HGH - Heartland Group Holdings

[born2invest]

And that leads me back to trying to figure out what the competitive advantage of Heartland really is.

I could say the same question and ask you what is a competitive advantage of ANZ as opposed to WBC, CBA and NAB?

[Snoopy]

I could say the same question and ask you what is a competitive advantage of ANZ as opposed to WBC, CBA and NAB?

ANZ gives you the biggest New Zealand exposure in the Australasian market of the big four Ozzie banks, and as part of that has a large rural lending portfolio in this country. With the Ozzie mining boom subsiding, that does give ANZ an advantage going forwards IMO.

SNOOPY

[percy]

1. Local NZ owned bank whose operations are overseen by the RBNZ and rating agencies
2. A specialist lender able to assess risk better and therefore provide better loan rates
3. Competition in the form of opaque finance companies has evaporated
4. Owners and much the senior management are directly associated with the business types they lend too
5. Supportive shareholders who will be quite happy to support rights issues to let the company grow
6. Good cross-selling partnerships with other NZ entities


Snoopy, Surely a comparison between UDC and HNZ would be more appropriate? I mean ANZ is huge and complex and doing large amounts of business that is very, very different to HNZ. Was there a reason you didn't use UDC? Opaqueness of data being the one that springs to mind but it is there, e.g. companies office, prospectuses, etc.

Great post.
Yes I totally agree that HNZ should be compared with UDC.
TUA and DPC and ANZ is a waste of time for all of us.!!!

[born2invest]

ANZ gives you the biggest New Zealand exposure in the Australasian market of the big four Ozzie banks, and as part of that has a large rural lending portfolio in this country. With the Ozzie mining boom subsiding, that does give ANZ an advantage going forwards IMO.

SNOOPY

Fair points. My favourite out of the big 4 is ANZ also for the Asian Growth strategy. I don't own any however.

Main concern I have with HNZ is how well they would do in a down economy. Since they rely heavily on rural lending and also car/smaller loans when a downturn happens people still need somewhere to live and will still buy groceries so need a traditional bank such as ANZ, but I'm not convinced HNZ will hold up well when the dairy pay-out is low and no one wants to upgrade their car on finance.

[Snoopy]

Snoopy, Surely a comparison between UDC and HNZ would be more appropriate? I mean ANZ is huge and complex and doing large amounts of business that is very, very different to HNZ.

Actually I believe ANZ New Zealand stacks up very well as a measuring stick for HNZ. See my post 22 on the ANZ.NZX thread for the full explanation..

Was there a reason you didn't use UDC? Opaqueness of data being the one that springs to mind but it is there, e.g. companies office, prospectuses, etc.

Couldn't find a full balance sheet, or income statement or much disclosure at all for UDC. Of course ANZ New Zealand fully owns UDC. I do agree that UDC on its own would probably provide a better comparison with HNZ. But having poked around the UDC site this is the best I can come up with.

https://www.udc.co.nz/comm/about_us/...type=borrowing

If you can point me in the direction of some more disclosure by UDC, I will happily analyse it.

SNOOPY

[Snoopy]

1. Local NZ owned bank whose operations are overseen by the RBNZ and rating agencies

So more reliable, but as a consequence less profitable than a company like Dorchester on an operating basis.

2. A specialist lender able to assess risk better and therefore provide better loan rates

Not as specialized as Turners Auctions Finance or Dorchester

3. Competition in the form of opaque finance companies has evaporated

Dorchester and Turners Auctions Finance are there as is UDC under the cloak of the ANZ Bank.

4. Owners and much the senior management are directly associated with the business types they lend too.

You may have something there. Care to be more specific?

5. Supportive shareholders who will be quite happy to support rights issues to let the company grow

Wait till Percy goes to bed before mentioning the 'R I' words Belg. He will go bezerk if he reads that!

6. Good cross-selling partnerships with other NZ entities

You are referring to PGG Wrightson, who have just quit their Heartland stake and are now looking around for other finance partners?

Still looking for that killer competitive advantage Belg. Appreciate your attempt here though. It has given me and possibly others a little more to think about.

SNOOPY

[percy]

Fair points. My favourite out of the big 4 is ANZ also for the Asian Growth strategy. I don't own any however.

Main concern I have with HNZ is how well they would do in a down economy. Since they rely heavily on rural lending and also car/smaller loans when a downturn happens people still need somewhere to live and will still buy groceries so need a traditional bank such as ANZ, but I'm not convinced HNZ will hold up well when the dairy pay-out is low and no one wants to upgrade their car on finance.

You may enjoy an article in www.theage.com.au/business headed "Good times end for bank profits."
The Australian Banks are very secure.
Heartland is a very small player when compared to them,yet they enjoy being well funded,have highest equity ratio,are very liquid,do not have exposure to mining,and reducing exposure to NZ residential property.

[janner]

and reducing exposure to NZ residential property.

With the NZ economy expected to boom this year .. A wise move indeed .. As the RB is expected to raise interest rates quicker than previously thought.

This is when many chickens will come home to roost IMHO..

" Only a thousand dollars down ".. " you may have to put in a little ".. Yeah Right..

[percy]

LOL ... He better not. And if he declines to take them up then I'll be quite happy too (at the discounted price of course ).

It is at times like this one is reminded of the famous John McEnroe quote; "You cannot be serious."

[Snoopy]

On growth, UDC in the last 3 years NPAT has been ...

2010: 18m ...
2011: 29m ... 61%
2012: 37m ... 27%
2013: 42m ... 13%

Not bad, but declining but that'll pick up as confidence seems to be back now and I'd expect 2014 will show similar growth to circa 20-30%.

Will HNZ do the same? Yip, I think they will. Consequently, the PE ratio will go up to reflect the growth and divie % down but will climb year on year.

Belg, thanks for the UDC link. I have put my UDC comparison on the ANZ thread, because UDC is entirely owned by ANZ. It has certainly got me thinking!

SNOOPY