Earnings Call: Q2 2026

Nov 10, 2025

Summary

All segments beat initial H1 forecasts, with record first-half ordinary profit and strong stock-type growth. FY2028 targets include JPY 135.0 billion net sales, JPY 27.0 billion ordinary profit, and ROE above 14%.

I am Hirahara, General Manager of the Corporate Planning Department. I will now provide an overview of the financial results up to page 15. First, I would like to explain the positioning and policy of the current fiscal year within our group. Celebrating our 26th anniversary this year, our group has consistently operated under the corporate motto of altruism. Guided by the philosophy, we believe in helping others as many as we can throughout our lives, we have focused on developing our human capital and sustainably growing and expanding our business. 12 years ago, we set the goal of becoming a JPY 100 billion company in net sales, 10 times larger within 10 years, which we achieved in the previous fiscal year. Starting this fiscal year, we have embarked on the challenge of realizing our Long-Term Vision 2035. Our goal is utilize limited resources to fill the world with smiles and excitement. Becoming a corporate group that continues to challenge the creation of future value. Through our business endeavors, we are committed to contributing to the happiness of people and the evolution and advancement of society. Next, in the first year of the new medium-term management plan, the performance summary of this second quarter shows that all segments exceeded their initial forecasts, achieving year-on-year growth in both net sales and profit. On a profit basis, we have reached approximately 60% of the full-year forecast. Topics include M&A activities in both the hotel operations and construction businesses. Additionally, the group published its first integrated report. Next, I will explain the key management indicators based on the consolidated income statement and balance sheet. Due in part to the concentration of property sales in the second half of last fiscal year, results have significantly exceeded those of the same period last year, as shown here. As a result, one of our key management indicators, the ordinary profit margin on net sales, reached 23.4%, surpassing our target of 20%. Another key indicator, the equity ratio, remains at a high level of 45.8%. Compared with the same period last year, when property sales were concentrated in the second half, all segments achieved significant year-on-year growth in both net sales and profit. On the other hand, progress toward the full-year forecast stands at approximately 50% for net sales, 55% for gross profit, and 60% for ordinary profit. Going forward, our group will continue to practice its management philosophy, striving to maximize corporate value and contribute to the resolution of social issues. This chart shows the trend of ordinary profit on a quarterly basis. The first half of the fiscal year achieved a record high. In addition, the second quarter represents the second highest quarterly result following last year's fourth quarter. We will continue to make every effort to minimize quarterly fluctuations as much as possible. Next, I will discuss the consolidated balance sheet. Total assets amounted to JPY 237.7 billion, an increase of JPY 19.5 billion compared with the end of March this year. The main drivers of this increase were active property acquisitions in both the office and hotel segments, while continuing to promote property sales. Interest-bearing debt stands at JPY 106.2 billion. Our group's financial soundness and strict property acquisition standards are highly regarded by our banking partners. Leveraging this financial capability, we will continue to pursue proactive growth investments. Next, I will discuss performance by business segment. In our core replanning business, the segment profit margin stands at a high 30.1%, reflecting the high added value we provide. At the same time, we are advancing both new property acquisitions and the commercialization and sale of existing properties. Progress toward the full-year forecast is on track for both net sales and gross profit. Next, I will discuss property acquisitions. By the first half of the fiscal year, we had already reached nearly the full-year level of the past two years. As a result, we raised our full-year acquisition target by JPY 15.0 billion to JPY 70.0 billion. In the second half, we will continue to maintain strict acquisition standards while focusing on strengthening our inventory. On the left is the breakdown of property acquisitions totaling JPY 50.0 billion for the first half of the fiscal year by product type. On the right is the composition ratio by product type of inventory assets totaling JPY 122.9 billion as of the end of the first half. From these two charts, I have highlighted three points. First, the balance of short-term and medium- to long-term portfolios. Second, diversification of our property types. Third, expansion of new businesses. This chart shows the actual and forecasted gross profit from inventory assets and property sales. Based on these results, we aim to achieve this fiscal year's performance forecast while continuing to accumulate unrealized gains on inventory assets shown at the bottom right, which will contribute to future performance. The real estate services business operates in a complementary and integrated relationship with the replanning business, serving as a platform that provides a one-stop, high value-added value chain within our group. In this context, the rental conference room business has grown in significance and is therefore reported separately from this period onward. Other segments are performing steadily, further strengthening the trust and confidence of our clients, including property owners. In the hotel and tourism business, we continue to make proactive investments while identifying and carefully selecting candidate sites that align with our business model. In our hotel operations business, progress toward the full-year forecast for gross profit is approximately 70%. Moving forward, we will continue to ensure that our guests enjoy an even more delightful stay, thanks to the warmth and attentiveness of our staff. At the same time, we will work together with local communities to leverage local resources and create vitality in the regions where we operate. Finally, in the construction business, progress toward the full-year forecast for gross profit has exceeded 80%, reflecting strong performance. In our overseas development business, the second condominium project in Vietnam is currently underway. I am Saito, the President and CEO. I would now like to provide an overview of our growth strategies and business initiatives. First, as a preface, let me briefly comment on the current business environment, which is summarized on this slide. The impact of U.S. tariff policies, which had been a concern at the outset, has not been as significant as initially expected, and a moderate recovery has continued. In the financial markets as well, partly due to the United States resuming interest rate cuts as anticipated, conditions have remained relatively stable. However, inflation remains elevated and geopolitical risks persist, leaving the outlook for the global economy uncertain. Amid such circumstances, both the domestic office and hotel markets, our core business foundations, remain solid. Although the pace of increase has become somewhat more moderate, we expect office rents and hotel room rates to continue their upward trend for the time being. While remaining fully prepared for sudden changes in the global economy and financial environment, we will continue to steadily advance our business in line with our plans. Next, here is an overview of our Long-Term Vision 2035 and our medium-term management plan, which we began implementing this fiscal year. Under this medium-term management plan, our basic policy is working to resolve social issues by promoting cooperation and diversification within core business, providing manufacturing through clients' point of view and heartwarming services. We are steadily implementing various strategies and initiatives based on this policy. By the final year of the plan, the fiscal year ending March 2028, we aim to achieve net sales of JPY 135.0 billion and ordinary profit of JPY 27.0 billion. In addition, we will work to maintain an equity ratio of around 45%, an ordinary profit margin of 20%, and to achieve ROE of over 14%. In our growth strategies, we are pursuing a business model that combines both manufacturing and services. By efficiently circulating and deploying capital, we aim to expand our business domains and accelerate growth. In the office segment, in addition to our existing building revitalization projects, we are placing greater emphasis on new development projects. We are also advancing replanning and small lot real estate investment business, including new initiatives in Osaka. In the hotel segment, we are working to increase the number of hotels under our management through a combination of new construction, renovation and active utilization of M&A. In the residential segment, we are developing new condominium projects primarily in Tokyo. In parallel with expanding these businesses, we are also working to transform our earnings structure. In our flow-type businesses, which generate gains primarily through property sales, we are promoting diversification across asset types. In our stock-type businesses, we are promoting diversification into adjacent fields. While steadily increasing overall revenue, we aim to raise the proportion of stock-type businesses, which are more resilient to market fluctuations. Under our medium-term management plan, we project a 35% increase in total revenue over the three-year period. Of this, we expect a 21% increase in flow-type businesses and a 53% increase in stock-type businesses. As a result, we plan to increase the share of stock-type businesses in total revenue from the current 30% to 35%. Next, regarding our capital investment plan, we expect to invest a total of JPY 310.0 billion over the three years of the medium-term management plan. We plan to allocate approximately JPY 200.0 billion to the replanning business, JPY 21.0 billion to small lot real estate investment products, and JPY 70.0 billion to hotel development. In addition, we have earmarked JPY 10.0 