Key Positives From The Results
While progress toward full-year operating income guidance of JPY 17.5B stands at just 11.6% at the H1 mark, the company has beaten initial full-year guidance for five consecutive fiscal years. Inventory of JPY 74.1B (an all-time high) is secured as the revenue base for H2. The DX Real Estate Revitalization segment posted +52.4% YoY revenue growth, while the DX Real Estate Value Enhancement segment saw gross margin expand sharply to 30.3% (+18.9pt YoY), reflecting an ongoing shift toward higher-margin operations.
- DX Real Estate Revitalization:Revenue of JPY 8,744M (+52.4% YoY). Premium renovation and other high-value property sales were key contributors
- DX Real Estate Value Enhancement:Revenue declined 29.0%, but gross margin surged to 30.3% (+18.9pt YoY), driven by selective disposition of high-margin properties
- DX New Construction Real Estate:H1 gross margin of 29.0% exceeded the full-year plan assumption of 20.6%, confirming high project quality
- Real Estate Leasing:Healthcare facility contributions lifted revenue +17.5%, with gross margin of 58.6% demonstrating a stable, recurring earnings base
- Shinhara-Takagi District Development in Koga, Fukuoka Prefecture(~277,000 m²): Land preparation completed in August, with large-scale revenue recognition expected from H2 deliveries
Key Concerns From The Results
Gross margin deteriorated to 22.9% (−8.8pt YoY), while interest expense rose to JPY 655M (+48.5% YoY), both weighing on profitability. Operating income progress of 11.6% is the lowest level in the past six years, and the heavy H2 weighting elevates uncertainty around full-year plan achievement.
- Gross Margin At 22.9% (−8.8pt YoY):Primarily driven by revenue mix shift and project composition differences in DX New Construction Real Estate; gross profit declined by a substantial JPY 1,657M
- Interest Expense Of JPY 655M (+48.5% YoY):Rising rate environment continues to pressure the JPY 74,041M interest-bearing debt load
- Operating Cash Flow At −JPY 9,184M:Heavily negative, driven mainly by inventory build (+JPY 8,804M), with funding reliant on borrowings
- SG&A Of JPY 1,812M (+19.9% YoY):Higher personnel costs and sales commissions are pushing up the fixed cost base
- Equity Ratio At 27.2% (−2.1pt From Prior FYE):Widening gap versus the long-term plan target of 35%+
Focus Areas / Items To Monitor Going Forward
- Timing and revenue scale certainty for large H2 projects in the DX Real Estate Value Enhancement segment (e.g., Shinhara-Takagi district in Koga). Achieving the full-year revenue target of JPY 27,600M (vs. H1 JPY 2,534M) requires booking over JPY 25,000M in H2
- Pace of interest expense increases amid continued rate hikes, and the refinancing schedule for outstanding borrowings. Need to assess interest rate sensitivity on JPY 74,041M of interest-bearing debt
- Timeline for earnings contribution from the Residential Hotel business. JV structure ratios and master lease terms for urban projects in Shibuya, Ginza, and other central locations are key to the medium- to long-term growth trajectory
- Project-by-project delivery schedule and confidence level underpinning H2 operating income of JPY 15,467M
- Status of buyer identification and price finalization for the Shinhara-Takagi district in Koga
- Hedging strategy for rising interest rates and the proportion of floating-rate debt
- Factors supporting potential upside to the DX New Construction Real Estate full-year gross margin assumption of 20.6%
- Total Residential Hotel pipeline value and expected timing of contribution to full-year results
- Timeline for achieving the 35% equity ratio target under the long-term plan
- Funding approach for scaling rental assets from JPY 10.8B to JPY 40.0B by 2031
- BILLION RESIDENCE® ASP trends and the outlook for UHNW demand
- Progress on M&A and strategic alliance pipeline
- Current assessment of free-float market cap and share turnover relative to TOPIX inclusion requirements
Key Financial Highlights
| Item | Value | YoY |
|---|---|---|
| Revenue | JPY 16,833M | −3.1% |
| Gross Profit | JPY 3,846M | −30.1% |
| Gross Profit Margin | 22.9% | −8.8pt |
| Operating Income | JPY 2,033M | −49.1% |
| Recurring Profit | JPY 1,239M | −63.7% |
| Net Income Attributable to Owners of Parent Company (Interim) | JPY 810M | −65.9% |
| EPS (Post-Split Adjusted) | JPY 35.38 | −71.5% |
| Comprehensive Income | JPY 817M | −65.7% |
| Total Assets | JPY 108,212M | +6.1% vs. Prior FYE |
| Net Assets | JPY 29,552M | −1.3% vs. Prior FYE |
| Equity Ratio | 27.2% | −2.1pt vs. Prior FYE |
The decline in gross margin (31.7% → 22.9%) was the primary driver behind the halving of operating income. Beyond the JPY 171M gross profit decline attributable to lower revenue, the JPY 1,486M decline from margin compression was the heavier drag. Combined with a JPY 301M increase in SG&A, operating income fell JPY 1,959M YoY.
Performance By Business Segment
The DX Real Estate Revitalization segment emerged as the largest contributor at 51.9% of revenue, posting top- and bottom-line growth. DX New Construction Real Estate saw revenue decline and segment profit fall 74.5%, reflecting the tough comparison against high-margin projects in the prior year. DX Real Estate Value Enhancement reported lower revenue but higher profit, benefiting from high-margin property dispositions. Real Estate Leasing maintained a steady trajectory, supported by healthcare facility operations.
Segment Performance Table
| Segment | Revenue | YoY | Segment Profit | YoY | Margin |
|---|---|---|---|---|---|
| DX New Construction Real Estate | JPY 4,919M | −34.8% | JPY 883M | −74.5% | 17.9% |
| DX Real Estate Revitalization | JPY 8,744M | +52.4% | JPY 833M | +26.3% | 9.5% |
| DX Real Estate Value Enhancement | JPY 2,534M | −29.0% | JPY 615M | +103.5% | 24.3% |
| Real Estate Leasing | JPY 599M | +17.5% | JPY 265M | +11.9% | 44.3% |
| Other (Brokerage, etc.) | JPY 35M | +228.6% | JPY 415M | +102.8% | - |
*Segment profit is a company-specific metric defined as gross profit less selling expenses and non-operating expenses.
- DX Real Estate Revitalization: Revenue +52.4%. Premium renovation and other high-priced property sales drove the revenue mix share from 33.0% to 51.9%. Gross margin of 14.5% is approaching the full-year plan of 15.0%
- DX Real Estate Value Enhancement: Segment profit surged +103.5% despite lower revenue. Dispositions of high-margin investment properties boosted gross margin sharply to 30.3% (vs. 11.4% in the prior year)
- Real Estate Leasing: Healthcare facility acquisitions and ramp-up drove revenue +17.5%. Gross margin held at a high 58.6%, functioning as a stable recurring earnings base
- DX New Construction Real Estate: Revenue −34.8%, segment profit −74.5%. Primarily a tough comp effect, as the prior year period benefited from concentrated delivery of projects with 50.5% gross margin. H1 gross margin of 29.0% remains above the full-year plan assumption of 20.6%, but scale contracted with the completion of Fukuoka projects "A*G Ropponmatsu" and "THE EDGE Tenjin"
Progress Versus Full-Year Guidance
Revenue progress stands at 27.6% and operating income progress at 11.6% against full-year guidance—both at low levels. However, the company recognizes revenue upon project delivery, which inherently creates quarterly lumpiness. Even in past years with similarly low 2Q progress rates (20.5% in FY2024, 22.1% in FY2022), the company exceeded full-year guidance. Management expects to achieve the plan, backed by JPY 74.1B in inventory as the H2 revenue and profit pipeline.
| Item | Value (2Q Cumulative) | Full-Year Forecast | Progress Rate |
|---|---|---|---|
| Revenue | JPY 16,833M | JPY 61,000M | 27.6% |
| Operating Income | JPY 2,033M | JPY 17,500M | 11.6% |
| Recurring Profit | JPY 1,239M | JPY 16,700M | 7.4% |
| Net Income | JPY 810M | JPY 11,600M | 7.0% |
- Revenue is recognized upon project delivery, creating inherent quarterly lumpiness. Revenue and profit historically concentrate in H2, particularly Q4
- For FY12/2026, large DX Real Estate Value Enhancement projects are planned for H2 recognition, resulting in lower-than-usual H1 progress rates
Changes To Guidance
No revision to guidance. The company maintains the full-year forecast published on February 13, 2026. Management judges that inventory of JPY 74,191M provides a sufficient base to achieve the full-year plan.
