Yes it does give one more confidence .And as a holder atp its a relief after what were some pretty relentless negative views by Roger . Chartwise HNZ needs to rise further to increase my conviction.
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Yes it does give one more confidence .And as a holder atp its a relief after what were some pretty relentless negative views by Roger . Chartwise HNZ needs to rise further to increase my conviction.
Surely I am not the only one surprised their average loan to dairy farmers has a 61% LVR ?
There's been several respected economists in the business media in the last couple of months basically saying that dairy farms with meaningful debt cannot make money and are unviable with dairy prices where they are now.
I took meaningful debt to be 30-40% of farmers asset values, I have no idea how an average dairy farmer with an average debt of 61% of their asset value has any possibility of making money unless there's a dramatic turnaround in the dairy price and the odds on that look increasingly unlikely given the amount of new supply coming onto the market world-wide.
7.6% of approx. $3b is circa $228m yet HNZ claims this is a small exposure ? Small relative to what ? Certainly not compared to the relative exposure of the Australian owned banks as a percentage of their lending.
One also needs to look beyond what they said to what they didn't say. How much of their lending is secured by first registered mortgage over land and buildings and how much over just herd values ?
The longer HNZ supports these unviable operations the higher their LVR goes, both through the increased financial support they provide and through missed payments and compounding interest.
At what point does HNZ say enough is enough if dairy stays low and becomes N.Z.'s iron ore problem ? One year, two year, three years ?
Anyone tried selling dairy cows to any party other than the works lately and seen how much you can get ? $700-$1,000 at the works. How does that compare to lending 61% when dairy cows were at their peak of over $3,000 a head ? Lending could represent over $2,000 a head in some circumstances which begs the question of how well many of their loans are secured, surely ?
The other aspect to this reality check is I would have thought people would have valued objective, vigorous debate both regarding any stocks attributes and its challenges.
It seems I was wrong and one poster in particular feels victimised, (grow a thicker shin for goodness sake), and some others fell I've been too dogmatic.
Its a brave man that gets on a forum and plays devil's advocate and debates the challenges in a forthright and open way as its usually not a popular position to take especially with people mainly holding the stock.
I think its a shame there's not more brave people in this world...they're the ones that get things done...you know, like SUM having to change their directors inside buying policies, and such posters often flush out companies in terms of getting them to disclose information they perhaps wouldn't otherwise have.
Those of us that have experience working in the finance industry know the differentiation of loans between what's bad, doubtful, overdue, impeded and otherwise classified is far from an exact science.
I suspect institutions and prudent forward thinking investors will be wondering exactly how many of HNZ's dairy client's are running fundamentally unviable operations at current dairy prices and might even ponder how HNZ directors could possibly reliably estimate the delinquent loans that will need to be written off in the year ended 30 June 2016 so far out most especially seeing as nobody really knows or has an idea when or if there might be some light at the end of the tunnel.
The lack of support for my position regarding this has been noted but it should also be noted that I picked this as fully valued at $1.32 way back on 1 February and posted same and also correctly picked the significant collapse in VIL's share price. Better to spend my time on profitable things eh...especially seeing as despite what many people might suspect, I never short stocks.
It seems to me people only really want to hear good news and the virtual hug from a long time supporter of this company.
Asking questions whether this company is really making and administering loans in a prudent, careful and appropriate way sure isn't a popular position, that much is obvious.
What have we learned from the dozens of finance company fiasco's of the GFC ?..it would appear, very, very little. Good luck folks.
P.S. In my view when robust debate is excessively moderated everyone is the loser.
Third highest volume of shares of the year traded today re 1.6 million shares; a strong day for HNZ, phew:)).
Welcome back Roger
61% LVR not too bad for Finance Company lending Roger? (I know they say Bank but..)
Better than a whole lot of HP deals on cars / laptops.
Not sure every sharemilker will fall over next three years, averages will be okay?
I am pleased you are back Roger. Your contribution, knowledge and amount of time you obviously can and do spend on research and share with us is very much valued. A robust debate of contrary views is healthy for all of us. But in my view we have seen in recent months too much personal bickering on many threads, that does not add much value to the debate. I hope all posters can refrain from that and stick to the issues of real interest and importance.
"It's not whether you're right or wrong, but how much money you make when you're right and how much you lose when you're wrong.
~ George Soros"
Whether Roger is right or wrong won't be known for a couple of years. But I am can now rest a lot easier knowing that Craigs and HNZ management agree the dairy impact is small.
Welcome back to the forum Roger.
Neil Roberts Founder and majority owner of Harmoney has stepped down from the Board but remains largest shareholder and CEO ! I wonder if he is finding it difficult to work within a structured Board or does this indicate some disagreements at Board level !
The Dairy Farm 61% LVR figure. Is that the percentage when the loan was granted? Or the % on present day values? Does anyone know? Plus I appreciate the $700 to $1,000 price by Roger for dairy cows at the works. It is a much higher residual value than I would have thought for loans that were under water. Other ideas please?
In that Heartland announcement They said that 6% of loans are dairy related.
but i am puzzled as to why they added these sentences, especially the 2nd one - "The average loan to value ratio (LVR) for Heartland’s dairy exposures is 61%. However, it is important to note that LVRs are only one of the indicators of loan quality"
Do we interpret that as Heartland themselves think the 61% is a high/risky number but its all OK because other things are alright. If so why even mention all this as everybody was excited at being told the exposure was low.
One thing I have learned over many years announcements have to be read carefully to really try to understand what is being said.
Just adding to Rogers note - even if 5% of these dairy loans go bad that's a decent chunk of the $50m profit gone.
Not too much point debating dairy anymore. Those who believe are happy as so no problems. Those who have concerns manage the risk best they can. Whatever happens you can either praise or blame yourself, what you do is up to you.
I still hold until the annual accounts. I believe there is more risk with heartland than a while ago and will manage accordingly.
If anybody is interested have a look at sector analysis in recent accounts and track impairment expense under rural for the last 3 to 4 quarters.
Cricket about to start ....could be exciting