East Japan Railway: Tailwinds From Non-Traditional Railway Services, Lifting FVE to JPY 11,800

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Equity Bottom-Up

We are initiating coverage of East Japan Railway Company, or JRE, with a fair value estimate of JPY 10,600. We assign JRE a narrow moat rating, owing to its positive returns that exceed its cost of capital and a high certainty of these stable returns as a result of the service territory monopoly.JRE benefits from an extensive rail network that continues to attract a large volume of passengers, with additional appeals emerging from new office property and retail facilities. Shares are trading at about a 12% discount to our fair value estimate, as the market is undervaluing an existing land revaluation gain of JPY 1.3 trillion below its book value.Analyst: Mari Kumaga

We are initiating coverage of East Japan Railway Company, or JRE, with a fair value estimate of JPY 10,600. We assign JRE a narrow moat rating, owing to its positive returns that exceed its cost of capital and a high certainty of these stable returns as a result of the service territory monopoly.JRE benefits from an extensive rail network that continues to attract a large volume of passengers, with additional appeals emerging from new office property and retail facilities. Shares are trading at about a 12% discount to our fair value estimate, as the market is undervaluing an existing land revaluation gain of JPY 1.3 trillion below its book value.Analyst: Mari Kumaga

East Japan Railway Co

Trading at Larger Discount