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Challenger Technologies Limited’s Latest Earnings: Revenue and Profits Are Up

Challenger Technologies Limited  (SGX: 573) reported its second-quarter earnings yesterday. The reporting period was for 1 April 2016 to 30 June 2016.

The business of Challenger Technologies is fairly straight-forward: It is primarily an IT products and services retailer with 44 stores around Singapore. You can read more about the company in here and here.

You can also catch up with the results from the company’s previous quarter here.

Financial highlights

The following’s a rundown on some of the company’s latest financial figures:

  1. For the second-quarter, Challenger Technologies’ revenue rose by 8% year–on-year to S$91.2 million.
  2. Profit from continuing operations was S$3.6 million, up 4% compared to the same quarter last year.
  3. Earnings per share (EPS) was up 10% from 0.99 cents in the second-quarter of 2015 to 1.09 cents in the reporting quarter.
  4. Cash flow from operations was S$6.6 million with capital expenditure coming in at S$533,000. The IT retailer generated $6.1 million in positive free cash flow, up significantly from the S$815,000 seen in the second-quarter of 2015 (S$1.69 million in cash flow from operations and S$879,000 in capex).
  5. As of 30 June 2016, Challenger Technologies had S$42.7 million in cash and equivalents and no debt. This is a slight increase from the S$41.7 million in cash and equivalents and no debt it recorded at the end of 2015.

In sum, Challenger Technologies managed to grow its sales and profit. The IT products retailer also generated good free cash flow and kept a clean balance sheet. The latter will be important in providing a base for any future initiatives.

The company’s board of directors proposed an interim dividend of S$0.011 per share, unchanged from last year.

Operational highlights

Challenger Technologies’ top-line grew largely due to an improved performance from tradeshow activities, corporate sales, and growing revenue from its Hachi.tech online marketplace.

Loo Leong Thye, Challenger Technologies’ chief executive, talked about the company’s digital push with Hachi.tech in the earnings release:

“Hachi.tech presents a strong platform for us to reach a wider market and an evolving customer base which shops via multiple channels today.

Today, we don’t have the physical constraints of a brick-and-mortar store because we can list an ever-growing range of products that a customer can buy anytime, anywhere. In the coming months, Hachi.tech will see more improvements in order to better serve our members.”

Loo also reminisced about the coming closure of Funan Digitalife Mall, which used to house Challenger Technologies’ flagship store:

“We had a successful closing sale after operating in Funan for more than 20 years. Despite Funan’s closure, we did not experience a significant revenue drop as our customers are already familiar with our large network of over 40 other stores where they can shop at.”

Loo remains optimistic on the future:

“We will continue to open new retail stores that have suitable locations and rentals, as well as right-size or end leases on stores that are not performing up to our expectations in this soft retail climate.”

At its closing share price of S$0.48 yesterday, Challenger Technologies traded at around 8.9 times trailing earnings with a trailing dividend yield of 5.5%.

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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.