HGH - Heartland Group Holdings

[minimoke]

Internet banking up and running again, that's good.

Shouldn't have gone down in the first place

[winner69]

Internet banking up and running again, that's good.

Sort of smiled about digital technology strategy when business is done over the phone with the banker writing the problem down in his pad with a pen

Problem not fixed so must have lost his pad

Oh well another call needed ...not cool

Original problem is a Heartland guy not doing what he said he would do

[trader_jackson]

$1.64, much cheaper than the start of the year when it was nearly 50 cents more expensive
Nearly cheap enough for me to consider jumping back in

[winner69]

$1.64, much cheaper than the start of the year when it was nearly 50 cents more expensive
Nearly cheap enough for me to consider jumping back in

Hoop would say well and truly in bear territory .....25% off its recent high and trading below 200MA. Quite a wealth destroyer of late eh

Like it or not Heartland have been tainted with the fall out from the Aussie banks fiasco and as such is going through ax rerating process. Probably about fair value at the moment but if Aussie banks continue to decline well you never know where Heartland might end up.

HBL almost as big an enigma as that great Australian finance company Flexigroup

[Beagle]

Hoop would say well and truly in bear territory .....25% off its recent high and trading below 200MA. Quite a wealth destroyer of late eh

Like it or not Heartland have been tainted with the fall out from the Aussie banks fiasco and as such is going through ax rerating process. Probably about fair value at the moment but if Aussie banks continue to decline well you never know where Heartland might end up.

HBL almost as big an enigma as that great Australian finance company Flexigroup

Looking at the big chart picture I must concede it still has a head and shoulders look to it and now looks like it might break down below the right shoulder. Hoop would probably say that happens far more often than not. I reduced last week at $1.73 having successfully stripped the dividend...playing "possum stuck in the headlights" with the rest and hoping its the light at the end of the tunnel I see not a train coming to run me over lol.
Financials worldwide under pressure at present plus the Aussie bank fiasco doesn't help that's for sure.

[Snoopy]

Industry Group Risk

From AR2017 note 18c, the greatest 'business group' risk in dollar terms is agriculture, with $757.004m worth of assets. This represents an increase of $129.334m over the previous year.

$757.004m/ $3,931.239m = 19% of all loans


Regional Risk

From AR2017 note 18b, the greatest regional area of credit risk in dollar terms is 'Rest of the North Island' , with $888.080m worth of assets. This represents:

$1.037.873m/ $3,931.239m = 26% of all loans

The 'Rest of North Island' loans (which excludes Auckland and Wellington) have risen 18% in numerical terms over the year, outstripping the growth of the previous largest region Auckland which only grew by 11% in gross loan amounts (Auckland still covers 24.0% of all loans) .

Given 'Agriculture' loans have grown by 18% over the year, this 'growth' could reflect yet more compounding of agricultural interest charges into existing loans. According to the FY2017 Annual Results presentation (page 15), dairy represented 8% of Heartland's total loan book.

0.08 x $3,931.239m = $314m

At an interest rate of 8%, assuming no interest was actually paid, this would increase the value of the Heartland dairy industry loan book by:

$314m x 0.08 = $25.2m

Since the actual agricultural loan balance increased by $129.334m, we can assume that more net new agricultural loans were taken out, rather than just rolling over the dairy loan book. This is logical when by 30th June 2017, it was becoming clear the dairy crisis was past its worst.

This is very much a contrast to traditional market leader ANZ.NZ who kept their total rural loan book static over the similar period (for the second year in a row) ($NZ19.205m @ 30th September 2017 vs $NZ19.226m @ 30th September 2016). I think agricultural loans will remain the key sector to watch when trying to forecast potential Heartland loan problems for the future.

Looked at just in agricultural terms, you could say that Heartland are potentially compounding their own problems for the future. Or is it just a case a putting more emphasis on their rural roots? Yet because the loan book in total has grown, reducing Heartland's relative reliance on Auckland is probably a positive.

The multi-year picture is shown below:

	2012	2013	2014	2015	2016	2017
Largest Regional Market	Auckland (30%)	Auckland (30%)	Auckland (25%)	Auckland (26%)	Rest of North Island (25%)	Rest of North Island (26%)
Largest Industry Group Market	Agriculture (24%)	Agriculture (21%)	Agriculture (16%)	Agriculture (17%)	Agriculture (18%)	Agriculture (19%)

Industry Group Risk

From AR2018 note 19c, the greatest 'business group' risk in dollar terms is agriculture, with $740.798m worth of assets. This represents a decrease of $16.206m over the previous year.

$740.798m/ $4,390.423m = 17% of all loans

This decrease is possibly due to Heartland declaring that they are moving away from 'larger relationship managed lending' (code for 'lending on farms') to strengthening the livestock lending proposition.

Regional Risk

From AR2018 note 19b, the greatest regional area of credit risk in dollar terms is 'Rest of the North Island' , with $1,121.983m worth of assets. This represents:

$1,121.983.m/ $4,390.423m = 25.6% of all loans

The 'Rest of North Island' loans (which excludes Auckland and Wellington) have risen 8.1% in numerical terms over the year, behind the growth of the previous largest region Auckland which grew by 13.6% in gross loan amounts (Auckland still covers 24.4% of all loans). The increase in regional lending in the NI is an interesting and surprising contrast given the consummate decrease in rural lending.

The multi-year picture is shown below:

	2012	2013	2014	2015	2016	2017	2018
Largest Regional Market	Auckland (30%)	Auckland (30%)	Auckland (25%)	Auckland (26%)	Rest of NI (25%)	Rest of NI (26%)	Rest of NI (26%)
Largest Industry Group Market	Agriculture (24%)	Agriculture (21%)	Agriculture (16%)	Agriculture (17%)	Agriculture (18%)	Agriculture (19%)	Agriculture (17%)

Overall Heartland looks less risky than at any time in its history (bar 2014) from a 'Customer Concentration Test' perspective.

SNOOPY

[winner69]

)

Peat - scary charts mate

The H&S pattern particulary scary ..... looks we heading to $1.40 or lower if it plays out and has a bit of bling added. That should send the shivers up Beagles spine

Beautiful eh

That H&S pattern does sort of say $1.40 is possible ...getting there

[Beagle]

)

That H&S pattern does sort of say $1.40 is possible ...getting there

LOL you ruffled my feathers, (opps sorry fur) last time you posted that mate for which I am in your debt because you scared me out of quite a bit of my holding at $1.73 ex divvy. Financials are vulnerable in a big market correction so maybe $1.40 is possible with a full blown overseas correction of circa 10- 15%.

[winner69]

LOL you ruffled my feathers, (opps sorry fur) last time you posted that mate for which I am in your debt because you scared me out of quite a bit of my holding at $1.73 ex divvy. Financials are vulnerable in a big market correction so maybe $1.40 is possible with a full blown overseas correction of circa 10- 15%.

It’s Peat’s chart. I just added the pendant (from Lovisa)

Hard to believe that such a great company with growing profits and steady dividends can see its share price fall by 24% in 9 months. Suppose that’s what happens when a stock goes from being outrageously overvalued to something closer to a reasonable value

And as often happens things often overshoot ....thats when you get your $1.40

[Beagle]

It’s Peat’s chart. I just added the pendant (from Lovisa)

Hard to believe that such a great company with growing profits and steady dividends can see its share price fall by 24% in 9 months. Suppose that’s what happens when a stock goes from being outrageously overvalued to something closer to a reasonable value

And as often happens things often overshoot ....thats when you get your $1.40

LOL thanks Peat, such a memorable pendant...looks like something KW would wear Yes mate as you suggest things do overshoot in both directions but I suspect if it does get down to $1.40 there will be plenty of other things to worry about as well so that's not something I want to see.