HGH - Heartland Group Holdings

[Snoopy]

Hey Snoops .....with these HER loans have you ever thought of considering the time value of the cash flows of say a 10 year duration?

Could be an interesting exercise for you on a cold winters afternoon after the chores have been done.

Without doing the maths, the gist of your proposal is that earnings from reverse mortgages in the future should be discounted back to the present day because cash back in the future is worth less than cash today. I agree with that in principle, but the mechanics of 'coming up with a number' seems more difficult. Let me outline what I do know as a starting point.

1/ Reverse Mortgages are lumped in with the 'Households' financial receivables. Those total $1,717.407m at balance date, of which $516m + $405m = $921m (just over half) are Reverse Mortgages.
2/ Reverse mortgages income is 'booked' year to year but not collected until the homeowner moves out. This means a reverse mortgage payment is always 'on time' and any non payment trouble will only be booked when the homeowner moves out at the end of the contract.
3/ For assessment of credit worthiness, Reverse Mortgages are part of the 'behavioural portfolio' of loans. Because of the way these loans are structured, I imagine they are always classed as 'Not in Arrears'.

I imagine the Reverse Equity 'income' must be accumulating as an asset on the Heartland balance sheet. Is it under 'Capitalised Net Interest Income' (not separately listed as a balance sheet item, but mentioned in the 'Reconciliation of Profit after tax to net cash flows from Operating Activities')? That was $32.221m over FY2017 (AR2017 p16).

The average Australian reverse mortgage balance over the year was:

($516m + $434m)/2 = $475m

The average New Zealand reverse mortgage balance over the year was:

($405m + $362m)/2 = $384m

So the average interest rate charged over all these reverse mortgages was:

$32.221m / ($475m + $384m) = 3.75% !??!??!!!!!

That can't be right!

SNOOPY

[winner69]

Hope Heartland aren’t going to do this to me

They’ve never asked me to fill in any forms ......been a pain doing it for other banks

https://www.nzherald.co.nz/personal-...ectid=12081478

[percy]

Hope Heartland aren’t going to do this to me

They’ve never asked me to fill in any forms ......been a pain doing it for other banks

https://www.nzherald.co.nz/personal-...ectid=12081478

Well I certainly trust they will.
Hate for them to loose their banking licence because of you..!!!! …..lol.

[winner69]

Well I certainly trust they will.
Hate for them to loose their banking licence because of you..!!!! …..lol.

I take it you have already disclosed you not a foreign taxpayer

I was a bit surprised they have never asked me ...a bit slack maybe

Didn’t the Risk Officer (usually in charge of such things) leave recently

[percy]

I take it you have already disclosed you not a foreign taxpayer

I was a bit surprised they have never asked me ...a bit slack maybe

Didn’t the Risk Officer (usually in charge of such things) leave recently

Recently we shifted houses.
Had to supply Craigs with proof of address.Not easy when I do not have a printer and most accounts are now sent via email.
Also had to sign a new form for trading on NZ Unlisted market,virtually stating I realised Unlisted was still the wild west.!
So forms are still very much of everyday life.

[peat]

Recently we shifted houses.
Had to supply Craigs with proof of address.Not easy when I do not have a printer and most accounts are now sent via email.
Also had to sign a new form for trading on NZ Unlisted market,virtually stating I realised Unlisted was still the wild west.!
So forms are still very much of everyday life.

Indeed Percy, same boat here
The council obligingly sent me a notification of rates costs via the post so I used that.

I personally think HBL will go a bit lower yet, (though I have some, and wont sell them)
Possibly as low as $1.40 though maybe only $1.60

[RTM]

I personally think HBL will go a bit lower yet, (though I have some, and wont sell them)
Possibly as low as $1.40 though maybe only $1.60

As long as the dividend per share is maintained or increased....I really can’t see the SP dropping a lot further. Well.... that’s what I’m hoping anyway. They are to big a part of my portfolio to double down on should they reach < $1.50. Maybe I’ll turn off my computer for a couple of months.
Yeah right !

[percy]

Indeed Percy, same boat here
The council obligingly sent me a notification of rates costs via the post so I used that.

I personally think HBL will go a bit lower yet, (though I have some, and wont sell them)
Possibly as low as $1.40 though maybe only $1.60

I am sure the HBL share price will fluctuate over the next year or two.
The only certainty is the increasing fully imputated divies……………….lol.

[couta1]

I am sure the HBL share price will fluctuate over the next year or two.
The only certainty is the increasing fully imputated divies……………….lol.

Irrational/Loopy equals overdone fluctuations.

[Snoopy]

Hey Snoops .....with these HER loans have you ever thought of considering the time value of the cash flows of say a 10 year duration?

Could be an interesting exercise for you on a cold winters afternoon after the chores have been done

This is the most recent report on Weighted Average Cost of Capital that I could find Winner

https://www.pwc.co.nz/pdfs/2017pdfs/...inter-2017.pdf

WACC for Heartland was 7.4%

Heartland's current variable rate applied to Reverse Mortgages can be found here:

https://www.seniorsfinance.co.nz/rev...age-calculator

The rate is 7.82%, is very close to the Heartland WACC discount rate.

So charging for future interest in the 'mid sevens' and discounting that future year income by a factor in the 'mid sevens' means the present value of that future income is close to zero. Using 'present value' accounting the cashflow from the Reverse Mortgage business is a product of a fractional difference' and is almost worthless. Is that how you see it Winner?

SNOOPY