HGH - Heartland Group Holdings

[Jantar]

If the institutions which got the shares issued at 146 get dividends on them, then small shareholders should get the same treatment for shares they acquire under the spp. And the shares under the spp should be issued at 146.

If not, a lot of the love gushed for HBL on this thread will evaporate.

This could be a tough one for HBL. The offer price really needs to be at a discount to the ex div SP, or else we would just buy on market rather than trough the SPP.

[janner]

Sold down two tranches of a 100K because I felt over loaded..

Regret it..

Disc. Holder.

[JeremyALD]

I want to buy more, but is that kind of dumb if I could get a discount in a month or two? The share price seems to hit a lot of resistance around $1.58 and has been between 1.50 and 1.60 for a few months.

[percy]

I want to buy more, but is that kind of dumb if I could get a discount in a month or two? The share price seems to hit a lot of resistance around $1.58 and has been between 1.50 and 1.60 for a few months.

Being so close to the interim result due on the 21st Feb,I would wait until you have read it,and find out the details of the SPP.Being a holder already, you will be able to apply for $15,000 worth,if you decide to.
HBL's sp appears to be tracking sideways again,so I do n't think you need to rush your purchase.
Value.At current prices I don't think HBL shares are cheap.Appears the market is now prepared to pay a higher PE for them,seeing they have delivered on their promises..
On the other hand they are not excessively over priced, considering future "organic" growth and growing dividends,currently a 5.45% yield.

[kizame]

With all the developements lately and the fact they do deliver the profits they say they are going to make,the p/e should be sitting a bit above the other banks,as I think of HBL now as a growth stock.

[Beagle]

Being so close to the interim result due on the 21st Feb,I would wait until you have read it,and find out the details of the SPP.Being a holder already, you will be able to apply for $15,000 worth,if you decide to.
HBL's sp appears to be tracking sideways again,so I do n't think you need to rush your purchase.
Value.At current prices I don't think HBL shares are cheap.Appears the market is now prepared to pay a higher PE for them,seeing they have delivered on their promises..
On the other hand they are not excessively over priced, considering future "organic" growth and growing dividends,currently a 5.45% yield.

Fully imputed though eh mate so 5.45 / 0.72 = 7.57% gross. Pretty handy return I reckon plus as you suggest, plenty or organic growth so if the PE stays where it is which seems fair we should see the share price grow in line with organic growth. 7.57% + ~ 10% organic growth = 17.57% total projected shareholder return, not too shabby in this low interest rate environment

[BlackPeter]

With all the developements lately and the fact they do deliver the profits they say they are going to make,the p/e should be sitting a bit above the other banks,as I think of HBL now as a growth stock.

Depends whether you prefer to rate or ignore the risks. Not quite sure how I feel about HBL's new affection to risky-er mortgages - if lenders don't worry about getting the best interest rates, there might be a more sinister reason than just their desire to make HBL shareholders happy.

Its now nearly a decade, bit I still remember the GFC ... do you?

Still holding, but monitoring closely.

[winner69]

Fully imputed though eh mate so 5.45 / 0.72 = 7.57% gross. Pretty handy return I reckon plus as you suggest, plenty or organic growth so if the PE stays where it is which seems fair we should see the share price grow in line with organic growth. 7.57% + ~ 10% organic growth = 17.57% total projected shareholder return, not too shabby in this low interest rate environment

Could be higher (growth and dividend) if things didn't get put in the bottom drawer fora rainy day as the saying goes

[Snoopy]

If there is a case for investment in Heartland today, I feel as though it will be as a dividend play. So how does one fairly value Heartland from a dividend perspective?

.... http://www.investopedia.com/terms/d/ddm.asp

Roger here is referencing the 'Dividend Discount Model' for valuing shares which, according to investpedia, goes like this:

Value of Share = (Dividend per Share) / (Discount Rate - Dividend Growth Rate)

The reason why I value a share on dividends is that my alternative growth modelling looks to be unreliable. There are plenty of reasons why Heartland could grow that are well discussed here. But despite Heartland having a strategy and successfully executing it (so far) there are lots of things that could go wrong too, and these scenarios are almost never discussed: except in this post.

1/ UDC gets some Kung Fu fighting ability: Many assume that the acquisition of nearest competitor UDC by the Chinese HNA Group will see a mass exodus of UDC depositors and customers. It is very curious that HNA Group are prepared to stump up a premium to book value of $NZ235m, or 1.6 times book value at UDC's full year balance, just to watch such a disaster unwind. What never got mentioned is that ANZ has agreed to fund a loan facility for UDC so generous, that even if nearly all depositors pulled out before UDC was sold, none of the loans would be affected. Once sold, credit rating agencies will drop UDC to below invesment grade because the new parent HNA froup has a rating delow investment grade. But if HNA then chooses to finance the business using cheap Chinese money, the credit rating no longer matters. Dollars still talk in financial deals. Those people with loans on the UDC book may be offered a very low interest rate, undercutting the likes of Heartland. Heartland's loan book could collapse under relentless Chinese pressure.

2/ The Great Reverse Mortagage Reversal: Reverse mortgages are more attractive in an environment of rising house prices. I reckon that some of those who took out reverse mortages in the last two years in Sydney, Melbourne and Auckland will have more capital now than before (despite semi-punitive interest charges) they took out their reverse mortgage. But if property capital growth stalls, or worse, the housing market goes backwards, then those with a reverse mortage will see a double decline in value. Both from compounding interest AND the diminuition in value of their house security. I think reverse mortgage growth will be much harder in that kind of market.

3/ Cost Pressures: Heartland, despite their superior interest margins - a point often quoted here, are still behind the big banks in terms of 'Net Profit margin'. 'Net Profit margin' I take as:

'Net Sustainable Profit' / 'Gross Interest Revenue'

For example ANZ in FY2016 this was 22.8%, and Heartland was 20.1%. So the superior 'net interest margin' of Heartland was more than compensated for by higher costs in the other operating expenses of the business. Heartland is actually a 'high cost base bank' which is much smaller than the big four banks. Being small and high cost puts Heartland in a vulnerable position. This is why Heartland have steered away from competing head on with the big banks (a smart move) in teir earlier visions. But now Heartland are to move back into regular mortgages via their on-line platform. I predict Heartland will succeed, but only by whatever measure the big banks choose to constrain them to. I can't see this U turn back to the mortgage market ending well for Heartland.

4/ "The nicking of Heartland Niches." Heartland are proud to point out their loan offerings to SMEs, a neglected segment (so they say). But Westpac are also going hard after SME business. Likewise both Westpac and ANZ are investing in their own digital strategies going forwards. ANZ will lend against livestock and farm machinery directly (leaving farm land unencumbered) too. Heartland's unique offerings to the market, while not offered by every other bank, are far from unique. Heartland may be going after underserved market niches, but other banks are going after those niches too!

I am not predicting the demise of Heartland even if all of my above bullet points come to pass. I am suggesting that the future of 'Heartland banking' may be a lot more combative that some shareholders think. I would say a dividend growth rate of zero would be the appropriately conservative figure to put into any dividend valuation equation.


SNOOPY

[winner69]

Roger here is referencing the 'Dividend Discount Model' for valuing shares which goes like this:

Value of Share = (Dividend per Share) / (Discount Rate - Dividend Growth Rate)


SNOOPY

So Value of HBL Share = (8.5 cents) / (10% - 13%)

= 0.085 / -0.03

= - $2.83 according to my Samsung

= don't make sense


Or if we moderate the 13% growth rate to a modest 9% and still use the 10% discount rate the answer is $8.50 - YIPPEE