HGH - Heartland Group Holdings

[Basil]

Comparing HGH and FBU is comparing apples and lemons.
FBU have had a absolute endless series of so called one-off write downs over the years and has proven over time it is a highly cyclical no growth company and there are clear signs there's more so called one-off write-downs to come.  NZICC and Western Australia pipes issue.

On the other hand, HGH have had a few one off's regarding Harmoney, reporting requirements around hedging and this latest which is simply under provisioning of past due motor vehicle receivables, but has a proven track record of growing earnings over time, yet some, despite doing very well out of the company in the past are happy to throw the baby out with the bathwater but for reasons unknown are happy to forgive the management of companies like FBU who are recidivist offenders.  Go figure?

Two things occur to me, some people are simply laser focused on the current result, blinkers on and that's all they see.  Others think ahead and sift the wheat from the chaff.  The other thing is personalities.  Once some people decide they really don't trust the CEO they make any narrative the company comes out with fit their own pre-conceived view.

This dog does his best to cut through all that B.S., does his best to take an objective view on forward earnings and positions himself well for the next big feed.  I'll stick to what I know has worked exceptionally well for me over the years.  When the forward metrics look absolutely dirt cheap you ignore all the sentiment and BUY.  Buying this at $1.14 net is like buying Turners at $3.50 last year when nobody wanted them. 
 

[Forrestdun]

Have topped up further, expect you are right Basil, dirt cheap.

[Shareguy]

Buying a bank under Nav which was $1.39 at Dec23.

What gets me going is the deposits raised at Challenger. $523m raised at average rate that is 1.34 percent lower than current fund cost.

And don't forget our Jeff's target of $200m NPAT by 2028

[winner (n)]

Buying a bank under Nav which was $1.39 at Dec23.

What gets me going is the deposits raised at Challenger. $523m raised at average rate that is 1.34 percent lower than current fund cost.

And don't forget our Jeff's target of $200m NPAT by 2028

NAV or NTA?

NTA was $1.05 at December ...down from $1.09 pcp

Whatever good buying today ...can't go wrong at these prices

[LoungeLizard]

Buying a bank under Nav which was $1.39 at Dec23.

What gets me going is the deposits raised at Challenger. $523m raised at average rate that is 1.34 percent lower than current fund cost.

And don't forget our Jeff's target of $200m NPAT by 2028

Maybe Heartland can turnaround Challenger and if they can, then hats off to Jeff...

https://www.bankingday.com/challenger-red-faced-once-more-in-banking

Challenger remains the big unknown. It will either turn out to be a masterstroke or a millstone. It will be fascinating to see how it turns out.

[Basil]

Challenger probably needs a full upgrade of its banking system software.  Noted in the latest report Heartland have now completed their system upgrade.  That sort of major capex now has to be expensed under the new reporting standards.  Probably just as well HGH didn't treat that as another one-off extraordinary item lol

I know Winner prefers his book value methodology when it comes to peer comparisons and I respect that, but I have always preferred earnings, because earnings drive share prices and I always will prefer earnings comparisons.
So here is the same group of 6 peers I have always used over many, many years to compare their forward metrics.  Note, this group I have used has never changed and to remove any bias whatsoever from any one broker or on my part the FY25 forward metrics are straight off the consensus of all analysts on Market Screener.
Note: HGH has almost always been with 1 or 2 PE above or below the average, usually about 1 below but I have never seen anything like this disparity before.
BEN 11,7
BOQ 11.7 (Not a typo they are the same)
WBC 14.4
ANZ 12.9
NAB 15.1
HGH 6.75
Average of peer group 13.16
HGH is trading at only ~ HALF the forward multiple of its peer group.   I have never seen anything anywhere remotely like this in all my years of following HGH.  It's a very strong buy relative to its peer group and by all previous metrics this company has ever traded on.

[Shareguy]

NAV or NTA?

NTA was $1.05 at December ...down from $1.09 pcp

Whatever good buying today ...can't go wrong at these prices

NAV is $1.39

[lorraina]

Challenger probably needs a full upgrade of its banking system software.  Noted in the latest report Heartland have now completed their system upgrade.  That sort of major capex now has to be expensed under the new reporting standards.  Probably just as well HGH didn't treat that as another one-off extraordinary item lol

Challenger Bank doing something right;
In the seven-week period commencing 8 January 2024,
retail deposit growth of $528 million was achieved, at a
rate which is 1.34% lower than Heartland Australia's
current cost of funds.
[saving au $7.0752 mil]

[winner (n)]

All the gloom around Stock Co a while ago didn't lead to much damage ...segment profit only downward few million

Weather all good now they say.

[winner (n)]

No OCR increase today

Market response ........ govt stock plunging

Somecwould say good sign for Heartland

[lorraina]

All the gloom around Stock Co a while ago didn't lead to much damage ...segment profit only downward few million

Weather all goo now they say.

StockCo all good.
Reverse Equity loans all good.
Challenger Bank deposits all good.
Australian economy looking stronger than NZ's.
Looks as though Jeff's timing is all good too.
 

[winner (n)]

Challenger Bank doing something right;
In the seven-week period commencing 8 January 2024,
retail deposit growth of $528 million was achieved, at a
rate which is 1.34% lower than Heartland Australia's
current cost of funds.
[saving au $7.0752 mil]

Jeez ...keep that up and it's about $4 billion a year $50 lower cost of funds

That $200m looking easy peasy

[LoungeLizard]

StockCo all good.
Reverse Equity loans all good.
Challenger Bank deposits all good.
Australian economy looking stronger than NZ's.
Looks as though Jeff's timing is all good too.
 

I seem to remember the same things being said from some quarters when the cap raise and strategy pivot was announced. $1.80 was a steal they said. Well yes, it was a steal - just not in the way they thought.

[Basil]

Maybe it's time to let go of resentments and embrace the fact HGH has never in its history before traded on such compelling forward metrics ..

[LoungeLizard]

Maybe it's time to let go of resentments and embrace the fact HGH has never in its history before traded on such compelling forward metrics ..

Fair enough, I'll let it go. But he who doesn't learn from - recent - history is doomed to repeat it. Check-in when the next cap raise is announced.

And as a dividend sniffing hound, let's check out this metric. EPS has collapsed from 7.3 to 5.3cents per share. And net cash flows from operating activities are now in the negative. The dividend has been cut from 5.5c to 4c but even then - where's the money going to come from for future dividends, particularly if operating costs continue to climb. Issuing more shares to fund Challenger is only going to squeeze things further. HGH do not appear to be able to fund current dividends and the final dividend will be cut to probably about 4c. That's 6.6% gross yield on current SP. And that's if you're lucky. Worth the risk? I don't think so.
You can get 6.3% term deposit - at Heartland - guaranteed. Sometimes owning the bank isn't the right thing.