HGH - Heartland Group Holdings

[nextbigthing]

Percy my friend, fetch your finest Friesian, I have a plan.

http://www.bbc.com/news/uk-england-s...shire-33840815

[percy]

Craig's research 30/7/2015.
FY 16 NPAT guidance of $51-55m [which includes an allowance for estimated impairments relating to the dairy loans] indicates the slowdown will not detract from its positive earnings momemtum.
The market update re-affirmed our view that the share price has over-reacted to the potential impact of the dairy slowdown on HNZ's earnings.We reiterate our BUY.

My our thoughts are the name Heartland is working against HNZ.I think "the market" sees HNZ as a "rural" bank.The fact they have an exposure to dairying of 7.8% of their loan book, compared to the other banks' up to 15% has not been seen by the market.As I have pointed out previously " In the land of the blind,the one-eyed man is king."

[mouse]

Craig's research 30/7/2015.
FY 16 NPAT guidance of $51-55m [which includes an allowance for estimated impairments relating to the dairy loans] indicates the slowdown will not detract from its positive earnings momemtum.
The market update re-affirmed our view that the share price has over-reacted to the potential impact of the dairy slowdown on HNZ's earnings.We reiterate our BUY.

My our thoughts are the name Heartland is working against HNZ.I think "the market" sees HNZ as a "rural" bank.The fact they have an exposure to dairying of 7.8% of their loan book, compared to the other banks' up to 15% has not been seen by the market.As I have pointed out previously " In the land of the blind,the one-eyed man is king."

My thoughts too. Heartland is a finance company, with the protection of being a bank. It has many income streams which seems to exclude mortgages on homes. Not saying that all is OK. But we are in quite perilous times, both here and Oz. I think Heartland is doing as well as can be expected in the circumstances. And putting your cash under the bed is not advisable. So, hope for the best and take the dividends.

[winner69]

Have Heartland lent on real farms, the land, or is that left to the big banks?

Does this then mean that the bulk of Heartland dairy exposure is on machinery, plant, livestock and working capital etc?

Different risk profiles I would presume.

[Hoop]

Fitch say a bbb rated bank is more sensitive to its economic environment than an aaa rated bank....so it seems HNZ is telling us the NZ economy is a bit stuffed at the moment.

Time to look at the economic clock again and see whereabouts the NZ economy is at within its economic cycle.

Hmmmm ...The clock looks broken.. the FED & Co, Mr Wheeler incl, must had fiddled around with its mechanisms....it's now behaving like a 2 bob watch

[Beagle]

Have Heartland lent on real farms, the land, or is that left to the big banks?

Does this then mean that the bulk of Heartland dairy exposure is on machinery, plant, livestock and working capital etc?
Different risk profiles I would presume.

That is precisely what many people don't appear to want to understand. How land values move downwards in really tough economic times is one thing, (and certainly the very early anecdotal evidence is startling), and how stock, plant and machinery move down is a completely different matter. It will be interesting to see if HNZ break down their dairy sector lending by security type in their forthcoming update.
In a severe industry contraction finance company's and finance company type lending get's belted much harder than traditional land and buildings type lending. Surely people remember this from all the finance company collapses during the GFC ?
While there's circa $200m of direct dairy exposure does anyone know or has anyone contemplated how much lending there is on plant and machinery to business's that support dairy ?
Talk of the prospects of a credit rating upgrade in this sort of macro economic environment is just plain ridiculous...all the more so when Fitch specifically mentioned the downside risks surrounding dairy in their most recent public statement.

[noodles]

That is precisely what many people don't appear to want to understand. How land values move downwards in really tough economic times is one thing, (and certainly the very early anecdotal evidence is startling), and how stock, plant and machinery move down is a completely different matter.
Finance company's and finance company type lending get's belted much harder than traditional land and buildings type lending. Surely people remember this from all the finance company collapses during the GFC ?
While there's circa $200m of direct dairy exposure does anyone know or has anyone contemplated how much lending there is on plant and machinery to business's that support dairy ?
Talk of the prospects of a credit rating upgrade in this sort of macro economic environment is just plain ridiculous...all the more so when Fitch specifically mentioned the downside risks surrounding dairy in their most recent public statement.

Analysts have stated that the majority of the diary lending is on land.

[winner69]

So no final payments on last seasons production and very small advance payments this season
http://www.sharechat.co.nz/article/7...cash-flowshtml

[winner69]

A large chunk of the $35 billion dairy debt is owed by 10%

If heartland have any exposure to these 10% I think moral / socially responsibly stuff needs to be forgotten and they just foreclose on those individuals if they are in default. Get in first before farm prices fall I reckon.

[Beagle]

A large chunk of the $35 billion dairy debt is owed by 10%

If heartland have any exposure to these 10% I think moral / socially responsibly stuff needs to be forgotten and they just foreclose on those individuals if they are in default. Get in first before farm prices fall I reckon.

Judging by the evidence of what you posted last week mate its too late and they've already fallen. I think with an average of 61% LVR HNZ have plenty of exposure to the most at risk sector of the industry. Upcoming sales will only reflect what we already know, that being that the massive disconnect between land prices and what that land is actually capable of producing in terms of cash flow has to close. Personally I think an astute buyer of a dairy farm right at the minute would be looking at bidding somewhere in the mid to high $2m range for an operation at its peak that would have been $4m. Just my opinion by why would any astute businessman right at the minute pay any more knowing its never been more of a buyers market ? We're in for a really meaningful correction in dairy farm prices, of that I am very sure. How much of that translates into real losses to HNZ, is very hard to quantify but history tells us that when times are really tough, (e.g. GFC), finance companies invariably underestimate their doubtful debt provisions, usually by a long way. I would have thought its crystal clear, all the risk to HNZ's FY16 forecast is too the downside. In terms of the point you've made mate, hopefully the board are well aware of there legal obligation to place the interests of shareholders ahead of anyone else. Thankfully the Fonterra loan thing buys some participants who are hopelessly unviable, at current pay-out level's, time to be helped to be managed out of the industry rather than be in a foreclosure position and therein probably lies a bit of relief for HNZ shareholders. Without the Fonterra loan thing the situation would be FAR worse.