GREENLAND RESORT COMPANY LIMITED FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.77B
• Operating Income: ¥511M
• Net Income: ¥468M
• EPS: ¥34.45

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

Verdict: Soft quarter with margin compression and liquidity stress overshadowing still-solid interest coverage. Revenue fell 1.0% YoY to 47.7, while operating income declined 22.3% YoY to 5.11, and net income dropped 23.9% YoY to 3.56. Gross profit was 11.52, implying a gross margin of 24.1%. Operating margin came in at 10.7% (5.11/47.7), down materially from an estimated 13.7% last year. Ordinary income decreased 24.8% to 5.03, with a current ordinary margin of 10.6% versus an estimated 13.9% a year ago. Net profit margin was 7.5% this quarter versus an estimated 9.7% in the prior year period. In basis points, operating margin compressed by roughly 294 bps and net margin by about 225 bps YoY. The decline in profit outpaced the modest revenue contraction, indicating negative operating leverage and/or cost inflation (likely utilities and labor for a resort operator). Non-operating results were small (income 0.40 vs expenses 0.30), so the profit decline is predominantly operational. ROE calculated at 3.4% reflects low asset turnover (0.239) and a modest net margin, despite leverage of 1.92x. ROIC at 2.2% is below a typical cost of capital, flagging capital efficiency concerns. Liquidity is the key red flag: current ratio of 0.18 and quick ratio of 0.18 with short-term loans of 43.19 far exceeding current assets of 8.99, creating a maturity mismatch. Interest coverage is strong at 17.1x, but that strength may not offset refinancing risk given the outsized short-term borrowings. Earnings quality cannot be verified due to unreported operating cash flow, so cash conversion is a notable data gap. Dividend payout ratio is 46.5%, which appears moderate on earnings, but FCF coverage is unassessable and could be constrained by liquidity. Forward-looking, margin repair (price/mix, energy cost pass-through) and refinancing/tenor extension are the most critical levers to stabilize returns and protect the dividend policy.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.4% = Net Profit Margin 7.5% × Asset Turnover 0.239 × Financial Leverage 1.92x. The component that changed the most YoY is Net Profit Margin (down ~225 bps to 7.5%), driven by operating margin compression (~294 bps) as profits fell faster than revenue. Business drivers likely include higher operating costs (utilities, labor, maintenance) typical for resort operations and potentially weaker mix or occupancy pacing that limited pricing power. Asset turnover remains structurally low (0.239), reflecting a heavy fixed-asset base and seasonality, and is unlikely to improve sharply without sustained demand growth or asset rationalization. Financial leverage at 1.92x is stable-to-moderate and not the primary driver of ROE changes this quarter. The margin compression is partially cyclical and could normalize with cost containment and demand recovery; however, utilities and wage inflation pressures suggest some persistence, so full reversal may be challenging near term. A concerning trend is that operating income (-22.3% YoY) deteriorated much faster than revenue (-1.0% YoY), indicating negative operating leverage and cost growth outpacing top-line resilience.

Growth Assessment

Revenue declined 1.0% YoY to 47.7, suggesting stable but slightly softer demand. Profitability weakened significantly: operating income -22.3% and ordinary income -24.8%, implying cost pressures and/or weaker mix. Net income fell 23.9% to 3.56; EPS at 34.45 JPY aligns with reported shares. Non-operating items were minor (net +0.10), so underlying operations explain most of the decline. With gross margin at 24.1% and operating margin at 10.7%, the company needs to either reprice or structurally lower costs to restore margins. Sustainability of revenue is likely tied to domestic leisure demand, weather/seasonality, and event programming; no segment detail was disclosed to parse drivers. Outlook hinges on energy cost normalization, labor efficiency, and potential pricing initiatives; absent these, margins could remain below prior-year levels.

Financial Health

Liquidity is strained: current ratio 0.18 and quick ratio 0.18 are well below the 1.0 warning threshold. Short-term loans of 43.19 dwarf current assets of 8.99, indicating a material maturity mismatch and refinancing dependence. Cash and deposits are 3.63 versus accounts payable of 0.71 and interest expense of 0.30 (quarter-to-date), leaving limited cash buffers. Total liabilities are 96.04 against total equity of 103.93 (D/E 0.92x), a moderate leverage profile structurally, but the issue is tenor rather than level. Long-term loans are 22.80, suggesting scope to extend maturities if banking relationships permit. No off-balance sheet obligations were reported in the data; absence of disclosure prevents assessment of guarantees, leases, or contingent liabilities. Explicit warning: Current Ratio < 1.0. D/E is below the 2.0 warning level.

Cash Flow Quality

Operating cash flow was unreported, so OCF/Net Income and cash conversion cannot be assessed. This is a key limitation, especially given liquidity stress. Free cash flow and capex are also unreported, leaving dividend and debt service coverage unclear. Interest coverage at 17.1x (OI/interest) is strong on an accrual basis, but without OCF we cannot validate cash interest coverage. Working capital indicators show low receivables (2.98) and low payables (0.71) relative to sales and COGS, but the dominant factor is reliance on short-term borrowing; we cannot detect working capital manipulation with the available single-period snapshot. Overall, earnings quality remains unverified due to missing cash flow data.

Dividend Sustainability

The calculated payout ratio is 46.5%, which is within a generally sustainable range on an earnings basis. However, with OCF and FCF unreported, coverage of dividends by free cash flow cannot be evaluated. Liquidity constraints (current ratio 0.18) and heavy short-term debt heighten the risk that even a moderate payout could pressure cash if refinancing tightens. Policy outlook likely depends on lenders’ stance and operating recovery; absent clearer cash generation, maintaining or growing dividends could be constrained despite the headline payout ratio appearing reasonable.

Risk Assessment

Business Risks:

• Demand volatility due to seasonality, weather, and macro leisure trends impacting occupancy and ticket sales
• Energy and utilities cost inflation compressing margins for a resort-heavy asset base
• Labor availability and wage inflation in hospitality operations
• Event mix and pricing power uncertainty affecting revenue yield

Financial Risks:

• Severe liquidity risk with current ratio 0.18 and quick ratio 0.18
• Refinancing/maturity mismatch risk: short-term loans 43.19 vs current assets 8.99
• Interest rate risk on floating-rate short-term debt
• Potential covenant pressure if operating metrics weaken further

Key Concerns:

• ROIC at 2.2% below typical cost of capital, indicating capital efficiency issues
• Margin compression: operating margin down ~294 bps YoY
• Cash flow opacity: OCF and FCF unreported, obscuring dividend and debt service coverage
• Limited non-operating buffers; minimal contribution from dividends and interest income

Investment Implications

Key Takeaways:

• Quarter marked by negative operating leverage: profits fell much more than revenue
• Liquidity is the primary near-term risk given outsized short-term debt
• ROE of 3.4% is constrained by low asset turnover and margin pressure
• ROIC at 2.2% underscores need for margin repair and/or asset optimization
• Interest coverage remains strong, but cash coverage unverified

Metrics to Watch:

• Operating cash flow and free cash flow trends
• Current ratio and refinancing progress (short-term to long-term debt mix)
• Energy costs and their pass-through to pricing
• Occupancy/footfall and average revenue per visitor (pricing/mix)
• Operating margin trajectory and SG&A discipline
• Interest rate exposure on short-term borrowings

Relative Positioning: As a fixed-asset-intensive leisure operator, the company exhibits lower asset turnover and ROIC than efficiency benchmarks, with liquidity notably weaker than peers that maintain longer debt tenors; margin sensitivity to utilities and labor costs appears elevated.

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