HGH - Heartland Group Holdings

[Snoopy]

Snoops ...that ‘Capitalised net interest income’ doesn’t form part of Operating Cash Flows on the ‘Statement of Cash Flows’ (because as you say they haven’t got that cash yet)

The $24,859 does show as an item on the reconciliation between Profit and Operating Cash Flow .....as a non cash item.


Winner I was referring to the second page of the 'CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS' which is the reconciliation between 'Profit' and 'Operating Cashflow' (I didn't make that clear). So I agree with you. You have re-expressed what I thought I was saying in a clearer way.

SNOOPY

[Biscuit]

Isn't this how banks operate? Banks typically do borrow money from third parties to lend it out to other people and they make money by charging a higher interest rate than they pay.

Banks are not supposed to lend out only their own money or money they first earned ....

:

Interestingly, that is not how banks principally operate. When a bank writes a mortgage, they create the money digitally by typing the numbers into your account.

[Snoopy]

Fair enough - but actually, there is a regular cash flow, it is just a bit slower than with other banks.

Cash flows every time a REL is paid back ... and I think (from memory) the average length of a REL mortgage is something like 7 years (could be less, but not sure).


In a 'steady state'/'modest growth' loan model you are right. But Heartland are growing their REL business. The amount paid back by maturing loans won't be enough to finance the next larger wave of loans. So as long as the Reverse Mortgage business is growing to plan, Heartland will need to raise more incremental capital over and above what they can collect by recycling their REL loans At this stage of the Heartland's Reverse Mortgage business development (10%-20% growth in the REL loan book YOY) the cashflow is negative. This is not in dispute as the cashflow reconciliation with profit statement confirms it. Without raising new capital, by either raising new bond money or new share money, the REL growth is restricted the profit booked on the REL loans that have matured each year. I don't see that underlying growth potential as sufficient to support Heartland's growth ambitions in the Reverse Equity Release Loan market.



It sounds like you have a fundamental problem with REL's. If you do, you should not invest into companies which offer REL's. Easy as that.

... if you don't like risk, better invest into government bonds ...

i am quite accepting of the risk. I am an HGH shareholder, but I bought in at a much lower price than where HGH is trading at today. Another way to de-risk your investment is to buy it more cheaply to start with. I would be keen to buy more Heartland shares. But not at the price they trade at today, I want to pay the discounted HGH entry price at the time of the next cash issue!

SNOOPY

[Snoopy]

YearDividends Paid 'per share'Significant Event During Year'


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

[/TR]

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








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


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


FY20164.5cps + 3.5cps


FY20175.0cps + 3.5cps


FY20185.5cps + 3.5cps


FY20195.5cps + 3.5cps1st November 2018: Heartland Group Holdings restructure set up


FY20206.5cps + ?.?cps


Average FY2015.5 to FY2019.5 inclusive8.80cps




I have chosen to use the last ten half years of operation as indicative, as this period includes the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards.




YearDividends Paid 'per share'Significant Event During Year'


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

[/TR]

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








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


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


FY20164.5cps + 3.5cps


FY20175.0cps + 3.5cps


FY20185.5cps + 3.5cps


FY20195.5cps + 3.5cps1st November 2018: Heartland Group Holdings restructure set up


FY20206.5cps + 4.5cps


Average FY2016 to FY2020 inclusive9.00cps



I have chosen to use the last ten half years of operation as indicative, as this period includes the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards. It also reflects the fact that after several years of growth, FY2015 is no longer a 'business cycle representative' dividend payment year.

SNOOPY

[Beagle]

Another way to de-risk your investment is to buy it more cheaply to start with. I would be keen to buy more Heartland shares. But not at the price they trade at today, I want to pay the discounted HGH entry price at he time of the next cash issue!

SNOOPY

I "hounded" some more up first thing this morning at $1.87...the early dog gets the bone :D

[winner69]

I "hounded" some more up first thing this morning at $1.87...the early dog gets the bone :D

That’s expensivevcompared to the $1.54 or so at last DRP

[Snoopy]

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

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

8.8c / (0.72 x 0.075) = $1.63

A reminder here that NTA was

($675.668m - $72.679m) / 569.338m = $1.06 cps

at the full year FY2019 balance date. This means my 'fair valuation' is at a good premium (+54%) to net tangible asset value.

This $1.63 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.30 to $1.96. $1.59, where the share is trading today, looks a few cents below fair value. My target accumulation price (10% below fair value) is now $1.47.



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

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

9.0c / (0.72 x 0.075) = $1.67

A reminder here that NTA was

($687.600m - $72.159m) / 577.468m = $1.07 cps

at the half year FY2020 balance date. This means my 'fair valuation' is at a good premium (+56%) to net tangible asset value.

This $1.67 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target share price range for HGH of $1.34 to $2.00. $1.90, where the share is trading today, looks a ten cents or so above fair value. My target accumulation price (10% below fair value) is now $1.50. And yes I could add the upcoming 4.5c interim dividend onto that fair value.

SNOOPY

[jonu]

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

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

9.0c / (0.72 x 0.075) = $1.67

A reminder here that NTA was

($675.668m - $72.679m) / 569.338m = $1.06 cps

at the full year FY2019 balance date. This means my 'fair valuation' is at a good premium (+54%) to net tangible asset value.

This $1.67 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.34 to $2.00. $1.90, where the share is trading today, looks a ten cents or so above fair value. My target accumulation price (10% below fair value) is now $1.50.

SNOOPY

Hasn't traded there since March 2019. What are the odds? ;)

[Beagle]

You really need to get a new valuation model Snoopy. Much erlier today I called it as fair value at $1.89, which is exactly where the VWAP and closing price turned out to be.

You really are in dreamland if you think you can buy more for $1.50.

[Snoopy]

You really need to get a new valuation model Snoopy. Much earlier today I called it as fair value at $1.89, which is exactly where the VWAP and closing price turned out to be.

You really are in dreamland if you think you can buy more for $1.50.


I didn't say I expected the price to go down to $1.50 Beagle. I said if the price did go down to $150, or $1.54.5 cum divie , then I would accumulate some more. I don't have to buy more. I would like to buy more at the right price. And buying at the right price on today's inflated market is a rare opportunity, not something I would expect to have every day.

My simple valuation model is based purely on dividends paid over the business cycle, with all the strengths and weaknesses that are inherent in that method.


Hasn't traded there since March 2019. What are the odds? ;)

Not good. But if HGH need to raise some new capital to buy UDC for example, then you never know. I am ready should the opportunity present itself.

SNOOPY

[percy]

More likely to hit $2.50 [my target price] than $1.50...........lol.

[Marilyn Munroe]

With the withdrawal of Holden from the vehicle market the value of used Holden's will crash.

Heartland who are the underwriter of Holden Finance in NZ will be hoping the residual value of any leases they have written have enough resilience to withstand the hit.

Open an account with us and receive a free Craptiva.

Boop boop de do
Marilyn

[stoploss]

With the withdrawal of Holden from the vehicle market the value of used Holden's will crash.

Heartland who are the underwriter of Holden Finance in NZ will be hoping the residual value of any leases they have written have enough resilience to withstand the hit.

Open an account with us and receive a free Craptiva.

Boop boop de do
Marilyn

Wouldn't mind having a Brock Holden .....:t_up:
The 1982 Holden Commodore sold for $2.1 million and was one of more than 30 Brock cars to go under the hammer. The car won the 1982 and 1983 Bathurst 1000 races and its sale was highly anticipated

[King1212]

our dairy price kept falling due to China coronavirus!!

[iceman]

our dairy price kept falling due to China coronavirus!!

Yes all of 1.6% in NZD. Should see HGH sp crash !

[King1212]

Yes all of 1.6% in NZD. Should see HGH sp crash !


Hopefully not crash!! I got half of my savings in HGH!!!

[iceman]

Hopefully not crash!! I got half of my savings in HGH!!!

I'd say you're "well positioned" :-)

[King1212]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12309694

not sure....with many companies starting to announce the impact of corona virus in china...

[winner69]

Share price hasn’t even gone up by the size of the divie .....quite often this happens.

Punters worried that 10% growth in H1 and only 3% growth (if not flat) for FY20 not good and doesn’t cut the mustard.

[BlackPeter]

Share price hasn’t even gone up by the size of the divie .....quite often this happens.

Punters worried that 10% growth in H1 and only 3% growth (if not flat) for FY20 not good and doesn’t cut the mustard.

Why should SP go up (other than by the one cent by which they increased the divie)? Market expected HGH to pay a divie, didn't they? - i.e. it was priced in.

More interesting will be what happens with the SP ex dividend ...

[winner69]

Just an observation over the years that share prices often go up by about what dividend is announced

why it doesn’t seem to be rationale...but nothing is really rationale on the share market.

Saying a divie was priced in just an assumption (not proved either way) .....isn’t it?

[BlackPeter]

Saying a divie was priced in just an assumption (not proved either way) .....isn’t it?

Sure - I assumed that the majority of market participants are at least informed about the dividend history of the company and are using their brains at least for simple linear extrapolations ... but hey, you are right - this is only an assumption and I well might be wrong ;);

[percy]

Just an observation over the years that share prices often go up by about what dividend is announced

why it doesn’t seem to be rationale...but nothing is really rationale on the share market.

Saying a divie was priced in just an assumption (not proved either way) .....isn’t it?

A 28.57% increase from 3.5cps to 4.5cps was a huge increase.
Expect they are softening us up for a big cash issue to buy UDC.???...lol.

[Marilyn Munroe]

If at the end of a Holden Finance lease the residual value is greater than the market value you are on to a winner as you have transfered some of the vehicle depreciation cost to Heartland.

They won't like that, expect them to strictly interpret the wear and tear claueses in the lease contract when the vehicle is handed back to them.

Boop boop de do
Marilyn

[Beagle]

Most of those lease to own type schemes that I have seen use very conservative residual value assumptions. I think you might be making a bit too much of a meal of this but please keep it up as I would like to buy more HGH shares at $1.85 :p

[RTM]

A 28.57% increase from 3.5cps to 4.5cps was a huge increase.
Expect they are softening us up for a big cash issue to buy UDC.???...lol.

Craigs say....” Rather than an increase in the total dividend, we have assumed this higher than expected interim reflects a shift towards more balance between the interim/final. ”

Hope they are wrong.

[percy]

Craigs say....” Rather than an increase in the total dividend, we have assumed this higher than expected interim reflects a shift towards more balance between the interim/final. ”

Hope they are wrong.
I think they are right.

[winner69]

Update this after each profit announcement

Getting into over priced region?

Beagle wants to buy more so I'd say the market has reacted to the lack of earnings growth for the next six months and will rereate HGH down to more realistic levels

But then again if you think that 189 is a fair price today such an analysis (quite common approach) is a load of **** and ignore it for what its worth (nothing)

[freddagg]

Why should SP go up (other than by the one cent by which they increased the divie)?

ROE improving 11.7% on 1H2019 ?

[pierre]

If at the end of a Holden Finance lease the residual value is greater than the market value you are on to a winner as you have transfered some of the vehicle depreciation cost to Heartland.

They won't like that, expect them to strictly interpret the wear and tear claueses in the lease contract when the vehicle is handed back to them.

Boop boop de do
Marilyn

I think you'll find that in a Finance lease any shortfall between the residual value and the price obtained in sale is to the account of the lessee not the financier. Different story if its an operating lease but Heartland is highly unlikely to be doing those.

[BlackPeter]

ROE improving 11.7% on 1H2019 ?

Absolutely - there are plenty of fundamental reasons why SP might go up .... but I was responding to a post which claimed it goes up because of the declared dividend.

[percy]

Heartland launches reverse mortgages for investors
Heartland has expanded its reverse mortgage business and will now lend against investment properties and second homes, as the product becomes more popular in New Zealand.
Tuesday, February 18th 2020






The lender has launched its new product, the Second Property Loan, off the back of strong growth.
Heartland will provide reverse mortgages to over 60s on second homes, investment properties and holiday homes.
The product is aimed at people who may not want to release equity from their main residence.
The money can be used for home improvements, debt consolidation, travel or bills, and the firm is offering the same guarantees as its main reverse mortgage lending products.
The new product line comes amid significant growth for Heartland, as reverse mortgages become more popular on both sides of the Tasman.
Heartland Bank announced its half-year results this week, and recorded a 10% increase in its New Zealand reverse mortgage book as consumers become more aware of equity release products.
Heartland posted its results for the six months to December, with group net profit of $39.9 million after tax, an increase of 20.4% on the comparable period the year before.
Receivables grew by 8% year on year to $4.46 billion, and the finance group and bank recorded a return on equity of 11.7% for the year.
A growth in reverse mortgages here and in Australia was a key reason for the profit boost and revenue increase, the company said.
New Zealand reverse mortgages receivables grew $26 million, 10% growth year on year. NZ reverse mortgage net operating income rose to $13 million, up $2.7 million.
Andrew Ford, head of retail, told TMM Online the reverse mortgage growth was mainly down to increased awareness in NZ.
He said customers ranged from 60-90 years of age, and tended to use the cash to renovate homes, make retirement more comfortable, and provide extra income for expenses.
Ford said low interest rates have put downward pressure on retirees’ term deposit income, leading some customers to seek additional funds.
“They are having to eat into savings or tighten their belt. Reverse mortgages are a way to maintain the lifestyle they desire and deserve. It can be transformational.”
Mortgage advisers only represent about 10% of Heartland’s reverse mortgage business, Ford said. He believes advisers have the chance to broaden their business and encourage clients to talk about the products with their families.
“We have dedicated resources to get out there and talk to advisers,” Ford said. “There’s a great opportunity for advisers to talk to potential customers, as well as the children of potential customers, who may not be aware of these solutions, as banks tighten their lending criteria.”

[iceman]

Expect they are softening us up for a big cash issue to buy UDC.???...lol.

Heartland not in the running for UDC according to the AFR : https://www.interest.co.nz/banking/103735/australian-financial-review-report-suggests-two-us-private-equity-giants-are-duking

[winner69]

Heartland not in the running for UDC according to the AFR : https://www.interest.co.nz/banking/103735/australian-financial-review-report-suggests-two-us-private-equity-giants-are-duking

Whew ...that’s a relief

[percy]

Heartland not in the running for UDC according to the AFR : https://www.interest.co.nz/banking/103735/australian-financial-review-report-suggests-two-us-private-equity-giants-are-duking


Although I was happy for HGH to buy UDC at a reasonable earnings accretive price,I think it is good to see they will not pay more than than see as fair value.
Pleasingly HGH has plenty of organic growth with RELS and O4B,using recycled funds from less profitable higher risk lending,ie business and rural relationships.
So was UDC speculation built into HGH's share price.?
Will UDC being sold at a high price see HGH's share price re-rated higher.?

[iceman]

Although I was happy for HGH to buy UDC at a reasonable earnings accretive price,I think it is good to see they will not pay more than than see as fair value.
Pleasingly HGH has plenty of organic growth with RELS and O4B,using recycled funds from less profitable higher risk lending,ie business and rural relationships.
So was UDC speculation built into HGH's share price.?
Will UDC being sold at a high price see HGH's share price re-rated higher.?

Hopefully it will go a bit lower. I sold half of mine 2 weeks ago as I did with HLG and some others, while I await the coronavirus economical threat to be completely over. Put the cash on 6 months fixed term so I can't touch it until then !! So happy for HGH to follow HLG a bit lower in the meantime :-)

[Beagle]

For my money, if the AFR report is true I am happy they are not in the running to buy UDC. They are growing organically at a strong pace already and this is not the time to be going out on a limb taking any sort of major risk with a big acquisition.

[bottomfeeder]

Not holding shares in Heartland. But I do have a Term Deposit with them. Their systems dont seem to be as versatile and professional as the other banks. Lastly advertising up to $100k on business loans without security over your house, does worry me. In a downturn, just wonder how secure my TD would be. I think I will take it out at earliest opportunity. Mind you unsecured loans to get more interest. But really a bank? or a risky finance company. Not paying me enough interest for the risk.

[fish]

Hopefully it will go a bit lower. I sold half of mine 2 weeks ago as I did with HLG and some others, while I await the coronavirus economical threat to be completely over. Put the cash on 6 months fixed term so I can't touch it until then !! So happy for HGH to follow HLG a bit lower in the meantime :-).

that was a really good move.
I only sold about a quarter of mine 2 weeks ago.
Like Beagle I increased my holdings in January but was regretting doing so late in the month.
Would appreciate hearing from Beagle or anyone else about the quality of all their loans and what will happen if there is a run on the money deposited.

[Beagle]

Hi Fish,

HGH's capital ratio is significantly better than the Australian banks so I think this gives them a good buffer. That said I think on average they engage in more "finance company" type lending so they are possibly a bit more vulnerable in a major recession from losses associated with that lending.

The open banking resolution is something that the Reserve Bank can impose to assist financial stability in times of great trouble.
I am not concerned about money on deposit with them at this stage but in terms of the shares, banks typically do poorly in a recession so if that's what's coming then we can probably expect the shares to come under pressure.

[Snoopy]

I "hounded" some more up first thing this morning at $1.87...the early dog gets the bone :D


Looks like the early dog snatched the bone without checking how much meat was on it.


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

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

9.0c / (0.72 x 0.075) = $1.67

A reminder here that NTA was

($687.600m - $72.159m) / 577.468m = $1.07 cps

at the half year FY2020 balance date. This means my 'fair valuation' is at a good premium (+56%) to net tangible asset value.

This $1.67 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target share price range for HGH of $1.34 to $2.00. $1.90, where the share is trading today, looks a ten cents or so above fair value. My target accumulation price (10% below fair value) is now $1.50. And yes I could add the upcoming 4.5c interim dividend onto that fair value.


The capitalised dividend valuation saved me from going after the bone the other Beagle got.

Back to my fair value range today. But the high $1.60s is still not cheap, even allowing for the upcoming dividend. Nevertheless it is now cheap enough for me to stay in the DRP, which I was on the point of pulling out from.


Hasn't traded there since March 2019. What are the odds? ;)

Over the last few days, the odds of picking up a few at $1.50 in the next few weeks or months just got a lot better. If the market mood turns negative against second tier financers then 'fair value' can be undershot.

SNOOPY

[Beagle]

Looks like the early dog snatched the bone without checking how much meat was on it.
SNOOPY

LOL Touché

[trader_jackson]

should be some cheap shares coming through via the DRP

[BlackPeter]

should be some cheap shares coming through via the DRP

Good point. Would make a nice silver-lining.

[iceman]

should be some cheap shares coming through via the DRP

Agree. Visited Link marketservices´website today to make sure I´m signed up 100% !

[Beagle]

Finance companies and Banks don't do well in a bear market / recession. Clean break down through the 100 day MA, momentum is broken so I've sold out completely.
Times like this TA is your friend and just throw your FA analysis out the window, its useless.

[iceman]

Finance companies and Banks don't do well in a bear market / recession. Clean break down through the 100 day MA, momentum is broken so I've sold out completely.
Times like this TA is your friend and just throw your FA analysis out the window, its useless.

I made my strategy decision 3 weeks ago with regard to HGH and other NZX investments and am sticking to it, unless something completely unexpected happens, which it has not done so far.
I do note you were buying and wanting more only 10 days ago and now you have sold all.
I do not think there is any one right strategy while we go through the COVID-19 effects on the markets and economies and we just all have to be content with our decisions and actions.
This is a very fluid situation Worldwide. Since our "chat" the other day I am now potentially faced with 2-3 months extra time where I am now (you know where) , which is not ideal for self or family !! Them is the breaks !!

[Snoopy]

Finance companies and Banks don't do well in a bear market / recession. Clean break down through the 100 day MA, momentum is broken so I've sold out completely.
Times like this TA is your friend and just throw your FA analysis out the window, its useless.


Sorry to lose you from 'the team' Beagle. I'll be thinking of you earning 2% on your former Heartland Capital (in a Heartland call account no less!) while we shareholders earn a gross yield upward of 7% on our Heartland shares. Rest assured I will wait until Heartland recovers from any bear market / recession before I consider selling any of my HGH shares. If anything, I would suggest any bear market / recession is the time to top up your HGH holding before the next business cycle starts.

Many consider the true messiah goes about under the initials 'JC'. But Heartland shareholders know the modern incarnation of the messiah goes about under the initials 'JG'. You need to learn to 'keep the faith' in 'our Jeff' Beagle. Good luck on the outside of the Heartland Temple.

SNOOPY

discl: Heartland shareholder looking to buy more.

[Beagle]

Fair enough mate. The Covid 19 situation is very dynamic, fluid and fast moving situation and since we last chatted I have acted very quickly and decisively on a wide range of shares to get out of the way of what I believe is a bear market coming. See Bear market thread, my central theme is the market as a whole is highly likely to be significantly cheaper in 2-3 months time.

You're much safer where you are than anywhere here.

[winner69]

Jeff has often said Heartlands fortunes are tied to general economic conditions and levels of employment

Everybody is talking a big recession coming and with the inevitable consequential rising unemployed numbers things might be a bit tough for Heartland for a while

Reduced profits?

[percy]

Always difficult swimming against the tide,although the tide going out, should benefit their REL and O4B businesses.
The Kia motor vehicle lending deal should help take up a lot of the slack from the Holden dealers,however I think most vehicle buyers, who are worried about their jobs,will put off upgrading their car,or settle for a modest upgrade.
So some parts of their business will go backwards, while others go forward.

[Bjauck]

"Better to own the bank, than have money in the bank."
In NZ, it has made sense to be the mortgagor rather than own shares in the mortgagee. Especially since most of the mortgagee banks are foreign owned. It would also have been better to have the money in the bank than own the bank!

In the last five years the NZD return on ANZ shares has been -1% pa.... (during that period I think the annual return on Heartland shares was about 12% gross.)

[Ggcc]

Jeff has often said Heartlands fortunes are tied to general economic conditions and levels of employment

Everybody is talking a big recession coming and with the inevitable consequential rising unemployed numbers things might be a bit tough for Heartland for a while

Reduced profits?
People always seem to borrow to maintain their lifestyle. I have friends on top money and prefer borrowing to get what they want. They feel interest rates are low and they only live once. Crazy concept, but people love that idea........ More dollars than sense

[dobby41]

People always seem to borrow to maintain their lifestyle. I have friends on top money and prefer borrowing to get what they want. They feel interest rates are low and they only live once. Crazy concept, but people love that idea........ More dollars than sense

Is it so crazy?
I bet on their death bed they don't say "I wish I had saved more and had it in the bank still".

[Ggcc]

Is it so crazy?
I bet on their death bed they don't say "I wish I had saved more and had it in the bank still".
On their death bed absolutely they would not say that, but are they maintaining a lifestyle there?

I understand what you say, but I find that those same people never seem content. The new car, the flash holiday. One couple I know ticked up a $20,000+ holiday in Rarotonga, they stayed one week.

Most people complain that had they saved more when they were younger, their retirement would have been so much better.

[dobby41]

On their death bed absolutely they would not say that, but are they maintaining a lifestyle there?

I understand what you say, but I find that those same people never seem content. The new car, the flash holiday. One couple I know ticked up a $20,000+ holiday in Rarotonga, they stayed one week.

Most people complain that had they saved more when they were younger, their retirement would have been so much better.

Agreed - we are talking degrees here.
Some save and never spend, some spend and never save, some get it right.
None so strange as folk.

[winner69]

Seems like Jeff knew at half year announcement there was going to be tough times ahead as NZ and the world sink into deep recession.

Even his forecast of H2 profits being less than last year might now been seen as rather optimistic.

[Beagle]

From memory he did say something about the headlines making grim reading, or words to that effect.

[percy]

link did not work

[percy]

https://sendy.tarawera.co.nz/l/J6oLVth2f3f6IXNYvUBQEg/VL763yLI892h7ggQOzWcXMy3Xw/dselQPY8M892r42mDUBCAvMw

[winner69]

DRP at $1.59 and a bit

Hope they are worth more than that in a few months time.

[winner69]

https://sendy.tarawera.co.nz/l/J6oLVth2f3f6IXNYvUBQEg/VL763yLI892h7ggQOzWcXMy3Xw/dselQPY8M892r42mDUBCAvMw

You won’t be entirely happy PERCY will you

But only a trail and a display of innovation so no worries

[percy]

You won’t be entirely happy PERCY will you

But only a trail and a display of innovation so no worries

No, hopefully the trial offering will not be too successful...lol.
Trouble is, HGH's online products are proving too successful.
Jeff does state "The rates created very low margins for Heartland,but if the trial was successful, it would put in place wholesale loans that would create a better return."
Last time I spoke to Jeff,[sometime ago] he said it was an opportunity for HGH to earn a margin, for very little, or no more overhead.Systems were already in place.
An add on product.

ps.In my book selling days I avoided low margins.Time was better spent on high margins.Low margins were waste of time and effort. "Why bother"? Yet Jeff feels it is an easy add on.Perhaps online is a lot different from the physical handing of books I was used to.?

[bull....]

Heartland jumps back into home loan market with 2.89% interest rate
https://www.stuff.co.nz/business/119943044/heartland-jumps-back-into-home-loan-market-with-289-interest-rate

joining simplicity in low rate mortgages.

[iceman]

Umm. Not sure about this latest move. Prefer to see them focused on areas where they are not in direct competition with the big 4. This may upset them !!

[Beagle]

Lending money out at those rates does not impress me.

[Snoopy]

No, hopefully the trial offering will not be too successful...lol.
Trouble is, HGH's online products are proving too successful.
Jeff does state:

"The rates created very low margins for Heartland,but if the trial was successful, it would put in place wholesale loans that would create a better return."

Last time I spoke to Jeff [sometime ago], he said it was an opportunity for HGH to earn a margin, for very little, or no more overhead.Systems were already in place.
An add on product.


I am intrigued by Jeff's comment:

"it would put in place wholesale loans that would create a better return."

Jeff is gunning for retail only loans as I read the article. So I think the article implies that Jeff must be looking at eventually rolling up these loans and offering them to a wholesale provider: IOW this is loan securitization by another name. The interesting thing is, often the willing buyer of these securitized loans is one of the big banks. A big bank might not take too kindly to Heartland undercutting their retail mortgage business then being asked to buy those 'Heartland pilfered' loans back at a wholesale rate that further undercuts their big bank margin. So maybe Jeff is looking to wholesale those loans somewhere else?

We also know that Jeff is looking for longer term wholesale funding for the reverse mortgage business. In an environment where 'cash is king' such wholesale funding might be getting harder to find. But what if Jeff was able to package the wholesale funding of the NZ reverse mortgages with an equivalent sized package of conventional mortgages? Straight away, the zero cashflow until maturity problem of a purely reverse mortgage only portfolio is solved. Jeff, thinking two steps ahead of the competition, does it again!

SNOOPY

P.S. It is interesting the offer is only for stand alone houses, and only in 'blue chip' locations. Jeff looks to be a bit nervous about the property market, and perhaps he sees this restriction as a way to derisk?

[percy]

Jeff is gunning for retail only loans as I read the article. So I think the article implies that Jeff must be looking at eventually rolling up these loans and offering them to a wholesale provider: IOW this is loan securitization by another name.
P.S. It is interesting the offer is only for stand alone houses, and only in 'blue chip' locations. Jeff looks to be a bit nervous about the property market, and perhaps he sees this restriction as a way to derisk?

Very much we can do it,with little effort,make a margin,and do it on our terms.

[ziggy415]

Very much we can do it,with little effort,make a margin,and do it on our terms.
And he announced it the day after the drp price was calculated....looking after shareholders I reckon

[Fred_Rubble]

Neo banks (online) are doing well in Australia, no doubt Heartland has observed this.

[audiav]

I’m in the market for a mortgage so very interested. Will arbitrage this by continuing to top up my HGH holdings.

[iceman]

I’m in the market for a mortgage so very interested. Will arbitrage this by continuing to top up my HGH holdings.

Makes perfect sense to try to get one of these mortgages. I would if I was looking for one.

[Snoopy]

In that Heartland announcement They said that 6% of loans are dairy related.

but i am puzzled as to why they added these sentences, especially the 2nd one - "The average loan to value ratio (LVR) for Heartland’s dairy exposures is 61%. However, it is important to note that LVRs are only one of the indicators of loan quality"

Do we interpret that as Heartland themselves think the 61% is a high/risky number but its all OK because other things are alright. If so why even mention all this as everybody was excited at being told the exposure was low.

One thing I have learned over many years announcements have to be read carefully to really try to understand what is being said.

Just adding to Rogers note - even if 5% of these dairy loans go bad that's a decent chunk of the $50m profit gone.

I still hold until the annual accounts. I believe there is more risk with heartland than a while ago and will manage accordingly.

If anybody is interested have a look at sector analysis in recent accounts and track impairment expense under rural for the last 3 to 4 quarters.




How did you extrapolate from 5% total rural loan impairment that 10% of dairy loans are impaired, W69?



Rural loans are ~$500m (they report rural two different ways but its about that) and have said a while ago dairy loans are ~$240m. So if dairy is all/most of the problem thats where I get the 10% from.

Impairment doesn't mean bad - in Heartland terms it is overdue and manageable (?)

(Might be completely wrong with my assumptions, that's why i used lot of ifs)


The above quotes relate to the FY2015 financial year. Dairy loans at Heartland currently 'off the radar' but I think we still have an issue.

What got me thinking was the report on dairy farm sales in the South Island on the RNZ rural program this morning. In Southland over the past year, the price of dairy farms has dropped from $45,000/ha to $35,000/ha over the last year. Actual numbers of properties sold are down 60% from a year ago.

In Canterbury there is no equivalent measure because there are no dairy farm sales at all. That is right - none. The explanation for this was that the typical Canterbury dairy farm is nominally much more valuable overall, around $10m. The overseas buyers that have that sort of money to invest are now locked out of the market, and local buyers don't have that kind of money available. Concomitant with this, the Australian controlled banks have tightened up their loan requirements. Buyers now require 60-70% equity, up from 45-55% last year.

60-70% equity is now well above the average (100% - 61%= 49%) figure that Heartland quoted five years ago. I know Heartland have reduced their dairy exposure from five years ago. But if the easy cases have been dealt with, that means the more difficult cases still on the Heartland books are unlikely to attract alternative financing. The current 'no sales' and 'no financing available' looks like setting the scene for a dairy farm price crash to me.

Heartland has since gone on other risky loan directions so that the remaining dairy farm loans form a smaller proportion of the overall risky loans. It hasn't made the risky dairy loan problem go away though. It only means it is a smaller piece of a larger troublesome loan market. I think the dairy farm loan comeuppance at Heartland is coming....

SNOOPY

[RTM]

It hasn't made the risky dairy loan problem go away though. It only means it is a smaller piece of a larger troublesome loan market. I think the dairy farm loan comeuppance at Heartland is coming....

SNOOPY

Lets say you are right Snoopy. If you are...then are they effectively first mortgages meaning that Heartland could end up owning some cheap dairy farms ? What % equity do you think the mortgagee has in the farms ? Are the farms effectively going to be half price ? Is that what you are trying to tell us ?

And will this hurt HGH....or is someone new just going to get a really cheap farm...compared with say 5-10 years ago and HGH will come out of it relatively whole ?

[Simsee]

Wouldn’t there have been a heap of work done around returns based on the milk solids price which appears to be holding up well? I really struggle to see where there is major cause for concern

[Snoopy]

Lets say you are right Snoopy. If you are...then are they effectively first mortgages meaning that Heartland could end up owning some cheap dairy farms ? What % equity do you think the mortgagee has in the farms ?


On average it was 39% in 2015



Are the farms effectively going to be half price ? Is that what you are trying to tell us ?


Forestry seems to be on a roll in this June 2019 article.

https://www.stuff.co.nz/business/farming/113232545/north-island-forest-land-doubles-in-price-in-a-year

"North Island forestry land rose from a median of $6656 a hectare to $13,128/ha."

If we look at recent farm sales information.

https://www.interest.co.nz/rural/resources/farm-sales

"The median price per hectare was only $21,221 in January 2020, -44% lower than December 2019, and -22% below January 2019."

So it does appear possible that dairy land repurposed for another use could fall in value by more than 40%, forcing Heartland to take a haircut.

SNOOPY

[kiora]

The above quotes relate to the FY2015 financial year. Dairy loans at Heartland currently 'off the radar' but I think we still have an issue.

What got me thinking was the report on dairy farm sales in the South Island on the RNZ rural program this morning. In Southland over the past year, the price of dairy farms has dropped from $45,000/ha to $35,000/ha over the last year. Actual numbers of properties sold are down 60% from a year ago.

In Canterbury there is no equivalent measure because there are no dairy farm sales at all. That is right - none. The explanation for this was that the typical Canterbury dairy farm is nominally much more valuable overall, around $10m. The overseas buyers that have that sort of money to invest are now locked out of the market, and local buyers don't have that kind of money available. Concomitant with this, the Australian controlled banks have tightened up their loan requirements. Buyers now require 60-70% equity, up from 45-55% last year.

60-70% equity is now well above the average (100% - 61%= 49%) figure that Heartland quoted five years ago. I know Heartland have reduced their dairy exposure from five years ago. But if the easy cases have been dealt with, that means the more difficult cases still on the Heartland books are unlikely to attract alternative financing. The current 'no sales' and 'no financing available' looks like setting the scene for a dairy farm price crash to me.

Heartland has since gone on other risky loan directions so that the remaining dairy farm loans form a smaller proportion of the overall risky loans. It hasn't made the risky dairy loan problem go away though. It only means it is a smaller piece of a larger troublesome loan market. I think the dairy farm loan comeuppance at Heartland is coming....

SNOOPY

What % rural loans are secured over land,livestock,P&M?
https://www.heartland.co.nz/rural-loans/livestock-finance?m

[Snoopy]

What % rural loans are secured over land,livestock,P&M?
https://www.heartland.co.nz/rural-loans/livestock-finance?m


I don't know the answer to this, although Heartland have lots of competition for livestock funding from PGW's 'GoLamb' and 'GoBeef' financing and Allied Farmer's equivalent programs. In fact, I think Heartland are taking a beating from this competition, who, unlike Heartland, have their own sale yards through which they sell livestock.

The one liner used in the past was that 'Heartland' could always 'kill the cows' and recover their 'debt due' from the meat, if the sharemilkers could not repay their livestock loans. But with cool store warehouses bulging from the bottleneck in meat exports to China, it looks like 'killing the cows' may no longer be possible as a last resort loan exit strategy. Oh dear.

To my way of thinking, the fire sale recovery of land and livestock as a method of recovering difficult loans looks to be in question. Perhaps as Heartland digitises, they can convert their retail premises into cattle barns so that they can maintain their 'livestock assets' until demand improves?

Plant and Machinery will always have value, although that 'realisable value' will always be tied to the ability of the farming community customers to pay.

SNOOPY

[kiora]

I don't know the answer to this, although Heartland have lots of competition for livestock funding from PGW's 'GoLamb' and 'GoBeef' financing and Allied Farmer's equivalent programs. In fact, I think Heartland are taking a beating from this competition, who, unlike Heartland, have their own sale yards through which they sell livestock.

The one liner used in the past was that 'Heartland' could always 'kill the cows' and recover their 'debt due' from the meat, if the sharemilkers could not repay their livestock loans. But with cool store warehouses bulging from the bottleneck in meat exports to China, it looks like 'killing the cows' may no longer be possible as a last resort loan exit strategy. Oh dear.

To my way of thinking, the fire sale recovery of land and livestock as a method of recovering difficult loans looks to be in question. Perhaps as Heartland digitises, they can convert their retail premises into cattle barns so that they can maintain their 'livestock assets' until demand improves?

Plant and Machinery will always have value, although that 'realisable value' will always be tied to the ability of the farming community customers to pay.

SNOOPY

Heartland announces half year profit of $39.9 million
18 February 2020
"Rural
Rural lending NOI was $15.5 million, a decrease of $0.3 million (2%) compared to 1H2019.
Rural Receivables decreased by $36 million (11% annualised decrease) to $621 million. Rural
Relationship Receivables reduced by $22 million (8% annualised decrease) as optimisation of noncore Rural Relationship lending to reduce low margin concentration continues. At the same time,
Livestock Receivables decreased by $13 million (22% annualised decrease) to $108 million."
Craigs
Rural -11% annualised. Good growth in Livestock lending, although this is
seasonal with December a low-point. The drought in parts of NZ may drive
greater livestock sales and provide a short-term boost for HGH. Relationship
receivables declined $22m, and we expect this to reduce further over time
driven by farm sales.
Competition from Wrightsons???
https://www.pggwrightson.co.nz/Services/Finance
Heartland provide the finance for PGG Go Lamb

[Snoopy]

Competition from Wrightsons???
https://www.pggwrightson.co.nz/Services/Finance
Heartland provide the finance for PGG Go Lamb


I think you will find that is wrong.

Have a look at the PGG Wrightson half year profit release. CEO Steve Guerin says that a large proportion of PGW's debt has gone to fund 'GoBeef' and 'GoLamb''. Heartland own 'PGG Wrightson Finance', but the relationship between PGW and HGH is not very productive. HGH do not know the PGW customers well, and cannot approve loans in a timely manner. PGG Wrightson Finance do not fund 'GoLamb' or 'GoBeef'. In fact those two 'brands' were created to create a separate rural lending identity by stealth, separate from the 'official' PGG Wrightson finance company owned by Heartland.

SNOOPY

discl: PGW and HGH shareholder

[percy]

PGW are doing well with their Go Lamb and Go Beef [finance].From memory $38 mil of their total $59 mil debt is in Go [financing].
ALF.are doing well with their livestock finance.
HGH are doing well with their livestock finance.
So who is not.? I would guess the 4 major Aussie Banks.Most farmers would have their farm mortgages with them,and would rather spread their finance options with ALF,HGH,or PGW,rather than relying on their Bank.A case of not having all their eggs in one basket.
PGW and ALF also clip the ticket when lambs etc are brought/ sold through their agents/stock yards,and I think that is more their focus, rather than straight finance margin,although both would find that the extra bonus.
What HGH are moving away from is large rural relationships, such as financing dairy farm conversions, and rural farm mortgages,but not livestock lending.
The length of time of a livestock loan is a great deal shorter than a mortgage.
Drought conditions in one area means farmers have to sell stock,as they can not feed them,while farmers in other areas, who have feed, buy them.
Also it does not take 20 to 30 years to fatten a lamb up....lol.

[Beagle]

A little birdie tells me that mature bulls and steers have dropped about $500 in value at the works in the last couple of weeks, $2,300 down to about $1,800 head. Might recover somewhat as the ships circling around and around the harbour in Chinese ports laden with hundreds of thousands of tons of meat are finally allowed to dock and deliver their cargo.

[percy]

Great news.
I will keep a look out at Pak'n Save for some "cheaper" Porterhouse steak.
Perhaps some nice lamb chops too.!


Trust HGH's next agm is in ChCh.Instead of tea and scones, Jeff may bring along the Barbie and cook us up some nice repossessed steers' steaks.

[Beagle]

Great news.
I will keep a look out at Pak'n Save for some "cheaper" Porterhouse steak.
Perhaps some nice lamb chops too.!


Trust HGH's next agm is in ChCh.Instead of tea and scones, Jeff may bring along the Barbie and cook us up some nice repossessed steers' steaks.

Plenty of specials on good cuts of steak in the supermarkets already. Fill the freezer.

[percy]

Maybe cheaper next week.?...............................lol.


ps.No,1 daughter is still upset Pak'nSave no longer have a mailer.
She used to be able to see what I would be stocking up with,and come and help herself.?.!.lol.

[JeffW]

A little birdie tells me that mature bulls and steers have dropped about $500 in value at the works in the last couple of weeks, $2,300 down to about $1,800 head. Might recover somewhat as the ships circling around and around the harbour in Chinese ports laden with hundreds of thousands of tons of meat are finally allowed to dock and deliver their cargo.

A result of the meatworks running reduced hours as export demand has fallen off as a result of coronavirus, and supply side increases because of drought conditions. There's quite a wait to book stock into the works at present

[kiora]

A result of the meatworks running reduced hours as export demand has fallen off as a result of coronavirus, and supply side increases because of drought conditions. There's quite a wait to book stock into the works at present

Export volumes of meat considerably up until end December though(20?%),go figure
https://www.stats.govt.nz/news/records-all-round-for-dairy-and-meat-exports

[peat]

Plenty of specials on good cuts of steak in the supermarkets already. Fill the freezer.

why not with stocks as well then? ;+)

[Beagle]

why not with stocks as well then? ;+)

Banks and especially finance companies or banks behaving like finance companies don't do well in a protracted severe recession which is where I think the economy is going. I'll leave it to the other Beagle to be "brave".

Could be good buying at NTA of $1.05 if it goes that low.

[winner69]

Banks and especially finance companies or banks behaving like finance companies don't do well in a protracted severe recession which is where I think the economy is going. I'll leave it to the other Beagle to be "brave".

Could be good buying at NTA of $1.05 if it goes that low.

Wonder what the capital raise will be at when it comes?

[Baa_Baa]

Wonder what the capital raise will be at when it comes?

Bulls climb the stairs, bears take the elevator. Starting to see how quickly a market can go from overpriced to attractive, HGH getting hammered. Years of climbing the stairs, only weeks in the elevator down. Despite this potentially taking a while to unfold, our conversation will eventually turn to all the terrific investment opportunities at prices and yields not seen for many months, even years.

[Snoopy]

Wonder what the capital raise will be at when it comes?


The answer is $1.59 for all the capital raised via the DRP. Or are you talking about the next one? I don't need to speculate what the next capital raising price will be. All I need to know is that I will be taking it up!

SNOOPY

[percy]

I think most of us long term holders will be trying to work out the net cost of our HGH shares, after taking off the great divies.we have received
I would guess it would work out between minus 5 cents [free ones?] and 15 cents per share.
Wednesday's 4.5cps fully imputed divie will bring our cost down again.
The wisdom of buying sensible shares, that pay increasing divies.

[janner]

Thank your lucky stars that HGH do not lend on Cruise Liners.

[Beagle]

Long term support for HGH at $1.30 might hold, otherwise we'll all be digging up old charts of HNZ to find the long term support before it became HGH.
From memory the multi year support line was $1.09 so maybe NTA of $1.05 isn't as outrageous as it sounds ?

[percy]

I did well buying at $1.15 and $1,16 when you were ranting and raving about HNZ"s supposed out of control dairy loans a few years ago.Noted Jeff and others were buying also.
Buying between $1.15 and $1.20, if and when you are in full panic mode should be very rewarding.
Trouble is, it will take my average cost price way up.I like it as it is now.[Plus or minus a few cents].!!...lol.

[SCOTTY]

Well done Percy. Remember those days very well. I was also well rewarded when George Kerr sold out and I got a good stack at 58c. The yield on these has been outstanding:)

[Beagle]

I did well buying at $1.15 and $1,16 when you were ranting and raving about HNZ"s supposed out of control dairy loans a few years ago.Noted Jeff and others were buying also.
Buying between $1.15 and $1.20, if and when you are in full panic mode should be very rewarding.
Trouble is, it will take my average cost price way up.I like it as it is now.[Plus or minus a few cents].!!...lol.

No worries, you should be able to do a Couta1 and buy even more at $1.15 soon enough.

Disc: I sold recently at an average of $1.80 and went short.

[percy]

I am neither a buyer nor a seller,in this market.
Happy with my holding.
Have my largest ever cash holding,[should be do 5 years or so] and am retaining my large holdings: PAZ,GNE,HGH,MEL,PGW, SPK,and TRA.

ps.Not nice,however with this CoronaVirus some of HGH's RELs may be of a shorter term than expected.
A recession should drive up demand for RELs.

[Beagle]

Recessions, bear markets and especially depressions are not kind to banks and especially those with significant unsecured finance company lending.

[Snoopy]

ps.Not nice,however with this CoronaVirus some of HGH's RELs may be of a shorter term than expected.
A recession should drive up demand for RELs.

I was thinking that oldies might be cancelling their big OE holiday but taking out a REL to get a new kitchen so they can feel safe cooking their meals at home. They are after all, the only generation left that still knows how to use a kitchen.

They are also the ones that, when they find their term deposit interest rates have dropped to zero, suddenly realise they need an REL to maintain a decent standard of living.

I don't see the recession/coronavirus being bad for Heartland's 'well secured' REL business. Far from it.

Probably a slow down in new motor vehicle sales is a bigger threat medium term, although I expect those customer with existing loans will keep paying them off. So the short term effect on motor vehicle loans may not be drastic.

SNOOPY

discl: HGH shareholder and not unduly worried about remaining on the share register

[winner69]

HGH share price keeping up with Aussie banks

HGH down 24% since Feb 14 just like Aussie Banks ...spooky eh

@scully
Australia's S&P/ASX 200 Banks Index* has fallen 24.7% since February 14.

[Beagle]

Hey Snoopy me ol Beagle mate. How many hundreds of millions have HGH loaned out unsecured to harmony customers ? Harmoney to become disharmonious for HGH as plenty of customers get laid off in a recession / depression and default on their loans ? What security have HGH got for any of these loans ? Opps...

[winner69]

Hey Snoopy me ol Beagle mate. How many hundreds of millions have HGH loaned out unsecured to harmony customers ? Harmoney to become disharmonious for HGH as plenty of customers get laid off in a recession / depression and default on their loans ? What security have HGH got for any of these loans ? Opps...

Big fail here beagle ...you forgot to mention those small business loans ....aren’t a lot of them unsecured?

Small businesses going to the wall already and many more to follow I read in the paper.

Open4Business might be closing down :eek2::scared:

[percy]

Big fail here beagle ...you forgot to mention those small business loans ....aren’t a lot of them unsecured?

Small businesses going to the wall already and many more to follow I read in the paper.

Open4Business might be closing down :eek2::scared:

Don't forget your old favourites,cows and dairying..

[Beagle]

Big fail here beagle ...you forgot to mention those small business loans ....aren’t a lot of them unsecured?

