For its most recent FY2019, HVN improved its earnings over the previous year and strengthened its balance sheet as well. PBT was up 8.4%, while net assets increased by 8.8% y-oy. Net debt to equity also improved: down from 25.5% to 19.5%. Over the past five years, HVN managed a CAGR of 8.1% and 9.4% for its revenue and earnings respectively. By contrast, its share price gained just 7.9% CAGR in the same period, suggesting potential undervaluation.
The Australia-listed retailer is a household name, but not one investors usually like. However, earnings are steady and valuations are attractive. And its dividend yield is too attractive to ignore.
SINGAPORE (Jan 23): ASX-listed Harvey Norman Holdings (HVN) operates and franchises household goods retail stores across Australia, New Zealand, Singapore, Malaysia and four European countries. HVN has three main business segments: It derives almost two-thirds of its revenue from retail operations, a quarter from franchising operations and the remaining 10% from the retail property segment. Given the company’s main business is in discretionary retail such as furniture and consumer electronics, the company’s earnings are positively correlated to the growth in household income and consumer spending. The risk for HVN, however, is relatively contained given its franchising fee structure which denotes more inelastic income, and is further supported by its robust property portfolio which enables it to control rental costs more flexibly.
