This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Tokyo Disneyland Closure: Impact on Disney Stock

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- Disney's (DIS) Disneyland resort in Tokyo has closed down for about 10 days following the natural disaster that shook the country recently. Disney competes with other media conglomerates like News Corp. (NWS) , CBS (CBS), Time Warner (TWX), Viacom (VIA) and New York Times (NYT) in the media and entertainment business.

The theme park has been closed along with Tokyo DisneySea while various safety checks are being carried out. Although it seems like the damage to theme parks has not been significant, it provokes a question as to how much Tokyo's Disneyland matters to Disney? Although the recent disaster was extreme, Japan is generally prone to earthquakes. Thus, it is worthwhile peeking into Disney's value that might be at risk.

Our price estimate for Disney stands at $45.20, which is a premium of roughly 7% to the market price.

Disney's Parks and Resorts Business

We estimate that Disney's parks and resorts business constitutes a little over 8% to the company's value. Thus overall this business fairly less significant when compared to filmed entertainment and TV programming businesses. The primary reason behind this is high capital investments that are required for theme parks.

Outside the U.S. the main Disney theme parks and resorts include Disneyland Paris, Disneyland Hong Kong and Disneyland Tokyo. The company has 51% ownership in Disneyland Paris and 47% in Disneyland HongKong. However, Tokyo Disneyland is different in the sense that Disney has a licensing agreement with OLC group that operates the theme parks, hotels and resorts in Tokyo.

Under the licensing agreement that Disney reached with OLC group in 1979, OLC agreed to pay 10% of its admission revenues and 5% of its food and souvenir revenues as royalty to Disney. To take a rough figure, we assume that OLC pays 7.5% of its revenues earned from theme parks to Disney as royalties. Out of about revenues of 371, 415 million yen that OLC Group earned in its fiscal year ended March 2010, about 77% was attributable to theme parks Tokyo Disneyland and Tokyo DisneySea. If we do math, this amounts to royalties of roughly 21,450 million yen. This will be somewhere close to $230 million based on exchange rates around March 2010.

Now these are pure profits. Looking at overall cash profits, it seems that a significant part of Disney's cash profits from parks and resorts is coming from Tokyo theme parks. Thus,Tokyo resort operations hold significance for Disney, even though Disney is not directly involved in it.

You can see the complete $45.20 Trefis price estimate for Disney's stock here.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,135.34 +3.37 0.02%
S&P 500 2,000.02 +1.04 0.05%
NASDAQ 4,559.4640 +6.7050 0.15%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs