Tokyo Disney Reopening Is No Fast Pass to Success for Investors

(Bloomberg) -- Tokyo Disneyland and its sister park DisneySea on Wednesday reopened their gates after a record four-month coronavirus-induced closure -- but the future path for the shares of their operator Oriental Land Co. remains murky, according to analysts.

“Shares have rebounded from the bottom over expectations that the park will reopen at some point, but share prices have adjusted a bit now with investors uncertain about its outlook,” said Ikuo Mitsui, a fund manager at Aizawa Securities Co. “It will be difficult to cover their losses for now. As park restrictions ease, markets will want to see what kind of profit trend Oriental Land can map out.”

The parks were shuttered for just over four months, by far the longest closure in its nearly 40-year history. Despite that, shares have remained impressively resilient, with the stock trading higher than it did a year ago. They fell 0.3% on Wednesday while the broader Topix gauge dropped 1.3%. The reopening is the first step on the road to recovery for one of Japan’s 20 largest companies, with a market value of 5.3 trillion yen ($49 billion).

The park is implementing new measures to prevent infection, requiring visitors to undergo temperature checks and wear a mask, and keeping Mickey Mouse and his friends at a respectable social distance. Some attractions and a handful of shops and restaurants will also remain closed until August.

Tomoaki Kawasaki, a senior analyst at Iwaicosmo Securities Co., believes a second wave of infections is one of the risks for the company’s profit recovery.

The uncertainty of when foreign visitors will be allowed back into Japan is also a concern. The country is tentatively seeking to open “travel bubbles” with some neighboring countries, but it may be years before tourist numbers see a full recovery. Oriental Land has been a key beneficiary of the tourist boom to Japan in the last decade, which helped boost visitors to the parks by nearly 30% and lifted its share price more than 700% in the period.

In its earnings for March, Oriental Land already recorded a 24 billion yen ($223 million) opportunity cost on the first 32 days of the 123-day closure. Executives will take pay cuts through March 2021, while more than 5,000 workers are also seeing their hours cut. It’s also unclear when the park will let visitors enter its newest area, a 75 billion yen ($720 million) expansion that includes areas themed around “Beauty and the Beast” which it had planned to open in April. Oriental Land hasn’t given guidance for this fiscal year.

Amir Anvarzadeh, a senior strategist at Asymmetric Advisors, says the firm retains Oriental Land on its short picks as company looks overvalued. “We are likely to see the parks operating at way below sub-optimal levels for the foreseeable future, possibly as long as there is no effective vaccine out there,” he said.

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