For those that are interested , link below and copy & paste more recent number crunching. ALL credit goes to originating author of thread and contributors whom I trust will not mind sharing with you.


http://www.advfn.com/cmn/fbb/thread.php3?id=13145995

lex1000 - 20 Jan'07 - 23:52 - 11 of 13 edit


Taking liberty as seemed appropriate to copy post below here on number crunching thread.

scburbs - 20 Jan'07 - 17:29 - 2585 of 2586

In the absence of any sensible forecasts from the broker I have attempted to do an estimate for this year, clearly H1 is known with a higher degree of certainty than H2. The forecast is complicated by last years H1 results including Digital and the admin/selling expenses not being split out for Digital (although this can be estimated using the annual accounts disclosures). Feel free to comment or challenge the assumptions/calculations.

I have made the following assumptions:

Turnover growth H1 +30%, H2 +25%;
Gross Margin H1 42% (prior yr 40%), H2 44% (prior yr 44%). I have increased H1 margin by 2% to reflect increased sales of in house products. I am unclear why H1 last year was 4% below H2 maybe suppliers charging higher prices in Christmas rush?
Selling & Distribution H1 14% (14%), H2 14% (14%). I have kept the ratio of selling & distribution costs constant as a percentage of turnover, but with a lot of the top selling Doctor Who range advertising indirectly coming from BBC as opposed to CCT costs this may fall.
Administrative costs H1 16% (18%), H2 18% (18%). I have reduced administrative costs which should have a large fixed cost component due to the large sales increase. In practice the percentage of sales numbers I have used is still a c.21% increase in administrative costs, so plenty of scope for outperformance here.
Tax - 25% rate per CS has been used. I believe they have lower tax rate on HK profits which brings it below 30%.

The above assumptions gives an operating margin of H1 12% (9%), H2 12% (11.5%).

The eps forecast is 15p, which is made up as follows, prior year in brackets.

Turnover 89m (70m) +28%
Gross Profit 38m (29m) +31%
Sales & Dist 12.4m (9.7m) +28%
Admin costs 15m (12.4m) +21%
Operating profit 10.7m (7m) +53%
Interest payable 0.5m (0.6m)
Profit before tax 10.2m (6.3m) +62%
Tax 2.5m
PAT 7.6m
Shares estimated at 50m (includes c.3-4m for share options)
Diluted EPS 15.2p (8.02p per CS) +90%

The assumptions underlying the forecast are in my opinion relatively prudent with the scope for upgrade with the interims. Whilst the forecast is clearly way ahead of CS's forecast of 11.1p their forecast doesn't really reflect the three golden factors which are causing the increase in eps, namely:

1. Significant increase in turnover;
2. Increase in operating margins (this one is assumed and is the one which could be wrong, although even CS said trend here was improving and expected to continue to do so, they just didn't put the improvement in their forecasts! This increase should naturally occur from increased own design sales);
3. Significant reduction in the number of shares in issue.

If a reasonable P/E rating is 12-15 then a fair target price would be 180p to 225p or a prospective P/E rating of 8.5 based on the current share price. This would be a rating of 1-1.25 times turnover in line with my previous post that CCT as a ungeared toy company with good (and increasing) operating margins should have a market cap at between 1-2 times its turnover.


scburbs - 21 Jan'07 - 14:25 - 2588 of 2588

Quick comparison with Hornby. Hornby forecast PBT 9m, CCT as above 10.2m. After distinctly average H1 Hornby will struggle to beat forecasts.

Hornby has a market cap of 105m. Putting CCT on the same market cap/PBT rating would imply a market cap for CCT of 119m. A share price of 2.66 based on 44.7m shares.

Personally I think CCT should trade at a discount to Hornby as it has a more variable market and more dependant upon new products than Hornby (although this is also an opportunity at the moment as CCT seems to be very good at new products). However, against that it also has better growth prospects mainly for the same reason! The above analysis appears to support the higher end of my 180-225p price target.

Final comparison I will offer for the moment is a turnover rating comparison. To recap Mattel trades at c.2*turnover and has operating margins at 12.8% (slightly over CCT forecast above). Hasbro trades at c.1.8*turnover and has margins at around 10% or similar to CCT last year. The equivalent CCT price based on 90m turnover is massive again supporting the 180-225p range as prudent.

