Daito Trust Q1 FY2027: Operating Profit Up 15.5% but Net Drops on Investment Loss

Revenue for the April–June period came to ¥480.1 billion (+0.4% year-on-year). Operating profit climbed 15.5% to ¥39.3 billion, and recurring profit rose 13.4% to ¥39.8 billion. The gains were driven by price revisions in the construction business and steady rental income from the property leasing segment. Notably, the construction segment’s gross margin on completed works surged 3.5 percentage points to 27.9%.

However, net profit attributable to owners of the parent fell 1.8% to ¥23.6 billion, weighed down by a ¥4.2 billion investment valuation loss on shares of JustCo Holdings Pte. Ltd. Excluding this one-time charge, underlying profit continued to rise, underscoring the strength of the core business.

While housing starts in April–May 2026 rebounded 21.1% year-on-year, partly due to a rebound from the previous year’s building code revisions, there are early signs of longer loan approval times amid rising interest rates. Still, first-quarter results held firm.

Construction
Completed works revenue fell 5.3% to ¥119.8 billion as last year’s rush of orders ahead of price revisions unwound and financing approvals slowed. Yet gross profit on completed works rose 8.0% to ¥33.4 billion, lifting the margin to 27.9% (+3.5pp). Operating profit jumped 16.9% to ¥9.8 billion. Price revision effects rapidly improved margins. Order intake dropped 21.1% to ¥102.6 billion and the backlog shrank 4.8% to ¥757.7 billion, hinting at near-term headwinds.

Rental Real Estate
Revenue grew 3.9% to ¥307.9 billion and operating profit advanced 15.7% to ¥27.5 billion, driving group earnings. Increased master-leased units and high occupancy sustained rental income. Managed units reached 1,356,363 (up 2.2% from the prior fiscal year-end), and the residential occupancy rate in June was 97.7% (up 0.3pp). The high occupancy rate underpins stable recurring earnings.

Real Estate Development
Revenue contracted 10.6% to ¥29.9 billion, mainly because bulk of sales are skewed to later quarters. Operating profit surged 52.3% to ¥4.2 billion as the impact of acquisition accounting adjustments from the Ascot consolidation eased, and the gross margin improved to 23.8% (+5.6pp).

Other (Nursing Care, Energy, etc.)
Revenue rose 2.9% to ¥22.3 billion, but operating profit dropped 24.2% to ¥2.5 billion due to higher facility investments and staff hiring expenses in the nursing care segment.

Total assets at end of June 2026 rose ¥20 billion from the previous fiscal year-end to ¥1,387.5 billion, mainly driven by increases in property held for sale and development. Cash and deposits fell ¥25 billion. Liabilities grew ¥21 billion to ¥891.9 billion, with short-term borrowings up ¥61.3 billion, while bonus provisions and income taxes payable decreased. Net assets were ¥495.6 billion (down ¥0.9 billion), putting the equity ratio at 35.8% (down 0.7pp), still a healthy level.

Cash flows: operating cash flow was negative ¥41.1 billion due to a rise in property inventories and tax payments. Investing cash flow was negative ¥26.7 billion, largely reflecting the ¥16.2 billion acquisition of THE GLOBAL Co. shares. Financing cash flow provided ¥41.4 billion, as a ¥14.1 billion inflow from disposal of treasury shares and increased short-term borrowings exceeded loan repayments and dividend payments.

The planned annual dividend for FY2027 is ¥163 per share (interim ¥81, year-end ¥82). After adjusting for the 1-for-5 stock split in October 2025, this represents a real increase from the previous year. In May 2026, the company re-introduced an ESOP trust for employees, selling ¥13.4 billion worth of treasury shares to promote employee stock ownership and long-term value creation. Additionally, the committed-type share buyback (FCSR) announced in February 2026 was completed, with a final purchase of 680,000 shares.

Daito Trust left its FY2027 forecasts unchanged from the April 30, 2026 announcement: revenue ¥2,050.0 billion (+3.3% YoY), operating profit ¥142.0 billion (+5.0%), and net profit ¥108.0 billion (+9.1%). First-quarter progress stands at about 23% of revenue and 28% of operating profit, a solid start. Management expects margin improvement in construction and expanding recurring income from rental operations to contribute throughout the year.

Downside risks remain: the potential impact of rising interest rates on construction demand, and goodwill amortization from the THE GLOBAL Co. acquisition.

Between April and July 2026, Daito Trust completed a takeover bid and subsequent squeeze-out of listed real estate developer THE GLOBAL Co. (Tokyo Standard Market), making it a wholly owned subsidiary as of July 31, 2026. The tender offer alone totaled ¥16.2 billion, with the final purchase price to be determined later.

THE GLOBAL Co. specializes in condominium development, building management, and hotel operations, primarily in central Tokyo. Daito Trust identified real estate development expansion as a key pillar of its medium-term plan, and this acquisition marks a major step toward the ¥100 billion investment target for the development business. Expected synergies include cost efficiencies through group-wide construction functions and broader exit strategy options. The company aims to quickly achieve ¥10 billion in operating profit from this unit and is accelerating post-merger integration.

• Rising interest rates may further lengthen loan approvals and cool investor sentiment, potentially reducing construction orders further.
• Elevated construction material costs could squeeze margins if price pass-through stalls.
• Currency and geopolitical risks: a weaker yen and heightened Middle East tensions add uncertainty.
• PMI of THE GLOBAL Co.: goodwill and integration costs may temporarily drag on profits.
• A rental market downturn in a recession scenario could lift vacancies or reduce rents, weighing on recurring income.