MEIHO ENTERPRISE CO.,LTD. Q2 FY2026 earnings call

• Overall Financial Performance

  • The company achieved double-digit year-over-year growth in both revenue and profit in the second quarter.
  • Total revenue increased 26.5% year-over-year, driven by a rise in delivered units from 15 to 16, and an increase in average selling price per unit from 0.508 billion yen to 0.682 billion yen.
  • Profit and revenue are expected to outpace year-ago levels starting from the second quarter for the remainder of the fiscal year.
  • Balance sheet: Total assets stood at 31.705 billion yen, and total liabilities at 21.032 billion yen, with the increases driven by higher borrowings for new development land acquisition.
  • Cash flow: Cash used in operating activities was 941 million yen, primarily due to a 1.326 billion yen increase in inventory for development land purchases. Cash provided by financing activities was 1.93 billion yen, driven by a 5.649 billion yen increase in long-term borrowing proceeds for land acquisition.

• New Brand Launch and Property Acquisition

  • The company launched its new brand LOS ARCOS, which is positioned as a new single-building investment condominium that builds on the track record of the company's existing product lines, with improved added value and larger property scale.
  • The company held an open house for the first LOS ARCOS property, LOS ARCOS Sendagi, on March 19, where the new design of the brand was unveiled.
  • The company has acquired a total of 18 properties in the first half of the fiscal year (including 10 in the second quarter), with acquisitions concentrated in high-demand areas of Tokyo's 23 wards, particularly the southern and western districts that the company specializes in such as Setagaya, Nakano, and Meguro. These areas have strong rental demand and are highly attractive for investment properties.

• Shareholder Return Policy

  • The company prioritizes stable and continuous shareholder returns, and announced the introduction of a progressive dividend policy in August 2025. This policy formalizes the company's commitment to avoiding dividend cuts, and aims to maintain or raise dividends whenever possible.
  • The full-year dividend forecast for the 2026 July fiscal year is 13 yen per share, a 1 yen increase from the previous fiscal year.
  • The company operates a shareholder benefit program, with an end-of-April record date that grants an 8,000 yen digital gift, and a combined annual benefit of 16,000 yen when combined with the end-of-October record date. The company uses separate record dates for dividends and benefits to deliver four annual shareholder return opportunities.
  • Based on the share price of 448 yen as of March 17, the combined total yield from dividends and benefits for a 1,000 share holding is 6.5%.

• Strategy Against Rising Interest Rates

  • While recent policy interest rates have reached a 30-year high and market participants are concerned about the impact of rate hikes on the real estate market, the company focuses its portfolio on Tokyo 23 wards, which continue to see positive net population inflow and strong housing demand even amid Japan's overall population decline. Combined with rent increases driven by rising prices, the company has not seen any negative market impacts as of the reporting date.

Meiho Enterprise operates four core business segments, with the following performance in the reporting period:

1. Real Estate Development: This is the company's core segment, contributing approximately 80% of total group revenue. In the second quarter, the segment delivered and transferred 16 properties under the company's main brands EL FARO and MIJAS, with 81% of full-year planned sales already contracted. The segment drove the overall double-digit revenue and profit growth for the company in the period.
2. Construction Business: Supported by stable construction order intake and solid completion results, the segment achieved profitable operations in the second quarter.
3. Real Estate Rental Business: No specific standalone financial results were disclosed in the transcript.
4. Real Estate Brokerage Business: No specific standalone financial results were disclosed in the transcript.

Aggregate company-wide results for the second quarter: Total revenue 14.861 billion yen, operating profit 1.44 billion yen, ordinary profit 1.202 billion yen, in line with the initial plan at the start of the fiscal year.

• Full-year 2026 July fiscal year performance guidance is maintained with no changes from prior announcements. As of the end of the second quarter, performance is progressing in line with the annual plan, and there is no impact to the full-year outlook from the second quarter sales progress.
• ROE is expected to reach 17.9% for the full fiscal year, exceeding the company's 15% target financial strategy metric.
• The 2026 July fiscal year full-year handover target of approximately 37 units across the EL FARO and MIJAS brands is maintained.
• The company confirms it is on track to meet the mid-term management plan targets announced in September 2025, which call for 45.0 billion yen in full-year revenue and 5.2 billion yen in operating profit for the 2028 July fiscal year. Management reports solid progress toward these goals.

• The company identifies rising interest rates as a key external risk to the business, given the recent 30-year high in Japanese policy interest rates and widespread market concerns over impacts to the real estate sector.
• As of the reporting date, the company has not experienced material negative impacts from rising interest rates, due to its concentrated portfolio in high-demand Tokyo 23 wards and the positive impact of rising prices on rental levels. Management will continue to monitor changes in the business environment and respond accordingly.
• No additional material operational risks or failures were discussed in the transcript.

No question and answer section is included in the provided transcript, so no content is available for this section.