Skip to main content
EquitiesRetail

Harvey Norman (HVN): Moving the dial

Some beats in 1H25 and good momentum at the start of 2H

Harvey Norman (HVN)’s 1H25 result saw some beats in the Australian Franchising division and also in the company operated New Zealand region. Australia franchisee headline comparable sales growth strengthened to +8.6% on pcp in Nov-Dec from +3.1% on pcp in Jul-Oct while all regions except Singapore/Malaysia had an incrementally better start to 2H with the positive consumer uptake of Mobile, Computer Technology and Home Appliances categories. In terms of new store growth, company-operated overseas stores were at 122 with 5 new stores opened across NZ, Malaysia & UK (Merry Hill flagship store) and 1 closure in Singapore.

Earnings changes

We factor in the beats in Australian franchising/NZ however somewhat offset by misses in Asia and higher costs (than BPe) in the company operated division including that for the UK flagship (opened in Oct-24). Our revenues are upgraded with the current comparable sales growth at +2.1% for Jan and +7.0% for Feb (first 21 days) in Australia while NZ has improved to better than expected -1.0% for Jan. We also make some changes to our new store assumptions given the closures of smaller stores in NZ (however offset by larger openings) and longer dated Malaysian store growth outlook. The net result sees our NPAT forecasts -1.8%/+2.3%/+3.1% for FY25/26/27e.

Investment View: PT +3% to $6.00, maintain BUY

Our PT +3% to $6.00 with earnings/cash flow changes. Our PT is based on a sum-of-the-parts valuation with a DCF methodology (WACC ~9%, TGR ~3%) for retail operations (ex-Property) and the property bank on a fair value basis (as last reported) assuming a broadly stable capitalisation rate in FY25e and ahead. We see HVN trading attractively at ~15x on a 1-year forward basis with multiple catalysts near/midterm such as improving sales trends in key markets assisted by a sizable upside from the AI driven upgrade cycle/replacement & spend shift to tech, gaining penetration in targeted regions in the UK in addition to the incremental earnings opportunities in its Property division as Australia’s largest single owner with a $4.4b global portfolio.

To read the full report click the button below.

View Detailed Report
Authored by Chami Ratnapala – Analyst – at Bell Potter Securities, 03 March 2025
Important Disclaimer—This may affect your legal rights: Because this document has been prepared without consideration of any specific client’s financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. This is general investment advice only and does not constitute advice to any person.
Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended.