HGH - Heartland Group Holdings

[winner69]

No.
ROE increases.
Interest paid on bonds is debuctible.

No

Yes - ROE does increase

Yes - I know interest is tax deductible

But - NPAT reduces by amount of interest paid on bonds (after tax) ---> means value of dividends paid out is reduced by same amount.

You might see a higher dividend per share but with the lower number of shares your $ dividend is less (assuming everything else remains constant)

[Snow Leopard]

No.
ROE increases.
Interest paid on bonds is debuctible.

No

Yes - ROE does increase

Yes - I know interest is tax deductible

But - NPAT reduces by amount of interest paid on bonds (after tax) ---> means value of dividends paid out is reduced by same amount.

You might see a higher dividend per share but with the lower number of shares your $ dividend is less (assuming everything else remains constant)

po-ta-toe, po-tah-to
to-ma-toe, to-mah-to

You can not beat a good debate on semantics.

Best Wishes
Paper Tiger

[winner69]

po-ta-to, po-tah-to
to-ma-to, to-mah-to

You can not beat a good debate on semantics.

Best Wishes
Paper Tiger

That's why they call it financial engineering - one thinks they getting more but actually getting less in the hand (all other things remaining constant of course)

And by the way po-ta-to is spelt potatoe according to guy named Dan

[percy]

po-ta-toe, po-tah-to
to-ma-toe, to-mah-to

You can not beat a good debate on semantics.

Best Wishes
Paper Tiger

Yet it sounded so simple when explained to me by a Dr. of Economics in 1991.!
W69.It may pay you to ring Jeff.If he is still not taking your calls, try the CFO,Simon Owen.

[winner69]

Percy, no need to ring Simon - would only waste his time as he'd agree with me as he a gun accountant.

You are right and I have never disagreed - proposed capital management initiatives will increase EPS, will increase ROE and will increase dividend per share. Other metrics will look better as well. No argument.

But NPAT will be reduced by the amount of interest on the bonds (after tax) and in theory the total value of dividends will reduce (assuming all other things remain constant)

But all other things don't remain constant which means we will never really know what impact the initiative will have anyway. Just like we will never really never know whether the Seniors acquisition was EPS accretive or not.

The tiger said lets call the whole thing off (think that meant cool it) - so seeing i might get the last word in I will

[winner69]

Back to reality

A close at 132 today - good sign that this was the high for the day which bodes well for tomorrow

Getting closer to the AGM - hopefully guidance will be tightened up and even increased slightly. Something like $54m to $57m sounds a lot better than the current guidance.

Likely? Why not? The economy is bubbling along nicely with business and consumer spend pretty strong. That should be helping the Heartland loan book grow.

No need to worry about problems in rural yet - if it all does turn to custard the impact won't be felt until FY17 anyway. By then the share price probably in excess of 170 so still plenty of upside.

[percy]

Percy, no need to ring Simon - would only waste his time as he'd agree with me as he a gun accountant.

You are right and I have never disagreed - proposed capital management initiatives will increase EPS, will increase ROE and will increase dividend per share. Other metrics will look better as well. No argument.

But NPAT will be reduced by the amount of interest on the bonds (after tax) and in theory the total value of dividends will reduce (assuming all other things remain constant)

But all other things don't remain constant which means we will never really know what impact the initiative will have anyway. Just like we will never really never know whether the Seniors acquisition was EPS accretive or not.

The tiger said lets call the whole thing off (think that meant cool it) - so seeing i might get the last word in I will

Goodness help us all.
That post could only have been written by an economist.!!!..lol.

[winner69]

Goodness help us all.
That post could only have been written by an economist.!!!..lol.

Most of it was your words anyway - what you learnt from your Dr of Economics in 1991.

But I will take your comments as a compliment anyway

[winner69]

Heartland says "Key drivers of growth for Heartland are GDP and employment"

A couple of recent Cameron Bagrie updates via twitte

@ANZ_cambagrie: ANZ job ads for NZ up 1.2% in October. Follows 2.3% lift in sept. Another sign economy picking up from sluggishness in first half of year

@ANZ_cambagrie: Our truckometer up for Oct: good sign for GDP. Heavy traffic up 0.9% follows last months 1.8. Light traffic down small but boomed last month


So all looking good on the GDP front for Fy16 Heartland growth

And don't forget that 83% of F16 interest margin growth is expected to come from business and consumers. (Low expectations from rural)

I'd say $51m to $55m F16 guidance will be tightened up and at the ASm it will become $54m to $57m

No wonder the share price is rising nicely

[Beagle]

My view is the Heartland lending to the dairy sector would be at a higher risk end of the market compared to the big 5(when considering client financial health & reason for the loan) .So if the big 5 may have 5-10% dairy lending impaired I would expect 2-3(maybe higher) times this % impairment with the Heartland loan book.My understanding is the Heartland loan book is more likely for stock etc rather than over land.

This is how I also see it. Reserve bank are forecasting a potential 18% average sector credit losses in a protracted downturn for dairy, (dairy stay's under $5 kilo for four years). This would translate to the potential for approx. $37m in losses at face value for HNZ ($207m x 18%) if things go really bad for the sector, (nobody can be sure whether they will or won't), based on average loan to valuation ratio's for the sector but seeing as it would appear HNZ's loans are at the higher end of the LVR spectrum in a worse case dairy situation losses for HNZ could be higher, exacerbated by sharp potential continuing declines in dairy farm values. That said spread the loss recognition over a number of years and its certainly manageable but nonetheless I think cautious people might like to consider this apparent headwind in their thinking. Optimists will be hoping for a recovery in dairy prices next year, as I am because its good for the economy as a whole as well as our hard working dairy farmers. Nonetheless I think its useful to have an peek into the abyss and an estimation of how bad the sector losses could be in a worst case scenario and the Reserve Bank obviously also thinks so too.