TSUKADA GLOBAL HOLDINGS Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥49.11B
• Operating Income: ¥3.58B
• Net Income: ¥2.30B
• EPS: ¥83.22

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: A solid topline-driven quarter with operating margin expansion, but ordinary income weakened due to higher non-operating costs and leverage; net profit surged, though its composition raises quality and sustainability questions. Revenue rose 14.8% YoY to 491.1, with gross profit of 159.1 and gross margin at 32.4%. Operating income increased 34.0% YoY to 35.9, implying operating margin of 7.3% and an estimated YoY expansion of about 105 bps (vs. ~6.25% a year ago by back-calculation). Ordinary income fell 24.0% YoY to 18.1, compressing ordinary margin to 3.7% and an estimated contraction of roughly 187 bps YoY. Net income jumped 71.8% YoY to 39.5, lifting net margin to 8.0% with an estimated expansion of about 267 bps YoY. Non-operating dynamics were a headwind: non-operating expenses (8.96) exceeded non-operating income (5.95), with interest expense (5.85) larger than interest income (1.43). Interest coverage stands at 6.13x, a comfortable level, but the overall D/E of 2.65x signals elevated financial risk. Liquidity is adequate with a current ratio of 1.28x and cash and deposits (245.7) broadly covering current liabilities (241.7), reducing near-term liquidity stress. ROE calculated at 10.4% is respectable, but ROIC at 3.6% flags capital efficiency concerns versus typical cost of capital. The balance sheet is asset-heavy (A/E 3.65x), and long-term loans (591.2) dominate the liability structure, highlighting refinancing and interest rate risks. Earnings quality is difficult to assess as OCF and FCF were not disclosed; therefore, cash conversion against the strong net income cannot be verified. The large divergence between operating profit growth (+34%) and ordinary income decline (-24%) underscores sensitivity to financing and other non-operating items. Given the mix, forward-looking performance will depend on sustaining demand momentum (weddings/hospitality), controlling SG&A, and managing financing costs. With a low payout ratio (13.7%), dividends appear conservative, but sustainability ultimately hinges on cash generation not disclosed this quarter. Overall, fundamentals improved at the operating level, yet leverage and non-operating headwinds temper the quality of the earnings beat.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.4% = Net Profit Margin 8.0% × Asset Turnover 0.355 × Financial Leverage 3.65x. Biggest change driver: net profit margin expanded materially (estimated +267 bps YoY), while asset turnover likely improved with double-digit revenue growth; financial leverage remained high and roughly stable. Business reason: stronger operating performance (revenue +14.8% vs operating income +34.0%) drove operating margin uplift (~105 bps), but higher non-operating costs (notably net interest) reduced ordinary income; nevertheless, below-the-line items and tax effects supported net profit. Sustainability: operating margin gains appear cyclical/operationally driven and partially sustainable if demand holds and cost discipline continues; however, net profit margin at 8.0% may not be fully sustainable given ordinary income compression and leverage sensitivity to rates. Flagged trends: SG&A detail was not disclosed, but operating leverage was positive (OP growth > sales growth), suggesting SG&A grew slower than revenue; monitor for any reversal if wage or rent pressures accelerate.

Growth Assessment

Revenue growth of 14.8% YoY indicates robust demand recovery in core businesses, likely weddings/hospitality/events, with favorable pricing/mix and volume. Operating income growth of 34.0% suggests solid operating leverage and improved cost absorption. Ordinary income fell 24.0% YoY, implying that non-operating headwinds (net interest expense and other items) offset operating gains. Net income growth of 71.8% was strong, but composition indicates reliance on items below ordinary income and tax line; this may be less repeatable. Asset turnover at 0.355 reflects better utilization but remains constrained by an asset-heavy model. Outlook: sustaining double-digit revenue growth will depend on event pipelines, consumer sentiment, and inbound-related demand; costs (energy/food) and wage inflation are key swing factors. Near-term, operating margin can hold near 7%+ if pricing power remains, but ordinary margin may be capped by financing costs unless deleveraging progresses.

