HGH - Heartland Group Holdings

[winner69]

Crikey this rampersareus club makes me a bit giddy....might be the vertigo of such lofty expectations or the hangover from last night...reaching for his trusty abacus. Better put me down as the independent treasurer...I think I'll set the first years membership fees as...let me see...we all have to shout each other a of round of beers when we next meet up....hmmm so as membership grows so does the fun...hmmm that could be a problem if membership really grows...NO wait a minute, legend has it Forest is very good at driving drunk investors home after ASM's so we'll all be okay

Now moving on to the second order of business...what's the EPS for 2015. Brokers have this as 9.9 cps but coverage is so poor I think they all put their junior analysts fresh out of diapers on this so us trusty seasoned professional investors know far better and this thing builds like a snowball over time. Any old fool or old accountant even, can do the maths $11m Q1, $12m Q2, $13m Q3 and $14mQ4. Quite obviously those silly analysts have never heard of a trusty abacus. So that's sorted then, we have $50m for 2015 giving about 11 cps. I wonder where that puts the SP in mid 2015 with talk of acquisitions, buy-backs, synergies, special divvy's, maybe even the possibility of a takeover...opps sorry I digress.

Third order of business 2016 profit. Lets see. $15m for Q1 $16m for Q2..., does anyone else see this secret growth pattern ...(this is easy isn't it, we hardly even need a treasurer on this committee, sshhh i'd better not tell the other committee members that, opps did I really say that out loud)..so we have $66m for 2016 and on only 420m shares, (the stupid idiots who sold that lucrative HER business were even more stupid to allow the company to buy back their shares back in mid 2015), so this gives 15.71 cps. Now let me see...what's a fair PE ?...some of those banks in Aussie are on 15, that's seems fair to me.
So we're all good for 15 x 15.71 cps = $2.35 by mid 2016. Opps, does that run me a risk of being appointed Chairman

All the numbers make sense though eh Roger

The only thing that can wrong with these sums is if they buy something by issuing shares like they did with Seniors. Bad move but hopefully lesson learnt

[bunter]

So we're all good for 15 x 15.71 cps = $2.35 by mid 2016. Opps, does that run me a risk of being appointed Chairman

Happy to hand over - my valuation's far too conservative for this position.

[Beagle]

All the numbers make sense though eh Roger

The only thing that can wrong with these sums is if they buy something by issuing shares like they did with Seniors. Bad move but hopefully lesson learnt

Many a true thing is said in jest

[kizame]

All the numbers make sense though eh Roger

The only thing that can wrong with these sums is if they buy something by issuing shares like they did with Seniors. Bad move but hopefully lesson learnt

Ahh But is it a lesson learnt and by whom?
Companies really like buying and paying at least partly by issuing shares,this has been a bit of a sore point with me over the years,as its great for the company(the directors only really care about the company not shareholders)IMOP.
So even though you would love an earnings accreditive (sp) aquisition without the addition of millions of new shares issued to prior business owners,this at least on past performance may not likely be the case.
Also if they issue shares as payment does this not allow them to maintain a higher equity ratio?
advice on this would be super.

[Beagle]

In my opinion its all about being earnings accretive whether they pay for any potential acquisition partially with shares or not. Obviously with the new lower capital adequacy requirements announced by RBNZ they have considerable headroom to grow their business organically or by simply writing a cheque for a bolt on acquisition but they'll probably want to play it a little conservatively to maintain and over time improve their credit rating. What was that old Mainland cheese advertisement theme again...oh yeah that's right "good things take time"

[percy]

In my opinion its all about being earnings accretive whether they pay for any potential acquisition partially with shares or not. Obviously with the new lower capital adequacy requirements announced by RBNZ they have considerable headroom to grow their business organically or by simply writing a cheque for a bolt on acquisition but they'll probably want to play it a little conservatively to maintain and over time improve their credit rating. What was that old Mainland cheese advertisement theme again...oh yeah that's right "good things take time"

Yes exactly right,it is eps accretive acquisitions that add to ROE that are worthwhile.
A company with a PE of 10 buying a company with a PE of 5 works well.
HNZ have a record of successful acquisitions.

[kizame]

In my opinion its all about being earnings accretive whether they pay for any potential acquisition partially with shares or not. Obviously with the new lower capital adequacy requirements announced by RBNZ they have considerable headroom to grow their business organically or by simply writing a cheque for a bolt on acquisition but they'll probably want to play it a little conservatively to maintain and over time improve their credit rating. What was that old Mainland cheese advertisement theme again...oh yeah that's right "good things take time"

Thanks Roger. Still though, even if the aquisition is earnings accretive,if they pay for that buy with a good percentage of shares,that waters down your holding and thus a lot of share price appreciation,as with the HER business. Also if those shares come to market after a year, another drag on the shareprice.

[winner69]

Bunter .....look what you have done to the shareprice

Not ramping were you , just a honest well thought out valuation wasn't it

Nice

What's your next tip?

[Beagle]

Thanks Roger. Still though, even if the aquisition is earnings accretive,if they pay for that buy with a good percentage of shares,that waters down your holding and thus a lot of share price appreciation,as with the HER business. Also if those shares come to market after a year, another drag on the shareprice.

Yep the directors copped a little bit of flak at the ASM over that mainly in respect of the fact that small shareholders hadn't been given the opportunity to subscribe for new shares as part of the HER acquisition.
Directors explained that certain transaction require swift execution and sometimes things need to be progressed in the most expeditious manner possible but they went on to concede that they'd taken on board comments received and would make best endeavours to accommodate shareholders in the future. SP is up 19% since the ASM at the end of October and is well aware of HER vendors intentions regarding pending sell-down so I'm not sure you're concerns regarding a drag on SP are a reality or more a perception. Also SP appreciation since the deal was done has substantially outstripped the NZX50 so its hard to make the argument that this hasn't been seen by the market to be a desirable acquisition with significant earnings growth potential over time. Personally I have no qualms whatsoever over the HER acquisition or the manner it was executed or the stock over-hang. Plenty of institutions ready to soak up a meaningful stake in an organised placement in due course, in my opinion. I see further institutional support in due course as a good thing.

[kizame]

Thanks Roger, its good to put stuff out there and get good feedback.
It's a good company,with the potential to be a great company,and I think it will only be a bit more water under the bridge till that is achieved.