HGH - Heartland Group Holdings

[mouse]

Many thanks Percy for your comments. Very interesting that you feel Sydenham is past its use by date for retail. I am sure HNZ will do pretty well once the sell hangover goes. We have people who bought at 50 cents taking profit, plus disillusioned investors wanting out. All depressing the share price.

[janner]

" As investors we need to note these changes and invest in go ahead companies, "..

Agree percy.. Why all the concern about Rakon ?? ..

Yesterdays people..

[winner69]

" As investors we need to note these changes and invest in go ahead companies, "..

Agree percy.. Why all the concern about Rakon ?? ..

Yesterdays people..

Rakon exciting as they come janner .... plenty of volatility and action and if traders play their cards right maybe heaps come their way ....... Heartland boring as at the moment (even though moossie wet his pants over them the other day) .... at least I think it was moossie



All to their own janner .... now janner its past your bed time so get percy to tuck you up in bed so you can have sweet dreams about Heartland

[janner]

Rakon exciting as they come janner .... plenty of volatility and action and if traders play their cards right maybe heaps come their way ....... Heartland boring as at the moment (even though moossie wet his pants over them the other day) .... at least I think it was moossie

Agree ..Plenty of volatility.. Plenty of Risk.. Not worth the minor effort worrying about it..

Bigger fish out there waiting to be hooked..



All to their own janner .... now janner its past your bed time so get percy to tuck you up in bed so you can have sweet dreams about Heartland

No No Winner... We ancients do not need so much sleep as you youngsters..

Which is only one of the reasons we are ahead .

Oh !!.. 4:30 rise .. That is am ... Not tea time..

[Huskeez]

Shouldnt be to far away

[Huskeez]

Where would i be without you moosie!
Your information is a little bit off there Huskeez, still have another week to go unfortunately...HNZ 04/02/2013 10:17 GENERAL REL: 1017 HRS Heartland New Zealand Limited GENERAL: HNZ: Heartland's Half Year Results Announcement NZX Release Heartland's Half Year Results Announcement 4 February 2013 Heartland New Zealand Limited (NZX: HNZ) intends to announce its Half Year Results for the six month period ending 31 December 2012 on Monday 25 February 2013.

[mouse]

I go for 1.5cents.

Anyone want to take a guess at a dividend (even if there is going to be one)?

[mouse]

I am still going for 1.5 cents. Since it is an interim, not a final. Plus its the first 'ordinary' dividend. They will be prudent, yet at the same time try to grow the dividend. In a prudent manner of course!

[percy]

Yeah that was a special one off though, as referred to in the November 30 communique:



30 November 2012

Heartland New Zealand Limited (Heartland) (NZX:HNZ) has adopted a dividend
policy, and determined to pay a special dividend.

Dividend Policy
The directors of Heartland have adopted a dividend policy. The policy is as
follows:
Heartland will determine dividends (both interim and final) based on its net
profit after tax, subject to maintaining a prudent level of capital for its
needs. Heartland's capital needs will vary from time to time, depending on a
range of factors (including regulatory and credit rating requirements,
general economic conditions, current and expected growth and the mix of
business). A key objective is to ensure an appropriate balance between
maximising shareholder returns, and protecting the interests of depositors
through prudent capital management.

Special Dividend
The directors of Heartland have resolved to pay a special dividend of 1.5
cents per share on 21 December 2012 to shareholders on the company's register
as at 5.00pm on 14 December 2012. This dividend will be fully imputed.



So, it sounds pretty straight forward that it is based on NPAT, but then they throw in cloudy, murky things like "general economic conditions" and "mix of business". In other words, you're guess is as good as mine, but I would guess it will be better than 1.5 cents if NPAT is met or exceeded!

The chairman,Bruce Irvine did add that they were looking at a number of opportunities.We have heard no more.However, should they have something in mind/close that may influence whether/or how much they pay in dividends.What I am looking to with this interim announcement, is on the progress made to make the business more profitable,progress made on troublesome property portfolio,and growth being achieved.They have laid the sound foundations,so now they should be getting on with it.I really do expect they will pay a divie,but not concerned how much it is,it is the state of the business and future prospects that is most important to me. future.

[Arbitrage]

And being a new bank I am sure they are well aware that the authorities will be watching them closely. I pick a conservative dividend that retains capital for growth and stability.

[CJ]

Given it is an interim, I would prefer a smaller dividend. That will give them a bit more time before the final dividend to see where things are going now they are a 'bank'.

However, they may want to go straight into being a dividend stock in which case paying a slowing increasing interim and final dividend might be their plan.

[winner69]

no divies!!! Save it for growth ... (and don't squander it!!!!)

agree belg .... Paying a divie now sends the wrong signal .... Use the earnings to make another 14% on earnings .... Instead of 14% on half of them eh

[Arbitrage]

the fact they paid a dividend before Christmas suggests the board are keen to get a cash return back to shareholders. I think they will pay something this time but not a lot.

[blobbles]

Come on guys, 1.5c divie is only 6 mill, they could easily repeat that and still have an improved cash position, particularly if they are continuing to grow like they have been!

[CJ]

$6M buys quite a few hotels on Park Place and Boardwalk for even better returns ;)I dont have that version of Monopoly. Is that like Mayfair and Parklane on the original?

[geezy]

hey guys, sorry that i m being lazy, but whens the payout for the divi date?

[Huskeez]

Niiiice back to 74cents , big mountain ofsellers @ 75

[Minerbarejet]

Hey Moosie if you could pick up that 398,000 at 75 there's not much after that. That would be really meaningful trading. You would be a legend.
Sellers keeping their heads down alright.

[Minerbarejet]

Depends what you want them for.

[robbo24]

I bought AIG at 37.50, and it's now almost $39, so it increased 3.5% in that time.

No big deal I say. Happy to hold winners..



3753 ¢
(USD)




107
[Down]
2.8%









Heartland was a much better buy, Sparky!

[robbo24]

What can you do - markets at work. Still. I have enough of both now that I'm happily placed for the future.

Agreed - I still higher in the short term than your buy-in though - I wasn't insulting you just highlighting the excitement of HEARTLAND BANK!

[Minerbarejet]

Moosie you will give yourself a (heartland) attack. Stay balanced and wait. You are in Hawkes Bay, I'm in Taranaki, now that's balance.

[Minerbarejet]

Have you got a case of Labatts Blue over there or Canadian Club. Hope you have because you will need it when it Heartland hits NTA. (Eventually) Patience is a virtue supposedly.

[Minerbarejet]

:DCrikey, that's the smoothest rye ever made. Are you going to drive your Lamborghini to pick up your dividend cheques?
Got a welcome to the Heartland Bank today - lovely to have you on board - that sort of thing. Notice there was no mention of reinvesting divs if available or perhaps I missed it.

[Minerbarejet]

Patience is a great virtue which I have learned over the past 2 years.
What took you so long?:D

[Minerbarejet]

Moosie - we have news - its all bad. When you are 70 two years seems like last week - suggest you make the most of it. Now the scene seems to be on the improve with Heartland we can put all the proceeds into NTL before long. Hope you actually drive a Toyota Corolla 1999. Non earning assets are nice to look at but don't amount to much in the long run especially if debt is involved.
May you make enough out of Heartland to get all the things you need.
Does Aratoi mean anything to you?

[mouse]

We do not have a normal market for Heartland at present. The traders who bought at less than 50 cents may be pretty happy to take their profit and buy Solid Energy, or some other company under pressure. Plus we have the original investors who have seen their cash destroyed. So they want out, and anything over 75 cents would satisfy. We may have to wait until the end of this year to get over a dollar. And that will depend upon reasonable profits and dividends.

That 75-76 cent ceiling is proving to be interesting, still people willing to sell even today. Pressure still building on the bid side though and those willing to pay 74 for it. Steady as she goes indeed!

[iceman]

We do not have a normal market for Heartland at present. The traders who bought at less than 50 cents may be pretty happy to take their profit and buy Solid Energy, or some other company under pressure. Plus we have the original investors who have seen their cash destroyed. So they want out, and anything over 75 cents would satisfy. We may have to wait until the end of this year to get over a dollar. And that will depend upon reasonable profits and dividends.

I think you are absolutely correct Moosie. Heartland's SP is being held down by influences from yesteryear and understandably so. There are still many negatively affected people holding shares and wanting to realise their capital. Many of them fairly mature and not interested in any "risky" investments. I have been taking advantage (in my view) of this situation and accumulating steadily over the last couple of months and am a very content shareholder with already very nice unrealised capital gains. I do expect further SP improvements and good dividend payments in years to come so am very happy with HNZ being a bit overweighted in my portfolio.

[Hoop]

I did a quick calculation yesterday assuming a continuation of a "conservative" EPS of 7 cents (6 cents last report, 5 the time before) with forecasted NPAT of $21M this report (lower end of the scale) and found that on a P/E of 15 the SP should be at a fair price of $1.05 - $1.10. This is more than reasonable I feel as every other stock is working around a P/E of 15 at the moment and the other banking stocks are at this level as well. Put in the fact that HNZ is realising its property investments and growing much faster than ANZ or WBC ever will, I think it could soon break out and become a growth stock for awhile when people actually realise what they have on their hands. Or not, and it will juts muddle like it has. At some point, I believe, there will be a tipping point where those disenfranchised early investors will be out and replaced with new blood that only sees upside to the SP. Where that point is, I don't know, but HNZ is very undervalued right now if I am correct and is one of the last few bargain plays available on the NZX.

Just my two cents :p

Disc - Holding

Over a long period of years as an investor..I got to observe some companies which year after year continually operate below the Average P/E Ratio of the NZX..

Is HNZ going to be another one of these companies...

Disc: Hold

[percy]

Over a long period of years as an investor..I got to observe some companies which year after year continually operate below the Average P/E Ratio of the NZX..

Is HNZ going to be another one of these companies...

Disc: Hold

No.
The sector HNZ is in has the pontential to be one of the fastest growing sectors on the NZX.We could be looking at 15% to 20% compounding growth for a good number of years.
They have achieved a great deal in a very short time;ie de merging from PGC,merging three business together [which was an achievement itself],getting through the Goverment Guarantee scheme,and obtaining the Banking Licence. All of this activity has cost a fortune.
This ground work is now behind us and we can look forward to steady growth from now on.

[winner69]

We do not have a normal market for Heartland at present..

Question .....what does a normal market look like?

Current hnz seems just normal activity between those keen to sell and those willing to buy

[winner69]

Over a long period of years as an investor..I got to observe some companies which year after year continually operate below the Average P/E Ratio of the NZX..

Is HNZ going to be another one of these companies...

Disc: Hold

Hoop .....you will banished from this thread for even thinking such thoughts

I will open another thread for you WHY HEARTLAND IS OVERVALUED ...THE CONTRARIAN VIEW

[percy]

Hoop .....you will banished from this thread for even thinking such thoughts

I will open another thread for you WHY HEARTLAND IS OVERVALUED ...THE CONTRARIAN VIEW

With a bit of luck SNOOPY will follow you there.!!! lol.
I'm happy here.!

[noodles]

I did a quick calculation yesterday assuming a continuation of a "conservative" EPS of 7 cents (6 cents last report, 5 the time before) with forecasted NPAT of $21M this report (lower end of the scale) and found that on a P/E of 15 the SP should be at a fair price of $1.05 - $1.10. This is more than reasonable I feel as every other stock is working around a P/E of 15 at the moment and the other banking stocks are at this level as well. Put in the fact that HNZ is realising its property investments and growing much faster than ANZ or WBC ever will, I think it could soon break out and become a growth stock for awhile when people actually realise what they have on their hands. Or not, and it will juts muddle like it has. At some point, I believe, there will be a tipping point where those disenfranchised early investors will be out and replaced with new blood that only sees upside to the SP. Where that point is, I don't know, but HNZ is very undervalued right now if I am correct and is one of the last few bargain plays available on the NZX.

Just my two cents :p

Disc - Holding

Moosie, Suggest you read the AGM preso. NPAT range is disclosed.

[janner]

A GENERAL ALERT !!!...

Any tremors found to be emitting from the Hawke Bay region should face deeper investigation...

A well known delusional Celica Driver is known to be in an unstable condition..

APROACH HIM WITH EXTREME CAUTION...

IF FOUND.. PLEASE TREAT AS DANGEROUS..

A TWENTY DOLLAR NOTE SHOULD BE PRODUCED .. UPWIND .. AS THE ONELY WAY TO ATTRACT HIS ATTENTION..

THE FMA SHOULD BE CONTACTED..

CAGING IS ALLOWED BY LAW..

Goes by the alias.. MOOSIE..

[janner]

moosie..moosie... MOOSIE !!!. ..

Stop dancing up and down on the same spot...

Tongariro is is beginning to erupt... ( TRUE )..

CONTROL YOUR SELF MAN !!!..

[mouse]

Twelve Hours to Go

[SCOTTY]

2c Divi - fully imputed :)

[mouse]

Happy to be wrong, with my 1.5 cents guess.
2c Divi - fully imputed :)

[Arbitrage]

NTA per share 90c

[winner69]

strange use of the phrase 'acceptable and sustainable earnings' ........... sounds like just ok and not a statement if you were aiming at that 14% ROE and $40m NPAT

Anyway in amarket where hard to lend people money probably quite 'acceptable' and they have excited punters with a decent divie .... belg for one will not be happy

[winner69]

the announcement will out a rocket under the share price .... punters love acceptable and staedy as she goes stuff these days

and look at that nta ... 90 cents now .... only 15 cents to go


up up and away

[GR8DAY]

the announcement will out a rocket under the share price .... Punters love acceptable and staedy as she goes stuff these days

and look at that nta ... 90 cents now .... Only 15 cents to go


up up and away



.......think that rocket might have been a dud winner??

[Snoopy]

Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2012 report.

The 'best case' scenario is that all loans are Tier 1. $1,939.29m of loans are outstanding. 20% of that figure is:

0.2 x $1,939.29m = $387.9m

Heartland has total equity of $374.8m which is insufficient no matter what the tier classification of the loans.

Result: FAIL TEST

However the numbers are moving in the right direction. Heartland are certainly doing the right thing by retaining their earnings and not paying out a dividend.
Ironically the small reduction in the size of their loan book is helping too.

However the fact that the overall business is downsizing does mean less customer activity. Those shareholders looking for a step change in earnings are likely to be disappointed IMO.


An update here of my post on 30-08-2012

Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2013 report.

The 'best case' scenario is that all loans are Tier 1. $1,935.1m of loans are outstanding. 20% of that figure is:

0.2 x $1,935.1m = $387.0m

Heartland has total equity of $381.1m which is within cooee of the amount of capital they need if all loans were classified as Tier 1. Good stuff.

The balance of loans is shifting too:

"The business receivables book contracted by $9.7m to $530.5m"
"The rural receivables book grew from $478.6m to $480.6m"
"The retail & consumer receivables book contracted by $9.0m to $945.8m"

Overall then, the core business is contracting which gives a lie to some of the irrationally exhuberant views on where the Heartland business is going. However I see this as positive. Heartland needs to contract while their equity position is so marginal. Getting smaller will help stabilize the business, even though share price growth will likely be constrained over the medium term as a result.

