Valuation
We value the JR stocks using a segment-based sum-of-parts
approach
We value JR operators using a sum-of-parts approach that compares the companies' various
business segments—rail transport, real estate, retail, and others—with competitors in each
area. We add the prospective future value of real estate that could be developed on current
land holdings. This involves assessing the redevelopment potential of the Shinagawa railyards
for JR East and Osaka Station for JR West.
We value the operators' rail transport businesses at an EBITDA multiple of 7–8x. Differentials
among the three companies result from population forecasts in each of their service areas
and the state of competition with other modes of transport. Please see today's individual
company reports for further details.
We value the retail operations at EBITDA multiples set with reference to those of the four
major convenience store operators: Lawson, Seven & I Holdings, Circle K Sunkus, and
FamilyMart. The retail business mainly operates concessions and convenience stores inside
train stations.
We value the real estate businesses using a net asset value (NAV) approach. We set cap
rates for the operators' real estate holdings with reference to surveys published by the Real
Estate Economic Institute.
We calculate separate valuations for plots of real estate that currently do not generate cash
flow but have the potential for major operating cash flow once they are redeveloped. We add
this figure to the enterprise value (EV). Figures 1 to 3 show the specific calculation of value
for each of the three stocks.

Table of Contents
Valuation ............................................................................................ 3
We value the JR stocks using a segment-based sum-of-parts approach..................................3
Risks.................................................................................................... 5
Greater competition from the airlines following the provision of increased take-off and landing
slots at Tokyo Haneda Airport...................................................................................................5
Further motorization could reduce rail passenger numbers......................................................5
Safety costs could exceed expectations...................................................................................5
Risks associated with a major earthquake ................................................................................5
Introduction ....................................................................................... 6
Long-term revenue forecasts....................................................................................................6
Operating environment..................................................................... 7
Shares of the passenger transport market................................................................................7
The impact of population decline ..............................................................................................8
Ways to address a decline in passenger revenues .................................................................10
Scope for cutting costs ...........................................................................................................12
The impact of high-speed trains..............................................................................................14
Company
East Japan Railway (9020) ......................................................................................................15
West Japan Railway (9021).....................................................................................................31
Central Japan Railway (9022) ..................................................................................................46