So much knowledge. It is clear you think Hnz is worth following. What would make you become a shareholder?
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So much knowledge. It is clear you think Hnz is worth following. What would make you become a shareholder?
Your time line is incorrect,and your "facts" are wrong.
PGC were never going to morph into a rural investment entity.In fact the board of PGC were talking of selling the the PGW holding.
GK was investing in Epic [Thames Water and Moto] long before he became involved in the recap of PGC.
Snoopy an HNZ shareholder? For that to happen, I would have to assure myself of the quality of the assets that are underpinning HNZs equity. I want to understand how much of the troublesome assets are already provisioned for and how much of the equity base is still vulnerable to erosion of value by further loan write-downs.
Contrary to what some assume here, I am happy with the business model that HNZ has and the niches where management are pushing to expand. I think they are good operators. But having a tidy front desk, with nice flowers on display for the punters, season after season, does not guarantee that all is in order in the back office.
Finally I would look at how HNZ stacks up against other NZX listed companies that are occupying finance niches. Motor vehicle finance is very lucrative (ask Percy). In relative proportional terms, the likes of TUA are better capitalised. The market is not dumb and knows this which is why TUA is more expensive (comparing share price to NTA) than HNZ (because TUA doesn't carry the potential downside risks of HNZ). But which is the better investment at today's prices is another question entirely.
SNOOPY
discl: hold TUA
I have only obtained a hard copy of the HNZ 2013 annual report in the last month. It is far easier to cross reference between pages (and believe me you have to do this) than on the pdf version. So here is a summary of where I am to date, for those who want something to chew over in the new year.
1/ The statement of financial position p24 shows that HNZ's largest asset is 'Finance Receivables'. You have to go to note 37 to find out what is really going on here. The total listed on p24 matches the total on the bottom RH corner of table 37d.
2/The on the book receivables assets are split into a 'judgement portfolio', where loans are graded on a scale 1 to 9 and a 'behavioural portfolio' where loans are graded according to how far they are in arrears, and where the bank is at recovering those loans that are in arrears. Some of these potentially troublesome loans have been provisioned against already by Heartland.
3/ As at 30th June 2013, the provision for collectively impaired assets was $15.961m. If I interpret note 37e correctly, this "collective provision" relates entirely to Grade 7 (Substandard) and Grade 8 (doubtful) loans, which collectively add up to nearly $40m of loans. Loans of Grade 9 (At risk of loss) are meant to be individually assessed for impairment. But despite Grade 9 loans being the most risky I can't find any provision for those in the accounts at all. Perhaps this is because applying a rule of thumb to individual troublesome assets doesn't really work. But my best reading of these notes is that $27.761m of Grade 9 loans are sitting on the books unprovided for. This is a potential write down per share of 7.1c.
4/ Also unprovided for is the largest category of loans needing attention, the grade 6 loans valued at $198.370m. These apparently have strong security and are typically rural exposures. But rural land value doesn't always go up. And with the NZ dollar set to rise further, I don't believe that rural land prices will rise in 2014. I have to take Heartland's word that their capital is not at risk with these farm loans. But if they have to tip farmers off their land to recover these debts, their credibility as a rural lender will be shot, even if shareholder funds are recovered.
5/ The biggest problem I have with the Grade 6 to Grade 9 loans is that when you add them all up for FY2013 I get $265.683m. Do the same for FY2012 and I get $268.242m, barely different. So this tells me that the 'management' of difficult debts has been accomplished by shuffling the same debt into different shoeboxes. In times of very low interest rates, I feel Heartland should have done better. And if they haven't sorted out their 'Monitor Plus' (Grade 6 to 9) loan portfolio now, how will they achieve it when interest rates start rising again?
SNOOPY
Glad you have had some financial benefit from my posts on HNZ Master. I just post the facts as I see them on HNZ (not always correctly as other posters have pointed out) and if that overall helps others to decide for themselves whether they want to be in or out of HNZ, well that is fine by me.
Personally I am still positive on HNZ, although not positive enough to own any shares. The problem with most bank shares is that it is all very easy to pick with hindsight. Those who bought in between 50-60c have done very well, albeit with some risk along the way that having 'succeeded' they are now oblivious to.
I guess by the time I decide that HNZ is worth investing in myself, the price may already have bolted. But I don't see any compelling value at 85c, with the credit rating only barely investment grade. Mind you I could say the same about a lot of shares on the NZX.
SNOOPY
Happy New Year Snoopy.
Don't bang Your Head against that Hard Copy for too long.
Best Wishes
Paper Tiger
Sparky The Clown.
Love that phrase "paralysis through analysis."
Being a rather simple sort of fellow I find if your simplify things, you can see the wood from the trees.
HNZ directors said what they were going to do,how they were going to do it,and the result, is they are doing it.
At the AGM they said where HNZ was,where it was going and how they were going to achieve it.
Profit forecast to be $34mil to $37mil for the year ended 30/6/2014,and that they intend growing the business through acquisition/s.They stated the equity ratio is high and they have very strong equity.
As they achieve more "runs on the board" the risk reduces.
5/ The biggest problem I have with the Grade 6 to Grade 9 loans is that when you add them all up for FY2013 I get $265.683m.
SNOOPY[/QUOTE]
Snoopy your are right that Grade 6 to 9 loans add up to $265mil. But HNZ is likely to have more than $200mil of security for those loans so potential loss is only a fraction of the at risk loans.
Also some of the the secured assets might appreciate in todays economic climate therefore I see HNZ as a good investment at todays SP.
All this argyle bargy about impaired loans begs the question;
Would CBS Canterbury shareholders have been better off to remain clear of MARAC and steer their own more prosaic course?
Boop boop de do
Marilyn
" Those who bought in between 50-60c have done very well, albeit with some risk along the way that having 'succeeded' they are now oblivious to. "..
No Snoopy.. Have sold down one third @ 0.87. Watching diligently.. ( No that is not where the monies went to )..
The price will bolt.... Nothing surer.. A few more months to go.. IMHO.