HGH - Heartland Group Holdings

[snapiti]

1.30 Basil.....you been down at the boat club preaching

[Basil]

Hey Snapper.  This is the sort of timeframe I am thinking of, from a previous post on 27 February and that price was cum the 4 cent fully imputed divvy.

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.

Very early days but it's nice to see a few runs on the board already.

[LoungeLizard]

hard to understand investors logic sometimes, it presented an excellent buying opportunity, thanks Mr markets

There's always possibilities around dividend time. It's the busy time for traders and unquestionably there's buying opportunities to get a dividend and exit with a profit. Good on you if that's the case.

But the longer term issues and uncertainties surrounding HLG are still to be resolved and if you are in it for the long term, then it really isn't best to start counting your (paper) chickens just yet. There's obviously a bit of chatter about HLG at the moment and it may just turn out to be a dead cat bounce off a 52 week low -  extrapolating from a week of trading is a fools errand.
AS I've said before, unless there's an uptrend supported by data, I'm not interested in a speculative 10 or 20c gain - just not my thing. There's plenty of movements of that magnitude everywhere, everyday. Chasing each one is a mugs game and the odds are against you.

So, still happy to sit here and listen to the chatter. If Challenger get's, as expected, it's banking licence, then a cap raise will most likely follow. And where the SP goes after that will be the next talking point

[mike2023]

Maybe the cap raise is the reason its getting a little pump right now?

[Basil]

I'm expecting the capital raise to be announced along with the announcement of the Challenger banking license approval which could be 6-12 months away.

I think it got oversold after the half year profit announcement by some people who were disappointed with the reported number and this minor retracement so far is exactly that, only minor and just the start.  Still very heavily oversold on a relative basis with its peer group.  I get that some people will say that's fully warranted but my view is over the medium term HGH track's its peer group multiples fairly closely.

I've learned before that HGH can deliver huge returns if you buy when its heavily oversold and patiently wait for the recovery.

[winner (n)]

Brokers recent research.
Craigs.Overweight...Target Price [12mths].$1.76
Forbar.Neutral......Target Price..........$1.37
Jarden.Overweight...Target Price [12mths].$1.92
Current share price $1.22

Methinks that Jarden guy must have been on happy pills when he came up with avrarget of 192

With Heartlands high dividend payout etc 192 in a years time would be at pretty extreme multiple

In other words a time when Basil would be looking to sell ....you know his buy when valuations are low but capital management risk strategy and selling when high.

Be good to see HGH close to 2 bucks in a years time.

[winner (n)]

Take off ...close 131 today

Up only way from here

[LoungeLizard]

Heartland 1.0 reached $2.38 before Jeff shelved the old version and released Heartland 2.0, currently trading  at $1.31, at a lower yield. Had HGH 1.0 been allowed to continue its slow, sustained growth path, the SP would probably be around $2.60-$2.70 by now with a good yield. Those that didn't read the writing on the wall and exited their position at the last cap raise, will wait a long, long time before they get anywhere near the sort of profits they left on the table.

But for those that are now considering following the pack in entering the market now, they need to be aware that HGH 2.0 is no longer focused on the smaller NZ investor. The manner of the last cap raise showed that - a 30% capital destruction exercise in a matter of weeks. That last cap raise ($1.80), announced 23/8/22, was a 15% discount on the SP at the time ($2.12). The SP never recovered and went into a sharp decline to where it is now. Given that everyone - Institutions included - are sitting on big losses from that raise, I would think that HGH 2.0 may have to discount the SPP even more.
 But assume that in 6 months time HGH do come round with the begging bowl and the discount is again 15%. Even if the SP has risen to say, $1.50 by then - doubtful but possible - a 15% discount will take the SP to under where it is trading today. Investors will have seen no growth and be looking at a reduced or suspended dividend to boot. If you are one of the lucky ones who bought near the bottom, you may get out with your capital intact. Anyone buying in after that will either have to sell down at a loss, or double down with participation in yet another cap raise. Deja vu, all over again

Sorry to rain on the parade, but when every man and his monkey is reaching for the buy button, then that is when there needs to be a few countervailing viewpoints in the mix. Good luck to all in guessing when the Cap raise steamroller will arrive. It could be here sooner than you think. In the meantime...party on

[winner (n)]

Maybe Heartland attractive acquisition target ...pretty cheap at moment

Action in Oz today -

The Australian market came alive with a $6 billion takeover offer by Nationwide Building Society to buy Australian securities exchange-listed (ASX) Virgin Money UK, which climbed 32.7% to A$4.075 (NZ$4.37)

On Wall Street, the Nasdaq Composite rose 1.51% to 16,237.38 points; the S&P 500 was up 1.03% to 5,157.36; and the Dow Jones Industrial Average gained 0.34% to 38,791.35.

The Virgin Money activity spurred fellow banks listed on the NZ market. ANZ was up 65c or 2.08% to $31.95; Westpac increased 76c or 2.64% to $29.60; and Heartland Group gained 5c or 3.97% to $1.31.

[Basil]

https://www.youtube.com/watch?v=vjD3EVC1-zU

Winner, Just reverting to average peer group forward PE for FY25 would see it at $2.08 !  $2+ next year is quite plausible.

[LoungeLizard]

https://www.youtube.com/watch?v=vjD3EVC1-zU

Winner, Just reverting to average peer group forward PE for FY25 would see it at $2.08 !  $2+ next year is quite plausible.

Basil -  by "peer group" do you mean the other digital or neo-banks currently running in OZ? I'd be doubtful of those forward PE projections if that is the case, given that many of them are struggling to keep their heads above water. It would be wrong to compare Challenger/Heartland to the big conventional banks as you'd be comparing totally different entities.

I think I'm right in saying that Volt bank was the first such digital bank to gain a full banking licence in OZ back in 2017. It folded in 2022. Others, like Challenger itself, have struggled to attract enough deposits to be able to function. Judo Bank has probably been the most successful of this new wave of digital banks but even there the SP has been a real rollercoaster and they've faced the twin problem that all these small neo-banks have faced - namely attracting enough deposits whilst maintaining a decent net interest margin. Currently, there are economic headwinds that affect both these areas and the small banks are more susceptible to them.

It's a super-competitive and risky area of the banking business that HGH are entering in OZ, but they will be migrating their Reverse-mortgage and STockCo clients into the Challenger system, so that will help to prop things up. For a while.
   

[Basil]

I posted the peer group I have used for over a decade quite recently. I've also posted that in my experience HGH tracks its peer group average multiple quite closely the vast majority of the time.

[LoungeLizard]

I posted the peer group I have used for over a decade quite recently. I've also posted that in my experience HGH tracks its peer group average multiple quite closely the vast majority of the time.

In that case, if you are comparing the PE metrics of huge, established high street bank like ANZ with the metrics of Challenger Bank, an absolute minnow operating solely as a digital bank, then, respectfully I don't think that's very useful.

Thee are some metrics that are worth comparing, and indeed digital banks can - and should - for example, have a better Cost to Income ratio. Jeff is looking to undercut the established banks in this area. Liquidity ratio, NIM, loans/deposits ratio and others are also useful to compare.
 
But predicting the SP for extremely small, very new digital banks that barely have a foothold and don't have the scale or operate like the conventional banks is pretty much a finger in the air prediction. A good talking point - nothing wrong with that I hasten to add -  but best taken with quite a few grains of salt! 

[winner (n)]

https://www.youtube.com/watch?v=vjD3EVC1-zU

Winner, Just reverting to average peer group forward PE for FY25 would see it at $2.08 !  $2+ next year is quite plausible.

And hopefully a bit more and then a SELL ......cashing up this cycle gains eh

[Basil]

In that case, if you are comparing the PE metrics of huge, established high street bank like ANZ with the metrics of Challenger Bank,

Look, this is getting pretty circular...To be clear I am comparing the metrics of HGH which is a well-established bank with those of a peer group in Australia.  I have been doing this very successfully for over a decade and I have already shared both the peer group I use and the close correlation in the metrics. 
If you want to come up with arguments why this shouldn't work, that's your prerogative but I am telling you it works extremely well and has worked for over a decade and is a very useful tool in determining if HGH is seriously undervalued or overvalued. 

I sent you a copy of Jenny Ruth's article. HGH has a dominant market share with its reverse mortgage book in Australia.  It's not some start up minnow.  Its already has about $1.6 Billion in highly profitable and low risk reverse mortgage lending and they are going to back this into Challenger if they get a banking license. 

With or without that approval HGH has a highly successful, well-established banking operation in Australia already and I believe they will grow eps regardless of whether or not the license is approved.  This has never been on cheaper forward metrics at any time, either Heartland 101 or Heartland 102.  Let that sink in or not, I've done my best to help you open both eyes to the opportunity ahead. 

Perhaps we should simply let the share price do the talking now for a while.