Tokyo Disney Park Investors Shrug at Loss of Only Revenue Stream

(Bloomberg) -- “Have faith in your dreams and someday, your rainbow will come smiling through,” go the lyrics to “A Dream Is A Wish Your Heart Makes” from Walt Disney Co.’s 1950 classic “Cinderella.” Investors in the operator of the Disney parks in Tokyo certainly seem to feel the same way.

Oriental Land Co. is losing virtually its only source of revenue as it further extends the closure of Tokyo Disneyland and DisneySea. Today’s extension will bring the shutdown past three months. And even when the park re-opens, the international tourism which has boosted attendees for the past decade could lag for months if not years.

Yet the shares today trade 14% higher than they did one year ago, compared with the 12% slide in the Topix. And despite dropping 2.3% Thursday after the latest extension to the closure was announced, the stock is 15% higher than when Oriental Land first shuttered the park six weeks ago.

Today, Oriental Land gave up on attempts to forecast when it would re-open and said it would make a decision in mid-May, meaning the park will have been closed for up to four months by then. That period includes the entirety of Japan’s Golden Week holidays, traditionally one of the strongest periods for visitors.

Oriental Land can count on its “overwhelming brand power” to help it weather the crisis, said Seiichiro Samejima, an analyst at Ichiyoshi Research Institute Inc. “It’s different from a regular company. Its balance sheet is strong and it can survive three months without revenue.”

“If the impact of the coronavirus becomes long-term, say for one or two years, shares might drop but in that case most Japanese companies will be suffering,” he says. “And even in that scenario, while earnings will be hit Oriental Land will still have its strong management.”

Some 97% of Oriental Land’s revenue came from its theme park business and the surrounding Disney hotels in the fiscal year ended March 2019, according to Bloomberg data.

Samejima also notes the growth the company experienced in the years after shutting the parks following the March 2011 earthquake and tsunami in Japan. “Tokyo Disneyland and Sea are also planning expansions, which will help attract visitors once the outbreak settles.”

©2020 Bloomberg L.P.