Return of the Ninja Turtles - jrj.com.cnpg.jrj.com.cn/acc/Res/HK_RES/STOCK/2014/1/14/4f15e...Jan 14, 2014 · Expected return (%) – 1 year 29 14 January 2014 Stock price vs. HSI

China/Hong Kong | Consumer Discretionary

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Playmates Toys (869 HK) 14 January 2014

Return of the Ninja Turtles Over its 40-year history, Playmates Toys has established a reputation for innovative marketing and distribution within the global toy industry. Among the brands it brought to the toy market are Waterbabies, Star Trek, Simpsons, Space Jam and notably, Teenage Mutant Ninja Turtles (TMNT). We expect Playmates Toys to achieve solid earnings growth in 2013F-2015F as the Nickelodeon animated TMNT TV series propels sales of TMNT merchandise.

We initiate coverage on Playmates Toys with an Outperform rating and HK$5.25 target price. The stock is trading on 7.7x 2014F P/E.

Analyst Zou Wenjing (852) 2844 3602 [email protected]

mailto:[email protected]


2

Table of Contents

Return of the Ninja Turtles ........................................................................................................................ 3

Playmates Toys – financial summary ........................................................................................................ 4

Investment summary ................................................................................................................................ 5

Investment risks ....................................................................................................................................... 7

Valuation .................................................................................................................................................. 8

Riding China’s toy market boom ............................................................................................................... 9

Growth in US toy market picking up ........................................................................................................ 11

Benefitting from the resurging popularity of TMNT .................................................................................. 12

Financial forecasts .................................................................................................................................. 13

Appendix 1: Management profile ............................................................................................................ 15

Appendix 2: Shareholding structure ........................................................................................................ 16

Appendix 3: Playmates Toys major products .......................................................................................... 17


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Playmates Toys (869 HK)

Return of the Ninja Turtles Company Rating:

Outperform (initiation)

We initiate coverage on Playmates Toys with an Outperform rating. Playmates Toys has a 40-year history developing and marketing toys for the international market. We expect it to achieve solid earnings growth in 2013F-2015F as the Nickelodeon animated TMNT TV series propels sales of TMNT merchandise.

Ninja Turtles to boost revenue growth in 2013F-2015F. When the first two TMNT animated series aired in 1987-1996 and 2003-2009, TMNT toys recorded total sales for the two periods of US$3.25b. In the interim period, 1997-2002, sales were negligible. This gives an indication of the importance of the TV series to TMNT product sales. Fast forward to 2012 when a new TMNT TV series returned to dominate the airwaves. Almost on cue, TMNT products began flying off the shelves.

Initiate with Outperform. We estimate the company’s earnings increased ten-fold in 2013F. We forecast earnings will grow at a CAGR of 20% in 2014F-2015F. The stock is currently trading on 7.7x 2014F P/E. Our HK$5.25 target price takes into account the company’s sound operating fundamentals and positive outlook for earnings growth. It translates to 10x FY14F P/E.

Downside risks. Slower-than-anticipated expansion in Asia and a sudden decline in the popularity of the TMNT brand.

Forecast and valuation Year to 31 December 2011 2012 2013F 2014F 2015F Revenue (HK$m) 45 372 1,789 2,238 2,752 YoY (%) (70) 727 381.3 25.1 23.0 Net profit (91) 43 541 629 771 YoY (%) (5.4) (147.9) 1,146.0 16.4 22.5 Core profit (HK$m) (86) 50 543 629 771 YoY (%) 6.3 N/A 991.7 15.8 22.5 Diluted core EPS (HK$) (0.067) 0.042 0.453 0.525 0.643 YoY (%) 14.5 N/A 974.4 15.8 22.5 P/E (x) N/A 96.6 9.0 7.7 6.2 P/B (x) 45.2 24.5 7.8 4.3 2.8 DPS (HK$) N/A N/A 0.14 0.16 0.20 Yield (%) N/A N/A 3.4 4.0 4.9 ROAE (%) N/A 30.4 140.3 76.7 57.5 Source: Company data, CCBIS estimates

