Corporate-Governance Events Do Not Affect Our Neutral View of West Japan Railway

We are increasing our fair value estimate for West Japan Railway, or JRW, to JPY 8,400 per share from JPY 8,200 to reflect the time value of money. Our fundamental view of the name is unchanged after a series of major safety incidents confirming the company’s weak corporate governance, which we have previously highlighted. The shares currently appear slightly overvalued versus our fair value estimate, reflecting our more cautious views on JRW's safety investment requirements and rising hotel investments over the next five years. We reaffirm our no-moat and stable moat trend ratings.