B-Lot Company Limited FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥29.69B
• Operating Income: ¥6.78B
• Net Income: ¥4.45B
• EPS: ¥215.50

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

Verdict: FY2025 Q3 was solid at the operating level with resilient margins and double-digit ROE, but bottom-line compressed year on year due to higher non-operating costs and taxes against a highly leveraged balance sheet. Revenue rose 7.3% YoY to 296.9, supported by continued deal flow in the real estate solutions business. Gross profit reached 91.6 with a gross margin of 30.8%, indicating healthy unit economics. Operating income increased 2.3% YoY to 67.8, implying operating leverage, but less than top-line growth. We estimate the operating margin at 22.8%, implying an approximate 111 bps compression YoY given revenue and operating income trajectories. Ordinary income declined 6.5% YoY to 58.9 as non-operating expenses (4.82) outpaced non-operating income (1.55), pressuring below-OP line. Ordinary income margin fell from roughly 22.8% to 19.8%, a compression of about 293 bps. Net income declined 9.1% YoY to 40.4, with net margin at 13.6% (down ~245 bps YoY), reflecting higher interest burden and a 29.7% effective tax rate. Interest expense was 4.30, yet interest coverage remained strong at 15.8x, supported by robust operating profit. ROE calculated at 20.6% (Net margin 13.6% × Asset turnover 0.309 × Leverage 4.89x) remains attractive, aided by high financial leverage. Liquidity looks ample (current ratio 308%), but solvency is stretched (D/E 3.89x using total liabilities/equity), a typical industry profile yet still a risk flag. Operating cash flow was unreported, limiting earnings quality assessment; therefore we cannot confirm cash conversion against net income this quarter. ROIC stands at 7.9%, around management target thresholds in Japan’s property trading/development space. Forward-looking, sustaining margins will depend on deal pipeline velocity, sales mix, and funding costs amid rate and credit conditions. Elevated leverage suggests sensitivity to refinancing and asset price changes; maintaining high coverage and liquidity will be key. Overall, operational momentum is intact, but bottom-line sensitivity to financing and non-operating items increased.

Profitability Analysis

ROE Decomposition: ROE 20.6% = Net Profit Margin (13.6%) × Asset Turnover (0.309) × Financial Leverage (4.89x). Change drivers: The most pronounced change YoY was the compression in net margin (approx. -245 bps) as ordinary income fell despite higher sales, indicating below-OP line headwinds (interest and other non-operating costs) and a near 30% tax rate. Business rationale: Revenue growth outpaced operating income growth (+7.3% vs +2.3%), pointing to modest operating margin pressure (~-111 bps), likely due to sales mix or higher SG&A ratio (SG&A 25.31 against GP 91.58) while non-operating expenses exceeded non-operating income (net -3.27). Sustainability: Operating profitability remains solid with a 22.8% OP margin, which appears repeatable if deal quality holds; however, the net margin impact from financing costs is sensitive to interest rate and leverage conditions. Asset turnover at 0.309 is in line with asset-heavy real estate trading models; improvements would require faster inventory monetization and asset rotation. Leverage (4.89x assets/equity) materially boosts ROE; given D/E 3.89x (liabilities/equity), leverage is a key, but risky, support to returns. Concerning trends: Ordinary income and net income declining despite revenue growth signals operating deleverage at the below-OP line; also, absent OCF data prevents validation of profit quality.

Growth Assessment

Top-line grew 7.3% YoY to 296.9, indicating sustained transaction momentum. Operating income grew 2.3%, trailing revenue growth, implying mild operating margin compression and a potentially less favorable sales mix or higher overhead absorption. Ordinary income fell 6.5% and net income fell 9.1%, as non-operating expenses (notably interest) eroded gains from operations. The effective tax rate at 29.7% further dampened bottom-line growth. Revenue sustainability hinges on pipeline visibility in property acquisitions and exits; with strong liquidity, the company can pursue deals, but elevated leverage narrows headroom if market conditions weaken. Non-operating line will remain a swing factor given interest costs; any rate uptick or higher average debt balances could weigh on ordinary income. ROIC at 7.9% is respectable; sustaining or improving will depend on disciplined capital recycling and maintaining GP/OP margins. Near-term outlook: steady operations if market liquidity remains, but profit growth re-acceleration requires either margin expansion or lower financing drag.

