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  1. #12811
    percy
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    Quote Originally Posted by Snoopy View Post
    . But by qualifying as a 'bank' in technical terms, even though they have given up their banking licence to Westpac,.

    SNOOPY
    Factually incorrect.[as per usual]
    Heartland Bank Ltd is a NZ registered bank,owned by Heartland Group Holdings,which is listed on both the NZX and ASX .
    Last edited by percy; 04-01-2020 at 08:14 AM.

  2. #12812
    Speedy Az winner69's Avatar
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    Quote Originally Posted by Beagle View Post
    Posted on 12 November 2019 when the SP was $1.67. (Emphasis added).
    Now sits at 7.3% of my portfolio allocation after share price increase and buying some more at $1.85, (actions speak louder than words), this week.
    No doubt about it, you are a guru ....but maybe just a lucky guess?

    Seeing the consensus is that Heartland is really only a Bank in name / disguise and really is just a finance company a ‘peer review’ against Aussie banks is a bit nonsensical.....isn’t it?

    You never know you might find Heartland at $1.87 appears to be even cheaper if compared against a ‘peer group’ of finance companies.
    Last edited by winner69; 04-01-2020 at 08:19 AM.
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  3. #12813
    Speedy Az winner69's Avatar
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    Quote Originally Posted by percy View Post
    Factually incorrect.[as per usual]
    Heartland Bank Ltd is a NZ registered bank,owned by Heartland Group Holdings,which is listed on both the NZX and ASX .
    Only became a ‘bank’ as a marketing ploy to give them some credibility - so said their finance man at the time with a big smile.

    Mind you it does impose some added disciplines ..that’s good
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  4. #12814
    ShareTrader Legend Beagle's Avatar
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    I've made quite a few "lucky guesses" with this one mate, as you know
    I'm no fan of their unsecured lending through Harmoney but it seems to be working. Bit harsh calling them a finance company and as you say, they have the extra disciplines required by the Reserve Bank of New Zealand.

    I think the current risk environment for HGH is quite benign and's there's scope for reasonable earnings growth and possibly a modest PE expansion such that we should see a (well earned this time) $2.14 sometime next year
    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

  5. #12815
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    Quote Originally Posted by Beagle View Post
    There's always a degree of issues with banks Snoopy, that's why they trade at such a big discount to the market median forward multiple of about 19 and always have.
    Last time I looked at this, which wasn't long ago, HGH has forecast eps growth considerably more than its peers which I concluded warranted a PE premium of about 2 to its peer group. The lack of issues compared to its peers also warrants a PE premium of at least 1, possibly 2.
    Heartland may not have the issues of the big Aussie banks. But it has other issues. It is still the bank with the most rural exposure as a percentage of their loan portfolio. Cashflow is much worse than other banks. As we get near the end of the business cycle some of the marginal loans at Heartland are more likely to become distressed than those made by the big banks. So in my mind no premium PE is warranted.

    I expect all banks to continue to trade at below market PEs and IMO, with the increased capital requirements and scrutiny, they deserve to. This is not a reason to take your capital out of other shares and put it into banks.

    Further, any consideration of an appropriate forward PE is best referenced off its own PE range I mentioned the other day, 11 - 17.5. Its not expensive especially when viewed in the context of 10 year Govt stock at ~ 1.6% which itself warrants a PE premium of 2 compared to more normal times when the risk free rate is closer to 4%.
    I don't believe you should buy a share and justify your position by how well the return compares with today's government stock rate, I think you have to consider what the medium to long term outlook for interest rates is. Clearly interest rates are likely to be lower over the next ten years, on average, than they were over the last ten years. But does lower mean stuck at today's all time low levels? I think not. By justifying your share purchases by using today's interest rates, the only certainty you are locking in is that you are paying too much for your shares in the medium term.

    I think eps growth in FY21 is going to be very strong and I actually think the shares are a bit cheap and let's be honest at 7.5% gross yield we're being paid pretty handsomely to enjoy the fruits of future growth.
    Perhaps, but the slow down has to come. If growth goes according to plan you can kiss good-bye to fully imputed dividends because most of that growth will come from Australia. Not that I see this as a problem. It is a natural consequence of Heartland's growth ambitions in Australia. A higher PE is more appropriate at the bottom of the business cycle, not at the top.

    Close to record dairy payout forecast this year means there's little to concern yourself with there.
    Did you miss the auction price plunge of over 6% in both whole and skim milk prices in December?

    You worry too much mate. Looking at the glass as half full is usually far more rewarding than looking at it as half empty and looking for problems.
    Perhaps so. But I don't mind giving away growth opportunities if the downside risk of losing capital is too high. I am a buyer of Heartland shares at $1.40, not $1.80.

    SNOOPY
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  6. #12816
    Speedy Az winner69's Avatar
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    Quote Originally Posted by Snoopy View Post
    Heartland may not have the issues of the big Aussie banks. But it has other issues. It is still the bank with the most rural exposure as a percentage of their loan portfolio. Cashflow is much worse than other banks. As we get near the end of the business cycle some of the marginal loans at Heartland are more likely to become distressed than those made by the big banks. So in my mind no premium PE is warranted.

    I expect all banks to continue to trade at below market PEs and IMO, with the increased capital requirements and scrutiny, they deserve to. This is not a reason to take your capital out of other shares and put it into banks.



    I don't believe you should buy a share and justify your position by how well the return compares with today's government stock rate, I think you have to consider what the medium to long term outlook for interest rates is. Clearly interest rates are likely to be lower over the next ten years, on average, than they were over the last ten years. But does lower mean stuck at today's all time low levels? I think not. By justifying your share purchases by using today's interest rates, the only certainty you are locking in is that you are paying too much for your shares in the medium term.



    Perhaps, but the slow down has to come. If growth goes according to plan you can kiss good-bye to fully imputed dividends because most of that growth will come from Australia. Not that I see this as a problem. It is a natural consequence of Heartland's growth ambitions in Australia. A higher PE is more appropriate at the bottom of the business cycle, not at the top.



    Did you miss the auction price plunge of over 6% in both whole and skim milk prices in December?



    Perhaps so. But I don't mind giving away growth opportunities if the downside risk of losing capital is too high. I am a buyer of Heartland shares at $1.40, not $1.80.

    SNOOPY
    Some good points there Snoops - not just relevant to Heartland but to the whole market per se.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  7. #12817
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by Snoopy View Post
    Heartland may not have the issues of the big Aussie banks. But it has other issues. It is still the bank with the most rural exposure as a percentage of their loan portfolio. Cashflow is much worse than other banks. As we get near the end of the business cycle some of the marginal loans at Heartland are more likely to become distressed than those made by the big banks. So in my mind no premium PE is warranted.

    I expect all banks to continue to trade at below market PEs and IMO, with the increased capital requirements and scrutiny, they deserve to. This is not a reason to take your capital out of other shares and put it into banks.



    I don't believe you should buy a share and justify your position by how well the return compares with today's government stock rate, I think you have to consider what the medium to long term outlook for interest rates is. Clearly interest rates are likely to be lower over the next ten years, on average, than they were over the last ten years. But does lower mean stuck at today's all time low levels? I think not. By justifying your share purchases by using today's interest rates, the only certainty you are locking in is that you are paying too much for your shares in the medium term.



    Perhaps, but the slow down has to come. If growth goes according to plan you can kiss good-bye to fully imputed dividends because most of that growth will come from Australia. Not that I see this as a problem. It is a natural consequence of Heartland's growth ambitions in Australia. A higher PE is more appropriate at the bottom of the business cycle, not at the top.



    Did you miss the auction price plunge of over 6% in both whole and skim milk prices in December?



    Perhaps so. But I don't mind giving away growth opportunities if the downside risk of losing capital is too high. I am a buyer of Heartland shares at $1.40, not $1.80.

    SNOOPY
    The same Aussie banks that lend billions for decades long LNG projects with no idea whether with commodity cycles whether it will be profitable or not ?
    The same Aussie banks that launder money for terrorist organisations and charge dead people fees and manipulate investors into a "diversified" portfolio made up entirely of their own financial products ?
    The same Aussie banks that are dangerously under capitalized according to the Reserve Bank of New Zealand ?
    ANZ has massive exposure to dairy as does Rabobank.
    HGH's dairy exposure is reducing. I try not to overreact to any one change in the dairy auction price these days, I learn from past mistakes unlike SUM dogs.

    Growth in Australia will be very strong but the bulk of their business is still in N.Z. so your claim of no imputation credits is baseless.

    I am comfortable with my own assessment of valuation for HGH. You've been worried about this stock ever since it was 85 cents when I first bought in.

    All banks have a mismatch in funding. They lend long and borrow short, its simply how it works and the vast majority of people roll their short term deposits over and over and when required various banks make their short term deposits more attractive than normal to get the funds required. This mismatch in funding you regularly go on about...I am sorry but it is needless worry.

    You don't understand the retirement sector at all...oh dear is all I will say.

