Value Investment on Singapore Stock Exchange - Valuation Report of Challenger Technologies

Value Investment on Singapore Stock Exchange - Valuation Report of Challenger Technologies

Evaluated on 11-Jan-2007 and I am currently not invested in this company.

About the company:

1. Core Business: IT products and services retailer (11 stores in Singapore) and electronic signage services.
2. Date of Listing: Jan-2004
3. What I like about this company: It is cash-rich, with about 46% of its total assets is cash. Revenue, Earning Per Share and Net Asset Value has been slowly increasing since 2003. The CEO is also one of the substantial shareholders, thus the company's fortune is closely tied to his own fortune. :)
4. What I do not like about this company: About 32% of its total assets is carried as inventories. I may be wrong, my impression is that value of high-tech goods tends to depreciate pretty quickly and I am not too comfortable that. I wonder how fast does its high-tech inventory moves out of the stores.
5. Competitive advantage (if any): One stop shop for customers?

Valuation Statistics (base on 3Q06 financial report)

1. Earning Per Share: $0.029 (projected)
2. Price/Earnings ratio : 7.02
3. Operating Profit: 5.57%
4. Return on Equity Ratio: 33.76 (projected)
5. Current Ratio: 2.59 (current assets is more than short-term debts)
6. Debt/Total Equity Ratio: 0.55 (total debt is less than total equity)
7. Net Tangible Assets: $0.086

Conclusion

1. Price: $0.20 (11-Jan-07)
2. Intrinsic Value: $0.23 (highly subjective)
3. Maximum Price I would purchase at: $0.16 (highly subjective)
4. Price to IV: 88%
5. Final word: At a 88% price to IV ratio, I am not very tempted to buy, it does not give me a good enough margin of safety. Personally, I think it is in a very competitive and price-sensitive business, which is not something I like.

Information sources

1. Challenger Technologies company website at http://www.challengerasia.com/
2. Its investor relation website at http://ir.asia1.com.sg/challenger/

Disclaimer: Completeness, accuracy and opinions based on information and comments mentioned via this website cannot be guaranteed. Investors should always conduct their own research before making investment decisions.