With the increasing house prices must make Heartland reverse mortgage look more compelling for both borrowers and lender , surely should reflect in share price .
Vaccine is successful.. will see covid bad debts less risky
Us n europe banks are up 15 persen
$1.80...here we come!
Financials do have a very high Covid beta as they are very sensitive to the economic effects of Covid on their customers and the opposite, to the recovery prospects that vaccines give hope for so its is very surprising to note that while many US, European and Australian financials have rebounded strongly on the hopes of the Pfizer vaccine and yesterday's Modera vaccine with an even higher efficacy at 94.5% HGH has been stuck pretty much in the doldrums.
For many years now I have compared the forward metrics to HGH's peers in Australia and found a very close correlation. Its not often that HGH's forward PE is more or less than 2 different to the average of its peers so imagine my surprise when I noted yesterday that based on HGH's official forecast at the midpoint of $84m = 14.4 cps HGH are currently on a forward FY21 PE of just 9.4 !
This compares with peers as follows, (all figures are average analyst forecasts off market screener)
ANZ 13.3
WBC 13.4
NAB 15.8
BEN 14.3
BOQ 14.4 CBA 18.2 Peer Group Average 14.9
Leaving aside the outlier of this group CBA which for reasons unknown is also trading at about twice NTA this still gives an average forward PE for the Australian banks of 14.25.
In my experience HGH's normal trading range on a forward PE basis is 11 - 17.5 with the mid point also being 14.25.
I have never seen HGH trade at a discount of this size to its peer group, nothing remotely like it so this presents as a real overlooked recovery story.
I think as 2021 unfolds and the recovery story and vaccinations get rolled out HGH has excellent prospects to recover towards the mid point of its historical PE range which is where the Australian banks already are.
14.25 x officially forecast of 14.4 cps = Target Price of $2.05. I think HGH has excellent prospects to make a strong recovery in 2021. I already have a sizeable position and added some more this morning.
I note the RBNZ dividend restrictions still apply so I am only expecting 5 cps (6.94 cps gross) in fully imputed dividends in the year ahead which gives a gross yield of 6.94 / 137 = 5.1% but I am expecting that to approximately double for FY22 and beyond and on a look through Covid recovery basis HGH could give a 10% Gross Yield in FY22
Last edited by Beagle; 18-11-2020 at 01:25 PM.
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
For someone good at maths.?
Medium price for an Auckland house is approx $1 mil.
70 year old borrows using a HGH REL a thousand dollars a week to spend.His house is worth currently $1mil.
Lives 10 years .So would owe $520,000 plus interest at 3% just under $70,000.
I would guess his house goes up $2,000 a week.So house is worth over $2mil when he dies.
His estate would be $2mil less what he owes HGH $590,000 ie Leaving $1,410,000.
Certainly beats selling the house for $1mil and buying a $1mil unit at The Sands.
Plenty of people seem to think so Percy with the massive growth in reverse equity loans !
The numbers on page 23 tell a real story about what the size of this part of their business has grown too and I expect very strong growth in the years ahead. http://nzx-prod-s7fsd7f98s.s3-websit...278/333910.pdf
From a financial viewpoint retirement living is a terrible investment but from a lifestyle perspective many people think its the best thing they ever did ! I know my Mum has enjoyed a fabulous 11 years at her retirement village and been so incredibly happy and well supported there...I couldn't care less that I will inherit less, her happiness in her sunset years is all that matters to me.
Last edited by Beagle; 18-11-2020 at 01:40 PM.
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
Re HGH v the peer group Beagle uses (Aussie banks)
I've always said Price/NTA is a better multiple to use than PE ratios for banks. Allows for different leverage and things. (Note: in reality prefer using Book Value instead of NTA but can't be bothered looking them all up for this exercise)
So I've compared the HGH peer group based on Price/NTA multiples (ex Direct Broking) - they are shown on the chart below.
I've dome this exercise a few times over the years and found that the average has always been around 1.3 plus or minus a bit and that HGH except for those totally irrational exuberant times the HGH share price has been over 2 bucks and was heading that way has been close to the average of its peers.
I don't see HGH going to 2 bucks soon - unless HGH con the market into thinking they really are a fintech stock
Last edited by winner69; 18-11-2020 at 02:48 PM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
For someone good at maths.?
Medium price for an Auckland house is approx $1 mil.
I would guess his house goes up $2,000 a week.So house is worth over $2mil when (after ten years).
How things have turned:
Old days
Woman sends man out of the house to earn the money.
Turn of the Century
Woman and man both go out of the house to earn money.
2020
House sends man and woman out of the house so that it can earn the money!
SNOOPY
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
Plenty of people seem to think so Percy with the massive growth in reverse equity loans !
The numbers on page 23 tell a real story about what the size of this part of their business has grown too and I expect very strong growth in the years ahead. http://nzx-prod-s7fsd7f98s.s3-websit...278/333910.pdf
From a financial viewpoint retirement living is a terrible investment but from a lifestyle perspective many people think its the best thing they ever did ! I know my Mum has enjoyed a fabulous 11 years at her retirement village and been so incredibly happy and well supported there...I couldn't care less that I will inherit less, her happiness in her sunset years is all that matters to me.
I totally agree with you.
What is interesting is those people who choose to remain in their own home,can make good use of RELs ,without worrying they are going to leave their estate with nothing.
….
I've always said Price/NTA is a better multiple to use than PE ratios for banks. …..
There are a number of ways to value a stock. PE as per Beagle, Price/NTA as per W69, reading tea leaves as FB seems to use. Personally I prefer to look at the divends and establish a price that will give me a return, purely on dividends, of 5% after tax. On that basis I have a fair value for HGH of $1.67. So somewhat less than Beagle's value but still ahead of W69.
Re HGH v the peer group Beagle uses (Aussie banks)
I've always said Price/NTA is a better multiple to use than PE ratios for banks. Allows for different leverage and things. (Note: in reality prefer using Book Value instead of NTA but can't be bothered looking them all up for this exercise)
So I've compared the HGH peer group based on Price/NTA multiples (ex Direct Broking) - they are shown on the chart below.
I've dome this exercise a few times over the years and found that the average has always been around 1.3 plus or minus a bit and that HGH except for those totally irrational exuberant times the HGH share price has been over 2 bucks and was heading that way has been close to the average of its peers.
I don't see HGH going to 2 bucks soon - unless HGH con the market into thinking they really are a fintech stock
Yeah I worked that out too mate but didn't share it because I knew you would, you're as predictable as a Swiss watch sometimes Unsurprisingly I prefer my methodology because it takes into account the return on capital, (net assets) employed in the business. Its all very well having assets but if your net interest margin is half that of HGH you need twice as many to get the same return ! Remind me again, who sold at $2.14 when someone else was calling for $2.50 and what was the top price ?
Last edited by Beagle; 18-11-2020 at 04:14 PM.
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
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Originally Posted by King1212
Unsurprisingly I prefer my methodology because it takes into account the return on capital, (net assets) employed in the business. Its all very well having assets but if your net interest margin is half that of HGH you need twice as many to get the same return ! Remind me again, who sold at $2.14 when someone else was calling for $2.50 and what was the top price ? 
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