The Walt Disney Company (DIS - Free Report) , along with its joint venture partner Shanghai Shendi Group, has decided to invest an additional $800 million (5 billion Yuan) to speed up the expansion of Shanghai Disney Resort. Originally, the total investment was pegged at $4.4 billion.
Most of the additional investment will be directed toward adding new attractions that will increase footfall at the park when it opens in 2015.
An anticipated boom in China’s travel and tourism market has prompted Disney to increase investment in the country. As per McKinsey, the number of upper-middle class and well-off households in China is likely to rise 18% annually from 2012 to 2022. Further, as per PhoCusWright, the Chinese travel market is expected to grow 34% from 2012 to 2015. Additionally, a 330 million strong population resides within the 3 km travel radius of the resort.
Disney will continue to hold 43% stake in the resort while Shanghai Shendi will own the remaining 57%. The additional investment will be made on a pro-rata basis and no third-party debt will be incurred for the resort expansion.
Disney, which competes with CBS Corp. (CBS - Free Report) and Twenty-First Century Fox, Inc. (FOXA - Free Report) , had begun the construction of Shanghai resort in 2011. This is the first Disney theme park in Mainland China. Disney had first ventured into China by opening Hong Kong Disneyland in 2005.
Disney has been on a roll for quite sometime now. The company posted earnings of $1.04 per share for the first-quarter of fiscal 2014, which beat the Zacks Consensus Estimate of 91 cents and rose 32% year over year. Results were driven by double-digit revenue growth across Studio Entertainment, Consumer Products and Interactive businesses.
Moreover, in the past 10 quarters, the company has beaten the Zacks Consensus Estimate by an average of 5.3%. With a Zacks Rank #2 (Buy) and positive Earnings ESP of 1.03%, the company is set to beat the Zacks Consensus Estimate this quarter as well. Disney is expected announce second-quarter fiscal 2014 earnings on May 6, 2014.
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