He seems to be a bit vague about how he gets there. All we know is that it doesn't include whatever the increased value of Harmoney is.
F20 NPAT was reported as $72.0m but included that $6.9m covid overlay so I think in Jeff's mind real NPAT was $78.9m
So the $85m F21 guidance is 7.7% up on the $78.9m - seems a pretty realistic growth as F20 growth was 7.2%
Growth from $72.0m to $85m is an outrageous 19.4% - Jeff would never be that bullish in a mllion years.
So it seems that they think the covid overlay is not needed in F21 (not used to date they said the other day). Does this imply that the forecast $85m is F20 NPAT $72.0m plus wrteback of covid overlay of $6.9 plus continued normal growth of $6.1m. (I don't think you can assume guidance of $85m and add on $6.9m covid overlay to come up with a 'likely' guidance of $91.9m)
That's how I see F21 - another year of steady 7%/8% growth - but I may be wrong reading between the lines of what Jeff is saying (he is pretty vague)
Last edited by winner69; 12-12-2020 at 03:58 PM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
He seems to be a bit vague about how he gets there. All we know is that it doesn't include whatever the increased value of Harmoney is.
F20 NPAT was reported as $72.0m but included that $6.9m covid overlay so I think in Jeff's mind real NPAT was $78.9m
So the $85m F21 guidance is 7.7% up on the $78.9m - seems a pretty realistic growth as F20 growth was 7.2%
Growth from $72.0m to $85m is an outrageous 19.4% - Jeff would never be that bullish in a mllion years.
So it seems that they think the covid overlay is not needed in F21 (not used to date they said the other day). Does this imply that the forecast $85m is F20 NPAT $72.0m plus wrteback of covid overlay of $6.9 plus continued normal growth of $6.1m. (I don't think you can assume guidance of $85m and add on $6.9m covid overlay to come up with a 'likely' guidance of $91.9m)
That's how I see F21 - another year of steady 7%/8% growth.
However the reported result could be north of $100m once the one-off benefits of a useful revaluation of Harmoney and some covid-19 overlay reductions are added back.
Strong end to week with a $1.60 close .... highest close since share price collapsed when covid struck
Getting closer by the week to beagles target of $2.05
I reckon the market will get a bit irrational and exuberant after Christmas and we will see $2.30 which would make it really overvalued. Is it really overvalued there ?, see below...I know you think they trade based on relativity to NTA but I will stick with earnings because I will always believe that's what really matters. Assets are only worth what they earn and NTA is useless as a relativity measure if you're not getting an adequate ROI
That'll be when real value investors will sell .... buy low (undervalued) sell high (when over valued) .....and then come back for more when sensibility returns and share price back to 180 or something.
Enjoy the next few months anyway ....unless Forbar are right and then we are for a big disappointment
Originally Posted by 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 14.2
WBC 13.4 14.1
NAB 15.8 16.4
BEN 14.3 16.7
BOQ 14.4 15.0 CBA 18.2 18.5 Peer Group Average 14.9 15.8
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
Updated with yesterday's closing metrics and as you'd expect with a few weeks since the previous post on 18 November with ongoing positive news of covid vaccines the Australian Peer group I follow have now moved up into a multiple that I would describe as a Covid recovery level and shareholders are obviously expecting good ongoing growth as we head towards higher earnings in FY22 and beyond. Interestingly the PE multiple of all this group have expanded with the average expansion moving up from 14.9 to 15.8, (0.9 increase)
Against this backdrop over the same timeframe HGH's multiple has expanded from the ridiculously low 9.4 to a still very low 11.1, an expansion of 1.7 multiple, (up 25 cents, ~ 18.5%) so my position that HGH was VERY cheap on a relative basis to its peers has been somewhat validated to date, (but its very early days). I expect HGH to continue to significantly outperform its peer group in the near term.
Looking ahead I see no reason why in the foreseeable future HGH won't move up into a covid recovery based earnings multiple at a similar level therefore I see scope for considerable ongoing outperformance. My high end scenario for this time next year is HGH trading on a forward multiple of 15.8 times estimated FY22 earnings of $100m = 16.3 cps = $2.58
We probably won't get that high but I think HGH has very strong potential to considerably outperform the NZX50 over 2021.
I expect normalized earnings this year of about $93m. On top of that could be one off's of some covid provisioning recovery from FY20 and the possible recognition of some unrealized profit on the harmoney stake.
Last edited by Beagle; 12-12-2020 at 07:00 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
FACT CHECK: Heartland always do what they say they will do
As the table below shows over the years NPAT guidance has been spot on, and generally stays unchanged through the year. Impressive.
Only one 'downgrade' and we'll forgive them for that (restructuring costs etc) and once they delivered slightly more than what they said they would do.
Jeff has his finger on the pulse of the business.
Note: F20 NPAT excludes the $6.9m covid overlay (ie their normalised NPAT). I get the impression that in Jeff's mind it isn't real but only something he was made to do.
Last edited by winner69; 13-12-2020 at 08:35 AM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Fair comment Winner and thanks for your work on that looking back at recent years. At mid point of guidance $84m and if one assumes 7% growth for FY22 that's a forecast of $90m for FY22, (I'll leave others to judge for themselves whether that's reasonable or not but remember they just declared a net profit of $29.9m for the last 4 months so that annualized is already $90m) and eps for FY22 of 14.67 cps. Put a covid recovery forward PE of 15.8, (average of what the peer group I follow is already on) suggests a fair target price for Christmas 2021 of $2.32.
Maybe Santa will come for HGH shareholders in 2021 ? (Its been a tough 2020 with the shares still well down on the $1.85 they started the year at)
Last edited by Beagle; 13-12-2020 at 11:51 AM.
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 winner69
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