The Global Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥7.62B
• Operating Income: ¥440M
• Net Income: ¥684M
• EPS: ¥7.95

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: Weak quarter with sharp profit contraction and margin compression despite adequate liquidity. Revenue fell 19.3% YoY to 76.24, while operating income dropped 52.3% YoY to 4.40 and ordinary income plunged 87.2% YoY to 1.08, driving net income down 67.1% to 2.25. Gross margin printed at 27.0%, and operating margin declined to 5.8%, indicating weaker project mix and/or cost pressure. Based on revenue and operating income declines, we estimate operating margin compressed by roughly 400 bps YoY (from ~9.8% to ~5.8%). Net margin compressed by about 430 bps YoY (from ~7.3% to ~3.0%). Non-operating items were a net drag (1.62 income vs 2.38 expense), compressing ordinary income below operating income. Profit before tax is reported at 8.47, which implies sizable extraordinary items not detailed in the disclosure; the subsequent tax expense of 1.62 (effective tax rate ~19%) and resulting net income of 2.25 suggest additional unreported non-recurring charges or adjustments. Earnings quality assessment is constrained as operating cash flow is unreported; we cannot confirm cash conversion versus net income. Balance sheet shows high leverage (D/E 2.85x) but robust liquidity (current ratio 214%), with 99.58 in cash against 25.45 in short-term loans. Interest coverage is modest at 2.7x, leaving limited buffer if rates rise or earnings soften further. ROE is low at 2.3% and ROIC at 2.7% is below the 5% warning threshold, indicating subpar capital efficiency. Ordinary income deterioration and reliance on non-operating/extraordinary items to bridge to PBT heighten earnings volatility risk. With inventories unreported, visibility on project pipeline and asset turnover drivers is limited; the reported asset turnover of 0.199 suggests a balance-sheet-heavy model typical of developers. The reported payout ratio of 503% appears inflated versus quarterly earnings and is not a meaningful gauge of annual dividend sustainability without full-year profit and OCF. Forward-looking, management likely needs stronger presales/ closings, tighter SG&A control, and margin discipline to restore profitability metrics and strengthen interest coverage. Key focus areas: sales pace, gross margin resilience amid construction cost pressures, and funding strategy given elevated leverage.

Profitability Analysis

ROE decomposition: ROE (2.3%) = Net Profit Margin (3.0%) × Asset Turnover (0.199) × Financial Leverage (3.85x). The most material deterioration YoY appears to be in the margin component: operating income fell 52.3% on a 19.3% revenue decline, implying ~400 bps operating margin compression (from ~9.8% to ~5.8%); net margin compressed ~430 bps (from ~7.3% to ~3.0%). Business drivers likely include weaker unit mix/ASP, higher construction/land costs, and timing of handovers reducing scale benefits, while non-operating expenses (notably interest expense of 1.63) pressured ordinary income. Asset turnover remains low at 0.199, consistent with a developer carrying substantial work-in-process/land bank; without inventory disclosure, we cannot quantify changes but the decline in revenue suggests weaker throughput. Leverage at 3.85x amplifies ROE but also heightens risk; with margins down, leverage no longer translates into healthy equity returns. Sustainability: margin compression from cost inflation and project mix can persist if pricing power is limited; some normalization is possible with improved handover timing and cost pass-through, but interest burden will remain until deleveraging progresses. Concerning trends: SG&A was 11.32 (no YoY provided), but operating leverage was negative as revenue fell faster than fixed-cost absorption, and ordinary income dropped far more than operating income due to higher non-operating expenses; interest coverage at 2.7x signals limited cushion.

Growth Assessment

Revenue contracted 19.3% YoY to 76.24, indicating slower closings or weaker presales conversion. Operating income fell 52.3% and ordinary income 87.2%, highlighting pronounced deleverage and higher non-operating drag. Net income declined 67.1% to 2.25; effective tax rate ~19.1% is normalizing, but bottom line was constrained by below-operating items and unreported extraordinary adjustments. Current gross margin of 27.0% suggests some product-level contribution, but insufficient to offset fixed costs and rising interest burden. With asset turnover at 0.199, growth is sensitive to the timing of project deliveries; absent inventory and backlog data, revenue visibility is limited. Non-operating income ratio (72.0%) and the gap between operating income (4.40) and PBT (8.47) imply notable non-recurring factors; sustainability is low. Near term, recovery hinges on presales pace, pricing discipline to offset construction cost inflation, and SG&A control. Medium term, improving ROIC above the 5–7% range requires faster capital turnover (inventory reduction/ quicker sell-through) and deleveraging to cut interest expense.

