GLOBAL LINK MANAGEMENT INC. FY2026 Q2 Earnings Report

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Executive Summary

In Q2 FY2026, revenue and earnings declined, as delays in the delivery of development projects due to timing shifts pushed down results. Revenue was ¥284.2B (-20.3% YoY), Operating Income was ¥32.7B (-27.8%), Ordinary Income was ¥26.9B (-35.6%), and Net Income attributable to owners of the parent was ¥18.6B (-34.2%). The gross profit margin improved by +0.6pt YoY to 19.7%; however, an increase in the SG&A ratio and higher interest expenses put pressure on margins. Progress against the full-year company plan was 37.9% for Revenue and 38.5% for Operating Income, below the 50% quarterly benchmark, highlighting the back-loaded earnings structure in the second half.

Factors Affecting Performance

【Revenue】Revenue was ¥284.2B, representing a decline of -20.3% YoY. As the Real Estate Solutions Business is the core business and the Company operates as a single segment, a business-by-business breakdown has not been disclosed. However, real estate under development increased substantially by +84.8% (+¥203.7B) from the end of the previous fiscal year, and delivery timing shifts are considered the primary cause of the revenue decline. Cost of sales was ¥228.3B, declining less than Revenue, while gross profit was ¥55.9B, with a gross profit margin of 19.7% (+0.6pt YoY), indicating that profitability remained resilient.

【Profit and Loss】SG&A expenses increased by +1.4% YoY to ¥23.2B, and the SG&A ratio rose to 8.2% (+1.75pt YoY). As fixed costs did not contract despite the decline in Revenue, the Operating Income margin decreased to 11.5% (-1.2pt YoY). In addition, non-operating expenses increased to ¥6.0B, including ¥4.5B in interest expenses, and Ordinary Income declined more substantially than Operating Income to ¥26.9B (-35.6%). Net Income was ¥18.6B (-34.2%), reflecting income taxes and other taxes of ¥8.6B. Overall, the Company experienced declines in both revenue and earnings, with a heavy cost structure and increased interest burdens widening the decline in earnings.

Segment Analysis

As the Real Estate Solutions Business is the core business and 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 Metrics

【Profitability】The Operating Income margin was 11.5%, down from approximately 14.9% in the same period of the previous year (4530/35672), while the Net Income margin also contracted to 6.5% from 7.9% in the previous year. The gross profit margin improved modestly to 19.7%, indicating that deterioration in the cost structure was the primary cause of the decline in margins.【Cash Flow Quality】Operating Cash Flow (OCF) recorded a substantial outflow of -¥210.5B against Net Income of ¥18.6B. This was attributable to inventory accumulation, including real estate under development and real estate for sale, which reduced working capital by -¥229.3B; current-period earnings have not been converted into cash.【Investment Efficiency】ROE was 11.8%; however, in light of the Equity Ratio of 23.9%, down from 31.3% in the previous year, the increase in financial leverage appears to have been a significant contributing factor.【Financial Soundness】Total assets expanded to ¥657.8B, while non-current liabilities increased to ¥279.9B, including ¥271.9B in long-term borrowings. The Equity Ratio declined by 7.4pt YoY to 23.9%, indicating greater dependence on interest-bearing debt.

Cash Flow Analysis

OCF was a substantial outflow of -¥210.5B, with the outflow widening from -¥122.6B in the same period of the previous year. The primary cause was deterioration in working capital due to increased inventories of real estate under development and real estate for sale, reflected in a -¥229.3B change in inventories. The substantial negative figure relative to Net Income of ¥18.6B indicates that earnings conversion into cash has been delayed. Investing Cash Flow was a modest outflow of -¥4.1B, with capital expenditures limited to ¥1.1B. Financing Cash Flow was positive at ¥156.3B, offsetting the OCF outflow through ¥177.9B in long-term borrowings and a ¥10.0B increase in short-term borrowings, among other factors. As a result, free cash flow was -¥214.6B, and current-period funding needs were primarily financed through borrowings. This structure indicates that whether inventories are converted into cash through delivery progress in the second half and whether cash flow normalizes will be the key determinant of future liquidity.

Earnings Quality

Current-period earnings were generally derived from the core business, while extraordinary income was a modest ¥0.2B, indicating that the impact of temporary factors was limited. Non-operating income was small at ¥0.3B, whereas non-operating expenses were substantial at ¥6.0B, including ¥4.5B in interest expenses and ¥0.9B in commissions paid; the increase in funding costs was the primary factor pushing down Ordinary Income. Comprehensive income was ¥18.6B, broadly in line with Net Income, with no significant divergence attributable to valuation differences on other securities or similar items. On the other hand, the fact that OCF was substantially below Net Income indicates that accruals, namely the non-cash increase in assets resulting from inventory accumulation, affected earnings quality. Attention is therefore warranted regarding cash-generating capacity.

Earnings Forecast and Guidance

The full-year company plan calls for Revenue of ¥750.0B (+8.3% YoY), Operating Income of ¥85.0B (+14.3%), and Ordinary Income of ¥75.0B (+11.3%), with no revisions made this time. First-half progress was 37.9% for Revenue, 38.5% for Operating Income, and 35.9% for Ordinary Income, more than 10 percentage points below the 50% benchmark for the midpoint of the fiscal year. This pace assumes a back-loaded earnings structure, with deliveries of inventories accumulated as real estate under development (+¥203.7B from the end of the previous fiscal year) concentrated in the second half to achieve the plan.

Shareholder Returns

There is no interim dividend, while the Company plans to pay an annual dividend of ¥100 per share, unchanged from the previous forecast. The estimated total dividend is approximately ¥1.60B based on the number of shares outstanding, resulting in a Payout Ratio of approximately 31% against the full-year Net Income plan of ¥51.3B, a reasonable level relative to planned earnings. However, current-period OCF and free cash flow are substantially negative, and the dividend funding structure is currently dependent on borrowings and inventory recovery in the second half.

Risk Factors

1. Risk of delivery delays associated with inventory accumulation: Real estate under development increased substantially by +¥203.7B (+84.8%) from the end of the previous fiscal year, while real estate for sale increased by +¥25.6B (+73.7%). Whether deliveries proceed as planned in the second half is a prerequisite for achieving the full-year plan.

2. Risk of high leverage and increased interest burdens: Long-term borrowings increased to ¥271.9B (+¥86.2B from the end of the previous fiscal year), while short-term borrowings increased to ¥122.6B (+¥43.1B). The Equity Ratio declined to 23.9% from 31.3% in the previous year. Interest expenses were ¥4.5B, an increase from the previous year, raising sensitivity to changes in the interest-rate environment.

3. Risk of dependence on funding due to deterioration in cash flow: OCF was a substantial outflow of -¥210.5B, and free cash flow was -¥214.6B, resulting in a structure financed through Financing Cash Flow of ¥156.3B. If normalization of OCF is delayed, dependence on refinancing and additional funding may increase further.

Industry Benchmark (For Reference; Based on Our Research)

Industry Benchmark (real_estate)

Profitability and Returns

Comparative data for the Company’s Operating Income margin and Net Income margin versus the industry median is unavailable; in absolute terms, the notable feature is the downward trend from the previous year.

Growth and Capital Efficiency

Comparative data for the Revenue growth rate versus the industry median is unavailable; the Company is experiencing a double-digit revenue decline from the previous year.

※Source: Based on our research

Key Points from the Earnings Results

1. The total accumulation of real estate under development and real estate for sale has reached approximately ¥229B, making delivery progress in the second half the most important point to monitor for normalization of earnings and cash flow.

2. The Equity Ratio declined to 23.9%, increasing dependence on interest-bearing debt, which totals approximately ¥394B across short-term and long-term borrowings. If OCF remains negative, it will be necessary to monitor the impact of changes in the refinancing environment on liquidity.

3. Progress against the full-year plan remains in the high-30% range; however, this is based on the back-loaded sales schedule assumed by the Company, and the delay in progress itself does not immediately imply failure to achieve the plan.

Theoretical Share Price (For Reference)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade). It does not constitute a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,723–¥1,828 at ±1% for the cost of equity, and ¥1,753–¥1,808 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used; there is a timing gap between these figures and the full-year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest-rate reference month: 2026-07 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 professionals as necessary.

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