KOSE R.E. Co.,Ltd. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥3.86B
• Operating Income: ¥-157M
• Net Income: ¥84M
• EPS: ¥-3.21

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

Kose R.E. (3246) reported FY2026 Q3 consolidated JGAAP results marked by a revenue decline and a narrowed operating loss, supported by sizable non-operating income. Revenue was 3,858 million yen (-13.3% YoY), reflecting softer transaction volume or project timing in its real estate business. Gross profit was 1,105.9 million yen, yielding a gross margin of 28.7%, which is respectable for a developer and suggests pricing/mix remained reasonable despite lower sales. SG&A totaled 1,124.1 million yen, slightly exceeding gross profit and resulting in an operating loss of 157 million yen; notably, the operating loss improved by 85.1% YoY, implying cost discipline and/or mix improvements. Non-operating income of 178.9 million yen largely offset the operating deficit and non-operating expenses (41.4 million yen), including interest expense of 39.0 million yen, reducing the ordinary loss to 42 million yen. Net loss was 32 million yen (net margin -0.83%), a small deficit compared with the prior-year level, indicating progress toward breakeven. Asset turnover is modest at 0.197x, consistent with a developer carrying a sizable asset base and recognizing revenue upon project deliveries. Financial leverage is 1.96x (assets/equity), translating to a calculated ROE of -0.32% via DuPont, reflecting the thin margin and slow asset turnover this quarter. The balance sheet appears strong: total assets were 19,605 million yen and total equity 9,988 million yen (implied equity ratio about 50.9%), with cash and deposits of 5,354 million yen (roughly 27% of assets). Current ratio stands very high at 623%, indicating ample liquidity to cover short-term obligations. Interest-bearing loans include 423 million yen short-term and 4,109 million yen long-term; the reported interest-bearing debt figure of zero is an unreported item rather than true zero, but the debt-to-equity ratio reported at 0.68x suggests moderate leverage for the sector. Reported cash flow figures are unreported in XBRL; therefore, OCF/NI, FCF, and coverage metrics in the feed are not meaningful for assessment. Dividend per share is reported as zero; with a small net loss and cautious sector backdrop, management appears to prioritize balance sheet strength over distributions. The effective tax rate and equity ratio shown as 0.0% are unreported, not actual values; we therefore rely on calculated ratios from available figures. Overall, results indicate a challenging topline environment but tangible improvement in operating performance, buffered by non-operating gains and supported by a robust liquidity position. The outlook depends on project handover timing, sales velocity, and the interest rate environment, with balance sheet capacity providing resilience.

Profitability Analysis

ROE_decomposition: DuPont: Net margin -0.83% x Asset turnover 0.197x x Leverage 1.96x = ROE -0.32% (matches reported). The negative margin is the main driver of the negative ROE; turnover is structurally low for a developer; leverage is moderate and not a major drag. margin_quality: Gross margin at 28.7% indicates healthy project-level profitability. However, SG&A (1,124.1m) exceeded gross profit (1,106.0m), yielding an operating margin of approximately -4.1%. Ordinary margin improved due to 178.9m non-operating income, which is non-core and not necessarily repeatable. operating_leverage: Revenue fell 13.3% YoY but operating loss narrowed 85.1% YoY to -157m, implying strong cost containment and/or better project mix. Fixed cost absorption remains a headwind at the current revenue scale; further revenue recognition (project closings) could swing to operating profit given proximity to breakeven.

Growth Assessment

revenue_sustainability: The 13.3% YoY decline suggests slower deal closings or a timing shift in completions/handover typical in real estate. Sustainability hinges on the pipeline and backlog conversion rather than run-rate sales. profit_quality: Profitability relied on non-operating income to offset operating losses; core profitability is not yet sustainably positive. Gross margin is stable, but SG&A needs better absorption via higher deliveries to sustain profits. outlook: Near-term earnings trajectory will depend on project delivery timing in Q4 and into FY2026 year-end, sales velocity amid macro conditions, and interest rate trends. With operating loss already narrow, incremental revenue could drive operating breakeven; risks include market softening and potential price concessions.

Financial Health

liquidity: Current assets 15,514.7m vs current liabilities 2,490.3m yields a current ratio of 623% and ample working capital of 13,024.4m. Cash and deposits of 5,353.8m provide a strong liquidity buffer. solvency: Total equity 9,988m vs total assets 19,605m implies an equity ratio around 50.9% (reported 0.0% is unreported). Debt includes 423m ST loans and 4,108.8m LT loans; debt-to-equity reported at 0.68x implies moderate leverage for a developer. capital_structure: Leverage (A/E) at 1.96x is conservative. Interest expense was 39.0m for the period, with interest coverage at -4.0x due to operating loss; once operating profit normalizes, coverage should improve. Note that some balance sheet items (e.g., interest-bearing debt total, inventories) are likely underreported in XBRL and not truly zero.

Cash Flow Quality

earnings_quality: Non-operating income (178.9m) played a key role in mitigating losses; reliance on non-core items reduces quality of earnings. The presence of tax expense alongside a net loss suggests timing differences and/or prior period adjustments. FCF_analysis: Operating, investing, and financing cash flows are unreported in the feed; FCF thus cannot be assessed from provided data. Given cash on hand of 5,353.8m and modest reported debt, liquidity appears adequate even without detailed CF data. working_capital: Developers typically carry large inventories/real estate for sale and advances; the zero balances for inventories/receivables reflect unreported items, not actual zeros. High current assets and working capital indicate capacity to fund ongoing projects and bridge timing gaps in closings.

Dividend Sustainability

payout_ratio_assessment: DPS is reported at 0.00 and payout ratios in the feed are not meaningful due to negative net income and unreported cash flows. With retained earnings of 7,216.9m and strong equity, capacity exists, but current earnings softness argues for prudence. FCF_coverage: FCF is unreported; thus, coverage cannot be calculated. Cash reserves suggest flexibility, but a sustainable dividend would require consistent operating cash generation from project deliveries. policy_outlook: Given the small net loss and sector cyclicality, maintaining a conservative stance (potentially minimal or no dividend) appears consistent with balance sheet protection until core profitability stabilizes.

Risk Assessment

Business Risks:

• Project timing risk: revenue and profit recognition concentrated around property delivery milestones
• Real estate market cyclicality in core regions impacting sales velocity and pricing
• Inventory and land bank valuation risk amid changing market conditions
• Dependence on non-operating income diluting core earnings quality
• Cost inflation in construction and materials pressuring gross margins

Financial Risks:

• Interest rate risk affecting financing costs and buyer affordability
• Refinancing risk on 4,108.8m long-term loans and 423m short-term loans
• Potential covenant pressure if operating losses persist and interest coverage remains weak
• Liquidity deployment risk if multiple projects require simultaneous capital outlays

Key Concerns:

• Core operating loss despite healthy gross margin implies insufficient scale or elevated fixed costs
• Ordinary income close to breakeven relies on non-operating gains that may not recur
• Limited visibility on cash flows due to unreported OCF/FCF data in the period

Investment Implications

Key Takeaways:

• Top line declined 13.3% YoY, but operating loss narrowed sharply to -157m, nearing breakeven
• Gross margin of 28.7% remains solid, indicating resilient project-level economics
• Non-operating income of 178.9m materially cushioned results; core earnings still weak
• Balance sheet is strong with implied equity ratio ~50.9% and cash of 5.35bn
• Leverage moderate (reported D/E 0.68x; loans total at least 4.53bn), but interest coverage negative pending operating recovery

Metrics to Watch:

• Backlog and scheduled project handovers in Q4 and next fiscal year
• SG&A-to-sales ratio and operating breakeven point
• Gross margin trends on new deliveries and land acquisition costs
• Interest expense trajectory and refinancing schedule
• Cash balance and changes in inventories/advances (once disclosed)

Relative Positioning: Within Japanese regional real estate developers, Kose R.E. appears conservatively capitalized with ample liquidity and moderate leverage, but currently exhibits weaker core profitability versus peers that are solidly operating-profitable; upside hinges on delivery timing and restoration of operating margins.

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