    Thankfully this Beagle has his own nose to follow and my nose works.

    A forward PE of 13.5 for HGH is fair and reasonable in my opinion as is a gross yield of 7.5%. The average Aussie bank I follow is currently on a forward FY20 PE of 13 and I think a small PE premium is fully warranted for HGH. If you can't see the value at this level maybe you should sell ?
    I have just bought some more at $1.85 this week which tells you exactly what I think.
    Last edited by Beagle; 04-01-2020 at 10:37 AM.
    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

  8. #12818
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by percy View Post
    The drivel started on 20-07-2011.
    Any chance we could go back to kicking the ball instead of trying to hit the player? This sort of language is adding nothing of value. A disgrace to the poster using these words.
    ----
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  9. #12819
    percy
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    Quote Originally Posted by BlackPeter View Post
    Any chance we could go back to kicking the ball instead of trying to hit the player? This sort of language is adding nothing of value. A disgrace to the poster using these words.
    Was referring to the poster's posts on this thread,not the poster,who I went to the trouble of introducing to "our Jeff" at the last agm..
    Last edited by percy; 04-01-2020 at 11:54 AM.

  10. #12820
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    Quote Originally Posted by Beagle View Post
    The same Aussie banks that lend billions for decades long LNG projects with no idea whether with commodity cycles whether it will be profitable or not ?
    The same Aussie banks that launder money for terrorist organisations and charge dead people fees and manipulate investors into a "diversified" portfolio made up entirely of their own financial products ?
    Yes, you and I both know these Aussie banks have issues (although LNG is widely regarded as a suitable transition fuel on the way to to lower carbon economy, and all mineral prospecting has risk). Now that these issues are out in the open the Aussie banks can do something about them. I expect the behaviour of these Aussie banks to improve. I am not denying that the Aussie banks have issues.

    Quote Originally Posted by Beagle View Post
    The same Aussie banks that are dangerously under capitalized according to the Reserve Bank of New Zealand ?
    You are talking about the likes of ANZ,NZ. You cannot buy shares in ANZ.NZ. You have to buy shares in the whole group. The capitalization of the whole group is being dealt with by the Australian Reserve Bank.

    Quote Originally Posted by Beagle View Post
    ANZ has massive exposure to dairy as does Rabobank.
    HGH's dairy exposure is reducing. I try not to overreact to any one change in the dairy auction price these days, I learn from past mistakes unlike SUM dogs.
    Agricultural Loan Portfolio {A} Total Loan Portfolio {B} Percentage of Agricultural Loans {A}/{B]
    Heartland Group Holdings EOFY2019 $741.947m $4,787.079m 15.5%
    ANZ Bank EOFY2019 $38,562m $618,295m 6.2%

    What the above table doesn't show is that the ANZ 'agricultural' figure also includes mining. Take that out and you can see that it is likely that the rural exposure of HGH is very likely triple that of the parent ANZ, in relative terms.

    Quote Originally Posted by Beagle View Post
    Growth in Australia will be very strong but the bulk of their business is still in N.Z. so your claim of no imputation credits is baseless.
    I didn't say that. I said future dividends would likely not be fully imputed if the Australian expansion goes to plan. I am quite comfortable with this, if the growth strategy pans out.

    Quote Originally Posted by Beagle View Post
    All banks have a mismatch in funding. They lend long and borrow short, its simply how it works and the vast majority of people roll their short term deposits over and over and when required various banks make their short term deposits more attractive than normal to get the funds required. This mismatch in funding you regularly go on about...I am sorry but it is needless worry.
    I am not talking about Heartland Bank. I am talking about Heartland Australia the non-banking group with a BBB- credit rating (below the BBB of Heartland Bank). Heartland Australia has no access to depositors and is set up to run on wholesale funding entirely. You may not be worried about any funding mismatch but Jeff is. Furthermore Jeff is doing something to fix it. Perhaps you had better e-mail Jeff and tell him to cease and desist and stop wasting time?

    Quote Originally Posted by Beagle View Post
    A forward PE of 13.5 for HGH is fair and reasonable in my opinion as is a gross yield of 7.5%. The average Aussie bank I follow is currently on a forward FY20 PE of 13 and I think a small PE premium is fully warranted for HGH. If you can't see the value at this level maybe you should sell ?
    I thought about that. $1.85 is some 13% above my fair valuation. Many shares on the NZX are overvalued by that amount or more. When it gets to 20% above my fair valuation I will think again,

    SNOOPY
    Last edited by Snoopy; 04-01-2020 at 12:16 PM.
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