BBB- stable to BBB negative outlook? You really think that will make a big difference?
SNOOPY
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The differential between ANZ term deposit interest rates and Heartland Term deposit interest rates has reduced over the last few months. So yes, I think improving credit ratings will increase Heartland profitability and hence attractiveness to investors.
Disclaimer: Shareholder in ANZ and HNZ.
Do any of our members with a banking background know what a difference the credit rating changes make to the cost of borrowing by the bank?
I think the BBB- also negative outlook as the negative outlook is industry/economy specific in this case, not company specific.
It is a step closer to BBB+, and then we are into the A's - of course it is positive. They would have just lowered their cost of funds with no corresponding decrease in what they loan out at.
Yes
It will make a BIG difference;
Lower cost of borrowing.
Means "the market" will appreciate the big progress Heartland are making.
I think brokers will be happy to recommend Heartland as they have more runs on the board.
Add to Heartland's record of achieving what they said they would do.
Good progress made in selling "legacy" property,and proceeds reinvested in good loans.
Added strength of loan book recognised.
As a investor the rerating adds to my peace of mind.
Snoopy - I agree with all of the above posters and can only add that its also about market perception.
I think people want to be dealing with a New Zealand bank that's growing stronger. Fundamentally the stock is very sound value at these level's and trading on a very undemanding 2015 PE ratio and attractive dividend yeild with ongoing growth prospects.
Well I rang Jeff Greenslade to congratulate him on the raised S&P Credit Rating.
Luckily Jeff was in a meeting,so I had the pleasure of speaking to Allison.
She was very pleased to hear from me, and will pass my comments onto Jeff Greenslade and The Chairman.
Jeff happy and says the new credit rating is a "good place to be". I am sure both Percy and Allison agree :)
Jeff also says further acquisitions are on the agenda albeit nothing firm at present !
http://www.stuff.co.nz/business/indu...-after-upgrade
Thanks for the link Iceman.
I sold a few AIA the day before yesterday,and used the money buying a few more HNZ at 89cents this morning.I think the Credit upgrade is very significant.I knew they were working on it,but the spend in which they achieved it caught me by surprise.With the fantastic acquisition of Sentinel,modest forward PE and wonderful dividend,plus Greenslade's positive comments I must say I feel we are well positioned.!! lol
Just checking guys...we're anticipating annual dividends totalling 6 cps fully imputed right ?
Yes.
I note Forbar research dated 3 April 2014 have dividends per share; 2013A 4.5 cents,2014E 6.5cents,2015E 8cents,and 2016E 8.5cents.
A = actual,,,E=estimate. All imputated 100% .
I thought they were a little optimistic,however a friend did point out to me,that banks have a history of paying good dividends.
You may be interested Forbar forecast the following dividend yields,[note 3/4/2014] for Aussie banks which do not have imputation credits here;ANZ 5.5%,CBA5.3%,NAB.6% and WBC 5.5%.
Thanks mate, much appreciated. WOW that's going to make for an impressive gross yeild going forward if Forbar's estimates prove correct isn't it !!! We are extremly well positioned :)
For what its worth in my opinion the fiasco where we can't claim Australian franking credits doesn't look like its going to be resolved any time soon.
I imagine you are referring to the Commonwealth Govt not Australians in general? Certainly the Kiwis who get into Australia via the special entrance get fewer benefits than those who get permanent residence. You need to be a citizen to vote in OZ...so that is not just directed at Kiwis. Nobody forces Kiwis to go Australia and you need to be aware of your entry permit and what your obligations are and what you are entitled to when you move to new country. There are way more Kiwis in OZ than vice versa so you could say Australia helps NZ in tough times by reducing NZ's unemployment numbers. Many Kiwis go to OZ not out of any particular love for their new host country but because they thought they could earn extra dollars compared to the country they left behind.
When comparing yields on HNZ with the OZ banks...you need to take into account the increased risk of HNZ compared with the OzBanks - a few notches down the credit rankings.
I know a lot of Kiwi's in Australia that feel they're facing considerable dicrimmination at a personal and at a Government level but perhaps we need to leave the politics out of this. Fact is the franking credit fisaco has been an issue that is potentially capable of resolution for as long as I can remember, (I've been an accountant for 32 years), so I'd argue in this respect either CER simply doesn't work or one of the Governments is activly blocking a resolution of this matter...I'm sorry I cannot give you a prize for guessing which Government.
Like many of my clients I have a strong bias against Australian investment because I don't want to pay tax twice !!
Point taken about the higher credit rating of Australian banks but I think taking into account the moderate extra risk and imputation credit availability investment in HNZ makes a compelling case for itself especially with the new higher credit rating. I recently dipped my toe into the water before the credit rating upgrade, hoping it would come through and added more yesterday and will continue to add on any dips.
For anyone tempted to buy Australian stocks and simply not declare the dividends as a way of rebelling against this commercial injustice, don't go there...the ATO and N.Z. IRD are swapping information like best buddies and its so easy these days with dividend information so easily available from the share registries, CER works when it comes to collecting tax revenue..
Westpac does make an effort and gives NZ resident shareholders imputation credits to the extent that it's NZ tax payments so allow: http://www.westpac.com.au/about-west...tation_credits
NAB does too on the odd occassion but its minimal and infrequent.
^^ What you've raised is a good idea.
Not me.!!!
I was a buyer earlier in the day at 89cents.Last sale today was 148 shares at 87cents.
If fact I may be classified as a "belgarion" ie a pyramid builder,as I have never sold any Heartland shares,just keep adding to our holdings.
I am still overjoyed at the S&P Credit rating upgrade.!!
Feel we have moved from "well positioned" to "poised."!! lol.
Personally I would like to see a 4.5c - 5.0c dividend maintained for the next 2-3 years and use the cash for further acquisitions as the opportunities arise. That would reduce the need for SPPs like the recent one to fund the purchase of SMI, which was very unfair on us existing shareholders. Using the cash generated by the business to acquire further growth, is much prefered by yours truly :)
Not sure how I feel about high dividend,and SPPs. A friend who went to the last Heartland presentation, told me Jeff Greenslade was told that shareholders thought the recent SPP was a waste of time.Whether Greenslade, and the board have taken that onboard or not , may dictate future dividend policy.
I would hope all this SPP BS will be rid of under the new Financial Markets Conduct Act 2013. If the directors do a capital raising, but not include existing shareholders on a proportionate manner, there is good reason to be pissed off.
See the article from Gaynor.
http://www.nzherald.co.nz/business/n...ectid=11236813
"Retail investors will welcome the move to less complicated offer documents because under the old regime individual investors were often excluded from attractive capital raisings.The most obvious examples of this were share placements by listed companies.
Before April 1 companies could issue new shares to sophisticated or wholesale investors without publishing an offer document but a prospectus was required if the offer was extended to retail investors.
This usually meant that retail investors were excluded from these capital raisings because companies didn't want to incur the expense of preparing and issuing offer documents. Under this scenario individual investors could only participate in Share Purchase Plans (SPP) which are capped at a maximum of $15,000 per investor.
This clearly disadvantaged individual investors as the Shareholders' Association has consistently noted."
Posted 18-04-2012.
I brought good amounts of shares at 49cents on 10-04-2012 and at 50 cents on 22-05-2012.[I kept adding since that time].
My gain has been over 77% in two years.I have also enjoyed great dividends.
The business has certainly achieved a great deal in those two years.The directors have kept in touch with shareholders,setting out the company's goals.They just keep doing what they say they will do.Jeff Greenslade certainly knows how to bring on board experienced banking people.The acquisitions have been at very modest multiples.Getting the banking licence was a great achievement,and now the credit rating upgrade is "the icing on the cake."
The future? With solid foundations the future looks very exciting.As shareholders we can look forward to "real earnings" growth,great dividends,and as "the market" rerates Heartland the share price will increase.
So we can still look forward to seeing Heartland trading at 2 or 3 times NTA some time in the future.
Choo Choo...the train is about to leave the station ALL ABOARD for the great ride :D
Heartland seem to make a big thing about being local and being part of the community. Niche seems to be the strategy going forward.
A while ago I floated the idea with Heartland of them getting involved in microfinance, small safe loans to the not so well off. Seemed to fit with their community thinking as well as strategy. They didn't seem that interested. Kiwibank are now involved in such an initiative in Auckland.
With a lot of initiatives under way about P2P lending maybe Heartland should get involved someway. Again community and niche angles to it. Westpac are already into it in Australia and looking at NZ. Maybe they see the threat that this could be to traditional banking and see getting involved as a good thing.
Will float that idea with Percy's mate Jeff - might have to go through Alison as I rarely get a response. Mind you a year or so ago when I knew a reverse mortgage outfit was on the block I emailed him to see if this was potentially a niche area for Heartland - maybe a bit close to home that request.
Anyway how Heartland getting involved with someone in doing something about P2P stuff
Growth will be hard to achieve in most of Heartland's sectors, motor vehicles and rural lending. I think Sentinel will really surprise us all on the upside.Further growth may be driven by more acquisitions.Heartland have proved they can do acquisitions well.
So I see modest growth,which as you point out;"the rerating should be significant."
What amount of shares are people using for EPS 2014? I'm using 458,455,000 full amount of shares not sure what the weighted average is.
2013 Normalized eps of 6.3 gives a current PE of 14
At the current price with my estimates taken from guidance
35m for FY2014 would give HNZ eps of 7.6c putting it on a 2014 PE of 11.7
43m for FY2015 would give HNZ eps of 9.4c putting it on a 2015 PE of 9.5
With over 20% eps growth forecast i see HNZ as a growth stock warranting a fairly higher PE is there any broker reports/ anyone done some research on forecast into 2016 and beyond?
But at a PE of 14 which it has been trading on (normalised) 2013 i get a 2014 value of $1.07 and 2015 $1.31. And dividends...:)
HNZ is currently my favourite stock on the NZX. Market re rating could send this share alot higher, hopefully we get some more broker coverage.
Disc: Hold :t_up:
This is my calculation:
Event Date Days Shares Shares used for calc Opening 01/07/2013 0 388704000 388,704,000 div resinvest 04/10/2013 95 3850604 2,848,392 Partial fund 19/02/2014 233 17045455 6,164,384 SPP 25/03/2014 267 5854940 1,572,011 more HER 01/04/2014 274 43000000 10,720,548 DRP 04/04/2014 277 4811618 1,160,061 411,169,396
The old weighted average trick eh
Helps make things look better this year and next year... and probably help the eps accretive bit come true
Hey noodles one question .... when they come to pay out the next divie bet you they don't use the weighted average number
The current number of shares on issue is 463,266,592 [NZX.COM]
I never bother with the weighted average stuff. Going forward the quantity of shares will not [generally] be less than the current count.
For me it is:
1/ Anything to worry about in the current accounts ?
2/ What is expected next year ?
I believe the current share price undervalues the company and thus it has more upside than downside potential.
Best Wishes
Paper Tiger
Forbar research 3/4/2014
2014 year NPAT 35.8 mil ...eps 0.080
2015 year NPAT 45.2 mil...eps 0.099
they therefore expect eps growth of 12.5% from 2014 to 2015.
My own view is closer to NZ First Capital estimates.
Growth will be driven by Sentinel and any further acquisitions.
I look forward to management's guidance of future earnings.
Recently UDC announced a good result,so I am sure Heartland will do so as well.
When you talk about growth, are you talk g about loan book size,, the margin they earn or both.
With the better credit rating, their cost of funds should reduce, giving them revenue growth (actually reduced expenses or net interest revenue), regardless of loan book growth. Does that sound right?
For me growth is earnings per share growth.
Heartland have been moving from low margin business [home loans] to higher margin loans [such as seasonal rural lending].
I agree the better credit rating will benefit them,however I think they have had access to cheaper funding since gaining the banking licence.
I am waiting for further guidance from the company,as there are too many variables for me to figure out growth.Those variables include rural lending [I have no idea how that is going,although I suspect with beef and sheep farmers also doing well Heartland will be doing well].Motor vehicles should be doing well with car sales at record levels.Business finance,I am not sure of. The big surprise could come from Sentinel,with pent up demand driving big growth.
I am inclined to look past the numbers,ie they are doing everything they said they would.The business is in great shape.This was confirmed by the S&P credit upgrade.I am sure Heartland will be working towards another upgrade.They talked at the last agm about acquisitions.I thought they may do one of about $25mil to $30mil from cash on hand,so I was over the moon with the Sentinel acquisition.As with most well run companies, the surprises tend to be on the upside.
Excellent home equity loan adds on TV1 between 5:30 and 6 tonight,very well put together.
Was pleasantly surprised by the possible reasons for needing a loan,very informative.
According to Bing finance Milford recently Kiwisaver growth fund has been buying HNZ together with a few more funds. This can only be positive for the SP.
HSBC NZ records 38% March quarter rise in impaired assets on back of one corporate loan
Never good to have too much in one loan.
Best Wishes
Paper Tiger
Looks like a pretty substantial deterioration in the quality of HSBC's loan book:
Sept 30, 2013 - $2.4 million of impaired loans (0.073% of net loans)
March 31, 2014 - $195.4 million of impiared loans (5.85% of net loans)
I hope that is not indicative of the finance industry in general.
Impaired loans reaching 5.85% of net loans is a huge % to have impaired.
I would expect some one's job at HSBC NZ is very much impaired!!!!!!
Will be a major concern to HNZ shareholders should we read of a new HNZ appointment,whose career has been with HSBC NZ !!!!
