The Global (3271) FY2026 Q2 Earnings Report

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Executive Summary

For Q2 of the fiscal year ending June 2026, revenue and earnings declined substantially in line with the earnings plan weighted toward the second half. Revenue was ¥11.85B (-49.3% year on year), Operating Income was ¥1.22B (-38.5%), Ordinary Income was ¥0.72B (-57.9%), and Net Income was ¥0.73B (-49.3%). The primary reason for the decline in revenue was the plan to concentrate deliveries of condominium units for sale and income-producing properties in the second half. The first half focused on acquiring business-use land and increasing the pipeline of development projects.

Factors Affecting Earnings

【Revenue】Revenue was ¥11.85B, a 49.3% decrease year on year. In addition to a decline in the core Income-Producing Properties Business to ¥11.14B (-23.4%), the Condominium Business contracted substantially to ¥0.12B, down ¥8.07B year on year, because deliveries were concentrated in the second half.

【Profit and Loss】Operating Income was ¥1.22B (-38.5%). As the rate of decline in cost of sales exceeded the rate of decline in revenue, the gross margin improved to 22.3% and the operating margin improved to 10.3% from the previous year. Meanwhile, Ordinary Income was ¥0.72B (-57.9%), with the decline from Operating Income widening as non-operating expenses of ¥0.53B, including interest expenses of ¥0.29B, weighed on earnings. Net Income was ¥0.73B (-49.3%), supported by a reversal of income taxes and other taxes. Revenue and earnings declined.

Segment Analysis

By segment operating profit and loss, the Income-Producing Properties Business, which accounted for 94.0% of the revenue mix, remained the core business and posted an increase in Operating Income to ¥2.04B, up ¥0.699B year on year, while maintaining a high profit margin of 18.3%. The completion of deliveries for 11 properties, including Jujo, Otorii, and Ryogoku, contributed to the result. Meanwhile, the Condominium Business (operating loss of ¥0.28B) and the Sales Agency Business (operating loss of ¥0.14B) remained in the red due to deliveries and contract signings being weighted toward the second half. The Building Management Business was almost flat, with a slight operating loss. Overall Operating Income was driven by higher profit from the core Income-Producing Properties Business, which absorbed losses from the other segments.

Key Financial Indicators

Profitability: Annualized ROE of 13.9% and operating margin of 10.3% (8.5% in the previous year)
Cash quality: Operating CF / Net Income of -12.35x (cash backing requires attention at less than 1.0x)
Investment efficiency: Capital expenditures were small at ¥0.03B, with no significant divergence from depreciation and amortization of ¥0.04B
Financial soundness: Equity Ratio of 22.3% (26.8% in the previous year) and current ratio of 186.8%

Cash Flow Analysis

Operating CF was -¥8.98B, more than 12 times the negative value of Net Income of ¥0.73B, indicating that current-period profit lacked cash backing. The primary factor was a ¥7.93B increase in inventories, primarily real estate under development, reflecting the addition of development projects associated with contracts for the acquisition of business-use land for 18 projects during the half-year. Investing CF was a small inflow of ¥0.01B. Financing CF was an inflow of ¥6.67B, offsetting operating funding requirements through increases of ¥3.62B in short-term borrowings and ¥2.68B in long-term borrowings. FCF was -¥8.97B. Cash generation requires monitoring, with cash collection from inventory sales and deliveries in the second half being the key focus.

Quality of Earnings

Ordinary Income of ¥0.72B and Net Income of ¥0.73B were almost at the same level; however, Net Income exceeded Ordinary Income because income taxes and other taxes resulted in a reversal of ¥0.023B. Non-operating expenses of ¥0.53B represented 4.5% of revenue and consisted primarily of interest expenses of ¥0.29B and commission fees paid of ¥0.24B, indicating a significant financial cost burden associated with development financing. Operating CF was substantially below Net Income, and the increase in accounting accruals resulting from higher inventories is a point of attention regarding earnings quality.

Earnings Forecast and Guidance

Progress against the full-year forecast was 23.0% for revenue, 26.9% for Operating Income, 20.6% for Ordinary Income, and 23.9% for Net Income, all substantially below the standard 50% progress level. This divergence is based on the plan to concentrate deliveries of condominiums for sale and income-producing properties in the second half, and the company considers progress to be in line with its initial assumptions. The second half will require revenue of ¥39.57B and Operating Income of ¥3.32B. The company entered into contracts for the acquisition of business-use land for 18 projects during the half-year, representing approximately ¥50.0B in expected sales, and expects to complete acquisitions totaling approximately ¥100.0B for the full year. Inventory accumulation as a source of future revenue is progressing.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year dividend forecast is ¥33.0 per share. Based on forecast EPS of ¥107.49, the Payout Ratio is approximately 30.7%. Treasury shares totaled only 76 shares, and no share repurchase activity has been confirmed.

Catalysts

【Short term】Scheduled completion and sell-out of four condominium projects (136 units), and earnings contribution from the concentration of deliveries of income-producing properties and condominiums in the second half. 【Long term】Full-scale launch of large-scale development projects, including the Nihombashi Tomizawa-cho Project, and expansion of the medium- to long-term earnings base through the completion of approximately ¥100.0B in business-use land acquisitions for the full year.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

Comparative data with the industry median for the Company’s operating margin and net profit margin has not been established; therefore, relative assessment of the levels is not possible.

Growth and Capital Efficiency

The revenue growth rate reflects a temporary decline resulting from the earnings plan being weighted toward the second half, and comparative data with the industry median has not been established.

※Source: Compiled by the Company

Risk Factors

1. Inventory and Delivery Concentration Risk: Real estate for sale and real estate under development totaled ¥35.12B, accounting for 75.0% of total assets. Due to the concentration of deliveries in the second half, achievement of the full-year forecast depends heavily on sales execution in the second half.

2. Financial Leverage Risk: The D/E ratio was 3.48x, interest-bearing debt was ¥20.29B, and the Equity Ratio was 22.3% (down from 26.8% in the previous year). Including short-term borrowings of ¥8.64B and long-term borrowings due within one year of ¥12.16B, the Company has a high degree of reliance on refinancing.

3. Cash Flow Volatility Risk: Operating CF was -¥8.98B, primarily due to the increase in inventories. If inventories do not convert into sales and deliveries in the second half, the impact on liquidity may persist.

Key Points from the Earnings Results

1. Despite the decline in revenue, cost of sales was reduced, and the gross margin of 22.3% and operating margin of 10.3% both improved from the previous year. The 18.3% profit margin of the core Income-Producing Properties Business drove the overall result.

2. Progress toward the full-year forecast remained in the 20% range for the key indicators, but this was attributable to the planned earnings structure in which condominium and income-producing property deliveries are concentrated in the second half. Sales and delivery results in the second half will be the focus of earnings assessment.

3. The Company entered into contracts for the acquisition of approximately ¥50.0B of business-use land during the half-year, and inventories increased by ¥7.93B. While this represents an increase in the source of future revenue, it was accompanied by higher interest-bearing debt and negative Operating CF, making it an important development in assessing changes in financial soundness.

Theoretical Share Price (Reference Value)

Sensitivity: ¥596–¥632 at ±1% for the cost of equity, and ¥607–¥624 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end were used (there is a timing difference from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated through AI-based integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The industry benchmark is reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting a professional.

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