3490.T

• Overall Financial Performance

  • Total company revenue reached 13.543 billion yen, a new all-time high, with 0.774 billion yen in operating profit, 0.468 billion yen in ordinary profit, and 0.294 billion yen in net profit attributable to parent company shareholders, resulting in a result of higher revenue but lower profit year-over-year.
  • Inventory of for-sale real estate hit an all-time high of 8.293 billion yen at the end of the period, a 4.6% increase from the prior year end, with the company holding multiple 1.5 billion yen-scale properties ready for future sale.
  • Equity ratio stands at 27.5%, net assets increased by more than 1 billion yen to 3.986 billion yen, and PBR reached 1.09x, showing steady progress in financial soundness.
  • Combined total yield for shareholders (dividend plus shareholder benefits) reaches up to 4.64% based on shareholding tier, delivering high returns to shareholders.

• Core Competitive Advantages

  • Follows the corporate mission of "Creating vibrant cities with no vacancies", and has shifted to a central Tokyo-focused area strategy to enhance the value of its "TOKYO Brand" after moving into Marunouchi in 2023.
  • Core strengths include property selection expertise, value-add renovation capabilities, product differentiation via amenities like facial recognition and soundproofing, and a growing network of overseas investors, with 30-40% of current period sales directed to overseas investors.
  • Specializes in creating "Vintage Assets": through large-scale renovation of older properties, it creates value for both owners (higher rental income) and tenants (lower initial investment for ready-to-use spaces).

• Growth Strategy

  • 1. Scale expansion of handled properties: The average price of income-producing properties per building rose to 0.79 billion yen in the period, and the company expects the average price to reach around or above 1 billion yen going forward, with an increasing share of 1 billion yen+ properties in inventory.
  • 1. Diversification of property types: Focuses on four core categories (whole office buildings, whole residential buildings, divided office units, divided residential units) and maintains a broad portfolio to collect more local market information.
  • 1. Inventory turnover improvement: Operates with a 9-month cycle from property acquisition, value-add renovation, sale to settlement to improve capital efficiency.
  • 1. M&A of stock-based real estate businesses: Acquired 70-year-old local firm Fuji Home in September 2025, which has a strong local network in the Asakusa/Ueno area, skilled professional talent, and untapped management contract potential. The company plans to prioritize expanding business in this high-potential downtown area.

• Capital and Shareholder Value

  • Over the past 5 years, market capitalization grew approximately 3.7x from ~1.1 billion yen to ~4.3 billion yen, but management still considers current levels below target and will continue initiatives to further increase market capitalization.
  • Current capital metrics: PBR 1.09x, ROE 8.5%, PER 13.4x. The company will target ROE improvement via higher profit margins, faster turnover, and effective use of borrowing to improve valuations, with a goal of earning higher investor evaluation.
  • Launched the "AtoZ Initiative" with the goal of becoming the top real estate infrastructure enterprise, aiming to meet all real estate client needs with group-level capabilities.

• For the 2027 February term (next fiscal year), management guides for total revenue of 15.5 billion yen, operating profit of 1.25 billion yen, ordinary profit of 0.85 billion yen, and net income of 0.53 billion yen, targeting a recovery from the prior year's lower profit result.
• Annual dividend per share is planned to be maintained at 30 yen.
• The company expects the number of large 1 billion yen+ properties available for sale to increase in coming periods, aligned with its strategy of scaling average property size.

1. Real Estate Sales Business: Revenue of 12.585 billion yen, accounting for 92.9% of total company revenue, with a 9.5% year-over-year revenue increase. Operating profit was 0.926 billion yen, a 10% year-over-year decrease. The business sold 26 properties in the period, with one large 1 billion yen+ property delayed and carried over to the current term. 2. Real Estate Leasing Business: Revenue of 0.703 billion yen, accounting for 5.2% of total company revenue, with a year-over-year decrease in revenue. Operating profit was 0.074 billion yen, a 42.3% year-over-year decrease. 3. Real Estate Management Business: Revenue of 0.254 billion yen, accounting for 1.9% of total company revenue, with a year-over-year revenue increase. Operating profit was 0.088 billion yen, achieving both revenue and profit growth following the acquisition of Fuji Home as a subsidiary in September 2025, which increased managed units by approximately 300 to a total of 1,840 units.

• The 2026 February term's overall profit decline was primarily driven by the Real Estate Leasing Business: newly acquired properties had extended vacancy periods that cut rental income, and the purchase of multiple for-sale properties generated no rental revenue while held prior to sale, leading to a 42.3% profit drop in the segment that dragged down company-wide results.
• Rising interest rates may impact the real estate sector and the company's borrowing costs, though specific risk mitigation details were not fully detailed in the transcript.

Q: What is the sales plan for the large property that was delayed from the last fiscal year to this period?

A: The delayed large-scale property will be sold in the current 2027 February term. Management will ensure full profit realization from the sale, which is a core contributor to the planned 12.5 billion yen in sales and 1.25 billion yen in operating profit for the period. This delayed asset is already part of the company's record high 8.293 billion yen in inventory, and its sale will drive next term's profit recovery.

Q: What was the main cause of last term's higher revenue but lower profit result?

A: The primary driver was the sharp 42.3% profit decline in the real estate leasing segment. Two key factors caused this: extended vacancy periods at newly acquired properties that cut rental income, and the holding of multiple for-sale properties that generated no rental revenue before sale. The real estate sales segment also saw a 10% profit decline, partially due to the carry-over of a large profitable property to the current term. Only the real estate management segment, boosted by the Fuji Home acquisition, achieved growth in both revenue and profit.

Q: How is the company progressing on expanding networks with overseas investors, and what is the strategic direction for this work?

A: Management has actively strengthened overseas investor networks over recent periods, and 30-40% of current period sales were completed with overseas investors. Amid growing global investor interest in Japanese real estate, especially central Tokyo assets, the company will continue prioritizing sales to this segment, leveraging its "TOKYO Brand" value to support continued sales growth. This aligns with the company's overall strategy of focusing on high-value central Tokyo properties that appeal to cross-border investors.

Q: What are the company's plans for the Fuji Home subsidiary after acquisition, and how will it expand its business?

A: Fuji Home is a 70-year-old established business with deep local networks and skilled professional staff in the Asakusa and Ueno area. It currently manages 300 units, and has existing relationships with many property owners who do not yet have formal management contracts with the firm, creating significant upside for future management revenue growth. The company is planning an expansion relocation of Fuji Home's Asakusa offices (not yet finalized) to prioritize growing its presence in this high-potential, vibrant downtown area, and expects additional M&A opportunities to emerge following the Fuji Home integration.