Tokyu Fudosan Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥591.27B
• Operating Income: ¥78.52B
• Net Income: ¥52.41B
• EPS: ¥72.92

Income Statement

Balance Sheet

Cash Flow Statement

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

Tokyu Fudosan Holdings (3289) delivered a strong FY2026 Q2 with materially higher earnings and margin expansion, but cash conversion and capital efficiency remain notable weak points. Revenue rose 17.5% YoY to 5,912.7, while operating income surged 55.3% to 785.2, driving a sharp uplift in profitability. Net income doubled (+108.1% YoY) to 521.6, pushing net margin to 8.8% versus roughly 5.0% a year ago. Operating margin expanded to 13.3% from an estimated 10.0% a year earlier, an improvement of about 325 bps. Net margin expanded by roughly 384 bps YoY, reflecting better operating leverage and lower non-operating drag. Ordinary income reached 695.9 (+55.2% YoY), implying an ordinary margin of 11.8%. EBITDA was 1,105.7, translating to an EBITDA margin of 18.7%, supporting solid interest coverage of 8.23x at the EBIT level. Despite the profit strength, operating cash flow was only 125.9, just 0.24x net income, indicating earnings quality concerns and potential working capital or development investment outflows. The balance sheet shows ample near-term liquidity (current ratio 254%), but leverage is elevated with D/E at 2.84x and total loans of about 15,482.8. ROE was 6.0% via a DuPont profile of 8.8% net margin, 0.177x asset turnover, and 3.84x financial leverage. ROIC at 2.3% is below typical cost of capital for developers, highlighting ongoing capital efficiency challenges. Tax rate was 33.9%, and non-operating items were modestly negative due to interest expense (95.4) outweighing non-operating income (26.7). The improvement appears driven primarily by operating profit growth outpacing revenue, suggesting better mix and scale in property-related segments. However, the weak OCF/NI signals that cash realization is lagging earnings, a key monitor given the sector’s working capital intensity. Forward-looking, the results set a higher profit base, but sustainability hinges on cash conversion, refinancing conditions, and the pace of asset sales and leasing amidst interest rate and macro uncertainties.

Profitability Analysis

ROE (6.0%) = Net Profit Margin (8.8%) × Asset Turnover (0.177) × Financial Leverage (3.84x). The largest driver of improvement vs last year appears to be margin expansion: operating income grew 55.3% vs revenue +17.5%, lifting operating margin by ~325 bps and net margin by ~384 bps. Business-wise, this likely reflects a favorable sales mix (higher-margin property sales/asset recycling) and operating leverage in leasing/management businesses. Non-operating headwinds (net interest burden) persisted but were outweighed by operating gains. This margin-led uplift can persist near term if the company maintains development sale timing and occupancy/rent growth; however, it is partly cyclical and sensitive to transaction timing and market conditions. Asset turnover remains low (0.177), typical for asset-heavy real estate but a structural constraint on ROE. Financial leverage (3.84x) is high and relatively stable for the sector, amplifying ROE but elevating risk. Watch for SG&A growth relative to revenue: SG&A is 525.8; given revenue growth outpacing SG&A expansion implied by operating leverage, cost discipline supported margins this quarter. Sustainability risk centers on the timing of closings and potential normalization of deal activity.

Growth Assessment

Top-line growth of 17.5% YoY to 5,912.7 was robust, with operating profit rising 55.3% and net income +108.1%, indicating strong operating leverage and mix benefits. Prior-period estimates imply operating margin improved from ~10.0% to 13.3%, driven by higher-margin contributions and/or better utilization. Non-operating income was modest (26.7), while interest expense (95.4) remained a headwind but manageable given EBITDA gains. Revenue sustainability depends on continued execution in development handovers, asset recycling, and stable leasing. Given the low ROIC (2.3%), growth that consumes balance sheet capacity without commensurate cash returns is a risk; the current quarter’s weak OCF/NI (0.24x) underscores this. Near-term outlook is constructive on profit given the strong H1 run-rate, but cash-backed growth requires tighter working capital and careful capital allocation. Monitor pre-sales pipeline, leasing occupancy and rent trends, and the cadence of property dispositions. External drivers include domestic rate trajectory and investor appetite for Japanese real estate.

