HGH - Heartland Group Holdings

[Basil]

The hound sniffed a feed and always follows his own nose because it's almost never wrong.  Believe it or not I am capable of demonstrating patience...yes, I know, Beagle's are not known for it.
Maybe have a look at those metrics in post # 682 again.  Very important to think ahead into FY25 and beyond rather than focus on FY24 like many are doing.  It's always darkest before the dawn.

Not disputing any of that LL, just saying at $1.15 net, after the 4 cent give-back divvy payable on 20 March, all that is now in the share price.  Overall, I thought the loan book growth was very good.  Better times are coming in due course.  Those with patience will get a decent feed here.  If we're not at the bottom, I think we are very, very close.  I have plenty of dry powder to continue to accumulate.  Only a 3.7% portfolio position at this stage.

Pick the beaten down dog with the least fleas is the name of the game here.  Choices as I see them are WHS, OCA, RYM, FBU or HGH...not touching SML at any price.  I reckon there's a heck of a lot less fleas on the HGH dog than any of those others.  Honestly not worried, bought hundreds of thousands of them years ago when everyone hated them at $1.30, waited quite a while, sold them and made heaps.  Watch this space, history is going to repeat.

[LoungeLizard]

The hound sniffed a feed and always follows his own nose because it's almost never wrong.  Believe it or not I am capable of demonstrating patience...yes, I know, Beagle's are not known for it.
Maybe have a look at those metrics in post # 682 again.  Very important to think ahead into FY25 and beyond rather than focus on FY24 like many are doing.  It's always darkest before the dawn.

Not disputing any of that LL, just saying at $1.15 net, after the 4 cent give-back divvy payable on 20 March, all that is now in the share price.  Overall, I thought the loan book growth was very good.  Better times are coming in due course.  Those with patience will get a decent feed here.  If we're not at the bottom, I think we are very, very close.  I have plenty of dry powder to continue to accumulate.  Only a 3.7% portfolio position at this stage.

Pick the beaten down dog with the least fleas is the name of the game here.  Choices as I see them are WHS, OCA, RYM, FBU or HGH...not touching SML at any price.  I reckon there's a heck of a lot less fleas on the HGH dog than any of those others.  Honestly not worried, bought hundreds of thousands of them years ago when everyone hated them at $1.30, waited quite a while, sold them and made heaps.  Watch this space, history is going to repeat.

Well good luck Basil - I hope you're right. I get the metrics but what I'm saying is that macroeconomics trumps company metrics every time. I don't like the overall picture even though some of the details look ok.
What bothers me also is that Jeff is trying to present a growth path that needs virtually everything to go his way. I mean - a reported NP of 37.6m (down by 11m) is somehow going to turn into 200m in a little over 4 years - a 530% increase. To me it smacks of Jeff, alarmed by the collapsing SP, has had to make a sows ear seem like a silk purse. Desperate stuff.
Anyhoo, let's re-convene in 6 months and see how things are progressing with the transformation. If a cap raise is announced and divys are cut (again) then you might get a sense of deja vu there Basil, when the SP takes a dive towards $1.

[Mos]

Well good luck Basil - I hope you're right. I get the metrics but what I'm saying is that macroeconomics trumps company metrics every time. I don't like the overall picture even though some of the details look ok.
What bothers me also is that Jeff is trying to present a growth path that needs virtually everything to go his way. I mean - a reported NP of 37.6m (down by 11m) is somehow going to turn into 200m in a little over 4 years - a 530% increase. To me it smacks of Jeff, alarmed by the collapsing SP, has had to make a sows ear seem like a silk purse. Desperate stuff.
Anyhoo, let's re-convene in 6 months and see how things are progressing with the transformation. If a cap raise is announced and divys are cut (again) then you might get a sense of deja vu there Basil, when the SP takes a dive towards $1.

Not quite that extreme. $37.6 m is half year.

[Basil]

After a $15M Write down too.
$110m underlying in FY24 to $200m in FY28 is 90%.

Not saying he can do that but circa $130m in FY25 is doable and the forward PE on that is 7, cheaper than at any time in the last decade.

I get it the macro isn't good but they're doing about $110m underlying in the current economic malaise which I think is quite satisfactory.

In summary I think all the crap is already in the share price but none of the opportunity in the years ahead.

[snapiti]

The hound sniffed a feed and always follows his own nose because it's almost never wrong.  Believe it or not I am capable of demonstrating patience...yes, I know, Beagle's are not known for it.
Maybe have a look at those metrics in post # 682 again.  Very important to think ahead into FY25 and beyond rather than focus on FY24 like many are doing.  It's always darkest before the dawn.

Not disputing any of that LL, just saying at $1.15 net, after the 4 cent give-back divvy payable on 20 March, all that is now in the share price.  Overall, I thought the loan book growth was very good.  Better times are coming in due course.  Those with patience will get a decent feed here.  If we're not at the bottom, I think we are very, very close.  I have plenty of dry powder to continue to accumulate.  Only a 3.7% portfolio position at this stage.

Pick the beaten down dog with the least fleas is the name of the game here.  Choices as I see them are WHS, OCA, RYM, FBU or HGH...not touching SML at any price.  I reckon there's a heck of a lot less fleas on the HGH dog than any of those others.  Honestly not worried, bought hundreds of thousands of them years ago when everyone hated them at $1.30, waited quite a while, sold them and made heaps.  Watch this space, history is going to repeat.

Interesting list of beaten dogs there Basil......wish you all the best with HGH, if I was taking a punt it would be on HGH to out perform the rest 

[entrep]

As someone on the other forum said it seems odd to be talking about $200m in 4 years time... how about what happens between now and then? How many more shares will be on issue?

[Ricky Bobby]

As someone on the other forum said it seems odd to be talking about $200m in 4 years time... how about what happens between now and then? How many more shares will be on issue?

I haven't had a chance to read through, 200mil is a big number! Easiest way to increase npat is reduce debt... how's that looking and what's their cashflow position like?.. man it's been a tough results period so far, but not surprised with how had business is at the moment. Looks like every industry is struggling...

[Shareguy]

Craigs positive with outperform

Multiples and Price Target Current trading multiples
At the current price HGH is trading on:
A price-to-book multiple of 0.8x (vs. Aus sector average of 1.5x)
A rolling forwards P/E of 8.3x (vs Aust sector average of 14.5x, with the 4 major banks averaging 15.7x).
A forward cash dividend yield of 8.5% based on 73% payout (vs Aust sector average of 5.4% with an average payout of 75%).
Price Target
Our $1.76 Price Target is based on the average of:
$1.93 - a forward PE of 12.0x (prev. $1.96), consistent with the long-term average for the ANZ sector and HGH's historical discount to the Aust sector.
$1.51 - a target P/BV of 1.0x (prev. 1.2x, $1.53). This is based on our estimate of HGH's average 3-year forward ROE relative to post-tax Ke.
$1.79 - a target dividend yield of 6.0% based on the ANZ sector long-term average.
Our revised Price Target implies a forward PE of 10.9x, P/BV of 1.16x, and a cash dividend yield of 6.1% (gross yield 8.5%).

[LoungeLizard]

After a $15M Write down too.
$110m underlying in FY24 to $200m in FY28 is 90%.

Not saying he can do that but circa $130m in FY25 is doable and the forward PE on that is 7, cheaper than at any time in the last decade.

I get it the macro isn't good but they're doing about $110m underlying in the current economic malaise which I think is quite satisfactory.

In summary I think all the crap is already in the share price but none of the opportunity in the years ahead.

Apologies. FY23 NP was 96m. It's going to be less than that this year I would say.  I'm not sure underlying NP after adjustments and one-offs is the way to go - too easily manipulated and there will always be more "one-offs." So 96m to 200m in 4 years. I think that's pretty unlikely given history and the fact that the banking industry is still in a cyclical slump. And as noted, how many shares will be on offer then - what will EPs and divvys be?
But hey, I'm not saying I am right to be pessimistic, but when they announced the pivot to OZ and ushered in a rushed cap raise that was bad for smaller investors and decimated the SP, I lost complete trust in Jeff to look after my money and bailed out at $1.80. I haven't regretted that decision and Jeff has a way to go to rebuilding this investors trust. The next 6-12 months will tell the story.

[winner (n)]

I love it when Craig's get excited ...or super excited

Comparing multiples with the '4 major ANZ banks' is justvstupid lazy analysis

[Basil]

I get all the negative sentiment prevailing and the trust issues.  I also get that people are rolling their eyes at the $200m profit target for FY28 but I see that as an aspirational goal more than a fixed target. 

