HGH - Heartland Group Holdings

[Beagle]

HBL was cheaper on PE terms a couple of years ago because people perceived the risks to be higher. Dairy and many related industries for example were up to their eyeballs in it.
Now the risks are widely perceived to be much lower and growth opportunities higher the market quite correctly and quite efficiently has re-priced the risk and PE accordingly.

[trader_jackson]

Hmm - extrapolations are always right, until they are wrong. And they always are.

Don't want to rain into the parade ... and while I agree that HBL (as well as some of the Ossie banks) look currently still reasonably priced (i.e. in my view more worth than what the shares currently cost) ... there are as well some risks hanging around.

The (though moderate) exposure to the dairy industry didn't go away overnight, Harmony does not always get the best press, and not sure how long their growth curve continues ... and haven't heard for some time how the reverse mortgage business is doing.

Consensus forecast is currently $1.30 ($1.25 ... $1.35) and while analysts have a track record in underestimating HBL's future share price, do I think that they are closer to the mark than some of the predictions in this thread.

(edit)
Discl: holding HBL (and ANZ) and NOT expecting a (huge) capital gain, but holding them for a dividend much better than bonds or bank accounts can deliver these days;

Posted on 15 March 2016, nearly exactly 1 year ago when HBL's share price was $1.23.

Analysts appear to be wildly wrong once again...

HBL finished at $1.64... with buyers lining up at $1.64 (and nobody keen to sell till another cent up)

I thought HBL was meant to go down after the shares were allotted?

Likely some of that $40 odd million that was oversubscribed is helping support the price, and the market is happy to pay a quality price for a quality company.
In my view, I believe it is more of a question of when (rather than if) a profit upgrade is coming.

[BlackPeter]

Posted on 15 March 2016, nearly exactly 1 year ago when HBL's share price was $1.23.

Analysts appear to be wildly wrong once again...

HBL finished at $1.64... with buyers lining up at $1.64 (and nobody keen to sell till another cent up)

I thought HBL was meant to go down after the shares were allotted?

Likely some of that $40 odd million that was oversubscribed is helping support the price, and the market is happy to pay a quality price for a quality company.
In my view, I believe it is more of a question of when (rather than if) a profit upgrade is coming.

There are situations in which I can live with conservative estimates ... It just meant that I was monitoring this holding at times a bit closer than I otherwise might have done.

Discl: (Still) holding;

[trader_jackson]

There are situations in which I can live with conservative estimates ... It just meant that I was monitoring this holding at times a bit closer than I otherwise might have done.

Discl: (Still) holding;

Just to clarify, it wasn't a dig at you in anyway, just a good comparative post, and to show how 'different' things are just 1 year on

[kizame]

Everyone wants HBL shareprice to trend higher, so it has done so, nice and slowly, So why now are some saying it's overvalued,what do you want?
If you look at ANZ WBC they have a pe of 16,so why shouldn't HBL be a little closer to them in value, considering it's growing faster.
I'm still thinking it's meandering it's way to 1.80, lookout for those poor shareholders owning this overvalued pup then,I couldn't think of anything worse.

[percy]

Everyone wants HBL shareprice to trend higher, so it has done so, nice and slowly, So why now are some saying it's overvalued,what do you want?
If you look at ANZ WBC they have a pe of 16,so why shouldn't HBL be a little closer to them in value, considering it's growing faster.
I'm still thinking it's meandering it's way to 1.80, lookout for those poor shareholders owning this overvalued pup then,I couldn't think of anything worse.

$2.00....????????????????????????????...

And yes the recent sp strength has most probably taken a lot us long term holders by surprise.
But we will quickly get used to it....lol.

[Joshuatree]

Maybe a bit of psychology involved wherein everyone wants to take the divvy esp the "gift" div from the new shares before they selldown /reset their portfolio sizing.

[Jantar]

Maybe a bit of psychology involved wherein everyone wants to take the divvy esp the "gift" div from the new shares before they selldown /reset their portfolio sizing.

That is what I am hoping then I'll top up with a few more.

[Beagle]

Why its worth more.
1. We cannot ignore the fact that HBL has grown its EPS faster in recent years than the Aussie banks.
2. This trend is set to continue, see below therefore a PE premium is warranted compared to its peer group.
3. The following are the forecast PE's for its peer group for FY17, FY18 and FY19 followed by average analyst expected EPS growth in percentage terms bolded from FY17 to FY19 All data off average analysis forecast off 4 traders
Bendigo BEN 13.2, 13.1, 13.3, EPS growth expected -1%
NAB 13.6, 13.4, 13 4%
WBC 14.5, 14, 13.6 6%
ANZ 13.4, 13.2 12.5 7%
Bank of Queensland BOQ 12.9, 12.6 12.3 4.5%
HBL 13.8 12.6 11.9 14%

The average FY19 PE which takes into account average forecasted growth to FY19 is 12.77

4. Even if you make the case, (which I don't) that HBL will only enjoy two more years of abnormal growth before reverting to the very modest rates the Australian banks are "enjoying" for HBL to be trading at the average of its peer group the SP is likely to outperform its peer group by 12.77 / 11.9 = 7.3% over the next two years.

5. Even now based on average estimated 2017 earnings the peer group is trading at an average PE of 13.56 and HBL at 13.8 represents only a tiny premium which taking into account its historical growth outperformance and projected stronger growth and I think the current market PE premium is not properly recognizing this superior growth.

6. I think given the distinct possibility that HBL's growth will continue to outperform its peers post FY19 I think that a minimum further 7.3% rerating will happen over the foreseeable future, probably this year.

7. Relative to its peer group I therefore value HBL at 1.64 + 7.3% = $1.76.

8. I think you can easily make the case that relative to its peer group given its considerably stronger historical and projected growth a PE premium of 1 on FY17 projected earnings is warranted.
Average FY 17 PE for Aussie banks excl HBL is 13.52.
HBL's current PE 13.8 HBL should be trading on a FY17 PE premium of at least 1 = 14.52 14.52 / 13.8 = 5.2% increase from here = $1.73

9. Investment case summary: I therefore think fair value for HBL is between $1.73 and $1.76 on an ex dividend basis and note it currently trades on a theoretical ex dividend price of $1.60.5 ($1.64- 0.035) so we have another ~ 10% rerating to go and then from there the price should continue to drift up in line with the 14% earnings growth to FY 19. My 2 year target price is therefore 1.76 x 1.14 = $2.01 and in the meantime based on 8.5 cps in annual fully imputed dividends we will be enjoying a gross dividend yield of 7.36% (8.5 / 160.5) / 0.72.
Disc: Hold and fully subscribed to dividend reinvestment plan.

[Snow Leopard]

Welcome to the Heartland Bank B***s*** Bubble.

I am probably going to reverse my decision to take the DRP


Best Wishes
Paper Tiger