Kasumigaseki Capital (3498) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended August 2026, revenue increased significantly by 69.7% YoY, and profit rose at each level. However, Operating Cash Flow (OCF) turned negative, making the conversion of earnings into cash the key issue. Revenue was ¥163.76B (¥96.5B in the prior year), Operating Income was ¥27.87B (+47.2%), and Ordinary Income was ¥25.9B (+51.1%). Net Income attributable to owners of the parent was ¥16.69B (+62.9%). Despite higher revenue, the gross profit margin declined from 37.8% to 33.1%, and the operating margin fell from 19.6% to 17.0%. OCF was negative ¥16.77B (compared with +¥6.89B in the prior period), primarily due to a ¥26.34B increase in inventories, including real estate held for sale.

Factors Behind Performance Changes

【Revenue】Revenue increased by ¥67.26B, up 69.7% YoY. As the company operates as a single segment (Real Estate Consulting Business), no segment composition breakdown is disclosed. In line with the expansion in revenue, real estate held for sale increased 78.4%, from ¥36.38B to ¥64.89B, indicating that business growth has been accompanied by inventory buildup.

【Earnings】Gross profit was ¥54.18B, with growth of 48.7% below the rate of revenue growth; the gross profit margin declined 4.7pt to 33.1%. SG&A expenses were ¥26.32B, and the SG&A ratio improved by approximately 2.0pt, from 18.1% to 16.1%, absorbing part of the decline in the gross margin. Non-operating items included a foreign exchange gain of ¥1.06B, while interest expense increased to ¥2.72B (¥1.31B in the prior period). Extraordinary income included a ¥1.48B gain on negative goodwill, while extraordinary losses included an impairment loss of ¥0.81B; these are one-off factors. Net extraordinary items were a loss of approximately ¥0.19B, with only a small impact on profit before tax of ¥25.71B relative to Ordinary Income. In summary, revenue and earnings increased, but margins declined.

Key Financial Metrics

【Profitability】ROE was 19.0%, the operating margin was 17.0% (19.6% in the prior period), and the net profit margin was 10.2%. ROA, based on Ordinary Income, was 15.1% (17.2% in the prior period). As net assets increased from ¥38.19B to ¥87.84B, the Equity Ratio rose to 39.5%.【Cash Quality】OCF was negative ¥16.77B, and the subtotal before changes in working capital was also negative ¥5.05B. This reflected an increase in inventories of negative ¥26.34B, income taxes paid of negative ¥8.71B, and interest paid of negative ¥3.12B. OCF was below Net Income attributable to owners of the parent of ¥16.69B, indicating that earnings have not yet translated into cash.【Investment Efficiency】Capital expenditure was ¥12.18B, approximately 6.2x depreciation and amortization of ¥1.96B. Property, plant and equipment expanded from ¥12.91B to ¥46.11B, making future monetization a key focus.【Financial Soundness】The current ratio was 236.3%, although current assets include ¥64.89B of real estate held for sale. Cash and deposits of ¥41.79B covered approximately 0.96x the combined total of short-term borrowings, long-term borrowings due within one year, and bonds due for redemption within one year, which was ¥43.68B. BPS was ¥3,531.57.

Cash Flow Analysis

OCF deteriorated significantly to negative ¥16.77B from +¥6.89B in the prior period. The main factor was an increase in inventories of negative ¥26.34B, along with an increase in advances paid of negative ¥4.83B and an increase in trade receivables of negative ¥2.51B. Investing Cash Flow was negative ¥31.48B, including capital expenditure of ¥12.18B and ¥5.93B spent on the acquisition of shares in subsidiaries. Free Cash Flow (FCF), calculated as OCF plus Investing Cash Flow, was negative ¥48.24B. This was offset by Financing Cash Flow of +¥65.34B, comprising ¥34.7B raised through share issuance and ¥65.899B in proceeds from long-term borrowings, among other items. Cash and deposits at period-end increased ¥17.77B from the prior year-end to ¥41.79B. Most funding has depended on external financing, making the conversion of inventory into cash key to the cash cycle.