"Total non-core property assets reduced by 11% during the Current Reporting Period - from $160.2m at 30 June 2012 to $143.2m at 31 December 2012. These non-core property assets are made up of net receivables of $87.9m and investment properties of $55.3m. RECL manages the ex-MARAC non-core property assets."

Great except that calling a large basket of your business 'non-core' and sticking it under the pillow doesn't make it go away. There is rather a nasty sting contained in the interim report, regarding these property loans:

"The higher impairment expense came from the non-core property book given that the RECL Agreement was regarded as fully utilised as at 30 June 2012, meaning that Heartland now has to bear any further losses in the legacy non-core property book."

IOW the cushioning effect of all previous capital raising has now run its course. Unless the value of the non-core properties improve, Heartland could be looking at some more significant proprty loan writedowns. Not good.

There is sufficient evidence here to suggest that there are significant "Tier 2 loans" within the company that means that lack of capital is a very real concern going forwards. I will continue to wait for the next HNZ cash issue before climbing on board.

Result: Tier1 and Tier 2 Lending Covenant Test Marginal

SNOOPY

[GR8DAY]

.....thanks SNOOPY, well summarized. Was also thinking of "climbing on board".........will now wait also.

[Balance]

.....thanks SNOOPY, well summarized. Was also thinking of "climbing on board".........will now wait also.

I would say last chance to get onboard before the stock really starts taking off.

Snoopy could not have been more wrong on HNZ.

[biker]

I think it is highly unlikely that the HNZ Board would initiate a cash issue capital raising with the share price at it's current level without more runs on the board, and a more elevated share price to sustain the move.
A capital raising is inevitable at some stage, but going by the measured approach of the current Board, unlikely in the short term. Therefore I see more short to medium term upside in the share price.
Interesting to see they obviously don't want the non-core assets having to be accounted for year after year and the review may well involve a one off hit to clear the decks. If the economy/ property market continues to improve, and they do it right, that hit may not be too traumatic, and would IMO eventually enhance the perception and hence share price of the company considerably.

[Snoopy]

The underlying debt of the company according to the full year 2012 statement of financial position is: $33,802,000m.

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the problem 'Investment Properties' and the unspecified 'Investments' from that total:

$2,348.69m - ($2,078.28m +$55.50m + $24.22) = $190.09m

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

$190.09m - $23.00m = $167.09m

Now we have the information needed to calculate the underlying company debt net of all their lending activities:

$33.8m/$167.09m= 20.2% < 90%

Result: PASS TEST

I note that the relative debt has increased since the half year reporting date. However it is still well within acceptable levels. I would expect the debt position to worsen during the year because of all the deferred branch transformation expenditure that was shunted into the FY2013 year. It will pay to keep an eye on this figure.

SNOOPY

The underlying debt of the company according to the half year 2013 statement of financial position is: $33,894,000m.

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the problem 'Investment Properties' and the unspecified 'Investments' from that total:

$2,350.10m - ($2,044.79m +$55.32m + $24.41) = $225.58m

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

$225.58m - $22.99m = $202.59m

Now we have the information needed to calculate the underlying company debt net of all their lending activities:

$33.894m/$202.59m= 16.7% < 90%

Result: PASS TEST

The relative debt has decreased since the half year reporting date, and is well within acceptable levels. The debt position has not worsened during the year despite all the deferred branch transformation expenditure that was shunted into the FY2013 year. Good stuff. Will this trend be maintained as Heartland trys to lift their profile via increased advertising? It will be interesting to see if the underlying debt position of the company remains under control.

SNOOPY

[Cool Bear]

Snoopy, thanks for your posts. I always learn a lot from them. After analysing HNZ's latest results, would you not say that they are definitely moving in the right direction? And if yes, what is holding you back? Capital adequacy? Surely that is something that they will managed very carefully now that they are a bank and will be monitored closely by the Reserve Bank as well. Rgds CB

[Balance]

Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2012 report.

The 'best case' scenario is that all loans are Tier 1. $1,939.29m of loans are outstanding. 20% of that figure is:

0.2 x $1,939.29m = $387.9m

Heartland has total equity of $374.8m which is insufficient no matter what the tier classification of the loans.

Result: FAIL TEST

However the numbers are moving in the right direction. Heartland are certainly doing the right thing by retaining their earnings and not paying out a dividend.
Ironically the small reduction in the size of their loan book is helping too.

However the fact that the overall business is downsizing does mean less customer activity. Those shareholders looking for a step change in earnings are likely to be disappointed IMO.

SNOOPY

Same old comment back in August 2012, regurgitated now with some new numbers for 2013 interim.

Sp has moved from 55 cents though to 74 cents - 35% gain.

You are missing the big picture, Snoopy.

[winner69]

.......think that rocket might have been a dud winner??

we already got the up and another up .... away this afternoon and the rest of the week .... be patient

[Balance]

we already got the up and another up .... away this afternoon and the rest of the week .... be patient

Agreed.

Hope Snoopy keeps the sp down in the meantime.

[percy]

I think it is highly unlikely that the HNZ Board would initiate a cash issue capital raising with the share price at it's current level without more runs on the board, and a more elevated share price to sustain the move.
A capital raising is inevitable at some stage, but going by the measured approach of the current Board, unlikely in the short term. Therefore I see more short to medium term upside in the share price.
Interesting to see they obviously don't want the non-core assets having to be accounted for year after year and the review may well involve a one off hit to clear the decks. If the economy/ property market continues to improve, and they do it right, that hit may not be too traumatic, and would IMO eventually enhance the perception and hence share price of the company considerably.

Yes pleasing to see non-core assets being dealt with.
A very good result with nett profit before tax increasing from $5.6mil to $14.9mil.Getting traction.Core loan book stronger.The reduction in mortgage loan book means they are not chasing this market,but would rather put the money to more profitable loans,which makes sense to me.Great that they are already achieving lower funding costs.NTA at 90cents.EPS at 3cents is improving as we expected.2 cents dividend was a big surprise.I take it they passed on the "opportunities"that they were offered.Maybe they are paying the higher dividend as they are confident in their future earnings. Well done HNZ,New Zealand's only listed bank is on course to deliver all we hoped for.

[Snoopy]

Updating for the full year 2012 result

EBIT (high estimate) = $205.148m-$65.547m= $139.601m

Interest expense is listed as $121.502m.

So (EBIT)/(Interest Expense)= ($139.602)/($121.502)= 1.15 < 1.20

Result: FAIL TEST but an improvement from the HY2012 position.


Updating for the half year 2013 result. EBIT is not recorded in the released pdf. So we need to do some 'deconstructive analysis' on the released results to estimate what it might be. We start using the "interest income" from the income statement, and subtract from that "selling and administration expenses."

EBIT (high estimate) = $103.280m-$31.943m= $71.337m

Interest expense is listed as $56.250m.

So (EBIT)/(Interest Expense)= ($71.337)/($56.250)= 1.27 > 1.20

Result: PASS TEST (a first for HNZ)

SNOOPY

[Snoopy]

Updating this number for the full year FY2012

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

Using numbers from the Heartland FY2012.

= $374.8m/$2348.1m = 16.0%

This is a slight improvement on the half year position, achieved by both shrinking the loan book and not paying out any dividend from profits.



Updating this number for the half year HY2013 release.

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

Using numbers from the Heartland FY2012

= $381.091m/$2350.101m = 16.2%

This is a slight improvement on the full year position, achieved by continuing to modestly shrink the loan book and build some equity. This half year marked the payment a maiden first half special dividend. It is encouraging that the equity ratio has continued to improve despite this.

SNOOPY

[Snoopy]

Customer concentration is of course an indirect measure of potential risk. Of more interest perhaps is 'real risk'.

Interesting reading from Note 32C in the Full Year 2012 accounts.

There is a large jump in Grade 6 categorized loans. Grade 6 is the 'monitor' category up from $16.3m to $62.9m. Grade 6 is the jargon used by Heartland when a loan is on the cusp of going bad. Obviously these loans have not gone bad at this point, and that should be emphasized. Nevertheless if even half of those loans did go bad it would wipe out a whole years profits. This is something that should make Heartland shareholders cautious. A call for new capital from shareholders is now officially an 'on the horizon possibility', even though Heartland have only said so indirectly in this obtuse way.


The half year report last year did not provide the same level of disclosure as the full year report. This has proved to be the case again in HY2013.

Under note 12 and as of 31st December 2012, the percentage of deposits from the Canterbury region has reduced from 42% six months previously down to 36%. Overall I see this as a good thing, even if some market share in Canterbury must continue to be sacrificed to improve the overall term deposit risk profile.

Note 17c re-emphasises that the credit provision as reached with RECL (the real estate credit limit mangement agreement) has been fully utilised. This in turn means any further writedowns will directly hit the HNZ balance sheet.

I get the impression that rebalancing the account risk is still a work in progress.

SNOOPY

[winner69]

Let us assume the 2c dividend is sustainable from here-on in. Perhaps it is also possible to assume that the dividend will be matched by another 2c dividend in the second half of the year, which should be more profitable for a variety of reasons.

4c per share, fully imputed, means a yield of 7.8% on today's current price of 73c. That's not bad at all. If that's what Heartland can keep up with in 2H2013.

As Percy says better owning the bank than putting money in the bank

[winner69]

Hmmmm, seller at 74 changed their bid to clean sweep the SP down to 71 cents. Ouch, those disenfranchised sellers are still present and trying to get their profits quick fast!

Maybe not the disenfranchised but those awful nasty traders who bought a month or so ago and now taking their profits ....good on them

Or maybe some who think result wasn't that good and decided to move on to something better as prospects might be better elsewhere

Maybe these disenfranchised are just a myth anyway!!!!

[GR8DAY]

I'm expecting a big buyer at the end of today or tomorrow with 100,000 shares +. Can't help but think there was a few on the sidelines waiting for that report...

huh??........are you trying to say Moose you've got a 100,000 shares you and your dad have to off load??(LOL).........looks like a softening SP to me, hope you dont get stuck with them mate!

[percy]

Maybe not the disenfranchised but those awful nasty traders who bought a month or so ago and now taking their profits ....good on them

Or maybe some who think result wasn't that good and decided to move on to something better as prospects might be better elsewhere

Maybe these disenfranchised are just a myth anyway!!!!
Well I did my best to help out the sellers today by buying more at 74cents.

[percy]

Let us assume the 2c dividend is sustainable from here-on in. Perhaps it is also possible to assume that the dividend will be matched by another 2c dividend in the second half of the year, which should be more profitable for a variety of reasons.

4c per share, fully imputed, means a yield of 7.8% on today's current price of 73c. That's not bad at all. If that's what Heartland can keep up with in 2H2013.

Sorry to go back to the AGM,however the chairman when speaking of dividends was very mindfull of how the market would react to HNZ at any time cutting the dividend.So I take it the 2cents is on going,[as for next year's interim].What we can start guessing is what the final in September will be.I guess it will be at least 2 cents,possibly more.Now that is fun,considering they want to leave plently of petrol in the tank.

[Snoopy]

Snoopy, thanks for your posts. I always learn a lot from them. After analysing HNZ's latest results, would you not say that they are definitely moving in the right direction?


Yes, although the underlying 'pace of movement' is not as fast as some think.



And if yes, what is holding you back? Capital adequacy? Surely that is something that they will managed very carefully now that they are a bank and will be monitored closely by the Reserve Bank as well.


Growing banks tend to need new capital to grow. Most of the profitability improvements for the HNZ half year look to have come from a near $2m fall in personnel expenses and a $1.6m reduction in legal fees verses the corresponding prior period. While welcome, these are not the foundations of a growth model for the future.

I think there is a difference between capital adequacy from a reserve bank perspective and capital adequacy from an HNZ company growth perspective. As it stands HNZ is fairly static (actully slightly shrinking) from a revenue perspective. And the shadow of more impairment in real estate has not gone away. The HY2013 report smacks more of 'kicking the can down the road' rather than finally addressing the impaired real estate issue.

Nevertheless it does look like there are plans to investigate selling off the difficult real estate package in one hit to clear the way going forwards. I am not sure if this is better or worse than just slowly working through the property portfolio.

SNOOPY

[forest]

Growing banks tend to need new capital to grow. Most of the profitability improvements for the HNZ half year look to have come from a near $2m fall in personnel expenses and a $1.6m reduction in legal fees verses the corresponding prior period. While welcome, these are not the foundations of a growth model for the future.

I think there is a difference between capital adequacy from a reserve bank perspective and capital adequacy from an HNZ company growth perspective. As it stands HNZ is fairly static (actully slightly shrinking) from a revenue perspective. And the shadow of more impairment in real estate has not gone away. The HY2013 report smacks more of 'kicking the can down the road' rather than finally addressing the impaired real estate issue.

.

SNOOPY[/QUOTE]

Snoopy thanks for sharing your detailed analyses on HNZ. Like Percy I was also at the AGM. And Percy please correct me if I am wrong but I think HNZ is focussed on being a small efficient bank. HNZ I think have researched the sector well and choosen to consentrate on
sectors were they feel they can have an advantage over the establised and bigger banks (and higher margens), think live stock and small to medium bussiness etc.
Therefore I expect slow growth and no need for capital in the forseeable future.

Forest

[Snoopy]

Let us assume the 2c dividend is sustainable from here-on in. Perhaps it is also possible to assume that the dividend will be matched by another 2c dividend in the second half of the year, which should be more profitable for a variety of reasons.

4c per share, fully imputed, means a yield of 7.8% on today's current price of 73c. That's not bad at all. If that's what Heartland can keep up with in 2H2013.

Yes this is all very true. From a potential yield basis alone I would be surprised to see HNZ retreat below 70c. But with revenue static and no clear growth path apparent [apart from rural finance which seems to be improving (I will let out a collective "Arrrgh!" here for those former PGW shareholders who had to watch and see their finance arm simply given away to HNZ)], I don't see a strong growth imperative for new shareholders to bid that price up above the 70 to 75 cent range.

I now expect HNZ to sit around the 70-75c levels for some time.

SNOOPY

[Balance]

Yes this is all very true. From a potential yield basis alone I would be surprised to see HNZ retreat below 70c. But with revenue static and no clear growth path apparent [apart from rural finance which seems to be improving (I will let out a collective "Arrrgh!" here for those former PGW shareholders who had to watch and see their finance arm simply given away to HNZ)], I don't see a strong growth imperative for new shareholders to bid that price up above the 70 to 75 cent range.

I now expect HNZ to sit around the 70-75c levels for some time.

SNOOPY

Eh, just like the 50 - 55c range before?

[percy]

Growing banks tend to need new capital to grow. Most of the profitability improvements for the HNZ half year look to have come from a near $2m fall in personnel expenses and a $1.6m reduction in legal fees verses the corresponding prior period. While welcome, these are not the foundations of a growth model for the future.

