HGH - Heartland Group Holdings

[lorraina]

Poor lending,hopeless collections resulted in approx $200 mil of suspect loans.
$200 mil cap raise resulted in 200mil more shares being issued,which reduces ROE,EPS,and DPS. .
Paid over the top for Stockco.
They stopped doing what they said they would do.
Crazy as they now have the same issues as when they first listed.
Current CEO was CFO while the current mess was developing,under a board who took their eye off the ball..
The old joke about the next capital raise being sooner than you expected still holds.
 
 
 

[Basil]

Poor lending,hopeless collections resulted in approx $200 mil of suspect loans.
$200 mil cap raise resulted in 200mil more shares being issued,which reduces ROE,EPS,and DPS. .
Paid over the top for Stockco.
They stopped doing what they said they would do.
Crazy as they now have the same issues as when they first listed.
Current CEO was CFO while the current mess was developing.

Agree 100%. Even worse is I saw no evidence in the annual meeting speaches or in questions and answers with management and directors after the meeting really owning their mistakes and acknowledging changes need to be made.

Very pleased I sold out completely and reinvested the proceeds in Turners, up 25% incl divvy just paid, since the annual meeting in late Oct 24 v HGH up 9%

I am expecting the half year result to be an absolute shocker, whereas on the other hand an FY25 guidance upgrade from TRA would not surprise me in the slightest.

Plenty of pain to come from trying to collect hundreds of millions of disclosed doubtful debts and the hundreds of millions more non disclosed and concealed through products like Heartland extend.

[winner (n)]

Poor lending,hopeless collections resulted in approx $200 mil of suspect loans.
$200 mil cap raise resulted in 200mil more shares being issued,which reduces ROE,EPS,and DPS. .
Paid over the top for Stockco.
They stopped doing what they said they would do.
Crazy as they now have the same issues as when they first listed.
Current CEO was CFO while the current mess was developing,under a board who took their eye off the ball..
The old joke about the next capital raise being sooner than you expected still holds.
 
 
 

Jeez lorriana, coming from that's a pretty damning post

You've been the most loyal of Heartland fans from the early days. Must be a bit shattering for you.

Hard to see them becoming great again eh.

Started going downhill a couple of years ago when the Greenslade Problem became obvious...remember my post not that long ago —

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."

[BlackPeter]

Its a strange rise given we are set for a poor result and hefty provisions.

Maybe $0.95 was the bottom (good picking if you got it currently) and investors with a more patient and longer term view are prepared to what will be poor number. Guidance will be interesting for the FY.

I am more interested on how the transition of all the spend up over last 2 years is going. Really wanting to see this start to show up on the NIM.

I bought in @ $1.06 before FY expecting result and nothing will be interested to see how Management come accross during the result.
 

Not sure about "strange". They say the smart money buys when there is plenty of blood on the floor, but then - money is obviously not smart, and while everybody can predict the future, nobody manages to get it in a statistically relevant way right.

So - I suppose the chart clearly shows that somebody has confidence in the stock, and the future will show whether these parties are right or wrong.

Discl: holding, expecting a result roughly matching last year (but yes, always interested to learn some more creative accounting tricks), and relaxed.

While I don't subscribe to "she'll be right"- I am pretty sure with this company it will - and if not this year, then next year or the year after that. Good business (unless they screw up their Australian expansion - yes, this is a risk) and (for the REM's) long term good tailwind.

[lorraina]

HGH was not the only "core" stock that I was slow to react to.SPK also caught me out.
Held them in our long term dividend portfolios,so was not watching them closely enough.First HGH warning was when they stated their collections were behind as they  had people overseas or sick .Really.??
Luckily I recycled the funds into 2CC,CHI,GFL [Unlisted] and TWR.
Recently when a former director sold down I loaded up of GEN General Capital.
Surprisingly Brent King at GEN knows to lend on good security to safeguard the risk,and to keep an eye on collections.
Who would of thought GEN would be a safer risk than HGH.?.

