Izu Shaboten Resort Co.,Ltd FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.84B
• Operating Income: ¥616M
• Net Income: ¥441M
• EPS: ¥23.88

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Solid topline and net profit growth with slight operating margin compression; cash generation remains strong and balance sheet conservative. Revenue rose 3.3% YoY to 28.39 (100M JPY), while operating income declined 3.8% YoY to 6.16, implying some cost pressure. Ordinary income was 6.42 (-2.5% YoY) and net income increased 5.7% YoY to 4.41, aided by small net non-operating gains and a normal tax rate. Gross profit reached 22.63 with a very high gross margin of 79.7%, highlighting the asset-light nature of the resort and attractions mix. Operating margin was approximately 21.7% this quarter versus an estimated 23.3% a year ago, indicating roughly 160 bps of margin compression. EBITDA was 8.25, producing a healthy EBITDA margin of 29.1%. OCF of 6.49 outpaced net income by 1.47x, signaling good earnings quality and limited accrual build. The balance sheet is robust: current ratio at 389.6%, cash and deposits of 22.39 cover all current liabilities (6.70) with ample headroom, and D/E at 0.23x is conservative. Interest burden is de minimis with interest coverage at 350.8x, reducing financial risk amid rate volatility. ROE is 7.4% per DuPont (NPM 15.5% × ATO 0.385 × leverage 1.23x), broadly in line with a mid-single-digit to high-single-digit return profile. ROIC is reported at 10.4%, comfortably above a 7–8% hurdle, suggesting value-accretive operations. Estimated FCF of roughly 4.78 (OCF 6.49 minus capex 1.71) more than covers implied dividends (payout ratio 63%), supporting sustainability. Key concerns are cost inflation in SG&A (labour/energy) compressing operating margin and potential sensitivity to tourism demand and weather seasonality. Forward-looking, modest revenue growth with disciplined cost control could stabilize margins; cash strength enables continued capex and shareholder returns without leveraging up. Monitoring pricing power, visitor mix (inbound vs domestic), and utility costs will be critical to sustaining profit quality through FY2026.

Profitability Analysis

Step 1 (ROE decomposition): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 15.5% × 0.385 × 1.23 ≈ 7.4%. Step 2 (largest driver): The most notable movement versus last year is a decline in operating margin (OP -3.8% YoY vs revenue +3.3%), implying the margin component (which ultimately feeds net margin) was the primary headwind. Step 3 (business reason): Elevated SG&A (labour, energy, and general operating costs) relative to revenue growth likely pressured operating margin despite strong gross margin (79.7%). Non-operating income modestly offset operating softness. Step 4 (sustainability): The margin compression looks cyclical and cost-driven rather than structural; with pricing initiatives and normalization of utility costs, some recovery is plausible, but wage inflation could keep pressure on SG&A. Step 5 (flags): Operating income declined while revenue rose, indicating negative operating leverage this period; watch if SG&A growth continues to exceed revenue growth, as that would cap ROE improvement even with stable leverage. Net margin at 15.5% remains healthy, cushioning ROE despite modest asset turnover and low leverage.

Growth Assessment

Revenue grew 3.3% YoY to 28.39, suggesting steady demand through Q2 despite seasonality. Operating income fell 3.8% YoY to 6.16, implying cost growth above revenue growth and leading to an estimated ~160 bps decline in operating margin (from ~23.3% to ~21.7%). Net income rose 5.7% YoY to 4.41, supported by small net non-operating gains (0.29 income vs 0.02 expense) and a normalized tax rate (31.4%). Gross margin remains very high at 79.7%, indicating pricing power/product mix resilience. EBITDA margin of 29.1% shows solid operating efficiency despite the SG&A drag. Near-term sustainability hinges on visitor traffic, pricing measures (ticketing/ancillaries), and cost control (labour/energy). With cash on hand and low leverage, management has room to invest in attractions and guest experience to support mid-single-digit revenue growth. Outlook cautiously positive, but margin recovery depends on containing SG&A growth relative to revenue.

Financial Health

Liquidity is strong: current ratio 3.90x and quick ratio 3.90x; no warning triggers (both well above thresholds). Cash and deposits (22.39) exceed current liabilities (6.70) by 3.3x, minimizing liquidity risk. Solvency is conservative with total liabilities 13.84 vs equity 59.91 (D/E 0.23x) and long-term loans of only 3.01. Interest coverage is 350.8x; refinancing and rate risks are minimal. Maturity mismatch risk is low given cash and receivables (24.39 combined) far exceed current liabilities; accounts payable are small (0.37), reflecting the business model. Intangibles (goodwill 6.84 and other intangibles 7.02) total 13.86—manageable relative to equity (59.91), but impairment risk should be monitored if performance weakens. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF of 6.49 exceeds net income of 4.41 (OCF/NI 1.47x), indicating high-quality earnings with supportive cash conversion. Estimated free cash flow (OCF 6.49 minus capex 1.71) is approximately 4.78, sufficient to fund dividends and small strategic investments. Working capital appears tight but stable: receivables (2.00) are modest; inventories unreported; payables low (0.37), with large cash cushioning variability—no signs of aggressive working capital management. Financing CF was -2.98, suggesting net outflows likely from dividends and/or debt service, consistent with the strong cash position. Overall, cash generation is robust and supports ongoing operations and returns.

Dividend Sustainability

The calculated payout ratio is 63.0%, slightly above the 60% benchmark for comfort but still within a manageable range given strong FCF. With estimated FCF of ~4.78 and implied dividends around ~2.78 (63% of NI 4.41), FCF coverage appears comfortable at roughly 1.7x. Low leverage and ample cash provide additional buffer to maintain dividends through cyclical fluctuations. Policy outlook: if management targets stable-to-rising dividends, continued OCF discipline and capex prioritization should sustain current levels; upside would depend on restoring operating margin and consistent traffic growth.

Risk Assessment

Business Risks:

• Cost inflation (labour, utilities) pressuring SG&A and operating margin
• Demand sensitivity to weather and seasonality impacting visitor traffic and yields
• Tourism/inbound volatility driven by macro and FX conditions
• Potential goodwill/intangible impairment if earnings underperform

Financial Risks:

• Small scale limits operating leverage and bargaining power
• Concentration risk in specific resort/attraction assets
• Dividend commitment near 60%+ payout could constrain flexibility if cash flow weakens

Key Concerns:

• Operating margin compressed ~160 bps YoY despite gross margin strength
• Sustained SG&A growth outpacing revenue would cap earnings growth
• Data gaps (inventory, detailed SG&A breakdown) limit visibility into cost drivers

Investment Implications

Key Takeaways:

• Topline grew 3.3% YoY, but operating income declined 3.8% on cost pressure
• Net income +5.7% YoY supported by small non-operating gains and normalized taxes
• OCF/NI 1.47x indicates solid cash conversion; estimated FCF ~4.78
• Balance sheet highly liquid and under-levered (D/E 0.23x, interest coverage 350.8x)
• ROE 7.4% with ROIC 10.4% suggests value creation above hurdle despite modest leverage

Metrics to Watch:

• Operating margin trajectory and SG&A growth vs revenue
• Visitor volumes, pricing (ticket/ancillary), and mix (inbound vs domestic)
• Utility and wage inflation trends impacting cost base
• Capex pipeline and returns on growth/maintenance projects
• Cash conversion (OCF/NI) and dividend coverage by FCF

Relative Positioning: Within the leisure/resort peer set, the company exhibits superior liquidity and low leverage, strong cash conversion, and high gross margins, but faces operating margin pressure from rising SG&A. Execution on cost control and pricing will determine relative EPS and ROE momentum through FY2026.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis