LEOPALACE21 CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

The Company posted higher revenue but lower operating income for the current period, while ordinary income and net income increased significantly due to the absence of the extraordinary loss recorded in the previous year, resulting in the normalization of its earnings structure. Revenue was ¥1,159.0B (+3.7% YoY), operating income was ¥121.2B (-1.1%), ordinary income was ¥122.8B (+6.2%), and net income was ¥73.4B (+763.9% from ¥8.5B in the previous year). The sharp increase in net income was primarily attributable to the reversal of the extraordinary loss recorded in the previous year (¥100.9B); it should be noted that underlying profitability at the operating level itself declined slightly.

Factors Affecting Business Performance

【Revenue】Revenue was ¥1,159.0B, up +3.7% YoY. The core Leasing Business accounted for 96.6% of revenue and recorded a +3.8% increase, driven primarily by rental income (¥865.4B, the principal revenue source within the rental business). ElderlyCare was ¥34.0B (-0.2%), essentially flat, while Other grew to ¥5.7B (+12.0%), albeit from a small base.

【Earnings】Operating income was ¥121.2B, down -1.1% YoY. Gross profit was ¥265.1B (gross margin: 22.9%), while SG&A expenses increased by +12.0% YoY to ¥143.9B. The increase in costs exceeding the rate of revenue growth was the factor behind the decline in operating income. Meanwhile, ordinary income improved to ¥122.8B (+6.2%) due to a reduction in non-operating expenses, including interest expense of ¥1.6B and foreign exchange gains of ¥1.3B. Net income surged to ¥73.4B (+763.9%) due to the absence of the impairment and extraordinary losses recorded in the previous year. In conclusion, the current period featured higher revenue but lower operating income at the operating level, while ordinary income and net income increased due to the reversal of extraordinary factors.

Segment Analysis

Leasing reported revenue of ¥1,120.3B (+3.8%), operating income of ¥144.2B (+1.2%), and a margin of 12.9%. Profit growth was sluggish relative to revenue growth, and the margin declined slightly. ElderlyCare reported revenue of ¥34.0B (-0.2%) and an operating loss of ¥4.05B (widening loss YoY, YoY-14.1%), while Other reported revenue of ¥5.7B (+12.0%) and an operating loss of ¥6.80B (margin: -119.3%); both segments remained loss-making. Leasing’s operating income of ¥144.2B exceeded consolidated operating income of ¥121.2B, creating a structure in which the core business absorbs the combined ¥10.9B losses of the two peripheral businesses.

Key Financial Metrics

【Profitability】The operating margin was 10.5%, and the net profit margin was 6.3%. ROE was 13.8%, representing a reasonable level in terms of both profitability and capital efficiency.【Cash Quality】Cash and deposits were ¥657.2B, accounting for 36.0% of total assets. Current assets were ¥822.9B versus current liabilities of ¥677.4B, resulting in a current ratio of 121.5%. Working capital was positive at ¥145.5B, ensuring short-term financial flexibility.【Investment Efficiency】Fixed assets were ¥1,004.7B, accounting for 55.0% of total assets, with property, plant and equipment (assets for rental operations) of ¥608.7B forming the core of the asset base. Deferred tax assets of ¥285.6B were equivalent to 53.6% of net assets of ¥532.4B, representing a somewhat large scale.【Financial Soundness】The equity ratio was 29.1%, improving from 27.0% in the previous year. Long-term borrowings were ¥300.0B, and interest-bearing debt was primarily long term. Although the liabilities-to-total-assets ratio was relatively high, the interest burden was limited, with interest expense of ¥1.6B.

Cash Flow Analysis

As detailed disclosure of the statement of cash flows is not available for this financial period, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits increased by +¥78.1B (+13.5%) to ¥657.2B from ¥579.1B in the previous year, indicating a strengthening cash position. Retained earnings increased by +¥54.0B YoY to ¥335.1B, with the accumulation of net income contributing to the strengthening of shareholders’ equity. Meanwhile, contract liabilities, corresponding to advances received, decreased to ¥370.8B from ¥386.8B in the previous year, exerting a slightly negative effect on cash generation from working capital. Overall, cash accumulation and the strengthening of shareholders’ equity progressed simultaneously, and the financial foundation was stronger than in the previous year.

Quality of Earnings

Extraordinary items in the current period were negligible, consisting of extraordinary income of ¥0.01B and extraordinary losses of ¥0.07B, including an impairment loss of ¥0.04B on assets related to the rental business. This contrasts sharply with the ¥100.9B extraordinary loss recorded in the previous year, including a ¥0.78B impairment loss. The reversal of this extraordinary loss was the primary factor behind the sharp increase in net income, and should not be interpreted as a sharp improvement in recurring earnings power. Net income was ¥73.4B versus ordinary income of ¥122.8B (¥70.3B attributable to owners of the parent), with income taxes of ¥49.3B (effective tax rate of approximately 40.2%) accounting for the difference. Non-operating income of ¥3.4B was small at approximately 0.3% of revenue and included foreign exchange gains of ¥1.3B; reliance on such gains was limited, and earnings can generally be regarded as recurring and derived from the core business. Comprehensive income was ¥76.5B, with only a small difference from net income of ¥73.4B; foreign currency translation adjustments of +¥3.8B were the primary factor behind the difference.

Earnings Forecast and Guidance

Progress against the full-year plan was 24.9% for revenue (¥1,159.0B/¥4,650.0B), broadly consistent with the simple 25% progress benchmark. Meanwhile, progress was 31.5% for operating income (¥121.2B/¥385.0B) and 32.2% for ordinary income (¥122.8B/¥381.0B), both ahead of the simple progress benchmark. Net income was also ahead of schedule because the large extraordinary loss incurred in the previous year did not recur in the current period; however, this should be interpreted in light of the optical effect created by the reversal of extraordinary factors. As of Q1, the Company had not revised either its earnings forecast or dividend forecast.

Shareholder Returns

The Company’s full-year dividend forecast is ¥15 per share. Compared with the previous year’s annual dividend of ¥5, the payout ratio is expected to be approximately 21.5% based on the full-year forecast EPS of ¥69.87. As of Q1, no revision had been made to the dividend forecast. In light of cash and deposits of ¥657.2B and an equity ratio of 29.1%, financial constraints on maintaining dividends for the time being are considered limited.

Risk Factors

1. Business Portfolio Concentration Risk: The Company depends on the Leasing Business for 96.6% of revenue, while the continued losses of ElderlyCare (operating loss of ¥4.05B) and Other (operating loss of ¥6.80B) weigh on consolidated operating income of ¥121.2B.

2. Margin Pressure from Cost Increases: SG&A expenses were ¥143.9B, increasing +12.0% YoY and expanding faster than the +3.7% revenue growth rate. The operating margin declined from the previous year.

3. Tax Burden and Asset Quality Risk: The effective tax rate was approximately 40.2%, reducing the conversion of ordinary income of ¥122.8B into net income. In addition, deferred tax assets of ¥285.6B accounted for 53.6% of net assets, meaning that the availability of future taxable income could affect asset quality.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

Both the operating margin and net profit margin exceeded the industry median, placing the Company’s profitability at a relatively high level within the industry.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median, leaving the Company’s growth pace at approximately the middle of the industry range.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The sharp increase in net income (+763.9%) resulted from the reversal of the large extraordinary loss recorded in the previous year and does not indicate a sudden change in recurring earnings power. The operating margin declined from the previous year, and core business earnings trends are moving in a different direction from the growth in ordinary income and net income.

2. The Leasing Business generated operating income of ¥144.2B, exceeding consolidated operating income of ¥121.2B, and the earnings structure in which it absorbs the combined ¥10.9B losses of ElderlyCare and Other remains in place. The earnings trends of these two businesses are structural factors that will influence the consolidated margin going forward.

3. Full-year progress exceeded the simple 25% benchmark, with both operating income and ordinary income exceeding 30%. As of Q1, the Company had not revised its earnings forecast. The increase in cash and deposits to ¥657.2B and the improvement in the equity ratio to 29.1% are notable data points indicating a stronger financial foundation.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥383–¥408 at ±1% for the cost of equity, and ¥388–¥406 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not predict or guarantee the future share price)

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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