Commentary On Shareholder Returns
The FY12/2026 interim dividend is JPY 177 (vs. JPY 165 prior year, +JPY 12 increase). The year-end dividend forecast is JPY 115 (post-split adjusted). On a pre-split basis, the year-end dividend is JPY 345, for a full-year total of JPY 522. The company maintains its dividend policy of a 40% payout ratio target, 6% DOE floor, and progressive dividend commitment. This marks the sixth consecutive year of dividend increases. Additionally, a new shareholder benefit program was introduced starting FY12/2026, offering a JPY 500 digital gift to shareholders holding 100 shares or more.
Financial Position
Total assets expanded to JPY 108.2B alongside the inventory build. Interest-bearing debt has risen to over JPY 74.0B, but the company's high OPM (28.7% on a full-year plan basis) provides a buffer against interest rate exposure. The equity ratio of 27.2% remains below the long-term plan target of 35%+.
- Key Figures
- Leverage Metrics
| Item | Value | Additional Information |
|---|---|---|
| Cash and Deposits | JPY 19,649M | −14.8% vs. Prior FYE |
| Total Inventory | JPY 74,191M | +13.5% vs. Prior FYE |
| └ Properties for Sale | JPY 27,225M | −3.9% vs. Prior FYE |
| └ Properties Under Development for Sale | JPY 46,965M | +26.8% vs. Prior FYE |
| Total Assets | JPY 108,212M | +6.1% vs. Prior FYE |
| Shareholders' Equity | JPY 29,433M | −1.3% vs. Prior FYE |
| Total Interest-Bearing Debt | JPY 74,041M | +12.9% vs. Prior FYE |
| └ Short-Term Borrowings | JPY 20,794M | +22.1% vs. Prior FYE |
| └ Current Portion of Long-Term Debt | JPY 16,548M | +31.9% vs. Prior FYE |
| └ Long-Term Debt | JPY 35,778M | +1.9% vs. Prior FYE |
| └ Bonds (Including Current Portion) | JPY 920M | No change |
| EBITDA | JPY 2,180M | Operating Income JPY 2,033 + D&A JPY 147 |
News Released Alongside The Earnings Announcement
None
Major Announcements During The Quarter
- 2026/05/14Announced a 3-for-1 stock split to lower the investment unit and improve liquidity. Revised interim dividend upward from JPY 175 to JPY 177 Notice Regarding Stock Split, Partial Amendment of Articles of Incorporation Due to Stock Split, and Revision of Dividend Forecast (Increase)
- 2026/05/14Introduced a new shareholder benefit program. Shareholders holding 100+ shares as of December 31 each year will receive a JPY 500 digital gift Notice Regarding Introduction of Shareholder Benefit Program
- 2026/07/10Announced long-term management plan "LA Next Stage 2031," targeting revenue of JPY 103.0B and recurring profit of JPY 22.0B for FY12/2031 Announcement of Long-Term Management Plan "LA Next Stage 2031"
- 2026/07/10Signed a business cooperation agreement for the development of hospice housing and group homes for people with disabilities in Hokkaido. Partnering with Fibergate, Nihon Hospice Holdings, and one other company, with the first project under development in Sapporo Notice Regarding Business Cooperation for Development of Hospice Housing and Group Homes for People with Disabilities in Hokkaido and ICT Communication Infrastructure Development
Large-Shareholding Filings / Material Proposals Over The Past Year
- Eiichi Wakita (Representative Director, including co-holders): 11.49% → 11.38% (2026/04/22) — Stable shareholder holding
- Summerbank LLC: 5.13% → 8.77% (2026/08/05) — Pure investment
- Summerriver LLC: 5.22% → 3.65% (2026/07/31) — Pure investment (fell below 5%)
- Summerbank LLC: 7.43% → 5.14% (Large shareholding report through change report, 2025/10–2026/07) — Pure investment
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