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Hi Paul,
I have been following CGF (Challenger) for a number of years. I was lucky enough to buy it a number of years ago around $7.00.and rode the price increase. I hung onto it to my dismay. It has been on a downward trend for years. Do you see any worth in the stock? Commsec has it at a dividend of 3.4% fully franked.
A: I find Challenger an extraordinarily difficult company to get a handle on, and as a result, tend to steer away from it. Its dominant market position in annuities is challenged when interest rates are so low, and it appears to have ongoing capital needs.
Tailwinds include the possibility of higher bond yields, inflation and a re-surgence in the demand for annuities.
At an investor briefing last week, it downgraded its FY21 NPBT to the lower end of guidance ($390m to $440m), and posted guidance for FY22 of a NPBT of $430m to $480m. It also reduced its target ROE (return on equity) to the RBA cash rate plus 12%.
The brokers are neutral on the stock – 1 buy recommendation, 6 neutral recommendations, with a consensus target price of $5.96, about 10% higher than the last price of $5.38. The range is tight…….from a low of $5.30 from Macquarie to a high of $6.50 from Morgan Stanley. The forecast dividend yield is 3.8%, which should be fully franked.
I think there are “easier” stocks to invest in.
