HGH - Heartland Group Holdings

[minimoke]

And increases the diversity of thinking within the management team. That is good.

A cabbage would increase the diversity - and that aint necessarily good

And women are often said to be better at managing money than men ...good attribute for a CFO

You are a braver person than I am coming up with a stereotype like that!

[kiwico]

That she belongs to a "Womens Club" (Global Women) should enable her to hold no opposition if someone wants to join a Mens Club.

But you'll find that not her being able to access the latter would be a breach under our Human Rights Act but it would not be a breach if you were refused access to the former. [We have quite a racist and sexist Human Rights Act.]

[SilverBack]

We know the Australian banks are facing quite a potential challenge from RBNZ in terms of their capital ratio, whereas even if RBNZ go to a 15% capital HGH can get there through its DRIP alone over the next 5 years.

If we look at the following three year forward PE comparison which is the average analyst view as presented on Market screener we see that generally speaking and taking the below Australian banks as a representative sample, there is no forecast eps growth for the Australian banks, actually a forecast 1.7% decline (average forward PE FY19 11.7, average forward PE FY21 11.9).

Comparing this with HGH we see the forward PE improving from FY19 of 12.3 to FY21 of 10.7 a 13% earnings improvement forecast over that 2 year period, average 6.5% per year.

Further, by FY21 HGH's PE at 10.7 will be 10% lower (10.7 v 11.9) than the Australian banks despite its quite considerably superior average growth rate.

Interestingly this compares with the FY19 PE being at 12.3 v the sector average of 11.7. I would at least expect that modest PE premium (5%) to be maintained so over the next two years I expect HGH to outperform the average performance of the Australian banks by ~ 15-20%.

The current modest PE premium to the sector average looks a little light to me given the seriousness of the capital adequacy challenge faced by the Australian banks with their operations here. I think HGH is an accumulate for growth and expect the forward yield to be 8.5% gross at the price of $1.55 assuming average forward dividends of 9.5 cps annually over the forecast period.
PE's for FY19, FY20, FY21
NAB 10.8, 10.3, 10.6
WBC 11.9, 11.0, 11.3
ANZ 11.2, 11.0, 11.3
CBA 12.8, 13.2, 13.8
BEN 11.7, 11.8, 12.2
BOQ 11.8, 12.0, 12.4
HGH 12.3, 11.4, 10.7

Full imputation credits are of course only available on HGH.
My rating is now accumulate.

P.S. I see fair value now at $1.62 and my one year price target is $1.73.

Maybe the forward looking PEs are worth considering (estimations after all) but what about the credit ratings? HGH is on BBB from Fitch while ANZ, BNZ, ASB/CBA, WBC are on AA- or equivalent from S&P, Fitch and Moodys. In case you think this does not matter, I still smart from losing on South Canterbury with a BBB rating (investment grade, remember).

[iceman]

We know the Australian banks are facing quite a potential challenge from RBNZ in terms of their capital ratio, whereas even if RBNZ go to a 15% capital HGH can get there through its DRIP alone over the next 5 years.

If we look at the following three year forward PE comparison which is the average analyst view as presented on Market screener we see that generally speaking and taking the below Australian banks as a representative sample, there is no forecast eps growth for the Australian banks, actually a forecast 1.7% decline (average forward PE FY19 11.7, average forward PE FY21 11.9).

Comparing this with HGH we see the forward PE improving from FY19 of 12.3 to FY21 of 10.7 a 13% earnings improvement forecast over that 2 year period, average 6.5% per year.

Further, by FY21 HGH's PE at 10.7 will be 10% lower (10.7 v 11.9) than the Australian banks despite its quite considerably superior average growth rate.

Interestingly this compares with the FY19 PE being at 12.3 v the sector average of 11.7. I would at least expect that modest PE premium (5%) to be maintained so over the next two years I expect HGH to outperform the average performance of the Australian banks by ~ 15-20%.

