It's apparent that Challenger has opened more stores since their last reported results; and these could potentially contribute more to revenue and earnings, and result in improved cash flows and therefore higher dividends.
But regarding 1-lotter share price movements, I will tend to think that these are aberrations or the work of a desperate buyer, rather than the counter exhibiting a sustained buying interest. After all, the medium-term business outlook and performance is more important to determine if a business is fairly valued, rather than just the trades done on a particular day.
(Not Vested)
BUSINESS TIMES
Published July 22, 2011
Challenger - an IT store and more
By WINSTON CHAI
MATERNITY wear, men's socks and baby diapers aren't exactly the kind of items you would typically associate with Challenger Technologies but unbeknownst to most consumers, the IT superstore has been selling such apparel for more than a year.
Mr Loo: The fluidity in customer purchasing behaviour requires a constant re-evaluation of retail strategy
However, these cannot be found on the racks of Challenger's physical retail stores. Instead, they are offered at 12buy.sg, the firm's latest attempt to cater to the modern consumer's penchant for online shopping.
In fact, gadgets make up just one of the five product categories on the site, which places a heavier emphasis on apparel and lifestyle knick-knacks.
'Being in IT retail, we need to constantly evolve with technology. When technology changes, it also changes the way we do our business,' says Challenger CEO Loo Leong Thye.
'Right now, we can see that sales volume for notebooks will overtake desktops. In time to come, the sales volume for tablets will overtake notebooks,' he adds.
For Challenger, the fluidity in customer purchasing behaviour requires a constant re-evaluation of its retail strategy.
The product mix in its stores is constantly refreshed to seize the latest consumer and technological trends.
New retail concepts and services, such as the introduction of 12buy.sg, 'mini' Challenger outlets, as well as 'Matrix IT Gallery' shops that specialise in selling notebooks, have been introduced to keep the firm ahead of the pack.
From Funan Centre, Challenger has grown its retail network to more than 24 locations across the island.
'We are able to counter them (competitors) by simply providing convenience in the form of having many outlets within easy reach of our customers. We have outlets in heartland malls, near or at MRT stations, as well as at central and town locations,' he says.
Earlier this year, it even upped the ante by offering round-the-clock shopping at its flagship Funan store.
Going 24 hours allows the company to work around the hectic lifestyles of its customers, Mr Loo explains.
'Our customers lead busy lives and have long working hours. They want to shop but have no time during the day,' he says.
Beyond Singapore, Challenger's geographical footprint now extends to Malaysia and other neighbouring countries could also feature in the company's ongoing expansion plan.
'We have three stores in Malaysia and will continue to expand in Malaysia and Singapore where there are suitable locations. We are also exploring expanding in the South-east Asia region with suitable joint venture or franchise partners,' Mr Loo reveals.
An adaptive mindset, coupled with a keen eye on operational costs, has kept Challenger in the pink of financial health year after year.
Despite analysts' prognosis of discretionary spending cutbacks, the company managed to register a healthy profit of nearly $5.3 million when the recession hit in 2008.
Its bottom line doubled to $11.1 million the year after and net profit climbed by a further 23 per cent to $13.7 million in 2010.
In recognition of his efforts, Mr Loo clinched the honour of Best CEO for companies with a market capitalisation of less than $300 million at this year's Singapore Corporate Awards.
Further to the announcement on 6th May 2011 regarding the securing of a new lease at Bangsar Shopping Centre (“the Mallâ€) in Kuala Lumpur, the Board of Directors of Challenger Technologies Limited (“the Companyâ€) wishes to announce that the Company will not proceed with the lease due to disagreement with the Mall over certain fit-out requirements. None of the directors or substantial shareholders of the Company has any interest, direct or indirect, in the above transactions.
Another feather on Challenger's cap! - local electronic/broadband/home-networking products producer Aztech has selected the 24-hour Challenger Megastore in Funan DigitaLife Mall to showcase its wide range of premium powerline Ethernet adapters.....
http://info.sgx.com/webcoranncatth.nsf/V...B00317A2D/$file/pressrelease.pdf?openelement
A relevant question: In such a distribution relationship between an OEM and a retailer, who needs who more?
