The Trading Floor

[Arctec]

Lego letdown could be boon for Mega Brands

ANGELA BARNES
Tuesday, October 31, 2006
It is not the kind of news that harried parents want to hear in the run-up to Christmas, especially if their kids have Lego on their wish list.

There have been reports in the Danish press that the toy maker, Lego, is rejecting orders because of its reduced production capacity and cannot meet demand from retailers for Christmas, 2006. A Lego spokeswoman was quoted as saying that many of Lego's most popular products are sold out.

But what is bad news for Lego and parents may be good news for Montreal-based Mega Brands Inc., a key Lego competitor., a Desjardins Securities analyst suggested. Analyst Jessy Hayem said, “We believe this announcement bodes well for Mega Brands, as some level of substitution may occur in favour of MB, when consumers look at buying construction blocks this Christmas.”

She reiterated her “buy-above-average risk” rating on Mega Brands shares and her $29 price target. Mega Brands was up 30 cents to $25.60 in afternoon trading on the Toronto Stock Exchange