Financial Health

Liquidity: current ratio 1.28x and quick ratio 1.28x are adequate (>1.0) but below the >1.5x comfort benchmark; working capital is positive at 67.3. Solvency: D/E at 2.65x is high (warning), with long-term loans of 591.2 and total liabilities of 1,006.1; equity 379.0 provides a buffer but leverage elevates risk. Interest coverage at 6.13x is acceptable now, but sensitivity to rate hikes/refi terms persists. Maturity mismatch: current liabilities (241.7) are roughly covered by cash and deposits (245.7), limiting short-term rollover risk; however, the sizable noncurrent liabilities indicate ongoing refinancing needs. Off-balance: no explicit disclosures on lease/guarantee commitments were provided in the dataset; potential lease liabilities typical for venues/hotels may exist but are not quantified here.

Cash Flow Quality

OCF and FCF were not disclosed, so we cannot compute OCF/Net Income or assess cash conversion; thus, earnings quality cannot be validated quantitatively. Given net profit of 39.5 and interest coverage of 6.13x, interest is covered by operating profit, but without OCF we cannot confirm working capital impacts. With capex undisclosed, FCF sufficiency for dividends and debt service is unknown. Potential red flags to monitor: a large divergence between OP and ordinary income due to financing costs; any increase in receivables/inventories (not disclosed) could pressure OCF; prepayment/deposit dynamics in weddings can swing quarterly cash flows.

Dividend Sustainability

Payout ratio is a low 13.7%, indicating a conservative stance and apparent capacity to sustain dividends under current earnings. However, absence of OCF/FCF data prevents confirmation of cash coverage. High leverage (D/E 2.65x) suggests capital allocation may prioritize debt reduction over dividend hikes. Policy outlook: stable-to-cautious dividend policy likely, with potential for increases conditional on sustained operating cash flow and deleveraging progress.

Risk Assessment

Business Risks:

• Demand volatility in weddings/hospitality/events tied to consumer sentiment and seasonality
• Cost inflation (food, energy, labor) pressuring gross and operating margins
• Execution risk on venue utilization and booking pipelines
• Brand/reputation risk impacting booking volumes and pricing

Financial Risks:

• High leverage (D/E 2.65x) and refinancing risk given 591.2 in long-term loans
• Interest rate risk: rising rates would further compress ordinary income
• Cash flow visibility risk due to undisclosed OCF/FCF and capex data
• Potential impairment risk on intangible assets/goodwill if trends deteriorate

Key Concerns:

• Ordinary income down 24% YoY despite stronger operating profit, highlighting non-operating headwinds
• ROIC at 3.6% below 5% warning threshold, signaling weak capital efficiency
• Liquidity buffer acceptable but not robust (current ratio 1.28x) relative to industry shocks
• Limited disclosure on SG&A and cash flows constrains quality assessment

Investment Implications

Key Takeaways:

• Operating momentum is strong with estimated ~105 bps operating margin expansion
• Ordinary income weakness reflects leverage/financing drag despite operational gains
• ROE at 10.4% respectable, but ROIC at 3.6% underscores efficiency issues
• Balance sheet leverage elevated; interest coverage acceptable but sensitive
• Dividend payout low (13.7%), but sustainability depends on undisclosed cash flows

Metrics to Watch:

• OCF and FCF trends and OCF/Net Income ratio once disclosed (>1.0 desirable)
• Interest expense trajectory and effective borrowing rate
• Booking/backlog indicators and venue utilization rates
• SG&A growth vs revenue growth to validate ongoing operating leverage
• Leverage metrics (D/E, net debt/EBITDA) and any deleveraging progress

Relative Positioning: Within domestic weddings/hospitality peers, the company shows solid post-pandemic revenue recovery and improving operating margins, but it is more leveraged than conservative peers and exhibits lower capital efficiency (ROIC 3.6%), making it more sensitive to financing conditions and cost inflation.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis