HGH - Heartland Group Holdings

[King1212]

All big bosses bought more!

[iceman]

All big bosses bought more!

I give them credit for sending the right signal

[winner69]

Open4Business going to be busy

Government underwriting a large % of each biz loan to keep small and medium businesses afloat

This right up Heartlands alley.

The nimble and those that make it easy are the winners

And it’s NZers helping NZers ...cool eh

And the market likes it

[Snoopy]

Open4Business going to be busy

Government underwriting a large % of each biz loan to keep small and medium businesses afloat

I must admit the full significance of this passed me by last week. I was under the impression that new business loans would be dead in the water for a long time. But this government policy effectively -mostly- socialises the risk and privatises the profits for any rag tag business loan!

https://www.interest.co.nz/opinion/1...ebtcredit-taps

"The latest government assistance is Finance Minister Grant Robertson's announcement of a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses (SMEs)."

"The Business Finance Guarantee Scheme has a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum, with loans for up to three years to be provided "at competitive, transparent rates." The Government/taxpayer takes on 80% of the credit risk, and banks 20%."

This is right down the middle of the road for O4B. Although the banks are ostensibly open, as I found out yesterday, all my local branches are closed with a notice up effectively saying 'do your banking on line'. Am I correct in saying that there is only one bank that will approve business loans on line?

Jeff might as well have drafted the small business support policy himself. I am not sure if I should now refer to Jeff as "Associate Finance Minister" or Grant Robertson as "Joint CEO of Heartland Bank". Either way I can see nothing but good coming out of this for Heartland shareholders. Jeff does it again!

SNOOPY

PS If I were Jeff, I would be refinancing some of those dodgy SME loans already on the Heartland books quick smart!

[SCOTTY]

I must admit the full significance of this passed me by last week. I was under the impression that new business loans would be dead in the water for a long time. But this government policy effectively -mostly- socialises the risk and privatises the profits for any rag tag business loan!

https://www.interest.co.nz/opinion/1...ebtcredit-taps

"The latest government assistance is Finance Minister Grant Robertson's announcement of a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses (SMEs)."

"The Business Finance Guarantee Scheme has a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum, with loans for up to three years to be provided "at competitive, transparent rates." The Government/taxpayer takes on 80% of the credit risk, and banks 20%."

This is right down the middle of the road for O4B. Although the banks are ostensibly open, as I found out yesterday, all my local branches are closed with a notice up effectively saying 'do your banking on line'. Am I correct in saying that there is only one bank that will approve business loans on line?

Jeff might as well have drafted the small business support policy himself. I am not sure if I should now refer to Jeff as "Associate Finance Minister" or Grant Robertson as "Joint CEO of Heartland Bank". Either way I can see nothing but good coming out of this for Heartland shareholders. Jeff does it again!

SNOOPY

PS If I were Jeff, I would be refinancing some of those dodgy SME loans already on the Heartland books quick smart!

Good post Snoopy

[Beagle]

Finance company type lending and especially unsecured loans do very poorly in a deep recession. My concern with HGH is the amount of unsecured lending on its books.
There's no question in my mind some of their Harmoney type lending (and not just through Harmoney), ends up causing a lot of disharmony for HGH down the track.
They are well capitalised and the RBNZ is standing behind the banks offering an open tap with liquidity and propping up a lot of households and business so they should get through this okay, but not without a substantial increase in bad and doubtful debts.

I think the current share price is about fair value, (not cheap), and not out of line with falls in Australian banks. The key question is whether there is another big wave of selling coming from the US off the back of what could be horrendous virus impacts coming for them ?

[Cyclical]

The key question is whether there is another big wave of selling coming from the US off the back of what could be horrendous virus impacts coming for them ?

That's the question alright. The 3 day long dead cat bounce was on a downward trajectory on Friday, even off the back of Trump's $2T lolly scramble...I'm half expecting that to continue into the new week. And if it's not a rapid sell down like they just had, then we'll probably see a slower prolonged trend downward. Either which way, it's going down, or so my Trump gut tells me anyway.

Things have been moving so fast that I don't think people have really got their head around the long term implications of this event just yet. A correction was well overdue anyway and this virus is only going to magnify it. And I think NZ will be the tail of the dog in terms of a recovery, especially if this shutdown works and we stamp out the virus, as our borders will be shut until we're vaccinated, while other countries take the loss of life on the chin and re-open the gates.

Anyway, given my grim outlook, target price for me on HGH has to be low 80 something.

[Snoopy]

Anyway, given my grim outlook, target price for me on HGH has to be low 80 something.

