Palma (3461) FY2026 Q1 Earnings Report

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Executive Summary

Although the first quarter of the fiscal year ending September 2026 resulted in increases in both revenue and earnings, the growth in ordinary income was supported by the one-time factor of gains on the sale of securities. Revenue was ¥5.2B (¥5.0B in the same period of the previous year, +4.0% YoY), operating income was ¥0.2B (¥0.1B in the same period of the previous year, +56.6%), ordinary income was ¥0.4B (¥0.3B in the same period of the previous year, +28.3%), and net income was ¥0.3B (¥0.2B in the same period of the previous year, +25.5%). The primary driver of earnings growth was an improvement in the gross profit margin due to cost-of-sales control (46.7%, compared with 44.0% in the same period of the previous year). However, gains on the sale of securities accounted for ¥0.21B of ordinary income of ¥0.41B, and the significant contribution from non-operating factors warrants attention.

Factors Affecting Business Performance

【Revenue】Revenue increased 4.0% YoY to ¥5.2B. While the core Business Solutions Services (BS) Business grew to ¥378 million in revenue (+7.1%) due to steady demand for self-storage and new initiatives such as guarantees for rental offices, the Turnkey Solutions Services (TKS) Business recorded a decline in revenue to ¥139 million (-3.5%).

【Profit and Loss】Operating income increased 56.6% YoY to ¥0.2B. As cost of sales declined 1.0% YoY, the gross profit margin improved by 268bp, and the operating margin rose to 4.3% (2.8% in the same period of the previous year). Meanwhile, SG&A expenses increased 7.1% YoY, exceeding revenue growth, and the SG&A ratio deteriorated to 42.2% (41.0% in the same period of the previous year), partially offsetting the improvement in gross profit. Ordinary income was ¥0.4B (+28.3% YoY), with gains on the sale of securities of ¥0.21B (a one-time factor) making a significant contribution to the increase. While the growth rates of operating income and net income were at broadly similar levels (+56.6% and +25.5%, respectively), the divergence from ordinary income was primarily attributable to temporary non-operating income. In conclusion, both revenue and earnings increased.

Segment Analysis

The BS Business accounted for 73.1% of the revenue mix (¥3.8B/¥5.2B) and is positioned as the core business. The BS Business generated segment profit of ¥1.3B, with a high profit margin of 34.7%, and steady demand for self-storage and new initiatives such as guarantees for rental offices drove overall earnings growth. The TKS Business generated revenue of ¥1.4B (26.9% of the revenue mix), while recording a segment loss of ¥0.6B and a profit margin of -41.9%. Although it remains in the red, the loss narrowed from approximately -¥60 million in the same period of the previous year. Progress in the development of single-building indoor facilities and improved profitability in the leasing business (Q1 loss of ¥12 million, compared with ¥24 million in the previous year) contributed to the improvement, while the difference in profit margins between the two segments remained substantial at 76.6pt.

Key Financial Metrics

【Profitability】ROE 4.4% (improved from the actual result for the same period of the previous year), operating margin 4.3% (2.8% in the same period of the previous year)

• Earnings quality: Gains on the sale of securities accounted for approximately 51% of ordinary income 【Financial Soundness】Equity Ratio 63.9% (63.8% in the same period of the previous year), current ratio 441.8%
• Capital structure: Interest-bearing debt ¥6.89B, D/E ratio 0.56x, interest coverage ratio 7.61x

Cash Flow Analysis

Cash and deposits totaled ¥20.71B, down 7.5% YoY (-¥1.68B), reflecting the allocation of funds to investments in properties under development and dividend payments. Properties under development increased 33.0% YoY (+¥0.95B), indicating that funds are being invested in projects. Although short-term borrowings increased 18.3% YoY, cash and deposits were maintained at approximately 8.5 times short-term borrowings, and liquidity remains sufficient. Cash generation assessment: Standard (a phase in which funding for development projects is being deployed ahead of cash generation).