Price: HK$4.07 Target: HK$5.25 (initiation) Trading data 52-week range HK$0.63 – 4.25 Market capitalization (m) HK$4,794/US$618 Shares outstanding (m) 1,178 Free float (%) 40 30-day average daily T/O (m share) 7.3 30-day average daily T/O (US$m) 3.2 Expected return (%) – 1 year 29 Price as at close on 14 January 2014

Stock price vs. HSI

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

14-Jan-13 7-Mar-13 28-Apr-13 19-Jun-13 10-Aug-13 1-Oct-13 22-Nov-13 13-Jan-14

HK$

Playmates Toys HSI (rebased) Source: Bloomberg

Zou Wenjing (852) 2844 3602 [email protected]

mailto:[email protected]


4

Playmates Toys – financial summary

Income statement Balance sheet

FYE 31 December (HK$m) FY11 FY12 FY13F FY14F FY15F Revenues 44.9 371.6 1,788.6 2,237.6 2,751.7 COGS (32.1) (147.6) (675.5) (872.3) (1,066.2) Gross profit 12.9 224.0 1,113.0 1,365.3 1,685.4 Other income and losses – – – – – Operating costs (99.2) (171.8) (527.6) (655.6) (806.2) Marketing expense (25.0) (75.9) (321.9) (402.8) (495.3) Selling and distribution expense (2.0) (19.4) (59.0) (73.8) (90.8) Administrative expenses (72.1) (76.5) (146.7) (179.0) (220.1) Operating profit (86.3) 52.2 585.4 709.7 879.2 Financial income 1.5 1.6 1.2 6.0 7.3 Financial cost (2.3) (4.4) (9.2) (11.5) (14.2) Other (3.2) (5.5) (2.7) 0.0 0.0 Profit before tax (90.3) 43.9 574.8 704.1 872.3 Income tax (0.2) (0.5) (34.1) (74.6) (101.2) Net profit (90.5) 43.4 540.7 629.5 771.1 Core profit (86.1) 49.8 543.4 629.5 771.1 Net profit growth (%) 5.4 N/A 991.7 15.8 22.5 Core profit growth (%) 6.3 N/A 991.7 15.8 22.5 Shares outstanding (m) 1,046 1,153 1,178 1,178 1,178 Core EPS (0.08) 0.04 0.46 0.53 0.65 BVPS 0.09 0.17 0.49 0.91 1.41 Dividend per share 0.14 0.16 0.20

FYE 31 December (HK$m) FY11 FY12 FY13F FY14F FY15F Inventories 2.1 21.8 60.8 65.2 88.8 Trade receivables 7.1 177.3 319.5 376.6 479.5 Other current assets 7.3 6.8 33.3 41.6 51.2 Cash and bank balances 208.8 161.5 604.5 1,107.9 1,669.6 Total current assets 225.3 367.3 1,018.1 1,591.4 2,289.1 Property, plant and equipment 1.8 1.3 1.5 1.7 1.9 Interest in an associated company 17.2 11.7 9.0 9.0 9.0 Other long-term assets 0.1 0.1 32.1 32.1 32.1 Total non-current assets 19.1 13.1 42.6 42.8 43.0 Total assets 244.4 380.4 1,060.6 1,634.2 2,332.1 Trade payables 3.2 46.4 103.7 138.6 157.6 Other current liabilities 72.5 142.7 377.3 422.3 514.9 Total current liabilities 75.7 189.1 481.0 560.9 672.5 Convertible bonds 74.4 – – – – Non-current liabilities 74.4 – – – – Total liabilities 150.1 189.1 481.0 560.9 672.5 Net assets 94.3 191.4 579.6 1,073.3 1,659.6 Share capital 10.5 11.5 11.8 11.8 11.8 Reserves 83.8 179.8 567.8 1,061.5 1,647.8 Total equity 94.3 191.4 579.6 1,073.3 1,659.6 Total liabilities and equity 244.4 380.4 1,060.6 1,634.2 2,332.1

Cash flow statements Key ratios

FYE 31 December (HK$m) FY11 FY12 FY13F FY14F FY15F Profit before tax (90.3) 43.9 574.8 704.1 872.3 Depreciation and amortization 1.5 0.7 0.6 0.7 0.8 Other adjustments 5.9 11.1 (9.2) (17.5) (21.5) Change in working capital 38.7 (72.9) (123.8) (26.7) (107.3) Operating cash flow (44.2) (17.3) 442.4 660.6 744.3 Capex (0.4) (0.2) (0.8) (1.0) (1.1) Other investment activities 1.5 1.6 1.2 6.0 7.3 Investment cash flow 1.1 1.4 0.4 5.0 6.2 Equity issue 1.3 47.2 0.3 0.0 0.0 Dividend paid 0.0 0.0 0.0 (162.2) (188.8) Other financing activities 77.5 (77.8) 0.0 0.0 0.0 Financing cash flow 78.8 (30.6) 0.3 (162.2) (188.8) Change in cash 35.7 (46.5) 443.0 503.4 561.7 Effect of FX changes 0.3 (0.8) – – – Cash at beginning of year 172.8 208.8 161.5 604.5 1,107.9 Cash at end of year 208.8 161.5 604.5 1,107.9 1,669.6

FYE 31 December (%) FY11 FY12 FY13F FY14F FY15F Growth Revenue (69.7) 726.8 381.3 25.1 23.0 Gross profit (79.3) 1,643.3 396.8 22.7 23.4 Net profit (5.4) (147.9) 1,146.0 15.8 22.5 Profitability Gross margin 28.6 60.3 62.2 61.0 61.3 EBITDA margin (188.8) 14.2 32.8 31.8 32.0 EBIT margin (192.1) 14.1 32.7 31.7 32.0 Net margin (201.4) 11.7 30.2 28.3 28.5 Efficiency (days) Inventory turnover days 42.2 29.2 22.0 26.0 26.0 Trade receivables days 71.2 89.3 50.0 56.0 56.0 Trade payable days 57.4 60.4 40.0 50.0 50.0 Return and gearing Return on average assets (38.9) 13.9 75.0 47.0 39.6 Return on average equity (66.3) 30.4 140.3 76.7 57.5 Net debt (cash)/equity (221.4) (84.4) (104.3) (103.2) (100.6) Current ratio 3.0 1.9 2.1 2.8 3.4 Quick ratio 2.9 1.8 2.0 2.7 3.3

Source: Company data, CCBIS


5

Investment summary

Playmates Toys was founded in 1966 by its current chairman, Mr. Chan Chun Ho. Over the years, the company introduced a number of well-known toy brands to the market, including Waterbabies, Star Trek, Simpsons, Space Jam and, notably, Teenage Mutant Ninja Turtles (TMNT). In 2008, the company had its initial public offering after it was spun off by Playmates Holdings (635 HK, Not Rated), still the majority owner.

Playmates Toys lives and dies on the performance of its TMNT merchandise. In 1H13, over 90% of Playmates Toys’ revenue was generated from selling TMNT products, with 61.9% from the US market and 22.3% from Europe. Asia-Pacific accounted for only 8.5% of the company’s total revenue.

We initiate coverage on Playmates Toys with an Outperform rating and HK$5.25 target price based on 10x FY14F P/E, a 30% discount to the valuation of its global peers, including Hasbro and Mattel. We consider Playmates Toys one of the best proxies to invest in China’s rapidly growing toy market in general and in the TMNT brand in particular. Playmates Toys has three major advantages: (1) its proven track record marketing TMNT toys; (2) high earnings growth visibility in 2013F-2015F, underpinned by the growing popularity of the TMNT TV series, and (3) a deep valuation discount to its global peers.

Rising popularity of TMNT

Nickelodeon acquired the global rights to TMNT in 2009. Three years later in 2012, the third animated TMNT series premiered. The third season, which consisted of 26 half-hour episodes, succeeded in bringing the TMNT brand back into vogue after its appeal had faded after the second animated series ended in 2009. Playmates Toys’ revenue surged from HK$24.5m in 1H12 to HK$347.2m in 2H12, translating to revenue growth of 1,317% compared with 1H12.

