Any Christmas shopper out there is likely to know the Hasbro (HAS) company. The company's brands range from GI Joe, Transformers, My Little Pony, to board games like Monopoly, and Battleship. I wrote recently about some of the strengths Hasbro had for 2012 and going forward. Here are my top reasons to get behind the stock before the holiday season.
New Partnership in China
Thursday, Hasbro announced a major partnership to expand in China. The company signed a joint venture with leading toy maker Alpha Animation. Alpha Animation is the company behind the popular Blazing Teens Yo-Yo brand. The yo-yos are so popular that they are actually part of a television series in China showing teams competing against each other. Alpha Animation will contribute the Blazing Teens brand to the joint venture. Hasbro will add an unnamed brand to the joint venture. Hasbro's Chief Operating Officer had this to say of the collaboration,
This long-term, strategic partnership will marry Hasbro's global capabilities in both merchandise and television programming with Alpha Animation's expertise and reach in entertainment, including television programming and toy distribution within China.
Alpha Animation was established in 1993 under the Guandong Alpha Animation parent company, which is traded overseas (002292: Shenzhen)
The new partnership will extend Hasbro's presence in the most populous nation. With Hasbro's diverse range of toys and games, this new joint venture could lead sales of numerous brands higher through Chinese sales. International sales increased from 36% in 2009 to 43% in 2011. The international segment is fast approaching 50% of total revenue, and new joint ventures could see the international segment finally take the lead.
Shares of Hasbro come with a yield of 3.8% at today's share price. The current annual payout of $1.44 represents the newest amount after Hasbro raised its quarterly payout to $0.36. Rival toy makers Mattel (MAT) and Jakks Pacific (JAKK) yield 3.5% and 2.9%, respectively.
Hasbro increased its dividend 25%% in 2010, 20% in 2011, and 20% in 2012. The company now plans on paying out 45-50% of earnings in the form of a dividend. Look for future increases from this generous yielding company.
Cheapest Toy Company
If the higher dividend yield wasn't enough to convince you to buy Hasbro over rivals Mattel and Jakks, maybe the earnings will be. Here is a look at the company's price to earnings ratios (Estimates are from Yahoo Finance):
|Company||2012 EPS||2012 PE||2013 EPS||2013 PE|
As you can see from the chart, Hasbro is cheaper on a current and forward basis when taking earnings per share into account. I recently wrote about how Jakks was struggling to hit analysts estimates and should be trading a lot lower.
Hasbro has grown its earnings per share at a compound annual growth rate of 17% over the last five years. Hasbro has seen its earnings per share increase in each of the last eleven years.
Back in the 1990s, Tiger Electronics plush toy named Furby. Furby, now owned by Hasbro, got a reboot this year and could become one of the hottest toys for Christmas once again. I first wrote about the Furby re-launch back in May, reminding investors how valuable the toy could be for shares of Hasbro.
The new Furby line retails for $60 and has already landed on hot toy lists for this holiday season for retailers like Toys "R" Us, Wal-Mart, and Target. The new Furby is electronic and compatible with mobile devices. An optional app available on iOS and Android, allows owners to translate what Furby is saying in his native Furbish language, and also allows owners to feed him various items. Hasbro plans on licensing the Furby brand for other companies to use on merchandise.
The Furby re-launch could be the sign of things to come for Hasbro as it expands in the digital age. The company recently said the toy is the first of more than twenty products Hasbro plans to bring back to life through technology. Over forty million Furbies were sold in the 1990s. The company won't hit that number, but should see quite the holiday season.
Kre-O Toy Line
If you don't know what the Kre-O toys are yet, you might not have kids. Kre-O is a toy line made up of construction bricks, similar to LEGO. Hasbro has used the line to link with other owned brands. The two current lines of Kre-O toys are Transformers and Battleship. In 2013, the toy line will see the introduction of a line aimed at Star Trek. Hasbro is licensing the Star Trek brand from CBS (CBS) to launch a toy line around the time of the movie sequel.
Recently announced by Hasbro, a new line of Kre-O toys centered around GI Joe will be exclusive to Toys "R" Us. The toys will launch in February of 2013, just in time for the movie sequel released later on March 29th.
Angry Birds Star Wars and Zynga
In an attempt to capitalize on popular mobile and internet brands, Hasbro has signed deals with Rovio and Zynga (ZNGA). Hasbro will release games centered around four of the social gaming company's brands. The four games are "Words With Friends", "Draw Something", "Farmville", and "Cityville". The announced games so far are a Cityville version of the popular board game Monopoly, and a Hungry Hungry Hippos game featuring characters from Farmville.
Beginning in November, Hasbro will release games centered on Rovio's newest mobile game "Angry Birds Star Wars". Toys and games centered on the Star Wars version of the popular game are Attack Battle game, Jenga, and KOOSH.
One of Hasbro's key growth initiatives going forward is The Hub. The Hub is a joint venture between Hasbro and Discovery Communications (DISCA). The channel is aimed at kids, and features many of Hasbro's toys turned into television shows.
Hasbro unveiled its newest television show recently that centered around its Transformers brand. "Transformer Prime Beast Hunters" will be coming to The Hub. The series will feature a new faction called the Predacons that fight against the Transformers. New characters of course means new toys, and this show should boost sales of Transformers toys.
In the second quarter, The Hub saw its highest rating ever. The channel has been a huge success for both Hasbro and Discovery Communications. The network allows Hasbro to cross-promote products and also boost sales of toys through television shows. Littlest Pet Shop recently go the television show treatment in a move by Hasbro to boost sales. Could a Furby television show be on the horizon?
Investors seemed to forget the movie business of Hasbro when they sent shares of the company down after box office disaster "Battleship". As a gaming and toy company, Hasbro is licensing out its brands to make movies about. The company has small risks involved in these deals, as it doesn't finance the majority of the budget.
Emmett and Furla Films announced that they will be financing and co-producing three movies based on Hasbro brands over the next two years. Monopoly is the first movie under the deal. Emmett and Furla saw their last movie "End of Watch" hit number one at the box office.
Other Hasbro brands that have been rumored to be the subject of movies are: Stretch Armstrong, Tonka, Risk, Clue, Candy Land, and Oiuja. Hasbro toys also see benefits from movies released that influence toy sales. Here is a look at movies in 2013 that could impact sales:
· March 29th: "GI Joe: Retalliation"
· May 3rd: "Iron Man 3"
· May 17th: "Star Trek 2"
· July 26th: "The Wolverine"
· Sep/Oct: "Star Wars: Episode I", "Star Wars: Episode II"
· November 8th: "Thor 2"
Hasbro reports third quarter earnings on October 22nd. Analysts on Yahoo Finance are expecting $1.20 in earnings per share for the quarter. Shares currently trade at $37.81, close to their fifty two week high ($39.98). I said previously that shares should get to $40 soon. I also recommended buying shares with a price target of $45 by the end of 2013. I stand behind this and think this is a well positioned company that offers international sales, growth, dividends, and exposure to several sectors including retail, entertainment, and technology.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HAS over the next 72 hours.