THE forces of gravity have finally taken their toll on the Teenage Mutant Ninja Turtle phenomenon, and Harbour Ring shares have reacted accordingly. However, the decline is over-done, and with earnings back on a recovery track, the shares look good value. Profits last year were down 36 per cent to $168 million, and the shares have fallen to 92 cents, compared with a 1991 listing price of $1.03; not a great return, against a booming market. The company is the largest and most efficient of Hongkong's toy manufacturers, and its profits had gone ''cowabunga'' on the Turtles bubble. But last year, dependence on Turtles company Playmates had fallen to 33 per cent from 88 per cent just two years earlier, and there are growing signs that sales of the amphibians have stabilised. The successful third Turtles feature film will ensure another spurt of toy sales. Playmates also has another temporary hit on its hands with the launch of several lines of action figures based on Star Trek. This all means the contribution of Playmates sales should show a small increase this year. However, Harbour Ring has been extremely successful in diversifying its client base, with six major clients accounting for 45 per cent of sales. Given the signs of recovery in the US, sales to Bluebirds, Hasbro, Mattel, Tomy and Unimax should show a substantial increase this year. Morgan Grenfell Asia Securities is forecasting a 16 per cent increase in profits for the current year to $198 million, putting the shares on a prospective price-earnings ratio of seven. A corresponding increase in the dividend pay-out leaves the shares on a yield of 6.8 per cent. The Luk family had their shareholding diluted by placements, but have shown their commitment by pushing their stake back to 40 per cent. Mr Li Ka-shing has also shown confidence, with Cheung Kong buying a four per cent stake taking a larger convertible share placement. Harbour Ring had a lot of cash, and has used this to make a push into property, primarily in China. This may corrupt the quality of earnings, but it will provide a substantial boost to the bottom-line. Morgan Grenfell expects property development profits of $85 million next year, helping put the shares on a 1994 PE of 5.3. At a time when everybody is hot for China play stocks, Harbour Ring can genuinely claim to have substantial potential for China sales. As China's largest toy exporter, it has the biggest quota for domestic sales of any Hongkong toy company. Sensibly avoiding high-risk retailing, Harbour Ring is building links with department store operators, to provide products for dedicated toy departments. It has distribution rights for a number of US toy companies, which would boost profit margins on any China sales. Therefore, two years after its flotation, Harbour Ring is a much better company, with more cash, a more diversified client base, and a stronger economy into which to sell its products. The stock hit a 1992 high of $1.37, and represents a cheap recovery play.