They are heading in the right direction.
The next six to twelve months will be very important for Heartland.
Should they achieve what they have set out to do,then I think we will see their rating improve.I am confident that this will happen.
Printable View
They are heading in the right direction.
The next six to twelve months will be very important for Heartland.
Should they achieve what they have set out to do,then I think we will see their rating improve.I am confident that this will happen.
Thanks Percy for the PE calculations and it was a pleasure meeting you and other sharetrader members last evening.
I must admitt I'm more for the comparitives with the smaller regional Aussie banks and am pretty much with Winner69 on this one. Over time...we could see the market rate the company as worth 10-11 times forward earnings.
I see three main issues holding the SP back.
1. They need more runs on the board to prove themselves to investors.
2. They need more recognition / improved credit ratings from the credit ratings agencies
And lastly and by no means the least, the legacy effect of all the other finance company failures over the course of the GFC wiping out billions of dollars of investors money.
I get such bad echo's of South Canterbury Finance, (not to forget Geneva Finance) when I think of this company, it does my head in something fierce and i'm pretty sure this sort of psychological effect play's itself out in other investors minds too.
Their capitaliazation rate is good and growth prospects very sound, (especially with so many other players having gone bankrupt), but the risk is if we see a GFC MK2, we will see what amounts to a South Canterbury Finance MK2 event as well. The problem I have learned from very bitter experience is that its really hard for banks and finance companies to make dispassionate and objective calls regarding doubtful and bad debtors and it ap[pears auditors can struggle to verfiy the accuracy of managements objectivity, so you never really know how much you can trust their objectivity until their loans are really "seasoned". It could take years for the market to build a level of trust that would accord the company with a more favourable PE rating.
I think they're fairly priced for the risks involved, given that they have it all ahead of them to prove themselves to the market.
You make a good point about being unable to claim franking credits with Australian banks which is a real frustration for many.
I see a slow share price appreciation upwards over a long period of time provided all stays well with the economy. Its not for me, (mainly due to the huge amount oif psychological baggage I carry with the finance company sector, and I bracket in with them the emerging bank sector), but I appreciate your hard work and analysis of this stock and wish you and other investors well with it. :)
I too enjoyed meeting up with you last night and being informed on the Geneva Finance going ons.
I agree with your comments with regards to more runs on the board,and needing more recongnition,and improved credit rating.
I think the next six to twelve months will see these objectives achieved.
I totally reject any comparison with South Canterbury Finance.To achieve Bank Licence Heartland went through a long and rigorous process.
They came through this.As do all Banks operating in NZ,Heartland must report quarterly to The Reserve Bank.This adds an extra layer of protection for shareholders and depositors.
I believe they are under valued.
I am currently forecasting returns resulting from P/E expansion of around 4.4% p.a. over the next three years plus EPS growth of around 7.6%, plus dividend yield of 7.4% amounting to a total return forecast of 19.4% p.a. over the next three years.
As ROE improves, HNZ will start to trade at higher multiples to book value. An ROE of 12% in three years time might see HNZ at 1.4x book value for example.
discl: long HNZ