JINUSHI Co.,Ltd. Q4 FY2024 earnings call

• 3-Year Growth Transformation (Post 2022 Name Change)

  • Net income has approximately doubled, and the asset size of 地主 Private REIT (JINUSHI REIT) has also doubled over the past 3 years. Procurement volume and the number of transaction tenants have expanded significantly, establishing a foundation for accelerated future growth.
  • Three core growth strategies are being pursued: diversification of tenant industries, expansion of operating areas, and promotion of off-balance sheet land proposals, with consistent progress on all three.

• FY2024 Financial Results Highlights

  • Net income increased for the 4th consecutive year, and beat the revised full-year guidance of 5.6 billion yen due to an approximately 300 million yen foreign exchange gain from end-of-period yen depreciation, after an upward revision from the initial 5 billion yen net income guidance.
  • Total assets at period-end reached 115.4 billion yen (up 13.9 billion yen year-over-year), with real estate for sale hitting a record high of 70.6 billion yen driven by increased procurement. Net equity increased 13.2 billion yen to 44.8 billion yen, mainly from 8.2 billion yen in capital raised via public offering and secondary share offering. The equity ratio is 38.6%, maintaining the 30%+ target for financial discipline.

• Off-Balance Sheet Land Value Proposition

  • Compared to full asset (land + building) off-balance sheet sale-leaseback transactions, land-only off-balance sheet transactions offer two key advantages to selling corporates: sellers retain ownership of their building for flexible operation, renovation, and additional investment, and transactions can be completed much faster and at lower cost with fewer compliance and due diligence requirements. Demand for this structure is growing as the underlying land market expands to a 10 trillion yen size.

The transcript does not break out financial performance into separate product segments. Aggregate full-year FY2024 results are: total revenue of 57 billion yen, operating profit of 8.6 billion yen, ordinary profit of 8.2 billion yen, and net income of 6 billion yen, representing significant year-over-year growth in both revenue and profit. Total procurement of land for the full year was 66 contracts with a total value of 59.9 billion yen, of which approximately 20% came from social infrastructure tenant sectors and approximately 20% came from off-balance sheet land projects (3 projects by count).

• FY2025 (ending December 2025) Consolidated Performance Guidance: The company projects revenue of 70 billion yen, operating profit of 9.5 billion yen, ordinary profit of 8 billion yen, and net income of 6.1 billion yen, representing another year of revenue and profit growth. The muted net income growth reflects that guidance incorporates expected foreign exchange losses based on an assumed exchange rate of 150 yen to the U.S. dollar.
• Procurement Guidance: The company targets total annual procurement of over 70 billion yen for FY2025. Off-balance sheet projects are expected to grow in both number and average project size, with large individual projects capable of contributing 30-40 billion yen to total annual procurement.
• Shareholder Return Guidance: The company formally adopted a progressive dividend policy, and plans a full-year dividend of 100 yen per share for FY2025, consisting of a 90 yen regular dividend plus a 10 yen 25th anniversary special dividend, representing a 15 yen year-over-year increase. The company aims to continue increasing dividends alongside profit growth, with 100 yen per share set as the base dividend going forward.
• Mid-Term Guidance: The company remains on track to hit its mid-term target of 7 billion yen net income for FY2026, the final year of the current mid-term plan. Historically, the company has beaten its initial annual guidance by an average of 11.4% for 4 consecutive years, and it aims to outperform its FY2025 guidance as well. Most of FY2025 profit is planned to be recognized in the second half of the fiscal year.

• Off-balance sheet projects have unpredictable closing timelines, as they are often tied to counterparties' fiscal year-end dates and investment planning schedules, which can lead to delays in project closing from the planned fiscal period.
  • Profit recognition timing varies by quarter based on when property sales close, leading to potential quarterly earnings volatility.
  • The 2027 change to lease accounting standards may lead to technical changes to contract terms (such as adjustments to non-cancelable lease periods) but is not expected to have a material negative impact on the company or demand for its off-balance sheet products, as underlying corporate demand for off-balance sheet land transactions remains intact.

Q: Given the large pool of 16,000+ potential tenant candidates and the 20% share dilution from last year's capital increase, why hasn't procurement accelerated faster? Does doubling the sales team size require to double procurement volume? / A: Management also believes FY2024 procurement of ~60 billion yen could have been stronger. Currently, there are 5-6 in-progress 5 billion yen-class off-balance sheet project inquiries and 2-3 10 billion yen+ inquiries, with enough pipeline to exceed 100 billion yen in annual procurement if all close. However, off-balance sheet projects take longer to close due to timing dependencies on counterparties. Doubling sales headcount would not automatically double procurement, but management has stepped up hiring of优秀 sales staff, with the CEO now conducting first-round interviews directly to secure top talent, and expects to accelerate procurement to hit the 70 billion yen+ target.

Q: If large off-balance sheet projects will not close quickly, would the company consider using the excess 8.2 billion yen in capital from last year's increase for share repurchases, given the current weak share price? / A: Large off-balance sheet projects have unpredictable timelines, with some closing quickly and others slipping into future periods, but the number of inquiries is growing steadily. Management has no plans for share repurchases, and will allocate all excess capital to procurement to deliver results that justify the prior capital increase, and asks investors for patience as the pipeline converts to closed projects.

Q: How has investor demand for JINUSHI REIT held up amid rising interest rates, and which investor segments are participating? / A: JINUSHI REIT's recent 9th capital increase raised 25 billion yen in equity to acquire 36 billion yen in assets, which is top-tier fundraising performance among all public and private REITs in Japan. The REIT has a unique product: it holds only land (no buildings) with a 10-year track record of zero rent reductions or tenant vacancies, giving it stable predictable dividends. It started with regional shinkin and regional bank investors, now has investment from nearly all large Japanese insurance companies, and pension funds now account for ~20% of the recent capital increase (up from under 9% previously). The REIT also maintains a very low 30% loan-to-value ratio with long-term fixed rate debt, giving it strong resilience to rising interest rates compared to peer REITs.