HGH - Heartland Group Holdings

[Baa_Baa]

Very happy indeed.

HNZ vaulted into 1st place, by value in my portfolio, ahead of my darling energy shares. That'll teach me to put up a bunch of wanna-be watchlist stocks for the 2015 contest, when my actual portfolio is killing them.

Kudos to the irrepressible Roger and Percy in particular. It's great that you selflessly share your convictions with sound analysis and it turns out to be 'on the money'.

Thanks guys.
BAA

Speaking of Blue Sky, this seems appropriate after this week's SP performance.
https://www.youtube.com/watch?v=K01YNsa_8m8 enjoy

[PartyPooper]

I also want to echo thanks to Percy and Snoopy on this one. I was suffering paralysis by analysis on HNZ but from reading the banter and well constructions posts, I took the dive and have the nice green 23% arrow now.

[Beagle]

We've certainly has a stellar run in January and that after a strong run-up from $1.00 at the time of the ASM on 31 October to circa $1.16 around Christmas.
A 32% SP gain in the last 3 months is a great result in anyone's books. Now all the good news is out there, unless there's some surprise I'm not aware of it won't surprise me if we see a quieter period in the next three months and this won't concern long term holders many of whom I suspect will be quite happy to collect a nice divvy and know the company is doing the business for the long haul.
Its interesting to reflect back to the day of the ASM just 3 short months ago. Those there that I spoke too thought $1.10 - $1.20, (depending on how much they'd had to drink) was a fair SP target for the stock by the time of the 2015 ASM in late 2015 and I was in that range too at that time, to be honest.

HNZ is presently trading on 13.2 times forecast 2015 earnings of 10cps and this price seems fair and reasonable to me for now. I remain of the view that's is a great long term hold on the basis that the team can deliver EPS growth over time and as they continue to deliver on their promises and continue to build their already strong credibility some modest further PE expansion is possible.

Since the ASM I've developed my understanding of the company to the point where I can see it being around $2 in due course but in my view this will take quite some time, probably, realistically, 2-3 years. I guess I feel its perhaps appropriate that somebody sounds a little note of caution to any newbie considering getting on board on the basis of very strong recent SP gains. Rome wasn't built in a day and good things take time. I think anyone expecting another 32% SP gain in the next 3 months ($1.32 growing to $1.74), is highly likely to be disappointed.

On the other hand long term investors will I remain sure, be very happy with long term SP gains and will be happy to know they're being paid well to wait for long term growth with handsome fully imputed dividends, I estimate this year at 7 cps which equates to a gross divvy yield of 7.37% for 2015 based on a SP of $1.32 and I am sure those dividends will grow over the years ahead. Everyone has their own way of investing but for what its worth I won't let any stock get to a position of being worth more than 20% of my portfolio no matter how sure I am of their long term prospects.

It concerns me a little that the company appears to be considering accounting for its profit on the Harmoney investment ? While it was more than fair of them to note that their upgraded guidance excluded any increase in the value of their Harmony stake as a result of the Trade Me investment I struggle to see where they are coming from in terms of implying that it might be acceptable to account for theoretical gains in this non-listed associate company on the basis that this is in some way connected with operational profit ? I would have thought the team would have taken professional advice from their auditors rather than leaving this as an open question is a profit upgrade announcement. You been pushing them too hard Winner 69 ?

[winner69]

Good post that one Roger.

I think the real incremental boost in FY16 profits will come from HER.

As Percy says they always do what they say. So to become eps accretive and to maintain a 10% roe her will be contributing a minimum of $6m to $7m. Percy says a good buy so 2016 is the year to start delivering that, and even more.

FY14 apparently had $1m odd contribution from her. That was ony a part year. Guidance says 'flat' this year whatever that means. So lets be generous and say $4m from her this year.

So $36m in 14 - add incremental $3m from her gives $39m so core business making $8m more to give $47m . (Still wimpish but that's another story)

Take that $47m and like your algorithm add say $10m growth plus $4m plus from her and hey presto FY16 guidance is in excess of $60m

That's the result on building on the good work of the last few years and doing what they say will with her. They are very well positioned to get over $60m next year.

Only a small bank so easier to make larger %age growth than the big boys.

[winner69]

Roger, And before you laugh at me and chastise me for being impatient $60m in 2016 will still only be 11% to 12% ROE .....and remember they always do what they say they will do and they laid the seed of expectations about ROE with that nice slide at the ASM

We need to keep pushing hard

(ROE est assumes no financial engineering)

[noodles]

A 32% SP gain in the last 3 months is a great result in anyone's books. Now all the good news is out there, unless there's some surprise I'm not aware of it won't surprise me if we see a quieter period in the next three months

Nice post.
An acquisition could be a catalyst for further share price movement upwards.
Additionally, I expect something special to be announced at the half year. Maybe a special dividend or a increase in the payout ratio. Prior to the recent announcement, the company was trading at a 20% premium to analysts due a high yield. This could happen again as the dividend yield is increased as a result of increased profitability and capital adequacy.

[Beagle]

I'm with you Winner on the $60M+ for 2016 and agree the HER business has heaps of potential for growth.
Yep, Noodles I agree mate. Lower capital adequacy requirements certainly gives them heaps of head-room unlike the Aussie banks

[JohnnyTheHorse]

Looks like some insto has an algo going on the buy side.

[nextbigthing]

Looks like some insto has an algo going on the buy side.

Johnny"TheHorse" it's Next"BigThing" here.

What makes you say it's on the buy side (other than the obvious, someone's buying...). I ask because as soon as a buyer appears for say 2000 shares it gets hit in say three parcels of say 287,1256 and 457. Wouldn't that suggest the algo is selling rather than buying, trying to feed it out in small random parcels but maintain the price and keep the sell depth looking thin, as it is this morning. These high prices are currently on small volume.

[percy]

What I find interesting is the very large volumes that have been traded over the past few months with no shareholder notices.