Challenger (ASX:CGF) is the #1 provider of annuity income streams to retirees in Australia, a strong position given the ageing population and requirement for...

Leyland Private Asset Management

Trusted and Confidential Asset Management Advisors

Challenger (ASX:CGF) is the #1 provider of annuity income streams to retirees in Australia, a strong position given the ageing population and requirement for stable income. Despite CGF's share price accretion in the last year, the company is still trading at a 20% discount to its local financial peer group. The Financial System Inquiry highlighted the need for protection against inflation and longevity risk for retirees, emphasising demand for annuity products and access to lifetime income streams. Challenger continues to deliver strong results, with FY14 normalised NPAT growing 7% to $329m. Annuities grew at 12.5% with FY15 guidance predicting similar results. Over the past 5 years Challenger grew earnings by 63% funded only by cash flow. The company now seeks to grow the annuities business through a $250m capital raising. Management expect the raising to be EPS neutral this year and accretive thereafter. With a P/E of 12x and forecast EPS growth 7% we continue to find the current valuation, growth proposition and operating environment attractive at current levels, regardless of share-price appreciation. Our monthly newsletter is available here: (VIEW LINK)


Leyland Private Asset Management
Trusted and Confidential Asset Management Advisors

Founded in 2003, Leyland Private Asset Management is an independently owned firm specialising in Australian Stock Market and Fixed Interest Investments for individuals, companies, self-managed super funds, institutions and family offices.

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