1H (ended 30Jun11) results just out....
http://info.sgx.com/webcoranncatth.nsf/V...100167194/$file/SGXNET1H2011.pdf?openelement [Results announcement]
http://info.sgx.com/webcoranncatth.nsf/V...100167194/$file/CHALLENGER_PressRelease_1H2011results.pdf?openelement [Press release]
I am surprised by the huge 52% yoy increase in revenue to a new record of $158.0m, which is $21.0m, or 15.3%, higher than 2H-FY10's $137.0m. Clearly, local demand for IT/digital products, and purchases by tourists, are very strong, and it appears that Challenger is gaining market share as well.
While PBT also increased by a solid 35% yoy to $9.67m, its smaller percentage increase (vs. the yoy percentage revenue increase) is mainly caused by a lower overall GP Margin of 18.5%, vs. 20.2% for the whole of FY10. This likely is related to Challenger's push for market share gain.
Based on 1H's NP of $7.85m (+35% yoy), and bearing in mind 2H's revenue and profits are usually higher (mainly due to Christmas shopping), Challenger's full-year NP for FY11 is poised to hit $17.5m - a new record. A NP of $17.5m will give an EPS of $0.0507 (based on the 345.208m outstanding issued shares as at 30Jun11), and a ROE of 51% (based on the Equity of $34.292m as at 31Dec10).
2 relevant questions: (1) What should be the fair value of this fast-growing, well-established, and steadily profitable IT retail enterprise, which I believe is destined to become the leading player in Singapore and Malaysia over the next 5 years? (2) Bearing in mind the counter is illiquid, would Mr Market be willing to do his trick by granting Challenger a market valuation close to its fair value?
To reward shareholders, Challenger as usual has declared an Interim dividend of $0.01/share (vs. FY10's $0.012/share), payable 2Sep11. After adjusting for the 1-for-2 bonus issue completed in Mar11, Challenger has actually raised the payout by 25%. Assuming Challenger just keeps a Final dividend at $0.011/share (same as FY10) - i.e. giving a total payout of $0.021/share for FY11 - we can get a forward current-year dividend yield, based on the last done share price of $0.42, of 5%.
very good results.
I am also amazed that the well trained counter cashiers never fail to ask me to renew my membership expiring this dec. Talk about keeping customers.
In the report, it is menstioned that they have secured 3 more leases for challenger stores in singapore which are due to open in Q1 2012. I m excited to know where these new locations are. I am sure 1 of them would be at Jcube undergoing reconstruction at JE.
Just checked my bank account and noted a very nice credit from Challenger's $0.01/share Interim dividend for FY11. Feeling great!
I now look forward to the FY11 full-year results expected in mid-Feb12 and the usually larger Final dividend (last FY10: $0.011/share) payable in May12.
Incidentally, shareholders should note that Challenger's FY11 profits would be boosted by $75k in dividends - a $0.01/share Interim paid in Apr11, and a $0.04/share Final+Special just declared and likely to be paid in Nov11 - from its 1.5m shares investment in listed Epicentre Holdings.
(03-09-2011, 10:19 AM)dydx Wrote: [ -> ]Just checked my bank account and noted a very nice credit from Challenger's $0.01/share Interim dividend for FY11. Feeling great!
I now look forward to the FY11 full-year results expected in mid-Feb12 and the usually larger Final dividend (last FY10: $0.011/share) payable in May12.
Incidentally, shareholders should note that Challenger's FY11 profits would be boosted by $75k in dividends - a $0.01/share Interim paid in Apr11, and a $0.04/share Final+Special just declared and likely to be paid in Nov11 - from its 1.5m shares investment in listed Epicentre Holdings.
Hi, yeah, received the nice dividend too! Did not know they hold shares in Epicentre, but yes, the extra dividends from Epicentre won't harm too! Though note that higher rental and salary expenses may also affect Challenger in its retail business, but hope its volume and scale of the business from new stores can offset these.
(31-07-2011, 01:26 PM)dydx Wrote: [ -> ]Challenger has started using a popular 3rd-party on-line shopping platform - Deal.com.sg - to promote/market arguably the world’s smallest zoom camera, the Samsung ST30.....
http://deal.com.sg/deals/singapore/S119-...aLife-Mall
Using deal.com.sg may not be so good for the merchant, as the portal takes away lots of fees, hope they do not do this often...