Sekisui House Reit,Inc. FY2025 Q4 Earnings Report

Financial Highlights

• Operating Income: ¥11.27B
• Net Income: ¥10.13B

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

FY2025 Q4 results for Sekisui House Reit, Inc. (単体, JGAAP) show solid profitability and very strong cash generation, albeit with tight near‑term liquidity typical of J‑REITs. Ordinary income was 101.29億円 and net income was 101.28億円, underpinned by operating income of 112.68億円 and limited non‑operating drag (non‑op income 0.14億円 vs non‑op expenses 11.53億円). Interest expense was contained at 9.21億円, delivering an interest coverage of 12.24x based on operating income, indicating ample buffer against financing costs. EBITDA reached 136.40億円 and depreciation was 23.72億円, consistent with a stable rental asset base. Operating cash flow was 283.50億円, or 2.80x net income, highlighting high earnings quality and strong cash conversion. The effective tax rate was near zero (0.0%), consistent with J‑REIT pass‑through taxation when distributions meet the requirements. Balance sheet leverage was moderate with a reported D/E of 0.99x and assets/equity (financial leverage) of 1.99x. Liquidity was tight: current ratio 42.9% and working capital of -369.29億円, with cash and deposits of 152.70億円 against current liabilities of 646.60億円. Long‑term loans totaled 1,957.39億円 and short‑term loans 183.60億円, indicating manageable but non‑trivial refinancing needs. We cannot assess revenue trends, gross margin, or operating margin changes due to unreported revenue and cost items, so margin expansion/compression in basis points is not determinable this quarter. Similarly, ROE and ROA cannot be calculated without revenue and average balance data, though leverage is measured at 1.99x. Despite these data gaps, the high OCF relative to NI suggests resilient underlying rental cash flows and conservative non‑operating costs. The low current ratio triggers a liquidity warning mechanically, but this is common for J‑REITs that rely on committed facilities and staggered maturities. Forward‑looking, interest rate and refinancing risk remain the key sensitivities, but current interest coverage and moderate D/E provide cushion. Absent reported DPS, the capacity to distribute appears supported by OCF, though exact payout coverage cannot be quantified. Overall, the quarter reflects stable operations, strong cash generation, and moderate leverage, tempered by near‑term liquidity metrics and the usual REIT refinancing cycle.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage. Net profit margin and asset turnover are not calculable due to unreported revenue, while financial leverage is 1.99x (Total Assets 5,775.58億円 / Equity 2,905.16億円). With margins and turnover unavailable, we cannot isolate which component changed most versus prior periods. Qualitatively, profitability is supported by robust operating income (112.68億円) and low tax burden, with non‑operating expenses mainly interest (9.21億円) that is well covered (12.24x on operating income). The business driver is stable rental income typical of a diversified J‑REIT portfolio, plus disciplined financing costs. Given REIT structures, low effective tax rates are sustainable if distribution rules are met; interest costs are sensitive to rate resets and refinancing but currently manageable. No alarming operating leverage signals are visible from the limited P/L provided; however, we cannot benchmark SG&A growth versus revenue due to data gaps. Overall, margin quality appears solid from cash conversion (OCF/NI 2.80x), but lack of revenue disclosure limits deeper mix and spread analysis.

Growth Assessment

Top-line growth and margin trajectory cannot be assessed as revenue and gross profit were unreported. Income statement performance at the operating and ordinary levels (112.68億円 and 101.29億円, respectively) indicates steady earnings capacity, with interest costs contained. EBITDA of 136.40億円 and depreciation of 23.72億円 suggest a stable asset base without outsized impairment or non‑recurring charges. The OCF/NI ratio of 2.80x implies strong profit quality and potential resilience in cash earnings. Outlook hinges on occupancy, rent revisions, and acquisition/disposition cadence, none of which were disclosed here. Without DPS or FFO/NOI disclosure, we infer sustainability from high OCF and moderate leverage, but cannot quantify growth runway. In sum, growth visibility is limited by missing revenue detail, but earnings quality indicators are favorable.

