HGH - Heartland Group Holdings

[Snoopy]

I have been covering these hurdles out of my original order to better match the flow of this thread. But there is one more bankers test that HNZ must face.

4/ Single new customer group exposure (as a percentage of shareholder funds) <10%

This criterion may have lead to the downfall of PGGW Finance (PGF) as an independent entity. As at 31/12/2010 PGG had $126.7m of loans in the dairy sector from a total loan portfolio of $491.8m. Total Crafer loans from all institutions are reputedly $200m. PGF claim they are a 'junior partner' in the banking syndicate. But if the PGF exposure was say $40m, then as other loans were wound back those
Crafer loan interest is capitalized, Crafer farms might approach 10% of all PGF loans.

I can't find any information in the Heartland HY2012 interim report on customer concentration. Since one of the objectives of merging all the entities that formed Heartland together was to reduce the concentration of risk, I don't think it likely that a single customer has 10% or more of the balance of the loans outstanding.

The HNZ interim report does say that post merger, 40% of loans are now in the Canterbury region (note 11). That might mean regional volatility need be considered in future.

Result: PROBABLE PASS (interim report has insufficient information)

OK my concentration appears to have strayed while making this post. Heartland shows shareholder funds of $356.5m as at 30th December 2011. So even if the Crafar farm exposure was $40m, that is still only just over 10% of shareholder equity. I think we can be fairly sure that Heartland does not have a concentration of single loan exposure problem.

SNOOPY

[Master98]

OK my concentration appears to have strayed while making this post. Heartland shows shareholder funds of $356.5m as at 30th December 2011. So even if the Crafar farm exposure was $40m, that is still only just over 10% of shareholder equity. I think we can be fairly sure that Heartland does not have a concentration of single loan exposure problem.

SNOOPY

Snoopy, as i know that loan to crafar farm didn't sell to HNZ, PGW keep it in a special vehicle.

[percy]

OK my concentration appears to have strayed while making this post. Heartland shows shareholder funds of $356.5m as at 30th December 2011. So even if the Crafar farm exposure was $40m, that is still only just over 10% of shareholder equity. I think we can be fairly sure that Heartland does not have a concentration of single loan exposure problem.

SNOOPY

Wrong again.Get over to ANZ.!!!!1
Crafar and other problems loans remain with PGW.HNZ only took over "the good" loans.
Correct, HNZ does not have a concentration of single loan exposure.
What we may say is a well balanced book,the envy of any ;I was going to say Australasian financial organization,but really I must say any world wide organization.
The other side of the coin is HNZ's strong balance of funding.

[Kiwi]

Hello Percy,
I have been reading your posts with interest lately as I'm considering buying a few thousand of HNZ shares.
Am I right in thinking that these could sky rocket if and when they are granted a banking licence?
Can anybody see why I should'nt have a go at trying to make a few dollars on these?
Lost a few thousand on PRC, would'nt mind a bit of good luck right now.

[percy]

Hello Percy,
I have been reading your posts with interest lately as I'm considering buying a few thousand of HNZ shares.
Am I right in thinking that these could sky rocket if and when they are granted a banking licence?
Can anybody see why I should'nt have a go at trying to make a few dollars on these?
Lost a few thousand on PRC, would'nt mind a bit of good luck right now.

First of all I am sorry you lost money on PRC.I have also lost money on shares.
Now HNZ.At present I feel HNZ is the best value for money on the NZ market.It is trading at over 35% discount to NTA.
It has achieved a lot in a short time,getting approvals and merging three companies.It has successfully got through the Govt guarantee,and now looks to be getting on with the business on making money.From earlier posts you will note the high rate of return banks/finance companies earn.This means they can grow quickly.You will also note that bad loans/deals have been left at PGC or PGW.
Once we have seen good earnings we will see HNZ rerated.It will /could trade at two or three times NTA.ie $1.60 to $2.40.The recent announcement of ACC buying approx 10% means a lot of the risk is past us.Kerr's influence is gone.
On the downside low interest rates,and low demand for money could delay big profits.
I think in two or three years time we will all look back,and kick ourselves for not buying more HNZ shares at today's price.
Whether the SP rockets on bank licence or not I do not know.In fact I see HNZ doing very well with out one,so a bank licence does not concern me,however I would rather have one>!!!

[percy]

Hello Percy,
I have been reading your posts with interest lately as I'm considering buying a few thousand of HNZ shares.
Am I right in thinking that these could sky rocket if and when they are granted a banking licence?
Can anybody see why I should'nt have a go at trying to make a few dollars on these?
Lost a few thousand on PRC, would'nt mind a bit of good luck right now.

Kiwi.HNZ should not be your only share.It could be a part of a small porfolio of four shares.
Sector 1/.Finance, HNZ.
sector 2/Health,either EBO,or ABA.
sector 3/Retirement,either RYM or SUM.
sector 4/Utiity,either AIA,POT,CNU,TEL,or CEN.

[Kiwi]

Kiwi.HNZ should not be your only share.It could be a part of a small porfolio of four shares.
Sector 1/.Finance, HNZ.
sector 2/Health,either EBO,or ABA.
sector 3/Retirement,either RYM or SUM.
sector 4/Utiity,either AIA,POT,CNU,TEL,or CEN.

Hello again Percy,

Thanks for your comments on HNZ, its always good to get someone else's opinion.
I'm pleased that my thinking is on the right track.
I do have some other shares that I have had for a while, but now I'm reading these posts on a regular basis, I may have to re think on some of them. While I think of it Percy,what are your thoughts on A2 Corp ?
I'M holding,
DIL
NEW
FPA
GEL
Snakk Media via Claridge Capital
LME

[percy]

Hello again Percy,

Thanks for your comments on HNZ, its always good to get someone else's opinion.
I'm pleased that my thinking is on the right track.
I do have some other shares that I have had for a while, but now I'm reading these posts on a regular basis, I may have to re think on some of them. While I think of it Percy,what are your thoughts on A2 Corp ?


I'M holding,
DIL
NEW
FPA
GEL
Snakk Media via Claridge Capital
LME

With your holdings you will never find the sharemarket boring.!!!!!!!1
ATM.I was never impressed with Cliff Cook when he was at MET,so never brought any ATM.However I never brought any DIL because of the Henry's track record.!!! Wrong again !!! ATM have a good product,and are doing everything right,so you should do well. with them.

[Snoopy]

Wrong again.Get over to ANZ.!!!!1
Crafar and other problems loans remain with PGW.HNZ only took over "the good" loans.

Got to get 'Heartland' out of my heart first before moving on!

I stand corrected by you and Master 98 regarding Heartland leaving those Crafer loans with PGW. In my defence, I don't think PGW ever admitted the make up of the so called bad loans that they retained in house. Although it would be logical to assume the Crafer farms were one of them. Nevertheless I remember chatting to some senior management at the PGW EGM just proir to the finance division sale. They were adament that the retained loans would all be recovered in full, in time.

SNOOPY

[Snoopy]

In the announcement dated 14/3/12 they state HNZ's equity ratio is 13.5% compared with regulatory requirement 9.58% so they have room to grow their book.

I have been sniffing around the NBDT section of the New Zealand Reserve Bank website.

The minimum capital ratio for a non bank deposit taker is 8% with a credit rating and 10% without a credit rating.

SNOOPY