Mortgage Service Japan Limited FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥751M
• Net Income: ¥436M
• EPS: ¥34.92

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

For FY2026 Q2 (consolidated, JGAAP), Nihon Mortgage Service Co., Ltd. delivered solid profit growth with operating income of ¥751 million (+17.6% YoY) and net income of ¥513 million (+16.2% YoY), indicating improved operating efficiency and cost control despite limited top-line disclosures. Ordinary income at ¥757 million suggests minimal non-operating drag and a stable core earnings profile. Depreciation and amortization totaled ¥66.03 million, placing EBITDA at approximately ¥817 million for the half. Interest expense was de minimis at ¥17 thousand, translating into an extremely high interest coverage ratio (~44,176x), underscoring negligible funding cost burden. On the balance sheet, total assets were ¥20.611 billion and total equity ¥8.974 billion; the implied equity ratio is approximately 43.5% (equity/total assets), while the reported 0.0% equity ratio appears to reflect an unreported metric rather than an actual value. Leverage is moderate with total liabilities/equity at ~1.48x and financial leverage (assets/equity) at ~2.30x. Liquidity looks sound with a current ratio of ~173.6% and working capital of ~¥8.533 billion, supported by a high share of current assets (¥20.129 billion). Operating cash flow was strong at ¥1.819 billion, equating to OCF/Net Income of ~3.55x, implying robust cash conversion for the half—likely benefitting from favorable working capital movements. Financing cash flow was a net outflow of ¥1.470 billion, suggesting net debt reduction and/or shareholder returns, though exact drivers are not disclosed. Investing cash flow and revenue-related line items are not reported in the provided XBRL mapping; hence, margin and asset-turnover metrics tied to revenue cannot be evaluated. Based on net income and period-end assets, ROA approximates 2.5% for the half (annualized ~5.0% if run-rate persists); using period-end equity, ROE approximates ~5.7% for the half (annualized ~11–12%), though these are rough given end-period denominators. The effective tax rate inferred from disclosed tax expense and net income is roughly 28.2%, broadly consistent with statutory levels. Cash and equivalents were not disclosed in this extract, limiting assessment of immediate liquidity buffers, yet the strong OCF and ample working capital provide comfort. Dividends and payout ratio are also unreported; therefore, dividend capacity is assessed qualitatively from earnings and cash generation rather than declared distributions. Overall, earnings momentum, liquidity, and cash conversion appear favorable, while the absence of revenue disclosures and investing cash flow details constrains a full assessment of margin quality and free cash flow.

Profitability Analysis

ROE_decomposition: A full DuPont breakdown is not possible due to unreported revenue and gross profit. However: leverage (assets/equity) is ~2.30x; net income of ¥513 million on period-end equity of ¥8.974 billion implies a rough half-year ROE of ~5.7% (annualized ~11–12%). Asset turnover and net profit margin cannot be computed without revenue; hence margin and turnover contributions are indeterminable. margin_quality: Operating income grew 17.6% YoY to ¥751 million and net income grew 16.2% YoY to ¥513 million, indicating resilient operating performance. Effective tax rate estimated at ~28.2% (¥201.4 million tax / ~¥714.4 million pre-tax), consistent with standard rates and suggesting no unusual tax items. Interest burden is negligible (¥17 thousand), so bottom-line is largely driven by operations and taxes. operating_leverage: With operating income outpacing an unreported revenue base, we cannot quantify operating leverage precisely. However, the double-digit YoY growth in operating income suggests either modest operating leverage or improved cost efficiency. D&A is modest (¥66 million), implying a relatively light fixed-asset intensity and limited fixed-cost pressure.

Growth Assessment

revenue_sustainability: Revenue is unreported in this dataset; therefore, growth sustainability must be inferred from profit trends. The YoY gains in operating and net income point to healthy demand/volume or better pricing/expense control. Confirmation requires disclosed fee/commission income, guarantee fees, or service revenues typically relevant to mortgage service/guarantee businesses. profit_quality: Ordinary income (¥757 million) slightly exceeds operating income, implying stable non-operating contributions. Minimal interest expense and a normalized tax rate bolster earnings quality. The strong OCF/NI ratio (~3.55x) supports the view that profits are cash-backed this half, though this may reflect temporary working capital inflows. outlook: If H1 run-rate holds, full-year profitability could improve YoY with an implied annualized ROE around low double digits. Key to sustainability will be the housing loan market environment, credit trends, fee/pricing discipline, and interest rate normalization impacts on origination/servicing volumes.

