HGH - Heartland Group Holdings

[SCOTTY]

Building Society Holdings (BSH) is now Heartland NZ Ltd (HNZ) so might as well start a new thread with the new name.

[Newman]

Building Society Holdings (BSH) is now Heartland NZ Ltd (HNZ) so might as well start a new thread with the new name.

Its share price suggests that "hard land" is more suitable name.

[percy]

Its share price suggests that "hard land" is more suitable name.

Love it.!!!!! lol

[Xerof]

Seems the silk purse remains a sows ear........

[SCOTTY]

Obviously ACC does not share the pessimistic view of the above posters as a SSH notice today says that they now own 5.64% of HNZ. Like me they see more of the "Promissed Land" to come.

[percy]

Obviously ACC does not share the pessimistic view of the above posters as a SSH notice today says that they now own 5.64% of HNZ. Like me they see more of the "Promissed Land" to come.

Unless they got them from their PGC holding.? They did have 54,444,099 PGC shares on 23/9/10.Will be interesting to see whether they think PGC or BSH is the road to the "Promissed Land".

[SCOTTY]

ITs worthwhile following what the ACC is up to as they have a pretty good track record. The fact that they are investing in a start-up that probably won't be paying a divie for quite a while suggests they see this as an exceptional investment (under their fund management rules) as I understand they usually have to recieve income fairly immediatley to help offset ACC claims.
Hardly a start-up belg. Marac and the other two businesses have been around for a day or two!!

[Lizard]

As mentioned previously on the BSH thread, it will be interesting to see where reinvestment rates sit going into the end of the govt guarantee, as Heartland seems to have more reliance on guaranteed deposits than the other affected institutions. Interest rates on debentures should be a pointer as to how things are going (particularly relative to any movements in bank term deposit rates).

So here is the picture of rates as they were from March until around the time of the recent PGC vote meeting:
http://img.villagephotos.com/p/2006-8/1204598/mar-depositrates-18apr11.png.jpg
And here is the current:
http://img.villagephotos.com/p/2006-8/1204598/mar-depositrates-jun11.png.jpg

The change is pretty subtle - in the 12 month and 18 month rates, which have crept up just 0.25%. However, by comparison, I would estimate that the typical bank term deposit rate has fallen by 0.5%, so the spread against banks has been widening.

No worries here yet, but worth watching.

[bottlerboy]

NZX have announced Hearthland is to enter the NZX-50 index on June 20 (and PGC will exit it.)

[Halebop]

ITs worthwhile following what the ACC is up to as they have a pretty good track record. The fact that they are investing in a start-up that probably won't be paying a divie for quite a while suggests they see this as an exceptional investment (under their fund management rules) as I understand they usually have to recieve income fairly immediatley to help offset ACC claims.

ACC do have (or at least did have) a good record, but not for reasons of immediacy.

Levies pay the claims of today. The reserves are for the long tail typical of a compensation book that may need to pay long term injury claims years so there is very little that needs to be immediate beyond standard cashflow /treasury / cash management needs that the levies already meet. ACC are typically profitable on a cashflow basis and have little need to tap technical reserves - it's on the long tail actuarial view that reserves need to be established for.

This is also the secret of how private Worker Comp companies make money in other countries - they trade on smaller insurance margins because they understand the funds may be captive for decades before being required for claims so investment returns are consequently higher then a short tail insurance book like say State Insurance's who have to pay for Motor claims in short order.

[MANDRAKE]

Heartland New Zealand to acquire PGG Wrightson Finance

http://www.nzx.com/markets/NZSX/HNZ/announcements/5140308/Heartland-New-Zealand-to-acquire-PGG-Wrightson-Finance

[Master98]

Heartland New Zealand to acquire PGG Wrightson Finance

http://www.nzx.com/markets/NZSX/HNZ/announcements/5140308/Heartland-New-Zealand-to-acquire-PGG-Wrightson-Finance

put a few words of your point of view.

[MANDRAKE]

Well it wasn't exactly a surprise :) Seems a fairly conventional arrangement I guess. Good to see an assurance there will be no EPS dilution resulting frm the placement. I wonder how much in excess of 10% the ROE will eventually be? I'm not that confident it will be much, but would like to hear others opinions on that.

[Newman]

Well it wasn't exactly a surprise :) Seems a fairly conventional arrangement I guess. Good to see an assurance there will be no EPS dilution resulting frm the placement. I wonder how much in excess of 10% the ROE will eventually be? I'm not that confident it will be much, but would like to hear others opinions on that.

What is the equity now or would be in 2 years time? HNZ shares were issued at 88 cents, and new shares will be at 75 cents. When equity drops to 30 cent/share a ROE of 10% is not good.

[Master98]

20 mill / 300 shares @ PER 10 = 66 cents per share. (Ozzy banks PERs betwenn 9 and 15)

After private placement and SPP, the issued shares will be more than 300 mil.

[Master98]

I am waiting for the announcement of SPP, so i just need to spend $30+ for the engagement of SPP:)

[percy]

The article by Tim Hunter in today's Sunday Star Times on Heartland is well balanced and fair.
"And while there are undoubted risks that Heartland will not achieve its goals,its management have so far demonstrated a clear strategy and excellent execution.
On those grounds it may earn a place in the portfolio."

[winner69]

Yes Percy a well balanced article but I hope Hunter wasn't swayed by what Cairns from Forbar told him .... that guy is more passionate about PGC/HNZ than you are

As long as HNZ remember that at the core of their business is 2 old fashioned Building Societies they should do OK - building societies that traditionally solid instutions which for generations have taken members savings in and prudently lent that money out on rock solid investments without taking on much leverage and associated risk.

Go too far away from this principles and think they can make zillions from a different approach then maybe the aspirations wont be achieved

Bit of a worry when that head finance man says 'Heartland aims to encourage depositors by becoming a bank, reasoning that people are more relaxed about putting money in a bank than with a finance company' So is becoming a bank just one big (and expensive) marketing ploy

[winner69]

This is what happens when Building Societies become financial instutions with a treasury department and change their business model .... and probably why the world is in such a mess today

A great article by John Kay in the Financial Times - We let down diligent folk at the Halifax
http://www.johnkay.com/2008/09/24/we-let-down-diligent-folk-at-the-halifax

Even if you don't read the whole article (it is a short one) read this bit

The business I joined gathered deposits from small savers, mostly through its branches. It lent the proceeds to house buyers. Founded as a self-help organisation by provident Yorkshire folk 150 years ago, the Halifax became the world’s largest mortgage lender. Its quality of service and competitive interest rates trounced conventional banks in the UK retail savings market. The simple business model was very robust. In the early 1990s, a combination of high interest rates, recession and falling house prices posed much more serious problems for UK homeowners than anything seen, or likely, in the current credit crunch. But the Halifax remained profitable and mortgages readily available

Accepting deposits and underwriting and administering mortgages requires that millions of records should be maintained and updated every day with almost no errors. This activity does not require flair or imagination but does require conscientious individuals with integrity and loyalty. The Halifax was a precision machine that made the most of the talents of ordinary people. I came to understand the fundamental incompatibility of the cultures of retail and investment banking and why the marriage of the two so often leads to tears.

Accepting deposits and underwriting and administering mortgages requires that millions of records should be maintained and updated every day with almost no errors. This activity does not require flair or imagination but does require conscientious individuals with integrity and loyalty. The Halifax was a precision machine that made the most of the talents of ordinary people. I came to understand the fundamental incompatibility of the cultures of retail and investment banking and why the marriage of the two so often leads to tears.

(Really a story about business sustainability but thats another topic)

[percy]

Yes Percy a well balanced article but I hope Hunter wasn't swayed by what Cairns from Forbar told him .... that guy is more passionate about PGC/HNZ than you are

As long as HNZ remember that at the core of their business is 2 old fashioned Building Societies they should do OK - building societies that traditionally solid instutions which for generations have taken members savings in and prudently lent that money out on rock solid investments without taking on much leverage and associated risk.

Go too far away from this principles and think they can make zillions from a different approach then maybe the aspirations wont be achieved

Bit of a worry when that head finance man says 'Heartland aims to encourage depositors by becoming a bank, reasoning that people are more relaxed about putting money in a bank than with a finance company' So is becoming a bank just one big (and expensive) marketing ploy
Marac was a very successful finance company for a good number of years ,before it got involved in property lending,which was its undoing.Made and still makes good money on business,motor vehicle, and plant lending.

[zs_cecil]

It is going south :( ... Seems PGC is holding up better than HNZ right now...

[corlemar]

http://www.nzx.com/markets/NZSX/HNZ/announcements/5309386/Heartland-New-Zealand-Limited-HNZ-Capital-Raising

Wayhey! Nice outcome for small investors.

Some fun and games to be had before the SPP tho [evil grin]

Belgarion, when you say nice outcome for small investors - is your rationale that small investors if they don't buy into the SPP won't have their holding diluted ?

[kizame]

If there are shares issued,and you don't take part,then your holding will be diluted.

I think Belgarion is refering to the discount to net asset backing of the SPP,but I'm sure he will elaborate.

[Lizard]

Small investors can buy a few now and take part in the spp at a price which will either be better than (possibly much better than) or the same as other institutional investors.

They can also wait until after the results are out to make a decision on making an investment of up to $15,000 - these results are going to be fairly critical in giving some insight as to how HNZ might perform in the future, so that is a considerable amount of de-risking around their purchase.

However, the only thing not clear to me is what the cut-off date for owning shares in the spp is. The details are due to be announced by tomorrow - given the spp is going to open on 8 August, it is possible there may not be much time/too late to get on?

(bought a few anyway at 62cps - am assuming there is a reasonable chance of getting access to the spp still)

[Balance]

There will be a few fund management institutions with their noses out of joint? Underwriting to be done without them being involved and they have been doing their usual selling down in anticipation that they will get reset via the underwriting.

[Xerof]

Underwritten by Impact Capital Management - formed July 1 2011, 100 shares, 100% owned by Impact Capital, 100 shares, owned by Greg Tomlinson, involving Richard Oliver

Seems like GK is having to call in favours from old Macquarie mates to get these deals away............

[janner]

Hmmmm... Liz could be right... Holding but not salivating.... Yet !!!..

[Lizard]

Just nosing around at the companies office and noticed there are approved name reservations there for Heartland Insurance Ltd, Heartland Kiwisaver Ltd, Heartland Trustee NZ Ltd, Heartland Building Society Ltd, Heartland Wealth Management Ltd.... at that rate, I half expected to come across a "Heartland Property Management Ltd" :) (No, there wasn't)

Not sure if they are just covering off the bases or an indication of strategic direction?

[percy]

Just nosing around at the companies office and noticed there are approved name reservations there for Heartland Insurance Ltd, Heartland Kiwisaver Ltd, Heartland Trustee NZ Ltd, Heartland Building Society Ltd, Heartland Wealth Management Ltd.... at that rate, I half expected to come across a "Heartland Property Management Ltd" :) (No, there wasn't)

Not sure if they are just covering off the bases or an indication of strategic direction?

Would think they are just covering bases,making sure no one else uses their name.Marac had insurance,so expect that is now Heartland Insurance.Trustee they would need,kiwisaver I don't know,building soc would be to cover the building socirties that joined Marac to form Heartland.
"Property management" may still be, and most probably remain a swear word for some time as that was Marac's down fall. Maybe in a year or two.!!!!

[Snoopy]

Bit of a worry when that head finance man says 'Heartland aims to encourage depositors by becoming a bank, reasoning that people are more relaxed about putting money in a bank than with a finance company' So is becoming a bank just one big (and expensive) marketing ploy


Not a holder Winner69, but I am becoming very uneasy about Heartland. What do you think of this observation?

I am presently visiting the Kapiti Coast and have read today's edition of the Dominion and the local rag the Kapiti Observer, both dated Wednesday 20th July.

On page B7 of the Dominion is an ad for PGG Wrightson Finance, an organization which seems inevitably destined to become part of Heartland. They are advertising a 12 month secured term deposit offering 7.5% per annum. This is despite the small print in the ad that notes any such investment will become a deposit with Heartland that will consequently be unsecured in a couple of months time (no mention of that last clause in the ad of course).

Then on p13 of the Kapiti Observer, a real 'heartland' publication (sic), Heartland are offering a 12 month term deposit rate of 6.25% per annum. This seems to be quite a big gap for what is ostensibly the same investment, even allowing for the fact the 'small print' shows that the PGG Wrightson Finance 7.5% rate is for investments of $100,000 plus.

The headline on the Heartland ad states 'We invest in Wellington'. Immediately I am thinking, no you don't! You are primarily the old Southern Cross and CBS Canterbury Building Societies, investing in the heart of the South Island. Oh and you are also Marac investing in the manufacturing heart of Wellington (yeah right, let me know if you can't count any manufacturer's left in Wellington on one hand!)

I can't help the impression that Heartland is really old rope painted and tarted up as a new frilly bow knot. The marketing budget is being spent to allow the paying of lower interest rates to depositors than a BBB- credit rated organization might otherwise offer. Pull the wrong string and the whole lot might unravel. I really, really hope that I am wrong.

I would like to see Heartland succeed. I think NZ inc. needs it! But is a 'Salt of the Earth' name and a hyped marketing budget really the key to the path of success?

SNOOPY

discl: Hold PGW, who are in the process of divesting PGG Wrightson Finance.

[janner]

So much to learn.. So little time..

Oy vhey !!..

Thank you all for your input..

[winner69]

Snoopy - you probably also heard the ads on the radio as well --- all day long -- and playing the 'we invest in Wellington' card as well ... actually stressing that as well

The marketing machine ramping up .... haven't seen on TV yet ... an old wise guy once told me he never invested with any finance company that had to to resort to TV .... and cited all those that had been on TV and then gone bust

And yes I do find that statement from the head finance honcho a bit strange and a bit of worry

[percy]

Every second car yard in NZ most probably uses Marac to finance their car,truck sales.If you look at any Marac/Heartland you will see their lending is spread through out NZ.Largest is offcourse Auckland area.
Most banks have at one time or other advertised on TV.Heartland is a "new" brand, so expect a lot of advertising.
Deposit rates vary with any organisation.Heartland is no different. They will just be trying to keep their book in order.
What is interesting is Lizard's earlier posts as to how Heartland deposits are stacking up for when government guarantee expires.Maybe all will be OK,but looks as though banking licence is going to be a must to get them through.
I will not be ading to my holding until I have seen result,although they have achieved everything they said they would do,and on time.!!!

[Balance]

http://www.stuff.co.nz/business/5317242/Tomlinson-to-back-Heartland-share-plan

A bit more infor on Greg Tomlinson, the underwriter to Heartland's capital raising.

He is certainly going to do a lot better than George Kerr in terms of his entry price.

As one star brightens, the other dims.

[Lizard]

Re Snoopy's comments, I checked the BSH merger presentation and that gave the combined geographical breakdown, with 7% of receivables and 8% of deposits coming from Wellington.

The rate on offer seems quite high at 7.5% - considerably higher than the 6.75% for a similar deposit on their web-site (annual interest payment). But the timeline for becoming non-guaranteed should be the same whether the deposit remains with PWF or moves to Heartland (i.e. all lose the guarantee at 31 Dec when it expires).

I have been following the Heartland interest rates, expecting them to move up to attract sufficient investors to remain with them. However, there have been only very subtle moves of around 0.25% increase in 9-18 month rates to attract investors beyond the end of the guarantee period. They have probably been fortunate in that bank rates have been falling and gifting them a wider spread over bank rates (which are generally below the recent CPI rate for now). The most recent moves at Heartland have been a reduction in the short term interest rates, further pushing investors towards "beyond the guarantee". Also of interest is that the MAR010 (2 yrs till maturity) are trading at around 8%, which suggests the market is reasonably comfortable with Heartland - it's a similar rate to the GFN030 (Guinness Peat) or the IFT150 (Infratil), although those both run until 2015.

While I think it is right to be cautious over their advertising, the crucial difference over GFC advertisers is that it seems many of them were seeking deposits to paper over impairments or capitalisation of interest. In Heartland's case, they have the challenge of re-building investor confidence heading beyond a period where investors can see their deposits as safely backed by the government.

The recent announcement of a June renewal rate of 82% intrigued me, as I wondered how it was achieved, but perhaps advertising is involved. Certainly they will need to stabilise deposits before they can start to go forward, so this is a critical phase for them. PWF actually appears to bring a less risk-averse depositor base, though possibly along with more scope for future impairments. If they are racking up the interest rates at PWF now rather than tarnish the Heartland rates to attract deposits, then that is an interesting marketing move too. Will have to see if I can find that ad...

[percy]

Small investors can buy a few now and take part in the spp at a price which will either be better than (possibly much better than) or the same as other institutional investors.

They can also wait until after the results are out to make a decision on making an investment of up to $15,000 - these results are going to be fairly critical in giving some insight as to how HNZ might perform in the future, so that is a considerable amount of de-risking around their purchase.

However, the only thing not clear to me is what the cut-off date for owning shares in the spp is. The details are due to be announced by tomorrow - given the spp is going to open on 8 August, it is possible there may not be much time/too late to get on?

(bought a few anyway at 62cps - am assuming there is a reasonable chance of getting access to the spp still)

Record date is 1st August.5pm.

[Catalyst]

The SPP discount is going to be "at least 3%" or around 2cps to the average price in late August - not exactly the most attractive SPP IMO.

[Balance]

The SPP discount is going to be "at least 3%" or around 2cps to the average price in late August - not exactly the most attractive SPP IMO.

It is not intended to be an attractive SPP. Some parties seem to want the capital raising to fali so they can end up with all the shares at 65 cents?

[Lizard]

It is not intended to be an attractive SPP. Some parties seem to want the capital raising to fali so they can end up with all the shares at 65 cents?

So in that case, we can presume they will also want the VWAP to be at about 67cps during the price-set period to avoid giving anything extra away to retail investors? If that's the case, it might also be better to just buy on market now at 63cps, instead of gambling on the spp price being lower than 65cps. Although achieving 67cps VWAP might not be simple with the set period occurring post-result.

I'm still not clear what day the result is actually released, but presumably prior to open of trading on 19 August. Also note this is one of those spp's where investors won't be sure what price they're getting until after the spp closes, so will probably want to hold off committing funds until the last few days of the offer.

[ETC]

As shakespeare once said... "To buy or not to buy: that is the question". :-)

[Grantas]

https://www.nzx.com/companies/HNZ/announcements/211912

"Heartland to offer staff an employee share plan
Heartland is pleased to announce that it is establishing an employee share plan (“Plan”) for employees of Heartland and its subsidiary companies. Directors and senior executives of the
Heartland Group will not be participants in the Plan.

The purpose of the Plan is to further the success of Heartland by aligning the interests of the employees in the Plan with those of Heartland’s shareholders, and to encourage participating employees to exercise long-term thinking to contribute to the long-term success of Heartland. "

And here I was naive enough to think the payment of a salary was to reward employees ... before the Company starts giving away money it'd be nice to see a return to shareholders first either by way of an increased share price or dividend.
Sorta reminiscent of PGC ... as to participate in any future share offering, what does this move tell you about the Company culture.

[kizame]

https://www.nzx.com/companies/HNZ/announcements/211912

"Heartland to offer staff an employee share plan
Heartland is pleased to announce that it is establishing an employee share plan (“Plan”) for employees of Heartland and its subsidiary companies. Directors and senior executives of the
Heartland Group will not be participants in the Plan.

The purpose of the Plan is to further the success of Heartland by aligning the interests of the employees in the Plan with those of Heartland’s shareholders, and to encourage participating employees to exercise long-term thinking to contribute to the long-term success of Heartland. "

And here I was naive enough to think the payment of a salary was to reward employees ... before the Company starts giving away money it'd be nice to see a return to shareholders first either by way of an increased share price or dividend.
Sorta reminiscent of PGC ... as to participate in any future share offering, what does this move tell you about the Company culture.

I think it is a good idea. They are doing the decent thing and purchasing them on market,if I read right,which is way better than issueing new shares in my opinion.

I am more concerned with Pyne Gould C.

[nwood]

Today's release

GENERAL: HNZ: Heartland New Zealand Share Purchase Plan Opens

NZX Release
Heartland New Zealand Share Purchase Plan Opens
8 August 2011

Heartland New Zealand Limited ("Heartland") (NZX: HNZ) is pleased to announce
its $35 million fully underwritten Share Purchase Plan ("SPP") opens today.

SPP documentation has been dispatched to all persons who held Heartland
shares at 5pm on 1 August 2011 and had a New Zealand address recorded in the
share register. A copy of the SPP
documentation is attached to this announcement.

The board of Heartland has determined that the pricing under the SPP will be
a discount of 5% to the average end of day market price of Heartland shares
over the 5 day trading period from 19 to 25 August 2011 (but in any case no
higher than 75 cents per share).

Eligible shareholders can each apply for up to $15,000 in value of new
shares. Scaling applies if the SPP is oversubscribed.

Eligible shareholders should complete and return their personalised
application form together with payment so as to be received by Link Market
Services Limited by 5pm on 24 August 2011.

The allotment date of the Heartland shares to be issued under the SPP is
expected to be 31 August 2011.

No brokerage or other transaction costs will be payable by shareholders. A
broker stamping fee of 0.5% of application monies will be payable to NZX
firms by Heartland on all valid applications bearing a broker stamp that are
received and accepted by the SPP closing date.

[Lizard]

This is going to be interesting.

HNZ shareholders are looking like they might get offered at well below PGC's 75cps and the underwriters 65cps minimum. There is no mention in the booklet of any conditions on the underwriting (e.g. get-out clause triggered by a market fall).

[Lizard]

Liquidity and funding update out.

Looks like HNZ has managed to maintain sufficient investor confidence to ensure they are well-positioned for the expiry of the government guarantee. I don't doubt they are keen to keep that confidence (and the confidence of shareholders who will have just received the spp papers at a time when investor confidence is struggling). Personally, I will still be waiting until the FY result is out before signing any cheques, but am cautiously positive.

[Grantas]

http://www.sharechat.co.nz/article/16b97170/heartland-considers-bond-sale.html

Heartland considers bond sale

NZPA

Tuesday 9th August 2011 1 Comment
Text too small?

Heartland New Zealand is considering a retail bond sale.

The financial services firm said that if the proposed acquisition of PGG Wrightson Finance (PWF) proceeds Heartland will become responsible for $92 million of outstanding PWF bonds which mature in October 2011.

"Heartland has sufficient cash on hand to repay the maturing PWF bonds in full. However, given current demand for corporate bonds and the desire to retain the PWF deposit base, the board is considering a bond issue in the near future as part of a broader wholesale funding strategy," the company said.

Heartland has mandated Westpac and Bank of New Zealand regarding the potential retail bond issue.

PWF held three special meetings for bondholders, secured depositors and unsecured depositors today to vote on the proposed transfer of debt securities to Heartland.

The meetings were adjourned until August 15 as the required quorums were not present. An average 96.5 percent of those voting to date support the resolutions.
Comments from our readers
On 9 August 2011 at 8:38 am Arty said:
So on one hand, Heartland is giving 1m of shareholder funds to a staff share purchasing schemme, but on the other they are short of cash, seemingly. If this company wants to be a bank, it better start acting like one, tighten the ship up, start making a profit, then shareholders will give support. Until then Heartland just looks like another another finance house stumbling around looking for funding.

[Marilyn Munroe]

Standard and Poor's changes outlook of Heartland to negative from previously stable.

BBB- rating retained

https://www.nzx.com/companies/HNZ/announcements/212344


Boop boop de do

Marilyn

[janner]

Maybe .. For what reason though ?? No skin off their nose if they give a bad report.

Disc. Holding.

[Xerof]

Janner, Belg is inferring spin by Heartland, not S&P.....Allow me to put my spin on the statement


The confirmation by Standard and Poors of the investment grade underpins the strength of Heartland

The rating is confirmed as close to junk, non investment grade


The change in outlook does not imply any deterioration in underlying risk

Their margins do not reflect the risk profile of their assets, and they are probably sitting on too much cash hoping for the banking license. In the meantime they are being killed by the negative cost of carrying all this idle liquidity

S and P are concerned with the exposure to the property development sector and would like to see them out now, take the hit and move on before the situation deteriorates further

This stock has been in a downward trend for some time and shows no reason for encouragement going forward.

The underwriters (a $100 company formed in July) must be getting nervous, as who in their right mind would tip good money after bad into what is still effectively a finance company with ambitions that look more distant by the day.

[janner]

Thank you Xerof.

Guilty as charged..

Just goes to show that one must analyse all statements..

Sorry Belg there was no ref:. apart from the " ...... " ..

My mistake..

Will continue to hold.. there has to be some excitment in one's life ;-))

[corlemar]

Janner, Belg is inferring spin by Heartland, not S&P.....Allow me to put my spin on the statement



The rating is confirmed as close to junk, non investment grade



Their margins do not reflect the risk profile of their assets, and they are probably sitting on too much cash hoping for the banking license. In the meantime they are being killed by the negative cost of carrying all this idle liquidity

S and P are concerned with the exposure to the property development sector and would like to see them out now, take the hit and move on before the situation deteriorates further

This stock has been in a downward trend for some time and shows no reason for encouragement going forward.

The underwriters (a $100 company formed in July) must be getting nervous, as who in their right mind would tip good money after bad into what is still effectively a finance company with ambitions that look more distant by the day.

What i'm confused about and would be interested in anyones thoughts......but i thought Heartland had exited their property development rollercoaster.....and these were now held by PGC. Also, the deal for PGWF is their good stuff and not at the risky high end side. In summary, is not Heartland a clean entity, with a lot less risk than what has been previously held.

[Xerof]

"clean" is a relative state - the world moves on and the robustness of the book most likely has deteriorated since that activity took place - at least that appears to be the perspective from S and P

[kizame]

"clean" is a relative state - the world moves on and the robustness of the book most likely has deteriorated since that activity took place - at least that appears to be the perspective from S and P

If the worlds economies are not improving,then a certain amount of stagnation,if not deterioration affects every loan as I'm sure you will appreciate,even your mortgage looks riskier.But you have to keep it in perspective,some on here are a wee bit negative,but when things turn,so does sentiment.

[Lizard]

The sensitivity analysis shows how vulnerable that $24m forecast is though.

Also, still think they are optimistic re liquidity profile and impairments, but still looks as though it should all hold together. Another year and things might be coming together for them. Looks like spp will go through at a good price for small investors.

[winner69]

The sensitivity analysis shows how vulnerable that $24m forecast is though.

Also, still think they are optimistic re liquidity profile and impairments, but still looks as though it should all hold together. Another year and things might be coming together for them. Looks like spp will go through at a good price for small investors.

That is a very interesting slide eh Lizard - some might say huge upsides as well

Looks like we need to keep an eye on those interest margins eh - 1% either way has a $14m impact

[corlemar]

That is a very interesting slide eh Lizard - some might say huge upsides as well

Looks like we need to keep an eye on those interest margins eh - 1% either way has a $14m impact

Does anyone have any thoughts on whether it's good idea to upsize their holding in HNZ in respect of the SPP at a 5% discount, based on trading for today and next 4 days ? Naturally nobody has a crystal ball, though you could argue that todays price of $0.56 on open market may fair better than average weighted price less 5%, come next week.

If anybody has any thoughts, I would welcome them, that said will small shareholders take up the SPP, given todays results ??

[Lizard]

Hi Corlemar,

If HNZ survives, then a 5% discount to todays price will probably be a very good deal and spp holders should opt for whatever they can afford. There's a strong chance they'll survive, but until the rate of overdues and impairments shows more signs of slowing and the liquidity constraints around the govt guarantee and the general attitude of investors in the new age of deleveraging-by-default-inflation-restructuring-etc-etc has been negotiated, then it is still going to be a bit tense.

Not an answer really, but I've opted to take up some of the spp, having bought a few to have access to it.

[corlemar]

Hi Corlemar,

If HNZ survives, then a 5% discount to todays price will probably be a very good deal and spp holders should opt for whatever they can afford. There's a strong chance they'll survive, but until the rate of overdues and impairments shows more signs of slowing and the liquidity constraints around the govt guarantee and the general attitude of investors in the new age of deleveraging-by-default-inflation-restructuring-etc-etc has been negotiated, then it is still going to be a bit tense.

Not an answer really, but I've opted to take up some of the spp, having bought a few to have access to it.

Thanks for the informative advice.....will most likely take up some !

[corlemar]

Thanks for the informative advice.....will most likely take up some !

hey liz, following on from the info you previously gave, and after looking at the prospectus for the SPP, it looks as though HNZ could influence, ultimately the offer price of the SPP, by simply extending the closing date. For example if they felt the average closing price was going to be too low, say $0.55 or lower (this as we know is substantially lower than what the institutions are paying $0.75) why not extend the closing date to bring them more in line ??

