Agora Hospitality Group Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥7.35B
• Operating Income: ¥795M
• Net Income: ¥48M
• EPS: ¥5.43

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

Agora Hospitality Group (TSE: 9704) delivered a strong FY2025 Q3 performance with revenue of ¥7,350 million, up 22.7% year over year, underscoring robust demand recovery in the hospitality segment. Operating income surged to ¥795 million (+503.1% YoY), translating to an operating margin of 10.8%, indicating significant operating leverage as post-pandemic room and F&B volumes scaled over a largely fixed cost base. Ordinary income reached ¥769 million (10.5% ordinary margin), with net income at ¥1,432 million, implying a high net margin of 19.5% due to non-operating/extraordinary factors. The gap between ordinary income and net income suggests sizable extraordinary gains and/or tax effects, which should be viewed as non-recurring until clarified. DuPont analysis points to an ROE of 16.48%, driven by a 19.48% net margin, modest asset turnover of 0.359x, and financial leverage of 2.36x. Gross margin printed at 25.7%, which, alongside the double-digit operating margin, signals improved pricing power and cost discipline. Interest coverage stands at 10.3x based on operating income and reported interest expense, indicating manageable financing costs. On the balance sheet, total assets were ¥20,496 million and total equity ¥8,688 million, implying an equity ratio of approximately 42.4% despite the reported 0.0% being an unreported placeholder. Current assets of ¥5,383 million versus current liabilities of ¥5,746 million yield a current ratio of 93.7% and negative working capital of ¥-363 million, a watch-point for liquidity in a seasonal business. The debt-to-equity ratio of 1.61x reflects a moderately leveraged capital structure typical for asset-heavy hospitality operations. Cash flow statements were not disclosed in this dataset (zeros represent unreported), so free cash flow and OCF quality cannot be quantitatively assessed here. Dividend per share is shown as ¥0.00 (likely no dividend), aligning with a reinvestment or balance sheet repair stance amid recovery. EPS was ¥5.43, but the share count was not disclosed in the feed, limiting per-share diagnostics beyond EPS. Overall, profitability momentum is strong and capital structure looks serviceable, but liquidity is tight and earnings quality is affected by non-recurring items elevating net income. The outlook depends on sustaining occupancy and ADR gains into peak seasons, controlling utilities and labor costs, and clarity on extraordinary gains and cash conversion.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 19.48%
• asset_turnover: 0.359x
• financial_leverage: 2.36x
• calculated_ROE: 16.48%
• interpretation: ROE is largely margin-driven rather than efficiency-driven, with moderate leverage providing an additional tailwind. Persistent ROE at this level would require maintaining double-digit operating margins and moderating extraordinary contributions. margin_quality:
• gross_margin: 25.7%
• operating_margin: 10.8% (¥795m / ¥7,350m)
• ordinary_margin: 10.5% (¥769m / ¥7,350m)
• net_margin: 19.5% (boosted by extraordinary/tax effects)
• commentary: Core margin expansion is evident at the operating level, likely reflecting higher occupancy/ADR and improved mix. The net margin outpaces operating momentum, implying non-recurring support; sustainability depends on recurring operations. operating_leverage: Very high in-period, as operating income grew 5x on a 22.7% revenue increase, consistent with fixed-cost absorption in hotels. Future leverage should normalize as cost bases catch up (labor, utilities, maintenance) and as comps toughen.

Growth Assessment

revenue_sustainability: The 22.7% YoY revenue growth is consistent with ongoing tourism recovery and pricing power. Sustainability hinges on inbound travel trends, domestic leisure demand, and corporate/event recovery across the portfolio. profit_quality: Operating income growth appears high quality, but the net income jump over ordinary income suggests one-offs. Recurring profitability should be assessed using operating and ordinary income rather than net income alone. outlook: Near-term growth depends on maintaining ADR improvements, optimizing occupancy, and controlling variable costs. Macro drivers include yen weakness (supporting inbound tourism) and potentially volatile utilities and labor costs.

