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  • HGH - Heartland Group Holdings Limited

    HGH - Heartland Group Holdings Limited, formerly known as HBL, Heartland Bank Limited - Edit by Fatportfolio

    Hi,

    Haven't seen quite as many orders for exactly 3317 shares going through as what I expected today. Although granted, people could be bulking up the sale with previously held shares to make the brokerage worthwhile!
    Last edited by fatportfolio; 02-11-18, 05:57 PM. Reason: Fatportfolio Admin - Added the line at the top, formerly Heartland Bank Limited HBL now HGH.

  • #2
    Wasn't expecting to see the shareprice hold up so well after the SPP. Price up, after a dilution in holdings for people who didn't apply. Market seems to be in love with Heartland Bank at the moment.

    Comment


    • #3
      Does anyone else feel this might be getting a little frothy? It's a great company but perhaps getting a little ahead of itself now?

      Looking at the chart (I'm no chartist, just naked eye), the price after the last big runup it had to 1.41 in Jan 2015 wasn't sustained, it slowly dropped back down to under $1.10. It had another big run in July last year which did mostly hold. It looks like it's breaking out for another big run now. But I have the feeling it won't hold. But if you're going with the momentum, now looks like a good time to be in.

      Thoughts? Any chartists wish to comment?


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      Comment


      • #4
        Well a couple of ways of looking at it.

        PE

        $1.66 / $0.1152 = 14.4 PE. Reasonable for a solid bank with good growth records and forecasts

        That said, 4 Traders have the future PE ratio as closer to 12 as growth slows. If you said earnings will grow to 13.8cps in two years and the PE drops to 12 then 13.8 x 12 = $1.66, meaning it's currently a little ahead of itself.

        DDM

        Vo=D1/(k-g)

        $1.66=0.09/(k-g)

        12.89 = k-g

        k=12.89% plus the growth rate. That's a pretty healthy discount rate!

        Book Value

        Price to Book Value is 1.6 at the moment which is starting to get high.

        BVPS has been ticking up about 3% per year.

        $0.1152/$1.66 = approx 7% return from divvy. Plus the 3% increase in BV makes a total effective return of 10% if they can just maintain that. Reasonable.

        Comment


        • #5
          How long until there is a shakeup in the banking world? Someone like the likes of ANZ starting an offshoot that chases niche, high value, low volume products etc, infringing on Heartland's territory.

          Comment


          • #6
            Originally posted by Ranger View Post
            How long until there is a shakeup in the banking world? Someone like the likes of ANZ starting an offshoot that chases niche, high value, low volume products etc, infringing on Heartland's territory.
            ANZ just sold UDC.

            Comment


            • #7
              Why its worth more.
              1. We cannot ignore the fact that HBL has grown its EPS faster in recent years than the Aussie banks.
              2. This trend is set to continue, see below therefore a PE premium is warranted compared to its peer group.
              3. The following are the forecast PE's for its peer group for FY17, FY18 and FY19 followed by average analyst expected EPS growth in percentage terms bolded from FY17 to FY19 All data off average analysis forecast off 4 traders
              Bendigo BEN 13.2, 13.1, 13.3, EPS growth expected -1%
              NAB 13.6, 13.4, 13 4%
              WBC 14.5, 14, 13.6 6%
              ANZ 13.4, 13.2 12.5 7%
              Bank of Queensland BOQ 12.9, 12.6 12.3 4.5%
              HBL 13.8 12.6 11.9 14%

              The average FY19 PE which takes into account average forecasted growth to FY19 is 12.77

              4. Even if you make the case, (which I don't) that HBL will only enjoy two more years of abnormal growth before reverting to the very modest rates the Australian banks are "enjoying" for HBL to be trading at the average of its peer group the SP is likely to outperform its peer group by 12.77 / 11.9 = 7.3% over the next two years.

              5. Even now based on average estimated 2017 earnings the peer group is trading at an average PE of 13.56 and HBL at 13.8 represents only a tiny premium which taking into account its historical growth outperformance and projected stronger growth and I think the current market PE premium is not properly recognizing this superior growth.

              6. I think given the distinct possibility that HBL's growth will continue to outperform its peers post FY19 I think that a minimum further 7.3% rerating will happen over the foreseeable future, probably this year.

