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  1. #13701
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    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

  2. #13702
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    Final dividend was cut from last year's 6.5c to 2.5c
    My TD was recently rolled over from 3.2% to 1.2%

    Which income stream will recover more quickly?

  3. #13703
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    "It operating expenses rose 24.5 per cent to $106.8m largely due to increased staff expenses after it hired 23 new people during the June quarter."

    (Old Operating Expenses) x 1.245 = $106.8m => 'Old Operating Expenses" = $85.8m

    Incremental Increase in OE was: $106.8m - $85.8m = $21m. But those 23 new people were only hired during the fouth quarter, so the equivalent annualised increase was: 4 x$21m = $84m. So spread over the 23 new employees, the average amount spent on each new employee was:

    $84m / 23 = $3.65m per person

    WOW! I certainly chose the wrong profession. Even Jeff must be looking over his shoulder at the pay rates of those 23 new guys and gals. Even allowing for not all of that money going straight to salary, those new people are on a good wicket. Maybe Jeff just employed the whole 'black cap' squad without telling anybody?

    Is this really good journalism from the Herald?

    SNOOPY
    Last edited by Snoopy; 18-09-2020 at 09:00 AM.
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  4. #13704
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    Hey Snoopy, the only plausible explanation is the the N.Z. Herald shed 23 good quality journalists in the same period...which sadly, is probably not far from the truth...
    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. #13705
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    I wrote a few things about why this company's share price performs so badly but lost them when I didnt fire them through and my token got dropped. (I hope someone remembers to pick it up)

    Is it tainted by the NZ Finance Company failure era
    Is it the poor cash flow Snoopy despairs over
    Or is it all smoke and mirrors ?

    Lets face it the graph is poo
    Attachment 11948

    massive resistance at 1.50
    though if it could get through that it would be positive and then act as strong support.

    sorry I forgot to remove all my indicators , currently having a bit of a play with them....
    Last edited by peat; 18-09-2020 at 10:05 AM. Reason: apologies for indicators
    For clarity, nothing I say is advice....

  6. #13706
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    Quote Originally Posted by peat View Post
    this justification of not paying full divi due to RB restrictions sounds like a bit of a crock to me. Hadnt they specifically stated they werent affected because they werent a bank they're a holding company that owns a bank. I get they may not want to pay out a divi - at least there is no cash raise huh! - but I didnt think they were restricted from paying one, and yet here it appears they are fobbing us off with that excuse
    I don't think it is a fob off Peat. The structure is that Heartland Group Holdings (HGH) are 100% owners of Heartland Bank (HBL). The NZ Govt has directed that banks registered in NZ are not allowed to pay dividends until further notice. So HBL cannot pay a dividend to HGH.

    HGH can still pay a dividend by either:

    1/ Paying the dividends from the profit of their Australian operations OR
    2/ Borrowing to pay a dividend.

    Given the non cashflow positive nature of the fast growing REL business, and the fact that they just two days ago HGH announced new beefed up loan facilities, I would guess they plan to do the latter. HBL looks nicely profitable for now. But they aren't allowed to pay out a dividend to HGH by law. And that means there is no way for Heartland shareholders to get cashflow access to HBL's profitability. I see no sop here.

    SNOOPY
    Last edited by Snoopy; 18-09-2020 at 10:14 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

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    Quote Originally Posted by peat View Post
    I wrote a few things about why this company's share price performs so badly but lost them when I didnt fire them through and my token got dropped. (I hope someone remembers to pick it up)
    Your thoughts may still be there Peat. Did you know that Sharetrader periodically automatically saves posts as you are writing them? So if you get logged out, go back to the post you were replying to, hit 'Reply' and an option on the bottom corner of the page should come up. 'Restore Autosaved Content'. Has worked for me in the past.


    SNOOPY
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  8. #13708
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    Default Reverse Mortgage Business for FY2021f

    Quote Originally Posted by Snoopy View Post

    In light of my realization that 0% growth in the Reverse Mortgage portfolio actually equates to some 6.7% receivables growth (because all of the interest is compounded, not collected) I am redoing the 'Reverse Mortgage' profit calculation that I fed into this Scenario.

    2/ Reverse Mortgage Adjustment

    I had assumed a 'steady' Reverse Mortgage market. But because the interest on Reverse Mortgages are compounded and not collected, even a steady Reverse Mortgage market means the receivable book will grow by about 6.7% per year. I am going to add to this an extra 2.5% increment (for a total of 9.2%) to model a modest real growth in the reverse mortgage portfolio going forwards,

    Reverse Mortgage Balance at EOFY2019: $1,318.8m

    Reverse Mortgage Balance at EOFY2021: $1,318.8m x 1.092 x 1.092 = $1,572.6m
    Incremental Receivable Gain EOFY2019 to EOFY2021: $1,572.6m - $1,318.8m = $253.8m

    Incremental Profit Gain from EOFY2019 to EOFY2021 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $253.8m = $33.0m

    Reverse Mortgage Balance at EOFY2022: $1,318.8m x 1.092 x 1.092 x 1.092= $1,717.3m
    Incremental Receivable Gain EOFY2019 to EOFY2022: $1,717.3m - $1,318.8m = $398.5m

    Incremental Profit Gain from EOFY2019 to EOFY2022 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $398.5m = $51.8m
    Above is my 'base case' Scenario 2b.

