HGH - Heartland Group Holdings

[Jamie]

Jarden re Heartland Group, Well positioned for strong self-funded growth. Last $1.88, Target Price $2.34

[Snoopy]

Forbar seem to have painted themselves into something of a corner here with their previous glum view and appear to be desperately trying to save face by doing a very slight upgrade to their forecast but at the same time reiterating their view that Covid provisioning is grossly inadequate. This seems incongruous with vaccine developments in recent weeks and the prospects of an economic recovery off the back of widespread vaccinations and reduced covid effect in early - mid 2021. I note for example a business confidence survey out yesterday saying business confidence had improved to the best level since Labour first got elected in 2017. That's an important lead indicator for how business's are feeling.

Who do you believe ? HGH directors working at the coal face of the business or Forbar's analyst who quickly and just to a minor extent tweaked their previously held glum view ?

Jarden re Heartland Group, Well positioned for strong self-funded growth. Last $1.88, Target Price $2.34

I wonder when Forbarr's next update will come? I have been at bit wary of Forbarr research, largely because they tend to come out in favour of all sorts of Dunedin based investment concerns that generally underperform. But the apparent misreading of the prospects of Heartland have certainly been a boon to Heartland shareholders who used the Covid shock to top up. Whereas the Forbarr research has been doubtful in the past, it does appear their research is now a strong countercyclical indicator. If research is almost guaranteed to be wrong, then that becomes very useful information for savvy investors. I think their research team deserves a pay rise to reflect their increased usefulness.

Jarden seems a bit all over the place of late, where last years pariahs become this years favourites. That isn't as silly as it sounds because overvaluation of previous favourites can indeed disqualify them as current investment prospects. Does 'strong self funded growth' mean that they don't see Heartland returning to paying dividends any time soon? If the asset base is not increasing and profits are, then that implies strongly increasing margins. That doesn't seem likely, which is why I am dubious about that $2.34 forecast. However, if dividend payments stop, maybe such a figure is on the cards?

SNOOPY

discl: Holding HGH at an average purchase price of $1.30 and not looking to increase that holding at current prices.

[Beagle]

I'm not tempted at all to sell at $2.14 this time. The fundamental's and outlook warrant something a fair bit north of that in my opinion. I can foresee up to 16 cps for FY22 in a strongly recovering economy with years of growth ahead and a PE of at least 15 gives me a fair target price 12 months hence of $2.40. Applying the same average PE as is currently accorded the peer group I follow which is 16.3 a fair value case can easily be made up to 16 x 16.3 = $2.61

I'm very comfortable taking a dogged approach with this one. Goes without saying that this is the only bank that will give you full imputation credits with its dividends which is a definite incentive to hold this instead of Australian banks.

I'm not sure what the dividends will be for FY21 but I am hopeful for 11 cps fully imputed (15.28 cps gross / 185 = 8.25% FY22 forecast gross yield) for FY22 when dividend restrictions are hopefully fully eased. Possibly worth noting that 8.25% is more than 8 times their best term deposit rate which really shines the spotlight on the importance of investing on the owners side of the ledger At call has very recently been reduced to just 0.5% which is pretty miserable for my call funds but good for the net interest margin of the bank and therefore good for my shares so I am somewhat conflicted and not sure whether I like the reduced call rate or not lol.

P.S. Just on 2 weeks until they report their half year on 22 February and I'm really looking forward to that.

Jarden re Heartland Group, Well positioned for strong self-funded growth. Last $1.88, Target Price $2.34

I'm almost tempted to think they might have been listening to my barking

[Greekwatchdog]

Snoopy, Generally 1/2 days after Result day. I will advise their revised Guidance.

[peat]

Whereas the Forbarr research has been doubtful in the past, it does appear their research is now a strong countercyclical indicator. If research is almost guaranteed to be wrong, then that becomes very useful information for savvy investors. I think their research team deserves a pay rise to reflect their increased usefulness.

SNOOPY

So funny Snoops.

[percy]

I'm almost tempted to think they might have been listening to my barking

My thoughts too..lol.

[iceman]

Jarden re Heartland Group, Well positioned for strong self-funded growth. Last $1.88, Target Price $2.34

I like the "self-funding" bit. Not sure what they mean by that. Maybe Jeff has gone himself to find the lenders/bond holders ? Certainly not self funded from own generated cash flows, which is not surprising given their huge growth, particularly in Australian reverse mortgages.

[winner69]

My thoughts too..lol.

Not unusual for one man's guess to be that much different from another - esp if both want the share price to go up

[percy]

Not unusual for one man's guess to be that much different from another - esp if both want the share price to go up

I have never known Jardens to guess,and in HGH's case ,Beagle's research has been sound of late.

[winner69]

Deleted ...reposted with target price in bold