Earnings Quality

Earnings growth was supported by business expansion, but the fact that OCF was below net income indicates weak cash backing. OCF/net income attributable to owners of the parent was negative 1.00x, while OCF/EBITDA was negative 0.56x. Of non-operating income of ¥1.69B, foreign exchange gains accounted for ¥1.06B, limiting its recurrence. Non-operating expenses of ¥3.66B consisted primarily of interest expense of ¥2.72B and fees paid of ¥0.82B, with the burden increasing alongside higher borrowings. Extraordinary items included a ¥1.48B gain on negative goodwill and a ¥0.81B impairment loss, but the net impact was small. Comprehensive income was ¥17.63B, and the difference from net income of ¥16.71B was primarily due to foreign currency translation adjustments of ¥1.03B; the divergence was limited. From an accrual perspective, the buildup of real estate inventory has created a gap between earnings and cash, making sales progress an important measure of earnings quality.

Earnings Forecast and Guidance

The forecast for the next fiscal year is Revenue of ¥220B (+34.3%), Operating Income of ¥41B (+47.1%), Ordinary Income of ¥36B (+39.0%), and Net Income attributable to owners of the parent of ¥24B (+43.8%). The forecast operating margin is approximately 18.6%, 1.6pt above the current period’s 17.0%. The forecast assumes a recovery in margins, and achievement will depend on the sales and profitability of real estate held for sale accumulated at period-end.

Forecast EPS is ¥976.85.

Shareholder Returns

The annual dividend for the current period was ¥165 per share (no interim dividend; year-end dividend of ¥165), with a Payout Ratio of 24.3%. Cash dividends paid were ¥2.37B; given FCF of negative ¥48.24B, dividends were effectively funded in part by external financing. The forecast dividend for the next fiscal year is ¥200 (+¥35), implying a Payout Ratio of approximately 20.5% based on forecast EPS of ¥976.85. A 2-for-1 stock split was conducted effective September 1, 2025; the dividend for the fiscal year ended August 2025 is stated on a pre-split basis.

Risk Factors

1. Real estate inventory recovery risk: Real estate held for sale amounted to ¥64.89B, accounting for approximately 29.2% of total assets. Changes in the timing or prices of sales could affect both earnings and OCF.

2. Refinancing and interest burden risk: The combined total of short-term borrowings, long-term borrowings due within one year, and bonds due for redemption within one year, at ¥43.68B, exceeds cash and deposits of ¥41.79B. Interest expense was ¥2.72B, approximately 2.1x the prior-year level, and reliance on refinancing could increase if collections are delayed.

3. Margin deterioration risk: Revenue increased 69.7%, while the gross profit margin declined 4.7pt. Property, plant and equipment also surged 257.1%, and the company recorded an impairment loss of ¥0.81B in the current period.

Industry Benchmarks (Reference; Company Estimates)

Profitability and Returns

Both the operating margin and net profit margin exceed the industry median and are positioned toward the upper end of the IQR.

Growth and Capital Efficiency

Revenue growth is well above the industry IQR upper bound of 29.7%.

※Source: Company estimates

Key Points to Watch in the Results

1. Operating Income increased 47.2%, but the operating margin declined from 19.6% to 17.0%. The gross profit margin fell 4.7pt despite revenue growth, so the quality of growth requires scrutiny from a profitability perspective.

2. OCF was negative ¥16.77B and FCF was negative ¥48.24B, indicating a divergence between earnings growth and cash generation. Progress in selling and collecting cash from real estate held for sale will be a key focus in future results.

3. Net assets expanded to ¥87.84B through an equity offering, and the Equity Ratio reached 39.5%. Meanwhile, long-term borrowings due within one year increased to ¥33.79B, making debt maturities and the trend in cash and deposits key items to monitor from a financial perspective.

Theoretical Share Price (Reference Value)

Sensitivity: 5,734円〜6,093円 at ±1% for the cost of equity, and 5,842円〜6,012円 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥6.2 per share has been added back to earnings (as a non-cash expense and to facilitate comparability with IFRS companies).

(Valuation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-09 / Mechanically calculated using only publicly disclosed data; this is not a forecast of market share prices or a recommendation to take any particular investment action, and it does not predict or guarantee future share prices.)

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This report is an automatically generated earnings analysis produced by AI analyzing XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available financial results data. Investment decisions should be made at your own responsibility and, where necessary, after consulting a professional.

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