Small businesses going to the wall already and many more to follow I read in the paper.

Open4Business might be closing down :eek2::scared:

Good point. There's a lot to think about at the moment !!...what about all those non recourse loans on Holden's that assume a decent percentage residual value ?
Pretty sure the value of my Holden Calais has tanked...just as well I quite like it and am happy to keep it lol, (it doesn't have any escape clause residual value loan to HGH, somewhat unfortunately) but if anyone else would like to enter into a contract to offer me 50% residual value after 4 years, I am all ears !!

[Ggcc]

Big fail here beagle ...you forgot to mention those small business loans ....aren’t a lot of them unsecured?

Small businesses going to the wall already and many more to follow I read in the paper.

Open4Business might be closing down :eek2::scared:

Lots of small businesses need to get tougher. If they cannot afford staff, start reducing your casual labour. Small businesses usually hire loads of casuals which can be easily reduced.

Also businesses need to start planning better. I have seen many business owners say they cannot afford to pay next months rent while they sip away with their daily wine. Take less cash out for your lifestyle. Heartland may need to delve a little deeper into how people borrow for their business. I have just started a small business and am making plans in case worst case scenario happens. I also do not pay myself yet, as the business needs to grow some capital first.

[Snoopy]

In that Heartland announcement They said that 6% of loans are dairy related.

but i am puzzled as to why they added these sentences, especially the 2nd one - "The average loan to value ratio (LVR) for Heartland’s dairy exposures is 61%. However, it is important to note that LVRs are only one of the indicators of loan quality"

Do we interpret that as Heartland themselves think the 61% is a high/risky number but its all OK because other things are alright. If so why even mention all this as everybody was excited at being told the exposure was low.

One thing I have learned over many years announcements have to be read carefully to really try to understand what is being said.

Just adding to Rogers note - even if 5% of these dairy loans go bad that's a decent chunk of the $50m profit gone.

Not too much point debating dairy anymore. Those who believe are happy as so no problems. Those who have concerns manage the risk best they can. Whatever happens you can either praise or blame yourself, what you do is up to you.

I still hold until the annual accounts. I believe there is more risk with heartland than a while ago and will manage accordingly.

If anybody is interested have a look at sector analysis in recent accounts and track impairment expense under rural for the last 3 to 4 quarters.


After five years I have decided to take up Winner's suggestion to get a handle on these Rural Loan bad debts once and for all. The only change I am making is that I am looking at six month periods, not quarters, because Heartland no longer reports quarterly. 'Rural loans' cover 'Rural land loans' and 'Rural stock loans'.




PeriodDeclared Rural Asset Impairment ExpenseHalf Year Rural Asset Impairment Expense


HY2020$0.189m$0.189m


FY2019($0.132m)


2HY2019$0.003m


HY2019($0.135)



FY2018$1.157m


2HY2018($0.205m)


HY2018$1.362m



FY2017$0.317m


2HY2017($0.060m)


HY2017$0.375m



FY2016$2.959m


2HY2016$2.585m


HY2016$0.374m



FY2015$0.135m


2HY2015$0.063m


HY2015$0.072m



The figures in brackets are impairments written back. Heartland have said they are not chasing any new rural land loans. So the impairments since FY2016 must either be 'rural land loans' that have further deteriorated since FY2016 or stock loans on which they have lost money. My memory is that the last three years have been relatively favourable for stock. It is only the drought combined with COVID-19 trade restrictions that have really made life difficult for stock in 2HY2020, a period for which the HGH results are not yet released. This means I am picking that the HY2020 rural 'write down' does relate to land and probably dairy farm land (from market data dairy fam land sales are the worst affected). The situation for stock and farmland has got worse since January 2020. So it wouldn't surprise me if the rural write-down for 2HY2020 at least matches the rural write-down for HY2020. Will the full year rural write-down match the near $3m figure from FY2016? I think it is possible.

SNOOPY

[trader_jackson]

HGH $1.09, NTA $1.05... I'd think this is starting to look somewhat attractive, but could go below $1 still.

[BlackPeter]

HGH $1.09, NTA $1.05... I'd think this is starting to look somewhat attractive, but could go below $1 still.

Yep, sort of glad I sold them a week or so ago when government started to introduce first travel restrictions ... It just felt like risks for small (tourism and hospitality) businesses are mounting.

Obviously - the DRP shares I could not yet sell at that stage have been a flop. Somehow I seem to remember more unpleasant DRP experiences than pleasant ones, but maybe my memory emphasizes at the moment the negative.

Not sure when it will be a good time to get back in? I suppose some other industries (like agriculture and freight services will de-risk earlier.

Anyway - interesting times, who would have thought to see HGH again around the $1 mark ...?

[oldtech]

HGH $1.09, NTA $1.05... I'd think this is starting to look somewhat attractive, but could go below $1 still.

Dipped to $1.01, keep watching this space ...

[Beagle]

Yep, sort of glad I sold them a week or so ago when government started to introduce first travel restrictions ... It just felt like risks for small (tourism and hospitality) businesses are mounting.

Obviously - the DRP shares I could not yet sell at that stage have been a flop. Somehow I seem to remember more unpleasant DRP experiences than pleasant ones, but maybe my memory emphasizes at the moment the negative.

Not sure when it will be a good time to get back in? I suppose some other industries (like agriculture and freight services will de-risk earlier.

Anyway - interesting times, who would have thought to see HGH again around the $1 mark ...?

Oh, I dunno, some mangy dog on here thought it might :)

[percy]

I can not stop thinking about Warren Buffet's quote;
"Only when the tide goes out do you discover who's been swimming naked."
Appears to be a lot of naked swimmers around at present.!..lol.

[Beagle]

I can not stop thinking about Warren Buffet's quote;
"Only when the tide goes out do you discover who's been swimming naked."
Appears to be a lot of naked swimmers around at present.!..lol.

:lol: Its good you can retain your sense of humour in times like this.

[peat]

I can not stop thinking about Warren Buffet's quote;
"Only when the tide goes out do you discover who's been swimming naked."
Appears to be a lot of naked swimmers around at present.!..lol.

I've been quoting that one a lot recently
Its quite disgusting seeing all these folk naked - I don't wanna look but I cant help taking a peek haha

A lot of the selldown is caused by Emperors with No Clothes imo. Sure there are reasons for less sanguine economic views but the stockmarket really punishes weak holders and tries to force them to liquidate.

[Entrep]

Oh, I dunno, some mangy dog on here thought it might :)

You knew this crisis was coming say 6 months ago, or are we talking last week?

[percy]

I've been quoting that one a lot recently
Its quite disgusting seeing all these folk naked - I don't wanna look but I cant help taking a peek haha

A lot of the selldown is caused by Emperors with No Clothes imo. Sure there are reasons for less sanguine economic views but the stockmarket really punishes weak holders and tries to force them to liquidate.

I think in time we will find out most of the nude swimmers,actually only had "new look naked swim suits" on.
Telling the difference between the "fake nudes" and the "real nudes" should prove very profitable.

[Snoopy]

HGH $1.09, NTA $1.05... I'd think this is starting to look somewhat attractive, but could go below $1 still.

Good to see Jeff keeping shareholders up to date. Italics are from the 18th March Update:

1/ Heartland expects that new lending levels in some portfolios, such as business intermediated and SME, will slow.
It will be no surprise to me if the open for business electronic channels come to a near halt, although there may be a pick up from the big banks wishing to shed some riskier customers in the medium term. Being mostly an 'e-presence' OFB should be relatively easy to ramp up and down as required.

However, Heartland has already started to re-focus its resource towards areas, such as NZ and Australian reverse mortgages and motor, where new lending forecasts remain strong.

Will pensioners suddenly strive to repay their RELs? I think not. Will workers suddenly stop their car finance payments so they can no longer travel to work or look for work? I think not. Good short term cashflow from those motor loans will keep coming.

As a result, Heartland is confident that total lending growth will continue. It is also pleasing to note that Heartland’s residential mortgage offering has been well received by the market and that much of the initial limited availability has already been allocated.

The new mortgage offer will provide Heartland yet more cashflow which is important at this time.

Heartland is working with a limited number of borrowers in industries such as forestry, where current events are exacerbating existing financial stress. Heartland will continue to monitor conditions as they develop, and support affected clients, but remains comfortable with its current provisioning levels.

The above comment is especially encouraging for what it didn't say. Heartland appear happy with their dairy industry provisioning!

Heartland remains comfortable with its liquidity levels, and as recently as the 16th of March successfully issued $20m of registered certificates of deposit to wholesale investors.

Translation: Wholesale investors are happy to back Heartland through troubled times. Even the massive cash bucket of Beagle is parked there.

SNOOPY

discl: Holder. Picked up a few more yesterday.

[Beagle]

Its official, the two Beagles are now playing Tug of War. Snoopy is long, Beagle is short.https://www.youtube.com/watch?v=nnsQxCaHeic Hopefully we don't tear the bank apart in the process lol
I sold at about $1.80 on average and went short so am winning this game very handsomely so far :t_up:

[Snoopy]

Its official, the two Beagles are now playing Tug of War. Snoopy is long, Beagle is short.https://www.youtube.com/watch?v=nnsQxCaHeic Hopefully we don't tear the bank apart in the process lol
I sold at about $1.80 on average and went short so am winning this game very handsomely so far :t_up:

You have already lost this contest Beagle. All I have to do is wait for your short to expire, add up what you have made (if anything) then wait enough accumulated years until my dividends accumulate to more than you made. I will be accumulating my dividends via the DRP. It's called 'compound interest', one of the most powerful forces in the universe....and it will create 'compounding capital' for me.

I have heard your stories of gloom and doom, and the poor performance of finance companies in recessions. But not all finance companies in NZ disappeared in the GFC. So what the board need to do is recruit a CEO who can slug it out in the deepest mud. Someone who knows how to steer this finance ship through the icebergs. Like the guy who saved Marac for example. The good news for shareholders is that he is already there, and goes by the name of Jeff....

SNOOPY

[jonu]

HGH one to watch this morning. Massively oversold IMHO.

[value_investor]

HGH one to watch this morning. Massively oversold IMHO.

Just posted in the RYM page something similar but its a buyers market now. Great times for a value investor such as myself.

[Beagle]

You have already lost this contest Beagle. All I have to do is wait for your short to expire, add up what you have made (if anything) then wait enough accumulated years until my dividends accumulate to more than you made. I will be accumulating my dividends via the DRP. It's called 'compound interest', one of the most powerful forces in the universe....and it will create 'compounding capital' for me.

I have heard your stories of gloom and doom, and the poor performance of finance companies in recessions. But not all finance companies in NZ disappeared in the GFC. So what the board need to do is recruit a CEO who can slug it out in the deepest mud. Someone who knows how to steer this finance ship through the icebergs. Like the guy who saved Marac for example. The good news for shareholders is that he is already there, and goes by the name of Jeff....

SNOOPY

I haven't lost. I can cover the short at any time, (no hurry...this Bear is going to be with us for a long time yet), and go long again and then we'll be both barking up the same tree :)

Quote for the day, don't forget this one mate "Banks and finance companies are support mechanisms for customers struggling during a recession" The question you might like to consider is how long and how deep this recession will be and might HGH need support itself from shareholders or the Reserve Bank at some stage ?

[Cadalac123]

I haven't lost. I can cover the short at any time, (no hurry...this Bear is going to be with us for a long time yet), and go long again and then we'll be both barking up the same tree :)

Quote for the day, don't forget this one mate "Banks and finance companies are support mechanisms for customers struggling during a recession" The question you might like to consider is how long and how deep this recession will be and might HGH need support itself from shareholders or the Reserve Bank at some stage ?

What platform do you use to short anyway?

[Beagle]

Couple of options for you

https://www.omf.co.nz/

https://www.cmcmarkets.com/en-nz/markets-shares

[Snoopy]

Quote for the day, don't forget this one mate "Banks and finance companies are support mechanisms for customers struggling during a recession" The question you might like to consider is how long and how deep this recession will be and might HGH need support itself from shareholders or the Reserve Bank at some stage ?


Well that was prophetic. The Reserve Bank announce this morning a quantitative easing program to keep the NZ banking system running smoothly. Our Jeff does it again!

Meanwhile I have about half the HGH shares I want in my long term portfolio so far. Will be happy to support a 1:1 cash issue if required.

SNOOPY

[Beagle]

You'd be forgiven for thinking I knew something when I made that post ;) Jeff didn't do it. The RBNZ had to step in last week and print a lot of money to sure up the liquidity in the system.

[stoploss]

You'd be forgiven for thinking I knew something when I made that post ;) Jeff didn't do it. The RBNZ had to step in last week and print a lot of money to sure up the liquidity in the system.
I think you mean “ inject “ money RB does not print the NZ cash .

[Beagle]

Obviously.

[winner69]

Open4Business going to be busy

Government underwriting a large % of each biz loan to keep small and medium businesses afloat

[King1212]

All big bosses bought more!

[iceman]

All big bosses bought more!

I give them credit for sending the right signal

[winner69]

Open4Business going to be busy

Government underwriting a large % of each biz loan to keep small and medium businesses afloat

This right up Heartlands alley.

The nimble and those that make it easy are the winners

And it’s NZers helping NZers ...cool eh

And the market likes it

[Snoopy]

Open4Business going to be busy

Government underwriting a large % of each biz loan to keep small and medium businesses afloat


I must admit the full significance of this passed me by last week. I was under the impression that new business loans would be dead in the water for a long time. But this government policy effectively -mostly- socialises the risk and privatises the profits for any rag tag business loan!

https://www.interest.co.nz/opinion/104234/gareth-vaughan-looks-strenuous-efforts-authorities-are-making-keep-debtcredit-taps

"The latest government assistance is Finance Minister Grant Robertson's announcement of a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses (SMEs)."

"The Business Finance Guarantee Scheme has a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum, with loans for up to three years to be provided "at competitive, transparent rates." The Government/taxpayer takes on 80% of the credit risk, and banks 20%."

This is right down the middle of the road for O4B. Although the banks are ostensibly open, as I found out yesterday, all my local branches are closed with a notice up effectively saying 'do your banking on line'. Am I correct in saying that there is only one bank that will approve business loans on line?

Jeff might as well have drafted the small business support policy himself. I am not sure if I should now refer to Jeff as "Associate Finance Minister" or Grant Robertson as "Joint CEO of Heartland Bank". Either way I can see nothing but good coming out of this for Heartland shareholders. Jeff does it again!

SNOOPY

PS If I were Jeff, I would be refinancing some of those dodgy SME loans already on the Heartland books quick smart!

[SCOTTY]

I must admit the full significance of this passed me by last week. I was under the impression that new business loans would be dead in the water for a long time. But this government policy effectively -mostly- socialises the risk and privatises the profits for any rag tag business loan!

https://www.interest.co.nz/opinion/104234/gareth-vaughan-looks-strenuous-efforts-authorities-are-making-keep-debtcredit-taps

"The latest government assistance is Finance Minister Grant Robertson's announcement of a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses (SMEs)."

"The Business Finance Guarantee Scheme has a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum, with loans for up to three years to be provided "at competitive, transparent rates." The Government/taxpayer takes on 80% of the credit risk, and banks 20%."

This is right down the middle of the road for O4B. Although the banks are ostensibly open, as I found out yesterday, all my local branches are closed with a notice up effectively saying 'do your banking on line'. Am I correct in saying that there is only one bank that will approve business loans on line?

Jeff might as well have drafted the small business support policy himself. I am not sure if I should now refer to Jeff as "Associate Finance Minister" or Grant Robertson as "Joint CEO of Heartland Bank". Either way I can see nothing but good coming out of this for Heartland shareholders. Jeff does it again!

SNOOPY

PS If I were Jeff, I would be refinancing some of those dodgy SME loans already on the Heartland books quick smart!

Good post Snoopy :)

[Beagle]

Finance company type lending and especially unsecured loans do very poorly in a deep recession. My concern with HGH is the amount of unsecured lending on its books.
There's no question in my mind some of their Harmoney type lending (and not just through Harmoney), ends up causing a lot of disharmony for HGH down the track.
They are well capitalised and the RBNZ is standing behind the banks offering an open tap with liquidity and propping up a lot of households and business so they should get through this okay, but not without a substantial increase in bad and doubtful debts.

I think the current share price is about fair value, (not cheap), and not out of line with falls in Australian banks. The key question is whether there is another big wave of selling coming from the US off the back of what could be horrendous virus impacts coming for them ?

[Cyclical]

The key question is whether there is another big wave of selling coming from the US off the back of what could be horrendous virus impacts coming for them ?

That's the question alright. The 3 day long dead cat bounce was on a downward trajectory on Friday, even off the back of Trump's $2T lolly scramble...I'm half expecting that to continue into the new week. And if it's not a rapid sell down like they just had, then we'll probably see a slower prolonged trend downward. Either which way, it's going down, or so my Trump gut tells me anyway.

Things have been moving so fast that I don't think people have really got their head around the long term implications of this event just yet. A correction was well overdue anyway and this virus is only going to magnify it. And I think NZ will be the tail of the dog in terms of a recovery, especially if this shutdown works and we stamp out the virus, as our borders will be shut until we're vaccinated, while other countries take the loss of life on the chin and re-open the gates.

Anyway, given my grim outlook, target price for me on HGH has to be low 80 something.

[Snoopy]

Anyway, given my grim outlook, target price for me on HGH has to be low 80 something.


IIRC HGH has been in the mid 80c range in intraday trading already. Your price target may end up being correct Cyclical. So what is your strategy from this? Buy at 81c (to get one step ahead of the round number brigade bidding at 80c). Or if it gets to 85c, do you revise your bid down to 75c? I guess it all depends on how much of what you think is focussed on the moment. If you regard Heartland as having a future (and I accept there may be those out there who don't) I think you have to focus on what it will look like coming out the other side.

I bought some HGH shares (my second tranche) at $1.46, right near the start of the COVID-19 downturn. Do I regret this? Well with the benefit of hindsight the answer would be yes, but no-one ever invests with hindsight. So I don't regret it at all because I was buying a business cycle dividend yield with a suitable discount (at the time) for safety. It may be the new business cycle resets at a lower base level. But the level of that cannot be predicted in advance, so I still have no regrets. It is very easy to beat yourself up on what, with hindsight, look like poor investment decisions in a way that is totally unjustified.

More recently I bought a third tranche of HGH shares at $1.10. I probably could have paid a bit less. But coming out of this, whether I bought in at $1.20 or $1 or even less is not going to be material IMO. HGH has a stable core of business that is not going to fall off the edge of the cliff next week. And 'agile Jeff' with his return to old fashioned mortgages and now the shutdown restricted monopoly that Heartland has on new business loans is changing the business to match the new environment. I think some investors think that Jeff is just sitting at his desk at head office waiting to be hit with a COVID-19 sledgehammer. It ain't so.

SNOOPY

[Snoopy]

I think the current share price is about fair value, (not cheap), and not out of line with falls in Australian banks. The key question is whether there is another big wave of selling coming from the US off the back of what could be horrendous virus impacts coming for them ?




That's the question alright. The 3 day long dead cat bounce was on a downward trajectory on Friday, even off the back of Trump's $2T lolly scramble...I'm half expecting that to continue into the new week. And if it's not a rapid sell down like they just had, then we'll probably see a slower prolonged trend downward. Either which way, it's going down, or so my Trump gut tells me anyway.


A lot of speculation here centered on Trump. I would suggest you quit speculating and wait until the next AGM and put the questions to Trump himself! Oh, I almost forgot. Trump isn't on the HGH board. Market prices of shares at times like this are so volatile it is a fair guess that buying at any particular time is unlikely to reflect future HGH business reality.

I doubt if selling or buying in the US over the next week will have any effect on the business of HGH in a years time. I am not saying that HGH will be trading in a years time as though nothing has happened. Remember the HGH share price has already reduced substantially. I am saying it is a time for careful accumulation. And largely unconnected hysteria in US markets could provide the opportunity for savvy NZ investors to do just that.

SNOOPY

[Snoopy]

Things have been moving so fast that I don't think people have really got their head around the long term implications of this event just yet. A correction was well overdue anyway and this virus is only going to magnify it. And I think NZ will be the tail of the dog in terms of a recovery, especially if this shutdown works and we stamp out the virus, as our borders will be shut until we're vaccinated, while other countries take the loss of life on the chin and re-open the gates.


I agree Cyclical that a correction is well overdue. So lets take some time to try and figure out what Heartland might look like coming out the other side. I will start.

From a 'market perspective', I think any hope of HGH trading at a 'premium' to other finance sector shares is gone.

From an operational perspective, I expect the reverse mortgage business to grow because it is one of the few ways for older NZers and OZers to access capital. They may even do it to help bail out their son's and daughter's businesses as the only source of wider family finance!

I expect the new car market will be hit hard and that will affect Heartland's motor industry finance going forwards. I don't expect existing customers to stop paying their loans as their car may be their only escape (and way to get to a job interview) from lock down for the unemployed, OR the safest way to get to work for those still employed. No-one will be keen to repossess cars, because who are they going to sell them on to? Better to work out an arrangement with your existing customers, even if Heartland has to take their share of a hit while doing it. For customers on lease arrangements, that end of lease residual value of the vehicle could be an issue for Heartland.

Providing seasonal rural financing looks to remain a strong pillar of the business. The competitive advantage that competitors 'Allied Farmers' and 'PGG Wrightson' had is now gone with the physical sale yards being closed own. From being a weak third player, Heartland, without any restriction about buying and selling through the same agent like their competitors, looks to have moved to market position of relative advantage in 'paddock to paddock' livestock sales.

I agree with Beagle that some of those Harmony unsecured P to P loans might be in trouble. But what proportion of Heartland's loan book will this effect?

Some thoughts off the top of my head. Not all of them bad. Interested to hear where other Heartland shareholders think HGH is going.

SNOOPY

[Cyclical]

IIRC HGH has been in the mid 80c range in intraday trading already. Your price target may end up being correct Cyclical. So what is your strategy from this? Buy at 81c (to get one step ahead of the round number brigade bidding at 80c). Or if it gets to 85c, do you revise your bid down to 75c? I guess it all depends on how much of what you think is focussed on the moment. If you regard Heartland as having a future (and I accept there may be those out there who don't) I think you have to focus on what it will look like coming out the other side.

SNOOPY

Truth be known, I did try to buy some at 90 late the other day, but the ASB platform just couldn't get it done before close. I'd be happy to get on the board at that sort of figure, but would certainly be keen to average down into the 80s or less if it comes to it. Then again, there's always the FOMO risk... But with so many tasty pickings on the market at the moment, at least 1 or 2 are going to hit a lean target price at some point.


More recently I bought a third tranche of HGH shares at $1.10. I probably could have paid a bit less. But coming out of this, whether I bought in at $1.20 or $1 or even less is not going to be material IMO.

SNOOPY

You say that, and maybe you have a broad and expansive portfolio, so it's less material, but for me, at the end of the day, if you can get 20% more shares for the same amount of dollars, and they are up around $2 (divvy included maybe) in a few years time, then you are going to get ~40% more return on your original investment.

[Cyclical]

I doubt if selling or buying in the US over the next week will have any effect on the business of HGH in a years time. I am not saying that HGH will be trading in a years time as though nothing has happened. Remember the HGH share price has already reduced substantially. I am saying it is a time for careful accumulation. And largely unconnected hysteria in US markets could provide the opportunity for savvy NZ investors to do just that.

SNOOPY

Agreed. And what opportunities there are.

[Cyclical]

I agree Cyclical that a correction is well overdue. So lets take some time to try and figure out what Heartland might look like coming out the other side. I will start.

From a 'market perspective', I think any hope of HGH trading at a 'premium' to other finance sector shares is gone.

From an operational perspective, I expect the reverse mortgage business to grow because it is one of the few ways for older NZers and OZers to access capital. They may even do it to help bail out their son's and daughter's businesses as the only source of wider family finance!

I expect the new car market will be hit hard and that will affect Heartland's motor industry finance going forwards. I don't expect existing customers to stop paying their loans as their car may be their only escape (and way to get to a job interview) from lock down for the unemployed, OR the safest way to get to work for those still employed. No-one will be keen to repossess cars, because who are they going to sell them on to? Better to work out an arrangement with your existing customers, even if Heartland has to take their share of a hit while doing it. For customers on lease arrangements, that end of lease residual value of the vehicle could be an issue for Heartland.

Providing seasonal rural financing looks to remain a strong pillar of the business. The competitive advantage that competitors 'Allied Farmers' and 'PGG Wrightson' had is now gone with the physical sale yards being closed own. From being a weak third player, Heartland, without any restriction about buying and selling through the same agent like their competitors, looks to have moved to market position of relative advantage in 'paddock to paddock' livestock sales.

I agree with Beagle that some of those Harmony unsecured P to P loans might be in trouble. But what proportion of Heartland's loan book will this effect?

Some thoughts off the top of my head. Not all of them bad. Interested to hear where other Heartland shareholders think HGH is going.

SNOOPY

Nice summary, thanks Snoopy.

[winner69]

Business failures increased significantly post GFC ...many took a few years to fail.

I would contend that economic damage as a result of the virus will be greater than because of the GFC

Wonder what this chart (courtesy of Motu) will look like in five years time ....

........and how many were Heartland customers

[Snoopy]

Business failures increased significantly post GFC ...many took a few years to fail.

I would contend that economic damage as a result of the virus will be greater than because of the GFC

Wonder what this chart (courtesy of Motu) will look like in five years time ....

........and how many were Heartland customers


I can answer the last bit. Coming out of the GFC none were Heartland customers. Because Heartland did not exist before the GFC!

Interesting chart there Winner. Are those scales on the side of the graph the number of business failures per month? What I found of interest in that chart was that the personal bankruptcies (perhaps more aligned with small business failure?) had a tough couple of years following the GFC but then reverted top a more normal level after four years. However corporate failures (perhaps more aligned with medium and large businesses) had high initial failure, then a quieter period, more indicative of pre-GFC levels just two years later. Yet between 2011 and 2014 inclusive there was a second wave of corporate business failure. That means the disruption due to corporate failure went on for far longer than individual financial failure overall . I would count that graph as suggesting in the end that things might be relatively 'less bad' for Heartland and O4B going forwards as compared to the bigger banks supporting medium to large businesses.

Was there any explanation offered in the article on the variation in timeline gyrations between the individual and corporates? In particular a comment on what caused that 'second wave' of corporate failure?

SNOOPY

[winner69]

I can answer the last bit. Coming out of the GFC none were Heartland customers. Because Heartland did not exist before the GFC!

Interesting chart there Winner. Are those scales on the side of the graph the number of business failures per month? What I found of interest in that chart was that the personal bankruptcies (perhaps more aligned with small business failure?) had a tough couple of years following the GFC but then reverted top a more normal level after four years. However corporate failures (perhaps more aligned with medium and large businesses) had high initial failure, then a quieter period, more indicative of pre-GFC levels just two years later. Yet between 2011 and 2014 inclusive there was a second wave of corporate business failure. That means the disruption due to corporate failure went on for far longer than individual financial failure overall . I would count that graph as suggesting in the end that things might be relatively 'less bad' for Heartland and O4B going forwards as compared to the bigger banks supporting medium to large businesses.

Was there any explanation offered in the article on the variation in timeline gyrations between the individual and corporates? In particular a comment on what caused that 'second wave' of corporate failure?

SNOOPY

The full paper is here http://motu-www.motu.org.nz/wpapers/19_15.pdf

Being in lockdown gives you the time to study such things ...esp when it’s wet, windy and cold outside

[Biscuit]

The full paper is here http://motu-www.motu.org.nz/wpapers/19_15.pdf

Being in lockdown gives you the time to study such things ...esp when it’s wet, windy and cold outside

I like that, they have a summary haiku!

Summary haiku:
Businesses do fail.
Things get worse in recessions
as costs rise sharply.

[Beagle]

Business failures increased significantly post GFC ...many took a few years to fail.

I would contend that economic damage as a result of the virus will be greater than because of the GFC

Wonder what this chart (courtesy of Motu) will look like in five years time ....

........and how many were Heartland customers

Interesting image Winner. As we know Hoop reckons the average bear market is 11 months.
Many economists here and overseas now saying that they expect the effects of this virus will be worse than the GFC.
Some people think that we still haven't fixed the core systemic issues with poor quality loans from the last GFC, (mainly an issue for some European banks).
Govt doing a good job of propping things up for now as is the RBNZ providing an open tap liquidity to the N.Z. banking system, (from what I have heard and experienced the overnight interbank settlement system nearly failed recently after the near 3,000 point drop in the Dow)
HGH will do their best to support customers through this in much the same way as they did through the dairy crisis and hope things pan out okay in the end and maybe they will ?

Where they get a real belting, (in my opinion), is all the loose Harmoney type unsecured lending. I won't try and second guess the recovery point using fundamental analysis as there is no way to reliably predict the cost of this whole thing in terms of bad and doubtful debt provisioning. So much guesswork here its a waste of time speculating.

Technical analysis is your best friend at times like this. Really simple TA said people should have sold out when it broke down through the 100 day moving average which would have got people out at about $1.73. 11173

I think the effects play out over a number of years. Banks typically do it very tough in situations like this. I think I will do my best to wait for it to break back up through a new uptrend and its safer with this one to use the 100 day MA indicator.

My view is that the **** has only just started to hit the fan https://www.cnbc.com/2020/03/27/what-could-be-shocker-economic-reports-may-test-stocks-in-week-ahead.html and there's plenty more to come.

[ratkin]

I think the effects play out over a number of years. Banks typically do it very tough in situations like this. I think I will do my best to wait for it to break back up through a new uptrend and its safer with this one to use the 100 day MA indicator.

My view is that the **** has only just started to hit the fan https://www.cnbc.com/2020/03/27/what-could-be-shocker-economic-reports-may-test-stocks-in-week-ahead.html and there's plenty more to come.

Yeah, appears to be no rush, I have moved to weekly charts now, they will give a better true picture in the coming months, the dailies tend to have too many false signals. Fine if you are an active, nimble trader, but for an investor like yourself the weekly charts cut out the noise

[Baa_Baa]

Where they get a real belting, (in my opinion), is all the loose Harmoney type unsecured lending.

At only 5% of receivables $250m, Harmoney (including other consumer lending) is probably the lesser of their worries, with potential defaults in business and motor vehicle loans (representing a combined 47% $2133m receivables).



