Hi, everybody. I'm Scott Callon, Chairman of Ichigo. I'm joined today on my right by Tetsuya Fujita, who is our Lead Independent Director, and on my left, Dan Morisaku, who is a Senior Member of our Finance Team and the Head of Global IR for us. We're speaking against what's right in front of you, the FY 2026, the February 2026 full year corporate presentation. Let's jump into it. I think there's a summary page right before that. There you go. I say there's a summary page. I'm going to go relatively quick through this presentation. Maybe I'm wrong, but we try to be consistent in the way that we present things. Maybe I'm wrong element of this.
I feel like I say the same things every three months, which is probably better than not saying the same things every three months in terms of what our core business activity is and providing you the KPIs and our progress against KPIs. I'll go relatively quickly through this and go through questions and any comments on our business. It is a very strong operating environment, and we're doing well. We've generated record business profit, net income, cash earnings, stock earnings. We'll go through some of the details on this later. We've done both investments for growth and significant buyback activity. We think that the shares are at a historically low level on this year's earnings.
The year that I'm going to describe the forecast, the FY 2027 earnings were at 11x PE and 8x cash PE, in an environment, and I'll talk about this also, where inflation is a strong driver of positive economics for the business model, which is unlike a lot of firms in the world. It is an extraordinary time for us to deliver positive outcomes for our shareholders. Here are some of the details. Again, I'm going to try to choose which areas to focus on. One of the things that you would notice is that we were down year-on-year on cash and income relative to net income. Cash EPS is flat because we were buying back the stock. Just to explain that, on occasion, it's pretty rare, but on occasion, you have a mismatch between how you account for earnings from a tax basis.
If you account for it on a tax basis, earnings, you have to pay taxes on it. There's a cash hit to you. The accounting can be different. What happened is we sold a real estate subsidiary at the end of last year. It was accounted for on a tax basis, but it's being accounted for on an accounting basis. This year, so all I'm saying that cash income, because of a one-off tax effect, is showing down, when in fact it would have been up about also 10%. Nothing odd going on there. We are relentlessly focused on driving high cash flows for our shareholders. That is what we believe in, not accounting earnings, but actual cash earnings. This is also reason why the multiple, the accounting earnings is only 1.1x when it would've been something more like 1.3x.
Anyway, a one-off artifact. You're gonna see a significant increase in cash earnings this year, and I'll also point to that later and say, look, this is not totally real because this is the offset of the underreporting of our earnings from last period. One of the most important things to know is that we have a portfolio of businesses that move with different levels of activity. They are all rooted in our core capability and our core activity of Value-Add. It does mean that within any fiscal period, any year, you're gonna have stuff going up and stuff going down. This is just the same as it always is. On a total basis, we're up 13% on Business Profit. We've got Asset Management down a little bit. We've got Sustainable Real Estate up a lot. We've got Hotel down a bit.
Ichigo Owners up a bit, and Clean Energy down a lot, but totally generates a +13% year-on-year. I'm not gonna go in too much detail on any of these. Hopefully, we designed these presentations to be relatively self-explanatory. It's probably worth pointing out that stock earnings are up in the Asset Management business. Loan earnings were down a little bit, but none of these are particularly material numbers. SRE, Sustainable Real Estate, continues to be the major driver of earnings. Let me just speak to the inflation element that I touched on earlier. It is not a good thing for the world for everything to become more expensive. The impact of the Iran war is proving to be very significant. There are global risks to this. There are country risks to this.
There are company-specific risks to this as investors or companies are gonna take significant higher input costs. This is a negative for the world. It is a good thing for all of us that inflation actually is a very positive feature. It shows up in two ways. It shows up in our balance sheet, that we have already built assets on our balance sheet, about $2 billion worth, JPY 300 billion right now of real estate. It becomes more expensive to build new assets. It means that our assets are already having kind of steel in the ground and buildings built. It means that when new builders come in at higher costs and they're going up at kind of 10% per annum in Japan in terms of construction inflation, it means that our assets are extraordinarily competitive relative to any new assets that would compete with them.
It means we can raise rents because your ability to price rents is all about replacement cost. What does it cost to replace the building and your asset as a competitive building? That's one element. It's less dynamic. It's a static element. We do have a balance sheet of assets that we added value to. The dynamic element is when inflation goes up, raw development, which is the classic development model in Japan, where you tear something down, you build it from nothing, is incredibly expensive. In our Sustainable Real Estate business, we're in the business of not tearing down assets. We keep them, we improve them, and you're putting in several percents of CapEx relative to building costs in order to improve the asset.
