Confession Season | Heartland Group

1 May 2019

​​​​Global markets were mixed overnight after shares of Google-parent Alphabet tumbled following a revenue miss and Apple dropped ahead of its results. Weak Chinese business surveys also weighted on global investor sentiment.
Once again, investor attention will also likely remain focussed on US corporate earnings season this week. Closer to home, a number of Aussie & Kiwi companies took the opportunity to update the market on their performance in the first part of the year as “confession season” (the period before full period profit reports are released) gets underway.  We touch on some key announcements below.

Stock in Focus: Heartland Group (HGH:NZX / HGH:ASX)

​​​Shares in HGH have made a sizeable recovery since mid-Feb in line with the broader market after delivering a disappointing 2019 interim result earlier this year.
HGH net profit for the half was $33.1m, up +6.5% from the same corresponding period last year. Despite a solid +11.9% increase in its finance receivables (loan book) which has been a strong contributor to HGH profit growth in the past, the result was offset by one-off corporate restructure costs, and a boost in impairment expense largely due to a new accounting treatment for HGH’s portfolio of loans. Due to the one-offs, HGH downgraded their full year net profit guidance down to $73m to $75m which was below what the market was expecting.
The risks of a slowdown in the NZ economy (which could increase the bank’s bad debts even further) and regulatory pressure, combined with their higher risk profile (due to the nature of their loans) has seen us hold a more cautious view on the outlook for HGH.
We currently have a HOLD recommendation on HGH.. 

Australia & New Zealand Market Movers

​​The Australian share market sold off yesterday (ASX 200 index -0.53%) on the back of broad declines from the index heavyweights. The major miners led the market losses on Tuesday as China data disappointed and metal prices traded weaker across the board.
In stock news, Newcrest Mining fell after reporting its gold and copper production for the March quarter was weaker than the previous three months. Domain Holdings shares slid after the company reported a disappointing third quarter on the back of a weakening Australian housing market with company's revenue for the first three months of 2019 falling 6 per cent. On the flipside, Afterpay Touch shares rose after outlining details of its UK strategy, saying it will operate in the region under the "ClearPay" brand after acquiring the payments company in a $110 million equity raising last August.
The New Zealand market was virtually flat on Tuesday (NZX 50 index +0.01%) with the NZX experiencing a 1.8% gain for the month. In stock news, Ebos shares were halted at $21.42 after the pharmaceuticals and animal care products maker announced an underwritten $150 million placement to institutional investors.
Retirement village operator Summerset Group fell as it told shareholders it has scaled back its development programme for this year in the face of slowing housing and construction markets.
NZME rose as the media company today launched a subscription for premium content on its NZ Herald website, which will need marketing investment over the coming year. NZME expects it to generate positive earnings in its second year.

3 Things Markets Will be Watching this Week

  1. ​​​The US first-quarter reporting season continues this week.
  2. Thursday morning (AU/NZ time) sees a ​meeting of the​ US​ Federal Reserve​, and the release of important monthly US manufacturing data​.
  3. The latest NZ employment figures are published on Wednesday.​


Have a Great Day,


Global markets were mixed overnight after shares of Google-parent Alphabet tumbled following a revenue miss and Apple dropped ahead of its results.

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