BRT - BrainyToys Limited

[sle304]

I recall HotCopper being another share website which I visited a while back, but never posted so I gather I havent attained 'cheerleader' status

Jimminy, 17.5c is still ok - but it will come down to how quickly they release the master toy license as to if they drop below that mark. There is certainly a lot of support when the stock gets around the 15 - 15.5c mark so you cant go too wrong getting in at 17.5c........and they day finished off at 19c in late trade. If you plan to hold long term ie. at least 12 months you wont be sorry in my opinion.

SLE

 

[sle304]

Re: BRT - BrainyToys Australian Article

Someone alerted me that BRT got a gig in The Australian yesterday and I located this story:

Brainytoys (BRT) 17.5cFont Size: Decrease Increase Print Page: Print Tim Blue | January 10, 2008
WANDERING amid the detritus of Christmas, Criterion was struck again by how much money gets spent on toys at this time and began to wonder how he might claw back some with a timely investment in a local maker.

As it happens, there really is only one - Brainytoys, based in Perth. The company thinks up, makes and distributes games and toys based on famous cartoon, book or movie characters, such as Thomas the Tank Engine, The Wiggles and Dreamworks' Bee Movie film.

Buying a licence to use these characters costs an upfront royalty and then a regular share of revenue, but comes with a degree of exclusivity for a fixed period, according to RM Research analyst Dennis Trlin.

While it is not yet making a profit, Brainytoys' share price shot up on a deal to sell Wiggles-branded toys in North America.

Jim Henson, the man behind the Muppets, handled the deal and has been central to the rise of the brand and its $150 million earnings over the past three years.

Last October, Brainytoys bought Reveal, a North American supplier of games, books and educational toys, and in the next few weeks will complete the $2.47 million purchase of Enertec, a Hong Kong toy distributor, product vendor and manufacturing agent.

It has acquired the licence for the Hummer brand of toys - the Tonka toy for the US Army - and agreed to buy British toy maker UKC for $840,000 in cash and scrip. More interesting, though, is the appointment a few weeks ago of a non-executive director, Larry Bernstein, formerly president of Hasbro Toys, a $US3 billion ($3.4 billion) company that is the second-biggest toy maker in the world.

Trlin expects the company to become cashflow positive in 2008, on maiden sales of $15million for the calendar year. "The Bernstein appointment is a major plus," he says.

"I suspect it helped the company become the master licensee for a significant US brand that it has talked of recently, which has big sales potential if it goes ahead."

All matters considered, Criterion rates Brainytoys a speculative buy.

-end

SLE

 

[Jimminy]

Certainly a get on board story...

Another positive announcement today re; UK acquisition. Things are progressing.

 

[Tristo]

BRT down to 12c, not so good. Didn't really fall in the correction but has gone down a bit on the bounce...

 

[Jimminy]

Not too worried about the past week. Try to predict where it will be in 12 months to 2 years.

Dropped on small volume due to buyers drying up and letting the sellers come to them.

Large long term holders will still continue to buy at these levels imo.

I'm happy to bump it back to 15c next week if you want.

 

[Tristo]

Ah soothing words Jimminy... yeah I'm not panicking by any means, but a bit dirty I've bought at a premium to the current prices.

Anyhoo, very confident things will turn around dramatically

 

[Jimminy]

It happens from time to time when investing - you pick the top and it drops.... we've all done it and will do it into the future.

If you have stuck this money in BRT and happy to say leave it there for 5 years then I think you'll absolutely be fine.

Seems strange it has been pushed back down so far - but most stocks have really.

 

[sachz]

I'm another fan of BRT.

I'm also a fan of FUN, and btw they are two very different companies.

FUN is essentially a retailer, whereas BRT are designers/manufacturers.

They are both complementary businesses, and if one does well the other will also do well.

Both are extremely good value in my opinion with recent price drops.

I've been in BRT since its opening (march2005) and have subsequently bought up to hold what I consider a significant portfolio comprising BRT and also FUN.

In my analysis, I predict BRT in a few years time will be trading closer to the $1.00 mark as the early work start to show dividends... anything u can pick up in the lower 10-20c range will return greatly for those that hold on long term..

Risks: it is a speculator, but they seem to have reduced the risks significantly by their actions to date...

Enjoy the ride!

