Thread by @hareng_rouge

Someone else has also since mentioned $JAKK to me - it's a (shitco) toy maker, similar to Character Group #CCT in the UK. CC's tweet mentions the refi, he has a point - I think there may be something here to play for, perhaps towards a double or so before the end of the year.

https://twitter.com/CasinoCapital/status/1400510479328595974

Company has cash of $80M + new debt of $99M (pink) repays difference on prior debt of $129M with cash on hand (green) so $50M cash + debt $99M

6,395 shares at $10.6, converts at $5.65 (purple) into $18.9M (blue) so + 3,345 shares = 9,740 / $103 cap & $20M prefs (grey) $172M EV

As you can see it's highly seasonal into Q3. Mgmt mentioned in the last (Q1) call that inventories are low. Typically they would be about $20M higher than here in Q2, so if we penalise the cash in the EV by that amount to account for inventory build we're at $192M

Giving a trailing EV/LTM EBITDA of x4.8 and looking for significantly increased profitability this year - and that against some easier comps

Toy sales are booming

toynews-online.biz/2021/06/09/sta…

And JAKK doesn't seem too badly placed for the categories called out by the article above

And yes, they do have Raya too

If you assume they increase their revenues in line with the overall toy industry growth figure of +27% and do $51M (vs $40) in EBITDA then their current valuation comes out at 3.75x - even for a shitco, this is quite cheap. Hold the multiple at 4.8x and the shares are $16, up 50%

The measly rise in the shares since the refi announcement implies these savings being capitalised at 2-3x - again, that's perhaps on the low side. Half a turn more on the multiple and $51M EBITDA has shares at $18.6 vs today's mid $10

Estimates suggest $39M EBITDA for FY21, my guess would be that they're perhaps on the low side given the comments on the call and this point from the toynews article

Q1/21 revenues were up 26% but the estimates for the money making quarter are down 5%, seems a little incongruous to me.

#CCT in the UK at end April reported revs up 44% in the HY to Feb and already had this to say about the H2. UK isn't the US but with a refi barely priced in and a fair environment for toy sales, some sales growth and multiple expansion for $JAKK don't seem too unreasonable to me