HGH - Heartland Group Holdings

[LaserEyeKiwi]

Interesting:

https://www.interest.co.nz/business/...e-improves-and

[Scrunch]

Interesting that ANZ sold UDC Finance to Shinsei Bank for 1.2x NTA.

Back in May 2020 ANZ was trading well below net assets and managed to sell a subsidiary for above NTA and in that context the sale looked sensible. Also if NZ/Oz did go into a deep recession, ANZ would have welcomed having the additional monies which may have enabled it continue lending normally and gain market share. The share price of ANZ has climbed sharply from its May 2020 low's. That climb started shortly after being at NZ16.40 on the 22nd of May (with the UDC sale announced 2 June). ANZ has returned to NZ$26.50 so is up 60% from where it was in May.

I'm pretty certain that if UDC was on-sold now, the price would be a lot more than 1.2x NTA.

For HGH economic conditions being better means total write-off's of loans are a lot smaller than earlier possibilities. Less write-off's mean bigger profits, and a higher share price.

[Snoopy]

Interesting:

https://www.interest.co.nz/business/...e-improves-and

The jump in the use of both the IRD borrowing scheme and bank assisted borrowing scheme is so recent, it won't have been reflected in the published Heartland results as yet.

With the Business Funding Guarantee Scheme (BFGS) (80% government guaranteed) ostensibly capped at $6.5billion, but only taken up to $1.3billion there is a lot of small business government funding available that is yet to be signed up for. The uptake on this scheme has been extended to June 2021. The average loan size under the scheme has been on the rise, hitting $541,993 at EOCY2020. Nevertheless $1.3billion is apparently only 0.8% of NZs business and agricultural loans.

We also have the Small Business Cashflow Loan Scheme (SBCLS) via the IRD with $1.7billion lent so far ($10,000 base loan plus $1800 for every full-time employee up to 50 employees). The average loan size was $16,265 at EOCY2020, with a maximum available of $100,000. In February, businesses will be able to get loans to invest in new equipment and digital infrastructure as well as operational expenses. Businesses have until December 31, 2023 to apply to the Inland Revenue for loans under this scheme. These loans are interest-free if repaid within two years. And a 30% loss of business over just a 14 day comparative period is now all that is needed to qualify. Just going for the annual holiday this year should do the trick.

The last disclosed O4B Heartland loan balance was $155m (PR2020 slide 16). So there is plenty of latent BFGS and SBCLS latent liquidity to wipe this O4B business unit out. The only people taking out O4B loans with Heartland in the future would have to be utter fools. Surely the increased availability of government backed business loans is terrible news for existing commercial lenders, the likes of Heartland especially?

SNOOPY

[Rawz]

The jump in the use of both the IRD borrowing scheme and bank assisted borrowing scheme is so recent, it won't have been reflected in the published Heartland results as yet.

With the Business Funding Guarantee Scheme (BFGS) (80% government guaranteed) ostensibly capped at $6.5billion, but only taken up to $1.3billion there is a lot of small business government funding available that is yet to be signed up for. The uptake on this scheme has been extended to June 2021. The average loan size under the scheme has been on the rise, hitting $541,993 at EOCY2020. Nevertheless $1.3billion is apparently only 0.8% of NZs business and agricultural loans.

We also have the Small Business Cashflow Loan Scheme (SBCLS) via the IRD with $1.7billion lent so far ($10,000 base loan plus $1800 for every full-time employee up to 50 employees). The average loan size was $16,265 at EOCY2020, with a maximum available of $100,000. In February, businesses will be able to get loans to invest in new equipment and digital infrastructure as well as operational expenses. Businesses have until December 31, 2023 to apply to the Inland Revenue for loans under this scheme. These loans are interest-free if repaid within two years. And a 30% loss of business over just a 14 day comparative period is now all that is needed to qualify. Just going for the annual holiday this year should do the trick.

The last disclosed O4B Heartland loan balance was $155m (PR2020 slide 16). So there is plenty of latent BFGS and SBCLS latent liquidity to wipe this O4B business unit out. The only people taking out O4B loans with Heartland in the future would have to be utter fools. Surely the increased availability of government backed business loans is terrible news for existing commercial lenders, the likes of Heartland especially?

SNOOPY

My understanding is the OB4 loans come with a double digit customer interest rate and is rather simple to obtain; i.e. online application form, no financials required, simple credit matrix tick box stuff. 24 hour turnaround.

Where as the BFGS comes with a 3-4% interest rate, financials/forecasts required, full credit assessment. Tough requirements.

I don't see BFGS stealing business away from O4B. They essentially target different customers even if G Robertson would have wanted the small businesses with 1-5 machinery units to access it.

I hear around mid 2020 Heartland hired up to 20 new employees on short contracts (9-12months) to jam through as many BFGS loans as they could, a big push to refinance customers from the main banks. 1) for volume 2) expose new customers to Heartland. And do it while the big 4 were cautious. So BFGS could well be a long term positive for Heartland.

However in saying all that I sold 80% of my HGH stash yesterday. Not so bullish as some on the this thread about the share price moving north of $2. (Put the funds back to work in equal portions into FPH and EBO).

[Snoopy]

My understanding is the O4B loans come with a double digit customer interest rate and is rather simple to obtain; i.e. online application form, no financials required, simple credit matrix tick box stuff. 24 hour turnaround.

Where as the BFGS comes with a 3-4% interest rate, financials/forecasts required, full credit assessment. Tough requirements.

Those 'tough requirements' sound more like 'good business practice' to me. O4B perhaps a bit slack?

I don't see BFGS stealing business away from O4B. They essentially target different customers even if G Robertson would have wanted the small businesses with 1-5 machinery units to access it.

I was thinking the Small Business Cashflow Loan Scheme (SBCLS), as run by IRD, was the greater competitor for O4B. Just take a two week holiday, then you are in. Couldn't be easier to qualify.

I hear around mid 2020 Heartland hired up to 20 new employees on short contracts (9-12months) to jam through as many BFGS loans as they could, a big push to refinance customers from the main banks. 1) for volume 2) expose new customers to Heartland. And do it while the big 4 were cautious. So BFGS could well be a long term positive for Heartland.

That is very interesting and we will see how it all worked out in the upcoming half year report. Or will we? Look at the graph on "Total Approved Limits for Business Finance Guarantee Scheme Loans.''

https://www.interest.co.nz/business/...e-improves-and

Hardly any traction on the scheme until October, and then the dollar value of loans in the scheme double in December. The costs of those contract employees may have come onto the balance sheet before the benefits have arrived!

However in saying all that I sold 80% of my HGH stash yesterday. Not so bullish as some on the this thread about the share price moving north of $2. (Put the funds back to work in equal portions into FPH and EBO).

You may have timed that right. I think HGH is looking very fully priced for FY2021 results. Today's pricing I predict will take eighteen months or so before it looks sensible. And there is some business execution risk in getting there. Time for me to pull out of the DRP?

SNOOPY

[nztx]

My understanding is the OB4 loans come with a double digit customer interest rate and is rather simple to obtain; i.e. online application form, no financials required, simple credit matrix tick box stuff. 24 hour turnaround.

Where as the BFGS comes with a 3-4% interest rate, financials/forecasts required, full credit assessment. Tough requirements.

I don't see BFGS stealing business away from O4B. They essentially target different customers even if G Robertson would have wanted the small businesses with 1-5 machinery units to access it.

I hear around mid 2020 Heartland hired up to 20 new employees on short contracts (9-12months) to jam through as many BFGS loans as they could, a big push to refinance customers from the main banks. 1) for volume 2) expose new customers to Heartland. And do it while the big 4 were cautious. So BFGS could well be a long term positive for Heartland.

However in saying all that I sold 80% of my HGH stash yesterday. Not so bullish as some on the this thread about the share price moving north of $2. (Put the funds back to work in equal portions into FPH and EBO).

Small Business Support Loans via IRD are now interest free for not one year but now two years - this amendment made by Robertson late 2020..

[winner69]

Global Dairy Trade update - global dairy prices surge

Just like Heartland's share price - surging towards 2 bucks

Both been rising since October

No worries

[RTM]

And there is some business execution risk in getting there. Time for me to pull out of the DRP?

SNOOPY

Long past it for me and I have been out for some time.
There are enough ups and downs in Heartlands share price to buy more, in a more meaningful way (bigger numbers and when you choose) , than the relatively small number I was getting through the DRP. Happy holder and enjoying the dividends.

[percy]

https://www.stuff.co.nz/business/300...rees-seek-cash

[Beau]

https://www.stuff.co.nz/business/300...rees-seek-cash

Thanks for sharing Percy good to read things going well for all involved.