"Challenger" Bank.....perhaps they could have saved a bunch of cash and completed due diligence merely upon the name of the target.
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Sizeable 6% move up today, no news?
Something in the wind eg Banking license ? or way too early ?
Nice to see anyway...
Wants to rise when the heavy sellers are away. Hopefully the not the long weekend effect.
Percy raised a good point to me - wonder whats happened with Geoff's shares? Was a chunky stake if memory serves me right - circa 15 million - but not above the 5% threshold for SSH notices, and (sadly) not required to provide director/officer notices anymore.
Well oversold in my view, hoping a rally can become entrenched.
Not just over sold, traders were manipulating the SP.
Nice to see HGH near the top of the leader board today.
I calculated the other day Heartland's long term beta - from the time it became HGH (from HBL) back at the end of October 2018 to the end of february. It's extraordinarily high at 1.57 (1 being average). What's that mean in practice? Volatily, with the price overreacting to bad news and sentiment, and the good. Hopefully at some point we start getting some good news for the SP to overreact to as well (the fun part).
Why would HGH have a high beta?
More retail investors vs instos? (I don’t know that for sure I just remember reading it once)
Or just because it’s a financial and a small bank at that
Aye there are too many ways to calculate it that all give you different outcomes and cause you to conclude its all a bit of bunk. The method I chose probably the best suited to low liquidity / lower volatility index that is the NZX50. Takes the average monthly SP, adds the declared div if there is one in that month, and compares that to the average monthly NZ50 gross index, taking the slope of the pairs monthly respective LNs. Better than just flicking daily or monthly on a bloomy but yeah take it with a grain of salt. no doubt off but intuitively feels sensible - recall the over reaction in the SP during the milk bust or covid, the soaring SP during 2021 and early 2022, etc
and @rawz yeah I think you are on to it
Hey Muse, a bit bored so I quickly calculated HGH volatility (annualised)....weekly closes since changed to HGH in 2018
Over that time historical volatility has been 30%
Over the last year it has been 32% and last 2 years 28% ……so recently not really less or more volatile than historically
Quite high ……could mean over next year if HGH share could go down 30% or up 30% we shouldn’t be surprised
But @winner you posted on another channel that HGH is in a "long term uptrend", well that's just nonsense isn't it. Why would you say something like that, it isn't and is far from it?
Maybe, just possibly, it's reversed a long term downtrend (buy the DCB), but a pop above 30 DMA (which failed last time) right on EOM rebalancing, is hardly encouraging. It's only just re-entered the long term down-trend channel .. quite a way from break out confirming an up trend.
This sounds pretty good
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From Sharetrader AM update
They did it
HGH
08/04/2024 08:30
OFFER
PRICE SENSITIVE
REL: 0830 HRS Heartland Group Holdings Limited
OFFER: HGH: HGH meets Challenger Bank milestone & NZ$210m equity raise
NZX/ASX release
8 April 2024
Heartland announces indicative regulatory approval of Challenger Bank
acquisition, and NZ$210m equity raise
Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) is pleased to
announce that it has received indicative regulatory approvals from the
Australian Prudential Regulation Authority (APRA) and the Reserve Bank of New
Zealand (RBNZ) for Heartland Bank Limited's acquisition of Challenger Bank
Limited from Challenger Limited (ASX: CGF).
Heartland also announces a NZ$210 million equity raise, comprising an NZ$105
million underwritten institutional placement (Placement) and a NZ$105 million
underwritten 1 for 6.85 accelerated non-renounceable entitlement offer
(Entitlement Offer).
APRA and RBNZ's final regulatory approvals are conditional on the successful
completion of the Placement and Entitlement Offer.
Included in this announcement is:
1. Offer Announcement
2. Offer Document
3. Investor Presentation
4. NZX Corporate Action Notice
5. Cleansing Notice
ENDS
PowerPoint Presentation (nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com)
Jeff leaving. Probably reading too many of Winners posts saying he lost his magic :(
Heartland is seeking to raise NZ$210m (Equity Raise) in new equity via a:
• NZ$105m placement to eligible investors (Placement); and
• 1 for 6.85 pro-rata accelerated non-renounceable entitlement offer to raise approximately NZ$105m (Entitlement Offer).
• Use of funds to pay consideration for Challenger Bank, satisfy indicative conditions pertaining to regulatory capital and liquidity and fuel projected growth.
