Kasumigaseki Capital Co.,Ltd. Q2 FY2026 earnings call

Hotel Business

• As of the first half, 10 new sourcing deals are in progress, 8 deals have had revenue recognized, and 3 new hotels have opened, with sourcing, disposal, development and operation all progressing on schedule.
• Launched a new experience-focused hotel brand HOTEL FORK & KNIFE centered on food experiences, opened in Hiroshima Miyajimaguchi, expanding the brand portfolio.
• Two recently opened hotels, FAV LUX Sapporo Susukino and edit x seven Fuji Gotemba, achieved stable operation targets within 6 months, twice as fast as the original 3-year expectation. Both reached 70-90% of target RevPAR in the first month of opening, demonstrating strengthened brand and operation capabilities enabling early capital recovery.
• Operates a multi-brand portfolio under the FHG HOTELS umbrella unified by the "self hospitality" smart hotel concept: fav (group-focused hotels), seven x seven (luxury hotels), BASE LAYER HOTEL (renovated business hotels), and HOTEL FORK & KNIFE (food-focused experience hotels). All brands leverage IoT and hotel DX to deliver smooth customer experiences, reduce labor costs, cut fixed expenses, and improve profitability.
• A previously renovated BASE LAYER HOTEL achieved 3.1x higher GOP and over 2x higher ADR, occupancy and RevPAR compared to 2019 levels, driven by renovation added value and DX-enabled fixed cost reduction. A second BASE LAYER HOTEL location in Fukuoka is scheduled to open in mid-April with innovative amenities including an unmanned convenience store.
• Kasumigaseki Hotel REIT Investment Corporation now manages 15 properties with 49.2 billion yen in assets, and has a 311.0 billion yen pipeline across 53 properties. Incorporated REIT properties delivered a 9.5% year-over-year increase in RevPAR, and distribution came in above initial forecasts.

Logistics Business

• Operations are progressing smoothly, with land settlements ongoing and multiple projects moving toward construction start. The company has begun acquiring existing dry warehouse properties to position for an expected market recovery.
• Market dynamics: after a period of rapid supply growth that pushed up vacancy rates, many developers have pulled back on new development, leading to reduced acquisition competition for available land. Supply is expected to drop sharply in 2027, with vacancy rates peaking in 2025 and starting to decline, while rents have begun to recover from 2025 lows. The company is pursuing both acquisition of existing undervalued properties and new development of dry warehouses to enter the market.
• For the Kuala Lumpur, Malaysia project targeting ASEAN expansion: planning is complete, the company has selected automated material handling equipment for a planned frozen automated warehouse, and has begun tendering for general contractors. After contractor selection, the project will move to the investor marketing phase, and additional land sourcing is underway. The company is also actively exploring entry into the local dry warehouse market.
• The company's COLD X NETWORK won industry awards for its efficient small-lot short-term cargo consolidation model, and won the top prize in the social implementation category at the Physical Internet Award, an honor judged by a consortium of top industry players across logistics, real estate, manufacturing and trading.

Healthcare Business

• 11 facilities are currently open, with 4 new openings in the first half. The company is focused on building its own operation system aligned with its business model, and hiring and ramp-up are progressing smoothly. Six stabilized facilities were grouped into a private fund in 2025, and future stabilized properties will continue to be moved into this fund structure.

Overseas Business

• The company follows three core principles for overseas expansion: 1) target markets with strong demand and insufficient supply to close the supply-demand gap, same as in Japan; 2) leverage core capabilities built in Japan: hotel expertise in the US, logistics expertise in Malaysia, and Japanese high-quality development standards for residential projects in Dubai; 3) maintain the same asset-light business model as Japan: use the balance sheet only for initial land acquisition, then off-balance sheet land to development funds and use external investor capital for construction.
• The company has acquired its first US site in a prime location in Miami, Florida, for a mixed hotel and residential development project. Miami was selected due to top-tier population growth in Florida (8% population growth adding 1.2 million people over 4 years, driven by corporate relocations and retirement migration) that has created hotel and housing shortages, combined with broadly tight hotel supply-demand dynamics in the US (travel demand exceeds pre-COVID levels, while new hotel supply is only half of pre-COVID levels, pushing up ADR and occupancy). Project details are being finalized and will be disclosed once confirmed. The Miami acquisition is not yet included in the current reported pipeline.
• In Dubai, the first development project is progressing in partnership with Daisho Toro, but the outbreak of conflict related to Iran has created potential uncertainty for the business.

Corporate Strategy & Business Model

• The company's asset-light circular growth model is built on three core pillars: 1) Finance x Real Estate: acquire land, conduct planning, move to development funds, transfer to operation funds after completion, and ultimately place assets into long-term REITs, capturing profits at each phase and rotating capital at high speed; 2) Technology x Franchise: standardize operations via unified PMS systems and detailed brand manuals, enabling scalable expansion through partner operators with industry-leading speed; 3) Creative x Partnerships: partner with top creators across design, food, music and fashion to create differentiated content and drive new demand, which in turn creates more opportunities for capital rotation. This creates a self-reinforcing cycle that competitors cannot easily replicate.
• The company's circular model enables Japan-leading opening speed: targets 10 openings per year, with over 50 openings annual expected after 2028. Japan's hotel market remains highly fragmented, with the top three chains holding only 14% combined share and over half of hotels independent, leaving large room for expansion; FHG HOTELS currently holds less than 0.1% market share.
• Capital raising: the company raised 34.5 billion yen via a public offering of new shares in November 2025 (resulting in just over 20% dilution) and issued its first public corporate bond last month, diversifying funding sources beyond dilutionary equity raising.
• Human Resources Strategy: 40% of mid-career hires are referral hires, which improves cultural and skill fit; the workforce has highly diverse backgrounds: only 30% come from real estate, 19% from finance, and 50% from other industries including trading, consulting, media, IT, manufacturing, hotel operation and logistics, enabling flexible response to market changes; around 70% of employees hold company stock via stock options or restricted stock, aligning employee and shareholder interests, which supports a 4% low employee turnover rate. Per employee net profit reached approximately 30 million yen in FY2025, and 70% of employees actively use AI tools to improve added value, not just operational efficiency.

The provided transcript does not disclose absolute revenue or profit figures broken down by product segment. Only aggregate half-year results are reported: all of revenue, operating profit, and net profit reached all-time record highs for the first half. Net profit reached 4.9 billion yen, representing 30% progress against the full-year net profit target of 16.5 billion yen, an improvement from the 24.5% progress rate in the prior year first half. Combined AUM plus project pipeline reached 806.2 billion yen, an increase of 142.6 billion yen from the end of August 2025. For the balance sheet: total assets increased by 41.725 billion yen to 163.413 billion yen, and equity ratio improved to 46% after the public offering. While reported inventory for sale properties only increased by 3.1 billion yen, when including prepaid earnest money deposits (up 7.71 billion yen) and tangible fixed assets (predominantly renovating hotels held for future sale, up 8.409 billion yen), effective inventory increased by approximately 20 billion yen. The Dubai business was expected to contribute around 10% of full-year revenue and profit, with a portion of this already realized in the first half.

• The full-year net profit guidance of 16.5 billion yen is maintained, with no changes required despite potential headwinds from the Iran conflict. Any unmet profit from Dubai in the second half can be fully offset by other projects, as only a few percentage points of full-year profit remains unrealized from Dubai after first half gains.
• The company confirms confidence in achieving the full-year 16.5 billion yen net profit target, following the same pattern of prior years where lower first half progress has consistently led to full-year target achievement.
• The planned annual dividend for FY2026 is maintained at 165 yen per share, which equals 330 yen pre-split, representing a 37.5% increase over the FY2025 dividend of 240 yen pre-split.
• The company expects strong logistics business growth in the second half of FY2026, as favorable land acquisition conditions create more opportunities to grow the pipeline.
• Long-term, the company maintains its target of 50 billion yen in annual net profit under its medium-term management plan, with further global expansion planned after achieving this target.
• The company expects continued growth in the total project pipeline by the full-year FY2026 earnings release, including the new Miami project once planning is finalized.

• Deteriorating Iran geopolitical conflict creates unavoidable potential negative impact on the company's Dubai business. At present, the magnitude of this impact cannot be clearly quantified, as the situation remains uncertain for all global market participants.
• While the company maintains its full-year net profit guidance, any larger than expected disruption to Dubai operations could create downside risk if alternative projects cannot fully offset lost profit.
• Dry warehouse market in Japan has seen elevated vacancy rates in recent years after a period of overbuilding, which creates near-term risk for new entry if the expected recovery in vacancy and rents is delayed.
• Overseas expansion into new markets (US, Malaysia, UAE) carries untested market and regulatory risks, even with the company's existing core capabilities.

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