Financial Health

Liquidity is strong: current assets 14,201.5 vs current liabilities 5,583.1, yielding a current ratio of 254.4% and quick ratio of 254.4%. Cash and deposits are 1,885.0, providing a reasonable buffer for operations. Solvency risk is elevated: D/E is 2.84x (warning threshold >2.0) with short-term loans of 2,471.1 and long-term loans of 13,011.7. Interest coverage at 8.23x (EBIT basis) is solid, but balance sheet leverage and a debt/EBITDA of ~14.0x point to higher structural risk for a developer. Maturity mismatch appears manageable near term given strong current assets versus current liabilities, but refinancing exposure remains significant given the absolute size of debt. No off-balance sheet obligations were disclosed in the data provided; however, real estate businesses commonly utilize SPCs/JVs, so undisclosed commitments could exist.

Cash Flow Quality

OCF was 125.9 versus net income of 521.6, yielding an OCF/NI ratio of 0.24x, which flags low earnings quality for the period. Potential drivers include working capital absorption from development (land acquisition, construction advances) or timing differences between revenue recognition and cash collection; inventories were not disclosed, limiting visibility. Free cash flow was unreported, so dividend and capex coverage cannot be precisely assessed. EBITDA of 1,105.7 and interest expense of 95.4 indicate healthy coverage, but high leverage means cash generation needs to accelerate. No clear signs of deliberate working capital manipulation are evident, but the divergence requires monitoring across subsequent quarters to confirm whether it is timing-related.

Dividend Sustainability

The calculated payout ratio is 50.4%, within a generally sustainable range (<60%) if supported by recurring cash flows. However, OCF was only 0.24x net income this period and FCF was unreported, reducing our ability to confirm cash coverage of dividends. Leverage is high (D/E 2.84x), implying that management may prioritize balance sheet stability and selective growth investments. Near-term sustainability appears acceptable given earnings strength, but durability hinges on improved cash conversion in H2 and maintenance of interest coverage amid refinancing cycles. Policy commentary and DPS figures were not disclosed; any commitment to stable or progressive dividends should be evaluated against FCF trends and asset recycling proceeds.

Risk Assessment

Business Risks:

• Development timing risk affecting revenue and margin realization
• Leasing market risk (occupancy, rental rates) amid macro uncertainty
• Transaction market/liquidity risk for asset recycling proceeds
• Construction cost inflation and supply chain volatility

Financial Risks:

• High leverage: D/E 2.84x and Debt/EBITDA ~14.0x
• Refinancing and interest rate risk given large long-term debt (13,011.7) and short-term loans (2,471.1)
• Weak cash conversion (OCF/NI 0.24x) increasing reliance on external funding
• Potential hidden obligations via JVs/SPCs (not disclosed in data)

Key Concerns:

• ROIC at 2.3% below cost of capital, pressuring long-term value creation
• Earnings quality flagged by low OCF vs NI
• Sensitivity to domestic/overseas rate moves impacting cap rates and financing costs
• Data gaps (COGS, inventories, capex, dividend cash outflow) limit full assessment

Investment Implications

Key Takeaways:

• Strong profit growth with clear margin expansion (+~325 bps operating, +~384 bps net)
• Interest coverage solid at 8.23x, but absolute leverage remains high
• OCF/NI at 0.24x signals earnings quality/cash conversion risk
• ROE improved to 6.0% but constrained by low asset turnover; ROIC of 2.3% is a structural concern
• Near-term performance supported by operating strength; sustainability depends on cash realization and market conditions

Metrics to Watch:

• OCF/NI and working capital movements (receivables, development inventory, advances)
• Debt/EBITDA and the debt maturity ladder/refinancing rates
• Pre-sales/backlog and scheduled property handovers
• Occupancy rates and rental reversions in the leasing portfolio
• Capex/land acquisition pace and asset recycling proceeds
• ROIC progression vs 5–8% thresholds

Relative Positioning: Within Japanese real estate developers, Tokyu Fudosan currently screens as profit-strong in the quarter with improved margins and adequate interest coverage, but below peers on capital efficiency (ROIC 2.3%) and above-average on leverage, placing it in a higher-risk, execution-dependent cohort pending improvement in cash conversion.

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
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