In today’s daily we have covered stock research on Challenger.

S&P 500 was up by 6.03 points or 0.32% to 1869.43 on Monday. S&P 500 rose on Monday after optimism over merger activity. Pfizer Inc. added 4.2 percent after proposing to buy AstraZeneca Plc for about 58.8 billion pounds. Microsoft Corp. and Apple Inc. rallied more than 2.4 percent, leading gains among the largest technology companies. Bank of America Corp. dropped 6.3 percent after suspending its planned buybacks and dividend increase because of an error in its capital planning.

Amazon ended down 2.4 percent at $296.58, while Facebook fell 2.7 percent to close at $56.14. High-growth stocks such as those have been battered in recent weeks as investors have pulled out of the tech and biotech space. The whole M&A aspect of the pharmaceutical healthcare industry has people positively biased for the time being.


S&P 500 Daily Chart   (Source – Thomson Reuters)

S&P ASX 200was up by 5.10 points or 0.09% on Monday and closed at 5536.1 points. Goodman fielder has received a non-binding highly conditional proposal to acquire all the issued equity in Goodman Fielder at a proposed price of $0.65 per share. The proposal was received from Wilmar International, a 10.1% shareholder in GFF jointly with First Pacific Company International.

ERM Power’s share price has been declining for the past two days after cutting down its growth guidance. According to the prospectus lodged by the Spotless group, new shares will be offered representing 51% of the company at a price of between $1.60 -$1.85 per share giving spotless a market value of around $1.9 Billion.


S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – Challenger (CGF)
 
Challenger Limited is an active investment manager focusing on providing long term and secure retirement income products to an ageing demographic. Challenger operates two core investment businesses, a wholly owned APRA regulated Life Company (90% of earnings). Assets under management in the life company exceed AUD 10 billion and funds under management in the funds business exceed AUD 40 billion.
 
Challenger has made an off market cash offer of AUD 2.74 per security for the 41.3% of the ASX Listed Challenger Diversified property group or CDI, it does not own. CDI’s AUD 860 Million predominantly Australian portfolio of office, industrial and retail properties increases challenger’s property holdings from 18% of total assets to 20%.


Source - Challenger

Challenger operates its annuity business by matching payments to investors with cash flow from investment assets making predictability around long term returns vital. Although holding a collection of smaller and lower quality properties than many other listed Australian REIT’s we believe CDI’s property portfolio can deliver a stable income.


Challenger Daily Chart  (Source - Thomson Reuters)

Occupancy of 95% and a weighted average lease expiry of five years provides comfort in the short term at least. By moving up the risk curve to higher yielding investments Challenger can increase the net interest spread  or offer higher returns to annuity clients, but overextending exposure to higher risk assets  may  become problematic in a property down turn. We believe the stock is overvalued at its current price and would review the stock at a later date.

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