Miyakoshi Holdings (6620) FY2026 FY Earnings Report

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Executive Summary

The current period results represent a shift to an operating loss and a substantial final loss, primarily due to a sharp decline in revenue from the real estate development and leasing management business and the recognition of impairment losses. Revenue was ¥3.9B (¥10.3B in the previous year, YoY -62.0%), Operating Income was ¥-3.3B (¥2.8B in the previous year, YoY -217.2%), Ordinary Income was ¥-8.4B (¥5.5B in the previous year, YoY -252.0%), and Net Income was ¥-20.7B (¥4.0B in the previous year, YoY -611.4%). In addition to SG&A expense reductions failing to keep pace with the contraction in revenue, fixed costs became a burden. Extraordinary losses of ¥9.4B, including an impairment loss of ¥8.5B, substantially reduced final earnings.

Factors Driving Performance Changes

【Revenue】Revenue was ¥3.9B, down 62.0% year on year. The primary factor was a reduction in project progress and revenue recognition in the single reportable segment, the real estate development and leasing management business. As the decrease in cost of sales was limited to 4.3%, the gross profit margin declined significantly from 79.8% to 49.4%.

【Profit and Loss】Operating Income fell to ¥-3.3B (¥2.8B in the previous year), and the operating margin deteriorated from 27.6% to -85.2%. SG&A expenses were ¥5.3B, a decrease of only 2.2% year on year, indicating that fixed-cost adjustments failed to keep pace with the sharp decline in revenue. Ordinary Income was ¥-8.4B. Although non-operating income of ¥4.4B (interest income of ¥3.3B and foreign exchange gains of ¥1.1B) partially mitigated the loss, non-operating expenses of ¥9.4B remained a burden. After additional extraordinary losses of ¥9.4B, including an impairment loss of ¥8.5B, Profit Before Tax was ¥-17.8B and Net Income was ¥-20.7B. Both revenue and profit deteriorated, resulting in lower revenue and lower earnings, while the impairment loss, a temporary factor, further expanded the final loss.

Segment Analysis

The Group has a single reportable segment, the “Real Estate Development and Leasing Management Business,” and disclosure of performance by segment has been omitted.

Key Financial Indicators

【Profitability】The operating margin deteriorated substantially to -85.2% (27.6% in the previous year), while the net profit margin was -528.4%. EBITDA was approximately ¥-2.8B, indicating that the core business remained loss-making even before depreciation and amortization. ROE was -7.9% (-7.4% on an annualized basis), and ROIC was also -2.3% on an annualized basis, confirming that invested capital is not generating returns.【Cash Quality】Operating Cash Flow (OCF) was ¥-9.1B, and the OCF-to-net-loss ratio was 0.47x, below 1x, indicating weak cash support for the current-period earnings. However, it should be noted that the loss includes the non-cash impairment loss of ¥8.5B.【Investment Efficiency】Total asset turnover was low at 0.015x. Revenue of ¥3.9B against an asset base of ¥265.1B indicates low asset utilization. Construction in progress accounted for ¥10.5B, or 99.6%, of property, plant and equipment, and the monetization of development assets will determine future capital efficiency.【Financial Soundness】The Equity Ratio was extremely high at 98.4% (based on the financial indicators; 92.5% under the detailed indicators), while total liabilities remained limited to ¥4.1B. Current assets of ¥123.5B substantially exceeded current liabilities of ¥1.9B, and there are no short-term liquidity concerns.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥-9.1B, deteriorating from a positive ¥4.7B in the previous year, due in part to changes in the allowance for doubtful accounts and working capital movements. Investing Cash Flow was positive at ¥28.2B. Even after deducting capital expenditures of ¥-3.7B, cash recovery from the redemption of time deposits and other items contributed to reported Free Cash Flow of ¥19.1B. However, this includes temporary cash inflows from investing activities rather than cash generation from the business. Accordingly, when assessing the underlying cash position, greater weight should be placed on negative OCF and cash outflows from capital expenditures. Financing Cash Flow was zero, and there were no cash outflows from dividends or share repurchases. Cash and deposits were ample at ¥113.6B, limiting concerns about near-term liquidity.