billion for M&A and related investments. In executing these investments, we will consistently evaluate capital costs and financial efficiency, while proactively investing to accelerate our future growth. Next, I would like to provide an update on our recent progress. First, let me explain the progress in our flow-type businesses. This graph shows net sales and gross profit derived solely from the sale of properties, such as RP properties and hotel properties. For the current fiscal year performance, the figures in the graph include not only the results up to the end of September, but also the transactions for which settlement was completed between October 1st and the date of yesterday's earnings announcement, as well as those already under contract and scheduled to be settled within this fiscal year. Taking these factors into account, progress for the current fiscal year is approximately 54% of the full-year forecast as of the end of the roughly seven-month period. Next, I will discuss our stock-type business. This chart shows the trends in net sales and gross profit for businesses other than property sales, namely our real estate services and hotel operation businesses, which generate revenue without selling assets. Thanks to strong performance, our stock-type businesses achieved increases in both revenue and profit in the first half, reaching record highs. Net sales were JPY 20.6 billion, up 33% year-on-year, and gross profit was JPY 7.5 billion, up 53% year-on-year, marking substantial growth. In addition, progress toward the full-year forecast has been solid, reaching 58% for net sales and 69% for gross profit. Next, this chart illustrates the extent to which our stock-type businesses cover fixed costs such as SG&A expenses and interest payments. Three years ago, the coverage ratio was approximately 70%. It improved to around 90% in the previous fiscal year, and in the current fiscal year, it is expected to exceed 100%. Next, I would like to provide a more concrete overview of our initiatives in both flow-type and stock-type businesses. First, the replanning business in our flow-type segment. This is one of our core businesses, and since the establishment of the company, we have accumulated a total of 522 projects. As a recent example, let me introduce one case. This is an office building located in Chuo Ward, Tokyo. The basement level had previously been used as a warehouse. After acquiring the property, we converted the basement into a set-up office. Since it is an underground floor, lighting was a key design element. By incorporating various ideas, such as the efficient placement of warm-toned pendant lights and indirect lighting, we created a bright and comfortable space. Thanks to these efforts, tenant leasing progressed smoothly, rental income increased, and we successfully sold the building as a highly profitable property. Next, I will discuss our new building development business. Leveraging the high-value-added redevelopment expertise we have cultivated through our replanning business, we are developing new office buildings in the five central wards of Tokyo. The photo on the right of the slide shows a recent example, a new office building project in Minato Ward. Designed to foster creativity, the building features a rooftop terrace with panoramic views and an exclusive lounge that encourages interaction among tenants, combining sophisticated design with comfort. Next, I would like to explain our small-lot real estate investment business under the specified joint real estate ventures scheme. In this business, we primarily sell buildings operated under long-term leases to tenant companies closely connected to the local community, such as childcare centers and medical clinics, as fractional ownership real estate products. While our main focus is on properties located in and around central Tokyo, we have also begun developing projects in the Kansai region in response to investor demand for geographically diversified investments. Next, I would like to discuss our residential development business. This business was newly launched last year, and we are currently progressing projects at the four locations listed here. We plan to develop high-value-added, whole-building rental condominiums that incorporate features suited to modern lifestyles, such as soundproofing and pet-friendly facilities. Our primary focus will initially be on Tokyo's five central wards and the seven adjacent wards. Next, I would like to discuss our apartment renovation business in New York. We launched this business in 2019. Since then, we have acquired a total of 12 buildings, completed renovation and redevelopment, and sold seven of them. For the current fiscal year, we plan to sell three buildings. Next, I will turn to our stock-type businesses, starting with the real estate services business. Our real estate services business encompasses a wide range of activities, including rental brokerage, sales brokerage, property management, building management, and delinquent rent guarantee services. These functions work together in an integrated manner to build a multidimensional business model. In the rental brokerage segment, we opened a new branch in Ueno in October. We will continue to focus on central Tokyo, providing highly detailed, localized services to further strengthen our customer base. In addition, our property management business has been steadily expanding the number of properties under management. In the first half of the fiscal year, we added 27 buildings, bringing the total number of managed properties to 569 as of the end of September. In addition, our rental conference room business has been performing strongly, and we have been actively opening new locations to expand the total operating area. We currently operate 18 locations with a total operating area of 9,963 tsubo. We are steadily expanding and progressing toward our medium-term management plan target of 16,000 tsubo over the next three years. Next, I will discuss our hotel operation business, which is also part of our stock-type segment. Thanks to strong performance, this business continues to expand steadily. In the current fiscal year, we added three hotels through new openings and one through M&A, bringing the total number of operating hotels to 32, with a total of 3,649 guest rooms. Including hotels under construction and properties for which land has already been acquired and development plans are being formulated, the total is expected to increase to 48 hotels with 6,183 guest rooms. This slide shows a list of these hotels. Next, I would like to show the performance trends of our hotel operations business. Both occupancy rates and average room rates have continued to rise, and overall performance has been steadily improving. While strong inbound demand and the impact of the Osaka-Kansai Expo have contributed, the business has achieved high occupancy and profitability primarily due to our continuous efforts to enhance service quality and operational capabilities. Through October of the current fiscal year, operations have been particularly strong, with hotels such as Hiyori Hotel Osaka Namba Station and Tabino Hotel Lit Matsumoto maintaining full occupancy on a daily basis. Going forward, under our management policy of providing heartwarming and fun hotels, we will continue to further enhance our service capabilities, deliver experiences that exceed customer expectations, and drive the continued growth of our business. Finally, I would like to discuss our construction business. Last month, we acquired 100% of the shares of the Otake Kenso Group through an M&A transaction. The company is a construction firm specializing in the design and installation of windows, including sashes and glass. With many highly skilled technicians and its own factory in Tokyo, the company is expected to generate significant synergies with our business in terms of both quality and responsiveness. It has annual sales of approximately JPY 5.0 billion and 115 employees. By combining the strengths of both companies, we aim to further strengthen our business foundation in construction-related fields and drive the expansion of our overall performance. This concludes my explanation of the initiatives in each of our business segments. Next, I would like to provide a brief explanation regarding management with a focus on capital costs and stock price. First, regarding shareholder returns, we are committed to long-term and stable returns based on the basic policy outlined here. For the current fiscal year, we will pay an interim dividend of JPY 38 per share in line with the initial forecast. Next, I would like to discuss the long-term trend of our stock price. Since the COVID-19 pandemic, our stock price has steadily risen. Of course, this has been supported in part by the overall strength of the stock market. However, we believe that sustainable long-term growth in EPS is fundamentally what drives long-term stock price appreciation. Going forward, we will continue to expand and grow our businesses, improve our performance, and increase EPS. In addition, we are also working to improve ROE from the perspective of capital costs. This slide summarizes our key initiatives to enhance ROE. All business divisions are working together to focus on profitability and capital efficiency, aiming to increase ROIC and, in turn, improve ROE. We are targeting ROE over 14% and working to further improve it beyond this level. In addition, we are committed to ensuring that both ROIC and ROE consistently exceed our WACC and cost of equity, respectively. We believe that this approach will steadily drive an increase in our PBR as well. In addition, we will continue to strengthen our IR activities. We are working to further enhance our IR disclosure materials, including foreign language versions, and will actively engage in dialogue with all of our stakeholders. Finally, I would like to announce that we have published our first integrated report. This report provides a comprehensive overview of both financial and non-financial information, including our management philosophy, growth strategies, and sustainability initiatives. It serves as an important roadmap for enhancing our long-term corporate value. By utilizing this report, we aim to further strengthen communication and engagement with all our stakeholders. We sincerely appreciate your continued support and understanding.