The competition is facing inflation, which is against 100%, and we're facing inflation against only a small percentage point, relative to the asset value. It's a way of saying we become extraordinarily more competitive in our core Sustainable Real Estate business when there is high inflation. This is playing out in very powerful economics. We're forecasting for next year a significant amount of growth, and that is durable. Again, inflation, for an Ichigo shareholder, is our friend. Hotels are down. That's primarily, as you can see, Stock Earnings were up year-on-year. That's primarily because we did less asset selling during the year. It's part and parcel. The upcoming year, we're forecasting down a little bit again on hotels, and this is fine.
There's going to be times when we generate a huge amount of profitability off the hotel business. There's times when it's going to be coming less. The point is that we manage on a portfolio basis and we make choices around, again, the core capability and the core activity, adding value between different asset classes. SRE, Sustainable Real Estate, is primarily about offices and retail. Hotel is broken out in this category that's turned to Owners, which is primarily residential. In Owners' case, business profit was up 13% year-on-year. It did, however, come in under forecast, as you can see, and that's because we pushed out some asset sales to the year that we're currently in, fiscal year 2027. To February, the earning environment remains very strong. There has been no backing off from a desire to own Japanese real estate assets.
It's linked in part because Japan is recognized as being incredibly safe and secure in a world that feels not as safe and secure as we all want it to be. It's because you still have the powerful economics, despite Japanese interest rates have gone up, are being well below your cap rate, your NOI coming off an asset. Because inflation, as I just pointed out, is increasing replacement costs, meaning this is a fundamental driver of the ability to raise rents because new assets have to come in at higher rents. You now have a phenomenon where you're able to raise rents on an ongoing basis, and that makes, obviously, real estate more attractive. Clean energy down just a little bit onto higher operating costs. This is how it shapes out. As you can see, it's a relatively nice chart.
Every year, earnings going up. That is not only our goal, it's believe what we need to deliver to all of you. Again, we see a lot of secure growth going forward, and I'll touch on that later. What's most important to us is that we are structurally profitable. That shows up in the left side pie graph. As you can see, our stock earnings, so these are contractually embedded earnings, are about twice our fixed expenses. That means this is a firm that almost went dead but did survive the Global Financial Crisis. One of the things we learned is that we need to be systematically and structurally profitable, and we are. Just going to touch on some elements of the business model. We have both stock and flow earnings. Our cash earnings. That shows up in cash earnings.
Again, we're focused on cash, not just accounting profit, but genuine cash in the door for all of us. Our cash earnings hit a record high this year. Similarly, we have a record high on our stock earnings. You can see they're diversified among a number of categories. It is the case, and this is not something we should run away from and is very powerful. Our Sustainable Real Estate business is just an extraordinary powerful growth and earnings engine. There are elements of us diversifying around it, but certainly not away from it. This is a very powerful engine, as I just told you. One of the things that can go horribly wrong in the world for investors and consumers is inflation. As I just told you, this model is anti-fragile in that sense. It gets stronger during an inflation environment. This is a very powerful business model.
We're selling these assets that we add value to. We generate and monetize gains on them, and yet year after year, we'll continue to generate to create higher unrealized gains in our business, which effectively create forward earnings. At the current point in time, third-party appraisal values put our unrealized gains at about JPY 83 billion. Our total shareholder equity is only about JPY 100. The appraisers say that there's actually another 80% of value underpinning our balance sheet in terms of shareholder equity. If you look at the reality, you can see what the multiple looks like. It is manifestly clear that the third-party appraisals underestimate the amount of actual value that we derive when we go ahead and monetize and sell assets. This year was a big year. We generated 2.9x on actual gains on sales relative to appraisal value.
We think that number is high. However, we think consistently, as you can see, we generate about 2x . I just told you, the appraisers think we have JPY 80 billion+ of unrealized gains on our balance sheet, meaning equity value. In reality, it's probably twice that. We have stated equity of JPY 100 billion. We actually probably have an equity of JPY 260 billion. That makes us less proud of what our ROE looks like. It goes both ways. It tells you that this is a ton of embedded forward earnings, and we're beginning the monetizing process. You should know that by pushing out our sales of some of the Ichigo Owners assets into this current year, the FY 2027 too, we actually ended up with a year with a slight increase in our balance sheet because we didn't do the sales that we expected.
We are actually going into balance sheet shrinkage. We will have a shrinkage in our balance sheet. We would've had it last year. We're going to have it more this year. The business is going to become more asset light and more capital efficient. Economic operating cash flow. Again, we're focused on cash flow is systematically higher than income. Again, we're a cash-driven firm. We have a very strong financial base, overwhelmingly long-term borrowings. As you can see, interest rates have gone up. That is a reality. We're up 43 basis points, relative to where we were two years ago. As you can see in the bottom of the page, 61% of our borrowings are fixed. We use interest rate swaps and caps to hedge interest rate exposure. We generally borrow for about 10 years.
Very specifically, we borrow 10+ years in SRE, Sustainable Real Estate, and hotel businesses. We tend to borrow 15 -20 years in our Clean Energy business. We borrow generally about seven years in the Owners business. We've had some coming in of the loan terms because we're doing increasing amounts of uncollateralized borrowing with no amortization. It's really, really nice borrowing with no covenants, and that generally is three to five years. It's a very, very durable capital structure for the firm both in terms of equity and debt. We continue to work on behalf of the world. Global warming is real. The actions we take, the core activity of the firm is deeply sustainable. We're not in the business of tearing down buildings and wasting assets and wasting value and creating environmental effects from it.
Because we are significantly sustainable in our activity, and Japanese financial institutions also believe in sustainability, it enables us to borrow through ESG as a sustainable loan activity at very, very good terms. We continue to expand this activity. As you can see on the page, we had net acquisitions of about JPY 6 billion. We thought we were actually going to be net sellers for the year. Because, again, we pushed out Ichigo Owners activity, some sales into this current year that we're in right now, we end up being relatively flat for the year. You got some buying and selling in various asset classes. The core activity of the firm is value add. We add value to assets, and when we add value to them, we sell them on. This breaks out the activity among the various key groups. Owners is the highest turnover model.
We generally have a hold of a year or so. That's extended just a little bit to give us some more opportunity. Rents are going up. We finance really well to optimize the final cap rate when we sell the asset to a brand-new owner at the highest possible rent. It's a very high turnover business. You generally have largely offset buying, selling within about a year. Hotel earnings were down year-on-year. That is, as I said earlier, is not because of stock earnings, which continue to grow. As you can see, RevPAR. Revenue per available room was up 12% year-on-year. Because we didn't do a large hotel sale in the year and some impact from hotel performance fees, full earnings were down. We have very little China inbound exposure.
We're not seeing really any effect of that. We, of course, should all be concerned about what's happening in the Middle East right now, its impact on high airfares and how it affects things. On a positive, it probably makes Japan a better and easier destination. On the negative, airplane costs are going up. We are kind of modeling for some negative impact on our hotel business this year. It's about 15% of our earnings. Okay, if something happens there, it's just going to be fine. FYI, this is something we're of course focused on. Owners continues to do well. It has diversified its sales channels in order for it to be able to sell well. I think that's on the next page. No, on the next page shows us business profit. We came in in the last two years.
We're going to see a significant increase, really, actually a doubling year-on-year in this year. Look, we have high visibility on this already. This is going to happen. This is the slide where we show the diversified sales channels. That's super powerful. The different segments in different parts of the market will have some cyclicality to them. We always want to sell at the highest possible price. We do. We work for our shareholders, which is to say, our buyers have alternatives because Ichigo is really good at delivering high-quality assets. We have an active bid from buyers, and we want to have the broadest set of buyers so that we can meet their needs and deliver the highest possible returns for our shareholders. AM growth on diverse growth drivers.
I say it's growth, but the truth of the matter is, this year, we were down a little bit. That was a one-off of some of the owners' activity was expected to be security tokens, which will increase again. So we expect to have growth, and you'll see it visibly in our asset management business. Clean energy. We shifted towards battery storage. The economics have become very, very powerful. There's a negative impact on our solar business, which is, there is effectively some overproduction right now relative to the ability for the grid to accommodate on the solar power production. This actually gets solved with battery storage, not just by us, but broadly, and so we think that it's ratified because battery storage has become incredibly compelling in its economics.
