Monex Group (8698) FY2026 Q3 Earnings Report

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Executive Summary

The current period marked a return to profitability in profit attributable to owners of the parent, driven by higher revenue, the reversal of the significant other expenses recorded in the previous year, and an increase in share of profit of investments accounted for using the equity method. Revenue was ¥62.29B (+12.1% YoY), profit before tax was ¥12.66B (a return to profitability from a loss of ¥-6.94B in the previous year), consolidated net income was ¥7.97B (a return to profitability from a loss of ¥-8.08B in the previous year), and net income attributable to owners of the parent was ¥8.01B (a return to profitability from a loss of ¥-5.84B in the previous year). SG&A expenses increased by only +1.1% YoY, substantially below the rate of revenue growth, and operating leverage supported the improvement in earnings. However, the reversal effect from the previous year also made a significant contribution, making it difficult to regard the growth rate in net income as equivalent to recurring growth.

Factors Affecting Performance

【Revenue】Revenue was ¥62.29B, representing a +12.1% YoY increase. Gross profit, after deducting cost of sales of ¥1.27B, remained solid, with top-line expansion serving as the starting point for earnings improvement.

【Profit and Loss】Operating income, calculated after deducting cost of sales of ¥1.27B and SG&A expenses of ¥46.23B, is estimated at ¥14.79B, with an estimated operating margin of 23.7%, an improvement of approximately 6.1pt from the estimated 17.6% in the same period of the previous year. The primary factor behind the improvement in the operating margin was the +1.1% growth in SG&A expenses, which was substantially below revenue growth. Profit before tax was ¥12.66B, a return to profitability from ¥-6.94B in the previous year, largely reflecting the reversal of significant other expenses recorded in the previous year (net other income/(loss) of ¥-12.90B). Share of profit of investments accounted for using the equity method was ¥2.29B (+31.9% YoY), accounting for 18.1% of profit before tax, and improvements in the earnings of investees also provided support. The effective tax rate was relatively high at 37.0%, and therefore did not drive net income growth to the same extent as the increase in profit before tax. In conclusion, earnings increased alongside higher revenue and the reversal of a temporary negative factor, and the results are classified as an increase in both revenue and profit.

Key Financial Indicators

【Profitability】The net profit margin was 12.9% (net income of ¥7.97B/revenue of ¥62.29B), above the 10% level. The estimated operating margin was 23.7%, improving from the estimated 17.6% in the previous year. 【Cash Flow Quality】Estimated EBITDA, calculated by adding depreciation and amortization of ¥3.81B, was ¥18.59B, resulting in an EBITDA margin of 29.9% and indicating a high level of earnings power before depreciation and amortization. Cash and cash equivalents were ¥49.52B, down ¥3.85B YoY. 【Investment Efficiency】ROE (annualized) was 8.4%. Under a DuPont analysis, the net profit margin was 12.9%, total asset turnover was low, and financial leverage was approximately 6.04x, calculated as total assets of ¥764.88B/net assets of ¥126.70B, indicating that ROE is structurally dependent on high leverage. 【Financial Soundness】The equity ratio was 16.2%, down 1.3pt from 17.5% in the previous year. Total liabilities were ¥638.18B, equivalent to approximately five times net assets, and the increase in assets and liabilities substantially exceeded the increase in net assets (+¥0.45B).

Cash Flow Analysis

As disclosed figures for operating cash flow (OCF) and investing cash flow are not included in the data, funding trends are analyzed based on balance sheet movements and shareholder return expenditures. Depreciation and amortization of ¥3.81B represented 25.7% of estimated operating income of ¥14.79B, indicating high earnings power before depreciation and amortization. Shareholder returns during the period totaled ¥11.26B, comprising dividend payments of ¥10.21B and share repurchases of ¥1.05B, equivalent to 1.4 times net income attributable to owners of the parent of ¥8.01B. Cash and cash equivalents were ¥49.52B, down ¥3.85B from the same period of the previous year, suggesting that shareholder returns exceeding the level of earnings were one factor behind the decline in cash balances. While total assets increased by ¥55.24B YoY, cash declined, indicating that a portion of funds was allocated to financial assets, equity-method investments, and other items.

Quality of Earnings

The return to profitability in profit before tax of ¥12.66B was strongly affected by the temporary reversal of significant net other expenses of ¥-12.90B recorded in the same period of the previous year, which warrants attention. Share of profit of investments accounted for using the equity method of ¥2.29B accounted for 18.1% of profit before tax, indicating a structure in which fluctuations in the performance of investees and the valuation environment have a material impact on consolidated earnings. The effective tax rate was high at 37.0%, making it difficult for the improvement in profit before tax to flow through fully to net income. Comprehensive income was ¥12.09B, exceeding net income of ¥7.97B, supported by foreign currency translation adjustments of ¥2.13B and other comprehensive income related to equity-method investments of ¥1.55B. The gap between net income and comprehensive income was primarily attributable to foreign exchange and valuation-related items, which differ in nature from recurring operating earnings and should therefore be taken into consideration.

Shareholder Returns

The Q2 dividend was ¥15.30 per share, and the full-year dividend forecast was ¥30.60 per share. Based on the average number of shares outstanding during the period of 251.4 million shares, the total full-year forecast dividend is approximately ¥7.69B, implying a reference payout ratio of approximately 96.0% relative to net income attributable to owners of the parent of ¥8.01B. The payout ratio based on the disclosed Q2 dividend was 48.4%, which differs from the level including full-year progress and should be noted. Including share repurchases of ¥1.05B, total shareholder returns during the period were ¥11.26B, resulting in a total return ratio of approximately 140.6% relative to net income attributable to owners of the parent, representing returns exceeding earnings. Although this reflects an aggressive shareholder return policy during a recovery in earnings, the balance between shareholder returns and capital accumulation will be a monitoring point given the equity ratio of 16.2%.

Risk Factors

1. Financial Leverage and Capital Buffer Risk: Total liabilities of ¥638.18B were approximately 5.04 times net assets of ¥126.70B, while the equity ratio declined 1.3pt YoY to 16.2%. The increase in net assets was limited relative to the expansion of assets and liabilities, and the pace of recovery in the capital buffer remains gradual.

2. Risk of Dependence on Equity-Method Investments: Share of profit of investments accounted for using the equity method of ¥2.29B accounted for 18.1% of profit before tax of ¥12.66B. If the performance of investees or the valuation environment deteriorates, the impact on consolidated earnings could be significant.

3. Risk of Continuing Shareholder Returns Exceeding Earnings: Dividend payments of ¥10.21B and share repurchases of ¥1.05B totaled ¥11.26B, exceeding net income attributable to owners of the parent of ¥8.01B. If shareholder returns at this level continue, capital accumulation through retained earnings may be constrained.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (utilities)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Revenue increased by +12.1%, while SG&A expenses rose by only +1.1%, resulting in an estimated operating margin of 23.7%, an improvement of approximately 6.1pt YoY. Revenue growth accompanied by disciplined SG&A expenses suggests an improvement in the earnings structure.

2. The return to profitability in net income attributable to owners of the parent of ¥8.01B includes the reversal of significant other expenses recorded in the previous year, making it difficult to attribute the entire improvement to recurring enhancement of earnings power.

3. Against a financial structure featuring an equity ratio of 16.2% (17.5% in the previous year) and a debt-to-equity ratio of approximately 5.04x, the implementation of shareholder returns exceeding earnings (total return ratio of approximately 140.6%) is an observation point from a capital policy perspective.

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional adviser as necessary.

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