Harvey Norman Stands Strong Alongside Rising Property Prices
- Harvey Norman Shares continued a remarkable run.
- The company has exhibited earnings per share growth of 19 per cent over the last five years.
- Morgan Stanley is Overweight Harvey Norman with a $6.40 price target.
Harvey Norman’s (ASX: HVN) diversified business model, exposure to a booming property market and a strong consumer discretionary sector which in the past year, the has surged 65 per cent. The sectors strong performance expected to continue as consumers fit out new homes and unload record savings built through JobKeeper.
Harvey Norman combines a retail, franchise, property and digital business model providing a range of homeware goods and appliances. They include but are not limited to, Furniture, Kitchen and laundry appliances, electrical products and bedding. Harvey Norman operates stores across New Zealand, Singapore, Ireland, Northern Ireland, Croatia, Malaysia and Slovenia.
The Bank of International Settlement recently revealed that global real house price inflation had risen 2.5 per cent in the third quarter of 2020. Fiscal Stimulus and more flexible access to credit, used to support economies through the pandemic, have contributed to elevated housing prices. Consumers who were once unable to buy a property have been provided with the ability to lead to a 3.4 and 3% increase in house price in Melbourne and Sydney, respectively. Goldman Sachs has also forecasted a 10 per cent increase in Australian property prices during 2021.
The beneficiaries of these elevated prices will undoubtedly include companies such as Harvey Norman, who will assist in the fit-out of these houses. Harvey Norman’s exposure to such a wide range of consumer goods will allow them to take advantage of a booming property market. Furthermore, their combination of physical and online stores will allow the company to satisfy the needs of all consumers.
Fundamentally the company pays an average dividend yield of 4.21 per cent while also experiences significant capital gains while it continues to expand its current business. With a price to earnings ratio of just 9.7 and earnings per share growth of 19 per cent over the last five years, the company is exhibiting both strong dividend payouts and capital growth.
As of the 22nd of April 2021, Harvey Norman is trading at $5.68 per share following a remarkable 148 per cent rise since its March lows. The share price has continued a remarkable uptrend which is still being held and is currently consolidating on previous highs. Despite this, Morgan Stanley has recently placed an overweight rating on Morgan Stanley with a price target of $640 per share. The company believe Harvey Norman believes it will benefit from the ‘household goods space and the vaccine rollout.’ Likewise, Macquarie and Citi both have Buy and Outperform ratings at a price target of $6.00 per share.