I guess what i'm getting at is, why in the offer document is there an option to extend the closing date, if as we know it is fully underwritten by an institution (should small investors not snap up the $35m SPP)....Perhaps I'm over complicating matters though would be interested in anyone's comments !!

[Lizard]

As I read it, the extension date exists mostly in order to tie the allotment of the spp in with the purchase of PWF becoming unconditional. The spp documentation was issued before the approval meetings of the PGW stakeholders and remains dependent on the timing of the NZ Treasury issuing the revisions to guarantee documents. Provided the Treasury side completes this week, I can't see them needing to extend.

I doubt very much that they would try to extend to get a higher share price, as it is more likely that any delays/extension would result in the share price falling rather than rising.

[SCOTTY]

As I read it, the extension date exists mostly in order to tie the allotment of the spp in with the purchase of PWF becoming unconditional. The spp documentation was issued before the approval meetings of the PGW stakeholders and remains dependent on the timing of the NZ Treasury issuing the revisions to guarantee documents. Provided the Treasury side completes this week, I can't see them needing to extend.

I doubt very much that they would try to extend to get a higher share price, as it is more likely that any delays/extension would result in the share price falling rather than rising.
I agree with you Lizard. The underwriters would not be happy with an extension as they will be keen to get as many as they can for as cheaply as they can.

[spmcg]

What happens to the share price once the new shares are allotted? Although the shareholding is diluted there is also a capital infusion, so unlike a bonus issue does the share price stay more-or-less the same? I ask because I currently can not spare the minimum $2.5K to purchase any more shares so wonder whether I should dispose of what I have if the price will drop further once the issue is complete.

[Lizard]

ask because I currently can not spare the minimum $2.5K to purchase any more shares so wonder whether I should dispose of what I have if the price will drop further once the issue is complete.

The shares are already "ex-SPP", so the market should have taken a rough approximation of the extra shares to be issued into account. At lest $20m of the $50m worth of the shares will be issued at higher prices (75cps to PGC/PGW) and possibly the underwriter will be paying 65cps as well.

The shares might fall further, but I doubt it will be due to the SPP issue, just market uncertainty. There may be a small amount of selling at above the SPP price once shares are alloted, but in general, I would expect prices to improve slightly.

[spmcg]

The shares might fall further, but I doubt it will be due to the SPP issue, just market uncertainty. There may be a small amount of selling at above the SPP price once shares are alloted, but in general, I would expect prices to improve slightly.

Thanks, that makes sense.

[SCOTTY]

Thanks, that makes sense.
Why worry about the share price in the short term. More importantly, what are the earnings per share likely to be in a year or 2 or 3? What return would you expect on a 90c NTA (shareholder funds) per share in normal trading conditions? Hellaby have just produced a 25% return on their shareholder funds!! Admittedly there will be some dilution with this SPP.

[Xerof]

Would someone like to explicitly tell me what the minimum rating required is to become a registered bank?

I can't see BBB- with negative outlook coming up to scratch in any shape or form

Perhaps this is why the downtrend in share price continues unabated.......

Hope that's not seen as a wee bit negative........would hate to upset the blue eyed brigade

[K1W1G0LD]

Would someone like to explicitly tell me what the minimum rating required is to become a registered bank?

I can't see BBB- with negative outlook coming up to scratch in any shape or form

Perhaps this is why the downtrend in share price continues unabated.......

Hope that's not seen as a wee bit negative........would hate to upset the blue eyed brigade

There is hope , The Bank of India was registered in NZ , March 31st 2011 , their current rating From Standard and Poors is BBB-

[Lizard]

Falling share price might also be the dilution factor - the lower it goes, the more shares likely to be issued under the spp. Though they can't actually issue more than 90m that way, so there'd be a hitch if the potential issue price fell below 39cps (would require an extension for that to happen now)!

No word on Treasury approvals, nor extension of closing date, so not sure if timing is confirmed yet.

One thing that confuses me is the talk of bond offer - not sure how they would plan to place this given the current bid interest rate on the MAR010's is 8.75%. These have two years to run and the govt guarantee until Dec, with same or better security than current term deposits. Yet Heartland is only offering 6.0% for two year deposits (with guarantee until Dec). Makes it hard to see where they could price a bond that the market would eat - do we believe investment advisers would happily sell clients 3 year bonds at say 7%, yet aren't buying the current ones at 8.75% for their clients???

[Penfold]

Would someone like to explicitly tell me what the minimum rating required is to become a registered bank?

I can't see BBB- with negative outlook coming up to scratch in any shape or form

Perhaps this is why the downtrend in share price continues unabated.......

Hope that's not seen as a wee bit negative........would hate to upset the blue eyed brigade

I believe investment grade (BBB-) is the minimum. They will likely need to have the negative outlook removed. Being downgraded to BB+ would see their funding cost blow out and the systemic risk from that would surely be unacceptable to the the RB.

[ETC]

Am I correct in thinking that the average price for the last 5 days is 56c?

[corlemar]

I thought it was $0.544.....no other method other than add end of day price and divide by 5 (trading days) this gives you I thought the end of day average price

[ETC]

Thanks Corlemar, if .544 is the average price then with the 5% discount we'll be getting shares at .526

Not bad considering some institutions will be paying 75cps

[corlemar]

Whatever the final price of the SPP is determined at, it is certainly a good deal for small investors when you compare to PGW and PGC that are locked in for $10m each at $0.75c per share. That said, imo we have seen over the past several mths that both PGW and PGC have not made the wisest of decisions....it seems a big merry-go-round (but thats another story).

Although there is still some uncertainty about HNZ and what it can and will achieve, i personally think it will become a success story in years to come.

[Master98]

Whatever the final price of the SPP is determined at, it is certainly a good deal for small investors when you compare to PGW and PGC that are locked in for $10m each at $0.75c per share. That said, imo we have seen over the past several mths that both PGW and PGC have not made the wisest of decisions....it seems a big merry-go-round (but thats another story).

Although there is still some uncertainty about HNZ and what it can and will achieve, i personally think it will become a success story in years to come.

lol, last smile is a beautful smile, wait to see.

[nwood]

Heartland New Zealand Limited ("Heartland") (NZX: HNZ) is pleased to announce
the price at which shares will be issued under its Share Purchase Plan
("SPP") has been fixed by the board at $0.522 per share.

[corlemar]

Does anyone know, where or how you can find out what the take up was of the SPP ?

[Lizard]

Does anyone know, where or how you can find out what the take up was of the SPP ?

They will have to announce shortly - most likely tomorrow when the shares are supposed to be allotted.

[Balance]

They will have to announce shortly - most likely tomorrow when the shares are supposed to be allotted.

Fascinating situation - the biggest disconnect we have seen in recent years with a public listed company between insiders being prepared to take up shares at a huge premium versus market price and SPP price.

So who is right and what kind of games are being played in the background?

[Joshuatree]

Announcement out on NZX

[Lizard]

A low take-up from existing holders, with only 15% putting in new funds, although probably understandable.

I thought this was a good entry opportunity for a new holder, and am pretty pleased to end up with a holding at an average entry of 53.5cps while NTA comes in at 83cps. All being well, they will trade at a good premium one day - just can't be too complacent as to the possibility that it occurs through NTA destruction rather than sp growth.

[Snoopy]

The shares are already "ex-SPP", so the market should have taken a rough approximation of the extra shares to be issued into account. At lest $20m of the $50m worth of the shares will be issued at higher prices (75cps to PGC/PGW) and possibly the underwriter will be paying 65cps as well.


No, no no say it ain't so!

As a PGW shareholder I am feeling doubly shafted at selling the PGG Finance loans to Heartland at book value, then having to buy at 10% stake in Heartland at a big premium to market value.

You guys can speculate all you like about fair value for the Heartland-Not-Bank. PGW Chairman Sir John Anderson told we PGW shareholders that 'fair value' is 'book value' for non-bank financiers these days, if you are lucky. And the more cheap Heartland shares are sold, the lower the overall per share book value for PGW shareholders. Overall I have a schizoid reaction to what is going on.

From an industry observer perspective, we need Heartland to succeed. I wish all shareholders good luck.. You Heartland investors are heros, pushing back from the financial sector collapse to create a base for a new golden dawn of finance funding. This will see the true heartland of New Zealand captaining the economic recovery going forwards.

From a PGW shareholder perspective, I hope Heartland goes down. If that were to happen, PGW could unload $50m in loans for the Heartland receivers to deal with, the contractual defacto fall back position of the debt sales agreement. You existing Heartland shareholders are leeches on the financial fabric of New Zealand, frightening sound businesses to sell their loan books to you, even as you cream the stolen profits. I would like nothing better for today to be seen as a false dawn in the finance sector, with the heavy trampling boot of back banking debt facilities weighing on you before crushing you into the ground. You parasites! I hope you all do your dough.

SNOOPY

[corlemar]

Announcement out on NZX

This may seem a bit of a trivial point.....but the announcment states three big institutional shareholders will be PGC, Impact Capital and ACC. It does acknowledge that PGW will also be a shareholder, also noting the deal between the two entities. Yet I thought in accordance with the perspectus under the SPP both PGC and PGW will take $10m each, assuming this is still the case, are PGC taking more than $10m in HNZ?

[Snoopy]

This may seem a bit of a trivial point.....but the announcment states three big institutional shareholders will be PGC, Impact Capital and ACC. It does acknowledge that PGW will also be a shareholder, also noting the deal between the two entities. Yet I thought in accordance with the perspectus under the SPP both PGC and PGW will take $10m each, assuming this is still the case, are PGC taking more than $10m in HNZ?

Perhaps the 10% subscription from PGW is not a commitment until all the 'i's are dotted and 't's crossed?

SNOOPY

[Xerof]

three big institutional shareholders will be PGC, Impact Capital and ACC

Really? Impact Capital is a $100 company formed in July 2011, specifically for this deal, I would surmise

Lets wait for the SSH notices before we say that it has three 'big' institutional shareholders. I'd put money on it that a lot of these shares end up in one of PGC's downstream entities, possibly that sinkhole for 'good' deals, Torchlight.

[Lizard]

This may seem a bit of a trivial point.....but the announcment states three big institutional shareholders will be PGC, Impact Capital and ACC. It does acknowledge that PGW will also be a shareholder, also noting the deal between the two entities. Yet I thought in accordance with the perspectus under the SPP both PGC and PGW will take $10m each, assuming this is still the case, are PGC taking more than $10m in HNZ?

PGC also had an underwriting commitment of up to $10m - of which it looks like they've ended up providing $6.53m.

[Lizard]

Really? Impact Capital is a $100 company formed in July 2011, specifically for this deal, I would surmise.

I'm kind of hoping that isn't linked to HNZ's liquidity update today where they say that liquidity has fallen due to increased lending activity...

[Xerof]

Liz,

Mogridge states the underwritten shortfall and the committed $10mill are to be funded with 'bank' debt

Shareholders of PGC should ask him to be more specific.......

[Grantas]

SSH Notice - (Harrogate Trustee Ltd)
4:16pm, 31 Aug 2011 | SSH

Disclosure of beginning to have substantial holding
Section 22, Securities Markets Act 1988

To: NZX
And: Heartland NZ Ltd
Date this disclosure made: 31 August 2011

Substantial security holder(s) giving disclosure

Name(s): Harrogate Trustee Ltd
Contact details: Graham Paull
(03) 377 0466
graham@alexanderpaull.co.nz
Date on which substantial security holder(s) began to have substantial holding: 31 August 2011

Summary of substantial holding to which disclosure relates

Class of listed voting securities: Ordinary shares
Summary for: Harrogate Trustee Ltd

For this disclosure,—

(a) total number held in class: 30,281,275
(b) total in class: 388,703,975
(c) total percentage held in class: 7.78%

[Grantas]

SSH (Pyne Gould Corporation Limited)
3:22pm, 31 Aug 2011 | SSH

Disclosure of movement of 1% or more in substantial holding or change in nature of relevant interest or both
Sections 23 and 24, Securities Markets Act 1988
Relevant event being disclosed: Change in nature of relevant interest
Date of relevant event: 31 August 2011
To NZX Limited
And Heartland New Zealand Limited
Date this disclosure made: 31 August 2011
Date last disclosure made: N/A
Substantial security holder(s) giving disclosure
Name(s): Pyne Gould Corporation Limited
Contact details: Colin Hair, 027 877 188 colin.hair@pgc.co.nz
Summary of substantial holding to which disclosure relates
Class of listed voting securities: Ordinary Shares
Summary for Pyne Gould Corporation Limited
For this disclosure,—
(a) total number held in class: 23,381,685
(b) total in class: 388,703,975
(c) total percentage held in class: 6.02%

[janner]

Ware Cassius ??..

[Xerof]

I note one of the sub-underwriters walked away from their obligation. I hope shareholders will insist on management taking action to address this, or at the very least alleviate concerns over something smelly being brushed under the carpet, by informing the market what clause in the agreement allowed them to walk away.

If a sub-underwriter doesn't settle, I would have thought the primary underwriter would then be held to pick up the obligation anyway

[Master98]

Seems these directors are not keen to buy those “cheap” shares.

[ETC]

Why buy shares when you can simple give yourself shares at the end of the financial year for a job "well" done.

[K1W1G0LD]

Seems these directors are not keen to buy those “cheap” shares.
Check again , looks to me like every director bar one, took up their full entitlement of $15k.

[Master98]

Check again , looks to me like every director bar one, took up their full entitlement of $15k.

lol, just spent $15k!!!, if I were those rich directors and have confident in this company, I will spend at least $150k to buy these"cheap" shares.

[percy]

lol, just spent $15k!!!, if I were those rich directors and have confident in this company, I will spend at least $150k to buy these"cheap" shares.

The maximum any one could take up in the SSP was $15,000.

[Balance]

lol, just spent $15k!!!, if I were those rich directors and have confident in this company, I will spend at least $150k to buy these"cheap" shares.

First you cannot read SSH notices and accuse the directors of not showing confidence.

Corrected, you then accuse them of not investing more - when they are only entitled like everyone else to $15,000.

If they invested more, you will accuse them of being given preferential treatment.

Just learn how to read before you write so you make some sense to yourself.

[Master98]

First you cannot read SSH notices and accuse the directors of not showing confidence.

Corrected, you then accuse them of not investing more - when they are only entitled like everyone else to $15,000.

If they invested more, you will accuse them of being given preferential treatment.

Just learn how to read before you write so you make some sense to yourself.

Balance, you must be very frustration of sp has fallen below SPP issue price, i reckon will hit to high 40c, i am quite happy bailed all my PGC holdings at 33c before share distribution:)

[Xerof]

And the spin doctors still remain silent on why they have let one of the sub-underwriters off the hook - yet another related party or mate, I suppose.

I also note a good size loan has turned to custard already - I don't want to harp on about just how bad finance company lending has proven to be, but why anyone thinks Heartland is immune to loans default is completely beyond me.......maybe this constant talk of becoming a bank has fooled a lot of shareholders.

The shareprice is doing a lot of talking........

[Master98]

maybe this constant talk of becoming a bank has fooled a lot of shareholders.

The shareprice is doing a lot of talking........

I agree with you, mate.

[Balance]

Balance, you must be very frustration of sp has fallen below SPP issue price, i reckon will hit to high 40c, i am quite happy bailed all my PGC holdings at 33c before share distribution:)

Frustrated? Like I was when DIL hit 13 cents?

You still need to learn to read properly - especially company announcements.

[percy]

Frustrated? Like I was when DIL hit 13 cents?

You still need to learn to read properly - especially company announcements.

Still no manners Balance. RNS.?

[Balance]

Still no manners Balance. RNS.?

You are starting to be like master911 - cannot read.

Win a few, lose a few - did the sums for you before of how you need to pick 5 to 10 baggers so will not insult others by repeating the exercise.

Happy to do it just for you though - just send me your email address, ok? I am very good like that.

[percy]

You are starting to be like master911 - cannot read.

Win a few, lose a few - did the sums for you before of how you need to pick 5 to 10 baggers so will not insult others by repeating the exercise.

Happy to do it just for you though - just send me your email address, ok? I am very good like that.
Only ever seen you pick two shares.you can't seen to able to pick five for NZ sharetrader competition.

[janner]

five to ten baggers ????

They have to be in the penny dreadful section..


They have way more duds than winners..

[Master98]

You are starting to be like master911 - cannot read.

Win a few, lose a few - did the sums for you before of how you need to pick 5 to 10 baggers so will not insult others by repeating the exercise.

Happy to do it just for you though - just send me your email address, ok? I am very good like that.

lol, you are starting to be desperate, loser:D

[Master98]

First you cannot read SSH notices and accuse the directors of not showing confidence.

Corrected, you then accuse them of not investing more - when they are only entitled like everyone else to $15,000.

If they invested more, you will accuse them of being given preferential treatment.

Just learn how to read before you write so you make some sense to yourself.


they can only buy up to $15000 shares from SPP, but can acquire more "cheap" shares or even lower than SPP price from market to show their confident in company.

[corlemar]

they can only buy up to $15000 shares from SPP, but can acquire more "cheap" shares or even lower than SPP price from market to show their confident in company.

Senior management and directors in most if not all NZX listed company's, have a period of restricted trade. So whilst management think, believe and want to buy cheap shares as a sign of confidence, they can't during this period, otherwise it would be borderline inside trading. I dare say this is the case with HNZ, given their results were announced not too long ago.

[winner69]

WTF ... shareorice close to having a 4 in front of it .. whats up as whatsup kept asking

Soemthign not right eh

[percy]

Last week a friend went to a Heartland depositers' briefing.They are to conduct a number of these around the country.My friend was most impressed with the presentation.Thought Greenslade was on top of the game.Had a lot of senior management there.A very positive meeting.

[K1W1G0LD]

Last week a friend went to a Heartland depositers' briefing.They are to conduct a number of these around the country.My friend was most impressed with the presentation.Thought Greenslade was on top of the game.Had a lot of senior management there.A very positive meeting.
Greenslade comes across as a confident operator but HNZ is going to be a hard slog changing public perception of Finance Companies in NZ .
On a slightly different tack I wonder if article reporting PGC may be ditching HNZ holdings in Stuff over weekend has anything to do with PGC losing 3 cents today.

[Xerof]

Heartland depositers' briefing

Interesting they put these cucumber sandwich meetings on for depositors - what about the poor suffering shareholders?


PGC may be ditching HNZ holdings

only a 'review' at this stage, but you are right - not a good look - shareholders will be feeling completely abandoned by now.....having lobbed the finance company off by way of an uncontested in-specie, and had the underwrite backfire badly on us, lets bail ........

[Snoopy]

- what about the poor suffering shareholders?


HNZ shareholders are some of our greatest heroes. With the bloodying of the balance sheet, you will be remembered.

SNOOPY

[POSSUM THE CAT]

May be worth a flutter at $0.20

[K1W1G0LD]

... which is why they want to become a bank ... :)
Yes, lets hope they succeed with that too Belgarion.:t_up:

[winner69]

Yes, lets hope they succeed with that too Belgarion.:t_up:

The alarm bells started ringing when the CFO made the comment that intending to become a bank was 'a great marketing tool' .... he left the impression that this was the main reason ... and until it happened (or not) they could still sort of use the the word bank quite a lot

As long as the depositors get the cucumber sandwiches and everybody thinks Greenslade is an OK switched on bloke all will be OK methinks.

[Lizard]

I am not terribly expert in analysing financial stocks and have made more than my share of investing mistakes. I also have a heap of respect for Xerof, Winner and Snoopy, who are all ringing the alarm bell on HNZ. So, since I recently acquired a few HNZ, am hoping someone can further outline the concerns in relation to the accounts.

My prior concerns were regarding liquidity, particularly in regard to the expiry of the govt guarantee. However, the accounts suggest that they have managed that quite well and the expiry in itself is unlikely to pose a threat at this point. Nor is there any sign of Marac raising rates to attract funds (although to some extent, they will have benefited from widening spread over bank deposits through a fall in bank rates).

The market is still looking more cautious though, with the MAR010 trading at 8.0% - considerably higher than the Heartland/Marac term deposit rate for similar maturities - but the yield on MAR010's is falling. This seems to suggest an "alert but not anxious" type approach from the market and is in line with the sort of rates being seen in GPG, IFT and NPX fixed interest securities.

So presumably, amongst the ST experts, credit risk is the main concern? How would you go about judging that versus, say, Kiwibank?

For instance, looking at equity relative to total lending, Kiwibank has $600m net equity and about $11,500m of non-bank lending (which doesn't seem to leave a lot of room for bad debts). Heartland-PWF combination looks to have about $400m of net equity for about $2,100m of lending. So I would take that to seem that HNZ could absorb a substantially greater % of bad debts, and could write off perhaps as much as $300m (about their entire property book) before they'd be down to Kiwibank-type equity as % of funding.

In impairments, Kiwibank had allowance for about $87m of individual and collective impairment at FY2011, while HNZ+PWF had about $50m. Kiwibank had a further $200m of overdue and impaired for which an impairment had not been provisioned. HNZ+PWF had about $212m, of which $74m came from PWF - and a good $53m was impaired but for which impairment had not been provisioned. i.e. overall, HNZ+PWF looks a little worse, but comes close to Kiwibank in terms of % of equity.

Not intending to defend HNZ, but am more just interested in specific comments as to where the risk in HNZ is coming from beyond the systemic risk affecting all lenders in the current environment?

(Also, I note re PGC potential sale of HNZ that the stuff article did not suggest PGC was in a hurry to quit HNZ, but more that their holding in it was not part of a long term strategy, and more to do with continuing to support HNZ transition to a stable business)
Mogridge said PGC was in no rush and HNZ's share price had some way to rise.

[Lizard]

After sleeping on it, just should point out that the equity of PWF+HNZ in my earlier post is not accurate - possibly equity is closer to $300m post-transaction. If I find the correct figure, I will post it. However, also note that $90m of impaired/restructured PWF loans were not acquired and $30m have a 3 year full-recourse agreement, so total of overdues in HNZ more like $140m (from HNZ side), with at least $50m of recourse to PGC (via RECL) and PGW (mostly against other loans).


Note: Just found pro-forma in the capital raising update at end of August and NTA was $324m for HNZ+PWF. Have also just re-read and adjusted the overdue but not impaired amounts for both. HNZ now looks to have overdue but not impaired assets equal to around 43% of equity, while Kiwibank is about 33%. This does not take account of HNZ's recourse agreements with PGW and RECL

[corlemar]

I am not terribly expert in analysing financial stocks and have made more than my share of investing mistakes. I also have a heap of respect for Xerof, Winner and Snoopy, who are all ringing the alarm bell on HNZ. So, since I recently acquired a few HNZ, am hoping someone can further outline the concerns in relation to the accounts.

My prior concerns were regarding liquidity, particularly in regard to the expiry of the govt guarantee. However, the accounts suggest that they have managed that quite well and the expiry in itself is unlikely to pose a threat at this point. Nor is there any sign of Marac raising rates to attract funds (although to some extent, they will have benefited from widening spread over bank deposits through a fall in bank rates).

The market is still looking more cautious though, with the MAR010 trading at 8.0% - considerably higher than the Heartland/Marac term deposit rate for similar maturities - but the yield on MAR010's is falling. This seems to suggest an "alert but not anxious" type approach from the market and is in line with the sort of rates being seen in GPG, IFT and NPX fixed interest securities.

So presumably, amongst the ST experts, credit risk is the main concern? How would you go about judging that versus, say, Kiwibank?

For instance, looking at equity relative to total lending, Kiwibank has $600m net equity and about $11,500m of non-bank lending (which doesn't seem to leave a lot of room for bad debts). Heartland-PWF combination looks to have about $400m of net equity for about $2,100m of lending. So I would take that to seem that HNZ could absorb a substantially greater % of bad debts, and could write off perhaps as much as $300m (about their entire property book) before they'd be down to Kiwibank-type equity as % of funding.

In impairments, Kiwibank had allowance for about $87m of individual and collective impairment at FY2011, while HNZ+PWF had about $50m. Kiwibank had a further $290m of overdue and impaired for which an impairment had not been provisioned. HNZ+PWF had about $212m, of which $74m came from PWF - and a good $53m was impaired but for which impairment had not been provisioned. i.e. overall, HNZ+PWF looks a little worse, but comes close to Kiwibank in terms of % of equity.

Not intending to defend HNZ, but am more just interested in specific comments as to where the risk in HNZ is coming from beyond the systemic risk affecting all lenders in the current environment?

(Also, I note re PGC potential sale of HNZ that the stuff article did not suggest PGC was in a hurry to quit HNZ, but more that their holding in it was not part of a long term strategy, and more to do with continuing to support HNZ transition to a stable business)


I agree with a lot of what you comment on Lizard.....admittedly I don't proclaim to know the exact ins and outs, in terms of equity/lending etc....and I am a shareholder of HNZ,but when you take a snapshot of HNZ it seems to me, that the entity is far better placed than the previous PGC which held MARAC. It seems that although there maybe still some bad loans like is possible with any bank or finance company these are minimal in the big scheme. Furthermore, Jeff Greenslade has delivered on everything to date, which imo represents good leadership. The management of HNZ have shown their confidence by accepting the $15k SPP and HNZ seems to have positioned itself where the big banks don't want to go and further you could could argue that farmers and the rural sector are more confident now than they have been for sometime. Also, whether pple perceive it as a finance company or a bank - the bad finance companies have been whittled down to a small few, which should benefit HNZ.

With regards to PGC i also agree that I fail to see why PGC would want rid of HNZ when they've only just acquired them, PGW which they hold on the otherhand yes I could see why they may wish to address this ownership !!

[Snoopy]

So presumably, amongst the ST experts, credit risk is the main concern? How would you go about judging that?


Liz, I have an indirect shareholding in HNZ as a PGW shareholder through the $10m that PGG Wrightson (PGW) supplied towards the just completed Heartland New Zealand (HNZ) recapitalization. I do not consider myself an expert in analyzing banks either. Albeit that is a hole in my analysis armour I hope to fill at some stage. I had hoped that my holding PGW through PGG Wrightson Finance (PGF) would be my window into future analysis of the banking world. But as you know, PGF has just been sold to HNZ.

Having just said I don’t really know what I am doing regards banking, I would nevertheless be a little worried about HNZ regarding their current capitalization relative to their lending book as you paint it.

If I look at the PGF financial accounts at the death (30th June 2011) I see total equity of $100.919m against loans and receivables of $381.778m, after the annual provision for doubtful debts.

$90.9m of those “still OK” loans (according to PGW management) have now been transferred to a special purpose vehicle that still sits with the seller PGW. The final sale price for PGF was confirmed at $99.5m. So my best guess of what Heartland acquired when they bought PGF is $99.5m of net tangible capital to support $381.7-$90.9= $290.8m of loan debt. That is a loan to equity ratio of 3:1

Using your figures for the combined HNZ Lizard, $324m of net equity for about $2,100m of loans equates to a loan to equity ratio of 6.5:1. What would the combined loan book have looked like at HNZ without the acquisition of PGF! Actually I can answer that:

($2,100m-$290.8m)/($324m-$99.5m)= 8:1. A crisis averted by HNZ in buying PGF?

Well according to you Liz (on the other side of the transaction fence) it was actually PGF that was the ‘bad boy’ in this cauldron of doubtful loans.

Lizard wrote
“HNZ+PWF had about $212m (of overdue and impaired loans), of which $74m came from PWF - and a good $53m was impaired but for which impairment had not been provisioned. i.e. overall, HNZ+PWF looks a little worse,”

This I don’t understand. We PGW shareholders were told that all the overdue loans where interest is being capitalized, were rolled up into the ‘special investment vehicle’ that PGW retained. How does Heartland justify classifying $53m of their just acquired PGF loans as impaired, when we PGW shareholders were lead to believe that all the loans on sold to Heartland were good?

SNOOPY

[Snoopy]

But as you know, PGF has just been sold to HNZ.



In the latest PGW interim report, authorized of 7th February 2011, this is what PGW management said about PGF:

“PGG Wrightson Finance had continued to benefit from its good fundamentals with strong reinvestment rates and initiatives to extend the book beyond the non-bank deposit taker Crown guarantee scheme.”

Yet a matter of weeks later PGF was portrayed to PGW shareholders as an effective “basket case” that could only be sold at net asset value. We shafted PGW shareholders were lucky to get even that, according to the PGW board. Somehow that fact PGF wasn’t even sold for asset value, because the unsaleable loans were retained by PGW by way of a special purpose investment vehicle, was overlooked. This suddeness in the fall of grace of PGF shocked and rocked me. Using the PGW board’s metric for measuring ‘finance unit trouble’, where does that now leave HNZ?

