From Motley Fool... Can't see any prospects from the business...

From Motley Fool... Can't see any prospects from the business fundamental.

Challenger Ltd (ASX: CGF)

The clear annuity leader of Australia has seen its share price fall by around 50% since January 2018. Falling interest rates have hurt profit expectations for the fund manager.

I sold out of my holding because of the low interest rate environment and the uncertainty surrounding how long rates could be low – just look at how long Japan has had low rates.

But, that doesn’t mean it can’t continue to provide attractive dividends and perhaps market-beating returns if people are attracted (or required) to have a guaranteed source of earnings in retirement.

The Challenger Ltd (ASX: CGF) share price has lost 20% of its value since the start of the year. The annuities company’s shares have come under pressure this year after weakness in Japanese annuity sales led to a profit downgrade. Challenger ultimately reported a full year net profit after tax of $307.8 million in FY 2019, which was a 4.6% decline on the prior corresponding period.

Unfortunately, things are expected to remain tough in FY 2020, with management providing normalised net profit before tax guidance of $500 million to $550 million. At worst this implies a year on year decline of 8.75% and at best it implies a 0.3% increase. Given this subdued outlook, I would stay clear of its shares until there has been a sustained improvement in its performance and would sooner buy Australia and New Zealand Banking Group (ASX: ANZ) shares.

Challenger Ltd (ASX: CGF) I’ve sold out of this business as the ultra-low rate environment sees margins, return on equity, profits, and product sales tumble. It looks risky to me and shares are at $7.10 today.