MELBOURNE, Sept 11 (Reuters) - U.S. private equity firm TPG plans to list Myer, Australia's largest department store chain, on the local stock exchange this year in a deal that could be worth up to $2.6 billion and test the market's faith in recovery.

Photo: www.myer.com.au

Retail analysts cautioned that much depended on the outlook for the retail sector in what would be Australia's biggest initial public offer since the credit crisis began two years ago.

"It's a very opportunistic time for the current owners to sell their stake," said Constellation Capital Management analyst Brian Han.

"The market and retailers are pretty buoyed by all the stimulus from the government, so earnings are holding up extremely well. But what will sales look like in the next 12 months?"

Myer, which forecast 3 percent sales growth as it released profit results, said details of the planned float would be revealed in a prospectus on or about Sept. 28.

The sales forecast helped lift shares in upmarket rival David Jones Ltd (DJS.AX) by 4 percent on Friday 11 September, dealers said.

Myer's IPO comes amid a resurgence in global equity issuance, as IPOs and secondary offerings from Hong Kong to New York return to favour with institutional and retail investors.

Offerings are starting to fly off the desks of underwriters, though deal volumes remain well below their levels in the 2007 bull market.

Only 12 companies have listed on the Australian market this year, worth a total US$190.8 million, down from 41 listings in 2008 and 197 at the peak of the market in 2007, according to data from Thomson Reuters.

Myer was bought by a consortium led by TPG Capital for A$1.4 billion ($1.2 billion) in 2006.

BEAT THE CHRISTMAS RUSH

Myer has 65 stores across Australia, nearly double David Jones's 36 stores, with turnover of A$3.2 billion in 2008/09.

The company wants to have the listing underway before the busy Christmas season and the timing will also take advantage of the upturn in the stock market, analysts said.

Australia's stock market has rallied 46 percent since March as the country dodged recession, and David Jones' share price has more than doubled in that time.

But total Australian retail sales fell unexpectedly in July, and could come under further pressure if the central bank lifts interest rates later this year.

The Myer float is expected to attract strong interest from mum and dad investors, and the company will allow its 3 million loyalty card holders to pre-register for a prospectus.

Myer has 3 million shoppers a week through its doors, in a country of 21 million.

Institution investors may be more wary.

"For private equity owners looking at a sale, they are better to do something now while expectations are good, rather than wait and run the risk that conditions don't turn out to be so favourable," said White Funds Management portfolio manager Angus Gluskie.

Myer reported profit growth of 14.8 percent for the year to July, and Chief Executive Bernie Brookes said he was optimistic about the outlook for 2009/10.

He forecast sales growth of about 3 percent and growth in earnings before interest and tax growth of about 10 percent. Sales in the first six weeks of the current financial year ran ahead of the 3 percent annual growth forecast.

Analysts said Myer could be worth A$2-A$3 billion, or 8-12 times forecast earnings before interest and tax for 2009/10. They expect Myer to trade at a discount to David Jones' multiple of around 12.

Myer was bought three years ago from struggling supermarkets owner Coles Group, which was later acquired by Wesfarmers Ltd (WES.AX). The new owners have overhauled the stores, which suffered from underinvestment under Coles.

TPG and Blum Capital have a combined stake of 84.2 percent, while the Myer Family Company holds 8.3 percent and management holds 7.5 percent.

($1=1.158 Australian Dollar)

(By Victoria Thieberger. Editing by Mark Bendeich & Ian Geoghegan)