[BlackPeter]

HGH was not the only "core" stock that I was slow to react to.SPK also caught me out.
Held them in our long term dividend portfolios,so was not watching them closely enough.First HGH warning was when they stated their collections were behind as they  had people overseas or sick .Really.??
Luckily I recycled the funds into 2CC,CHI,GFL [Unlisted] and TWR.
Recently when a former director sold down I loaded up of GEN General Capital.
Surprisingly Brent King at GEN knows to lend on good security to safeguard the risk,and to keep an eye on collections.
Who would of thought GEN would be a safer risk than HGH.?.

Not sure, how you measure "safer risk". I guess - no doubt, GEN performed over the last 2 years better than HGH on the stock exchange, however - GEN's SP volatility during that time (and probably before as well) was significantly higher than HGH.s. Isn't high volatility an indicator for high risk?

[lorraina]

Better risk profile,lending mainly on short term residential bridging finance.
Stronger growth rate.
Better equity ratio.
Currently have enough capital.
No exposure to Australian risks.,[which also means dividends will be fully imputed]
No exposure to property developers.
No exposure to livestock lending.
No exposure to motor vehicle lending.
No exposure to capital heavy Reverse Equity lending.
More in tune with current lending markets.

PS HGH made a right mess of things in NZ.Imagen the mess they will make in Australia.Bigger country,bigger mess.?

[Basil]

Couple of common themes between badly performing OCA and HGH. Same chairman in Greg Tomlinson, maybe he has too much on his plate, and an increasingly intense focus on all things ESG.
Go woke, go broke or go keep doing lots of capital raises to stop going broke.

[Red Baron]

What I learned with Heartland last year is they really are a fair-weather company.  They do well when the economy does well and very poorly when the economy tanks.   The economy was a lot worse for a lot longer last year than I thought it would be and I got it wrong in 2024 but am grateful to escape with a break-even result.   

I guess Geoff's statement many years ago that the fortunes of the company are inextricably tied to the economy is the lesson to never ever forget. Heartland will do okay again one day when the economy starts doing well again and they have cleaned up all the mess from the long and deep recession and their loose lending policies and then in due course when the economy goes into recession again, they will tank yet again. 

I have trouble believing an eenvestor as experierced as Basil has only just vigured out zhat Heartland eez a cyclical company.   But at least he has acknowledged zhat Heartland vill get through zhis recession to vight another day.   Ze reverse mortgage business has ztabalised ze company and vill allow eet to zurvive vhere various lesser vinance companies may not have.

Vehicle lending eez a market ze 'big banks' have zhied away vrom.   Zo Heartland has correctly IMO identified a niche vhere zhey can operate.  A niche vhere many tradies and zmall business owners have a real need vor Heartland's offering.  Yes ze current recession has been longer and deeper zhan many predicted.   But you cannot blame Heartland vor zhat.   

Basil highlights 'loose lending policies', but vhat is the alternative zolution?   Don't lend to tradies and contractors in good times because ze economy at zome part of ze business cycle might collapse?  Be a fair veather lender who vill liquidate trade and construction assets at ze bottom of ze market vhen zhere is no-one out zhere to buy zhem?  How vould zhat kind of operational policy help Heartland or zheir customers, or zhareholders vor zhat matter?

RB

[BlackPeter]

Better risk profile,lending mainly on short term residential bridging finance.
Stronger growth rate.
Better equity ratio.
Currently have enough capital.
No exposure to Australian risks.,[which also means dividends will be fully imputed]
No exposure to property developers.
No exposure to livestock lending.
No exposure to motor vehicle lending.
More in tune with current lending markets.

PS HGH made a right mess of things in NZ.Imagen the mess they will make in Australia.Bigger country,bigger mess.?

Look - it is well possible that GEN may or may not do better than HGH in the short to midterm. I don't know. But still not sure whether I would see them as a lower risk. Did you happen to compare the creditratings of both companies?

GEN is rated BB, indicating "an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time;"

HGH on the other hand is rated BBB, indicating "good prospects for ongoing viability. The financial institution's fundamentals are adequate, such that there is a low risk that it would have to rely on extraordinary support to avoid default."

I suppose its just one of these things - GEN is (according to the rating agencies) clearly higher risk, but sure - if things go right, the rewards might be higher. On the other side, if they don't, than it might be not just a lower SP, but capital gone.

There is no free lunch.

[Basil]

Red Barron. Leanne Lazarus told me after the meeting they have no issues with continuing their zero deposit vehicle lending.  I warned her unemployment is still trending up and to be more cautious. She and the directors I was talking to at the time expressed absolutely no interest in changing their approach.

Turners by contrast tightened their lending criteria many times during this seemingly endless recession and have put through 12, (that's not a typo) price increases on lending as interest rates increased.

I think it's crystal clear with Turners posting repetitive consequtive recod results in the last 5 years which approach has worked better.

Heartland are as loose as a promiscious Goose with their lending and not interested in changing. Look where that's got shareholders over the last decade, nowhere!

[Red Baron]

Red Baron. Leanne Lazarus told me after the meeting they have no issues with continuing their zero deposit vehicle lending.  I warned her unemployment is still trending up and to be more cautious. She and the directors I was talking to at the time expressed absolutely no interest in changing their approach.

Turners by contrast tightened their lending criteria many times during this seemingly endless recession and have put through 12, (that's not a typo) price increases on lending as interest rates increased.

I think it's crystal clear with Turners posting repetitive consecutive record results in the last 5 years which approach has worked better.

Heartland are as loose as a promiscious Goose with their lending and not interested in changing. Look where that's got shareholders over the last decade, nowhere!

Basil, I agree vith you zhat Turners have turned in a better performance zhan Heartaland vor zhareholders over ze time period you are considering.   But although zhere may be zome 'crossover at the margins', IMO we are largely talking about 'deeferent markets'.

Vhen you zay:
"Turners by contrast tightened their lending criteria many times during this seemingly endless recession and have put through 12, (that's not a typo) price increases on lending as interest rates increased."

you are talking about 'new lending'?  You are not zaying zhat zomeone took out a 'vloating rate loan' on a car vhich zhen increased een eenterest rate twelve times?

A private car vill always vind an alternative buyer eef ze price gets low eenough.   IOW zhere eez a good chance of recovering ze debt.  But a bulldozer?  How low vould ze price have to go before granny buys one to go down to ze zhops?

'Deposit' vs 'Eenterest rate' eez a commercial decision trade off.  Many of Heartland's vehicle loans are via new vehicle dealers. Maybe new vehicle dealers are een a better position to recover capital vrom a defaulting new car owner on a new car, zhan Turners vould be vrom a defaulting zecond hand car owner on a zecond hand car?

RB

[Greekwatchdog]

Red Barron. Leanne Lazarus told me after the meeting they have no issues with continuing their zero deposit vehicle lending.  I warned her unemployment is still trending up and to be more cautious. She and the directors I was talking to at the time expressed absolutely no interest in changing their approach.

Turners by contrast tightened their lending criteria many times during this seemingly endless recession and have put through 12, (that's not a typo) price increases on lending as interest rates increased.

I think it's crystal clear with Turners posting repetitive consequtive recod results in the last 5 years which approach has worked better.

Heartland are as loose as a promiscious Goose with their lending and not interested in changing. Look where that's got shareholders over the last decade, nowhere!

HGH have always done the riskier side of lending hence their NIM was higher. Higher the risk, higher the chance of loss. Why would you compare a Bank like HGH to TRA who are in Car market? Goodness a little desperate. I do note that when you invested last time @ $1.15 you were quite bullish on all the risks.. Hmmm

[Syd]

Good to see the Dog doubling down on his Menu of Doubt , A la Trump, he's never wrong ! And currently shareprice still not listening, currently $1.15 .   

[lorraina]

HGH have always done the riskier side of lending hence their NIM was higher. Higher the risk, higher the chance of loss. Why would you compare a Bank like HGH to TRA who are in Car market? Goodness a little desperate. I do note that when you invested last time @ $1.15 you were quite bullish on all the risks.. Hmmm

HGH always trumped their MARAC Finance as having major franchise dealers as well as only the top second hand car dealers.
Total rubbish.Vehicle financing turned out to be another mess.
Yet Turners avoided such a mess.