EDIT: guys, just a followup to my posting above. i'm a long time reader of this forum but only a recent poster. to ensure i abide by the forum rules, let me state that indepenent reports were that BRT will be at 38.5c within the year (i will dig up the exact URL). I was using this data to extract my final figure posted above over the next few years.. by all means, with institutions buying in at 15c the past few months, a final price of 11.5c today and bouncing between 11.5 and 13.0 the past few weeks, does indeed undervalue this small cap. thanks in advance, and i hope to be a more frequent & positive contributor to this forum.. cheers!

 

[Trojax]

Wow, didnt realise theres a small cap toy comp on the ASX.

Couple of things, getting a licence isn't about being 'awarded' it's all about money, buying the licence, future estimates on sales commissions etc, there's nothing special about getting one, got the cash and the relationships and you'll get it, particularly if front more since the rest is guesstimates without orders on the books. Toy market is fickle, hit and miss, certainly brands make a difference but aren't the be all and end all, plenty of companies have known licences and lose money in this industry. To make money it all comes down to price points to retail, if they're working via trading houses in HK or China which as a 'development company' they will be then margins are likely pretty average but based on the ann theres none as yet?

I'm not familar with BRT, did a run over their annuals and not very impressive, I'm at a loss as to why their running a negative margin, they have some good licences but doesn't seem to be translating into $$, doubt they have the relationships in China and are likely working through trading houses in HK or SEZ or trying to deal with domestic resellers.

I also disagree between drawing a relationship for performance between FUN and BRT, they aren't related, the only time this will occur is if BRT sub licences to FUN for aust, but that's a case by case basis, FUN would have taken licences direct if they wanted to front the cash, in many ways their competitors, only if BRT has a better relationship would they take a prize licence. Conceptual ideals mean nothing without patents\trademarks.

FYI I am in a major privately owned player in the toy supply industry (not BRT or FUN) although we do compete with FUN, we're growing at 40% per annum last 3 years straight, 08 will see 20 million+ with local turnover only at 2 million net profit, lol, every cent goes back into the company and expansion on factory ownership and back into development. We should float!

Actually we should be talking to BRT about using our factories we own in China lol.

 

[sachz]

Heya, thanks for the feedback.

I dont pretend to know the business that ur in, but I suggest if it makes good financial sense that you do some arrangement with BRT in hong kong. Most of the past couple of years has been preparing the manufacturing and distribution mechanism, as well as securing licences.

Perhaps you should list on the ASX sometime to realise some of your capital? Its only a few mil. To do that and then u would be able take advantage of what is on offer.

I like what BRT have done so far, and I like many here are still very optimistic with this small cap.

BRT are planning a dual listing with the US stock exchange in the near future. I look forward to when this happens, it will be a milestone when it does happen.

All the best with ur biz and ur stock portfolio. If ur prepare to leave BRT out of ur equation then that is fine, but I know it will always be a part of mine..

cheers!

 

[Trojax]

Hi Sachz,

I like to talk toys, it's my trade so happy to discuss, I find BRT an interesting company in it's own niche. Relating to their HK re them setting up manufacturing, it's VERY hard in China to get in here without relationships on the mainland, most western corporations deal with trading houses though this really can hurt price points. We've over time been fortunate enough to have bought or deal direct with interest stakes taken in many factories on the mainland, this is really what's needed to have a good crack at the existing majors otherwise you can find your priced out of the market even if have a licence. The buyers have budgets, floor space and margin, you can have the best licence in the world but if the retailer can make more money off a generic item in the same space, they won't buy it. Manufacturing overhead is critical.

I was thinking myself we should float, though we're a bit different to our competitors, we have existing established retail channels (not just aust, but including UK and USA Kmart etc), professional graphic design house, the QA systems and the factories, offices in HK, Taiwan, China (head office) and Aust. there are no middlemen in our business at all, this allows us to stay cutting edge on every toy season including the regular toy cats and hammer the competition, it works well. We can go from a conceptual item with no mould etc to ship in 8 weeks, that's where being a private company has distinct advantages.

I see BRT has bought a small trading house in HK, this is a good step, but better if they could get an 'in' direct into China, HK trading houses are just overhead and should be bypassed IMO whenever possible, their value is as a third party handler is somewhat ambigious based on my experience and they have limited understanding of western requirements when it comes to even basics such as mandatory testing, dept of fair trading requirements by state, AQIS etc.

