Sun Frontier Fudousan Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥58.23B
• Operating Income: ¥14.13B
• Net Income: ¥4.42B
• EPS: ¥185.31

Income Statement

Balance Sheet

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

Sansei Frontier Real Estate (Sun Frontier Fudosan, TSE: 8934) delivered a very strong FY2026 Q2 (cumulative) performance under JGAAP on a consolidated basis, with topline and earnings expanding sharply year over year. Revenue grew 58.3% YoY to ¥58.2bn, while operating income more than doubled (+110.8% YoY) to ¥14.1bn, indicating substantial operating leverage. Net income increased 103.3% YoY to ¥9.0bn, driving EPS to ¥185.31. The DuPont decomposition indicates a net margin of 15.44%, asset turnover of 0.245x, and financial leverage of 2.17x, yielding an ROE of 8.22% (consistent with the reported ROE). Gross margin printed at 19.8%, but operating margin reached approximately 24.3%, implying meaningful “other operating income” contributions or favorable mix effects beyond simple product gross profit. Interest expense was modest at ¥391m, and interest coverage was a very comfortable 36.1x, underscoring strong earnings capacity relative to financing costs. Balance sheet strength appears solid: total assets were ¥237.8bn and total equity ¥109.4bn, implying an equity ratio around 46% despite the reported equity ratio field showing 0.0% (unreported). Liquidity looks ample with current assets of ¥183.7bn versus current liabilities of ¥26.7bn, resulting in a current ratio of 6.89x; note the quick ratio equals the current ratio because inventories are unreported in the dataset. Working capital stood at ¥157.0bn, providing substantial flexibility to support ongoing deal activity and development cycles. Cash flow statement line items are unreported (shown as zero), so operating cash flow, investing cash flow, free cash flow, and cash balances cannot be assessed from this extract. Dividend fields are also unreported (DPS and payout show as zero), so distribution policy cannot be inferred from this dataset alone despite robust earnings. Overall profitability momentum, operating leverage, and conservative financing costs position the company well; however, results may be sensitive to deal timing, property market conditions, and the mix between trading gains, rental/fee income, and other operating contributions. The absence of cash flow detail and inventories data limits assessment of earnings quality and capital efficiency typical of real estate business models. We therefore place greater analytical weight on the strong income statement and balance sheet signals while highlighting data gaps that constrain full cash flow and dividend sustainability analysis.

Profitability Analysis

ROE of 8.22% decomposes into net profit margin of 15.44%, asset turnover of 0.245x, and financial leverage of 2.17x. The ROE profile is currently margin-driven rather than efficiency-driven, given relatively low asset turnover for a real estate business that holds substantial assets. Gross margin was 19.8% and operating margin was approximately 24.3% (¥14.13bn / ¥58.23bn), which implies sizable positive other operating items or fee/rental contributions offsetting SG&A, a favorable sign for margin resilience if recurring. Operating leverage appears high: operating income growth (+110.8% YoY) outpaced revenue growth (+58.3% YoY), implying an operating leverage factor of roughly 1.9x. Interest burden is light with interest expense at ¥391m and coverage at 36.1x, supporting pre-tax profitability. Ordinary income of ¥13.61bn is close to operating income, indicating limited non-operating drag. While EBITDA cannot be computed due to unreported depreciation/amortization, operating income serves as a reasonable proxy for near-term profitability traction. The margin mix suggests the period benefitted from strong transactions and possibly higher-value assets or fee income, but sustainability depends on pipeline and market liquidity.

Growth Assessment

Revenue expanded 58.3% YoY to ¥58.2bn, reflecting robust transaction activity and/or strong contributions from key projects. Operating income rose 110.8% YoY to ¥14.1bn, indicating meaningful scale benefits and fixed-cost absorption. Net income grew 103.3% YoY to ¥9.0bn, roughly in line with operating gains, suggesting limited dilution from interest or non-operating items. The net margin of 15.44% indicates healthy unit economics in the period. Given the real estate context, revenue can be lumpy due to deal timing; therefore, sustainability hinges on the forward pipeline of property sales/turnover and recurring rental/fee income. Absent cash flow and inventories data, we cannot validate whether growth was accompanied by proportional increases in working capital or inventory build, which would affect future period revenue capacity. The strong leverage of profits to sales suggests the company has room to scale IF pipeline remains solid and market conditions hold. Outlook qualitatively skews favorable on current momentum, but cyclicality and transaction timing introduce volatility risk. Continued monitoring of segment mix (trading vs. leasing/fees) will be key to assessing the durability of margin expansion.

