HVN - Harvey Norman Holdings

[iced earth]

Re: HVN - Harvey Norman

HVN : 21.10.10

The share could not pass the resistance line (white) and recently broke down the support line (Purple) and now testing Fibo 50% . if this can not hold it we should expect the next support level at around 2.96$ (Fibo 61.8 %) Momentum also is near important 0 level and passing down this level could cause more downtrend (Fig 1)


from another point of view share price is testing another support line (yellow). this line can be Neck Line for tilted Head & Shoulders pattern. If the line passed down the target could b around 1.8$ which is the lowest price of HVN in FEB 2009. (Fig 2)

It was 10 month ago(price that day was $3.39) when in my TA I predicted the target of around $1.8 for Harvey Norman. Today it was trading $1.89

 

[iced earth]

HVN(Harvy Norman) 11 August 2011:
========================================

After head &Shoulder pattern (which was predicted 21.10.10 here when share was trading 3.39) Share price reached $1.8.




Now we can see positive divergence between price and CCI



More importantly we can see a very strong support line around $1.8 and it could be a considerable buy at this level ( putting the stop loss below this support line)

 

[McLovin]

At $1.80 HVN is pretty great value IMO, you are buying a property portfolio at about book value and getting an OK retailing business thrown in for almost nothing.

 

[notting]

Still good value now that the result is out with a 9% lift.
Market respond quickly with a lift and since has gotten nervous.
My main concern is WOW selling white goods in their new Hardware thingy. Still with only one WOW store in Melb for the moment you'd think Harvey can still make a bit. Buying a bit around 2

 

[McLovin]

Still good value now that the result is out with a 9% lift.
Market respond quickly with a lift and since has gotten nervous.
My main concern is WOW selling white goods in their new Hardware thingy. Still with only one WOW store in Melb for the moment you'd think Harvey can still make a bit. Buying a bit around 2

If you take the cap rate used to value the properties as being an accurate then yes they are still good value. However, I was speaking to a guy who works in commercial property and he said Harvey's were using an inflated cap rate to value the property. I did a bit of research and a few brokers have noted the same thing, the cap rate was below market rates a few years ago and is now above. On the positive side it was good to see HVN vacancy rate fall after 4 years of rising.

My biggest concern with HVN at the moment (aside from the fact their business model is probably in long run decline) is that so far, as you've noted, whitegoods prices have held up pretty well. If the Koreans decide that they want to have a crack at seeing how much of the whitegoods market they can take then it could see the same price deflation as browngoods have.

At $1.80 it is probably fair value (I'd prefer a bigger MoS) for it's real estate assets, although the problem with the breakup scenario is it won't happen while Gerry is still alive.

 

[investorpaul]

If you take the cap rate used to value the properties as being an accurate then yes they are still good value. However, I was speaking to a guy who works in commercial property and he said Harvey's were using an inflated cap rate to value the property. I did a bit of research and a few brokers have noted the same thing, the cap rate was below market rates a few years ago and is now above. On the positive side it was good to see HVN vacancy rate fall after 4 years of rising.

My biggest concern with HVN at the moment (aside from the fact their business model is probably in long run decline) is that so far, as you've noted, whitegoods prices have held up pretty well. If the Koreans decide that they want to have a crack at seeing how much of the whitegoods market they can take then it could see the same price deflation as browngoods have.

At $1.80 it is probably fair value (I'd prefer a bigger MoS) for it's real estate assets, although the problem with the breakup scenario is it won't happen while Gerry is still alive.

Hi McLovin,

Any idea of what cap rate HVN was using to value their property at?

 

[McLovin]

Hi McLovin,

Any idea of what cap rate HVN was using to value their property at?

8.77%.

 

[ROE]

8.77%.

I don't think 8.77% is a inflated figure, if anything I reckon HVN is spot in
the middle ... not too low and not too high ... lot of properties trust use between 7%-8%
which is more aggressive than HVN

Price = Rent/Cap Rate

The lower the cap rate, the higher the price ....so HVN is more conservative than people like Bunnings properties trust etc..

and beside cap rate doesn't matter if you are not force to sell and dont have a lot of debt ...
you just collect your rent every year whatever the going rate is ..

HVN is low in debt and very conservative so their properties portfolio is safe as.

Gerry whinge a bit but he's not stupid ...he know how to make a bucks and been through many recession and wont let debt get in the way of bring his fortune down..

Gerry run it like my rental properties I would never sell it I just collect rent every year ...I don't care what
the cap rate is or what price the properties goes for unless I want to sell which I'm not..

HVN is a good exposure to properties and retail in one mix ...

 

[investorpaul]

I agree ROE, if anything I think 8.77% is too conservative.

I used to work for a property developer and they were constantly using a cap rate of 7 to 7.75%.

Given alot of HVN's prop is large space/bulky goods/stand alone store type configuration I think a cap rate of between 8.25 and 8.75% would be fair.

 

[skc]

I agree ROE, if anything I think 8.77% is too conservative.

I used to work for a property developer and they were constantly using a cap rate of 7 to 7.75%.

Given alot of HVN's prop is large space/bulky goods/stand alone store type configuration I think a cap rate of between 8.25 and 8.75% would be fair.

Isn't the value of the property somewhat derived from the success or otherwise of the retail businesses which it hold? If a shop is to shut due to bad sales then the value of the property will also take a hit. So the two sides of the business may not be as diversified as one would hope.

Although it is probably relatively more attractive than buying a retail trust at a higher cap rate, given that you get a retail business on the cheap... as long as the retail side doesn't start making losses.

 

[ROE]

Isn't the value of the property somewhat derived from the success or otherwise of the retail businesses which it hold? If a shop is to shut due to bad sales then the value of the property will also take a hit. So the two sides of the business may not be as diversified as one would hope.

Although it is probably relatively more attractive than buying a retail trust at a higher cap rate, given that you get a retail business on the cheap... as long as the retail side doesn't start making losses.

Unless you running your business at a loss for a long time you shut up ..but slow sales
and still making a profit no one would shut up shops .. To date and through out many recession HVN still turn a profit for its Franchisee.

beside at price around 1.80-2.00 a lot of that would have already been factor in
unless employment go to 10%, HVN property portfolio should enjoy reasonable income
plus a bit on the business side ...people bitch, people moan but as long as they still
have a job, they will spend some of that money at HVN, JB, WOW and WES

HVN is price much more attractive to the other lot so your down side is low compared to upside... and the HVN property equity ratio is pretty good

2B property, 600m of debt ... 70/30 ratio ... there is room for it to pay down more debt
and it becomes even more attractive ...

The future is always uncertain make sure you can handle the future

 

[McLovin]

I agree ROE, if anything I think 8.77% is too conservative.

I used to work for a property developer and they were constantly using a cap rate of 7 to 7.75%.

Given alot of HVN's prop is large space/bulky goods/stand alone store type configuration I think a cap rate of between 8.25 and 8.75% would be fair.

Jones Lang LaSalle gives the following cap rates for bulky good property.

Trough cycle nation average bulky goods cap rate of 10.15%
Current nation average bulky goods cap rate of 9.35%
Peak cycle nation average bulky goods cap rate of 7.63%

Also over the last 5 years HVN's cap rate has gone from a discount to a premium to the prevailing market rate.

 

[ROE]

Also over the last 5 years HVN's cap rate has gone from a discount to a premium to the prevailing market rate.

What do you make of this in the report? I don't see them deviate much
unless you count a few basis points as a massive deviation from the norm..


Australian Property Portfolio Statistics
Weighted average capitalisation rates
FY2007 FY2008 FY2009 FY2010 FY2011
8.69% 8.21% 8.36% 8.7% 8.77%

 

[McLovin]

What do you make of this in the report? I don't see them deviate much
unless you count a few basis points as a massive deviation from the norm..


Australian Property Portfolio Statistics
Weighted average capitalisation rates
FY2007 FY2008 FY2009 FY2010 FY2011
8.69% 8.21% 8.36% 8.7% 8.77%

You're only looking at one side of the equation. Either HVN has adjusted their cap rate or the market cap rate has adjusted and HVN's has remained unchanged.

 

[ROE]

You're only looking at one side of the equation. Either HVN has adjusted their cap rate or the market cap rate has adjusted and HVN's has remained unchanged.

So what you saying HVN manipulate the figures and no one else has?

Let take the data you post up

Trough cycle nation average bulky goods cap rate of 10.15%
Current nation average bulky goods cap rate of 9.35%
Peak cycle nation average bulky goods cap rate of 7.63%

wouldn't an 8 ish figure sound about right, smack bang in the middle?

what HVN figure show you is they are consistent and not play around with figures..

during good and bad times they use similar figures with little variation ...

anyway these figure doesn't mean anything unless you intend to refinance debt
or sell the properties .... HVN intends to do neither...almost all of their debt are long term

what more important is their underlying operations..

Net Cash flow at $358m
Return on invested capital: 15%
It generates a 9.1% rental income on its properties.

if it generates like 4% or 5% yes I would say its properties is over value but 9.1% is
a fair figure for commercial rental return.

so people making these comments are without facts but
pure speculation and comments.

sometimes fictions tells better stories than facts

enough said from me ... I tend to go with the facts..

 

[McLovin]

So what you saying HVN manipulate the figures and no one else has?

Where did I say that? I haven't said anyone is manipulating anything. HVN claims they use a lower cap rate because their properties are in better locations. Perhaps they are. On the other hand, the point skc and I was making is that their property portfolio is dependent to a certain degree (how much I don't know) on the strength of their underlying retail business.

I've pointed out the difference, you can make of it what you want. I certainly won't lose sleep over it.

 

[iced earth]

Technical Analysis of HVN(Harvy Norman):11 sept 2011:

The price is moving in a channel and now has touched the upper line, if it could scape up of the upper line the target would be $2.50 if not the lower line would act as the support line.
Also EMA20 , momentum and MACD has sent buy signal



In this picture we have 3 resistance lines (red line is short term, blue line is middle term and green is longer term)



Tio and parabolic SAR shows uptrend in HVN

 

[iced earth]

HVN-20 SEPT 2011:

HVN could not pass up the upper (resistance) line of the channel, now it is near to the lower (support) line of the channel which could halt downtrend of HVN.

 

[iced earth]

HVN - 10.10.2011
=========================
HVN is moving in a upward channel and now is touching the upper line of the channel which might cause a little halt in rising



but important thing is that HVN has been passed up the resistance line (green) and the possible correction would be just a pull back to this resistance line

 

[ROE]

The come back king
http://www.theage.com.au/business/harvey-norman-takes-the-online-plunge-20111123-1nuj3.html

I went and check some stuff out ..they are cheaper than JB Hi-Fi

Buy online pickup in store ..pretty damn cool