HGH - Heartland Group Holdings

[Shareguy]

What's one and two on the list please

(1)MCY (2) CEN

Top growth

(1) SKO (2) ATM (3) SKL (4)VGL (5) FPH

[BlackPeter]

They have the same NZX code as my favorite dietary supplement.

I see. You have a background in molecular biology? This would help as well to understand your avatar ...

Joking aside I first bought in at the COVID dip, sold at the first CR and now consider it a good value buy for the long term. I managed to buy shares at 97c in the mid 5 figures. I bought because I like their acquisition of CB and the opportunities that presents. How that goes I'm excited to see.

Sounds like the first part of your strategy worked quite well ... and I can understand the excitement looking into the future. While no investment is without risks, assuming there are no hidden skeletons surfacing in the Challenger acquisition - I am pretty sure HGH won't have to complain about lack of demand for their REM products.

Discl: holding (and participated in the recent CR).

[Ferg]

This would help as well to understand your avatar ...

It's an anagram.

[Administrator]

This thread is the most viewed one on the forum, with over 66,000 views 

[TGB]

Lots to discuss and consider with HGH while Stocktalk has existed. It seems to avoid derailing like other threads 

[Bob50]

In another forum this person had this to say about Heartland
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"If you are concerned about bank stability check out the Reserve Bank Dahboard.
https://bankdashboard.ronz.govt.nz/summary
I have concerns about the financial stability of Heart Land bank at the moment."

Then someone asked this poster to expand on this comment.
His reply

"They have non-performing loans of 3.8%. These are loans that people may not pay back.
That number is high.
Their reserve asset ratio has dropped to 13.8%. That is how much money they have to actually back deposits people have made. This is low.
If those loans go bad then their backing is only 10%.
At 9% the Reserve Bank will be required to step in and place them under administration.
This is when it gets really bad. This would be the last chance to try and save the bank before it fails.
If even 1% of their customers tried to withdraw funds they would be in a very pre-carious situation.
This is all my opinion. You need to do your own due diligence."
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Not a lot of positive energy for this company at the moment.

[Bob50]

https://bankdashboard.rbnz.govt.nz/summary

[BlackPeter]

In another forum this person had this to say about Heartland
-+-+-+-+-

"If you are concerned about bank stability check out the Reserve Bank Dahboard.
https://bankdashboard.ronz.govt.nz/summary
I have concerns about the financial stability of Heart Land bank at the moment."

Then someone asked this poster to expand on this comment.
His reply

"They have non-performing loans of 3.8%. These are loans that people may not pay back.
That number is high.
Their reserve asset ratio has dropped to 13.8%. That is how much money they have to actually back deposits people have made. This is low.
If those loans go bad then their backing is only 10%.
At 9% the Reserve Bank will be required to step in and place them under administration.
This is when it gets really bad. This would be the last chance to try and save the bank before it fails.
If even 1% of their customers tried to withdraw funds they would be in a very pre-carious situation.
This is all my opinion. You need to do your own due diligence."
-+-+-+-+-

Not a lot of positive energy for this company at the moment.

Why are you hiding behind an anonymous poster on some "other forum"? What do you think?

I assume you realize that "non-performing" loans are not equivalent to losses. It just means that whoever took the loan is late with at least one repayment. It certainly does not mean that the bank will lose everything, and it does not mean either the bank will lose anything. I am sure you are aware that banks tend to ask for securities if they give you money. They use these securities later to recover the money. Sure - sometimes this does not work (or does not cover everything), but the average loss will be significantly less than 100%

Not sure about this other statement of this anonymous poster you choose to repeat either.

A good bank makes sure that the terms of any credits are aligned with the terms of deposits - and long term credits are covered by long term deposits.

So - what exactly is the argument - that people with long term deposits want their money back before it is due??

Maybe you should ask you mysterious anonymous source from the other channel whether they checked the ratio of short term to long term borrowing and lending? If that's out of kilter, than we should be worried, but I am not aware of that. Could you please clarify?

[Basil]

https://bankdashboard.rbnz.govt.nz/summary

I think points to note are:-
In general I agree with the general thrust of BP's post above.  Additionally,
Those metrics were as at 31 March 2024 and there's been a capital raise since then.
It's interesting and probably much more than a coincidence that Rabobank who are a specialist rural lender have a very similar level of nonperforming loans.
Feedback from clients suggests it's been a very tough year on the farm with substantial increases in input costs.
My understanding is that a lot of Heartland's rural loans are secured over livestock.
Livestock are a very readily sellable commodity.

I remain of the view the metrics on Heartland make a robust case for investment and I am positioned accordingly with a ~ 5% portfolio position.  When we start to get some green shoots and with TA support, I am favorably inclined towards increasing this.   Yes, we're scraping along the bottom of the economic cycle and probably will be for at least the rest of this year and perhaps some of 2025, but we're not going to be in the doldrums forever.

[Bob50]

The quote is from the Reddit financial forum. I doubt if he is any form of expert,
I posted it as an example of the negativity currently surrounding this stock.

