Following its quarterly update, Challenger has upgraded FY profit guidance to close in on the upper end of the range. While the quarter saw net outflows these included the Whitehelm exit and an institutional redemption at a lower margin, Macquarie notes.
Challenger will shortly commence its move into corporate and SME lending which should support growth but will only be a relatively small part of the business, the broker notes.
Otherwise the broker continues to like the long-term growth thematic, coupled with the capital benefits of the acquisition of the bank licence, but sees valuation as fair. Neutral retained, target falls to $6.60 from $6.70.
Sector: Diversified Financials.
Target price is $6.60.Current Price is $7.50. Difference: ($0.90) – (brackets indicate current price is over target). If CGF meets the Macquarie target it will return approximately -14% (excluding dividends, fees and charges – negative figures indicate an expected loss).
