| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥392.2B | ¥470.0B | -16.5% |
| Operating Income | ¥11.9B | ¥17.0B | -29.8% |
| Ordinary Income | ¥12.3B | ¥17.2B | -28.5% |
| Net Income | ¥16.3B | ¥16.9B | -3.6% |
| ROE | 8.5% | 9.1% | - |
2026 FY Q3 (9-month cumulative) saw Revenue of ¥392.2B (YoY -¥77.8B, -16.5%), Operating Income of ¥11.9B (YoY -¥5.1B, -29.8%), Ordinary Income of ¥12.3B (YoY -¥4.9B, -28.5%), and Net Income of ¥16.3B (YoY -¥0.6B, -3.6%), resulting in lower sales and profits. The core Real Estate Sales segment (68.8% of Revenue) declined -11.1% YoY, and House Leaseback fell sharply by -31.8%, driving a decline in Gross Profit Margin to 21.8% (prior 22.8%), down 1.0pt. SG&A was reduced to ¥73.7B (YoY -¥13.7B), but Operating Margin worsened to 3.0% (prior 3.6%), down 0.6pt. At the Ordinary Income level, interest expenses of ¥6.1B (prior ¥5.8B) were a burden, leaving non-operating items roughly offset. Net Income was cushioned by non-recurring gains of ¥13.7B (including ¥13.6B gain on sale of subsidiary shares), resulting in only a -3.6% YoY decline, but this was supported by low-recurrence one-off factors.
Revenue of ¥392.2B (YoY -¥77.8B, -16.5%) declined. By segment: Real Estate Sales ¥270.9B (share 68.8%, YoY -11.1%), House Leaseback ¥83.3B (share 21.2%, -31.8%), Franchise ¥24.9B (share 6.3%, +3.0%), Real Estate Finance ¥4.7B (share 1.2%, +11.1%), Other ¥10.1B (share 2.6%, -38.5%). Volume declines were primarily due to real estate market swings and delays in deal formation, with a particularly large slowdown in House Leaseback. Franchise and Finance grew and remained relatively resilient as high-margin segments. Gross profit was ¥85.6B (gross margin 21.8%), down 1.0pt from 22.8% last year, suggesting deterioration in deal mix and heightened price competition.
Profitability: Operating Income ¥11.9B (YoY -29.8%), Operating Margin 3.0% (prior 3.6%)—a profit decline. SG&A was ¥73.7B (SG&A ratio 18.8%), compressed by ¥13.7B YoY, but the reduction was smaller than the Revenue decline (-16.5%), so fixed-cost absorption lagged. Segment Operating Income: Real Estate Sales ¥15.9B (margin 5.9%, YoY -23.3%), House Leaseback ¥8.4B (margin 10.1%, YoY -35.8%), Franchise ¥14.1B (margin 56.9%, YoY -1.0%), Real Estate Finance ¥1.9B (margin 40.6%, YoY +35.5%). Ordinary Income ¥12.3B (YoY -28.5%) was driven by roughly offsetting non-operating income ¥7.4B and non-operating expenses ¥7.0B, with interest expense ¥6.1B weighing heavily—so the operating-stage decline flowed through to Ordinary Income. Non-recurring gains of ¥13.7B (¥13.6B gain on sale of subsidiary shares, ¥0.8B gain on business transfer, etc.) boosted pre-tax income to ¥25.9B, limiting the YoY decline in Net Income to -3.6%. In conclusion, the group is in a revenue- and profit-decline setup, with core earnings sharply slowing at the operating and ordinary stages.
Real Estate Sales (REALESTATE) is the core segment with Revenue ¥270.9B (YoY -11.1%) and Operating Income ¥15.9B (YoY -23.3%, margin 5.9%), accounting for 68.8% of Revenue and roughly 39.4% of Operating Income. Declines in gross margin and delays in deal formation drove the margin deterioration (prior 7.7% → 5.9%). House Leaseback recorded Revenue ¥83.3B (YoY -31.8%) and Operating Income ¥8.4B (YoY -35.8%, margin 10.1%), showing notable revenue and profit declines. Worsening procurement and sales yields reduced margins (prior 10.7% → 10.1%). Franchise posted Revenue ¥24.9B (YoY +3.0%) and Operating Income ¥14.1B (YoY -1.0%, margin 56.9%), maintaining high profitability and contributing about 35.0% of total Operating Income—serving as a stabilizing revenue source. Real Estate Finance had Revenue ¥4.7B (YoY +11.1%) and Operating Income ¥1.9B (YoY +35.5%, margin 40.6%), small but high-margin and showing growth potential. Other segment Revenue ¥10.1B (YoY -38.5%) and Operating Income ¥0.1B (YoY -94.5%, margin 0.9%) were heavily impacted by the transfer of the renovation business, causing large profit declines. Company-level adjustments of -¥28.5B (prior -¥34.1B) were compressed, but the slowdown in the two core segments pressures consolidated profits.
