About Quarterly Earnings Report Disclosures
| Item | Current | Prior | YoY % |
|---|---|---|---|
| Net Sales | ¥39.88B | ¥38.85B | +2.7% |
| Operating Income | ¥19.75B | ¥19.46B | +1.5% |
| Non-operating Income | ¥15M | - | - |
| Non-operating Expenses | ¥2.62B | - | - |
| Ordinary Income | ¥16.98B | ¥16.85B | +0.7% |
| Profit Before Tax | ¥16.85B | - | - |
| Income Tax Expense | ¥605,000 | - | - |
| Net Income | ¥16.98B | ¥16.85B | +0.7% |
| Depreciation & Amortization | ¥5.08B | - | - |
| Interest Expense | ¥2.32B | - | - |
| Basic EPS | ¥4,202.00 | ¥4,153.00 | +1.2% |
| Dividend Per Share | ¥4,105.00 | ¥4,045.00 | +1.5% |
| Item | Current End | Prior End | Change |
|---|---|---|---|
| Current Assets | ¥64.55B | - | - |
| Cash and Deposits | ¥32.63B | - | - |
| Non-current Assets | ¥1.18T | - | - |
| Property, Plant & Equipment | ¥1.17T | - | - |
| Intangible Assets | ¥7.67B | - | - |
| Item | Current | Prior | Change |
|---|---|---|---|
| Operating Cash Flow | ¥40.91B | ¥41.59B | ¥-683M |
| Investing Cash Flow | ¥-14.55B | ¥-23.27B | +¥8.72B |
| Financing Cash Flow | ¥-8.84B | ¥-12.92B | +¥4.09B |
| Cash and Cash Equivalents | ¥79.37B | ¥61.86B | +¥17.52B |
| Free Cash Flow | ¥26.36B | - | - |
| Item | Value |
|---|---|
| ROE | 2.7% |
| ROA (Ordinary Income) | 1.4% |
| Payout Ratio | 97.7% |
| Net Profit Margin | 42.6% |
| Current Ratio | 63.1% |
| Quick Ratio | 63.1% |
| Debt-to-Equity Ratio | 0.97x |
| Interest Coverage Ratio | 8.50x |
| EBITDA Margin | 62.3% |
| Effective Tax Rate | 0.0% |
| Item | YoY Change |
|---|---|
| Net Sales YoY Change | +2.7% |
| Operating Income YoY Change | +1.5% |
| Ordinary Income YoY Change | +0.7% |
| Net Income YoY Change | +0.7% |
| Item | Value |
|---|---|
| Shares Outstanding (incl. Treasury) | 4.04M shares |
| Treasury Stock | 0 shares |
| Book Value Per Share | ¥156,541.97 |
| EBITDA | ¥24.84B |
| Item | Forecast |
|---|---|
| Net Sales Forecast | ¥38.94B |
| Operating Income Forecast | ¥18.74B |
| Ordinary Income Forecast | ¥15.73B |
| Net Income Forecast | ¥15.73B |
| Dividend Per Share Forecast | ¥4,166.00 |
This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.
Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)
Verdict: Solid quarter with modest top-line growth, slightly softer margins, and strong cash flow, but liquidity remains tight as typical for a J-REIT. Revenue rose 2.7% YoY to 398.77, supported by stable rental operations. Operating income increased 1.5% YoY to 197.53, while ordinary income and net income edged up 0.7% YoY to 169.76. Operating margin is approximately 49.5% (197.53/398.77), implying about 60 bps YoY compression given revenue growth outpaced operating profit. Net margin of 42.6% similarly declined by roughly 80 bps YoY, as non-operating expenses (26.19), largely interest (23.24), weighed slightly more than the small non-operating income (0.15). EBITDA was 248.36, yielding a robust 62.3% margin, indicating resilient underlying property earnings. Interest coverage of 8.5x remains comfortably above typical risk thresholds, a positive in a rising rate environment. Cash generation was strong: operating cash flow of 409.09 was 2.41x net income, signaling high earnings quality and solid cash conversion. Free cash flow of 263.57 (OCF + investing CF) remained positive even after 145.52 of investing outflows, suggesting adequate internal funding capacity for distributions and modest growth capex. The balance sheet is conservatively levered for a REIT: D/E at 0.97x and LTV (short- and long-term loans of ~4,492.7 vs total assets 12,546.59) near 36%, leaving financial flexibility. However, liquidity is tight with a current ratio of 0.63 and working capital of -378.02, implying reliance on bank lines and ongoing refinancing—a manageable but notable risk. The effective tax rate is near zero, consistent with pass-through REIT status. Depreciation of 50.83 supports the gap between EBITDA and operating income but does not constrain cash distributions. EPS was 4,202 JPY, while book value per share is around 156,542 JPY, highlighting the asset-heavy nature of the vehicle. Dividend data were not disclosed in XBRL; however, cash flow coverage appears sufficient for typical J-REIT distribution policies. Looking forward, modest NOI growth and disciplined refinancing will be key to defend margins against higher interest costs. Overall, the quarter supports a stable outlook with strong cash flow and manageable leverage offset by tighter liquidity and mild margin compression.
