awe at the departing red of the last glorious sunset,
and been reborn with the arrival of the cold crystal light of the first sunrise.
The sleeping Paper Tiger awoke renewed as the Snow Leopard.
I became one with the magnificence and beauty of life.
I hear the Om.

But all such fades into the deepest of shadows cast by a transformation such as this:


....To summarize, in my assessment, the fundamental underlying strength of Heartland has never been sounder, to the extent that I could even see myself on the share register at some point in the future (!)....

To have achieved the ultimate state of brain zonc after so many years of dedicated study!

Like Wow!

[RupertBear]

For I have trod the lands of Qomolangma.
I have bowed in awe at the departing red of the last glorious sunset,
and been reborn with the arrival of the cold crystal light of the first sunrise.
The sleeping Paper Tiger awoke renewed as the Snow Leopard.
I became one with the magnificence and beauty of life.
I hear the Om.

But all such fades into the deepest of shadows cast by a transformation such as this:



To have achieved the ultimate state of brain zonc after so many years of dedicated study!

Like Wow!

Welcome Snow Leopard I have often wondered what happened to the eclectic Paper Tiger. It sounds like you have been on an interesting journey and I look forward to reading your enlightened posts. :)