Heartland Receivables (Dec 2019)

$M


%



Reverse Mortgages

$ 1,424


31%



Motor Vehicle Finance

$ 1,124


25%



Harmoney & other consumer lending

$ 250


5%



Business Finance

$ 1,009


22%



Open for Business

$ 158


3%



Rural Finance

$ 621


14%




total


$ 4,586








11175

[Beagle]

Couple of economists out today predicting GDP to decline by 6% over the rest of 2020. My instincts tell me that its probably going to be quite a bit worse than that. Could this recession be worse than the GFC ? I suppose a lot depends upon how soon an effective treatment is developed followed by how long before a vaccine is widely available.
My sense is it won't be until 2022 that things get back to some sort of "normal", whatever that new normal looks like ?
For HGH I expect the impact to last until at least FY23 as previous level's of provisioning for bad and doubtful debts prove to be inadequate.
Dividend level under threat now ? Definitely in my opinion.

[Playa]

Many will say cash is king at a time like this, but how secure do you think our money is sitting in the bank?Are the big Aussie Banks safe if sh*t really does hit the fan?Or will the govt come knocking on our doors(bank accounts).Just a thought.Where is the best place to keep the cash?

[Beagle]

The safest place is Govt issue Kiwibonds https://debtmanagement.treasury.govt.nz/kiwi-bonds

Yes the Govt could come knocking on your door with bank deposits under the open banking resolution and some or all of your money could be "collared" for a period of time and some could be lost. https://www.rbnz.govt.nz/regulation-and-supervision/banks/open-bank-resolution

My understanding is you do not have this risk with Kiwibonds but do have it with bank term deposits. What investors need to weigh up for themselves is whether the after tax extra return of a bank term deposit compared to Kiwibonds is worth the risk considering we could be headed into a very long and protected recession and worse case a great depression which potentially could involve the Reserve Bank invoking the open banking resolution with potential losses to even deposit holders..

Last week Kiwibonds were paying 1.0%. Banks were generally paying 2.7% or thereabouts. At that point people were earning an extra 1.7% before tax, or for investors on a 33% tax rate an extra 1.14% per annum after tax for a bank term deposit. Now that shorter duration Kiwibonds are down to 0.5% and special term deposit deals from HGH have been offered at up to 2.9% for existing customers the after tax spread is out to 1.6%.

One advantage Kiwibonds have is that you can ask for all or some of your money back with 7 working days notice, (there is an early repayment penalty) People may find banks very reluctant to repay term deposits early, (even with the penalties banks normally apply for doing so) if things get really tough. Even proving hardship may not be enough.

Having a bob each way (Kiwibonds and term deposits) and a variety of different banks for term deposits could be a good strategy for those who are largely cashed up to ride this storm out.

[winner69]

Couple of economists out today predicting GDP to decline by 6% over the rest of 2020. My instincts tell me that its probably going to be quite a bit worse than that. Could this recession be worse than the GFC ? I suppose a lot depends upon how soon an effective treatment is developed followed by how long before a vaccine is widely available.
My sense is it won't be until 2022 that things get back to some sort of "normal", whatever that new normal looks like ?
For HGH I expect the impact to last until at least FY23 as previous level's of provisioning for bad and doubtful debts prove to be inadequate.
Dividend level under threat now ? Definitely in my opinion.

By how much did the economy contract as a result of the GFC ......about 2%

Maybe GFC not a good benchmark

[Beagle]

Possibly not. I am planning for the worst, (another great depression), and really hoping it doesn't get that bad. The majority of my funds are now in Kiwibonds. If there's a glimmer of light at the end of this tunnel I can call all or part of them up early to take advantage of depressed asset prices. As you know, I believe we are headed down well below 6,000 on the NZX50 index.

[Playa]

Thanks Beagle.Long time reader of this site and have just joined.I guess 0.5%,1% or 2.7% is chicken feed which ever option you take,it's all about protecting capital until we get to a point where it looks safe enough to dip the toes (or paws) back in the water with the markets.I actually contacted Westpac in Australia last week about sending some money over there,I heard(correctly or not) we have a guarantee deposit scheme in NZ of only $50k and in Australia $250k. The lady in Westpac Australia told me that they are not allowed to open accounts for people from NZ now unless they are planning to live there,a new policy apparently

[Beagle]

I don't think that $50K deposit guarantee scheme is in effect yet. Welcome to the forum :)

[Jerry]

Getting way off topic now, but how would money say in a Jarden Trading Account in AUS $ be considered if there were a haircut? I suppose I should ask them! :confused:

[Traderwannabe]

I too have bought some Kiwi Bonds, only got the 0.5% rate as I bought them last week. (Bought them before during the GFC so have some experience with them.) The Kiwi Bond information website says that you can buy them from some registered banks, however, after visiting quite a few banks Kiwibank, ASB, Westpac, BNZ - not one teller even knew what I was asking for?? They thought I wanted Bonus Bonds? So ended up dropping off my application form in the drop box outside the ComputerShare office in Takapuna, as you are not able to go up to their office anymore.

Beagle can I ask, why did you open a TSB account and not a Kiwibank account - just wondering, do you think it is safer? As also looking to spread money between banks, currently just have Kiwibank and now Kiwi Bonds.

[Snoopy]

At only 5% of receivables $250m, Harmoney (including other consumer lending) is probably the lesser of their worries, with potential defaults in business and motor vehicle loans (representing a combined 47% $2133m receivables).



Heartland Receivables (Dec 2019)

$M


%



Reverse Mortgages

$ 1,424


31%



Motor Vehicle Finance

$ 1,124


25%



Harmoney & other consumer lending

$ 250


5%



Business Finance

$ 1,009


22%



Open for Business

$ 158


3%



Rural Finance

$ 621


14%




total


$ 4,586










Thanks for putting things in proportion Baa baa. $250m is not a lot for Harmony in the big picture. Incidentally, I went over to the P to P forum and saw that Harmony P to P for most of us is closing down. You can still borrow as a 'P' but to get on the lending side you now require a minimum of $10m. There aren't too many, even on this forum, able or willing to splash out that much on lending via Harmony. Harmony losses may not be so bad because, as a part owner of Harmony, Heartland 'clips the ticket' on each loan they write by part owning the Harmony platform. That income stream is independent of what happens to the loan down the track.

'Business Finance' must be a worry. The problem here is that many of these loans would have been taken out in a business environment that could not have conceived of a business lock down such as we are in now. Having no revenue does not mean you are an incompetent business person today. For example, what would be the point in bankrupting a mall store owner, then on selling the bankrupt's assets to a new store owner who may be less competent? And who would take on a lease in a mall that is closed, and liable to be closed again at short notice anyway? The only solution I can see to this is a multi-party solution. Banks, premesis owners, and business operators will have to work together and take a 'joint hit'. If they don't then all three will lose, and lose big time. OK banks might get their money back, but then they will have no-one to lend to. I think we are going to have to move out of the lock down phase before anything can happen. 'And Grant Robertson has provided the liquidity to allow everyone to wait. And if there is no light after six weeks, Robertson will provide more liquidity. 'Liquidating at the bottom' would be three way commercial suicide for business owners and landlords and banks alike.

Motor vehicle loans is likely to be more of a slow moving problem. There will be no appetite to repossess a whole lot of vehicles en masse. In this environment there would be no-one to sell them to. Better to let things slow burn, and even put aside some car payments, deferring them to the end of the lease when a lump sum of capital becomes available. It is very hard to form a meaningful view of what happens to a motor loan that expires in 2-3 years. Kicking the loan down the road looks like the only short term solution.

Suddenly 'rural finance' looks relatively safe. Who would have picked that two or three years ago! Maybe time to return the HGH AGM to Ashburton?

SNOOPY

[Beagle]

I too have bought some Kiwi Bonds, only got the 0.5% rate as I bought them last week. (Bought them before during the GFC so have some experience with them.) The Kiwi Bond information website says that you can buy them from some registered banks, however, after visiting quite a few banks Kiwibank, ASB, Westpac, BNZ - not one teller even knew what I was asking for?? They thought I wanted Bonus Bonds? So ended up dropping off my application form in the drop box outside the ComputerShare office in Takapuna, as you are not able to go up to their office anymore.

Beagle can I ask, why did you open a TSB account and not a Kiwibank account - just wondering, do you think it is safer? As also looking to spread money between banks, currently just have Kiwibank and now Kiwi Bonds.

I had a look through TSB's financial statements and their history. I think they are the safest bank in N.Z. and I love the fact that they are owned by the TSB Community trust and all profits go profits go back into the community, (makes the dog feel really warm inside). My read on them is they are the most traditional bank of any in N.Z.

HGH have a better level of capital and should be fine. For what its worth I have term deposits with HGH, BNZ and TSB as well as the Kiwibonds. I have just over 50% of my portfolio in Kiwibonds.

[winner69]

Couple of economists out today predicting GDP to decline by 6% over the rest of 2020 ...

Bank economists are a bit x#3%+. (Don’t know the word)

Economic activity down at least 50% next 3 months ....even if it rebounds to normal for rest of year hard to get only 6%

And those same economists say unemployment only going to blow out to 7% ....surely has to well over 10%

[Beagle]

They're just guessing like the rest of us.

[BlackPeter]

Bank economists are a bit x#3%+. (Don’t know the word)

Economic activity down at least 50% next 3 months ....even if it rebounds to normal for rest of year hard to get only 6%

And those same economists say unemployment only going to blow out to 7% ....surely has to well over 10%

Don't forget - we are in uncharted territory. The bank economists know as much about the shape of the economy in a year, than the 15th century chartists knew about the shape of the American continent.

[Cyclical]

Bank economists are a bit x#3%+. (Don’t know the word)

Economic activity down at least 50% next 3 months ....even if it rebounds to normal for rest of year hard to get only 6%

And those same economists say unemployment only going to blow out to 7% ....surely has to well over 10%

Maybe they 6% GDP decline figure has had some communist party spin applied?

[stoploss]

Don't forget - we are in uncharted territory. The bank economists know as much about the shape of the economy in a year, than the 15th century chartists knew about the shape of the American continent.

Someones quote not sure who " They made economists to make weather forecasters look good "

[winner69]

Someones quote not sure who " They made economists to make weather forecasters look good "

and weather forecasts benchmark is 'tomorrows weather the same as todays'

If they beat that they are good

That's why economic forecasts are often just he long term average

But they sat accountonomists are becoming popular

[GTM 3442]

Getting way off topic now, but how would money say in a Jarden Trading Account in AUS $ be considered if there were a haircut? I suppose I should ask them! :confused:

The Australian government scheme only covers Australian dollar accounts. I doubt that the NZ government would take on the currency risk when setting up a guarantee or deposit scheme.

[percy]

Perhaps The NZ Govt should only guarantee deposits in NZ owned banks ?.............lol.

[SCOTTY]

Perhaps The NZ Govt should only guarantee deposits in NZ owned banks ?.............lol.

Brilliant Percy. I like it :)

[Balance]

Perhaps The NZ Govt should only guarantee deposits in NZ owned banks ?.............lol.

Remember how NZ government stepped in and guaranteed finance companies' deposits during the GFC?

As it was then, it will be too if banks here start falling.

Not worried about the current situation at all - governments will pump money via the printing presses until the Parousia if need be.

[nevchev]

Wouldn't of thought I'd get back into hgh at these prices.How do we think recent events will effect dividends?Strange days indeed

[Beagle]

For what its worth I closed out a small short position I put on (some time back) at $1.75 this morning at $1.01. I will look to go long again once we're further through with seeing the extent of the economic effects of this virus. I have no reservations about HGH surviving this thing, and still hold considerable funds with them on term deposit and call account. Happy to be a shareholder again when the time is opportune.

Will revert to my usual approach or tuning up my long range radar nose and leap in when I sense the faintest smell of a pending feed :D

Whether the current dividend level is sustainable or not is the $64,000 question ?

[dobby41]

For what its worth I closed out a small short position I put on (some time back) at $1.75 this morning at $1.01. I will look to go long again once we're further through with seeing the extent of the economic effects of this virus. I have no reservations about HGH surviving this thing, and still hold considerable funds with them on term deposit and call account. Happy to be a shareholder again when the time is opportune.

Will revert to my usual approach or tuning up my long range radar nose and leap in when I sense the faintest smell of a pending feed :D

Whether the current dividend level is sustainable or not is the $64,000 question ?

What do you think will kill them?
Banks seem to have a lot of Govt support at the moment with the Govt guarantees (risk sharing) on loans etc

[Beagle]

Other than the chance of a really protracted Great Depression, (low chance of that in my opinion), I think they will be fine.

[Cyclical]

Looks like the CEO has picked up a couple of 10k parcels this month, well above the current asking price. Not that it means a lot in the context of his total holding.

[iceman]

So Heartland Bank and other registered banks have had their core funding ratio reduced from 75% to 50% by the Reserve Bank and also basically been told to get out there and lend to their business customers under the "Government's Business Finance Guarantee Scheme".
But conditions include no dividends while this situation lasts which obviously does not preclude HGH from paying dividends. But I would expect and hope HGH follows the spirit of this condition and suspends dividends for a time and lends money out to businesses in need

[Snow Leopard]

We are definitely living in interesting times. :ohmy:

Assuming that Heartland survives this then hopefully it survive the aftermath and rebuild the necessary reserves.

[traineeinvestor]

A little less draconian than the UK regulator which just issued an edict banning the large banks and building societies from paying dividends in 2020 (including already declared dividends from 2019 profits), conducting share buy backs or paying staff bonuses.

[blockhead]

Sold mine on Tuesday @ $1.02, now I'm not really game enough to buy back in

[Snoopy]

A little less draconian than the UK regulator which just issued an edict banning the large banks and building societies from paying dividends in 2020 (including already declared dividends from 2019 profits), conducting share buy backs or paying staff bonuses.


https://www.stuff.co.nz/business/120754357/banks-not-allowed-to-pay-dividends-to-shareholders-until-recovery-rbnz-announces

From a shareholder perspective, it doesn't seem much less draconian. No dividend for Heartland shareholders for the foreseeable future. For me it makes little difference because I was part of the DRP anyway.

I have highlighted how Heartland doesn't generate any cashflow anyway, on an operational basis. The 'illusion' of sustainable dividends was always offset against cash issues of new shares, the DRP, and large bond issues as ways of bringing more cash into the business. Really all this reserve bank measure has done has made official the situation Heartland has been in since its formation. Those of us who have studied the accounts have known this for a long time. This announcement will have no effect on my own investment position in Heartland. Happy to hold through the rebuilding phase.

SNOOPY

[Beagle]

Other than the chance of a really protracted Great Depression, (low chance of that in my opinion), I think they will be fine.

Posted 31 March 2020. I think the chances of that are increasing by the day. RBNZ should prop up the system though and their balance sheet is in very good shape to weather this crisis.

[ScrappyO]

Ive done the opposite and bought this morning. See what happens...….

[Snoopy]

https://www.stuff.co.nz/business/120754357/banks-not-allowed-to-pay-dividends-to-shareholders-until-recovery-rbnz-announces

From a shareholder perspective, it doesn't seem much less draconian. No dividend for Heartland shareholders for the foreseeable future.


I may have been premature with this:

https://www.nzx.com/announcements/351120

"Importantly, the distribution restriction applies to Heartland Bank, and not to Heartland. Heartland’s Board will consider the impact (if any) of the restriction on its own, separate, dividend policy, and when considering the dividends that it may wish to declare (if any) to its shareholders in due course."

Heartland Bank cannot pay any dividends to Heartland Group Holdings. But it looks like there is a window for HGH shareholders to have a dividend to be paid after all, paid for from the Australian business which is 'not a bank', as so would not be covered by any pending future Australian rulings applied to banks 'over there'.

