GLOBAL LINK MANAGEMENT (3486) FY2026 Q1 Earnings Report

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Executive Summary

This was a profit-growth result without revenue growth, achieving higher operating income and double-digit net income growth, mainly due to an improvement in the gross profit margin amid declining revenue. Revenue was ¥15.29B, down 7.2% year on year, while Operating Income increased 13.0% to ¥2.05B, Ordinary Income increased 10.1% to ¥1.79B, and Net Income increased 22.5% to ¥1.22B. The primary reason for the revenue decline is believed to have been the timing mismatch in property handovers, while the improvement in the gross profit margin from 17.5% to 20.9% drove profit growth.

Factors Affecting Earnings

【Revenue】Revenue was ¥15.29B, a 7.2% decrease from ¥16.47B in the same period of the previous year. As the Real Estate Solutions Business is the principal business and the Group operates as a single segment, fluctuations by business cannot be identified; however, while real estate under development accumulated to ¥43.68B, up 81.8% year on year, the sluggish handover and sale activity in Q1 is believed to have been the background to the revenue decline.

【Profit and Loss】Cost of sales was ¥12.08B, down 11.1% year on year, declining at a faster pace than the revenue decrease (-7.2%). As a result, the gross profit margin improved by 340bp from 17.5% to 20.9%. SG&A expenses increased 8.2% year on year to ¥1.15B, and the SG&A ratio to revenue rose from 6.5% to 7.5%; however, the benefit from the gross profit improvement outweighed this increase, resulting in Operating Income of ¥2.05B, up 13.0%. In non-operating expenses, interest expense increased 66.1% to ¥0.196B, becoming a factor compressing Ordinary Income relative to Operating Income; nevertheless, Ordinary Income increased 10.1% and Net Income increased 22.5%. In conclusion, this was a result characterized by declining revenue but increasing profit.

Segment Analysis

The Group’s principal business is the Real Estate Solutions Business, and because other business segments are not material, segment information has been omitted for both the current period and the same period of the previous year.

Key Financial Indicators

【Profitability】The Operating Income margin was 13.4%, improving by 240bp from 11.0% in the same period of the previous year, while the Net Income margin also rose by approximately 190bp from 6.0% to 8.0%. The gross profit margin was 20.9%, expanding by 340bp from 17.5% in the same period of the previous year, and was the primary driver of the profitability improvement.【Cash Quality】Cash and deposits were ¥10.11B, down 30.6% from ¥14.56B in the same period of the previous year, and the cash-to-short-term liabilities ratio was only 0.81x. Although the current ratio was high at 326.7%, the primary components of current assets are inventories such as real estate under development, which must be evaluated separately from cash liquidity.【Investment Efficiency】Annualized ROE was 32.7%, decomposed into a Net Income margin of 8.0%, total asset turnover of 0.95x, and financial leverage of 4.31x. The primary factor behind the high ROE was financial leverage, while improvements in the Net Income margin and asset turnover were limited.【Financial Soundness】The Equity Ratio was 23.2%, down from 31.3% in the same period of the previous year. Interest-bearing debt increased, centered on long-term borrowings of ¥29.77B, and both the D/E ratio and LTV were at high levels.

Cash Flow Analysis

Because cash flow statement figures are not included in the disclosed data, funding trends are analyzed based on changes in the balance sheet. Real estate under development increased by ¥19.66B year on year (+81.8%) to ¥43.68B, becoming the primary driver of asset expansion. This funding was raised through increases of ¥11.199B (+60.3%) in long-term borrowings and ¥4.582B (+56.4%) in short-term borrowings, while cash and deposits decreased by ¥4.450B (-30.6%) to ¥10.11B. Net assets were ¥14.94B, approximately unchanged from the same period of the previous year, indicating that asset expansion was primarily supported by debt financing. In the real estate development and sales business, the timing of invested capital recovery and profit recognition tends to diverge, and the business structure makes declining cash levels likely when inventory accumulation continues.

Quality of Earnings

The profit growth in the current quarter was primarily driven by the recurring factor of gross profit margin improvement resulting from lower cost of sales, and no temporary factors such as extraordinary gains or losses have been identified. In non-operating income and expenses, interest expense increased 66.1% from ¥0.118B in the same period of the previous year to ¥0.196B, representing a recurring increase in costs reflecting the expansion of interest-bearing debt. The compression from Operating Income to Ordinary Income was ¥0.26B, indicating that the increase in interest burden partially offset the profit-growth effect. Comprehensive Income was ¥1.22B, approximately equal to Net Income attributable to owners of the parent of ¥1.22B, with no significant divergence attributable to valuation differences on other securities or similar items; factors impairing earnings quality were therefore limited. On the other hand, properties for sale and real estate under development account for approximately 74.7% of total assets, and because the valuation of these assets and the timing of their sale affect future earnings realization, the quality of inventory should be monitored continuously.

Earnings Forecast and Guidance

The Full-Year forecast remains unchanged, with Revenue of ¥75.00B (+8.3% year on year), Operating Income of ¥8.50B (+14.3%), and Ordinary Income of ¥7.50B (+11.3%); neither the earnings forecast nor the dividend forecast has been revised. Q1 progress rates were 20.4% for Revenue, 24.1% for Operating Income, 23.9% for Ordinary Income, and 23.8% for Net Income. While profit progress was close to the quarterly average progress rate of 25%, revenue progress was 4.6pt below this level. Achieving the Full-Year plan will require the accumulation of property handovers and sales in subsequent quarters, as well as maintaining a gross profit margin near the 20.9% demonstrated in Q1.

Shareholder Returns

The Full-Year dividend forecast is ¥100.00 per share, with no revision to the dividend forecast. Based on the average number of shares outstanding during the period of 15,918,996 shares, the estimated annual total dividend is approximately ¥1.59B, resulting in a Payout Ratio of approximately 31.0% against the Full-Year Net Income forecast of ¥5.13B. At the current forecast level, the dividend burden on an earnings basis is not excessive; however, under this capital-intensive business structure, with interest-bearing debt of ¥42.20B and LTV of 65.6%, the practical sustainability of dividends depends on cash recovery through property sales and interest rate trends. No data on share repurchases has been disclosed.

Risk Factors

1. Real Estate Inventory Concentration Risk: The combined amount of properties for sale and real estate under development was ¥48.06B, accounting for approximately 74.7% of total assets, while real estate under development increased 81.8% year on year to ¥43.68B. This structure means that delays in completion or sales and deterioration in market conditions directly affect revenue and cash recovery.

2. Risk of Rising Financial Leverage: Interest-bearing debt expanded, centered on long-term borrowings of ¥29.77B, and the Equity Ratio declined to 23.2% from 31.3% in the same period of the previous year. While the use of debt supports ROE of 32.7%, the ability of equity capital to absorb losses in the event of declining asset prices is reduced.

3. Risk of Increasing Interest Burden: Interest expense increased 66.1% from ¥0.118B in the same period of the previous year to ¥0.196B. If interest-bearing debt continues to increase, the pressure on Ordinary Income may intensify.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

Because median data for the Company’s Operating Income margin and Net Income margin has not been prepared, their relative positions within the industry cannot be confirmed.

Growth and Capital Efficiency

The Company’s Revenue growth rate was negative year on year, and comparative data against the industry median has not been prepared.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Despite Revenue declining 7.2% year on year, Operating Income and Net Income achieved double-digit growth, primarily due to the gross profit margin of 20.9% (+340bp year on year). The sustainability of profit improvement without revenue growth depends on property handover performance in subsequent quarters.

2. Annualized ROE of 32.7% was high, but was supported by a high debt-dependent structure, as indicated by financial leverage of 4.31x, a D/E ratio of 3.31x, and LTV of 65.6%. The effects of improvements in the Net Income margin and asset turnover must be distinguished from the effect of leverage.

3. The profit progress rate against the Full-Year forecast was approximately 24%, a standard level, while the revenue progress rate was 20.4%, below this level. Progress in selling the accumulated inventory of ¥43.68B in real estate under development will be the key to achieving the Full-Year plan.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥1,706–¥1,810 for a ±1% change in the cost of equity, and ¥1,734–¥1,791 for a ±0.1 change in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the Full-Year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

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

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. 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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