Challenger Technologies

[setan]

Correct me if I am wrong, Berkshire Hathaway is taking a stake in HP Inc, which printer / Laptop PC side of things. These are products that requires RnD and comes with a constant recurring demand. Especially Printer Ink, which costs very little to manufacture and commands a huge premium. Printers are more or less subsidized. Also a quick look reveals that HP Inc do generate decent returns & no one is rushing into "old tech" space, hence less new competition.

HP Inc and challenger are completely different animals.

Here is some background. Even when contract manufacturers are tasked to produce HP products (venture WAS once HP's contract manufacurer when margins were still decent), the printer head know-how is still kept secret and the contract manufacturer would not be able to produce it without HP's help. Also you have the HP brand and the distribution channels that have been established over many years.

Challenger is just a IT retailer and they did a fantastic job at that. Bear in mind consumers will just go any online store or physical store to get their IT products @ a competitive price. As I did not go into any detail for challenger, I cannot comment how well their house brand(with probably higher margins)/ warranty/servicing etc are doing.

I am not saying that HP is a great investment and challenger is not(investments would require much more research and understanding to come to a decision). But in terms of moat, HP for sure has a wider one.

And comparing Challenger(IT retailer) and Sheng Siong(Supermarket), sheng siong arguably has a much wider moat even though they do not own most of the brands they sell, very much like Challenger. Sheng siong will likely be around for a long time. Challenger, not really that sure...

Hi Big Toe,

I totally agree with your statement "investments would require much more research and understanding to come to a decision".

However, there are very few publicly disclosed data on margins for the individual segments. Even there is, it is not very detailed like for the case of Challenger the margin of house brand, warranty/servicing ... etc.

I would like seek your advice whether segment reporting provided in the AR is good enough. 

Further to that, even you ask the management, the data esp. margin they given is very difficult to validate or refuse to disclose.

[Big Toe]

Pertaining to Challenger, no further comment from me as I am have no interest in the company currently. Rule of the thumb is after scanning 100 companies, 2-3 would probably suit an individual's investment profile and deserves further attention/action. Another few will KIV.

[dreamybear]

I am thinking perhaps margin isn't so much of an issue in the cases of Sheng Siong and Challenger as both turn out to be a good investment. Furthermore, the latter has both fund manager and private equity invested in it, which indicates it must have its investment merits. I guess for such stocks, the "trick" is to get in as early as possible and let the equity compound over time; it may not be worthwhile for a retail investor to get on the boat late or at high valuations.

[weijian]

@setan,
A company doesn't get listed to share some of its secrets (eg. margins) even though the requestor is a shareholder, as it also means sharing with the public. Case in point - many years ago, VICOM used to break down its vehicular and non-vehicular testing into 2 segments as both of them were relatively different business. While the former was ok because it owns 7/9 inspection centers in Singapore and everyone is compelled to use their services due to regulation, the latter was not because of the existing competition. Eventually, VICOM (wisely) merged them.

I do understand where you are coming from, because all OPMIs would prefer more information and hence more certainty when we invest. But investing at a lot of times, is about making best guesses (coming up with creative ways to approximate an estimate close to the truth) and hence eventually decision making under uncertainty. I think as OPMIs, we need to prepare ourselves for something like that.

In reality, a business list itself because it wants to benefit those who made the decision to list or get funding for expansion.
It is not to allow OPMIs to invest comfortably or with certainty.

@dreamybear,
Equating that "fund manager and private equity are vested" to "investment merits" is at best, a heuristic. It may work, it may not work. That may be how many people think but probably something VBs wouldn't want to depend too much on.

It is also interesting to remember that it depends on which side the private equity is on. Some time back, it wasn't on the side of OPMI (when it teamed up with Chairman Loo to privatise the company) but now, everyone is on the same side

[setan]

@setan,
A company doesn't get listed to share some of its secrets (eg. margins) even though the requestor is a shareholder, as it also means sharing with the public. Case in point - many years ago, VICOM used to break down its vehicular and non-vehicular testing into 2 segments as both of them were relatively different business. While the former was ok because it owns 7/9 inspection centers in Singapore and everyone is compelled to use their services due to regulation, the latter was not because of the existing competition. Eventually, VICOM (wisely) merged them.

I do understand where you are coming from, because all OPMIs would prefer more information and hence more certainty when we invest. But investing at a lot of times, is about making best guesses (coming up with creative ways to approximate an estimate close to the truth) and hence eventually decision making under uncertainty. I think as OPMIs, we need to prepare ourselves for something like that.

In reality, a business list itself because it wants to benefit those who made the decision to list or get funding for expansion.
It is not to allow OPMIs to invest comfortably or with certainty.

@dreamybear,
Equating that "fund manager and private equity are vested" to "investment merits" is at best, a heuristic. It may work, it may not work. That may be how many people think but probably something VBs wouldn't want to depend too much on.

It is also interesting to remember that it depends on which side the private equity is on. Some time back, it wasn't on the side of OPMI (when it teamed up with Chairman Loo to privatise the company) but now, everyone is on the same side

Hi WeiJian,

Well, I got you and accepted it is fact in the business world. That's why the experienced investors say investment is a art rather than science. Hope I can get better over time.

Thank you.

[dreamybear]

Proposed voluntary delisting. $0.56 including declared dividend FY2018 of $0.02.

https://links.sgx.com/1.0.0/corporate-an...190320.pdf

Sent from my SM-G955F using Tapatalk

Years later, once again .....

---------------

Challenger majority stakeholders make S$0.56 per share cash offer to privatise company
https://www.businesstimes.com.sg/compani...se-company
"....The trading volume also excludes the sale of 9.2 million units at S$0.50 per share to Digileap Capital. This was done in January via a married deal, which is an off-the-market share transaction between two parties on an agreed price.

The privatisation offer therefore provides shareholders with a “clean cash exit opportunity” to realise their investment at a premium – something that might otherwise “not be available given the low trading liquidity of the shares”, said the offeror...."

[pianist]

At S$0.56 a share, the offer price represents a premium of 3.1 per cent over the volume weighted average price (VWAP) for the shares traded in Challenger over the past one month

Doesn't look exciting

[brattzz]

At S$0.56 a share, the offer price represents a premium of 3.1 per cent over the volume weighted average price (VWAP) for the shares traded in Challenger over the past one month

Doesn't look exciting

2019 = 56cts offer
2023 = 56 cts offer again...

i see it as an attempt to just mop up as much loose shares as possible for 2023, and hope to make a final offer in 2024, before ACRA's SPV cut off rules kicks in...

anyway, market's buy-in price is 58cts, impelling possible price revision... 

[weijian]

2019 = 56cts offer
2023 = 56 cts offer again...

i see it as an attempt to just mop up as much loose shares as possible for 2023, and hope to make a final offer in 2024, before ACRA's SPV cut off rules kicks in...

anyway, market's buy-in price is 58cts, impelling possible price revision... 

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.

[brattzz]

Not much options left, 
1) Reduce/stop dividends,
2) Offer low-ball price, then see market reactions.. make revised offer if necessary..
3) If cannot managed to get 90%, but very close...just let offer lapse, try again next year... repeat step 2.

Or,

4) do share placement to dilute the remaining 10% resistance, then offer again next year where there is no more resistance left.....

:O

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.

Starting the offer with an unloved price to be used as an anchor for a subsequent revised price, seems to be playbook for most recent takeovers.