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02-12-2020, 04:28 AM
#14101
I am not concerned about the reverse mortgage business at all. It has been showing great strength in Australia and I have no doubt it will do so again post COVID, in Australia at least. NZ seems much slower on the uptake.
We need to remain mindful of the fact that these numbers are for 4 months only and during a pandemic when large parts of the target market for this product, has been in lockdown or self imposed social isolation.
The RMs are mainly used for "nice to haves" such as housing upgrades, vehicle upgrades or travel, all of which require interactions with people outside of one's bubble. Clearly that has had negative effect on the RM business for obvious reasons, but in my view it is a temporary blip that will quickly return to normal once COVID is dealt with next year.
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02-12-2020, 08:35 AM
#14102
Originally Posted by Cyclical
Snoopy, regarding the reverse mortgage sector not performing to your expectations, could this just be the quiet before the storm, before this low interest rate environment means the oldies burn through their remaining liquid capital (stuff all interest in addition to reduced buying power), but enjoy the gains on their property value? How's the NIM likely to hold up in this part of the business?
Cyclical, yes, now that NZ is (touch wood) out of lock down, I would expect the reverse mortgage business to pick up. Both the booming property market and collapse of the traditional pensioners means of income supplementation of 'bank interest' should help. The decrease in the NZ reverse mortgage market business (and I mean decrease on a net contract operational business - the beauty of reverse mortgages is that an existing REL customer not borrowing more capital continues to boost HGH group profits via interest charges) should stop. Increased competition (that means 'some' competition because Heartland have been the only active nationwide player in both Australia and NZ for a while) from SBS in NZ and 'Household Capital' in Australia is not all bad. It can raise the profile of the whole sector and so boost business for everyone.
NIM I expect will reduce, although I am not modelling this directly for now. I have been using relatively conservative NIMs anyway. The NIM for Reverse Mortgages have always been lower than that for motor vehicle loans for instance.
Personally I am more concerned about 'net profit margin' of which 'net interest margin' is but one component. And if you look at the 'profit equation':
NPAT = (Net Profit Margin) x (Revenue)
we can still expect rising profits from a decreasing net profit margin - provided revenue is increasing to compensate. And once an REL customer is all signed up there is very little work from HGH staff required to keep those REL profits rolling in.
I am not saying the super bullish predictions from Beagle, Winner et all are wrong. I am saying there are alternative more muted alternative futures ahead. And if those scenarios wash through then at $1.45, HGH is looking fully priced, for now.
SNOOPY
Last edited by Snoopy; 02-12-2020 at 08:48 AM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
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02-12-2020, 08:38 AM
#14103
Originally Posted by Snow Leopard
Not convinced that in this particular case FuBar know what they are talking about
That or they are downramping
I suspect they may have copied code developed from their analysis of the big banks and forgot that the vast majority of hgh's margin is made on the lending side. Squeezing the deposit margin with super low rates isn't going to stuff up hgh's nim the same way it impacts banks. If you took the model building shortcut noted above you would expect a substantially worse result and be referencing the rbnz work on a available deposit margins, exactly as fubar are.
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02-12-2020, 06:18 PM
#14104
Pretty clear Forbar have made a big phopar. I managed to get a few more at $1.49 on the open this morning and am very pleased I did.
Alas...I am going to have to take a more "dogged" approach to get up to a 15% portfolio allocation.
Last edited by Beagle; 02-12-2020 at 08:09 PM.
Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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02-12-2020, 07:01 PM
#14105
Grabbed some more here today -- getting close to the 15% notional, but *just may* choose to ignore that yardstick ..
HLG is already well above that % too (but hey at +47% + ignoring Div's - why not)
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02-12-2020, 07:13 PM
#14106
Originally Posted by Beagle
Pretty clear Forbar have made a big phopar. I managed to get a few more at $1.49 on the open this morning and am very pleased I did.
Dont you like the French this week?
At the top of every bubble, everyone is convinced it's not yet a bubble.
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02-12-2020, 08:04 PM
#14107
Originally Posted by winner69
Don’t you like the French this week?
LOL https://www.goodreturns.co.nz/articl...for+2+Dec+2020
Contains observations regarding Heartland.
Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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02-12-2020, 08:17 PM
#14108
Originally Posted by Beagle
Demerging Marac would be cool move ..that wouldn’t be a faux pas.
At the top of every bubble, everyone is convinced it's not yet a bubble.
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02-12-2020, 08:23 PM
#14109
Originally Posted by winner69
Demerging Marac would be cool move ..that wouldn’t be a faux pas.
You got me...I'm no good at Te Reo either...ask me if I am worried about it
Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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03-12-2020, 06:03 AM
#14110
Last edited by Habits; 03-12-2020 at 06:54 AM.
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