October 26, 2014 1:00 pm JST

Facing lull at home, Tokyu sets about urbanizing SE Asia

TETSUYA KATANO, Nikkei staff writer

TOKYO -- The search for a new revenue source is taking railway operator Tokyu from its profitable but mature home market in Japan to fast-growing Southeast Asia, where lucrative redevelopment projects await.

     In Japan, Tokyu is the leader in redeveloping areas along railway lines. Still, the company's earnings are widely expected to hit a ceiling in the near future, given the country's declining population. For fiscal 2013, the population in areas along Tokyu lines climbed 19% from the year ended March 2000, comfortable ahead of other companies, which logged single-digit growth for the period. In fiscal 2035, however, Tokyu expects the population in those areas to rise only 1% from fiscal 2010. As for people between the ages of 15 and 64, the most frequent users of trains, the population will likely fall 10% during the same period.

     Ryota Himeno, analyst at Barclays Securities Japan, said the company can afford to make long-term investments abroad because it is currently generating a profit. Its urban redevelopment project in Tokyo's Tama area, along a railway operated by the company, has proved a success.

     The company aims to continue growing by bringing its experience and expertise to Thailand and Vietnam.

Looking for more

On Oct. 1, Tokyu announced that it will begin operating a property rental business for Japanese living in Thailand, aiming to capitalize on the growing number of Japanese businesses expanding into the country.

     Tokyu has set up a venture with the Saha Group, Thailand's largest consumer goods manufacturer. The new company is capitalized at about 1.1 billion yen ($10.1 million) and the Japanese company has a 45% stake in it. It is a rather small deal for Tokyu, whose sales for the year through March topped 1 trillion yen.

     Unlike other Japanese railway operators, which invest only in Japan, Tokyu is eager to look abroad, having already entered the Vietnam market.

     Tokyu is taking part in a large-scale government-led project to develop Binh Duong New City. The city will cover 10 million sq. meters in Binh Duong Province, about 30km north of Vietnam's largest metropolis, Ho Chi Minh City. The project calls for local government offices, apartments, schools and other structures. Tokyu is expected to spend roughly 100 billion yen in total to develop commercial facilities and large-scale luxury condominiums called Sora Gardens, which will have a rooftop pool and a gym.

     Sora Gardens will have about 1,500 residential units in total. Becamex Tokyu, a joint venture between Tokyu and local public corporation Becamex IDC, have made 400 of them available since April 2013, but has not yet sold them all. Senior Managing Director Masao Tomoe said this is a long-term business and that the company will be able to sell additional units after their value increases.

     In September, Becamex Tokyu Bus, a subsidiary of Becamex Tokyu, started provisional operation of the Kaze Shuttle bus in the province.

     Expectations for Tokyu are high in Vietnam. Prime Minister Nguyen Tan Dung and more than 1,500 guests attended the inauguration ceremony of the Binh Duong Integrated Administration Center on Feb. 20. "Utilizing the most of our expertise in urban development, which we acquired in Japan, we are implementing a comprehensive development project," said Toshiaki Koshimura, head of the Tokyu group, in his speech at the ceremony on behalf of companies investing in Binh Duong Province.

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