For reference I did not compare with the Hornby turnover as Hornby trades at a very high rating compared to turnover, but has operating margins much higher than CCT and, therefore, a comparison on a turnover basis would not be fair. It is only appropriate to make a turnover rating comparison with companies in the same industry and with a similar operating margin.

http://www.havetimeout.co.uk/analysis/analysis.php?aid=616


Gryphon2 - 21 Jan'07 - 09:36 - 12 of 13


the only comment I have on the above is that there is no reason why admin and sales and distribution costs should go up becase Sales go up so teh forecast out turn could nbe better.

lex1000 - 1 Feb'07 - 06:08 - 13 of 13 edit



scburbs - 31 Jan'07 - 10:28 - 2754 of 2803


Morning dayjob, Here is the 15p eps forecast in more detail. I welcome your comments. In terms of "significantly ahead" not many companies would state that so early in the year even if they were expecting it. Indeed it is rare for a company not even halfway through the year to upgrade forecasts at best most would say on course to at least meet expectations. Check how late CCT upgraded to significantly ahead last year!

You will note that my H1 turnover growth is already looking a bit low!

scburbs - 20 Jan'07 - 17:29 - 2585 of 2586

In the absence of any sensible forecasts from the broker I have attempted to do an estimate for this year, clearly H1 is known with a higher degree of certainty than H2. The forecast is complicated by last years H1 results including Digital and the admin/selling expenses not being split out for Digital (although this can be estimated using the annual accounts disclosures). Feel free to comment or challenge the assumptions/calculations.

I have made the following assumptions:

Turnover growth H1 +30%, H2 +25%;
Gross Margin H1 42% (prior yr 40%), H2 44% (prior yr 44%). I have increased H1 margin by 2% to reflect increased sales of in house products. I am unclear why H1 last year was 4% below H2 maybe suppliers charging higher prices in Christmas rush?
Selling & Distribution H1 14% (14%), H2 14% (14%). I have kept the ratio of selling & distribution costs constant as a percentage of turnover, but with a lot of the top selling Doctor Who range advertising indirectly coming from BBC as opposed to CCT costs this may fall.
Administrative costs H1 16% (18%), H2 18% (18%). I have reduced administrative costs which should have a large fixed cost component due to the large sales increase. In practice the percentage of sales numbers I have used is still a c.21% increase in administrative costs, so plenty of scope for outperformance here.
Tax - 25% rate per CS has been used. I believe they have lower tax rate on HK profits which brings it below 30%.

The above assumptions gives an operating margin of H1 12% (9%), H2 12% (11.5%).

The eps forecast is 15p, which is made up as follows, prior year in brackets.

Turnover 89m (70m) +28%
Gross Profit 38m (29m) +31%
Sales & Dist 12.4m (9.7m) +28%
Admin costs 15m (12.4m) +21%
Operating profit 10.7m (7m) +53%
Interest payable 0.5m (0.6m)
Profit before tax 10.2m (6.3m) +62%
Tax 2.5m
PAT 7.6m
Shares estimated at 50m (includes c.3-4m for share options)
Diluted EPS 15.2p (8.02p per CS) +90%

The assumptions underlying the forecast are in my opinion relatively prudent with the scope for upgrade with the interims. Whilst the forecast is clearly way ahead of CS's forecast of 11.1p their forecast doesn't really reflect the three golden factors which are causing the increase in eps, namely:

1. Significant increase in turnover;
2. Increase in operating margins (this one is assumed and is the one which could be wrong, although even CS said trend here was improving and expected to continue to do so, they just didn't put the improvement in their forecasts! This increase should naturally occur from increased own design sales);
3. Significant reduction in the number of shares in issue.

If a reasonable P/E rating is 12-15 then a fair target price would be 180p to 225p or a prospective P/E rating of 8.5 based on the current share price. This would be a rating of 1-1.25 times turnover in line with my previous post that CCT as a ungeared toy company with good (and increasing) operating margins should have a market cap at between 1-2 times its turnover.



lex1000 - 31 Jan'07 - 10:41 - 2756 of 2803 edit


Thanks guys for the number crunching.31/01/2007 09:20 AFXF Character Group sees current year exceed market expectations = BUY,BUY,BUY.All the other add ons 3i=STRONG BUY.AIMVHO.DYOR.

dayjob - 31 Jan'07 - 10:49 - 2757 of 2803


scburbs, looks not beyond the realms of possibility - hope you're right!

Nil Desperandum - 31 Jan'07 - 11:41 - 2758 of 2803


dayjob said:
must be 12.5p at least? - x 15 a la hornby = 1.875. which is nice

I think Hornby has a nice strong track record and so deserves that rating. I'd be comfortable with say 12x current year estimate for CCT.

scburbs said:
You have ignored the share buybacks in your 12p eps calc
Very good point. A quick calc gives 52.5m for Feb 06 interims and 44.6m now - that's about 15% less (are those figures right?!) - for the clac you have to do weighted averages over the period, but we should certainly be able to add 10% to my EPS estimates giving 8.8p and 13.2p ... hmmm better and better ... put that 13.2p on a PER of 12 and you get a nice healthy target price of 158p.