The current modest PE premium to the sector average looks a little light to me given the seriousness of the capital adequacy challenge faced by the Australian banks with their operations here. I think HGH is an accumulate for growth and expect the forward yield to be 8.5% gross at the price of $1.55 assuming average forward dividends of 9.5 cps annually over the forecast period.
PE's for FY19, FY20, FY21
NAB 10.8, 10.3, 10.6
WBC 11.9, 11.0, 11.3
ANZ 11.2, 11.0, 11.3
CBA 12.8, 13.2, 13.8
BEN 11.7, 11.8, 12.2
BOQ 11.8, 12.0, 12.4
HGH 12.3, 11.4, 10.7

Full imputation credits are of course only available on HGH.
My rating is now accumulate.

P.S. I see fair value now at $1.62 and my one year price target is $1.73.

Good post Beagle. No question in my view that HGH is and has been for a long time, a very good long term investment. Probably quite fully priced at the moment but a good steady dividend payer.
Having said that, I am a little intrigued that HGH is relying quite a lot on SH taking up the DRIP with regard to the expected capital ratio. Would it not be more prudent to simply lower the dividend payout ? I realise this would not go down well with many SH but how will the deal with it if SH do not take up the DRIP ?

[dabsman]

Good post Beagle. No question in my view that HGH is and has been for a long time, a very good long term investment. Probably quite fully priced at the moment but a good steady dividend payer.
Having said that, I am a little intrigued that HGH is relying quite a lot on SH taking up the DRIP with regard to the expected capital ratio. Would it not be more prudent to simply lower the dividend payout ? I realise this would not go down well with many SH but how will the deal with it if SH do not take up the DRIP ?

Correct me if I'm wrong (and every ex-gf would assume I was) but arent they talking about current DRP uptake? Not if everyone was on DRP?

[Beagle]

Good post Beagle. No question in my view that HGH is and has been for a long time, a very good long term investment. Probably quite fully priced at the moment but a good steady dividend payer.
Having said that, I am a little intrigued that HGH is relying quite a lot on SH taking up the DRIP with regard to the expected capital ratio. Would it not be more prudent to simply lower the dividend payout ? I realise this would not go down well with many SH but how will the deal with it if SH do not take up the DRIP ?

Thanks Iceman. DRIP current level of take-up is sufficient to achieve the current RBNZ's target capital rate of 15% but I expect the RBNZ will lower that rate.
DRIP take-up rates can be encouraged if necessary, as I am sure you appreciate, through varying the discount level of new shares in lieu of dividend.
I think a lot of retired and semi retired folk rely on the dividend income from high yielding stocks like HGH to support a comfortable lifestyle and its likely that the directors of HGH are cognisant of that. I don't think they need to do anything. Shares currently right about fair value in my opinion.

[winner69]

Interesting article

Nothing to do with Heartland but interesting

https://www.smh.com.au/business/bank...04-p51k1i.html

[peat]

And increases the diversity of thinking within the management team. That is good.

A cabbage would increase the diversity - and that aint necessarily good

A cabbage would not increase the 'diversity of thinking' so you'll need to be a little more inventive and try to reduce the number of angry-old-man rant farts

Quite frankly - it still makes me nervous how David Mackrell came and went so quickly

[peat]

Interesting article

https://www.smh.com.au/business/bank...04-p51k1i.html

Is there any particular reason why you put this article about BS'ers into the HGH thread?

re that article though I'd be much more interested in the results from an older sample of people. Teenagers are notorious BS'ers , and I note that I would've claimed expertise in at least two of those three fictitious areas of maths. And I dont consider myself a BS'er (though self evaluation is often flawed).

[minimoke]

A cabbage would not increase the 'diversity of thinking' so you'll need to be a little more inventive and try to reduce the number of angry-old-man rant farts

You must have missed the diversity memo. Its all about difference from the norm and nothing about competence