For mine, we're at the bottom of the economic cycle and HGH normally trades at a forward PE of 9 at times like this.    If HGH announce in August a forecast profit of ~ $125m for FY25 or thereabouts which I think is quite plausible that's a forward PE of just under 7 based on the net entry price of $1.14 this morning, ($1.18 - 4 cents back in a few weeks).  I think that's a compelling buy.  $1.14 is only one cent more than the intra day low it hit the other day on fears of
a) A capital raise
b) Dividends being suspended
c) Profit being reported such that they would have to do another downgrade on FY24 underlying profit outlook.

None of those fears have come to pass which for me de-risks the stock.  I foresee them growing eps at a faster rate in the next 4-5 years as the economic cycle improves than they have in the last 5 years.  I don't think they will get to $200m in FY28 but eps growth rates of mid-single digits in the medium term seems quite plausible to me.

In my long experience following this stock Winner, (and I have done very well out of it over the years), the forward PE is usually within a range of 1 or 2 of its peer group, more commonly on the downside.  Outside of that range is an actionable event in my experience, either buy if a lot lower or sell if a lot higher.  We are at a point where this indeed is at an actionable anomaly to its peer group and HGH looks extremely cheap by all metrics relative to its peers.

I think a lot of people on here and the other channel are allowing their unconscious bias to cloud their thinking.  The indicators and forward metrics, (PE gross yield, peer group comparative metrics and discount to book, are truly compelling at a $1.14 net entry price.   I bought more on the open this morning. 

From me, more buying less talking about it now, you can either see through the current sentiment and see the forward metrics and the opportunity here or you can't...I'm not here to sell it to anyone.

[winner (n)]

Result had impairments at $24.0m but Jeff says that included 'a $16.0m increase in provisions for a subset of legacy lending' so we can deduct to give underlying impairment of only $8.0m.

Is this $16.0m a safety net just in case these legacy landings turn really bad?

But that begs the question what happens to Underlying NPAT if they end up actually having to be written off?

[LoungeLizard]

Result had impairments at $24.0m but Jeff says that included 'a $16.0m increase in provisions for a subset of legacy lending' so we can deduct to give underlying impairment of only $8.0m.

Is this $16.0m a safety net just in case these legacy landings turn really bad?

But that begs the question what happens to Underlying NPAT if they end up actually having to be written off?

It does my head in trying to determine whether "underlying" profit is real or not. I prefer to stick to the figure that they are prepared to report. I mean, look at this statement:

"The arrears experienced in a subset of longer dated Motor Finance loans are a result of operational issues in "Heartland Bank's Collections & Recoveries area and do not reflect any underlying issues with the credit quality of the book. This is primarily a resourcing issue caused by illness, employee turnover due to overseas travel, and a focus on Heartland Bank's core banking system upgrade (which is now complete). This is being addressed through a specialised recruitment strategy and automation. Underlying impairments are otherwise performing as expected given the challenging economic conditions. Heartland's asset quality continues to shift towards loans with lower risk exposures."

Sounds like gobbledegook to me. Reported NP is down 22% and hence interim dividend has been cut from 5.5c to 4c. That's all I need to know.

[winner (n)]

It does my head in trying to determine whether "underlying" profit is real or not. I prefer to stick to the figure that they are prepared to report. I mean, look at this statement:

"The arrears experienced in a subset of longer dated Motor Finance loans are a result of operational issues in "Heartland Bank's Collections & Recoveries area and do not reflect any underlying issues with the credit quality of the book. This is primarily a resourcing issue caused by illness, employee turnover due to overseas travel, and a focus on Heartland Bank's core banking system upgrade (which is now complete). This is being addressed through a specialised recruitment strategy and automation. Underlying impairments are otherwise performing as expected given the challenging economic conditions. Heartland's asset quality continues to shift towards loans with lower risk exposures."

Sounds like gobbledegook to me. Reported NP is down 22% and hence interim dividend has been cut from 5.5c to 4c. That's all I need to know.

Agree with your thinking loungelizard

Bit like Fletcher Building ......when things get stuffed up and cost money don't count it ...like it is legacy after all eh

[winner (n)]

Always safer / better / less risky to buy at valuation lows ...now is the time for HGH

Mind you Book Value per share dropped 8 cents in H1

As matter of interest P/B ayatollah about 0.8 is still higher than what small aussie banks like BOQ and BEN are currently trading at ....so could more than fairly valued

Never mind must be all onwards and upwards from here

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