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Challenger Technologies Limited’s 2018 Third-Quarter Earnings: Strong Growth in Net Profit

Challenger Technologies Limited (SGX: 573) is an operator of the Challenger chain of IT retail stores and online tech marketplace, Currently, the group has a total of 38 stores comprising one flagship Challenger megastore store, 25 Challenger superstores, 11 small format stores and one store in Singapore.

On Friday (2 November), Challenger announced its financial results for the third quarter ended 30 September 2018. Let’s look at the main takeaways from the earnings announcement below:

1. Revenue for the reporting quarter climbed 6% year-on-year to S$82.5 million. The increase was mainly on the back of revenue growth from both corporate sales and trade shows. Lower contribution from retail and online sales partially offset that growth.

2. Net profit surged by 44% to S$4.5 million. Higher revenue and lower operating expenses from the management’s cost control efforts led to the strong showing.

3. Consequently, earnings per share rose from 0.91 cents to 1.31 cents, an increase of 44%.

4. For the nine-month period, revenue inched up by 1% to S$236.3 million while net profit rose by 35% to S$13.7 million.

5. As of 30 September 2018, Challenger had S$61.9 million in cash and cash equivalents with no debt. In comparison, at the end of last year, it had cash and cash equivalents of S$63.2 million with zero borrowings.

6. Net asset value per share rose 3% to 25 cents.

7. Cash flow from operations improved for the 2018 third-quarter as well. This metric increased by 11% in the reporting quarter to around S$4.0 million. After accounting for capital expenditure, free cash flow was S$3.6 million, compared to that of S$3.3 million one year back.

8. The company revealed that it would open its Musica Boutique at ION Orchard by the end of this month. The boutique will focus on mid and high-end multimedia equipment. Another new concept, money, which started operating in August 2018 at JCube, retails demo and pre-owned IT and other related products. Such new offerings are “necessary to keep our retail offerings fresh and relevant to the consumer market,” said Challenger chief executive’s Loo Leong Thye.

9. Looking ahead, Challenger commented the following regarding its IT products and services division:

“The Group continues to remain cautious about the outlook and condition of the overall retail business environment. As such, we will continue to execute the ongoing cost management measures across the Group.

Meanwhile, the Group will continue to provide good value to our customers so as to increase our revenue from our omnichannel retailing and further strengthen our market position.”

Challenger shares ended Friday at S$0.47 apiece, giving a trailing price-to-earnings ratio of 9 and a dividend yield of 7%.

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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 doesn’t own shares in any companies mentioned.