GLOBAL LINK MANAGEMENT INC. FY2026 Q2 Earnings Report

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Executive Summary

In the first half, inventory accumulation for real estate development projects took precedence, resulting in lower revenue and profit than in the same period of the previous year. 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 decline in Operating Income exceeded the decline in Revenue, while selling, general and administrative expenses were maintained at approximately the previous year's level, increasing the fixed-cost burden. Real estate under development expanded 84.8% YoY to ¥443.9B, and achievement of the full-year forecast (Revenue of ¥750.0B and Operating Income of ¥85.0B) depends on the progress of sales and deliveries in the second half.

Factors Affecting Performance

【Revenue】Revenue was ¥284.2B, down 20.3% YoY. The Real Estate Solutions Business is the principal business, and segment information has been omitted; however, the primary cause of the decline in revenue was a difference in the timing of property sales recognition. Meanwhile, real estate under development increased 84.8% YoY to ¥443.9B, and real estate for sale increased 73.7% to ¥60.3B, representing a substantial expansion in inventory and an increase in the source of future revenue.

【Profit and Loss】Gross profit was ¥55.9B, and the gross profit margin improved by 60bp to 19.7% from 19.1% in the same period of the previous year. However, as selling, general and administrative expenses increased 1.4% YoY to ¥23.2B, Operating Income remained at ¥32.7B (-27.8%). The increase in interest expense to ¥4.5B (+64.1%) also pressured Ordinary Income, which was ¥26.9B (-35.6%), while Net Income was ¥18.6B (-34.2%). In conclusion, the Company recorded lower revenue and lower profit.

Segment Analysis

The Group's principal business is the Real Estate Solutions Business, and because the importance of other businesses is limited, 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 contracted by 120bp to 11.5% from 12.7% in the same period of the previous year, while the gross profit margin improved by 60bp to 19.7%; therefore, the primary cause of the deterioration in profitability was the relative increase in selling, general and administrative expenses rather than the cost ratio. The Net Income margin declined by 140bp to 6.5% from 7.9% in the same period of the previous year.【Cash Flow Quality】Operating Cash Flow (OCF) was negative ¥210.5B, and Free Cash Flow was negative ¥214.6B. OCF/Net Income was significantly negative, primarily due to a ¥229.3B increase in inventories.【Investment Efficiency】Annualized ROE was high at 23.7%, but the structure indicates that the contribution of financial leverage is greater than that of the 6.5% Net Income margin and asset turnover.【Financial Soundness】The Equity Ratio declined to 23.9% from 31.3% in the same period of the previous year. Although the current ratio was high at 284.1%, cash and deposits decreased 40.1% YoY to ¥87.2B, below short-term borrowings of ¥122.6B.

Cash Flow Analysis

Operating Cash Flow was negative ¥210.5B, deteriorating from negative ¥122.6B in the same period of the previous year. The primary cause was a ¥229.3B increase in inventories, mainly real estate under development, reflecting a business model in which development and procurement precede sales. Investing Cash Flow was negative ¥4.1B, including capital expenditures of ¥1.1B, and was relatively small in scale; consequently, Free Cash Flow was negative ¥214.6B. Financing Cash Flow was positive ¥156.3B, primarily reflecting an increase in long-term borrowings (+46.4% YoY) and covering the shortfall in Operating and Investing Cash Flow. As a result, cash and deposits decreased by ¥58.4B during the first half to ¥87.2B. Going forward, the reversal of Operating Cash Flow through progress in inventory sales and deliveries will be a key focus for the Company's cash cycle.

Earnings Quality

First-half profit primarily reflected recurring property sales revenue and an increase in financial expenses. Extraordinary income was only ¥0.2B, less than 0.1% of Revenue, indicating that the impact of temporary factors was limited. Meanwhile, Operating Cash Flow of negative ¥210.5B was substantially below Net Income of ¥18.6B, representing a significant divergence between earnings and cash flow. This divergence was primarily attributable to the ¥229.3B increase in inventories, while accounts receivable decreased 63.7% YoY, indicating that it was not caused by deterioration in receivables collection. Even taking into account the Company's development- and sales-led business characteristics, the fact that accounting profit for the period has not been sufficiently converted into cash earnings is an important point to consider when evaluating earnings quality.

Earnings Forecast and Guidance

The full-year Company forecast is Revenue of ¥750.0B (+8.3% YoY), Operating Income of ¥85.0B (+14.3%), and Ordinary Income of ¥75.0B (+11.3%). No revisions were made to the earnings forecast or dividend forecast during the current quarter. First-half progress rates were 37.9% for Revenue, 38.5% for Operating Income, and 36.2% for Net Income, all more than 10 percentage points below the 50% benchmark for half-year progress. In the second half, the Company needs to record Revenue of ¥465.8B (approximately 1.6 times first-half results) and Operating Income of ¥52.3B. The Operating Income margin required in the second half is approximately 11.2%, slightly below the first-half result of 11.5%. The expansion of real estate inventories, including ¥443.9B of real estate under development, provides the source of second-half revenue; however, achievement of the full-year forecast depends heavily on the timing of property deliveries and sales.

Shareholder Returns

The dividend at the end of Q2 was ¥0 per share, while the full-year dividend forecast remains unchanged at ¥100 per share. Based on the average number of shares outstanding during the period of 15,935 thousand shares, estimated annual total dividends are approximately ¥15.9B, resulting in a Payout Ratio of approximately 31.1% against forecast full-year Net Income of ¥51.3B. On an earnings basis, the dividend burden is not excessive; however, first-half Free Cash Flow was negative ¥214.6B, and dividends cannot be adequately covered by internally generated cash during the period alone. The actual sustainability of the dividend depends on the recovery of Operating Cash Flow through inventory sales and deliveries from the second half onward. The amount of share repurchases cannot be confirmed from the current-period data; therefore, the assessment is limited to the Payout Ratio rather than the Total Return Ratio.

Risk Factors

1. Concentration of assets in real estate inventories: Real estate inventories (¥443.9B of real estate under development + ¥60.3B of real estate for sale) totaled ¥504.2B, accounting for 76.6% of total assets. Real estate under development has expanded sharply, increasing 84.8% YoY, creating a structure in which delivery delays and changes in demand directly affect earnings and cash flow.

2. High leverage and liquidity management: The D/E ratio was 3.19x, and interest-bearing debt reached ¥394.5B, with long-term borrowings increasing 46.4% YoY. Cash and deposits of ¥87.2B were below short-term borrowings of ¥122.6B, while Operating Cash Flow deteriorated substantially to negative ¥210.5B. Accordingly, refinancing and progress in inventory sales will be key focuses for liquidity management.

3. Risk of concentration of the full-year plan in the second half: First-half progress rates for Revenue and Net Income were 37.9% and 36.2%, respectively, substantially below 50%; achieving the full-year forecast requires Revenue in the second half of approximately 1.6 times first-half results. Sales and deliveries are concentrated in the second half.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (real_estate)

Profitability and Returns

As median data has not been adequately prepared, a relative positioning cannot be presented; however, the Company's Operating Income margin of 11.5% is at a certain level for the real estate industry.

Growth and Capital Efficiency

Revenue growth was negative YoY, and relative comparison within the industry can be assessed once sufficient median data becomes available.

※Source: Company research

Key Points from the Financial Results

1. Annualized ROE of 23.7% is high, but the Company relies more heavily on financial leverage (over 4x) than on its 6.5% Net Income margin or asset turnover. The leverage structure must therefore be considered when evaluating profitability.

2. The expansion of inventories, centered on ¥443.9B of real estate under development, provides a source of future revenue, while Operating Cash Flow has deteriorated to negative ¥210.5B. The balance between growth investment and cash generation will be an important focus going forward.

3. First-half progress rates against the unchanged full-year forecast were 37.9% for Revenue and 36.2% for Net Income, both below 50%; the realization of property deliveries and sales in the second half will be the decisive factor in achieving the plan.

Theoretical Share Price (Reference Value)

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 quarter-end were 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 solely from publicly available 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 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 available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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