I'm not saying that I disagree with scburbs analysis, but I've learned to be prudent (perhaps overly so) and not raise expectations too much. I'd be happy with 158p by the time of the interims (end April last year) - that's 20%.

fido - 31 Jan'07 - 11:55 - 2759 of 2803


Morning comment from Charles Stanley says:

"Following a good reception for its products at last weeks Toy Fair and a positive response from its major customers, Character has announced that it expects to beat current market estimates. As a result, we are now raising our estimates by 14%. We are also raising our target price to 160p from 145p"

Putting figures on that, they are expecting:

- T/O up from previous estimate of 77m to 87m
- 8.2m PBT (as opposed to the 7.2m previously expected)
- EPS estimate up from 11.11p to 12.66p

penpont - 31 Jan'07 - 12:47 - 2762 of 2803


From Hemscott this am. - going by these numbers the upgraded 08 eps should I assume be around 14p min, though nearer 15p using the PE of 8.8 quoted below:

'Paul Bates at house broker Charles Stanley has this morning raised his pretax profit forecasts from 7.2m to 8.2m for the current year and from 8.1m to 9m for the following 12 months. His figures make the PE 9.8 falling to 8.8, a surprisingly lowly rating for a company that clearly has momentum.

He expects the dividend to be increased from 3.3p last time to 3.6p and then 3.9p, giving a yield of 2.9% rising to 3.2%. Bates has raised his target price for the second time this month, from 145p to 160p.

Goodnight1 - 31 Jan'07 - 12:46 - 2761 of 2803


Scburbs,
Good analysis! Do you think they will have as much interest to pay. I think they get the other $1.8m for the previous sale next month so should have a healthy bank balance.



scburbs - 31 Jan'07 - 13:04 - 2764 of 2803


Goodnight1, They have been using factor advances even when they have cash that is why I kept in the interest charge. In addition a lot of the cash has been spent on share buybacks, although has you say they do have the $1.8m coming in the next few weeks.

Fido/penpont, thanks for CS information. They are getting closer on the turnover number. I think the area that they will need to upgrade next for the upgrade after the interims is operating margin.

This is what they said in one of their previous notes:

"...the margin has improved with a better sales mix, which we expect to continue. Our estimates are based on a 10% operating margin, which compares against 10.4% for FY2006 and a healthy 12.3% in H2, so we believe this to be conservative too."

To summarise they expect margins to be above 10.4% and so have used 10%! A margin around 12% is more likely, but it is always useful to have broker upgrades to look forward to.

CockneyRebel - 11 Feb'07 - 11:54 - 2968 of 2976


I think north of 14p eps will be achieved this year. On the basics they did 5.69p epd in H1 last year. Add 20% to the eps for the reduced shares (it should actually be a bit more) and you have 6.83p. Sales are up 35% and margins at the same levels (I think they will increase a tad myself) and H1 eps would be 9.22p. If H2 was just the same as last year they would do 3.4p with the reduced shares. So the 12.7p eps forecast factors in no growth in H2 and the whole of the estimates factor in no margin increase.

Add in 35% sales growth in H2 maintained and you have 13.8p eps this year.

If they have increased margins it could be 15p eps+ for this year.

So the earnings growth looks like 60%+ and the PE for the current year is just 10 maximum. Growth may actually be a fair bit stronger and the PE lower if best estimates are met.

fwd PE for the year ahead will get focussed upon from the interims which is likely to be 8 or less imo. H1 ends Feb 28 so there could be an H1 trading statement in the next few weeks or then on.

17p eps next year looks well likely and a fwd PE of 12 looks modest for this gowth. Come the interims in May I bet these could easily be 170p+ with 200p a possibility imo.

CR

scburbs - 15 Feb'07 - 20:05 - 3108 of 3112


With Hasbro reporting final results now is an appropriate time to compare with CCT.

http://phx.corporate-ir.net/phoenix.zhtml?c=68329&p=irol-news

Sales $3.15bn (+2%)
PBT $0.34bn (+10%) - a PBT margin of 10.8%
EPS $1.29 (+18%)
Market cap c.$5.1bn ($29.4*175m diluted shares)

Valuation ratings:
Market cap/sales - 1.62
P/E - 22.8

In comparison CCT is growing much faster and is expected to have a better margin than 10.8% IMO, although slightly lower in Charles Stanley's opinion.

