Vancouver: Mainframe Entertainment shares were racking up new 52-week highs last week as the glow of media mega-mergers put the focus on content providers.

Shares closed out the month of February at about $3.60 per share after two days of heavy trading. The jump in price comes a week after Mainframe confirmed its service deal with Hasbro to do 26 episodes of Action Man and a full 11 days after the Vancouver cgi animator announced its third profitable quarter in a row. Shares then traded at about $2.15 per share.

The delayed rush, instead, seems to be due to two specific factors: a new focus on the content needs of media conglomerates such as the proposed bce-ctv merger and AOL Time Warner, and the sale of a large block of shares at the end of February.

‘There have been a lot of people watching the stock and looking for an excuse to buy in,’ says Mainframe cfo Brett Gannon, who describes Mainframe as a successful turnaround story. He adds there are few Canadian companies like Mainframe in a position to provide content to broadcaster/Internet convergence companies bce-ctv.

‘We have created expectations that we are on the road to recovery,’ he explains. ‘Also, we’re a content provider and, more importantly, a digital content provider.’

While Mainframe has been in discussions with analysts and institutional investors since the positive news about earnings and new business, it was the sale of 200,000 shares from a single source on Feb. 28 that undid the logjam, says Gannon. He presumes that the bulk sale was by former Mainframe chief executive Chris Brough, who can offload 20% of his estimated 1.3 million shares held in escrow each year. (Brough could not be reached for comment.)

On Feb. 29, two more blocks of 100,000 shares each also changed hands, creating a volume of trading that has attracted other investors and pushed the shares up.

With five series on the air, an Imax deal and significant service work, Mainframe is in a stronger position with investors and is reaping the benefits, says Toronto-based analyst Karen Fisman, who has assigned a target price of $4 for each Mainframe share.

Meanwhile, the renewed interest in content has also pushed other Canadian entertainment stocks up in the past week, she adds.

‘This is a selective recovery of the entertainment sector,’ Fisman explains. ‘Good-quality companies are more likely to be rewarded.’

Like Mainframe, Astral shares were also posting year highs. Class a shares, which previously closed at a year high of $36.45 on Feb. 28, jumped another $4.30 to $40.30 per share on Feb. 29. Class b shares also jumped $1 per share to a new high of $41 at month end.

Despite recent charges of fraud at Cinar, Class b shares for the Montreal animation company were up $1.20 per share to $29 on Feb. 29.

At Nelvana, shares traded up $1.75 to $25 per share on a volume of 170,000.

Likewise, a heavy volume of 100,000 shares pushed Motion International up $1.75 to $5.55.

Alliance Atlantis Communications is also enjoying a rally. Class b shares traded up $0.40 to close February at $21.30 per share, compared to the year high of $25.70 per share.

While Mainframe investors appear bullish, the company’s share price is still much below its historical high. The company listed in June 1997 at $9.75 per share and reached an ultimate high of $13.50 shortly after going public.

For the third quarter of fiscal 2000 (ended Dec. 31, 1999), Mainframe generated earnings of $707,000 ($0.04 per share) on revenue of $8.6 million, down 29% from the same period last year. In the same period in fiscal ’99, Mainframe earned $884,000 ($0.06 per share) on revenues of $12.1 million.

Nine episodes of Beast Machines and Transformers and five episodes of Weird-Ohs comprise the 14 half-hours delivered in the quarter, seven fewer than last year.

During the quarter, Mainframe announced deals to produce Casper’s Haunted Christmas, a direct-to-video feature for Harvey Entertainment, and Action Man for Hasbro.

For the nine-month period, however, Mainframe has doubled its revenues year-over-year to $23.7 million from $12.4 million in 1999. Likewise, year-to-date tallies show the company with net income of $500,000 ($0.03 per share) compared to a net loss of nearly $9 million ($0.65 cents per share) in 1999.

Mainframe is on track to deliver 52 episodes by fiscal year end (March 31), which is a 100% improvement from volumes in fiscal 1999 when 26 episodes were delivered.