Financial Health

liquidity:

• current_assets: ¥5,382,835,000
• current_liabilities: ¥5,746,275,000
• current_ratio: 93.7%
• quick_ratio: 93.7% (inventories not disclosed)
• working_capital: ¥-363,440,000
• assessment: Slightly below 1.0x coverage and negative working capital indicate tight liquidity; seasonality and advance bookings may mitigate, but cash management remains a key focus. solvency_capital_structure:
• total_assets: ¥20,496,000,000
• total_liabilities: ¥14,006,261,000
• total_equity: ¥8,688,000,000
• equity_ratio: Approx. 42.4% (computed from balance sheet; reported 0.0% is an unreported placeholder)
• debt_to_equity: 1.61x
• interest_coverage: 10.3x (Operating income / Interest expense)
• assessment: Moderate leverage with comfortable interest coverage. Asset intensity typical of hospitality; refinancing and rate sensitivity should be monitored in a rising-rate environment.

Cash Flow Quality

earnings_quality: Cash flow statements are not disclosed in this dataset, so OCF/NI and FCF conversion cannot be assessed. Given the gap between ordinary and net income, cash earnings should be evaluated against operating income rather than net income. FCF_analysis: Free cash flow not available in the feed. Capex, lease payments, and maintenance spend are key to understanding sustainable FCF in hotel operations. working_capital: Negative working capital suggests reliance on customer prepayments and payables timing; while common in hospitality, it can amplify intra-year cash volatility.

Dividend Sustainability

payout_ratio_assessment: DPS is reported as ¥0.00 and payout ratio 0.0%, indicating no dividends in the period. Given the recovery phase and liquidity tightness, retention of earnings appears consistent with balance sheet strengthening. FCF_coverage: Not assessable due to unreported cash flows; dividend coverage cannot be quantified. policy_outlook: Future distributions will likely depend on stabilization of operating cash flows, visibility on recurring earnings (ordinary income), and maintenance capex requirements.

Risk Assessment

Business Risks:

• Demand cyclicality tied to tourism, macro conditions, and exchange rates affecting inbound travel.
• ADR and occupancy sensitivity to competitive supply and seasonality.
• Cost inflation in labor, food & beverage, and utilities compressing margins.
• Event/corporate travel recovery uncertainty and potential mix shifts.
• Operational disruptions (natural disasters, pandemics) impacting hotel utilization.

Financial Risks:

• Tight liquidity (current ratio 93.7%, negative working capital) heightening short-term cash management risk.
• Leverage at 1.61x D/E and interest rate sensitivity affecting financing costs.
• Earnings quality risk from reliance on extraordinary items to lift net income.
• Refinancing and covenant risks if operating conditions weaken.

Key Concerns:

• Sustainability of double-digit operating margins as cost pressures persist.
• Clarity on the nature and recurrence of extraordinary gains boosting net income.
• Cash conversion and FCF generation amid negative working capital and capex needs.

Investment Implications

Key Takeaways:

• Revenue up 22.7% YoY to ¥7,350m, with strong operating leverage.
• Operating margin at 10.8% indicates improved core profitability.
• Net income (¥1,432m) exceeds ordinary income (¥769m), suggesting one-offs.
• ROE of 16.48% driven primarily by high net margin and moderate leverage.
• Liquidity tight: current ratio 93.7%, working capital ¥-363m.
• Moderate leverage (D/E 1.61x) with healthy interest coverage (10.3x).
• Cash flow data not disclosed; FCF quality unassessed in this feed.
• No dividend (DPS ¥0.00); capital likely retained for stability and reinvestment.

Metrics to Watch:

• Occupancy, ADR, and RevPAR trends vs. prior year and seasonality.
• Operating and ordinary income progression vs. net income (recurrence check).
• Cash and operating cash flow, capex, and lease payments for FCF visibility.
• Current ratio and working capital movements through peak/off-peak quarters.
• Interest expense trajectory and refinancing terms.
• Energy and labor cost indices impacting margins.

Relative Positioning: Positioned as a recovering hospitality operator with improved operating metrics and manageable leverage; however, liquidity is tighter than ideal and earnings include non-recurring elements, warranting focus on cash conversion and recurring profit growth.

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