Just a timely warning that banks can/and still do get it wrong.
I would guess Mainzeal. Postie is peanuts.!
So, according to an article that I can no longer find:
The average farmer in NZ is 60 years old. Sounds like the younger generation are not wanting to be farmers. How good the research is, is another story.
An "ageing farmer" population could propose a problem?
Mmm - not sure on that. I was referring to the large players (Harvard Pension fund with 10+ farms, NZSuper fund with 10+ farms etc) with multiple farms who are likely to have large funding lines from a bank, secured over all assets so no need for small individual loans for new equipment.
You could be right for the small, single farm corporates (who have long term funding for the farm but need short term funding for the equipment) as they replace the old rich farmers who just pay cash as they are debt free and rolling in it.
I think this is quite the wrong conclusion. Farmers generally don't hand over the farm to their siblings until they retire anyway - generally. What I'd prefer to see is data that shows the average age of farmers has gone from xx to 60 over the past generation or so. I don't think there will be a worrisome trend at all. Agree lots more corporate farming ownership, but the staff won't average 60 IMO
Well, its not quite that bad: according to Federated Farmers President, Bruce Wills: "The average age of a dairy farmer today in New Zealand is 43 years old, the average age of a sheep and cattle farmer is 58,"
check out the NZ Herald article:
http://www.nzherald.co.nz/business/n...ectid=10894302
Sounds like the younger generation is going where (currently) the money is: into dairy!
Its cracked 90c again. Interesting to see if it holds.
Makes sense, get up early and work hard while you're young.
Just out of interest, does anyone know if HNZ provides finance for sharemilkers cows ?
Thanks guys, perhaps I need to spend some more time on their website :)
Nice to see the SP finally getting some upside traction.
We should run a sweepstake on when they'll hit $1 :)
hmm - even the optimistic analysts set their 12 month target below $1 (well - just). Mean target is 96 cts. Based on this and my cloudy crystal ball my bet for HNZ breaking through the $1 mark would be August 11, 2015 ;). However - don't take my word for it and do your own research ... linear extrapolations of random processes are normally wrong!
Please guys don't put the voodoo spell on these shares I hope they stay where they are,because they seldom do when i say that.
But buyers seem to be looking a bit further ahead now and with the big pluses of medium PE and growth through aquisition prospects,starting to continue the slow but steady trend upwards.
Under the impairment section of the interim report for 31st December 2012 we learn.
"Net impaired,restructured and past due loans over 90 days were $80.2m (or 3.9% of net finance receivables – Net Impairment Ratio) as at 31 December 2012 – down from $90.5m (or 4.4% of net finance receivables) as at 30 June 2012. The level of impaired, restructured and past due loans are primarily due to the legacy non-core property book and are expected to continue to reduce as a percentage of total assets as lending in the core business grows and the non-core property book runs down."
It is interesting to see that the historical bad debt situation of 31st December 2011 has been revised upwards (from 4.2% to 4.4%) with the benefit of hindsight.
"The Net Impairment Ratio on the core business (excluding the non-core property book) was 1.7% as at 31 December 2012, compared to 1.8% as at 30 June 2012"
A new thing for Heartland here in quoting the bad debts only for their 'core' business. I am always suspicious when businesses introduce new metrics like this. In this case the motive is obvious - trying to convince shareholders old bad property debt is a legacy issue. The problem is closing one eye to make half the debt go away, doesn't actually cause half the bad debt to go away.
SNOOPY
New tactics for the HY2014 report. The word 'impairment' isn't even mentioned in the text, which is I suppose another way to make any impaired loans go away.
In the table on page 4 there is at least a nod to 'impaired asset expense' down to $3.3m (HY2014, ended 31st December 2013) from $5.3m in the corresponding prior period (HY2013) and $22.5m in the full year to 30th June 2013. By simple subtraction the bad debt expense for the period 1st January 2013 to 30th June 2013 ( 2HY2013 ) was $22.5m - $5.3m = $17.2m.
'Impaired Asset Expense' is code for having lost all hope. Almost no chance of getting the money back. 'Restructured' and 'past due loans' do not fall under that category. So comparisom with the previous comparable period are - deliberately? - difficult to make.
SNOOPY
On page 5 of the interim report there is a note (iv) to this effect:
"Total non-core property assets reduced by 19% in the six months up to 31st December 2013. As at this date, non-core property assets comparised net receivables of $25.6m and investment properties of $61.5m. We remain confident that future earnings will not be affected by these assets."
From the Interim Balance Sheet (p9) 'Finance Receivables' were $1,905.89m.
So "problem property assets" represent:
($25.6m+ $61.5m) / $1,905.89m = 4.6% of total finance receivables.
This is the worst result in two years for Heartland in its current form, topping the 4.4% from 31st December 2011. But that figure also included 'restructured ' and 'past due' loans.
Go to note 11 of the HY2014 report and you will find restructured assets of $3.994m on the books, together with past due loans of $19.518m. Now we can work out the total "Net impaired,restructured and past due loans over 90 days" at the last balance date:
($25.6m+ $61.5m) + $3.994m + $19.518m = $110.612m
Divide that by balance sheet receivables and you get the total doubtful debt ratio.
$110.612m / $1,905.89m = 5.8%
Not a pretty figure. No wonder HNZ changed their reporting metrics so they didn't have to tell you shareholders about it.
SNOOPY
"Total non-core property assets reduced by 19% in the six months up to 31st December 2013. As at this date, non-core property assets comparised net receivables of $25.6m and investment properties of $61.5m. We remain confident that future earnings will not be affected by these assets."
Speaks for itself. You either believe the Directors or you don't and in the latter case you probably wouldn't own the shares.
Disc Happy to hold, every Bank has a few fleas in the closet.
Nice try Snoopy,
There are invalid assumptions, lack of understanding of what the figures represent, and general adding up of the wrong things in your posts.
Fortunately putting the wrong data in results in the wrong answer coming out, and they are doing a lot better than you [are determined to] believe.
Best Wishes
Paper Tiger
I don't know if any of you guys watch family guy, but Paper Tiger and Snoopy remind me of Peter Griffin and the chicken.
Ha, I was just coming to edit that post to make it clear I had no idea who was Peter and who was the chicken. I guess I'll leave that for you two to fight it out :)
So it suddenly occurred to me that I had not actually checked the Mar-14 disclosure statement for the Bank (which was most of HNZ).
How remiss of me. :mellow:
Anyway that number of $80M2 (3.92%) from Dec-12 which was actually $42M4 (2.22%) at Dec-13 has blown back out to $44M6 (2.35%) at Mar.
On the old Capital Adequacy ratios the important one is Total Capital which stood at 14.71% against the minimum requirement of 12.00%
Their required buffer ratio remains at 0.00%. (Look it up for yourself if you do not believe me).
Otherwise profit at 3/4 time stands at $26M4.
Best Wishes
Paper Tiger
Just checking some of these calculated results supplied by Heartland.
(1/2)AR2013 note 11 shows $2072.27m of gross financial receivables, less a $27.477m allowance for impairment gives total financial recivables of $2044.793m.
Go to note 17a to get the quality of financial receivables and we find:
At least 90 days past due $49.173m
Individually impaired $49.418m
Restructured assets $9.069m
That sums to $107.66m. Take off the allowance of $27.277m for impairment and I get $80.383m. That is close enough to the $80.2m quoted for me.
$80.383m / $2044.793m = 3.93%
That within rounding error is the same as the 3.9% quoted. So far so good.
SNOOPY
The 'Finance Receivables' on the balance sheet have already had a $34.214m provision for impairment taken off them. From note 11 'Gross Finance Receivables' were $1,940.064m
Rexamining note 11, I may have double counted some of those problem property assets. The note says:Quote:
This is the worst result in two years for Heartland in its current form, topping the 4.4% from 31st December 2011. But that figure also included 'restructured ' and 'past due' loans.
Go to note 11 of the HY2014 report and you will find restructured assets of $3.994m on the books, together with past due loans of $19.518m. Now we can work out the total "Net impaired,restructured and past due loans over 90 days" at the last balance date:
($25.6m+ $61.5m) + $3.994m + $19.518m = $110.612m
At least 90 days past due $19.518m
Individually impaired $53.1m
Restructured assets $3.994m
That sums to $76.712m. Take off a provision for impairment of $34.214m and I get $42.498m.
However that $76.712m does not correspond to the:
"non-core property assets comprised net receivables of $25.6m and investment properties of $61.5m." (page 5 in same report)
which sum to $87.1m. Anyone know why the difference?
$42.498m / $1,905.85 = 2.2%Quote:
Divide that by balance sheet receivables and you get the total doubtful debt ratio.
$110.612m / $1,905.85m = 5.8%
Not a pretty figure. No wonder HNZ changed their reporting metrics so they didn't have to tell you shareholders about it.
A much less worrying result. Apologies to all those Heratland shareholders that suffered a heart attack yesterday as a result of my calculations. I wonder why HNZ chose to stop measuring bad debts this way?
SNOOPY
Sorry... I had to break your 3-post streak!