I think there is a difference between capital adequacy from a reserve bank perspective and capital adequacy from an HNZ company growth perspective. As it stands HNZ is fairly static (actully slightly shrinking) from a revenue perspective. And the shadow of more impairment in real estate has not gone away. The HY2013 report smacks more of 'kicking the can down the road' rather than finally addressing the impaired real estate issue.

.

SNOOPY

Snoopy thanks for sharing your detailed analyses on HNZ. Like Percy I was also at the AGM. And Percy please correct me if I am wrong but I think HNZ is focussed on being a small efficient bank. HNZ I think have researched the sector well and choosen to consentrate on
sectors were they feel they can have an advantage over the establised and bigger banks (and higher margens), think live stock and small to medium bussiness etc.
Therefore I expect slow growth and no need for capital in the forseeable future.

Forest[/QUOTE]

Forest 100% correct.They know where they want to be.That is why there is a reduction in mortgage lending.No win situation competing against the majors,including Kiwi Bank.Better to concentrate on profitable sectors. I agree will mean no need for extra capital,however more profitable lending will mean better use of capital and ratios such as ROE will improve. Overall loan book may not grow quickly,however profit will certainly grow very quickly.

[Balance]

Ah - you may not have read the presentation by CEO Jeff Greenslade today. There are some useful comments on growth there.

https://nzx.com/files/attachments/171425.pdf

Future profits and growth will come from a number of areas:

- Reduction in cost of funds (around 80 basis points so far now they are a registered bank)
- operating efficiencies (easier said than done, and IT systems always overpromise, but not unreasonable to expect some backoffice savings)
- building a float - offering more cash and cheque accounts which don't charge interest, offering HNZ "free money"
- Growth in certain market segments like invoice financing, livestock financing, credit cards, SME and school fees finance



Trust Bank had a similar experience after listing on NZSE. Its sp fell heavily after its first public company results because profit growth was via costs reduction, not revenue growth.

What the market missed at that time was the repositioning of the trustee banks to bring in new revenue streams but maintaining profitability meanwhile by containing and reducing costs.

A year later, investors who bought from the institutions who sold out made serious money.

Snoopy was expecting HNZ's sp to range trade for a long time at 50 - 55c last year?

[Snoopy]

Time to reevaluate liquidity for FY2012.

HNZ has total borrowings of $1,939,489,000, made up principally of term deposits lodged with Heartland.

Note 24 is meant to give a breakdown of these borrowings. Once again there is no breakdown given of current and longer-term borrowings

The information given on the secularized facilities is as follows

"The Group has securitisation facilities in relation to the Trusts totalling $450.0 million. On 27 February 2012, the Group entered into an agreement with its securitisation facility provider to extend the maturity date of Heartland ABCP Trust 1 $300 million securitisation facility to 6 February 2013. On 19 December 2011, the Group entered into an agreement to increase CBS Warehouse A Trust securitisation facility by $100 million to $175 million. $25 million of this increase matured on 1 April 2012. The maturity date of the remaining $150 million CBS Warehouse A Trust securitisation facility is 22 July 2013."

IOW all activity relates to a time-frame no more than one year out in the future.

The amount of securitized holdings has increased when I would have expected it to decrease now that HNZ has fully rolled out of the government deposit guarantee scheme.

"The Group has bank facilities totalling $650.0 million (2011: $475.0 million)."

That increase is good for future flexibility.

This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,078,276,000. Again there is no breakdown as to what loans are current and longer term (note 16).

Given:

1/ I understand 'liquidity' to be a balance between the maturity profile of current debenture holders VERSES
2/the loan periods associated with those on lent funds are unknown,

then my analysis comes to a full stop (again).

The only thing I do note is that the amount borrowed as debentures and deposits from customers has gone down (by $6.022m) and the amount lent to customers has gone up (by $3.065m). Given that bank facilities have gone up by $175m over the same period this isn't an issue.


Time to reevaluate liquidity for HY2013.

HNZ has total borrowings of $1,935,116,000, made up principally of term deposits lodged with Heartland (see note 12).

Note 12 is meant to give a breakdown of these borrowings. Once again there is no breakdown given of current and longer-term borrowings

The information given on the securitized facilities is as follows

1/ The Group has securitisation facilities in relation to the Trusts totalling $450.0 million.
2/ Securitisation facility provider to extend the maturity date of Heartland ABCP Trust 1 $400 million securitisation facility to 7 August 2013 (a six month extension, and a $100m higher ceiling than before).
3/ The Group has entered into an agreement to maintain CBS Warehouse A Trust securitisation facility at $175 million. It matures on 22nd January 2014, six months later than the last referenced maturation date."
4/ Heartland have their own bank facilities that have been wound back from $200m to $50m, maturing on 30th September 2013.

Putting all that together total bank facilities have decreased by $50m (to $600m total) compared to six months previously. I further note that all facilities expire to a time-frame no more than one year out in the future. I take this to mean those lending to HNZ want to retain the right to have HNZ management on a tight leash.

This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,044,793,000. Again there is no breakdown as to what loans are current and longer term (note 11).

Given:

1/ I understand 'liquidity' to be a balance between the maturity profile of current debenture holders VERSES
2/the loan periods associated with those on lent funds are unknown,

then my analysis comes to a full stop (again).

The only thing I do note is that the amount borrowed from NZ sourced deposits has gone up (by $38.433m) and overseas sourced deposits have also increased (by $7.203m). Meanwhile total finance receivables have decreased (by $33.483m). This is indicative of a more conservative policy of using more equity to cover less borrowings.

SNOOPY

[Snoopy]

Trust Bank had a similar experience after listing on NZSE. Its sp fell heavily after its first public company results because profit growth was via costs reduction, not revenue growth.

What the market missed at that time was the repositioning of the trustee banks to bring in new revenue streams but maintaining profitability meanwhile by containing and reducing costs.

A year later, investors who bought from the institutions who sold out made serious money.

Snoopy was expecting HNZ's sp to range trade for a long time at 50 - 55c last year?

No, I can't find a post where I mentioned a trading range of 50 -55c. However on 18th April 2012, I did post this:

"If current asset backing sits at 90c, and current market norms are to value finance companies at asset backing there is another way of looking at that 60c shareprice. One might say 60c reflects a 2/3 chance of success and a 1/3 chance of failure. A 1/3 chance of failure is not insignificant to those shareholders who want to retain capital. OTOH you could say a 60c to 90c move would be quite a good return if things go well."

"I see HNZ as a genuine investment with a decent risk return arbitrage. But a ticket to print money this is not."

SNOOPY

[janner]

Can I be Christopher Robin, the one to cheer everyone up then?

Anyone else buying more today around the 70-71 mark?

Don't forget the 2 cents divie up to and incl. 20/03/13.

[GR8DAY]

......ah NO........not yet Moose. I can see the SP just drift back now to maybe 65 over the coming weeks. Im looking to buy in but dont think there's any rush at this stage. Just the usual follow on after any announcement/reporting....down , down, down. Doesnt make sense but hey that's the market for you.

[janner]

That's true, the MACD is pointing down but is still in the positive area of the chart. I can't see it going below 68-69 cents, there was a massvie glut of buyers there remember? That 70 cent ceiling should hold, and if it doesn't 68-69 should.

Or even 66-67 cents :eek2:

[GR8DAY]

......hope so for your sake mate if your holding. Happy to be cashed up at the moment (apart from from my poorly timed re-entry into OGC!)

[janner]

OH... MY... GOODNESS!!!!! :eek2::eek2::eek2::eek2::eek2::eek2:

I will be buying more then :D

You must be a wearer of Cargo Pants Moosie.. with all the pockets full..

[futurist]

Why attacking Snoopy? Isn't a diversity of opinion a good thing for everyone, especially when they are backed by a recognisable approach in deriving them rather than guts feeling or fortune telling? Yes visiting and speaking with the company perhaps get you better insight from your view, but those information is as subjective as whatever you can conclude from them. If balance sheet is so out-of-date, why should it still exist?

I may disagree with Snoopy but I respect his method/opinion and definitely his right to express without being attacked (or asked for a name change in this instance to be exact).

[percy]

Why attacking Snoopy? Isn't a diversity of opinion a good thing for everyone, especially when they are backed by a recognisable approach in deriving them rather than guts feeling or fortune telling? Yes visiting and speaking with the company perhaps get you better insight from your view, but those information is as subjective as whatever you can conclude from them. If balance sheet is so out-of-date, why should it still exist?

I may disagree with Snoopy but I respect his method/opinion and definitely his right to express without being attacked (or asked for a name change in this instance to be exact).

His record on this thread has been 100% wrong.Most of my replys have been to correct him.Read the whole thread and make up your own mind.

[percy]

Can I be Christopher Robin, the one to cheer everyone up then?

Anyone else buying more today around the 70-71 mark?

Yes the wife got 20,000 at 71cents this morning.

[janner]

Why attacking Snoopy? Isn't a diversity of opinion a good thing for everyone, especially when they are backed by a recognisable approach in deriving them rather than guts feeling or fortune telling? Yes visiting and speaking with the company perhaps get you better insight from your view, but those information is as subjective as whatever you can conclude from them. If balance sheet is so out-of-date, why should it still exist?

I may disagree with Snoopy but I respect his method/opinion and definitely his right to express without being attacked (or asked for a name change in this instance to be exact).

A fair call.. Do not think there was any malice intended though.. Just sparring..

[Anonymous]

Actually, here are some other pearlers from Snoopy about Heartland over the last nine months. They represent ongoing negativity, a desire to bury oneself in the balance sheet, and not actually visit or speak to the company, ignoring real world developments and instead making assumptions based on historical information that was outdated. Snoopy should change his name to Eeyore, the continually depressed donkey of Winnie the Pooh fame.

I haven't seen a post like that since the days of Phraedus. All you need to do now is reference these comments on the chart...

Snoopy, for what its worth, I value your opinion and respect the detailed analysis you throw yourself into and make available to us all on here (likewise with Sparky's valuable contributions). The diversity of opinion on this site is what makes it so great.

However, I am a very happy holder of HNZ over the last year.

[Balance]

A fair call.. Do not think there was any malice intended though.. Just sparring..

All good stuff.

Snoopy can take it, trust us!

[janner]

I apologise if its taken as otherwise.


Nothing to apologise for STC... As I said. " just sparring "..

Which is one of the reasons I like this forum.. Different opinions and dissections.. Mostly with intelligence ..

A little Borax now and then does no harm..

All good grist to the mill..

Long may it continue..

[winner69]

one could say the announcement has hardly set the world on fore and got the market all excited ....one way or the other ..... with only jsut above average volume days yesterday and not that busy today. One of HNZ disciples got a little excited yesterday and mentioned that it could be a 2 million day ....eah right

just the normal sort of activity ..... what does that mean?

[Snoopy]

Actually, here are some other pearlers from Snoopy about Heartland over the last nine months. They represent ongoing negativity, a desire to bury oneself in the balance sheet, and not actually visit or speak to the company, ignoring real world developments and instead making assumptions based on historical information that was outdated.


Without requoting myself as you have done Sparky, the consistent message I have been trying to get across is that Heartland could do with more capital.

The 'rule of thumb' for quasi-finance companies is to have shareholders equity equal to 20% of loan debt. HNZ for the first time has s/h equity around this level. Yet such ratios can be easily upset if some of those property loans in particular go bad. The last annual report showed more loans moving into the 'at risk' category. Nothing much has changed over the last year, except that HNZ have now fully utilised their bad debt provision for property. The shareholders equity (which is going up) and bank borrowing facilities (which are going down) are the cushion to such adverse events.

The other problem banks face is matching loan periods of the money lent out with the rotating cashflow of the term deposits that fund them. Heartland does not release this information at all to the market. So I prefer to be extra cautious and watch Heartland tick all of those other boxes for which information is released.

I was wrong about Heartland getting their banking licence so soon. But it was the Reseve Bank's own rules that required three years of accounts to be presented. I find it inexplicable that they ignored their own rules when giving the OK for Heartland to become a bank.

Of course Heartland are not 'too big to fail'. So the 'safety' of having a banking lcence is in reality more of a marketing tool. Certainly the credit rating outlook of HNZ was not changed when they became a bank.

SNOOPY

[macduffy]

Quite so, Snoopy.

Banking is a capital hungry business and if HNZ is to grow it will need to raise big chunks of new equity from time to time, particularly once the new Basle capital adequacy rules take effect. Big profits help, of course, but not if too big a proportion get paid out in dividends.

For me, HNZ still has to prove itself - so I'm not holding.

[biker]

Should HNZ be worth NTA? Not in my opinion with the exception of a T.O. (Heartland Financial USA anyone? Same colours too ;) )

Or..... Kiwibank Heartland anyone?

[percy]

Quite so, Snoopy.

Banking is a capital hungry business and if HNZ is to grow it will need to raise big chunks of new equity from time to time, particularly once the new Basle capital adequacy rules take effect. Big profits help, of course, but not if too big a proportion get paid out in dividends.

For me, HNZ still has to prove itself - so I'm not holding.

Trying to grow low margin mortgage loans would put pressure on capital ratios.forest [who was at the agm] pointed out in his post #1270 that HNZ were not chasing this sector.So, need for capital is not an issue.
I think if we are looking to compare HNZ with the major Australian Banks we are making a mistake.Banking licence is about cheaper funds and a marketing tool.HNZ is more MARAC with a banking licence.SCOTTY pointed out a long time ago UDC's fantastics result.I feel HNZ is closer to UDC than the likes of Westpac or ANZ.HNZ are steadily proving themselves.I see more of a movement away from home loans to more profitable lending.
As for new Basle capital adequacy rules, I am sure new Reserve Bank Governor had them in mind when he granted HNZ a bank licence.

[Snoopy]

Actually, here are some other pearlers from Snoopy about Heartland over the last nine months. They represent ongoing negativity, a desire to bury oneself in the balance sheet, and not actually visit or speak to the company, ignoring real world developments and instead making assumptions based on historical information that was outdated.

One more comment on this. I do place a lot of emphasis on the balance sheet. But a balance sheet is a snapshot of the companies position "right now". It is very current information, the most current available. The Balance sheet is historical only in the sense that all data is historical as soon as it is captured. If you regard the balance sheet as outdated, then by implication the entire financial report becomes 'not worth bothering about' historical bunk.

In other companies that I have analyzed I have used historical information to the extent that Sparky may have a point, depending on your views of how things should be done. But in the case of HNZ, all of my 5 checking calculations are based on the balance sheet. It is not possible to use published information more current than this.

SNOOPY

[percy]

[QUOTE=Snoopy;394935]

I was wrong about Heartland getting their banking licence so soon. But it was the Reseve Bank's own rules that required three years of accounts to be presented. I find it inexplicable that they ignored their own rules when giving the OK for Heartland to become a bank.

One phone call to either Bruce Irvine or Jeff Greenslade was all it would have taken to get the correct information.They had been in discussion with the Reserve Bank for months/years.
Buffett spends all night reading annual reports, and all day on the phone talking to managers.You could take a leaf out of his book,and use the phone.

[macduffy]

Trying to grow low margin mortgage loans would put pressure on capital ratios.forest [who was at the agm] pointed out in his post #1270 that HNZ were not chasing this sector.So, need for capital is not an issue.
I think if we are looking to compare HNZ with the major Australian Banks we are making a mistake.Banking licence is about cheaper funds and a marketing tool.HNZ is more MARAC with a banking licence.SCOTTY pointed out a long time ago UDC's fantastics result.I feel HNZ is closer to UDC than the likes of Westpac or ANZ.HNZ are steadily proving themselves.I see more of a movement away from home loans to more profitable lending.
As for new Basle capital adequacy rules, I am sure new Reserve Bank Governor had them in mind when he granted HNZ a bank licence.

Fair points. percy.

I wonder though, how much of UDC's success stems from having ANZ as its parent? How much business comes their way from having all those commercial and corporate managers out there, putting business their way which for one reason or another is more suited to the finance company than the bank? How much the ANZ name is worth to UDC in terms of cost of funds, investors' confidence etc.? HNZ will be a different animal - part bank part finance company. Let's see how they go!

[percy]

Thank you belgarion and macduffy.I value your opinions.I think switching can go on for some time.UDC having ANZ has never affected MARAC in the past,although I would think ANZ channel a good bit of business their way .Maybe to compete with UDC ,HNZ needed bank licence.My best investments in the past [EBO] did not have instos on their register for years.

[macduffy]

Yes, percy, EBO has been a great investment for me, too, back to the days when they were a very low profile company called Early Bros Ltd, operating out of premises in Cashel St. Christchurch.

Having instos on the share register can do wonders for the shareprice but they don't often bring in much business. Having a powerful, active parent acting in your interests is a different matter!

Cheers

[percy]

Yes, percy, EBO has been a great investment for me, too, back to the days when they were a very low profile company called Early Bros Ltd, operating out of premises in Cashel St. Christchurch.

Having instos on the share register can do wonders for the shareprice but they don't often bring in much business. Having a powerful, active parent acting in your interests is a different matter!

Cheers

The first EBO agm I attended was in the company's boardroom upstairs at Cashel stree ,and the chairman Jamie Maddren served the tea.Only about a dozen of us shareholders there.
I think you are right about having a powerful active parent,but can't help thinking that may work out better for HNZ's relationship with all the other banks,as they would see it as not helping out ANZ.

[mouse]

Heartland seems to me to be a finance company in drag. Good. We need finance companies, and if they can get away with calling themselves Banks, so much the better.
The major, overseas owned NZ banks meanwhile can be seen as Pawnbrokers, without drag. Their Credit Cards, over 20% interest, are a bit steep. I do not have one, but have seen people at pack and save buying food with credit cards. (A historical note, in 1850, the time of Dickens, there were about 400 official pawnbrokers in London. They charged interest of between 15% and 20% per year. 'Victorian City, Judith Flanders, Atlantic Books, 2012').

NZ Farming Systems Uruguay had a sp of about half its net assett value. Olam of Singapore bought them up at 70 and 80 cents a share. Heartland is in a similar situation to NZFS. The sp is well below the 90 cents assett backing of the shares. How much is a Banking License worth? Heartland has one. If our price continues like this then it will be taken over by the Chinese. Lots of cash available. This could be their vehicle to come to NZ. I think if they made an offer of $1.00 at the moment they would get 50% of Heartland. At $1.50 they would get well over 90%. We would make a short term profit, but a long term loss.
My prediction is a share price of $1.00 by the end of this year, plus dividends. That seems to me to be pretty good.

[janner]

Heartland seems to me to be a finance company in drag. Good. We need finance companies, and if they can get away with calling themselves Banks, so much the better.
The major, overseas owned NZ banks meanwhile can be seen as Pawnbrokers, without drag. Their Credit Cards, over 20% interest, are a bit steep. I do not have one, but have seen people at pack and save buying food with credit cards. (A historical note, in 1850, the time of Dickens, there were about 400 official pawnbrokers in London. They charged interest of between 15% and 20% per year. 'Victorian City, Judith Flanders, Atlantic Books, 2012').

NZ Farming Systems Uruguay had a sp of about half its net assett value. Olam of Singapore bought them up at 70 and 80 cents a share. Heartland is in a similar situation to NZFS. The sp is well below the 90 cents assett backing of the shares. How much is a Banking License worth? Heartland has one. If our price continues like this then it will be taken over by the Chinese. Lots of cash available. This could be their vehicle to come to NZ. I think if they made an offer of $1.00 at the moment they would get 50% of Heartland. At $1.50 they would get well over 90%. We would make a short term profit, but a long term loss.
My prediction is a share price of $1.00 by the end of this year, plus dividends. That seems to me to be pretty good.

So.. When it gets to your predicted $1.00 by end of year.. Will you be selling to Mao Tze Dong ??.. Or are you going to hang out until the Tongs come and offer you a price you can not refuse ??..

[Xerof]

On another matter dear to our hearts, I read Treasury have hired GS to run the ruler over Kiwibank....murmerings of more capital needed for their growth (something sadly lacking at HNZ btw) via a possible float

Key is on record as saying 'not while I'm Prime Minister', so perhaps some interesting spin due before the election.

The spin will have something to do with replacing Solid Energy IPO, and urgent need for CHCH rebuild funding, is my guess

anyway, no facts, just one to watch, and will no doubt spark huge debate if it is progressed

[mouse]

I hope to hang onto my Heartland shares very long term. But as investors we have some responsibility I would think to support NZ companies that seem to be making a reasonable profit and effort. This business of buying at 50 cents and selling at 70 cents after six months is brilliant timeing but long term, if everyone does it, the market becomes a racetrack with the Bookies yelling the odds. I see Heartland Bank doing well in the future and we should support our bank in its start-up time. That was the problem incidentally with NZFS. A start-up without support during the start-up period.

So.. When it gets to your predicted $1.00 by end of year.. Will you be selling to Mao Tze Dong ??.. Or are you going to hang out until the Tongs come and offer you a price you can not refuse ??..

[POSSUM THE CAT]

Mouse all smart people pay PAK & SAVE with credit cards. They can earn Interest for up to 55days on there money elsewhere and still pay only the cash price if you have the right type of credit card.

[mouse]

Beaten by technology again! But I know of a number of people who max their cards then turn to family for a bale-out. One even gets her card cut up and the bank sends her a new one! Which soon is at maximum credit limit. Incidentally, not my family. Its our modern day Pawnbroker. Run by banks.
The real issue is that Heartland is very vulnerable at present to a take over from overseas. They will make the dollar offer for 51%, and will get it! Disgraceful action by Kiwis in taking the bait and selling.

Mouse all smart people pay PAK & SAVE with credit cards. They can earn Interest for up to 55days on there money elsewhere and still pay only the cash price if you have the right type of credit card.

[percy]

Heartland seems to me to be a finance company in drag. Good. We need finance companies, and if they can get away with calling themselves Banks, so much the better.
The major, overseas owned NZ banks meanwhile can be seen as Pawnbrokers, without drag. Their Credit Cards, over 20% interest, are a bit steep. I do not have one, but have seen people at pack and save buying food with credit cards. (A historical note, in 1850, the time of Dickens, there were about 400 official pawnbrokers in London. They charged interest of between 15% and 20% per year. 'Victorian City, Judith Flanders, Atlantic Books, 2012').

NZ Farming Systems Uruguay had a sp of about half its net assett value. Olam of Singapore bought them up at 70 and 80 cents a share. Heartland is in a similar situation to NZFS. The sp is well below the 90 cents assett backing of the shares. How much is a Banking License worth? Heartland has one. If our price continues like this then it will be taken over by the Chinese. Lots of cash available. This could be their vehicle to come to NZ. I think if they made an offer of $1.00 at the moment they would get 50% of Heartland. At $1.50 they would get well over 90%. We would make a short term profit, but a long term loss.
My prediction is a share price of $1.00 by the end of this year, plus dividends. That seems to me to be pretty good.

Hi mouse.FPF is owned by FPA who are now Chinese owned.I thought HNZ may try to takeover FPA as it would make a great fit.Now after reading your post,maybe FPF may takeover HNZ?
"May we live in interesting times."

[winner69]

janner ... i thought of you when looking at the losers table on direct broker (the decliners list) ..... HNZ and RAK were leading the way along with MAD

See RAK and HNZ do have something in common ...... maybe one shouldn't waste their time and effort and know how on the likes of HNZ after all

[Lizard]

On another matter dear to our hearts, I read Treasury have hired GS to run the ruler over Kiwibank....murmerings of more capital needed for their growth (something sadly lacking at HNZ btw) via a possible float

Key is on record as saying 'not while I'm Prime Minister', so perhaps some interesting spin due before the election.

The spin will have something to do with replacing Solid Energy IPO, and urgent need for CHCH rebuild funding, is my guess

anyway, no facts, just one to watch, and will no doubt spark huge debate if it is progressed

I am interested in how to judge a suitable level of capital for banks and in particular for HNZ and Kiwibank?

I've been over HNZ a couple of times, and capital seemed adequate to a non-banker. I am thinking I calculate capital adequacy ratio by putting the $344m of tier 1 capital over the $2057m of risk weighted exposures (16.7%) - is that correct? They have a 12% minimum in their conditions of registration vs Basel III minimum of 6%, so does Basel III have any effect at all for them? Is part of your concern re capital a presumption that the $143m value of their non-core property book is going to trend rapidly downwards and perhaps halve or worse? Or is it more in regard to capital requirements for growth? How much capital is enough?

Does Basel III have greater impact for Kiwibank (who currently only have a condition of 4.5% tier 1, up from 4% last year)? Although, if I am reading their disclosure statement correctly, I think they have 10.6% currently, so maybe a non-issue there too? It's pretty close to the 10.9% for ANZ's New Zealand operation?
With effect from 1 January 2013, the Bank’s conditions ofregistration were amended to implement the Reserve Bank’sBasel III policy. The changes include a requirement to maintaina Common Equity Tier 1 capital ratio of not less than 4.5% from1 January 2013, and the requirement to ensure a buffer ratio of2.5% with effect from 1 January 2014.

Anyway, appreciate your comments, Xerof, if you get the chance. :)

[percy]

[QUOTE=belgarion;395137

A break out will be some time away methinks. And it'll not rocket to 90c ... just slow, steady plod.[/QUOTE]


Just the speed I like.!!!!!

[Hoop]

Almost as many buyers at 72 as the whole ask side of the board now. Could be a new support level forming, askers fleeing on the lower side of 75. Let's see some breakthrough here!

the breakthrough has already occurred...

Some will believe that the 72 support has already been formed If your principals are not Dow Theory related the recent 72 support occured on 14th February, spawned from the resistance line created on the 8th October 2012 when the intraday high reached 72c.
If your principals incl Dow Theory then 72c support formed with the 72 retest on the 25th Feb.

As it stands this breakthough has been disappointing so far considering a result come out during it....however it still early days


There's no point over complicating things with minor technical details...the simple observation will suffice...There has been over 700 optimist posts on this thread since October and HNZ has moved up bugger all during its the last 5 months breather (granted that it shot up 30% in September)... since then the NZX index has risen a further 10%.
Disc: culling stock from my Portfolio I need cash!!!...HNZ just survived for now

[Xerof]

Liz,

it's 20 years since I was last involved in Bank treasury ops, and in those days Capital Adequacy Ratios were only just being implemented globally (Cook ratios in those days)

It seems the basic principles have morphed into Basel i,ii and iii, and without knowing the exact details, I think you can take it for granted that banks comply with the requirements at all times. Monitoring by the authorities is fairly detailed and intense.

i do know that asset classes and liability classes for that matter, have been tweaked over the years, perhaps to cope with the financial engineering that the back room boys seem to invent on a daily basis, and push out to the unsuspecting public and insto's as new products.

So, each bank would apply the rules as they stand to each item on the asset side of the balance sheet, multiply $ amounts by the appropriate weighting, to determine an 'adjusted' balance sheet number (off bs products are alo captured to varying degrees)

similarly, the same exercise is done for the liability side, to calculate adequacy ratio

in a nutshell, don't sweat the detail, but if a bank's experiencing high growth, in products that are 'expensive' to hold on/off B/S, and it's Basel ratio is nearing the limit, sure as eggs, you will be looking at a CR

HNZ products would carry more capital requirements than Kiwibank products I would suggest, and that means less leverage to expand the operations

Look for Rabo to call its perpetuals in 2017, coz that particular type of debt issue no longer counts as Basel equity......just one of the tweaks in Biii

hth

[macduffy]

HNZ products would carry more capital requirements than Kiwibank products I would suggest, and that means less leverage to expand the operations


I would agree. Housing loans are the most favoured assets for capital requirements, ie they carry the lightest weighting after, I think, some sovereign assets (although there'd be question marks over some countries' bonds!). HNZ has a strategy of seeking commercial loans whereas Kiwibank is still heavily housing loan oriented.

I still reckon that the RBNZ should tweak the weightings for higher loan to valuation lending - to act as a bit of a brake on housing speculation. No doubt the banks would protest on the grounds of impractibility, lack of systems etc. but where there's a will there's a way, even if a few more staff have to be employed to collect the information.

:cool:

[Xerof]

Yes, and people wonder why banks are so keen to lend on residential.......

an easier solution is to tweak the weighting away from residential property, and into commercial lending

[CJ]

Look for Rabo to call its perpetuals in 2017, coz that particular type of debt issue no longer counts as Basel equity......just one of the tweaks in BiiiIs that why BNZ just recalled theirs? Dont ASB have some too?

[CJ]

Yes, and people wonder why banks are so keen to lend on residential.......

an easier solution is to tweak the weighting away from residential property, and into commercial lendingThere should be a higher risk weigthing as LVR get over say 60% on a sliding scale upwards.

This is one reason why they are so reluctant to lend on businesses unless they get access to the family house as well. Not good for the economy at all.

[Xerof]

CJ, yes thats another way to do it

Fair weather bankers are commonplace unfortunately.....lend you their umbrella, until it starts raining, then they want it back

perpetual query: yes could apply to some of the others, although RBOHA are deeply subordinated, perhaps more so than anyone elses.

[Xerof]

Well, speak of the devil.....look what appeared in the NBR this afternoon:

Mr English did not give much in the way of detail about what those measures might be, or their timing, but the context of a pre-Budget speech indicates the government’s preference is to include them in Budget 2013, to be delivered on May 16.


“Later this year, the government will have more to say about how the financial stability tools will work alongside policies on more flexible supply in the housing market and social housing reform,” was all Mr English would say in his speech to the Auckland Chamber of Commerce this afternoon.


Those financial stability tools – the domain of the Reserve Bank – include loan-to-value ratios and additions to the capital and bank funding requirements already being imposed on banks.


