HGH - Heartland Group Holdings

[Minimoke]

Where's the Te Reo version 

Its got plenty of the te reo. Goit the rainbow Tick. Got the gender diversity. Got the Climate Change. Got all the key elements of a business I stay well clear of.

[Basil]

Annual report  https://api.nzx.com/public/announcement/439086/attachment/428392/439086-428392.pdf  Plenty of Te Reo in here.

[Basil]

All this talk of massive shorting of Spark got me wondering how much shorting was / is still in play with HGH especially with the recent cash issue at $1 ?  Doggy wonders if some of those shorts are like a dog with a bone and won't let go considering for the first time in years there was no forward guidance given.

What happens if at the annual meeting on 30 October a half reasonable amount of guidance is forthcoming, (not quite the nightmare level of bad debt provisioning it appears some are expecting in FY25)?  Maybe some of those shorts might need to cover their position.  Does seem a little strange that the share price is hugging the recent capital raise price of $1 pretty closely...or maybe the dog is just indulging in wishful thinking...who knows...it was a slow day at work and I had to ponder something lol

I will cling on "doggedly" and see what happens.  Lets just say I really like Turners chances of them hitting their $65m profit target but in my opinion the jury is well and truly out on the chances of HGH hitting their $200m FY28 target.  Might attend the meeting and ask them, seeing as Jeff is going , if they still stand by the veracity of the underpinnings of that objective.  Might follow that up with asking them instead of focusing on all things ESG like your life depends on it and there's some tangible benefit in terms of eps to shareholders, maybe focus a lot more attention on tightening up your loan approval process to reduce bad debts going forward is a good idea.   See what reaction that gets from them. 

[Shareguy]

https://www.heartlandgroup.info/newsroom/updates/introducing-heartland-bank-australia

[winner (n)]

An old work mate asked me to critique an entry he was working on for this years Deloittes Top 200 Awards.

I had to laugh and when I told him why I was laughing he got it.

Remember they were the awards last year where Comvita edged out Heartland for BEST GROWTH STRATEGY section .....what a laugh

Both masters of producing screeds of awesome slides full of buzzwords and cool diagrams ...things that both judges and investors love to see ...and are seduced by them.

Good piece of advice (that sums both up)  -

"In the absence of a track record of accomplishment, you should take a CEO's plans as hopeful intent. That doesn't mean they are lying, just that we really don't necessarily know what they can or cannot do. There is a particular danger if they use language that resonates with you. More than once in my investment career did I fall for someone who said all the right things, except that they hadn't done them — in the past, or as it turned out, in the future."

[Basil]

Agree, a lot of work ahead for management to prove their expansion strategy is eps accretive. Where the market is pricing the shares, it's basically giving them no chance of success but maybe their strategy does start working over the next few years?
 They're certainly not a completely hopeless. zombie. company like Convita, that's for sure.

Very limited downside and potentially quite a lot of upside is how I see it and holders are being paid a gross yield of circa 10% while they wait and see what happens.

I've got a few curly questions lined up for them at the annual meeting.  Even if I don't like their answers I'll probably hang around and collect 10%,  try and tolerate all their endless woke BS and see what happens next year with their FY26 forecast. They reckon by the end of FY25 90% of their loan book in Australia will be funded from retail deposits at circa 2% lower cost of funds. That should be strongly eps accretive in FY26 but we will see.

[Basil]

I would encourage all shareholders to vote against resolution 5 at the forthcoming annual meeting or online.
Under the listing rules they are allowed to issue up to 15% new shares in a placement in any one period, and subsequently ratify that issue at the next annual meeting, (on 30/10/2024).  If the last issue, (arguably at desperation pricing and heavily favoring institutions), is not ratified, there is no effect on the issue already made but it blocks their ability to make another placement in the next 12-month period.  In my opinion they made such a mess of the last issue they should be blocked from having the ability to make another one in the next 12 months. 

Haven't we all had enough of them sledgehammering the price down with repeated capital raises?   I voted against this resolution online and will also make my thoughts well known at the annual meeting in person on this and other points.

[winner (n)]

Re that resolution

Will 'provide flexibility to raise money through issue of new shares' ...good practice


But believe it or not 'There is no guarantee that any further issue will be undertaken or to the terms and timing for any such issue'

I'd say more money will be needed in next year or two .....esp if they are going to get anywhere near that touted $200 profit

Basil asking questions ...I might pop in a few as well

Could be a good HUI eh

[winner (n)]

I've suggested to a media guy that the  upcoming HUI n could make for a good story

Hope they make the effort to attend     

[Basil]

Need others to turn up and ask really hard question of the board to.  Really give them a grilling.   Shares languishing close to a decade low, they need to be held accountable for their actions.

