Japan's Kyushu Railway skyrockets on Tokyo trading debut

Japan's Kyushu Railway skyrocketed 20 percent as the former state-owned firm made its Tokyo trading debut on Tuesday, after one of this year's biggest initial public offerings.

Shares in the firm, which raised 416 billion yen ($4.0 billion) this month, fetched 3,120 yen ($30) each, up 20 percent from their IPO price of 2,600 yen.

The sale is the world's third biggest this year after Postal Savings Bank of China's $7.4 billion listing September and an offering this month from German renewable energy firm Innogy, worth about 5.0 billion euros ($5.4 billion).

Japan's government sold about 160 million shares in the struggling regional railway, better known as JR Kyushu, which was born out of the 1987 breakup of Japanese National Railways.

The government was hoping the sale would attract big-saving Japanese households as part of broader efforts to kickstart the economy.

Based in Fukuoka, about 900 kilometres (560 miles) southwest of Tokyo, the company has struggled with a money-losing railway business as the region's population declines.

To counter those losses, the firm has diversified into real estate, hotels and restaurants.

Chairman Koji Karaike, 63, a company veteran and judo black belt, said he could not have imagined listing the company three decades ago.

"No one, including ourselves, thought we'd ever be able to list our shares," he told Bloomberg News in an interview this month.

With losses equivalent to almost 30 percent of sales, the company "faced a sense of crisis that we would fade away," he said.

Operating a total of 2,273 kilometres (1,410 miles) of railway with just over 560 stations, it is the fourth Japan Rail company to be publicly traded, following the listings of its three bigger peers in the 1990s.

Its revenue came to 378 billion yen in the fiscal year ended in March.

Last year, Japan's government sold off shares in state-owned behemoth Japan Post, which has about 24,000 offices nationwide, after an IPO that raised about $11.5 billion.

Kyushu Railway faces an uphill battle in closing unprofitable routes as trains remain a key mode of transportation for many residents in the region, analysts said.

Japan has a dizzying array of bullet trains and local lines that criss-cross the island nation.

"The biggest problems facing the company are the declining population and money-losing routes," said Kazumi Tanaka, a Tokyo-based analyst at DZH Financial Research.

"They should take the listing as a chance to change the structure of the company."

The Kyushu region in Japan's far southwest has seen a jump in tourism in recent years, but it's also regularly plagued by natural disasters including typhoons and earthquakes.

In April, two strong quakes hit Kumamoto prefecture in Kyushu, leaving at least 50 dead and causing widespread damage.

The disaster cost JR Kyushu millions of dollars in lost sales and repairs.

-- Bloomberg News contributed to this report --