JR Kyushu Shares Surge in Tokyo Debut After $4 Billion IPO (3)

(Bloomberg) -- Kyushu Railway Co. shares rose on their first day of trading in Tokyo after Japan’s government raised 416 billion yen ($4 billion) selling its entire stake in an initial public offering.

The stock climbed 15 percent to 2,990 yen in Tokyo on Tuesday after touching 3,120 yen earlier. The government sold all 160 million shares held by Japan Railway Construction, Transport and Technology Agency for 2,600 yen apiece, or the top end of a marketed range. The shares will start trading in Fukuoka on Wednesday.

Three of the four major Tokyo IPOs this year are trading above offer price, according to Bloomberg-compiled data. Line Corp.’s $1.24 billion July IPO, which included a New York and Tokyo listing, is the best performer, trading more than 40 percent above its offer price of 3,300 yen a share. Komeda Holdings Co., the worst performer of this year’s deals, is down about 15 percent.

The JR Kyushu share sale is the nation’s largest rail IPO in more than a decade and is part of Prime Minister Shinzo Abe’s efforts to encourage citizens to invest some of their 1,700 trillion-yen household savings in the stock market. The gains in the shares of the rail operator compare with the 32 percent surge in Line’s stock on its July debut.

For an article on JR Kyushu’s Chairman Koji Karaike, click here.

JR Kyushu, which operates in Japan’s third-largest island, gets most of its profit from its station and real-estate businesses that include hotels and shopping centers as non-transportation services account for about half its sales.

“We’ve focused on non-rail assets and that’s led to synergies,” President Toshihiko Aoyagi told reporters after the listing ceremony in Tokyo. “We want to step that up in the future.”

JR Kyushu won’t get any money from the offering that was marketed in a range of 2,400 yen to 2,600 yen. Three-quarters of the shares were sold domestically, with the rest going to overseas investors. The IPO followed debuts in the 1990s by East Japan Railway Co. and Central Japan Railway Co. after the breakup of state-run Japan Railways in 1987.

“JR Kyushu has attracted attention for its real estate, station building and hotel expansion, but in the medium to long term, its earnings will be under pressure,” said Minoru Matsuno, president of Value Search Asset Management Co., a Tokyo-based investment advisory firm. “They need to step up their growth plans.”

Nomura Holdings Inc., Mitsubishi UFJ Morgan Stanley Securities Co. and JPMorgan Chase & Co. were the global coordinators for the JR Kyushu IPO, while SMBC Nikko Securities Inc. and Goldman Sachs Group Inc. also led the global offering.

The world’s largest IPO this year was by Postal Savings Bank of China Co., which raised $7.4 billion in a Hong Kong share sale last month, followed by Innogy SE’s about $5.1 billion offering in Frankfurt this month.

(Updates shares in second paragraph.)

--With assistance from Timothy Sifert and Anna Kitanaka To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net, Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Sam Nagarajan

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