Challenger (CGF): Housing retirement funds in annuities

A media report last week suggested the Australian Government developing policy which is highly supportive of retirement-income protection products and provides a major new revenue opportunity for CGF. Following this report and given the likely introduction of DLAs and other products later next year we have upgraded our valuation to better account for the growth potential of the three developments. We have upgraded our Sum-of-Parts valuation target Life Company PE from 12.0x to 14.0x. Following which, our revised Price Target is $10.15 per share (previously $8.90 per share).