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Heartland Bank Retail Share Offer February 2017

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Heartland Bank LogoOn 21 February 2017 Heartland Bank announced a half year profit of $29.1M.

Heartland Bank is offering existing shareholders a chance to buy a maximum of $15,000 worth of additional shares at $1.46.

On 22 February 2017 the share price closed at $1.58.

At $1.46 the Heartland Bank's forecast dividend yield is nearly 9.0%. The credit rating agency Fitch, recently gave them a positive review.

Heartland Bank Limited (Heartland) (NZX: HBL) achieved a net profit after tax (NPAT) of $29.1m for the half year ended 31 December 2016, an increase of 14% from the half year ended 31 December 2015. The increase in profitability was driven primarily by growth in receivables across all divisions - Household, Business and Rural.

Achievements for half year:

  • Increase in profitability of 14%
  • Strong growth in receivables of 7%
  • Return on equity (ROE) of 11.6%
  • $20m institutional placement completed
  • Launch of multiple digital platforms

If you hold Heartland shares this might be a good opportunity to buy some more. If you want to discuss the options please call us on 578 3863.

Cick here to view the Heartland Bank 2017 Share Purchase Plan offer document.

If you are already a shareholder in Heartland you should have received a letter that begins as follows.

"Dear Heartland shareholder

Heartland Share Purchase Plan

On behalf of the directors of Heartland Bank Limited (Heartland), I am pleased to offer you the opportunity to acquire new Shares through this Share Purchase Plan (SPP), without incurring brokerage or other transaction costs.

Heartland announced on 12 December 2016 that it intended to raise up to $30 million of new capital to ensure it continues to have sufficient capital to support its growth and to further invest in its digital strategy. The first stage of the capital raising was a $20 million equity placement to existing and new investors under which 13,698,630 new Shares were issued on 15 December 2016 at $1.46 per Share. The second stage of the capital raising is this SPP. The SPP enables each Heartland shareholder with a New Zealand address recorded in the share register on the record date to subscribe for up to $15,000 of Shares at a discounted price. The price Heartland shareholders will pay for each new Share under the SPP will not be more than the price paid by investors in the equity placement. We had initially intended to raise up to $10 million through the SPP but, given the strong interest that investors have shown in the SPP and our desire to provide our loyal retail shareholder base with an opportunity to make a meaningful further investment, we have decided to increase the size of the SPP and we now intend to offer up to $20 million of Shares.

If we receive applications for Shares in excess of $20 million, your application will be scaled on a proportionate basis with regard to the size of your application and you will receive less than the amount you applied for. If you do not participate in the SPP, your shareholding in Heartland will be diluted..."

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Update on Port of Tauranga share price

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Port of Tauranga Shares Up Over 20% After share Split

On 22 September 2016 we explained about the five for one Port of Tauranga Share Split, at that time Port of Tauranga shares (NZX code POT) had traded at close to $20.00, but they were trading at $19.25 immediately before the split. On 21 October 2016 we updated readers on Port of Tauranga after the Share Split. They were then trading at $3.73. down on their theoretical post split price of $3.85.

Last night - 21 February 2017 Port of Tauranga Shares (NZX code POT) were trading at $4.48. That is equivalent to a pre split price of $22.40, an increase of 16.36% in a little over three months. You would have a return of over 20% if you were clever (or lucky) enough to have bought them the day after the split at $3.73.

It appears the Directors' decision to split the shares was a very good one.

But what else, if anything, has happened to make the shares worth more? Are they just trading at a higher price because of the "perception" that they are cheaper? It certainly appears so.

The next dividend, expected to be about 25c is due to be paid on 10 March 2017.

At $4.48 Port of Tauranga shares are certainly not cheap. We do not expect the share price to continue to increase at the rate they have.

They might even be due for a "correction". However we still like the long term propects for Port of Tauranga. If you were to sell what would you do with the proceeds? If you'd like to discuss please call Jonathan York on 07 578 3863.

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Port of Tauranga Share Split

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port of tauranga logoPort of Tauranga - More For Your Money?

On Thursday, 18 August 2016, Port of Tauranga Limited (POT) announced that they will undergo a capital increase of shares -  a share split.

Shareholders will receive five POT ordinary shares for every one POT ordinary share held at 5 pm on the record date of 17 October 2016.

If you own 500 POT shares on the 18 October on the 19 October you'll own 2,500 shares. You don't have to do anything except own the shares - it will just happen.

POT shares are currently trading at about $20.00 so 500 shares are currently worth about $10,000.

Before the split POT has a little over 136 million shares, at $20.00 per share the market is valuing the company at about $2.7 billion dollars.

A share split doesn't increase a companies profits or increase it's assets. Applying financial logic and fundamental analysis formulae a share split doesn't increase a companies value. After the split there are five times as many shares, and each share is just that, a share of the company. After the split there will be about 680 million shares, five times as many as there are now. As the company's fundamental value doesn't change the shares should be worth one fifth of what they were or $4.00 each.

Applying financial formulae to the situation, after the split the share price should be $4.00 and so 2,500 should still be worth $10,000. But some believe it will be higher, and we think they are probably right.

People often confuse price and value

Investors are people and people don't necessarily apply financial logic to investing. People often confuse price and value. Currently POT is perceived by some investors as being "expensive" because it costs $20.00 a share. Currently an investor with $10,000 can buy about 500 Port of Tauranga shares but they can buy nearly 1,500 Auckland International Airport, they get three times as many. Rightly or wrongly some will go for the share with the lower price because they get more shares. It doesn't make financial sense but it's a fact that some people think that way.

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Buying and Selling Shares

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wallstreetDid you know that Bay Financial Partners can help you to buy or sell listed shares?

Many people are starting to get interested in the sharemarket again. Some company shares may be looking attractive for their higher dividend yields compared to bank term deposits and other fixed interest options.

On the other hand returns from the sharemarket have been very good over the last few years and some are thinking it's time to reduce their exposure - selling shares - in expectation of a fall in prices.

Some who haven't been active in the market for a while are finding that their broker account is "no longer compliant" and are having to provide new documentation. I'm afraid we are in the same boat and there is no way around that requirement now.

We are noticing a move by some brokers to push people towards custodial servces. Custodial services definitely have their place and we use them ourselves, but they are not for everyone and can be very expensive in dollars terms, particularly for those with large portfolios. We're happy to talk through the options with you, the pros and cons of custodial services and the alternatives you can consider.

Some people seem to think that they have to sell their shares through the same broker that they bought them through, that is not the case. You can buy and sell listed securities through any broker. You can buy through one broker this week and sell through another next week, and you can have accounts with as many brokers as will accept you.

Opening a Broker Account

It's not hard to open a broking account through us and it costs you nothing - but we do need to gather some information about you.

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Port of Tauranga after the Share Split

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upanddownWhat Happened to Port of Tauranga's Share Price?

We've recently had a number of calls from people concerned that the price of their Port of Tauranga shares had fallen - SIGNIFICANTLY.

Our answer was "Don't panic".

On the 18 October 2016 Port of Tauranga completed a five for one share split. There are now five times as many Port of Taurangas shares on issue.

Investors have been given four extra shares for every one share they used to own, for free! But no not really, the price has adjusted to take the share split into account.

Port of Tauranga's share price on the 17 October was $19.25.

On the first day of trading after the split the price was $3.73. But that is not as bad as some seemed to think.

To compare the two prices we have to divide the price on the 17th by five and we get $3.85.

Contrary to our expectation the price fell immediately after the split from $3.85 to $3.73. But the price recovered the next day to $3.80. $3.73 might have been a bargain.

We expect that more people will consider buying Port of Tauranga shares at around $3.80 - $4.00 than would have if the price was $19.00 - $20.00 and so we expect the share price performance will be better than if the split hadn't occured.

But there is no way of proving this one way or the other as there are innumerable other factors to take into account.

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Trustpower Demerger

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trustpower logo 2015Trustpower Limited (TPW) have approved the demerger into two NZ incorporated listed companies.

The two companies will be Bay Energy Limited (to be renamed Trustpower Limited, New Trustpower), which will own TPW's NZ and Australian hydro power generation and NZ multi-product retailing businesses, and Tilt Renewables Limited, which will own TPW's Australian and NZ wind farm assets and wind and solar development projects.

Eligible shareholders are to receive one share in each of Tilt Renewables and New Trustpower for every share held in Trustpower. Shareholders don't need to do anything further to receive the new shares

Consequently, TPW intends to redeem all four series of its existing bonds on 13 October 2016 prior to its demerger, at the greater of par plus accrued interest or market value. An exchange offer has been provided to holders of TPW100, TPW110 and TPW120 Bonds who may elect to exchange their TPW Bonds for new bonds to be issued by New Trustpower that have the same interest rate, maturity date and ranking as the TPW Bonds they currently hold.

The New Trustpower will issue up to $165 million of new 15 December 2022 unsecured, unsubordinated, fixed rate bonds (TPW150). The indicative margin has been set at 1.75-1.80%pa over the swap interest rate which implies an indicative interest rate of 4.11-4.16%pa if it were set today.

If you might be interested in investing in these bonds please give us a call on 07 578 3863, we may be able to source some for you.

Once the demerger is complete, New Trustpower will be New Zealand’s fifth largest electricity generator with approximately 8% of NZ’s installed hydro capacity and the fourth largest energy retailer by market share, with approximately 13% retail electricity market share.

We expect that after the demerger the two companies will be worth more to investors than before. Read the Port of Tauranga Share Split article for the reasons.

New Trustpower’s management have a stated strategy of retaining profit to pay down debt, which in time should result in improving debt ratios. At this time we don’t have any financial forecast for New Trustpower. Hence, we have based our analysis on current pro-forma financial data. While New Trustpower has better financial ratios than Trustpower, as a greater proportion of the debt is taken on by Tilt Renewables, its financial ratios are not as good as those of the other NZ electricity generators.

We expect most investors will take up the offer of swapping their existing Trustpower Bonds for the
New Trustpower bonds.