HGH - Heartland Group Holdings

[Fred_Rubble]

ANZ NZ has come out and said they will need additional $ 6-8 BILLION to meet the new capital requirements. BNZ, Westpac and ASB have all said they need large numbers. All the aforementioned, as well as Kiwibank, have said there is no question mortgage and other lending rates need to go up.
Lets see if the Reserve Bank actually goes ahead with this. Can't imagine the Government being excited about it.

Interesting times as we move towards a period of rising interest rates and reducing credit availability all the whilst central bank interest rates remain at all time lows with their hands tied in this regard. When both begin moving up......

[minimoke]

Interesting times as we move towards a period of rising interest rates and reducing credit availability all the whilst central bank interest rates remain at all time lows with their hands tied in this regard. When both begin moving up......
Interesting times indeed. I think HGH REL holders wil be in an OK position They wil be capital rich and can afford any increase in interest rates and they will still have access to a REL due to HGH's low equity requirement.

The people I am very concerned about are those that bought property with a bank mortgage when the market was at a high. Taking a flattening / reducing property market will push people closer to negative equity. Add in increased costs of servicing that debt - well things are potentially going to get very ugly.

[alex f]

The Aussie house market is down 10% which is worrying

At the moment it is only a consultation paper seeking out public views on proposal to increase min level of regulatory capital.
Cut off end of March, so the uncertainty will drag on for months.

[percy]

The Aussie house market is down 10% which is worrying

Yes for Australian Banks who are heavily exposed to residential and commercial property lending.
No affect for HGH's Australian REL lending.

[minimoke]

Yes for Australian Banks who are heavily exposed to residential and commercial property lending.
No affect for HGH's Australian REL lending.Yup!. HGH have a huge amount of equity fat in their REL's. 10% drop is neither here not there to them

(Disc HGH just avoiding my stoploss trigger)

[percy]

I said I would not buy any more HGH.
However, I changed my mind and brought a few more for myself as a Christmas present today.
Only present I know that will keep paying me fully imputed divies,and if a couple of brokers' forecasts are right, they will be increasing divies.!

[Baa_Baa]

Yes for Australian Banks who are heavily exposed to residential and commercial property lending.
No affect for HGH's Australian REL lending.

Can you explain why there is "no affect" [sic], i.e. nothing zip nada effect, on HGH REL lending regardless of the market valuations on the property that the punters converting to REL are exposed to? I think you're pushing the boat out a bit far here, but still keen to understand why you think that the market valuations of ones residential property have no effect on a conversion to a REL.

[percy]

Can you explain why there is "no affect" [sic], i.e. nothing zip nada effect, on HGH REL lending regardless of the market valuations on the property that the punters converting to REL are exposed to? I think you're pushing the boat out a bit far here, but still keen to understand why you think that the market valuations of ones residential property have no effect on a conversion to a REL.

Read HGH's 19th November announcement; Heartland Investor Day Presentation."Reverse Mortgages"
Then should you disagree with my "no affect" comment, I think we will have to agree to disagree.

[Baa_Baa]

Read HGH's 19th November announcement; Heartland Investor Day Presentation."Reverse Mortgages"
Then should you disagree with my "no affect" comment, I think we will have to agree to disagree.

Thank you, I will read that, again, maybe I missed something important. It doesn't stand to reason that a bank would disregard a property's market valuation when considering how much they would lend on the said property.

[minimoke]

I said I would not buy any more HGH.
However, I changed my mind and brought a few more for myself as a Christmas present today.
!Cant go wrong with that. Even a pair of socks would wear out in a couple of years and you would have nothing to show for your gift. (I treated myself to a santa sack load of OCA)

[percy]

Cant go wrong with that. Even a pair of socks would wear out in a couple of years and you would have nothing to show for your gift. (I treated myself to a santa sack load of OCA)

OCA.Best retirement sector divie yield,and a nice home for you when you wear out.!..lol.

[percy]

Thank you, I will read that, again, maybe I missed something important. It doesn't stand to reason that a bank would disregard a property's market valuation when considering how much they would lend on the said property.

Big difference between lending 80% to 90% of a property's valuation and 12% to 40%.

Remember the story about the difference between being committed and being involved.?

A pig and a chicken were walking along the road early one sunny morning,when they came upon a cafe.

The chicken said to the pig "lets go and have breakfast of bacon and eggs".

The pig said no,"for you,you are only involved ,yet for me it is a commitment."
I like to think HGH are" involved "in the Australian property market,while the Australian Banks are "committed".

[winner69]

These guys should come and see Heartland and share ideas


Transforming a Traditional Bank into an Agile Market Leader

https://www.strategy-business.com/article/Transforming-a-Traditional-Bank-into-an-Agile-Market-Leader?gko=0fb33&utm_source=itw&utm_medium=20181220&utm_campaign=resp

[Beagle]

Big difference between lending 80% to 90% of a property's valuation and 12% to 40%.

Remember the story about the difference between being committed and being involved.?

A pig and a chicken were walking along the road early one sunny morning,when they came upon a cafe.

The chicken said to the pig "lets go and have breakfast of bacon and eggs".

The pig said no,"for you,you are only involved ,yet for me it is a commitment."
I like to think HGH are" involved "in the Australian property market,while the Australian Banks are "committed".

lol, good story. Unfortunately if we head into a recession I believe all financials will get tarred with the same brush.

[BlackPeter]

lol, good story. Unfortunately if we head into a recession I believe all financials will get tarred with the same brush.

True - however ... some will survive and others may not ...

Despite a risk for all financial institutions to drop in price - it still might be better to own the ones which do survive.

[percy]

Shares with directors with a lot of skin on the line, good management,a strong balance sheet, and the capacity to grow dividends always recover the quickest from any recession.
You do your research, and are sure your portfolio will survive any stress test,but you never know if you are right or not until the recession is over.

[percy]

I will be sorry to see CFO David Mackell leave Heartland.Very competent, easy to talk to person,as was his predecessor Simon Owen.

[peat]

I will be sorry to see CFO David Mackell leave Heartland.Very competent, easy to talk to person,as was his predecessor Simon Owen.
Yeh I worked with him a long time ago at Air NZ. He was a whizz on the spreadsheet I can assure you. So he was at AIR for decades and yet leaves Heartland after a year? Hmmm
A slight concern from my view but equally could be nothing.

[winner69]

Yeh I worked with him a long time ago at Air NZ. He was a whizz on the spreadsheet I can assure you. So he was at AIR for decades and yet leaves Heartland after a year? Hmmm
A slight concern from my view but equally could be nothing.

Where’s he off to — another listed company they say

[Beagle]

Wouldn't surprise me if Chris made him an offer he can't refuse.

[percy]

I think you are right.I would not be surprised either.

[percy]

Well I am very surprised he is moving from HGH, with a market cap of near $768mil, to NZM with a market cap of near $100mil. ?

[trader_jackson]

Well I am very surprised he is moving from HGH, with a market cap of near $768mil, to NZM with a market cap of near $100mil. ?

NZM will pay him the big(er) bucks I reckon... they need to try turn that slowly sinking ship around
New challenge for David etc... maybe the bank job isn't all that he thought it would be

[peat]

NZM will pay him the big(er) bucks I reckon... they need to try turn that slowly sinking ship around
New challenge for David etc... maybe the bank job isn't all that he thought it would be

I'm not sure if hes a strategist or simply a good bean counter.

[winner69]

"Heartland will consider its on-going requirements, particularly in light of the recent corporate restructure, and will provide a further market update prior to David’s departure.

That's code Jeff uses to say he is going to start empire building .....probably a Group Finance person with a CFO for both both the Bank and Australia reporting to him. Sounds like more expenses to me

[percy]

"Heartland will consider its on-going requirements, particularly in light of the recent corporate restructure, and will provide a further market update prior to David’s departure.

That's code Jeff uses to say he is going to start empire building .....probably a Group Finance person with a CFO for both both the Bank and Australia reporting to him. Sounds like more expenses to me

Sounds to me as though Jeff is laying the foundations to deliver on the growth opportunities, avaliable to HGH in both NZ and Australia.
Bring it on.

[Baa_Baa]

From $2.14 high to this YE close $1.36 is a big disappointment. Stuff the dividends, it'd be years to recover that degree of capital losses. Shows how with ramping and ceaseless promotion, that a share can get way ahead of itself and upset a lot of punters for a long time when sensibility creeps back in. God help HGH if the market Bear truely takes hold, all I can say is you'll need a strong stomach if you're holding and impeccable timing to find and get a fill at the lows, wherever that ends up being.

[percy]

I respect the directors and management of HGH more than Sharetrader posters,as they have very large personnel holdings,and each have proven successful business records.
None of them have sold any of their shares.
HGH have a record of achieving what they say they will do.They are taking advantage of the opportunities that are avaliable to them.
I still retain my view of HGH as a high conviction stock.It is my second largest holding.
I will refrain from making a decission to hold,sell or buy more until HGH's interim report is released in early Feburary,however I am expecting a solid result with a positive outlook..

disc.I brought a few more last week,as a Christmas present for myself..

[couta1]

I respect the directors and management of HGH more than Sharetrader posters,as they have very large personnel holdings,and each have proven successful business records.
None of them have sold any of their shares.
HGH have a record of achieving what they say they will do.They are taking advantage of the opportunities that are avaliable to them.
I still retain my view of HGH as a high conviction stock.It is my second largest holding.
I will refrain from making a decission to hold,sell or buy more until HGH's interim report is released in early Feburary,however I am expecting a solid result with a positive outlook..

disc.I brought a few more last week. I'm thinking both HGH and TRA will be good candidates for the 2019 stock picking comp, dash I've let the cat out of the bag now.

[Beagle]

I'm thinking both HGH and TRA will be good candidates for the 2019 stock picking comp, dash I've let the cat out of the bag now.

Neither are defensive in a bear market so to pick then one needs to assume either the bear isn't coming here or these companies are special and immune to a bear market, (nothing about their SP performance in 2018 provides evidence of the latter in my opinion). If they could just stop going down and pay their dividends for 2019 that would be a good start. (Still hold some HGH)

[couta1]

Neither are defensive in a bear market so to pick then one needs to assume either the bear isn't coming here or these companies are special and immune to a bear market, (nothing about their SP performance in 2018 provides evidence of the latter in my opinion). If they could just stop going down and pay their dividends for 2019 that would be a good start. (Still hold some HGH) Well they are in my picks and it looks like there are a few behind me in this years comp so let's see.

[Beagle]

Well they are in my picks and it looks like there are a few behind me in this years comp so let's see.

You got there by not having them in your 2018 picks competition. You must be working on the principle that every dog has its day :D
I wouldn't mind having a few bob that one of your other picks is OCA :)
Merry Christmas mate.

[winner69]

I'm thinking both HGH and TRA will be good candidates for the 2019 stock picking comp, dash I've let the cat out of the bag now.

Just like Dogs of the Dow the Dogs of the NZX sometimes a good strategy but more often than not tend to underperform (as a group). Losers often remain losers

Dogs of the NZX were in the bottom 10 in the 2017 competition

Both down nearly 30% this year .....couldn’t repeat that could they ...you never know

[Beagle]

Vehicle retailers and manufactures generally speaking had their share prices brutalised in the GFC...people simply fix the vehicle they have as and when necessary in really tough times. The other thing is a lot more loans go bad so Turners cop it from both directions whereas at least with HGH more and more people borrow money even at higher interest rates in the hope of getting by so at least HGH get more business to help with their significantly increased loan delinquencies. Dog's can be dog's two years in a row, even three.

GE a classic example...that was a real dog of the DOW in 2017 (down from $31.60 to $17.45) and anyone who bought that at $17.45 as part of their dog's of the Dow strategy for 2018 was been well bitten with it now down to $6.92, a 60% loss in 2018 after nearly halving the year before ! Couldn't happen on the NZX though...or could it...

Financials and vehicle companies are not defensive sectors.

[percy]

HGH's Marac downfall was property development loans.The rest of Marac's business traded well through GFC.
Turners had one bad year in 2008 and a huge profit in 2009.
Neither had any abnormal vehicle loan problems.
Both companies have strengthened their business model since GFC,and will trade well in any slowdown.
I expect HGH's REL business to keep going gangbusters.A matter of the right product at the right time.Pleasing they have secured funding for the next four years from CBA."Committed [think about the pig and the chicken.lol.]warehouse facility to 30th September 2022."

[Ggcc]

HGH's Marac downfall was property development loans.The rest of Marac's business traded well through GFC.
Turners had one bad year in 2008 and a huge profit in 2009.
Neither had any abnormal vehicle loan problems.
Both companies have strengthened their business model since GFC,and will trade well in any slowdown.
I expect HGH's REL business to keep going gangbusters.A matter of the right product at the right time.Pleasing they have secured funding for the next four years from CBA."Committed [think about the pig and the chicken.lol.]warehouse facility to 30th September 2022."
Nice quote and completely agree. looking at topping up on this gem in the new year.

[trader_jackson]

Couldn't find heartland in any of the big wig brokers picks
Perhaps more surprising, is I found AFT and ARV

[oldtech]

$1.33 ... sheesh, this is now exactly at the level where I first bought into HBL just over three years ago. Sold out during October/November, I might just be tempted to get back in at these levels once the tide turns.

[couta1]

$1.33 ... sheesh, this is now exactly at the level where I first bought into HBL just over three years ago. Sold out during October/November, I might just be tempted to get back in at these levels once the tide turns. Hard to believe where the price has dropped to, I'm sitting on some serious paper losses with this and TRA, were talking a serious Bear attack here not a little tickle up Beagle just experienced with KMD.

[trader_jackson]

$1.32, crazy stuff... and I thought $1.50 was cheap... Gross dividend yield nearing 10% now
They need to come out with some sort of announcement reaffirming profit guidance, surely can't go below $1.30
A good few cents below that dog on the asx flexigroup - now that when you know its bad

[winner69]

A very good result coming out in 4 to 5 weeks so no worries long term

The expected rerating down because of the ‘riskier’ group structure continues

[100101]

I also have a paper loss - but $1.33 was so attractive that I pinged off some STU at a loss and popped the HGH order in @ $1.33.
4:00 pm came and and the last order seemed to go through @ $1.34.
Blow me at 5:00pm I get an email confirming the buy at $1.32
Strange but it pays the brokerage.

Yes looking forward to some reaffirmation of guidance.

[trader_jackson]

A very good result coming out in 4 to 5 weeks so no worries long term

The expected rerating down because of the ‘riskier’ group structure continues

I thought the group structure thing was meant to put HGH on a higher PE? as they can grow faster now without as much pesky regulations etc

[percy]

Hard to believe where the price has dropped to, I'm sitting on some serious paper losses with this and TRA, were talking a serious Bear attack here not a little tickle up Beagle just experienced with KMD.

The market either knows something I don't, or the market fears something I don't.
HGH's half year result announcement is due early February,and should confirm my confidence "all is on track".
TRA's divie is due at the end of this month.No sure when their next update will be..

[Beagle]

Fear of the bear.

[percy]

Funny HGH sp went down, as milk prices went up.????? ....lol.
Must prove people fear "The Bear" more than they love "The Cow."...??????????????

[winner69]

Funny HGH sp went down, as milk prices went up.????? ....lol.
Must prove people fear "The Bear" more than they love "The Cow."...??????????????

Dairy prices went up like HGH share price went up a few weeks ago ....probably means dairy prices will fall over next month

It’s the trend that matters

[percy]

Dairy prices went up like HGH share price went up a few weeks ago ....probably means dairy prices will fall over next month

It’s the trend that matters

Not for long term share holders,including directors and management with substantial holdings.
It is HGH's fundamentals and outlook.

[winner69]

Not for long term share holders,including directors and management with substantial holdings.
It is HGH's fundamentals and outlook.

And those fundamentals and outlook are really solid ...no worries here

[winner69]

$1.32, crazy stuff... and I thought $1.50 was cheap... Gross dividend yield nearing 10% now
They need to come out with some sort of announcement reaffirming profit guidance, surely can't go below $1.30
A good few cents below that dog on the asx flexigroup - now that when you know its bad

Heartland getting the flexi disease since becaming an Aussie company has been painful.

Market shows no respect for dodgy Aussie finance companies eh ....wonder if there’s a cure

[percy]

The cure is continuing solid earnings.Always has been.

[Balance]

The cure is continuing solid earnings.Always has been.

Anyone done an assessment of HGH's fast growing reverse mortgage business in Oz as the property market there is predicted to continue to decline (and maybe crash)?

[winner69]

Anyone done an assessment of HGH's fast growing reverse mortgage business in Oz as the property market there is predicted to continue to decline (and maybe crash)?

No worries with RELs mate

Company spokesman person Percy would refer to you pages 35 to 39 being the section on Stress testing RELs in this presentation
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HGH/327018/290747.pdf

Last page below

Part of that presentation is very much like one’s CBL Insurance produced ....designed to make sophisticated complex things clear as mud

[percy]

No worries with RELs mate

Company spokesman person Percy would refer to you pages 35 to 39 being the section on Stress testing RELs in this presentation
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HGH/327018/290747.pdf

Last page below

Part of that presentation is very much like one’s CBL Insurance produced ....designed to make sophisticated complex things clear as mud

No "sophisticated complex things" at HGH.
Any comparison to CBL is misleading,and mischievous.
Should any one bother to check,I did warn, as was pointed out by BlackPeter's post; #125 page 9 on CBL Insurance IPO thread 8/4/2017,of huge disasterous underwriting losses breaking insurance companies,because I had read the history of Lloyds.
HGH is a simple business model,run by directors and managers who tell shareholders what they intend to do,then they do it.

[Balance]

No worries with RELs mate

Company spokesman person Percy would refer to you pages 35 to 39 being the section on Stress testing RELs in this presentation
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HGH/327018/290747.pdf

Last page below

Part of that presentation is very much like one’s CBL Insurance produced ....designed to make sophisticated complex things clear as mud

Too complicated for me. All one needs to know (really) from HGH is :

Given the actuarial spread of RELs portfolio, what would be the impact on HGH's profitability and financial position of another 10%, 20% and 35% fall in Oz property prices.

https://www.theguardian.com/australia-news/2018/nov/01/sydney-house-prices-fall-at-fastest-rate-in-30-years-dragging-rest-of-australia-down

[boysy]

Percy i respect your views and opinions, i am a new shareholder thankfully having entered the registry in the past few weeks. As someone who works in banking its clear to all HGH are taking higher risks to obtain the NIM they achieve which is all well and good but it doesn't sit well that they then try and compare their NIM to dare i say it real banks (those that provide full banking services (corporate, property finance, institutional etc). To try and say HGH are conservative by lending xxx LVR is a red herring one only has to look at how quickly valuations which are relied on in lending decisions are proven to be wrong and guesstimates at one point in time. Lets hope HGH earnings can be sustained through a downward cycle with particular emphasis on keeping impairments manageable.

[Beagle]

Company spokesman person Percy would refer to you...
... of that presentation is very much like one’s CBL Insurance produced ....designed to make sophisticated complex things clear as mud

Is that a paid role or voluntary (got to be a part time paid role for TRA surely) lol


...but it doesn't sit well that they then try and compare their NIM to dare i say it real banks...

This is going to be more fun than the 5th November :) Its the tens of millions loaned unsecured through Harmoney to hapless / reckless consumers who can't even be bothered saving up for their overseas holiday that worries me. Too easy to do a voluntary short form no asset procedure and wipe the slate clean these days.

[percy]

Percy i respect your views and opinions, i am a new shareholder thankfully having entered the registry in the past few weeks. As someone who works in banking its clear to all HGH are taking higher risks to obtain the NIM they achieve which is all well and good but it doesn't sit well that they then try and compare their NIM to dare i say it real banks (those that provide full banking services (corporate, property finance, institutional etc). To try and say HGH are conservative by lending xxx LVR is a red herring one only has to look at how quickly valuations which are relied on in lending decisions are proven to be wrong and guesstimates at one point in time. Lets hope HGH earnings can be sustained through a downward cycle with particular emphasis on keeping impairments manageable.

Property lending based on % of LVR is not a red hearing with HGH.
Your 'real' banks lend up to 75% to 90% of LVR on initial lending,for terms up to 30 years,at a lot lower magin than HGH achieve with REL lending.
HGH lend intial 11% to 12% of LVR.Average term of loan is not 30 years but between 6.6 years and 7.5 years.
The average LVR at repayment is between 27% and 33%.
Any deterioration in property values will be felt by your 'real' banks.
Yes the 105 [or is she 106?] year old in Geelong, is having the last laugh at HGH's expense,but I think shareholders and management still wish her well.!..lol.

[iceman]

Property lending based on % of LVR is not a red hearing with HGH.
Your 'real' banks lend up to 75% to 90% of LVR on initial lending,for terms up to 30 years,at a lot lower magin than HGH achieve with REL lending.
HGH lend intial 11% to 12% of LVR.Average term of loan is not 30 years but between 6.6 years and 7.5 years.
The average LVR at repayment is between 27% and 33%.
Any deterioration in property values will be felt by your 'real' banks.
Yes the 105 [or is she 106?] year old in Geelong, is having the last laugh at HGH's expense,but I think shareholders and management still wish her well.!..lol.

Well said. HGH certainly does some lending that could be regarded as higher risk, such as Harmoney, car finance and business finance. But HGH's residential property portfolio most certainly is not high risk with the very low LVR REL's being as safe as any property lending by any bank, as you clearly lay out in your post. The "real" banks are MUCH more exposed to decline or crashes in property valuations.

[boysy]

The difference being those high lvr loans are P&I with people who have jobs. If they fail to pay the mortgage you can move in sell up so even if the LVR is 80% the bank can still walk away without loss.

Quite different than interest capitalising loans where you cannot realise anything until the oldies Kark it.To call these loans lower risk is simply ignoring the different risk each type of borrower poses.

[percy]

The difference being those high lvr loans are P&I with people who have jobs. If they fail to pay the mortgage you can move in sell up so even if the LVR is 80% the bank can still walk away without loss.

Quite different than interest capitalising loans where you cannot realise anything until the oldies Kark it.To call these loans lower risk is simply ignoring the different risk each type of borrower poses.

Average length of loan on RELs is between 6.6 years and 7.5 years.
It is not just a matter of waiting for oldies to die, as RELs are taken out for a great number of reasons,ie doing up a house for resale.
No need to worry, ever, about them losing their jobs.! [or wanting mortgage repayment holidays].

[percy]

Well said. HGH certainly does some lending that could be regarded as higher risk, such as Harmoney, car finance and business finance. But HGH's residential property portfolio most certainly is not high risk with the very low LVR REL's being as safe as any property lending by any bank, as you clearly lay out in your post. The "real" banks are MUCH more exposed to decline or crashes in property valuations.

I can not comment on Harmoney,or business finance,however I know HGH's MARAC has done very well with vehicle lending for 30 to 50 years.Maybe longer.
Well I certainly got that wrong.Marac originated in 1952.!!!!!

[Beagle]

https://www.oneroof.co.nz/news/35810

What's not in dispute is this is the worst house price bloodbath for decades. Provided it doesn't go much lower and stay low for a very long time HGH should be okay with the vast majority of their lending.

[horus1]

I am continuing to Buy HGH . The point being missed is that the Reserve bank proposed rules are over 5 years , give a level plasying field to the NZ banks at last on risk, and will result in AU banks doing asset sales in NZ. If you read what Cullen has to say about the AU banks in GFC you will agree with the reserve banks positions. I think HGH is cheap. Have a million shares roughly.

[percy]

https://www.oneroof.co.nz/news/35810

What's not in dispute is this is the worst house price bloodbath for decades. Provided it doesn't go much lower and stay low for a very long time HGH should be okay with the vast majority of their lending.

Thanks for the link.
Interesting to see Tasmanian prices are still rising.
My brother, who lives in Hobart told me his house has increased a great deal in the past couple of years.
Was not that many years ago,maybe 5 or 6, when you could not sell your house in Hobart.
I expect the big Australian Banks look as though they may have a very big problem on their hands.
I seem to remember warning of this ,on this thread and ANZ Bank thread ,a couple or three of years ago.

[Beagle]

Another article I was reading has the Sydney house price average rate of decline accelerating most recently with a drop in the December 2018 average sale price of 1.3%, (annual rate of decline 15.6%). Down 9% already so just another 9 months of monthly declines at that rate and recent buyers putting in a 20% deposit will be in a negative equity position. I reckon some of those "real banks" could find themselves in an interesting situation with some of their customers in 2020.

[percy]

Add to the mix cultural,funding,capital ratios,excessive executive pay,and branch closures, I think the Aussie banks will have a busy "interesting " year or two.What a bugger..!!..lol.

[winner69]

If these ‘real banks’ start getting into strife or even go broke I would hazard a guess that Heartland activities will be affected in some way.

In these circumstances one thing for sure it’s share price will go down

[percy]

If these ‘real banks’ start getting into strife or even go broke I would hazard a guess that Heartland activities will be affected in some way.

In these circumstances one thing for sure it’s share price will go down

HGH's share price has already been affected by association.
I see the 'real banks' adapting to changing circumstances,as they always have done so..
I remember 1990, or there abouts, when commercial real estate looked to just about break the Aussie Banks.Kerry Packer's "threat" to take over Westpac was the low point.Was it $2 per share or $3.00?.The rest is all history as they say.

[Beagle]

Add to the mix cultural,funding,capital ratios,excessive executive pay,and branch closures, I think the Aussie banks will have a busy "interesting " year or two.What a bugger..!!..lol.

Bet ya the boards of those Aussie banks are "absolutely thrilled" about the prospect of having to potentially meet 14% capital ratio's for their N.Z. operations lol.
All HGH has to do is continue is DRP program and they're sweet :)

[Snoopy]

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 six years ended June 30th 2018, 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. Does this matter? 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 (still) generates none.


I wrote the above last September. Could it be that what I suggested above in bold above has now come to pass?



Bet ya the boards of those Aussie banks are "absolutely thrilled" about the prospect of having to potentially meet 14% capital ratio's for their N.Z. operations lol.
All HGH has to do is continue is DRP program and they're sweet :)


So you are effectively asking Heartland to raise yet more capital by continuing to funnel more dividend money into reinvestment in Heartland bank, even though the net payout to shareholders (disregarding the additional money raised in bonds) over the last six years is already zero?

I wonder, given the market turmoil, whether there are enough institutional investors still willing to fund a wholesale HGH bond in Australia to fund Australian reverse mortgages? At a no/low growth PE for HGH of around 10, maybe Mr Market is telling us that there aren't?

SNOOPY

[percy]

Your post is factually incorrect.
HGH have already secured wholesale funding for their Australian RELs.
Existing DRP take up was what was referred to.[over 5 years].
And what is not yet clear what equity ratio HGH will have.
HGH is capable of meeting Heartland Bank's required equity today,yet it has 5 years to do so.
Remember HGH is not a bank,however it owns a bank,and at this stage it is the bank the Reserve Bank regulates.
With the restructure HBL repaid their Australian bond issue.At this stage there has been no announcement about a replacement issue,or the size of of it.

[Snoopy]

Your post is factually incorrect. HGH have already secured wholesale funding for their Australian RELs.
<snip>
With the restructure HBL repaid their Australian bond issue.At this stage there has been no announcement about a replacement issue,or the size of of it.


HBL and now HGH have wholesale funding through the CBA in Australia - that is true. And this is tied into the REL mortgage portfolio in Australia. This isn't what I meant to refer to though. That funding is more than sufficient for now to sustain the REL portfolio in Australia - as proved by the fact that the HBL wholesale funding bond was repaid without consequence to the Australian REL business.

Yet as part of the HGH restructure, HGH, outside of the HBL, are planning some more wholesale bond issues in Australia to fund future REL growth in Australia. As you have pointed out Percy, the building blocks for this are not yet in place. I don't think it is a 'given' that just because the Australian bond issue rolled out by the bank HBL last year (the one that has now been repaid) was a success, that those same institutions will roll up again to buy bonds from non-bank HGH with a very different outlook for the OZ property market one year on.

Yes I do know that the percentage loaned on an REL property is on average much lower than that on a conventional mortgage. So -in theory- REL loans should be the least affected by falling property prices in Australia of all mortgages. But if securitised funding for housing becomes less popular overall, this could rub off on the REL business as well. CBA pulling out of new reverse mortgage funding on their own account is one reflection of this.

SNOOPY

[percy]

HBL and now HGH have wholesale funding through the CBA in Australia - that is true. And this is tied into the REL mortgage portfolio in Australia. This isn't what I meant to refer to though. That funding is more than sufficient for now to sustain the REL portfolio in Australia - as proved by the fact that the HBL wholesale funding bond was repaid without consequence to the Australian REL business.

Yet as part of the HGH restructure, HGH, outside of the HBL, are planning some more wholesale bond issues in Australia to fund future REL growth in Australia. As you have pointed out Percy, the building blocks for this are not yet in place. I don't think it is a 'given' that just because the Australian bond issue rolled out by the bank HBL last year (the one that has now been repaid) was a success, that those same institutions will roll up again to buy bonds from non-bank HGH with a very different outlook for the OZ property market one year on.

Yes I do know that the percentage loaned on an REL property is on average much lower than that on a conventional mortgage. So -in theory- REL loans should be the least affected by falling property prices in Australia of all mortgages. But if securitised funding for housing becomes less popular overall, this could rub off on the REL business as well. CBA pulling out of new reverse mortgage funding on their own account is one reflection of this.

SNOOPY

I think you have answered your own questions.
Tighter overall lending by Australian Banks with work in HGH's RELs favour.

[Snoopy]

I think you have answered your own questions.
Tighter overall lending by Australian Banks with work in HGH's RELs favour.


Not saying you are wrong. But the counter argument to this is that the OZ government, by introducing their own REL scheme to top up pensions, have creamed off the respectable end of the business. The REL business that is left is 'greedy' baby boomers taking out lump sums for luxuries and denying their poor children their rightful inheritance. Those poor children were quite happy to see Mum and Dad splash out on a new car and a world trip when that draw down was covered by the capital gain on their parents' property. IOW the capital they were expecting to inherit was largely unaffected. But now with house prices falling by $50,000 per year and the REL loan money gone on top of that, the attitude of those 'poor children' may have changed. And Mum and Dad will listen to them. And it isn't clear that wholesale funders will want to anger these 'poor children' by funding the destruction of equity in the parent's homes.

SNOOPY

[iceman]

The difference being those high lvr loans are P&I with people who have jobs. If they fail to pay the mortgage you can move in sell up so even if the LVR is 80% the bank can still walk away without loss.

Quite different than interest capitalising loans where you cannot realise anything until the oldies Kark it.To call these loans lower risk is simply ignoring the different risk each type of borrower poses.

I recently assisted friends parents getting a REL from Heartland. I believe they are typical REL borrowers, mid-late 70s and needed money for small renovations and a new car.
Heartland sent out very good documentation to explain the risks and details of the loans.
In their case, if house prices do not rise at all over the next 20 years, interest rates stay at 7.5% and both of this old couple live beyond 104 years old, Heartland will suffer as the equity would be gone in the house. However, if house prices average 2.5% increase over that time, the equity would pretty much stay unchanged (slightly deteriorate).

The average age of a Heartland's new REL customer is 73 on last numbers I saw, average new loan size is $45k and the medium loan term to date is just over 8 years.

Below are Heartland's rules for LVR
Age of youngest borrower Maximum % of home loan's value available
65 20%
70 25%
75 30%
80 35%
85 40%

I remain steadfast in my view that these loans are low risk for HGH.

[percy]

Not saying you are wrong. But the counter argument to this is that the OZ government, by introducing their own REL scheme to top up pensions, have creamed off the respectable end of the business. The REL business that is left is 'greedy' baby boomers taking out lump sums for luxuries and denying their poor children their rightful inheritance. Those poor children were quite happy to see Mum and Dad splash out on a new car and a world trip when that draw down was covered by the capital gain on their parents' property. IOW the capital they were expecting to inherit was largely unaffected. But now with house prices falling by $50,000 per year and the REL loan money gone on top of that, the attitude of those 'poor children' may have changed. And Mum and Dad will listen to them. And it isn't clear that wholesale funders will want to anger these 'poor children' by funding the destruction of equity in the parent's homes.

SNOOPY

As expected the Australian Govt move to approve RELs have given the sector more "approval",or "respectability".The best advertising HGH could get.

The Australian Govt restricts their lending to pension "top ups".

"Greedy" baby boomers?.You forget it is their money to do with it whatever they want to do.
I think this arguement has already been flogged to death on this thread.

[Ggcc]

Not saying you are wrong. But the counter argument to this is that the OZ government, by introducing their own REL scheme to top up pensions, have creamed off the respectable end of the business. The REL business that is left is 'greedy' baby boomers taking out lump sums for luxuries and denying their poor children their rightful inheritance. Those poor children were quite happy to see Mum and Dad splash out on a new car and a world trip when that draw down was covered by the capital gain on their parents' property. IOW the capital they were expecting to inherit was largely unaffected. But now with house prices falling by $50,000 per year and the REL loan money gone on top of that, the attitude of those 'poor children' may have changed. And Mum and Dad will listen to them. And it isn't clear that wholesale funders will want to anger these 'poor children' by funding the destruction of equity in the parent's homes.

SNOOPY

I don't know about you, but I don't think it is up to me how my parents should spend their money. I don't think any child is waiting with anticipation on their inheritance. Maybe the REL may pay for a family holiday together with parents and children together. children also play their part in working towards their retirement and if they get inheritance consider it icing on the cake and not a given.

[Beagle]

https://www.nzherald.co.nz/lifestyle/news/article.cfm?c_id=6&objectid=12186508

Wonder how this guy feels about giving an inheritance to "his" children ? Ouch !!!
I agree with Percy, this kids "entitlement" thing has been flogged to death.

[janner]

A pleasant rise in the price today.. A paucity of comments.

Disc. Long time holder.

[winner69]

A pleasant rise in the price today.. A paucity of comments.

Disc. Long time holder.

The rise our doing janner

Clarifying the low risk of RELs and that any rbnz future requirements won’t affect heartland was enough to get a few punters on board before regret hits in when share price hits 150 soon.

Percy, beagle et all have done well responding to balances and snoopy’s concerns.





thats how it works over the holiday season isn’t it?

[janner]

The rise our doing janner ? [/SIZE]

No.. Neither a lender or a borrower be..

[777]

If any of you get interest paid out from term funds at the end of each quarter then check to see if you have received the Dec 31st 2018 payment. I hadn't so may be others.

[Kelvin]

I havent either 777. I've sent them a secure message as last year I recieved the payment on 3 Jan

[Soolaimon]

Ditto, no interest payment yet.

[777]

Ring them.

09 9279641

[Beagle]

No.. Neither a lender or a borrower be..

Good advice in Shakespearian times. Apparently the nobles of London were running rampant with reckless spending. Consumerism running rampant back then, who would have thought ? lol

[percy]

Good advice in Shakespearian times. Apparently the nobles of London were running rampant with reckless spending. Consumerism running rampant back then, who would have thought ? lol

A good read is "The Devil's Half Mile" by Paddy Hirsch.
A vivid story of New York in 1799,of greedy men with no morals.
Impossible not to think nothing has changed.

[Beagle]

A good read is "The Devil's Half Mile" by Paddy Hirsch.
A vivid story of New York in 1799,of greedy men with no morals.
Impossible not to think nothing has changed.

Thanks. I'm not a great reader to be honest, eyes get tired easily, but that one does sound interesting. One thing has never changed since Adam was a boy, the love of money is the root of all evil.
One of the interesting theme's behind neither a lender nor a borrower be was back in Shakespearian times it was fairly common for a person to lend money to their friends. The warning of course behind this famous cliché is if your friend defaults on their loan you lose your money and your friendship !

[winner69]

t_j me old mate .......Heartland leaving FLX for dead this week

You might get to breakeven on HGH well before FXL etops going down

Must be a better than 'expected' result coming up for Heartland

[trader_jackson]

t_j me old mate .......Heartland leaving FLX for dead this week

You might get to breakeven on HGH well before FXL etops going down

Must be a better than 'expected' result coming up for Heartland

And a far far worse than 'expected' result coming up for FXL - must be, otherwise share price would be 2x high as the $1.30 it hit briefly today. We'll find out about both in around a months time I suppose.

[Marilyn Munroe]

Below is a link to a web page about reverse mortgages. It is from an American perspective and dating back to just before the global financial crises. It is well written and recommended reading for those who want to know what a reverse mortgage is.

https://www.calculatedriskblog.com/2007/05/reverse-mortgages-ubernerditorial.html

Boop boop de do
Marilyn

[minimoke]

Below is a link to a web page about reverse mortgages. It is from an American perspective and dating back to just before the global financial crises. It is well written and recommended reading for those who want to know what a reverse mortgage is.

https://www.calculatedriskblog.com/2007/05/reverse-mortgages-ubernerditorial.html

Boop boop de do
Marilyn Or youi could just read about it on teh HGH website "
What is a reverse mortgage?
A reverse mortgage is like a normal home loan that has been designed for the needs of seniors. It allows people aged 60 and over to release home equity to live a more comfortable retirement.

Importantly, you continue to own and live in your home for as long as you wish, continuing to enjoy the benefits of your community, social network, and family memories.

How does it work?
Unlike a standard mortgage, you don’t need to make regular repayments. Instead, interest is calculated on the balance outstanding, and added monthly to your loan. Voluntary repayments can be made at any time, which reduces the balance and interest charged.

The total loan amount, including accumulated interest, is repayable when you move permanently from your home; this could occur when you sell your property, move into long-term care or pass away.

To be eligible, you need to be aged 60 or over, own your own home outright, or have a standard mortgage that can be paid off by the reverse mortgage. The amount you can access depends on your age, and the value of your home.

What about the costs?
In addition to the interest on your loan, there will be fees and charges for setting up the loan, which are dependent on what options you select. These can be paid out of your loan at settlement. You can find out more about our fees and mortgage rates on the resources page.

It is a requirement that you seek and receive independent legal advice on the loan agreement issued by Heartland from a solicitor of your choice. The cost for this could also be paid out of your loan."

[winner69]

Dairy prices rising and Heartland share price rising

Farmers and Heartland shareholders happy

The recent shareprice low of 132 will never be seen again

Good news coming soon

[percy]

Dairy prices rising and Heartland share price rising

Farmers and Heartland shareholders happy

The recent shareprice low of 132 will never be seen again

Good news coming soon

Hard to believe the rise in dairy prices is also causing the Australian banks' share prices to rise too;ANZ,CBA,NAB and WBC.?
Not a lot of people know that,and even fewer believe it.!..

[winner69]

Hard to believe the rise in dairy prices is also causing the Australian banks' share prices to rise too;ANZ,CBA,NAB and WBC.?
Not a lot of people know that,and even fewer believe it.!..

So you saying that Heartland share price rises and falls in line with those dastardly Australia banks — it’s own shareprice nothing to do how good (or bad) Heartland is. Maybe Heartland is seen as evil as well.

I believe that

[percy]

So you saying that Heartland share price rises and falls in line with those dastardly Australia banks — it’s own shareprice nothing to do how good (or bad) Heartland is. Maybe Heartland is seen as evil as well.

I believe that
Yes,
However you must remember it will change,because time is the friend of a good share and the enemy of a poor share.
Had you read my previous posts on this thread, you would be well aware I have pointed out HGH do not face the same issues as the Australian Banks.
Being tard with the same brush as the Australian Banks offers a window of opportunity for an astute investor who knows the difference.

[Waiuta]

In viewers opinion what is the buying range for Heartland? Is there a DCF?

[Joshuatree]

Ive just seen this post from KW elsewhere. That last sentence is a bit spooky!!!!!

From today's AFR
"Bankwest and CBA have also started the new year by withdrawing reverse mortgages (https://www.afr.com/personal-finance/cba-and-bankwest-axe-reverse-mortgages-amid-rising-costs-and-tougher-scrutiny-20181022-h16xqk), the last of the major lenders to pull out of the $3.1 billion sector amid rising costs and tougher regulation.
It will withdraw the product for new borrowers but continue for existing.
Westpac Group, the nation's second largest lender, and Macquarie Bank, withdrew from the market about two years ago.
A reverse mortgage borrower can take the funds from the equity in their house as a lump sum, regular income stream, cash reserve, or a combination of all three.
CBA and Bankwest's decision to quit new lending means reverse mortgages are now only being offered by smaller lenders, such as Heartlands Seniors' Finance, IMB Bank and P&N Bank.

The federal government is expected to enter the market with a low-cost reverse mortgage scheme that will provide an alternative to the private sector." !!!!!!!!!!!!!!!!

[Kelvin]

Ive just seen this post from KW elsewhere. That last sentence is a bit spooky!!!!!

The federal government is expected to enter the market with a low-cost reverse mortgage scheme that will provide an alternative to the private sector." !!!!!!!!!!!!!!!!



Must be referring to the expansion of the pension loan scheme https://www.smh.com.au/money/borrowing/government-reverse-mortgage-expanded-20180509-p4ze6z.html

[winner69]

Ive just seen this post from KW elsewhere. That last sentence is a bit spooky!!!!!

From today's AFR
"Bankwest and CBA have also started the new year by withdrawing reverse mortgages (https://www.afr.com/personal-finance/cba-and-bankwest-axe-reverse-mortgages-amid-rising-costs-and-tougher-scrutiny-20181022-h16xqk), the last of the major lenders to pull out of the $3.1 billion sector amid rising costs and tougher regulation.
It will withdraw the product for new borrowers but continue for existing.
Westpac Group, the nation's second largest lender, and Macquarie Bank, withdrew from the market about two years ago.
A reverse mortgage borrower can take the funds from the equity in their house as a lump sum, regular income stream, cash reserve, or a combination of all three.
CBA and Bankwest's decision to quit new lending means reverse mortgages are now only being offered by smaller lenders, such as Heartlands Seniors' Finance, IMB Bank and P&N Bank.

The federal government is expected to enter the market with a low-cost reverse mortgage scheme that will provide an alternative to the private sector." !!!!!!!!!!!!!!!!



No worries here JT

Only limited top ups to pensions and to be taken in cash .....no lump sums that are the attraction of a proper HER scheme.

[Joshuatree]

Thanks w69; for some reason i missed percys response saying much the same.The plus is less competition!

[Beagle]

Less competition generally leads to more business at higher margins and they already have strong growth. Hmmmmm

[minimoke]

Less competition generally leads to more business at higher margins and they already have strong growth. HmmmmmAdd in "increased demand" and it ought to be a rosy looking picture.

[iceman]

Add in "increased demand" and it ought to be a rosy looking picture.

No question that this part of the business is looking very rosy and exciting. The growth requires a lot of cash. That borrowing and meeting the potential new RBNZ liquidity requirements will require very careful balance sheet management. Personally I think suspension of dividend should be one of the many options considered but realise this will not happen. But maybe they could raise the DRP discount a little more to entice us SH further to sign up for it !

[ziggy415]

Less competition generally leads to more business at higher margins and they already have strong growth. Hmmmmm
Heartland already has a banking facility with cba bank for its reverse mortgage book so why not a little more and take cba reverse mortgages off their hands....over the years as cba has less repverse mortgages left the cost to administer these will In crease so why not on sell to heartland now

[dabsman]

Heartland already has a banking facility with cba bank for its reverse mortgage book so why not a little more and take cba reverse mortgages off their hands....over the years as cba has less repverse mortgages left the cost to administer these will In crease so why not on sell to heartland now

Smart option Ziggy

[Beagle]

Heartland already has a banking facility with cba bank for its reverse mortgage book so why not a little more and take cba reverse mortgages off their hands....over the years as cba has less repverse mortgages left the cost to administer these will In crease so why not on sell to heartland now

My rating BBB+, Beagle Busy Buying :)
Dairy prices rising nicely lately so HGH's SP is highly likely to follow. Sounds ridiculous but the historical correlation between the two provides startling evidence over a very considerable period of time supporting this rather bizarre proposition.
Some of the American banks had a huge night overnight on Wall St, who knows, maybe HGH spending time in the doldrums,is nearly at an end.

[winner69]

No question that this part of the business is looking very rosy and exciting. The growth requires a lot of cash. That borrowing and meeting the potential new RBNZ liquidity requirements will require very careful balance sheet management. Personally I think suspension of dividend should be one of the many options considered but realise this will not happen. But maybe they could raise the DRP discount a little more to entice us SH further to sign up for it !

The last DRP didn’t even make up for the $15m reduction in equity from the increased doubtful debt provision needed to comply with new accounting standards

[percy]

The last DRP didn’t even make up for the $15m reduction in equity from the increased doubtful debt provision needed to comply with new accounting standards

Comparing a "one off" [to comply with new accounting standards] to an "ongoing" DRP is misleading.

[winner69]

Comparing a "one off" [to comply with new accounting standards] to an "ongoing" DRP is misleading.

All I was saying that that share equity was reduced because of the increased provision .....and the new capital from the last DRP wasn’t enough to get shareholder equity back to where it was.

[percy]

All I was saying that that share equity was reduced because of the increased provision .....and the new capital from the last DRP wasn’t enough to get shareholder equity back to where it was.

Agreed,however the affected shareholder equity is at HGH,not necessarily at Heartland Bank.
Perhaps the interim report will give us more clarity as to what equity HGH are confortable with.[We know already what the bank's equity has to be].

[Snoopy]

i have been looking through Heartland's lending to industry sectors (AR2018 Note 18c) and noticed an inconsistency between the business done in the 'Finance and Insurance' Sectors in FY2017. In the FY2018 report $64.286m from the finance and insurance business has apparently been reclassified from 'Finance & Insurance' to that catch all net of 'Other'.



HBL (FY2017) from AR2017HBL (FY2017) from AR2018


Agriculture Forestry & Fishing: $836.977m (21.3%) $836.977m (21.3%)


Mining: $19.006m (0.5%) $19.006m (0.5%)


Manufacturing: $76.445m (1.9%) $76.445m (1.9%)


Finance & Insurance: $395.804m (10.1%) $331.518m (8.4%)


Retail & Wholesale Trade: $188.941m (4.8%) $188.941m (4.8%)


Households: $1,717.407m (43.7%) $1,717.407m (43.7%)


Property & Business Services $347.776m (8.8%)$347.776m (8.8%)


Transport & Storage: $179.016m (4.6%)$179.016m (4.6%)


Other Services: $169.867m (4.3%) $234.153m (6.0%)


Total $3,931.239m (100%) $3,931.239m (100%)



I wondered if any reader could explain why $64.286m worth of finance and insurance business suddenly disappeared into another box? Heartland is a finance company after all. And if they can't decide what part of their business lending is classified as 'finance', that has to be a worry!

SNOOPY

[Beagle]

https://go.harmoney.com/rs/915-LSX-181/images/NZHarmoney%20NewWheelsEBook.pdf?mkt_tok=eyJpIjoiTU dVNFl6aG1aVFprTXpkaiIsInQiOiJUM04rT1B3VUFUQVgzaUsz UmVySUFuQVcxU3NXQmNcL0JSOFdtRW1wQ0s1MmhsM2tSZXNhSm 9rT1lQNlFjckFLZElrVGZEWUppYkNBaE9jckRVbUVcL3dvV3Yz b0toN3ZmU1Y0dzZxZ1FOSE9PeDBsaWtuejFTakd3blc0ekRCSW p5In0%3D
Harmoney put out an interesting guide to buying a car - this bit struck a chord with me.
If money was no concern, we’d all buy new cars - aside from that enticing new car smell, driving a new car means enjoying the latest in automotive technology and (in theory) years of hassle-free motoring. In reality, these advantages are probably overstated
One new car I have bought in the last 20 years had no issues and I remember it fondly. The rest all had at least one issue and the current one...oh dear !
It seems to me that buying a new car or shares off private equity firms in the Chinese year of the dog is likely to end you up with the buyer owning puppies.
Chinese year of the dog ends on 4 February...maybe OCA shares and my other pup will come good shortly thereafter...

[percy]

Motor vehicle lending is a good sector to be in.

[Beagle]

http://www.sharechat.co.nz/article/99d6ae4b/australian-commission-ban-likely-to-scare-nz-mortgage-brokers.html?utm_medium=email&utm_campaign=Australian%20commission%20ban%20likel y%20to%20scare%20NZ%20mortgage%20brokers&utm_content=Australian%20commission%20ban%20likely %20to%20scare%20NZ%20mortgage%20brokers+CID_ec37a0 6df9dd6ba7c4376425c88d2a5a&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle99d6ae4baustra lian-commission-ban-likely-to-scare-nz-mortgage-brokershtml

NAB have been very naughty dog's. I don't see any major issues here for HGH. Fundamentally they look pretty good value at this level and I note on the US markets according to CNBC financials as a group are up 13 % year to date for 2019.

[winner69]

http://www.sharechat.co.nz/article/99d6ae4b/australian-commission-ban-likely-to-scare-nz-mortgage-brokers.html?utm_medium=email&utm_campaign=Australian%20commission%20ban%20likel y%20to%20scare%20NZ%20mortgage%20brokers&utm_content=Australian%20commission%20ban%20likely %20to%20scare%20NZ%20mortgage%20brokers+CID_ec37a0 6df9dd6ba7c4376425c88d2a5a&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle99d6ae4baustra lian-commission-ban-likely-to-scare-nz-mortgage-brokershtml

NAB have been very naughty dog's. I don't see any major issues here for HGH. Fundamentally they look pretty good value at this level and I note on the US markets according to CNBC financials as a group are up 13 % year to date for 2019.

Share price will rocket ahead after the stunning / wow / huge half year profit announcement in a few weeks

That’ll wake the market up.

Hope they don’t do any tricky normalising stuff and say things like ‘if it wasn’t for this it would have been that’

[winner69]

Dairy prices booming ..gdt auction overnight saw whole milk powder up more than 8%. Good sign for the economy.

Lately the long term relationship between dairy prices and Heartland share price has broken down.

Last 5 auctions prices have been up. Whole milk powder UP 16% since November — Heartland share price DOWN nearly 10%

Jeez that Heartland is a real dog of a stock

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12201485 Yeah mate I was going to ask you, is this correlation broken ?

HGH looking like an old 3 legged mange and flea infested Pig dog (Financials in the US up 13% YTD) or is this an opportunity ? Every dog has its price...surely...

Even if HGH doesn't respond as you say at least this is good for the economy so that's good.

[winner69]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12201485 Yeah mate I was going to ask you, is this correlation broken ?

HGH looking like an old 3 legged mange and flea infested Pig dog (Financials in the US up 13% YTD) or is this an opportunity ? Every dog has its price...surely...

Even if HGH doesn't respond as you say at least this is good for the economy so that's good.

Correlation sort of broken short term but longer term still exists

Some think this ‘correlation’ is stupid because Heartland not exposed to dairy. But if you think that how dairy prices are going are an indication of how the general economy is going then it sort of makes sense ...after all Jeff often reminds us that Heartland’s fortunes are tied to the economy (GDP growth)

I make no comment about three legged mange and flea invested pig dogs....but a piss poor ‘investment’ / punt over the last year or so....still in downtrend from the highs of over 2 bucks in spite of all this being cheap as talk.

[Beagle]

Noticed in ASB's result yesterday that provisioning for delinquent loans is up 73% to $45m for the half year. Hope that's not a sign for HGH's provisioning...

[winner69]

Noticed in ASB's result yesterday that provisioning for delinquent loans is up 73% to $45m for the half year. Hope that's not a sign for HGH's provisioning...

No ...Heartland not exposed to residential lending or dodgy business lending

But you knew that

[Beagle]

No ...Heartland not exposed to residential lending or dodgy business lending

But you knew that

Yeap, all that no deposit unsecured lending to Harmoney is super safe...what could possibly go wrong lol

[oldtech]

I make no comment about three legged mange and flea invested pig dogs....but a piss poor ‘investment’ / punt over the last year or so....still in downtrend from the highs of over 2 bucks in spite of all this being cheap as talk.

Agreed, but does this not go to the heart of 'buy and hold' versus trade? It is now at the level where I first bought in (November 2015). Over that time I watched it rise to $2.14, then start a long decline at the start of 2018. I do remember people expressing nervousness in December 2017 when it reached $2.14, and at least one regular here who I respect greatly selling out completely at this time.

I subsequently sold out (far later than I should have, but hey I'm still new at this!), and have now started buying back in at virtually the same price I paid three years ago. Time will tell whether I have picked the bottom correctly or not I guess ...

[Joshuatree]

Yep theres traders who worry away every day micro managing and itching and biting and worrying and theres Investors who ride out the cycles and cruise through it all totally confident in the company and management, easy as..

[Beagle]

http://www.sharechat.co.nz/article/1a04ef1f/biggest-hayne-impact-on-heartland-will-be-the-ban-on-mortgage-broker-commissions.html?utm_medium=email&utm_campaign=Biggest%20Hayne%20impact%20on%20Heart land%20will%20be%20the%20ban%20on%20mortgage%20bro ker%20commissions&utm_content=Biggest%20Hayne%20impact%20on%20Heartl and%20will%20be%20the%20ban%20on%20mortgage%20brok er%20commissions+CID_c6cf45b2fa773a64de2891c3e5e10 619&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle1a04ef1fbigges t-hayne-impact-on-heartland-will-be-the-ban-on-mortgage-broker-commissionshtml

[winner69]

http://www.sharechat.co.nz/article/1a04ef1f/biggest-hayne-impact-on-heartland-will-be-the-ban-on-mortgage-broker-commissions.html?utm_medium=email&utm_campaign=Biggest%20Hayne%20impact%20on%20Heart land%20will%20be%20the%20ban%20on%20mortgage%20bro ker%20commissions&utm_content=Biggest%20Hayne%20impact%20on%20Heartl and%20will%20be%20the%20ban%20on%20mortgage%20brok er%20commissions+CID_c6cf45b2fa773a64de2891c3e5e10 619&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle1a04ef1fbigges t-hayne-impact-on-heartland-will-be-the-ban-on-mortgage-broker-commissionshtml

Thanks for posting

All makes Heartland stronger in OZ .....and 80% of the market still available to them ....and 20,000 Aussies getting ‘old’ every month ...wow

[Beagle]

http://www.scoop.co.nz/stories/HL1902/S00024/gordon-campbell-on-why-the-aussie-banks-are-bastards.htm Fair bit of talk there about how the watchdog failed to bark.
Should have appointed a Beagle who never suffers from that problem lol
Seriously...some of those Aussie banking practices are shocking !
Just as well HGH not in the line of fire and with a similar PE to the Aussie banks and not liable for massive fines like them then HGH does seem to me to be at the very least, good value at present. Forward PE about 11 and gross yield assuming 9.5 cps this year (13.2 cps gross) 9.5% at present.
I wonder why they are still languishing ?...those numbers look pretty good to me.

[Snoopy]

Just as well HGH not in the line of fire and with a similar PE to the Aussie banks and not liable for massive fines like them then HGH does seem to me to be at the very least, good value at present. Forward PE about 11 and gross yield assuming 9.5 cps this year (13.2 cps gross) 9.5% at present.
I wonder why they are still languishing ?...those numbers look pretty good to me.


This really should have gone through the stock exchange first as the effect on the share price will be so profound. But I thought you guys on the forum deserve this heads up. The reason why the HGH share price is languishing is that as of earlier this week .... drum..roll....Snoopy has become ..."a Heartlander"!!!! Yes folks it is really true. All my concerns about the operational issues at Heartland remain. But at a price under $1.40, even if my worst fears come to pass - and Australian Reverse Equity business chokes, - then that circumstance is built into the share price already. I think the digital initiative has legs and I will look forward to following in the footsteps of Geoff and Jeff going forwards from here. So far this is only a foot in the water exercise. My plan was to buy in and wait for the share price to fall (that is what usually happens when I buy into a company for the first time) and buy a bigger stake after that -heh heh heh. But the plan has gone wrong because the share price hasn't collapsed! I think that given my circumstance you existing shareholders are lucky the share price is sticking where it is!

SNOOPY

[percy]

OMG.
SELL,sell,SELL.
"The end is nigh"....!!......lol.

ps.Welcome.You are now "well positioned".
pps.Interim result 19th Feb,should confirm they are delivering on their strategy..

[couta1]

OMG.
SELL,sell,SELL.
"The end is nigh"....!!......lol.

ps.Welcome.You are now "well positioned".
pps.Interim result 19th Feb,should confirm they are delivering on their strategy.. One of my 3 dogs stocks of late(OCA and TRA being the other 2) and I haven't sold any but now with 2 mutts (Beagle and Snoooy) holding things are looking ominous.Lol

[percy]

One of my 3 dogs stocks of late(OCA and TRA being the other 2) and I haven't sold any but now with 2 mutts (Beagle and Snoooy) holding things are looking ominous.Lol

We have gone from "well positioned" to "buggered".!!....
Beagles ???....Not investors best friends?..................lol.

ps.I also hold OCA,TRA and HGH.
Time for us to move to PAZ on www.usx.co.nz
Beagle free!.

[winner69]

One of my 3 dogs stocks of late(OCA and TRA being the other 2) and I haven't sold any but now with 2 mutts (Beagle and Snoooy) holding things are looking ominous.Lol

I won’t mention Heartland to the neighbour ....they really pissed off with OCA and TRA .....Heartland could save their bacon (keen on ZEL though but not bought in yet)

[Beagle]

One of my 3 dogs stocks of late(OCA and TRA being the other 2) and I haven't sold any but now with 2 mutts (Beagle and Snoooy) holding things are looking ominous.Lol

Gentle on the Beagle...saw one today out on my walk, such a cute adorable little doggy. (We actually have two Sydney Silky Terriers these days but they're getting old). I still remember my former Beagle very fondly. Might get another one when Basil or Skippy pass away but haven't told Mrs Beagle yet. This will come right mate, hang in there but Turners really does look like a sick pup.

[Onion]

Snoopy has become ..."a Heartlander"!!!!

Snoopy's role as the Reserve Bank banking advisor (informally on this forum -- but I'm sure the RB take notice) will need to come to an end as he is now biased!

This forum has no place for bias from any of the canine posters :p

[Beagle]

Snoopy's role as the Reserve Bank banking advisor (informally on this forum -- but I'm sure the RB take notice) will need to come to an end as he is now biased!

This forum has no place for bias from any of the canine posters :p

Canine's will keep barking biased or not...its in their nature lol

[Onion]

Canine's will keep barking biased or not...its in their nature lol

Good to see you haven't fallen asleep Beagle! Keep barking and biting... :t_up:

[percy]

Good to see you haven't fallen asleep Beagle! Keep barking and biting... :t_up:

Are Beagles prone to biting their own tail.?

[iceman]

Are Beagles prone to biting their own tail.?

Have been accumulating quite a bit in the last week and now back up to my previous holding size. Just can not help myself at this price but am now seriously concerned that HGH appears to have gone to the dogs, as Snoopy has confirmed

[Beagle]

Have been accumulating quite a bit in the last week and now back up to my previous holding size. Just can not help myself at this price but am now seriously concerned that HGH appears to have gone to the dogs, as Snoopy has confirmed

:lol: :lol: Snow patrol chasing cars, how do you drive a Beagle nuts ? Tell him there's a really cheap car to chase that won't break down :D https://www.youtube.com/watch?v=hW2z6vDGaJ8
https://www.youtube.com/watch?v=GemKqzILV4w (the low exercise version) and if you don't like HGH you've got to go your own way
https://www.youtube.com/watch?v=qNM6IuA87eM

Hope I'm not barking up the wrong tree with this one because its sure been a bit "doggy" since it changed its name.
Hoping a dogged approach to holding this one will pay off but dog-gone-it, I'm not 100% sure.

[horus1]

I am accumulating . Hope the report on the 18th is OK

[Snoopy]

Snoopy's role as the Reserve Bank banking advisor (informally on this forum -- but I'm sure the RB take notice) will need to come to an end as he is now biased!

This forum has no place for bias from any of the canine posters :p


Unfair unfair! Yes it is true that since becoming a HGH shareholder, I have had a sudden realisation that Heartland extracting themselves from that dastardly collection of southern lakes property developments from the GFC days must have been entirely due to the skill of management. No luck could possibly have been involved. And yes I am starting to appreciate that as a moniker for our leader, "Sir Jeffrey Greenslade" has a nice ring to it.

But apart from that, being 'inside the tent' will not mean any blunting off this beagle's teeth. Skin in the game will see to that!

SNOOPY

[Beagle]

Unfair unfair! Yes it is true that since becoming a HGH shareholder, I have had a sudden realisation that Heartland extracting themselves from that dastardly collection of southern lakes property developments from the GFC days must have been entirely due to the skill of management. No luck could possibly have been involved. And yes I am starting to appreciate that as a moniker for our leader, "Sir Jeffrey Greenslade" has a nice ring to it.

But apart from that, being 'inside the tent' will not mean any blunting off this beagle's teeth. Skin in the game will see to that!

SNOOPY

With two beagles on board barking and biting in unison what could possibly go wrong lol

[Ggcc]

I’m accumulating, but do expect a decrease in dividend up coming to fund for growth or another capital raise. I do value this share a little higher at $1.70. Either way I am holding on from long ago

[peat]

Well , a lot of excitement on this forum re HGH despite it being a very downward sloping chart , however lo and behold I've spotted a possible reversal pattern here as well. Again a bullish gartley perhaps not quite as perfect as the one on Z Energy , and it is a bit holey and spotted looking using normal candlesticks on the chart. But if I Heiken Ashi those candles it smooths it out and the pattern looks more complete and more critically, it does retrace the required 61.8 and 78.6% on the B and D points.

10303

We've had a bounce off the D point , its not exactly the greatest indication of a turnaround but it is a bounce and that bounce is now retracing so if you were a risk taker its not a bad time to punt on the pattern.
Entry 1.37-8 , Stop Loss 1.32 , first target 1.45 but hope for a lot more (otherwise the trade is somewhat marginal on risk/reward basis) .

FWIW DYOR no responsibility taken.

[Leftfield]

Well , a lot of excitement on this forum re HGH despite it being a very downward sloping chart , however lo and behold I've spotted a possible reversal pattern here as well. Again a bullish gartley perhaps not quite as perfect as the one on Z Energy , and it is a bit holey and spotted looking using normal candlesticks on the chart. But if I Heiken Ashi those candles it smooths it out and the pattern looks more complete and more critically, it does retrace the required 61.8 and 78.6% on the B and D points.

10303

We've had a bounce off the D point , its not exactly the greatest indication of a turnaround but it is a bounce and that bounce is now retracing so if you were a risk taker its not a bad time to punt on the pattern.
Entry 1.37-8 , Stop Loss 1.32 , first target 1.45 but hope for a lot more (otherwise the trade is somewhat marginal on risk/reward basis) .

FWIW DYOR no responsibility taken.

Thanks Peat. Your analysis appreciated. I hope your 'bullish gartley' all 'holey' and 'spotted' is not too contagious :p.
Looks like a mild sort of bullish penant formation to me. But I wouldn't bet my house on it.

[peat]

But I wouldn't bet my house on it.
Totally

Tho maybe the deck?

[Snoopy]

There was a tiny foot note at the bottom of page 6 (of the HGH restructuring proposal):

"It is a condition of Heartland Bank’s registration as a registered bank that Heartland Bank must conduct a substantial portion of its business within New Zealand. This requires Heartland Bank’s Australian assets to not exceed 33% of its total assets."

Yet if you go over to the Cameron Partners Report p23, or p64 of the 'report within a report'.

Requirement for Substantial portion of business in New Zealand (Total Assets Maximum): Not disclosed

Why did Heartland not disclose to Camerons the maximum amount of business they could do outside of New Zealand, when they knew what it was all along? Could it be that if they had disclosed this, then Cameron's would have realised that they could more than double their business in Australia with the rules as they are now? And if Cameron's had known this, then the touted advantage of removing the 'constraint on Australian funding and asset growth' would probably not be a factor for several years of organic business growth?

Of course it might be that Heartland wants to acquire a substantial existing reverse mortgage portfolio from a third party to add to their existing operations. In that case the restructure would be understandable. But if this was the case, why doesn't Heartland tell you shareholders what is in the wind?

This proposal removes the protection of Reserve Bank of NZ oversight for no good reason. It will make no difference to Heartland profitability for the next couple of years at least if you vote in down. This new arrangement is an erosion of minority shareholder oversight and protection IMO. Vote it down folks.


I wrote the above before I was a shareholder and before 'you shareholders' voted the deal through. For shareholders at that time, the HGH restructuring has been a disaster. We have had this and the PGW seed sale as recent incidences where the directors apparently did not know best. Shareholders in both of these companies who blindly followed the directors voting advice at consideration time, have ended up voting for the destruction of their own share capital. Perhaps 'thinking for yourself' might be a salutatory lesson to learn from this?

I talked to my broker before buying into Heartland recently. He said that talk around the institutions was that Heartland had doubled down on their Australian operations at exactly the wrong time. Confirmation of further falling property values, particularly in Sydney and Melbourne, meant many institutions have headed for the exit. However, my broker suggested that the dividend yield had become so compelling that he saw value at $1.38. If the restructuring had not gone through and Heartland had 'stuck to its knitting' my broker thought the share price would be about $1.80 now. Co-incidence or not, the $1.38 trading price is 10% below my 'fair valuation' of the company, this time based on a multi-year picture of dividend yield. My own modelling suggests that $1.38 is good value even if the dividend falls a cent or two. That means I will be happy to hold on to my HGH shares, even if this does eventuate.

That 'Aussie Banking Industry Spanking' dealt out by Kenneth M Hayne, Commissioner looks determined to see trailing commissions on mortgages phased out, in favour of a one off 'fee for service' charge. I don't know how any trailing commissions were structured by Heartland for arranging REMs in Australia. But they may have increased as the loan value increased via accruing of interest over the years. That won't happen from now on.

Most of Heartland's representation in Australia is through brokers in Australia. I presume there is no such thing as a 'Reverse Mortgage Broker'. These brokers would handle all mortgage products. So why would they put their efforts into encouraging REM loans which tend to be smaller than regular mortgages? I think the selling of REM loans into Australia is destined to get a lot harder!

SNOOPY

[Snow Leopard]

Welcome to the Heartland registry Snoopy. Pity you did not sign up back in the days when the risk/reward ratio was higher.

I voted against this restructure (and also against the PGW sale) and of the ten NZX holdings I currently have, HGH is the smallest.
But I am not particularly concerned about the timing of Heartland's expansion in the Oz market. It is a long game and now is as good as any other.

So the $64 question: Does the Snow Leopard think a $1.38 is good value for money?
The $64 answer: Yes.

The $65 question: Is the Snow Leopard buying?
The $65 answer: No. Look at that chart! (but really it is because I have no spare change)

[Beagle]

I think the selling of REM loans into Australia is destined to get a lot harder! Snoopy
A reality check from one hound to another. People are just like dogs, they like to eat and have their treats. If the food bowl provided by most all other sources has been withdrawn then every man woman and dog of age will look for some food bowl that's full. You don't have to sell anything. People and Beagles can't help themselves and like their treats, they will follow their nose and come looking. Payment of commissions is irrelevant to people eating into their own homes equity...if the customer must pay it then it will simply be loaded onto the loan.

Falling house prices will sort themselves out over time and I am confident that HGH's lending policies are fairly conservative.

One other thought for the day. As one of the very last food providers, those needy and looking for treats might find they have to pay a bit more for them...that would be a real "disappointment" for HGH shareholders wouldn't it :)

The $64,000 question is are HGH shares value at this price ?...Is the Pope a Catholic ? Do I expect a quick ascent from here, absolutely not but with a gross dividend yield of ~ 9% and a forward PE of ~ 11 every man and his dog has the luxury of being patient.

Why are a number of people talking about a dividend cut when eps is going up this year ? Some people appear to have forgotten that the RBNZ's capital adequacy proposal is just that, a proposal and that even if implemented in its current radical form, banks will have 5 years to comply and HGH can get there solely through its dividend reinvestment scheme issuing shares at , (from memory a 2% discount to VWAP). Ask yourself this simple question and the penny might drop. What would happen to the shareholder participation rate of the dividend reinvestment scheme if they raised the discount level to 3 or 4% ?

[Snoopy]

Welcome to the Heartland registry Snoopy. Pity you did not sign up back in the days when the risk/reward ratio was higher.


Good on investors who got in at lower levels and despite the recent share price fall, are still sitting on a good capital profit while those dividends continue to flow. Personally I do not regret not getting in earlier. The risk/reward ratio an investor is comfortable with is a personal choice. 'Benefit of hindsight analysis' does not show that those who made the choice not to invest at the time made the wrong choice. I have been researching Heartland for many years and was well aware of alternative future paths at the time that Heartland could have followed, not all of those alternative futures being under the control of management! Five years of navigating through challenging market conditions gives me more confidence in Heartland's management's ability to navigate through the business ups and downs. I think that I have bought in at a risk/reward sweep spot. At this point I am happy to put my HGH shares in the bottom drawer and harvest the dividend stream. But if they can gain more traction in Australia, then all power to them. It will be 'growth for free' for me.



I voted against this restructure.

But I am not particularly concerned about the timing of Heartland's expansion in the Oz market. It is a long game and now is as good as any other.

So the $64 question: Does the Snow Leopard think a $1.38 is good value for money?
The $64 answer: Yes.

The $65 question: Is the Snow Leopard buying?
The $65 answer: No. Look at that chart! (but really it is because I have no spare change)


I sense 'mixed mind messages' with the statement of being in for the medium term countered by the caution of short term chart signals. But I understand that 'no spare change' is the most legitimate ultimate trump card in this investment strategy game!

SNOOPY

[oldtech]

Do I expect a quick ascent from here, absolutely not but with a gross dividend yield of ~ 9% and a forward PE of ~ 11 every man and his dog has the luxury of being patient.

Agreed, remember this took over three years to rise from $1.05 to $2.14 ... I well remember a comment around 2015-2016 complaining the SP was stuck as it just didn't seem to move anywhere!

[Snow Leopard]

...But I understand that 'no spare change' is the most legitimate ultimate trump card in this investment strategy game!

SNOOPY

So, just bought a lot while sitting on a bench in a park in Bangkok, using the money saved by staying in a cheaper hotel.

Must go, a squirrel is eyeing me up as an easy target for the old bench hire fee scam.

[peat]

So, just bought a lot while sitting on a bench in a park in Bangkok, using the money saved by staying in a cheaper hotel.

Must go, a squirrel is eyeing me up as an easy target for the old bench hire fee scam.

tbh I think I'd rather stay in a nicer hotel. :p

certainly doesnt look to be any upward pressure as of today.

[percy]

So, just bought a lot while sitting on a bench in a park in Bangkok, using the money saved by staying in a cheaper hotel.

Must go, a squirrel is eyeing me up as an easy target for the old bench hire fee scam.

NZ $80,000 is a lot of money to save.
You living in that hotel for 3 years.?

[King1212]

Relentless selling....where is the button?

[winner69]

Relentless selling....where is the button?

Seems plenty of keen buyers getting the bargain of the centre

[percy]

Relentless selling....where is the button?

No surprises there.!!!
Snoopy's buying has spooked the market....lol.
Well we must wait a week for the interim result.

[oldtech]

No surprises there.!!!
Snoopy's buying has spooked the market....lol.
Well we must wait a week for the interim result.

Four more shopping days to either grab the bargain of the century or land more in debt.

19/02/2019 at 08:31, we will be patting ourselves on the back for getting in early, or crying buckets of tears

[oldtech]

Heck, I've just seen the closing price ... where did that come from?

I've been holding off from topping up ... don't really have the cash ... but I might just have to dig deep.

[King1212]

Four more shopping days to either grab the bargain of the century or land more in debt.

19/02/2019 at 08:31, we will be patting ourselves on the back for getting in early, or crying buckets of tears

according to the market it is more likely crying buckets of teas with tissue wiping eyes nonstop?

[couta1]

Heck, I've just seen the closing price ... where did that come from?

I've been holding off from topping up ... don't really have the cash ... but I might just have to dig deep. A real bargain unlike nearly all the other divvy paying stocks at the moment.

[Balance]

A real bargain unlike nearly all the other divvy paying stocks at the moment.

Market obviously expecting something baaad?

Very strange that the intos are not putting up their hands.

[Snow Leopard]

NZ $80,000 is a lot of money to save.
You living in that hotel for 3 years.?

Told my broker I had saved 80,000 Thai Baht (less than NZ$4,000) by cancelling the Executive Suite and sleeping on a park bench (though the squirrel reckons I should be paying something) and to spend it on HGH.

One panic exchange of emails later...


Heck, I've just seen the closing price ... where did that come from?

I've been holding off from topping up ... don't really have the cash ... but I might just have to dig deep.

broker desperately trying to sell $76,000 of HGH he bought in error. ;)

[oldtech]

Told my broker I had saved 80,000 Thai Baht (less than NZ$4,000) by cancelling the Executive Suite and sleeping on a park bench (though the squirrel reckons I should be paying something) and to spend it on HGH.

One panic exchange of emails later...

broker desperately trying to sell $76,000 of HGH he bought in error. ;)

LOL

"Sell, dammit, SELL!"

[boysy]

Not long to wait either way, housing market in AUS and NZ not helping sentiment in the interim, banks had a relief rally seems HGH bypassed. How much negativity and growth is built into the SP is the $64,000 question...

[winner69]

Share price down about 17% since the great restructure - is the market saying they didn’t think the restructuring was such a great idea.

Seems years ago the share price was as low as this

Half year report has to be a doozy or else anything could happen

[RTM]

Share price down about 17% since the great restructure - is the market saying they didn’t think the restructuring was such a great idea.

Seems years ago the share price was as low as this

Half year report has to be a doozy or else anything could happen

Do you really think so Winner ? Let’s say it’s just an ordinary report, some growth, dividend maintained. And they acknowledge some kind of negative reaction to the Australian issues and the loss of the mortgage brokers. That’s what I am expecting. But will the price really drop a lot further ?

Personally I don’t really think so. The PE ( hard to find at the moment) is undemanding. The dividend is good and hopefully they maintain it. I think it’s gone about as low as it will. If I was not already over weighted with them, I would buy a few more. Disc. Hold, Avg 106c

Hope I am right.

[Beagle]

At $1.33 the metrics look almost too compelling that I am concerned and I think the market is pricing in at least a 50/50 chance of a recession in 2020 and /or we've got a leaky ship and insiders are aware of a dramatic increase in bad and doubtful debt provisioning in the announcement next week.
I would like to buy more but my nose is telling me something funny is up.

[King1212]

Well...a lot of angry sellers there.....stop loss trigger...sell..sell.sell

[Balance]

Well...a lot of angry sellers there.....stop loss trigger...sell..sell.sell

Don't discount margin call selling!

Looks like Forbar type style selling from their leveraged finance book!

[BlackPeter]

Do you really think so Winner ? Let’s say it’s just an ordinary report, some growth, dividend maintained. And they acknowledge some kind of negative reaction to the Australian issues and the loss of the mortgage brokers. That’s what I am expecting. But will the price really drop a lot further ?

Personally I don’t really think so. The PE ( hard to find at the moment) is undemanding. The dividend is good and hopefully they maintain it. I think it’s gone about as low as it will. If I was not already over weighted with them, I would buy a few more. Disc. Hold, Avg 106c

Hope I am right.

Here are your PE"s (at SP = $1.33):

Forward PE (based on average of next 3 years forecasted earnings) is 9.8;
forward earnings CAGR is 7.4

backward PE (based on the last 6 years earnings) is 14;
backwards earnings CAGR is 13.

So - earnings growth expected to drop, but 7% pa is still no reason to hide under a rock, particularly in combination with a forward PE of under 10.

Couldn't resist and bought back in ... lets hope KW's famous words won't haunt me.

[King1212]

Don't discount margin call selling!

Looks like Forbar type style selling from their leveraged finance book!

nah..I will never sell my HGH...it is a cash cow....good dividend share

[Beagle]

Here are your PE"s (at SP = $1.33):

Forward PE (based on average of next 3 years forecasted earnings) is 9.8;
forward earnings CAGR is 7.4

backward PE (based on the last 6 years earnings) is 14;
backwards earnings CAGR is 13.

So - earnings growth expected to drop, but 7% pa is still no reason to hide under a rock, particularly in combination with a forward PE of under 10.

Couldn't resist and bought back in ... lets hope KW's famous words won't haunt me.

Never buy in a downtrend. Those words have been ringing VERY LOUD in my ears today !!!! I agree the metrics look compelling.

[winner69]

The dividend is good and hopefully they maintain it. I think it’s gone about as low as it will. If I was not already over weighted with them, I would buy a few more. Disc. Hold, Avg 106c.

Hopefully maintain the divie you say ....hasn’t changed increased for a year or so now so what you reckon would happen if the divie was not maintained ...put to rest that great phrase ever increasing divies eh

Disc: Hold. Average - Minus $0.35

[King1212]

Never buy in a downtrend. Those words have been ringing VERY LOUD in my ears today !!!! I agree the metrics look compelling.


Well..it has been downtrend since last year peak..$2.12....for sure it will bounce back at one stage

[Beagle]

Some dog who picked the top at $2.14 reckons he might have nailed very close to the bottom at $1.33. Couldn't help myself.

Sharing my latest sector comparative research which is based on yesterday's prices so forward PE is even more compelling for HGH at $1.33 today. Keep in mind Aussie banks face multi billion fines for their reckless behaviour.
Sector comparison - all figures consensus average analyst view off market screener 4 traders site.
Forward PE's for FY19, FY20 FY21
ANZ 11.3, 10.8, 10.8
NAB 10.5, 10.2, 10.3
WBC 11.3, 11.4, 11.7
BEN 12.1, 12.1, 12.4
CBA 13.2,13.8,14.2
BOQ 11.9, 11.9, 12.3
HGH 11.6, 9.9, 9.3
Avg 11.6, 11.4, 11.6 (avg = sector average)

Keep in mind not only above expensive fines only for Aussie banks but HGH's better capitalisation rate and no issues with RBNZ capital requirements, its apparent better forecast eps growth and its the only company with which we can get full imputation credits.
American financials as a sector up 13% YTD on the US markets according to CNBC.
HGH has gone backwards ?
Opportunity appears to be knocking pretty loudly !...so loudly it drowned KW's advice out of my head.

My rating BBB (Beagle busy buying)

[BlackPeter]

Some dog who picked the top at $2.14 reckons he might have nailed very close to the bottom at $1.33. Couldn't help myself.

Sharing my latest sector comparative research which is based on yesterday's prices so forward PE is even more compelling for HGH at $1.33 today. Keep in mind Aussie banks face multi billion fines for their reckless behaviour.
Sector comparison - all figures consensus average analyst view off market screener 4 traders site.
Forward PE's for FY19, FY20 FY21
ANZ 11.3, 10.8, 10.8
NAB 10.5, 10.2, 10.3
WBC 11.3, 11.4, 11.7
BEN 12.1, 12.1, 12.4
CBA 13.2,13.8,14.2
BOQ 11.9, 11.9, 12.3
HGH 11.6, 9.9, 9.3
Avg 11.6, 11.4, 11.6 (avg = sector average)

Keep in mind not only above expensive fines only for Aussie banks but HGH's better capitalisation rate and no issues with RBNZ capital requirements, its apparent better forecast eps growth and its the only company with which we can get full imputation credits.
American financials as a sector up 13% YTD on the US markets according to CNBC.
HGH has gone backwards ?
Opportunity appears to be knocking pretty loudly !...so loudly it drowned KW's advice out of my head.

My rating BBB (Beagle busy buying)

Well, here we have the first and long expected reversal signal: BBB! Lets hope other indicators will follow and confirm ...

[freddagg]

Some dog who picked the top at $2.14

I think you might have already mentioned that.

Thanks for the research, I also just bought at at 1.33 and will keep buying until it stops dropping.

[Beagle]

Well, here we have the first and long expected reversal signal: BBB! Lets hope other indicators will follow and confirm ...

Hope so mate. If this isn't the bottom I'm hopeful its very very close.

[RTM]

At $1.33 the metrics look almost too compelling that I am concerned and I think the market is pricing in at least a 50/50 chance of a recession in 2020 and /or we've got a leaky ship and insiders are aware of a dramatic increase in bad and doubtful debt provisioning in the announcement next week.
I would like to buy more but my nose is telling me something funny is up.

A couple of comments....
1) They have not been shown to be a leaky ship in previous years.
2) A recession will affect far more stocks than Heartland. In fact one could argue that their Seniors Loans might do even better in a recession.

[RTM]

Here are your PE"s (at SP = $1.33):

Forward PE (based on average of next 3 years forecasted earnings) is 9.8;
forward earnings CAGR is 7.4

backward PE (based on the last 6 years earnings) is 14;
backwards earnings CAGR is 13.

So - earnings growth expected to drop, but 7% pa is still no reason to hide under a rock, particularly in combination with a forward PE of under 10.

Couldn't resist and bought back in ... lets hope KW's famous words won't haunt me.

Thanks for that BlackPeter.
Its not always bad to buy in a down trend, but you need to be very confident in the company, and not bet the house with the first purchase. . I have done so several times and not regretted it. Of course....I have also regretted it sometimes as well !

[winner69]

A couple of comments....
1) They have not been shown to be a leaky ship in previous years.
2) A recession will affect far more stocks than Heartland. In fact one could argue that their Seniors Loans might do even better in a recession.

Jeff has often said that Heartland’s fortunes are tied to economic growth (GDP) and employment.

That implies recession will slow Heartland growth somewhat

[Beagle]

Well, here we have the first and long expected reversal signal: BBB! Lets hope other indicators will follow and confirm ...

A credit rating upgrade this year would be nice :)

[Baa_Baa]

Jeff has often said that Heartland’s fortunes are tied to economic growth (GDP) and employment.

That implies recession will slow Heartland growth somewhat

Recession is no good for business, especially banks. But history would show it's a great time buy income generating assets if you got the readies. Anyway, why you talking about recession?

[winner69]

Recession is no good for business, especially banks. But history would show it's a great time buy income generating assets if you got the readies. Anyway, why you talking about recession?


RTM and others talking recession, not me


No recession for a year or two in NZ, at least not until Orr wakes up and realises his dangerous gamble has failed.

[RTM]

RTM and others talking recession, not me


No recession for a year or two in NZ, at least not until Orr wakes up and realises his dangerous gamble has failed.

Nah...I’m not talking about recession. It was Beagle who suggested “I think the market is pricing in at least a 50/50 chance of a recession in 2020.......” But I do think if/when there is one, it will affect most stocks, not just a few. Won’t be singling just one out.

[Beagle]

Last year HBL paid 9.0 cps in dividends. If HGH can pay 9.5 cps fully imputed this year (9.5 / 0.72), heck that's 13.19 cps gross and as near as damm it a gross return of 10% at $1.33 AND the interim dividend is just around the corner. Hmmm I think one can afford to be quite patient seeking a recovery in the SP when they're getting a 10% gross divvy yield.

[percy]

Some of us old timer Heartlanders are enjoying a much higher [on average holding cost] divie yield..... lol.

[Baa_Baa]

Last year HBL paid 9.0 cps in dividends. If HGH can pay 9.5 cps fully imputed this year (9.5 / 0.72), heck that's 13.19 cps gross and as near as damm it a gross return of 10% at $1.33 AND the interim dividend is just around the corner. Hmmm I think one can afford to be quite patient seeking a recovery in the SP when they're getting a 10% gross divvy yield.

Then you'd we wise to wait until a bottom SP was confirmed, possibly locking in an even better yield, especially if one thinks a recession is around corner. No point imho in rushing into these things until there's an obvious SP up trend delivering tasty yields and capital gains. Then again maybe you picked the bottom, there's a recent $1.32 price support precedent that suggests you might have. Not infallible, but worth keeping an eye on. Personally I'd rather leave a decision until the last minute.

[winner69]

Some of us old timer Heartlanders are enjoying a much higher [on average holding cost] divie yield..... lol.

I can’t work my yield out — calculator goes wonky when I punch in 13.16 / -35

[Snoopy]

YearDividends Paid 'per share'Significant Event During Year'

[/TR]

FY2014Not in Calculation1st April 2014: Seniors 'Reverse Mortgage' Business Acquired








FY20153.5cps + 3.0cps10th September 2014: invests in Harmony P2P startup


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


FY20164.5cps + 3.5cps


FY20175.0cps + 3.5cps


FY20185.5cps + 3.5cps


FY20195.5cps + ?.?cps



Average FY2015 to FH2019 inclusive8.33cps




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



Plugging in a representative yield of 7.5%, one that IMO represents an appropriate risk for the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

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

8.333c / (0.72 x 0.075) = $1.54

This $1.54 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.23 to $1.85.

But if the share does drift back towards my fair value mid point of $1.54, that might be the time to -finally- add HBL to my portfolio.



For those who have forgotten what I posted last October



Then you'd we wise to wait until a bottom SP was confirmed, possibly locking in an even better yield, especially if one thinks a recession is around corner. No point imho in rushing into these things until there's an obvious SP up trend delivering tasty yields and capital gains. Then again maybe you picked the bottom, there's a recent $1.32 price support precedent that suggests you might have. Not infallible, but worth keeping an eye on. Personally I'd rather leave a decision until the last minute.


A dividend hound following your instructions would never invest Baa-Baa. There is always a possibility of locking in a better yield. IMO you have to decide what yield is acceptable to you and make your investment decisions based on that. There is no 'right answer' to this question. It is a matter of individual judgement that each shareholder must make for themselves.

In my case I try to look over the business cycle because the chances are I will hold over the business cycle. I want to buy at the lowest price (highest yield) I reasonably can. Buying just before a recession (share prices are forward looking) gives me the best opportunity to do just that. Any share price can always go up, go down or stay the same. Buying when a trend reverses will guarantee you do not get in at the lowest price and does not guarantee that the aforementioned trend will not suddenly reverse again. At that point a trader might sell, possibly at a loss and certainly incurring brokerage - trading their profits away. There are no guarantees in this game and with the benefit of hindsight I could have got a better yield on my HGH shares that I bought. But do I regret buying a couple of weeks ago? No. Because:

1/ No-one has the benefit of hindsight at the time they buy. AND
2/ I was very happy with the yield I got.

You have to remember that the market is a mechanism to offer you deals for buying and selling your shares. There is no compulsion to act on these daily offers to buy or sell. 99% of shareholders don't on any particular day.

SNOOPY

[oldtech]

Snoopy, in your formula above you write:

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

8.333c / (0.72 x 0.075) = $1.54

Sorry if I'm missing something, I don't see where the 0.72 comes from. Could you explain please, for the benefit of an old tech?

[Snoopy]

Snoopy, in your formula above you write:

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

8.333c / (0.72 x 0.075) = $1.54

Sorry if I'm missing something, I don't see where the 0.72 comes from. Could you explain please, for the benefit of an old tech?

Thanks for the question oldtech. The 8.333c is a representative dividend figure with tax paid. If you go down to a bank and put money in a term deposit the rate they quote to you will be before tax is paid. So to get a better 'like with like' comparison I prefer to look at dividends before tax is paid. The company tax rate in New Zealand is 28%. That means you keep 72% of your return and the government keeps 28% (28% + 72% = 100%). The factor '0.72' in the denominator of my calculation is therefore the factor I am using to convert my annual indicative dividend figure of 8.333c to the 'before tax dividend figure' of.

8.333c / 0.72 = 11.57c (note 11.57c x 0.72 = 8.333c)

The technical term for 'before tax dividend' is the 'gross dividend'. The after tax dividend figure of 8.333c is normally termed the 'net dividend'.

HTH

SNOOPY

[bull....]

im thinking div cut is on the cards

[Snoopy]

im thinking div cut is on the cards


The first half year paid dividend was 5.5c. If the second half dividend of 3.5c is maintained, that gives a full year dividend of 9.0c. I am modelling a business cycle dividend 8.33c. That represents a 7% dividend cut from current levels. That means I am modelling a dividend cut (which doesn't mean I necessarily expect it) and the investment case for HGH still stacks up.

SNOOPY

[winner69]

im thinking div cut is on the cards

Never, never will happen

Profits up - divies up ....even though they haven’t increased them for a while

Bull......this company has a record of ever increasing fully imputed dividends

[bull....]

Never, never will happen

Profits up - divies up ....even though they haven’t increased them for a while

Bull......this company has a record of ever increasing fully imputed dividends

regulatory costs are increasing in aus for bank, finance related businesses look at all the commentary in aus about increased costs going forward. in nz rbnz capital requirements im thinking hgh need to be cautious until everything known. if div goes up i be surprised and guess it will be a very good div yield company

[Balance]

Never, never will happen

Profits up - divies up ....even though they haven’t increased them for a while

Bull......this company has a record of ever increasing fully imputed dividends

Talked to a Sydney based fundie 2 days ago who cut their position in HGH last year.

Two reasons - they have enough problems with their own banking exposure without taking on any in NZ but they are also very concerned about HGH's exposure to the Oz property market.

https://www.smh.com.au/money/investing/7-trillion-question-how-low-will-house-prices-go-20190214-p50xpc.html

Let's hope HGH make a real effort to explain their exposure and sensitivity to that market - in simple terms and in plain English!

Otherwise, there will be only Kiwis left in this stock as the Ozzies continue to sell down and out.

[winner69]

The Heartland 2022 Notes priced at 3.3% at the moment

Dividend yield 6.7% - gives you some idea of the ‘risk’ the market sees with holding the shares

[bull....]

The financial services industry today faces a great deal of change: this includes future policy settings, shifts in regulation, and material impacts on business distribution models," chief executive Michael Cameron said

http://www.thebull.com.au/articles/a/80162-suncorp-ups-post-hayne-investment-by-$50m.html

was what suncorp were saying yesyerday said there reg cost have increased 50m

i own a very small parcel long time waiting to see results before i consider what to do

[oldtech]

Thanks for the question oldtech. The 8.333c is a representative dividend figure with tax paid. If you go down to a bank and put money in a term deposit the rate they quote to you will be before tax is paid. So to get a better 'like with like' comparison I prefer to look at dividends before tax is paid. The company tax rate in New Zealand is 28%. That means you keep 72% of your return and the government keeps 28% (28% + 72% = 100%). The factor '0.72' in the denominator of my calculation is therefore the factor I am using to convert my annual indicative dividend figure of 8.333c to the 'before tax dividend figure' of.

8.333c / 0.72 = 11.57c (note 11.57c x 0.72 = 8.333c)

The technical term for 'before tax dividend' is the 'gross dividend'. The after tax dividend figure of 8.333c is normally termed the 'net dividend'.

HTH

SNOOPY

Ahh, I get it! Thanks Snoopy!

[beetills]

I read where some people are concerned with HGH exposure to the Aus property market.
My only concern would be if the borrowers live to long.The % of the loans taken out compared to valueation is small which indictes to me that the market would have to collapse over 60%.
No expert so could be totally incorrect.

[Beagle]

Talked to a Sydney based fundie 2 days ago who cut their position in HGH last year.

Two reasons - they have enough problems with their own banking exposure without taking on any in NZ but they are also very concerned about HGH's exposure to the Oz property market.

https://www.smh.com.au/money/investing/7-trillion-question-how-low-will-house-prices-go-20190214-p50xpc.html

Let's hope HGH make a real effort to explain their exposure and sensitivity to that market - in simple terms and in plain English!

Otherwise, there will be only Kiwis left in this stock as the Ozzies continue to sell down and out.


Pretty conservative lending limits on REL have been well explained before but another refresher probably wouldn't hurt given recent declines in the Australian market.
I'm more concerned about their unsecured lending through Harmoney as the delinquent loan rate there can be very high.

[Balance]

Pretty conservative lending limits on REL have been well explained before but another refresher probably wouldn't hurt given recent declines in the Australian market.
I'm more concerned about their unsecured lending through Harmoney as the delinquent loan rate there can be very high.

Agree with you but HGH should explain in simple terms how exposed they are to falling property prices - takes away any concerns.

[percy]

Agree with you but HGH should explain in simple terms how exposed they are to falling property prices - takes away any concerns.

More than fully explained in HGH's 19th November "Heartland Investor Day Presentation."

[Beagle]

More than fully explained in HGH's 19th November "Heartland Investor Day Presentation." http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HGH/327018/290747.pdf

[Balance]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HGH/327018/290747.pdf

I read it and it's clear as mud - especially from pages 34 onwards.

[Beagle]

I read it and it's clear as mud - especially from pages 34 onwards.

You're a bright guy mate. I am sure you can wrap your head around this and the risks. Let me frame it up another way. Its off the charts safer than lending unsecured through Harmoney for some overseas trip that some punters can't be bothered saving for or consolidating lots of other unsecured loans they have...

[Balance]

You're a bright guy mate. I am sure you can wrap your head around this and the risks. Let me frame it up another way. Its off the charts safer than lending unsecured through Harmoney for some overseas trip that some punters can't be bothered saving for or consolidating lots of other unsecured loans they have...

Of course it is.

That's why all the other players decided to get out of it and leave HGH to become the leading player!

I recall CDOs were safe as houses too!

HGH shareholder so I am just trying to point HGH management to answer the concerns simplistically - at what level of property value drops does HGH have to pump in more supporting capital on its balance sheet, and its securities need write-offs.

[Beagle]

The other banks have a far lower capitalisation rate.. Various future modeling scenario's outlined in that report give you a good idea of the risks. Have another go at reading it would be my suggestion.

[percy]

Of course it is.

That's why all the other players decided to get out of it and leave HGH to become the leading player!

I recall CDOs were safe as houses too!

HGH shareholder so I am just trying to point HGH management to answer the concerns simplistically - at what level of property value drops does HGH have to pump in more supporting capital on its balance sheet, and its securities need write-offs.

I have been told there are two major reasons for the other players to leave the market.
1] They are not set up for a loan process that takes a month or more, and requires more than a few boxes to be ticked off.Consultations with family and their lawyer is too hard for them,and opens up too many opportunities for them to give poor advice.
2] They are scared of backlash from "the family", when they find out their legacy has diminished because of compound interest charges.

.

[Balance]

I have been told there are two major reasons for the other players to leave the market.
1] They are not set up for a loan process that takes a month or more, and requires more than a few boxes to be ticked off.Consultations with family and their lawyer is too hard for them,and opens up too many opportunities for them to give poor advice.
2] They are scared of backlash from "the family", when they find out their legacy has diminished because of compound interest charges.

Makes sense.

Thanks, Percy!

[Snoopy]

HGH shareholder so I am just trying to point HGH management to answer the concerns simplistically - at what level of property value drops does HGH have to pump in more supporting capital on its balance sheet, and its securities need write-offs.


Below was my answer to this question in the middle of 2018 Balance. Sorry I haven't adjusted the figures to reflect the last reported financial year. But the underlying argument is still valid.



I have always found Heartland's disclosure compares favourably with what is disclosed by other banks.

If you look in the Financial Report 2017, note 26 (Capital Adequacy), you will find the requirements of the Basel 3 standards that must be complied with, including what happens in times of 'economic stress'.

In note 26c, the relative risks of the entire loan book, as estimated by 'relative risk rating' is there.

Looking at the same table we can see that the reverse mortgages with an LVR <60% total $885.278m.

So $885.278m/$922.748m = 96% of all the reverse mortgages on the books.

That means that if every properties` underlying backing value dropped by 40%, then Heartland would still recover in full 96% of their reverse mortgage loans. Only the remaining 4% of loans would be wiped out (total $37.470m). With shareholder capital of $565.595m on the balance sheet, I don't think such a loss (a fairly extreme stressed scenario) would 'break the bank'.


After further thought, my conclusion above may be oversimplifying things. What I have said above is true if all debts to Heartland remain static. But in general a reverse mortgage does not behave like that.

If you take out a 'fixed reverse mortgage amount', then the interest keeps accumulating, even if the amount lent to the homeowner is static. So it is possible that some of those reverse mortgages with an LVR less than 60% will become LVRs greater than 60% with the passage of time as the interest bill accrues. But such an event is more liable to happen if the LVR at the time of a 'property crisis' is above 50% (say). And we don't know how many reverse mortgage loans fall into this category.

Conversely if property values keep going up by enough, we could still have a situation where LVRs are reducing because the increase in property value more than cancels out the interest accruing on the loan.

Things are never quite as simple as they might seem in the finance world. I don't see anything in Heartland's published FY2017 figures that would change my view that Heartland could survive a 40% drop in property prices and still emerge viable of the other side of such an event. The problem I suppose would be a 40% drop in house prices would likely be coupled with downturn in Heartland's other areas of business. So surviving a 40% fall in house prices while farmers and small business people also cut back on their lending simultaneously might not be so easy! Sorry to finish on a gloomy note!


The risk is the part of the quote that I have highlighted in bold. The good thing in this scenario is that there may not be a good correlation between house prices in Sydney and rural lending in New Zealand (for example). The less correlation there is between the different areas of Heartland's loan book, the greater the property downturn in Australia that can be managed.

SNOOPY

[Balance]

Below was my answer to this question in the middle of 2018 Balance.

The risk is the part of the quote that I highlighted in bold.

Thanks, Snoopy - easy to understand!

My take is that there could be a real risk that these reverse mortgages could be problematic in years to come - combination of property prices falling over the next 5 years even while HGH's loans levels keep increasing with the compounding interest payments.

* Property prices in Sydney & Melbourne have gone up 80% since 2011. The factors which led to the explosive price increases are either static (interest rates, wages growth) or declining (housing affordability, investors' appetite, banks' appetite to lend, speculative fund flows from Asia etc). I know of one recent sale in Sydney where the sale of a unit went through at 15.6% below CV - scary! In Auckland, I have been offered properties by desperate real estate agents at 15% below CV already in recent months.

[percy]

Hold off Balance until properties in Sydney sell 60%below CV,then you may catch some HGH want to move.!!
Ring HGH today and tell them you are a BIG" buyer.They may take your number?
You will have to be a cash buyer as the Australian Banks will not be able to lend,as they have gone bust.
Remember Heartland Bank will be the last one standing.!!

[freddagg]

Hold off Balance until properties in Sydney sell 60%below CV,then you may catch some HGH want to move.!!
Ring HGH today and tell them you are a BIG" buyer.They may take your number?
You will have to be a cash buyer as the Australian Banks will not be able to lend,as they have gone bust.
Remember Heartland Bank will be the last one standing.!!

So maybe investing in shares in HGH is safer than depositing money with an Aussie owned bank.

[Balance]

Hold off Balance until properties in Sydney sell 60%below CV,then you may catch some HGH want to move.!!
Ring HGH today and tell them you are a BIG" buyer.They may take your number?
You will have to be a cash buyer as the Australian Banks will not be able to lend,as they have gone bust.
Remember Heartland Bank will be the last one standing.!!

Not necessarily - depends on where the properties mortgaged are situated?

Remember that the Aussie banks have the implicit guarantee of their government over there. NZ made the mistake of no implicit guarantee and we lost all our banks to them - BNZ, Trust Bank, ASB, Countrywide, NZI etc and some were allowed to go broke - DFC for eg. Pathetic really.

Bear in mind I am a holder, Percy so I am passing on my thoughts and feedbacks from what I gather. Put it this way - given market trend and China investors (speculators) offloading, I certainly WILL NOT be a residential property investor anytime soon!!!!

And given HGH sp trend, I will not be adding to my holding either!

[horus1]

i am adding. This is a sound company my reading of the RB policies are that they restore a balanced field in NZ for the local banks who are not saints. Looked at my credit card today 22% interest rates.??

[macduffy]

Not arguing against a govt g/- for depositors but it's stretching things a bit to include the Development Finance Co as a "bank". It was intended to finance ventures that were too risky for the banks - rather a govt sponsored venture capitalist, as I recall.

[King1212]

Sell..sell...sell..I buy ...buy ...n buy.....:t_up:

[couta1]

Sell..sell...sell..I buy ...buy ...n buy.....:t_up: This things gone real doggy doo.

[King1212]

Snoppy cut loss....his $1.32 triggered..once he out..it will bounce back:D

[couta1]

Snoppy cut loss....his $1.32 triggered..once he out..it will bounce back:D Hopefully it's not inside knowledge based selling or a few of us are going to get fried.

[King1212]

Hopefully it's not inside knowledge based selling or a few of us are going to get fried.

This company has no history of leaking ship..not like all oz companies.....

[bull....]

something smelly here , too much selling before results

[Balance]

something smelly here , too much selling before results

Agree with you that something really smells here - too much and too many volume sellers without institutional buying.

My reading of sp action is that -




- THERE WILL be a capital raising when they announced next week.

You read it here first.

[bull....]

Agree with you that something really smells here - too much and too many volume sellers without institutional buying.

My reading of sp action is that -




- THERE WILL be a capital raising when they announced next week.

You read it here first.

thats the instos for you sell and buy back cheaper in the raise ( if true )

[Beagle]

Have to say the Beagle agrees with Balance and even Bull here. My nose says the selling is too persistent and doesn't feel right.

[Balance]

https://finance.yahoo.com/news/warren-buffett-doubles-down-big-215027393.html

Might pay to get the checkbook (or password) ready and follow the MAN?

[Balance]

thats the instos for you sell and buy back cheaper in the raise ( if true )

Trades going through look too much like retail buying (many smaller individual orders) and (in the know, volume) institutional selling?

[bull....]

Trades going through look too much like retail buying (many smaller individual orders) and (in the know, volume) institutional selling?

lot of insto selling is in small parcels now , bot selling and buying by instos in small quantities relative to the volume on bid and offer

[King1212]

I reconk just a fear...remembered the sp dripped to $1.10 ish...couple years ago...

[Balance]

I reconk just a fear...remembered the sp dripped to $1.10 ish...couple years ago...

At this price level, it's okay if they go ahead with a rights issue as long as it's pro-rata and not one of those nonsensical placements to institutions at a deep discount and all other shareholders limited to $5k or $15k, maximum.

[winner69]

As suggested may need more cash .....especially if REL things have really taken off.

Been paying too much out in divies last few years

Wouldn’t be the first time they had a capital raise and then given most back to share holders as a divie ....dumb eh

[King1212]

It is too soon to decide how any future capital requirement would be met but,


given the quantum of the requirement and the length of the transition period,


and based on Heartland's forecasts, it would be possible for Heartland to


satisfy the requirement using its dividend reinvestment plan.

[percy]

At this price level, it's okay if they go ahead with a rights issue as long as it's pro-rata and not one of those nonsensical placements to institutions at a deep discount and all other shareholders limited to $5k or $15k, maximum.

Most probably be a pro-rata rights issue to fund the huge growth HGH are achieving, driven by their Australian REL business, which contines to grow "GangBusters".
Increased divie ??? [I live in hope].
SPP I will not support.

[Balance]

As suggested may need more cash .....especially if REL things have really taken off.

Been paying too much out in divies last few years

Wouldn’t be the first time they had a capital raise and then given most back to share holders as a divie ....dumb eh

Haha - what the Ozzie banks have been doing since time immemorial?

[winner69]

Jeez ...we need to go back to July 2016 to have a share price this low ....thats some time sgo

[Balance]

Hold off Balance until properties in Sydney sell 60%below CV,then you may catch some HGH want to move.!!
Ring HGH today and tell them you are a BIG" buyer.They may take your number?
You will have to be a cash buyer as the Australian Banks will not be able to lend,as they have gone bust.
Remember Heartland Bank will be the last one standing.!!

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12204230

100 fewer million dollar property suburbs in Sydney in latest survey.

And better wish HGH has not done reverse mortgages in Box Hill!

"Houses in Box Hill in Sydney's north west saw the biggest drop in value, falling from A$1.5 million to A$896,000 in a year" - there's your 40% drop already and all in 1 year!

[Snoopy]

I recently assisted friends parents getting a REL from Heartland. I believe they are typical REL borrowers, mid-late 70s and needed money for small renovations and a new car.
Heartland sent out very good documentation to explain the risks and details of the loans.
In their case, if house prices do not rise at all over the next 20 years, interest rates stay at 7.5% and both of this old couple live beyond 104 years old, Heartland will suffer as the equity would be gone in the house. However, if house prices average 2.5% increase over that time, the equity would pretty much stay unchanged (slightly deteriorate).

The average age of a Heartland's new REL customer is 73 on last numbers I saw, average new loan size is $45k and the medium loan term to date is just over 8 years.

Below are Heartland's rules for LVR
Age of youngest borrower Maximum % of home loan's value available
65 20%
70 25%
75 30%
80 35%
85 40%

I remain steadfast in my view that these loans are low risk for HGH.



My take is that there could be a real risk that these reverse mortgages could be problematic in years to come - combination of property prices falling over the next 5 years even while HGH's loans levels keep increasing with the compounding interest payments.

* Property prices in Sydney & Melbourne have gone up 80% since 2011. The factors which led to the explosive price increases are either static (interest rates, wages growth) or declining (housing affordability, investors' appetite, banks' appetite to lend, speculative fund flows from Asia etc). I know of one recent sale in Sydney where the sale of a unit went through at 15.6% below CV - scary! In Auckland, I have been offered properties by desperate real estate agents at 15% below CV already in recent months.

Divergent views of the risk of reverse mortgages from Iceman and Balance.

Time to run through a few scenarios to allow Balance to maintain hiser cool?

Example 1: 85 year old couple take out a 40% REL loan at an 8% interest rate for ten years. House price falls 20% over first five years of loan then flatlines for the next 5 years. We will say the house is worth $1m at the start of this process to keep the numbers easier.

1/ Value of property at the end of the loan period is $800,000.
2/ Loan taken out $400,000.
3/ Interest accrued over first year: 0.08 x $400,000 = $32,000. The interest accrued over a ten year period is listed below:



Cumulative Loan Capital at Start of YearInterest Accrued over Year


Year 1$400,000$32,000


Year 2$432,000$34,560


Year 3$466,560$37,245


Year 4$503,805$40,304


Year 5$544,109$43,529


Year 6$587,638$47,011


Year 7$634,649$50,772


Year 8$685,421$54,834


Year 9$740,255$59,220


Year 10$799,475$63,958


Year 11$863,433



Loss for Heartland over loan period: $800,000 - $863,433 = $63,433

Example 2: 65 year old couple take out a 30 year 20% REL loan at an 8% interest rate for the next ten years and a 6% interest rate for the ensuing 20 years. House price falls 20% over first five years of loan then flatlines for the next 5 years, then increase by 1% per year over the subsequent 20 years. We will say the house is worth $1m at the start of this process to keep the numbers easier.

1/ Value of property at the end of the loan period is:

$800,000 x (1.01)^20 = $976,152

2/ Loan taken out $200,000.
3/ Interest accrued over first year: 0.08 x $200,000 = $16,000. The interest accrued over a thirty year period is listed below:



Cumulative Loan Capital at Start of YearInterest Accrued over Year


Year 1$200,000$16,000


Year 2$216,000$17,280


Year 3$233,280$18,662


Year 4$251,942$20,155


Year 5$272,097$21,768


Year 6$293.865$23,509


Year 7$317,374$25,390


Year 8$342,764$27,421


Year 9$370,185$29,615


Year 10$399,800$31,984


Year 11$431,784$25,907


Year 12$457,691$27,461


Year 13$485,153$29,109


Year 14$514.262$30,856


Year 15$545,118$32.707


Year 16$577,825$34,670


Year 17$612,495$36,750


Year 18$649,245$38,955


Year 19$688,200$41,292


Year 20$729,492$43,770


Year 21$773,262$46,396


Year 22$819,658$49,180


Year 23$868,838$52,130


Year 24$920,968$55,258


Year 25$976,226$58,573


Year 26$1,034,800$62,088


Year 27$1,096,888$65,813


Year 28$1,162,701$69,762


Year 29$1,232,463$73,948


Year 30$1,306,411$78,385


Year 31$1,384,756



Loss for Heartland over loan period: $976,152 - $1,384,756 = $408,604


SNOOPY

[Balance]

Jeez ...we need to go back to July 2016 to have a share price this low ....thats some time sgo

With the benefit of hindsight, I think that HGH's restructuring to spin the Reverse Mortgage (A$640m) out of HBL may have contributed to the sharper focus on this perceived higher risk business in the face of Aussie falling house prices?

Would have been better to bite the bullet last year and just do the capital raise then.

All we need now is for the RBA to require more capital into the Reverse Mortgage business and it's going to be double ouch?

Not a happy holder but happy to support a pro-rata capital raise.

[Balance]

Divergent views of the risk of reverse mortgages from Iceman and Balance.

Time to run through a few scenarios to allow Balance to maintain hiser cool?

Example: 85 year old couple take out a 40% REL loan at an 8% interest rate for ten years. House price falls 20% over first five years of loan then flatlines for the next 5 years. We will say the house is worth $1m at the start of this process to keep the numbers easier.

1/ Value of property at the end of the loan period is $800,000.
2/ Loan taken out $400,000.
3/ Interest accrued over first year: 0.08 x $400,000 = $32,000. The interest accrued over a ten year period is listed below:



Cumulative Loan Capital at Start of YearInterest Accrued over Year


Year 1$400,000$32,000


Year 2$432,000$34,560


Year 3$466,560$37,245


Year 4$503,805$40,304



SNOOPY

I get around $800,000 at the end of 10 years in cumulative loan value.

So if house prices do nothing but flat line, HGH is going to have to do capital raising to top up its capital base to support this business - on top of raising more funds to keep feeding the reverse mortgagors.

If house prices drop by more than 20% over the 10 years, HGH is under water.

Now you have me worried!

[winner69]

With the benefit of hindsight, I think that HGH's restructuring to spin the Reverse Mortgage (A$640m) out of HBL may have contributed to the sharper focus on this perceived higher risk business in the face of Aussie falling house prices?

Would have been better to bite the bullet last year and just do the capital raise then.

All we need now is for the RBA to require more capital into the Reverse Mortgage business and it's going to be double ouch?

Not a happy holder but happy to support a pro-rata capital raise.


I think you are right there Balance


The new Group structure makes Heartland more 'risky' as not seen as a bank to the same extent. (the cahade of being a bank served its purpose early on)


Maybe the market per now sees them more a 'finance company' and is rating them accordingly (hopefully not to the same extent as the likes of Flexigroup ....just joking)

[Snoopy]

I get around $800,000 at the end of 10 years in cumulative loan value.

So if house prices do nothing but flat line, HGH is going to have to do capital raising to top up its capital base to support this business - on top of raising more funds to keep feeding the reverse mortgagors.

If house prices drop by more than 20% over the 10 years, HGH is under water.

Now you have me worried!

Balance, the two examples I have quoted are extreme examples of REL holders taking up the maximum loans. Yet the average loan period is just 8 years. After 8 years in Example 1, Heartland can keep all their profits:

$800,000 - $740,455m = $59.545m

That figure is more indicative of the risk than the extreme I quoted. I have also assumed that our REL holders take out the maximum loan they are allowed. This is not what happens in practice. Personally I don't have an issue with how these REL loans are set up. from an overall perspective.

You have also said that Heartland may need to raise capital as a provision to take into account these future risks. Yet Heartland have already done this. That change came in the change in accounting standards last year where Heartland was required to provision for statistically predicted losses at the start of the loan period and not wait until a loan is actually impaired to account for the problem. Heartland think such provisioning is ridiculous and that when these REL loans mature they will have to write these provisions back. I am not so sure. But the point is, the provision for bad debts attached to these REL loans is on the Heartland books right now.

SNOOPY

[alex f]

65 20%
70 25%
75 30%
80 35%
85 40%

makes sense to me. I don’t think people draw the whole amount it is used for a few luxuries.
Looks less risky that a table mortgage for the bank

[Balance]

Thanks, Snoopy.

[Brain]

Do they lend as high as 40%?. I thought most were 10-15%

From memory their reverse mortgage calculator will allow you to borrow 50% but that’s when you reach 99 years of age.

I think it would be fair to say that Heartland do not take undue risks. :p

[Snoopy]

From memory their reverse mortgage calculator will allow you to borrow 50% but that’s when you reach 99 years of age.

I think it would be fair to say that Heartland do not take undue risks. :p

Jiroemon Kimura of Kyoto in Japan died in June 2013 aged 116. He was still living in his own home at the time. I predict significant problems for Heartland should they expand their REL business into the Japanese market.

SNOOPY

[Brain]

Jiroemon Kimura of Kyoto in Japan died in June 2013 aged 116. He was still living in his own home at the time. I predict significant problems for Heartland should they expand their REL business into the Japanese market.

SNOOPY

Yes but interest rates for home loans in Japan are around 1%. Heartland could still have charged Mr Kimura an exorbitant 4% compounding for 17 years and still get the money back.