is this up for a Tui's ad? Just about every thread has posters offering advice. The thing is to filter it the best you can.
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Hi Longhaul,
It depends on your appetite for risk and what you looking for in a particular stock.
I think that as a listed company HNZ strikes a pretty good balance between a company that is profitable, pays a dividend (or DRP a at small discount), is still in somewhat of a 'growth' phase (and hopefully more to come either organically or through acquisitions), and enjoys a near monopoly position on the type of products it provides (i.e. high-margin livestock/personal/business lending - they're not battling it out with the big 4 to see who can write more residential mortgages). The move to registered bank status means higher risk management requirements than the NBDT scheme and the need to adhere to bank capital ratios (Basel Accord etc.) which to me provides more certainty that there is a regulatory framework in place to ensure that credit risk is controlled. The key business risk I see is a stagnant/declining loan book (especially if the big banks start to move back into the space HNZ lends in), I don't think there will be many/any further write-downs in the loan book given the bath HNZ has taken on the legacy property portfolio this/last year.
There seems to be a lot more transactional work around than a year ago which should hopefully mean more business lending for HNZ as people get out there and starting trying things again. Additionally, the rural sector is strong and HNZ has strong grass-root ties with farmers, particularly in the South Island.
Price wise - I think anywhere in the 80s represents pretty good value. I've been buying since high 40s low 50s but have topped up as recently as last week. It is trading on a high PE at the moment of 47 compared to say ANZ on 13, but when you factor in EPS growth and actually achieving the $34-$37 mil profit next year it will drop back to a more reasonable level - certainly when you consider the potential upside for business lending growth as the economy continues to grow.
It is also difficult to compare HNZs data to other banks data as it's really apples and oranges in terms of where they are placed in the market. If you bought HNZ today at 86c you're essentially getting $1 worth of net assets for $1 invested (provided loans are healthy and valued correctly!) and a ~9% div yield at this price (dividends should continue nominally at the same level - maybe an increase if profit continues to improve/they don't acquire anything). I think it is natural to see a bit of resistance around the 80s as this was near the float price from memory and the share price has only just come back after a big decline and bumpy 2 years..
Key metrics to look out for will be growth/decline in the loan book, maintaining/improving cost of funds relative to lending rate, and reduced operating costs. If the big banks started to move back into the same space as Heartland I would be pretty concerned as they have the resources to simply run circles around Heartland. But I think you would have plenty of warning of this happening and would have to look closely at HNZs response.
Different people will have different ways of looking at how it is/should be priced. I think ultimately it always comes back to whether you believe in the company and what they are telling you where they want to be and what they will achieve and whether the price is reasonable (and it certainly isn't expensive/pricing in future growth at 86c).
Makes sense to ask far more seasoned and knowledgeable investors for advice which (just like with a broker) I and many other readers can ignore or take into consideration when making investment decisions. Particularly for companies in industries that I have little knowledge of.
Heartland not mentioned in this measure interest.co.nz keep an eye on
http://www.interest.co.nz/news/67820...k-has-lowest-r
Hnz would have improved the average ....with their equity ratio of 14(?) the the leverage ratio as per this article would be 7. The lowest and some would say the best
Jeez that Kiwibank is pretty leveraged eh
As an aside had a 6 month TD to renew this week .....heartland dont seem keen on borrowing and rabobank were a bit so so so best deal was with anz.
Langhaul.
Brokers have an average target of 89c. So current price is around 5% less than target price. According to brokers, there is some value. I'm still holding some.
http://www.4-traders.com/HEARTLAND-B...518/consensus/
Where did all the Buy depth go? Little unnerving