HGH - Heartland Group Holdings

[nevchev]

Mr market is either unimpressed or slow to react.

[Beagle]

Very good result considering most of the Aussie banks got downgraded.

[nevchev]

What am i not seeing with this!!!Good news from Fitch,reasonable divy and good management but know market interest😕

[Beagle]

What am i not seeing with this!!!Good news from Fitch,reasonable divy and good management but know market interest��

Well seeing as you ask I will opine, (not facts, just my opinion). RBNZ has said they are not allowed to pay dividends until they get permission from them which may not be forthcoming for quite some time. Banks in Australia and the US as a group are down about 40% because basically banks are going to suffer a lot of loan defaults through this Covid 19 thing. HGH are down in line with other banks in terms of the percentage drop so they're not cheap per se, they just appear to be.
Another reason is we don't have Percy regularly "supporting" this stock any more and I'd wager a lot of other regulars on here are also out, including myself.
Many people own banks stocks for their reliable dividends...it turns out they're not reliable. My 2 cents.
Disc: Not holding.

[nevchev]

I thought Heartland group holdings could still pay a divy if they thought appropriate?

[Nasi Goreng]

They might be able to find a loophole to do so, but if they did pay divi, I imagine will get some bad press if they have had government support. I wonder how much of the old divi went back into the reinvestment plan, and in which case might not effect all shareholders as the net effect might be the same.

If they retain earnings and you need cashflow, simply sell 2% of your holdings every 6 months.

[ziggy415]

I thought Heartland group holdings could still pay a divy if they thought appropriate?

that's the way I read it too...only the bank part of hgh is constrained paying divvy

[Beagle]

Who can say for sure on the divvy front but the new IFRS reporting standard, sorry can't remember which number it is, requires them to book expected Covid 19 losses up front so you can expect substantial provisioning for this when they announce their year end result in August. Check out some of the provisioning the Australian banks have been doing !
I'm very cautious with this one as basically banks become a form of social welfare organisation for business in really tough times. They will be "supporting" a lot of business's at this point in time and many won't make it. A lot of the massive amount of finance company style unsecured lending through Harmoney is going to come unstuck with massive unemployment and a lot vehicle financing is going to be problematic too. We live in VERY interesting times !

Anyway, that's my 2 cents. I am not trying to talk it down and have learned not to be too dogmatic when it comes to expressing a negative opinion on a stock.
Disc: No holding, not short and don't want shares at a lower price either.

[ziggy415]

I completely forgot about harmoney lending....that maybe become a problem....not so sure about vehicle lending going bad but levels will be down for a while ..interesting times for sure

[Baa_Baa]

At only 5% of receivables $250m, Harmoney (including other consumer lending) is probably the lesser of their worries, with potential defaults in business and motor vehicle loans (representing a combined 47% $2133m receivables).

Heartland Receivables (Dec 2019)	$M	%
Reverse Mortgages	$ 1,424	31%
Motor Vehicle Finance	$ 1,124	25%
Harmoney & other consumer lending	$ 250	5%
Business Finance	$ 1,009	22%
Open for Business	$ 158	3%
Rural Finance	$ 621	14%
total	$ 4,586

Attachment 11175

Thanks for putting things in proportion Baa baa. $250m is not a lot for Harmony in the big picture. Incidentally, I went over to the P to P forum and saw that Harmony P to P for most of us is closing down. You can still borrow as a 'P' but to get on the lending side you now require a minimum of $10m. There aren't too many, even on this forum, able or willing to splash out that much on lending via Harmony. Harmony losses may not be so bad because, as a part owner of Harmony, Heartland 'clips the ticket' on each loan they write by part owning the Harmony platform. That income stream is independent of what happens to the loan down the track.

'Business Finance' must be a worry. The problem here is that many of these loans would have been taken out in a business environment that could not have conceived of a business lock down such as we are in now. Having no revenue does not mean you are an incompetent business person today. For example, what would be the point in bankrupting a mall store owner, then on selling the bankrupt's assets to a new store owner who may be less competent? And who would take on a lease in a mall that is closed, and liable to be closed again at short notice anyway? The only solution I can see to this is a multi-party solution. Banks, premesis owners, and business operators will have to work together and take a 'joint hit'. If they don't then all three will lose, and lose big time. OK banks might get their money back, but then they will have no-one to lend to. I think we are going to have to move out of the lock down phase before anything can happen. 'And Grant Robertson has provided the liquidity to allow everyone to wait. And if there is no light after six weeks, Robertson will provide more liquidity. 'Liquidating at the bottom' would be three way commercial suicide for business owners and landlords and banks alike.

Motor vehicle loans is likely to be more of a slow moving problem. There will be no appetite to repossess a whole lot of vehicles en masse. In this environment there would be no-one to sell them to. Better to let things slow burn, and even put aside some car payments, deferring them to the end of the lease when a lump sum of capital becomes available. It is very hard to form a meaningful view of what happens to a motor loan that expires in 2-3 years. Kicking the loan down the road looks like the only short term solution.

Suddenly 'rural finance' looks relatively safe. Who would have picked that two or three years ago! Maybe time to return the HGH AGM to Ashburton?

SNOOPY

Recently we talked about 'exposure', and Harmoney will be the least of their worries.