Shanghai Disneyland February 24, 2003 BA 456

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Shanghai Disneyland February 24, 2003 BA 456

Содержание

2. Agenda Case Introduction Background Project Description Our Analysis Recommendation Questions?
3. The Walt Disney Company Entertainment Conglomerate consisting of Media, Studio Entertainment, Consumer Products and Theme Parks
4. Disney’s Interest in China Long-term Consistently searching for areas of expansion where there are un-captured markets
5. Agenda Case Introduction Background Project Description Our Analysis Recommendation Questions?
6. Background: Disney Parks Disneyland, Anaheim: 1955 Walt Disney World, Orlando: 1971 Tokyo Disneyland:1983 Owned and operated
7. Hong Kong Disneyland $1.8 Billion USD Project 60% Debt 80% Government 20% Commercial 40% Equity 43%
8. Background: China Largest population in the world with relatively slow projected population growth 1.26 B (2001)
9. Theme Parks in China Most parks in China were American-themed Few have survived mainly because of
10. Background: Why Shanghai? China Shanghai Shanghai leads in GDP and FDI in China GDP US$4,512 (2001)
11. Agenda Case Introduction Background Project Description Our Analysis Recommendation Questions?
12. Park Location is Key Significant infrastructure development is occurring to support the 2010 Expo Expo Site
13. Target Market * Based on 2008F Population numbers
14. Project Structure 1.27 Billion US$ total capital investment 60% Debt 80% Government 20% Commercial 40% Equity
15. Operating Cash Flows Admissions (50%) Food and beverage (24.5%) Merchandise (24.5%) Main entrance (1%) Park labor
16. Discussion
17. Agenda Case Introduction Background Project Description Our Analysis Recommendation Questions?
18. Risk Analysis - Sovereign Currency risk is not mitigated by this project since the majority of
19. Risk Analysis – Operating and Financial The technology for this project will be provided by Disney
20. Cost of Capital ICCRC 16.10% U.S. Risk Free 4.00% U.S. Risk Premium 4.00% China’s Country Credit
21. Cash Flow Analysis * Cash flows analyzed through 2029 (per Disney, typical 20-25 year financial analysis
22. Real Options Option to wait until Universal Studios opens Already losing any first mover advantage Universal’s
23. Agenda Case Introduction Background Project Description Our Analysis Recommendation Questions?
24. Recommendation Begin negotiations with Chinese government Government equity stake and debt provisions Land and infrastructure provisions
25. Questions?
26. Ticket Price Projection
27. Demand Projections
28. Revenue Projections
29. Operating Costs
30. Capital Structure
32. Скачать презентацию

Слайд 2

Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Слайд 3

The Walt Disney Company
Entertainment Conglomerate consisting of Media, Studio Entertainment, Consumer

Products and Theme Parks & Resorts
Theme Park & Resorts Division
Current Park Locations: Anaheim, Orlando, Tokyo, Paris, Hong Kong (2005)
Also includes: The Disney Cruise Line, Disney Regional Entertainment, The Disney Vacation Club, The Anaheim Angels, and the Mighty Ducks of Anaheim
Revenues of $7 Billion in 2001, or 28% of company-wide revenue

Слайд 4

Disney’s Interest in China
Long-term
Consistently searching for areas of expansion where

there are un-captured markets
Current
Government relations established through the Hong Kong Disneyland project indicate easier entry into the mainland
Competitive
Universal-Vivendi’s land purchase in Shanghai and proposed expansion into Beijing

Слайд 5

Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Слайд 6

Background: Disney Parks
Disneyland, Anaheim: 1955
Walt Disney World, Orlando: 1971
Tokyo Disneyland:1983
Owned and

operated by the Oriental Land Company
Deal structure indicative of financial turmoil within the company in the early 1980s with a 0% Equity stake
Revenue from royalties and management fees
Disneyland Paris/Euro Disneyland: 1992
Disney retains 39% of Equity Interest and receives management fees as part of reported revenue

Слайд 7

Hong Kong Disneyland
$1.8 Billion USD Project
60% Debt
80% Government
20% Commercial
40% Equity
43% Disney
57%

Government (will eventually sell down ownership stake)
6 Million Visitors in its first full operating year, and 1.4 Million additional visitors to Hong Kong
$148 Billion value added boost to the Hong Kong economy over the next 40 years
35,800 jobs created in the next 20 years

Слайд 8

Background: China
Largest population in the world with relatively slow projected population

growth
1.26 B (2001) - 1.5 B (2050F)
63 - 70% Rural
High growth rates in GDP and foreign direct investment (FDI)
Urban income growth of 17.2% in 2002,
Growth in FDI of 14.8% in 2002
2003F: US$58 B
2004F: US$62 B
Accession to the World Trade Organization in December 2001
Increased support for private and foreign investments
Theme parks still fall under Restricted Foreign Investment Industries

Слайд 9

Theme Parks in China
Most parks in China were American-themed
Few have survived

mainly because of transportation issues
Admission Prices: 56 – 100 yuan ($6 – $12)
Park Sizes: 70 – 150 acres
Universal-Vivendi December 2002 agreement to build a park in Shanghai
Projected park opening in 2006, with more than 8 million visitors in the first year
In discussions to build a similar park in Beijing

Слайд 10

Background: Why Shanghai?
China
Shanghai
Shanghai leads in GDP and FDI in China
GDP US$4,512

(2001)
9% of total FDI in China
Shanghai residents (2002)
18.4 M, including floating population
Average household size is 2.9
Tourist population (2000)
64.7 mainland domestic
1.5 million foreign overseas
0.5 million

* 2000 figures

Слайд 11

Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Слайд 12

Park Location is Key
Significant infrastructure development is occurring to support the

2010 Expo

Expo Site and Universal Property

Слайд 13

Target Market
* Based on 2008F Population numbers

Слайд 14

Project Structure
1.27 Billion US$ total capital investment
60% Debt
80% Government
20% Commercial
40% Equity
43%

Disney
57% Government
10.6 Million Visitors in its first full operating year and average annual growth of 1.5%
Corporate tax rate of 30%, with tax loss carry-forwards permitted for five years

Слайд 15

Operating Cash Flows
Admissions (50%)
Food and beverage (24.5%)
Merchandise (24.5%)
Main entrance (1%)
Park labor

and overhead
Maintenance materials
Entertainment (costuming, labor, etc.)
Food and beverage COGS
Merchandise COGS
Support labor
Miscellaneous

Revenues

Costs

Слайд 16

Discussion

Слайд 17

Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Слайд 18

Risk Analysis - Sovereign
Currency risk is not mitigated by this project

since the majority of cash inflows and outflows are in local currency
Expropriation risk is mitigated some with the government taking a controlling equity stake
No other commercial or multi-lateral agency partners are involved in the project
Because the project is in the tourism industry and involves an American cultural icon, the susceptibility to strikes or terrorism is slightly higher than average
The project’s location in Shanghai reduces the overall risk of natural disasters when compared to country averages

Слайд 19

Risk Analysis – Operating and Financial
The technology for this project will be

provided by Disney and is proven in other locations
Potentially lengthy negotiations with the Chinese government increases start-up risks slightly
Given the project is very service oriented, there is some risk associated with the level of control assumed by the government, but this is difficult to quantify
There are no financial mitigating factors ― rather, this project is closely tied to the government
Real option: A minor amount of cannibalization from the Hong Kong property may be expected

Слайд 20

Cost of Capital
ICCRC 16.10%
U.S. Risk Free 4.00%
U.S. Risk Premium 4.00%
China’s Country Credit Rating 58.9
Anchored to

U.S. cost of equity
Adjustments
Industry beta adjustment -0.80%
Expropriation -0.97%
Start-up risks assoc. with Gov’t negotiations +0.12%
Sensitivity to strikes, terrorism +0.08%
Sensitivity to natural disasters -0.12%
Real option: Cannibalization from HK Disney +0.08%
Project Cost of Capital 16.09%

Слайд 21

Cash Flow Analysis
* Cash flows analyzed through 2029 (per Disney, typical

20-25 year financial analysis time horizon)

Слайд 22

Real Options
Option to wait until Universal Studios opens
Already losing any first

mover advantage
Universal’s track record at opening resorts is not on par with Disney’s ― lessons learned from Universal may be minimal
Build a resort hotel in conjunction with the park
Build a “Downtown Disney” entertainment center adjacent to park
Build another gate after several years of operation (double park size)

Слайд 23

Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Слайд 24

Recommendation
Begin negotiations with Chinese government
Government equity stake and debt provisions
Land and

infrastructure provisions
Disney must make the argument that a Shanghai Park would not substantially damage Hong Kong
Escalating political tensions on the Korean peninsula could change the risk assessment

Слайд 25

Questions?

Слайд 26

Ticket Price Projection

Слайд 27

Demand Projections

Слайд 28

Revenue Projections

Слайд 29

Operating Costs

Слайд 30

Shanghai Disneyland February 24, 2003 BA 456

Содержание

AgendaCase IntroductionBackgroundProject DescriptionOur AnalysisRecommendationQuestions?

The Walt Disney CompanyEntertainment Conglomerate consisting of Media, Studio Entertainment, Consumer

Disney’s Interest in ChinaLong-term Consistently searching for areas of expansion where

AgendaCase IntroductionBackgroundProject DescriptionOur AnalysisRecommendationQuestions?

Background: Disney ParksDisneyland, Anaheim: 1955Walt Disney World, Orlando: 1971Tokyo Disneyland:1983Owned and

Hong Kong Disneyland$1.8 Billion USD Project60% Debt80% Government20% Commercial40% Equity43% Disney57%

Background: ChinaLargest population in the world with relatively slow projected population

Theme Parks in ChinaMost parks in China were American-themedFew have survived

Background: Why Shanghai?ChinaShanghaiShanghai leads in GDP and FDI in ChinaGDP US$4,512

AgendaCase IntroductionBackgroundProject DescriptionOur AnalysisRecommendationQuestions?

Park Location is KeySignificant infrastructure development is occurring to support the

Target Market* Based on 2008F Population numbers

Project Structure1.27 Billion US$ total capital investment60% Debt80% Government20% Commercial40% Equity43%

Operating Cash FlowsAdmissions (50%)Food and beverage (24.5%)Merchandise (24.5%)Main entrance (1%)Park labor

Discussion

AgendaCase IntroductionBackgroundProject DescriptionOur AnalysisRecommendationQuestions?

Risk Analysis - SovereignCurrency risk is not mitigated by this project

Risk Analysis – Operating and FinancialThe technology for this project will be

Cost of CapitalICCRC 16.10%U.S. Risk Free 4.00%U.S. Risk Premium 4.00%China’s Country Credit Rating 58.9Anchored to

Cash Flow Analysis* Cash flows analyzed through 2029 (per Disney, typical

Real OptionsOption to wait until Universal Studios opensAlready losing any first

AgendaCase IntroductionBackgroundProject DescriptionOur AnalysisRecommendationQuestions?

RecommendationBegin negotiations with Chinese governmentGovernment equity stake and debt provisionsLand and

Questions?

Ticket Price Projection

Demand Projections

Revenue Projections

Operating Costs

Capital Structure

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Agenda
Case Introduction
Background
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Recommendation
Questions?

The Walt Disney Company
Entertainment Conglomerate consisting of Media, Studio Entertainment, Consumer

Disney’s Interest in China
Long-term
Consistently searching for areas of expansion where

Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Background: Disney Parks
Disneyland, Anaheim: 1955
Walt Disney World, Orlando: 1971
Tokyo Disneyland:1983
Owned and

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$1.8 Billion USD Project
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80% Government
20% Commercial
40% Equity
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Background: China
Largest population in the world with relatively slow projected population

Theme Parks in China
Most parks in China were American-themed
Few have survived

Background: Why Shanghai?
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Shanghai leads in GDP and FDI in China
GDP US$4,512

Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Park Location is Key
Significant infrastructure development is occurring to support the

Target Market
* Based on 2008F Population numbers

Project Structure
1.27 Billion US$ total capital investment
60% Debt
80% Government
20% Commercial
40% Equity
43%

Operating Cash Flows
Admissions (50%)
Food and beverage (24.5%)
Merchandise (24.5%)
Main entrance (1%)
Park labor

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Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

Risk Analysis - Sovereign
Currency risk is not mitigated by this project

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The technology for this project will be

Cost of Capital
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U.S. Risk Free 4.00%
U.S. Risk Premium 4.00%
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Agenda
Case Introduction
Background
Project Description
Our Analysis
Recommendation
Questions?

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Begin negotiations with Chinese government
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Land and