From Earnings Presentation: The financial results presentation for the fiscal period ending October 2025 of Kenedix Real Estate Investment Corporation clearly articulates a strategy to flexibly adapt to environmental changes and pursue sustainable growth as a diversified J-REIT. With an asset size of 1兆2,208億円 (3rd largest among J-REITs) and a diversified portfolio of 344 properties (1st), it achieved DPU growth at an annual rate of +3%. Offices and residential account for approximately 66% of rental income, accelerating internal growth through inflation linkage. Variable rents at lodging facilities rose significantly by +57% YoY, and cumulative acquisitions/dispositions exceeding 600億円 were executed through asset rotations, recording 15.8億円 in gains on sale. Going forward, the REIT will halt new acquisitions of healthcare facilities to reduce their portfolio weight, while raising lodging facilities to over 10%. In response to rising interest rates, it will adjust leverage and loan tenors, aiming to control costs by maintaining a basic stance of long-term fixed while incorporating short-term floating. Through progressive distributions utilizing ample internal reserves of 231.9億円 (5,742円/unit), the REIT will maintain stable payouts even during periods of front-loaded dispositions and rising rates. ESG ratings are also improving, including GRESB 4 Stars and an anticipated CDP score of B, and the fee structure linked to unitholder interests and sustainability metrics is functioning effectively.
ROE decomposition (DuPont): ROE ≈ Net Profit Margin × Asset Turnover × Financial Leverage = 42.6% × 0.032 × 1.98 ≈ 2.7%. The low ROE is primarily driven by very low asset turnover (0.032), which is typical for REITs with large asset bases and stable rents, partially offset by high net margins and moderate leverage. The component that softened most this quarter is margin: operating income grew 1.5% vs revenue +2.7%, implying operating margin compression of ~60 bps; net margin fell by ~80 bps as interest expense modestly pressured below-the-line results. Business drivers include slightly higher financing costs (non-operating expenses 26.19, of which interest 23.24) and mix/timing effects that limited operating leverage. These pressures are likely partly persistent given the rate environment, though asset-level performance (high EBITDA margin at 62.3%) remains resilient; any rent revisions or occupancy gains could stabilize margins. Expense control appears reasonable, but with operating profit growth trailing revenue, operating leverage was limited this quarter. No SG&A detail was disclosed, but the pattern suggests cost growth slightly exceeding revenue growth, or higher property-level expenses. Sustainability: net margin should remain high by sector standards, but further compression is possible if refinancing occurs at higher rates. Flag: revenue +2.7% vs operating income +1.5% indicates a mild negative operating leverage trend.
Top-line growth of 2.7% suggests steady underlying NOI from the portfolio, consistent with stable occupancy and rent revisions typical for core REIT strategies. Operating income rose 1.5%, lagging revenue, indicating higher operating or property costs and/or timing effects. Ordinary income and net income grew 0.7%, reflecting slightly heavier finance costs. With investing cash outflow of 145.52 and minimal capex (-1.11), the trust appears to be selectively investing, likely incremental acquisitions or asset enhancements. EBITDA margin at 62.3% is strong, underscoring durable earnings quality from real assets. Near-term outlook hinges on rent reversion, occupancy stability, and cost of debt; absent sizable acquisitions, expect low-single-digit growth. If interest rates trend higher, ordinary income growth may slow without offsetting NOI gains. Growth via external acquisitions remains feasible given moderate leverage (~36% LTV), but funding costs will be the swing factor.
Liquidity is tight: current assets 645.53 vs current liabilities 1,023.55 yields a current ratio of 0.63 (warning) and working capital of -378.02. Cash and deposits of 326.28 cover roughly one-third of current liabilities, implying reliance on committed credit lines and continuous refinancing—a standard REIT model but a clear short-term liquidity risk. Solvency is sound: total liabilities 6,140.73 vs equity 6,323.04 gives D/E of 0.97x, within conservative ranges for J-REITs. Interest-bearing debt (short 100.00 + long 4,392.70 ≈ 4,492.70) implies LTV near 35.8% of total assets, leaving some headroom. Interest coverage at 8.5x is strong. No off-balance sheet obligations were disclosed in the data; any lease/guarantee commitments are not available. Maturity mismatch risk is present given low current ratio and short-term loans, but manageable if bank relationships and diversified maturities are maintained.
