Central Japan Railway

Central Japan Railway. At current levels, the stock is trading at historically low valuations despite two significant near-term earnings catalysts. The first is passenger traffic growth turning positive after its -9% decline in 1H09. A recent conversation with one of their competitors revealed most recent long distance passenger volume numbers down -2% from the 2009 low of -9%; we expect them to move into positive territory in April/May of this year. Amongst the Japanese railway operators, it has the biggest exposure to long distance travelling, with Shinkansen (bullet train) trains generating 66% of revenue. The other kicker to demand is the bankruptcy of Japan Airlines (JAL). JAL has subsequently scaled back several routes, with the two businesses having a significant route overlap. We expect their traffic volume to reap the benefits.