What do you like about it?
Challenger operates two core investment businesses: funds management and life. Challenger Life is Australia’s largest provider of annuities.
Challenger’s core business is well exposed to one of the most significant demographic shifts in Australia’s compulsory superannuation, the growth in post-retirement assets. The Federal Government’s response to the Financial System Inquiry (FSI) is supportive of considerable growth in the annuity market in Australia and CGF remains well positioned as the leading annuity provider to capitalise on this opportunity with a strong brand and its focus on increasing distribution agreements. New distribution agreements and the favourable regulatory environment could see a multi-year growth phase.
How is it better than its competitors?
Challenger is Australia’s leading annuity provider. It has won the Plan for Life Annuity Provider for seven years in a row (2007 to 2014). It is a proven product innovator, and its independence ensures its products are available from all major financial planning organisations. Its product excellence has recently been highlighted by signing partnerships with Colonial First State and VicSuper. It now provides retirement products to over 60,000 Australian retirees.
What do you like about its management?
Challenger has a strong focused board and management team under the chairmanship of Peter Polson (ex CBA, Colonial Group & National Mutual Funds Management), since June 2004. Brian Benari was appointed managing director and chief executive officer of Challenger Limited in February 2012, having previously held the role of Group chief financial officer and chief operating officer since 2008, and leads a very capable team of managers.
They have been visionary in recognising the huge demographic switch in Australian population, out of the accumulation phase to retirement phase, as well as the requirement for the security and certainty of guaranteed cash flows with protection against market, inflation and longevity risks. They have done a great job positioning CGF to be well positioned to take advantage of that shift.
How long have you held the stock?
We have just recently acquired a position.
What is your target price?
We are targeting $9.40, which is some 18% above current levels.
At what point would you sell it?
That would have to be assessed at the time. We don’t see our target price as fixed in stone, we can see a number of other potential upside drivers.
Source: Yahoo!7 Finance, 25 February 2016
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