Challenger Technologies

[specuvestor]

I find it hard to believe too. Do they get huge discount for paying COD on those inventory? The suppliers not supporting the event by providing consignment terms, since there seems to be complimentary brand advertising for them?

My guesstimate is $5m max working capital for the 4 days event.

https://www.businesstimes.com.sg/compani...end-payout

Of interest also was when CLG CFO Mr Tan Wee Ko rather derisorily replied the young chap who asked about returning more of the cash hoard via dividends :
"I keep on hearing this S$20 million magical number; it looks like you all already know the business more than us in management know our business. But to tell you honestly actually, to participate in an IT show, basically the full purchase of the stocks that we need for that four-day IT show could be more than S$12 million, S$15 million, just for the four days. I think you all have your own views on how much cash we need; similarly we also have our own views of how much cash we need."


It struck me as a rather high number when I first heard it from his mouth, and a cursory analysis shows that this instinct might well be correct (correct me if i'm wrong) :

1) Challenger is paying rental deposits, renovating, outfitting, and stocking 3 stores in 2019 spanning 7,700 sqft of space..... for $3.5million in capex...

2) The 2018 AR states that it is holding on to a total of $37.939million of inventories.... across 39 retail outlets.

3) IT fairs are occasions where people throng to find good deals, hopefully to buy big-ticket items.  Supposing the cost price of such an item is $1,500 (iphone? laptop? desktop?).  Thus, the CFO is suggesting that, on the low end of his estimate (12million), CLG is stocking up on 8,000 big ticket pieces of inventory just for the 4-day IT fair.  Supposing they're selling off only half of these.. and sales are spread evenly through the 12 hours of each of the 4 days, does this not suggest that they are expecting sales of 80-90 big ticket items per hour?  I would be overjoyed to be able to sell 80 RAM sticks an hour @ $100-150 each but are sales at IT fairs for consumer IT products really at a rate of one big-ticket item per minute?

Even factoring in costs for a large booth at a typical trade show (anything from 100-500k) - I am still inclined to think the CFO might be off by an order of magnitude here....

[weijian]

CFO Tan is probably cleverly trying to mix up actual working capital and the total sales/inventory required for an IT fair.

Anyone who does business knows that suppliers dont collect money from u on the spot. Even if there is COD discount, Challenger (or any sane conservative business man) will not risk doing so because they have to keep all the inventory that doesnt sell. One could probably do it once or twice n get lucky, but u cant survive 4 IT fairs a year.

[rakkun]

CFO Tan is probably cleverly trying to mix up actual working capital and the total sales/inventory required for an IT fair.

Anyone who does business knows that suppliers dont collect money from u on the spot. Even if there is COD discount, Challenger (or any sane conservative business man) will not risk doing so because they have to keep all the inventory that doesnt sell. One could probably do it once or twice n get lucky, but u cant survive 4 IT fairs a year.

Would it be disingenous for the most in-the-know person to throw out what is basically a bald-faced lie to shareholders about actual working capital requirements of an IT fair tho?  I can only consider two possibilities - that the CFO had a moment of muddle on the one occasion that he gets to face shareholders every year, or the management is deliberately obfuscating and working contrary to the interests of minority shareholders.

That being said, I remember Challenger touting essentially a "shelf rental" business model for all of the IT products that it touts with suppliers fighting for shelf real estate in their stores, thus allowing them to have minimal inventory on its books while enjoying the profitability of good IT retail sales margins.... Has this changed?  $37.939million inventory in 39 stores = $0.972M per store feels like an extremely large number in conjunction with the touted business model above esp when considered that 13 of the stores in the denominator are "mini" or "concept stores".

[mobo]

CFO Tan is probably cleverly trying to mix up actual working capital and the total sales/inventory required for an IT fair.

Anyone who does business knows that suppliers dont collect money from u on the spot. Even if there is COD discount, Challenger (or any sane conservative business man) will not risk doing so because they have to keep all the inventory that doesnt sell. One could probably do it once or twice n get lucky, but u cant survive 4 IT fairs a year.

Would it be disingenous for the most in-the-know person to throw out what is basically a bald-faced lie to shareholders about actual working capital requirements of an IT fair tho?  I can only consider two possibilities - that the CFO had a moment of muddle on the one occasion that he gets to face shareholders every year, or the management is deliberately obfuscating and working contrary to the interests of minority shareholders.

That being said, I remember Challenger touting essentially a "shelf rental" business model for all of the IT products that it touts with suppliers fighting for shelf real estate in their stores, thus allowing them to have minimal inventory on its books while enjoying the profitability of good IT retail sales margins.... Has this changed?  $37.939million inventory in 39 stores = $0.972M per store feels like an extremely large number in conjunction with the touted business model above esp when considered that 13 of the stores in the denominator are "mini" or "concept stores".

To me it's not the lying part from the CFO that amazes me, after all realistically he has to say whatever it takes to support his boss's business decision. I also do not expect much in terms of sophistry from the CFO of a minor organization like Challenger either, hence the very lame explanation is probably the best he can do.

What is of note here is that a senior executive has to cite such a bombastic number as justification for working capital that doesn't even pass the laugh test. This goes to show how feeble the business case for privatization and cash hoarding is.

[Kelvin]

9.7% now

keep it up

[opmi]

wa lao, every VB here just buy $20k worth, can cross 10% already...

[ACTIVIST SPEAKS]

https://www.businesstimes.com.sg/compani...exit-offer

On Wednesday, Challenger's chief executive officer Loo Leong Thye, himself part of the offeror consortium as a director of Digileap, said he began exploring the possibility of delisting after receiving two unsolicited offers from Pangolin to sell its stake.
The first offer was received in October 2017 wherein Pangolin offered to sell its holding at 43.5 cents per share; the second offer was received in March 2018 and did not state the price at which Pangolin would be willing to sell, Mr Loo said.
"Instead of doing a transaction with a single shareholder, I wanted to make an offer to all shareholders and so began looking for a partner to start this process," Mr Loo added.


Well.....what we now know is Pangolin was (is?) always a very motivated seller.

[Shiyi]

The following is the response from Pangolin.

Back in October 2017 we were considering selling our Challenger shares and did sound out the company as to whether they might have a buyer. There was never any firm offer – in fact the communication with the company stated that we were “pondering the exit of our investment”. As fund managers we are always weighing up the pros and cons of holding any investment; it is part of the day to day operation of running a fund. It is also useful to sound out major shareholders as to their intentions.

The pondering was a result of frustration, not with the operational running of the business, but the drag on shareholder returns as a result of the company holding too much cash and non-core investments. The value has always been apparent within Challenger, as was the case then and as is the case now.

At the time, as part of our internal discussion within Pangolin we decided that not only would we not sell, but that we’d prepare a presentation for all the directors of the company containing our recommendations as to what Challenger should do with its excess cash and how it should be deployed for the benefit of all the company’s shareholders. We were hopeful that the directors would take our ideas on board; in fact it is surely the duty of the directors to do so.

What it seems has happened is that Mr Loo has also seen that his company is massively undervalued by the market. Whether he reached this conclusion as a result of our presentation, on his own, or with the help of Dymon Asia we don’t know. All we do know is that the offer, if it goes through at such a derisory low price and in the light of our research and recommendations, will benefit him and Dymon and not the minorities who have supported Challenger over the years. Our valuation of the company’s shares is $1.15. The offer is not even 50% of this.

We have had overwhelming support from other minorities and have received emails pledging to vote against this offer amounting to 9.8% of the company’s shares (including our shareholding). This is despite the company refusing to give us access to the share register in order to contact all the shareholders – and you can see why they would not want us to do that. 10% is enough to formally reject this offer and we’ll easily get this. Digileap are wasting time and money proceeding at 54c.

James Hay

Director

Pangolin Investment Management



About the offer price is final: they can still revise the price before EGM, if they want to.

Next is to VOTE NO for the offer. If our 9.8% sticks firmly together, Mr Loo and Dymon Asia’s Delisting plan will fail. They will have to wait for 12 months before they can make a fresh offer. By then, SGX Regco will change the rules that the Offeror will be barred from voting, leaving them little or no chance to delist with a low offer price.

[huiyi]

im 99% sure they aren't allowed to increase price liao.

just skim the announcement and section 3.1 basically says they can't change price anymore?
hi shiyi can you confirm pls

[rakkun]

I hear the Pangolin bloc has secured >10%

Good luck Digileap.