Tobu Railway : Notice Concerning Action to Implement Management that is Conscious of Cost of Capital and Stock Price

Published May 14, 2025 at 1:10 a.m. UTC

Source: MarketScreener

‌Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

April 30, 2025

Company name: TOBU RAILWAY CO., LTD.

Name of representative: Yutaka Tsuzuki, President and

Representative Director (Securities code: 9001; Tokyo Stock Exchange Prime Market)

Inquiries: Kosuke Shimizu, Finance and Accounting Department Manager (Telephone: +81-3-5962-2182)

Notice Concerning Action to Implement Management that is Conscious of Cost of Capital and Stock Price

TOBU RAILWAY CO., LTD. (the "Company") hereby announces that the Company, at the Board of Directors meeting held today, resolved to pursue initiatives to implement management that is more conscious of the cost of capital and the stock price toward enhancing the Tobu Group's corporate value.

For details, please see the attachment, "Notice Concerning Action to Implement Management that is Conscious of Cost of Capital and Stock Price."

‌Notice Concerning Action to Implement Management that is Conscious of Cost of Capital and Stock Price‌

April 30, 2025

TOBU RAILWAY CO., LTD.

‌I. Notice Concerning Action to Implement Management that is Conscious of Cost of Capital and Stock Price

Details of initiatives

Enhancing corporate value

ROE improvement Capital cost reduction

Strengthening profitability by promoting growth strategies

Achieve operating profit of ¥100.0 billion or more in the mid-2030s by promoting growth strategies, raising the target figure and revising the timeframe set forth in the Long-Term Management Vision, which previously called for operating profit of

¥80.0 billion in FY2033

Use of financial leverage based on financial soundness

Improve cash flow by strengthening profitability, reducing cross-shareholdings (to less than 10% of the consolidated net assets at the end of FY2027)
Promote growth strategies by using financial leverage while ensuring medium-to long-term financial soundness with an interest-bearing debt to EBITDA multiple in the 6-range and an equity ratio of 30% or higher in the mid-2030s
Increase in expected growth rate
Increase the expected growth rate by improving profitability and enhancing our ability to communicate the medium- to long-term growth strategy through enhanced dialogue with the market

Aim to maintain and increase ROE of 8% or higher over the medium to long term, while controlling the cost of capital and enhancing the Group's corporate value by executing the above initiatives to implement management that is even more conscious of the cost of capital and the stock price in light of the current business environment and market trends
Implement strategic shareholder returns by raising the total shareholder return ratio to 40% or higher during the period of the Medium-Term Business Plan (FY2024-FY2027) and then considering a further increase in FY2028 and beyond

‌Stock Price*1

P/B ratio*2

¥3,770

¥3,781

¥3,195

¥2,979

¥3,170

¥2,976

¥2,550

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

*1: Closing price for each period

1.69x

1.46x

1.40x 1.37x 1.38x

0.92x

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

*2: Value at the end of the period

P/B ratio 1x

Stock price and P/B ratio were both at low levels in the most recent FY2024
P/B ratio was below 1x in FY2024 partly due to low growth targets and the failure to fully
communicate the Group's growth strategy
Must implement concrete measures to increase corporate value in the medium to long term

‌ROE

9.5% 9.4%

7.7%

The market's expected

return is supposed to be higher

6.2%

6.3%

Our cost of equity based on

CAPM is approx. 5-6%

Not calculable due to a net loss

3.0%

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Our cost of equity based on CAPM is approximately 5-6%
We believe that the market's expected return is higher than the above
We must ensure ROE that exceeds the market's expected return over the medium to long term

自己資本（百万円）

‌

Equity (millions of yen)

有Balance of Interest-bearing debt (millions of yen)

利子負債残高（百万円）

554,507

461,359

465,648

444,954

452,567

474,754

535,693

793,137 789,533 837,279 808,507 795,502 749,777 780,253

Interest-bearing debt has settled at approx. ¥750.0 to

840.0 billion

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

Interest-bearing debt to EBITDA multiple

Steadily improving due to increasing EBITDA

28.1% 28.1% 26.4% 26.8% 27.3%

31.4% 31.6%

6.6x 6.7x

19.4x 10.1x

Equity ratio

Consistently improving

7.2x

5.9x

6.1x

Financial soundness is steadily improving, with the balance of interest-bearing debt hovering at approximately ¥750.0 to 840.0 billion
Equity ratio is consistently increasing; interest-bearing debt to EBITDA multiple is steadily improving as well
We will maintain financial soundness over the medium to long term, balancing growth investment and shareholder returns