• Approximately 210m new Heartland ordinary shares will be issued under the Equity Raise.
• NZ$1.00 per new share representing:
• 14.6% discount to TERP1 of NZ$1.1703.
• 18.0% discount to last closing price of NZ$1.22 as at 5 April 2024.
• The Australian Dollar Offer Price for eligible retail shareholders has been set at A$0.9151, using the prevailing RBNZ AUD/NZD exchange rate on 5 April 2024.
• The Placement and Entitlement Offer are fully underwritten (with the exception of the pre-committed amount by Heartland’s largest shareholder, Harrogate Trustee Limited)
FY2024 dividend
• Having regard to the equity raise, acquisition of Challenger Bank and associated growth opportunities, the Board expects to target a total dividend payout ratio in the financial year ending 30 June 2024 of 50% of underlying net profit after tax. The Board will, as it has historically, actively manage dividend settings and carefully consider the declaration of any dividend based on Heartland’s capital needs, ROE accretive growth opportunities, balance sheet flexibility and Heartland’s financial performance.
Board and Management updates
• After 15 years at Heartland, Jeff Greenslade has indicated to the Board his intention to step down from his role as CEO of Heartland at the end of this calendar year. Jeff’s tenure at Heartland included seeing through its formation in 2011, and receipt of Heartland Bank’s RBNZ banking registration in 2012. Post-Completion, Jeff’s focus as CEO will be on the strategic transition of Heartland in its role as a listed parent company of banks in two jurisdictions, the integration of Challenger Bank into the group, and the continued development of Heartland’s business in Australia. The Board is confident in the continuation of senior expertise within the Heartland group, and will work closely with Jeff on succession planning through the calendar year to ensure a successful transition.• For further Board and Management updates, please refer to the announcement that accompanies this investor presentation.
Well after the CR is done, I will be back in for long term. This is great for NZ bank to be given this opportunity. To me this shows you how useless Kiwibank is having a shareholder not giving them enough funds to grow.
These accelerated institutional placements really do disadvantage retail shareholders.
They get their $1.00 new shares on 11th April while retail shareholders do not get theirs until 26th April, giving the institutions an advantage of taking profits for 2 weeks as the shares trade ex-entitlement* 9th April.
* Theoretical ex-entitlement price - $1.17
lower div's going forward than this yr's 8c by my calc's
1.22 last spot price
(x) 719.509 existing shares outstanding
= 877.8m pre money market cap
plus the $210m raised
= post money market cap of 1087.8
divide that by the post raise # shares outstanding, which is
719.509 + 210 new shares (raised at a dollar) = 929.5
1087.8/929.5 = 1.1703
Or more simply
(6.85*1.22+1.00)/7.85=1.192
I go with Rawz.
I chose the wrong time to partly rejoin the DRIP! Oz usually chews up Kiwi companies and spits them out. Jeff's skedaddling, not wanting to be in charge should that happen with Heartland?
I wouldn’t be surprised if a version of the “fair dividend rate” for low or non-dividend paying companies will be introduced for NZ company share investments by one party or another. Governments have found all sorts of erratic ways around the crazy absence of a general CGT.
I don't find the absence of a general CGT crazy at all.
On another note, by my count 30 of the 2024 competition entrants chose HGH as one of their picks so when XP04 adjusts for today's announcement (and how he does it) the outcome will be interesting.
My two pennys worth is don't do that.
For a start, I cannot see more than 20% of entitlements not being taken up, as you cannot renounce for value and the pricing suggests that theoretically you get $1.17 for investing $1.00 or leave that difference to the benefit of others. So it does make sense to gather cash but not as much cash as you intend if you need to sell an existing investment to do so.
Secondly I would trawl your portfolio for something other than AFT, which is relatively low in the cycle just now and has run the hardest yards in the last few years so as to now be dividend paying and with relatively low debt, and is due to report for FY24 in May albeit that outcome seems quite well signalled. AFT is increasing annual revenue relatively strongly and is in growth mode, and whilst the dividend yield is (very) modest it is at least paid. So perhaps there is more potential there than some other holding?
Hoping to pick some of these up for a buck in the coming weeks
I'll be taking up my entitlement and I'll also be taking advantage of the offer which allows me to buy up to an additional 100% of the offered shares at 1 buck. I'll fund it by selling some ANZ Aussie shares, that way the amount allocated to banking in my portfolio will remain the same.
