Bluebird sets up Disney link xxxx Bluebird

THE INVESTMENT COLUMN

Bluebird Toys has enjoyed meteoric growth on the back of its miniature characters, ranging from Mighty Max to Polly Pocket. But after a storming rise in 1993, the shares marked time last year as the stock market latched on to the risks in this branch of the toys market.

That all changed yesterday following news that Bluebird had signed a deal with Mattel, its main distributor, and Walt Disney to market a new range of miniature characters based on Mickey Mouse, Donald Duck and their extensive relations. No figures were placed on the deal, but it does not take a lot of imagination to see that the enormous pulling power of the Disney brand could lever Bluebird on to a new plane. The shares responded accordingly, soaring 100p to 370p for a one-day rise of 37 per cent.

Followers of the company had been fretting over the rapid demise of Mighty Max, which did pounds 46m of sales in the first two years but hit the buffers in 1995, when business is expected to slump to pounds 9m. That will knock a sizeable hole in group turnover worth pounds 99.4m last year, which will not be entirely made up by the launch of Mimi and the Goo Goos, forecast to add pounds 9m to this year's sales.

The launch next year will do nothing for 1995 profits, which if they hit pounds 18m would put the shares on a prospective p/e of 15. But analysts expect Disney could add at least pounds 1.5m to next year's bottom line, taking it to pounds 24m and reducing the multiple to 11. That still looks reasonable value, particularly given that Mattel trades on around 20.