upgrades, page-9

This from Ord Minnett:


Challenger Financial Services Group (CGF.AX – A$5.05), Buy
Takeover Target Speculation Likely Incorrect
�� Recent media speculation has suggested that the recent strength in the CGF share price may reflect that that (i) the Packer
Family 21% stake in CGF through Consolidated Press Holdings may be up for sale, and (ii) CGF may be a takeover target for
either WBC, BNB or private equity generally. For CGF to be in play ConsPress would have to be a seller.
�� Despite recurring speculation to the contrary we believe Consolidated Press are unlikely to divest its stake in CGF at the
present price given (i) CGF provides Consolidated Press Holdings with its targeted exposure to Financial Services, and (ii)
CGF is still cheap with the present share price still not capturing the latent value of the A$2bn MetLife annuities portfolio
which CGF acquired for free in February 2007.
�� While domestic institutions are now broadly market weight the facts are that some domestic institutions carry significant
overweight CGF positions, while many are zero weight and offshore institutional investors are strongly underweight
notwithstanding CGF is an MSCI stock.
�� We believe CGF is going up because it is cheap and the share register is tight. Our CGF zero-premium sum of the parts
valuation December 2007 share price target is A$6.00. The risk to this price target is future growth in funds / mortgages
under management and the reallocation of investment assets from low yielding cash / fixed interest to higher yielding asset
classes.