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  1. #8471
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    Quote Originally Posted by Snoopy View Post
    I didn't lose any debenture money in NZ's "great finance company collapse" around the global financial crisis, because I didn't invest any money in finance company debentures PT...
    ...And if that means being extra careful about risk, and losing some opportunities along the way, then so be it.

    SNOOPY


    Quote Originally Posted by Snoopy View Post
    2/ Despite bluster about capital returns over the last couple of years, the real situation required Heartland to make a cash issue of shares late in CY2016. Heartland got the recapitalisation plan away at a very good price. But that good price was never assured before the event...
    If any one part of that post shows your extreme negative bias which you let colour your conclusions then this is it.

    There were and are risks with Heartland, as with any share, but there also rewards.

    The risk reward ratio for Heartland has been heavily biased to reward for longer than you have been misunderstanding and misinterpreting their accounts.

    Best Wishes
    Paper Tiger
    om mani peme hum

  2. #8472
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    Exclamation Another one

    Quote Originally Posted by Roger View Post
    Snoopy

    I'm with you on this one....


    Best Wishes
    Paper Tiger
    om mani peme hum

  3. #8473
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    Default How Depositors and Loan Customers are 'expected' to behave: FY2016 update

    The objective of this post is to consider cashflow, both in and out over the subsequent one year period after reporting date. This will help evaluate the ability of Heartland to repay debentures due for repayment in the 12 months following the end of year account reporting date.

    The following information for FY2016 is derived from note 20 in AR2016 on 'Liquidity Risk'.

    1/ Contractual information is extracted from the table titled 'Contractual Liquidity Profile of Financial Assets and Liabilities.
    2/ Expected information is calculated by multiplying the 'Contracted' risk by the Expected Behaviour Multiple.
    3/ The Expected Behaviour Multiple is dervied from Heartlands own results, back in the day they printed both 'Contracted' and 'Expected' behaviour.

    Loan Maturity Expected Behaviour Multiple FY2014 Financial Receivables Maturity: Contracted/ Expected FY2015 Financial Receivables Maturity: Contracted/ Expected FY2016 Financial Receivables Maturity: Contracted/ Expected
    On Demand 100% $50.254m / $50.254m $37.012m / $37.012m $84.154m / $84.154m
    0-6 months 132% $477.190m / $629.445m $664.557m / $877.215m $743.389m / $961.274m
    6-12 months 132% $367.564m / $483.727m $450.638m / $594.842m $484.420m / $639.962m

    Note that in the above table, a 'loan maturity' represents an expected inflow of cash from a Heartland bank perspective.

    Deposit Maturity Expected Behaviour Multiple FY2014 Financial Liabilities Maturity: Contracted/ Expected FY2015 Financial Liabilities Maturity: Contracted/ Expected FY2016 Financial Liabilities Maturity: Contracted/ Expected
    On Demand 3.01% $629.125m / $18.922m $748.332m / $22.450m $718.587m / $21.630m
    0-6 months 32.4% $748.129m / $242.431m $1,213.450m / $395.102m $892.944m / $289.314m
    6-12 months 36.4% $538.050m / $195.682m $686.159m / $249.762m $837.844m / $304.975m

    Note that in the above table, a 'financial liability (debenture) maturity' represents an expected outflow of cash from a Heartland bank perspective.

    If we now take the expected cash inflows and subtract from those the expected cash outflows we can examine the expected net cashflow from a 'one year in advance' perspective.

    Deposit Maturity FY2014: 'Expected' combined Loan and Deposit Cashflow FY2015: 'Expected' combined Loan and Deposit Cashflow FY2016: 'Expected' combined Loan and Deposit Cashflow
    On Demand $31.332m $14.562m $62.524m
    0-6 months $387.014m $482.113m $691.960m
    6-12 months $288.045m $345.080m $334.987m
    Total $706.391m $841.755m $1,089.471m

    I should note here that 'expected' behaviour from future and existing depositors can be modified. Heartland could put a special offer into the market to attract more deposit money if required, for example. Nevertheless even without this I see little cause for concern if customer behaviour pans out as expected.

    From an historical perspective, the 'On Demand' net position outlook for FY2015 looked a little weak. But there has been a lot of promotion in the market regarding Heartland's 'on call' rates over the last year. So it is fair to assume that any potential problem in this area has been well and truly fixed.

    SNOOPY
    Last edited by Snoopy; 02-08-2018 at 10:35 PM.
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  4. #8474
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    I like heartland. The only listed NZ bank . I have a lot and will be buying more to take to 1m. shares. Banks historically are good investments and the pity is the NZ Govt sold BNZ at a fire sale price so ordinary investors can only invest thru AU unless you buy hbl.l

  5. #8475
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    Quote Originally Posted by horus1 View Post
    I like heartland. The only listed NZ bank . I have a lot and will be buying more to take to 1m. shares. Banks historically are good investments and the pity is the NZ Govt sold BNZ at a fire sale price so ordinary investors can only invest thru AU unless you buy hbl.l
    Good on you horus1.
    You are "extremely well positioned."
    Some how I feel with the solid ground work in place,the fun is just starting.[this was the impression I gained listening to the directors', seeking re-election to the board, speeches,and talking to other directors at the agm.]
    Last edited by percy; 19-01-2017 at 04:48 PM.

  6. #8476
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    Default Buffett Point 2/ FY2016: Sustainable 'eps' trend

    The trend below is required to track higher for five years with one setback allowed.


    Financial Year Net Sustainable Profit (A) Shares on Issue EOFY (B) eps (A)/(B)
    2012 $26.606m + 0.72($5.642m + $3.900m) =$30.476m 388.704m 7.84c
    2013 $6.912m + 0.72($22.527m+ $5.101m)= $26.804m 388.704m 6.90c
    2014 $36.039m 463.266m 7.78c
    2015 $48.163m - 0.72(0.588m) = $47.743m 469.980m 10.2c
    2016 $54.164m - 0.72(1.136m) = $53.346m 476.469m 11.2c

    Result: Pass Test

    One necessary hurdle has been lept over in a quest to see if Heartland is a suitable candidate to apply the Buffet growth model, as espoused in "The Buffettology Workbook" by daughter in law Mary Buffett.

    SNOOPY
    Last edited by Snoopy; 30-01-2017 at 06:04 PM.
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  7. #8477
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    EPS growth,plus dividend growth = one very happy Percy,and all other HBL shareholders..
    Even better is the fact the past year's strong growth has been organic.
    This strong organic growth is set to continue for the foreseeable future.
    Digital products delivered online is proving very successful.

  8. #8478
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    Default Buffett Point 3/ FY2016: Return on Equity history

    The table is required to have an ROE figure of >15% for five years in a row, with one setback allowed.


    Financial Year Net Sustainable Profit (A) Shareholder Equity EOFY (B) ROE (A)/(B)
    2012 $26.606m + 0.72($5.642m + $3.900m) =$30.476m $374.798m 8.1%
    2013 $6.912m + 0.72($22.527m+ $5.101m)= $26.804m $370.542m 7.2%
    2014 $36.039m $452.622m 8.0%
    2015 $48.163m - 0.72(0.588m) = $47.743m $480.125m 9.9%
    2016 $54.164m - 0.72(1.136m) = $53.346m $498.341m 10.7%

    Result: Fail Test

    Pre-empting the grizzlers, the thinking behind this test is that an ROE of 15% is well above the cost of capital of most firms. A lower ROE than this means that it is possible that some of the businesses under the Heartland umbrella are earning a return less than their cost of capital. This means that there is less certainty that capital in the future will be efficiently deployed, and consequently less certainty about the profit oulook. This doesn't mean that one should not invest in Heartland though. It just means that you should use a method other than the 'Buffett Growth Model' to evaluate the business.

    SNOOPY
    Last edited by Snoopy; 29-01-2017 at 11:03 AM.
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  9. #8479
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    Default The Heartland hunger for new Capital

    Quote Originally Posted by Snoopy View Post
    1/ If you look at the EBIT to Interest Expense Ratio when Heartland was formed my post (8477) you can see that their position was very marginal back in FY2012/FY2013. The threat of a recapitalisation that would provide breathing room at a big discount to the current share price back then and since has been omnipresent.

    2/ Despite bluster about capital returns over the last couple of years, the real situation required Heartland to make a cash issue of shares late in CY2016. A check of the constantly declining equity ratio (my post 8478) has hinted that eventually a recapitalisation was going to be required. Heartland got the recapitalisation plan away at a very good price. But that good price was never assured before the event.
    Financial Year Number of New Shares Issued during FY Total Shares on the Books EOFY Net Money Raised from Shares Issued During FY
    2012 88.704 m 388.704m $54.946m
    2013 0 m 388.704m $0m
    2014 75,562 m 463.266m $64.774m
    2015 6,624 m 469.980m $9.163m
    2016 6,579 m 476.469m $6.798m
    2017 13.659+ m 499.165+ m $20.0m +
    Total Cash Raised $155.681m +

    For those who need some more convincing about what I am saying, the table above lays out the 'new capital' that has been poured into Heartland from its formation. Some years the new capital injection was modest, via the dividend reinvestment plan. Most years the capital required was significant. In only one year was no new capital needed. By showing the whole picture, I am hoping to put the bed the idea that, for the ambitions that Heartland has, Heartland has 'excess capital'.

    In all years since Heartland has become a bank (FY2013 onwards), Heartland has satisfied Reserve Bank requirements for capital. But having a buffer on the minimum capital required, and having enough capital to allow Heartland to realise their business ambitions are different things. Some of this 'new capital' is being put toward the digital strategy. The effectiveness of this deployment while promising is yet to be seen! Because of the nature of the growing Reverse Mortgage business this is likely to be cashflow negative until a steady stream of these loans starts to mature. So yet more capital will be required for a while. None of this is meant to be a criticisim of Heartland's strategy going forwards. I am merely pointing out the cashflow implications for the near and medium term.

    Any readers still believe that Heartland has 'plenty of capital' and won't be requiring more?

    SNOOPY
    Last edited by Snoopy; 03-03-2017 at 09:03 PM.
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  10. #8480
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    Default Some big words time.

    Snoopy, your posts are bordering on sophistry.

    Actually they have crossed the border and well and truly invaded the territory.

    Leaving aside all that is apocryphal, or at least wildly inaccurate, and the weird set of criteria by which you measure the performance of the bank, I am now totally at loss as to what point you are actually trying to prove.

    Read my words: HBL is a good well run company and has been for at least 5 years.


    Whilst not the bargain it was, the current market price is a fair price for HBL.

    Best Wishes
    Paper Tiger

    PS: Dividend reinvestment schemes are not new capital.
    PPS: There is a very big difference between requesting new capital to enhance returns and needing new capital to survive.
    om mani peme hum

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