Your comparisons with Kiwibank were interesting Lizard. However the big difference is that ultimately if Kiwibank needs more money the government is there to supply it. And my hunch is the quality of Kiwibank loans is superior to Heartland too.

SNOOPY

[Snoopy]

So presumably, amongst the ST experts, credit risk is the main concern? How would you go about judging that?


Of practical concern for old owner PGW was the ongoing depositor and lender cashflows in PGF from here on in. Net negative cashflows would ultimately stress the now HNZ balance sheet, should that be required to be called upon as a result of depositors not reinvesting enough money. This was certainly the case with PGF as it existed within PGW. And this reasoning was put forward by the board of PGW as the real reason for the PGF fire sale.

I would be interested if you expanded a bit more on your opinion here Lizard as it relates to HNZ:
“My prior concerns were regarding liquidity, particularly in regard to the expiry of the govt guarantee. However, the accounts suggest that they have managed that quite well and the expiry in itself is unlikely to pose a threat at this point.”

In the case of PGF, it seemed that getting some balance with the depositor reinvestment rate and deposit rollover time period verses the underlying farmer loans was going to become an issue. Under note 23 of the PGF FY2011 accounts, we see that $185.924m of secured debentures are redeemable within a year (mostly this October, the one coming up in a few days) when the government guarantee scheme runs out. Could PGF as a stand-alone entity attract the required new and/or reinvested depositor capital in time? This is the capital required to match the $333.911m (see PGF FY2011 Note 14) of customer loans also due to expire over the June 2011 to June 2012 twelve month period.

Far from saving PGF, it looks like the government guarantee has contributed to the firm’s stand alone downfall by concentrating all the term deposit maturities around one date. Thus a ‘wall of reinvestment’ is created that cannot be easily hurdled.

How will putting on a new brand of running shoes allow the renamed Heartland (rural division) to clear this jump? Keeping back $90.9m of loans:

$333.911m- $90.9m= $243.0m

does help, yes. But it doesn’t fix the now HNZ problem from where I sit.

SNOOPY

[percy]

[QUOTE=Xerof;357190]Interesting they put these cucumber sandwich meetings on for depositors - what about the poor suffering shareholders?

At present it is most important to have depositors on side.HNZ are carry a lot of cash at present to help them get through the end of Govt guarantee.
You can not stay in lending business ,unless you have money to lend.It surprised me to learn that there are a lot of people with over half a mil just sitting in a cheque a/c earning no interest.It is very important for big lenders to meet the people at HNZ. If they like them they will lend them big money.I love going to these meetings.First, I look at people's shoes, then their trousers.Lovely shoes,and clothes made out of good clothe.Then it is fun watching who the local brokers are talking to.Real money draws them. Only takes a few minutes to work out who is worth big bucks.Old saying everyone laughs at a rich man's jokes is very true. So if your depositors like cucumber sandwichs,then make sure they get enough,and laugh with them.!!!!
]

[Lizard]

Hi Snoopy, This could take me hours to answer and will probably send everyone to sleep, so I'll try and limit it to a few main points.

Liquidity risk is covered on pages 32 & 33 of the HNZ FY11 report and in pages 16 and 17 of the PWF FY11 report. Note that leaving behind the impaired loans with PGW doesn't change the deposits due, and actually removes some receivables from the contractual maturity, so could be perceived as a negative in regards to cashflow from HNZ perspective (reality is, not much would have been likely to be received though).

There are two parts to the liquidity risk tables - those based on contractual maturity and those based on expected maturity. Contractual maturity pretty much presumes a wind-down scenario - no new deposits, no reinvestments. Under that scenario, most financial institutions will have a funding gap - banks can look pretty extreme with all those on-demand deposits versus long-term mortgages. Expected maturity is more relevant - and obviously the assumptions that go to making that up. HNZ appear to have presumed a 72% re-investment rate (no new deposits), and expected maturities show redemptions could easily be handled from maturing loans, without even resorting to the $267m of cash on hand or $280m of undrawn bank facilities.

The 72% re-investment rate has been beaten by rates of 74-75% in July/August (although I would expect that there remains a significant chunk of deposits that will be redeemed in November/December and would be surprised if this rate is maintained). Furthermore, HNZ has had a steady stream of new deposits - at June, the rate was running at around $30m per month and the rate has since been said to be stable. Almost all of the new deposits and 80% of the re-investments have been choosing the non-guaranteed option. In reality, retail deposits fell by only $80m between the 5 Jan accounts and 30 June - a 5% reduction in overall deposits. This seems to suggest that their depositor base isn't about to head off into the sunset with the expiry of the guarantee.

The PWF side provides less information - there is a narrower asset-liability margin in maturities and, unlike HNZ, they only give the contractual data for debt repayments, which probably over-estimates versus expected repayments. In addition, the PWF040 will come up for redemption in early October, taking nearly $100m of cash to redeem. I am not sure if any attempts are being made to see these funds re-invested in HNZ, but will likely represent a substantial cash drain. As it stands, PWF contractual maturities suggest that this can be more than covered from debt repayments/lending contraction. I'd be a bit sceptical in that regard - along with recognising the cost attached to a shrinking loan book. However, HNZ have also been flagging another bond issue that could have the potential to replace these deposits.

My view is that the cash reserves, new investments and bank facilities look more than adequate to replace likely redemptions in the face of the guarantee expiring, taking into account recent re-investment rates. Although it is possible to come up with scenarios in which this is not the case, in my assessment, those scenarios would have to be quite extreme, such as re-investments crashing to 30% in the last quarter, along with no new investments.

One major point to be made here - I take the view that the expiry of the govt guarantee should see the low point in depositor funds. After that, I presume that investors will see HNZ as having survived and confidence will gradually increase. Continued low interest rates elsewhere provides ongoing impetus for yield-starved investors to put aside any anxiety. Obviously if investor confidence and deposits were to shrivel further beyond year end, that would not be a good thing - but that is more an issue of ongoing profitability than liquidity.

That brings me back to Credit Risk. Asset Quality has to be the hardest thing to gauge. Overdues, impairments and write-offs combine to provide some insight. These appear to be stabiliising. Providing they do not increase again, it seems likely that HNZ will be profitable and equity will not be further eroded. If this is the case, then the level of HNZ equity looks to me to be able to support considerably higher levels of lending and subsequent profits.

[Lizard]

Using your figures for the combined HNZ Lizard, $324m of net equity for about $2,100m of loans equates to a loan to equity ratio of 6.5:1. What would the combined loan book have looked like at HNZ without the acquisition of PGF! Actually I can answer that:

($2,100m-$290.8m)/($324m-$99.5m)= 8:1. A crisis averted by HNZ in buying PGF?

Well according to you Liz (on the other side of the transaction fence) it was actually PGF that was the ‘bad boy’ in this cauldron of doubtful loans.



Actually Snoopy, HNZ acquired very little in equity from the purchase of PGW - the asset price was based on adjust NTA, so in effect, they simply swapped cash on their books for some assets. As it happened, very few net assets - since they probably gave back over $95m in impaired assets and associated tax losses (I'm not sure if we received final figures on the transaction) and swapped cash for the remaining $7.5m. They then raised $58m of which about $55m went to pay off the ASB for exiting a risk-sharing arrangement. I doubt this was on PWF's balance sheet as a liability as would have been contingent I think, so that was a straight out give-away. In the end, HNZ ended up with $324m in equity vs the $296m they had at year end, so I am guessing that there were other parts to this transaction - e.g. some of those impaired loans given back to PGW might have already been provisioned and therefore not included in the original book value on which the transaction was based.

From the HNZ accounts, year end loan to equity was $1700m to $296m.

I just need to add some corrections to this post. The pro-forma equity for HNZ+PWF is $351m, the $324m is net tangible assets. It looks like the main transaction with PGW was neutral for company nta, but the overall equity was increased by the amount that went to ASB ($55m from equity raising) to purchase back the share of the loans under the risk-sharing agreement. It looks like they could have been purchased at a premium to book value under that agreement, as it appears intangibles must have risen from the $22m on the combined HNZ/PWF books to $27m in pro-forma.

The total depositors funds are now the HNZ depositors plus PWF depositors ($2.1bn). The total loans are the HNZ loans plus PWF loans, less $90m returned to PGW and plus $50-$55m purchased back from ASB risk-sharing facility (also $2.1b) plus any new lending since 30 June.

The total cash on book at year end was $340m plus a $280m undrawn bank facility for HNZ and presumably also the undrawn $100m bank facility for PWF. In addition, HNZ announcement in early August said that they were undertaking a further $100m of securitisation. Although they may have since re-loaned some of that funding, it does look as though they should have access to perhaps $750m of cash and funding facilities - enough to pay out one-third of the depositor base at a pinch without reducing lending.

[Lizard]

Your comparisons with Kiwibank were interesting Lizard. However the big difference is that ultimately if Kiwibank needs more money the government is there to supply it. And my hunch is the quality of Kiwibank loans is superior to Heartland too.

SNOOPY

I agree with that point re government funding. However, I haven't seen anyone on this forum proclaiming that Kiwibank is about to need more capital or in any trouble. As for asset quality, that was my point about overdues and impairments - yes they are higher in HNZ relative to loan book (as would be expected in a finance company), but relative to equity, they perhaps don't compare as unfavourably with Kiwibank as might have been expected.

Should also point out that PWF didn't look like a complete basket case given that their funding maturities had actually lengthened on prior year. I also seem to remember from looking in the past that they had quite a high proportion of deposits on call - that may be classed as less than 12 months maturity, but these aren't likely to be withdrawn en masse.

The bigger concern was probably more around asset quality and also funding the bond redemption. I suspect some of those maturing loans weren't likely to be repaid on time and the short term funding gap might have caused some hiccups. Also, ASB may have had dibs on some of the better loans under their risk-sharing agreement - I really haven't looked into that. Must have been very few options available to them, as it seems to me that they pretty much gave PWF away.

[winner69]

WTF ... shareorice close to having a 4 in front of it .. whats up as whatsup kept asking

Soemthign not right eh

Is that really a 4 in front of the HNZ shareprice .... where's whatsup when we really need him

[Lizard]

I am not terribly expert in analysing financial stocks and have made more than my share of investing mistakes. I also have a heap of respect for Xerof, Winner and Snoopy, who are all ringing the alarm bell on HNZ. So, since I recently acquired a few HNZ, am hoping someone can further outline the concerns in relation to the accounts.

My prior concerns were regarding liquidity, particularly in regard to the expiry of the govt guarantee. However, the accounts suggest that they have managed that quite well and the expiry in itself is unlikely to pose a threat at this point. Nor is there any sign of Marac raising rates to attract funds (although to some extent, they will have benefited from widening spread over bank deposits through a fall in bank rates).

So presumably, amongst the ST experts, credit risk is the main concern?

Hey, Winner - neither you nor Xerof answered my recent query and Snoopy said he's not expert in financials either. Is it Credit Risk you are thinking is the issue? If so, how do you go about assessing it and forming a view?

[winner69]

Hey, Winner - neither you nor Xerof answered my recent query and Snoopy said he's not expert in financials either. Is it Credit Risk you are thinking is the issue? If so, how do you go about assessing it and forming a view?

Suppose at the end of the day it is 'credit risk' being the issue - but more from a perspective of the future direction of the company.

Agree done a good job in bringing together the 3 entities into 1 and as such getting some critical mass. Also have some pretty big aspirations like 20% ROE (or was that Belg saying that was possible?)

The foundation of the business is 2 building societies and a more traditional finance company (Marac accounts looked pretty sick before the bailout and Southern Cross accounts show big losses the last 2 years and I didn't look at CBS)

HNZ wants to become a banK - to me a red flag when the businesses now the foundation of HNZ have been like SCBS says 'For 87 years, the Society has been helping New Zealanders to invest their savings and to purchase property.'. Yep simple model in taking peoples savings and invested wisely (with 1st mortgages) in mainly residential property. Suppose CBS was much rhe same and as percy reminds me marac has been a successful finance company for years. (Mind you SBS is an old fashioned building society with a banking license so maybe a model does work)

Call me old fashioned now but the way HNZ seems to be heading is far removed from what the platform businesses have based their success on. With growth and earnings aspirations like they seem to have the red flag is doing business a different way ... probably taking more risks (non traditional lending areas/ less security etc)

And I still think the finance head saying 'Heartland aims to encourage depositors by becoming a bank, reasoning that people are more relaxed about putting money in a bank than with a finance company' isn't a good look. Is this the only thing they have to engender investor confidence? Almost as bad as Hangover using Dougal to say how safe they were.

So at the end of day suppose credit risk is the issue ... probably not now (you never know as there is a lot of noise around the book) but what it might look like in a few years time, esp as they seem to be moving away from traditional old fashioned models that ahve been successful. They'll probably even up with a treasury dept trading in derivatives and the like with investors money before they lend it out.

[Lizard]

Thanks Winner.

I'm still at a bit of a loss - you seem to suggest that they would be taking more risk by being a "bank" when I would have thought that could have meant they could take less risk. Surely that would mean they could go to mainstream lending rather than having to pick from those borrowers rejected by mainstream banks with lower cost of funds? The main reason I can see for becoming a bank is that banks (or at least the brokers who sell a large proportion of those loans) have weakened their lending criteria over the years and are now so undiscerning that they don't leave much in pickings for the traditional 2nd tier. After all, from what I can gather, the big 4 will lend me enough money to have me working until 75 while living off unsalted rice with no heating or phone in order to pay the mortgage - and that's presuming interest rates never go up.

Coincidentally, I was rung by Heartland today regarding a deposit due to mature for which I'd only recently posted off the form. This is not the place to go into details, but the calibre of that conversation was way, way beyond anything I've experienced since the good old days of telephone banking... not the "enter your pin" variety, but the days when one could ring the bank and they recognised your voice. If there isn't a place for this in the modern world, there is still a place for it in my sentiments.

[percy]

[QUOTE=Lizard;.



Coincidentally, I was rung by Heartland today regarding a deposit due to mature for which I'd only recently posted off the form. This is not the place to go into details, but the calibre of that conversation was way, way beyond anything I've experienced since the good old days of telephone banking... not the "enter your pin" variety, but the days when one could ring the bank and they recognised your voice. If there isn't a place for this in the modern world, there is still a place for it in my sentiments.[/QUOTE]




I think this is most important.It confirms what my friend who went to the "investors' presentation" told me,"they are making sure they have their depositors on side."

