KEY POINTS:
MELBOURNE - Credit Suisse today downgraded its rating on Australia's Harvey Norman Holdings Ltd to neutral, based on price, but said a 3-5 cent special dividend was likely.
Credit Suisse said it expects the electrical and furniture retailer to record a A$107 million ($123 million) after-tax gain on the sale of its 52.8 per cent stake in Rebel Sport Ltd, which was bought by private equity firm Archer Capital after a narrow shareholder vote in favour.
Given Harvey Norman's historical payout approach, a special dividend of 3 to 5 cents may be declared from the proceeds, analyst Michael Jenneke said.
He said Harvey Norman had a positive outlook given further opportunities for growth in market share and stronger discretionary spending, and raised its 12-month target price for the shares to A$5.20 from A$5.00.
"Despite this increase, the recent outperformance by the stock has reduced our total return expectations sufficiently to downgrade our rating to neutral from outperform," he said.
But he added high valuations meant he had no outperform ratings among the larger retailers, and Harvey Norman remains at the top of Credit Suisse's sector preferences.
- REUTERS
