HGH - Heartland Group Holdings

[Onemootpoint]

Certainly agree the NZ economy not boosting my confidence at the moment.
Bank jitters still prevail in the North American an markets. Maybe not quite a fair comparison but jitters easily cross borders.

HGL has room to fall a bit more I think in this market.

[lorraina]

From Craigs.
We have have upgraded our rating from Neutral to Overweight.    HGH is
trading at a higher than average discount to the ANZ sector average PE.
While we still have some concerns around the macro environment we think
this is largely already in the price and HGH's receivables book has shown
good resilience so far to tough economic conditions.

[Onemootpoint]

It's that 'macro environment' concerns theta problematic.

I was reading up/ listening to discussions on the Canadian banks over the past few days (don't have the kinks with me now but most likely BNN Bloomberg) and although they don't have the same issues or concerns as the USA banks, being highly regulated like here and Aus, there are headwinds in the sector.

The main Canadian banks share prices have steadily been tracking down the last year or two like the USA counterparts.

Economic factors produce similar factors that can hamper share price growth in Aus/ NZ banks.

Then again it is also quite cyclical.

Probably a bit more downside before it goes up again.

[winner (n)]

From Craigs.
We have have upgraded our rating from Neutral to Overweight.    HGH is
trading at a higher than average discount to the ANZ sector average PE.
While we still have some concerns around the macro environment we think
this is largely already in the price and HGH's receivables book has shown
good resilience so far to tough economic conditions.

Love how Craig's and Forbar seem to resort to comparing PE rations to ANZ 'peers' to assess under / over pricing

Seems lazy to me .....pity the world doesn't 'price' everything 'correctly'

[Basil]

From Craigs.
We have have upgraded our rating from Neutral to Overweight.    HGH is
trading at a higher than average discount to the ANZ sector average PE.
While we still have some concerns around the macro environment we think
this is largely already in the price and HGH's receivables book has shown
good resilience so far to tough economic conditions.

Kudos where its due, any company trading on a forward PE of only 10 and forecasting eps growth of 6% in this dreadful economy deserves respect.
Not only the discount to its peer group but over the years based on my observations HGH's PE trading range is 9.5 - 17.5 and with a gross yield of ~ 9.5% one is being paid handsomely to wait for better economic times and PE expansion to eventuate.  I took another look and decided to invest some of my previous profits in HGH back into the company from whence they came.  Very good growth in reverse home loans on both sides of the Tasman impressed. 

[Onemootpoint]

I'm still banking on a dip mid Sept to end Oct -ish. Not because of anything fundamentally wrong with HGH (looking good now) but rather the impact of possible weaker market direction in the US.

Pun absolutely intended.....

[winner (n)]

A chart of HGH Price/Book ratio over the years

Currently it's at 1.2 which seems about right.

We might even get another period of exuberance and see the multiple go back  close to  2 ......share price about 3 bucks then. ........and I can see some selling then and and waiting for another feed in the dish when share price reverts to normal levels.

I note WBC is just over 1 and the smaller Aussie banks are less than 1

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[Basil]

Yeap price to NTA seems about right.  Share price has spent enough time in "purgatory" is how I see it.  One other reason for me buying back in is I think on a look through this recession basis we are very close to the bottom of the traditional fear to exuberance range metrics range of 9.5 PE to 17.5.  Much better to be buying at the bottom of this range and selling at the top than a simply buy and hold strategy in my opinion. 

That said it could be many years before another bout of over enthusiastic exuberance so it's good to see a good post on the other channel by FM noting average broker forecasts for dividend growth FY24 12 cps, FY25 13 cps FY26 14 cps, all fully imputed.  Pretty sure it won't play out so smoothly as that, but I think the prospects of modest dividend growth over the long haul are very good.  Classic GARP stock with increasing earnings and divvy feeds.  Not many good value GARP stocks to choose from so i had to jump back in even if it was probably my most reluctant buy this year lol

[winner (n)]

Updated my HGH database

This is interesting

• Last 10 years profits have totalled $697m
• Dividends paid have totalled $488m .....payout 70%
• New capital raised has totalled $353m and the DRIP has bought in $106m
• Therefore total new capital has been $459m

Some might say (cynically) that HGH raise capital to pay the dividends

But I suppose that's how high finance works

[winner (n)]

Book Value / Shareholder Equity is a measure of a company's worth. In simple terms Book Value generally increases by retained profits (profits less dividends) plus changes in capital

Chart below is Heartland's Book Value per share over the years.

Hasn't Jeff done a good job in consistently growing the company by doing what he said he would do.

As noted HGH Book Value has grown by 4.5% pa over the last 10 years. Might seem a bit low but this is mainly due to the high dividend payment

What does mean for the HGH share price? If Price/Book ratio remained constant the share price would increase at 4.5% a year ...not that much and that's why over time the HGH hasn't really boomed (outside of extreme highs and lows a bit steady as she goes)

Of course total return to shareholders includes divies ...meaning TSR over time is going to be that 4.5%pa plus divies .....which have been quite healthy  eh

No doubt Jeff will keep on doing  what he says he will do .....and that should see the worth / Book Value of compa my steadily growing why decent divies get paid .....but every now he have to get the begging bowl out and ask for some more cash.

You cannot view this attachment.

[Shareguy]

Craigs say

Price Target $1.93 (prev $1.96). Rating upgraded to Overweight
Risks
Key upside/downside risks include: 1) macro environment including interest rate changes and business/consumer sentiment, 2) material house price movement, and 3) earnings delivery.
Our Price Target remains based on the average of a fwd PE of 12.0x ($2.14), a target P/BV of 1.1x ($1.67) based on HGH's average forward ROE relative to post-tax Ke, and a target dividend yield of 6.0% ($1.97) reflecting the long-term ANZ sector average. The small reduction in our Price Target reflects recent increases in interest rates/Ke. Our revised Price Target implies a forward PE of 10.8x and a cash dividend yield of 6.3% (8.8% gross yield).

[Hectorplains]

Another excellent Jenny Ruth article.  She clearly explains the disadvantage Heartland faces vs the 'Big 4' Aust. banks. 

[Basil]

Heartland Bank raises interest rate on reverse mortgages to 9.98% !  Crickey they'd be doing okay at that rate !
https://www.interest.co.nz/economy/124752/review-things-you-need-know-you-sign-friday-reverse-mortgage-rate-almost-touches-10

[Basil]

Got to thinking over the weekend with the great election result which companies might benefit?
I think many will but as the economy goes, so goes Heartland so I think HGH should do well from here over the next 3 years.  I note the average broker rating is outperform and the average price target is $2.01.

Average eps forecast is 17 cps, (forward PE 10.2 and dividends 13 cps ~ 10% gross yield.  I think fully imputed dividends of 12 cps are more likely but that's still 9.6% Gross at $1.74.  https://www.marketscreener.com/quote/stock/HEARTLAND-GROUP-HOLDINGS--47041144/consensus/
Those are excellent metrics trading very close to the bottom of the usual PE range of (9.5 - 18) for HGH. 

[winner (n)]

HGH share price down to 166 ....do we blame surging bonds ...or something sinister come out

What were the DRP shares issued at?