Earnings Quality

The difference between ordinary income of ¥0.41B and net income of ¥0.26B reflects the tax burden, with an effective tax rate of approximately 36.4%. The gap between ordinary income and operating income (¥0.22B) is approximately 86%, primarily due to gains on the sale of securities (a one-time factor) recorded as non-operating income of ¥0.21B. Non-operating income accounted for approximately 4.1% of revenue. Although this did not reach 5%, its impact on ordinary income was substantial. Accordingly, recurring earnings power should appropriately be evaluated based on operating income, and the increase in net income (+25.5%) was more affected by one-time factors than the increase in operating income (+56.6%).

Earnings Forecast and Guidance

The Q1 progress rates against the full-year plan were 6.0% for operating income (¥0.22B out of ¥3.7B), 11.7% for ordinary income (¥0.41B out of ¥3.5B), and 12.4% for net income (¥0.26B out of ¥2.1B). Compared with the standard Q1 progress rate of 25%, operating income was 19.1 points below the benchmark, making earnings expansion from Q2 onward a prerequisite for achieving the full-year plan. The Company maintained its full-year operating income target of ¥370 million. The scheduled sale in September 2026 of single-building indoor facilities in the TKS Business (Ikegami, Ota-ku, and Tammachi, Yokohama, approximately 340 units in total) will be an important event for performance progress. The outstanding balance of BPO contracts expanded to 137,000 cases (+1.6% from the end of the previous fiscal year), indicating stable growth as a leading indicator for the BS Business.

Shareholder Returns

The full-year dividend forecast is ¥13.0 per share, corresponding to a Payout Ratio of approximately 41.9% (calculated based on forecast full-year net income of ¥2.10B and total dividends of approximately ¥0.88B). The Company has stated a policy of targeting a Payout Ratio of at least 40%, and the current forecast Payout Ratio is consistent with this level. No share repurchases have been confirmed, and shareholder returns consist solely of dividends. The financial base of cash and deposits of ¥20.71B and net assets of ¥23.65B supports dividend continuity; however, the increase in properties under development (+33.0%) may affect the balance in the allocation of funds between project investment and shareholder returns.

Catalysts

【Short Term】The single-building indoor facilities in the TKS Business (Ikegami, Ota-ku, and Tammachi, Yokohama, approximately 340 units in total) are scheduled for completion in March 2026 and sale in September of the same year, making them an important event for achieving the full-year performance targets.

【Long Term】The accumulation of revenue data and visualization of yields through in-house operation of outdoor container-type facilities, as well as verification of nationwide expansion in the utilization of idle real estate, are attracting attention as opportunities to create growth outside the BS Business.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

The Company’s relative position within the industry cannot be determined due to insufficient comparative data.

Growth and Capital Efficiency

The Company’s relative position within the industry cannot be determined due to insufficient comparative data.

※Source: Compiled by the Company

Risk Factors

1. TKS Business earnings volatility risk: The TKS Business recorded a segment loss of ¥0.6B (profit margin -41.9%), and earnings may fluctuate significantly depending on the sales performance of single-building indoor facilities. The scheduled sale in September 2026 may be affected by market conditions and interest-rate trends.

2. Full-year plan achievement risk: The Q1 progress rate for operating income was 6.0%, substantially below the standard 25%, and significant profit expansion from Q2 onward will be required to achieve the full-year target of ¥370 million.

3. Earnings quality risk: Gains on the sale of securities of ¥0.21B accounted for approximately 51% of ordinary income of ¥0.41B, indicating a high degree of dependence on one-time factors. The sustainability of earnings power based on operating income excluding this factor must be confirmed.

Key Points from the Earnings Results

1. The operating margin rose to 4.3% due to an improvement in the gross profit margin (46.7%, compared with 44.0% in the same period of the previous year). However, the SG&A ratio also deteriorated to 42.2%, indicating limited progress in fixed-cost absorption.

2. The narrowing of the TKS Business loss (segment loss of ¥0.6B, improved from a loss of approximately ¥0.6B in the same period of the previous year) and the reduction in the leasing business loss (Q1: -¥12 million, previous year: -¥24 million) warrant attention as signs of structural profitability improvement.

3. The low full-year operating income progress rate of 6.0% indicates a performance structure dependent on seasonality and the timing of project recognition, with the timing of the TKS Business sale likely to determine future performance.

Theoretical Share Price (Reference Value)

Sensitivity: ¥328–¥346 at ±1% for the cost of equity, and ¥336–¥337 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest-rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated through an AI-integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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