TOKYO (Oct 23): Tokyo Metro's shares shot up 45% in their market debut on Wednesday after Japan's largest initial public offering (IPO) in six years bagged it US$2.3 billion (RM9.99 billion) with the lure of sizeable dividends.

Shares closed at ¥1,739 (RM49.60) giving Tokyo Metro, one of the capital's two major subway operators, a valuation of roughly ¥1 trillion.

Tokyo Metro's first-day performance is the best to follow a large Japan IPO since flea market app operator Mercari, which popped 77% in its debut in 2018, Dealogic data showed.

The subway operator raised ¥348.6 billion in an IPO that was more than 15 times oversubscribed and priced at the top of an indicative range at ¥1,200 apiece.

"It's a well-known, well-respected and stable business which offered a decently high dividend yield at IPO and excitement around that is reflected in the first day of trading," said Travis Lundy, a special situations analyst who publishes on Smartkarma.

Tokyo Metro forecasts a dividend of ¥40 per share for the financial year ending March 2025 and also offers perks to shareholders such as toppings at its noodle eateries.

There was a large increase in the opening of brokerage accounts targeting the IPO, said senior market analyst Tomoichiro Kubota at Matsui Securities.

At the IPO price, Tokyo Metro's dividend yield — a measure of how much a company pays out in dividends compared to its stock price — was 3.3%.

At ¥1,739 the yield is a more modest 2.3%, comparable to peer Kyushu Railway.

The company's history dates back to 1920 with the establishment of the Tokyo Underground Railway Company. Seven years later, it opened Japan's first subway line, between the Asakusa and Ueno districts of Tokyo.

Tokyo Metro runs 195km of lines carrying 6.5 million passengers daily and its business includes real estate and retail.

"The listing of a large company familiar to individual investors has a large merit in broadening the investor base," Toshio Morita, CEO of the Japan Securities Dealers Association and former president of Nomura Securities, said before the debut.

The IPO was the largest in Japan since SoftBank Group listed its telecoms unit in late 2018.

Rigaku Holdings, a maker of X-ray testing tools, raised US$863 million in its IPO after pricing shares at the top of the range and will debut on Friday.

There have been US$4.9 billion worth of IPOs year to date in Japan, LSEG data shows, the largest amount in six years.

The stock market has been volatile following a surprise interest rate hike and change of prime minister.

Bain Capital scrapped its plan for an IPO of chipmaker Kioxia in October after investors pushed for a lower valuation than the buyout firm was targeting, Reuters has reported.

The benchmark index closed flat on Wednesday. It has gained 14% year-to-date.

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