CIBC CIBC Institutional Equity Research
February 21, 2018
Spin Master Corp.
Strong Showing At 2018 NY Toy Fair And Positive Investor Day - Raising Target To $58
Our Conclusion
We are reiterating our Outperformer rating while increasing our price target to $58 (from $52) following our preview of Spin Master's 2018 product lineup at the New York Toy Fair. Though the return to our price target is still fairly modest, the company will report Q4 results and provide 2018 guidance on March 7th, 2018, and we expect to see our thesis supported by the numbers — if not boosted further — at that time. We remain bullish on the Spin Master story as it remains one of our top picks for our coverage list.
What's The Event?
Spin Master hosted its third annual Investor Day on February 20th, in conjunction with its attendance at the New York Toy Fair. The Investor Day was extremely well attended (such that future events will need to be adjusted to account for that interest). The extensive tour of Spin Master's 2018 product lineup was impressive. Relative to prior years, it is clear that Spin Master now has a product portfolio with more depth and diversification, but also with a base platform of proven properties that are current hits from which to build upon. The company continues to innovate, which is a key success element of the story, but does so from a greater position of strength than in recent years.
What's Changed?
We have moved ahead in our model to use 2019 estimates as the basis for our valuation. Our $58 price target is based on 21.0x our 2019E EPS (converted to C$ terms), which continues to imply a ~2.0x premium to consensus target multiples for peer Hasbro. With Spin Master growing sales at a faster rate than peers (double digits vs. mid- to high-single digits), on a similar margin profile, we believe a premium multiple for TOY is justified.