HGH - Heartland Group Holdings

[Basil]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HBL/426934/413626.pdf

Something in there for everyone.  If you accept all the normalizations they do I suppose the result is not to bad but NIM has been tracking down for years and I am unconvinced that trend will change anytime soon.

Absolutely disgraceful they left the information release so late.

[LoungeLizard]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/HBL/426934/413626.pdf

Something in there for everyone.  If you accept all the normalizations they do I suppose the result is not to bad but NIM has been tracking down for years and I am unconvinced that trend will change anytime soon.

Absolutely disgraceful they left the information release so late.

Yep, the delay is inexcusable and further evidence of something fishy going on at HGH.

I still feel a cap raise is inevitable, once Challenger gets full regulatory approval. It would be tempting to buy in at current levels, but investors got burnt badly with the last raise so it should be a case of once bitten twice shy. Best to stay on the sidelines I feel.

[Shareguy]

Heartland's ambition is to achieve an underlying NPAT of $200 million and an underlying cost-to-income (CTI) ratio of less than 35% by the financial year ending 30 June 2028 (FY2028).

Divi full imputation with 11 percent yield

[Basil]

Extract from presentation under outlook.

Excluding the impact of the (non␂cash) increase in provisions for a
subset of legacy lending, and
Challenger Bank NPAT, the
underlying guidance range is $108
million to $112 million, reflecting
Heartland's underlying operational
performance (which is the basis
upon which the underlying 1H2024
results are presented)

So that's unchanged and at the mid point $110m if you accept that the normalization is the result of true one off costs that's 16 cps.  Put a no growth bottom of the cycle PE of 9 on that = $1.44.  Raised over half a billion dollars on term deposits already with Challenger bank at 1.3% lower than their current cost of funds over there.

No capital raise at this stage but one is probably coming.  At some point it's probably appropriate to say, hey, maybe they can pull this off and at the mid 120's, trading cum a 4 cent fully imputed divvy that goes ex divvy next week the risks and rewards appear to be equally in balance.

After reviewing the presentation a bit more I have come to the initial conclusion that I think it's okay to dip one's toes in here so I just did that in a very small way.  I'm calling it, I think $1.13 yesterday was the bottom.

[notmaurice]

Still a happy holder.

[LoungeLizard]

Extract from presentation under outlook.

So that's unchanged and at the mid point $110m if you accept that the normalization is the result of true one off costs that's 16 cps.  Put a no growth bottom of the cycle PE of 9 on that = $1.44.  Raised over half a billion dollars on term deposits already with Challenger bank at 1.3% lower than their current cost of funds over there.

No capital raise at this stage but one is probably coming.  At some point it's probably appropriate to say, hey, maybe they can pull this off and at the mid 120's, trading cum a 4 cent fully imputed divvy that goes ex divvy next week the risks and rewards appear to be equally in balance.

After reviewing the presentation a bit more I have come to the initial conclusion that I think it's okay to dip one's toes in here so I just did that in a very small way.  I'm calling it, I think $1.13 yesterday was the bottom.

That's a fair and measured call there, Basil, and you may well be proved right - the bottom of $1.13 was hit on the fear of no divvy and/or cap raise, so take them off the table plus a better than expected report, a dip-the-toe in buy could be the right response. SP up to $1.25 so obviously some are thinking the same thing.

The overhang of the still-on-the-cards capital raise could derail that strategy though if, like last time, it is deeply discounted. The SP plunged from $2.25 to $1.80 pretty quickly and then kept going. If history repeats itself I don't think $1.13 would be the bottom.

All conjecture of course.Depends on one's risk/reward appetite as much as anything. Give a hound a sniff of an easy 4c divvy and he's in for a feed!

[Basil]

Give a hound a sniff of an easy 4c divvy and he's in for a feed!

LOL, too funny, you know me well mate.
I agree 100% a capital raise is on the cards and it will probably be a rights issue of some kind and agree it could be at lower than $1.13 but if you don't have some shares you probably miss out. 

I quite like the cheaply priced capital raises where you can apply for $50,000 of new cheap shares even if you only have a token small shareholding.  That would suit me very well in the circumstances and maybe food for thought for others ?

The way I see it, there's quite a few shares trading now at very beaten down "doggy" level's.  Pick the dog with the least flea's I reckon. 😊
If they go back to paying 11 cps fully imputed in FY25 that's 12.2% gross yield + probably slowly increasing after that.  That's pretty attractive.

[Basil]

https://www.marketscreener.com/quote/stock/HEARTLAND-GROUP-HOLDINGS--47041144/finances/

Current situation on market screener.  3 analysts following.  Will be revised after this result, but I note underlying profit target for FY24 has not changed.
Average target price $1.73
Average earnings FY25 $119m rising to $138m in FY26.
EPS for FY25 17.49 cps.  DPS 12 cents per share

At $1.19, back out the 4 cent divvy, shares go ex next week that's $1.15 Net effective outlay.

At $1.15 and taking the eps and DPS at face value from market screener the metrics look like this
FY25 PE 1.15 / 0.1749 = 6.58
FY25 Gross yield 12 cps / 0.72 = 16.67 cps gross / $1.15 = 14.5% gross.