If I do the prudent thing and apply the above valuation ratings to Charles Stanley's low forecast I get a price target of around 2.90 for both. If I apply the above valuation ratings to my forecast I get a price range of 3-3.40. The reason there is a wider spread on my forecast is that I have assumed margin improvement, but have a turnover number which is only slightly higher, therefore, the targets using market cap/sales are similar.

Hasbro is a massive company which achieves a wide spread of risk, therefore, I would expect CCT to trade at a discount to Hasbro, although against that you have CCT's much greater growth prospects. The recent licenses and product range should start to narrow that risk discount.

However, even after the recent massive climb this stock trades at c.50% discount to the price suggested by using a comparison with Hasbro. Is that fair given the greater growth prospects and the new licenses that CCT is winning? I would say a 10-20% risk discount maximum and as CCT continues to perform that is where we are heading IMHO, DYOR etc. i.e. 2.50+.

Any comments on the comparison most welcome.

scburbs - 15 Feb'07 - 20:17 - 3109 of 3112


If Paulypilot will forgive me the liberty, I have also run the valuation ratings using his forecast, having reduced eps from 18.8p to 17.7p to account for c.3m share options to be consistent in using diluted eps.

His forecast gives a price range of c3.15-4.05. Again the increase in the spread of the range is that Paulypilot forecast has higher margins and when you apply the 22.9 P/E to higher margins it clearly throws of a higher forecast share price whereas the turnover number is relatively constant, i.e. the increases from 3 (my forecast) to 3.15 reflects the Paulypilot forecast assuming 35% throughout the year vs slightly slower growth in my forecast (30% H1/25% H2).

scburbs - 15 Feb'07 - 21:07 - 3110 of 3112


Whilst I am on a roll it also appears that Mattel have also announced their results covering the 2006 Christmas period. These show:

Turnover $5.65bn +9%
PBT $684m +5% (margin 12.1%)
EPS $1.53 +51% (the eps is more like $1.18 if adjusted for a normal tax rate, i.e. c.30-35%).

Valuation ratings:

Market cap/sales 1.8
P/E 17.5 or c.22.7 using tax normalised eps.

So Mattel trades on a similar adjusted P/E, but a large market cap/sales due to its better margins as compared to Hasbro. Nothing here to suggest anything but an increase in the forecasts implied by the Hasbro comparison.

lex1000 - 15 Feb'07 - 23:03 - 3111 of 3112 edit


scburbs,thanks again for your sterling efforts in producing coherent figures, comparisons and valuations.Suffice to say minimum 50% to 100% & dare I say double bagger potential from where share price is today i.e 450p if CCT not bought out before then.Anyone should think twice before selling one single Character share.To be treasured and held safe for at least a few years collecting increasing divis.CT likely to increase in % terms faster than house prices.imho.



fido - 15 Feb'07 - 23:03 - 3112 of 3112


scburbs,
Good work matey. You can see why I get so annoyed with the MM`s. This share should be at least 2.25-2.50 right now even before we start talking about potential. The problem with the MM`s apart from their playing games that is, is that they have a long memory. They remember the times when things were not so good in the days of Star Wars and they remember the loss of focus with the cameras. From a company point of view those days are long gone but the market is not so forgiving. Character have come a long way to being forgiven but there is still a little way to go yet. That is why I said that Character are recovering from an undervaluation. This does however mean that Character are still way undervalued.
Since Character refocused on what they do best, namely toys, they have not put a foot wrong. In fact they have done everything very right indeed. As deals are done and confidence increases, the undervaluation will dissapear and we can then concentrate on Characters potential.
Your figures re Hasbro and Mattel show just how undervalued Character are going forward. Both companies are mature and mainstream. Character are reborn, they are nimble on their feet and have an eye for a winner. Their expertese in marketing and distribution sets them out from the crowd and gets them noticed.
This is exactly what is happening and Character are starting to win deals. The market normally rewards higher growth companies with a higher PE rating and this is what is taking place with Character. If you take into account the growth prospects then a figure of 3-4 is indeed the SP you are looking at.
The deal with BKN was stated as initial in nature meaning more will follow. Character were the obvious choice for BKN and will be for others. Mark my words, what we know of Character growth prospects is just the start. Character are gearing up as a much bigger company, and when they aquire the certainty of earnings coupled with higher growth rates this is not only going to propel the SP strongly northwards but will also make them an odds on bid target.
This is what gets my goat.
I know that Characters SP should be much higher, so to do the company and its directors. This is also known by 3i and the institutions and by any bidding company. So why can`t we get to 4.80 in double quick time and have a proper value put on this company with one of the strongest growth rate going.
The answer is simple. Nothing is that easy, there are no straight lines in the market. The MM`s will work this all the way up to its former peak and all because its their field and their ball and they are going to earn as much money out of it as they can.

Plenty of number crunching on this thread to get your teeth into and realise the potential in CCT.

Will copy & paste number crunching after issue of H1 results in April.

Character Group expects FY to exceed current market expectations 'substantially'
AFX


LONDON (AFX) - Character Group PLC said it expects to exceed current market expectations for the financial year 'substantially' as its sales and profitability in the year to date from continuing business are ahead on-year.

The toys, games and gifts company said Christmas retail demand for its products, particularly its Doctor Who lines, was very strong and the new year has started well, adding that it expects the trend to continue throughout the calendar year.

Character Group noted ongoing strong demand for its continuing lines and new introductions such as Dragonfly, Movin and Groovin Flowers, and Bindees.

newsdesk@afxnews.com

tsm/jr



COPYRIGHT



Copyright AFX News Limited 2007. All rights reserved.

The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.



AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited

H1 Results next Tuesday.Get ready for number crunching.

Here's the full text of that Trading Update from 23 March:

Character Group PLC - Trading Update
RNS Number:5584T
Character Group PLC
23 March 2007




Issued by Charles Stanley Securities, London

Date: 23 March 2007





Immediate Release



The Character Group plc

Trading Update



The Character Group plc ('the Group') issues the following update ahead of
publication of the Group's Interim Results for the six months ended 28 February
2007, which are scheduled to be announced on Tuesday 24 April 2007.



Current Trading



As shareholders will be aware, the high street retailers have been reporting
very mixed trading conditions, however, this is not being reflected in the
Group's performance, which continues to strengthen.



Demand at retail for the Group's products at Christmas, particularly the Doctor
Who products (including the award winning Cyberman Voice Changer Helmet), was
very strong and the New Year has started well with a successful Toy Fair in
London, resulting in increased exposure and brand support by our major trading
partners. This is expected to continue throughout the calendar year.



To date, Group sales and profitability in the continuing business are
substantially ahead of the same period last year. As a result and taking account
of the on-going strong demand for our continuing lines (such as the Doctor Who
products range) and our new introductions (such as Dragonfly, Bindees, and Movin
and Groovin Flowers), the Directors now expect that the Group will also
substantially exceed current market expectations for the financial year.



Matters relating to the Discontinued Digital Products business



Following the sale by the Company's subsidiary World Wide Licenses Limited
('WWL') of the Group's digital business in February 2006, two principal matters
remain unresolved.



Petters Consumer Electronics, LLC ('Petters'), a customer of WWL, has disputed
outstanding amounts due to WWL, totalling approximately US $1.6 million.
Proceedings have now been issued and served upon Petters seeking payment of the
full amount.





continued...


-2-





Flextronics Sales & Marketing (A-P) Limited has failed to pay WWL approximately
US$1.8m, which was due to be paid on or before 22 February 2007. Advice is
currently being sought by WWL from its legal advisers regarding its position and
it is WWL's intention vigorously to pursue payment of this debt.



The background to both of these matters appears to arise out of allegations made
against Polaroid Corporation of patent infringement in relation to certain of
the digital products produced by WWL. Whilst Polaroid has intimated that it may
have a claim against WWL in respect of these allegations, no detail regarding
those claims has been provided to WWL and it has not been possible to make a
full assessment of them to date.



The above matters are not believed to have any material effect on the on-going
business of the Group, which continues to go from strength to strength.






Enquiries:
Richard King, Chairman Fiona Tooley, Director Richard Thompson
Kiran Shah, Group Finance Director & Joint Katie Dale, Senior Account Manager Philip Davies
MD
The Character Group plc Citigate Dewe Rogerson Charles Stanley Securities
Tel: +44 (0) 20 8949 5898 Tel: +44 (0) 121 455 8370 Tel: +44 (0) 20 7149 6000
Mobile: +44 (0) 7836 250150 (RK)
Mobile: +44 (0) 7956 278522 (KS)





Notes to Editors:

The Character Group plc designs, develops and distributes toys, games and
giftware, principally to the UK although it has an increasing exposure to
international markets.



Revenues are generated from a mix of product ranges, with over 70% designed and
developed in-house, either under the Group's own brand or under licence, with
the balance being derived from third party distribution. Notable product lines
are Doctor Who, Scooby Doo, Biker Mice from Mars, Peppa Pig, GR8 Gear,
Robosapien, Roboraptor and Robopet. For a more comprehensive view of the
product portfolio, please refer to www.characteronline.com.

www.thecharacter.com

CCT.L: Sector: Media, AIM


This information is provided by RNS
The company news service from the London Stock Exchange
END