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Dividend Growth at Challenger Technologies Limited

The largest IT products and services provider in Singapore, Challenger Technologies Limited (SGX: 573), released its full year results for Financial Year 2013 yesterday. It saw revenue surge 14% year-on-year to S$385.4 million, which was a record for the company. Elsewhere, net profit for Challenger grew 6% to S$17.1 million while earnings per share also went up 6% to 4.96 Singapore cents.

And, in news that would likely please income investors, the company had increased its dividend per share by 12% to 2.52 Singapore cents.

In our shores here, Challenger Technologies has a total of 40 stores comprising one flagship Challenger megastore, 22 Challenger superstores, 10 mini stores, five Valore concept stores and two Musica concept stores. In our neighbouring country, Malaysia, it operates one flagship Challenger megastore and two Challenger superstores.

For the year, revenue grew by 14% mainly due to higher sales from the retail business in Singapore. Profits, on the other hand, had grown slower on the back of higher gross profit and interest income that were partly offset by higher depreciation charges, rental, staff costs and other operating expenses.

As of 31 Dec 2013, the company had no debt with a cash pile of S$42.9 million. Though Challenger had saw its return on equity (ROE) dip by 3.3 percentage points to 28.2% in 2013, that’s still a lot stronger than the ROE of 9% for the 30 blue chips that make up the Straits Times Index (SGX: ^STI).

Challenger Technologies generated cash flow of S$16.6 million from its business for FY2013, a drop of 10% year-on-year.

The firm had proposed a final dividend of 1.42 Singapore cents per share for the quarter. Together with the interim dividend of 1.10 cent that was declared in the second quarter, total dividends of 2.52 cents per share will be dished out for FY2013. This amounts to 50.8% of FY2013’s net profit and is in line with the company’s promise that it will pay out at least 50% of its net profit for FY2013, FY2014 and FY2015 as dividends.

Mr. Loo Leong Thye, the Chief Executive of  Challenger Technologies, commented on his company’s results: “Q4 for 2013 has been a mixed quarter as business for the first two months of the quarter was slow. The Group’s revenue and profit were also evenly split between the first and second half of FY2013. We normally see stronger second half performance due to the festive season shopping in prior years. We think 2014 will continue to be challenging for us. However, we will continue to expand our retail space in Singapore and Malaysia so as to serve and reach out to a wider customer base.”

Challenger’s shares last traded at S$0.61 on Wednesday. Based on its latest results, this translates to a historical PE ratio of 12.3 and a dividend yield of 4.1%

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns shares in Challenger Technologies Limited.