HGH - Heartland Group Holdings

[SCOTTY]

There is an interesting article in the "Press" Business Day section today; C21 - A Brokers View. The article by Grant Davies was looking at Westpac and ANZ Banks. Although these two banks operate in different markets to Heartland the thing that caught my attention is the 15.3% return on equity for ANZ and 16% for Westpac.

For this financial year, HNZ is forcasting a profit of between $34 - 37m. By my calculations, the $34m bottom range projection equates to a 10% return on shareholder equity (88cps) which is about 9c per share. On say a pe of 12, this would give a share price of $1.08. Looking into the future, a return of 15% without any increase in equity but keeping the pe @ 12 would put the share price at $1.62. In reality the price should be higher with a re-rated pe and a higher NTA due to growth in assets and retention of earnings.

Interesting

[percy]

There is an interesting article in the "Press" Business Day section today; C21 - A Brokers View. The article by Grant Davies was looking at Westpac and ANZ Banks. Although these two banks operate in different markets to Heartland the thing that caught my attention is the 15.3% return on equity for ANZ and 16% for Westpac.

For this financial year, HNZ is forcasting a profit of between $34 - 37m. By my calculations, the $34m bottom range projection equates to a 10% return on shareholder equity (88cps) which is about 9c per share. On say a pe of 12, this would give a share price of $1.08. Looking into the future, a return of 15% without any increase in equity but keeping the pe @ 12 would put the share price at $1.62. In reality the price should be higher with a re-rated pe and a higher NTA due to growth in assets and retention of earnings.

Interesting

Yes, very interesting.
And as usual you "are right on the money".

[macduffy]

Perhaps the market doesn't consider HNZ to be quite in the same category as ANZ and WBC - yet!



How do the numbers compare with those of the Aussie regionals such as Bank of Queensland and Bendigo Bank?

[forest]

Fair enough mate, its simply too big a hurdle too clear my head from all the baggage and destruction of wealth I've seen in this sector since 2007 but all the best with it. (Roger in post 2722).

I attended the last 2 AGM's talked afterwards with directors on both occasions. Also talked to a number of other HNZ share holders some very experienced ones none of them raised any concerns.

HNZ is a turned around story in my mind which is likely to take some time to be understood. Negative impressions of the finance company history will take time to fade.

In the mean time I see it as one of the few growth companies with reasonable dividend for sale at an attractive price.

I expect ROE to rise in the next few years together with the market starting to understand HNZ this is possible one of the less risky shares on the NZX

[noodles]

Scotty, but what's keeping the sp below those lofty heights? ...

Risk somewhere? If so where? Snoopy's identified a few places and those alone may keep the ultra-risk avoiders out ...

But where else? Anyone care to remove their rose-tinted glasses and summarise them?

The share price has tracked just below the concensus broker target for the last 18 months. Target is currently .89c. I am not privy to the broker reports, so I can't be sure what would trigger a re-rate.

Unless we see a re-rating by the brokers, I feel it could trend range until the Feb results. Patience required (this is very difficult for me).

[percy]

Scotty, but what's keeping the sp below those lofty heights? ...

Risk somewhere? If so where? Snoopy's identified a few places and those alone may keep the ultra-risk avoiders out ...

But where else? Anyone care to remove their rose-tinted glasses and summarise them?

It took a good number of years for RYM to be accepted by the market.Was only a few years ago brokers said they were dependant on the property market.
EBO is still under the radar of a lot of brokers.Macquaries don't follow it.
Most probably easier for brokers to recommend ANZ and Westpac.
It has often been said Heartland "need more runs on the board".
Other people will agree with Roger, that it is another finance company.Again a lot of people have not moved on, or back into shares after/since the 1987 crash.

[SCOTTY]

Scotty, but what's keeping the sp below those lofty heights? ...

Risk somewhere? If so where? Snoopy's identified a few places and those alone may keep the ultra-risk avoiders out ...

But where else? Anyone care to remove their rose-tinted glasses and summarise them?

Hi Belg.

Just like making cheese - Good things take time

[percy]

Took "big players" years to appear on either RYM or EBO register,so I would not be too concerned what/where or why they take so long to come on board.

[Snoopy]

Thanks to all who responded to my question. However, big players move prices far more than the small ones that many responses refer to. So where are the big player buying in? Surely they do the same value calcs that we do?

Have just been inspecting the latest weighted average cost of capital calculation calculation calculations as published by PWC.

http://www.pwc.co.nz/PWC.NZ/media/pd...march-2013.pdf

Heartland does not have a Beta or a WACC rating. As a prequel to this information Price Waterhouse wrote:

"Where a company has been listed for
less than three years we have included
those companies’ multiples although we
have not included the estimated WACC
as there is insufficient trading history
for the calculation of Beta used in the
calculation of WACC."

If there is insufficient data to calculate the "risk" of an investment, it may be that some investment professionals would not invest in it?

SNOOPY

[Wolf]

Became a holder today at 85c. Decided i'm a long term holder not a trader so moved my trading funds 50-50 between HNZ and SUM.