The Character Share Discussion Threads

[tkamp] 04/9/2019 08:26

It's like I'm talking to a wall.

How can you even say 'PE of 8x, yield of 6%' when both will be significantly changed when they lose their Entertainment One licenses. These are now completely irrelevant metrics. That PE would be at 14x or so if you take out E.O. and that yield would drop to maybe around 3-4%. I have already made the case that replacing the E.O. sales will not be easy at all, so you cannot just assume that they will make up for the difference, and especially not at equal margins.

And Zipstuck, you must be on drugs if you think a mega-company like Hasbro needs CCT to develop freaking kids toys. That's like saying Ferrari needs Fiat to help them build a sports-car. Of course Hasbro will 'work with CCT' (whatever that even means) for the next two years, simply because CCT has the license. After that Hasbro will dump CCT and bring all Peppa stuff in-house.

Anyways, hard to debate with people who just really do not want to see it. For your wallets I hope your IMO wildly over-optimistic and naive views will turn out to be correct.

[zipstuck] 04/9/2019 07:48

I think Hasbro has an interesting conundrum

It wants to take advantage of Peppa in the next 2 years but cant really do so unless it works with CCT.

It's stateD aim is to extract value form franchisees and the innovation that CCT brings should have some value to them IF THEY WORK WITH THEM

So Hasbro has to risk CCT promoting other product which will cut into its market.

ITS NOT AS EASY FOR HASBRO AS IT WOUYLD LIKE IMHO

[undervaluedassets] 04/9/2019 07:22

I dunno..

This company was here before Peppa Pig and will be here after.

They are quick to jump on emerging trends (which is surely the name of the game as the kids toy world is constantly evolving).

Right now:-

Huge cash pile
Pe of 8
yield of 6%

I would venture that this company will survive and thrive long after Peppa Pig has fallen from favour

[tkamp] 03/9/2019 11:35

Total Entertainment One brands that CCT sold accounted for 27% of sales in the last financial year. Not sure where you get the 20% number from.

Two more years is not much right. The value of a company is determined not just by the next few years but by its entire lifetime. Hence two years is tiny, accounts for a few % (maybe 5) of firm value. Sure keeping it for two more years is better than losing it immediately, but for valuation purposes it doesn't matter much.

[mcartdon] 03/9/2019 10:59

the peppa turnover was 25m, that is 20% t/o, they have it two more years, so 3 years before change, long time to adapt and add
they were also enthusiastic and growing so the share price is understandable, but probably a bargain.

[tkamp] 03/9/2019 10:19

Some of you need to wake up and smell the coffee, with all due respect. Whether it's a closed period or not, the argument that CCT was buying shares at 5.80 in July and is no longer today 'even though the share price is so much lower' is completely invalid because CCT is going to lose Peppa Pig. That's a real event that lowers the value of the company. It's not some fictional thing that doesn't really matter right? The company is going to lose 30% of revenues and probably an even higher % of profits (due to operating leverage + likely above-average margin of Peppa products).CCT shares are no longer worth what they were worth a month ago. Not even nearly.

Arguments like 'CCT will make up for it with new licenses or products' are just as invalid. What do you think CCT's business development employees were doing the last year? Just fiddling their thumbs? It's not because they lost Peppa that now all of a sudden the business development people are going to start to look for new brands/licenses/own IP. At best they may become more aggressive in their search, with aggressive being another word for desperate, which would result in them accepting less attractive terms to win new additions to their product portfolio.

I owned CCT shares for >1.5 years and was lucky enough to have sold out before the Peppa announcement was made (pure luck, obviously I didn't know this Peppa thing was coming). When I sold out I was thinking I'd like to get back in if the share price would fall substantially. It fell substantially, but for very good reason. There is no way I'm going back in now. IMO shares would be justified to fall to about 300p.

[sketchley] 03/9/2019 09:22

That could well explain it, thanks

[deanowls] 03/9/2019 09:18

Usually a trading update next week so maybe in a closed period.

[sketchley] 03/9/2019 08:27

Anybody know why the company are not buying there own shares at this price ?
They were buying at £5.80 in July

[scooper72] 28/8/2019 14:21

Bought a few more as my original holding from earlier this year was tiny.

[mcartdon] 23/8/2019 15:52

character have two Christmases and the sell down period even if the contracts end to continue to make money on peppa, they have two years to seek and develop new licences to replace the turnover they may loose, opportunities will come to do so and there is no reason to believe the company will not adjust to the change if it happens smoothly
with new products and new licences. the 25% drop when only 25% sales are involved is overdone when it would only affect three years out.

[undervaluedassets] 23/8/2019 15:26

have nibbled a few more

over-reaction by market to purchase of EntertainmentOne by Hasbro.

they will work it out.

[tkamp] 23/8/2019 14:59

Hasbro likes to own the IP of their products, so CCT wouldn't have been a sensible purchase for them. Also CCT is way too small an acquisition to make any sort of impact on Hasbro.

Interesting that Hasbro trades down 6% (reduction of ~$850mn in company value) while Entertainment One is trading 5% above offer price. But even if someone else acquires Entertainment One there is a real risk they would in-source toy production, unless they are acquired by a media house (e.g. Netflix, Disney, etc.)

[runthejoules] 23/8/2019 13:24

Damnit, Hasbro, ya bought the wrong company!! :-(

[zipstuck] 23/8/2019 12:29

mbdx

It would be useful if you could expand on the product that CCT is bringing to market for Hasbro licence.

If correct then there is a reciprocal arrangement in place which cant be a bad thing.

Hasbro want expand the brands so they are going to have to work with CCT to do this.

[tkamp] 23/8/2019 11:06

mbdx

Every reason to believe it will be renewed? Hasbro literally says in that it plans to bring in-house any licenses for Entertainment One brands, so not sure where you get this idea from.

[mcartdon] 23/8/2019 10:58

I have struggled to think of a bidder for character over a number of years

the buyer of entertainment one is a possibility but could just remove the brand over time,
the management could be tempted to sell up or move in with hasboro but at what price a sell out or at value?

if they dont replacement of this brand and recovery might take a while,
sadly i remember the stitch up at bluebird toys.

[mbdx7em21] 23/8/2019 09:33

just made a few calls

looks like a few spooked on back of ETO takeover - the contract has two year to run and also there's every reason to believe that it will be renewed.

ETO price above bid price - market thinks we may well see another bidder.

CCT bringing to market a product which Hasbro has license (forget which one was mentioned)

[zipstuck] 23/8/2019 09:08

Pig in a poke now

[wjccghcc] 23/8/2019 08:50

Contract was renewed in 2017 for a further 3 years. I seem to remember them saying no brand was more than 20% of sales but I suspect the margins on Peppa are low given the competition for the contract so profitability contribution probably less than that.

The share price is beginning to look interesting,

[orange1] 23/8/2019 08:48

The current Peppa Pig licence lasts until December 2020.

[zipstuck] 23/8/2019 08:23

Good spot Deanowls - I missed that one

Might make their marketplace more difficult overall so cut my losses

[sammu] 23/8/2019 07:29

Probably take them in house but not definitely in the UK? Don't know how long cct contract is and don't know what proportion of sales PP is.

[deanowls] 23/8/2019 07:19

Got out first thing on the back of eone takeover. Will they bring Peppa Pig in-house?