FJ NEXT HOLDINGS (8935) FY2027 Q1 Earnings Report

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Executive Summary

The Company reported higher revenue and profits, accompanied by a significant improvement in profit margins, mainly due to an increase in deliveries of newly built condominiums. Revenue was ¥40.24B (+27.8% YoY), Operating Income was ¥5.68B (+88.0%), Ordinary Income was ¥5.67B (+89.0%), and Net Income was ¥3.91B (+90.2%). A decline in the cost-of-sales ratio and control of selling, general and administrative expenses generated operating leverage, expanding the Operating Income margin to 14.1%. Progress against the full-year plan was 26.5% for Revenue and 37.9% for Operating Income. Although the latter was substantially above the standard progress rate of 25%, the impact of uneven delivery timing across projects should also be considered.

Factors Driving Performance Changes

【Revenue】Revenue was ¥40.24B (+27.8% YoY), led by the core Real Estate Development Business, which generated ¥35.74B (+28.1%). Within this business, revenue from newly built condominiums increased substantially from ¥5.80B to ¥13.35B, while revenue from existing condominiums was ¥20.53B and remained broadly flat. The growth driver was therefore the delivery of newly built properties. The Construction Business increased revenue to ¥3.11B (+33.8%), the Real Estate Management Business was approximately flat at ¥1.15B (-0.2%), and the Ryokan Business increased slightly to ¥0.30B (+7.9%).

【Profit and Loss】Operating Income increased significantly to ¥5.68B (+88.0%), Ordinary Income to ¥5.67B (+89.0%), and Net Income to ¥3.91B (+90.2%). The difference between Ordinary Income and Operating Income was small at ¥0.01B, indicating almost no dependence on non-operating income and expenses, which amounted to a net expense of ¥0.01B. No extraordinary gains or losses were identified. By segment, the Real Estate Development Business’s segment profit margin improved from 9.5% to 14.5% and accounted for the core of consolidated profits. Meanwhile, the Real Estate Management Business’s profit margin declined to 21.4% (-13.1% YoY), and the Ryokan Business continued to report a loss of ¥0.05B. The Company achieved both revenue and profit growth, and the improvement in profit margins can be attributed to the project mix and expanded scale of the Real Estate Development Business.

Segment Analysis

The Real Estate Development Business generated revenue of ¥35.74B (88.9% of total revenue, +28.1% YoY) and segment profit of ¥5.18B (+94.7%), creating the majority of consolidated profit. The Construction Business posted revenue of ¥3.11B (7.7% of total revenue, +33.8%) and profit of ¥0.31B (+136.2%), resulting in higher revenue and profit. The Real Estate Management Business recorded revenue of ¥1.15B (2.9% of total revenue, -0.2%) and profit of ¥0.25B (-13.1%), resulting in lower profit and a decline in its profit margin to 21.4%. The Ryokan Business continued to report a segment loss of ¥0.05B against revenue of ¥0.30B, indicating that profitability improvement remains a work in progress. The structure of relying on a single segment for the majority of consolidated profit indicates that the overall results are highly susceptible to delivery progress in the Real Estate Development Business.

Key Financial Metrics

【Profitability】Gross profit margin was 21.9%, Operating Income margin was 14.1%, and Net Income margin was 9.7%, all improving from the same period of the previous year (18.9%, 9.6%, and 6.5%, respectively). The SG&A ratio declined to 7.8%, and the restrained growth in SG&A expenses relative to revenue growth led to the emergence of operating leverage.【Earnings Quality】Ordinary Income of ¥5.67B was almost identical to Profit Before Tax of ¥5.67B, while non-operating income of ¥0.03B remained below 0.1% of revenue. Accordingly, most profits were derived from the core business.【Investment Efficiency】Annualized ROE was 18.7%, EPS was ¥119.46 (¥62.85 in the same period of the previous year), and BPS was ¥2,557.30.【Financial Soundness】The Equity Ratio was 72.3%, up from 71.2%, equivalent to 72.0% in the previous year. Cash and deposits were ¥32.36B (+25.7% YoY), approximately three times the ¥10.65B in long-term borrowings, indicating a conservative financial position.

Cash Flow Analysis

As individual figures from the statement of cash flows were not disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased by ¥6.62B (+25.7% YoY) to ¥32.36B, expanding financial capacity. Meanwhile, real estate for sale declined by ¥8.74B from ¥25.43B in the same period of the previous year to ¥16.69B, indicating progress in the sale and delivery of completed inventory. Real estate under development increased by ¥2.71B from ¥39.28B to ¥41.99B, indicating continued investment in future projects. Combined real estate inventory totaled ¥58.69B, accounting for 50.7% of total assets, meaning that the amount of capital tied up in the development and sales cycle remains substantial. Long-term borrowings decreased by ¥0.75B YoY, and the accumulation of cash without increasing reliance on borrowings provides support for the Company’s cash-generation capacity.