Earnings Quality

The current-period loss reflects a mixture of a recurring decline in earnings power and temporary factors. The operating loss of ¥-3.3B represents a recurring deterioration in core-business profitability, whereas extraordinary losses of ¥9.4B, including an impairment loss of ¥8.5B, are temporary items and account for a substantial portion of the loss attributable to owners of the parent. Of the ¥4.4B in non-operating income, interest income of ¥3.3B represents a scale equivalent to more than 80% of revenue and cannot substitute for the earnings power of the core business. OCF was ¥-9.1B, and its ratio to net loss was limited to 0.47x, indicating weak cash support for current-period profit (loss). However, because this also reflects the impact of the non-cash impairment expense, there are limitations to determining earnings quality based solely on this ratio.

Earnings Forecast and Guidance

The full-year earnings forecast calls for Revenue of ¥20.0B (up +410.4% year on year), Operating Income of ¥-7.0B, Ordinary Income of ¥-3.6B, EPS of ¥-8.62, and no dividend. Current-period Revenue of ¥3.9B represented only 19.6% of the full-year forecast, while the loss attributable to owners of the parent of ¥19.4B substantially exceeded the forecast loss of ¥3.5B. Future progress is expected to depend significantly on the timing of revenue recognition for real estate development projects and the commercialization status of construction in progress.

Shareholder Returns

Both the Q2 and year-end dividends were ¥0, resulting in no annual dividend. As Net Income was a loss, the Payout Ratio is not calculable. No share repurchases were conducted, and there were no cash outflows from total shareholder returns. The no-dividend policy is consistent with negative OCF and the substantial final loss. Any decision to resume dividends will presuppose an improvement in core-business earnings and cash flow.

Risk Factors

1. Continued contraction in earnings scale: Revenue declined 62.0% year on year and the operating margin was -85.2%, creating a risk that delays in project progress and revenue recognition, or a prolonged contraction in earnings scale, in the real estate development and leasing management business may continue.

2. Risk of recurring asset valuation adjustments and impairment losses: An impairment loss of ¥8.5B was recognized in the current period, and continued reviews of the profitability and recoverability of development projects and held assets may be required.

3. Risk of delays in capitalizing construction in progress: Construction in progress of ¥10.5B accounted for 99.6% of property, plant and equipment, substantially exceeding the 20% level considered a warning threshold. Delays in asset monetization may arise from construction delays or changes in leasing and sale conditions after completion.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

The Company’s profitability was substantially below the industry median and was at the lowest level within the industry.

Growth and Capital Efficiency

The Revenue growth rate was also substantially below the industry median, contrasting with the industry’s overall trend of revenue growth.

※Source: Company analysis

Key Points from the Financial Results

1. Due to the shift to an operating loss and the recognition of impairment losses, the loss attributable to owners of the parent reached ¥19.4B. Annualized ROE was -7.4% and annualized ROIC was -2.3%. Meanwhile, the financial foundation—an Equity Ratio of 92.5%, a debt-to-equity ratio of 0.02x, and cash and deposits of ¥113.6B—supports the Company’s capacity to absorb losses.

2. Progress in monetizing construction in progress of ¥10.5B and improvement from OCF of ¥-9.1B will be important points to monitor when assessing future asset value and earnings power.

3. Although the continuation of a no-dividend policy means there is no direct cash burden from shareholder returns, the resumption of dividends is expected to presuppose a return to positive cash flow from the core business.

Theoretical Share Price (Reference Value)

Sensitivity: ¥423–¥447 at a ±1% change in the cost of equity, and ¥429–¥438 at a ±0.1 change in ω.

Note:

• As forecast ROE is below the cost of equity, the theoretical value will be below book value per share.

(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 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 discretion and responsibility, after consulting a professional where necessary.

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