HGH - Heartland Group Holdings

[SCOTTY]

I won't ask you about that Beagle ... yes dived into HGH yesterday sensing it will only get more expensive, not that it is expensive the share price could be a lot higher probably.... I don't really know, am first time shd for this stock

Welcome aboard - enjoy the ride

[Habits]

Thanks Scotty
Bit of luck.... SP up 6 cents today

[iceman]

Demerging Marac would be cool move ..that wouldn’t be a faux pas.

winner what would you see as the main benefit of splitting Marac out of HGH and set it up as a standalone business ?

[mondograss]

Well one good thing about the terrible Jarden portal is that they gave me a free trade for signing up, so I used that to buy more HGH this morning, saved myself $200 which is not to be sniffed at. That's probably me fully in to HGH for the present time, now to just let it run.

[winner69]

winner what would you see as the main benefit of splitting Marac out of HGH and set it up as a standalone business ?

They seem to think that the Motor business as a separate entity may assist in highlighting any intrinsic value which may not be reflected in current bank-based benchmarking.

Fair enough

Demerger is one way. Demergers were popular in Australia a few years ago and there’s been the odd one on the NZX

One I was involved in was Orica. They had explosives and chemical businesses as well as a paint company in Dulux. They reckoned Dulux was the cause of the Orica share price not being what ‘it should be’

Dulux was demerged ....every Orica shareholder got shares in DLX at $2.50 ....DLX share price kept rising and was eventually taken over close to $10

The Orica share price is less than what it was but that’s another story.

[winner69]

Wow ...hit $1.60

[Ltw]

Its got a head of steam under it.
I had a massive "fail" this morning an old Sell order at $1.55 sold on opening this morning and I'm sure I changed it yesterday to a higher value very disappointed to say the least.
Brought back in this arvo and hoping it continues on this bullish run

[nztx]

The SP graphs certainly suggest that the market is rerating HGH - & probably catching up
on overall market rise in recent months, which HGH seems to mostly have missed out on ..

The premium in the SP which HGH deserves above overall market rise could be interesting to see

[Ltw]

Out of interest is anyone keep to put there predictions up on where they think the stock will be come Christmas?
$1.85 or am I being optimistic

[Beagle]

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

I'm not going to try and predict the price at Christmas 2020, that's way too short a timeframe but I stand by this post of 18/11/20 when the shares were in the mid $1,30's. I think $2 is quite plausible sometime next year. Very happy with the recent share price action buts its early days and I think this has quite some distance further to go but as the ol mainland cheese advertisement jingle goes "good things take time" I've been comparing this peer group relativity for many years and have a very high confidence level because of what I know I have seen regarding the correlation in their forward metrics.