TNR v HBL Head to Head Round 2 (Relative Profitability)
Quote:
Originally Posted by
Snoopy
Calculations backing up the above table entry are as follows:
Heartland:
$48.163m +0.72($12.105m) /( 1/2( $480.125m + $452.622m)) = 12.2%
Turners:
2x ($7.432m- $0.046m) /( 1/2 x( $125.810 + $121.002)) = 12.0%
From the above, Heartland NPAT for FY2015 with annual impairment charge removed was:
$48.163m +0.72($12.105m)= $56.879m
The annual interest charge, already taken out of the above figure is $43.515m (from Note 2, AR2015).
This represents: $43.515m/ $56.879m = 77% of NPAT
From the above, Turners NPAT (half year,no tax payable at operational level) for HY2016 with half yearly annual impairment charge (revaluation in this case) removed was:
($7.432m- $0.046m) = $7.386m
The annual interest charge, already taken out of the above figure, was $5.772m. This represents
$5.772m/ $7.386m = 78% of NPAT
Very interestingly, in percentage terms,there is almost no difference between the two.
However, Heartland faced an operational tax bill of $16.170m, for which there was no Turners Finance Equivalent.
$16.170m/$56.879m = 28% of NPAT
So despite ROE being close for Heartland and Turners over our comparison, we might expect Turners relative performance in ROE to decline, once they start paying full tax.
Conclusion: Heartland win round two of our head to head contest.
SNOOPY
TNR v HBL Head to Head Round 3 (Loan Shock Debt cover)
Quote:
Originally Posted by
Snoopy
|
Heartland |
Turners (Finance Division) |
Loan Book 30-06-2014 |
$2,607.393m |
N/A |
Loan Book 31-03-2015 |
N/A |
$142.827m |
Loan Book 31-06-2015 |
$2,862.070m |
N/A |
Loan Book 31-09-2015 |
N/A |
$164.386m |
And here are the results of the calculations....
|
Heartland |
Turners Limited |
Turners Limited (Finance Divisions Only) |
EBIT /(Loan Book {averaged}) |
7.0% |
N/M |
12.8% |
Impaired Loans / Total Loans |
0.57% |
|
3.9% |
Impaired Loans / Shareholder Equity |
3.4% |
5.2% |
8.3% |
The:
(i) EBIT to total loan book calculation,
(ii) impaired loans to total loans and
(iii) impaired loans to shareholder equity referred to above are calculated like this:
Heartland:
(i{H}): ($260.488m-$68.403m)/ [(1/2)*($2,862.070m+$2,607.393m)] = 7.0%
(ii{H}) ($10.201m+$6.242m)/ ($2,862.070m+$10.201m+$6.242m) = 0.57%
(iii{H}) ($10.201m+$6.242m)/ ($480.125m) = 3.4%
Turners (Finance Only) (i{T} annualised):
(i{T}): 2x ($5.901m+$4.008m-$0.046m) / [(1/2)*($164.436m+$142.827m)] = 12.8%
(ii{T}) $6.637m / ($6.637m + $164.436m) = 5.2%
(iii{T}) $6.637m / $79.54m = 8.3%
So what do I conclude from this? The underlying loan book at Turners looks a lot more profitable than Heartland, (based on the respective end of year loan balances). But it probably needs to be because the proportion of impaired loans to total loans is higher.
Meanwhile the impaired loans to shareholder equity is there to show how these impairments could affect the shareholders capital of the company. In the case of Turners I have apportioned the company equity so that $79.54m is behind the finance operation and the rest (adding to a grand total of $125.81m) is there to support the old TUA, insurance and debt recovery businesses.
Turners has a lot less 'effective equity' to support their loan book than Heartland does. Turners also have a possible cash injection coming up. The maturity of the TNRHA bonds will see some of those convert to shares. Of the $23m in bonds that are due to mature, lets say $12m convert to shares.
The proportion of that new capital that will go behind the finance side of the business would approximately be:
$12m x ($79.54m/$125.810m) =$7.6m
(iii{T}) (projected, revised) $6.637m / ($79.54m + $7.6m) = 7.6%
That is still well below the level of 'impaired loan to equity cover' that Heartland enjoys. On this 'Loan Shock Debt Cover' head to head, I am declaring Heartland the winner.
SNOOPY