Financial Health

Liquidity is sound: current ratio 214.2% and quick ratio 214.2% (cash-heavy) with 99.58 in cash vs 174.29 in current liabilities and 25.45 in short-term loans. Solvency is stretched: D/E 2.85x (warning >2.0) and total loans of 133.55 (ST 25.45, LT 108.10). No explicit interest-bearing debt total disclosed, but loan detail implies significant leverage funding current assets (inventories unreported). Maturity mismatch risk appears moderate-near term given cash exceeds short-term loans, but long-term loans (108.10) fund largely current assets, creating refinancing/rollover dependence if sales slow. Interest coverage at 2.70x is below the >5x comfort benchmark, exposing the company to rate/earnings shocks. No off-balance sheet obligations were disclosed in the provided data; absence of information limits assessment of guarantees or contingent liabilities.

Cash Flow Quality

Operating cash flow was not disclosed; OCF/Net Income and FCF cannot be assessed. We therefore cannot validate earnings-to-cash conversion or working capital movements (receivables, inventories, advances). Given the developer model, quarter-to-quarter OCF can be volatile based on handover timing; the reliance on debt and modest coverage elevate the need for positive OCF over the year. Without capex/dividend data, FCF coverage of commitments cannot be evaluated. No clear signs of working capital manipulation can be identified due to missing disclosures; inventory turnover and advance receipts would be key but were unreported.

Dividend Sustainability

Dividend data were unreported; the calculated payout ratio of 503.2% is likely based on annual DPS versus a single quarter’s net income and is not meaningful for sustainability analysis. With ROE at 2.3% and ROIC at 2.7%, internal capital generation is weak; sustainable dividends would require improved full-year profitability and positive OCF. Coverage from FCF cannot be evaluated due to missing OCF and capex data. Given leverage (D/E 2.85x) and modest interest coverage (2.7x), management may prioritize balance sheet resilience over payout growth unless earnings recover in subsequent quarters.

Risk Assessment

Business Risks:

• Housing demand cyclicality and potential slowdown in contract signings/closings
• Construction cost inflation and subcontractor capacity constraints pressuring gross margins
• Project timing risk (handover delays) impacting quarterly revenue and cash flow
• Inventory/land bank valuation risk amid market softening (impairment risk)
• Competitive pricing pressure limiting ability to pass through cost increases

Financial Risks:

• High leverage (D/E 2.85x) with modest interest coverage (2.7x)
• Refinancing/rollover risk given long-term loans funding current assets
• Interest rate risk elevating financing costs and compressing ordinary income
• Earnings volatility from non-operating/extraordinary items

Key Concerns:

• Ordinary income down 87.2% YoY and below operating income due to non-operating drag
• Apparent reliance on undisclosed extraordinary items given PBT (8.47) vs OI (4.40) and OI < PBT mismatch
• ROIC at 2.7% (<5% threshold) signaling weak capital efficiency
• Limited visibility due to unreported OCF, inventories, and segment/backlog details

Investment Implications

Key Takeaways:

• Sharp margin compression (~400–430 bps) and profit declines across operating, ordinary, and net levels
• Leverage elevated (D/E 2.85x) with only moderate interest coverage (2.7x)
• Liquidity cushion (cash 99.58) offsets near-term short-term debt (25.45), but long-term leverage remains high
• ROE 2.3% and ROIC 2.7% underscore subpar returns; improving turnover and deleveraging are needed
• Earnings quality unclear due to missing OCF and the presence of sizable non-operating/extraordinary items

Metrics to Watch:

• Presales/backlog and quarterly closings (volume and ASP)
• Gross margin trajectory and SG&A ratio
• Inventory levels and turnover days (when disclosed)
• Operating cash flow and free cash flow
• Interest coverage and average funding cost
• Debt trajectory (ST vs LT), D/E ratio, and covenants
• ROIC improvement toward >5–7%

Relative Positioning: Versus domestic small/mid-cap developers, THE Global’s liquidity is adequate but leverage is higher and returns lower; profitability volatility appears elevated due to non-operating/extraordinary swings, placing it below peers on capital efficiency and interest coverage metrics.

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