Financial Health

Liquidity: Strong near-term liquidity with current ratio of 308% (current assets 848.5 vs current liabilities 275.6) and cash/deposits of 155.7, providing cushion for working capital needs. Solvency: Leverage is high with D/E (liabilities/equity) at 3.89x (warning >2.0), while interest coverage is comfortable at 15.8x, reflecting strong operating earnings relative to interest costs. Capital structure: Short-term loans of 100.95 and long-term loans of 464.10 underpin the balance sheet; total liabilities are 763.8 vs equity 196.3. Maturity mismatch: Current assets comfortably exceed current liabilities, reducing near-term refinancing pressure; however, the heavy reliance on long-term debt (488.2 noncurrent liabilities) makes the firm sensitive to refinancing terms. Off-balance sheet: Not disclosed; no data on guarantees or contingent liabilities were provided. Given real estate exposure, collateralized borrowings are likely, but details are not available.

Cash Flow Quality

Operating cash flow was unreported; thus OCF/Net Income cannot be assessed and we cannot verify cash conversion. This is a key limitation for validating earnings quality in a transaction-driven real estate model where working capital swings can be large. Free cash flow and capex are unreported, preventing an assessment of FCF coverage for dividends and debt service. Working capital: Balance sheet indicates ample working capital (573.0), but without period cash flow we cannot determine if working capital released or consumed cash in Q3. No signs of working capital manipulation can be inferred from the available data; disclosures are insufficient to conclude.

Dividend Sustainability

The payout ratio is indicated at 30.2%, which appears conservative relative to net income and generally sustainable in earnings terms. However, with OCF and FCF unreported, coverage by free cash flow cannot be validated. High leverage elevates the priority of debt service and may constrain dividends if market conditions tighten or OCF weakens. Policy outlook: If the company maintains ROE ~20% and ROIC ~8% with stable liquidity, maintaining a ~30% payout seems feasible; flexibility should be retained given financing cost sensitivity.

Risk Assessment

Business Risks:

• Real estate market cyclicality affecting transaction volumes, pricing, and exit timing
• Sales mix risk impacting gross and operating margins in a deal-based model
• Project/asset concentration risk if large deals disproportionately drive earnings
• Execution risk in sourcing, underwriting, and disposing of properties

Financial Risks:

• High leverage (D/E 3.89x) increases sensitivity to asset value declines and covenant pressure
• Interest rate and refinancing risk given interest expense of 4.30 and substantial long-term loans (464.10)
• Liquidity reliance on continued access to credit markets despite current strong current ratio
• Potential LTV-like leverage above conservative thresholds (reference 58.9% warning flag), heightening downside risk in downturns

Key Concerns:

• Compression in ordinary and net margins despite revenue growth
• Non-operating expenses exceeding non-operating income (net -3.27) pressuring below-OP earnings
• Data gaps on OCF/FCF impede assessment of earnings quality and dividend coverage
• Sensitivity of ROE to leverage; returns could fall sharply if leverage is reduced or financing costs rise

Investment Implications

Key Takeaways:

• Operational performance remains solid with OP margin ~22.8% and revenue +7.3% YoY
• Bottom-line contracted (NI -9.1% YoY) due to higher non-operating drag and taxes
• High ROE (20.6%) is leverage-assisted; sustainability hinges on financing conditions
• Liquidity strong (current ratio ~3.1x), but solvency risk elevated (D/E 3.89x)
• ROIC ~7.9% near target range; improving requires disciplined capital recycling and margin defense

Metrics to Watch:

• OCF/Net Income and FCF once disclosed
• Operating margin trend vs deal mix and SG&A ratio
• Interest coverage and average funding cost trajectory
• Debt maturity ladder and refinancing terms
• Inventory/asset turnover and asset disposal gains/losses
• Ordinary income bridge (non-operating income/expense components)

Relative Positioning: Within Japan’s real estate solutions/developer cohort, B-Lot combines high operating margins and strong ROE with above-average leverage. Its liquidity position is stronger than many peers, but earnings are more exposed to financing costs and below-OP line volatility; sustaining premium returns will require stable funding and consistent pipeline execution.

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