Challenger Technologies

From what I see when I bypass the Challenger Mini stores, I don't usually see many customers within.

Only store that I see good biz is their main store. Is my observations correct?

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(16-10-2013, 11:51 AM)Dividend Warrior Wrote:

(16-10-2013, 09:01 AM)riverfish Wrote: What attracted me to this stock when I bought it more than 5 years ago, was firstly, like what 8Alex8 ha said, I noticed Challenger shops doing decently at Funan Centre and also popping up at the neighbourhood malls.

Beneficial for retail REITs?

I observed that their stores are usually in shopping malls own by CapitaMalls. Maybee they having special arrangement?

(16-10-2013, 12:09 PM)NTL Wrote:

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(16-10-2013, 11:51 AM)Dividend Warrior Wrote:

(16-10-2013, 09:01 AM)riverfish Wrote: What attracted me to this stock when I bought it more than 5 years ago, was firstly, like what 8Alex8 ha said, I noticed Challenger shops doing decently at Funan Centre and also popping up at the neighbourhood malls.

Beneficial for retail REITs?

I observed that their stores are usually in shopping malls own by CapitaMalls. Maybee they having special arrangement?

Yup. That's right. CMT is the largest retail REIT in Singapore. So, no surprise.

Challenger stores under CMT:
- Funan DigitalLife Mall
- IMM
- JCube
- Plaza Singapura
- Junction 8
- Lot One
- Tampines Mall
- Bukit Panjang Plaza
- Bugis Junction (new store opening in 4Q 2013)

Challenger stores under FCT:
- Causeway Point
- Northpoint
- Bedok Point
- Yew Tee Point

Challenger stores under SPH REIT:
- Clementi Mall

Challenger stores under MCT:
- Vivocity

Another 14 stores are not under any REITs.

Hahaha. Maybe I hardly went those other shopping centres, thus never notice that Challengers are EVERYWHERE.

Challenger is trading at around 12 times earnings
Courts is trading at around 10 times earnings

which is a better choice and why?

(16-10-2013, 04:36 PM)ForeverAlone Wrote: Challenger is trading at around 12 times earnings
Courts is trading at around 10 times earnings

which is a better choice and why?

I'm not sure what's Challenger's business model but Courts is a 'licensed money lender' (Hire purchase schemes) and quite dependent on the sales of Apple products (incl. export sales of Apple products to other parts of SEA).

YTD 30 Jun Credit sales comprise of 10.1% and 54.0% of sales of goods in Sg and Msia respectively.

In Msia, they generate more profits from financing than from the sales of electronics.

Recently, Courts has been negatively impacted by weakening consumer sentiment:

-SG has been impacted by higher household debt exceeding 75% of GDP (Also, closure of JEM store due to ceiling collapse will slightly affect sales growth)
-In Msia, fuel subsidies has affected Courts’ core customer base. The Malaysian government’s warning on rising household debts and an aggressive push by AEON Credit to offer retail credit services had prompted Courts to tighten its credit policy which affected its sales

Going forward, mgmt intends to review its conservative credit sanctioning and push aggressively for more credit sales in Msia to compete against Aeon -> may cause slight drop in credit spread but generate more topline sales.

Indo expansion plans (first store to be ready by FY2015) would entail Courts enduring credit risk during the initial years in order to establish a database of credit profiles.

I bought some challenger today, pushing it to 59.5 cents ~
anything 60 cents or less I think its still a very good deal

if they make 5 cents this year, its only 12 times earning
cheap for a growth stock

(16-10-2013, 04:36 PM)ForeverAlone Wrote: Challenger is trading at around 12 times earnings
Courts is trading at around 10 times earnings

which is a better choice and why?

It's hard to generalise which is better unless you zoom into an aspect to analyse. Courts has a larger market cap and more than twice Challenger's revenues. Can't also say their products and businesses are directly comparable.

But let's say you take these two business and compare their ability to generate free cash flows (operating cash flows minus capex), Challenger is much stronger. But one can also argue that Courts has larger capex needs to support its growth plans.

(16-10-2013, 06:45 PM)ForeverAlone Wrote: I bought some challenger today, pushing it to 59.5 cents ~
anything 60 cents or less I think its still a very good deal

if they make 5 cents this year, its only 12 times earning
cheap for a growth stock

5 cents is an achievable target, given that half year results already clocked 2.47 cents. Run up to calendar year end should be better.

what do you guys think the fair value of challenger should be?

since some of you think its cheap.. then how much is it really worth?

would high rentals eat into the profits?

would buying from the internet eat into the profits?

would other competitors like Popular eat into the profits?

would it become like Epicenter?

(I remember I bought recently a mouse from Popular and I did a price check from Challenger....if I am not wrong....the price is similar)

not vested....just food for thoughts

(17-10-2013, 12:28 PM)Behappyalways Wrote: would high rentals eat into the profits?

would buying from the internet eat into the profits?

would other competitors like Popular eat into the profits?

would it become like Epicenter?

(I remember I bought recently a mouse from Popular and I did a price check from Challenger....if I am not wrong....the price is similar)

not vested....just food for thoughts

Challenger is an economies of scale business, like NTUC, Walmart. Hence, expanding their retail outlets and increasing their sale is crucial for Challenger, as bulk buy gives them pricing power with suppliers, which will enable them to keep prices competitive.

I am not too concerned about internet eating into Challenger's territory if it can sustain its economies of scale pricing power. However, Challenger's narrowing profit margins, is something which I will have to monitor closely.

Am more concerned about rising rentals & labour costs, which is a problem for most retail businesses in Singapore. Think in the long term, their successful expansion into M'sia and perhaps beyond, will determine if they are going to do well or not.