Such tools though will be the preserve of the Reserve Bank and not the government, Mr English says

[mouse]

Closed today at 71cents. At closing point a substantial number of shares sold, driving the price down. I saw this used in HK in 1971? To both drive up and drive down the price. Manipulate the market. Is this what we are seeing, prior to The Mafia, any country, making the dollar bid? I dont have to be right, I do have to be suspicious.

[Xerof]

A lot of people only deal in the opening/closing auctions. It's where liquidity usually surfaces for their volume to get done.

mouse, I think you're 'trapped' in conspiracy theory.....

[mouse]

You could be right. We wait to see.

A lot of people only deal in the opening/closing auctions. It's where liquidity usually surfaces for their volume to get done.

mouse, I think you're 'trapped' in conspiracy theory.....

[Lizard]

Liz,

it's 20 years since I was last involved in Bank treasury ops, and in those days Capital Adequacy Ratios were only just being implemented globally (Cook ratios in those days)

It seems the basic principles have morphed into Basel i,ii and iii, and without knowing the exact details, I think you can take it for granted that banks comply with the requirements at all times. Monitoring by the authorities is fairly detailed and intense.

i do know that asset classes and liability classes for that matter, have been tweaked over the years, perhaps to cope with the financial engineering that the back room boys seem to invent on a daily basis, and push out to the unsuspecting public and insto's as new products.

So, each bank would apply the rules as they stand to each item on the asset side of the balance sheet, multiply $ amounts by the appropriate weighting, to determine an 'adjusted' balance sheet number (off bs products are alo captured to varying degrees)

similarly, the same exercise is done for the liability side, to calculate adequacy ratio

in a nutshell, don't sweat the detail, but if a bank's experiencing high growth, in products that are 'expensive' to hold on/off B/S, and it's Basel ratio is nearing the limit, sure as eggs, you will be looking at a CR

HNZ products would carry more capital requirements than Kiwibank products I would suggest, and that means less leverage to expand the operations


Thanks Xerof. Appreciate your help. For interest, below is the snapshot of weightings for HNZ exposures from last report:

4351

On maths only, that seems well covered by the $344m of tier 1 capital, so doesn't seem to show asset mix inhibiting growth yet? Also, the fact that HNZ has a higher condition for capital adequacy placed on it than other banks by the RBNZ may mean that they would already be holding enough capital should ratios move again?

I am probably too optimistic/simplistic though, as not really familiar with banks/financials.

[janner]

Numbers stay the same Moosie.. It is only the point that changes..

[GR8DAY]

I keep telling my father to buy-in because he needs to de-risk his buy options but, alas, he won't listen to me. Will get a call in 3-6 months saying "you were right, I should have listened to you and that internet clown".

[Thanks for the heads up on it btw Sparky] ;)

That's AIG btw, not PGW!




MAYBE DAD KNOWS A THING OR TWO YOU DONT MOOSE??...........hope you sold out in time in time, not looking that flash at the mo!

[blobbles]

I don't get the share price today, heaps of people willing to buy at 73c and rising to 74c, then someone goes and sells 4000 odd for 71c??? They don't want more money for their shares or what?

[POSSUM THE CAT]

They might know something or have very good brains

[percy]

They might know something or have very good brains

They may not too.!!!!! Yeah right!!!!
Most of today's trades [247,992 shares] were at 73cents.Only small parcel of 4415 shares traded at 71cents.

[blobbles]

They may not too.!!!!! Yeah right!!!!
Most of today's trades (247,992 shares) were at 73cents.Only small parcel of 4415 shares traded at 71cents.

That's what I mean by ridiculous. To me, that sounds like someone forcing the price down so they can buy a whole lot more at a potential discount. Is this sort of thing ever investigated by anyone?

[percy]

That's what I mean by ridiculous. To me, that sounds like someone forcing the price down so they can buy a whole lot more at a potential discount. Is this sort of thing ever investigated by anyone?

Could be a small seller wanting out straight away and only buyer at the time was 71cents.A broker selling up a deceased estate,or tidying up a client's portfolio.

[mouse]

There are also a lot of idiots out there. :-)
The problem is, its the weekend. You lie awake, thinking of how much you have lost already. Will the market collapse over the week-end? Will the shed burn down? Will the drought break? Could we have more quakes? Will the car work when I turn it on? Life can be very miserable, particularly for insomniacs.
SELL THE B****Y SHARES.
[SIZE=1]And so the price drifts down.
Hopefully Monday Morning its raining and cheers Ashburton up.

[Hoop]

Could be a small seller wanting out straight away and only buyer at the time was 71cents.A broker selling up a deceased estate,or tidying up a client's portfolio.

Being the last trade before closing on friday afternoon it got all the signatures of a tidy up trade and needs to be settled by the due date probably today....eh?

You guys worry too much Sparky is right...if you worry too much ...the market isn't for you....don't stick around and try to regulate it.

...Regulated markets perform badly as values become distorted with time. Too costly to police and too many grey areas to consider ...end result..disaster!!


The two most well known tricks of the trade are fake outs and shake outs..... see here for a basic summary Incredible charts tricks of the trade (http://www.incrediblecharts.com/trading/shakeout.php)

Knowing all about Trader Psychology definitely helps you stop becoming paranoid...

[Xerof]

Gee, much ado about nothing

some dude just sold 100k parcel 'at market' which happened to penetrate into the buyers at 71

[K1W1G0LD]

Gee, much ado about nothing

some dude just sold 100k parcel 'at market' which happened to penetrate into the buyers at 71

Hear,hear...........................seems this had some of the experts on here a bit befuddled!!

[kizame]

On a different note,I noticed last night as I was dining opposite the Tauranga branch,that they havn't put the word bank on their signwork,but have a video running in the window mentioning they were NZ's newest bank.

[winner69]

this thread is getting like the Pike thread a few years ago .... hysterical fantasicm

Must get balance's mate at oxford to include in his book on investor behaviour ... i believe he is always on the look out for raw material

[mouse]

Sparky, that is partly the problem with Heartland. Many were in CBS, a building society. They then voted to become part of the bank project and saw their share value plummet. Now, that is not me. But for those in this situation it now worries them and SELL is their solution. At least they can get a good nights sleep.
The problem will come, when Heartland goes to a dollar, then higher. Nightmares after that situation. Incredibly, they will then buy back in.

shouldn't be in shares then. wrong investment class for people who worry.

[percy]

[QUOTE=winner69;395693]this thread is getting like the Pike thread a few years ago .... hysterical fantasicm

Very wrong.
Pike never achieved one thing they set out to do.
Heartland on the other hand have achieved everything they set out to do.
Solid foundations laid for a sound business.

[winner69]

Wasn't comparing hnz to pike Percy ......just comparing the passion of investors in both ...and your response is just the sort of response balances mate at Oxford ( or was it the London school of economics?) loves analysing

[percy]

Wasn't comparing hnz to pike Percy ......just comparing the passion of investors in both ...and your response is just the sort of response balances mate at Oxford ( or was it the London school of economics?) loves analysing

Can't speak for others,however I leave passion and my hearts desires out of my investment decissions.
Old fashion values, like capable people achieveing what they set out to do, is very much at the forefront of what drives my investments.

[blobbles]

Ha haa, hope you aren't referring to me as an expert! I am a small time investor that's only been in the game 2 years, but had planned to get in on the Xero float but stupidly forgot and paid for my mistake (relatively speaking). As such I still have heaps to learn about how things work! Cheers Xerof

[Snoopy]

I will quibble with your PGW comment though. While PGG Wrightson finance was a good asset and one which their shareholders were sad to see go, what came with it was a huge cash crunch that PGW would have to address in order to pay the maturing bond back. I doubt PGW were in any position to issue another bond to cover the debt maturing in 2011, what with its own headaches with Crafar, the failed Silver Fern Farms deal, a crappy economy etc etc etc.


I am afraid I suffered a memory lapse when I analyzed the Heartland profit. Here is what Heartland said about their rural loans:

-----

Rural
The rural receivables book grew from $478.6m to $480.6m during the Current Reporting Period. NOI was $11.5m, an increase of $3.6m from the Previous Corresponding Reporting Period due to a full six months earnings from the PWF book. The minimal book growth was due to low seasonal demand in livestock trading and a low credit growth environment.

-----

But of course, what Heartland failed to mention was that during the year they acquired the PGW Finance loan book, excluding $90.9m of doubtful loans left with PGW.

$333.911m- $90.9m= $243.0m

On a true before and after comparative basis, including the PGW Finance Assets acquired during the year, the Heartland press release should have read:

"The rural receivables book shrunk from $721.6m to $480.6m during the Current Reporting Period."

So when you combine that with what happened in their other core business areas:
"The business receivables book contracted from $540.2m to $530.5m during the Current Reporting Period."
"The retail & consumer receivables book contracted from $954.8m to $945.8m during the Current Reporting Period."

We can see that total retained core business over the year was:

($480.6m+$530.5m+$945.8m)/($721.6m+$540.2m+$954.8m)= 0.88

In blunt terms the HNZ business contracted by 12% over the last year. Mind you given their capital restraints, it was probably a wise thing to shrink the business down. But let's not let the facts get in the way of a good story. HNZ is not a growth story. It is in fact this country's fastest shrinking bank.

SNOOPY

[percy]

I am afraid I suffered a memory lapse when I analyzed the Heartland profit. .

SNOOPY

No surprises there.!!! lol
Seems to happen everytime you post on this thread.

[percy]

SNOOPY;
A couple of management tips for you;
1] It's not how many hours you spend working,it's what you do in those hours.
2[ Lending.It's not how much you lend,but the margin you make on those loans.

[winner69]

SNOOPY;
A couple of management tips for you;
1] It's not how many hours you spend working,it's what you do in those hours.
2[ Lending.It's not how much you lend,but the margin you make on those loans.

Snoopy ....Percy and jeff keep on taking about this margin ...Percy a lot and jeff says a key value driver

I have been through a couple of presentations and can't find much about margins ..let alone a rave about them improving. Yes cost of fuds are coming down but maybe, just maybe, they are charging lower interest rates as well

In your research snoops have you found anything about expanding margins

[percy]

In case SNOOPY is still having memory lapses problems,go to the AGM presentation and read where HNZ want to be and new areas they are looking to expand on.Also read where they don't want to go head to head with the major banks.Lower cost of funds is only half of the full picture.
Also think about of my posts where I have stated HNZ is more like UDC,ie MARAC with a bank licence.
page 19/34 of agm presentation; 'Our emphasis is on cashflow and drivers of productivity;the generation of real wealth-NOT asset appreciation."

[winner69]

Yes I understand all that .....just looking to see the numbers that demonstrate the strategy is on track and working

Just like having the warm fuzzies what is being said is actually happening if you get the gist ...plenty of charts about all sort of things but nothing that tells me interest margins are trending up

[percy]

Never been any "warm fuzzies" with this company.Speak plain English, and deliver what they say they will.

[robbo24]

$90.9m of doubtful loans left with PGW.

$333.911m- $90.9m= $243.0m

"Doubtful" does not mean unenforceable, invalid or a liability.

Any loan is "doubtful" whether it is secured or not.

In my opinion Snoopy's analysis is based on the assumptions that:

(a) All the loans from the PGC books are "doubtful", and;
(b) All "doubtful" loans are unenforceable, invalid or worthless/a liability.

Seems like scaremongering to me...

[janner]

Ha haa, hope you aren't referring to me as an expert! I am a small time investor that's only been in the game 2 years, but had planned to get in on the Xero float but stupidly forgot and paid for my mistake (relatively speaking). As such I still have heaps to learn about how things work! Cheers Xerof

Stay with those thoughts Bobbles.. We are all small time investors.. We all still have much to learn.. We on this site are willing to expose our failings.. And .. Only occassionally . .. Trumpet our Victories..

The Banter.. The Borax..

Profitable learning is why I am here... From any one... Including .. YOU.. :-))

[winner69]

Never been any "warm fuzzies" with this company.Speak plain English, and deliver what they say they will.

No no percy .... its me that wants the warm fuzzies

I'm sure Jeff is pretty pleased with his corporate speak

[janner]

No no percy .... its me that wants the warm fuzzies

I'm sure Jeff is pretty pleased with his corporate speak

Oh !!.. Back handed compliment ???

[janner]

No no percy .... its me that wants the warm fuzzies

I'm sure Jeff is pretty pleased with his corporate speak

Interested to know which company does give you the " Warm Fuzzies " winner..

[percy]

Snoopy is talking about a reduction of revenue in certain segments, but conveniently neglects to mention earnings are up. In some people's books, the best growth is when earnings go up, not revenue.

HNZ are being selective about the business they want to fund, focusing on the cashflow positive parts of a farm (machinery, livestock), rather than funding the land itself. They don't want to contest the mortgage space with the big banks head on. They have told me directly that they are keen to work with the big banks (who also seek to partner with HNZ to help spread risk), so that HNZ fund the business, stock, plant and equipment, and ASB/ANZ/??? fund the land. It is a "symbiotic" relationship. ASB don't want to end up with a combine harvester, and HNZ don't want to fund land they are uncompetitive on. They will be most keen to lend to households for mortgages when they have a total relationship, rather than competitively quoting for every man and his dog.

HNZ have said to me that their business model is ideally 1/3 consumer, 1/3 SME+business, and 1/3 agricultural.

http://www.scoop.co.nz/stories/BU1302/S00847/heartland-nz-lifts-1h-profit-by-92-on-improved-margins.htm
http://www.stuff.co.nz/business/money/8091759/New-bank-to-play-niche-role

I'm sure that a quick phone call or an email to the folks at Heartland would assist Snoopy with understanding this better than a financial statement alone. I hope Snoopy makes the call on Monday.

Sparky The Clown.
Thanks for your post. "the best growth is when earnings go up,not revenue." Exactly.Right on.!!!!

[janner]

Snoopy is talking about a reduction of revenue in certain segments, but conveniently neglects to mention earnings are up. In some people's books, the best growth is when earnings go up, not revenue.

HNZ are being selective about the business they want to fund, focusing on the cashflow positive parts of a farm (machinery, livestock), rather than funding the land itself. They don't want to contest the mortgage space with the big banks head on. They have told me directly that they are keen to work with the big banks (who also seek to partner with HNZ to help spread risk), so that HNZ fund the business, stock, plant and equipment, and ASB/ANZ/??? fund the land. It is a "symbiotic" relationship. ASB don't want to end up with a combine harvester, and HNZ don't want to fund land they are uncompetitive on. They will be most keen to lend to households for mortgages when they have a total relationship, rather than competitively quoting for every man and his dog.

HNZ have said to me that their business model is ideally 1/3 consumer, 1/3 SME+business, and 1/3 agricultural.

http://www.scoop.co.nz/stories/BU1302/S00847/heartland-nz-lifts-1h-profit-by-92-on-improved-margins.htm
http://www.stuff.co.nz/business/money/8091759/New-bank-to-play-niche-role

I'm sure that a quick phone call or an email to the folks at Heartland would assist Snoopy with understanding this better than a financial statement alone. I hope Snoopy makes the call on Monday.

