JR Kyushu Seeks Southeast Asia Property Amid $4 Billion IPO

  • Company’s initial share sale set to raise up to $4 billion
  • Shares scheduled to list on Tokyo Stock Exchange on Oct. 25

Koji Karaike.

Photographer: Akio Kon/Bloomberg

Kyushu Railway Co., the state-owned bullet-train operator seeking to raise as much as 416 billion yen ($4 billion) in an initial public offering, plans to reduce its reliance on Japan by investing in residential and office properties in Southeast Asia, its chairman said in an interview.

Investing in Southeast Asia will be a first for the company, which owns five restaurants in China, Koji Karaike, 63, said in Fukuoka Tuesday. Japan makes up almost all of the company’s revenue, according to data compiled by Bloomberg.

JR Kyushu, which is benefiting from a tourism boom with record numbers of visitors to Japan, gets most of its profits from real estate and station buildings. The company said in its mid-term plan it aims to spend 80 billion yen over three years on some sectors that will help boost sales from non-rail sources as the population on the island declines.

“Southeast Asia offers huge growth potential for JR Kyushu,” Karaike said. “Whether it’s in terms of visitor numbers or investment opportunities, we’re looking to the region to help diversify and increase our revenue.”

JR Kyushu plans to expand its non-rail sales to more than 62 percent of revenue by March 2019, from 57.5 percent in the year ended March 2012, according to the mid-term plan. Sales are forecast to increase to 400 billion yen in the same period, from 333 billion yen seven years earlier.

The company expects at least as many tourists to Kyushu this year as the 2.8 million who visited last year, as the island recovers from the earthquakes in Kumamoto prefecture in April, Karaike said.

“Foreign visitors from Asia used to come to Japan for the purpose of massive shopping, but their interest is shifting to culture, history, dining, and other aspects that are only available in Japan,” the executive said.

JR Kyushu is the fourth of the JR firms selling shares to the public. The sale is set to test a market where more than half the 1,700 trillion yen in household savings is held as cash and bank deposits amid dwindling returns due to the central bank’s negative interest-rate policy. Shares are being offered from 2,400 yen to 2,600 yen each, compared with an indicative price of 2,450 yen announced last month.

Restaurants, Shops

The IPO involves the sale of all 160 million shares held by Japan Railway Construction, Transport and Technology Agency, which fully owns JR Kyushu. The sale is part of a government plan started in the 1990s to privatize the nation’s train operators created from the breakup of Japan Railways in 1987. East Japan Railway Co. and Central Japan Railway Co. were sold in the 1990s.

Based in Fukuoka City, about 890 kilometers (550 miles) southwest of Tokyo, the JR Kyushu is benefiting from record overseas visitors to Japan, spurring demand for its hotels, shops and restaurants, as well as train travel. Visitors to Kyushu from overseas reached 2.8 million last year, more than doubling from 1.3 million two years earlier, according to the transport ministry.

In addition to real estate, the company also operates restaurants in Shanghai and Tokyo. JR Central, the nation’s busiest bullet train operator, also has a restaurant in London.

Nomura Holdings Inc., Mitsubishi UFJ Morgan Stanley Securities Co. and JPMorgan Chase & Co. are global coordinators for the company’s IPO, while SMBC Nikko Securities Inc. and Goldman Sachs Group Inc. will also lead the global offering.

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