HVN

Sharemarket analyst Macquarie Research Equities have provided a 2007/2008 Australian Budget Impact statement. Investors who had been eagerly awaiting the release of the 2007-2008 Budget were last night greeted with a host of initiatives that included a significant boost to household disposable income.

Harvey Norman (HVN) have maintained a price target of $4.25 for their shares from stock analyst Citigroup Investment Research (CIR). The retailer has reported 1H07 sales of $2.71 billion, growth of 16.7%. Furniture sales continue to improve, but air-conditioner sales were weak dragging like-for-like growth down to 6.2% in 2Q07 from 8.2% in 1Q07. CIR have slightly raised their EPS forecasts by 0.9% in FY07e and FY08e to reflect the sales result. Furniture sales grew 10% in 2Q07. The result continues the improvement seen in 1Q07 and is a positive sign for HVN's FY07e profit margins given the pressure on Furniture sales in FY06. 2Q07 growth softened because sales of seasonal merchandise fell. The temperature in the eastern states of Australia was lower than 2005. However, overall temperatures were near long-term averages indicating the sales slowdown was a correction. Harvey Norman confirmed that it acquired 14 Retravision stores. The acquisition price was not revealed, but no goodwill was paid. The acquisition adds to HVN's market dominance in Australia and weakens a major competitor. CIR expect more stores to be acquired in the coming months.Total new store growth was the fastest since FY04. The growth continues in offshore markets with new stores in Ireland and NZ during 2Q07.

Deutsche Bank have rated the Harvey Norman (HVN) stock with a hold recommendation dropping their share price target to $3.75 from $4.00. Continuing downside risks to the retail business are rising world oil prices and higher interest rates.

Credit Suisse has rated the Harvey Norman (HVN) stock as Downgrade to Neutral from an Outperform recommendation. Harvey Norman Holdings is listed on the Australian Stock Exchange (ASX) under stock code HVN. Check your charts!

Last week the Australian government handed down their 2006-07 federal budget. Macquarie Research Equities (MRE) notes that "The centre piece of the Budget was the personal income tax cuts which were more widespread and extensive than the financial markets had been anticipating. This will inevitably provoke fears that interest rates may have to rise in order to offset the fiscal stimulus.
The key initiatives announced in the Budget that have notable implications for the Australian listed market are as follows:
- Reductions in the tax rates on personal income as well as increases to the thresholds for each tax rate;
- Accelerating the depreciation allowance for eligible business investment;
- Abolition of the Reasonable Benefit Limit (RBL) and age based contribution limits, and the elimination of tax of benefits paid to retires from taxed superannuation funds."
Here are some Australian listed stocks that MRE believes that will benefit from the budget: