Shares of Harvey Norman Holdings Ltd [ASX:HVN] opened significantly higher today than they had closed yesterday. But they gave up much of those gains over the course of the morning.
Harvey Norman shares have been largely stagnant, since falling more than 17% in a handful of days from 27 February to 5 March.
At time of writing they are trading for $3.63 a share.
Harvey Norman’s market cap is currently $4.045 billion and enterprise value stands at $4.81 billion.
Dairy investment ends in failure
Recently, Harvey Normal wrote down over $20 million of its investment in Coomboona.
This resulted in triggering a chain of events which eventually bought down the company.
There have been legal action between the shareholders. The directors and shareholders have agreed to appoint voluntary administrators.
Despite the state of Coomboona, the company is continuing to trade.
The result of this unfortunate business partnership simply came from underperforming sales, as well as the joint venture partner being short on cash.
The breakoff resulted in Harvey Norman taking a $20.67 million hit.
Harvey Norman acquired 49.9% of Coomboona holdings back in 2015 for $34 million.
Retail real estate concern
The Coomboona partnership was not Harvey Norman’s only concern.
The value of the company’s property went up under $23 million in the six months going into December 31, which is low in comparison to $76 million during the same period last year.
Mr Harvey continues to be un-phased by the unfortunate real estate price, as he believes their real estate portfolio would continue to add to the company’s earnings.
ABC.net reported that Harvey stated:
‘If things stay as they are, then all that will happen is that every six months we will have another revaluation and properties will keep going up in price.’
The fact that most of their opposition don’t own any properties gives him confidence, and little worry on any real estate drops that may occur.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
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