Heartland Bank NZ Ltd: A Good time to Buy?

Investors are finding it hard to value the relatively new listing Heartland Bank NZ Ltd [HNZ.NZX]. It was listed on Jan 25 this year on the main board of NZX after a merger of CBS Canterbury, Southern Cross and the financial services business of PGC (MARAC), and has had some mergers and restructures since then when PPG Wrightson Finance was subsumed into HNZ and $55 million of capital was raised.

HNZ shares were trading at 88c on Feb 1 of this year and are currently trading at 61c as at close of business yesterday. Either the market has no faith in the value that management put on it or the company is undervalued.

The fact that the merged company has been trading in its present form since the beginning of the year means it doesn't have a long track record to prove its value to the market but with net tangible assets at 90c per share, there could be some money made here if those assets are quality ones and have been valued in terms of the current discount of assets in a global market with little appetite for risk.

The only downside that I see -and it is a big one - is its large debt burden of 1.9 billion and assets in the form of 1.75 billion in receivables and $285 million in cash or equivalents. (see Jan 2011 accounts) In the current climate where debt levels such as these have sunk other companies, this is probably the reason why investors have been a little cagey and the market has discounted the company and its shares.

HNZ's intention to become a fully fledged trading bank in due course means that investors that come in on the ground floor could be in for good long-term gains as the company grows and they are able to negotiate their way through a dire global financial situation and maintain their receivables accounts satisfactorily if things get worse and are able to tap future borrowing at good prices.

There is room for a private company such as this one. Its main competitors are TSB Bank and Kiwibank at this stage and the failure of Kiwibank to gain a strong foothold in business and its low value clients in personal banking leading to net losses over its 10 year lifespan will be incentive for Heartland to push on with capturing unsatisfied customers from that bank and the main ones as it grows.

Heartland has forecast an inaugural profit of between 6-8 million to be announced August 19 and investors will want to see that sustained and grown over the 2012 full year before Mum and Dad start climbing on board for a piece of the future action.

It might just be good value at 61c.


Heartland Bank @ Share Investor

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c Share Investor 2011

TSB Bank VS Kiwibank

The fuss made from the left over a possible part sale of Kiwibank would be easy to understand if the bank was a roaring success but the bank that was set up in the early 2000s to buy votes for Labour and Jim Anderton has been a drain on taxpayer funds since then.

You will read the exact opposite in the mainstream left media but this particular Government Department just doesn't cut it.

A $NZ 125 million set up cost and continued subsidization from New Zealand post means Kiwibank has been a big failure.



Some forget what happened last time politicians got involved in banking in New Zealand, with the BNZ having to be bailed out by the taxpayer in the late 1980s after it went belly up. Why do some insist we keep something because it makes Kiwibank customers feel all warm and fuzzy while the rest of us subsidise them with our taxes?

A possible float of Kiwibank would ameliorate the demands of Kiwibank management for more taxpayer dosh for expansion of the bank.

I am of the view that the bank be sold outright and the money returned to taxpayers but any float, partial or full would benefit the bank and the company in one fell swoop.

We have a smaller bank, TSB Savings Bank, that is community owned and it has powered ahead the likes of Kiwibank without taxpayer handouts, growing business a real and sustainable way by using largely customer deposits to lend to other customers (you know, how a real bank operates)

By subsidising the likes of Kiwibank we stifle real private business like TSB. When their competitors have the advantage of taxpayer funding it really isn't a level playing field. The only winners are the bureaucrats working at the bank.

So, lets float or sell Kiwibank. In the long-term it is going to save us alot of money.

TSB have just announced their 23rd consecutive annual record profit of $51.2 million, up 19% on last year. This compares with a $23.4 million half year 2009 profit (bolstered by NZ Post & taxpayer funding) by Kiwibank, down 9% on last year. TSB have acheived their results on less than half the assets that Kiwibank has on its balance sheet.

Figures don't lie.


Related

TSB Savings Bank - Services
Contact TSB - Support your local bank


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c Share Investor 2010

Its ours, but can we get rid of it already?

Customer service comes with paddle included.

What is all the fuss over national wanting to sell that monstrous failure Kiwibank.

They said they were not going to sell any Taxpayer "assets" in the their first term and they wont.

Will they sell it should they get a second?

Who cares.

The architect of this black hole for more taxpayer funds, Jim Anderton, says most Kiwis don't want it sold.

Really?

Then why are there only 500,000 low value customers then?

Kiwibank has been a drain on the taxpayer for 7 years now. It has been propped up by an initial NZ$125 million injection of taxpayer money, then subsidised by that other great sucker of taxpayer funds the highly inefficient NZ Post.

Typical customer service at a Kiwibank

Its minute "profit" in 2006 and 2007 was creatively accounted to make Anderton look good.

Its CEO Sam Knowles was at the Bank of New Zealand to "fix it up" after it collapsed under Labour's watch in 1990 and then was one of those overseeing the collapse of Databank.

Lets face it the lending book of Kiwibank is high risk and poor quality, much of it revolves around beneficiaries, the low paid and State involvement through taxpayer subsidised or sponsored home loans.

Kiwibank is a high risk possibility in the future for it to go under,taking our taxpayer money with it.

Lets sell it for what we can get for it.

c Political Animal 2008