Financial Health

liquidity: Current assets ¥20.129 billion vs. current liabilities ¥11.596 billion yields a current ratio ~173.6% and working capital ~¥8.533 billion. Cash and equivalents are unreported here, but liquidity appears comfortable given the magnitude of current assets and strong OCF. solvency: Total liabilities ¥13.320 billion vs. equity ¥8.974 billion implies liabilities/equity ~1.48x; assets/equity ~2.30x. The inferred equity ratio is ~43.5% (vs. 0.0% reported due to non-disclosure), indicating a solid solvency buffer for a nonbank financial/service model. capital_structure: Interest costs are negligible (¥17 thousand), suggesting low-cost funding and/or limited interest-bearing debt. Financing CF outflow of ¥1.470 billion indicates net repayments and/or shareholder returns, consistent with a de-risking or disciplined capital return stance.

Cash Flow Quality

earnings_quality: OCF of ¥1.819 billion vs. net income of ¥513 million (OCF/NI ~3.55x) indicates strong cash realization of earnings. Tax cash outflows appear consistent with the 28% effective rate inferred. FCF_analysis: Investing cash flow is unreported; consequently, true free cash flow cannot be computed. EBITDA of ¥817 million provides capacity for investment, but capex/intangibles outlays are unknown. On a proxy basis, net cash generation (OCF plus Financing CF) was positive (¥349 billion? No—¥1.819 billion OCF offset by ¥1.470 billion financing outflow leaves a net +¥349 million before investing), implying residual cash accretion in H1 absent investing needs. working_capital: Given the OCF strength, working capital likely released cash (e.g., higher payables or lower receivables). However, component details (receivables, payables, deferred income) are not disclosed, so durability is uncertain.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are unreported in this dataset; therefore, we cannot calculate actual payout. Earnings capacity (H1 NI ¥513 million) would support moderate distributions if policy allows. FCF_coverage: Free cash flow cannot be assessed due to missing investing cash flow/capex data. OCF strength suggests headroom, but without capex and actual dividends, coverage cannot be quantified. policy_outlook: No explicit policy disclosure here. For mortgage service/guarantee peers, stable payout policies are common when cash flows are predictable; confirmation requires management guidance and dividend track record.

Risk Assessment

Business Risks:

• Housing market cycle sensitivity affecting origination and fee volumes
• Interest rate normalization (BoJ policy shifts) impacting mortgage demand and prepayment behavior
• Fee/pricing pressure and competitive dynamics in mortgage guarantee/servicing
• Credit performance of guaranteed/serviced loans and default trends
• Regulatory changes in housing finance, guarantees, and consumer protection
• Dependence on securitization and capital markets conditions
• Operational and compliance risks in servicing/collections and data handling
• Demographic headwinds in Japan potentially weighing on long-term housing demand

Financial Risks:

• Working capital volatility affecting period-to-period OCF
• Potential funding concentration or maturity mismatches (if applicable) despite currently low interest costs
• Limited disclosure of cash and investing cash flows constraining assessment of liquidity buffers
• Exposure to counterparty risk with lenders/insurers
• Possible valuation impacts on any financial assets related to servicing/guarantee exposures

Key Concerns:

• Revenue and gross margin unreported, limiting margin analysis and DuPont detail
• Investing cash flow unreported, preventing FCF estimation
• Cash and equivalents not disclosed in this extract, obscuring immediate liquidity
• Equity ratio reported as 0.0% appears to be non-disclosure rather than economic reality

Investment Implications

Key Takeaways:

• Double-digit YoY growth in operating and net income in H1 indicates resilient core earnings
• Strong cash conversion (OCF/NI ~3.55x) supports earnings quality this period
• Liquidity solid with current ratio ~1.74x and sizable working capital
• Leverage moderate (assets/equity ~2.30x; liabilities/equity ~1.48x) with negligible interest burden
• Implied half-year ROE ~5.7% (annualized ~11–12%) and ROA ~2.5% (annualized ~5.0%) using period-end balances
• Financing cash outflow suggests net de-leveraging and/or returns to shareholders
• Incomplete disclosure of revenue and investing cash flows is the main analytical limitation

Metrics to Watch:

• Disclosed revenue/fee income and segment mix to assess margin sustainability
• Working capital components (receivables, payables, deferred revenue) driving OCF
• Capex and investing cash flows to derive true FCF
• Credit loss experience/default rates within guaranteed or serviced portfolios
• Leverage and funding mix, including any interest-bearing debt trends
• Dividend policy, payout ratio, and cash return framework
• Origination/guarantee volumes and servicing balances as leading indicators

Relative Positioning: Within Japanese nonbank financials and mortgage service/guarantee peers, the company exhibits moderate leverage, very low interest burden, strong interim cash conversion, and solid liquidity; however, lack of revenue and investing CF disclosure in this extract makes margin benchmarking and FCF comparison inconclusive.

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