Originally Posted by
Snoopy
The return on assets invested of 2.1% corresponds to a NPAT of $37m. Based on 388.7m Heartland shares currently on issue, that equates to earnings per share of:
$37m/ 388.7m = 9.5cps
Based on a PE of 10, which I think is appropriate for a small bank at the top of their earnings curve, that sees Heartland fully valued at 95c. To suggest it is worth more would be to assume it will significantly outperform ANZ and WBC, which IMO is an unrealistic expectation. The 95c also assumes a clean asset book, and Heartland is still working through their assets to clean them up. Until this happens Heartland will always trade at a discount to full value. I am therefore forced to conclude that 85c is a very fair price for HNZ.
SNOOPY