Sharechat Logo

Daily ShareChat: Harvey Norman

By Jenny Ruth

Wednesday 16th June 2010

Text too small?
 Jenny Ruth

Australia-based Harvey Norman, which has 27 stores in New Zealand, is facing an aggressive sales season with tough retail demand and the need to clear stock resulting in prices of some products falling 70%, says Tim Montague-Jones, an analyst at Aegis Equities Research in Sydney.

"Harvey Norman is offering large discounts, no deposit and 50 months interest-free financing to help clear stock," Montague-Jones says.

"We think the consumer has become far more interest-rate sensitive after an extended period of gouging out equity from a rising housing market," he says.

Nevertheless, the company has a healthy balance sheet with gearing of only 19% and interest cover of 13 times earnings.

"It is cashed up and could easily make an opportunistic acquisition overseas or domestically," Montague-Jones says.

The Australian housing market and business confidence took a hit in May on fears of Europe's sovereign debt woes spreading and the government's proposed resource tax.

"We expect retail conditions to be tough in the short term but when fear is rampant it is also the time to buy Harvey Norman. When conditions improve, the ship will quickly sail and Harvey Norman will be re-rated upwards."

Montague-Jones expects strong pickups in the company's operations in Asia, Slovenia and New Zealand but "the jury remains out on whether Ireland will survive."

Recommendation: Add


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

GEN - Equifax reaffirms General Finance Limited's BB rating
General Capital Subsidiary General Finance Market Update
Acceleration of expressway will be transformative for Northland economy says EMA
The Warehouse Group - Proposed Scheme of Arrangement
The Warehouse Group - Proposed Scheme of Arrangement
Winton announces timing of its Annual Results
Fletcher Building Announces Director Appointment
Meridian issues new demand response exercise notice to NZAS
CRP - Chatham Closes Private Placement of Shares