Challenger Technologies

Challenger Technologies

Postby Aspellian » Fri May 23, 2008 9:30 am

AGM on 18th April 2008

Below are observations made on AGM today. [comments by Aspellian]

Malaysia - next Growth Driver[u]
- Largest IT specialty MegaStore in Msia.
- Capitaland "invited" Challenger as a key tenant in Mines Shopping Fair. The rent is reasonable. Mgt always emphasised on affordable rentals (<25% of GP margins) when assessing new locations.
Other tenants include Giant and Daiso.
Mgt is confident of Capitaland's expertise in "building up" the crowd through promotions and the right tenant mix.
[A good strategy of following the right "boss"/landlord. Capitaland has a good track record of turning around non-performing malls; wise move by mgt]

- Challenger will take its time to establish the market through its MegaStore. Megastore will have ~5,000 sqft for backoffice eg. admin and merchanise staff. As more stores are opened in Msia, there will be economies of scale and overheads will reduce.

- Reno cost est. to be RM1m to 2m [much lower than my estimation of S$1.5m; maybe labour and materials cheaper]

- Capitaland has other malls in Msia (5 - 10 malls in the owned and in pipeline) and possible for Challenger to tag along when it is ready to expand. it will be 6mths to 1 year before the expansion. [A good timeline to understand the local market and set up of network]

- Only one Mega Store, the future expansion on Super Stores. Similar to Spore concept. [follow a tried and tested winning formula, with a bigger Msia market compared to the matured Spore retail scene]

- Mgt is mindful of Thailand misadventures in the past, so prudent in the current overseas expansion.

- [Possibility of Msia number of stores to be as much as Spore or even more in 3-5 years time]

RISK FACTORS
Poor understanding of culture/market - [but through the Q&As, it seems that mgt is more prepared and taking calculated steps in their Msia expansion]

New management team / staff - [only a single key management, a certain Mr Ng is from Spore. I will presume it is Mr Ng Kian Teck whom is the Senior Director of Merchandising and inventory control and marketing department. Challenger plans to employ 60 Msians. These staff will undergo training in Spore to understand the working culture to absorb and adopt the "Challenger Way".

Human Resource factor could be Challenger's stumbling block in its expansion in Msia. The Spore team has been around for a long time, so to build up a Msia team that is as efficient and cost-effective may take time.]

Reno cost - easily supported by Spore's strong cashflow
Rental cost - mgt managed to get a competitive rental rate
Others ----xxxxx

Summary
The Msian expansion looks bright. But do not expect as much a significant contribution to bottomline as compared to all those Spore SuperStores opened in FY2006 and FY2007. These SuperStores are following the "winning formula" and Spore entity is enjoying the economies of scale and fruits of labour in laying the foundations.

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Re: Challenger Technologies

Postby Aspellian » Fri May 23, 2008 9:30 am

Other key highlights of AGM

Vivocity - sales much better than expected. Rental based on flat rental plus a % of gross turnover (if a pre-agreed target is met). Vivocity's revenue is double that of target.

Key Success Factors
Inventory Mgt - Mgt practise Just In Time. No major warehousing in Spore. One of the fastest turnover in the industry.< 30 days!!!!
Active steps taken by Mgt:
- Quarterly review of stocks.. via slowdown of inventory puchase instead of standard quantum of purchases month after month. Allows clearing of old stocks
- Old stocks are also used to reward shareholders<brand loyalty is important>
- Special discounts/promotions to clear old stocks

Accounts receiveable - mainly credit cards companies. Cash delievery of products, likelihood of bad debts very low.

Accounts Payables - As Challenger increase its topline, its a volume business and economies of scale kicks in. Bargaining power vs Suppliers. Better pricing and credit terms.

Cost control - mgt is aware. and they make sure that rental cost is attractive at < 25% of gross profits. Mgt has walked away from many lease deals when the rents are high, ie. they are not desperate -->prudent mgt.

Brand name - Nowadays, mgt waits for landlords to call and "invite" them to be a lessee because of Challenger's brandname. In this way, the rental is cheaper. Businessman.

Segment Targeting - Challenger, Matrix (notebooks) and Pixels (cameras) similar to Giant, Cold Storage and 7-Elevens concept. Targeting more segments. main priority is to create topline revenue and economies of scale and even greater buying power (volume discount, better pricing etc). In retail - size is Power.

Ask anyone dealing with NTUC FairPrice, be it brand executives, advertising companies etc, they are anything but FAIR....

Key Locations - Mgt tries to get good locations, eg. near MRTs, near to crowds, good landlords, target 3,000 sqft to 6,000 sqft. Tampines One will be the new location/even nearer to MRT than Tamp Mall... its relatively big size, 9,000sqft but its a familiar battle ground as they have been there previously in the old CPF building.

on a side note....
Competitors - Mgt do not view Courts, Best Denki or Harvey Norman as direct competitors as they operate via different business model <contrary to my initial analysis>. Mgt feels that they are the only major IT player in Spore. <True but is this complacency?? - Possible Red Flag but with Msia expansion, hopefully Mr Loo still hungry for more....>

KEY RISKS
Currently LCD TV businesses not doing very well, could even be loss making as there's no economies of scale and maybe limited publicity. hopefully it wont be a drag on their profits.

Summary
Just hold on to this counter.... this baby will be flying in very soon <when i mean SOON, i'm refering to 2-3 years time.... >

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Re: Challenger Technologies

Postby Aspellian » Fri May 23, 2008 9:31 am

Challenger has gone ex-dividend. Congrats to all shareholders who have collected 2.3cents in dividends!

and contrary to certain belief, there is not a single stock traded the day after EX. sellers at 0.285. speaks volume of the shareholders of this company.

Note that Mr Loo (CEO) and Mr Ng (fellow director) has excercise ALL their warrants [12.8m and 7.5m units resp]. This shows mgt firm commitment to this company and their interests are aligned with shareholders.

On a side note - my personal observation of Mr Loo.
- He seems like a prudent businessman. On a personal note, he mentioned that he viewed but didnt buy any of the overpriced properties in Sentosa as he feels that its too speculative and personally he wont stay there. On hindsight, he didnt regret not profiting from such speculations (he has business associates which earned millions flipping the properties there).
- His reasoning from putting part of excess cash in AUD fixed deposit is because of the high interest rate of ~8% and he feels that there is limited currency downside risk (Australia is a resource rich country and export oriented and now is commodities boom).
- He also mentioned that Challenger bought some beaten down blue chip stocks during the recent stock market turbulent.
- Note that there is no hedging done by Challenger as it has a natural hedge (S$sales vs S$puchases/expenses).

Summary
Overall, I feel that Mr Loo is a patient and savvy businessman. He does things one step at a time and doesnt over-stretch the himself/company. He has build up his Challenger brand for 20years+ and only then did he entered overseas into Thailand market but alas lost heavily. So it is a big lesson for him and the management team. BUT it is good for current shareholders as Mr Loo will be even more prudent in its Msia expansion.

I feel safe with my money on this company and management. beginning to understand/appreciate the meaning of sleeping well at night as mentioned so many times by the gurus here.

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Re: Challenger Technologies

Postby Aspellian » Fri May 23, 2008 9:31 am

Key factor will be whether Challenger will suffer much start-up losses when it open its msia megastore in June 08.

Note that Challenger opened 2 Specialty stores and 3 Superstores in FY06. In FY07 its 3 and 5 respectively. These stores have been contributing to Challenger's top and bottomline almost immediately as there's economies of scale in the Spore operations. Can Challenger be able to achieve such immediate success in its first foray into Msia? It will be a remarkable achievement if Management is able to do so, but that's overly optimistic. I feel it will take at least 6mths to a year before this store can breakeven... (hopefully Management breaks down results by geographical segments as well).

The dividends of 3.3cents may not be sustainable in FY08 unless Management pays out more than its net profits which has been done in FY06 (i think), and is also possible as Challenger is very cash-rich with no debts.

If Challenger is able to give a 10% yield at current price (dividend of 2.75cents), I will be jumping up in joy!

And if Challenger has indeed found the "magic-formula" of expansion via Mega, Super and Specialty stores and this can be replicated around the region, WOW, we have a power-baby here. I prefer organic growth even though its slow, but steady.

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Re: Challenger Technologies

Postby iam802 » Thu Jan 15, 2009 2:03 pm

RESPONSE TO COMMENT ON THE STRAITS TIMES’ “STOMP” ONLINE FORUM

http://info.sgx.com/webcoranncatth.nsf/ ... penelement

Reference is made to the comment posted on the The Straits Times’ “STOMP” online forum entitled “Challenger Superstore Faces Bankrupcy [sic] In 2009”.

The Board of Directors of the Company strongly denies the claim made in the aforesaid post that the Company is on the verge of bankruptcy for failing to pay rent in respect of its premises at the Funan DigitaLife Mall. The claim is completely without basis and malicious.

As at the date of this Announcement, the Company is not in arrears of rent in respect of any of its premises. Also, as announced on 6 August 2008, the Company had cash and cash equivalents of S$16.4 million as at 30 June 2008.

The Company is presently seeking legal advice in respect of its rights in this matter and will make further announcements if there are any material developments.

Submitted by Loo Leong Thye, Chief Executive Officer, on 15 January 2009.
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Re: Challenger Technologies

Postby Aspellian » Mon Sep 28, 2009 8:56 am

Published September 28, 2009
businesstimes

S'pore PC market to buck global decline
Research firm Gartner says surging consumer demand in Singapore is fuelling growth
, reports ONG BOON KIAT

SINGAPORE'S PC market will grow this year even as the global PC market declines, according to a new forecast from Gartner Inc.

Elbow room only: Gartner expects S'pore PC shipments to grow 3.8% this year to 1.14 million units while the Asia-Pacific region is projected to grow 7.4% to 84.1 million units. However, the worst may be over for the PC industry, the technology research firm says.

Global PC shipments are expected to decline by 2 per cent to 285.4 million units.

Explaining the reasons behind the positive growth forecast for Singapore, Gartner research analyst, client computing markets, Eileen He, said: 'Based on historical data from the second quarter, we can already see that many countries, including Singapore, are coming out of GDP decline. At the same time, the unemployment rate (in Singapore) is declining. Hence, we adjusted upwards our forecast for Singapore to show a positive growth rate by end-2009.'

'We're actually more concerned that vendors will overestimate the initial demand for Windows 7 and end up carrying excess inventories into 2010.' - George Shiffler, Gartner research director

Besides the economic factors, 'we also see that there is strong demand from the consumer side and the small business segment - those are the key factors (for Singapore)', she told BizIT in an interview.

Singapore PC shipments for the home market is projected to grow by 17.4 per cent this year - handily beating the projected growth rates for Asia-Pacific and worldwide in this segment, at 8.7 per cent and 8.8 per cent respectively.

Bullish home PC market

Singapore's bullish home PC market, which will account for 0.58 million shipment units this year, is expected to more than offset the continued slump in the professional market here.

Singapore PC shipments for the professional market, which includes the government, education and business sectors, will by fall 7.3 per cent to 0.56 million units, Gartner said.

But the research firm expects Singapore PC shipments for both the professional and home markets to be higher in 2010 than 2009. Both segments should also clock positive growth in 2010.

On Asia-Pacific's expected strong showing, Ms He attributed it to strong demand in China, which accounts for a large share of the Asia-Pacific PC shipments and has been showing relatively strong economic growth this year compared to the rest of the world. The Asian Development Bank recently raised its forecast for China's economic growth this year to 8.2 per cent.

Further fuel for this region's PC market growth comes from the recovering economies of emerging countries like Vietnam, Thailand, Indonesia and the Philippines, she added.

The outlook for the global PC market is continuing to improve, Gartner said. Its latest forecast for worldwide PC shipments to fall by 2 per cent to 285 million units this year, from 291 million units in 2008, is more optimistic than its June forecast of a 6 per cent unit decline.

With three months more to go before year-end and with Microsoft's Windows 7 expected to stoke further demand for PCs when the new operating system is released next month, global PC shipments could yet improve further.

But Gartner said it is unlikely that global shipments will see growth this year.

'At best, Windows 7 may generate a modest bump in home demand and possibly some added demand among small businesses. However, we aren't expecting most larger businesses, governments and educational institutions to express strong demand for the new operating system until late 2010,' said Gartner research director George Shiffler.

'We're actually more concerned that vendors will overestimate the initial demand for Windows 7 and end up carrying excess inventories into 2010.'

According to Gartner's numbers, for PC shipments to post growth for the year, shipments would have to grow at least 4 per cent in the second half of 2009. PC units declined 4.4 per cent in the first half of 2009 compared to the first half of 2008.

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DELIGHT, DISCIPLINE, DILIGENT, DETERMINATION, DESIRE

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Re: Challenger Technologies

Postby millionairemind » Fri Mar 26, 2010 7:22 pm

March 26, 2010, 7.13 pm (Singapore time)

Challenger CEO's daughter buys 49,000 shares at 32 cts/shr

By ANGELA TAN

Challenger Technologies Ltd said on Friday that the daughter of its chief executive officer, Loo Leong Thye, has bought 49,000 shares in the company at $0.32 each.

The IT-related company also said Mr Loo's son has converted 3,000 warrants to 3,000 shares at $0.10 each.

As a result of the share purchase and warrant conversion, Mr Loo's deemed interest in the company has risen to 0.336 per cent from 0.313 per cent.

His direct interest remains unchanged at 43.359 per cent.
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Re: Challenger Technologies

Postby memphisb » Sat Mar 27, 2010 5:57 am

something is brewing :?

Its going flat @ $0.295- $0.30 for a couple of months. Why don't buy then??
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Re: Challenger Technologies

Postby helios » Sat Mar 27, 2010 9:11 am

Yo.

What's brewing? hot Tea?
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Re: Challenger Technologies

Postby Musicwhiz » Sat Mar 27, 2010 10:54 am

memphisb wrote:something is brewing :?

Its going flat @ $0.295- $0.30 for a couple of months. Why don't buy then??


A friend of mine got some @ 22 cents during the crisis. That's when I kicked myself currently because back then I did not understand and appreciate the business model well enough to make a financial commitment.

Now, with news that CEO's daughter has bought some, it should inject more confidence into the company and its prospects.

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