Percy.. Please note .. You have at least one convert.. :-)

Sparky.. Just my note.. Your investment into AIG " $35 or so .. Expecting to go to $50 or so ...

Equates to HNZ going from .70 to .90.. or there abouts..

Not wishing to know amounts .. and understanding the difference between the liquidity of the US Markets.. and ours..

Why Aig as against hnz.. ??..

This is a serious question Sparky because ... Because.. because.. ??????.. I would like to know..

[janner]

Hmm.. Thanks for the reply..

So.. Understanding .. " Deep Growth " Why did you not understand that HNZ was deep growth ... Knowing that you have already said that it is a long term investment.. ??

This is one area that intrieques me.. Of course the market would collapse if we all invested into penny dreadfulls..

But their would be no market with out them !!..

Why invest " $35 .. ??

[mouse]

The Banking License is interesting. How much is it worth? Is it down on the financial report as an 'asset.' If not valued at present, what is its value? Can anyone give some advice on it? I think a Bankers License must be worth cash. How much am I bid?

Janner, had I bought HNZ when it was in the 50c range on the basis it was trading at a massive discount to NTA, and was mispriced, I would have bought into HNZ as a deep value play.

However, I really didn't know enough about the company until they got their banking license, which was what really got my research synapses firing.

By then though, I was more interested in their earnings growth potential, rather than a mispriced share value compared to NTA (which at 67-70c to 88c, was still a big discount).

So I can see HNZ's shareprice rise to an intrinsic value of $1.00 based on 2013 earnings.

Conversely, I can see AIG re-value to a more rational level compared to its price/book of 0.58, as more people realise that it WAS a basket case 3-4 years ago, but is no longer. This is a case, (well at least I say it is) of the market fears irrationally pricing a stock because of former fears.

This is what I look for in a value investment - where people are scared of a company on the mend because they see high risk. The truth is, the very low price is what makes it less of a risk than blue chips that are fairly priced.

[janner]

It cost Heartland more than they expected - their recent result was a bit depressed as a result of one off costs associated with consultants, lawyers etc in gaining the licence.

What it is worth is not so much a fixed price, but the margin increase in loaning out cash.

Consultants, lawyers... The Remora fish of this world today....

[mouse]

I agree that having Reserve Bank monitoring on a day to day basis is of great vaue to us shareholders. But what does the market think it is worth? The costs of getting it are history. The benefits, or problems of having it must have some cash value which has to be reflected in the share price. Can someone, cleverer than me, hazard a guess? If necessary an uneducated guess?

It cost Heartland more than they expected - their recent result was a bit depressed as a result of one off costs associated with consultants, lawyers etc in gaining the licence.

What it is worth is not so much a fixed price, but the margin increase in loaning out cash.

[percy]

I agree that having Reserve Bank monitoring on a day to day basis is of great vaue to us shareholders. But what does the market think it is worth? The costs of getting it are history. The benefits, or problems of having it must have some cash value which has to be reflected in the share price. Can someone, cleverer than me, hazard a guess? If necessary an uneducated guess?

It is worth approx $60mil,with on going worth of approx $15 to $22mil per year.

[winner69]

Mouse .......clown says it is the extra margin they make cos cost of borrowing is lower

A hazard a guess .....say 2 billion lent out .....lets say they make half a percentage point more on this .... Thats 10 mill bucks a year ...... multiple of say 12 .... heck that licence is worth 120 mill ....on 388 mil shares that's at least 30 cents a share eh

See why I am waiting to see the evidence of margin enhancement ...instead of jeff just talking about it

The 10 mill extra per year should end on the bottom line eh

But what the heck I know ......and it was the back of a fag pack calc .... More room on them without the pretty pictures

[winner69]

So Percy reckons margins will be up 1 percentage point ..... Not my guess of half a point

No doubt that brilliant man jeff will tel us one day

[macduffy]

A banking licence doesn't have a market value in the sense of something that can be sold to another party. It is "conferred" ( not the right word exactly) by the RBNZ after the applicant meets certain requirements, such as sufficient capital. and that the RB is satisfied with the relevant experience, reputation etc of management.

[percy]

[QUOTE=winner69;395833]So Percy reckons margins will be up 1 percentage point ..... Not my guess of half a point

You have not taken into consideration the HUGE marketing/PR value,which must be added to the savings on cost of borrowings.
Yes, Jeff has done/and is doing a brilliant job,achieving all he says he will do.Savy investors take note of what he says he will do, in his clear communications,as that is what happens."His word is his bond."

[janner]

[QUOTE=winner69;395833]So Percy reckons margins will be up 1 percentage point ..... Not my guess of half a point

You have not taken into consideration the HUGE marketing/PR value,which must be added to the savings on cost of borrowings.
Yes, Jeff has done/and is doing a brilliant job,achieving all he says he will do.Savy investors take note of what he says he will do, in his clear communications,as that is what happens."His word is his bond."

Percy... An Indian bank ( the name slips me ) was given a licence to operate in NZ only a few months prior to HNZ's.

Where is. The PR hype and info about them ??.. Does this mean that having no hype they will fail ??

Calm down man.. :-)). Me thinks thou Protesteth to much...

[noodles]

It cost Heartland more than they expected - their recent result was a bit depressed as a result of one off costs associated with consultants, lawyers etc in gaining the licence.

Hi Sparky,

Can you point me to where these one-off costs are reported?

Regards,
Chris

[winner69]

[QUOTE=winner69;395833]So Percy reckons margins will be up 1 percentage point ..... Not my guess of half a point

You have not taken into consideration the HUGE marketing/PR value,which must be added to the savings on cost of borrowings.
Yes, Jeff has done/and is doing a brilliant job,achieving all he says he will do.Savy investors take note of what he says he will do, in his clear communications,as that is what happens."His word is his bond."

Yes we have

Should help them compete against other nz banks ....... Kiwibank and Cooperative BANK

From a consumer story perspective that Cooperative Bank sounds pretty good

[percy]

[QUOTE=percy;395836]

Yes we have

Should help them compete against other nz banks ....... Kiwibank and Cooperative BANK

From a consumer story perspective that Cooperative Bank sounds pretty good

I thought you said you had read HNZ presntations?
They have stated all along where the intend to operate,and is it not in Kiwi Bank or Co-op space.

[percy]

[QUOTE=percy;395836]

Percy... An Indian bank ( the name slips me ) was given a licence to operate in NZ only a few months prior to HNZ's.

Where is. The PR hype and info about them ??.. Does this mean that having no hype they will fail ??

Calm down man.. :-)). Me thinks thou Protesteth to much...

I only try to correct misleading and false statements.
I think my record of correct postings on this thread speaks for itself,and going from the number of PMs I have had,others seem to agree with my contribution .
Sorry I do not know anything about the Indian bank.

[winner69]

Wonder if the punters will show idiotic behaviour today and sell hnz shares for ridiculous prices

Must be those stupid mum and dad investors ..... The retail investors as opposed to the pros eh

I guess hnz 75 by end of day .... Up 1 cent really

[percy]

Wonder if the punters will show idiotic behaviour today and sell hnz shares for ridiculous prices

Must be those stupid mum and dad investors ..... The retail investors as opposed to the pros eh

I guess hnz 75 by end of day .... Up 1 cent really

Over the years it has been the clever mum and dad investors at EBO who have made a lot of money from the stupid pros selling.Maybe the same here?
SP today? Don't know,but has been good liquidity.

[macduffy]

A couple of other points to consider in assessing the value of a banking licence to HNZ:

- Their retail deposit rates won't necessarily change much. For example ANZ's v UDC's carded rates for deposits $10k+ are currently:
6mths ANZ 3.75% UDC 4.0%
12mths 4.0 4.2
2yrs 4.2 4.2
5yrs 5 4.9

It frequently happens that ANZ - the parent - offers more than its finance co offspring!

- Having a banking licence will enable HNZ to participate in more better secured lending than it could as a finance co., eg 1st mortgage lender rather than seasonal/top -up lending with lower ranked security. But the security comes at the price of lower lending rates, squeezing the margin a little.

The biggest advantage of the licence, IMO, is that it improves HNZ's access to wholesale funding markets, when/if this is necessary, and, in theory, allows borrowing there at a better rate than would be possible as a finance company. But I think it's an exercise in futility to try to put a "value" on it in terms of a funding cost percentage.

[winner69]

Over the years it has been the clever mum and dad investors at EBO who have made a lot of money from the stupid pros selling.Maybe the same here?
SP today? Don't know,but has been good liquidity.

but it was lack of liquidity that saw the price end up at 71 cents on friday ... somebody couldn't off load 100,000 shares without 'moving the market' so they say

[Snoopy]

Snoopy wrote:
"But of course, what Heartland failed to mention was that during the year they acquired the PGW Finance loan book, excluding $90.9m of doubtful loans left with PGW."

"333.911m- $90.9m= $243.0m"

"Doubtful" does not mean unenforceable, invalid or a liability.

Any loan is "doubtful" whether it is secured or not.

In my opinion Snoopy's analysis is based on the assumptions that:

(a) All the loans from the PGW Finance books are "doubtful", and;
(b) All "doubtful" loans are unenforceable, invalid or worthless/a liability.

Seems like scaremongering to me...

Robbo24, perhaps I have been a little loose with my english here, and that has not left a clear impression of what I was trying to say. You say that "Doubtful" (when used to describe a loan) does not mean unenforceable, invalid or a liability. I agree with you 100% on this. I certainly never mentioned 'doubtful' in relation to a loan implying that I think it will not be recovered.

The term 'doubtful' always implies a matter of opinion. The loans were doubtful for Heartland because they refused to accept them. However PGW did not regard them as doubtful and have subsequently recovered almost all of them. With hindsight you can say Heartland were wrong in calling them doubtful, but that doesn't mesan they didn't have an honestly held opinion that the $90.9m worth of loans were doubtful at the time.

Your point of view has been vindicated in that the $90.9m of loans that I referred to as 'doubtful' were in fact retained by PGW and paperwork from that side of the operation suggests that all of these loans either have been recovered, or are on track for recovery.

I reject your implication of 'scaremongering' as based on a misunderstanding of what I was saying. The $90.9m worth of doubtful loans were never owned by Heartland. Even in the highly theoretical case of all of these 'doubtful' loans had all going bad, the effect on Heartland would have been nil because they never owned them or had any responsibility for them. How could I be scaremongering if the loans in question were never even owned by Heartland?

Your tone suggests that you think I was implying that the $243m of loans acquired by Heartland from PGW were also doubtful. This is the opposite of what I meant. In fact, the reason I highlighted $90.9m worth of loans as doubtful was meant to imply that the remainder were not doubtful. Although admittedly I didn't explicitly state this.

I hope that clears things up.

SNOOPY

[percy]

but it was lack of liquidity that saw the price end up at 71 cents on friday ... somebody couldn't off load 100,000 shares without 'moving the market' so they say

No very positive that there was a buyer at 71cents.Good liquidity.A lot of depth today too.

[robbo24]

I hope that clears things up.

Ah yes that makes a lot more sense to me - thanks Snoopy. Perhaps I got a little bit caught up on semantics, but then again things can get lost in interpretations...

[CJ]

yip ... volume weighted average was 73c if memory serves ... is the close being manipulated?Given it was a trade of a round 100k of shares, no. People are reading to much into this. Someone dumped a 100k holding and the last 4k odd settled at 71.

Should they have sold it in a couple of lots over a few days? maybe? but maybe they decided to go for the AMG version and needed a bit of extra change for the weekend.

[Xerof]

I hear Phil Goff is calling for a Commission of Enquiry into this particular trade. It appears to have all the hallmarks of manipulation by terrorist organisations based in Ashburton.

I'll keep you posted.......

[K1W1G0LD]

I hear Phil Goff is calling for a Commission of Enquiry into this particular trade. It appears to have all the hallmarks of manipulation by terrorist organisations based in Ashburton.

I'll keep you posted.......

yeah the Jenny Shipley brigade operates somewhere down their , I heard she drives a bulletproof AMG.

[Snoopy]

Snoopy ....Percy and jeff keep on taking about this margin ...Percy a lot and jeff says a key value driver

I have been through a couple of presentations and can't find much about margins ..let alone a rave about them improving. Yes cost of funds are coming down but maybe, just maybe, they are charging lower interest rates as well

In your research snoops have you found anything about expanding margins

I think it is hard to tell about the margins Winner, until the overall loan book is appropriately resized and we have like for like comparative periods to compare.

SNOOPY

[Snoopy]

Snoopy is talking about a reduction of revenue in certain segments, but conveniently neglects to mention earnings are up. In some people's books, the best growth is when earnings go up, not revenue.

HNZ are being selective about the business they want to fund, focusing on the cashflow positive parts of a farm (machinery, livestock), rather than funding the land itself. They don't want to contest the mortgage space with the big banks head on. They have told me directly that they are keen to work with the big banks (who also seek to partner with HNZ to help spread risk), so that HNZ fund the business, stock, plant and equipment, and ASB/ANZ/??? fund the land. It is a "symbiotic" relationship. ASB don't want to end up with a combine harvester, and HNZ don't want to fund land they are uncompetitive on. They will be most keen to lend to households for mortgages when they have a total relationship, rather than competitively quoting for every man and his dog.

HNZ have said to me that their business model is ideally 1/3 consumer, 1/3 SME+business, and 1/3 agricultural.


I agree Sparky that in the end profitability is more important than size. I think it is wise strategy for Heartland not to tackle the big four banks head on. However this proposed symbiotic relationship with the big banks does not quite ring true to me.

My question is, why would a farmer borrow from Heartland at higher rates if they could get that same money secured against their land at lower rates from one of the big four banks? The answer is they wouldn't. Heartland may have indeed identified niche. But that niche will be highly leveraged undercapitalized farmers that can't get a larger loan from their big four bank. So at once the profile of the Heartland rural farmers doing the borrowing is a collective set of 'risky' farmers.

SNOOPY

[mouse]

Of course, the only lot who borrow cash are those without it. There is no advantage in taking security with a sixth mortgage over land that already has five mortgages on it. Which is where taking security over a combine harvester is useful. You can drive it off the property! Even flog it overseas if big enough. So farmers will have to pay more to borrow from Heartland, but I think the risk warrants a higher interest rate with maybe more actual security than land. Providing of course the combine harvester has not been borrowed against six times also!
This also raises the question of the expertise in Heartland to value a combine harvester, which must be worth quite a lot a Harvest Time. But how much is it worth in Winter? Most peculiar situation.

I agree Sparky that in the end profitability is more important than size. I think it is wise strategy for Heartland not to tackle the big four banks head on. However this proposed symbiotic relationship with the big banks does not quite ring true to me.

My question is, why would a farmer borrow from Heartland at higher rates if they could get that same money secured against their land at lower rates from one of the big four banks? The answer is they wouldn't. Heartland may have indeed identified niche. But that niche will be highly leveraged undercapitalized farmers that can't get a larger loan from their big four bank. So at once the profile of the Heartland rural farmers doing the borrowing is a collective set of 'risky' farmers.