The poster clearly got his talking points from the rbnz site.
I am curious what the more experienced investors here think of his view and can discredit them as I am somewhat sour on this stock with its collapse in value.

My view is that this bank survived the 2007 financial meltdown and is in a better position now.
Investors have poured money into them recently with the capital raises. Making it secure and showing faith for the future.
I believe now is a good buying and have been doing so. It now makes up 11% of my portfolio and I have term deposits with them as well.

[KW]

It's interesting and probably much more than a coincidence that Rabobank who are a specialist rural lender have a very similar level of nonperforming loans.
Feedback from clients suggests it's been a very tough year on the farm with substantial increases in input costs.
My understanding is that a lot of Heartland's rural loans are secured over livestock.
Livestock are a very readily sellable commodity.

AAC recently reported they had to write down the value of their livestock by 20%.  This will be industry wide. 
 
"Cattle prices hit a four year low in FY24, leading to a downward unrealised mark-to-market fair value adjustment in the herd of $149.4m. This resulted in a Statutory Net Loss After Tax of $94.6m and a negative statutory EBITDA of $87.9m, both down on pcp."

[Red Baron]

AAC recently reported they had to write down the value of their livestock by 20%.  This will be industry wide.
 
"Cattle prices hit a four year low in FY24, leading to a downward unrealised mark-to-market fair value adjustment in the herd of $149.4m. This resulted in a Statutory Net Loss After Tax of $94.6m and a negative statutory EBITDA of $87.9m, both down on pcp."

Ze reason a varmer borrows to buy livestock, eez because a varmer eez an expert at 'vattening up animals'.
If zhey eencrease ze veight of a bobby calf by vifty percent een six months BUT ze price of cattle valls by twenty percent over zhat same timeframe, THEN ze net gain vill be:

1.5 x (1-0.2) = 1.2

Zo ze zecurity of ze livestock lender has gone up by 20%, not down by 20% as a zuperficial reading of ze headline numbers might lead you to expect.

RB

[LoungeLizard]

The quote is from the Reddit financial forum. I doubt if he is any form of expert,
I posted it as an example of the negativity currently surrounding this stock.

The poster clearly got his talking points from the rbnz site.
I am curious what the more experienced investors here think of his view and can discredit them as I am somewhat sour on this stock with its collapse in value.

My view is that this bank survived the 2007 financial meltdown and is in a better position now.
Investors have poured money into them recently with the capital raises. Making it secure and showing faith for the future.
I believe now is a good buying and have been doing so. It now makes up 11% of my portfolio and I have term deposits with them as well.

Investors poured money into at least 5 capital raises. For their show of faith they saw, each time, their capital being eroded. This is how HGH have operated - and facilitated dividends - for donkeys years. I rather suspect we haven't seen the last of the CR's either.

HGH is like any other stock - it has its supporters and its detractors. Each can point towards "metrics" to support their views. What is unarguable is that the market as a whole has become very wary of it and suspicious of the claims that "this time it's different." The TA doesn't lie. Nor does the share price - stuck just below or above the CR price, and less than half of what it was a couple of years ago.

 Until Jeffs profit projections start to come true, I don't see any reason to invest in HGH. I can't see the upside in rolling the dice on such an erratic stock with such a terrible history of capital raises that destroy shareholder wealth, when there's much better and safer blue chip stocks that are currently seriously undervalued.   

[Ricky Bobby]

AAC recently reported they had to write down the value of their livestock by 20%.  This will be industry wide.
 
"Cattle prices hit a four year low in FY24, leading to a downward unrealised mark-to-market fair value adjustment in the herd of $149.4m. This resulted in a Statutory Net Loss After Tax of $94.6m and a negative statutory EBITDA of $87.9m, both down on pcp."

I heard from a cocky that they are only getting $60/lamb compared to $120+ over the last few years. Holding security of stock that has halved in value will be putting pressure on things... also the banks are also starting to put some real pressure on farmers.

[Basil]

https://www.marketscreener.com/quote/stock/HEARTLAND-GROUP-HOLDINGS--47041144/finances/

FY25 starts in a couple of weeks.  Average analyst view is PE of 7.5% and yield of 11.2% (I have grossed this up for imputation credits which most people find useful)
FY26 average forecast is PE of only 6.2 and gross yield of 13.3%   (Average PE over the last 5 years is 12.1)

Not suggesting its without risk by any means but I am struggling to recall the last time I saw a company on the NZX with genuine growth prospects in the years ahead trading on such compelling metrics.

HGH has a long history of high beta and its prospects are inextricably tied to the economy.   A well-used cliche, but seems appropriate here, it's always darkest before the dawn.  Sentiment here and elsewhere and the economic indicators suggest to me we are trading through the darkest period at present.

I'm still hopeful of some emerging green shoots early in 2025.  Average broker target price is $1.37

If they achieve the FY26 eps target of 16 cps and the economy is improving, we might see this recover to a normal PE of 12.1 on 16 cps = $1.94 by 2026.

I can understand why others might want to wait until TA suggests it's a buy.