Founded: 1982, ASX code: HVN, homepage: www.harveynorman.com.au

Overview:
Harvey Norman is a an outstanding Australian retailer operating 216 retail businesses around the world. The company supplies its customers with a mixture of own branded and franchised homewares, electrical goods and computer products. The majority of Harvey’s stores is situated in Australia (174 stores) and New Zealand (20 stores), but it also continues building its brand in Asia (Singapore 11 stores, Malaysia 1 store) and Europe (Ireland 8 stores, Slovenia 1 store).

Analysis of latest annual report (June 2006):

• Market Cap: Depending on the daily stock price the market cap of this company is about $4,100mil in about 1,057mil of outstanding shares.

• Shareholders Equity: $1,353mil making the stock’s book value approx. $1.28 per share (6.2% growth on year ending June 2005). From that about $698.4mil. ($0.66 per share) is available working capital.

• Earnings per share: $0.21 making the average EPS growth in last 3 years about 14.6%

• Return on Equity: 16.5%, averaging around 15% in last 3 years

• Balance Sheet: Working capital of $698.4mil versus total debt of $852.3mil

Sharemarket’s view:
Average HVN’s Price to Earnings ratio of 22 suggests the share price around $4.62 ($0.21 EPS x 22 P/E)

GROWTH STOCK:

• Conservative forecast of average EPS growth in next 10 years: 13%

• Share price in 10 years time: about $15.7 (EPS in year 10 based on forecasted yearly EPS growth times average P/E)

• Total shareholders return in 10 years times: $17.5 (share price of $15.7 plus $1.8 of all the dividends if current payout ratio of 40% persists)

• Rate of Return in next 10 years based on the beginning of January 2007 price of $3.95 per share: 16%pa

PROS AND CONS:
+++ Good levels of ROE
+++ Strong balance sheet
+++ Management holds around 49% of all shares
— Operating in volatile market
— Rewarding its managers with stock options

Further information about Australian Stock Exchange www.asx.com.au

This entry was posted on Friday, January 19th, 2007 at 1:03 pm and is filed under Australian stock. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.