Fair enough but the board of MTF appear to dislike both offers
http://www.sharechat.co.nz/article/e...-uncertainhtml
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Fair enough but the board of MTF appear to dislike both offers
http://www.sharechat.co.nz/article/e...-uncertainhtml
http://www.heartland.co.nz/news/231/...land-bank.aspx
Amazing...didn't they check with Roger ?:)
https://www.nzx.com/companies/HNZ/announcements/271848
Fitch affirms Heartland's credit rating. Stable outlook. It gave Heartland a vote of confidence with this statement: “core asset quality to remain sound, benefiting from continued improvement in underwriting standards and good economic conditions”.
We saw a substantial increase in doubtful debt provisioning for consumer loans in the most recent financial result and by my reckoning there should have been a commensurate increase in provisioning for dairy loans based on known financial information and heavily stressed loans at that time. I guess they couldn't do that otherwise they wouldn't get their nice juicy bonus's for the year ?
Relying on luck to get you out of potential trouble is not a prudent way to run a bank in my opinion and I remain unconvinced about some of their new consumer loan initiatives.
With a lack of feasible takeover opportunities I'm concerned these extremely well paid senior managers are not really adding a lot of value. HER acquisition didn't really add a lot of value did it. I predict the MTF fiasco will drag on for quite a considerable time.
The internal controls in the Harmoney system have yet to prove themselves up so could we see further significant provisioning on loans through this "unproven" channel ?
Was the head of new product development pushed or did he jump before the custard hits the fan in this regard ?
I'm not convinced they're all that well positioned.
Some take-out from Fitch's report.
"The stable outlook reflects our view that HBL [Heartland Bank Limited] is likely to continue its solid performance over the next 12 to 24 months."
High household leverage and NZ high property prices."The impact for HBL is limited as its residential mortgage exposure is insignificant."
Dairying."HBL conducted stress tests to assess the impact of prolonged low dairy prices,which were found to be manageable as of August 2015"
"The bank benefits from a more balanced asset-liability-maturity profile relative to domestic peers as HBL's lending products typically have a shorter term maturity."
"HBL's capital position benefits from strong profitability and sound levels of retained earnings."
I guess the only surprise to me ,was after reading such glowing commentary, Fitch's did not upgrade HNZ's credit rating.!!! lol.
So very true.."He who pays the piper calls the tune."
Maybe next year if Fitch's want to increase their fees.?.lol.
However HNZ still remains,as far as I know,the only listed NZ company, that reports quarterly to The Reserve Bank of NZ.This is a great safety net for any HNZ investor .
The whole country got lucky but most especially directors in HNZ that thought their dairy loan book didn't need prudent level's of extra bad debt provisioning. As for me, I'm happy to have sold out at $1.32 months ago and reinvested in stocks like SKL and AIR that have made solid moves up by 10% or more not down by 10% and before you bring up the fact that HNZ have just gone ex divvy so have both those stocks I've been buying in good volume....be a lazy pirate or a proactive sucessful guru :)
Dairy customers with 65% LVR loans have been struggling to honour their obligations for going on two years now and have required further bank support. The ECB will be lucky if the Greeks can repay their loans and HNZ are fortunate that the price has recovered and they stand a better chance to recover most of their's. Call it luck or a lucky increase in the GDT auction price or the natural swings and runabouts of the commodity market aided by the extra 50 cent interest free loan of Fonterra...whatever term grabs your fancy. I guess Fonterra were in a better position to cop a credit rating hit so they had to do something.
I have no idea how much heartland has lent through the harmoney p2p platform but it seems reasonably significant
A few weeks ago discussed p2p lending in the context of people (and hedge and pension funds) seeking excessive returns.
He mentioned that a lot of the underlying loans on these platforms could e the new 'subprime'
Could be interesting times ahead for p2p lenders
http://www.chrislee.co.nz/index.php?...mber&year=2015
Scary stuff. Is it a coincidence that we saw a dramatic increase in doubtful debt write-offs and general consumer provisioning in the same half year that HNZ started lending through Harmoney ?Quote:
As a matter of record, banks anticipate an 8% delinquency rate for their credit card book
Is it a coincidence that the head man in charge of new product development resigned / was pushed around the same time as this dramatic new level of provisioning was made and he hasn't been replaced ?
Overseas evidence suggests the loan write-off's in PEP lending really start to accelerate in the second and third years so are these earlier initial provisions for bad unsecured loans just the tip of the iceberg ?
Interesting times lie ahead for this brave new frontier of lending.
[QUOTE=Roger;
Interesting times lie ahead for this brave new frontier of lending.[/QUOTE]
I agree .. Have sold half of everything..
Why ?...
Makes one concentrate....
Time to sort the wheat from the chaff..
IMHO.. :-)))
Think that I am OK.. Pass the Tui !!..
I would like to think Harmoney is well regulated as I'm sure the people giving it licenses are well aware of the risks involved.
I see the above comments as interesting, but at the end of the day, just speculation.
As for Heartland exposure to Harmoney... I believe they have a 15% shareholding, so one could argue it isn't alot of exposure anyway
I think Roger was referring to the loans that Heartland have made through the Harmoney platform .... not an insignificant amount I believe
As an aside Harmoney valued at more than $100m (based on what latest new shareholder paid) so heartland share now worth over $10m. Revalue the holding in their books and profits would jump.
Should HNZ miss out on a slice of the MTF pie,can anyone see where further growth with aquisitions would come from.
The Harmoney business model has its attractions especially its potential to cut high cost financial intermediaries like banks out of the loop.
However a large part of the business of lending is trying to determine who amongst your potential clients can’t or won’t pay the money back. Banks are pretty good at this as they have a good handle on their clients cash flows and financial behaviour. My opinion is they use the advantage this gives them to overcharge for credit.
Harmoney will not thrive unless it cracks the nut of assessing borrowers credit worthiness accurately.
Boop boop de do
Marilyn
Duplicate post
Yes they hinted at it at the half year result in February, said they were thinking about it. Maybe they could hire the CFO leaving VIL...probably quite good at being "creative"
Speaking of being extremely creative...it must be time for a couple of your special sandwiches eh ?
Nice looking 1 year chart atm and good uptrend above M/A. S/P re $1.23 and rising.
Finally broken out of that 9 month downtrend.
Will be 140 soon and this time next year 160/170
Even if consumer and dairy loans blow out and there huge bad debts one day we won't know until mid 2017 anyway. Share price be over 2 bucks then so may as well make hay while the sun shines.
Just make sure one takes profit if the **** hits the fan - watch those charts
The ol I see nothing...nothing at all ! theory eh Winner...good luck with that mate.
You in the office (sorry home) tomorrow lunch time
I'll pop around with a sandwich special - sounds pretty simple - sausage and caramelised onions and some secret ingredients
Generally English pub food pretty ordinary (and outrageously expensive) but I had one of these in a Surrey pub. So yummy I had a chat with the chef and seeing I was nice and friendly and a foreigner to boot he gave me the recipe (even the secret part) and showed me how he put it together
I reckon you enjoy, esp if still warm when I get there - more wholesome than fancy smoked salmon and avocado and special cheese with a bit of rabbit food ones
Suggest you pm each other ;this is not a personal food fest blogg.This is Share trader , we talk about shares without ramping /personal self enrichment agendas and the subject is Heartland. Thank you
Poor old Roger thinks it's all going to turn to tears with this innovative and progressive bank. He's completely blind to the great cap gain and dividend opportunity (over 10% gross) that HNZ offers (and that many of us have already enjoyed), so he's probably upset that the SP has moved up again today to 124. There are six times more buyers lined up than sellers too - so Winner's SP predictions just might come true.
I think, by offering Roger a sausage sandwich, Winner is very kindly trying to take his friend's mind off the fact that he's missed out on the HNZ success story over the past 2-3 years. Roger and Winner are both informative and entertaining posters on ST - surely we can allow them one or two food related comments without bringing down the axe?
Winner and me good mate. I bought HNZ at 85 early 2014, sold at $1.32 about five months ago - 55% gain in a year or so plus divvies and made plenty by reinvesting funds in AIR, SKL and others in the last five months as well as avoiding a 9 cent capital loss so no need to feel sorry for me mate.
