HGH - Heartland Group Holdings

[Beagle]

Well done.
I note Jeff has never sold any.

Thanks. Herdlicker and many of the AIR exec's should take notes.

[Fred_Rubble]

Strong volumes again. Someone is buying.

[SCOTTY]

Strong volumes again. Someone is buying.

And someone is selling

[Snoopy]

Year	Dividends Paid 'per share'	Significant Event During Year'
FY2013	1.5cps(sp) + 2.0cps	17th December 2012: Heartland becomes a bank
FY2014	2.5cps + 2.5cps	1st April 2014: Seniors 'Reverse Mortgage' Business Acquired
FY2015	3.5cps + 3.0cps	10th September 2014: invests in Harmony P2P startup
		28th October 2014: Credit rating upgraded from BBB- to BBB (Fitch Ratings)
FY2016	4.5cps + 3.5cps
FY2017	5.0cps + 3.5cps
FY2018	5.5cps + 3.5cps
FY2019	5.5cps + 3.5cps	1st November 2018, Heartland Group Holdings restructure set up
Average FY2015 to FY2019 inclusive	8.20cps

I have chosen to use the last five years of operation as indicative, as these years include the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards.

SNOOPY

[Snoopy]

Plugging in a representative yield of 7.5%, one that IMO represents an appropriate risk for the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Gross Yield) = Share Price (an algebraic manipulation of: Dividend per Share / Share Price = Yield )

8.333c / (0.72 x 0.075) = $1.54

A reminder here that NTA was

($664.160m - $74.401m) / 560.587m = $1.05 cps

at balance date. This means my fair valuation is at a good premium (+46%) to asset value.

This $1.54 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.23 to $1.85. Given where we are in the business cycle, $1.73 looks fair value today. Given the sweet spot in the business cycle today for shares, I think $1.85 over the next twelve months is a target that Heartland could get to. I don't see compelling value at $1.73 though. But if the share does drift back towards my fair value mid point of $1.54, that might be the time to -finally- add HBL to my portfolio.

Plugging in a representative yield of 7.5%, one that IMO represents an appropriate risk for the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Gross Yield) = Share Price (an algebraic manipulation of: Dividend per Share / Share Price = Yield )

8.2c / (0.72 x 0.075) = $1.52

A reminder here that NTA was

($654.150m - $73.085m) / 565.430m = $1.03 cps

at the half year FY2019 balance date. This means my fair valuation is at a good premium (+48%) to asset value.

This $1.52 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.22 to $1.82. $1.41, where the share is trading today, looks a little below fair value. Take off the upcoming 3.5c dividend and we get down to an equivalent $1.375. That is a 10% discount to fair value. I therefore see HGH as worth accumulating at $1.41.

SNOOPY

discl: New shareholder, in at $1.38

[Timesurfer]

Another positive ... I wanted some coin for another punt and since HGH has been boring me something chronic I took the hit and bailed today. It is bound to bounce back now given my track record - you lucky holders you.

[Beagle]

Plugging in a representative yield of 7.5%, one that IMO represents an appropriate risk for the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation

(Representative Dividend per Share) / (Acceptable Gross Yield) = Share Price (an algebraic manipulation of: Dividend per Share / Share Price = Yield )

8.2c / (0.72 x 0.075) = $1.52

A reminder here that NTA was

($654.150m - $73.085m) / 565.430m = $1.03 cps

at the half year FY2019 balance date. This means my fair valuation is at a good premium (+48%) to asset value.

This $1.52 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.22 to $1.82. $1.41, where the share is trading today, looks a little below fair value. Take off the upcoming 3.5c dividend and we get down to an equivalent $1.375. That is a 10% discount to fair value. I therefore see HGH as worth accumulating at $1.41.

SNOOPY

discl: New shareholder, in at $1.38

I also see it at around $1.50 using my peer comparison valuation methodology. 2 Beagles in agreement is not a common thing lol
With you on this one but good luck with your TRA, (you'll need it)

[Fred_Rubble]

Small but positive.

https://www.nzx.com/announcements/331285

Positive close too.

[oldtech]

Small but positive.

https://www.nzx.com/announcements/331285

Positive close too.

Yup, will be very interesting to see if that holds up today. SP has climbed fairly rapidly from 1.31 on the 15/02 to 1.44 at yesterday's close.

[winner69]

Yup, will be very interesting to see if that holds up today. SP has climbed fairly rapidly from 1.31 on the 15/02 to 1.44 at yesterday's close.

...will do ...heading into the 150s

Was always the time to buy in the low 130s