JR Kyushu surges in debut, helped by fat dividends and tourism hopes

[TOKYO] Shares in Kyushu Railway Co jumped 15 per cent in their market debut on Tuesday, helped by fat dividends and hopes for the company to benefit from its real estate business and increased tourism to Japan.

The strong first day of trade comes after its IPO - the world's third-largest this year - priced at the top of its range, raising US$4 billion (S$5.5 billion) for the Japanese government which sold off all shares in the company.

Shares in JR Kyushu, as the company is better known, were trading at 3,010 yen in early morning trade, up from their IPO price of 2,600 yen (S$34.6) and just above levels seen in the grey market ahead of its debut of around 2,800 to 3,000 yen.

JR Kyushu runs trains, including bullet trains, across the southern island of Kyushu. Last year a record 2.8 million foreign tourists visited the island, which is close to Taiwan and Korea, drawn by its hot springs and scenic landscapes.

The number of tourists to Kyushu has grown every month from a year earlier in 2016, local government data shows, despite part of the island being hit earlier this year by a series of deadly earthquakes.

JR Kyushu said in its prospectus the company would target a payout ratio of about 30 per cent through March 2019. It is also offering 50 per cent discount coupons for its railway services to shareholders. Owners of more than 100 shares can also receive discount coupons for hotels and retail stores run by JR Kyushu.

In the last financial year, the firm posted 69.1 billion yen (US$665 million) in EBITDA (earnings before interest, taxes, depreciation and amortization). Its railway business accounted for 38 per cent of that while its real estate businesses accounted for 40 per cent.

REUTERS