Jeff does it again!

SNOOPY

[RTM]

So Heartland Bank and other registered banks have had their core funding ratio reduced from 75% to 50% by the Reserve Bank and also basically been told to get out there and lend to their business customers under the "Government's Business Finance Guarantee Scheme".
But conditions include no dividends while this situation lasts which obviously does not preclude HGH from paying dividends. But I would expect and hope HGH follows the spirit of this condition and suspends dividends for a time and lends money out to businesses in need


That’s all fine and dandy Iceman, but there are also a group of people who have budgeted on the dividend as part of their income. I hope some compromise can be found, as long as HGH is not made insolvent.

[dabsman]

HGH and Heartland Bank are different entities.

Importantly, the distribution restriction applies to Heartland Bank, and not to Heartland. Heartland’s Board will consider the impact (if any) of the restriction on its own, separate, dividend policy, and when considering the dividends that it may wish to declare (if any) to its shareholders in due course.

[Bjauck]

That’s all fine and dandy Iceman, but there are also a group of people who have budgeted on the dividend as part of their income. I hope some compromise can be found, as long as HGH is not made insolvent. The HGH dividend yield was high. However the fact of the matter, there are few individual shareholders in NZ these days, and even fewer for whom dividend income would form a major part of their total income. So their protestations would not figure highly in government policy formulation. I think suspension of dividends is sensible in the circumstances, even though I will miss the payment.

Most NZ banks are controlled overseas with overseas shareholders. So the ban on bank dividends would be seen as positive from a NZ political and electoral aspect. Such is the result of overseas ownership of so much NZ business. Government proscriptions on returns from NZ real estate ownership would be a different matter.

Disc: Still a HGH & ANZ shareholder.

[Snoopy]

YearDividends Paid 'per share'Significant Event During Year'


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

[/TR]

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








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


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


FY20164.5cps + 3.5cps


FY20175.0cps + 3.5cps


FY20185.5cps + 3.5cps


FY20195.5cps + 3.5cps1st November 2018: Heartland Group Holdings restructure set up


FY20206.5cps + ?.?cps


Average FY2015.5 to FY2019.5 inclusive8.80cps




I have chosen to use the last ten half years of operation as indicative, as this period includes the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards.




YearDividends Paid 'per share'Significant Event During Year'


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

[/TR]

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








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


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


FY20164.5cps + 3.5cps


FY20175.0cps + 3.5cps


FY20185.5cps + 3.5cps


FY20195.5cps + 3.5cps1st November 2018: Heartland Group Holdings restructure set up


FY20206.5cps + 0cps


Average FY2016 to FY2020 inclusive8.20cps



We are more than six months out from any expected final dividend. But I am going to make the bold prediction that there will not be one. What does this do to the Dividend Capitalised valuation of HGH? First see what the five year dividend average is.

I have chosen to use the last ten half years of operation as indicative, as this period includes the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards.

SNOOPY

[Beagle]

I think you are right and there won't be a final dividend this year.

[Snoopy]

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

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

8.8c / (0.72 x 0.075) = $1.63

A reminder here that NTA was

($675.668m - $72.679m) / 569.338m = $1.06 cps

at the full year FY2019 balance date. This means my 'fair valuation' is at a good premium (+54%) to net tangible asset value.

This $1.63 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.30 to $1.96. $1.59, where the share is trading today, looks a few cents below fair value. My target accumulation price (10% below fair value) is now $1.47.


Events have certainly moved on since my FY2019.5 year calculation. I have to ask the question, given the economic shock, should I still be happy with a 7.5% yield from a second tier financial institution? My initial thought was no. But then I realised that coming out of this, interest on bank term deposits are likely to be materially lower than the all time lows we have been experiencing of late. We might even be faced with a generation who do not know what interest is, because no bank pays it anymore! So I have decided my 7.5% figure is still appropriate. 7.5% does reflect a higher risk in an even lower interest rate environment going forwards!

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

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

8.2c / (0.72 x 0.075) = $1.52

A reminder here that NTA was

($675.668m - $72.679m) / 569.338m = $1.06 cps

at the full year FY2019 balance date. This means my 'fair valuation' is at a good premium (+43%) to net tangible asset value.

This $1.52 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.22 to $1.82. $0.95, where the share is trading today, is 37.5% below fair value. My target accumulation price (10% below fair value) is now $1.37. But is any of this realistic in the current investment climate?

SNOOPY

P.S. This iteration assumes no 4.5c March 2020 dividend which is not what happened. Refer back to Iteration 1 (post 13004) for a better valuation.

[Snoopy]

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

8.2c / (0.72 x 0.075) = $1.52

A reminder here that NTA was

($675.668m - $72.679m) / 569.338m = $1.06 cps

at the full year FY2019 balance date. This means my 'fair valuation' is at a good premium (+43%) to net tangible asset value.

This $1.52 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.22 to $1.82. $0.95, where the share is trading today, is 37.5% below fair value. My target accumulation price (10% below fair value) is now $1.37. But is any of this realistic in the current investment climate?


It is at times like this that the crudeness of the 'capitalised dividend valuation' model is useful, because it is so transparent.

Dividends paid in the past are indicative of the past business environments in which those dividends were paid. Clearly future business environments, for the medium term at least, are likely to be less favourable than those of the last five years. But how much worse?

I fear for the financing of new vehicles. The fact is that those running around in a five year old Japanese car will be disadvantaged very little compared to running around in a brand new equivalent, in practical terms. Yes they will pay a bit more for fuel. But for those that haven't noticed, the price of fuel has come down quite significantly in the last month. This morning I heard that demand for Air Travel within NZ has fallen 99%. I wonder what the fall in demand for rental cars is? Are rental car companies, one of the largest buyers of new cars, even still operating?

A shake out in small business is underway as well. But rather than a panicked risk averse 'pulling out of the rug', I expect a much more measured working through of the issues. Operators, landlords, banks and the government will all need to come to the party. After the initial shake out, I see a good future for financing SMEs in New Zealand.

Livestock funding's future is looking good as the four bigger banks look to wind down their rural exposure in New Zealand. The need for reverse mortgages looks to be even greater than before.

Overall I think HGH has a strong future if they can get through the current period. And the government is there, guaranteeing loans and subsidising incomes, to make sure that it does.

My guess, and it is nothing more than that, is that a new lending market, maybe 80% of the size of what was there BC19 (Before Covid 19), will emerge. That means that all my target prices have to be multiplied by a factor of 0.8. I also think that given the current volatility in share prices, potential shareholders should be able to accumulate at 20% below fair value, not just 10%. So how does my HGH valuation stack up given those changes?

(0.8 x8.2c) / (0.72 x 0.075) = $1.22

My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $0.98 to $1.46.

My target accumulation price (20% below fair value) is now $0.98. With the share trading at 92c as I write this, it is definitely 'in the accumulation zone', IMO!

SNOOPY

discl: hold HGH, and is nevertheless not accumulating until my next term deposit rolls off at the end of the month!

[Balance]

I think you are right and there won't be a final dividend this year.

Forget about the dividend - there will be a rights issue later in this year to fix the hole from loan losses from this economic downturn.

[davflaws]

there are also a group of people who have budgeted on the dividend as part of their income.

And they are going to have to adjust their budgets, just like most of the rest of the population.

I feel very lucky to have had enough excess income in the last few years to put money aside in a portfolio. So I have lost lots of it and so HGH might not give me any return on my $60 k shares. So what?

Lots of people are coping on the Govt's $500 odd, and some are suddenly unemployed and coping on the benefit.

[Beagle]

Forget about the dividend - there will be a rights issue later in this year to fix the hole from loan losses from this economic downturn.

Yeap, I think that hits the nail directly on the head !

[percy]

They better get in quick before the money runs out.!

[Snoopy]

Forget about the dividend - there will be a rights issue later in this year to fix the hole from loan losses from this economic downturn.


Or perhaps a rights issue to fix 20% of the loan losses, thanks to Grant's help?

There is another reason why the 'hole' might not be as big as you think. FY2019 saw the adoption of a much more aggressive policy as regards bad debts under the newly adopted AASB9 standard. I recall Jeff being a bit cynical about it, particularly in relation to reverse mortgages. So you may find some of the expected write backs on 'expected reverse mortgage losses' will offset other losses.

Remember in 2019 when the share price plummeted because of an expectation of a cash issue that didn't happen? The same thing could be happening here. The cash issue, if indeed there is one (Jeff might go for tier 1 bond capital issue instead for instance) might be for rather less than some here think.

SNOOPY

[Balance]

Signs of the times - first financial institution to go under.

A bit like the covid-19 virus having particularly deadly effect on those with pre-existing medical conditions - company was already struggling and with the virus impact, it's all over.

https://www.stuff.co.nz/business/120775705/new-zealand-investors-face-millions-in-losses-as-fe-investments-folds

Troubled finance company FE investments has been put into receivership with $54.3 million of New Zealand investor deposits at risk. FMA's director of regulation said: "This is terrible news for the investors in this troubled non-bank deposit taker. FE Investments has been in difficulty for some time following a number of business setbacks. Its problems were not caused by COVID 19, but there's no doubt the current economic conditions have made matters worse,"

[SCOTTY]

The HGH dividend yield was high. However the fact of the matter, there are few individual shareholders in NZ these days, and even fewer for whom dividend income would form a major part of their total income. So their protestations would not figure highly in government policy formulation. I think suspension of dividends is sensible in the circumstances, even though I will miss the payment.


Most NZ banks are controlled overseas with overseas shareholders. So the ban on bank dividends would be seen as positive from a NZ political and electoral aspect. Such is the result of overseas ownership of so much NZ business. Government proscriptions on returns from NZ real estate ownership would be a different matter.

Disc: Still a HGH & ANZ shareholder.

You have obviously never attended a HGH Agm.
A great number of shareholders are like myself (70+) and very interested indeed in regular dividends.

[Pricey]

And they are going to have to adjust their budgets, just like most of the rest of the population.

I feel very lucky to have had enough excess income in the last few years to put money aside in a portfolio. So I have lost lots of it and so HGH might not give me any return on my $60 k shares. So what?

Lots of people are coping on the Govt's $500 odd, and some are suddenly unemployed and coping on the benefit.

Amen. My best return recently has been on donating $90 to the foodbank, with ZURU matching me $ for $!

[Bjauck]

You have obviously never attended a HGH Agm.
A great number of shareholders are like myself (70+) and very interested indeed in regular dividends. I did not make myself clear in my post. I know there are individual shareholders, who rely on regular dividends. However in NZ , that number is proportionally fewer than in other countries such as Australia, the UK and the USA. Their concerns would carry little weight as compared with the concerns of other interest groups. The NZ sharemarket is small, even for our small population, and so is the involvement of individual investors.

[Bjauck]

And they are going to have to adjust their budgets, just like most of the rest of the population.

I feel very lucky to have had enough excess income in the last few years to put money aside in a portfolio. So I have lost lots of it and so HGH might not give me any return on my $60 k shares. So what?

Lots of people are coping on the Govt's $500 odd, and some are suddenly unemployed and coping on the benefit. Do you have income other than your income from your investments? There are some people for whom income from investments is their main source of income. Without dividends they may not be able to pay their bills.

The government have prevented the companies in which they have invested from conducting their business.

[kiora]

Amen. My best return recently has been on donating $90 to the foodbank, with ZURU matching me $ for $!

Well done you & ZURU. Now that's a company I wouldn't mind investing in.Slash building costs by 90%.It is developing a robotic factory in China
https://zuru.tech/

[Nasi Goreng]

Do you have income other than your income from your investments? There are some people for whom income from investments is their main source of income. Without dividends they may not be able to pay their bills.

The government have prevented the companies in which they have invested from conducting their business.

While no situation is good, these people can sell their shares to provide dividend equivalent. It might mean they may need to sell 10% per year to get their income but 2 years from now, we will have turned the corner... or seen the worse of it... hopefully!

[SCOTTY]

While no situation is good, these people can sell their shares to provide dividend equivalent. It might mean they may need to sell 10% per year to get their income but 2 years from now, we will have turned the corner... or seen the worse of it... hopefully!

Not good advice. Not the time to sell when the price is down. Losing income and capital :(. You may have noticed that when dividends are reduced or stopped, the share price drops. Time to be buying, not selling.

[Waikaka]

Luckily in NZ everyone gets national super. Which is what ~$980 a fortnight before tax. Should pay most bills

So if dividends were your 'main source of income' and an average dividend across the NZX50 is about 3.4%, then you have a portfolio of ~$750,000. Hopefully not all in HGH so might be a bit dramatic to say they may 'not be able to pay the bills'.

Stability of the whole system is important so it seems prudent for financial institutions to not be paying dividends at this time and focusing on supporting their customers.

Disc holding ANZ, WBC

[Ggcc]

I have someone who is thinking of applying for a REL from heartland while the shares are down and wait for the shares to bounce back before selling shares. Just another thought to add to the list of thoughts of people who survive off income from their shares

[Bjauck]

While no situation is good, these people can sell their shares to provide dividend equivalent. It might mean they may need to sell 10% per year to get their income but 2 years from now, we will have turned the corner... or seen the worse of it... hopefully!
Sure they could sell their shares at fire-sale prices and suffer a permanent loss of income when the recovery comes.

Just like business owners could sell their businesses at fire sale prices too to use their capital as income . Just like employees could sell their homes or other assets and then buy cheaper ones, or rent or rent cheaper, to replace their lost employment income.

The government makes arbitrary decisions as to whom it supports to compensate for its covid policies.

[Bjauck]

Luckily in NZ everyone gets national super. Which is what ~$980 a fortnight before tax. Should pay most bills

So if dividends were your 'main source of income' and an average dividend across the NZX50 is about 3.4%, then you have a portfolio of ~$750,000. Hopefully not all in HGH so might be a bit dramatic to say they may 'not be able to pay the bills'.

Stability of the whole system is important so it seems prudent for financial institutions to not be paying dividends at this time and focusing on supporting their customers.

Disc holding ANZ, WBC
I presume your reference to superannuation paying most bills was a joke? For a start you must assume that accommodation cost has been excluded? Not everyone has the same size household or level of bills. A sudden drastic reduction in your previous income will have an immediate effect in being able to pay your usual bills, unless you were saving a large amount out of your previous income.

Your estimate of portfolio value of $750,000 and dividend yield were pre Covid recession valuations? That portfolio may have lost 20% (or more if you had a high dividend yield portfolio)

[Nasi Goreng]

I agree with what you guys are saying but if you got yourself into a situation where you are reliant on dividends, then taking a 20% haircut over 1-2 years is not the end of the world. Yes income will be down in the future but you should know before you buy that investing carries risk.

[Bjauck]

I agree with what you guys are saying but if you got yourself into a situation where you are reliant on dividends, then taking a 20% haircut over 1-2 years is not the end of the world. Yes income will be down in the future but you should know before you buy that investing carries risk.
Sure..some companies have cancelled their dividends so the haircut from your portfolio may be well over 20%. Everything carries a risk. Just like you cannot rely on receiving a wage or salary or bring employed by the same company. However the government has offered Covid subsidies to some.

[Waikaka]

I presume your reference to superannuation paying most bills was a joke? For a start you must assume that accommodation cost has been excluded? Not everyone has the same size household or level of bills. A sudden drastic reduction in your previous income will have an immediate effect in being able to pay your usual bills, unless you were saving a large amount out of your previous income.

