HGH - Heartland Group Holdings

[winner69]

HGH down 9% since Jan31st

ANZ, NAB and BEN still down about the same

REst of beagles peer group outliers - BOQ up 2%, CBA down 2% and WBC seem to be down 20%

So HGH keeping in step with their 'peers' .....but weren't they meant to be getting ahead, like catching up

Anyway Heartland in the 180's by end of week and over 2 bucks early January

Do you like my new signature? Cool eh

[winner69]

Hit $1.70, wonder how that Forbar Analyst feeling now

The 145 was a target - presumably a year out ......still might be correct

[Snoopy]

How many think of HGH share price on of $1.60 at a PE of 11.8 is actually calculated as - $1.20 (Equity per share / Book Value) X 11.3% (ROE) X 11.8 (PE) = $1.60

Putting ROE in there reminds how important it is ... companies returning excessive returns on capital often are rewarded with higher share prices than ‘lesser performing’ companies

This is a very interesting way of thinking of how HGH should be priced Winner. I keep going back to Jeff's slide 15 from AGM2019, where he highlighted the ROE available from each category of loan. Of those classed as 'superior' returns ( ROE >15%) , motor loans are going gangbusters (although I expect the death of Holden to be a heavy handbrake on those going forwards). O4B loans are not doing well (pretty hard to compete with 0% loans from the government). And Harmoney is certainly under pressure. Of these three categories Motor Loans are by far the largest. But I would expect motor loan growth to slow sharply in the second half, making it hard to build on the momentum of the first six months. I don't expect O4B or Harmoney to recover over the remainder of the year.

Moving onto the 'in line returns' ( 11%<ROE<15% ) this is where the reverse mortgages sit. With margins set to reduce, from both sliding interest rates and competition, I wouldn't be surprised if Heartland's overall ROE of 11.8% is sitting near the benchmark for this part of the business as well. REL loans in Australia is the biggest loan category here. So I can't see how ROE will improve for HGH going forwards. An ROE for HGH of 11.8% could yet be the cyclical high point. Of course, HGH can generate more profits by writing more business. But REL returns over the last reported six months (admittedly including the Covid-19 shock) are below where I was modelling them. The market might anticipate more business going forwards by according HGH a higher PE ratio. But that also means more loan capital must be acquired to be loaned out. And that -presumably- means more retained earnings for the company and consequently lower dividends. I say 'presumably' because I do not fully understand who regulates the capital requirements of HGH Australia. HGH in Australia seem to have pulled off the 'deal of the decade' by borrowing lots of European money at a low interest rate and instantly redeploying that money at a much higher charge out return. What is the equity required inside HGH to back this arrangement up?

So to summarize, if the share price goes up, but ROE stays more or less the same, this implies all the 'growth' must come from the growth in the number of new loans being written. I haven't seen any evidence that such a large increase in loan writing, to warrant the HGH share price going from $1.30 to $1.70 (a 30% rise in business in a year, or is Mr Market pricing in FY2022 growth as well?) has in fact occurred or is likely to occur. This would suggest to me that at $1.70, the HGH share price has now got a little ahead of itself.

As further evidence of this look at he recovery of the share price of that other listed motor finance company TRA which is up 70% from April/May. Heartland is up 54% over the same period but with a far lesser proportion of their loans being the top performing motor vehicle loan category. To my mind it doesn't add up.

SNOOPY

discl: Holding Heartland at an average $1.30 acquisition price, mostly accumulated this year.

[King1212]

Damm u snoopy! Sp lost 7c since your post...cannt u just enjoy the party??? Lol

[Beau]

He does seem to want to keep share price back .

[nztx]

The 145 was a target - presumably a year out ......still might be correct

I'd be interested in what sort of darts & dartboard they are using to come up with weird & wonderful future gazing results
on the same info any man & his dog out there get to do their own analysis on ..

The neighbour's cat seems to be more on the money than some of the advisor 'experts' ..

[Beagle]

Snoopy me ol Beagle mate...I am sorry but you get the wooden spoon award of the day for party pooping.
You need lessons on when and where to poop... https://www.youtube.com/watch?v=5Y-OG9fR1mk

[peat]

Hahahahah
first lesson dont sh*t in your own kennel.

[Snow Leopard]

looks like today was one of those peak things that has some weird name like 'exhausted pooping Beagle' and I am sure it will be all downhill from tomorrow.

Still it was nice while it lasted

[peat]

looks like today was one of those peak things that has some weird name like 'exhausted pooping Beagle' and I am sure it will be all downhill from tomorrow.

where have we seen this before ?

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