HGH - Heartland Group Holdings

[winner (n)]

In case we overlook the obvious - Heartland (or our man Jeff) always does what he says he will do

Doubt if any have a guidance record like shown below

So in a years time we will be lauding NPAT of $114.1m or around about $114m

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[winner (n)]

Walking along the beach earlier today it dawned on me that a lot of what has been said about Heartland in the last week (generally negative) has been very much what was being said in 2018 when they went through that corporate restructure and became Heartland Group ... and listed on ASX

Lot of negativity back then .... too messy, not good concentrating more on Aussie etc etc ..... and the share price did weaken through 2018

But at the end of the day these things didn't seem to hold them back eh

In a few months time we'll be saying what was all the fuss about

[Basil]

In case we overlook the obvious - Heartland (or our man Jeff) always does what he says he will do

Doubt if any have a guidance record like shown below

So in a years time we will be lauding NPAT of $114.1m or around about $114m

You cannot view this attachment.

WOW, that's unprecedented to the best of my knowledge on the NZX. I guess the slightly cynical bean counter in me would perhaps observe that its obvious they have the luxury of smoothing loan provisioning, both specific and general each year but nonetheless leaving that aside, objectively that's a profoundly impressive track record of doing what they say they will do. 

I'm applying for the maximum extra $50K in the SPP.

"In a few months time we'll be saying what was all the fuss about"  I couldn't agree more.

[LoungeLizard]

The HGH cheerleaders may of course be right and be laughing all the way to the bank in 12 months time. But there is a little too much backward looking going on - things turned out well before so why won't they turn out well now seems to be the thinking. Well, recessionary economics for one thing. People borrow less for houses and cars etc during tough times. Those that do borrow can get themselves into trouble quicker with inflation/ rising interest rates. Default risk is higher.
Mitigating that is HGH's reverse mortgage niche and the fact that banks tend to do better in periods of rising interest rates. But banks are not the steady growth stocks that people think - look at the major banks, they've taken a beating in recent times. Banking stock is cyclical - and I think they are going to be in trough for the next few years. Will HGH be the exception. Time will tell.

[snapiti]

I think it is marvelous all those new sher funds propping up the company........makes my term deposit with them at 4.2% a lot safer

[winner (n)]

Heartland Bank their reverse equity rate by another +25 bps to 7.75% today

That's good

[Basil]

Really busy week so haven't really had a chance to drill deep down into recent announcements.

What have HGH said about the $150m bond maturity on 21 September ?

Is that the real reason for the capital raise ?

[lorraina]

On 23 August 2022, Heartland Group Holdings Limited (Heartland) announced an equity raise of approximately NZ$200 million to repay an A$158 million acquisition finance facility outstanding in relation to the recent acquisition of StockCo Australia and to provide additional growth capital for Heartland's existing businesses both in Australia and New Zealand.

No mention of the bonds.

[winner (n)]

Had a look at some numbers in their reports mainly to see impact of StockCo on F22 but more importantly on F23

Presentation says StockCo contributed $1.4m to F22 NPAT and is forecast to contribute A$10m to A$12m in F23 (lets say NZ$12m)

First observation: Backing StockCo out of F22 normalised NPAT of $96.1m means 'base' business grew at 7.7% over F21 (makes the reported 9.3% reported growth not that flash)

Second observation: F23 NPAT guidance is $109m to $114m and as above lets assume StockCo is going to contribute $12m. This implies that the 'base' business (ie excluding StockCo) NPAT is forecast to grow by 2% to 8% in F23. Not that impressive ,,,,, and a lot lower than most were touting before the results came out

Seems things getting tough for Heartland .... underlying earnings growth stalled and flattening out

No wonder share price down last week .... I don't think you can put it all down to the capital raise.

[Plata]

Well the director disclosures are out, Jeff really putting his money where his mouth is with a whopping 50k purchase... clearly not inclined to avoid dilution is he 

[lorraina]

What is 'Skin In The Game'. Skin in the game is a phrase made popular by renowned investor Warren Buffett referring to a situation in which high-ranking insiders use their own money to buy stock in the company they are running.

[Basil]

I tossed and turned over this at considerable length, was certain to participate in the SPP, then decided not too and then what the heck, why not...and in the end decided to throw them another 50 kg bone.
At the end of the day while I am a little disappointed with this years dividend and a flat near term eps outlook I think in the long run the reverse equity loan book is a "very low risk goldmine" and even if they only pay 11 cps fully imputed next year that's still 8.5% gross.  Beagles are by their nature impatient dogs when it comes to seeing bigger feeds arrive in their food bowl but I think one can afford to be patient waiting for more growth when getting 8.5% gross yield.

[Shareguy]

A bit late but my thoughts on latest result.

NPAT of $96.3m within guidance of $93 to $96m

NIM of 4.16 percent. Lower than 4.35 percent in FY21. Lower NIM due to book quality changes from motor vehicles and residential mortgages after cccfa changes.

Strong growth in reverse mortgages. I see this business as a gold mine. Interest rates increasing is going to be beneficial.

Harmony shares written down by A$12.7m

An increase in non performing loans to 1.81 percent from 1.58 percent YE21

Good cost control with underlying costs to income ratio of 42.5 percent from 44.8 percent pcp.

Dividend less than expected but still healthy and makes sense when having CR.

Flat growth with EPS forecasted at $.163 FY23 (taking into account CR)

Purchase of Stockco seems like a good fit to me when you consider how well their rural side went (up 17 percent)

If the Aust bank acquisition goes ahead will give access to retail deposits and should increase NIM.

I have been in this since it was spun out of PGC. It's been a great share for me and I expect it to continue.

The large holding that the CEO and some of the directors have also gives me confidence. Disappointing that Jeff only took a small amount in the latest disclosure and won't be maintaining his holding. But how may ceos in NZ have such a big holding anyway.

I think $1.80 will seem like a good price in the months to come. Just need markets in general to improve.

[Fiordland Moose]

yes agree shareguy - cost control was excellent in all respects. both as a proportion of revenue, book, or just the absolute change year on year. page21 of the finstats really illustrates it...one would be hard pressed to find a company who held its costs as well in the face of inflationary pressures

[Basil]

Thanks shareguy, great post.
Dairy prices up, Winner reckons that's usually good for HGH share price.
https://www.nzherald.co.nz/business/global-dairy-prices-rebound-from-prolonged-winter-slump/X4A6XXBA4L3GPP3BZDHYJRHGAQ/