Q: In reviewing recent Q&A on this it would appear that you are luke-warm at best on this name. I was wondering if you could confirm my percpetion, but also comment on debt loads and dividend security. They would seem like a good candidate for privatization.
5i Research Answer:
Yes, TOY is vulnerable to tariffs and a possible consumer slowdown. The stock is very cheap, but sales growth is not great and EPS is lower than it was three years ago. It has about $400M in net debt, against 12-month cash flow $329M. This is an OK balance sheet at just over 1X cash flow. The stock value is there, but it has been a value trap recently. It has missed four of the last eight quarters. Sales fell 2.7% in the last quarter and costs have risen. Not a horrible stock, just not so interesting right now. We absolutely agree a privatization makes sense here. The dividend was doubled last year and the payout ratio less than 15%, so we would not see it at risk.