Profitability: ROE 8.5%, Operating Margin 3.0%, Net Margin 4.1%—low profitability. Gross Margin 21.8% fell 1.0pt YoY, suggesting worse deal mix and price competition. SG&A ratio 18.8% improved YoY, but overall profitability deteriorated due to lower Operating Margin. EBIT margin 3.0% is low, indicating weak earnings generation against interest burden. Cash Quality: Non-recurring gains ¥13.7B boosted Net Income ¥16.3B, so Net Income exceeding Ordinary Income reflects one-offs; earnings quality is neutral-to-slightly-concerning. Interest Coverage (Operating Income ÷ Interest Expense) is 1.95x, indicating a heavy interest burden. Investment Efficiency: Total Asset Turnover 0.56x (annualized 0.75x) is low; inventory for sale ¥273.1B and development properties ¥111.3B result in an inventory ratio of 55.1%, suppressing asset turnover. EPS ¥81.48 (prior ¥85.03, -4.2%), BPS ¥961.00. Financial Soundness: Equity Ratio 27.5% (prior 25.6%) improved but remains low. D/E ratio 2.64x (interest-bearing debt ¥506.1B ÷ Net Assets ¥192.0B) indicates high leverage and a clear caution area. Debt/Capital ratio 62.5%. Current Ratio 168.3% suggests acceptable short-term liquidity, but short-term debt ratio 47.4% (current liabilities ¥323.0B ÷ total liabilities ¥506.1B) raises refinancing sensitivity. Cash and deposits ¥128.6B versus short-term interest-bearing debt ¥287.4B (short-term borrowings ¥151.9B + long-term borrowings due within 1 year ¥126.5B + bonds due within 1 year ¥9.1B) yields a cash coverage of about 0.45x, thin. Long-term borrowings ¥168.4B and bonds ¥7.0B are trending down, but short-termization of liabilities is a risk factor.
Operating Cash Flow is not disclosed, but funding trends can be inferred from B/S changes. Cash and deposits increased from ¥85.8B to ¥128.6B (+¥42.9B), improving liquidity. Inventory for sale decreased from ¥341.3B to ¥273.1B (-¥68.2B), indicating progress in monetizing inventory, while development properties increased from ¥87.1B to ¥111.3B (+¥24.2B), signaling continued upfront investment for future sales. Long-term borrowings decreased from ¥201.0B to ¥168.4B (-¥32.6B), indicating some deleveraging, but short-term borrowings rose from ¥140.9B to ¥151.9B, causing a shorter liability profile. Contract liabilities (advance receipts) fell from ¥12.8B to ¥10.0B (-¥2.8B), and weakening order intake pressures Operating CF. Non-recurring gains of ¥13.7B were mainly from sale of subsidiary shares and contributed cash, but have low recurrence. Interest Coverage 1.95x highlights low tolerance for rising rates; improving inventory turnover and Operating Income will be key to restoring FCF generation.
Recurring earnings are low, with Operating Income ¥11.9B and Ordinary Income ¥12.3B, and a low-margin operating structure with Operating Margin 3.0%. Non-operating income ¥7.4B (1.9% of Revenue) and non-operating expenses ¥7.0B (including interest expense ¥6.1B) roughly offset, making interest burden a bottleneck. Non-recurring gains ¥13.7B (¥13.6B gain on sale of subsidiary shares, ¥0.8B gain on business transfer, etc.) are one-offs that boosted pre-tax income to ¥25.9B and resulted in Net Income ¥16.3B exceeding Ordinary Income ¥12.3B. This divergence is primarily due to temporary asset sale gains and should be evaluated separately from core earnings. On accruals, inventory reduction ¥68.2B aided cash conversion, while contract liabilities (advance receipts) fell ¥2.8B, distorting the timing of revenue recognition and cash and suggesting weaker order intake. Most non-operating income is not one-off, but the reproducibility of the non-recurring gains is low; unless operating and ordinary income recover, earnings quality should be considered neutral-to-slightly-concerning.