OCF of 409.09 is 2.41x net income (169.76), indicating high earnings quality and strong cash conversion from rental operations. Free cash flow of 263.57 (OCF + investing CF) is solid even after 145.52 investing outflows and minimal capex (-1.11), suggesting internal funding capacity for distributions and incremental investments. OCF/NI well above 0.8 signals no immediate quality concerns; rather, depreciation (50.83) and low tax burden underpin cash generation. Working capital details are not disclosed, but the positive OCF amid negative working capital suggests timing of payables/accruals is not a detractor this period. No signs of aggressive working capital management are evident from available data. Sustainability: assuming stable occupancy and rent, OCF should remain robust; the key sensitivity is interest expense on refinancing.
Dividend data (DPS, total dividends) were not disclosed in XBRL, and the reported payout ratio of 1.0% appears non-representative. As a J-REIT, the entity typically targets high payout of distributable income. Using available cash metrics, OCF of 409.09 and FCF of 263.57 provide ample coverage over net income of 169.76, implying capacity to sustain typical REIT distributions absent large debt-funded acquisitions or spikes in interest costs. Capex needs are minimal (-1.11), and investing outflows this period were manageable relative to OCF. Key watchpoints for sustainability: refinancing rates, LTV discipline, and rent/occupancy trends. Without reported DPS, a precise payout ratio and FCF coverage cannot be calculated, but qualitative coverage appears comfortable this quarter.
Progressive distributions are forecast: DPU 4,166円 (+61円 QoQ) for the fiscal period ending April 2026 and 4,227円 (+61円 QoQ) for the fiscal period ending October 2026. For internal growth, the main drivers of NOI increase are the widening rent gap in offices (68.7% of spaces above contract rent at market levels) and residential rent revisions (80.1% acceptance for rent increase negotiations at renewal in the Tokyo economic zone). In lodging, in addition to full-period contribution from variable rents, the acquisition of MC-type hotels will enable full upside capture of GOP. For external growth, with a mid-term target of AUM 1兆5,000億円, the REIT will continue property acquisitions leveraging a sponsor pipeline of about 1,000億円. Asset rotation will be maintained at 300～500億円 annually, disposing of properties with low NOI yields, older vintage, and rigid lease structures, and replacing with assets that can drive CF growth. Interest rates are assumed to rise in stages through 2026, and the balance of loan tenor and fixed-rate ratio will be used to smooth cost increases across periods. The REIT aims to accelerate external growth through agile leverage deployment with a guideline upper limit of total asset LTV at 49%.
Management has articulated a vision to “flexibly adapt to environmental changes and pursue sustainable growth,” leveraging the strengths of a diversified strategy and aiming for CF growth resilient to market conditions through multiple growth drivers. Specifically: (1) pursue CF upside linked to inflation/macroeconomics in offices, residential, and lodging, while enhancing inflation resistance in retail and logistics; (2) strengthen strategic value-add investments using free cash aligned with depreciation; (3) promote portfolio metabolism through continuous asset rotation and deliver unitholder returns by realizing unrealized gains. The REIT explicitly states it will not conduct new acquisitions in healthcare for the time being and will lower its portfolio weight, while lifting lodging to over 10%. Distributions will remain progressive through effective use of ample internal reserves (reserve for reduction entry 72億円 and RTA, etc. 159億円), with guidance targeting DPU growth of +3% per annum or more and early achievement of 4,500円. While rate increases are expected to continue for the time being, the impact will be controlled through adjustments in loan tenor and fixed-rate ratio and via achieved spread reductions at refinancing (-17bps in the fiscal period ending October 2025, etc.), with a stance to offset through internal and external growth.
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Relative Positioning: Within the J-REIT peer set, the trust shows resilient cash generation, moderate leverage, and solid coverage, offset by sector-typical liquidity tightness and mild margin pressure from financing costs. It appears positioned as a stable income vehicle with measured growth capacity contingent on funding costs.
This analysis was auto-generated by AI. Please note the following:
| Total Assets | ¥1.25T | ¥1.25T | +¥9.14B |
| Current Liabilities | ¥102.36B | - | - |
| Short-term Loans | ¥10.00B | - | - |
| Non-current Liabilities | ¥511.72B | - | - |
| Long-term Loans | ¥439.27B | - | - |
| Total Liabilities | ¥614.07B | - | - |
| Total Equity | ¥632.30B | ¥631.44B | +¥861M |
| Working Capital | ¥-37.80B | - | - |