EURASIA TRAVEL Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥2.27B
• Operating Income: ¥115M
• Net Income: ¥123M
• EPS: ¥30.87

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: FY2025 Q4 results were solid operationally with modest top-line growth and margin resilience, though bottom-line declined slightly due to below-the-line factors. Revenue grew 0.9% YoY to 22.70, while operating income rose 7.7% YoY to 1.15, indicating positive operating leverage. Ordinary income increased 2.9% YoY to 1.23, but net income declined 5.5% YoY to 1.13, suggesting a mild drag from non-operating or tax items despite a low effective tax rate. Operating margin improved to roughly 5.1% (1.15/22.70), and ordinary income margin to 5.4% (1.23/22.70), while net margin was about 5.0%. SG&A was 7.87, equating to a 34.7% SG&A-to-sales ratio, showing cost discipline sufficient to outpace revenue growth at the operating line. EBITDA was 1.23 with a 5.4% margin, broadly consistent with the operating margin profile. Cash generation was healthy with operating CF of 1.49 exceeding net income (OCF/NI 1.32x), and free cash flow of 1.31, supporting capital allocation flexibility. The balance sheet remains conservative: cash and deposits at 19.91, current assets at 27.38, and current liabilities at 12.25 yield a 223.5% current ratio, providing substantial liquidity. Leverage is modest with D/E of 0.75x and equity of 18.44 against total assets of 32.19 (financial leverage ~1.75x). ROE prints at 6.1% based on a 5.0% net margin, 0.705x asset turnover, and 1.75x leverage—adequate but with room for improvement via either margin expansion or asset efficiency. The effective tax rate is notably low at 8.0%, potentially non-recurring, and a normalization could pressure net income. Dividend capacity appears sound with a calculated payout ratio of 39.2% and FCF coverage of 2.96x; however, DPS data is unreported in XBRL. Reported ROIC of -71.8% appears anomalous relative to profitability and balance sheet and likely reflects data definitional issues rather than true capital efficiency; caution is warranted in interpreting this metric. Overall, the company exits FY2025 with improved operating performance, strong liquidity, and healthy cash conversion, positioning it to sustain dividends and reinvest prudently. Forward-looking, sustaining demand recovery, maintaining SG&A discipline, and improving asset turnover will be key to lifting ROE above mid-single digits.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 5.0% × 0.705 × 1.75 ≈ 6.1%. The margin component improved at the operating level (operating income +7.7% vs revenue +0.9%), implying operating margin expansion of roughly +39 bps YoY to about 5.1%. Asset turnover stands at 0.705x, indicating moderate capital intensity for a travel operator with sizable cash and current assets. Financial leverage is low-to-moderate at 1.75x, providing some ROE uplift without excessive balance sheet risk. The largest positive change appears in the margin component (given OI growth outpacing sales), likely driven by cost control within SG&A and a more favorable sales mix. The net margin, however, did not follow through fully to the bottom line as net income fell 5.5% YoY, suggesting below-the-line headwinds (e.g., smaller non-operating gains or timing effects), despite a low reported tax rate. Sustainability: operating margin gains from SG&A discipline are more sustainable if revenue momentum continues; below-the-line swings are more volatile and could normalize. Watch for SG&A growth relative to revenue; the current SG&A-to-sales ratio is 34.7%, and any reacceleration in personnel or bonus costs (currently salaries 3.40 and bonuses 0.32) that outpaces revenue could cap margin improvement.

Growth Assessment

Revenue growth was modest at +0.9% YoY to 22.70, suggesting stabilization but not yet robust expansion. Operating income growth of +7.7% YoY indicates positive operating leverage, implying better cost absorption or improved product mix. Ordinary income grew +2.9% YoY, but net income declined -5.5% YoY, reflecting potential one-off items or reduced non-operating tailwinds. Non-operating income was 0.09 (dividends 0.04, interest 0.03), a small 7.7% of operating income, indicating earnings are primarily operating-driven. EBITDA margin at 5.4% is aligned with the operating margin, underscoring limited non-cash addbacks (depreciation 0.08) and a relatively light asset base. Looking ahead, sustaining growth will likely depend on travel demand normalization, itinerary yield management, and cost control amid possible wage inflation. Mix improvements and digital marketing efficiency could support incremental margin expansion. Absence of disclosed gross profit limits insight into unit economics; monitoring tour load factors and pricing would help gauge sustainability.

Financial Health

Liquidity is strong: current ratio 223.5% (27.38 current assets vs 12.25 current liabilities) and quick ratio 223.5%, with cash and deposits at 19.91 providing ample coverage for short-term obligations. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.75x and leverage is conservative. Working capital is solid at 15.13, reducing refinancing risk. Maturity mismatch risk appears low given high cash relative to current liabilities; however, we lack detail on any customer advance liabilities common in travel agencies. Interest-bearing debt details are unreported; given low D/E and high cash, net debt is likely minimal or net cash. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net income is 1.32x (1.49/1.13), indicating good earnings quality with cash conversion above the 1.0x benchmark. Free cash flow is 1.31 (OCF 1.49 minus capex 0.19), comfortably covering potential dividends and minor reinvestment needs. No signs of aggressive working capital management are visible from the limited data; however, without receivables, payables, or advances detail, deeper diagnostics are constrained. Investing CF of -0.18 and low depreciation (0.08) suggest a light capital intensity model consistent with a travel services business. Financing CF of -0.51 likely reflects shareholder returns or debt reduction, but specific dividend and buyback cash flows are unreported.

Dividend Sustainability

The calculated payout ratio is 39.2%, within the <60% benchmark for sustainability, though DPS is unreported. FCF coverage of dividends is strong at 2.96x, indicating capacity to maintain or modestly increase shareholder returns if earnings remain stable. With cash and deposits of 19.91 and steady OCF, the dividend appears well supported by internal cash generation. Policy visibility is limited due to absent DPS disclosures; monitor management guidance and any announced payout policies. A potential normalization of the unusually low 8.0% effective tax rate could trim net income and thus coverage, but current headroom is adequate.

Risk Assessment

Business Risks:

• Travel demand volatility due to macroeconomic conditions, geopolitical events, and public health developments
• FX fluctuations affecting outbound travel appetite and package pricing
• Supplier capacity and pricing (airlines, hotels) impacting margins and availability
• Competitive pricing pressure from online travel agencies and direct booking channels
• Reliance on tour load factors and itinerary mix to sustain margins

Financial Risks:

• Potential normalization of the low 8.0% effective tax rate reducing net margin
• Seasonality and customer advance liabilities (common in travel) could create intra-year cash swings (not disclosed)
• Limited disclosure on interest-bearing debt structure and maturities
• Small scale (revenue 22.70) increases sensitivity to demand shocks

Key Concerns:

• Net income decline (-5.5% YoY) despite stronger operating profit suggests below-the-line volatility
• Thin margins (operating ~5.1%, net ~5.0%) provide limited cushion against shocks
• Reported ROIC of -71.8% appears inconsistent with profitability and likely reflects definitional/data issues; requires clarification
• Absence of gross profit disclosure limits visibility on unit economics and pricing power

Investment Implications

Key Takeaways:

• Operational improvement with OI +7.7% on +0.9% revenue indicates cost control and operating leverage
• Cash conversion strong (OCF/NI 1.32x) and FCF positive (1.31), supporting dividends and reinvestment
• Balance sheet conservative with ample liquidity (current ratio 223.5%, cash 19.91) and modest leverage (D/E 0.75x)
• ROE at 6.1% is adequate but could improve via higher asset turnover and incremental margin gains
• Bottom-line softness vs operating strength highlights sensitivity to non-operating/tax items

Metrics to Watch:

• Revenue growth trajectory and booking trends by destination
• SG&A growth vs revenue and SG&A-to-sales ratio (currently 34.7%)
• Operating and net margin progression (operating ~5.1%, net ~5.0%)
• OCF/NI conversion and FCF sustainability
• Effective tax rate normalization from 8.0%
• Detailed disclosure on customer advances, receivables, and payables to assess working capital dynamics

Relative Positioning: Within the travel services space, the company exhibits strong liquidity and disciplined cost control, resulting in stable mid-single-digit margins and positive cash generation; however, scale is small and earnings are sensitive to below-the-line factors, making consistent ROE uplift contingent on sustained demand recovery and improved asset turnover.

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