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Anyone still following Mega Brands these days? I know FFH and Chou are still holders. has had a great run the past year. Anyone have any thought on MB's current valuation? Any thoughts on the warrants at this levels?

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Anyone still following Mega Brands these days? I know FFH and Chou are still holders. has had a great run the past year. Anyone have any thought on MB's current valuation? Any thoughts on the warrants at this levels?

 

My opinion is that they look better today than when you posted your question, assuming you're a holder and not a buyer.  MB was looking pretty bleak a few years back.  It was almost a year ago that Victor Bertrand and FFH added 400,000 and something like 375,000 more shares to their holdings at $9 something.

 

P/S ratio (there are lots of moving parts re: debt, etc.) is still under 1.  Very basic measure but doesn't scream over-valued.

 

Company seems to be on a path to returning to their 'normal' business operations after a multi-year screw up (various reasons)

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IMO, the expectation is that they are continuing their path to recovery and that Q3 2013 will be better than Q3 2012.  First two quarters are generally weak and the last two quarters are generally strong.  They paid down $60M of debt recently which will reduce interest expense in future quarters. 

 

Shares Outstanding - 23M

Warrants - 85M - 20:1 ratio ($42M in potential cash proceeds + 4.2M shares issued in 1.5 yrs)

Debentures - $54M

Credit Facility - $0 - ($55M available) - possibly drew some down in Q3 to fund growth plan

 

Q2 has been $95M and $98M the last two years while Q3 has been $133M and $140M, so there is a large seasonal factor.  Q3 sales are generally about double Q1.

 

Looking out 1.5 years when debt will in all likelihood be mostly gone, if sales continue to rise modestly, you will have a virtually debt free company who are expanding their margins trading at a very reasonable valuation.  If they continue to trend towards $500M in sales (one of their stated objectives?) than I would think that another large player may get involved.  FFH and Trimark and Krembil will want some liquidity at some point in time and I don't think that you can just sell off those large blocks to the general public.  A dividend is another possibility.

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MEGA Brands reports third quarter 2013 results

 

Canada NewsWire

 

MONTREAL, Oct. 31, 2013

 

* EBITDA of $29.2 million compared to $28.2 million

* Diluted EPS of $0.79 compared to $0.63

 

MONTREAL, Oct. 31, 2013 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced its

financial results today for the third quarter ended September 30, 2013. (All

figures are expressed in US dollars.)

 

Consolidated net sales in the third quarter were $140.9 million compared to

$140.1 million in the corresponding 2012 period.

 

* Sales for the Toys segment increased 1% compared to the third quarter of 2012,

with strong shipments of Preschool & Girls construction toys, offset by lower

sales of Boys & Collectors construction toys.

* Sales for the Stationery & Activities segment were up 1%, the tenth

consecutive quarter of year-over-year growth.

* On a geographical basis, North American sales were 1% higher and international

sales were level.

 

Earnings before interest, taxes, depreciation and amortization (''EBITDA'')

increased to $29.2 million compared to $28.2 million in the third quarter of

2012. EBITDA is a supplementary financial measure.

 

Net earnings were $22.6 million or $0.79 per diluted share ($0.99 per basic

share) compared to $19.5 million or $0.63 per diluted share ($1.19 per basic

share) in the third quarter of 2012.

 

For the nine-month period ended September 30, 2013, consolidated net sales

increased 4% to $303.5 million compared to $292.7 million in the same period

last year, with 4% growth in Toys, 2% in Stationery & Activities, 4% in North

America and 2% in International. EBITDA increased to $38.1 million compared to

$35.2 million in the corresponding period in 2012. Net earnings were $19.4

million or $0.82 per diluted share ($0.94 per basic share) compared to $12.6

million or $0.64 per diluted share ($0.77 per basic share) in the same 2012

period.

 

''With our solid Preschool & Girls offering and recent traction in Boys &

Collectors construction toys, including the launch of Call of DutyCollector

Construction Sets, we continue to focus on sustaining our positive sales

momentum through the balance of 2013,'' said Marc Bertrand, President and CEO.

''In addition, we are continuing to move forward with initiatives to improve our

balance sheet, global manufacturing position and brand portfolio.

 

 

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