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.
Still tracking the long term trend
That short period of excitement was really irrational - but bonus time for some who took advantage of the opportunity
So 140 soon and then 160 and the .... who knows
Whoops.Missed the thread on it.May have helped the s/p strength.Not big on ratings agencies ; however this is a good read.
"Today is the tomorrow you worried about yesterday"
I'm v humbled that you consider my opinion so important. I've never claimed to by a guru….but perhaps you should scan PAY up 181% since Jan, TIL up 166%, ATM up 27.5% EBO up 46.4% NZR up 56.11%, even BLT up 31.58%. (Disc four of these in my humble portfolio) 'Nuff said methinks.
Thanks but I'm no threat to Moosey. On Jan 14 in post #238 (on the 2015 stock pick thread) I posted, "Just returned from an extended holiday and have missed placing my entry. However I plan to piggy back on XROF's entry as his/her picks are the same as mine."
So currently sitting #81 with 9.71% YTD along with XROF, and now heading out to enjoy the long weekend.
Egos really shouldn't come into this,its not a nice trait.
I just wanted to offer my support seeing as your original comment was in response to me expressing my opinion on HNZ. I think you handled yourself extremely well and brought a great deal of credit upon yourself so please allow me to offer you a little tip in return. Never hurts to take a little cream off the top of a tasty cappuccino just in case its got a little too frothy..hope you catch my drift with two of those top performers of your's. All the best mate.
Yes they are which is why I advocate only taking some of the cream off the top of the cappuccino and still leaving room for further tasting later :) That said...there's plenty of stocks that have performed better than EBO in the last two years and plenty more that have performed better than HNZ this year so its all relative to what you did with the money after selling.
Watching the MTF play with interest. HNZ have started DD but Turners close to a 10% blocking stake. Interesting watching this play out. Money on Turners though as an existing originator and a head start.
I think, at the end of the day, Heartland will get there, they are going to pay more than turners, and also have deeper pockets, resulting in 'greater flexibility' regarding a MTF bid.
I also think MTF will actually do better (as in prosper more) under Heartland than it would under Turners (and I think some dealerships know/feel this as well).
PS: Yes I am a bit late with my 'homework' but I do think it is a 'good deal' for Heartland to do what they are doing (regarding bid price and due diligence clause). I also think this week we could see heartland crack $1.30
Must agree with you,yet I feel MTF dealers/originators would be better off with HNZ owning MTF.
For HNZ,MTF would be a good bolt on acquisition.
Should HNZ walk away from the MTF,HNZ will be able to do a bigger share buy back,so as HNZ shareholder I am not too concerned how it plays out,although I would prefer HNZ to takeover MTF.
We should hear in the next two weeks how the MTF Sportzone court case pans out,then the fun could start.
High court took five months to make its ruling so just because the hearing is in the Supreme court next month doesn't mean you'll get an early decision.
Looking at what MTF dealers and originators are paid, they get by far the lion's share of what little profit there is in the MTF business model. Really looking at MTF's accounts and outlook report I don't know why HNZ would want to take them over, other than to get access to the really cheap preference share funding and to possibly change the commission model so the dealers get less. The board of MTF must give approval for any shareholder to take over a 10% stake so if they're acting for their members in accordance with their appointment I'd suggest they'll be seeking assurances that the lucrative commission structures the dealers currently enjoy remains uncharged.
Turners have first mover advantage and I think its likely the decision from the supreme court could be months away. Shareholders best hope for a SP rise appears to be with the prospect of a tier 2 Basil 3 compliant issue and the company buying its own stock back...financial engineering, decide for yourselves whether this is a good or bad thing.
Roger I think one potential benefit to originators (card dealers) with having HNZ onboard may be access to cheaper funding for their car financing. But I agree that Turners have a 1st mover advantage.
Cheaper more secure finance would result from a HNZ takeover.
The attraction to HNZ of MTF is MTF's strong dealer network,whose customers I am sure would be happier knowing their loan is from Heartland Bank.Dealers/originators would also gain by having a larger "product" range to sell.
The reason MTF works (IMO) is that the business is full recourse to the dealer who then gets the lion share of the profit. Change that model and you break it. Dealers invariably have several financiers to whom they place business and select deal by deal where to put the paper. The other observation I would make is that the assets are high quality because the Dealers only put the best business on a recourse basis - as you would. With NTA of $1.81 or so, the Turners and Heartland offers are well below NTA. Can see $2 being paid by the time this is over. Peanuts, popcorn.... The big assumption here is that MTF will allow a shareholder over 10% -without that, nothing happens.
MTF was formed by car dealers, who at the time could not arrange finance for their customers' via finance companies.
In some ways the business may have run its course, and a lot of those dealers would like their capital out.
I think "the noise" we are hearing,ie MTF not interested in HNZ's proposals,HNZ are the competition are far from being correct.I would think most dealers would see TNR as their competition,and I think the majority of MTF shareholders would be keen sellers into a takeover.
HNZ are doing DD, but I think its a bit more complex than that. The biggest originators for MTF are now the brokers not the dealers, and MTF's largest originator overall is actually Turners (around 10% I understand). If Heartland or Turners acquire MTF, I could see Dealers and Brokers going elsewhere, so yes you're right, maybe its run its course - so what are they buying, a good ledger and database but with an 18 month average run off ?? And why would shareholders take less than NTA ? Turners will be on the phones flat out accumulating shares as fast as they can.
Just noticed the Head of Rural Banking is no longer on the web-site - can't see an NZX announcement - did I miss something ?
I guessing a lot here.Should HNZ takeover MTF I would expect they would be able to retain most dealers/originators and maybe even Turners.
I think Turners should get to 10% easily, as the price offered is a lot higher than the 90 to 95 cents price range MTF has traded at over the past year,and I think there are a lot of willing sellers..
It is what happens to the 80% to 90% of MTF shareholders who are locked in to MTF should HNZ walk away. Turners are in no position to make a full takeover.
The value of MTF shares will drop considerably.
Would a lot of dealers just transfer their business elsewhere further eroding the value of MTF.?
I see Turners as direct competition to Marac/HNZ so they for one would leave. The only reason they are putting business into MTF would be to 'share up' past the 10%. I agree the MTF ownership model is not perfect, but the value to active shareholder originators is not just the dividend but the up front volume based profit share which they wouldn't get under HNZ. Turners could offer a takeover based on part shares / part cash if they didn't have the balance sheet. Interesting game to watch. Advantage Turners, but Heartland yet to serve.
Turners have 7.6% of MTF shares according to their latest announcement.
So MTF originators are not exactly jumping at the opportunity to sell to TNR ! This game has a long way to go yet but my money is on HNZ getting what they want
BNZ say their rural loan book is 'extremely sound' but I note HY have put aside 'a big pile of cash for potential bad debts' (as The Herald put it)
I think HNZ actually reduced their provision in rural sector last financial year.
No worries though. If there is going to be a big bad debt problem it won't come out to late next year at the earliest and by then the share price will be 160 anyway.
Share price still going OK at the moment - 130 soon methinks
would be an easy bet, HNZ would win...
I think Turners are in it for a nice profit,knowing HNZ want it.
Lets not get to excited, they might not even get a blocking stake yet...
... isn't Turners shareholding like 7.6%? not exactly a huge rise from their initial shareholding (giving the significant amount of time that has passed since they made the offer)
None the less, Turners stand to profit (potentially) a little bit, but may (probably will) fail to get a blocking stake, and therefore Turners will 'get some choc chips', but HNZ 'gets the cake'
My view is that it hasn't taken Turners long to get to where they are. They're playing a brilliant hand and are setting themselves up sweetly to greenmail HNZ into a very fulsome offer.
How well has HNZ really done from its last fulsome offer regarding the HER business ?
Lets see if the good vibes from the world cup win filter through to the sharemarket and HNZ today.:p
No not really mate...I would have thought with all those staff at HNZ getting close too or above a $1m salary one or two of them might have had the skills to develop HNZ's own P2P platform :confused:
They must be traditional finance company executives then, opps sorry, bankers.