Starting Snoopy's HNZ Analysis
Quote:
Originally Posted by
belgarion
And where are they at now .... ;)
Time to jump the PGGW Finance hurdles as imposed by their banking syndicate of the day (November 2009). How does Heartland stand up against them? I have gone to the latest half-year report for the
period ended 31st December 2011 (HY2012) to pull out the following figures:
(Note to readers: I haven't attempted to analyze a financial institution like this before. So I could be talking out of a hole in my WW1 goggles. Please feel free to put an alternative interpretation on the
judging criteria and correct me.)
Let the analysis begin!
SNOOPY
EBIT to Interest Expense Ratio HY2012
Quote:
Originally Posted by
Snoopy
Let the analysis begin!
1/ EBIT to interest expense > 1.2
EBIT is not listed as that, so I have had to improvise. On p10 (Interim
Statements of Comprehensive Income) we find the 'Interest Income'
figure and I have subtracted from that the selling and administration
costs also on p10.
EBIT = $101.770m-$35.691m= $66.079m
Interest expense is listed as $62.64m.
So (EBIT)/(Interest Expense)= ($66.079)/($62.64)= 1.05 < 1.2
Result: FAIL TEST
SNOOPY
Tier1 & Tier 2 Lending Covenants HY2012
Quote:
Originally Posted by
percy
This quarter would give a better indication of future profit. Operating profit for the quarter was $5.3mil compared with the first two quarters combined profit of $3.6mil. The figures up to 31/12/11 were quiet frankly hopeless.
I take your point about HNZ being a work in progress Percy. Consequently your argument that the last reported half year report should not be taken as indicative of future half years has merit.
Let's say we are heading for a full year profit of $20m. How does that stack up in context? It turns out, not that well when considered in light of the Tier 1 and Tier 2 lending covenant test.
Criterion 5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.
There is no mention of Tier 1 or Tier 2 in the Heartland HY2012 interim report. I am not sure how to apply this test. Perhaps someone will confirm or correct my opinion?
I think the loans have to be grouped into both 'Tier 1' and 'Tier 2' categories. Once this is done then enough equity capital has to be set aside to cover 20% of the gross lending value of 'Tier 1' loans and
likewise 30% of the 'Tier 2' loans. Add these two required amounts of capital together and the figure should not exceed the actual underlying capital on the company balance sheet.
The 'best case' scenario is that all loans are Tier 1. $1,985.55m of loans are outstanding. 20% of that figure is:
0.2 x $1,985.55m = $397.0m
From p3, Heartland has total equity of $360m, which is insufficient no matter what the tier classification of the loans. Even if $20m of profit is booked to boost shareholder capital, there would still be a shortfall of capital of $17m assuming no growth in the loan portfolio.
Result: FAIL TEST
SNOOPY