Financial Health

Total assets were ¥237.8bn and total equity ¥109.4bn, implying an equity ratio of approximately 46% (computed from non-zero items), suggesting a balanced capital structure. Total liabilities of ¥112.3bn result in a debt-to-equity ratio of about 1.03x (on a broad liabilities-to-equity basis). Liquidity is strong with current assets at ¥183.7bn versus current liabilities at ¥26.7bn, driving a current ratio of 6.89x and working capital of ¥157.0bn. The reported quick ratio equals the current ratio due to unreported inventories; actual quick ratio is likely lower but still appears robust given the scale of current assets. Interest expense of ¥391m is well covered (36.1x), indicating manageable financing risk at current earnings levels. The unreported cash and inventories figures limit precision in assessing immediate liquidity buffers and the composition of current assets (cash vs. properties held for sale vs. receivables). Nonetheless, the implied equity cushion and low interest burden point to sound solvency.

Cash Flow Quality

Cash flow data are unreported in this extract, so OCF, investing CF, and financing CF cannot be assessed; the OCF/Net Income ratio showing 0.00 is not meaningful. As a result, free cash flow (FCF) cannot be calculated, and we cannot reconcile earnings with cash generation. For real estate operators, working capital swings (particularly acquisition and sale of properties) can cause significant divergence between earnings and OCF; without inventories and cash detail, we cannot judge the conversion quality. The sizable operating profit and interest coverage suggest underlying cash generation potential, but this must be validated against property acquisition outlays, project expenditures, and settlement timing. Monitoring receivables, advances, and real estate for sale turnover would be critical to evaluate earnings quality once disclosed.

Dividend Sustainability

Dividend data are unreported (DPS and payout appear as zero placeholders), so we cannot evaluate actual distributions for FY2026 Q2. With EPS at ¥185.31 and strong net income, capacity to pay dividends appears supported by earnings; however, sustainability depends on cash generation and capital requirements for inventory acquisition and redevelopment. FCF coverage cannot be computed due to missing OCF and capex data. The company’s equity base (~46% implied equity ratio) and low interest burden provide flexibility, but policy direction (target payout ratio, stability vs. performance-linked) is unknown from this dataset. Investors should look for guidance on full-year dividend policy and interim distributions in the company’s disclosures.

Risk Assessment

Business Risks:

• Cyclicality and potential volatility in the Japanese real estate transaction market
• Deal timing risk leading to lumpy revenue and profit recognition
• Property price risk and cap rate movements impacting margins and asset valuations
• Construction and renovation cost inflation affecting project economics
• Geographic concentration risk if exposure is high to specific metropolitan areas
• Regulatory, tax, and zoning changes affecting redevelopment and sales
• Competition for prime assets reducing acquisition yields
• Natural disaster risk (earthquake/typhoon) affecting properties and operations

Financial Risks:

• Refinancing and interest rate risk if rates rise from current levels
• Working capital intensity and inventory holding risk typical of property trading
• Potential mismatch between accounting earnings and cash flows due to settlement timing
• Valuation risk on assets held for sale or investment properties
• Counterparty risk on large transactions and receivables

Key Concerns:

• Sustainability of elevated operating margin given reliance on transaction mix
• Lack of disclosed cash flow and inventories data limiting visibility on liquidity and FCF
• Potential earnings volatility from project and sales timing despite strong 1H performance

Investment Implications

Key Takeaways:

• Strong 1H topline growth (+58.3% YoY) with outsized operating income growth (+110.8% YoY) indicates high operating leverage
• Healthy net margin (15.44%) and robust interest coverage (36.1x) underscore earnings resilience
• Implied equity ratio around 46% and large working capital (¥157.0bn) signal solid balance sheet capacity
• Operating margin (~24.3%) exceeds gross margin, suggesting material other operating contributions or favorable mix
• Data gaps on cash flow, inventories, and dividends constrain assessment of earnings quality and distribution capacity

Metrics to Watch:

• Operating cash flow versus net income and free cash flow conversion
• Inventories/real estate for sale levels, turnover, and acquisition pipeline
• Segment mix of trading gains vs. rental/fee income and its impact on margin durability
• Debt maturity profile, effective interest rate, and sensitivity to rate changes
• Asset turnover trend and ROE progression across cycles
• Guidance on dividend policy and payout targets for the full year

Relative Positioning: Within Japan’s mid-cap real estate operators/developers, the company currently presents strong profitability momentum, moderate leverage, and ample near-term liquidity; however, visibility on cash flow and inventory dynamics is lower than ideal in this dataset, which is important for assessing durability versus peers with more granular disclosures.

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