Full Year forecast is unchanged: Revenue ¥550.0B (YoY -15.0%), Operating Income ¥29.0B (YoY +10.6%), Ordinary Income ¥30.0B (YoY +1.9%), Net Income ¥27.7B, DPS ¥46. Progress against Q3 cumulative results: Revenue 71.3% (standard 75%: -3.7pt), Operating Income 41.1% (standard: -33.9pt), Ordinary Income 41.0% (standard: -34.0pt), Net Income 58.7% (standard: -16.3pt). Progress of Operating and Ordinary Income is substantially delayed, implying strong Q4 concentration assumptions. Main causes are slowdown and gross margin decline in Real Estate Sales and House Leaseback, and higher interest burden. Net Income progress looks relatively solid due to contribution from one-off gains, but achieving full-year plan will require concentration of high-margin deals, accelerated inventory turnover, further SG&A restraint, and control of interest costs. If the progress gap is not closed, risk of missing Operating and Ordinary Income targets is high.
Interim dividend was nil, but full-year dividend forecast is ¥46 per share. Against company-forecast EPS ¥138.9, the Payout Ratio is about 33.1%, numerically sustainable. However, given the poor progress of Operating and Ordinary Income (both around 41%), high leverage (D/E 2.64x), and short-term debt ratio 47.4% with heavy interest burden, the balance between retained earnings and deleveraging is important for dividend sustainability. If profit progress does not improve, maintaining the dividend may be impacted by reprioritization of capital policy. Historical trends are not disclosed, but considering cash and deposits of ¥128.6B, short-term dividend payment capacity is ensured.
Real estate market fluctuation risk: High inventory ratio of 55.1% with Inventory for sale ¥273.1B and Development properties ¥111.3B, making valuation losses and slower turnover directly affect earnings and cash flow in a market downturn. Real Estate Sales accounts for 68.8% of Revenue, so fluctuations in housing demand significantly impact results. Inventory quality (completion stage, regional mix) will determine cash collection variability.
High leverage & refinancing risk: D/E 2.64x and Debt/Capital 62.5% indicate high leverage; short-term debt ratio 47.4% raises rollover dependency. Cash and deposits ¥128.6B vs. short-term interest-bearing debt ¥287.4B implies thin cash coverage of 0.45x, constraining financial flexibility under rising rates due to higher funding costs and refinancing risk. Interest Coverage 1.95x signals low tolerance to interest burden; delayed Operating Income recovery would increase cash-flow pressure.
Segment concentration & revenue mix risk: Real Estate Sales (68.8%) and House Leaseback (21.2%) account for 90% of Revenue and both have Operating Margins below 10%, indicating low margins. High-margin Franchise (56.9%) and Finance (40.6%) segments combine for only 7.5% of Revenue, so slowdown in the two core businesses (YoY -11.1% and -31.8%) dilutes group gross margin. Slow diversification of the business portfolio undermines revenue stability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.0% | 8.0% (2.8%–11.2%) | -4.9pt |
| Net Margin | 4.1% | 4.4% (1.2%–7.2%) | -0.3pt |
Operating Margin is 4.9pt below the industry median, reflecting a low-margin position within the real estate sector. Declining gross margin and weak fixed-cost absorption are primary causes, indicating sizable room for improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -16.5% | 18.5% (6.9%–54.7%) | -35.0pt |
Revenue growth underperforms the industry median by 35.0pt, highlighting a pronounced decline trend. Market fluctuations and delays in deal formation are primary drivers, making portfolio restructuring urgent.
※ Source: Company compilation
Delayed progress in core earnings and uncertainty of achieving full-year guidance: Progress rates for Operating and Ordinary Income are in the low 40% range versus full-year targets, relying heavily on Q4 concentration of high-margin deals. Net Income resilience is supported by non-recurring gains with low reproducibility; absent recovery at the operating stage, the risk of missing full-year guidance is high. Investors should monitor monthly and quarterly deal formation status, trends in gross margins, and the persistence of SG&A reductions.
Financial leverage and refinancing risk due to short-term debt bias: D/E 2.64x, short-term debt ratio 47.4%, and Interest Coverage 1.95x point to elevated funding risk in a rising-rate environment. While long-term borrowings are being reduced, liability short-termization is progressing, making refinancing timing and interest terms material to profits and cash flow. Cash and deposits ¥128.6B provide short-term liquidity, but sustained improvement in inventory turnover and Operating CF generation is critical for durable financial stability. Deleveraging plans and progress in extending liability maturities are key watch points.
Room for business portfolio restructuring: While Franchise (margin 56.9%) and Finance (margin 40.6%) are high-margin and show growth potential, the core Real Estate Sales and House Leaseback businesses are low-margin and slowing. Expanding Franchise Revenue and scaling the Finance business could improve consolidated margin mix; medium-term strategic allocation of management resources to these high-margin segments and structural margin improvement in core businesses (deal quality, pricing strategy) are necessary conditions for recovery of structural profitability.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional.