Interview: Disney
>> disney opened its latest theme park in hong kong. hong kong disneyland, disney’s first overseas park in 12 years and first in china. the hong kong government opening 57% of the venture. it invested about $3 billion. disney in the meantime invested about $2315 million, a 10th of the total cost for a 43% stake. it expects 5.6 million visitors in the first year and a third of them from mainland china.
>> investors should be pleased with our efforts here. the financial underpinnings of this park are solid as far as we’re concerned for the company and the shareholders of the walt disney company.
>> disney says hong kong disneyland is financially sound, very key for investors given that euro disney outside of paris does lose money. so let’s get more details on this story, specifically what it means for investors. peter goldman is portfolio manager with chicago asset management. he does own disney shares for his shareholders. he joins us from chicago as we take a closer look. nice to have you with us, pete are. >> thanks. nice to be here.
>> what are your expectations for this park?
>> expectations are very good. you know, geographically they’re within a five-hour airplane flight from half the population of the world. disney right now has only 22% of revenues coming internationally and only 5% of overall revenues from asia which has a disproportionate portion of the world’s population and a demographic that is steadily rising. i think they’re positioning themselves very, very well. i think economically it was a great deal as you pointed out. $300 million out of pocket for 43% interest and a $3 billion venture. so we remain very excited. i think this year there will be little contribution from the park. but they’re getting in the way of, you know, a big wave going in the right direction.
>> culturally is it something that can translate?
>> it will not initially translate quite as well because they don’t video the familiar hraeurt. but disney has been out marketing aggressively. they’re tiing in with a 70-million youth group. it probably will take some time before, you know, you get the ubiquitous recognition of all the characters and the product. but i think it will be very successful in the long run.
>> what do you think, peter, in terms of how disney is doing in light of the latest leg up we have seen in energy prices given that consumers are now paying above $3 a gallon for their gasoline?
>> history has shown that the only thing that really hurts the parks domestically outside this terrible weather is lack of availability of gas, not simply higher gas prices. on the margin i’m sure, you know it will hurt them to some slight degree though the tpaoepl that go to disneyland and disneyworld here are for the most part addicted. a lot of them take annual trips, many of them many times a year. they think they’ll continue to go and cut back elsewhere.
>> let’s switch gear as little bit and talk about the fact that we’re at start of the fall lineup. abc very much has that hit with “desperate housewives.” is that enough for the network component for abc to be a contributor to disney in a meaningful way?
>> well, i mean the first important thing is that abc stopped hemorrhaging which it has. you have “lost” and “desperate housewifes.” it is going the right direction. momentum is there. the changes at the top. disney will make it easier to retain and motivate key talent. i think they’re well positioned. i think the turn is in place. at least maintaining speed if not gaining momentum. so yeah, i think abc is one of the bright spots of the story right now.
>> what do you do with your shares currently?
>> i think it’s a great opportunity if i didn’t have them, i think it’s a great time to load up at current valuations. i think the stock is probably worth mid $30’s. you know, a lot of value and intangible assets out there. they have talked about monday advertising the radio properties. you could have $2 billion there. they bought back almost $1 billion worth of stock alone last quarter. you know, right now you have the negatives of the theatrical releases. they’ll be spending $25 million less quarter preopening for hong kong disneyland. then they have about 11 films coming out this quarter for miles an hour max as part of the settlement with the weisteen numbers. i think the media industry is sort of depressed. disney is suffering along with them. i think it’s a very, very good opportunity if you have a somewhat longer term time frame, meaning not the next quarter or so, i think you’ll make good money from here.
>> peter, we leave it here. thank you so much.
>> thanks.
>> peter goldman, portfolio manager with chicago asset management. let’s take a quick break. after the break, we look at latest on what some analysts call a high class problem at microsoft. our editor-at-large has that story in “chart of the day.”
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changed. traders saying mounting costs associated with hurricane katrina may slow economic growth. the nasdaq, however, rising, going to a five-week high. takeovers by oracle and ebay lifting computer as well as internet stocks. 2,182 for the nasdaq. and it may not be earnings season but that doesn’t mean we don’t have earnings. campbell’s soup with its latest results. let’s check with deborah kostroun for details.
>> well, that’s right, ellen. we were looking at campbell’s soup today, mainly because they had earnings and volume about four times what they typically v.a lot of trading going on in campbell’s. we mainly know them as soup makers. but also they make godiva chocolate and pefferidge farm cookies. the company raised prices and spent less on promotions. price increases averaging about 4.8% higher on some of their products like chunkeys. they also make pace and v-8 juices. they saw a decline in the number of goods sold. chief executive telling analysts he was willing to sacrifice that volume for greater profit just as long as campbell’s cut costs and held on to the market share. krispy kreme doughnuts, they’re under a federal accounting probe and that ended higher. we had news out late in the trading day. they had a net loss in the second quarter as revenue declined 21%. they delayed reporting their full results as they prepared to declare past earnings. last month former chief executives and other officers may have inflated earnings to beat forecasts. shares of krispy kreme have fallen 44% over the past year. commerce bancorp may miss targets as rising short-term interest rates hurt their results more than expected. that stock falling as can you see almost 9% on the day. commerce saying the flattening yield curve will make the company’s loans less profitable because what they’re seeing is a narrower spread. that squeezes banks which, of course, they lend money for longer durations and pay depositers interest tied to shorter rates. the shortfall won’t force―the shortfall they’re talking about will not force the bank to revise their expansion plans. they still expect to open 16 branches this quarter and as many as 55 this year and 65 branches in 2006. by the end of next year, commerce will have 440 locations total. back to you in the studio.
>> thank you so much. news after the bell from ford motor and what ford is saying is ford and the canadian auto workers union reached a three-year labor agreement eight days before the current contract expires. it face as vote of some 12,000 foreign workers. the union announced a tentative agreement in tonighto. ford’s larger rival, general motors, hopes the flock of 2006 cars and trucks will boost sales. the chief executive showing many of the global models at the international auto show going on in frankfurt. we asked g.m. chief executive rick wagoner if the company’s new approach to designing vehicles which include as proetee type for an s.u.v. would phraeubg a difference in that market ?
>> it will enable us to develop more products with shorter lifecycles and get them he to market faster. it certainly could help our cost competitiveness more than anything. it focuses on the revenue side. we get more products to market faster.
>> we also spoke with bob lutz, g.m.’s vice chairman and head of product development. he said the combination of value with style will allow g.m. to transition to what he called value pricing.
>> in value pricing, what we try to do is get the actual transaction price much closer to the list price or the suggested list price and to avoid this thing that the industry has gotten into of a somewhat inflated suggested retail price which is then subject to a huge discount. i don’t think anybody likes that.
>> lutz said the billionaire investor kirk consider koran who controls almost 10% of shares has not shown interest in seeing the new g.m. car as well as trucks. certainly automakers keep ago close eye on the energy market . as for today, crude and gas fell on signs record fuel prices and disruptions caused by katrina will reduce consumption. the closing price on this monday. down 1.2% for crude. 63.34 is the latest for a barrel of crude. as for other energy movers today declines across the board. gas and heating oil each down more than 4%. natural gas ending the day just down 2%. natural gas prices today the biggest fluctuation of any commodity trade around the world. futures at end of the regular session, if we take a quick look one more time, down 2%. the fall in natural gas prices as hurricane ophelia moves north erasing last week’s concern he that the storm may turn into the gulf of mexico and threaten offshore production. traders watching ophelia closely in the aftermath of katrina. ophelia is east-southeast of charleston, south carolina. the national hurricane center saying it is expected to move northward. over the past week, here’s what happened to natural gas prices. down 5.7%. as for the past month, look at that surge, up 15 tpers percent. and since the beginning of the year, you will see an even greater increase there. 79%. as of this weekend, 38% of prestorm natural gas production remains shuttered. that according to the u.s. minerals management service. the gulf coast, keep he in mind, klts for 24% of all u.s. natural gas production. well, disney opened its first chinese theme park today. will it represent a growth area for the company in quarters ahead? we talk with a shareholder, peter goldman.
