Well, 55% gain, divvies - and a sausage sandwich! Life is good for you Roger.
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The last few posts have turned to rubbish.
Back to Heartland.
Thanks
If it hadn't for those completely ridiculous few weeks early this year when the share price shot up to 140 (and its subsequent decline) one could say that today is almost a new all time high
Things all back to normal - strong steady increases from here .... 130 ....140 and then to 160 next year
But keep an eye on those charts and lock in profits (like Roger did) if things don't quiet turn out as expected
I think Heartland is worth no more than 12 times forward earnings so 12c max for FY16 gives a valuation of $1.44. You can buy ANZ in Oz at 10 times earnings and NAB/CBA etc at 12-13 times. Heartland is more tax efficient from a NZ yield perspective and does have some growth runway as a second tier operator with so many competitors knocked over in 2007-2010 period but it is still a BBB rated small player so for me 12 times is fully valued.
I'll hold for the medium term and see if Jeff can continue to tidy HNZ up from an ROE and bad loan perspective because maybe 15c or so EPS is doable giving a $1.80 valuation in say 3 years time and a strong yield while we wait.
Just my 2c worth
Having good run after few horrible few months recently, $1.30 in the near term I reckon.
Why not if the markets stay stable, like I've said the Harmoney and reverse mortgages investment is not really rated by market, more gains to come I reckon.
The REINZ Dairy Farm Price Index, which adjusts for differences in farm size and location, .........was down 17.6% compared to September last year.
http://www.interest.co.nz/rural-news...ck-sales-surge
Suppose that 65% LVR figure could be a bit higher now?
Absolutely mate. As you know and I do from my own experience with finance companies including running a medium sized one for a while, one thing people don't seem to understand, (you and I do), is that provisioning for bad and doubtful debts requires a lot of best guess estimations at balance date. This is usually based on historical default rates for various loan types.
Thing is we haven't seen this sort of dairy decline for over a decade so any sort of estimation, (appears there was no extra provisioning for dairy loan defaults as at 30 June notwithstanding dairy being in the absolute doldrums at that point and some customers on life support unable to service their existing loans for nearly two years), is prone to wide variation from the standard deviation models through lack of recent and reliable empirical evidence, also exacerbated by potentially serious declines in the underlying security value, the extent thereof being incredibly difficult to gauge with any degree of accuracy.
I maintain, (based on my experience in this sector) this is an incredibly irregular position for HNZ to take and based on that evidence of their (prima facie under-provisioning in this area), this leads me to speculate that despite a dramatic increase in consumer loan provisioning, maybe this wasn't sufficient for this asset class either ?
Looking at the speed and severity of the decline in farm sales, (in all likelihood this hasn't run its course by any stretch of the imagination), HNZ's average LVR ratio would now appear to be well over 70% based on current farm sale prices. Dairy farmers have VERY low cash flow this year so HNZ are undoubtedly still carrying, (they call it "supporting" to make themselves out to be good corporate citizens), many of their customers...some for a third year. The European Central Bank seems extremely reluctant to write off its loans to Greece so I suppose HNZ are following their "prudent" example.
The thing with estimations for provisioning, which has a material effect on profit, (which is nothing more than estimated profit) is you never really know whether you got it right for a number of years down the track therefore I suspect the under-provisioning in the dairy sector will catch up with HNZ in future years and erode profit growth. My estimate for FY16 is 11 cps because of this factor and additional provisioning required in the consumer loan sector because of the type of customer they're chasing.
We have seen PE's in the financial sector pull back all around the world based on asset quality concerns in a slowing global economy. In my view a PE of no more than 11 is warranted for HNZ given the specific risks known and the type of lending they're doing. ANZ bank for example has a far better credit rating, a vastly longer track record and is trading on a PE currently under 11.
I see a maximum fair value of 11 cps x 11 PE = $1.21 based on FY16 profit so will remain on the side-lines despite the clear break through the 100 day MA because at my core I believe fundamental analysis trumps technical analysis.
I note the company has been very slow to move on the acquisitions and capital management initiatives they strongly hinted at a full year ago at the last annual meeting. These $1m plus salary bankers aren't really doing a heck of a lot to add value to shareholders and justify their extremely generous remuneration packages are they ?
Investors will no doubt take some comfort from the recent Fitch report but I remain sceptical. Not trying to down-ramp as I'm not especially interested in getting back in unless its at a 10% plus variation to my own assessment of fair value..just my 3 cents worth.
http://www.interest.co.nz/property/7...-although-they Somewhat interesting article on how S & P model risk to the housing sector, little exposure for HNZ but interesting to note their observations on credit worthiness in a 30% correction scenario. Also of interest is the advertisement at the top of the page touting over 2,000 working farms for sale. Things might get "pretty interesting" if farm prices fall another 20% on top of the existing 17.6% fall.
Roger, suppose that's the sort of stuff that people are looking for on the Heartland thread instead of discussing sausage sandwiches. (by the way just picked up the rashly baked bread from the bakery)
I take heart from nextbigthing's comment that the word on the street is 160 by Christmas. He could be right as things will still be looking rosy then.
Yes it probably is mate. I thought after yesterday's discussion of gourmet delights at lunchtime I'd give the punters something meaningful to chew over this lunchtime...not nearly as flavoursome though :)
I suppose as a short term punt this could push higher before they have to do a reality check on doubtful debts next balance date, (to keep the auditors happy) but I see bluer skies elsewhere. One could ride the technical signals and rush for the exit when it breaks back down through the 100 day MA like I did last time. Wouldn't mind having a couple of bob bet on that being your cunning plan :D
HNZ / ANNOUNCEMENTS
Fitch Affirms Credit Rating for Heartland Bank
8:57am, 16 Oct 2015 | CREDIT
NZX Release
Fitch Affirms Credit Rating for Heartland Bank
16 October 2015
Heartland New Zealand Limited (Heartland) (NZX: HNZ) is pleased to announce that Fitch Australia Pty Ltd (Fitch) has affirmed its long term issuer credit rating on Heartland subsidiary Heartland Bank Limited (Bank) of ‘BBB’ outlook stable. The full report from Fitch is attached.
The Fitch report notes the Bank’s continuing improvements to its risk management practices and its simple and transparent business model which provides the Bank with pricing power in its target markets. Fitch expects the Bank’s “core asset quality to remain sound, benefiting from continued improvement in underwriting standards and good economic conditions”. Fitch notes its expectation that New Zealand’s economic growth will continue, albeit at a slower pace than the last two years.
Heartland is pleased with the report and the affirmation of the Bank’s ‘stable’ outlook which reflects Fitch’s view that the Bank is likely to continue its solid performance over the next 12 to 24 months.