Then there's more growth to come in future years.   Those are extremely attractive metrics and if they can get the growth they are targeting in future years it would seem there's serious money to be made here. Hmmm  Opportunity knocks ?

Disc: I have been accumulating at $1.19.  Yeah I know there are risks and a probable capital raise coming but my Beagle nose is registering a solid feed coming here if one patiently holds for a couple / few years.
 

[Shareguy]

https://www.marketscreener.com/quote/stock/HEARTLAND-GROUP-HOLDINGS--47041144/finances/

Current situation on market screener.  3 analysts following.  Will be revised after this result, but I note underlying profit target for FY24 has not changed.
Average target price $1.73
Average earnings FY25 $119m rising to $138m in FY26.
EPS for FY25 17.49 cps.  DPS 12 cents per share

At $1.19, back out the 4 cent divvy, shares go ex next week that's $1.15 Net effective outlay.

At $1.15 and taking the eps and DPS at face value from market screener the metrics look like this
FY25 PE 1.15 / 0.1749 = 6.58
FY25 Gross yield 12 cps / 0.72 = 16.67 cps gross / $1.15 = 14.5% gross.

Then there's more growth to come in future years.   Those are extremely attractive metrics and if they can get the growth they are targeting in future years it would seem there's serious money to be made here. Hmmm  Opportunity knocks ?

Disc: I have been accumulating at $1.19.  Yeah I know there are risks and a probable capital raise coming but my Beagle nose is registering a solid feed coming here if one patiently holds for a couple / few years.
 

Agree. Have been doing the same.

[Basil]

Agree. Have been doing the same.

Good stuff mate.  Hope it's a case of great minds think alike rather than fools seldom differ lol

[winner (n)]

Market not too impressed with result

Share price at 119 way below where it was a few months ago

I think market doesn't like Jeff's normalisation game and has caught on his bad debt smoothing is a problem ..he's been caught out ....and market only believes the real number innReported NPAT

Little wonder share price today is where it is ...after all Net profit after tax (NPAT) of $37.6 million. NPAT decreased by $11.1 million (22.7%)

So npat down 23% ......no wonder share price down ... about 23% down from a few months ago

As a matter of interest the last 12 months (23H2 + 24H1) reported npat is $84.8m ...the lowest it's been since 2020.

[winner (n)]

Wow. ...Basil been seduced by Jeff's rave and what analysts say

That's a first ...maybe

Anyway good on you for taking advantage of market inefficiencies

But don't panic if things take a little longer than you expect to come right .....stay in for the long haul.

[Basil]

Good advice mate.  Just opened up a quite modest sized position.   Its not my first rodeo.  Bought hundreds of thousands in gloom a few years back at $1.30 and then sold them when in boom.  Only playing around with free Heartland money I've made in the past so all shares currently held are "free carry"
For what it's worth, I think the analysts on Market Screener are a bit too optimistic for FY25 and beyond but nevertheless even if its 10% lower in earnings and dividends those metrics look compelling as long as there's no more "normalization" in FY25, he says, rather hopefully.  Need to hold my nose or skip through all the ESG and Te Reo nonsense parts of reports though eh     

[snapiti]

Good advice mate.  Just opened up a quite modest sized position.   Its not my first rodeo.  Bought hundreds of thousands in gloom a few years back at $1.30 and then sold them when in boom.  Only playing around with free Heartland money I've made in the past so all shares currently held are "free carry"
For what it's worth, I think the analysts on Market Screener are a bit too optimistic for FY25 and beyond but nevertheless even if its 10% lower in earnings and dividends those metrics look compelling as long as there's no more "normalization" in FY25, he says, rather hopefully.  Need to hold my nose or skip through all the ESG and Te Reo nonsense parts of reports though eh     

me thinks the hound  caught a case of FOMO today.....suspect a tough year ahead for HGH

[LoungeLizard]

The wider macro-economic issues alluded to in HGH's December update made for quite downbeat reading - and the market responded accordingly. Yet, a mere two months later, HGH seem to be now quite bullish about their prospects. What changed? The adverse OZ climactic conditions, tight deposit market, legacy issues in their loan book, cost of living crisis affecting the purchase of new cars etc are all still there, yet somehow in the space of two months they are now trumpeting their great growth prospects and are dangling the carrot of achieving 200m NP in a little over 4 years. Hmmmm....

NPAT,NIM,EPS and dividend are all down. The degree to which they are down depends on how much you believe in the "underlying" figures after Jeff has waved his magic wand over the accounts, but the "underlying" figures are all still down nonetheless.

So after the spinning has stopped, I'm thinking this isn't as good a report as it may seem. The SP has lifted on the result not being as bad as predicted, but that doesn't mean the result is a good one. Dead cat bounce anyone? The macroeconomic pressures and risks are, after all, still there. And a cap raise if and when it comes could throw the SP into another tailspin. Personally, I'd like to see a good second half report before I'd consider jumping on this horse again.

Good luck to all!