SNOOPY

[percy]

I agree Sparky that in the end profitability is more important than size. I think it is wise strategy for Heartland not to tackle the big four banks head on. However this proposed symbiotic relationship with the big banks does not quite ring true to me.

My question is, why would a farmer borrow from Heartland at higher rates if they could get that same money secured against their land at lower rates from one of the big four banks? The answer is they wouldn't. Heartland may have indeed identified niche. But that niche will be highly leveraged undercapitalized farmers that can't get a larger loan from their big four bank. So at once the profile of the Heartland rural farmers doing the borrowing is a collective set of 'risky' farmers.

SNOOPY

You have answered your own question;"secured against their land.".Old banker story,put the boat on the house is stupid.Farmers realise they are better paying a higher rate for a short term rather than a low rate for a higher term ,and keeping their land unencumbered as much as they can.
Management tip.It's not the interest rate that is important, it is the length of time you pay that interest.

[Snoopy]

You have answered your own question;"secured against their land.".Old banker story,put the boat on the house is stupid.Farmers realise they are better paying a higher rate for a short term rather than a low rate for a higher term ,and keeping their land unencumbered as much as they can.
Management tip.It's not the interest rate that is important, it is the length of time you pay that interest.

Hmmm, you may have a point there Percy. Should we be on the look out for good deposit dates for 120 day terms to confirm your theory?

SNOOPY

[Snoopy]

Of course, the only lot who borrow cash are those without it. There is no advantage in taking security with a sixth mortgage over land that already has five mortgages on it. Which is where taking security over a combine harvester is useful. You can drive it off the property! Even flog it overseas if big enough. So farmers will have to pay more to borrow from Heartland, but I think the risk warrants a higher interest rate with maybe more actual security than land. Providing of course the combine harvester has not been borrowed against six times also!
This also raises the question of the expertise in Heartland to value a combine harvester, which must be worth quite a lot a Harvest Time. But how much is it worth in Winter? Most peculiar situation.


The point is a combine harvester is worth a heck of a lot, just before harvest, and not much afterwards. If Heartland are using a combine harvester for security, they will need to be able to hold it until the high season to get a good price, should a loan go bad. And that means they will need more shareholder capital than an equivalent bank that has a lien over land. How much more capital? 50% more (that translates to 30% of the outstanding loans being the capital requirement that HNZ would need to hold.) At least that is the figure the underwriting banks were demanding when PGW Finance were still part of PGW.

Going after these niche markets will have a capital cost for HNZ shareholders.

SNOOPY

[winner69]

WTF is going on ...... liquidity has dried up .... no one keen on selling or buying

Brokers will not be happy .... no income coming in from people buying and selling HNZ shares

I feel Forbar and Craigs or somebody will be putting out a glowing report to fix that ....... BUY BUY BUY ..... or maybe SELL SELL SELL .... they don't care as long as people are buying or selling

[winner69]

Liquidity has dried up across the board, not just HNZ. NZX is waiting to see how the other markets trend this week regarding Italy, European reports, the US economy and commodities to give it guidance. Risk has dried up and there is a short-term negative outlook in effect. No surprise really.

But not a SINGLE trade in HNZ

[iceman]

I'd expect a fall back to 68 before continuing upwards, the market didn't get what it wanted report wise, so expect punishment. It usually takes just one downward trade to open the floodgates to panic...

Ex divie on Friday so I wouldn't expect it to fall further before then. I was quite happy with the report, meeting their targets and paying a better than expected dividend. What do you think the market wanted and is punishing HNZ for not getting ?

[blobbles]

I'd expect a fall back to 68 before continuing upwards, the market didn't get what it wanted report wise, so expect punishment. It usually takes just one downward trade to open the floodgates to panic...

Huh? What were you expecting Moosie? I thought we got exactly what we wanted!

[percy]

The point is a combine harvester is worth a heck of a lot, just before harvest, and not much afterwards. If Heartland are using a combine harvester for security, they will need to be able to hold it until the high season to get a good price, should a loan go bad. And that means they will need more shareholder capital than an equivalent bank that has a lien over land. How much more capital? 50% more (that translates to 30% of the outstanding loans being the capital requirement that HNZ would need to hold.) At least that is the figure the underwriting banks were demanding when PGW Finance were still part of PGW.

Going after these niche markets will have a capital cost for HNZ shareholders.

SNOOPY

Experience is important.MARAC have a record of successful lending on vehicles and equipment.
We saw them fail when they went and lent in market they did not understand,ie property developement.
Each and every type of lending would have certain guidlines, different levels of deposit,different length of credit, and with rural lending I would expect they are aware of the seasons.Payments would be right up to date on the harvester until the crop was in anyhow.!!! We better keep an eye out with Turners to see if any/or a number come up for auction. Niche markets have great potential for HNZ,so long as they understand them.As I said before each market will have it's own requirements.
What is positive is HNZ are not chasing the areas the major banks are strong in,ie home mortgage market.
120 day rate will be the same as any other day rate,ie HNZ will be matching their deposits with their lending.From what I know they are still carrying a lot of cash.Being prudent?

[mouse]

Brilliant post, Percy,

Payments would be right up to date on the harvester until the crop was in anyhow.!!!

And it sums up the problem with Combine Harvesters. Which needs plenty of experience in valueing farm equipment for hire purchase. If Marac, sorry Heartland, has retained that expertise then things look good. It might take us a few years to find out Heartlands level of expertise.

[Minerbarejet]

And you are only a "temporary custodian" so to speak

[shambles]

Interesting to catch a HNZ advertisement on 'The Rock' today offering high deposit rates for businesses, it mentioned something about no fees. Didn't quite catch the details but was pleasantly surprised to hear the add, it finished with the profile 'NZ's newest bank'.

[CJ]

Interesting to catch a HNZ advertisement on 'The Rock' today offering high deposit rates for businesses, it mentioned something about no fees. Didn't quite catch the details but was pleasantly surprised to hear the add, it finished with the profile 'NZ's newest bank'.Saw a similar 1/4 page ad in the Hearld a few weekends ago.

[mouse]

I cannot even find a branch of Heartland!

TV ads as well...

[percy]

I cannot even find a branch of Heartland!

No surprises there.!!!!!!!! lol.

[winner69]

Just starting to catch up with COOPERATIVE BANK with their advertising

Hope HNZ don't spend too much on this advertising ..... there is a group of people out there who still believe that once a finance company with a fancy name goes on TV they are to be avoided at all costs .... and that was the case for many 'investors' even before Colin and Dougal started appearing on our TV screens

[percy]

Just starting to catch up with COOPERATIVE BANK with their advertising

Hope HNZ don't spend too much on this advertising ..... there is a group of people out there who still believe that once a finance company with a fancy name goes on TV they are to be avoided at all costs .... and that was the case for many 'investors' even before Colin and Dougal started appearing on our TV screens

You know from your reading,that EVERY successful company advertises.
You will note, their advertising advertises one particular product.Very clever, as it also gets name accross as well, and is easy to gauge success.
Clever people doing it right.

[percy]

Sorry, I'm not sure if this is humour?

Very much so.!!!!
75 Riccarton Road.
Deposits/investments Feephone 0800852020.
Internent www.heartland.co.nz
Large Cash deposit contact our pickup courier PERCY at sharetrader.

[Snoopy]

Each and every type of lending would have certain guidlines, different levels of deposit,different length of credit, and with rural lending I would expect they are aware of the seasons. Payments would be right up to date on the harvester until the crop was in anyhow.!!! Niche markets have great potential for HNZ,so long as they understand them.As I said before each market will have it's own requirements.


Well said Percy. The problem I have is that Heartland does not give potential investors the information they need to acquire investor confidence. Well, that is not quite true: see note 32c of the FY2012 annual report. That table is the maximum exposure to credit risk by internal credit grading. There was a big jump to over $60m in the Grade 6 'monitor' category. Not a problem yet, but an acknowledgement that there is a large body of loans that need to be 'monitored'. The next category downward is 'substandard' and there was a $20m jump in that. The half year report does not give this kind of reporting detail, yet the 'monitor' and 'substandard' loans amount to a not insubstantial $80m of capital. Now how many years of profit is that? One thing we do know is that the provision for bad loans on Heartland's books has been exhausted.

The other information not given is the term deposit reinvestment rate. PGW Finance was happy to give this before it was acquired by Heartland. So why can't Heartland do it now? Of course this all flows into the matching of deposit capital and loan capital both in amount and maturity timing. No information on that. Yet as we all found out during the finance company crashes, this was the information stakeholders needed. PE ratios, growth or otherwise on the lending book and ad campaigns meant diddly squat. I will be waiting until after the 2013 annual report is out and I will be carefully perusing note 32 before I make my decision to become a shaareholder in Heartland or not.

SNOOPY

[percy]

Well said Percy. The problem I have is that Heartland does not give potential investors the information they need to acquire investor confidence. Well, that is not quite true: see note 32c of the FY2012 annual report. That table is the maximum exposure to credit risk by internal credit grading. There was a big jump to over $60m in the Grade 6 'monitor' category. Not a problem yet, but an acknowledgement that there is a large body of loans that need to be 'monitored'. The next category downward is 'substandard' and there was a $20m jump in that. The half year report does not give this kind of reporting detail, yet the 'monitor' and 'substandard' loans amount to a not insubstantial $80m of capital. Now how many years of profit is that? One thing we do know is that the provision for bad loans on Heartland's books has been exhausted.

The other information not given is the term deposit reinvestment rate. PGW Finance was happy to give this before it was acquired by Heartland. So why can't Heartland do it now? Of course this all flows into the matching of deposit capital and loan capital both in amount and maturity timing. No information on that. Yet as we all found out during the finance company crashes, this was the information stakeholders needed. PE ratios, growth or otherwise on the lending book and ad campaigns meant diddly squat. I will be waiting until after the 2013 annual report is out and I will be carefully perusing note 32 before I make my decision to be in or not.

SNOOPY

Sorry can't answer first question.Ring Simon Owen CFO [09]9279195.or M 0276294602.I expect the Troublesome realestate loans make up the most part of it.It is interesting area with something happening there.I did suspect they were going to take them back from PGC's management.I think I got that wrong, and I now feel they are looking to sell them,maybe to PGC.[NZ Herald article "Inside Money; Pyne Gould answers distressed call"] .They are working on it.I think we would all be pleased to see them shot of the problem.I am off course reading between the lines of what has been stated.
Reinvestment rate.Lizard was quoting reinvestment rates at the beginning of this thread,don't know where she was getting them from.They have always been very high.Again CFO should tell you.
I have seem pie graphs setting out all of this information.May have been in the annual report.

[percy]

Better volumes at 76 cents ... I think we can safely conclude the breakout is in full swing ... might be worth snapping up few more while we can?

Happening very quickly.
4,432 only for sale at 76cents.Good volume of 663,820 shares traded today.

[percy]

This is very hard to explain. The banking license is at least two years away and the capital ratios are all out of whack.

:cool:

Easy to explain.!!
You rang your 'friend" Mr.Rothschild, and he is buying.
I expect the SP to really take off when he lets his "mates" at the golf club in on it. lol.

[Xerof]

I know one person who (on behalf of all his loyal PGC shareholders) will be particularly thrilled to see the price back up to his underwriting level again at last, and thats my ole mate George Cur. Only another 12 cents higher and he will be at breakeven on all the rest....

oooops, I forgot, no it doesn't matter really, he wisely sold them all at less than half price on behalf of all remaining PGC loyalists

[Balance]

Better volumes at 76 cents ... I think we can safely conclude the breakout is in full swing ... might be worth snapping up few more while we can?

Merger announcement soon?

[mouse]

The Market is a funny place. Last week, 71 cents. Close today 76 cents. Why? The situation is the same as ever. Percy, any ideas?
Or have the silly people down in Ashburton now decided to hang on to their shares?

[percy]

I would say last chance to get onboard before the stock really starts taking off.

Snoopy could not have been more wrong on HNZ.

Posted on 25/2/13 SP 72cents.
Well done Balance.As always on HNZ thread you have been right on the money.

[percy]

Merger announcement soon?

FPF .Wouldn't it be nice>>!!!!!!!

[percy]

The Market is a funny place. Last week, 71 cents. Close today 76 cents. Why? The situation is the same as ever. Percy, any ideas?
Or have the silly people down in Ashburton now decided to hang on to their shares?
No silly sharehoders in Ashburton,maybe a few dilly Tinwaldians [south of the river] selling.
Expect there are more buyers than sellers,so SP goes up.
I would also think the idea of 2cents divie every six months appeals to a lot of people.
Others would enjoy buying 90cents of NTA for 76cents.ie 15.5% discount,as Sparky The Clown pointed out..
Maybe Balance is right yet again?

[mouse]

None so queer as folk! But things are looking up.

No silly sharehoders in Ashburton,maybe a few dilly Tinwaldians [south of the river] selling.
Expect there are more buyers than sellers,so SP goes up.
I would also think the idea of 2cents divie every six months appeals to a lot of people.
Others would enjoy buying 90cents of NTA for 76cents.ie 15.5% discount,as Sparky The Clown pointed out..
Maybe Balance is right yet again?

[bonne vie]

Hi This is my first post but am I missing something - wasn't the license granted 17/12/12

[Snoopy]

Correct. The above post was in reference to one poster who steadfastly maintained it wouldn't be granted for three years and Heartland was on a path of trouble.


Just to clarify -on behalf of that rogue poster-, for those who came in late: the reserve bank's own rules required three years of prior accounts before an entity is granted a banking licence. My deduction from that was that Heartland in its current form would have to wait three years before a banking licence from the point in time it took over PGW finance. I don't know why the reserve bank did not follow their own rules, and decided to grant a banking licence a little more than a year from the PGW finance takeover. My critics have never offered an explanation as to why either. Mind you since the banking licence has been granted, I would argue the whole issue is now moot anyway. I still stand by my original prediction of not receiving a banking licence for three years given the information I had available to me at the time of making the prediction.

Also I mentioned that I believed Heartland was risky, and I still believe that. That is not the same thing as saying Heratland is on the way to inevitable trouble.

SNOOPY

[Balance]

Snoopy - you sure sniff some strange stuff at times?

[mouse]

I am trying to average DOWN!

I'd guess the suggestion of an ongoing and reliable dividend stream has caused many on the widely spread share register to rethink and the supply of small sellers has dried up. And, of course, there are those (perenial optimists) that are happy to average UP.

[Cool Bear]

finally! over the 75/76 barrier. Now 77. Mouse will be able to breakeven soon. Hopefully be 80s by end of this week or next week. Unfortunately not able to buy more as it is already a big chunk of my small portfolio.

[blobbles]

Likely they will be given a 4c dividend for this year based on their earnings, I would estimate (2c now, 2c in Dec). That's basically the same as having money in the bank and earning interest, or actually a little better because its fully imputed and a slightly better than most rates the banks offer.

