HGH - Heartland Group Holdings

[allfromacell]

They said they were but shut down my questioning and any further questioning from the floor from anyone else in a huge hurry.  I really wanted to ask the auditor publicly if they had been through those dodgy assets with a fine-tooth comb but was not allowed the opportunity to do so.
The way questioning was shut down was an absolute crock of s@#t.  Plenty of things to try and hide is the clear impression I got.
Not sure if there's a recording anywhere of the meeting?  I wouldn't mind hearing their so-called answers again.  Hard to take everything in when you are Johnny on the spot thinking how to phrase the next question.

Link to the meeting recording here: https://www.heartlandgroup.info/investor-information/annual-meetings

[Basil]

'Receivables are as 30 June 2024 excluding provisions'

Thanks Winner.  Gosh, that does not read well to me at all.  No wonder they wanted to shut down further questions!  As I suspected, it would appear they have just rounded up all the really bad loans, which in truth, they have no idea how to collect at this point in time, and transferred them at full value to the bad bank, at least that's what I make of "excluding provisions".  Their corporate statement of "we will work to realize these assets over a responsible period of time" is the worst sort of double speak nonsense I have read and heard for many years.

Transferring them all over to a separate bad bank at full value, completely fudging FY24's real figures and will provision these over a number of years and try and make the case they are extraordinary items by normalizing profit, a practice that's got increasingly worse over the years with HGH and try and pretend everything is good.  This is exactly the same sort of crap that went on at Geneva Finance in the GFC and look how that's worked out for shareholders.

Thanks allfromacell, I'll have a listen to that just to hear their so-called "answers" again.

[Red Baron]

Because index funds are technically driven - they simply buy more of what is going up in price (increased index weighting) and sell more of what is going down in price (reduced index weighting).  When companies decline in price so much they are removed from the index completely and replaced by something that is better.  Thats why its difficult to outperform an index - because TA outperforms FA.

Technically driven 'at ze margin' yes, at ze point of index inclusion and exit.

But vor ze vast majority of zheir portfolio, vor an  'index fund' eet eez zimply 'buy and hold'.  There eez generally no buying and zelling on a day to day basis.    For example eef ze share price of Heartland drops by 2% in a day, ze value of Heartland zhares in ze 'index fund' drops by 2% automatically.  Likewiseise eef ze Heartland share price rises by 2%, zhere eez no 'index buying'. 

Zhis eez vone of ze reasons 'index funds' perform vell, compared to 'active funds'.  Tradings costs are almost zero een 'index funds'.

RB

[Basil]

The barking starts at 56.45 minutes.  Shut down very abruptly with little to no regard to shareholders rights to ask more detailed questions.  I was only about half way through.  Got another chance at 1.34 to quiz them on their absurd approach of lending on residential mortgages at only a 75 bps margin.

They blatantly lied about those doubtful debts being fully provisioned.  As I said to a few shareholders after the meeting, calling $188m of really dodgy receivables "non-strategic assets" is analogous to creating a very old and ugly fat pig, putting him in the corner and putting a bow tie on him and saying doesn't he look pretty, what's the problem.    Notioce how Greg said we have a pool of capital to go to with these assets before going to shareholders.  Big hint there about another capital raise sometime down the track, not in the very near term.

"Blind Freddy" could have told them the residential mortgage thing at a 75 bps margin was a waste of capital and time considering the capital backing required and their overall bank costs.  I could have told them this for free, you don't need to pay me $1m per annum to state the completely obvious.  It would seem they have seen the light that they are wasting their time and capital allocation with those residential loans.    "Only" another few hundred million non-strategic assets Leanne assured me after the meeting.
High resolution YouTube here https://www.youtube.com/watch?v=bFPQJtET6UM

[KW]

Technically driven 'at ze margin' yes, at ze point of index inclusion and exit.

But vor ze vast majority of zheir portfolio, vor an  'index fund' eet eez zimply 'buy and hold'.  There eez generally no buying and zelling on a day to day basis.    For example eef ze share price of Heartland drops by 2% in a day, ze value of Heartland zhares in ze 'index fund' drops by 2% automatically.  Likewiseise eef ze Heartland share price rises by 2%, zhere eez no 'index buying'. 

Zhis eez vone of ze reasons 'index funds' perform vell, compared to 'active funds'.  Tradings costs are almost zero een 'index funds'.

RB

Only if the index fund is a closed fund with no redemptions.  But if money is coming in, and redemptions are being made, then the fund has to invest that new  money or sell stock to raise cash to pay redemptions.  So if $100 comes in, then they have to invest more of that money into the greater weight stocks, and less of that money than before in the lower weight stocks.  As a stock price goes up, more and more of that $100 will be directed towards buying it.  As a stock price goes down, less and less of that $100 will be directed towards buying that stock. This is why passive investing has been blamed for the rise of the megacaps dominating the indexes - its a perpetuating cycle.  Index funds buying drives the stock price, the stock price drives the index fund allocation to that stock.

[KW]

The barking starts at 56.45 minutes.  Shut down very abruptly with little to no regard to shareholders rights to ask more detailed questions.  I was only about half way through.  Got another chance at 1.34 to quiz them on their absurd approach of lending on residential mortgages at only a 75 bps margin.

They blatantly lied about those doubtful debts being fully provisioned.  As I said to a few shareholders after the meeting, calling $188m of really dodgy receivables "non-strategic assets" is analogous to creating a very old and ugly fat pig, putting him in the corner and putting a bow tie on him and saying doesn't he look pretty, what's the problem.    Notioce how Greg said we have a pool of capital to go to with these assets before going to shareholders.  Big hint there about another capital raise sometime down the track, not in the very near term.

"Blind Freddy" could have told them the residential mortgage thing at a 75 bps margin was a waste of capital and time considering the capital backing required and their overall bank costs.  I could have told them this for free, you don't need to pay me $1m per annum to state the completely obvious.  It would seem they have seen the light that they are wasting their time and capital allocation with those residential loans.    "Only" another few hundred million non-strategic assets Leanne assured me after the meeting.
High resolution YouTube here https://www.youtube.com/watch?v=bFPQJtET6UM

1.  If these are non-performing receivables then who the hell is going to want to buy them?  If they are unsellable, how then can they be considered assets for the purpose of raising capital - no buyer = no cash.  And if they were sold to a debt collector or similar, then they would be sold for cents on the dollar, and nowhere near their book valuation.  So that asset valuation is rubbish.

2.  If the placement capacity automatically rolls over in April next, why are they in such a hurry to cleanse the placement capacity?  If they dont need to raise capital before April, there is no need to cleanse.  Something is up here.

[winner (n)]

Come to conclusion that I have to work out whats 'between the lines' in the speeches and presentations .....in other what's not being said ...like what are they to embarrassed to own up to.

All started going downhill when Jeff's bottom drawer was found to be empty .... Goodbye to profit smoothing.... And then digging themselves into a big hole.

One issue I have is that new CEO has been party to all this carry, maybe he's one of the worst culprits. Be interesting what he does now as he's essentially just the "Chief Administrator" with putting together the glossy presentations his main task.

So far from trying to work out what's not being said I have a suspicion Australia not really working out as it's made out to be .

[snapiti]

Thanks Winner.  Gosh, that does not read well to me at all.  No wonder they wanted to shut down further questions!  As I suspected, it would appear they have just rounded up all the really bad loans, which in truth, they have no idea how to collect at this point in time, and transferred them at full value to the bad bank, at least that's what I make of "excluding provisions".  Their corporate statement of "we will work to realize these assets over a responsible period of time" is the worst sort of double speak nonsense I have read and heard for many years.

Transferring them all over to a separate bad bank at full value, completely fudging FY24's real figures and will provision these over a number of years and try and make the case they are extraordinary items by normalizing profit, a practice that's got increasingly worse over the years with HGH and try and pretend everything is good.  This is exactly the same sort of crap that went on at Geneva Finance in the GFC and look how that's worked out for shareholders.

Thanks allfromacell, I'll have a listen to that just to hear their so-called "answers" again.

well my friend you sum it up wonderfully, great way to fudge a really bad year when you put all the shit into a basket and label it as smoke n mirrors, will drip feed this pile of shit back into our results over a number of years.
I never bought into the BS that staffing levels meant they could not chase bad debt as well as they liked, my son received several phone calls ,he did not like answering that number, a week and a couple of letters a month.

[snapiti]

I salute you for speaking up with your concerns Mr Hound.
I note at about the 1 hour mark they are questioned on the Aussie bank deposits and lending out of this money.
They addressed the deposit side of things but totally avoided answering the very important question of who and where are they lending the money to. 

[Basil]

Thanks for your very kind words, mate.
Jarden reckon net tangible asset backing is $1.03.

So where would I consider buying back in? I asked myself as a rhetorical question today.  Well, I'd want to be quite confident all the dead wood is exposed and after what I witnessed last week, I'm not at all convinced they're being straight and honest with shareholders.  I reckon those $218m of bad bank assets are not the end of it by any stretch of the imagination, especially with corporate receiverships jumping up in FY25.

Maybe another $100-200m (1-2%) of highly questionable receivables already of their other $9.6 Billion of loans, either being concealed or very inadequately provisioned and another $50m to come this year ?  Say $218 declared + $150m concealed + $50m coming in FY25 = $418m as a really rough guess, and that's all it is..  Maybe they can recover somewhere between a quarter and half over time?, let's say 40%.  60% potential loss on $418m = $251m on 956m shares = 26 cents per share.

Maybe the true NTA is as low as $1.03 - 26 cents = 77 cents.  Just my deeply jaundiced theory of what's really under the hood if you were allowed to do a deep dive and take a proper look yourself.  (I recall in the last RBNZ disclosure 6.5% of all loans were past due, stood out like a pair of huge dog balls compared to any of the other finance companies, Opps sorry, banks). 

Whether I have become unduly jaundiced or not, we won't know the real answer for years so in the meantime it's just as well we can sleep really easy at night and totally rely on the auditors to pick up all this alleged under provisioning eh...Opps, sorry,, how did that work out in the GFC, with the dozens of finance companies that went under?  Hmmm...  No worries, another capital raise or two over time will hopefully fix all this mess up properly.  $200m NPAT by FY28?...I would argue it's the directors and management who are the ones in fantasy land.

Feel free to ignore this post if you are still holding.  This could be just echoes in my mind of all the years of anguish I went through with Geneva Finance and all their creative B.S. in the GFC, or it might be some similar creative accounting B.S as they did., only time will tell.

[snapiti]

one also has to wonder how bad some of their rural lending is when they have to wait for farm prices to recover so they can recover debt.
I am very confident most banks will only lend 50% of farm values.
Latest REINZ figures show a 12.6% average price fall across all sectors of farming in the last 12 month, the previous year was 8.5% decline however prior to that farm prices had been rising.
Looks to me that Heartland have been happy to loan 80% of value(much higher than mainstream lenders) and just like their 100% car loans have been caught with their pants down. 

[Basil]

Makes you wonder if Geoff left or was he pushed?  I wasn't at all surprised he was absent from the annual meeting.  Seems quite interesting timing that his retirement was brought forward to the end of Sept so he could avoid being accountable to shareholders at the annual meeting. 

[raW tent Buffer]

Looks to me that Heartland have been happy to loan 80% of value(much higher than mainstream lenders) and just like their 100% car loans have been caught with their pants down. 

Do you have any evidence of this LVR or are you just throwing numbers around?

[winner (n)]

Makes you wonder if Geoff left or was he pushed?  I wasn't at all surprised he was absent from the annual meeting.  Seems quite interesting timing that his retirement was brought forward to the end of Sept so he could avoid being accountable to shareholders at the annual meeting. 

Remember this post of mine -

One day, well into Jeff's long and illustrious career, a journalist asked the banker why he wasn't driving great Heartland performance like he used to.

"When Heartland was growing profits I was cold and hungry," said Jeff. "I'm not cold and hungry anymore."

Then Jeff realised he'd also had stuffed up big time and he better go before the shit really hit the fan. Had to chat to Greg and Greg probably said something good idea to go ..then Greg asked Jeff to get a $200m capital raise across the line before leaving....in good grace lol. At least Greg knew that Jeff could spin a good story and seduce punters.

That's how I see it anyway ...and I think I'm not too far off the mark.

[winner (n)]

I've sent Greg an email via Investor Relations that he and his team have a read through the thread on investing forums ...included link to this thread

But the high degree of self indulgence displayed at AGM suggests they are above such activities