Record-high share prices of Tokyo Disney Resort’s operator are putting the spotlight on the cheap valuation of its largest stakeholder.
(Bloomberg) — Record-high share prices of Tokyo Disney Resort’s operator are putting the spotlight on the cheap valuation of its largest stakeholder.
Oriental Land Co., which operates Japan’s largest theme park, has surged to a market cap of 8.9 trillion yen ($66 billion) amid a strong recovery in tourism. That suggests the valuation of Keisei Electric Railway Co, which holds about a fifth of Oriental Land’s shares, may be worth at least 1.78 trillion yen. But it’s nowhere near that mark.
Instead, Keisei Electric is valued at just 800 billion yen, according to data compiled by Bloomberg — less than half the value of the Oriental Land shares it holds. And the gap has been widening in recent years.
Oriental Land’s shares rose more than 28% this year to close at a record on Wednesday, outpacing the 8% gain in the benchmark Topix index. That’s increasing the focus on Keisei Electric’s stake.
A spokesperson for the railway operator said it’s aware of the distortion. “We are studying how to raise our own value,” he said.
Analysts say Keisei Electric’s valuation is underwhelming given it has a steady stream of cashflow from its main train service. It’s also on track to return to profit in the financial year that ended on March 31 after two years of losses during the pandemic.
One reason for the discrepancy may be because Keisei Electric has been saying that it has no plan to sell its holdings in Oriental Land, according to Yasuhito Tsuchiya, a senior analyst at Mitsubishi UFJ Morgan Stanley Securities. Some even say investors may pressure Keisei Electric’s management to do more to boost its share price, including unlocking some of the value.
With investor activism picking up in Japan, “Keisei Electric presents a good opportunity for an activist to start a campaign,” said Oshadhi Kumarasiri, an equity analyst at LightStream Research.
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