Forum Archive Index - September 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

 Athol, I hope that this is satisfactory. A dividend is due and the Annual Meeting could be on 22 Nov.

 

Gerry

Holds CLI

Disclaimer: Readers are not asked to buy, hold or sell CLI. To do so, will be entirely at their own risk.

 

  

Athol,

 

Yes, I had a look at this stock last night! Based on the current price of $2.50 and last year's profit of $ 154 mill., the P/E = 4.6!

 

Analysts say that this profit includes "revaluations" ( see my reference to the "residual effect", below ) which, when deducted, would reduce this to say $ 110 + mill.

 

CLI is adamant that the $ 154 mill. profit is correct. However, CLI paid 16.6% tax and this will be increasing. 

---

Let us assume that their 'real' profit is about $ 125 mill. on 30/6/2002. By then, they will have about 285 mill. shares. Then, E/S= 43.9 cents and the prospective P/E = 5.7  

 

If CLI persists with including the "revaluations" and instead declares a profit of say $175 mill, then the prospective P/E =4.1! 

 

Lower interest rates tend to increase property valuations, particularly in high class property, assuming that they are fully rented out, and these are! Much of their property is less than 18 months old and most property are on 10-15 year leases to blue chip tenants!

 

There is also a residual effect of Annuities, as CLI is entitled to any " residual " property after the annuitant has died. I think that for that reason alone, this ever reoccurring annual residual effect will continue to be part of the profit and that this will increase with time to the consternation of some analysts!

 

I agree with CLI and feel that the current price is a joke! The NTA is increasing at a fast rate.

 

There has been some friction between CLI and some brokers as CLI tends to do a lot of business through their own investment

advisors and not through other brokers: The latter won't recommend CLI and may even take an active stance against this company!

 

Some investors are waiting for further developments in the UK, and some risk still exists there till the CLI schemes are up and running. Kerry Packer owns 20% of CLI. 

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The wall of money for Annuities keeps coming in and the compulsary Aussie super schemes also produce profits for CLI and other companies.CLI is the largest Annuities provider in Australia!

 

Shares ought to pick up from now, I think, particularly after this CLI announcement, made on Friday, 3.20 pm (Aus, E ):

 

From Stockness:

 

CLI  Challenger International Ltd

CHALLENGER INTERNATIONAL LIMITED              2001-09-28  ASX-SIGNAL-G

HOMEX - Sydney

+++++++++++++++++++++++++
In response to your enquiry, the directors of Challenger
International Limited ("Challenger") state that the business has not
been materially affected by the recent global problems relating to
the terrorist attacks in the USA.

The majority of Challenger's products are fixed interest in nature
and all these areas continue to show strong growth of funds under
management. Also the core, term-certain annuities business of
Challenger Life has been trading strongly and is ahead of budget.
Inflow on some growth funds have slowed but are still positive.

The company's approximately $1.75 billion property portfolio has not
been affected by the events of September 11, and the drop in interest
rates has had a positive affect on the value of the properties in the
portfolio.

It is important to reiterate that Challenger Life does not underwrite
ordinary life insurance risks and, thus, is not exposed to the
effects of the crisis in the USA. Lifetime annuities, which are less
than 4% of the total annuity business of the company, involve an
element of mortality risk. This risk is the subject of a reinsurance
treaty with the Munich Reinsurance Group who, while affected by the
USA terrorist events, retains its AAA rating from S & P.

The Directors of Challenger have made this statement as a response to
an inquiry from the Australian Stock Exchange and view the
substantial decline in the company's share price since September 11
to be inconsistent with the business levels and performance factors
mentioned above. In addition, it is also relevant to note that there
appears to have been substantial selling of Challenger shares as a
result of re-balancing of some professional portfolios where there
had previously been an expectation of the company's shares being
included in the S & P 100 index at the last round of adjustments
which take effect as at 1 October 2001. These types of portfolio
adjustments would be expected to be completed by quarter end (ie
effectively today.)


R Thomas
ACTING COMPANY SECRETARY