AMG HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.99B
• Operating Income: ¥823M
• Net Income: ¥458M
• EPS: ¥163.55

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

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 profit expansion despite softer top-line; margins improved, but cash conversion was weak in FY2026 Q2. Revenue declined 2.8% YoY to 139.86, while operating income rose 23.8% YoY to 8.23 and ordinary income increased 24.4% to 7.65. Net income grew 11.6% YoY to 4.58, with EPS of 163.55 JPY on 2.80 million average shares. Gross profit was 23.40, implying a gross margin of 16.7%. SG&A was 15.17, yielding an SG&A ratio of 10.9% and evidencing improved cost discipline. Operating margin expanded to 5.9%, up roughly 127 bps YoY by reverse-calculation. Ordinary margin reached 5.5%, up about 119 bps YoY. Net margin improved to 3.3%, an expansion of roughly 42 bps YoY. Profit growth outpaced sales thanks to better operating leverage and lower non-operating drag (non-op income 0.24 vs expenses 0.82; interest expense 0.77 with coverage ~10.7x). However, earnings quality deteriorated: operating cash flow was -5.91 versus net income of 4.58 (OCF/NI -1.29x), indicating significant working capital outflows or project timing effects. Liquidity remains sound with a current ratio of 190%, and short-term loans of 65.58 are well covered by current assets of 260.64, though reliance on short-term funding persists. Leverage is moderate with D/E 1.56x; no immediate solvency flag, but refinancing discipline is important. Capital efficiency remains weak: ROE is 4.0% and ROIC 2.8%, both below typical cost of capital thresholds. The headline payout ratio is 38.1%, suggesting earnings-based dividend sustainability, but negative OCF this half implies weak cash coverage. Forward-looking, sustaining margin gains while normalizing cash conversion and lifting ROIC toward 5%+ are key to de-risking; monitoring the timing of project deliveries and funding costs will be critical. Note: REIT-specific alerts (e.g., Debt/EBITDA 11.7x) are not applicable to this issuer.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.0% = Net Profit Margin 3.3% × Asset Turnover 0.481 × Financial Leverage 2.56x. Among the three components, the net margin appears to have improved the most YoY (net income +11.6% vs revenue -2.8%), implying better cost control and operating leverage, while asset turnover likely softened slightly due to lower sales versus a relatively stable asset base (YoY asset data not disclosed). The operating margin expanded to 5.9% (+~127 bps YoY by reverse-calculation), and ordinary margin to 5.5% (+~119 bps), driven by SG&A discipline (SG&A ratio ~10.9%) and controlled non-operating costs despite interest expense of 0.77. Business reason: mix/pricing and execution on SG&A restrained overheads, while non-operating losses remained contained. Sustainability: Operating margin gains can be partly sustainable if cost control persists, but sensitivity to project timing and financing costs remains high; interest rate moves could pressure the non-operating line. Concerning trends: ROIC is low at 2.8% (well below 5% warning threshold), and revenue contraction alongside SG&A at absolute levels raises the risk that SG&A growth could outpace sales if topline softness persists.

Growth Assessment

Top-line contracted 2.8% YoY to 139.86, indicating softer demand or project timing. Profit growth was strong: operating income +23.8% and net income +11.6%, reflecting margin improvement. Gross margin stood at 16.7%, and SG&A ratio at 10.9%, highlighting cost control as a key driver. Non-operating items were a net drag (-0.58), but manageable with interest coverage ~10.7x. Revenue sustainability depends on project pipeline conversion and housing/real estate market conditions; absent backlog data, visibility is limited. Profit quality is mixed: accounting profits rose, but OCF was negative (-5.91), pointing to timing/working capital outflows. Near-term outlook hinges on delivery schedules in H2 and normalization of working capital; if deliveries catch up, cash conversion should improve. Without disclosed R&D or significant capex (0.15), growth is primarily execution- and cycle-driven rather than investment-led.

Financial Health

Liquidity is healthy: current ratio 190.4% and quick ratio 190.4%, with cash 26.40 and receivables 31.15 supporting near-term needs. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 1.56x, indicating moderate leverage slightly above our conservative benchmark but below warning levels. Maturity structure: short-term loans 65.58 versus current assets 260.64 suggests low immediate rollover risk, though dependence on ST funding calls for careful liquidity management. Long-term loans are 36.59; total liabilities 176.89 vs equity 113.72. Interest coverage ~10.7x is solid at current earnings. Off-balance sheet obligations: not disclosed; no data on guarantees or contingent liabilities. Equity ratio not provided; book equity is 113.72.

Cash Flow Quality

OCF/Net Income is -1.29x (<0.8), flagging poor earnings-to-cash conversion this half, likely due to working capital outflows or project timing (inventories and investing CF not disclosed). With capex modest at 0.15, FCF is likely negative given OCF -5.91, implying dividends (if paid) are not covered by internal cash generation this period. No clear signs of deliberate working capital manipulation can be confirmed from the limited disclosure; however, receivables and inventory movements (inventory unreported) are typical swing factors in this sector. Financing CF was +1.22, indicating reliance on external funding amid negative OCF. Sustained improvement in OCF in H2 will be necessary to underpin dividend and debt service.

Dividend Sustainability

Calculated payout ratio is 38.1%, within a generally sustainable range (<60%), but DPS and total dividends paid are unreported. Given negative OCF this half and small capex, earnings-based coverage looks fine while cash-based coverage does not, implying potential reliance on existing cash or financing to fund dividends in the interim. Policy outlook is unclear due to lack of DPS guidance; maintaining dividends will require normalization of OCF in H2 and/or stable credit lines. With ROE at 4.0% and ROIC at 2.8%, distribution growth may be constrained until capital efficiency improves.

Risk Assessment

Business Risks:

• Project timing and delivery slippage causing revenue and OCF volatility
• Real estate market softness impacting sales pace and pricing
• Construction cost inflation and subcontractor capacity tightness squeezing margins
• Customer credit risk reflected in receivables collection timing

Financial Risks:

• Negative operating cash flow requiring external funding in the half
• Moderate leverage (D/E 1.56x) and reliance on short-term loans (65.58)
• Low ROIC (2.8%) versus assumed WACC, risking value dilution if sustained
• Interest rate risk: higher rates would raise interest expense and pressure ordinary income

Key Concerns:

• OCF/NI at -1.29x indicating weak earnings quality this period
• ROIC below 5% benchmark signals capital efficiency issues
• Potential refinancing risk if credit conditions tighten, given ST loan dependence
• Limited disclosure (inventories, investing CF, dividend details) reduces visibility

Investment Implications

Key Takeaways:

• Profitability improved materially despite a 2.8% revenue decline
• Operating margin expanded ~127 bps YoY to 5.9% on SG&A discipline
• Net margin rose to 3.3%, but cash conversion deteriorated (OCF -5.91)
• Liquidity is sound (current ratio ~190%), yet short-term debt reliance is notable
• Leverage moderate (D/E 1.56x); interest coverage healthy (~10.7x)
• Capital efficiency weak: ROE 4.0%, ROIC 2.8% below target thresholds
• Dividend payout ratio appears manageable, but cash coverage is thin this half

Metrics to Watch:

• OCF/Net Income and working capital movements (receivables, inventories)
• Backlog/contracted sales and H2 delivery schedule
• Gross and operating margins, SG&A ratio
• Short-term loans and refinancing terms; effective interest rate
• ROIC trajectory and asset turnover
• Tax rate sustainability (current ~35%)
• Equity ratio and any changes in interest-bearing debt composition

Relative Positioning: Within domestic real estate operators, the company demonstrates improving cost control and margin resilience but lags on capital efficiency and cash conversion; sustaining margin gains while restoring positive OCF is essential to close the gap with higher-ROIC peers.

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