Nickelodeon’s animated TMNT series continues to rank among the most popular kids shows in the US. Its popularity revived when season two premiered in 3Q13. TMNT is sure to remain prominent in popular children’s culture at least for the next couple of years as the famous action movie director and producer, Michael Bay, is at work on a live-action TMNT movie from Paramount Pictures scheduled for global release in 2014.

Based on the lifecycle of the first two TMNT series – nine and six years, respectively – we conservatively forecast the popularity of the TMNT brand to remain high for at least another four years.

Expansion in Asia-Pacific to drive future growth

In the few international markets that already had TMNT toys on retail shelves, specifically Canada, the UK and Australia, mounting sales coincided with the rising popularity of the TV shows. In 2012, TMNT became the number-one best-selling action figure brand in Australia and in the UK. That same year, TMNT figurines were the number-one best-selling item among all action figures after less than two months on the shelves in both markets.


6

According to the Hong Kong Toy Association, per capita spending on toys by households in China is US$13 per year, markedly lower than either the US or Europe at US$340 and US$144, respectively. Playmates Toys is eyeing the tremendous opportunities in China and other Asian countries. Expansion within Asia will be the company’s main driver of future growth, in our view.

Solid track record

In 1987-1996, when the first animated series of TMNT aired globally, TMNT toys recorded US$2.50b in retail sales. In 2003-2009, when the second TMNT series aired, TMNT toys recorded US$0.75b in retail sales.

Most critics agreed that the reason the first TMNT animated series was more successful than the second was because it placed greater emphasis on humor. The second series was darker and edgier than the 1987 animated series, which did not sit well with young TMNT fans. Ratings and toy sales were somewhat disappointing given the high expectations. The third season went back to TMNT’s roots, with plenty of humor and a lighthearted style overall. TV ratings and toy sales have been very good as a result.

Based on the company’s solid track record in TMNT toys sales, we are positive on the long-term growth prospects of Playmates Toys. TMNT is sure to be promoted heavily by Nickelodeon as the brand is the only intellectual property the network has of an animated superhero (or superheroes in the case of TMNT). Nickelodeon acquired the global rights to TMNT in 2009, which is not that long ago. We think it is likely the company will allocate more resources to the development of TMNT going forward.

Deep valuation discount

Trading at 7.7x 2014F P/E, Playmates Toys represents an attractive investment opportunity given its major peers in the US are now trading at 15-18x 2014F P/E. The company is deeply undervalued, mainly due to its weak performance over the last couple of years which we attribute to (1) the second animated TMNT series coming to an end in 2009 and (2) the negative impact from the global economic downturn since 2007, especially in the US.

In 2012, the company realigned its product portfolio to put even greater emphasis on the core TMNT business. Two years have passed and we now believe that Playmates Toys is back in position to become a competitive force within the global toy industry.


7

Investment risks

Asia expansion plans proceed slower than we expect. Should penetration into China and other Asian markets prove to be slower than we expect due to weak execution by the company’s distributors in those regions, our current earnings forecast for Playmates Toys would likely overshoot the mark.

Popularity of TMNT fades faster than we expect. Playmates Toys is placing a lot of faith in the TMNT brand believing as we do that the popularity of the TMNT TV series will underpin substantial sales of TMNT toys. However, should the appeal of TMNT toys fade faster than we expect (i.e. within four years), the company’s operations and earnings outlook would be negatively affected.


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Valuation

We estimate Playmates Toys’ fair value using a peer group comparison. In creating our peer group comparison, we noted Playmates Toys’ business mix more closely resembled its international peers, namely Hasbro and Mattel. We estimate a 12-month target price for Playmates Toys of HK$5.25, equivalent to 10.0x 2014F P/E.

Peer comparison

Because Playmates Toys’ business is unique among Hong Kong-listed companies, we compare its valuation with its international peers Hasbro and Mattel listed in the US and Alpha Animation listed on the Shenzhen Exchange. Hasbro and Mattel are currently trading on 2014F P/Es of 16.3x and 15.1x, respectively. Alpha Animation is trading on a 2014F P/E of 65.7x.

