HGH - Heartland Group Holdings

[Left Field]

HGH tracking well to challenge 12 month highs today, no doubt assisted by recent brokers 2026 picks.

While I tend to view 'holiday' trading with some scepticism, overall HGH current SP is up over 30% (exl divvies) based on my average hold SP. and now a cautious 5% of my portfolio.  I'm happy to wait till the next update to see how the results are tracking before considering adding more.  I see potential  to have HGH at least 10% of my portfolio.

[Left Field]

HGH tracking well to challenge 12 month highs today, no doubt assisted by recent brokers 2026 picks.

While I tend to view 'holiday' trading with some scepticism, overall HGH current SP is up over 30% (exl divvies) based on my average hold SP. and now a cautious 5% of my portfolio.  I'm happy to wait till the next update to see how the results are tracking before considering adding more.  I see potential  to have HGH at least 10% of my portfolio.

Influential posters on the other channel recently singing the praises of HGH...... Crikey.

Balance said:

"HGH to be $1.45 by end of 2026 - that's my expectations.

Sp will be driven by profit upgrades (first one this year in mid-Feb imo) and market appetite for yield stocks like HGH.

Meanwhile, latest data (Nov 25) from Australia shows continuous growth in assets (4%), loans (1.9%) and deposits (1.8%).

Onwards and upwards."



From Winner

"Don't forget they are aiming for an ROE of 10% plus and even mentioned 12% plus once. . Likely to manage FY26 result to 8% ROE before going over 10% in FY27

A 10% ROE will be about $125m profit or EPS about 13 cents. At 50% payout that is about a 7 cent divie. Not too bad when divie likely to increase substantially in future

The good thing about only paying out 50% of profits is that it leaves the other 50% to go out and earn another 10%/12% ... year after year.

All looking good

I wouldn't be surprised if share price is over $1.70 later in the year"

[Basil]

Heartland have been quite clear that they're reinvesting Australian profits into growth there and only paying out half of N.Z. based profits so I think with all due respect to Winners future estimated dividends, (and for that matter average analyst forecasted dividends noted below), those investing for yield would be very wise to crunch the numbers for themselves.

We know that business liquidations hit all time high's in 2025 and we also know that last year's ~$50m write-down announced in February 2025 only just moved the needle with non performing loans falling only very marginally from a very high level of 3.8% of all loans to 3.6%.  Barely made a dent in the level, (but if you just read the corporate B.S. rhetoric that came with that announcement you'd have thought they almost completely eliminated all problem loans).  The level of creativity in the narrative was breathtaking to say the least. 

All eyes will be on their non performing loans when they announce their half year result next month.  We will also see if the staggering rate at which operational costs have climbed in recent years slows down.  Their cost to income ratio has completely blown up in recent years.

I'll leave the last word to the three analysts covering it with their average price target 1 year hence of just $1.03, forecast EPS of 9.31 cps, DPS of 5.4 cps for FY26 and forecasting ROE of just 7% in FY26 and 8.26% in FY27.  https://www.marketscreener.com/quote/stock/HEARTLAND-GROUP-HOLDINGS--47041144/finances/

[winner (n)]

Hey Basil - so they reinvesting Australian profits into growth there and only paying out half of N.Z. based profits

Then I'm mistaken and my forecasts are all wrong

Better run with guru analysts then

[Basil]

Yes they've been quite clear about that mate.  Maybe 3-4 cps fully imputed DPS is somewhere about where it might be ?

Forgot to bookmark it but the other day in the Herald I noticed a headline that despite an anticipated recovery in the economy this year business liquidations were expected to climb again in 2026.  I guess there's the lag effect at play here from the very weak economy over the last few years as well as the IRD being more forceful with their recovery proceedings against delinquent taxpayers.

On the positive side the GDT auction recovered somewhat overnight and the nine reductions in a row that occurred last year didn't continue so maybe the rot has stopped there and farmers won't feature too heavily in the insolvency stakes in 2026 ?

[lorraina]

Number of shares on issue;
27/9/2021, 585,904,365.
Today,    942,543,367.
Over 60% more shares.
No wonder ROE,EPS and DPS ratios are shot.

[Greekwatchdog]

Number of shares on issue;
27/9/2021, 585,904,365.
Today,    942,543,367.
Over 60% more shares.
No wonder ROE,EPS and DPS ratios are shot.

Thats what happens when you have two Cap Raises so close to one in other.

Takes a while to get the new businesses imbedded into existing, and all this during recessionary times when all their dodgy loans came back and hunted them

[Pierre]

Yes they've been quite clear about that mate.  Maybe 3-4 cps fully imputed DPS is somewhere about where it might be ?

I've got a total of a miserly 3.5cps in my CY26 cash flow forecast - but I'll still be flying Biz class to Italy in August!