How good this deal will depend on AUS growth of this business. Presentation looks good at face value but no real discount on the offer The previous capital raise offer was a flop with shareholders loosing significant value. This is one of my smaller holdings, will dip my toe in the water but don't expect to pick up additional allocation over the 1:6.85 allocation.
Ah well hgh won the race with whs to get to one dollar first ,good luck to Jeff he tried his best I believe
Chris Flood surely will be the new Jeff, but the old version. Should go good
As a SH since this was first listed (only exiting temporarily during COVID), I think Jeff has done an outstanding job managing and growing this business. He leaves the business with plenty of notice and in good health. A NZ company buying an Australian bank is quite impressive and a first ever. Have a read of Jenny Ruth's article published today.
I will be taking up my entitlement.
I will also be taking up my entitlement.
I'll be taking up my entitlement plus a few more.
Taking up mine too
It's a yes from me.
ill buy one day , but for current holders underwater prob good to buy to save more losses
Hi all. My latest column published on my Substack, Just the Business, looks at a chief executive with a mostly sterling track record. The headline is: Jeff Greenslade announces Heartland departure after hugely successful reign
and you can find it here: https://substack.com/@justthebusinessjennyruth
Thanks, Iceman. I've just posted a link to my story on this thread
i find there forecasts for challenger quite optimistic in an environment of nim contraction in AUS
market may be skepitical till they get runs on the board which will take time
4cps my guess for div's based on capital requirements and npat forecast
135m shares placed instead of the 105m for the institutional pool - so additional 30m shares looking for a quick profit?
Looks to me like sp will be heading towards $1.01 or $1.02 shortly?
S/P low of $1.05, $1.09 ATM .
I will be taking up my allotment.
Some sanity starting to prevail now. Buyers at $1.13 and Sellers $1.14. Easy trading profit today if you were in the Buy queue early enough.
Final price at market close today is $1.10 which is somewhat disappointing. Perhaps indicative of a lack of trust, and that post settlement outcomes are anticipated to be less rosy than predicted?
A bit of water to flow under the bridge before Challenger is safely acquired and the transaction events intended are finalised, so we can wait and see what the market thinks during the rest of the month and early in May.
Did someone say this was a Two Buck share a while back ? ;)
The Board seem to have an uncanny knack of putting their foot in any meaningful
term upwards in the SP towards where many self respecting banks are usually priced :)
hasnt been that great of an investment for cap gain , was good as a income stock but that appears to have dis-appeared as well now unless challenger turns into a roaring success. but that will take time. in the mean time the cut in div payout to under 50% of npat implies this may not be a income stock again for a while.
Putting on my cynical hat as I seem to do these days, A reverse pyramid investment. The institutional placement had already eroded our investment but, if past results have shown, we are being asked to add yet more capital for the possibility/probability to expand our capital losses, and to get a reduced dividend. I must learn a new mantra:Australia will be different for this NZ company.
Sell side building… be interesting to see where it gets to?..
Buyers
Buy Quantity
Prices
4 113,262 $1.100
6 19,731 $1.090
12 16,088 $1.080
7 32,161 $1.070
5 100,932 $1.060
14 255,384 $1.050
2 7,020 $1.040
3 12,050 $1.020
5 13,222 $1.010
12 222,110 $1.000
70 791,960
Prices
Sell Quantity
Sellers
$1.110 59,627 7
$1.120 25,000 1
$1.130 40,014 3
$1.140 32,427 3
$1.150 70,000 3
$1.160 15,000 1
$1.190 850 1
$1.200 58,908 2
$1.210 826 1
$1.220 91 1
302,743 23
Sellers possibly selling to cash up to buy into the rights. ie sell @$1.10/buy back at $1.00 = 10% bonus on existing holding
Hi all. My latest column published on my Substack, Just the Business, looks at Heartland's 2028 financial targets. The headline is: Heartland says its targets aren't much of a stretch; analysts are sceptical
and you can find it here: https://substack.com/@justthebusinessjennyruth
HGH projections.From HGH presentation.
"Projections based on growth in Reverse Mortgages, Livestock Finance and Home Loans5 only.5 Home Loans acquired through the acquisition of Challenger Bank and is assumed to be in run-off. "
Therefore HGH have not counted on any motor vehicle or asset financing profits in their Australian projections.
Also;Lenders such as HGH,TRA, etc made a lot of loans when interest rates were very loan.
I watched a Turners presentation where their finance man Aaron,Saunders said it would take another 18 months to 2 years for these loans to be recycled.ie paid back in full and the money relent at new rates.
HGH mentions this in passing,but again I do not think the analysts have taken this into account.
I therefore think HGH will exceed their [in my opinion modest] projections.
I wonder whether Forbar's target price of $1.25 or Craigs' of $1.51 is correct.
I am happy with either,as I will collect the fully imputated divie in the meantime.
You don't think telling people what analysts think - and what I think - is adding anything? I don't agree
Not much different to me posting a link to a paywalled article in say BusinessDesk is it mate
Headline said “Heartland says its targets aren't much of a stretch; analysts are sceptical “ says it all
Read between the lines and you’d say Jenny thinks target are doable.
You could always give Jenny a few Bob and read the whole thing …it’s actually very good piece
Bit different as you are not the author. But I know what you mean mate.
Hope I don't have to pay you for those cool charts and data you share in the future, same applies to the other guru posters here in this cool community :)
Wish Jenny all the best, not trying to be mean or anything like that. Its tough gig for NZs journalists right now, I certainly understand that.
Thanks for the heads up to sell at $1.1 to buy at $1.
I guess most will have seen simply wall streets item
Consensus EPS estimates fall by 11%, revenue upgraded The consensus outlook for fiscal year 2024 has been updated.
- 2024 revenue forecast increased from NZ$291.4m to NZ$294.9m.
- EPS estimate fell from NZ$0.132 to NZ$0.118 per share.
- Net income forecast to grow 24% next year vs 1.6% decline forecast for Banks industry in New Zealand.
- Consensus price target down from NZ$1.48 to NZ$1.43.
- Share price fell 7.6% to NZ$1.10 over the past week.
[QUOTE=winner69;1047927]Not much different to me posting a link to a paywalled article in say BusinessDesk is it mate
Headline said “Heartland says its targets aren't much of a stretch; analysts are sceptical “ says it all
I've got a stockco loan but I cant pay it back but your happy for me to sell some cows on this thread or perhaps you want to buy my tractor or advertise the missus looking for a new home....thin end of the wedge....soon we,ll be inundated with advertisers...hell sailor rob might sell a boat or two
Interesting.....I interpreted the headline such that analysts thought the targets were a stretch, in other words they would struggle to reach their targets.
nxtz obviously loves the cryptic so I would be curious to see how he reads between the lines on that headline....
I thought this was a negative headline. However the analysts are sceptical of Heartland reaching its $200 million dollar profit- instead predicting they will only increase profits to more like the low $170 million’s.
i see this as positive- both parties predicting significant improvement from current levels.
Thanks Jenny I appreciate your input.
There is a lot of speculation here and in that other place, about the 'risks' Heartland are taking by expanding into Australia via Challenger Bank and Stockco. This seems to be coming mostly from non-shareholders who are overlaying historical tales of doom from other companies who have tried and failed to established themselves across the ditch, while conveniently ignoring the tales of those NZ companies that have made it 'over there'.
While I acknowledge that all change involves risk, I feel Heartland have been treading very carefully down their expansion path in Australia. In Reverse Mortgages, Heartland are no longer 'the new kid on the block'. They dominate the Australian market for unlocking chunks of capital from home equity, a market that the big banks have deliberately and purposefully shied away from. This isn't because it is a market not worth pursuing. It is because there are legal and financial implications that require a specialist advice team which is above the pay grade of the big bank branch staff. Heartland have ensured they have the back office support just right for this Reverse Mortgage product. The main competition in Australia is from government. But that competition is really tangential, as the Australian government is only offering income supplementation in their home equity release packages - not the big lump sums that Heartland can offer.
Unlike other 'new markets', the demand for the reverse mortgage product is not in question. Heartland are currently experiencing growing demand for RM in Australia in what is, for a niche market, nevertheless a large business landscape for a relatively small cap bank like Heartland. The Challenger Bank acquisition is all about controlling costs for a business that already exists. And all the pre-banking licence acquisition talk I have heard is that both the level of deposit taking and interest rates being paid are looking very promising in the quest to replace higher cost wholesale funding for the Australian arm of Heartland. I am less sure about the rebranding of 'Challenger' to 'Heartland Bank Australia.' If the Challenger brand in Australia has become toxic then it might be understandable. But this is an area where I have no knowledge. If it were me I would have saved the money on Challenger rebranding, and kept the Aussies happy doing business with their own known quantity 'local' bank.
Stockco, the rural fiance lender, have got themselves nicely embedded with Elders who are Australia's largest general rural retailer, filling much the same role that PGG Wrightson does in New Zealand. We can look at how PGW's own embedded 'GoLivestock' rural funding business is going as a clue as to how Stockco might perform. It is fair to say that while 'GoLivestock' is not spectacularly profitable in its own right, its role in keeping other parts of the PGW rural business empire's wheels turning is very significant. A genuine rural funder may actually benefit from tougher rural times, as conventional banks pull back on their farm lending, and the likes of Stockco become a 'funder of last resort'. That sounds risky. But businesses like Elders know their customers in a way the big banks do not these days. And if you support a farmer in tough times, you may find that your rural business lending with them blossoms in easier times. Some say that Heartland overpaid for Stockco. I can't really comment on that, except to say that when times are tough down on the farm, some of the earnings multiples for rurally based businesses do look eye watering.
In summary, what Heartland are doing in Australia is a 'cost out' exercise, for a successful business model that is already up and running. IOW the front end operational model already has the 'operating tick'. Sure it involves a capital injection up front to get financial critical mass. And yes, maybe Heartland should have timed their capital raising a little earlier (although there would have been risks in doing that as well, because the size of the capital raise required was not clear at that time). I am regarding the current capital raising as a 'vote' on the Australian business plan. Those shareholders who 'do not believe' should have already sold out. Those who 'believe' should fully back the cash issue and buy as many extra shares as they can for that 'rock bottom buck' price offer. Those non-shareholders on the sidelines should stop the silly whispering whimsical tales of doom and educate themselves as to what is really going on here.
SNOOPY
discl: enthusiastic HGH and PGW shareholder
Good overview there Snoops
Shouldn’t forget that what drove the NZ business years ago was when they got a banking licence and became Heartland Bank. Back then they even admitted it essentially was a marketing ploy as well as the means to be able to take more deposits
The new Heartland Bank is just that …history repeating …bank in their name and marketing as such to get more money from the public
Yes, but with one slight twist in the tail. When the acquisition of Challenger has all the boxes ticked, Heartland will actually be an operational bank in Australia, unlike in New Zealand where they operate on a day to day basis under Westpac's banking licence.
SNOOPY
I also think that is a good overview of Heartland going into Oz Snoopy-thanks.
I am a holder and have applied for my entitlement, plus the extra amount allowed. Not big money in my case.
I am always a bit nervous of Australian ambitions of NZ companies, but they do seem to be doing okay.
As Snoopy says, if you don't like the direction they are going, you should have been out by now.
At present I am a happy enough holder.
The real price action starts today with the 131m new shares being available for institutions to sell if they so choose.
http://nzx-prod-s7fsd7f98s.s3-websit...578/416756.pdf
Remember that this CR is non-renounceable for retail shareholders so any shareholder not taking up their entitlement will receive zero value for being diluted.
So dividend investors are going to have to sell existing shares to take up their entitlements.
Certainly not expecting any 'informed' retail investors to be buying any shares on market and they only have this week to take up their entitlements.
Sp to hit $1.06 today?
I think W69 said if it goes under $1.10 it will go under $1
Hope so. $1 would be too good to be true.
I've also bought my allotment and will buy more if it goes below $1. I'm so underwater on this and others in my portfolio, hoping the tide comes in some time in my lifetime.
Market is always interesting. Only 7.5k at $1.09 at the 5.00pm match pricing close, then over 2m at $1.10 shortly afterwards.
Quite a volume transacting as folk position themselves for the 22 April closing date to take up retail entitlements. Might be prudent to finalise any intention to do so by Friday this week as you never know what can get in the way at the last minute.
This is an amusing substantial holder disclosure notice:
http://nzx-prod-s7fsd7f98s.s3-websit...609/416791.pdf
“ceasing to be a substantial holder” (5%+) but the reported number of held shares increased since last disclosure.
(but of course the share count had increased proportionally more so, so percentage held is lower)