Is Challenger Technologies Limited Up for its Latest Challenge?

Real estate investment trust CapitaLand Mall Trust (SGX: C38U) shared its plan yesterday to redevelop one of its portfolio malls, Funan DigitaLife Mall.

The IT-based mall, which will be closed for three years for the redevelopment, accounted for 5% of the REIT’s gross revenue for the first nine months of 2015.

With a potential loss of 5% of its revenue for a few years, CapitaLand Mall Trust’s decision has some implications for its own finances. The closure of the mall though, has a bigger impact for an IT retailer, namely Challenger Technologies Limited (SGX: 573).

The retailer, which has its flagship megastore located in Funan DigitaLife Mall, will be facing a loss of revenue for the duration of the closure. As already mentioned, the redevelopment plan is expected to take about three years to fulfil and the mall is set to close in the third-quarter of 2016.

The sands shifting below its feet

But, Challenger Technologies’ chief executive Loo Leong Thye remains upbeat. The following are some of his comments on the closure and its impact:

“When we first listed on SGX in 2004, our Funan store contributed to 60% of our total group revenue. As of Q32015 [third quarter of 2015], this number is only 20% of our total group revenue.

Over the last seven years, many of our members and even tourists have also begun shopping at our heartland mall stores because of proximity convenience.”

That said, Challenger Technologies has grown its revenue by around 10% per year between 2010 and 2014. Even if all the company’s other stores were to continue growing at 10%, it won’t be enough to make up for the sudden loss of 20% of total revenue stemming from the closure of the flagship store at Funan DigitaLife Mall.

Thing is, that may not be the only headwind that the retailer is facing.

Consumer dollars are also increasingly shifting toward online purchases. With 47 brick and mortar locations in Singapore, this presents another issue for Challenger Technologies to deal with.

With every challenge, though, comes opportunity.

Danger and opportunity

Loo sees the growth of e-commerce as an opportunity. He noted:

“We can stock 10 times more products online than at our megastore, creating a mega mall effect for customers to browse and transact on their mobile devices. We need to go where the customers are.

With our mobile-first revamp coming in early 2016, more Challenger customers will switch to shopping with us online. They will enjoy online-only member deals, always-on rebates credited to their eWallets and even same-day express delivery.”

Challenger Technologies also launched Andios a few months back, an e-commerce marketplace which enables customers to buy or sell their smartphones online.

Foolish takeaway

It’s too early to tell whether the company’s efforts will pay off.

At the end of 2013, Challenger Technologies reported that it had half a million members in its ValueClub loyalty program. The loyalty program could prove to be a valuable source of sales if Challenger Technologies is able to effectively to meet its members’ needs.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.