There's some things regarding toys that are impacting on the industry at present as a result of Mattel issue last year. For one the Chinese government has imposed certification on factories for export compliance and are fairly diligent to police exports with testing, it's however slowing the channel out somewhat, plus the additional costs associated (theres export duties in diff % depending on item classification) and on top of it things like EU regulatory requirements regarding pthathlates, total cadmium, phenol etc + testing (expensive) are driving up costs massively to supply to the EU.. US is so far not onto this though California is adopting pthalates I believe soon (would need to confirm). Companies like Sears (Kmart) and Toys R US etc are imposing testing per batch and passing back to the manufacturing as an overhead, this also is having a big impact on bottom line.

The industry over the next 12 months will see big shakeups, the smaller players or less diligent will be pushed from the market while those with the capital or know how will be in a great position. BRT holding licences is a very distinct and unique advantage as they'll be immunised by their limited exposure on the manufacturing side, they can capitalise on this though when the main shakout finishes. It's really a tough industry at the moment but for the good players it's all upside, that said I'm suprised BRT hasn't been taken over by FUN at this stage (just my opinion).

 

[Trojax]

Erm, I'd like to retract comment above re FUN for BRT, at this point doesn't look like their in much of a position to acquire anything. Any links to the licences BRT own and existing partners?

 

[sachz]

Erm, I'd like to retract comment above re FUN for BRT, at this point doesn't look like their in much of a position to acquire anything. Any links to the licences BRT own and existing partners?

Good place to start is their last HALF YEARLY REPORT lodged recently.

http://www.asx.com.au/asxpdf/20080228/pdf/317r28c2v08g4v.pdf

Bear in mind they will not disclose all & sundry at this build up stage due to the delicate nature of the starting up phases of the business -- the same way a private company will not divulge this information to the competition.

See NOTE 7 on PG 7 for a bit of insight...

Happy investing!

 

[Tristo]

Any talk about the 3 to 5 options to shares issue goin on to raise the capital needed to buy the Marshmalow company? BRT goes ex-entitlements today.

 

[Jimminy]

options are a great idea.....will shake out any that are not here for the long term. SP may suffer in the ST as a result.

 

[sachz]

options are a great idea.....will shake out any that are not here for the long term. SP may suffer in the ST as a result.

Interested in peoples opinions on the likeihood of BRT announcing anything major to the market before mid-year?

 

[sle304]

Well quarterly results out today with a nice $1.9m in sales is a pretty good result. Should see some uplift tomorrow, hopefully in both the normal stock and the options.

SLE

 

[Jimminy]

:bowdown:a great result and one I was not expecting to be perfectly honest....

This now bodes well for the 12 months - 2 years for this emerging co.

The dynamics of the acquisition are also yet to take hold. 2008-2009 may be looking rosier than I first thought.

Let's wait and see whether any liquidity returns..

 

[sle304]

Re: BRT - BrainyToys (The Australian)

Someone from another forum spotted this today in The Australian.

http://www.theaustralian.news.com.au/story/0,25197,23736923-23634,00.html

Brainytoys (BRT) 9.5c

A GRANDFATHER with a keen interest in such matters asks why Brainytoys' price has shed 44 per cent since we visited the stock in January.

The Perth minnow makes and distributes games and toys based on characters such as Thomas the Tank Engine. Unlike Funtastic, Brainytoys owns 70-80 per cent of its products, which allows for fatter margins.

Through four acquisitions, Brainytoys has expanded into the UK and the US, the latter of which accounts for 65 per cent of sales. It has also attracted Larry Bernstein, former president of Hasbro Toys, to the board and other ex-Hasbro folk are involved.

Brainytoys' March quarter statement showed a deficiency of $1.42 million on revenue of $1.9 million, with a cash balance of $666,000. A subsequent options issue raised a further $977,000, but not without difficulty.

In April, Brainytoys pointed to $20 million of revenue in calendar 2008, with 70-75 per cent of earnings derived in the second (Christmas) half. "Our model is to get the (revenue) to the level of well past $50 million and at that point we are of interest to the majors," says chairman Charles MacKinnon.

MacKinnon says an advantage of working in the US is that there's a greater number of retailers, some of which have chains of 400 stores or more.

Criterion can only conclude the stock has been dragged down by the general malaise. We retain the speculative buy ascribed at 17c in January, but warn it's especially risky because investors aren't giving small-cap stocks the benefit of the doubt.

 

[Jimminy]

It's all about building a company and in my belief the right steps are being put into place.

Whether it can be done, time will tell but I continue to hold these and will do so for some time.

Good to see others still believe also.