Our major activity you're going to see from us in the near term is going to be around that as opposed to new activity in solar, when we can pick that up again, when the battery infrastructure is in place. We were a J.League top partner. J.League is Japan's soccer league, or as they say, I'm an American, we pronounce football, soccer, the Japanese football league, if you want to put it that way. For a number of years, we're effectively shifting our activity towards the club that we bought, Tegevajaro Miyazaki. We bought in 2023. It was in J3. It got promoted last year. We just think that's a better place to build a brand and build our activities in the sports area. This is not done as charitable enterprises. These are businesses.
We have returns along with brand value creation coming from the sports activity, and that's going to continue to be the case. On the shareholder side, we actually announced a JPY 5 billion share buyback right at the end of the previous period, which began execution in the last year. Actually JPY 15 billion of buyback execution during the February 2026 period, of which we got about JPY 10 billion done. The other JPY 5 billion is in execution right now. We bought a bunch of stock in. We think it was a very good use of capital for our shareholders. We're going to grow EPS both through bottom-line growth and through shrinking the number of shares outstanding. Cash generation is significant. We can afford to do it. As I just told you, we're 11x earnings on an accounting basis.
We're on 8x EPS earnings on a cash EPS basis. The shares are very good value. That's why we've been buying them with a bucket. We have raised our DOE target, and we might well raise it again. Which is to say, if you look over the last five years, we've had double-digit dividend increases. We've shrunk shares outstanding. We want to continue to reward shareholders. The ability to fund growth, we're very capital efficient and becoming more capital efficient, and so the ability to fund growth through growth investments and add capital along the way, and also to increase our dividends and do buybacks is the highest it's ever been. We're reflecting that in a structural permanent dividend increase by raising our DOE target. Based on today's closing price, so we've got above a 3% yield on the stock.
As I said earlier, global climate change is real, and we're focused on doing our best to assuage the effects of that. We've gone to 100% renewable energy at this point. The next page shows how we're climate positive. Our CO2 reduction activity is nine times our CO2 emissions. Turning to the forecast, this is meant to be a summary of it. Hopefully, it's relatively understandable. As you can see, business profit, so that's the best measure of operating income in the firm, is we're forecasting up 21% year-on-year. The other key metrics we're focused on are EPS, which we have up 13%. Cash EPS, which will be up 35%. Again, that's in part because we underreported cash earnings because of this one-off tax effect, tax and accounting mismatch during last year. Robust growth in our business.
That will deliver us a 15% ROE and a cash ROE of 20%. This is how it breaks down. I think I've already spoken to this. Let's go to the next page. Again, we have a portfolio of businesses. One of the things you should know is that every year we announce a terrible forecast for asset management. It's not because we expect to have a terrible year in asset management. It's that we just put in the stock asset management fees. Our primary asset management business is the REITs. We do get performance fees when we generate value and gains on sales in that business, and of course, we do that systematically on an ongoing basis. This is a decision that's going to be made by the REITs, not by us. It is a completely different shareholder set. They're completely different boards.
It's completely separate, independent governance. If there is value add monetization activity in the REIT, we will earn our performance fees, but we're not going to forecast them as us, as Ichigo, because in a sense, it's not our right to do so, and we have no visibility on it. Anyway, the number shows down year-on-year. We think we'll do a lot better than that. Sustainable Real Estate, we're forecasting up 42%. Hotel down 29%. That's again, we had some gains on sale we're not forecasting for this year. Owners, we expect, as I said earlier, to be a double. Clean Energy, I just touched a little bit.
We're having more power suspensions, meaning you have to turn off your delivery of power from solar power plants when there's too much power in the grid, and so we're going to have some impact from that this year. We think that resolves itself over time. We have some SG&A increase also. This is how it breaks out in terms of the various segments, and business profit, again, continuing growth, and we think this is durable and will be long-lasting. Again, cash earnings, we expect to be a record. Business profit, of course, was a record also. I think the next slide is the last one, which shows what stock earnings looks like. A little bit, some balance sheet shrinkage will push down some of the stock earnings.
Again, that's fine because that's balance sheet shrinkage, and we expect to, as I say, have very high capital efficient earnings for you over the next year. Thank you very much, everybody. It is an honor and a privilege to work for you. We look forward to delivering the strong results that you deserve. Thank you so much.