Tokyu Fudosan HD Q1 FY2027: Operating profit up 12.7%, net income down 16.8%

Tokyu Fudosan HD’s first quarter saw revenue slip even as operating profit climbed. Revenue edged down 0.8% year on year to ¥285,774 million. However, gross operating profit expanded 13.4% to ¥76,074 million on lower cost of sales, more than offsetting higher SG&A expenses to lift operating profit 12.7% to ¥46,593 million. Ordinary income rose 8.6% to ¥40,725 million.

Net income attributable to owners of the parent fell 16.8% to ¥25,502 million, primarily because the year-earlier quarter included a ¥9,466 million gain on sale of shares in an affiliate that did not recur. As a result, pre-tax profit dropped 13.8%, dragging down the bottom line.

By segment, Property Management & Operations posted a sharp profit jump, while the mainstay Urban Development business logged declines in both revenue and profit. Strategic Investment swung to a profit, and Real Estate Brokerage profit fell.

The four reporting segments, Urban Development, Strategic Investment, Property Management & Operations, and Real Estate Brokerage, displayed mixed fortunes.

Urban Development revenue dropped 26.9% to ¥71,498 million, and segment profit plunged 46.3% to ¥11,596 million, likely reflecting fewer condominium deliveries. The segment margin narrowed to 16.0% from 21.9% a year earlier.

Property Management & Operations revenue jumped 27.1% to ¥98,124 million, while segment profit soared 374.5% to ¥21,157 million, driven by a recovery in hotels and resorts, as well as growth in senior housing and building management. The segment became the largest profit contributor, with margins improving sharply to 20.9% from 5.5%.

Strategic Investment revenue rose 27.8% to ¥21,879 million, and the segment turned a profit of ¥590 million, compared with a loss of ¥593 million a year ago, helped by renewable energy facilities and logistics rental income.

Real Estate Brokerage revenue slipped 1.6% to ¥94,271 million, while segment profit declined 20.1% to ¥16,345 million, likely reflecting softer brokerage commissions and narrower buy-and-resell margins.

Total segment profit rose 9.9% to ¥49,688 million, which after adjustments resulted in consolidated operating profit of ¥46,593 million.

Total assets stood at ¥3,475,651 million, up ¥56,599 million from the prior fiscal year-end, mainly due to increases in real estate for sale and investment securities. Net assets amounted to ¥929,992 million, and the equity ratio held almost flat at 26.2%, versus 26.3% at the previous year-end. Book value per share rose to ¥1,276.89.

The annual dividend forecast is ¥50.00 per share (interim ¥25.00, year-end ¥25.00), up ¥2.00 from the prior year’s ¥48.00, marking the second consecutive year of dividend hikes. The number of treasury shares decreased by approximately 500,000 shares during the quarter. Cash and deposits declined to ¥152,700 million from the prior year-end, while holdings of marketable securities increased, indicating diversified funding.

While the quarterly report did not flag specific risks, the following points merit attention for the real estate business:

• Interest rate risk: With large interest-bearing debt, a further rise in rates could lift interest costs. Interest payments in Q1 rose 35.7% year on year to ¥6,135 million.
• Condominium market: The slowdown in Urban Development suggests that condominium sales trends could affect full-year performance.
• Foreign exchange: Overseas operations and investment securities carry currency risk. The foreign currency translation adjustment expanded to ¥70,071 million.
• Intensifying competition: Price competition and talent acquisition remain challenges in brokerage and property management.

Tokyu Fudosan HD left its full-year consolidated forecasts unchanged, maintaining the original plan:

First-quarter progress against these targets came to 20.4% for revenue and 24.5% for operating profit, a solid start. The company expects the strong performance in Property Management & Operations to continue driving full-year profit growth. The company sees the operating-profit uptrend continuing through the fiscal year.