Trading value hits record JPY 32T; investment in Five Star Asset Management and 23-hour US equity trading accelerate media-driven new revenue model

Summary

In 1Q FY03/2027, operating revenue reached JPY 17,299M (+52% YoY) and recurring profit JPY 8,856M (+95% YoY), both at record levels. Against the backdrop of record equity trading value of JPY 32.2T (+112% YoY), brokerage commissions and net financial income expanded simultaneously, pushing the recurring profit margin to 51%. Management candidly addressed the structural concentration in select names and large-lot clients, while articulating new revenue initiatives anchored by a YouTube channel with ~1 million subscribers—including a capital and business alliance with Five Star Asset Management and support for 23-hour US equity trading.

Key Points (Earnings Takeaways And Growth Actions)

• Management Strategy And Market View
  • In a market driven by AI semiconductor names, management acknowledged high concentration in select stocks and large-lot clients, noting that shifts in market conditions could alter share composition
  • Retail investors' realized gains reached JPY 108B in 1Q alone, already 50% of the prior full-year total, suggesting ample upside capacity
  • Capital adequacy ratio of 304% is in the safe zone, but management has already revised its payout ratio policy in anticipation of a declining trend
• Current Business Progress And Drivers
  • 62% of in-house equity trading value concentrated in the TSE top 5 names (up sharply from 33% in March), with Kioxia alone accounting for 43%
  • The number of clients executing trades of JPY 100M or more roughly doubled vs. January, and increased application of the commission cap drove the effective commission rate down from 3.1bp to 2.5bp
  • FX trading value declined 18% QoQ on lower USD/JPY volatility from May onward, but revenue held roughly flat thanks to accumulated open interest and account growth
  • The interest rate uplift was fully reflected in 1Q, with segregated client money investment income reaching JPY 2.06B (+JPY 350M QoQ)
• Strategically Important Initiatives And Inflection Points
  • Acquired a 20.95% voting stake in Five Star Asset Management, becoming the largest shareholder; aims to leverage YouTube reach to boost awareness and AUM in active funds
  • Announced plans to support 23-hour US equity trading from day one on December 6
  • Permanently reduced narrowed spreads across 27 FX currency pairs; tie-ups with well-known traders sustaining ~5,000 new account openings per month
  • Introduction of a conversational AI agent approximately doubled the self-resolution rate

Outlook And Strategy

• Full-year guidance is not disclosed. 1Q recurring profit of JPY 8,856M represents 37% of prior full-year recurring profit of JPY 23,812M, indicating strong progress
• Each +25bp in the policy rate is estimated to add ~JPY 750M in annual revenue (assuming JPY 700B in segregated deposits and JPY 400B in borrowings). Further rate hikes from the current 1.00% level would generate incremental upside
• CFD service rollout and 23-hour US equity trading support are positioned as priority initiatives for FY2026
• The Five Star alliance aims to build a new distribution channel targeting YouTube viewers (~70% of whom do not hold Matsui accounts)
• The absence of a fractional share purchase service remains a challenge, constraining the broadening of the investor base for high-priced stocks. Management acknowledges the need but is also exploring alternatives such as single-stock ETFs and 23-hour trading

Positive Factors

• Equity trading value of JPY 32.2T (quarterly record) and average margin balance of JPY 494.4B (+51% YoY), expanding the trading base
• Recurring profit margin of 51% and annualized ROE of 27.5% demonstrate high profitability
• New revenue models leveraging 190M total YouTube views (No.1 in the industry)—including premium IR videos and asset management alliances—are taking concrete shape
• Ranked No.1 in customer satisfaction in the securities category of JCSI (Japanese Customer Satisfaction Index), with brand awareness at 60.6% (No.3 in the industry)
• MATSUI Bank deposit balance surpassed JPY 80B / 200K accounts; the top-tier annual rate of 0.75% linked to securities balances strengthens client asset retention
• Retail investors' realized gains were a robust JPY 108B in 1Q, and margin trading unrealized P&L for Nikkei 225 constituents was in positive territory as of end-June

Concerns And Risks

• 62% of trading value is concentrated in the top 5 names, reflecting high dependence on a single theme (AI semiconductors). Risk of a sharp reversal if the market rotates
• Effective commission rate declined from 3.1bp to 2.5bp; rising share of large-lot trades and intraday margin trades caps commission revenue upside
• Capital adequacy ratio of 304% is on a downward trend (vs. 308% at prior FY-end). Of JPY 575.8B in margin balances, ~JPY 45B is concentrated in the top 20 names, heightening the importance of single-name risk management
• As of July 24, the margin buy unrealized loss ratio was -7.5% for Nikkei 225 names and -22.2% for non-225 Prime names, trending worse
• Lack of a fractional share purchase service may put the company at a competitive disadvantage in broadening access to high-priced stocks
• While industry-wide PTS trading value share is rising, the company does not utilize PTS, meaning its 8% TSE share is diluted on a PTS-inclusive basis

Performance Highlights

In 1Q FY03/2027, operating revenue was JPY 17,299M (+52% YoY), recurring profit JPY 8,856M (+95% YoY), and net income JPY 5,609M (+95% YoY). Record equity trading value of JPY 32.2T and average margin balance of JPY 494.4B were the key drivers, with the recurring profit margin reaching a record 51%. SG&A of JPY 7,123M (+18% YoY) grew well below revenue, driving margin expansion.

Key Revenue Items

• Equity Trading Value: JPY 32.2T (YoY +112%, record high)
• Average Margin Balance: JPY 494.4B (YoY +51%)
• Equity Trading Value Market Share: 8.4% (vs. 8.3% in prior-year period)
• Margin Buy Balance Market Share: 7.8% (vs. 7.9% in prior-year period)
• Effective Commission Rate: 2.5bp (vs. 3.1bp in prior-year period)
• Net Financial Income / Average Margin Balance: 4.6% (vs. 4.5% in prior-year period)
• Recurring Profit Margin: 51% (vs. 40% in prior-year period)
• ROE (Annualized): 27.5% (vs. 15.2% in prior-year period)
• Total Accounts: 1,804,490 (as of end-June 2026)
• New Account Openings: ~11,810/month average
• AUC: JPY 5.9T
• Investment Trust Balance: JPY 707.1B
• FX Trading Value: JPY 129.9T
• FX Open Interest: JPY 307.1B
• FX Accounts: 276,654
• Capital Adequacy Ratio: 304% (after shareholder distributions)

Q&A List

• Q: Regarding investment income on segregated client money trust, was there any front-running of rates ahead of the mid-June rate hike? And what is the outlook for investment yields in 2Q?
  A: We primarily invest in time deposits, so the effect of the December rate hike did not materialize immediately—it comes through as, for example, a 3-month deposit matures and is rolled at the post-hike rate. In 4Q of last fiscal year, the rate hike effect was not yet fully reflected and was phasing in gradually, but in 1Q the full impact of time deposits at the new rate was captured. In addition, heading into the June rate hike, there was a tendency for investment yields to edge up as markets partially priced it in. The 1Q level reflects the combined effect of these two factors.
• Q: On trading value market share—with PTS trading value share rising industry-wide, what portion of your trading flows through PTS? I'd like to confirm whether your share of individual investor brokerage trading value on the TSE is actually increasing.
  A: We understand that Rakuten and SBI route a significant volume to PTS through intelligent order routing. Additionally, the surge in high-priced stock trading since January may have boosted PTS volumes. We do not use PTS for best execution, so our PTS share is negligible. The JPY 32.2T and 8% share figures are based on TSE and Nagoya Stock Exchange combined as the denominator, and the share would indeed look different if PTS were included. That said, we are not seeing customer attrition, so we believe the impact of commission-free trading has not been that significant.
• Q: Could you explain the background behind the investment in Five Star Asset Management?
  A: Our YouTube channel with ~1 million subscribers is generating new value. We see it not only as a distribution channel through our brokerage accounts, but also as a new distribution channel reaching viewers who do not hold accounts with us. Premium IR videos were the first initiative, and this capital and business alliance is the second. By introducing distinctive, high-conviction active funds from Five Star—which has a unique investment philosophy—viewers can purchase them through their respective brokerage accounts, growing the fund house's AUM and revenues. There is precedent: an influencer's introduction propelled a specific India equity fund to become the No.1 India equity fund by AUM in Japan without any advertising, and we aim to replicate that kind of effect.
• Q: On the Five Star investment—you mentioned channel expansion and media enhancement, but do you plan to enter the asset management business as a standalone operation going forward?
  A: This investment is structured as a non-consolidated stake. Whether we increase our ownership will depend on whether this alliance can demonstrate tangible results.
• Q: Why was it necessary to invest capital—what was the rationale for taking an equity stake?
  A: An existing shareholder from Five Star's founding days wished to sell, and we wanted to commit to the asset management business with a meaningful voting interest. Whether we increase our stake going forward will depend on the results generated by the alliance.
• Q: How have business trends and the overall tone been since July?
  A: Trading value is running slightly below June but remains strong. Margin balances on an average basis are roughly in line with June. While stock price declines have affected unrealized P&L, this has not meaningfully shown up in macro-level figures.
• Q: Will Five Star's Mr. Oki appear on "Manaberu Lovely" to discuss stock picks?
  A: What we ask Mr. Oki to do and what format the content takes are topics for future discussion. We are not currently considering his appearance on Manaberu Lovely. The immediate opportunity is supporting his self-branding, given that it is quite rare for a fund manager to have a fund bearing their own name. Investment-focused video content is also something we can pursue right away. Whether Mr. Oki is a fit for entertainment-oriented investment videos is something we will evaluate going forward.
• Q: Is it correct to understand that the Five Star alliance is fundamentally aimed at selling investment trusts to new investors rather than existing clients?
  A: We will of course introduce products to existing account holders, but roughly 30% of the 1 million YouTube subscribers are our clients—the remainder are active investors who hold accounts elsewhere. If they become interested and purchase Five Star funds through their respective brokerage accounts, it will grow the fund house's AUM and revenues. There is precedent: an influencer's introduction propelled a specific India equity fund to No.1 in India equity fund AUM in Japan without any advertising, and we aim to replicate that kind of effect.