TOKYOTOKEIBA CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥31.18B
• Operating Income: ¥11.81B
• Net Income: ¥7.62B
• EPS: ¥294.25

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

Tokyo-Tokyo Keiba Co., Ltd. (9672) delivered solid profitability in FY2025 Q3 under JGAAP on a consolidated basis, with both revenue and earnings growing year over year. Revenue rose 3.2% YoY to ¥31.18bn, while operating income increased 8.8% YoY to ¥11.81bn, indicating positive operating leverage. Net income reached ¥7.85bn (+3.4% YoY), with ordinary income broadly aligned to operating income, suggesting limited non-operating distortions. Gross margin was a strong 39.8%, and the operating margin was approximately 37.9% (¥11.81bn/¥31.18bn), reflecting tight cost control and an efficient business model. DuPont metrics indicate a net margin of 25.19%, asset turnover of 0.243x, and financial leverage of 1.34x, yielding an ROE of 8.17% (matching the reported figure). The implied ROA (net margin × asset turnover) is approximately 6.12%, consistent with a business generating high profitability on moderate asset intensity. Liquidity is robust, with a current ratio of 246.4% and quick ratio of 243.6%, and working capital of ¥14.19bn. The balance sheet appears conservatively structured: with total equity of ¥96.07bn versus total assets of ¥128.54bn, the implied equity ratio is about 74.8% (the reported 0.0% is an undisclosed placeholder), and the debt-to-equity ratio is a modest 0.33x. Interest coverage is very strong at roughly 345.5x (EBIT/interest), underpinned by low interest expense of ¥34.18m. Based on reported tax expense of ¥3.39bn and net income of ¥7.85bn, the implied effective tax rate is approximately 30%, despite a 0.0% placeholder in the calculated metrics. Cash flow statement items (operating, investing, and financing cash flows) and cash balances were not disclosed in this dataset, so free cash flow analysis and cash conversion metrics cannot be assessed. Dividend data (DPS and payout) were also undisclosed, preventing a direct assessment of distribution policy; however, earnings capacity and the conservative balance sheet imply financial flexibility. Overall, the quarter reflects a high-margin, well-capitalized operator with positive operating leverage and low financial risk, although the absence of cash flow disclosure limits the assessment of earnings quality and dividend sustainability. Business momentum appears steady, but sensitivity to event-driven demand, calendar effects, and regulatory conditions remains a consideration. The key focus areas going forward are maintaining revenue resilience, sustaining operating efficiency, and confirming cash flow generation once disclosed.

Profitability Analysis

ROE of 8.17% decomposes into a 25.19% net profit margin, 0.243x asset turnover, and 1.34x financial leverage. The ROA implied by DuPont (≈6.12%) underscores strong profitability relative to assets, with only moderate use of leverage to amplify returns. Gross margin is 39.8%, and the operating margin is approximately 37.9%, highlighting disciplined operating expense control. Operating income grew 8.8% versus revenue growth of 3.2%, demonstrating positive operating leverage; operating profit growth was about 2.7x the pace of revenue growth. Ordinary income (¥11.81bn) closely tracks operating income (¥11.81bn), indicating minimal reliance on non-operating gains. Interest expense is very low (¥34.18m), resulting in an interest coverage ratio of about 345.5x, which supports earnings stability. The implied effective tax rate, based on tax expense of ¥3.39bn and net income of ¥7.85bn, is roughly 30%, which is consistent with domestic statutory norms. EBITDA cannot be computed due to undisclosed depreciation and amortization (reported as 0 by placeholder), but the high operating margin suggests strong underlying EBITDA generation. Overall margin quality appears high and largely operationally driven, with limited financial engineering.

Growth Assessment

Revenue increased 3.2% YoY to ¥31.18bn, reflecting steady top-line momentum. Operating income rose 8.8% YoY to ¥11.81bn, evidencing positive operating leverage and improved operating efficiency. Net income grew 3.4% YoY to ¥7.85bn, broadly aligned with revenue growth, after reflecting a roughly 30% implied tax burden. The relationship between ordinary and operating income suggests growth is being driven by core operations rather than non-recurring factors. While EBITDA is not disclosed, the stability in operating metrics implies income quality is solid. Sustainability of revenue growth will hinge on event volumes, attendance/handle dynamics, and consumer spending within leisure/entertainment, all of which can be seasonal or weather-sensitive. Given the modest revenue growth with proportionally larger operating income growth, incremental margins appear healthy in the period. Outlook considerations include maintaining promotion effectiveness, optimizing event calendars, and deepening digital/remote engagement to sustain volumes. Absent cash flow data, we cannot verify the conversion of earnings growth into operating cash flow, but the conservative balance sheet reduces near-term execution risk.

Financial Health

Total assets were ¥128.54bn and total equity ¥96.07bn, implying an equity ratio of about 74.8% (the reported 0.0% is an undisclosed placeholder). Total liabilities were ¥31.26bn, yielding a debt-to-equity ratio of 0.33x, indicative of modest leverage. Liquidity metrics are strong: current ratio 246.4%, quick ratio 243.6%, and working capital of ¥14.19bn. Interest expense is minimal (¥34.18m), with interest coverage of approximately 345.5x, implying low refinancing risk and ample buffer against rate increases. Ordinary income is essentially equal to operating income, signaling limited hidden financial risks from non-operating lines. Overall solvency and liquidity are robust, with capacity to absorb shocks and invest in maintenance or growth capex.

Cash Flow Quality

Operating, investing, and financing cash flows, as well as cash and equivalents, were not disclosed in this dataset (zeros are placeholders). As a result, the OCF/Net Income ratio of 0.00 and Free Cash Flow of 0 in the calculated metrics are not meaningful. Earnings quality appears solid based on margin structure and low interest burden, but we cannot validate cash conversion, working capital intensity, or the level/timing of capex. Given current assets of ¥23.89bn and inventories of ¥0.27bn, the business likely operates with low inventory risk, but receivables and payables dynamics are unknown. Once disclosed, key tests will include OCF versus net income, maintenance versus growth capex, and free cash flow coverage of any dividends.

Dividend Sustainability

Dividend per share and payout ratio were not disclosed (zeros are placeholders), precluding a direct assessment of current distribution. From a capacity standpoint, net income of ¥7.85bn, low leverage (D/E 0.33x), and strong liquidity (current ratio 246%) suggest room for shareholder returns if policy allows. However, without operating cash flow and capex disclosure, we cannot confirm free cash flow coverage or the stability of distributions through cycles. Policy outlook should be assessed in light of long-term capex needs for facilities, regulatory requirements, and the volatility inherent in event-driven revenue.

Risk Assessment

Business Risks:

• Demand volatility tied to event schedules, weather, and consumer discretionary spending
• Regulatory and licensing risk inherent to local horse racing/entertainment operations
• Concentration risk in specific venues and geographies
• Competition from alternative leisure options and online entertainment
• Potential declines in in-person attendance offset only partly by remote channels
• Calendar and seasonality effects affecting quarter-to-quarter comparability
• Cost inflation (labor, utilities, maintenance) potentially pressuring margins

Financial Risks:

• Cash flow timing risk due to event-driven revenue recognition and working capital swings
• Potential capex requirements for facility upgrades and digital infrastructure
• Interest rate risk is limited but non-zero despite low debt and high coverage
• Tax rate variability (implied ~30%) impacting net income sensitivity

Key Concerns:

• Lack of disclosed cash flow data limits validation of earnings quality and FCF
• Dividend policy and distribution capacity cannot be verified without OCF/capex
• Exposure to exogenous shocks (extreme weather, health-related restrictions) affecting operations

Investment Implications

Key Takeaways:

• Solid quarter with 3.2% revenue growth and 8.8% operating income growth, indicating positive operating leverage
• High profitability: 39.8% gross margin and ~37.9% operating margin
• ROE of 8.17% driven primarily by strong net margin and moderate leverage
• Very strong balance sheet: implied equity ratio ~74.8%, D/E 0.33x, and current ratio 246%
• Interest coverage ~345x underscores low financial risk
• Limited non-operating contribution; earnings quality appears operationally driven
• Cash flow, DPS, and share data are undisclosed, constraining FCF and payout analysis

Metrics to Watch:

• Operating cash flow and capex to assess FCF conversion and sustainability
• Attendance/handle trends and per-event revenue to gauge top-line resilience
• Operating margin trajectory versus promotion and maintenance spending
• Any updates to dividend policy and payout commitment
• Capital structure changes (debt usage) and interest expense trends
• Asset turnover (currently 0.243x) as a gauge of utilization and efficiency

Relative Positioning: Within domestic leisure and event-driven operators, the company exhibits superior margins, conservative leverage, and ample liquidity, positioning it as financially resilient; however, the lack of disclosed cash flow data tempers visibility on cash conversion relative to peers that report fuller FCF detail.

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