Japan Property Management Center Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥43.80B
• Operating Income: ¥2.17B
• Net Income: ¥1.30B
• EPS: ¥86.64

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

FY2025 Q3 was a solid profitability-driven quarter for JPMC, with earnings growing double digits despite essentially flat top line. Revenue was 437.98, up 0.1% YoY, while operating income rose 11.4% to 21.72 and net income climbed 12.3% to 14.57. Gross profit totaled 55.84 and SG&A was 36.34, implying an SG&A ratio of 8.3% of sales. Operating margin improved to 4.96% (21.72/437.98), expanding by roughly 50 bps YoY based on reported growth differentials. Net margin increased to 3.33% (14.57/437.98), about a 36 bps YoY expansion by our estimate. Ordinary income of 21.80 (+11.7% YoY) indicates non-operating items were small (non-operating income 0.06 and expenses 0.04), so earnings quality within the income statement looks clean. The effective tax rate was 33.2%, broadly in line with a normalized rate. Balance sheet strength underpins the results: current ratio is 194.4% and cash & deposits of 60.39 exceed current liabilities of 50.88, minimizing liquidity risk. Leverage appears manageable with a D/E of 0.90x and long-term loans of 6.69; interest burden is minimal (interest expense 0.04), yielding an interest coverage of 520x+. ROE is a healthy 16.4%, supported by a high asset turnover of 2.589 and moderate financial leverage of 1.90x. While operating leverage worked positively this quarter, revenue momentum remains muted (+0.1% YoY), highlighting reliance on margin management to drive EPS. Cash flow disclosure was not provided this quarter, so we cannot verify whether operating cash flow tracked earnings; this is the main earnings quality gap. Dividend payout ratio is calculated at 66.9%, slightly above a conservative benchmark, but appears serviceable given the cash position; FCF coverage, however, is unassessable due to missing CF data. Overall, the quarter suggests resilient core profitability and tight cost control, but future growth will benefit from re-acceleration of revenue to reduce dependence on incremental margin gains. Near-term focus points are sustaining the improved margin mix, monitoring tax rate stability, and confirming cash conversion once cash flow statements are available. Forward-looking, the company’s strong liquidity and modest leverage provide flexibility to invest for growth or maintain shareholder returns, conditional on maintaining operational discipline.

Profitability Analysis

ROE decomposition (DuPont): ROE 16.4% = Net Profit Margin 3.3% × Asset Turnover 2.589 × Financial Leverage 1.90x. The largest positive change driver versus last year appears to be net profit margin expansion, inferred from operating income growth (+11.4%) far outpacing revenue growth (+0.1%). Business reason: improved operating leverage—either a better gross margin mix and/or disciplined SG&A containment (SG&A ratio now ~8.3%), with negligible drag from non-operating items. Sustainability: partially sustainable if cost discipline and mix hold; however, without revenue growth, future margin expansion may be harder to repeat, and gains could normalize as comparatives toughen. Asset turnover is high at 2.589, reflecting efficient use of assets for a service-oriented model; we lack prior-year asset data to confirm the YoY delta. Financial leverage at 1.90x is moderate and does not appear to be the earnings driver; interest costs are de minimis. Concerning trend check: revenue growth is essentially flat, implying that if SG&A growth were to re-accelerate above revenue, operating leverage would turn negative; monitoring SG&A growth vs revenue is key.

Growth Assessment

Top-line growth was +0.1% YoY (437.98), indicating a stable but low-growth environment. Profit growth outpaced sales: operating income +11.4% to 21.72, ordinary income +11.7% to 21.80, and net income +12.3% to 14.57, driven by margin improvements rather than volume. Operating margin improved to ~4.96% (about +50 bps YoY), and net margin to ~3.33% (+36 bps YoY). The quality of profit within the income statement is high given minimal non-operating contributions (non-operating income ratio 0.4%) and a normalized tax rate. However, lack of cash flow disclosure prevents confirmation of earnings-to-cash conversion and working capital behavior. Outlook: near-term earnings resilience is likely if cost discipline persists; upside requires re-acceleration in revenue via volume growth, pricing, or mix upgrades. Watch for potential normalization of margins if wage inflation or other cost pressures emerge. If demand improves modestly, the business can leverage its high asset turnover to convert growth efficiently into profit.

