HGH - Heartland Group Holdings

[Beagle]

Lets be clear. Firstly they issued the forecast of $83-85m, (mid point $84m for FY21) at the same time as announcing their FY20 result (which was impacted by the Covid overlay). I see this as their core current year earnings unsullied by any one off Covid or Harmoney items.
The fact that subsequently they are talking about not needing earlier Covid provisioning taken in FY20 based on evidence to date suggests a partial of full reversal of this provisioning on top of earlier guidance of $84m, (total could be over $90m inclusive of full reversal of FY20 provisioning plus any upgrade of current year forecast). i.e. $90m for full year, (3 x $29.9m) plus reversal of previous over provisioning for Covid plus possible Harmoney one-off.

Some commentators maintain that the economic ramifications of the pandemic are yet to be
fully felt, and due to this remaining uncertainty, and despite running ahead of the forecast run
rate, we don’t propose currently to change the current NPAT guidance of $83 million to $85
million for FY21.

My interpretation of this is that they are acknowledging that the $29.9m core operating earnings for the 4 months to 31/10/20, (annualized run rate of ~ $90m), is currently ahead of forecast but they are effectively saying that because the effects of the pandemic may not be fully felt yet they are leaving their core earnings at $84m forecast as is for the present time. This certainly does not preclude them from raising it later this financial year.

I share your cynicism about proactive provisioning and suspect core operating earnings for the year will meet forecast and be about 14.4 cps and I think a fair Covid recovery PE going forward is in the range of 15-16 so am sticking with my target of $2.30. I think the dividends will be about 11 cps fully imputed once the RBNZ restrictions come off so that's 11 / 0.72 = 15.28 cps gross and on $1.63 gives a prospective FY22 yield of 9.4% gross. Just a "little" better than their term deposit rates

Hopefully this post clarifies my thinking of how this all fits together.

[winner69]

I think we have to agree to disagree - because I reckon you are double counting the covid overlay. Never mind disagreement is healthy.

For what's worth my 'valuation' of HGH for June 2021 is about $1.97

June 20 Book Value is $1.20 /share. Add F21 earnings of 13.4c ($85m) less divies paid 8 cents plus DRIP 2.2 cents plus HMY revaluation 3.4 cents gives June 21 Book Value of $1.31 / share

Apply the long term P/B of 1.5 and gives you share price of $1.97

Let's say $2.00 and add a 15% hype / exuberance / irrationality factor and one gets $2.30

Same as you at $2.30 ---- Golly gosh we do agree - let's hope the hype etc plays out

[King1212]

$2 will do...master winner.bi will get one tiger rather than two...lol

[Baa_Baa]

I think we have to agree to disagree - because I reckon you are double counting the covid overlay. Never mind disagreement is healthy.

For what's worth my 'valuation' of HGH for June 2021 is about $1.97

June 20 Book Value is $1.20 /share. Add F21 earnings of 13.4c ($85m) less divies paid 8 cents plus DRIP 2.2 cents plus HMY revaluation 3.4 cents gives June 21 Book Value of $1.31 / share

Apply the long term P/B of 1.5 and gives you share price of $1.97

Let's say $2.00 and add a 15% hype / exuberance / irrationality factor and one gets $2.30

Same as you at $2.30 ---- Golly gosh we do agree - let's hope the hype etc plays out

And then you'll both sell. Maybe not at the same time, but close. You momentum traders (however long it takes) imho are the most impressive investors able to actually 'time the market' which common wisdom says is impossible. Common wisdom though is not all that common.

Impressive sustained performance and enjoyable banter along the journey, we have much to learn about active portfolio management.

[Scrunch]

June 20 Book Value is $1.20 /share. Add F21 earnings of 13.4c ($85m) less divies paid 8 cents plus DRIP 2.2 cents plus HMY revaluation 3.4 cents gives June 21 Book Value of $1.31 / share

Apply the long term P/B of 1.5 and gives you share price of $1.97

Let's say $2.00 and add a 15% hype / exuberance / irrationality factor and one gets $2.30

Same as you at $2.30 ---- Golly gosh we do agree - let's hope the hype etc plays out

Is the DRIP going to be able to add that much to the NTA? I can see the DRP increasing equity by 2%+ quite easily. Its also going to add to the shares on issue so I'm not sure the NTA impact will be as large as 2.2c. Does that mean that Beagle now has a more aggressive forecast than you?

[Snow Leopard]

So much poo, mainly dog poo on this thread .

The definitive current value of HGH is $1.806 and the one year is $1.860.


Speaking of poo I heard this joke the other day, stop me if you already know it:

A young boy goes up to his dad and asks:
"Daddy, where does poo come from?"

Dad slightly taken aback decides to give his son the best version of the truth that he thinks a four year old will be able to understand.

As his explanation progresses the young boy's face becomes sadder and sadder;

Dad gamely carries on;
The boy bursts into tears;

Dad wraps up with:
"and that is how it is, son."



The boy wiping the tears from his eyes, looks up at his father, and in a timid voice cautiously asks:
"and Tigger too?"

[tuaman]

Ha ha funny. BTW are the boy YOU. Must be a very traumatic event still affecting your investment decision. Keep up the good work.

So much poo, mainly dog poo on this thread .

The definitive current value of HGH is $1.806 and the one year is $1.860.


Speaking of poo I heard this joke the other day, stop me if you already know it:

A young boy goes up to his dad and asks:
"Daddy, where does poo come from?"

Dad slightly taken aback decides to give his son the best version of the truth that he thinks a four year old will be able to understand.

As his explanation progresses the young boy's face becomes sadder and sadder;

Dad gamely carries on;
The boy bursts into tears;

Dad wraps up with:
"and that is how it is, son."



The boy wiping the tears from his eyes, looks up at his father, and in a timid voice cautiously asks:
"and Tigger too?"

[Beagle]

I think we have to agree to disagree - because I reckon you are double counting the covid overlay. Never mind disagreement is healthy.

For what's worth my 'valuation' of HGH for June 2021 is about $1.97

June 20 Book Value is $1.20 /share. Add F21 earnings of 13.4c ($85m) less divies paid 8 cents plus DRIP 2.2 cents plus HMY revaluation 3.4 cents gives June 21 Book Value of $1.31 / share

Apply the long term P/B of 1.5 and gives you share price of $1.97

Let's say $2.00 and add a 15% hype / exuberance / irrationality factor and one gets $2.30

Same as you at $2.30 ---- Golly gosh we do agree - let's hope the hype etc plays out

Okay so lets just keep this really simple. Just forget ALL the one off's. Official forecast mid point is $84m = 14.4 cps. When it hits $2.14 this time it will be on a PE of 14.8, (last time it was nearly on 18 times forward earnings). Not many growth stocks on the NZX on around a modest PE of that level - Jarden reckon the market average is currently 32.

[winner69]

Heartland's npat growth rate over the years is interesting

Growth is consistently slowing

Spot the trend in the numbers below - almost has a A2 growth profile look to it

Heartland NPAT growth:
2013 74.3%
2014 47.5%
2015 33.3%
2016 12.9%
2017 12.2%
2018 11.0%
2019 9.0%
2020 7.2% on normalised $78.9m otherwise it would be negative
2021 6.5% forecast $84 midpoint

One needs to bear in mind that EPS growth is generally less than NPAT because of capital raises and DRIP

So growth not as flash as the hype makes it out to be - if share price gets to 15 times EPS than it would be on a PEG over 2 - some say that's quite a high PEG and indicates expensive and not good value.

[winner69]

Is the DRIP going to be able to add that much to the NTA? I can see the DRP increasing equity by 2%+ quite easily. Its also going to add to the shares on issue so I'm not sure the NTA impact will be as large as 2.2c. Does that mean that Beagle now has a more aggressive forecast than you?

I guessed a DRIP uptake of about 25%

And then forgot about the new DRIP and exec incentive shares in my calculation (bad eh)

Projected book value then $1.30 at say P/B of 1.4/1.5 is shareprice of $1.82/$1.95 next June - say about $1.75/$1.85

Closer to Snow Leopards numbers than Beagles ....and answering your question Beagles forecast is more aggressive than mine.