[Lizard]

I think this is most important.It confirms what my friend who went to the "investors' presentation" told me,"they are making sure they have their depositors on side."

Yes, normally I would be wary about being rung as it is generally an indicator of problems. However, we all know the liquidity crunch the expiry of the guarantee has the potential to cause, so, in this case, I just see it as being pro-active in reducing the volatility of the deposit base. I am reasonably confident that liquidity risk is now below the threshold that could topple them, but I think there are secondary goals for them here in terms of establishing a strong core depositor base and minimising the need to draw on bank facilities.

[winner69]

Everybody must be worried about rolling over money ... even Rabobank rang me the other day to make sure I kept on investing with them

Easiest way to ensure that i told him was to give some decent rates - ha ha

[Xerof]

Rabodirect are paying 4% for new call money, for a limited time only, so they heeded your call Winner :D

Liz, my concerns on HNZ are general, not specific, and are based on my recent experiences gained from cleaning up the mess in a finance company. They will not be immune to credit deterioration, and in certain sectors this is very severe. This is now apparently hitting mainstream banks ( see the story on James Smith building, where ANZ had first mortgage, and will not recover all of their money) Deterioration is also becoming apparent in 'safe' lending areas such as plant and equipment, where cashflow to service these loans is the issue.

I also do not buy the story that they will get a banking license, but happy for them if they do.

[Balance]

Rabodirect are paying 4% for new call money, for a limited time only, so they heeded your call Winner :D

Liz, my concerns on HNZ are general, not specific, and are based on my recent experiences gained from cleaning up the mess in a finance company. They will not be immune to credit deterioration, and in certain sectors this is very severe. This is now apparently hitting mainstream banks ( see the story on James Smith building, where ANZ had first mortgage, and will not recover all of their money) Deterioration is also becoming apparent in 'safe' lending areas such as plant and equipment, where cashflow to service these loans is the issue.

I also do not buy the story that they will get a banking license, but happy for them if they do.

Big disconnect between insiders versus market - only time now will tell who is right.

[percy]

Yes, normally I would be wary about being rung as it is generally an indicator of problems. However, we all know the liquidity crunch the expiry of the guarantee has the potential to cause, so, in this case, I just see it as being pro-active in reducing the volatility of the deposit base. I am reasonably confident that liquidity risk is now below the threshold that could topple them, but I think there are secondary goals for them here in terms of establishing a strong core depositor base and minimising the need to draw on bank facilities.

Since day one everything Heartland has done is to lay very strong foundations for the business.Everything they have said they would do,they have done,and on time.Strong core depositor base is the best foundation they can have.

[percy]

Big disconnect between insiders versus market - only time now will tell who is right.

I think I would back the insiders. U2Balance?

[POSSUM THE CAT]

Xerof what they did not tell you was they reduced the main interest rate a few days before to pay for it So if you have reasonably sized deposits with Rabo Bank you loose out very badly. If it was possible to close my account with them I would It Stinks Still waiting for an explanation of a Balls up they made in February.

[Lizard]

Thanks for the thoughts, Xerof. Sounds like you have some useful insights, which are appreciated.

We should probably do some more calcs on the credit risk sometime. There is quite a bit of further write-down built into current price. But, as always with a high-leverage situation, the sensitivity analysis will throw up a big range of outcomes. So probably comes down to personal views on the odds and risk-return weighting to scenarios.

[SCOTTY]

Up 3c today and looking stronger with good buying strength and few sellers. Probably too soon to say but SP may have turned the corner at last.

[Xerof]

I think I would back the insiders. U2Balance?

No reply percy

He's making an observation percy, not a commitment......


Everything they have said they would do,they have done

with the key exception of adding to shareholder wealth as promised - this has gone one way all year, as has PGC, as has PGGW

[percy]

No reply percy

He's making an observation percy, not a commitment......



with the key exception of adding to shareholder wealth as promised - this has gone one way all year, as has PGC, as has PGGW

Yes, with the key exception of adding to shareholder wealth. One would have thought that it would have followed.It has not.My experience of life/business is if you build good foundations you will have a good chance of success.HNZ have built solid foundations, so I would expect them to keep their promise of adding shareholder wealth.I remember reading Sir James Goldsmiths book Billionaire.He owned a business called Caversham Foods which took a number of years to produce good profits.He said he knew it would work because he had put in such good people to run it.HNZ have ticked all the boxes on the right path to success.
Looks as though we are "well positioned."
PS no surprises from Balance.!"

[K1W1G0LD]

Percy well put. I agree. I know of one v lge holder in HNZ who has confidence as well . " the second tier finance
Sector has and is continuing to go through major reform for good reasons, but underlying there is a business.
It will take time and effort to rebuild under the new environment, price is only a match of willingly buyer and seller at the time, but that does not necessarily collate to the value proposition".

His words not mine!

[Balance]

There are some insiders one would back, eyes closed.

HNZ has an insider who is a severe liability - when he is ousted as a shareholder, that's the time to really load up.

Meanwhile, let the elephants fight.

[Xerof]

Agree with your observation Balance, however, in my view there are two insiders that need to be cleared. One is a very recent and reluctant holder, who realised he had made an error of judgement even before the ink had dried. That parcel is an overhang to be cleared by distribution.

As for the second insider, well enough has been said already.........

[Balance]

Agree with your observation Balance, however, in my view there are two insiders that need to be cleared. One is a very recent and reluctant holder, who realised he had made an error of judgement even before the ink had dried. That parcel is an overhang to be cleared by distribution.

As for the second insider, well enough has been said already.........

They always think they are smarter than everyone else.

But there are even smarter ones than them!

Old money vs new money, experience vs cunningness, contacts vs acquaintances.

Bit like Terry Sereposis vs Bob Jones!

[Balance]

SCF is not around any more to make some of the ridiculous loans that some of the South Islanders have been able to obtain to indulge in rampant property speculations.

A few are getting caught big time.

Will they survive?

[Lizard]

Rabodirect are paying 4% for new call money, for a limited time only, so they heeded your call Winner :D



Hey, and now they are on Credit-watch negative with Fitch - only €690m of exposure to PIIGS bonds against €42bn of equity last time I looked, but maybe 1 st mortgages in Europe aren't so safe either any more.

[winner69]

Chalkie points out in the papers this morning that if the Baker St/ Kerr takeover of PGC goes ahead Kerr will contol 13-14% of Heartland .... maybe that is why PGC borrowed to get their new shares in the latest cap raising

Heck what a thought - Kerr having such a large say in HNZ

[winner69]

Today's close of 48 a new low since going alone

Even this must be a bit of a worry for the believers .... wonder how far it can actually drift down to

[percy]

Today's close of 48 a new low since going alone



Even this must be a bit of a worry for the believers .... wonder how far it can actually drift down to
It is a times like this one is reminded of Emperor Hirohito's famous quote after the US had bombed Hiroshima,"The war is not nessarily going our way." !!

[winner69]

It is a times like this one is reminded of Emperor Hirohito's famous quote after the US had bombed Hiroshima,"The war is not nessarily going our way." !!

That was in his surrender speech .... bit premature for HNZ isn't yet ... there might be some fight in the dog yet?

[percy]

That was in his surrender speech .... bit premature for HNZ isn't yet ... there might be some fight in the dog yet?
The surrender speech came after Nagasaki. I am sure there is plenty of fight in the dog.? In fact I am "well positioned for the upturn".

[RRR]

Owners looking after themselves>loss of confidence from investors>share price crash>owners buy them for cheap and take it private - is this what we are witnessing now?

[Lizard]

Today's close of 48 a new low since going alone

Even this must be a bit of a worry for the believers .... wonder how far it can actually drift down to

Looks like Belgie's stop getting triggered by the 3:10pm seller. Probably only got another couple of mill to go, eh? :p

But yes, agree not looking good and plenty of time to fall further before they tell us all is going gangbusters at the agm.

If it's not worth close to NTA, then it is impossible to know what it is worth, as there is a presumption of impairments and/or future losses being built into value. Market wants clarity as to where it will end up and so that will take time.

[Balance]

GK telling his detractors to put up or shut up as there has been some serious big selling out of PGC and HNZ? He is now giving them a chance to get taken out at 33 cents in PGC, instead of him being squeezed out.

The battle lines are drawn - just sit back and watch the fun. Old money vs new old money.

So far, both sides have done badly!

[corlemar]

https://www.nzx.com/companies/HNZ/announcements/215563

the plot thickens !!

[Lizard]

This is an interesting statement:


Consumer business performing well offsetting a sluggish mortgage market where EQC payments have resulted in a reduction in the mortgage book

Does that mean that the government provisions for EQC payments will shortly show up as coming off private sector debt? And will private sector debt be re-established to a greater or lesser extent once those home-owners begin to rebuild?

I know the money-flow of Chch rebuild has been talked about often enough and will be drip-fed over longer than most might think likely, but I think we (as share investors) may still be underestimating its likely impact... and will likely one day under-estimate its cessation.

[Lizard]

Another interesting comment:


The forecast is in the process of being updated, further guidance will be provided once complete

That wouldn't need a mention if they didn't already have some clues and wish to divert further questions. So 80% chance it's not going to be an upgrade?

[SCOTTY]

I did go to the meeting yesterday. The business seems to be going ok. The Press report this morning is pretty accurate.

Some other intersting facts:

- Currently $500m liquidity including $150m in cash. Greenslade said that it is a bit high and that they are working hard to get the funds working.
- 97% of funds are now out of the Govt. Garantee.
- Bank Registration: They are now in engagement with the Reserve Bank.
- The equity ratio is very high @ 14%.
- The NTA post the PGF purchase is 84cps.
- The reinvestment rate is 74% which is above their target of 70%

At this stage all is going to plan.

Cheers

[percy]

Thanks SCOTTY,it is always good to here from a fellow investor who went to the meeting.

[Lizard]

... looking at equity relative to total lending, Kiwibank has $600m net equity and about $11,500m of non-bank lending (which doesn't seem to leave a lot of room for bad debts). Heartland-PWF combination looks to have about $400m of net equity for about $2,100m of lending. So I would take that to seem that HNZ could absorb a substantially greater % of bad debts, and could write off perhaps as much as $300m (about their entire property book) before they'd be down to Kiwibank-type equity as % of funding.


I agree with that point re government funding. However, I haven't seen anyone on this forum proclaiming that Kiwibank is about to need more capital or in any trouble.

Kiwibank could get asset sale cash - Key (Stuff) (http://www.stuff.co.nz/national/politics/5881891/Kiwibank-could-get-asset-sale-cash-Key)

Reminder to self once again - "whenever you find yourself making a comparison with another business to justify a valuation, you are usually just proving that the other business is over-valued."

[Lizard]

Interesting profit forecast - slight downgrade at $20-$22m NPAT, but sounds like the $6m deferred tax benefit is included in the forecast? Good to hear impairments are lower than forecast and higher than anticipated level of referrals from PGW.

Price has been plateauing here, so if there is any hint of volume building on the buy side, I would be interested in adding to my initial position. Although, while we all sit around the campfire, waiting to see if we get struck by fall-out from the sovereign debt meteorite or pass through the tail of another banking crisis comet, it seems prudent to watch a little longer...

[percy]

Keep holding yourself at the ready lizard. !!!!!!
I thought the $6 mil would have been on top,so when I saw the announcement I thought it would be a profit upgrade,not a profit downgrade.!!!The impairments being down I take that they are taking few risks.Certainly trying to be a bank rather than a finance company.Maybe too careful,not wanting to miss out on bank licence. Hopefully laying good foundations for the future.Sitting on so much cash and liquidity does not earn profits,so once over Govt guarantee that cash /liquidity should be put to use.Still they are doing everything very carefully,moving forward as to plan,so shareholders will rewarded by having a very run company they can pride of ownership in.

[janner]

Perc.

Was wondering whether to respond to lizards as I feel much the same.. So much happening global.. Have a few shillings ready to spend but feeling very wary..

To increase or not to increase.. That is the question..

Must admit that I think that the company is on the right track..

BUT... with all the shenanigans going on at PGC who have a finger in the HNZ pie..
Are they masters of their own destiny ??

[percy]

I agree with you and Lizard,with so much happening global.Time to be very careful.Take your time deciding.
I am sure the shenanigans at PGC are very much at PGC.All the problem bits are at PGC.
As for PGC and GK influence at HNZ I am sure both Chairman Irvine and MD Greenslade will tell them to "clear off." They will not risk the bank licence.
GK and PGC will know that Irvine and Greenslade will add value to HNZ.HNZ is on the right track.Has not been the best of times to undertake creating a new bank,but they have done the hard yards.

[winner69]

So guys - excluding the deferred tax benefit is the forecast NPAT $14m-$16m as per Lizards question mark or is $26m-$28m as per Percy's thoughts

Downgrade or upgrade or just confusing

But then again if the $6m was included in the original guidance then it is about the satus quo and just a strom in a teacup

[percy]

So guys - excluding the deferred tax benefit is the forecast NPAT $14m-$16m as per Lizards question mark or is $26m-$28m as per Percy's thoughts

Downgrade or upgrade or just confusing

But then again if the $6m was included in the original guidance then it is about the satus quo and just a strom in a teacup

$14m-$16m. I do not think the $6m was included in the original guidance.

[Lizard]

$14m-$16m. I do not think the $6m was included in the original guidance.

No, looks like you are right on that, Percy. From the Annual Report:

We have set a profit target of $20m–$24m for the 2011–2012 financial year. Achieving that forecast will be dependent on our ability to meet our performance milestones and anticipate and quickly adapt to any major market events, needs and opportunities. By virtue of a law change, a one-off deferred tax benefit will be booked as an additional credit to NPAT for the 2011-2012 financial year. The amount of this credit is likely to be in the order of $5m to $6m. This credit will have a positive impact on the forecast.

While yesterday's update certainly reads as though it IS included in the forecast (and to be booked in first half as part of the $9-$10m first half NPAT, thereby making underlying first half only $3-$4m).

The impact on earnings has been offset by the previously announced one-off deferred tax benefit of $6m, and lower than expected operating costs and impairment expense to 31 October.

On the positive side, I think this forecast is inclusive of their current view on likely impairments, which would mean equity should at least be heading upwards rather than eroding....

[SCOTTY]

When the $20 - 24mil projection was made , there were 300m shares on issue. Since then PWF was purchased and another 88.7m shares issued. Now the profit forcast is reduced to $20 - 22m. On a projected earnings per share basis there is a definate drop in earnings!! This is with or without the tax credit which I don't think was included in the original projection.

[Lizard]

On the other hand, you have to bear in mind that at 49cps, the market looks to be pricing in either further substantial losses or additional dilution in the future, given that NTA is around 85cps (sorry, can't find exact figure). The deferred tax credit still adds 1.5cps to NTA. Forecast of even $4m NPAT for half year will still add another cent, presuming they don't pay a dividend.

By the nature of finance capital, isn't it likely that an equilibrium has to be eventually reached in the world of finance where returns on equity at least match one year interest rates (and most likely carry a risk premium to it)? For that to happen, either we see profits at a level that the gap on NTA will also close (giving the double whammy to the share price) or we have to see losses and a reduction in NTA. While they post profits, no matter how small, then I am thinking the first scenario seems realistic (over, say, 3 years).

[winner69]

So we agree it is a pretty hefty profit downgrade then?

Meaning what? All is still on track but real success for this very well run business is just that bit further away

Market probably like it though .... don't hold on too much longer Lizard

[winner69]

Bit ominious -- decliners list (1st half hour) led by ALF PPL and HNZ .... rest of table in green as the worlds problems have all been fixed again

What elite company HNZ is in ........ but then they say one swallow doesn't make a summer or something like that

[winner69]

Phew ... relief all round I suppose ..... out of the red

[winner69]

Objective achieved .... press only reporting HNZ profit being 'pruned' from $24m to $20m-$22m .... pretty good result seeing how tough the business world is these days .... well done

Like the head finance man admitting that becoming a bank was only a marketing ploy suppose even financial updates are sort of marketing as well

[percy]

[.... don't hold on too much longer Lizard[/QUOTE]

winner69.What do you mean.?Do you mean Lizard should sell? or do you mean lizard should buy.
Be careful other wise Lizard will think you still have "Bi-trendual tendencies."

[SCOTTY]

I checked with Heartland today. They confirm that the forecast does include the one-off deferred tax benefit.

[Lizard]

Objective achieved .... press only reporting HNZ profit being 'pruned' from $24m to $20m-$22m .... pretty good result seeing how tough the business world is these days .... well done

Like the head finance man admitting that becoming a bank was only a marketing ploy suppose even financial updates are sort of marketing as well

I was pretty disappointed with the way they handled that. I'm pretty nervous of any company that isn't straight-up in their announcements and reporting, and that one was a little on the borderline.... up until now, they've been pretty straight-up (with only a slight polish to the PWF acquisition outcomes).

Now I can understand, that given the fragile nature of a finance business at the moment, there would have to be a degree of caution - they probably couldn't risk the media jumping on the "downgrade" story too dramatically, especially given their business is now increasingly distanced from broker support and the associated "selling". We should all know by now how much of a "confidence" story finance is! (And the loss of broker support is more about incentives related to commission and regulation, than about sentiment).

But still counts as a strike.

"Three strikes and you're out" remains a good policy. (After that, "two years and a change of management" is the general rule before there's another chance...)

[winner69]

[.... don't hold on too much longer Lizard

winner69.What do you mean.?Do you mean Lizard should sell? or do you mean lizard should buy.
Be careful other wise Lizard will think you still have "Bi-trendual tendencies."

No bi-trendual stuff here percy ... clear as mud .... Lizard should be buying .... delay (or holding off buying) might mean missing out on the bargain price ... after all belg is accum and sucking up those that go on the market

[percy]

No bi-trendual stuff here percy ... clear as mud .... Lizard should be buying .... delay (or holding off buying) might mean missing out on the bargain price ... after all belg is accum and sucking up those that go on the market

Must admit I never had any doubts about you myself. !!!!
With you and belg's endorsement, we will all feel more comfortable,purchasing/holding HNZ.

[winner69]

2012: 22m NPAT / 388m shares @ PE of 10 = 56c 2012 shareprice target ... Some upside ... also expect that NTA figure to be leveraged once the license is achieved and BUA sets in ... but then the history of "Pxx" related businesses is not that flash. discl: accum

Redo Belg numbers excluding deferred tax adjustment ----

Real 2012 NPAT $15m / 388m shares = 3.9 cents / share X PE 10 is 39 cents shareprice target - some upside from here?

At 49 on PE of just under 13 .... maybe about right using this form of valuation

[Lizard]

.... don't hold on too much longer Lizard


.... Lizard should be buying ....

Two seemingly opposing opinions in 8 hours. Clear proof that Winner is actually a female. :p

[SCOTTY]

Redo Belg numbers excluding deferred tax adjustment ----

Real 2012 NPAT $15m / 388m shares = 3.9 cents / share X PE 10 is 39 cents shareprice target - some upside from here?

At 49 on PE of just under 13 .... maybe about right using this form of valuation

You are onto it winner. You are looking at the normalised earnings projection - AS IT SHOULD BE.!!! Adding in a one-off deferred tax benefit is very missleading. As investors it is sustainable long term income that will "drive the dream".

Cheers

[winner69]

Surprised at the non reaction by the market to this latest guidance - though volume was quite high and the share price didn't go anywhere even though it was a good day for the market.

On 28/10 guidance still $20m-$24m (and if consitent to Annual Report excludes the deferred tax thing)

A month later an announcement after the market closes (and it wasn't even a Friday) says this is really $14m-$16m (exc deferred tax)

So over a month where has the $7m expected profit gone - 30% less - doesn't give much you the warm fuzzies they know what is really going on does it .... and Lizard talks about how important having confidence is

So $15m at this stage .... equity appears to be about $320m odd (if you can decipher an amended slide they put after the PWF deal was xompleted so may be completely wrong with this number) .... so ROE in the year after the year of transition is less than 5% .... who were touting 20% plus a while ago

Prob have not wasted my time going over the past few months presentations but all the pictures and pretty charts and what seems not so detailed commentaries just seem to confuse me.

No doubt they have a story to tell and they are doing a very good job in telling that story .... to have confidence in them as an investment I think you need to believe that story and go along for the journey .... but I sense that even the likes of Scotty is having some doubts

But it is disappointing to see that when the rubber meets the road the promises do not appear to being delivered ... at least this year

One last thought - the Annual Report guidance did not include the deferred tax thing but when they talked about it at the AGM it was included but they forgot to say so (at least in what was published) and then a month later did sort of say it was in the number and hoped nobody would notice .... ruins the story a bit eh

You guys have me interested but too much confusion and noise and things just don't seem to stack up for me to think this is cheap enough to put hard earnt cash into .... but will definitely include in the 2012 stock picking compo

[winner69]

Two seemingly opposing opinions in 8 hours. Clear proof that Winner is actually a female. :p

Know I know Goff feels .... god bless him .... quoting out of context ..... first was 'dont hold on much longer from buying' (maybe the on should have been an off) .... which means buy buy now ,,,, and that is consistent with .... 'should be buying'

Bugger - being so misunderstood like Goff is even worse than being bi-trendual .... next you guys will be ganging up on me and saying which part of BUY don't you understand ..... maybe Winstone (now he has 7 mates with him) will have to come up with something like that when they hock off the SOEs

Please don't pick on me .... sob sob .... you have ruined my day .... even John Key spoke to me nicely earlier tonight as he was heading off to Shed 5

[Lizard]

.... but will definitely include in the 2012 stock picking compo

Well that was all we needed to know! :D

(Oh damn, we still don't have anyone to run the comp.)

[percy]

Know I know Goff feels .... god bless him .... quoting out of context ..... first was 'dont hold on much longer from buying' (maybe the on should have been an off) .... which means buy buy now ,,,, and that is consistent with .... 'should be buying'

Bugger - being so misunderstood like Goff is even worse than being bi-trendual .... next you guys will be ganging up on me and saying which part of BUY don't you understand ..... maybe Winstone (now he has 7 mates with him) will have to come up with something like that when they hock off the SOEs

Please don't pick on me .... sob sob .... you have ruined my day .... even John Key spoke to me nicely earlier tonight as he was heading off to Shed 5

Pleased to see you have your "on" and "off" finally sorted.
No one here will ever try and pick on you !!! just trying to enliven our day.Need something with a 30% adjustment in nett profit.

[winner69]

Pleased to see you have your "on" and "off" finally sorted.
No one here will ever try and pick on you !!! just trying to enliven our day.Need something with a 30% adjustment in nett profit.

I'll get over it Percy .... just hope that zillions of HNZ NTA doesn't disappear like PGC managed to do

[percy]

I'll get over it Percy .... just hope that zillions of HNZ NTA doesn't disappear like PGC managed to do

No fear of that.

[Xerof]

No fear of that.

"killing you softly with their song"

sorry for the plagiarism Roberta Flack.......

[winner69]

Xerof ... you should have plagiarised a few versus more

2nd and 3rd verses .... I wonder who HE is in this case .... whoever wtote this lyrics really perceptive eh

I heard he sang a good song,
I heard he had a style,
And so I came to see him and listen for a while
And there he was this young boy
Stranger to my eyes


I felt all flushed with fever
Embarrased by the crowd,
I felt he found my letters and read each one out loud,
I pray that he would finish
But he just kept right on Repeat chorus

[percy]

I may not agree with the choice of song,but am pleased were are all singing together.!!!! lol.
Thinking of The Trogs 'So happy together."

[Xerof]

The Turtles, if my memory serves me correctly, but percy, is this the relevant Heartland shareholders chorus?



I can't see me lovin' nobody but you
For all my life
When you're with me, baby the skies'll be blue
For all my life

:):)

[percy]

The Turtles, if my memory serves me correctly, but percy, is this the relevant Heartland shareholders chorus?



I can't see me lovin' nobody but you
For all my life
When you're with me, baby the skies'll be blue
For all my life

:):)

Offcourse it is,in fact perfect.

[winner69]

The guys at HQ must be relieved big time that no serious damage done since the downgrade .... and note they are keeping a low profile at the mo .... all quiet on the western front they say

[K1W1G0LD]

Heartland ‘Investment Grade’ Rating affirmed; Outlook improved to ‘Stable’


Posted: 7 December 2011

A small Christmas present for the faithful.Good to know they're working hard back at head office.

[Penfold]

Heartland ‘Investment Grade’ Rating affirmed; Outlook improved to ‘Stable’


Posted: 7 December 2011

A small Christmas present for the faithful.Good to know they're working hard back at head office.

It arose from a revised methodology that favoured financial institutions with more domestic retail funding than o/s wholesale. I wouldn't read to much into it.

[Lizard]

Looking good ... breakout coming ... Be there or not ... TA got a view?

Patience, Belgarion.

Actually, if I had to make a T.A. call, I'd say this consolidation looks more likely to break to the downside. Though, overall (FA + TA), I'd just plump for a longer period of consolidation before an eventual turnaround...

Btw, I'm not sure where others find their freebie charts these days (FT has been short on NZ data lately), but Bigcharts thinks HNZ is Heinz... so need to revert to BSH.

[Financially dependant]

Btw, I'm not sure where others find their freebie charts these days (FT has been short on NZ data lately), but Bigcharts thinks HNZ is Heinz... so need to revert to BSH.

I am having difficulty getting NZ data on Incredible charts which uses Yahoo data and nothing on RealProtime at all...:(

[SCOTTY]

I am having difficulty getting NZ data on Incredible charts which uses Yahoo data and nothing on RealProtime at all...:(

It is tracking below both the 30 and 100 day moving averages - What does that tell you? More importantly, what are the projected eps on normalised earnings after the latest downgrade?

[SCOTTY]

Interesting ... some undisclosed seller wants to talk at 50c and the market moves up towards 50c see what they have to say ...

Forgive my ignorance but what is an undisclosed seller?

[SCOTTY]

LOL Scotty ... should have said the "undisclosed" seller ... I.e. the one(s) who are selling more than $100k worth ... generally lots more than 100k tho ...

Thanks bel. I have noticed the "u" at times, but didn't know exactly what it meant, so thanks.

Have a great Christmas and NY.

Cheers

[Xerof]

Sub-underwriters bailing out..........at least those that had the moral fibre to pay for their commitments......would seem the banking license might be a distant fantasy, as predicted on this channel very early on

[winner69]

Sub-underwriters bailing out..........at least those that had the moral fibre to pay for their commitments......would seem the banking license might be a distant fantasy, as predicted on this channel very early on

Xerof ... don't ruin a good story

Merry Xmas to you & hope 2012 favours you

[K1W1G0LD]

up 3 cents today with nearly 3mil traded, somebodys buying up large!

[Arbitrage]

At 49 cents can anyone tell me the major downside of this stock?

[Marilyn Munroe]

On the the site interest.co.nz there is a comment by large shareholder George Kerr that he wants Heartland to grow by emulating American bank Wells Fargo.

http://www.interest.co.nz/news/57607/heartland-nzs-biggest-shareholder-wants-bank-wannabe-achieve-explosive-returns-over-20-ye

My jaw hit the floor when I read that.

George as a master of the financial universe should ask his fellow financial master of the universe and large shareholder in Wells Fargo, Warren Buffett, how all those residential second mortgages in California they loaned during the housing bubble are getting on.

Boop boop de do

Marilyn

[Lizard]

Well looks like George has been doing some selling. :)

[Lizard]

Result out... not too surprised that George is selling.

There are some good bits in there (deposits up, despite expiry of the guarantee, impairments reducing), but pretty hard to get excited about it. Hard to see this year hitting forecast and next year won't have the one-off tax benefit to salvage it. At this rate, could be another couple of years of consolidating before it is able to cast off the GFC leg-irons.

[winner69]

Lots of if, but and maybe in predicting $20m to $22m FY ... Hmm ... NTA @ 85c ... ??? ... Mr Market has HNZ at 48c ... Hmmm ... 22m / 388m shares @ PE of 10 = 56c ... Hmmmm ... Revolt against gouging Ocker banks ... 26m? ... More Hmmmmms ... :)

Hmmmmm ..... allow for the one off never to be repeated tax benefit ..... hmmmm .... $1m / 388m shares @PE of 10 = 41c ....... Hmmmmm ...... revolt against gouging Ocker banks ..... $20m? ..... more Hmmmmmm

[Xerof]

The "Looking forward" statements tell the true story - a banking license is not even on the horizon, and they have little chance of meeting forecasts

watch out for the sub-underwriters and underwriters bailing......

[Marilyn Munroe]

I have been puzzled by Heartlands desire to become a registered bank.

