HGH - Heartland Group Holdings

[Greekwatchdog]

Here it is https://www.nzx.com/announcements/457176

Divvie $0.02. Result as to be expected

Guidance this early for 2026 as well. How many upgrades throughout the year I wonder?

Overview: FY2026 outlookHeartland's priority for FY2026 is to deliver an underlying return on equity (ROE) of at least 7% and animproved underlying NPAT of at least $85 million. In FY2026, Heartland will maintain its refined strategic focuson its core product sets, invest in technology uplift to unlock future growth, continue to focus on operationalcost control and prioritise efficient use of capital.

[lorraina]

NPAT of $38.8 mil .Number of shares on issue 940,099,841,means eps of approx 4.1cps gives a PE of approx 20.24.
Underlying NPAT $46.9 means eps of 4.98 cps and PE of 16.67.
Disappointing to see impairments are up.

Guidance NPAT of $85 m gives eps of 9 cps and a PE of 9.22..

[Mos]

Decent progress from HGH in a challenging economy. Reverse Mortgages now around 48% of receivables and growing at 15-19% p.a. so should be closer to 54/55% of receivables in a year's time. Together with $85m+ NPAT guidance expect this to be well received by the market.

[Left Field]

Decent progress from HGH in a challenging economy. Reverse Mortgages now around 48% of receivables and growing at 15-19% p.a. so should be closer to 54/55% of receivables in a year's time. Together with $85m+ NPAT guidance expect this to be well received by the market.

Yep looks like the tide has turned for HGH so I finally joined the club today.

Good divvy prospect (around 9% return on today's prices) plus aiming to double underlying profit in FY26 should drive the SP higher. 

Article on today's news here FYI

https://www.interest.co.nz/banking/134827/heartland-posts-469-million-underlying-june-year-profit-and-targets-85-million

[Basil]

NPAT of $38.8 mil .Number of shares on issue 940,099,841,means eps of approx 4.1cps gives a PE of approx 20.24.
Underlying NPAT $46.9 means eps of 4.98 cps and PE of 16.67.
Disappointing to see impairments are up.

Guidance NPAT of $85 m gives eps of 9 cps and a PE of 9.22..

Thanks for crunching the numbers on the hugely expanded number of shares on issue. Possibly worth noting that the guidance is for no real growth in eps in FY26 as 1H FY25 was a write-off with ostensibly no profit due to asset write-downs.  Just as well we can be absolutely sure this won't repeat and there won't ever be more major unexpected write-offs 

I see all their much hyped FY28 goals that their capital raise was predicated upon of $200m profit and a cost to income ratio of 35% are gone for a Burton and they will announce new FY30 goals at an investor day to be held before the annual meeting.  We can be sure these new goals have far more credibility that their last ones eh 

My assessment is this is a very, very poorly managed company with huge numbers of executives being paid incredibly well and performing far below the standard that would reasonably be expected of them.  Taking years to realise that a stricter more regimented policy to chase loan arrears would result in a better outcome.    Costs and impairments are rampant.  The reverse mortgage side of the business is worth normal banking metrics, the rest of it is ostensibly worthless in my opinion.

[LoungeLizard]

Thanks for crunching the numbers on the hugely expanded number of shares on issue. Possibly worth noting that the guidance is for no real growth in eps in FY26 as 1H FY25 was a write-off with ostensibly no profit due to asset write-downs.  Just as well we can be absolutely sure this won't repeat and there won't ever be more major unexpected write-offs 

I see all their much hyped FY28 goals that their capital raise was predicated upon of $200m profit and a cost to income ratio of 35% are gone for a Burton and they will announce new FY30 goals at an investor day to be held before the annual meeting.  We can be sure these new goals have far more credibility that their last ones eh 

My assessment is this is a very, very poorly managed company with huge numbers of executives being paid incredibly well and performing far below the standard that would reasonably be expected of them.  Taking years to realise that a stricter more regimented policy to chase loan arrears would result in a better outcome.    Costs and impairments are rampant.  The reverse mortgage side of the business is worth normal banking metrics, the rest of it is ostensibly worthless in my opinion.

Agreed. Have they turned the corner? Possibly, but how would you know, given the credibility gap that exists between shareholders and management. HGH have been borderline dishonest in their predictions of growth in NPAT - either that or they simply did not know what was going on in their own business. Take your pick.

I am highly suspicious of their guidance figures and would want them to meet or exceed them before returning to the fold.

I am also a bit worried about their dependency on the reverse mortgage business. Will there be a point where that market begins to dry up and if so where does the growth come from?

[winner (n)]

My view

HGH share price was about $2.50 not that long ago. Will it ever get back to that level?

Not likely for a long time I reckon.

HGH EPS peaked at 16.1 cents a share .... FY25 it achieved 4.1 cents. Wow that's bad and the legacy that Greenslade left behind. Realisation that reported profits weren't actually there and the subsequent capital raises produced this collapse.

Never mind. We need to forget what was and live the new dream. After all Greenslade took EPS from 4 cents to 16 cents (over 10 years) so the new crew can do that eh.

guidance for F26 is >$85m or 9 cents a share ....maybe 10 cents after profit upgrades. The market might be happy in a years time and Heartland will be a roll so a share price of $1.50 is a reasonable target. Not $2.50 but a lot better than what it's now and a good start for the new Heartland era.

Book Value will be about $1.50 per share by then so it all stacks up

[winner (n)]

One of the most amazing charts I've produced

Many stories can be told over the years I reckon

You cannot view this attachment.

[Basil]

Forbar have a neutral rating and a price target of $0.96

Cost to income ratio (CTI) has gone absolutely ballistic in the last 2 years and is completely out of control in my opinion.  FY26 outlook for same gives no encouragement. CTI gone from 48% to 59.6% in just 1 year, for goodness sake !  This against their much hyped target, (now no longer mentioned), of getting it down to 35% by FY28.  Completely disingenuous in my opinion.  If there was any chance of them getting it down to 35% by then the CTI would be trending down, not rocketing up at a ballistic pace.  Layers and layers of senior management on vast salaries, performing in a manner that would deeply embarrass decent quality middle management in one of the major Australian banks in my opinion. 

The way they have dropped all FY28 targets that the capital raise was predicated upon smacks of a total lack of credibility around those original targets.  The annual report due for release on 30 Sept will make for a fascinating read to see how many of these "banking professionals" are collecting $500K or more salaries.

[Left Field]

That's one scary chart Winner! (thanks for posting.)

However, I like the  bend beginning  in the end.

The cunning plan is that management has learned something and won't repeat their past mistakes!!??....as you say in post #2166 (Crikey that's a lot of frenzied posting for this thread....) "guidance for F26 is >$85m or 9 cents a share ....maybe 10 cents after profit upgrades. The market might be happy in a years time and Heartland will be a roll so a share price of $1.50 is a reasonable target."

Risky maybe, but not as risky as it was buying north of $1.00. Sometimes turn-around stories prove worth the risk (TWR etc.) At around $0.80c I suspect the risk is worth the opportunities.

The other cunning plan is only holding HGH at < 2% of a portfolio currently, then only adding more when/if the news and the figures improve.

JMHO. Each to their own.

[Basil]

Great chart Winner.  The way I see it anything over 12 cps is not real because Greenslade was chasing his huge bonus's and many loans were not provisioned properly.  Its a no growth company capable of making about 10 cps across the business cycle and I value no growth companies at 8.5 times average earnings.  Fair value is about where the shares are currently priced, if and only if, you trust the new management and quite obviously, I don't.  I've made very good money in the past but in recent times its a case of once bitten twice shy and I'm not drinking the HGH cool aid again.

[BlackPeter]

One of the most amazing charts I've produced

Many stories can be told over the years I reckon

You cannot view this attachment.

Interesting chart ... and yes, the years 2012 to 2022 had a lot of interesting moments as well.

The question is - is this a cyclical stock and the next 10 years are good again? Will the SP go up again to $2.50 and higher?

Impossible to say - even the usual one year forecasts are absolutely meaningless (little signal and plenty of noise).

I guess the only halfway sensible question is, whether the SP goes up from where it is now ... and I think the chances are not too bad that it will be better in a year or so.

More complicated is the question whether the SP will go up faster or slower than NZX. Hard to say und obviously very dependent as well on the performance of the current management team.

I understand that many people don't love them anymore, while some years ago everybody was just loving them.

Easy to see that love for a team is related to past earnings and (future) stories.

Rising earnings is good. Stories promising more earnings rises to come are good.

Clearly - earnings dropped since 2013. Was this the old loved team or the new unloved team?

Predictions look good, but hey - why would we want to believe them?

Anyway ... personally I am still holding and don't think that now is the best time to leave. But hey, my forward forecasts are not different to others. Sometimes I am right and sometimes I am wrong.

[lorraina]

Forbar have a neutral rating and a price target of $0.96

Cost to income ratio (CTI) has gone absolutely ballistic in the last 2 years and is completely out of control in my opinion.  FY26 outlook for same gives no encouragement. CTI gone from 48% to 59.6% in just 1 year, for goodness sake !  This against their much hyped target, (now no longer mentioned), of getting it down to 35% by FY28.  Completely disingenuous in my opinion.  If there was any chance of them getting it down to 35% by then the CTI would be trending down, not rocketing up at a ballistic pace.  Layers and layers of senior management on vast salaries, performing in a manner that would deeply embarrass decent quality middle management in one of the major Australian banks in my opinion. 

The way they have dropped all FY28 targets that the capital raise was predicated upon smacks of a total lack of credibility around those original targets.  The annual report due for release on 30 Sept will make for a fascinating read to see how many of these "banking professionals" are collecting $500K or more salaries.

Interesting noting HMY's cost to income.
19% Cost to income
Automation and increasing
scale continue to drive
efficiency gains, fuelling
improved profitability as the
loan book grows

Craigs;
FY26 guidance for NPAT of at least $85m
HGH has guided to FY26 Underlying NPAT of at least $85m. Key drivers of
this are 1) an average NIM greater than 3.90%, 2) a CTI ratio of under 53.5%,
Price Target $1.22 (prev $1.12)
and 3) an annualised Impairment Expense ratio of under 0.55%. The NIM looks
achievable based on Q425 exit rates, and with improvements in the operating
Our Price Target remains based on
environment we think the CTI and Impairment targets are also achievable. We
the average of a forward PE of 12.0x
have forecast $86.8m (prev $91.1m).
($1.41), a target P/BV of 0.9x ($1.20),
and a target dividend yield of 6.0%
Overweight rating retained
($1.04) based on the long-term
sector average.
We think the new management team has made a good start at restructuring
the activities to focus on the high ROE receivables where they can retain a
Our Price Target implies a forward
competitive advantage. We expect this will be aided by an improving macro
PE of 10.4x and and cash dividend
environment over the next year that should translate into growing EPS and
yield of 5.1% (7.1% gross yield).
dividends. We have retained our Overweight rating.
Forecasts And Ratios
Year End   2024A   2025A   2026F   2027F   2028F
EPS   9   4   9   11   14
P/E (CIP) (x)   9.7   20.8   9.4   7.5   6.2
DPS (net) (cps)   7.0   4.0   5.5   7.2   8.5
Yield (net) (%)   8.1   4.7   6.4   8.4   9.9
s

[winner (n)]

One lesson all should take on board from this mess is that 'normalisation' of profits is a bad practice. Often as in the case of Heartland the abnormals turn out to be real and not abnormal at all

The start of this practice at Heartland was a red flag ......especially after years of Jeff always doing what he said he would do.

Jeff was a master of 'normalising' to smooth profits ...as was Jack Welch at GE and just as it did with Jack it caught up with Jeff.

After Jack Welch left GE they said ...."Jeff has left it a hollowed-out "pile of shit".... And suffered 20 years of gradual decline. Have a look at the GE share chat this century to see the consequences

It concerns me that Jeff's protege and Heartland CFO during the normalisation period is now running the place as CEO

Have things changed? Probably not as they still tell great stories and continue the normalisation process. It was good news to some they beat guidance on 'underlying' basis (cynically I note that normalisation things in H2 was $1m) - haven't we heard just beating guidance before?

Never mind, the markets happy today so it's all hunky dory.

[BlackPeter]

One lesson all should take on board from this mess is that 'normalisation' of profits is a bad practice. Often as in the case of Heartland the abnormals turn out to be real and not abnormal at all

The start of this practice at Heartland was a red flag ......especially after years of Jeff always doing what he said he would do.

Jeff was a master of 'normalising' to smooth profits ...as was Jack Welch at GE and just as it did with Jack it caught up with Jeff.

After Jack Welch left GE they said ...."Jeff has left it a hollowed-out "pile of shit".... And suffered 20 years of gradual decline. Have a look at the GE share chat this century to see the consequences

It concerns me that Jeff's protege and Heartland CFO during the normalisation period is now running the place as CEO

Have things changed? Probably not as they still tell great stories and continue the normalisation process. It was good news to some they beat guidance on 'underlying' basis (cynically I note that normalisation things in H2 was $1m) - haven't we heard just beating guidance before?

Never mind, the markets happy today so it's all hunky dory.

Absolutely - a quite relevant lesson. Just hope somebody reminds us towards the end of the next path up ...