Analyst Note| Shaun Ler |
We lift our fair value estimate on no-moat Challenger to AUD 8 per share from AUD 7.60, after factoring in the time value of money, and revising our expense forecasts in the funds management business. The firm’s first-quarter fiscal 2022 update points to continuous improvements in operating conditions. Annuity sales are stable, thanks to customer diversification efforts, setting the foundation for future sales growth. Financial health is strong, with capital buffer at the high end of Challenger’s target. Ongoing innovation is boosting the appeal of its annuities, and helping it cater to the complex needs of super funds. Our forecast profit before tax, or PBT, for fiscal 2022 sits at AUD 453 million, in line with guidance.