Challenger Technologies

[kopitescouser]

anyone know what happen to the market today? everything is going down.

[CityFarmer]

anyone know what happen to the market today? everything is going down.

Probably due to US automatic budget cut. Time to buy those under-valued?

[Musicwhiz]

anyone know what happen to the market today? everything is going down.

Don't get too worried about Mr. Market. Just focus on valuations for the business you are reviewing.

[CityFarmer]

The company continue to rationalize its outlet locations

It closes the outlet located at PIKOM ICT Mall @ CapSquare in Kuala Lumpur, and will open 2 more outlets in Tampines Mall, Singapore and Jaya Shopping Centre in Petaling Jaya, Malaysia

http://info.sgx.com/webcoranncatth.nsf/V...6003D042B/$file/ClosureofOutletAnnouncement_CapSq.pdf?openelement

http://info.sgx.com/webcoranncatth.nsf/V...6003C9F58/$file/NewleasesAnnouncement_SingaporeandMalaysia.pdf?openelement

[dydx]

FY12 (ended 31Dec12) AR is out and makes interesting reading.....
http://info.sgx.com/listprosp.nsf/6c6be9...00040dc81/$FILE/Challenger%20AR_Complete_Low-Res.pdf

Shareholders should note that the declared $0.0125/share Final dividend will be paid on 10May13.

[felixleong]

just read the AR, thanks for sharing
can't wait for the physical one to come thur mail hehe

btw I noticed ROE has been slowly declining from 42% to 32%

is it due to the intense competition from courts, which results to the lowering of net profit margins?

I do hope they can hold ROE at 30% level for the next few years to come

I'm also positive in their expansion in malaysia, do hope that management will give us a break down of the msia operation numbers

anyone here going to the AGM this month?

[lanoitar]

btw I noticed ROE has been slowly declining from 42% to 32%. is it due to the intense competition from courts, which results to the lowering of net profit margins?

ROE = NPM x Asset Turn (Sales/Asset) x Leverage (Asset/Equity)

2009: NPM = 5.8%, S = 191.559m, A = 53.913m, E = 26.548m
ROE = 0.058 x 3.553 x 2.031 = 41.85%

2013: NPM = 4.9%, S = 337.258m, A = 90.261m, E = 51.426m
ROE = 0.049 x 3.736 x 1.755 = 32.13%

Asset turn has actually improved, but not enough to offset the 15.6% drop in NPM and 13.6% drop in leverage.

I would see NPM in 2009/2010 as a fluke, as the years before were sub 5%. Wages and rental have also escalated in recent years. Even without competition, I would expect NPM to come under pressure.

Leverage, on the other hand, is under the control of management. They've switched from a 90+% dividend payout policy to the current 50%, resulting in the accumulation of idle cash. If not for this cash drag, ROE would have been about 37%.

[felixleong]

thanks for the calculations and insights, very helpful and I feel more confident about challenger now than ever ^^

[CityFarmer]

btw I noticed ROE has been slowly declining from 42% to 32%. is it due to the intense competition from courts, which results to the lowering of net profit margins?

ROE = NPM x Asset Turn (Sales/Asset) x Leverage (Asset/Equity)

2009: NPM = 5.8%, S = 191.559m, A = 53.913m, E = 26.548m
ROE = 0.058 x 3.553 x 2.031 = 41.85%

2013: NPM = 4.9%, S = 337.258m, A = 90.261m, E = 51.426m
ROE = 0.049 x 3.736 x 1.755 = 32.13%

Asset turn has actually improved, but not enough to offset the 15.6% drop in NPM and 13.6% drop in leverage.

I would see NPM in 2009/2010 as a fluke, as the years before were sub 5%. Wages and rental have also escalated in recent years. Even without competition, I would expect NPM to come under pressure.

Leverage, on the other hand, is under the control of management. They've switched from a 90+% dividend payout policy to the current 50%, resulting in the accumulation of idle cash. If not for this cash drag, ROE would have been about 37%.

Mostly agreed with the conclusion.

ROE drops partly due to NPM, and partly due to leverage, after repayment of more than S$16 million In FY2012. ROE drops due to lower leverage might not be a bad thing. One of the reasons for NPM issue may due to rapid expansion from 23 stores in FY2009 to 33 stores in FY2012.

Furthermore, ROA rises in FY2012 versus the previous year, from 16.3% (FY2011) to 17.9% (FY2012).

(vested)

[specuvestor]

Dupont breakdown is important for new investors to have a gauge of their return on capital deployed.

But for intrinsic earning power, long term value investors should look at ROA as better guage, which is just your Dupont formula divided by leverage, or simply NPM X Asset Turn. But nothing beats the grunt work of analysing the cashflow returns in detail and understanding the business, unless you are a quant guy