Recent share price weakness Character (CCT:AIM) is a buying opportunity. Elevated sourcing costs and a worsening UK consumer backdrop are headwinds but a trading update next month could flag strong appetite for its brands as retailers stock-up on Character’s ‘must-have’ toys for Christmas.

Character’s diversified portfolio of iconic brands appeal to successive generations of children and help make the business resilient. Panmure Gordon remains a buyer with a 635p price target implying 35% potential upside.

The broker views the extension (14 Jul) of Character’s license for smash hit pre-school property Teletubbies for an additional three years as a positive, demonstrating the confidence that Teletubbies intellectual property (IP) holder DHX Brands has in Character’s ability to develop and commercialise the toy product portfolio.

Character has held the brand license for Peppa Pig since 2004, while other top brands include Little Live Pets, Minecraft, Scooby Doo and Fireman Sam.

For the year to August 2017, Panmure forecasts pre-tax profit of £15.4m, rising to £16.4m in August 2018. Based on estimated earnings of 54.9p and a forecast 21p dividend for the latter period, Character swaps hands for a modest 8.6 times forward earnings, while investors are being paid a 4.5% yield while they wait for the shares to move higher.

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