IIRC HGH has been in the mid 80c range in intraday trading already. Your price target may end up being correct Cyclical. So what is your strategy from this? Buy at 81c (to get one step ahead of the round number brigade bidding at 80c). Or if it gets to 85c, do you revise your bid down to 75c? I guess it all depends on how much of what you think is focussed on the moment. If you regard Heartland as having a future (and I accept there may be those out there who don't) I think you have to focus on what it will look like coming out the other side.

I bought some HGH shares (my second tranche) at $1.46, right near the start of the COVID-19 downturn. Do I regret this? Well with the benefit of hindsight the answer would be yes, but no-one ever invests with hindsight. So I don't regret it at all because I was buying a business cycle dividend yield with a suitable discount (at the time) for safety. It may be the new business cycle resets at a lower base level. But the level of that cannot be predicted in advance, so I still have no regrets. It is very easy to beat yourself up on what, with hindsight, look like poor investment decisions in a way that is totally unjustified.

More recently I bought a third tranche of HGH shares at $1.10. I probably could have paid a bit less. But coming out of this, whether I bought in at $1.20 or $1 or even less is not going to be material IMO. HGH has a stable core of business that is not going to fall off the edge of the cliff next week. And 'agile Jeff' with his return to old fashioned mortgages and now the shutdown restricted monopoly that Heartland has on new business loans is changing the business to match the new environment. I think some investors think that Jeff is just sitting at his desk at head office waiting to be hit with a COVID-19 sledgehammer. It ain't so.

SNOOPY

[Snoopy]

I think the current share price is about fair value, (not cheap), and not out of line with falls in Australian banks. The key question is whether there is another big wave of selling coming from the US off the back of what could be horrendous virus impacts coming for them ?

That's the question alright. The 3 day long dead cat bounce was on a downward trajectory on Friday, even off the back of Trump's $2T lolly scramble...I'm half expecting that to continue into the new week. And if it's not a rapid sell down like they just had, then we'll probably see a slower prolonged trend downward. Either which way, it's going down, or so my Trump gut tells me anyway.

A lot of speculation here centered on Trump. I would suggest you quit speculating and wait until the next AGM and put the questions to Trump himself! Oh, I almost forgot. Trump isn't on the HGH board. Market prices of shares at times like this are so volatile it is a fair guess that buying at any particular time is unlikely to reflect future HGH business reality.

I doubt if selling or buying in the US over the next week will have any effect on the business of HGH in a years time. I am not saying that HGH will be trading in a years time as though nothing has happened. Remember the HGH share price has already reduced substantially. I am saying it is a time for careful accumulation. And largely unconnected hysteria in US markets could provide the opportunity for savvy NZ investors to do just that.

SNOOPY

[Snoopy]

Things have been moving so fast that I don't think people have really got their head around the long term implications of this event just yet. A correction was well overdue anyway and this virus is only going to magnify it. And I think NZ will be the tail of the dog in terms of a recovery, especially if this shutdown works and we stamp out the virus, as our borders will be shut until we're vaccinated, while other countries take the loss of life on the chin and re-open the gates.

I agree Cyclical that a correction is well overdue. So lets take some time to try and figure out what Heartland might look like coming out the other side. I will start.

From a 'market perspective', I think any hope of HGH trading at a 'premium' to other finance sector shares is gone.

From an operational perspective, I expect the reverse mortgage business to grow because it is one of the few ways for older NZers and OZers to access capital. They may even do it to help bail out their son's and daughter's businesses as the only source of wider family finance!

I expect the new car market will be hit hard and that will affect Heartland's motor industry finance going forwards. I don't expect existing customers to stop paying their loans as their car may be their only escape (and way to get to a job interview) from lock down for the unemployed, OR the safest way to get to work for those still employed. No-one will be keen to repossess cars, because who are they going to sell them on to? Better to work out an arrangement with your existing customers, even if Heartland has to take their share of a hit while doing it. For customers on lease arrangements, that end of lease residual value of the vehicle could be an issue for Heartland.

Providing seasonal rural financing looks to remain a strong pillar of the business. The competitive advantage that competitors 'Allied Farmers' and 'PGG Wrightson' had is now gone with the physical sale yards being closed own. From being a weak third player, Heartland, without any restriction about buying and selling through the same agent like their competitors, looks to have moved to market position of relative advantage in 'paddock to paddock' livestock sales.

I agree with Beagle that some of those Harmony unsecured P to P loans might be in trouble. But what proportion of Heartland's loan book will this effect?

Some thoughts off the top of my head. Not all of them bad. Interested to hear where other Heartland shareholders think HGH is going.

SNOOPY