    I have come to the conclusion during my Scenario Analysis' modelling that it is going to be the reverse mortgage business that drives the profitability of Heartland over the next couple of years. But it does fly under the radar a bit. We shareholders really don't know how it is going until the full and half year announcements.

    As announced yesterday, at EOFY2020, the total NZ and Australian Reverse Mortgage Balance was: $560m +$958m = $1,518m. So we are almost at my modelled 'base case' reverse mortgage balance for EOFY2021 a year early.

    Below is my 'optimistic' scenario 3

    Quote Originally Posted by Snoopy View Post

    2/ Reverse Mortgage Adjustment

    I had assumed a 'steady' Reverse Mortgage market. But because the interest on Reverse Mortgages are compounded and not collected, even a steady Reverse Mortgage market means the receivable book will grow by about 6.7% per year. I am going to add to this an extra 8% increment (for a total of 14.7%) to model continuing growth in the reverse mortgage portfolio going forwards, This is a similar growth rate to what actually occurred over FY2019.

    Reverse Mortgage Balance at EOFY2019: $1,318.8m

    Reverse Mortgage Balance at EOFY2021: $1,318.8m x 1.147 x 1.147 = $1,735.0m
    Incremental Receivable Gain EOFY2019 to EOFY2021: $1,735.0m - $1,318.8m = $416.2m

    Incremental Profit Gain from EOFY2019 to EOFY2021 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $416.2m = $54.1m

    Reverse Mortgage Balance at EOFY2022: $1,318.8m x 1.147 x 1.147 x 1.147 = $1,990.1m
    Incremental Receivable Gain EOFY2019 to EOFY2022: $1,990.1m - $1,318.8m = $671.3m

    Incremental Profit Gain from EOFY2019 to EOFY2022 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $671.3m = $87.3m
    The above scenario is modelling a reverse mortgage portfolio growth rate of: $1,735m/$1,518m = 14.3% over FY2021. Even allowing for slowing portfolio percentage growth as the REL portfolio grows in absolute size, that looks believable when you consider the REL portfolio growth rate over FY2020

    $1,518m/ $1,319m = 15.1%

    and over FY2019

    $1,319m/$1,115m = 18.3%

    Switching the new 'base case' to the old 'optimistic' scenario for Reverse Mortgages equates to a boost of NPAT profit of $21m for FY2021, and that is significant. At the same time the old 'base case' becomes the new pessimistic scenario.

    I will now need a new 'optimistic' scenario.

    A steady Reverse Mortgage market means the receivable book will grow by about 6.7% per year. I am going to add to this an extra 10% increment (for a total of 16.7%) to model continuing growth in the reverse mortgage portfolio going forwards, This is a similar growth rate to what actually occurred over FY2019.

    Reverse Mortgage Balance at EOFY2019: $1,318.8m

    Reverse Mortgage Balance at EOFY2021: $1,318.8m x 1.167 x 1.167 = $1,796.0m
    Incremental Receivable Gain EOFY2019 to EOFY2021: $1,796.0m - $1,318.8m = $477.2m

    Incremental Profit Gain from EOFY2019 to EOFY2021 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $477.2m = $62.0m

    Reverse Mortgage Balance at EOFY2022: $1,318.8m x 1.167 x 1.167 x 1.167 = $2,096.0m
    Incremental Receivable Gain EOFY2019 to EOFY2022: $2,096.0m - $1,318.8m = $777.2m

    Incremental Profit Gain from EOFY2019 to EOFY2022 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $777.2m = $101.0m

    SNOOPY
    Last edited by Snoopy; 02-10-2020 at 08:03 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  9. #13709
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    Quote Originally Posted by Bjauck View Post
    Final dividend was cut from last year's 6.5c to 2.5c
    My TD was recently rolled over from 3.2% to 1.2%

    Which income stream will recover more quickly?
    Good question. I would bet on Heartland stock.
    In addition your capital stands a reasonable chance of appreciating as well.
    No chance with TD.
    Good luck.

  10. #13710
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    Quote Originally Posted by Snoopy View Post
    I don't think it is a fob off Peat. The structure is that Heartland Group Holdings (HGH) are 100% owners of Heartland Bank (HBL). The NZ Govt has directed that banks registered in NZ are not allowed to pay dividends until further notice. So HBL cannot pay a dividend to HGH.

    HGH can still pay a dividend by either:

    1/ Paying the dividends from the profit of their Australian operations OR
    2/ Borrowing to pay a dividend.

    Given the non cashflow positive nature of the fast growing REL business, and the fact that they just two days ago HGH announced new beefed up loan facilities, I would guess they plan to do the latter. HBL looks nicely profitable for now. But they aren't allowed to pay out a dividend to HGH by law. And that means there is no way for Heartland shareholders to get cashflow access to HBL's profitability. I see no sop here.

    SNOOPY
    Thanks for that Snoopy. I was wondering as well.

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