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Reason for CCT price drop

lse:cct

#1

I noticed that the sp dropped significantly this morning ( down ~20% to 425p), but have been unable to ascertain a reason for the drop.

The only indicator I found was on ADVFN where the drop was being linked to the Entertainment one takeover. Peppa Pig os one of the leading ranges being sold by CCT, and there is a suggestion that marketing of Peppa Pig toys will be taken in-house in Hasbro, which would adversely affect CCT’s profitability.

Reading the CCT Reports it appears that the Peppa Pig range is actually produced by CCT, and it is difficult to see how Hasbro could take this over, although it is possible that the licence to use the Peppa Pig name might be renegotiated / cancelled.

Does anybody else have an input on this drop, or is it a classic case of market over-reaction (in a thinly traded share), which would imply a good chance of a substantial bounce coming in the next week or so?


#2

Just looked at the longer-term chart, and I see that the drop today did not return us to the levels seen after the Toys-R-Us problems. At the time there was a bit of discussion of exactly how the loss of this major Customer would affect the bottom line. Subsequent events showed that the market reaction was overdone.

I think that this could be the case here, especially since the Peppa Pig licence has about 2 more years to run. In addition, the Hasbro takeover is not yet a done deal, and counter-bidders could enter the fray. Whilst Hasbro might have a major interest in the toys business (which could affect CCT), other bidders might not be interested in that part of the business, in which case the impact on CCT might be negligible.

The length of the licence validity also gives CCT plenty of time to minimise the effect of the loss of the licence (if this is actually what happens) by seeking alternative licences or developing other parts of their business.

It will be interesting to see how the market reacts over the coming months. I hope the above proves correct since I added a small top-up to my holding this afternoon, since I still have belief in the underlying business and the capabilities of the management.