3238.T

• Financial & Earnings Structure

  • Consolidated first half revenue is 11.029 billion yen, with an operating loss of 895 million yen and an ordinary loss of 1.23 billion yen. Revenue missed internal forecasts, but profit performance was broadly in line with expectations.
  • The company recognizes that its current business model inherently results in first half interim losses unless at least 40% of full-year completed units are delivered in the first half; it has a target to increase this ratio to 40% by fiscal 2030, from the current 21% in the first half of fiscal 2026, despite ongoing headwinds from rising construction costs and labor shortages delaying project starts.
  • Revenue is only recognized upon handover of completed condominiums to buyers. This period had 3 completed projects (174 units, 21% of full-year equity-based units) versus 2 projects (68 units, 10% of full-year units) in the prior year period.

• Sustainability & Product Differentiation

  • The company launched its first Claire Series property with ZEH-M Ready certification, the second highest net-zero energy condominium standard (after ZEH-M Oriented at the lowest level), which requires at least 50% energy consumption reduction via renewable energy, compared to 20% improvement for ZEH-M Oriented. The first ZEH-M Ready project in Kyushu is a joint venture with Craftia (former Kyudenko) in Beppu, incorporating solar power, storage batteries, and ENE-FARM to meet requirements.
  • The company is on track to reach 100% of projects meeting at least ZEH-M Oriented standards (including ZEH-M Ready) from fiscal 2026, aligned with its 2030 target. This initiative delivers customer benefits including mortgage tax deductions and improved long-term resale value, alongside social environmental benefits.
  • The company added targeted amenities to differentiate properties, including the first facial recognition security system in a Claire Series property in Kawaguchi, which has received positive feedback from younger buyers, while avoiding over-investment in unnecessary upgrades to keep construction costs manageable.

• Geographic & Product Strategy

  • The company continues its policy of controlled expansion into new regional markets outside the three major metropolitan areas, where the company sees significant untapped growth potential for condominiums. Condominiums account for only ~10% of total new housing starts nationwide, and only ~15,000 units per year in non-major metro areas, aligning well with compact city development and aging population trends. The company entered Hamamatsu, Kakegawa, and Matsue in this fiscal year, targeting repeat development in successful new markets.
  • The company is prioritizing development of compact condominiums (30-50 square meters) to meet growing demand from single-person households. Compact properties have been well received in Osaka, where a 64-unit compact project near Tennoji Station (30-50 square meters) has already sold out, but acceptance varies by region, with many buyers in slower markets still preferring units over 50 square meters, and purchase decision delays due to budget constraints for mid-sized compact units remain a key challenge to address.
  • The company is increasing joint venture (JV) projects with qualified partners on a measured basis, after operating primarily independently post-Lehman Shock. Notable JVs include the first project with JR Shikoku in Takamatsu, Kagawa, leveraging regional synergies with JR Shikoku's local network, and the Claire Mdia Miyakojima project, with development already well underway.

• Upcoming Project Pipeline

  • Full fiscal 2026 (ending March 2026) planned completed projects total 18 properties with 845 equity-based units. 16% of units are in the Tokyo metropolitan area, and 84% are in other regions, all meeting at least ZEH-M Oriented standards.
  • Fiscal 2027 (ending March 2027) planned completed projects are already largely finalized, with all properties meeting at least ZEH-M Oriented standards, 3 compact units, and continued JV projects with Craftia. A key highlight is the 106-unit project in Matsuyama, which incorporated an innovative 50/50 split of north-facing (with unobstructed views of Matsuyama Castle) and south-facing units; north-facing units have sold faster than south-facing units, demonstrating the success of the company's locally-focused, customer-centric approach that differs from big data-driven national developers. The Miyakojima project is the first demand-focused condominium supply on the island in 18 years, developed as a JV with a local Kagoshima developer, targeting growing immigration and dual-residence demand; it incorporates localized features including water softening systems to address Miyakojima's naturally hard water, which has already received positive local feedback.

• Full fiscal 2026 (ending March 2026) guidance is maintained unchanged from prior public disclosures, targeting 46 billion yen in full-year revenue, 1.5 billion yen in operating profit, and 800 million yen in ordinary profit. Management confirms it is continuing to work toward these targets with less than two months remaining in the fiscal year.

1. Real Estate Sales: Revenue of 9.017 billion yen, segment loss of 596 million yen, accounting for approximately 81.8% of total consolidated revenue. 2. Real Estate Leasing & Management: Achieved slight year-over-year revenue and profit growth, with revenue and expenses roughly proportionate. 3. Other Business (primarily insurance services for condominium buyers): Revenue of approximately 25 million yen, accounting for approximately 0.2% of total consolidated revenue.

• Rising construction costs and industry-wide labor shortages have made it difficult for the company to start construction projects on its desired timeline, slowing progress toward its 2030 target of increasing first-half completed unit delivery to 40% to eliminate consistent interim period losses.
• Compact condominium acceptance varies significantly by region, with slower adoption of smaller (30-square-meter range) units in many markets, and persistent buyer hesitation to commit to 40-50 square meter units even when buyers are technically able to afford them, creating unanticipated sales challenges.
• The company's geographic expansion strategy carries inherent execution risk, as market demand varies across new regional entry points, and there is no guarantee that successful initial entry will lead to repeat profitable development in new markets.

No question and answer section was included in the provided earnings call transcript.