Tokyo Metro Co.’s shares surged 47% in their market debut, opening at ¥1,630 and peaking at ¥1,768, significantly above the IPO price of ¥1,200.
The public offering raised ¥348.6 billion ($2.3 billion), marking Japan’s largest IPO since SoftBank Corp.’s listing in 2018.
The deal was oversubscribed more than 15 times, signaling robust demand from investors.
Strong IPO demand despite cautious market sentiment
The overwhelming response reflects investors’ confidence in Tokyo Metro’s steady business model.
“We thought the IPO price was too low and fair value would be around ¥1,600,” said Taku Ito, chief equity fund manager at Nissay Asset Management.
Ito emphasized that the stock is a reliable dividend play and offers stability in a volatile market, though rapid appreciation in value is not expected.
Retail investors show enthusiasm, but foreign interest awaited
While retail investor interest was strong, analysts believe the stock could rise further once foreign investors gain exposure.
Mitsushige Akino, president of Ichiyoshi Asset Management, predicts the shares could climb 13% to around ¥2,000, especially if Tokyo Metro is included in a major market index.
Government stake reduction aligns with fiscal recovery plans
The IPO was part of a broader government plan to reduce public sector debt, a move mandated by legislation requiring the sale of Tokyo Metro shares by March 2028.
Following the offering, the Japanese government and Tokyo Metropolitan Government will halve their stakes in the company.
Tokyo Metro forecasts 13% profit growth by March 2025
With more than 6.5 million daily passengers, Tokyo Metro expects net profit to rise 13% to ¥52.3 billion by the fiscal year ending March 2025.
The company also forecasts an 18% increase in operating income from its transportation segment, driven by a rebound in tourism and commuter traffic. However, real estate income is expected to remain stable at around ¥4.5 billion.
Public service nature may limit long-term profitability
While Tokyo Metro enjoys high ridership, its public service commitments could constrain future profitability.
“It will be difficult for Tokyo Metro to raise fares or pursue aggressive profits,” said Naoki Fujiwara, senior fund manager at Shinkin Asset Management.
Additionally, the company’s property ventures offer limited growth opportunities, suggesting a stable but modest outlook.
First major IPO in six years signals renewed market momentum
The listing is a significant development for Japan’s IPO market, marking the first major offering in six years.
The strong market debut comes at a time when new listings in Japan have delivered average gains of 34% on the first trading day.
With nine lines and 180 stations, Tokyo Metro serves nearly twice as many passengers daily as the New York City subway, underscoring its importance to Japan’s infrastructure.
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