Trust you to see that mate
Besides being distracted were you impressed with Jeff
Printable View
Thanks for trying to comfort me Snoopy.
Yes, there is always risk and as PT much of it can be understood and quantified. Percy says no black swans left so we can even take that out of the equation.
A few months ago the Risk/Reward ratio was pretty good.
However recent developments suggest that Risk has increased. The factors I have mentioned and some of those things Roger has alluded to. So in my view risk up
Recent guidance implies growth has (temporarily? stagnated. The implication is that H1 earnings same as H2 and Q4 less than Q3. That's not growth. I am having doubts about 'believe the story'. So from a reward perspective the expected returns have diminished.
So Risk up and Reward down .....that ratio not so good as it was a few months ago.
Snoopy, you not suggesting I sit back, have faith in that the story will come true and just hope are you?
Very soothing words from Jeff while he paints the picture of his ideal personal loan customer, someone in their 30's e.t.c., all sounds robust and good BUT
These words are incongruous with their no wallet no worries marketing campaign using a young guy in his twenties who appears to be unable to find his wallet, much like my nephew would if I took him to the pub.
As mentioned before this sort of no deposit lending with no payments till 2016, ifinance lending targeting people coming off GE finance interest free terms along with lending through Harmoney which is mostly unsecured and the ongoing decline in the dairy sector payout in recent months has shifted the risk profile of the company at least in my eye's. Much of this sort of lending is the sort of thing that got a lot of finance companies into trouble during the GFC.
With the significant increase in world-wide dairy production there is no guarantee that what we have now is anything other than the new normal in which case a substantial proportion of HNZ's loans in the dairy sector are in serious trouble in due course in much the same way that small iron ore miners are in serious trouble if that commodity stays at its currently depressed level for several years. Many of their loans in this sector only have the cows themselves as security and who will want to buy them off the receiver if and when people are forced to liquidate some / all of their herd when returns are sub economic in much of this sector as a whole, (depending upon land fertility) e.t.c. ?
In my view events in 2015 have materially shifted the risk profile of HNZ and we are seeing that reflected in the SP. The type of new lending they are targeting makes me very tempted to review what an appropriate PE is for HNZ especially when the major Aussie banks aren't much more expensive on a relative PE basis. I had been using a 2015 of 13 which gave me fair value of $1.32- $1.33 based on consensus analyst forecasted EPS for FY15 of 10.2 cps.
Maybe given the risks a PE of 13 is no longer appropriate ?
The type of lending that got finance companies into trouble in GFC was property development lending.Companies like FPF and UDC who lent on consumer goods came through in good shape.The other parts of Marac came through GFC in good shape. Heartland are not lending on property development.So to compare today's lending to GFC is misleading.
With three quarters of the year's business already done, the projected profit of $48mil is not a big call.This works out to the eps of 10.2 that analysts are using.
It therefore comes down to projected growth for year 2016,and what you expect the fully imputed dividends to be,that will govern your acceptable PE ratio.
When comparing HNZ to the Aussie banks,keep in mind HNZ do not have the need to raise their capital requirements.HNZ is not exposed to the Australian problems,such as ;minning,manufacturing,retail,and over valued property markets.
Neither do HNZ have to rely on European wholesale funding.
I think the lists confirms ;
1] Not one of those companies were registered as a bank by The Reserve Bank of NZ,nor did they have to report to The Reserve Bank.
2]None of those companies were rated by a "recognised" rating agency.
3]None of those companies had an experienced banker on the board.
4] None of those companies had an experienced banker as CEO.
5]Most of those companies were run by people who 'had history".
6] None of them had proper risk/management systems.
7]Most of those companies had huge related party lending.
8]Comparing any or all of them to HNZ, is as I pointed out,not appropriate.
Roger, it is concerning that your confidence in Heartland is being tested, even waning when it is likely or even probable, that your confidence in conjunction with Percy late '14 and into summer this year, may have brought new money to the table. Possibly quite a lot of new money.
I was convinced at the time, made a modest gain, but exited when the weekly price descended below the weekly 14EMA, which it has again and now sits on the 100day EMA. Money flow has declined but is still positive, RSI is declining below 50 and the Slow STO has crossed down, from overbought. (TA talk, in english .. SP is weak and weakening).
It would be helpful I think if you crunched the numbers again and provided your revised assessment of the fundamentals. All the talk of fringe finance lending etc obviously hasn't helped the SP, for that I'm apologetic having participated, but in the overall scheme of things Heartland as you say may have shifted from growth+yield to yield only, and may be exposed to second tier lender variables and risks.
BAA
Roger was bullish last year, justifiably so, but no one should blame him for buying into HNZ.
So was winner bullish. My detailed financial forecast based on reasonable growth assumptions that essentially tied in company narrative and presentations was earnings of $51m to $53m. Roger was quoting similar numbers (maybe a fraction less)
Company says we need to accept $47m this year (maybe a bit higher). That implies they have stopped growing - like H2 will be the same as H1 and worse still Q4 will be less than Q4. That say growth has stagnated. Reasons still be disclosed
I agree with Roger, there appears to be higher risk around Heartland at the moment and the rewards don't look like they are going to be as good as I expected a while ago. Going from growth + yield to just yield lowers the reward side of he equation doesn't it. Not good if perceived risk is increasing.
We just have to wait closer to August before we'll find out what's happening. But the last announcement was might disappointing when you look at the rosy picture they were painting in previous presentations.
You should post an updated chart BaaBaa ...mine looks rather sad, yours might cheer me up