Global toy sector company valuations

Stock CCBIS Share price*

Market cap EPS growth (%) P/E (x)

Company code rating (HK$) (HK$m) FY13F FY14F FY15F FY13F FY14F FY15F Playmates Toys 869 HK Outperform 4.07 4,794 968.5 15.8 22.5 9.0 7.7 6.2 Hasbro Inc. HAS US Not Rated 53.04 53,367 3.3 12.3 6.7 18.3 16.3 15.3 Mattel Inc. MAT US Not Rated 45.26 118,778 11.3 9.1 8.6 16.5 15.1 13.9 Guangdong Alpha Animation 002292 CH Not Rated 38.10 32,104 42.8 48.0 41.3 97.3 65.7 46.5 * Price as at close on 14 January 2014 Source: Bloomberg, CCBIS


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Riding China’s toy market boom

Leveraging its success in the US and Europe, Playmates Toys is now making inroads into mainland China, which achieved a CAGR of 30.1% for 2007-2012. The size of China’s toy market reached US$13,396.5m in 2012, about half the size of the US toy market.

Size of China’s domestic toy market (2007-2012)

3,595.7

5,068.8

6,795.4

8,395.2

10,521.9

13,396.5

0

3,000

6,000

9,000

12,000

15,000

2007 2008 2009 2010 2011 2012

US$m

Source: TJPA, CCBIS

Despite being the biggest toy manufacturing country in the world, China’s per capita household spending on toys is still low by western standards. According to a survey conducted by the Hong Kong Toy Association in 2012, per capita spending on toys by households in China came to US$13 per year, markedly lower than the US or Europe at US$340 and US$144, respectively.

Household spending on toys per capita in the US, Europe and China (2012)

Region Per capita spending on toys (US$) US 340 Europe 144 China 13 Source: Hong Kong Toy Association, CCBIS


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According to the GDP/inhabitant model, China is in the very early stages of growth in per capita spending per household on toys.

GDP/inhabitant model

0

50

100

150

200

250

300

350

5,000 15,000 25,000 35,000 45,000 55,000

$/kid

(US$

)

GDP/inhabitant (US$) Source: Hong Kong Toy Industry Association, CCBIS

Two of Playmates Toys’ major clients in the US, namely Wal-Mart and Toys “R” Us, already have a wide footprint in China and are expanding rapidly. Playmates Toys can likewise expand rapidly, simply by leveraging the distribution power of these retail giants.

China expansion plans of Wal-Mart and Toys “R” Us

Wal-Mart 393 stores in China by the end of 2013. The company plans to open 110 new stores before 2016. Toys “R” Us 51 stores in China by the end of 2013. It plans to open approximately 50 new stores before 2015F. Source: Company, CCBIS


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Growth in US toy market picking up

For most of 2008-2012, US toy industry growth had been relatively flat, in large part because of the economic recession. It wasn’t until the 2013 Christmas season that the US toy market began to show signs of life. According to a recent survey conducted by Deloitte, 71% of consumers stated that this Christmas (2014) they intend to spend either the same amount as they did last Christmas or more. As we can see from the chart below, only 29% of consumers intend to spend less according to the survey, the lowest level in seven years.

Consumer intentions to spend less during the Christmas season is currently at the lowest level in seven years

82%

66%64%

67%71%

68%71%

59%

41%

51%

62% 59% 63%

71%

18%

34% 36%33%

29%32% 29%

41%

59%

49% 38% 42%37%

29%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Spend more/same Spend less

8%11% 10%

13% 13%

2009 2010 2011 2012 2013

Spend more

Source: Deloitte, CCBIS

US toy industry growth was flat in 2008-2012

21.5421.49

21.91

21.62

22.00

21.2

21.3

21.4

21.5

21.6

21.7

21.8

21.9

22.0

22.1

2008 2009 2010 2011 2012 2013

US$b

Source: Hong Kong Toy Industry Association, CCBIS

Consumer anticipation of higher holiday spending increases 12% in 2013 Consumer expectations for holiday spending on 2012 (US$) 2013 (US$) % change Gifts 386 421 9 Socializing away from home 242 270 12 Entertaining at home 149 159 7 Non-gift clothing for family or oneself 119 136 14 Home/holiday furnishings 65 81 25 Any other holiday-related spending not listed above 74 87 18 Total 1,035 1,154 12 Source: Deloitte, CCBIS


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Benefitting from the resurging popularity of TMNT

Garnering 3.9m viewers on its premiere night, TMNT hit a rating high for Nickelodeon with boys 2-11, making it the network’s top-rated premiere for an animated series since 2009. During its premiere weekend, the series reached nearly 12m total viewers. The premiere’s success prompted Nickelodeon to order a second season and in February 2013, the network renewed the show for a third season.

We attribute the triumphant return of TMNT to the exposure generated by Nickelodeon, the number-one entertainment brand for kids in the US. Nickelodeon’s main US television network is seen by around 100m households and has been the number-one-rated basic cable network for 18 consecutive years. Thanks to Nickelodeon’s television programming, production capabilities and feature films, we believe the TMNT brand is now enjoying the highest exposure it has ever had.

It is important to note that the second animated TMNT animated series (2003-2009) did not air on the juggernaut that is the Nickelodeon network, but on the much smaller 4Kids TV network, which has since been practically eliminated from the US children television market due to what Fox Broadcasting, its parent company, described in 2008 as “insurmountable competition from children’s cable channels” (i.e. Nickelodeon and the Cartoon Network). Now that TMNT is being aired on Nickelodeon with all the promotion and exposure that entails, it has become a monster hit.

Another development that bodes well for the TMNT brand is the upcoming movie based on the TMNT series. As noted earlier, the movie is to be produced by Michael Bay and is scheduled for release on August 2014. This event is bound to bring TMNT even greater exposure than it now enjoys.


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Financial forecasts

Expect 20% earnings CAGR in 2014F-2015F

We look for Playmates Toys to deliver net profit CAGR of 20% for FY2014F-2015F on the back of expanding revenue and stable margins.

Revenue forecast

Over the past year and a half, Playmates Toys has made a successful return to the US and European markets, mainly on the strength of the third animated TMNT series. Penetrating new markets, particularly China and Japan, will be the company’s main driver of revenue expansion over the next two years. We forecast company revenue derived from the Asia-Pacific market will account for 23.4% of the company’s total revenue in 2015F versus to 8.5% in 2013.

Playmates Toys revenue projections

0

400

800

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2012 2013F 2014F 2015F

HK$m

Hong Kong America Europe Asia-Pacific other than Hong Kong Other Source: CCBIS

Playmates Toys revenue breakdown by region HK$’000 2012 2013F 2014F 2015F Hong Kong 41 1,938 2,422.5 2,907 Revenue growth (%) 25 20 GPM (%) 60 60 60 Americas ~USA 302,528 1,107,543 1,218,297 1,340,127 Revenue growth (%) 10 10 GPM (%) 65 65 65 ~Other 19,945 121,011 151,264 181,517 Revenue growth (%) 25 20 GPM (%) 60 60 60 Europe 36,381 399,540 479,448 575,338 Revenue growth (%) 20 20 GPM (%) 60 60 60 Asia pacific other than Hong Kong 12,698 150,711 376,778 640,522 Revenue growth (%) 150 70 GPM (%) 50 50 55 Other 22 7,812 9,374 11,249 Revenue growth (%) 20 20 GPM (%) 55 55 55 Total revenue 371,574 1,788,555 2,237,583 2,751,659 Source: CCBIS


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Margin outlook

Playmates Toys penetrates new markets through distributors instead of selling to retailers directly as it does in the US market. We forecast a 1% decline in the company’s overall gross margin in 2014F stabilizing at around 61% by the end of 2014F and throughout 2015F due to rapid growth and relatively lower margins in Asia. We expect the company’s operating margin and net margin to remain broadly stable over the next two years.

Playmates Toys margin outlook

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

2012 2013F 2014F 2015FGross margin Operating margin Net margin

Source: CCBIS

Playmates Toys ROE and debt/asset ratio

30.4%

140.3%

76.7%

57.5%49.7%

44.0%33.7%

28.5%

0%

20%

40%

60%

80%

100%

120%

140%

160%

2012 2013F 2014F 2015FROE Debt/asset

Source: CCBIS


15

Appendix 1: Management profile

Chan Chun Hoo, Thomas, Chairman and executive director

Mr. Chan, age 62, joined Playmates Toys in 1967. He has been the principle driving force behind the growth, global expansion and diversification of the company’s business activities. His decision to take on the promotional toy business in 1985 led to the evolution of the company from a manufacturing entity into a pure toy development and marketing group. Mr. Chan is also the chairman of the board of Playmates Holdings Limited.

Cheng Bing Kin, Alain, executive director

Mr. Cheng, age 50, was appointed a director of Playmates Toys in March 2010. He is the company’s legal counsel and also an executive director of Playmates Holdings Limited. Mr. Cheng was admitted to practice as solicitor in Hong Kong in 1996 and in England and Wales in 1997. Mr. Cheng is also a chartered accountant and a CPA of the Hong Kong Institute of Certified Public Accountants.

Chow Yu Chun, Alexander, independent non-executive director

Mr. Chow, age 66, joined the Group in 2007. He is a CPA of the Hong Kong Institute of Certified Public Accountants. He has over 35 years of experience in commercial, financial and investment management in Hong Kong and China. Mr. Chow is currently an independent non-executive director of Top Form International Limited and China Strategic Holdings Limited. He was a non-executive director of New World China Land Limited until 28 December 2012.

LEE Ching Kwok, Rin, independent non-executive director

Mr. Lee, age 64, joined Playmates Toys in 2007. He has over 32 years of experience as a legal practitioner in the fields of property and financing, and was a partner and consultant in one of Hong Kong’s largest law firms. Mr. Lee was previously a solicitor qualified to practice in Hong Kong, England and Wales.

TO Shu Sing, Sidney, executive director

Mr. To, age 55, joined the firm in 1986. Prior to joining, he had nine years working experience with multinational marketing and manufacturing companies. Over the years he has served Playmates Toys in a number of capacities, including sales and marketing, licensing, strategic business development and corporate communications. He was appointed an executive director in May 2008. Mr. To is also an executive director of Playmates Holdings Limited. He holds an Executive Masters of Business Administration Degree from Simon Fraser University, British Columbia, Canada.

YANG, Victor, independent non-executive director

Mr. Yang, age 67, joined the Group in 2007. Mr. Yang holds a Bachelor of Commerce Degree and a Juris Doctorate from the University of British Columbia, Canada. He is a founding partner of Messrs. Boughton Peterson Yang Anderson, a Canadian law firm, and is presently the managing partner of Boughton Peterson Yang Anderson in Hong Kong SAR. He has over 39 years’ experience in legal practice and is a solicitor of the High Court of Hong Kong, a barrister and solicitor in British Columbia, Canada and a solicitor in England and Wales. Mr. Yang is presently a governor of the Canadian Chamber of Commerce in Hong Kong and an immediate past member of the Major Sports Committee of the Home Affairs Bureau, Hong Kong. He is an independent non-executive director of China Agri-Industries Holdings Limited and Singamas Container Holdings Limited.


16

Appendix 2: Shareholding structure

Playmates Toys shareholding structure

Corporations (public)57.54%

Individuals/insiders2.04%

Public and other39.64%

Institutions0.78%

Source: S&P Capital IQ, CCBIS


17

Appendix 3: Playmates Toys major products

TMNT (“Leonardo”) TMNT figurines

TMNT Donatello deluxe Mask TMNT Michelangelo Combat Gear

Waterbabies Girls

Source: Company, Amazon


Rating definitions Outperform (O) – expected return > 10% over the next twelve months

Neutral (N) – expected return between -10% and 10% over the next twelve months

Underperform (U) – expected return < -10% over the next twelve months

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