On Wednesday, Tokyo Metro made its debut in the stock market, launching an Initial Public Offering (IPO) for a subway system that serves an impressive 6.5 million passengers daily—3.4 times more than Taipei’s transit system. The IPO saw a staggering 15-fold oversubscription, indicating strong investor interest and potentially adding momentum to Japan’s stock market.
The IPO raised a total of 348.6 billion yen (approximately $2.3 billion), pricing each share at the upper end of the range at 1,200 yen. This high-dividend and stable investment is particularly appealing to retail investors.
Kirk Boodry, an analyst at Astris Advisory Japan, commented, “This is a highly recognizable and popular asset with generally stable finances and low volatility.”
Underwriters noted that demand among foreign investors was especially robust, with subscriptions exceeding the available shares by more than 35 times.
Tokyo Metro anticipates a dividend of 40 yen per share for the fiscal year ending March 2025, offering a cash yield of 3.4%, which surpasses the less than 2% yield of typical listed transportation companies in Japan.
Additionally, investors will enjoy perks such as free train tickets and golf vouchers. Hiroaki Tomori, the executive fund manager at Mitsubishi UFJ Asset Management, estimates that these benefits could elevate the yield to 4.9%. In a market like Japan, where years of ultra-low interest rates have limited returns for investors, such yields are highly attractive.
Yutaka Tokushige, manager of business promotion at FFG Securities, believes this IPO is akin to a festival for those inexperienced in stock trading, with many eager to participate in this commemorative offering.
Kazumi Tanaka, an IPO analyst at DZH Financial Research, predicts that trading for Tokyo Metro will begin at around 1,500 yen.
The IPO pricing reflects a market capitalization of approximately $4.7 billion for Tokyo Metro, which is less than a quarter of the valuations of East Japan Railway and Central Japan Railway companies. Based on estimated earnings for the fiscal year ending March 2025, the price-to-earnings ratio is projected to be between 13 to 14 times, higher than that of Central Japan Railway.
