Challenger Limited: Fidante transaction proceeds to be channeled towards growth

Research evidence excerpt

Challenger Limited: Fidante transaction proceeds to be channeled towards growth

Siddharth Parameswaran AC Asia Pacific Equity Research

(61-2) 9003-8629 18 June 2026 J P M O R G A N

siddharth.x.parameswaran@jpmorgan.com

Investment Thesis, Valuation and Risks

Challenger Limited (Overweight; Price Target: A$10.00)

Investment Thesis

CGF is a major annuity provider in the Australian market. The company is exposed to the

retirement income market, which should grow in line with demographic changes. CGF’s

Funds Management (FM) business provides: (1) asset management; (2) back-office

administration for FM businesses; and (3) distribution for boutique FM businesses in which

it also takes minority equity stakes. We think CGF appears cheap amongst our financials

universe in Australia due to concerns about Apollo’s stake sale and recent experience losses.

We think those losses should slow, and we point to an upside catalyst from potential changes

to capital standards that would decrease the capital intensity for annuity providers. We have

always been concerned about the levered, spread nature of CGF, which exposes investors

to substantial risk from downside in markets.

Valuation

Our Dec-26 PT is A$10.00, a slight premium to our SOTP valuation of A$9.53, where we

apply 15.5x on FY26 JPMe earnings for both the Life and Funds Management segments.

Our target multiple accounts for the lighter capital intensity proposed by APRA for annuities

and CGF’s update on the potential impact of these on capital. We do not assume much in the

way of investment losses, although these have been there and could remain a material drag

on valuation.

SOTP

FY26 Earnings JPM post dilution adjustment ($mn) 52.0 52.0 52.0 52.0 52.0 52.0 52.0

Multiple - on FM FY26 Earnings (JPM Forecasts)