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024

非上場株式残高（百万円）

場株式残高（百万円）

‌上Balance of cross-shareholdings (millions of yen)

% of consolidated net assets

連結純資産比率

15.8%

14.6%

Reduce consistently

11.5%

54,147

Less than 10%

at FY2027

9.0%

42,426

11.5% 11.1%

52,195 51,045

12.6%

60,363

85,755 81,983

In FY2024, we sold approximately ¥10.0 billion in cross-shareholdings, which accounted for 14.6% of consolidated net assets at the end of FY2024
We will reduce the percentage of consolidated net assets to less than 10% at the end of FY2027, and will continue to reduce thereafter

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2027 FY2028 and later

‌Key management indicators and projected values
Before

After

Operating profit

FY2027

¥74.0

billion

FY2033

¥80.0

billion

Operating profit

FY2027

¥74.0

billion

mid-2030s

¥100.0 billion+

ROE

Period of the Medium-Term Business Plan

（FY2024-FY2027）

Approx. 8%

Management conscious of cost of capital

Profitability

Increase profit in the non-railway businesses by capturing growth markets, particularly tourism, in light of changes in the operating environment

Manage assets and liabilities with an awareness of the cost of capital by allocating funds from the sale of assets (such as cross-shareholdings) to growth investments and shareholder returns

Accelerate investment in growth areas (tourism and area development) and expand leisure, real estate, and new businesses.

ROE

Until the mid-2030s

Maintain and increase 8%+

Management conscious of cost of capital

Profitability

Aim to maintain and increase the rate of 8% or higher over the medium to long term, while controlling the cost of capital and enhancing corporate value

From FY2028

Until FY2027

After

Before

‌Key management indicators and projected values

Total return ratio

Period of the Medium-Term Business Plan

(FY2024-FY2027)

30%+

FY2028 and beyond

Consider further increase

Period of the Medium-

Term Business Plan

（FY2024-FY2027）

Increase in phases

with 2.2%+ in mind

Period of the Medium-

Term Business Plan

（FY2024-FY2027）

40%+

DOE

Total return ratio

Interest-bearing debt to EBITDA multiple

FY2027

6x range

Financial soundness

Shareholder returns

Enhance shareholder returns through flexibly combining dividends and share buybacks, while balancing them with growth investments and financial soundness with future performance in mind

Control interest-bearing debt in anticipation of large-scale investment in the Ikebukuro West Exit redevelopment while investing for further growth

Achieve a total return ratio of 40% or higher through dividends and share buybacks during the period of the Medium-Term Business Plan, and further increase the ratio in FY2028 and beyond

Interest-bearing debt to

EBITDA multiple

Equity ratio

Until the mid-2030s

6x range

Until the mid-2030s

30%+

Financial soundness

Shareholder returns

Maintain financial soundness by improving profitability, increasing cash flow, and flexibly using funds from the sale of cross-shareholdings and borrowings to sustain the interest-bearing debt to EBITDA multiple and the equity ratio over the medium to long term

‌Cash allocation（for period of the Medium-Term Business Plan）

Borrowings

Maintain interest-bearing debt to EBITDA multiple in the 6-range

¥45.0-

55.0 billion

Major priority strategic investments

Approx. ¥40.0

billion

Approx. ¥270.0

billion

Non-railway business investment: approx. ¥180.0 billion (comprising
¥115.0 billion for development, ¥62.0 billion for tourism, and ¥4.0 billion for digitalization)
Railway business investment:

approx. ¥90.0 billion (comprising ¥10.0 billion for digitalization and ¥80.0 billion for strengthening of business infrastructure)

Approx. ¥425.0

billion

Approx. ¥160.0

billion

Maintenance and renewal investments

Non-railway business investment: approx. 60.0 billion
Railway business investment: approx. ¥100.0 billion

Approx.

¥80.0 to

90.0 billion

Shareholder returns

Total return ratio to be raised to 40% or higher
DOE to be raised in phases with 2.2% or higher in mind
Flexible share buybacks

Operating CF

Expand operating CF by capturing strong demand for inbound tourism among others

Sale of cross-shareholdings

Reduce cross-shareholdings to less than 10% of FY2027 consolidated net assets
Actively use proceeds from sale for key strategic investments

Procurement Distribution

Implement cash allocation to improve capital efficiency while maintaining financial soundness