HGH - Heartland Group Holdings

[Teitei]

We'll see.  I suspect there was an overhang from the index exit on Friday that needed to be cleared.

I think you are probably right, Beagle.

I am still going to wait however for the CR.  There's always the possibility of course that they will simply do a placement to selected instos ($85m) with a small rights issue ($35m) to remaining shareholders - hardly a burden.

[LoungeLizard]

I think you are probably right, Beagle.

I am still going to wait however for the CR.  There's always the possibility of course that they will simply do a placement to selected instos ($85m) with a small rights issue ($35m) to remaining shareholders - hardly a burden.

The instos got given the inside track in the last cap raise and lost a third of their money like everyone else. Might be harder to generate same level of enthusiasm this time? I think HGH will do the time-honoured thing. Wait for a piece of good news - Challenger given a banking licence for which they will need more capital for anyway - then present it as a "great opportunity" to buy at a discounted price. And so it goes on...

[Fiordland Moose]

There's always the possibility of course that they will simply do a placement to selected instos ($85m) with a small rights issue ($35m) to remaining shareholders - hardly a burden.

Jarden estimate a Challenger capital raise will be between $150-200mn

[Basil]

Jarden estimate a Challenger capital raise will be between $150-200mn

That's suggestive of a rights issue of 1:5 or 1:4 at the current price which is about the level that I think is already widely anticipated by the market. 
1:4 @ $1.10...show me where to sign, I'm keen.

[Teitei]

That's suggestive of a rights issue of 1:5 or 1:4 at the current price which is about the level that I think is already widely anticipated by the market. 
1:4 @ $1.10...show me where to sign, I'm keen.

Say $150m so $85m placement and a 1:8 rights issue at $1.10 will raise the required amount.

[lorraina]

I would like to see a $200mil placement to an Aussie intos.

[winner (n)]

I would like to see a $200mil placement to an Aussie intos.

Could be the quick and easy way

But massive dilution ....like would Greg like having 20% less of the company than now

[lorraina]

Not only Greg.
The whole team hold a lot of shares.
Could say they have "The Owners' Eye".

[LoungeLizard]

More shares in play means a lower EPS and probably a lower dividend. It might be accretive if they were buying an existing profitable bank, but they are not. As of this moment Challenger is losing money and will need propping up.
Unless the downtrend corrects itself, buying more of anything is never a good strategy.

[KW]

HGH is in a verrrrryyyyy long term downtrend now.  This chart is a weekly chart, and the pre-Covid support/resistance levels have kicked in, and not in a good way.  Now that its out of the index, insto support for it will be non existent, leaving it as a retail only play.  With a weekly "death cross" coming up, its likely that the downwards price movement will continue. 

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[Teitei]

I would like to see a $200mil placement to an Aussie intos.

Can only raise 10% of market cap via placement without shareholders' approval. Companies like to do it fast and easy to avoid price reaction.

[Basil]

More shares in play means a lower EPS and probably a lower dividend.

How do you know that ?  The reverse mortgage book in Australia is highly profitable already, $1.6 Billion in size and Challenger will dramatically lower their cost of funds on that book that's growing at ~ 20% per annum.  In the medium term I'm confident it's eps accretive.  You do understand the simple process of reversing into Challenger their existing business in Australia, surely?   Honestly, I am beginning to wonder if you do... Professional analysts' consensus is for good growth in eps and dps in the years ahead but you know better eh mate.

Now that its out of the index, insto support for it will be non existent,

It got kicked out of the FTSE small companies index not the NZX50 so that part of your theory is  invalid.  Yes its in a downtrend.  Everyone hates a cyclical at the bottom of the cycle and sentiment is absolutely terrible.  It takes real courage to buy here, I get that and have it.
 

[Basil]

Say $150m so $85m placement and a 1:8 rights issue at $1.10 will raise the required amount.

Not a big ask or taxing on the stock in my opinion.  Happy to take another 100,000 @ $1.10 in a placement or rights issue or on market, (have a bid on market to that effect in the hope of some more extreme irrational pessimism).

[LoungeLizard]

How do you know that ?  The reverse mortgage book in Australia is highly profitable already, $1.6 Billion in size and Challenger will dramatically lower their cost of funds on that book that's growing at ~ 20% per annum.  In the medium term I'm confident it's eps accretive.  You do understand the simple process of reversing into Challenger their existing business in Australia, surely?   Honestly, I am beginning to wonder if you do... Professional analysts' consensus is for good growth in eps and dps in the years ahead but you know better eh mate.   It got kicked out of the FTSE small companies index not the NZX50 so that part of your theory is  invalid.  Yes its in a downtrend.  Everyone hates a cyclical at the bottom of the cycle and sentiment is absolutely terrible.  It takes real courage to buy here, I get that and have it.
 

No need to resort to insinuations there, Basil. I respect your viewpoints even if I don't agree with them. I ask the same of you.

I am quite aware that the reverse mortgage and Stockco business's are going to be folded into Challenger bank. Hence my comment about "propping up," But they will need to accelerate their growth in order to cover the legacy costs and issues that Challenger has. And in an increasingly doubtful macroeconomic environment.
And remember - HGH posted a cut in profit and EPS in their interim report.

So in the short-medium term the never-wrong analysts expect EPS will increase? I don't happen to  think so. And I expect the final dividend to be cut, not increased.

[Basil]

So in the short-mediumm term EPS will increase. I don't think so. And I expect the final dividend to be cut, not increased.

Yes, you've mentioned that many, many times now and every single analyst out there disagrees with you and so do I.