ASAX CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.23B
• Operating Income: ¥2.74B
• Net Income: ¥1.80B
• EPS: ¥54.69

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Share Information

Dividend 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 profitability with exceptional operating efficiency, but low capital efficiency and weaker cash conversion temper the quality of earnings in FY2026 Q2. Revenue was 42.28, operating income 27.39, ordinary income 27.85, and net income 18.03, translating to a very high operating margin of approximately 64.8% and a net margin of 42.6%. Interest coverage was extremely strong at 112.6x, reflecting a low interest burden (interest expense 0.24 vs EBITDA 28.07). Balance sheet strength is evident with current assets of 1,112.07 versus current liabilities of 226.82 (current ratio 4.90x) and equity of 502.20, keeping D/E at a conservative 1.38x for a specialty finance model. ROE calculated at 3.6% is modest despite high margins because asset turnover is very low (0.035), and leverage (2.38x) is only moderate. ROIC at 2.0% is below the 5% warning threshold, indicating capital efficiency headwinds despite strong profitability at the P&L level. Cash flow quality is mixed: operating cash flow of 8.88 is only 0.49x net income, signaling weaker cash conversion in the period, likely reflecting loan book growth and working capital dynamics typical for collateralized lending. Free cash flow is not disclosed, but capex is minimal at 0.20, implying limited maintenance cash requirements. Tax burden is relatively heavy with an effective tax rate of 35.3%, which partially caps bottom-line conversion. Liquidity risk appears low given substantial current asset coverage and long-dated borrowings (long-term loans 452.24). Dividend affordability looks reasonable with a calculated payout ratio of 36.6%, though OCF underperformance suggests monitoring cash coverage through the cycle. Margin trend comparisons in basis points versus prior periods are unavailable due to missing YoY/quarterly comparatives; baseline margins are currently very strong. Forward-looking, funding cost normalization and real estate collateral market conditions will be key to sustaining spreads and credit quality. The company’s model remains resilient on earnings, but improving capital efficiency (ROIC/ROE via better turnover) and stabilizing cash conversion will be necessary to elevate quality.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 42.6% × 0.035 × 2.38 ≈ 3.6%. The binding constraint on ROE is the very low asset turnover (0.035), not margin or leverage. Business driver: as a real-estate collateralized lender, large interest-earning assets generate recognized revenue slowly, depressing turnover while sustaining high margins from spreads and low credit costs in the period. Financial leverage at 2.38x is moderate for a lender, supporting ROE but not aggressive enough to offset low turnover. Sustainability: high net margins look supported by low reported interest expense and controlled personnel costs (salaries and allowances 2.04 = ~4.8% of revenue); however, margins are sensitive to funding cost increases and credit costs, which can reverse quickly. Without YoY data, the component that changed most cannot be quantified; qualitatively, any rise in funding rates would pressure net margin and ROE unless repricing is timely. Operating leverage appears favorable at present (high operating income vs revenue), but we cannot confirm SG&A vs revenue growth trends due to limited disclosure.

Growth Assessment

Revenue of 42.28 and operating income of 27.39 indicate robust unit economics, but sustainability hinges on loan growth, collateral quality, and funding costs. No YoY or sequential growth rates are available, so we cannot quantify growth momentum. The profit mix appears primarily recurring (interest/spread income), with minimal contribution from non-operating items (non-operating income ratio 4.4%). EBITDA margin of 66.4% is strong, suggesting limited cost leakage. Outlook depends on: 1) ability to pass through higher funding costs, 2) credit cost normalization in a softening or volatile real estate environment, and 3) maintaining disciplined underwriting to avoid NPL upticks. With ROIC at 2.0%, incremental growth must be value-accretive; management focus on asset mix and pricing will be critical to lift capital efficiency.

Financial Health

Liquidity is strong: current ratio 4.90x and quick ratio 4.90x, with working capital of 885.24, implying ample coverage of short-term obligations. Solvency is acceptable: D/E at 1.38x sits within our conservative threshold (<1.5x), and interest coverage is extremely robust at 112.6x. Long-term loans of 452.24 dominate liabilities (noncurrent liabilities 467.27), reducing near-term refinancing stress; current liabilities are modest at 226.82, and current assets (1,112.07) provide substantial cushion—maturity mismatch risk appears low. No off-balance sheet obligations were disclosed in the provided data. There is no warning for Current Ratio (<1.0) or D/E (>2.0).

Cash Flow Quality

OCF/Net income is 0.49x, below the 0.8 threshold, indicating weaker earnings-to-cash conversion this period. For a lender, OCF can be depressed by growth in the loan book and working capital movements; this does not necessarily imply poor quality, but it warrants monitoring across multiple periods. Capex is minimal at 0.20, so structural cash needs are low. Financing cash flow was -4.05, likely reflecting net debt repayment and/or dividends; without full detail, we cannot separate the components. Free cash flow is not disclosed; dividend and capex coverage by FCF cannot be assessed. No clear signs of working capital manipulation are evident from limited disclosures; however, loan origination/collection timing can materially swing OCF.

Dividend Sustainability

Calculated payout ratio is 36.6%, comfortably below the 60% benchmark, suggesting a conservative dividend stance. Given minimal capex (0.20), maintenance cash needs are low; however, OCF underperformed net income (0.49x), so near-term cash coverage should be monitored. Total dividends paid and DPS were not disclosed, limiting precision; implied DPS (based on EPS and payout) would be modest. Unless funding costs or credit losses spike, current earnings power supports dividends, but sustained negative OCF-to-NI would pressure cash coverage over time. Policy outlook cannot be inferred from the data provided.

Risk Assessment

Business Risks:

• Credit risk/NPL uptick in real-estate collateralized loans if property prices soften.
• Interest rate risk: higher funding costs could compress spreads and margins.
• Collateral valuation risk in a volatile real estate market.
• Concentration risk if loan book exposure is not well diversified (not disclosed).
• Regulatory/consumer finance rule changes impacting underwriting and pricing.

Financial Risks:

• Low capital efficiency (ROIC 2.0%) limits value creation, especially if growth is funded with leverage.
• Debt/EBITDA at 16.1x appears high on a non-financial metric basis; while less meaningful for lenders, refinancing conditions still matter.
• Cash conversion shortfall (OCF/NI 0.49x) increases reliance on external funding for growth.
• Tax burden (35.3% effective rate) reduces flexibility in downturns.

Key Concerns:

• Earnings quality flag due to OCF/NI < 0.8.
• Sensitivity of net margin to rate hikes and credit cost normalization.
• Data gaps (no YoY trends, limited SG&A detail, no credit cost disclosure) hinder assessment of trajectory.

Investment Implications

Key Takeaways:

• High profitability at the P&L level: operating margin ~64.8%, net margin 42.6%.
• ROE is modest at 3.6% due to very low asset turnover (0.035) and moderate leverage (2.38x).
• Liquidity strong (current ratio 4.90x) and interest coverage exceptionally high (112.6x).
• Capital efficiency weak (ROIC 2.0%); improving turnover/spread dynamics is key.
• Cash conversion is a watchpoint (OCF/NI 0.49x) amid loan book growth dynamics.

Metrics to Watch:

• Net interest spread and funding cost trajectory.
• Credit costs/NPLs and collateral valuation indicators.
• OCF vs NI trend and FCF after dividends.
• Leverage profile (D/E) and refinancing schedule.
• ROIC and ROE progression, especially asset turnover.
• Dividend policy updates and DPS guidance.

Relative Positioning: Within specialty finance/real-estate collateral lenders, the company exhibits superior reported margins and strong liquidity but lags on capital efficiency and cash conversion this quarter; resilience to funding cost normalization and disciplined credit risk management will define its relative standing.

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