HGH - Heartland Group Holdings

[winner69]

But wait there's more LOL. Was it really so silly for me to talk about $2+ on the weekend ?

Lets value the stock using the extremely well regarded Benjamin Graham formula of V = EPS x (8.5 + 2g)
According to Reuters http://www.reuters.com/finance/stock...?symbol=HNZ.NZ - Consensus analysts forecasted 2015 EPS is 9.95 cps, consensus long term growth is 15%, (note historical growth last couple of years has been much higher) and using those numbers we get 9.95 x 38.5 = $3.83 !!
Like I said, HNZ is a very cheap growth stock.

Whichever way you look at it Roger isn't 2 bucks on the card by Christmas.

$50m NPAT this year and then say a poor year in 2016 and only $55m NPAT and still people will be excited.

And heck another acquisition must be on the way, more growth and don't forget those synergies to put more icing on the cake

All makes sense

[gv1]

Like I said, HNZ is a very cheap growth stock. Surely this new valuation gets me the position of Chairman of the rampersrus club [/QUOTE]


Naa, Warren Buffet of sharetrader.

[Beagle]

Like I said, HNZ is a very cheap growth stock. Surely this new valuation gets me the position of Chairman of the rampersrus club

Naa, Warren Buffet of sharetrader.[/QUOTE]

LOL Warren Buffett is reported as saying Benjamin Graham's book is the greatest investment book of all time. Maybe that formula isn't so silly after all
Even if we use a long term growth rate of 10% which seems very reasonable and use trailing EPS as stipulated in that formula we get 9 x 28.5 = $2.56 intrinsic value.
Even using my tight arsed accountants approach to buying growth... value formula of V = eps x (8.5 + 1g) I see it as a strong buy up to $1.66. I guess it all depends where one sees the long term growth potential and that's where high margin aspects of the HER come into play. Also worth noting the net interest margin of HNZ is circa double that of the average Aussie bank. I reckon that might come in handy when it comes to future EPS growth

[dingoNZ]

Naa, Warren Buffet of sharetrader.

LOL Warren Buffett is reported as saying Benjamin Graham's book is the greatest investment book of all time. Maybe that formula isn't so silly after all [/QUOTE]


Great book but very dated and in parts hard to read.

Glad I topped up recently at $1.14, up 6.1% already since the start of the year!!

[gv1]

Naa, Warren Buffet of sharetrader.

LOL Warren Buffett is reported as saying Benjamin Graham's book is the greatest investment book of all time. Maybe that formula isn't so silly after all
Even if we use a long term growth rate of 10% which seems very reasonable and use trailing EPS as stipulated in that formula we get 9 x 28.5 = $2.56 intrinsic value.[/QUOTE]

Spot on. Cheers mate.

[winner69]

Isn't the market totally irrational at times. Like still to recognise real value

But as MAC reminds us on other threads the market eventually recognises intrinsic value, or something like that

C'mon 2 bucks by Christmas

[dingoNZ]

Sentiment > Fundamentals at the best of times, as irrational as that is.

[winner69]

Naa, Warren Buffet of sharetrader.

LOL Warren Buffett is reported as saying Benjamin Graham's book is the greatest investment book of all time. Maybe that formula isn't so silly after all
Even if we use a long term growth rate of 10% which seems very reasonable and use trailing EPS as stipulated in that formula we get 9 x 28.5 = $2.56 intrinsic value.
Even using my tight arsed accountants approach to buying growth... value formula of V = eps x (8.5 + 1g) I see it as a strong buy up to $1.66. I guess it all depends where one sees the long term growth potential and that's where high margin aspects of the HER come into play. Also worth noting the net interest margin of HNZ is circa double that of the average Aussie bank. I reckon that might come in handy when it comes to future EPS growth

Like that 256 mate

Heartland offering 4.5% for 12 months term deposit ...3% after tax.

Heartland divie this year 8 cents ......jeez instead of taking the term deposit buy shares ....all the way to 256 ....and be heaps better off, same yield and what a capital gain.

Spooky though Ben comes up with 256 and dvidends support that 256

Where's the equity risk premium you might say? Globally punters don't need a premium, that's how markets are priced anyway.

Why put money in the bank when you can own it and get rich

[Snoopy]

This 'minimum capital requirement' has been discussed on this thread before. See post 2990, the interest.co.nz reference quoted by Captain Dan. You are correct PT, the 'minimum capital requirement' (for the Bank) remains at 12%.

"Since January 1 this year banks also require a buffer ratio for common equity tier one capital of at least 2.5%. This buffer ratio is described by the Reserve Bank as a counter-cyclical capital buffer that can be applied in times of excessive credit growth. It's part of the Reserve Bank's version of the global Basel III bank capital adequacy standards, which have been endorsed by the G20. Heartland isn't required to maintain this buffer."

My 14.5% equated to 12% + 2.5% (the buffer). I now see that Heartland has an exemption regarding this buffer.

The Basel III requirements have previously not effected the Banking Group's minimum capital requirements as the Banking Group’s Conditions of Registration prescribe minimum capital requoirements higher than Basal III requirements. On January 14th 2015 , the Reserve Bank has consented to the reduction of its regulatory capital requirements, bringing them in line with other New Zealand registered banks.

Today I want to update the Heartland New Zealand banking covenants in relation to the for the June 30th 2014 quarter (corresponding to the EOFY).

The document I am referencing is the:

"Heartland Bank Disclosure Statement for the year ended 30th June 2014"

Note 39 (p63), contains the information on capital adequacy.

All Tier 1 capital for Heartland is shareholder equity.

Heartland's 2018 Subordinated Bonds (the Bonds) constitute Tier 2 Capital of the Banking Group. The Bonds had an issue period from 12 July 2013 to 15 December 2013 and have a maturity date of 15 Decembe 2018.

The information supplied is as follows:

Common Equity Tier 1 ratio: ( RBNZ minimum of 4.5% + 2.5% buffer)
Total Tier 1 ratio: ( RBNZ minimum of 6.0% + 2.5% buffer)
Total Tier 1 & 2 ratio: ( RBNZ minimum of 8.0% + 2.5% buffer)

As of September 30 2014, Heartland had a common equity tier 1 ratio, as a percentage of total risk weighted exposures, of 13.99%, tier 1 capital ratio of 13.99%, and total capital ratio of 14.09%. Its buffer ratio was then 1.99%

Note 39 contains detailed notes on just how the Heartland NZ capital is made up. If you use that information and use it to calculate the above ratios, based on a loan book with net loans and advances of $1,985.119m (from the balance sheet) I calculate the above ratios as follows:

Common Equity Tier 1 ratio: $334.981m/$1,985.119m = 16.9%
Total Tier 1 ratio: $334.981m/$1,985.119m = 16.9%
Total Tier 1 & 2 ratio: $337.487m/$1,985.119m = 17.0%

Risk weighted exposure (scaling of the loan book) as per note 39f gives a slightly different result.

Common Equity Tier 1 ratio: $334.981m/$2,344.744m = 14.3%
Total Tier 1 ratio: $334.981m/$2,344.744m = 14.3%
Total Tier 1 & 2 ratio: $337.487m/$2,344.744m = 14.4%

Why the difference between the two calculations? That is because the Tier 1 and Tier 2 capital figures have been 'risk adjusted' before they went into the second calculation. The risk adjustment is done because the expected capital recovery from loans should they go bad is different among the different classes of loans (corporate, sovereign, bank, retail mortgages and other retail).

SNOOPY

PS Tabulated version of above results

	30/06/2014 (quote)	30/06/2014 (risk adj)	RBNZ Required (FY2015)
Common Equity Tier 1 Ratio	16.9	14.3	4.5+2.5
Total Tier 1 Ratio	16.9	14.3	6.0+2.5
Total Tier 1&2 Ratio	17.0	14.4	8.0+2.5

[Beagle]

Like that 256 mate

Heartland offering 4.5% for 12 months term deposit ...3% after tax.

Heartland divie this year 8 cents ......jeez instead of taking the term deposit buy shares ....all the way to 256 ....and be heaps better off, same yield and what a capital gain.

Spooky though Ben comes up with 256 and dvidends support that 256

Where's the equity risk premium you might say? Globally punters don't need a premium, that's how markets are priced anyway.

Why put money in the bank when you can own it and get rich

Exactly !!!