As a cynical person I wondered if the bank registration was just a story told to win over those voting on the merger. The real driver was to shelter MARAC beneath CBS Canterburys balance sheet.

Now that the "Mission Accomplished" banner has been unfurled in the boardroom will we see bank registration quietly fade away?


Boop boop de do

Marilyn

[winner69]

I have been puzzled by Heartlands desire to become a registered bank.

As a cynical person I wondered if the bank registration was just a story told to win over those voting on the merger. The real driver was to shelter MARAC beneath CBS Canterburys balance sheet.

Now that the "Mission Accomplished" banner has been unfurled in the boardroom will we see bank registration quietly fade away?


Boop boop de do

Marilyn

Agree Marilyn ..... main objective achieved .... a bit of a con about the bank story .... and now back to business as usual

[percy]

Well I am un decided.HNZ appear to be like Mainland Cheese;"Good things take time."HNZ have achieved a merger,and seem to be sticking to their agenda.I think they have been over careful with everything they do ,so they don't risk putting "The Bank" licence at risk.They have got through the govt guarantee ,and hopefully the have laid solid foundations for the future.I continue to hold and expect it will take time.The NTA at 85 cents is reassuring.

[Under Surveillance]

Well I am un decided.HNZ appear to be like Mainland Cheese;"Good things take time."HNZ have achieved a merger,and seem to be sticking to their agenda.I think they have been over careful with everything they do ,so they don't risk putting "The Bank" licence at risk.They have got through the govt guarantee ,and hopefully the have laid solid foundations for the future.I continue to hold and expect it will take time.The NTA at 85 cents is reassuring.
Whatever the motivation(s) underlying the quest for a banking licence, I think the outcome - either way - will have a big impact on the fortunes of HNZ. The more so if it comes sooner, not later.
I suppose the NTA is reassuring, hadn't really thought about it. Until HNZ puts decent and sustained profits together and pays solid dividends the NTA has an academic quality? HNZ is trading at 0.55 times NTA. With decent profits and dividends, or increasing promise of same, the HNZ price will move towards the 1.8 times NTA of ANZ and the 2.0 times NTA of WBC. Getting there will take much more time than Mainland cheese, and a few more old boys on the Mainland commercials will have popped their clogs along the way, but loyal HNZ holders will wallow in good port and vintage tasty.

[percy]

Great post Under surveillance.

[Lizard]

A bit ignorant here - why would they want to enter into a lockup agreement with Harrogate Trustee for 5% of share capital till FY result?

[Snow Leopard]

Nice chart !

best wishes

Paper Tiger (wearing a Technical hat) :blush:

[winner69]

Got to love it ..... George getting all grumpy and saying Heartland is under perfoming and they better get their act together .... and George holding onto the shares in HNZ


George talks tough
http://www.stuff.co.nz/business/industries/financial-results/6500994/George-Kerr-talks-tough

[winner69]

That lock up deal with Harrogate a 'defensive move' to make a full takeover by somebody a bit harder .... me thinks George has had some influence in this action .... see Belg your mate looking after you after all

[percy]

Got to love it ..... George getting all grumpy and saying Heartland is under perfoming and they better get their act together .... and George holding onto the shares in HNZ


George talks tough
http://www.stuff.co.nz/business/industries/financial-results/6500994/George-Kerr-talks-tough

Love it.Wonder if he will attend an HNZ AGM.?

[Marilyn Munroe]

About the share lock-up agreement.

Imagine yourself to be an Aussie banker sitting in your plush office in Melbourne. You have a problem. You have been trying to grow your customer base at your subsidiary across the ditch by spending megabucks on advertising. The trouble is all your fellow Ocker Banker mates are doing the same, so all you are doing is churning customers.

You think, why not simply buy these customers by making a cash bid for a struggling small bank with a tidy number of customers and a sinking share price.

Boop boop de do

Marilyn

[Lizard]

Odd... he was selling his own indirect holdings via Pyne Holdings and can be presumed to be still selling (now below 5%), so may well be him pushing the price down... while saying it is badly performing and speculation he might have something to do with a lock-up to stop others getting it...

[GTM 3442]

About the share lock-up agreement.
You think, why not simply buy these customers by making a cash bid for a struggling small bank with a tidy number of customers and a sinking share price.


Such cynicism in one so young.

Seriously - wouldn't you just be buying customers who, by their actions, have shown that they don't want a relationship with an Aussie bank ? And who have already voted with their feet.

Or customers who have already been rejected by the Aussie banks ?

[Xerof]

I don't think it's a defensive move at all - the lock-up agreement specifically gives Tomlinson the right to sell into a full takeover - end of story. And anyway, such moves are illegal if my memory is correct (frustration of T/O?)

If you accept that Tomlinson was fitted into doing the underwrite, and I am led to believe thats correct (sweet talking Georgie Porgie says no chance of you being called upon old son, the mugs will all take up their rights, and if you are called, leave the arrangement of the funding to me), then its got to the point where Tomlinson wants out and to cut his losses (see last weeks curious SSH, where there was a 'rearrangement' of who tells who what to do with the running of Harrowgate)

He is after all down 30% less underwriting fees collected, plus funding costs in a market that simply does not like HNZ and it's prospects.

So who has who over a barrel?

I suspect the lock-up buys HNZ and their 'advisors' a bit of time to find a home (acceptable to PGC and HNZ) for the 19m, with some sort of side deal done to 'alleviate' the costs to Tomlinson

So it begs the question, who funded the underwrite ? Hmmm, only need one guess at that - perhaps that secretive slush fund owned by PGC?

As for Kerr/PGC deciding the HNZ's aren't for sale, well surprise surprise, given he's so far out of the money it's become a joke, long at 78, more at 75 and even more again at 65, when at the time of the split-off, everyone was looking up.

Despite this huge overhang of 'reluctant' holders, it's hard to see much further downside, so they will just have to hold the line and wait for the improvements, meantime sweating on unrealised losses


"curiouser and curiouser" said Alice.....

AIMHOO and please do your own research

[karen1]

Not being a follower, not sure if this is covered above:

http://http://www.stuff.co.nz/business/industries/6503006/Heartland-shareholder-won-t-sell

[Lizard]

So George also buying through Torchlight for the past week... 17m shares is not small change.

I'm feeling too small to be playing in the same water as great white sharks....

[Master98]

I'm feeling too small to be playing in the same water as great white sharks....

lol, PGC sold 19m shares in PGW and buy 17m shares in HNZ.

[corlemar]

So George also buying through Torchlight for the past week... 17m shares is not small change.

I'm feeling too small to be playing in the same water as great white sharks....

...whilst selling down PGW !!!

[geezy]

hmmmm.........so i guess i should prepare for a pathethic offer for Heartland by GK? and then be given a recomendation to sell and buy back later when the SP dives after the T/O offer?

bah.

[ETC]

Looks like you're on the right track geezy :)

PGC are continuing to accumulate HNZ shares. I’m guessing GK’s looking for the 20% mark, that way he’s assured a place at the table when one of the big Aussie banks swoop in to pick up HNZ.

So much for the concept of a NZ listed bank, oh well.

[Marilyn Munroe]

Business Day columnist Chalkie has had a dig into recent Heartland share transactions. His conclusion; "Chalkie also reckons PGC's latest purchase of Heartland shares is probably an undisclosed related-party deal"

http://www.stuff.co.nz/business/opinion/6610871/For-a-non-bank-to-be-a-bank-it-must-be-whiter-than-white

Boop boop de do

Marilyn

[K1W1G0LD]

Latest view from S&P re NZ banks including Heartland


[URL="http://http://www.interest.co.nz/news/58475/big-four-banks-s-and-p-ratings-going-nowhere-kiwibank-hits-credit-rating-ceiling-tsb-woul"]

[macduffy]

Looks like you're on the right track geezy :)

PGC are continuing to accumulate HNZ shares. I’m guessing GK’s looking for the 20% mark, that way he’s assured a place at the table when one of the big Aussie banks swoop in to pick up HNZ.

So much for the concept of a NZ listed bank, oh well.

I don't see it that way, for several reasons.

- I can't see the big Aussie banks ( assets of several billion dolllars) being interested in a fledgling business of $360m assets, before or after HNZ receives a banking licence.

- NZ's economy isn't exactly a booming proposition for further investment.

- I reckon it suits the big four very well to have a few minor players - Kiwibank, TSB Bank, HNZ (eventually) to share and dilute the anti-bank sentiment that flares up from time to time.

- The Aussies have enough Australian issues to occupy them without taking on any new ones offshore.

Just IMO.

[Lizard]

Business Day columnist Chalkie has had a dig into recent Heartland share transactions. His conclusion; "Chalkie also reckons PGC's latest purchase of Heartland shares is probably an undisclosed related-party deal"

http://www.stuff.co.nz/business/opinion/6610871/For-a-non-bank-to-be-a-bank-it-must-be-whiter-than-white

Boop boop de do

Marilyn

Great article and research there! Perhaps we should seek clarification on the FMA's position in regard to these transactions, as it all looks a bit wild-west to me...

[Marilyn Munroe]

as it all looks a bit wild-west to me...

Here is the banking license application for the Heartland Saloon.

Pay no attention to the whiskey drinking brawling cowboys, scheming bar gals, or card sharps in there.

The provincial accountants with director tin stars on their chests who have ducked behind the bar to avoid punches and flying glass are hard-arses who are going to clean up Dodge.

Boop boop de do

Marilyn

[Lizard]

The provincial accountants with director tin stars on their chests who have ducked behind the bar to avoid punches and flying glass are hard-arses who are going to clean up Dodge.

Yes, just seemed like a good test of whether they're able to go beyond the equivalent of stopping kids drinking too much lemonade.

I think the antics of self-interested majority or substantial shareholders will always be difficult to regulate, thereby leaving a sour taste in the mouths of small holders. Will be interesting to see at what point moral high-ground meets pragmatism under the new cadre of enthusiastic sheriffs.

[winner69]

Good to see things are all honky dory at HNZ and that they can make more in the 3rd quarter as they made in the first half of the year ..... really good stuff

That'll put a rocket under the shareprice tomorrow ..... up up and away .... maybe 60 cents by the end of the week?

[Master98]

Good to see things are all honky dory at HNZ and that they can make more in the 3rd quarter as they made in the first half of the year ..... really good stuff

That'll put a rocket under the shareprice tomorrow ..... up up and away .... maybe 60 cents by the end of the week?

w69, you didn't mention that CFO is leaving, i don't think it is a good sign( or news ), let's see market reaction tomorrow.

[Master98]

They report third quarter results may just for balance the news of CFO resgination.

[Arbitrage]

Despite the sceptics, this stock appears to be trending upwards.

[Arbitrage]

Yes.

The analytical side of the brain says stay away, but for an interesting punt, it could be fun as long as the finger is hovering over the sell button. Certainly the graphs are heading in the right direction and the 60 cent level may be closer than we think.... On a percentage basis that is not a bad capital gain on todays price. However the analytical side may still be right.

[Balance]

A few positives kicking in :

1. George Kerr out of the way - he has been selling HNZ shares to pay for PGC shares.

2. Market is extrapolating current turnaround profit of $6m into full year's future profit of $24m pa from hereon in = PE of 8 times on current share price.

3. Expectations of banking license?

If they announce banking license, expecting sp will close gap towards NTA of 72 cents?

[Arbitrage]

My opinion is that the banking licence is not a "must have". If it happens it happens. More importantly the company has brought together a few companies that appear to be starting to gel and making money. These companies survived the finance company purge so they must do something right.

[SCOTTY]

A few positives kicking in :

1. George Kerr out of the way - he has been selling HNZ shares to pay for PGC shares.

2. Market is extrapolating current turnaround profit of $6m into full year's future profit of $24m pa from hereon in = PE of 8 times on current share price.

3. Expectations of banking license?

If they announce banking license, expecting sp will close gap towards NTA of 72 cents?

And there is 87cps nta in the tool kit. A reasonable return on that (say 10% = 8.7cps or 15% = 13cps) would put a rocket under the share price.

[Snoopy]

And with all those other finance companies out of the way ... up goes the margins and market share.


There are plenty of companies still out there still competing for customers. Most of them end in the word 'bank'.

SNOOPY

[Snoopy]

The analytical side of the brain says stay away,


PGG Finance was sold to Heartland in the early part of the FY2012. As part of the sale investment banking and corporate finance entity “Northington Partners” did an independent review of the buyer, Heartland.

Heartland is now a listed independent entity in its own right. I think it is useful to look at how the look forward view of Heartland in June 2011 compares with the actual progress made to date.

The Northington Partners review of Heartland concentrates on:

1/the value of the retail funding [term deposits], and
2/the value of the wholesale funding [securitisation (aggregated loans as presold parcels) and available bank facilities].

Critical to the ongoing retail funding is the aimed for 80% term deposit reinvestment rate target (when averaged over a year). This is critical not only in maintaining target asset growth, but also to maintain an adequate liquidity buffer.

Of other performance metrics to monitor, Northingtons were looking for a reduction in the operating expenses to income expenses to happen, a result of improving economies of scale. Stabilization of any impairment expenses was listed as another performance metric to look out for. Failure to obtain bank status was seen as a risk that could lead to a blowout in the cost of funds.

PGW Finance is now part of Heartland. But back in November 2009, PGW Finance was regarded as an integral and ongoing part of PGG Wrightson future in the new capital-raising ‘Simplified Disclosure Prospectus’. The prospectus was issued after the global financial crisis and so encompasses still current thinking on how a financial organization should be structured post GFC. P44 gives the banking syndicate banking facilities restrictions that PGW Finance entered into at the time:

1/ EBIT to interest expense > 1.2
2/ Liquidity buffer ratio (including bank lines) >10%
3/ Gearing Ratio (Total non-risk share liabilities to total non risk tradeable assets) < 90%
4/ Single new customer group exposure (as a percentage of shareholder funds) <10%
5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.

Forget all of the results information about profit that Heartland has been headlining. I think that if you wander through the above calculations as they relate to Heartland, then and only then will you discover how Heartland is really doing.

One more quote from the prospectus for those who might be wondering when they might get a dividend out of Heartland

“No distributions (i.e. dividends) will be permitted while the interest cover is less than 1.3 times after such a payment has been made.”

SNOOPY

[K1W1G0LD]

Yes , looks like HNZ shareprice turning positive at last, its good to see a lot more buyers than sellers too, lets hope it stays that way.

[Arbitrage]

More press for Heartland: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10799352

[Balance]

Sp action smells of banking license decision coming soon.