Daiwa Securities Living Investment Corporation FY2025 Q4 Earnings Report

Financial Highlights

• Operating Income: ¥8.21B
• Net Income: ¥7.21B

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Daiwa Securities Living Investment Corporation (a J-REIT focused on senior and healthcare-related residential assets) reported FY2025 Q4 results with solid earnings and cash generation, despite several key line items being unreported in the XBRL. Operating income was ¥8.21bn and ordinary income was ¥7.21bn, translating into net income of ¥7.21bn with a negligible tax burden, which is consistent with REIT tax treatment. Based on reported net income and equity, we estimate ROE at roughly 3.8%, with ROA at about 1.8%, reflecting a conservative return profile aligned with stabilized rental assets. Depreciation and amortization were ¥2.71bn and EBITDA was ¥10.92bn, supporting an interest coverage ratio of approximately 10.8x when measured against reported interest expense of ¥0.76bn. Operating cash flow was strong at ¥14.98bn, more than 2.0x net income, signaling healthy cash conversion for a rent-based portfolio with relatively low working capital needs. The balance sheet shows total assets of ¥402.0bn and equity of ¥189.3bn, implying financial leverage (assets/equity) of about 2.12x and an equity ratio near 47%, which is robust by REIT standards. Current assets were ¥15.35bn versus current liabilities of ¥32.14bn, producing a current ratio of 0.48x and negative working capital of ¥16.79bn; this is typical for J-REITs that rely on committed credit lines and staggered debt maturities. Financing cash flow was negative (¥-5.78bn), likely reflecting cash distributions and/or debt servicing, but dividends per unit were not disclosed in the dataset. Revenue-related line items (revenue, gross profit, margins) are unreported; the zeros shown should be interpreted as undisclosed, not actual zeros, so margin-based diagnostics on sales cannot be evaluated. Even with these disclosure gaps, the income statement and cash flow data indicate resilient underlying operations, adequate coverage of financing costs, and disciplined leverage. The low effective tax and proximity of net income to ordinary income further support a clean earnings profile without notable below-the-line distortions. Operating leverage appears limited, consistent with a stabilized rental portfolio, and earnings are primarily driven by property income and funding costs. The sector backdrop remains supported by demographic tailwinds in senior housing and healthcare-related residential assets, though sensitivity to interest rates and refinancing conditions remains a key consideration. Liquidity at the balance sheet level appears tight on a pure current ratio basis but is not unusual for the structure of J-REITs. Given the strong OCF and interest coverage, solvency risk appears moderate provided access to bank lines and capital markets remains intact. Overall, results suggest a steady, income-driven profile with conservative leverage and robust cash generation, albeit with limited visibility on top-line trends due to missing revenue detail.

Profitability Analysis

ROE_decomposition: Using available figures: ROE ≈ Net income / Equity = ¥7,210,646,000 / ¥189,342,710,000 ≈ 3.8%. Financial leverage (Assets/Equity) = 2.12x. Asset turnover and net profit margin cannot be reliably computed because revenue is unreported; accordingly, a full DuPont split is not feasible. ROA ≈ ¥7,210,646,000 / ¥401,985,060,000 ≈ 1.8%, consistent with stabilized rental assets. margin_quality: Revenue, gross profit, and related margins are unreported, but the relationship between operating income (¥8.21bn), depreciation (¥2.71bn), and interest expense (¥0.76bn) suggests margins are supported by predictable rent cash flows and manageable financing costs. Low effective tax and minimal gap between ordinary and net income imply limited non-recurring below-the-line impacts. operating_leverage: EBITDA of ¥10.92bn vs operating income of ¥8.21bn indicates a meaningful non-cash component (depreciation) typical of real estate portfolios. Operating leverage to sales cannot be gauged without revenue, but earnings sensitivity is likely driven more by financing costs and occupancy/rent trends than by fixed-cost absorption.

Growth Assessment

revenue_sustainability: Top-line metrics are unreported. As a J-REIT, revenue stability typically depends on occupancy levels, rent revisions/escalators, and acquisition/disposition activity. The steady operating income and strong OCF suggest underlying contractual cash flows remain intact. profit_quality: Net income of ¥7.21bn is well supported by OCF of ¥14.98bn (OCF/NI ≈ 2.08x). Interest coverage of ~10.8x from operating income indicates earnings cushion versus financing costs. Minimal tax and small difference between ordinary and net income point to high quality of earnings. outlook: Growth will hinge on external acquisitions, same-property rent growth, and cost of capital. Demographic support for senior-living/healthcare residential assets is favorable, but higher interest rates could cap external growth and pressure spreads. With leverage moderate and coverage strong, incremental acquisitions remain possible if funding conditions are supportive.

Financial Health

liquidity: Current assets ¥15.35bn vs current liabilities ¥32.14bn yields a current ratio of ~0.48x and negative working capital of ¥16.79bn. While optically tight, this is typical for J-REITs that rely on revolving credit and scheduled refinancing rather than holding large cash balances. solvency: Total assets ¥401.99bn and equity ¥189.34bn imply an equity ratio near 47% and financial leverage of ~2.12x. Debt-to-equity is reported at 1.12x, consistent with moderate leverage for a REIT. Interest coverage is strong at ~10.8x. capital_structure: Total liabilities are ¥212.64bn. The split between interest-bearing debt and other liabilities is not disclosed here, so LTV cannot be precisely computed. Nevertheless, the leverage metrics suggest a balanced capital structure with headroom, subject to refinancing conditions.

Cash Flow Quality

earnings_quality: OCF of ¥14.98bn versus net income of ¥7.21bn (OCF/NI ≈ 2.08x) indicates strong cash conversion and limited accrual risk, typical for rent-driven portfolios. FCF_analysis: Investing cash flows are unreported, and maintenance capex is not disclosed, so true free cash flow cannot be determined. Using reported figures alone, we avoid deriving FCF; however, the large positive OCF indicates ample internal funding capacity for distributions after maintenance needs under normal circumstances. working_capital: Negative working capital (¥-16.79bn) is structural for REITs and not necessarily a red flag. OCF strength suggests efficient collection of rents and limited inventory requirements.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are unreported. As a J-REIT, distributions generally reflect a high payout of distributable income. With OCF > NI, coverage of typical cash distributions appears supportable, but precise payout metrics cannot be computed from the provided data. FCF_coverage: FCF is not derivable due to missing investing/capex data. Financing cash outflow of ¥-5.78bn likely includes distributions and debt servicing, implying distributions were made; coverage looks reasonable given the ¥14.98bn OCF, but exact coverage cannot be quantified. policy_outlook: Assuming a standard J-REIT policy to distribute the majority of earnings, distribution stability will depend on maintaining occupancy, controlling financing costs, and accessing capital for accretive acquisitions.

Risk Assessment

Business Risks:

• Occupancy and rent level risk in senior-living and healthcare residential assets
• Regulatory changes to long-term care and healthcare reimbursement frameworks in Japan
• Concentration risk if tenant or operator exposure is high
• Asset revaluation and appraisal cap-rate movements affecting NAV and lending capacity
• Natural disaster risk (earthquakes/typhoons) impacting assets and operating continuity
• Acquisition pipeline execution risk and integration of new properties
• ESG and reputational risks related to quality of care at operated facilities

Financial Risks:

• Interest rate risk impacting funding costs and acquisition spreads
• Refinancing and liquidity risk given a low current ratio and reliance on capital markets and bank lines
• Valuation and LTV sensitivity to property reappraisals
• Counterparty risk with lenders and potential covenant headroom erosion if NOI declines
• Potential mismatch between fixed and floating debt profiles

Key Concerns:

• Limited disclosure of revenue and detailed cash items constrains margin and FCF analysis
• Exposure to rate environment for growth and distributions
• Negative working capital necessitating dependable access to revolving facilities

Investment Implications

Key Takeaways:

• Steady earnings with net income of ¥7.21bn and strong OCF of ¥14.98bn indicate robust cash generation
• Moderate leverage (Assets/Equity ~2.12x; D/E ~1.12x) and high interest coverage (~10.8x) support solvency
• Data gaps on revenue and capex limit conclusions on margins and true FCF
• Distribution capacity appears supported by OCF, but exact payout metrics are unavailable
• Sector tailwinds from aging demographics underpin medium-term demand, offset by interest-rate sensitivity

Metrics to Watch:

• Occupancy rate and same-property NOI growth
• Debt maturity ladder, average interest rate, and fixed/floating mix
• LTV and NAV per unit movements with appraisal updates
• AFFO/DP U and payout ratio once disclosed
• Acquisition/disposition volumes and cap rates
• OCF/NI and interest coverage trends

Relative Positioning: Within the J-REIT peer set focused on residential and healthcare assets, DLI appears conservatively leveraged with strong coverage, suggesting a stable income profile; ultimate competitive positioning will depend on acquisition execution, funding costs, and occupancy resilience relative to 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