Star Mica Holdings (2975) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, revenue and earnings increased, accompanied by an improvement in the gross profit margin, with earnings growth substantially outpacing revenue growth. Revenue was ¥65.23B (+34.4% YoY, +¥16.69B), and Operating Income was ¥9.77B (+67.4%, +¥3.93B). Ordinary Income was ¥8.89B (+78.0%), and Net Income attributable to owners of the parent was ¥6.08B (+77.3%). The main drivers of earnings growth were the expansion of the Renovated Condominium Business and improvement in the gross profit margin (up approximately 3.0pt from 18.8% in the prior-year period to 21.8%). On the other hand, real estate for sale accounts for approximately 91% of total assets, making the sustainability of earnings dependent on inventory turnover and cash collection.

Factors Behind Financial Performance

【Revenue】Revenue was ¥65.23B, up 34.4% YoY, with the Renovated Condominium Business accounting for most of the increase. Revenue from this business was ¥62.56B (+33.0%), representing 95.9% of the total. The Investment Business generated ¥1.39B (+79.5%), while external revenue from the Advisory Business was ¥1.27B (+80.1%). “Other revenue,” which includes rental income and real estate transfers, was ¥8.98B, up from ¥6.35B in the prior-year period.

【Profit and Loss】Operating Income was ¥9.77B (+67.4%), and the operating margin improved by approximately 3.0pt to 15.0% from 12.0% in the prior-year period. Gross profit was ¥14.21B, and the gross profit margin increased to 21.8% from 18.8% in the prior-year period. SG&A expenses were ¥4.44B (¥3.29B in the prior-year period, +34.7%), broadly in line with revenue growth; the gross profit margin was the main driver of the improvement in profitability. Among non-operating items, interest expense increased to ¥1.22B from ¥0.9B, and non-operating expenses totaled ¥1.42B. Non-operating income was ¥0.54B, leaving Ordinary Income of ¥8.89B, ¥0.88B below Operating Income. In summary, both revenue and earnings increased.

Segment Analysis

The Renovated Condominium Business is the core source of profit, with segment profit of ¥8.74B (+61.6%) and a segment profit margin of 14.0%. It accounts for approximately 84% of total segment profit of ¥10.41B. The Investment Business generated revenue of ¥1.39B and profit of ¥0.15B (+13.6%), with a profit margin of 10.7%; profit growth was modest relative to revenue growth.

Profit from the Advisory Business was ¥1.52B (+88.5%). The 119.4% profit margin against external revenue of ¥1.27B is calculated using a denominator that excludes ¥0.87B in intersegment revenue; the margin against total revenue of ¥2.15B, including intersegment revenue, is approximately 70.8%. After deducting corporate expenses of ¥0.64B, consolidated Operating Income was ¥9.77B.

Key Financial Indicators

【Profitability】The operating margin was 15.0% (12.0% in the prior-year period), the net profit margin was 9.3% (7.1% in the prior-year period), and annualized ROE was 19.7%. Basic EPS was ¥172.08 (¥102.23 in the prior-year period, +68.3%).【Cash Flow Quality】Cash flow statement data is not included in this report. Based on the balance sheet, real estate for sale increased to ¥132.29B, up ¥27.27B (+26.0%) from the end of the same period last year. Funds invested in inventory exceeded Net Income of ¥6.08B, while cash and deposits remained at ¥4B (¥3.4B in the prior-year period).【Investment Efficiency】The annualized total asset turnover ratio was approximately 0.60x, and financial leverage was approximately 3.5x. ROE was primarily driven by improved profitability.【Financial Soundness】The Equity Ratio improved to 28.4% from 25.6% in the prior-year period. The current ratio was 880.6%, but approximately 95% of current assets consisted of real estate for sale. Total liabilities were approximately 2.52x net assets. Long-term borrowings were ¥88.21B (¥73.55B in the prior-year period), and current portion of long-term borrowings was ¥9.74B. Interest coverage (Operating Income ÷ interest expense) was approximately 8.0x.

Cash Flow Analysis

As no cash flow statement is available, the balance sheet movements indicate that the company continues to fund inventory expansion with borrowings. Real estate for sale increased by ¥27.27B from the end of the same period last year. Over the same period, long-term borrowings rose by ¥14.66B, the current portion of long-term borrowings increased by ¥2.68B, and short-term borrowings increased by ¥0.7B. Net assets also increased by ¥11.51B, indicating that accumulated earnings and capital increases, among other factors, are supporting part of the inventory investment. Cash and deposits increased by ¥0.6B to ¥4B, below the ¥9.74B current portion of long-term borrowings. Whether higher earnings translate into available cash depends on the pace at which inventory is converted into cash through property sales.

Earnings Quality

The improvement in Operating Income was the primary factor, and no extraordinary gains or losses were reported; therefore, the earnings increase was mainly attributable to the core business. Of non-operating income of ¥0.54B, gains on valuation of derivatives accounted for ¥0.44B, while dividend income was only ¥0.03B. Valuation gains can fluctuate with market conditions and should be distinguished from recurring income. Non-operating expenses were primarily interest expense of ¥1.22B, up from ¥0.9B in the prior-year period in line with the increase in borrowings. “Other revenue” of ¥8.98B includes rental income and real estate transfers, and does not consist entirely of recurring rental income. Comprehensive income was ¥6.25B, and the difference from Net Income of ¥6.08B was ¥0.17B in deferred hedge gains or losses, a small variance. The modest increase in cash relative to earnings growth, alongside expanding inventory and borrowings, is a factor to monitor when assessing the conversion of earnings into cash.

Earnings Forecast and Guidance

The full-year forecast is Revenue of ¥89.17B, Operating Income of ¥10.45B, Ordinary Income of ¥8.77B, and EPS of ¥167.62, with no revision this quarter. Cumulative Q3 progress was 73.2% for Revenue and 93.5% for Operating Income, with earnings progress ahead of revenue progress. Cumulative Ordinary Income (¥8.89B) and Net Income (¥6.08B) have already exceeded the full-year forecasts of ¥8.77B and ¥6.03B, respectively.

To achieve the forecast, Q4 would require Revenue of ¥23.94B and Operating Income of ¥0.78B. Since cumulative Ordinary Income and Net Income already exceed their forecasts, the assumptions for Q4 effectively imply results near zero. The forecast assumes relatively low earnings compared with revenue, which appears to reflect the timing variability of property sales.

Shareholder Returns

The dividend for the end of Q2 was ¥25.5, and the full-year dividend forecast is ¥51.0 (unchanged). The annual dividend in the previous fiscal year was ¥15, so the forecast represents a substantial increase. The forecast payout ratio, calculated by dividing the full-year dividend forecast of ¥51.0 by forecast EPS of ¥167.62, is approximately 30.4%. No share repurchase is reported. Given substantial funding needs for inventory investment and debt repayment, dividend sustainability should be assessed alongside cash collection from property sales.

Risk Factors

1. Business concentration risk: The Renovated Condominium Business accounts for 95.9% of Revenue and approximately 84% of total segment profit. This structure means changes in the used condominium market and sourcing competition can directly affect consolidated performance.

2. Inventory and cash collection risk: Real estate for sale is ¥132.29B, accounting for approximately 91% of total assets. Prolonged sales periods or price declines could affect both profitability and cash collection. Against cash and deposits of ¥4B, the current portion of long-term borrowings is ¥9.74B, making continued property sales and refinancing necessary.

3. Interest rate and leverage risk: Total liabilities are approximately 2.52x net assets, and long-term borrowings are ¥88.21B. Interest expense was ¥1.22B, up approximately 35.6% from the prior-year period. Higher interest rates could affect the company through both increased funding costs and reduced purchasing power among buyers.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net profit margin are above the upper end of the industry IQR.

Growth and Capital Efficiency

Revenue growth is above the median and within the IQR.

※Source: Company compilation

Key Points to Note in the Results

1. The main driver of earnings growth was improvement in the gross profit margin (18.8%→21.8%), and the operating margin rose from 12.0% to 15.0%. The SG&A ratio was nearly flat, and profitability remains susceptible to sourcing prices and market conditions.

2. Progress toward the full-year Operating Income forecast was 93.5%, while cumulative Ordinary Income and Net Income have already exceeded their forecast amounts. The forecast has not been revised, implying that the cumulative earnings pace is not expected to continue in Q4.

3. Dependence on real estate for sale of ¥132.29B and borrowings is a key issue in assessing the sustainability of performance. The Equity Ratio improved to 28.4%, but the pace of inventory conversion into cash and debt repayment will require monitoring.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,281–¥1,357 for a ±1% change in the cost of equity, and ¥1,313–¥1,327 for a ±0.1 change in ω.

Notes:

• Since progress toward full-year forecast Net Income (101%) exceeds the standard level (75%), forecast EPS has been adjusted upward, within the maximum of +10% (because companies with leading progress tend to exceed forecasts; for businesses with strong seasonality, the adjustment may be excessive).
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be somewhat overstated.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated using only publicly disclosed data; this is not a forecast of market share prices or a recommendation of any specific investment action, and it does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI analysis of XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available earnings data. Investment decisions should be made at your own responsibility and, as necessary, after consulting with a professional.

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