SHINGAKUKAI HOLDINGS (9760) FY2026 Q3 Earnings Report

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Executive Summary

The key point of the results is that losses widened because the increase in cost of sales exceeded the growth in revenue despite higher sales. Revenue increased to ¥5.05B (+15.5% year on year), while operating income was ¥-0.80B, representing a wider loss than the ¥-0.37B recorded in the prior year. Ordinary income was ¥-0.83B, and net income was ¥-1.00B. The primary driver of revenue growth was the expansion of sales gains in the Real Estate Business, but widening losses in the Fund Management Business weighed down consolidated earnings.

Factors Affecting Results

【Revenue】Revenue increased 15.5% year on year to ¥5.05B. By segment, the Fund Management Business was the largest segment at ¥2.86B (56.6% of total revenue, +9.3% year on year), while the Real Estate Business recorded substantial revenue growth of 125.9% year on year to ¥1.08B (21.4% of total revenue). Meanwhile, the Education-Related Business declined 11.2% year on year to ¥0.73B (14.4%), and the Sports Business declined 3.5% to ¥0.25B (4.9%).

【Profit and Loss】Cost of sales increased 27.0% year on year to ¥5.45B, outpacing revenue growth (+15.5%), resulting in a shift to a gross loss of ¥0.39B from gross profit of ¥0.09B in the prior year. SG&A expenses were ¥0.40B, down 11.6% year on year, but this reduction was insufficient to absorb the deterioration in the cost ratio, and the operating loss widened to ¥0.796B. By segment, the Real Estate Business contributed to earnings with operating income of ¥0.29B (operating margin of 26.6%), while the Fund Management Business was the primary cause of the consolidated loss, recording an operating loss of ¥0.70B (operating margin of △24.6%). The divergence between the ordinary loss of ¥0.83B and the net loss of ¥1.00B was attributable to the recognition of ¥0.17B in corporate income taxes and other taxes; the impact of non-operating and extraordinary gains and losses was limited. In conclusion, the company experienced higher revenue but lower earnings, with losses widening.

Segment Analysis

The Real Estate Business is the principal earnings-contributing segment, with revenue of ¥1.08B (+125.9% year on year) and operating income of ¥0.29B (operating margin of 26.6%). The Fund Management Business is the largest segment by revenue at ¥2.86B (+9.3%), but its operating loss widened to ¥0.70B from a ¥0.14B loss in the prior year, making it the central factor behind the consolidated loss. The Education-Related Business recorded revenue of ¥0.73B (△11.2%) and an operating loss of ¥0.12B, an improvement from the ¥0.21B loss recorded in the prior year. The Sports Business recorded revenue of ¥0.25B (△3.5%) and an operating loss of ¥0.03B, widening from the ¥0.01B loss in the prior year. The total of the reportable segments was a loss of ¥0.57B, and after adding ¥0.31B in company-wide expenses and other items, consolidated operating loss was ¥0.80B.

Key Financial Indicators

【Profitability】The operating margin was △15.7%, deteriorating by 7.4pt from △8.4% in the prior year, while the net profit margin also declined to △19.8%. The gross margin was negative 7.8%, a substantial deterioration from 2.0% in the prior year, making cost control the greatest profitability challenge.【Cash Quality】Cash and deposits were ¥3.20B, a decrease of ¥2.28B year on year, while short-term borrowings of ¥7.70B accounted for all interest-bearing debt.【Investment Efficiency】Annualized ROE was △16.4%. Total assets stood at ¥17.57B, while net assets were ¥8.12B, with both assets and capital contracting from the prior year.【Financial Soundness】The equity ratio improved to 46.2% from 39.4% in the prior year, but this was primarily due to a decline in total assets—a contraction in the denominator—and does not indicate an improvement in absolute capital accumulation. Short-term borrowings of ¥7.70B accounted for ¥9.12B of current liabilities, making short-term liquidity management a critical issue.

Cash Flow Analysis

As cash flow statement data has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥3.20B, a decrease of ¥2.28B from ¥5.48B in the same period of the prior year, indicating continued net cash outflows. During this period, short-term borrowings increased by ¥0.67B to ¥7.70B, suggesting that borrowings were used to secure funds, while the recognition of a ¥1.00B net loss put pressure on cash and deposits. Trade receivables and other receivables (accounts receivable) were ¥3.97B, a decrease of ¥2.89B year on year, contributing to the overall contraction in current assets. Total assets were ¥17.57B, down ¥6.05B from ¥23.62B in the prior year, indicating that a contraction in asset scale and tightening liquidity were progressing simultaneously.

Quality of Earnings

Non-operating income was ¥0.02B, equivalent to only 0.5% of revenue, and primarily consisted of ¥0.01B in dividend income. Non-operating expenses were ¥0.06B, including ¥0.04B in interest expenses. Extraordinary gains and extraordinary losses were both limited to the ¥0.00B range, and the substance of the current-period loss lies not in extraordinary items but in the excess of cost of sales at the operating level and losses in the Fund Management Business. The divergence between the ordinary loss of ¥0.83B and the net loss of ¥1.00B was ¥0.18B, primarily attributable to the recognition of ¥0.17B in corporate income taxes and other taxes. The fact that a tax burden arose despite negative operating income, with tax effects failing to mitigate the loss and instead worsening final earnings, is an important consideration in evaluating earnings quality.

Earnings Forecasts and Guidance

Against the full-year revenue forecast of ¥7.50B, cumulative Q3 progress was 67.4%, 7.6pt below the standard 75%. Against the full-year operating loss forecast of ¥0.28B, the company had already recorded a cumulative loss of ¥0.796B through Q3, resulting in a progress ratio of 284.3%. Similarly, against the ordinary loss forecast of ¥0.33B, the cumulative loss was ¥0.83B (progress ratio of 250.9%), while against the net loss forecast of ¥0.48B, the cumulative loss was ¥1.00B (progress ratio of 209.2%). In each case, losses substantially exceeded the forecasts. The company has not revised its earnings forecasts, implying that Q4 alone would need to generate revenue of ¥2.45B and a return to operating profitability of approximately ¥0.52B. The significant gap from cumulative actual results warrants attention.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year dividend forecast is also ¥0, resulting in a payout ratio of effectively 0%. With net losses continuing, no shareholder returns through cash dividends are planned for the current period.

Risk Factors

1. Widening losses in the Fund Management Business: Against revenue of ¥2.86B, the segment recorded a loss of ¥0.70B and a margin of △24.6%, making the largest consolidated business the primary source of losses. Consolidated results are structurally exposed to fluctuations in gains and losses on investment assets and project profitability.

2. Tightening short-term liquidity: All ¥7.70B of interest-bearing debt consists of short-term borrowings, while the ratio to cash and deposits of ¥3.20B is only 0.41x. Cash and deposits declined by ¥2.28B year on year, making refinancing and trends in financing terms key monitoring points.

3. Gross loss caused by deterioration in the cost ratio: Cost of sales increased 27.0% year on year, exceeding revenue growth of +15.5%, resulting in a gross margin of △7.8%. Unless an improvement in the cost structure is confirmed, the company may remain in a state where revenue growth directly leads to wider losses.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Profitability is substantially below the industry median, placing the company in the lower tier of the industry.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median, contrasting with the company’s low profitability.

※Source: Compiled by the company

Key Points from the Financial Results

1. Revenue growth of +15.5% was outpaced by a +27.0% increase in cost of sales, causing the gross margin to deteriorate from 2.0% in the prior year to △7.8%. The fact that revenue growth is accompanied by widening losses is an important observation in evaluating profitability.

2. Against the full-year operating loss forecast of ¥0.28B, the cumulative Q3 loss was ¥0.796B, resulting in a progress ratio of 284.3%. The substantial divergence from the unchanged forecast makes Q4 profit and loss trends the key focus going forward.

3. All ¥7.70B of interest-bearing debt consists of short-term borrowings, and the cash-to-short-term-liabilities ratio is only 0.41x. Refinancing trends from a liquidity perspective warrant close attention when evaluating financial soundness.

Theoretical Share Price (Reference Value)

Sensitivity: ¥285–¥300 at ±1% for the cost of equity, and ¥287–¥296 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing difference relative to the full-year forecast.

(Calculation model: Residual Income Model (Ohlson-type, explicit five-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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