As such, my estimation of the real price value now for these guys sits at 95c-$1. If they get growth, which is looking likely, there is considerable upside to that value in the medium term. With a 90c NTA, I see no reason why the Heartlands price is below this value at least. However I know why - people still a bit scared to invest in a finance company, especially one with a chequered past that still has a BBB- rating.

Although interestingly Heartlands TDs are at 4.25% for 6 months or 4.45% for a year! This is higher than their dividend (though less after tax).... I wonder if this is telling? Is it better to have money in the bank or own the bank?

[CJ]

Although interestingly Heartlands TDs are at 4.25% for 6 months or 4.45% for a year! This is higher than their dividend (though less after tax).... I wonder if this is telling? Is it better to have money in the bank or own the bank?I think you are forgetting the Heartland hasn't hit $1 yet.

4c/77c = 5.2% net yeild (7.2% gross)

Much higher than the interest rate being offered. Plus 17% growth to get to NTA. For shareholders on capital account, that will be the equivalent to a 32% interest rate if the share price gets to 90c by the end of 12 months (capital growth of 17% grossed up and div of 7%).

[blobbles]

Oh yes, you are right CJ, I was putting the cart before the horse! Good numbers!

[percy]

Oh yes, you are right CJ, I was putting the cart before the horse! Good numbers!

Even better for those of us who brought "a little cheaper".!!!!

[winner69]

http://www.thebreakfastclub.org.nz/

mentioned on another thread

May 28th ..... roll up to the an inspiring sermon from the man himself ..... probably more hysteria than at a Billy Graham gathering of old unless they restrict who is allowed to go

What a day it could be .... HNZ hits a buck and Jeff preaches to the converted

[winner69]

sincere apologies for the above post .... jeff will probably inspire the young wannabe bankers that morning

[percy]

sincere apologies for the above post .... jeff will probably inspire the young wannabe bankers that morning

Don't see your mate from the Co-op on the list of speakers?
Maybe he is not an early riser?

[percy]

Gold, pure gold!

77c today on almost 1 million shares traded. And a 2c dividend is struck in a few days time. I'm reluctant to give short term pricing guesstimates, and I'm far more a fundy than a technician, but the technicals suggest the move up is only starting... (RSI, Parabolics, BBands and MACD all look like they are starting an upwards trend)

SNOOPY's record stands intact. 100% wrong.!!!! lol.

[Snoopy]

Also I mentioned that I believed Heartland was risky, and I still believe that. That is not the same thing as saying Heartland is on the way to inevitable trouble.


I am not sure that I have explained the above point clearly.

Risk in this context is a probability assessment of a possible outcome. There is both good risk, where the company has a result far in excess of analyst expectations and bad risk where the result is far worse. In my assessment HNZ possesses both of these kind of risks. I mentioned in a previous post that HNZ was a real investment and one of the few shares on the NZx where significant gains were possible. However such gains were never certain even if management does everything right that they can control.

I am consistently on record as saying that I woudl invest in HNZ if the capital position was more secure. Going after seasonal farm finance instead of financing the land itself might be a good strategy, but it also requires a higher capital ratio in the long term. In my assessment following what seems to be a sensible strategy will ultimately require more capital. That means a discounted share placement or rights issue. In my judgement that will be the best time to enter HNZ to balance the upside risks against the downside risks. The further the share price rises in the interim, the worse the entry point for long term investors.

The half year report does not contain the information needed to judge how HNZ is going long term. So I will reserve all judgements until the full year report comes out (as I have said before). If other people want to gamble on the outcome before then, well good luck to them. I will be staying out, no matter what happens to the share price until that fulll year information is out

SNOOPY

[percy]

I am not sure that I have explained the above point clearly.

Risk in this context is a probability assessment of a possible outcome. There is both good risk, where the company has a result far in excess of analyst expectations and bad risk where the result is far worse. In my assessment HNZ possesses both of these kind of risks. I mentioned in a previous post that HNZ was a real investment and one of the few shares on the NZx where significant gains were possible. However such gains were never certain even if management does everything right that they can control.

I am consistently on record as saying that I woudl invest in HNZ if the capital position was more secure. Going after seasonal farm finance instead of financing the land itself might be a good strategy, but it also requires a higher capital ratio in the long term. In my assessment following what seems to be a sensible strategy will ultimately require more capital. That means a discounted share placement or rights issue. In my judgement that will be the best time to enter HNZ to balance the upside risks against the downside risks. The further the share price rises in the interim, the worse the entry point for long term investors.

The half year report does not contain the information needed to judge how HNZ is going long term. So I will reserve all judgements until the full year report comes out (as I have said before). If other people want to gamble on the outcome before then, well good luck to them. I will be staying out, no matter what happens to the share price until that fulll year information is out

SNOOPY

Again you will be proved WRONG.They have more than enough capital.Only time they will come to the market,as I have stated before,is if they takeover FPF.That would be welcome by the market,and would be strongly supported.

[percy]

Yep, 100% in agreement with Percy. This is exactly what a senior executive at Heartland said to me as well when I asked him. if anything, they may return surplus capital...

Now that is something;if anything, they may return surplus capital.!!!!!!!!!
All through this thread a number of posters have said HNZ will be raising capital.WRONG.
You really are picking up the correct information by talking to the right people.
Great research,and thank you for sharing it with us.

[mouse]

Percy, you wrote that at 7.15am today. What on earth are you doing out of bed at that time? It could have serious effects on your health. I, at 9.40am, have only just finished breakfast! And am not really awake.How on earth can you even THINK at that time in the morning?

Now that is something;if anything, they may return surplus capital.!!!!!!!!!
All through this thread a number of posters have said HNZ will be raising capital.WRONG.
You really are picking up the correct information by talking to the right people.
Great research,and thank you for sharing it with us.

[percy]

They have more than enough capital to do that. What we are talking about are sufficient funds for a quality acquisition.

They will absolutely consider a first class acquisition like Fisher and Paykel Finance, should that come up for sale. They will not buy a second class acquisition. It must be a quality one.

If FPF was to come up for purchase, then they would no doubt go to shareholders or the market for a rights issue/capital raise/whichever.

Should FPF come HNZ's way,not only would shareholders support it,but I think the instos would be very keen it too.

[percy]

lol, very enthusiastic for 7:15 am! I'm out of the shower by then, but nowhere near thinking about shares and the market at that time!

Tomorrow morning I will be on the road to Geraldine and Timaru schools at 6.30am .The cat loves the alarm going off at 5 or 5.30 am early breakfast goes down a treat.Have my shower the night before.Usually try to see what the Dow has done and check out Cavotec's price on Sweedish exchange ,before I hit the road.Must be careful not to post on sharetrader,as being a slow typist,I run out of time.
ps.I dream of shares.!!!

[Xerof]

"return surplus capital" ... OMFG ... Have these guys got no imagination? Growth! Growth! Growth! ... HNZ board and mgt, please look around, analyse every option and/or opportunity and grow the company.

Can't agree more with you on that one Belgie......

4383

[percy]

Can't agree more with you on that one Belgie......

4383

Wish you and all other DIL shareholders well.

[Master98]

HNZ director Graham Russell Kennedy keep selling HNZ shares remind me of years ago one of Rakon major shareholder Peter ??? damping RAK shares at about $1.6, Rakon shares now trade at 22c. not feel good.

[percy]

Looks to me as though Graham Kennedy is acting in the best interests of two long serving CSB director's trusts[Thomson trustand Church trust]
Being directors of CSB [which merged to form HNZ]they most probably were overweighted in HNZ.

[janner]

Looks to me as though Graham Kennedy is acting in the best interests of two long serving CSB director's trusts[Thomson trustand Church trust]
Being directors of CSB [which merged to form HNZ]they most probably were overweighted in HNZ.

Plausible Percy.... Prefer to follow up on STC's explaination.. :-))

[Snoopy]

Now that is something;if anything, they may return surplus capital.!!!!!!!!!


I know that Heartland is 'the incredible shrinking company' as their loan book slims down. But hopefully thy don't continue to shrink to the exent that they have to give shareholders some capital back!

SNOOPY

[percy]

I know that Heartland is 'the incredible shrinking company' as their loan book slims down. But hopefully thy don't continue to shrink to the exent that they have to give shareholdcers some capital back!

SNOOPY

I think you are still 100% wrong.So you understand what is going on. I will try to explain the facts of life to you.Think RBD.With them closing and/or selling Pizza Hut stores they did not need capital from shareholders to expand KFC etc.With unprofitable/low profit stores gone the earnings from KFC continued.So even with less turnover nett profit increased.ROE increased as did divies.
HNZ are focusing on profitable lending.Increasing ROE.Better for shareholders.
Another example of management's careful use of capital is EBO ,who have returned capital [special divie],when they don't need it,and have come to the market when they have required capital for an acqusition.EBO market cap has gone from 2.5mil to 468mil.I expect HNZ to be a great performer too.!!!

[kizame]

A Question. HNZ finished Friday at .75c,yet today it finished up 2c at yes .75c wow so I'm having some good gains without actually realising it,no wonder the shareprice is lagging XRO and DIL,my gosh.

seriously though,does the morning session constitute a price period and the afternoon session another complete period or what?

[lowrolling]

A Question. HNZ finished Friday at .75c,yet today it finished up 2c at yes .75c wow so I'm having some good gains without actually realising it,no wonder the shareprice is lagging XRO and DIL,my gosh.

seriously though,does the morning session constitute a price period and the afternoon session another complete period or what?

HNZ went ex div today with a 2c div per share.

[Cool Bear]

HNZ sh price seems to be mimicking the company - slow and steady. All I want for Christmas is for HNZ to go up 1cent every one or two weeks :)

[janner]

A Question. HNZ finished Friday at .75c,yet today it finished up 2c at yes .75c wow so I'm having some good gains without actually realising it,no wonder the shareprice is lagging XRO and DIL,my gosh.

seriously though,does the morning session constitute a price period and the afternoon session another complete period or what?

HNZ is in my opinion. A long term hold.. From which you will receive good DIVIDENDS.. .. With long term growth..

Is this what you wish to invest in Kizame ??..

XRO and DIL are another story.. Iin this wonderful world of wishes..

[janner]

Forgot to ask how is the Kitchen ??.. Hope you are keeping Mr's Kizame at bay.. :-))

[kizame]

HNZ is in my opinion. A long term hold.. From which you will receive good DIVIDENDS.. .. With long term growth..

Is this what you wish to invest in Kizame ??..

XRO and DIL are another story.. Iin this wonderful world of wishes..

take my comments with a grain of salt Janner, tongue was in cheek haha.

[janner]

take my comments with a grain of salt Janner, tongue was in cheek haha.

Hopefully your wifes also :-))

[mouse]

HNZ went ex div today with a 2c div per share.

INTERIM DIVIDEND
The directors of Heartland have resolved to pay an interim dividend of 2.0 cents per share on 5 April
2013 to shareholders on the company’s register as at 5.00pm on 20 March 2013. This dividend will be
fully imputed. (from a Heartland statement).

[mouse]

So trading tomorrow is with the 2 cent dividend. On the 21st, without. We can expect therefore a drop of 2 cents, or so, on the share price on the 21st.

[Xerof]

No, it went ex yesterday, so reflected the 2 cent divi in the price. Tomorrow is the record date, which has allowed for deals traded up until Friday to be settled and recorded on the Register

[Under Surveillance]

So trading tomorrow is with the 2 cent dividend. On the 21st, without. We can expect therefore a drop of 2 cents, or so, on the share price on the 21st.

No no no. The shares have been trading ex dividend since Monday 18. The register at 5pm Wednesday 20 reflects trades made up to the close on Friday 15, the last day of trading cum dividend.

[percy]

No, it went ex yesterday, so reflected the 2 cent divi in the price. Tomorrow is the record date, which has allowed for deals traded yesterday to be settled and recorded on the Register

Xerof.
Thank you for clearing this up.
Makes it very important to check when buyer whether it is ex or cd.

[mouse]

No no no. The shares have been trading ex dividend since Monday 18. The register at 5pm Wednesday 20 reflects trades made up to the close on Friday 15, the last day of trading cum dividend.

Many thanks to all. I was wrong again. But we now have a bit of a peculiar situation where the share price has stood up very well in spite of another 2 cents, plus tax credits, in our pockets.

[Joshuatree]

Not unusual when its in an uptrend. (hope youre proud of me Hoop)

[mouse]

It looks as if there will be great uncertainty about Banks, not just John Banks, but money banks. We have Cyprus in trouble and Australia with problems about exporting another mountain to China. Does China want the mountain? If Gold yes, but the other stuff like coal and iron ore, we don't know.
Heartland Bank seems to have sufficient capital. But things do look difficult.
This is the problem. You place your cash in the bank, say BNZ. Another bank goes broke and you lose 10%?, 50% of your cash deposit.
Proposals do not seem to require shareholders of the bank to lose their cash!!!
What to do? Should we print more money?
Have a good week-end. (Being retired, the week-end starts Thursday, except for Percy who is thinking about money all week-end).

[percy]

It looks as if there will be great uncertainty about Banks, not just John Banks, but money banks. We have Cyprus in trouble and Australia with problems about exporting another mountain to China. Does China want the mountain? If Gold yes, but the other stuff like coal and iron ore, we don't know.
Heartland Bank seems to have sufficient capital. But things do look difficult.
This is the problem. You place your cash in the bank, say BNZ. Another bank goes broke and you lose 10%?, 50% of your cash deposit.
Proposals do not seem to require shareholders of the bank to lose their cash!!!
What to do? Should we print more money?
Have a good week-end. (Being retired, the week-end starts Thursday, except for Percy who is thinking about money all week-end).

Having a bit of a sleep in tomorrow.Don't have to be on the road to Geraldine until 7am.Showered and getting ready for bed.
Having lovely dreams counting Heartland dollars rather than sheep.
No uncetainty with HNZ,only bank with a fresh licence,makes us "well positioned."

[Minerbarejet]

who is the supreme optimist with 9000 odd shares for sale at 75.00

[robbo24]

who is the supreme optimist with 9000 odd shares for sale at 75.00

Me. I read the interim report.

[Minerbarejet]

havent seen it yet , must be good:)

[777]

What is the bet they want out at 75c mucked up the zeros.

[mouse]

This is a link to an English Language Cyprus newspaper. Reporting the bank problems with readers comments too. All very interesting if you want to spend the weekend worrying about cash. And bank deposits.
http://www.cyprus-mail.com/bailout/central-bank-says-keep-2nd-largest-lender-business/20130321
(you may have to copy the link into Google).

[Minerbarejet]

hasnt fired a shot today so far. Possibly the end of financial year, reporting season, divs, record dates and general melee throughout the market is having a toll on the punters.

[Minerbarejet]

What is the bet they want out at 75c mucked up the zeros.
see that 75.00 ask is still there - probably ringing up to ask why his/her shares havent sold. lol