10/17/2016 Volcano clouds Japans biggest IPO this year

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IPOs
VolcanocloudsJapansbiggestIPOthisyear
InvestorinterestinKyushuRailwayCompanylistingdentedbyMountAsoeruption

PlumesofsmokerisefromMountAso'sNakadakeCraterfollowingtheOctober8eruptionAP

YESTERDAYby:LeoLewisinTokyo

A 10km pillar of ash that spewed from one of Japan (https://www.ft.com/topics/places/Jap

an)s largest active volcanoes and triggered warnings of more eruptions has complicated
efforts to sell investors on the countrys biggest share listing of 2016, brokers say.

Concerns over levels of retail and institutional investor appetite for the planned $4bn initial
public offering of the Kyushu Railway Company (JR Kyushu) on October 25 emerged during
the final hours of the nine-day bookbuilding process that closed on Friday.

The final pricing of JR Kyushu, Japans biggest sale of a state asset since last years mega-
IPO of Japan Post (http://next.ft.com/content/f9ed58fc-7f2a-11e5-ae43-f6d4a22c5a1a),
will be announced on Monday and will fall between an indicated range of between Y2,400
and Y2,600 per share.

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10/17/2016 Volcano clouds Japans biggest IPO this year

Brokers at three houses involved in the IPO, which will be the worlds biggest this year after
the Postal Savings Bank of China (http://next.ft.com/content/53f563af-afe9-306d-ab5e-64
ddcaa8609d) and marks another test of the Japanese prime ministers Abenomics economic
revival programme, said interest in JR Kyushu had been dented by the October 8 eruption
of Mount Aso and other recent reminders of Mother Natures destructive might.

Like Japan Posts in 2015, the JR Kyushu IPO is part of a drive by Shinzo Abes
administration to convince rapidly ageing Japanese households to transfer some of their
roughly $9tn of cash and bank deposits into the stock market. Unfortunately for that
ambition, the shares of two of the three Japan Post group companies now stand below their
listing prices.

The sale of the state-run railway, property and bullet-train operator that dominates the
southern island of Kyushu is expected to be fully covered but brokers reported a difficult
time getting there. The pricing, like that of Japan Post, has been pitched to attract retail
investors and the annual dividend is expected to be just over 3 per cent theoretically
attractive in a country where most government bonds have negative yields. The company,
acknowledging that its domestic growth prospects are limited, said it planned to diversify its
property portfolio outside Japan and invest in Southeast Asia

But people involved in the IPO said sales staff had encountered very high levels of
scepticism that related closely to the spectacular run of geological and meteorological
activities that have blighted Kyushu this year.

The JR Kyushu growth narrative leans heavily on the regions prospects as a tourist
destination and a continuation of the boom that saw 2.8m people visit last year.

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10/17/2016 Volcano clouds Japans biggest IPO this year

HousesinAsocityliecoveredinvolcanicashfromtheeruptionAP

Residents near Mt Aso, whose eruption was its most violent in more than 30 years, are still
removing ash from their homes, businesses and farms. The whole Kyushu region,
meanwhile, is only slowly recovering from two huge earthquakes (http://next.ft.com/conten
t/b63219d2-055c-11e6-9b51-0fb5e65703ce) that hit in April and caused a bullet train to
derail for only the third time since high-speed rail was introduced in Japan 50 years ago.
The quakes, followed by more than 1,000 aftershocks, triggered landslides and the region
has been further battered this autumn by an unusually vehement typhoon season.

The typhoons, quakes, landslides and volcanic eruptions are all noted in the JR Kyushu
prospectus as potential risks to business operations: brokers involved in the sales admitted
they had not expected to have to answer questions about all four.

Leading Japanese volcanologists scrutinising the magma and hydrothermal water flows
around Mt Aso said further eruptions were possible and that this months market debut
of JR Kyushu could take place to the accompaniment of a second round of exploding ash
and flying boulders.

Print a single copy of this article for personal use. Contact us if you wish to print more to
distribute to others. The Financial Times Ltd.

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10/17/2016 Volcano clouds Japans biggest IPO this year

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