Financial Health

Liquidity: Current ratio 0.429 and quick ratio 0.429 are below 1.0, triggering a warning; working capital is -369.29億円. Cash and deposits total 152.70億円 versus current liabilities of 646.60億円, indicating reliance on operating cash flows and credit facilities. Solvency: D/E is 0.99x; total liabilities are 2,870.42億円 against equity of 2,905.16億円; financial leverage (Assets/Equity) is 1.99x—moderate for a J‑REIT. Debt profile: Short‑term loans 183.60億円 and long‑term loans 1,957.39億円; this mix presents some maturity concentration risk at the short end relative to on‑hand cash but appears manageable with operating cash flow of 283.50億円. Interest coverage at 12.24x (operating income basis) is strong; by EBITDA, coverage is ~14.8x (136.40/9.21). No off‑balance sheet obligations were reported in the data provided. Explicit warning: Current ratio < 1.0 indicates low liquidity; D/E is below the 2.0 threshold.

Cash Flow Quality

OCF was 283.50億円 versus net income of 101.28億円, yielding OCF/NI of 2.80x—well above the 0.8 threshold and supportive of high earnings quality. Free cash flow is not calculable due to unreported investing cash flows and capex; however, the magnitude of OCF provides a cushion for interest, maintenance capex, and potential distributions. With limited working capital detail (AR/AP/inventories unreported), we cannot identify specific working capital drivers or manipulation signs; nonetheless, REIT cash flows are typically less volatile in working capital terms. Interest expense (9.21億円) is well covered by both operating income and OCF. Sustainability appears favorable, subject to stable occupancy and financing conditions.

Dividend Sustainability

DPS, total dividends, and payout ratios were unreported, so quantitative dividend coverage cannot be computed. As a J‑REIT, maintaining high distributions is central to tax pass‑through treatment, and the near‑zero effective tax rate suggests compliance. Capacity indicators are positive: OCF of 283.50億円 versus net income of 101.28億円 and EBITDA of 136.40億円 imply headroom for distributions after interest, though we lack capex and investing cash flow details. Without FCF and policy disclosure, we cannot assess DOE or payout against policy. Tentative view: Dividend capacity appears supported by cash generation and moderate leverage, but precise coverage is indeterminable from available data.

Risk Assessment

Business Risks:

• Occupancy and rent revision risk affecting NOI in the rental portfolio
• Property valuation declines impacting NAV and potential covenant headroom
• Tenant concentration or sectoral exposure risk (details not disclosed)
• Natural disaster risk in Japan (earthquake/typhoon) affecting assets and cash flows

Financial Risks:

• Refinancing and interest rate risk on 1,957.39億円 long-term and 183.60億円 short-term loans
• Low current ratio (0.429) indicating reliance on ongoing cash flows and facilities
• Potential cost of debt increases compressing distributable income despite current 12.24x coverage
• Maturity mismatch risk with current liabilities (646.60億円) exceeding current assets (277.31億円)

Key Concerns:

• Missing revenue and NOI disclosures limit margin and growth analysis
• Dependence on capital markets conditions for acquisitions/dispositions and refinancing
• Sensitivity of valuations and LTV to cap rate movements in the J‑REIT market

Investment Implications

Key Takeaways:

• Profitability solid with operating income of 112.68億円 and ordinary income of 101.29億円
• High earnings quality with OCF/NI of 2.80x
• Interest coverage strong at 12.24x; D/E moderate at 0.99x
• Liquidity tight (current ratio 0.429), a common J‑REIT pattern but still a monitoring point
• Revenue and margin metrics unreported, constraining trend analysis

Metrics to Watch:

• LTV/leverage (including interest‑bearing debt to assets and to equity)
• Average debt maturity, fixed/floating mix, and refinancing schedule
• NOI growth, occupancy, and same‑property rent changes
• Average borrowing cost and interest coverage
• Appraisal NAV and cap rate assumptions
• DPS/FFO payout ratio and distribution guidance

Relative Positioning: Within J‑REIT peers, leverage appears moderate and interest coverage strong, suggesting resilient financing capacity; liquidity metrics are weak on a current ratio basis but typical for the sector, while the lack of disclosed revenue/NOI limits comparative operating efficiency assessment.

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