Mullion Co.,Ltd. Q2 FY2025 earnings call

• Company Overview and Core Structure

  • Marion is a 3rd-generation real estate firm founded in 1986, listed on the Tokyo Stock Exchange JASDAQ Standard market, with 32 total employees and full digitalization of all operations (no in-person sales staff). Major shareholders include the founder's family, SBI Holdings, the Marion Public Interest Foundation, and Belluna Co., Ltd.
  • The company holds all required real estate and financial licenses, plus ISO 14001 for environmental management, and ISMS certification for information security.

• Real Estate Leasing Business Core Strengths

  • The business is the stable core pillar of Marion, with a 90-year operating history across three generations. It focuses exclusively on residential properties, which are more economically stable than commercial office space. Value-added services for government tenants include free daily shuttle buses to Kasumigaseki and free rental of home appliances, leading to high tenant retention and 97% consistent occupancy.

• Real Estate Securitization Business Evolution and Strategic Direction

  • The product lineup has evolved from face-to-face sold Marion Bond to semi-digitized Salaryman Bond, and now to fully digitized i-Bond. i-Bond allows investments starting from 10 thousand yen per unit, distributes pro-rated rental income to investors, offers 24/7 free deposits/withdrawals, and currently has a target distribution yield of 1.50% annually (higher than standard Japanese bank deposit rates).
  • Following the November 2024 amendment to Japan's Financial Instruments and Exchange Act, the company is developing its blockchain-based security token product called M Coin (Fuyaku-ho ST, or Real Estate Specific Joint Business Security Token). M Coin will inherit all features of i-Bond, will be classified as a regulated securities product equivalent to stocks, and will be backed by income-producing underlying real estate (unlike unbacked crypto assets such as Bitcoin).

• ESG and Social Contribution

  • The company prioritizes environmental initiatives including building greening and rooftop solar installations. It runs the public interest Marion Foundation, which is approved by the Cabinet Office and focuses on supporting child welfare facilities. In 2024, the foundation provided 6 million yen in grants to 12 facilities, including support for areas affected by the Noto Peninsula earthquake.

For the 2024 September full fiscal year, the two business segments contributed to total revenue as follows: 1. Real Estate Leasing Business: 55% of total revenue, generating stable recurring monthly rental income. Marion owns 41 mid-sized residential condominium properties across major Japanese cities (80% located in Tokyo), maintaining a 97% occupancy rate driven by long-term contracts with local governments for government trainee housing. 2. Real Estate Securitization Business (including sales and securities issuance): 45% of total revenue. This segment generates revenue from issuance fees for the company's digital small-lot real estate securities product i-Bond, occasional property sale gains, and fees from securitization activities. As of the first half of 2025 September fiscal year, cumulative sales of i-Bond have exceeded 10 billion yen.

• For the full 2025 September fiscal year, Marion maintains its original full-year plan with: total revenue of 3 billion yen, operating profit of 0.73 billion yen, ordinary profit of 0.55 billion yen, and net profit of 0.36 billion yen. Full-year progress for both core business segments is on track, with upside potential from expected property sales in the second half.
  • The company expects total balance sheet assets to remain between 19 billion yen and just under 20 billion yen for the period, with significant growth projected once M Coin receives regulatory approval and is distributed via third-party securities firms.
  • The planned full-year dividend is 5.40 yen per share (post 5-for-1 stock split in February 2024), for a dividend yield of approximately 1.5%. The company is targeting a 20% payout ratio long-term, and has committed to raising dividends if M Coin adoption drives business growth.
  • The company is currently negotiating with Japan's Financial Services Agency to obtain the required license for M Coin, and will launch commercial sales immediately upon approval.

• The company faces regulatory risk for its M Coin security token product: obtaining the required regulatory license is noted as the most challenging step of the launch process, with no guarantee of approval on a desired timeline.
  • There is uncertainty around third-party distribution: while securities firms are expected to have demand for M Coin due to its fee-generating structure, major financial institutions may take a cautious approach to the new product, limiting near-term distribution growth.
  • Cybersecurity risk: as a fully digital financial business that holds customer personal and financial information, the company faces ongoing risk of cyberattacks, unauthorized access, and fraudulent withdrawals, even with current security measures in place.
  • Current capital allocation for system development and marketing to build awareness for i-Bond and M Coin is limiting near-term dividend payouts relative to the company's 20% target payout ratio.

Q: What cybersecurity measures does Marion have in place to prevent unauthorized withdrawals and cyberattacks, given growing industry concerns about account takeovers? / A: Marion uses encrypted communications and hosts all systems on Amazon Web Services (AWS), which is recognized as having the highest current industry security standards. The company also maintains ISMS information security certification, and implements the same rigorous multi-factor authentication standards required by major institutional financial partners like SBI Holdings to protect customer accounts.

A: Management confirms that security is a top priority for the business, given the digital-first operating model, and the company continuously updates its defensive controls to address emerging threats. The partial transcript does not include further details on risk mitigation for potential breach events.

Q: What is the current status of Marion's M Coin security token license application? / A: Following the amendment of Japan's Financial Instruments and Exchange Act in November 2024, Marion is currently in active negotiations with the Local Finance Bureau to obtain the required license to issue security tokens. Management confirmed that the application process is moving forward, but did not provide a specific timeline for final approval.

A: Once approved, M Coin will become a regulated securities product, opening up new distribution channels that were not available to the current self-distributed i-Bond product.

Q: Will securities firms actually distribute M Coin after launch, and what is the outlook for distribution partnerships? / A: Management notes that many Japanese securities firms are facing margin pressure from zero commissions for stock trading, so the fee revenue from distributing M Coin creates clear demand for the product. There are approximately 270 securities firms in Japan that will be eligible to distribute M Coin once it is approved as a regulated security.

A: Marion will begin formal partnership discussions with prospective securities firms immediately after the M Coin license is granted, but no binding agreements have been signed to date, so actual distribution volume remains uncertain.

Q: Are there any property sales planned for the second half of the current 2025 September fiscal year? / A: Marion regularly sells older, depreciated properties to realize unrealized gains and rotate the portfolio into newer higher-performing assets. Property sales are typically scheduled for the end of the fiscal year (Q4) to lock in annual gains.

A: Management confirmed that planned property sales for the current full year are on track, and these sales will help deliver results that meet or exceed the current full-year profit guidance.