Your estimate of portfolio value of $750,000 and dividend yield were pre Covid recession valuations? That portfolio may have lost 20% (or more if you had a high dividend yield portfolio)


I don't want to sidetrack what is quite an informative thread. The straw-man portfolio would be as at today values so yes was larger before correction.

Obviously individual circumstances vary but your hypothetical 70+ person who needs Heartland dividends to pay the bills is also in the cohort that has the highest home ownership rate of all NZrs, at around 77.5% (2013 census was the latest I could find). I suspect that most will be mortgage free. Accommodation is unlikely to be their largest expense. Perhaps other cohorts with more debt, job uncertainty and obligations (ie young families) will be hit harder? Whatever the situation individuals are in, I hope we all pitch in to help those in need.

My only point is that pretty much everyone in NZ is in the same boat, portfolios down, dividends cancelled, jobs lost, capital raises coming when not much cash is around. I understand the disappointment in having the govt enforce rules but that is their job.

The wide ranging new rules have impacted many business. Do I mind that my ANZ and WBC will suddenly be not paying dividends, yes, but do I think now is the time to be conservative with cash and protect balance sheets it is also yes.

[Bjauck]

Do I mind that my ANZ and WBC will suddenly be not paying dividends, yes, but do I think now is the time to be conservative with cash and protect balance sheets it is also yes. Pensions do not cover all expenses as of course they assume home ownership. It underlines the protected position of investment in real estate in NZ. A situation which has passed its best before date.

Many people have indeed been impacted by the Covid response. Many shareholders may have relied on their dividend income as employees relied on their salaries, notwithstanding that both sources carry continuity risk..

I agree that bank dividend suspension is prudent. However it is worth noting that there has not been a mandated suspension of Australian bank dividends (yet)

Perhaps there has been greater reticence in so doing there as share ownership is more widespread and Australian bank shares figure highly in Australian pension accounts?

[Snow Leopard]

One of the rules of life is to have enough cash set aside to pay your expenses for a few months whilst hoping the bank(s) you are keeping it in does not go phut!

Heartland is the bank I am invested in but not one of the banks I keep my cash and term deposits in.

Hoping to see the far-side of these unusual times intact.

[davflaws]

Do you have income other than your income from your investments? There are some people for whom income from investments is their main source of income. Without dividends they may not be able to pay their bills.


I am lucky enough to have National Super, and up until the lockdown had a modest professional practice as well. That is where the surplus to build a portfolio came from. That practice has (like the portfolio) crashed, and over the next few months will probably burn. So my income has been very sharply reduced, and is likely to be further reduced. I have had to reduce budgeted expenditure accordingly, but I am still a hell of a lot better off than a huge number of other people.

I can't muster too much sympathy for the "haves" - (people who are pretty well located towards the top of the heap) who are moaning about having their dividend income reduced, while the "have nots" on the bottom are coping with a reduction that is making many of them dependent on food parcels.

[Bjauck]

...
I can't muster too much sympathy for the "haves" - (people who are pretty well located towards the top of the heap) who are moaning about having their dividend income reduced, while the "have nots" on the bottom are coping with a reduction that is making many of them dependent on food parcels. Well if the haves are wiped out, the government will need to have deep pockets for a long time to fund and establish businesses afterwards. Too bad if the impact from their drastic Covid measures, and who they chose to support, could also be seen as a way of establishing a government owned socialist society.

Of course there are many have-nots who have been impacted and who do not receive sufficient compensation from the government. However not all shareholders are in the "haves" and of course they get zero compensation from the government. You need a certain level of wealth just to be able to get the deposit for a below median price house in many parts of NZ these days! Homeowners are the "haves"

After Covid-19, it makes me wonder how much longer NZ can carry on without some sort of general wealth tax and with so much wealth wrapped up in real estate/land values.

[kiora]

One of the rules of life is to have enough cash set aside to pay your expenses for a few months whilst hoping the bank(s) you are keeping it in does not go phut!

Heartland is the bank I am invested in but not one of the banks I keep my cash and term deposits in.

Hoping to see the far-side of these unusual times intact.

Another rule is to spread it around a few banks in these times when its crazy out there

[Balance]

Another rule is to spread it around a few banks in these times when its crazy out there

CBA & ASB - to me, the strongest & most financially robust bank in the Australasian financial markets - principally consumer & household based lending & well diversified funding base.

The Australasian 4 trading banks (& NZ subsidiaries) operate with implicit government guarantees imo.

[janner]

After Covid-19, it makes me wonder how much longer NZ can carry on without some sort of general wealth tax and with so much wealth wrapped up in real estate/land values.

Perish the thought.

The haves in the main have worked and saved.

There are far to many in this country that are happy to just bludge.

Yes there will always be those that do need assistance.

If you do not work you do not eat was my up bringing.

Time to get back to basics IMHO.

[Balance]

Perish the thought.

The haves in the main have worked and saved.

There are far to many in this country that are happy to just bludge.

Yes there will always be those that do need assistance.

If you do not work you do not eat was my up bringing.

Time to get back to basics IMHO.

Yup - agreed wholeheartedly.

Labour is going to need the productive sector (those doing real work) and the funders (those with money) post the lockdown to pull NZ out of the humongous debts which is being incurred now.

Going to be tens of thousands out of jobs - where are the jobs going to come from?

[kiora]

Yup - agreed wholeheartedly.

Labour is going to need the productive sector (those doing real work) and the funders (those with money) post the lockdown to pull NZ out of the humongous debts which is being incurred now.

Going to be tens of thousands out of jobs - where are the jobs going to come from?

Yep that's the worry.
We either need herd immunity,a treatment or vaccine so airlines, tourism & hospitality can get going again very quickly otherwise their will be a lot of people on an enforced holiday for a long time
In the meantime we need the crops,seafood,forestry & meat industries to ramp up back to more normal levels.A worrying problem is storage,logistics,shipping & containers
At least the tech industries can work more remotely
Balance of payments will be interesting as in spite of primary exports being reduced imports should be well down as well.Will we see a bounce back in consumer demand?
Interesting times

[janner]

Yup - agreed wholeheartedly.

Going to be tens of thousands out of jobs - where are the jobs going to come from?

There are tens of thousands of jobs going begging now ( prior to lock down ).
Stop importing cheap labour. Simple aye ?.

[Balance]

There are tens of thousands of jobs going begging now ( prior to lock down ).
Stop importing cheap labour. Simple aye ?.

Well, not such a bad thing if unemployed NZers start becoming fruit pickers, farm labourers, drive Ubers, clean toilets etc etc

Can you see it?

[iceman]

Well, not such a bad thing if unemployed NZers start becoming fruit pickers, farm labourers, drive Ubers, clean toilets etc etc

Can you see it?

You beat me to it Balance. Even right at this moment, horticulture is struggling to find reliable pickers and packers. How bad is that ? We seem to have strayed far from HGH on this thread though !!

[Cyclical]

There are tens of thousands of jobs going begging now ( prior to lock down ).
Stop importing cheap labour. Simple aye ?.

I wonder what it means for my Indian colleague who submitted his residency application about 9 months ago (but at last count still hadn't been assigned to a case manager)? We are in the tech industry, so he might be ok. As much as many of us don't like the influx, I feel sorry for those guys who have spent thousands of dollars and a whole lot of effort to apply and then something like this comes along.

At least Winny might be able to say he achieved one of his promises.

[Balance]

You beat me to it Balance. Even right at this moment, horticulture is struggling to find reliable pickers and packers. How bad is that ? We seem to have strayed far from HGH on this thread though !!

Has profound implications for the banking sector if businesses are unable to ramp up production, generate revenues and service their bank loans.

If most of the unemployed NZers are happy to live on subsistence welfare payouts (likely), tecpcery is going to be painfully slow and domestic demand is not going to be able to offset the loss of economic momentum of the global lockdowns.

Just look at the tens of thousands of rental vehicles parked up and down NZ (especially in tourist spots like Queenstown) and shudder at how the banks are going to enforce their security!

[janner]

Well, not such a bad thing if unemployed NZers start becoming fruit pickers, farm labourers, drive Ubers, clean toilets etc etc

Can you see it?


Yes... With a Government that closes the purse.

But this is now going off topic.

[Bjauck]

Perish the thought.

The haves in the main have worked and saved.
... Yep the government will have its work cut out to encourage boomers to take divert their capital from inflated land based investments to reinvest into productive business and investments after they successfully rode house price inflation for years. With current settings, another generation will take a lot of convincing to reinvest into NZ companies and businesses.

[kiora]

Yep the government will have its work cut out to encourage boomers to take divert their capital from inflated land based investments to reinvest into productive business and investments after they successfully rode house price inflation for years. With current settings, another generation will take a lot of convincing to reinvest into NZ companies and businesses.

The landscape is likely to drastically change from riding house price inflation to protecting capital.Farm investments,primary industries, will be at the other end of the oscillation
https://www.stuff.co.nz/business/114687837/nzs-superrich-seek-safe-investments

[Panda-NZ-]

Well if the haves are wiped out, the government will need to have deep pockets for a long time to fund and establish businesses afterwards. Too bad if the impact from their drastic Covid measures, and who they chose to support, could also be seen as a way of establishing a government owned socialist society.

Those who survive (ie the young) will take up assets, designs/IP for cheap and take it to new heights as it always has been in nz. Rent will be cheaper, commercial and residential hopefully. This will enable some positive changes with tech minded people taking over the leadership positions.

Boomers on the whole are not that educated (some left without HS) but own the property market.. how rediculous is that. If the domestic talent is not there it can be imported.

[blackcap]

Boomers on the whole are not that educated (some left without HS) but own the property market.. how rediculous is that. If the domestic talent is not there it can be imported.

The fact that boomers are not educated is actually of no significance whatsoever. They have something that no young person has. They have the wisdom of experience, which in my experience, trumps formal education every time.

[iceman]

Those who survive (ie the young) will take up assets, designs/IP for cheap and take it to new heights as it always has been in nz. Rent will be cheaper, commercial and residential hopefully. This will enable some positive changes with tech minded people taking over the leadership positions.

Boomers on the whole are not that educated (some left without HS) but own the property market.. how rediculous is that. If the domestic talent is not there it can be imported.

And many of them coming to work for Heartland to design new Open 2 Business and REL tools ? Just wondering about the relevance to this thread !

[Panda-NZ-]

The property market is relevant also HGH's loans are weighted towards the more older population with their reverse mortgages.

[iceman]

The property market is relevant also HGH's loans are weighted towards the more older population with their reverse mortgages.

Fair enough

[Bjauck]

The landscape is likely to drastically change from riding house price inflation to protecting capital.Farm investments,primary industries, will be at the other end of the oscillation
https://www.stuff.co.nz/business/114687837/nzs-superrich-seek-safe-investments True. However if we want to stop future investment from going straight back into inflating land prices instead of rebuilding businesses and companies, policies may need to change.

[kiora]

True. However if we want to stop future investment from going straight back into inflating land prices instead of rebuilding businesses and companies, policies may need to change.

We already have
https://www.interest.co.nz/rural-news/102626/wrap-all-policy-changes-underway-concerning-dairy-farmers-accompanied-healthy-dose
I'm not suggesting inflating capital.I was suggesting for preserving capital

[Biscuit]

CFO bought some end of last month. Not many so not much of a vote of confidence. If he'd waited till today, he would have got them cheaper.

[winner69]

There’s often adversarial relationships between farmers and bankers during recessions ....even more so in the case of (if beagle is right) depressions.

[Ecks]

HGH up 10.75% today to $1.03, it seems with the leveling off of NZ Covid19 curve and a lower new infection count the market has some buoyancy! I think people let media drive their buying decisions and we have not seen the economic impact at its worst yet. Still too early and we should see March low points hit lower by the end of Q2.

[Beagle]

HGH up 10.75% today to $1.03, it seems with the leveling off of NZ Covid19 curve and a lower new infection count the market has some buoyancy! I think people let media drive their buying decisions and we have not seen the economic impact at its worst yet. Still too early and we should see March low points hit lower by the end of Q2.

Wise words. We haven't seen the economic effects of this virus play themselves out yet. I am really happy with the fact that we appear to be on track with controlling this virus but remain very cautious with the market per se and the tourism, retail and financial sectors especially.

[Biscuit]

Wise words. We haven't seen the economic effects of this virus play themselves out yet. I am really happy with the fact that we appear to be on track with controlling this virus but remain very cautious with the market per se and the tourism, retail and financial sectors especially.

Recklessness can cost you dear but prudence will never make you rich

[freddagg]

HGH up 10.75% today to $1.03, it seems with the leveling off of NZ Covid19 curve and a lower new infection count the market has some buoyancy! I think people let media drive their buying decisions and we have not seen the economic impact at its worst yet. Still too early and we should see March low points hit lower by the end of Q2.

You may well be right Ecks but I think the degree of doom looking out the window in Wanaka is much higher than in rural southland where work is going on as normal and farmers are salivating over a 60 cent exchange rate

[King1212]

What depression...?what bear market? What the hell u guys talking about..? Many people ... especially newbies are buying ......they even think skycity is a good buy.... without revenue at least till end of year ....

AIA is a bargain ..... no passengers at least till next year.....

Buy...buy ..buy...... great opportunities!

[Beagle]

Recklessness can cost you dear but prudence will never make you rich

A sensible man watches for problems ahead and prepares to meet them.

[Rowdy Flat]

A sensible man watches for problems ahead and prepares to meet them.

Perhaps, the often-used adage that the Chinese Hanzi character for the word ‘crisis’ is made up of the characters for the words ‘danger’ and ‘opportunity.’

[tim23]

CFO bought some end of last month. Not many so not much of a vote of confidence. If he'd waited till today, he would have got them cheaper.

Trouble is he doesn't have a crystal ball!

[Rowdy Flat]

Recklessness can cost you dear but prudence will never make you rich

https://www.youtube.com/?feature=ytca

As the much over quoted Buffett says, “when it’s raining gold, reach for a bucket, not a thimble”. This was from his 2010 annual letter to his shareholders ... right on the heels of the GFC.

Discl. Made my first foray into HGH at .93c

[janner]

https://www.youtube.com/?feature=ytca

As the much over quoted Buffett says, “when it’s raining gold, reach for a bucket, not a thimble”. This was from his 2010 annual letter to his shareholders ... right on the heels of the GFC.

Discl. Made my first foray into HGH at .93c

Depending on how long you have invested for..
I think you may well be …. " Well Positioned "..

[RTM]

Well....the problem of Heartland being to big a proportion of my portfolio is well and truly fixed.
Silver lining in every cloud !:(

[Biscuit]

https://www.youtube.com/?feature=ytca

As the much over quoted Buffett says, “when it’s raining gold, reach for a bucket, not a thimble”. This was from his 2010 annual letter to his shareholders ... right on the heels of the GFC.

Discl. Made my first foray into HGH at .93c

Well done, I picked up a thimbleful at 94c, think I will wait to see if there is return to panic before I bring out the bucket though.

[nztx]

I dont think HGH will be having too much trouble raking in the depositor gold at the moment with comparable tiny rates offered by their competitors for smaller terms and a system awash in Govt Loot, with limited avenues for spending aside from "the so called deemed Essentials"

Their deposit rates pages are only near Rabo - and as for the other players - HGH & Rabo now offer a very generous multiple of those on offer from many or bulk of the majors & other banks.

Hate to say it - Kiwibank (aka The People's Bank) now offer what seem to be the most miserable rates, after having been severely razored down in recent days


A few thimblefuls here and more to follow ..