[Basil]

I've got a total of a miserly 3.5cps in my CY26 cash flow forecast - but I'll still be flying Biz class to Italy in August!

Your April HLG dividend will cover that very nicely 

[Red Baron]

- but I'll still be flying Biz class to Italy in August!

How do you get vat enough to vly business class?  Vhat eez ze minimum veight?  I do not know as I always vly myself!

RB

[LaserEyeKiwi]

Hey Basil - so they reinvesting Australian profits into growth there and only paying out half of N.Z. based profits

Then I'm mistaken and my forecasts are all wrong

Better run with guru analysts then

Where are you guys getting the idea that the dividend policy is that they are only paying out half of the NZ groups profits?

The dividend policy is target payout of at least 50% of the entire groups underlying NPAT. There is nothing said about it only being the NZ based operations profits.

[Basil]

Where are you guys getting the idea that the dividend policy is that they are only paying out half of the NZ groups profits?

Good question.  I started this so you deserve an answer but unfortunately I'm sorry, I can't give you one as I can't remember whether it was something the company said at the 2024 annual meeting I attended in Oct 2024 or maybe it was in an analysts report.  Whichever was the case I know for sure it was before the recent Government announcement of a relaxation in the capital requirements for banks so you are probably best to run with the average the brokers are forecasting which is 5.4 cps for FY26 as the capital ratio relaxation is a material change in circumstances.

The fly in the ointment as I see it is the measurement yardstick is underlying profit which is almost always a very heavily massaged figure.   For example, they could foreseeably take another $50 write-down on legacy assets next month, have a reported profit of nothing but report underlying profit of $50m.  I simply don't "buy" the way they massage that underlying profit figure as for example last years extraordinary write-down is just a very modest catch-up on under-provisioning for bad loans in the low part of the economic cycle.  They could end up paying dividends without making money...but no worries mate, its something another capital raise in due course will easily fix 

[Shareguy]

I think Basils caution is warranted given the past.

FB latest note says that the combination of lower capital requirements, HGH's success in exiting non-core lending, and modest declines in its motor and asset finance books means HGH could now find itself in a position with excess capital. Assuming a ~3% buffer, and the removal of half of its transitional capital overlay, HGH would have up to NZ9cps of excess capital in FY28, reducing the likelihood of an equity raise if impairments surprise to the upside or providing it capital to grow its reverse mortgage lending faster in NZ and Australia.

[LaserEyeKiwi]

Good question.  I started this so you deserve an answer but unfortunately I'm sorry, I can't give you one as I can't remember whether it was something the company said at the 2024 annual meeting I attended in Oct 2024 or maybe it was in an analysts report.  Whichever was the case I know for sure it was before the recent Government announcement of a relaxation in the capital requirements for banks so you are probably best to run with the average the brokers are forecasting which is 5.4 cps for FY26 as the capital ratio relaxation is a material change in circumstances.

The fly in the ointment as I see it is the measurement yardstick is underlying profit which is almost always a very heavily massaged figure.   For example, they could foreseeably take another $50 write-down on legacy assets next month, have a reported profit of nothing but report underlying profit of $50m.  I simply don't "buy" the way they massage that underlying profit figure as for example last years extraordinary write-down is just a very modest catch-up on under-provisioning for bad loans in the low part of the economic cycle.  They could end up paying dividends without making money...but no worries mate, its something another capital raise in due course will easily fix 

So you cant find any evidence to back up your assertion you are stating as fact that contradicts every official piece of shareholder communication? Not surprised.

You are confusing the payout ratio equation with how they are funding the dividend payout.

HGH is paying out at least half of underlying NPAT, and its being paid for by the excess cashflow generated by the NZ operation, which accounts for more than half of the groups profits, which is why they can payout at least 50% of total group NPAT, while still reinvesting all Australian profits back into growing the Australian operation.

[Basil]

You could well be right LEK, I haven't followed very closely since selling at just over $1 in late 2024 and reinvesting into Tower at a similar price, a decision I am very happy with.

What they pay in dividends has historically been pretty much irrelevant as they give with one hand and then ask for several times as much back with heavily discounted capital raises with the other.  Perhaps it will be different going forward, time will tell.

I have no confidence in management that they can get an acceptable return on capital in any sector other than reverse mortgages.

I'm also not convinced at all that this is a growth company in any respect other than management salaries.  Averaging the last 8 years reported earnings and the average of analysts forecast EPS for the next two years gives average EPS across the economic cycle, (10 years) of 11.66 cps.  Forecast FY27 EPS is 11.4 cps.  I value no growth companies at a no growth Ben Graham PE of 8.5 so as I see it fair value id 8.5 x 11.66 cps = 99 cps which I note is within a few cents of the average analyst valuation at $1.03.