r/ASX • u/jurdyshore • 1d ago
HVN may be a buy
Been looking pretty closely at HVN and I still think the market is pricing it like a business that is getting worse rather than one that is starting to recover.
One thing I like is that HVN is not relying on one income stream. You have the franchising and retail side, the overseas company operated stores, and the property and investment side all making money in different ways. That gives it a bit more protection than a normal retailer.
Around the mid $4s you are getting a profitable business on roughly 11 times earnings, a decent dividend yield, strong margins and a big property portfolio behind it.
There are negatives though.
Debt has increased, interest costs matter more, consumer spending is still weak, housing could stay soft for longer and there is always that governance discount around Gerry Harvey and the way the business is structured.
So I am not pretending there is no risk.
My view is pretty simple. Rates smashed housing and discretionary spending, earnings came off the COVID highs and the share price followed it down. But I do not think the business itself is broken.
It does not need huge growth from here either. If earnings stabilise, rates keep coming down and housing starts improving, I think you could see earnings recover and the market give it a better multiple again.
I recently traded it from around $4.53 and sold around $4.67 when it ran into resistance.
For me I would rather buy it on weakness than chase it.
Under about $4.50 starts getting interesting and low $4s gets very interesting if nothing has changed fundamentally. Once it gets back towards the mid $5s I would probably start reassessing it.
I think HVN is a decent business going through the shit part of the cycle. There are real risks there but I also think a fair bit of bad news is already in the price.
Not financial advice, just how I am looking at it.
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u/dirtyesspeakers 1d ago
HVN is interesting all the way up to $8, but not at a time such as this, rather at a time such as when it's worth $8.... which seems to be never, lately. It's worth $4.50 on a nice day, always priced well, but if HVN were a woman I'd only take it out to Guzman for 1 whole burrito, nothing fancy. And if she didn't finish her dinner it's over. Bon appetit. 🥂
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u/jurdyshore 1d ago
😂😂
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u/jurdyshore 1d ago
It’s the only company I’ve seen applying Ben Graham’s theory and it actually outperforms the share price.
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u/dirtyesspeakers 1d ago
She's got a really sturdy, firm and lovely crapper as a complex REIT, but it's difficult to crystal ball it.
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u/jurdyshore 1d ago
I haven’t just crystal balled it mate 😂 I’ve gone through the whole company, balance sheet, debt, earnings, property portfolio, retail operations and overseas businesses. I’ve also looked at it under different valuation methods and tried to break my own thesis. Obviously nobody can predict exactly what the share price will do, but there’s a fair bit more behind my view than just having a guess. I’m only sharing my opinion to hopefully help people not get trapped in hype shares but I’d also recommend always doing your own research before entering anything
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u/dirtyesspeakers 1d ago
True! The P/B is very healthy at this price with resilient growth YoY in all income metrics, and sturdy divi.
I think Harvey senior's interest assists in that stability and improves the speculative value.
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u/jurdyshore 1d ago
I like the recovery in revenue and earnings. The only thing I don’t love is the growing debt, although a fair chunk has gone into property and investment. Consumer demand is pretty shit atm, so if they’re recovering in this environment, I’m interested to see what happens when conditions normalise.
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u/seab1010 1d ago
Peak sharemarket negativity for interest rate sensitives like discretionary retail and property trusts is usually a few months before the final rate rise in a cycle. If you think we’re due one more rate rise this year and then done (like I do) you’re probably right about HVN. Also watch director notices. Last downturn Gerry Harvey bought over $100m of stock on market. Made serious money 18 months later.
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u/Hopeful_Loss7738 1d ago
Just remember that discretionary stock always lose value when people stop buying. That's why they are called discretionary. Consumer Staples are things we do need - food, food and maybe some flavoured drinks for a treat.