              7. Relative to its peer group I therefore value HBL at 1.64 + 7.3% = $1.76.

              8. I think you can easily make the case that relative to its peer group given its considerably stronger historical and projected growth a PE premium of 1 on FY17 projected earnings is warranted.
              Average FY 17 PE for Aussie banks excl HBL is 13.52.
              HBL's current PE 13.8 HBL should be trading on a FY17 PE premium of at least 1 = 14.52 14.52 / 13.8 = 5.2% increase from here = $1.73

              9. Investment case summary: I therefore think fair value for HBL is between $1.73 and $1.76 on an ex dividend basis and note it currently trades on a theoretical ex dividend price of $1.60.5 ($1.64- 0.035) so we have another ~ 10% rerating to go and then from there the price should continue to drift up in line with the 14% earnings growth to FY 19. My 2 year target price is therefore 1.76 x 1.14 = $2.01 and in the meantime based on 8.5 cps in annual fully imputed dividends we will be enjoying a gross dividend yield of 7.36% (8.5 / 160.5) / 0.72.
              Disc: Hold and fully subscribed to dividend reinvestment plan.

              Comment


              • #8
                Originally posted by Roger View Post
                Why its worth more.
                1. We cannot ignore the fact that HBL has grown its EPS faster in recent years than the Aussie banks.
                2. This trend is set to continue, see below therefore a PE premium is warranted compared to its peer group.
                3. The following are the forecast PE's for its peer group for FY17, FY18 and FY19 followed by average analyst expected EPS growth in percentage terms bolded from FY17 to FY19 All data off average analysis forecast off 4 traders
                Bendigo BEN 13.2, 13.1, 13.3, EPS growth expected -1%
                NAB 13.6, 13.4, 13 4%
                WBC 14.5, 14, 13.6 6%
                ANZ 13.4, 13.2 12.5 7%
                Bank of Queensland BOQ 12.9, 12.6 12.3 4.5%
                HBL 13.8 12.6 11.9 14%

                The average FY19 PE which takes into account average forecasted growth to FY19 is 12.77

                4. Even if you make the case, (which I don't) that HBL will only enjoy two more years of abnormal growth before reverting to the very modest rates the Australian banks are "enjoying" for HBL to be trading at the average of its peer group the SP is likely to outperform its peer group by 12.77 / 11.9 = 7.3% over the next two years.

                5. Even now based on average estimated 2017 earnings the peer group is trading at an average PE of 13.56 and HBL at 13.8 represents only a tiny premium which taking into account its historical growth outperformance and projected stronger growth and I think the current market PE premium is not properly recognizing this superior growth.

                6. I think given the distinct possibility that HBL's growth will continue to outperform its peers post FY19 I think that a minimum further 7.3% rerating will happen over the foreseeable future, probably this year.

                7. Relative to its peer group I therefore value HBL at 1.64 + 7.3% = $1.76.

                8. I think you can easily make the case that relative to its peer group given its considerably stronger historical and projected growth a PE premium of 1 on FY17 projected earnings is warranted.
                Average FY 17 PE for Aussie banks excl HBL is 13.52.
                HBL's current PE 13.8 HBL should be trading on a FY17 PE premium of at least 1 = 14.52 14.52 / 13.8 = 5.2% increase from here = $1.73

                9. Investment case summary: I therefore think fair value for HBL is between $1.73 and $1.76 on an ex dividend basis and note it currently trades on a theoretical ex dividend price of $1.60.5 ($1.64- 0.035) so we have another ~ 10% rerating to go and then from there the price should continue to drift up in line with the 14% earnings growth to FY 19. My 2 year target price is therefore 1.76 x 1.14 = $2.01 and in the meantime based on 8.5 cps in annual fully imputed dividends we will be enjoying a gross dividend yield of 7.36% (8.5 / 160.5) / 0.72.
                Disc: Hold and fully subscribed to dividend reinvestment plan.
                Excellent post Roger. Where do you see the growth coming from? They have had organic growth, but don't they need another thing to supercharge their growth - another takeover etc. Doesn't seem to be much noise coming from them.

                Comment


                • #9
                  Originally posted by Yachtie View Post

                  Excellent post Roger. Where do you see the growth coming from? They have had organic growth, but don't they need another thing to supercharge their growth - another takeover etc. Doesn't seem to be much noise coming from them.
                  Thanks. I believe they are starting to get real traction with their home equity loans for old folks and they have a number of initiatives in the peer to peer market and digital platforms.
                  I think they're more proactive with lending online than the other banks and that's the way the world is headed in my opinion.

                  Comment


                  • #10
                    I tend to agree with your assessment Roger. I think $1.60 (current price as at 24/3/17) is not quite fully priced. But this company is one that seems to continually perform for its investors, even when people thought the downturn in dairy prices would hurt them. I wouldn't want to bet against Heartland's performance over the next few years.

                    Comment


                    • #11
                      Originally posted by Sharewatcher View Post
                      I tend to agree with your assessment Roger. I think $1.60 (current price as at 24/3/17) is not quite fully priced. But this company is one that seems to continually perform for its investors, even when people thought the downturn in dairy prices would hurt them. I wouldn't want to bet against Heartland's performance over the next few years.
                      IIRC they only have approx 7% direct exposure to dairy via the loan book. The dairy effect was always overstated and this was an excellent opportunity for the knowledgeable to acquire, which it sounds as if you may have done. I would like another event like this to top up further.

                      Comment


                      • #12
                        https://www.nzx.com/companies/HBL/announcements/299157

                        Excellent move by HBL to get further low cost, low risk tier 2 capital to strengthen the books. No doubt they have an abundance of institutions willing to support the offer.

                        Comment


                        • #13
                          What caught my attention was that it was in Australian dollars. $20M. What's the story there?

                          Comment


                          • #14
                            IMF says I should be able to find out what my employees (effectively) at Heartland get paid http://www.stuff.co.nz/business/9236...asel-standards

                            Comment


                            • #15
                              Originally posted by Roger View Post
                              Why its worth more.
                              1. We cannot ignore the fact that HBL has grown its EPS faster in recent years than the Aussie banks.
                              2. This trend is set to continue, see below therefore a PE premium is warranted compared to its peer group.
                              3. The following are the forecast PE's for its peer group for FY17, FY18 and FY19 followed by average analyst expected EPS growth in percentage terms bolded from FY17 to FY19 All data off average analysis forecast off 4 traders
                              Bendigo BEN 13.2, 13.1, 13.3, EPS growth expected -1%
                              NAB 13.6, 13.4, 13 4%
                              WBC 14.5, 14, 13.6 6%
                              ANZ 13.4, 13.2 12.5 7%
                              Bank of Queensland BOQ 12.9, 12.6 12.3 4.5%
                              HBL 13.8 12.6 11.9 14%

                              The average FY19 PE which takes into account average forecasted growth to FY19 is 12.77

                              4. Even if you make the case, (which I don't) that HBL will only enjoy two more years of abnormal growth before reverting to the very modest rates the Australian banks are "enjoying" for HBL to be trading at the average of its peer group the SP is likely to outperform its peer group by 12.77 / 11.9 = 7.3% over the next two years.

                              5. Even now based on average estimated 2017 earnings the peer group is trading at an average PE of 13.56 and HBL at 13.8 represents only a tiny premium which taking into account its historical growth outperformance and projected stronger growth and I think the current market PE premium is not properly recognizing this superior growth.

                              6. I think given the distinct possibility that HBL's growth will continue to outperform its peers post FY19 I think that a minimum further 7.3% rerating will happen over the foreseeable future, probably this year.

                              7. Relative to its peer group I therefore value HBL at 1.64 + 7.3% = $1.76.

                              8. I think you can easily make the case that relative to its peer group given its considerably stronger historical and projected growth a PE premium of 1 on FY17 projected earnings is warranted.
                              Average FY 17 PE for Aussie banks excl HBL is 13.52.
                              HBL's current PE 13.8 HBL should be trading on a FY17 PE premium of at least 1 = 14.52 14.52 / 13.8 = 5.2% increase from here = $1.73

                              9. Investment case summary: I therefore think fair value for HBL is between $1.73 and $1.76 on an ex dividend basis and note it currently trades on a theoretical ex dividend price of $1.60.5 ($1.64- 0.035) so we have another ~ 10% rerating to go and then from there the price should continue to drift up in line with the 14% earnings growth to FY 19. My 2 year target price is therefore 1.76 x 1.14 = $2.01 and in the meantime based on 8.5 cps in annual fully imputed dividends we will be enjoying a gross dividend yield of 7.36% (8.5 / 160.5) / 0.72.
                              Disc: Hold and fully subscribed to dividend reinvestment plan.
                              Update. Its nice to see that prediction come right. Since that post in the other forum I updated my relative valuation to the Australian banks a couple of weeks back and arrived at an updated relative fair value to other regional banks of $1.83. Since the shock bank specific tax announcement by the Australian Govt this week, which in my view is a draconian measure we've seen some of the Aussie banks coming under serious pressure and HBL add 7 cps. The market is saying the net present value of all the future competitive advantage because HBL is not susceptible to this punitive new tax is 7 cps. HBL came out the other day and said their high margin reverse equity loan book is growing strongly. I now see fair value as $1.83 - $1.90 so am continuing to hold notwithstanding the very nice SP gains since my earlier post above..
                              Last edited by Beagle; 12-05-17, 07:06 PM.

                              Comment

                              HLG

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