HGH - Heartland Group Holdings

[Fiordland Moose]

going to be good and not so good in the ann.
Certainly looking good today for all that could see the value @ $1 or under not so long ago.
Dont think Mr markets has priced in an upbeat result but hard to imagine the report will be all roses given the macro environment so sure to be stuff in there for winner and lizard to squawk about.

Totally agree. Expect to see more bickering between the bulls and the bears which I've got no interest in participating in.

A side note...sentiment and the banking cycle is an interesting thing to behold. Traditionally, for overseas banks, the prospect of slowly and modestly rising interest rates are usually positively perceived by investors. If the climb is modest enough there is no hard landing and material increase in credit losses, but the prize is in what happens to the vast holdings of interest rate linked securities they hold as collateral for the deposits they've taken. Banks hold huge sums of capital, and when interest rates are at historic lows like they have been for most of the last 10 years, they earn bugger all. But when they go up, even by small amounts, its a meaningful contributor to interest income, EPS and DPS and SP's tend to appreciate so as long as credit outlook doesn't get out of control. and some have argued banks are traditionally best positioned to expand NIM during a slowly rising interest rate environment (though I'm not sure that has borne out in this cycle in Australia).

The above didn't really happen in this cycle for HGH (or last for as long as would have been expected) as interest rates rose far faster and higher than most expected which crunched sentiment re credit losses. Lots of other issues at play with the SP (cap raise overhangs, and the fact that RM NIM actually compressed because HGH were unwilling to pass the full interest rates through, plus other items) but the perception was that as interest rates rose bad debts would explode and financial stability be threatened. Interest rates now trending back down and a tailwind to the SP, but ironically from a credit perspective heartland is at its most exposed and that could continue (or even increase) over the coming year as unemployment rises and businesses fail in greater numbers. Falling interest rates are an intoxicating and powerful tailwind to high beta equities and markets are forward looking, just got to be mindful not to look too far ahead.

Will the NZ reverse mortgage NIM% stabilise or improve as interest rates fall (keeping in mind the compression experienced last year when HGH declined to pass on all their costs)? But one thing that is clear is that the interest earned from heartlands capital (usually bonds) will fall as interest rates fall and the business is in a heightened credit risk environment and will be in FY25. but with the SP so depressed how much of that is already baked in (or more than baked in) from a fundamental perspective and at the end of the day is  the direction more driven by sentiment around falling interest rates? [so as long as there isn't another big write down like in 1H 24]

Random musings, without a purpose or particular point.

[Shareguy]

Totally agree. Expect to see more bickering between the bulls and the bears which I've got no interest in participating in.

A side note...sentiment and the banking cycle is an interesting thing to behold. Traditionally, for overseas banks, the prospect of slowly and modestly rising interest rates are usually positively perceived by investors. If the climb is modest enough there is no hard landing and material increase in credit losses, but the prize is in what happens to the vast holdings of interest rate linked securities they hold as collateral for the deposits they've taken. Banks hold huge sums of capital, and when interest rates are at historic lows like they have been for most of the last 10 years, they earn bugger all. But when they go up, even by small amounts, its a meaningful contributor to interest income, EPS and DPS and SP's tend to appreciate so as long as credit outlook doesn't get out of control. and some have argued banks are traditionally best positioned to expand NIM during a slowly rising interest rate environment (though I'm not sure that has borne out in this cycle in Australia).

The above didn't really happen in this cycle for HGH (or last for as long as would have been expected) as interest rates rose far faster and higher than most expected which crunched sentiment re credit losses. Lots of other issues at play with the SP (cap raise overhangs, and the fact that RM NIM actually compressed because HGH were unwilling to pass the full interest rates through, plus other items) but the perception was that as interest rates rose bad debts would explode and financial stability be threatened. Interest rates now trending back down and a tailwind to the SP, but ironically from a credit perspective heartland is at its most exposed and that could continue (or even increase) over the coming year as unemployment rises and businesses fail in greater numbers. Falling interest rates are an intoxicating and powerful tailwind to high beta equities and markets are forward looking, just got to be mindful not to look too far ahead.

Will the NZ reverse mortgage NIM% stabilise or improve as interest rates fall (keeping in mind the compression experienced last year when HGH declined to pass on all their costs)? But one thing that is clear is that the interest earned from heartlands capital (usually bonds) will fall as interest rates fall and the business is in a heightened credit risk environment and will be in FY25. but with the SP so depressed how much of that is already baked in (or more than baked in) from a fundamental perspective and at the end of the day is  the direction more driven by sentiment around falling interest rates? [so as long as there isn't another big write down like in 1H 24]

Random musings, without a purpose or particular point.

Great posts FM. I think guidance is what most of us are expecting. Even then it's not a great result when you consider the highly dilutive cap raise. This is more about a beaten down share price, any lurking bad stuff and the future. $A1.4bn of retail deposits is a great start relative to its FY25 target of $2.4bn. I suspect the market will look at this very favourably. Nim expansion alone should be a real catalyst and hopefully a game changer, even though we are in a falling interest rate environment.

[Waltzing]

Waiting...  long breakfest somewhere down on the water front maybe...

someone hit the AI button marked publish...

time all these glossie junk was dumped in favour of saving trees and simple pdf standard format adopted...
'
that way AI can read it and then your favourite avatar can chat to you as a hologram...

its just so 1929....

oh it just flew in by pigeon....

