Tokyo Metro sets record with largest IPO in 6-yrs

Tokyo Metro, one of Japan’s largest subway operators, successfully raised a 348.6 billion yen ($2.3 billion) in Japan’s largest IPO in six years.

The offering was oversubscribed more than 15 times, with investors attracted by the company’s strong brand and high dividend yield. The shares were priced at 1,200 yen each, at the top of the range, and the company is set to list on the Tokyo Stock Exchange on Oct. 23.

Retail investors oversubscribed the portion available to them by almost 10 times, accounting for four-fifths of the total. Institutional investors, both domestic and foreign, oversubscribed their shares by more than 20 and 30 times, respectively.

Tokyo Metro chose not to comment on the matter. The current price provides Tokyo Metro with a dividend yield of 3.3 per cent based on its projected dividend of 40 yen per share for the fiscal year ending March 2025.

Analyst Kazumi Tanaka from DZH Financial Research noted that this yield is notable compared to other private and JR railways. “In addition to the stability of the railway business, we can expect growth from increased inbound traffic,” he added.

The dividend yield of Kyushu Railway (JR Kyushu) (9142.T), listed in 2016, is 2.2 per cent. Tokyo Metro, one of the capital’s major subway operators, runs nine subway lines and served an average of 6.5 million passengers daily last fiscal year.

The company’s business includes real estate and retail, with operating income increasing by 175 per cent to 76 billion yen in the financial year ending in March.

The central government, owning 53.4 per cent of Tokyo Metro, and the Tokyo government, holding the remaining 46.6 per cent, are selling half of their shares in the IPO.

Tokyo Metro’s IPO is the largest in Japan since SoftBank Group listed its telecoms unit in late 2018.

Rigaku, a maker of X-ray testing tools backed by Carlyle Group, is also planning an IPO in October. Bain Capital has canceled an IPO plan for chipmaker Kioxia this month due to investor demands for a lower valuation.

Attribution: Reuters

Subediting: M. S. Salama