HGH - Heartland Group Holdings

[Beagle]

For what its worth Snoopy, Westpac initial provisioning was 2.5% of market cap so on an adjusted basis that suggests ~ $17m for HGH.
As you suggest they have very different business models but I would suggest whatever level of specific and general provisioning banks bring to account in their books is nothing better than a very wild guess anyway as everyone is effectively just throwing darts at a dartboard while blindfolded as we're in unchartered waters and nobody has a playbook for this thing or how its going to affect their customers.

Concentrate of the level of their capital adequacy and liquidity, those are the more reliable indicators we have, right at the moment.

[Cyclical]

Is there any concern at this point, and maybe a bit further down the track, that there may be a flight of capital as those with term deposits get a bit nervous? Being a smaller bank, are people in danger of lumping them in with the likes of South Canterbury / Hanover? I know back in the day my parents wisely pulled their money from Hanover and that they currently have a TD with Heartland... I might have to ask how they are feeling about everything when I catch up with them this long weekend.

[Beagle]

Fitch have recently given them the tick of approval and maintained their credit rating.

[pierre]

Fitch have recently given them the tick of approval and maintained their credit rating.

Mr Market has given them a tick too - up another couple of points at the close to 119.

[King1212]

Upward from here...will settle around $1.50 ....till the next update.

Always my favorite stock...!

U should jumped onboard master Beagle!

[Beagle]

Well done mate.

[Snoopy]

Upward from here...will settle around $1.50 ....till the next update.

Always my favorite stock...!

King , I have to admire your optimism. But $1.50 is basically pre-Covid levels. You really think that this financial crisis, which has been described as the greatest since the depression of the 1930s, will have no effect on the financial system at all?

Let me reprise what assumptions I have built into my own valuation modelling for Heartland.

1/ Reverse Mortgage market flat.
2/ A 45% reduction in New Vehicle funding, coupled with no reduction in used vehicle funding. A lot of that is due to the end of Holden, which was by far the largest new vehicle funding partner for Heartland.
3/ The effective closing down of O4B small business funding for three months (because O4B can't compete with 0% interest rate loans from the IRD) with O4B recovering to 90% of base level after that.
4/ 'Business Intermediated' loans will likewise shrink by 10%.
5/ Business Relationship loans will decline by 16% for two years, because Heartland indicated pre-Covid they were wanting to wind back this side of the business.
6/ Rural earnings steady.
7/ The collapse of Harmoney, the unsecured consumer loan lender, in about a year's time.

If you think those assumptions are wrong, I will quite happily rework my valuation model. But as it stands looking out to FY2021, a share price of $1.50 and eps of 6.6c equates to a PE ratio of 22, rising to 27 for FY2022. One could make an argument that the PE for Heartland should be half that. And that equates to a share price of just 75c.

SNOOPY

[Beagle]

Heartland has traded in a PE range of 10-17. Close to 17 is a SELL. I find this one almost impossible to value at the moment, (not sure anyone can reliably predict the earnings) as the extent of projected losses are impossible to quantify. In the past, bank shares have been a very bad place to be in a deep recession. I can't see any good reason why it would be different this time so I remain VERY cautious.

[King1212]

Haha....when u ever got HGH valuation or sp right Snoopy?

Even before covid....your valuation was all over the place.

Pre covid was $1.80 ish. I sold before it crashed $1.84.

I remembered when SP went down to $1.30...gloom n doomed before covid... everyone was thinking capital raise...but HGH did not do capital raise...it shocked the market.

Everything comes to a risk....that is share market.

Recession or no recession...no one has a crystal ball. Even my master Beagle ...he was cashing all up before covid n sworn no to be back in the market till end or year or when the market recover.

But...he jumped in back quicker than he thought so ....

Be careful out there....crazy market here

[King1212]

What I learnt from my other Master...

Master Wu kui
Yesterday is history, tomorrow is a mystery, but today is a gift. That is why it is called present.