Friday, 17 April 2015

Mattel - the turnaround continues

I asked in early April whether there was any value in Mattel shares (link here) concluding that:

'All things considered following the Easter break I am thinking about buying some more shares in Mattel targeting something in the upper half of the US$20s (with some element of a profits recovery closer to US$1bn AND with a still attractive dividend equivalent to x10+ forward EV/ebit)'

Well...Mattel's Q1 statement did surprise...positively:

So, in detail, what did they say?  Well first I like the combination of new management focus...and 'encouraging trends in underlying business' a potential combination I hinted at within the above link.  

Nevertheless - and hindered by exchange rates - the sales line remained a bit shabby...

...but this failed to capture the improved pricing and impact of the cost cutting drive ('funding our future') which are already positively impacting the gross margin.  Of course there is a long list of other factors which are negatively impacting it but slowly the new management appear to be turning around the supertanker...

...especially as the company noted on the conference call that 'dividends (recall the company is a 6% yielder and I noted at the above link that sustainability was a little thin) remain our first priority after reinvesting in the business' which is also going to help sentiment.  

Not time to jump off this turnaround yet.  Have another look nearer US$30?

No comments:

Post a Comment