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Japan's JR Kyushu sets top price for up to 416b yen IPO filing

[TOKYO] Kyushu Railway Co set the price for its initial public offering (IPO) at the top of its marketing range, as it seeks to raise up to 416 billion yen (S$5.6 billion) in what will be Japan's biggest listing this year, a regulatory filing showed on Monday.

The government-owned company, better known as JR Kyushu, priced its IPO at 2,600 yen a share compared with its book-building range of 2,400 to 2,600 yen a share, reflecting strong interest in the railway operator.

The government will sell its entire stake of 160 million shares in the railway operator.

Investors were attracted by the prospect of JR Kyushu's tourist-driven growth, people with direct knowledge of the IPO said. Another said demand from abroad exceeded by five times the 40 million shares allotted to overseas investors. "There are catalysts such as rising inbound tourism demand, which should support its business," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management, who participated in the IPO.

Mr Akino said the stock was good value even when priced at the top end of the marketed range.

Among other businesses, JR Kyushu operates the Shinkansen bullet and tourist-oriented luxury trains on Kyushu, the southernmost of Japan's four main islands, which is currently enjoying a tourist boom.

Last year a record 2.8 million foreign tourists headed to the island, drawn by its hot springs and scenic landscapes.

JR Kyushu's diversification into non-railway businesses such as real estate may also boost profit, said Masayuki Kubota, chief strategist at Rakuten Securities.

However, Kubota voiced caution at the timing of the privatisation, which comes amid tepid investor activity and falling stock prices.

Trading volume on Japan's stock markets has fallen in six of the last seven months and the Nikkei average stock price index has fallen over 11 percent this year, with investors concerned that a strengthening yen will erode corporate profits.

Nomura Securities, Mitsubishi UFJ Morgan Stanley Securities, and JP Morgan Securities are global coordinators for the IPO.