[winner (n)]

Bugger about the emergence of $10m debt provisioning ...would have been within guidance if that hadn't happened

Never mind, that's the way the cookie crumbles ...and makes F25 result look better lol

[winner (n)]

Jeez NIM down 58 basis pointhttps://announcements.nzx.com/detail/437072s on last years and CTI (costs) up 311 basis points

That NIM was getting better. ...sorry can't contain myself but looking. For the good bits

[winner (n)]

The number of adjustments to 'normalise' things on a par with Fletchers

[Left Field]

Mmmmmmm best leave this for holders to digest......

https://www.nzx.com/announcements/437072

Full investor presentation here; https://api.nzx.com/public/announcement/437072/attachment/426005/437072-426005.pdf

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) has announced a net profit after tax (NPAT) of $74.5 million for the financial year ended 30 June 2024 (FY2024). On an underlying basis, FY2024 NPAT was $102.7 million.
 
 In a challenging economic environment, Heartland achieved solid gross finance receivables (Receivables) growth, up 6.4% on the financial year ended 30 June 2023 (FY2023). While some volatility is expected to continue through the remainder of the 2024 calendar year, the longer-term outlook for Heartland is positive. Having executed significant strategic milestones in FY2024, further growth is anticipated in the financial year ending 30 June 2025 (FY2025) as Heartland continues towards its ambitions for the financial year ending 30 June 2028 (FY2028).
 
 Heartland's FY2024 result was impacted by the rapidly deteriorating economic conditions in May and June 2024 which saw the emergence of additional provisions primarily in Heartland Bank Limited's (Heartland Bank's) Asset Finance, Motor Finance and Rural portfolios. This resulted in a 4.9% shortfall to guidance. This late increase in provisions reflects (amongst other things) enhancements to Heartland Bank's Motor Finance provisioning model, a more conservative provisioning approach on certain Rural exposures, and the effect of the sustained inflationary environment on some consumer and business borrowers.
 
 Highlights
 ‒ Solid FY2024 result achieved in a challenging economic environment.
 -- One-off or non-cash technical items had a $28.2 million impact on NPAT.
 -- The shortfall to guidance was largely due to the late increase of $10.1 million of provisions, primarily in Heartland Bank's Asset Finance, Motor Finance and Rural portfolios (without which Heartland would have seen a result within guidance).
 ‒ Growth in Receivables of 6.4% ($432.1 million) on FY2023 to $7.2 billion in FY2024.
 -- Reverse Mortgages up 20.2% in New Zealand and 19.7% in Australia.
 -- Asset Finance up 8.0% in a market with difficult trading conditions.
 -- Motor Finance up 3.8% in a market where total new and used car sales by dealers were down by 12.7%.
 ‒ Significant strategic milestones set the foundation to achieve FY2028 growth ambitions.
 -- Completed the acquisition of Challenger Bank Limited (Challenger Bank) and subsequently rebranded the authorised deposit taking institution (ADI) to Heartland Bank Australia Limited (Heartland Bank Australia).
 -- Successfully completed a $210 million equity raise to fund the acquisition, with strong investor support.
 -- Heartland Bank's core banking system was successfully upgraded, enabling increased digitalisation and automation.

[Basil]

Presentation. https://api.nzx.com/public/announcement/437072/attachment/426005/437072-426005.pdf

[Teitei]

Bugger about the emergence of $10m debt provisioning ...would have been within guidance if that hadn't happened

Never mind, that's the way the cookie crumbles ...and makes F25 result look better lol

Impaired asset expense $46.4m.

Data provided to RBNZ to June 2024 showed 42.3m (which excluded Australia).

https://bankdashboard.rbnz.govt.nz/orgs/HEART-BK

Well within expectations for anyone who follows the stock.

[winner (n)]

I better stop snoozing ..... and wake up so I don't miss out on some cheap shares later this morning

[LoungeLizard]

At first glance the results look pretty underwhelming, bordering on negative (not meeting guidance) but it'll be up to those with skin in the game to delve into the details. The acid test of course will be how Mr.Market will see it.

[Basil]

Happy to hold and see what happens.  Always have been thinking that I've recently been investing on a "look through" the bottom of the economic cycle basis.
Disc 7.3% portfolio position all bought with prior realised profits made on HGH, so "free carry", at an average price of $1.07
FY 25 cloudy.  FY26 should be a ripper.

[Perky]

I've enjoyed following this thread last few months..reading the pros vs the cons

There was a lot of talk about a pig still swallowing the python re cap raise but did I just see a lizard swallow a beagle...lol



Disc. Have a very small holding on asx....been waiting for results and guidance and I happy to sit and watch. Market could be interesting today. Will buy more of these one day...see what the market says.


Hard to believe management comment that shit only hit the fan in June/july eh
Bit like I nearly won powerball but missed by 1 number

[Basil]

He certainly took a bite out of my tail but as noted above, my holding is all free carry from past successful investing in HGH so I will certainly live to see another day.  It's all about growth in the years ahead.  Business conditions were very ugly in May and June but I think we have hit the bottom, and spring is around the corner, literally and metaphorically.

Could be a buying opportunity once the weak hands have "spat the dummy"

[Perky]

Good spirit there Basil.

Seriously appreciate everyone putting their views out there...it's not about who right or wrong.

I still think this a good share but not sure I want anymore just yet.