Financial Health

Liquidity is strong: current ratio 194.4% and quick ratio 194.4%, with cash & deposits of 60.39 exceeding current liabilities of 50.88. Solvency: D/E is 0.90x (well below a 2.0x warning threshold), and long-term loans are 6.69; total liabilities are 80.08 versus equity of 89.10. Interest burden is very low (interest expense 0.04), leading to an interest coverage >520x. No explicit red flags on maturity mismatch: sizable cash plus current assets (98.92) comfortably exceed current liabilities (50.88). Noncurrent assets (70.26) are backed by noncurrent liabilities (29.20), suggesting a balanced funding structure. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

Operating cash flow (OCF) was not reported, so OCF/Net Income cannot be calculated—this is the primary limitation in assessing earnings quality. Free cash flow and capex were also unreported, preventing assessment of sustainability against dividends and growth investments. Working capital indicators within the balance sheet are benign: accounts receivable are modest at 5.09, and cash is ample; however, without period flows, we cannot detect timing or manipulation effects. Interest expense is minimal, reducing the risk that interest capitalization or low financing costs are masking underlying cash shortfalls. Flag: OCF/Net Income ratio unassessable (data gap), so defer quality judgment until CF statements are available.

Dividend Sustainability

Calculated payout ratio is 66.9%, modestly above the <60% conservative benchmark but potentially manageable given a net income of ~14.57 (c. JPY 1.46bn) and cash & deposits of 60.39 (c. JPY 6.04bn). With OCF and FCF unreported, we cannot confirm cash coverage of dividends; on balance-sheet capacity alone, dividends appear serviceable. Lack of clarity on capex and investment needs prevents a full view of future coverage. Policy outlook: absent evidence of cash flow strain and given low leverage, the company has room to maintain dividends, but future increases should be contingent on confirming consistent FCF generation.

Risk Assessment

Business Risks:

• Muted revenue growth (+0.1% YoY) increases reliance on margin management to drive earnings.
• Potential cost inflation (wages, outsourcing, IT) could erode recent margin gains.
• End-market sensitivity to real estate/rental market conditions and vacancy dynamics.
• Customer concentration or contract renewal risks typical for property management/guarantor services (not disclosed here but industry-relevant).
• Execution risk in sustaining high asset turnover without compromising service quality.

Financial Risks:

• Limited visibility on cash generation due to unreported OCF/FCF.
• Tax rate variability (current effective rate ~33.2%) could impact net margins.
• Exposure to refinancing or interest rate increases is low currently but not fully quantifiable given incomplete debt disclosures (interest-bearing debt not fully reported).

Key Concerns:

• Data gaps in cash flow statements impede assessment of earnings quality and dividend coverage.
• Revenue stasis may cap upside if cost tailwinds fade.
• Any reversal in SG&A efficiency would quickly compress operating margins given low gross margin profile (12.7%).

Investment Implications

Key Takeaways:

• Earnings outperformance driven by margin expansion despite flat sales.
• ROE of 16.4% underpinned by high asset turnover and moderate leverage.
• Strong liquidity (current ratio ~194%) and negligible interest burden (>520x coverage).
• Main analytical gap: no OCF/FCF disclosure to validate cash conversion.
• Payout ratio ~67% is serviceable given cash on hand but slightly above conservative thresholds.

Metrics to Watch:

• Operating cash flow and FCF once disclosed; target OCF/NI ≥ 1.0.
• SG&A growth versus revenue; maintain SG&A ratio at or below ~8.3%.
• Gross margin trajectory relative to service mix and pricing.
• Revenue re-acceleration catalysts (new contracts, price revisions, occupancy trends).
• Effective tax rate stability around low-30s percent.

Relative Positioning: Within Japanese small/mid-cap property management/guarantor peers, JPMC exhibits stronger-than-average ROE and balance sheet liquidity, with lower interest burden; however, its current growth profile is more margin-led than volume-led, making it more sensitive to cost dynamics until revenue growth re-accelerates.

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