Mew Who? More Pok�mon Madness (News) October 28, 1999

Mew Who? More Pokemon Madness

By Dave Marino-Nachison (TMF Braden)
October 28, 1999

Despite all the furor over the Japanese import multimedia phenomenon of Pok�mon, there's a Pok�mon so rare few in the world have ever seen it: its species and element are completely unknown (if this isn't making sense, stop and find a 10-year-old).

And at one foot and four inches tall, weighing in at just nine pounds, little Mew certainly wouldn't seem to present much of a threat to the likes of, say, the imposing Mewtwo, which sizes up at a neat 6' 7" and 269 lbs. courtesy of its creation through a series of horrific genetic experiments.

Or would it? That's what kids across this country will be itching to find out come Nov. 12, when Pok�mon: The First Movie -- billed as "the Pok�mon match of all time" -- hits American screens. Expect long, loud lines at the local multiplex.

In much the same manner that American kids have scurried to get their hands on Pok�mon merchandise of every kind, investors have been falling over themselves like desperate parents in Toys 'R' Us (NYSE: TOY) on Christmas Eve to get a piece of the action driven by the fast-selling Nintendo games. Just a few of the companies benefiting from Pok�madness to varying degrees have been 4Kids Entertainment (Nasdaq: KIDE), Topps (Nasdaq: TOPP), Grand Toys International (Nasdaq: GRIN), Toymax International (Nasdaq: TMAX), and the Wizards of the Coast game company recently purchased by Hasbro (NYSE: HAS).

(For a selection of Pok�mon-related Foolish stories, head down to the "Related Links" section at the bottom of this story.)

Today's beneficiary was San Francisco-based die-cast model, injection-molded collectible, quality book and specialty packaging maker Zindart (Nasdaq: ZNDT), shares of which jumped more than 35% today following the company's alert to the world that, hey, we make Pok�mon products! Zindart got its pop by announcing a reorder for a die-cast collectible item, total orders of which it expects to account for $7 million in fiscal third-quarter (ending Dec. 31) revenues; last year's Q3 figure totaled $25.8 million.

Zindart framed its statement by saying the order is a reflection of its manufacturing capabilities, but don't be fooled about the intent here.

Then again, is a little publicity necessarily a bad thing? Zindart appears a pretty solid company having increased revenues, gross profits, and operating income more than 20% per year (on a compounded basis) over the past five years. And although return on equity has declined in recent years, the company has generated significant free cash flow in two of the last three years -- in fiscal 1998 Zindart spent heavily to buy Hua Yang, a Chinese company that marked its entry into the book and specialty packaging businesses.

The company's most-recent full-year earnings numbers were something of a disappointment year-over-year, but investors should look for a pop from the July acquisition of Corgi Classics Ltd., a well-known maker of scale model car, truck, bus, and plane replicas that has seen strong sales of late amid a burgeoning collectibles market and was expected at the time to add significantly to earnings right away.

Other customers include Mattel (NYSE: MAT) and Hasbro, Revell-Monogram and Hallmark, leaders in the toy, model, and collectibles businesses and it's their orders that make up the bulk of Zindart's revenues. Corgi, an established upscale marque, should add to the predictability of the company's business in coming years.

Pok�mon probably won't be around forever, although it must be said that thanks no doubt in large part to its video-game background it has managed considerable longevity given its faddish nature. Still, with the movie coming out soon to almost certain blockbuster success, there is probably more room for investors to profit and Zindart appears to be still another way to enjoy the ride.

Related Links:
Zindart Web Page
Zindart Message Board
Pok�mon: The First Movie
Daily Double, 10/18/99, Topps Co.
Fool News, 8/24/99: "Sacre Bleu! It's Pok�mon!"
Daily Double, 4/22/99, 4Kids EntertainmentReturn on Equity.

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