[Red Baron]

I would encourage all shareholders to vote against resolution 5 at the forthcoming annual meeting or online.
Under the listing rules they are allowed to issue up to 15% new shares in a placement in any one period, and subsequently ratify that issue at the next annual meeting, (on 30/10/2024).  If the last issue, (arguably at desperation pricing and heavily favoring institutions), is not ratified, there is no effect on the issue already made but it blocks their ability to make another placement in the next 12-month period.  In my opinion they made such a mess of the last issue they should be blocked from having the ability to make another one in the next 12 months. 

Haven't we all had enough of them sledgehammering the price down with repeated capital raises?   I voted against this resolution online and will also make my thoughts well known at the annual meeting in person on this and other points.

Zomething odd in ze fine print of zees motion.

"In accordance with NZX listing rule 6.3.1, Heartland will disregard any votes cast in favour of Resolution 5 (Ratification of Placement) by any shareholder who acquired shares under the placement."

Zo only those who did not participate in ze last placement can vote for another one?  However, every zhareholder can vote against eet happening again?

Eef zhey had done ze placement at a higher share price, zhey may have not needed to issue zo many zhares, and zees whole motion vould have been unnecessary?   I vill be voting against ze motion like you Basil.   Let us get ze board to reflect on their reckless timing of zees placement, and virst digest ze cash mountain zhey have raised vor a vew months, before zhey greedily come back to zhareholders vor more!

RB

 

[winner (n)]

Zomething odd in ze fine print of zees motion.

"In accordance with NZX listing rule 6.3.1, Heartland will disregard any votes cast in favour of Resolution 5 (Ratification of Placement) by any shareholder who acquired shares under the placement."

Zo only those who did not participate in ze last placement can vote for another one?  However, every zhareholder can vote against eet happening again?

Eef zhey had done ze placement at a higher share price, zhey may have not needed to issue zo many zhares, and zees whole motion vould have been unnecessary?   I vill be voting against ze motion like you Basil.   Let us get ze board to reflect on their reckless timing of zees placement, and virst digest ze cash mountain zhey have raised vor a vew months, before zhey greedily come back to zhareholders vor more!

RB

 

Does seem strange

I'm led to understand that Placement only refers to the insto raising and it's only those beneficiaries who can't vote for the resolution

That's what I got told but could be wrong

[Basil]

Interestingly the placement was at an 18% discount to the prevailing price. How does this compare with others? Right up there with the level of discount RYM, (with all their egregious mismanagement of debt) had to offer to get their deal done, 21.9% and was higher than Fletchers (with all their endless fiasco's), 17%, (13.9% on a theoretical ex rights price).

Why is there so little apparent confidence in the market in Heartland such that you had to discount the share issue to desperation pricing?  (A good question to ask at the annual meeting).  Do you accept that there is an enormous amount of work to do to restore confidence such that the shares might lift a bit from their decade low? 

Reading through their book of excuses, Opps sorry, annual report yesterday, it was pleasing to see Geoff received no short-term incentives and took a big pay cut this year compared to last.  I suspect he was pushed by the board.  I wonder if he will be at the annual meeting to be held accountable for some of the reckless lending that led to such a poor result?

Disc: I reduced my portfolio allocation yesterday at break even on cost from ~6% to ~3%.  I think they have wasted an enormous amount of management time and energy on woke agenda's and taken their eye of their core responsibility to maximize shareholder returns.    "Go woke, go broke"
My conviction level with this company is now much lower than it once was.  I'd wager many other shareholders feel much the same.

[BlackPeter]

...
 "Go woke, go broke"
...

Not disagreeing with the gist of your post, but is it really necessary to include above frequently debunked statement?

https://www.rnz.co.nz/news/national/529342/is-there-any-truth-to-go-woke-go-broke

Many companies doing better for being "woke"- but yes, it doesn't safe you if you forget to look as well after your major stakeholders and your core business.

[Basil]

Well yes, it's a cliche but it definitely was one of Geoff's very strong points of focus, (read about the highlights of his career in the annual report).

Interesting comparing this finance company, Opps sorry, Bank with Turners loan book, (they both run large motor vehicle loan books).  You'll read in Turners annual report how they tightened lending criteria several times during the year to mitigate against the level of expected loan delinquencies in tougher economic times.

On the other hand, there's endless pages of ESG material to wade through in Heartland's report but I have yet to read one reference to them tightening lending criteria in a proactive manner to guard against bad and doubtful debt levels.  Focus in the wrong area?  I think so.