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Housing Finance: HFCK a diamond in the rough
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Aguytrying
#721 Posted : Sunday, November 03, 2013 11:34:55 AM
Rank: Elder

Joined: 7/11/2010
Posts: 5,040
Horton wrote:
Yep sorry. Egrish!!! Yep referring to HF

Me thinks eps should be 4bob so at 10-15pe prices should be 40-60bob come April. What u reckon?


of course its possible. but for best results hold for longer like 2 yrs and see the madness that my happen
The investor's chief problem - and even his worst enemy - is likely to be himself
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the deal
#722 Posted : Sunday, November 03, 2013 11:50:03 AM
Rank: Elder

Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
HF is fully valued at the current price

1. State of the loan book-NPL ratio way above sector average

2. Loan Loss Coverage-way below sector coverage.

3. Land Laws-Land or a house is no longer that attractive as collateral.

4. Real Estate Sector-returns from the sector are taking a knock...most likely to affect HF's loan book as people scale back on plans in the sector.

5. Margins...over reliance on interest income-margins to come under pressure from high cost of funds i.e MTN last year was at 13%.

Given the risks...A P/B Ratio of 1.22 is fair...last time HF traded on a sky high PE was bcos Equity Bank was talking of a bid.

FY13 PAT most likely to be up by 20-35%.
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  | | Edit by user: Sunday, November 03, 2013 11:55 AM | Reason: Not specified
Horton
#723 Posted : Sunday, November 03, 2013 12:38:39 PM
Rank: Veteran

Joined: 8/30/2007
Posts: 1,558
Location: Nairobi
the deal wrote:
HF is fully valued at the current price

1. State of the loan book-NPL ratio way above sector average

2. Loan Loss Coverage-way below sector coverage.

3. Land Laws-Land or a house is no longer that attractive as collateral.

4. Real Estate Sector-returns from the sector are taking a knock...most likely to affect HF's loan book as people scale back on plans in the sector.

5. Margins...over reliance on interest income-margins to come under pressure from high cost of funds i.e MTN last year was at 13%.

Given the risks...A P/B Ratio of 1.22 is fair...last time HF traded on a sky high PE was bcos Equity Bank was talking of a bid.

FY13 PAT most likely to be up by 20-35%.



@ the deal where did u see that number 3 item?

also number 4, real estate sector is taking a knock? really? I was invited to an open day recently on lower kabete road and a house built on 0.35acres is at 110m off plan...they only have like 4 available....in the words of Gary Coleman....."what u talking about??"

What pricing model do you use? Because we are in agreement that eps should be 20% ishh above last year....nonetheless, eps of 4 give or take or forward pe of 6....even if u use current pe, its below 10, for a growth company!! show me another company that is trading pe below 10 that ticks most boxes.....even my DCF valuation shows that its undervalued
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the deal
#724 Posted : Sunday, November 03, 2013 1:34:55 PM
Rank: Elder

Joined: 9/25/2009
Posts: 4,534
Location: Windhoek/Nairobbery
Horton wrote:
the deal wrote:
HF is fully valued at the current price

1. State of the loan book-NPL ratio way above sector average

2. Loan Loss Coverage-way below sector coverage.

3. Land Laws-Land or a house is no longer that attractive as collateral.

4. Real Estate Sector-returns from the sector are taking a knock...most likely to affect HF's loan book as people scale back on plans in the sector.

5. Margins...over reliance on interest income-margins to come under pressure from high cost of funds i.e MTN last year was at 13%.

Given the risks...A P/B Ratio of 1.22 is fair...last time HF traded on a sky high PE was bcos Equity Bank was talking of a bid.

FY13 PAT most likely to be up by 20-35%.



@ the deal where did u see that number 3 item?

also number 4, real estate sector is taking a knock? really? I was invited to an open day recently on lower kabete road and a house built on 0.35acres is at 110m off plan...they only have like 4 available....in the words of Gary Coleman....."what u talking about??"

What pricing model do you use? Because we are in agreement that eps should be 20% ishh above last year....nonetheless, eps of 4 give or take or forward pe of 6....even if u use current pe, its below 10, for a growth company!! show me another company that is trading pe below 10 that ticks most boxes.....even my DCF valuation shows that its undervalued


Unfortunately I know what I'm talking about....

1. On 3 read the new land laws

2. On 4 check Hass Consult Property Index

3. @Deal was a buyer at Ksh13-Ksh15

4. HF deposits and loan book isnt growing at a faster pace than industry average..check Q3 2013 earnings...look at q/q balance sheet growth

5. Let Ireri increase loan loss coverage to 50%...lets see if there will be any growth in 2013.

6. Add a rights issue...HF will need to recapitalise in the next 3 years....

HF is no longer attractive as it was at Ksh12-15 last year...given the risks...

DTB...CFC...are all trading on single digit forward PE's...I think theyre better picks at current prices than HF.
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VituVingiSana
#725 Posted : Sunday, November 03, 2013 7:31:08 PM
Rank: Chief

Joined: 1/3/2007
Posts: 18,366
Location: Nairobi
Aguytrying wrote:
Horton wrote:
Yep sorry. Egrish!!! Yep referring to HF

Me thinks eps should be 4bob so at 10-15pe prices should be 40-60bob come April. What u reckon?


of course its possible. but for best results hold for longer like 2 yrs and see the madness that my happen
Currently, a 10 PER is pricey. Peers are trading at 7-9 forward PERs. A 15 PER only if there's news/rumor of a takeover!
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Horton
#726 Posted : Sunday, November 03, 2013 8:15:55 PM
Rank: Veteran

Joined: 8/30/2007
Posts: 1,558
Location: Nairobi
VituVingiSana wrote:
Aguytrying wrote:
Horton wrote:
Yep sorry. Egrish!!! Yep referring to HF

Me thinks eps should be 4bob so at 10-15pe prices should be 40-60bob come April. What u reckon?


of course its possible. but for best results hold for longer like 2 yrs and see the madness that my happen
Currently, a 10 PER is pricey. Peers are trading at 7-9 forward PERs. A 15 PER only if there's news/rumor of a takeover!



Currently pe is actually 6. Something. Eps fy 12 was 3.22
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VituVingiSana
#727 Posted : Monday, November 04, 2013 1:10:56 AM
Rank: Chief

Joined: 1/3/2007
Posts: 18,366
Location: Nairobi
Horton wrote:
VituVingiSana wrote:
Aguytrying wrote:
Horton wrote:
Yep sorry. Egrish!!! Yep referring to HF

Me thinks eps should be 4bob so at 10-15pe prices should be 40-60bob come April. What u reckon?


of course its possible. but for best results hold for longer like 2 yrs and see the madness that my happen
Currently, a 10 PER is pricey. Peers are trading at 7-9 forward PERs. A 15 PER only if there's news/rumor of a takeover!

Currently pe is actually 6. Something. Eps fy 12 was 3.22
Your expectation of a 10 PER is high vs peers. 26/4 = 6.5 PER which is lower than 7-9 PER but not egregiously cheap vs others. There is core issues with HFCK not of their own making [and it suffered in the past] which is:

1) It cannot pass on substantially high(er) financing costs to customers who will otherwise default. Short-term borrowing vs long-term lending.
2) Land laws will kick in when folks default. Sales/recovery will slow down sales as well as increase costs of recovery like lawyer fees, etc.
3) Lending is concentrated in a single sector. Always riskier.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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guru267
#728 Posted : Monday, November 04, 2013 7:40:51 AM
Rank: Elder

Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
Its amazing to see the negativity towards housing finance as an investment more so from "seasoned" investors...
Just because you love CFC (@the deal) or you love DTB (@VVS)does not mean all objectivity is out the window..

Historical P/E for HF is around 15...

Historical P/E for the whole banking sector is around 12....

Historical P/B for HF is around 2...

Historical P/B of the whole sector is also around 2...

In what world is it impossible to return to those ratios at least for the whole sector??

Given that the new land laws are not retrospective and the so called NPL ratios are cooked at board meetings I still think HF is the best bet in the banking sector...

And not to forget that DIVIDEND YIELD is on fire in this current market!!!!
Mark 12:29
Deuteronomy 4:16
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VituVingiSana
#729 Posted : Monday, November 04, 2013 7:57:55 AM
Rank: Chief

Joined: 1/3/2007
Posts: 18,366
Location: Nairobi
guru267 wrote:
Its amazing to see the negativity towards housing finance as an investment more so from "seasoned" investors...
Just because you love CFC (@the deal) or you love DTB (@VVS)does not mean all objectivity is out the window..

Historical P/E for HF is around 15...

Historical P/E for the whole banking sector is around 12....

Historical P/B for HF is around 2...

Historical P/B of the whole sector is also around 2...

In what world is it impossible to return to those ratios at least for the whole sector??

Given that the new land laws are not retrospective and the so called NPL ratios are cooked at board meetings I still think HF is the best bet in the banking sector...

And not to forget that DIVIDEND YIELD is on fire in this current market!!!!

"Given that the new land laws are not retrospective" Well, if you say so then it must be so...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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guru267
#730 Posted : Monday, November 04, 2013 8:37:23 AM
Rank: Elder

Joined: 1/21/2010
Posts: 6,675
Location: Nairobi
VituVingiSana wrote:
guru267 wrote:
Its amazing to see the negativity towards housing finance as an investment more so from "seasoned" investors...
Just because you love CFC (@the deal) or you love DTB (@VVS)does not mean all objectivity is out the window..

Historical P/E for HF is around 15...

Historical P/E for the whole banking sector is around 12....

Historical P/B for HF is around 2...

Historical P/B of the whole sector is also around 2...

In what world is it impossible to return to those ratios at least for the whole sector??

Given that the new land laws are not retrospective and the so called NPL ratios are cooked at board meetings I still think HF is the best bet in the banking sector...

And not to forget that DIVIDEND YIELD is on fire in this current market!!!!

"Given that the new land laws are not retrospective" Well, if you say so then it must be so...


@VVS my source is directly from Caroline Kariuki who is CEO of The Mortgage Company after I had asked her how they would factor in the risk... Where is your source from about the retrospective laws... I'm always open to correction!
Mark 12:29
Deuteronomy 4:16
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