Earnings Quality

The difference between Operating Income of ¥5.68B, Ordinary Income of ¥5.67B, and Profit Before Tax of ¥5.67B was extremely small, indicating a recurring earnings structure with low dependence on non-operating income and expenses. Non-operating income was ¥0.03B, including ¥0.01B in dividends received and interest received, but remained below 0.1% of revenue. This was almost offset by non-operating expenses of ¥0.04B, including ¥0.04B in interest expense. No extraordinary gains or losses were identified, and Net Income of ¥3.91B can be considered to strongly reflect the profitability of the core business. Comprehensive income was ¥3.87B, slightly below Net Income of ¥3.91B, due to factors including a ¥0.03B loss in valuation difference on other securities and a ¥0.01B loss in adjustments related to retirement benefits. The gap was small, and concerns regarding earnings quality from an accrual perspective are limited. Nevertheless, the concentration of earnings sources in transactions involving the delivery of newly built condominiums, which have a one-off nature, warrants attention when assessing the recurring nature of earnings.

Earnings Forecast and Guidance

The Company maintained its full-year forecasts of Revenue of ¥152.00B (+6.8% YoY), Operating Income of ¥15.00B (+4.2%), and Ordinary Income of ¥15.00B (+4.5%). Neither the earnings forecast nor the dividend forecast was revised during the quarter. Q1 progress was 26.5% for Revenue, 37.9% for Operating Income, and 37.8% for Ordinary Income. Operating Income and Ordinary Income were 12–13pt above the simple progress benchmark of 25%. This outperformance is considered largely attributable to the concentration of newly built condominium deliveries. Because the Real Estate Development Business is susceptible to quarterly fluctuations depending on delivery timing, caution is warranted in directly linking Q1’s high progress rate to the likelihood of full-year outperformance.

Shareholder Returns

The Company forecasts an annual dividend of ¥80.00 per share, implying an expected Payout Ratio of approximately 25.0% against forecast full-year EPS of ¥320.59. The dividend at the end of the previous fiscal year totaled ¥38, comprising an ordinary dividend of ¥28 and a special dividend of ¥10. The special dividend should be evaluated separately from the ordinary dividend. Net assets of ¥83.76B, cash and deposits of ¥32.36B, and an Equity Ratio of 72.3% support the Company’s capacity to pay the forecast dividend. No share repurchase disclosures were made, and no assessment is provided for the Total Return Ratio.

Risk Factors

1. Real estate inventory risk: Real estate for sale of ¥16.69B and real estate under development of ¥41.99B totaled ¥58.69B, accounting for 50.7% of total assets. A slowdown in sales, price declines, or delivery delays could lead to delays in cash recovery and lower profit margins.

2. Dependence on the timing of newly built condominium deliveries: Revenue from newly built condominiums expanded sharply by 130.1% YoY, pushing Q1 Operating Income progress to 37.9%. Deliveries tend to be uneven across quarters and may become a factor contributing to performance fluctuations in subsequent quarters.

3. Profitability of the Ryokan Business and Real Estate Management Business: The Ryokan Business continued to report a segment loss of ¥0.05B against revenue of ¥0.30B, while the Real Estate Management Business’s segment profit margin declined to 21.4% (-13.1% YoY). Improving the profitability of stable revenue sources remains a challenge.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (real_estate)

Profitability and Returns

The Company’s profitability substantially exceeds the industry median and is near the upper bound of the IQR.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the upper bound of the industry IQR, demonstrating high growth relative to peers.

※Source: Company analysis

Key Points from the Earnings Results

1. The Operating Income margin improved by 450bp YoY to 14.1%. The main factors were revenue growth in the Real Estate Development Business and an increase in that business’s profit margin. The SG&A ratio also declined to 7.8%, resulting in operating leverage.

2. Real estate inventory (real estate for sale plus real estate under development) totaled ¥58.69B, accounting for 50.7% of total assets. Although cash and deposits were substantial at ¥32.36B and short-term liquidity concerns were limited, the progress of inventory sales and deliveries is a structural factor that will influence future performance.

3. Operating Income progress against the full-year plan was 37.9%, exceeding the standard progress rate. However, this may have resulted from the concentration of newly built condominium deliveries. The associated quarterly performance volatility is a characteristic of the Company’s earnings structure that warrants attention.

Theoretical Share Price (For Reference)

Sensitivity: ¥2,781–¥2,947 at ±1% in the cost of equity, and ¥2,855–¥2,874 at ±0.1 in ω.

Notes:

• Because Net Income progress against the full-year forecast (37%) exceeds the standard rate (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule in terms of progress tend to exceed forecasts. In businesses with strong seasonality, the adjustment may be excessive).
• Net assets as of the end of the quarter are used (there is a timing difference versus the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of the market share price or recommendations for specific investment actions, and do not forecast or guarantee future share prices.)

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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 a professional as necessary.

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