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Omega Investment Co., Ltd.

Sansei Landic (Company note – 1Q update)

Coverage
Share price (6/12) ￥1,044Dividend Yield (24/12 CE)3.83 %
52weeks high/low￥1,172/850ROE(23/12 act)10.2 %
Avg Vol (3 month) 30.5 thou shrsOperating margin (23/12 act)9.3 %
Market Cap ￥8.96 bnBeta (5Y Monthly)0.66
Enterprise Value ￥20.54 bnShares Outstanding 8.241 mn shrs
PER (24/12 CE)8.9 XListed market TSE Standard
PBR (23/12 act)0.7 X
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FY12/2024 1Q sales increased while profits decreased, but the result exceeded the company’s forecasts. A new medium-term plan is awaited.

◇Summary of FY12/2024 1Q results: sales up and profits down in line with expectations

Sansei Landic announced its FY12/2024 1Q results on 13 May 2024, with increased sales and decreased profit YoY. Sales were 7.20 billion yen (+11% YoY), operating income was 570 million yen (-49% YoY), ordinary income was 490 million yen (-52% YoY), and net income attributable to owner of parent was 320 million yen (-52% YoY), representing a significant decline in profit. Profit margins were depressed by an increase in the sales mix of Old unutilized properties (which have relatively low profit margins) compared to Leasehold land. However, this performance was better than planned.

The company’s forecasts for the first half and full year and the dividend forecast for the current year have not been revised. These do not surprise. The company’s sales, operating income, and ordinary income exceeded those of the same period two years ago, which endorses that the company’s business is performing steadily.

◇FY12/2024 company forecast: no change

As mentioned earlier, the company’s 2Q and full-year forecasts for FY12/2024 have not been revised. As 1Q progress vis-a-vis the full-year plan is not remarkably high, we want to see whether sales and purchases will remain steady by quarter.

The company will start paying an interim dividend from this financial year. This decision is thought to be based on the fact that the company can now generate quarterly profits with a small margin of fluctuation。This is, therefore, positively evaluated. It will be interesting to see whether this will trigger an increase in new long-term shareholders.

◇Share price trend: announcement of new medium-term plan awaited

The company’s share price has fluctuated between 950 yen and 1,100 yen since autumn last year. Although PER and PBR are not overdone, investors will likely wait for catalysts to turn the share price higher, especially as this year’s results will stagnate against the rapid earnings growth in FY12/2023.

Therefore, in addition to the quarterly progress of purchases and sales, the announcement of the next medium-term plan is awaited. If the company’s distinctive growth strategy is presented, the stock market will become more aware of its stable and difficult-to-imitate growth capacity, and PBR above 1x could come into sight.

 JPY, mn  Net sales  YoY
%		 Oper.
profit		 YoY
%		 Ord.
profit		 YoY
%		 Profit
ATOP		 YoY
%		 EPS
(¥)		 DPS
(¥)
2019/12 18,020 7.1 1,860 5.4 1,758 7.0 1,158 15.1 137.08 23.00
2020/12 17,774 -1.4 847 -54.5 709 -59.7 357 -69.1 42.34 25.00
2021/12 16,836 -5.3 1,117 31.9 999 40.9 609 70.5 73.56 26.00
2022/12 15,513 -7.7 1,469 31.5 1,283 28.4 1,060 73.9 129.61 28.00
2023/12 23,269 49.8 2,155 46.7 1,765 37.5 1,182 11.6 143.79 33.00
2024/12  (CE) 23,700 1.9 1,800 -16.5 1,500 -15.0 1,000 -15.5 121.35 40.00
2023/12  1Q 6,486 45.9 1,118 150.0 1,045 151.6 683 82.2 83.48 0.00
2024/12  1Q 7,206 11.1 570 -49.0 492 -52.9 328 -52.0 39.82 0.00

　

◇FY12/2024 1Q results summary: Sales increased while profits declined YoY, but the results were in line with expectations

Sansei Landic announced its FY12/2024 1Q results on 13 May 2024, with an increase in sales and a decrease in profit with sales of 7.20 billion yen (+11% YoY), operating income of 570 million yen (-49% YoY), ordinary income of 490 million yen (-52% YoY) and net income attributable to owner of parent of 320 million yen (-52% YoY). The profit decline was notable. On YoY, the profit margins were depressed due to an increase in the sales mix of Old unutilized properties (with relatively low profit margins) compared to Leasehold land. However, as shown in the table below, this performance exceeded the company plan.

 There are no revisions to the company’s forecasts for the first half and full year and the dividend forecast for the current year. These do not surprise. The company’s sales, operating income, and ordinary income exceeded those of the same period two years ago, which endorses that the company’s business is performing steadily.

【Profit trends】

Source: Omega Investment from company materials

【Sales trends】

Source: Omega Investment from company materials

【Sales trends and gross margins】

Source: Omega Investment from company materials

Purchases fell by 33% YoY to 3.35 billion yen. While Old unutilized properties grew substantially, purchases of Leasehold land were weak, partly in the absence of the purchases of large properties in the previous year. However, the company mentioned that purchases of Leasehold land are progressing in line with expectation. In addition, the total purchase value increased over the same period two years ago.　

【Purchasing trends】

Source: Omega Investment from company materials

As discussed above, sales fell YoY in the quarter under review, and purchase volumes also declined YoY. However, as is shown next, inventories have remained high since 4Q 2022, and the business is performing well.

【Changes in purchases and inventories】

Source: Omega Investment from company materials

◇Forecasts for FY12/2024: no change. Commencement of interim dividend.

As mentioned earlier, the company’s 2Q and full-year forecasts for FY12/2024 have not been revised. As 1Q progress against the full-year plan is not remarkably high, we are interested to see whether sales and purchases will remain steady from quarter to quarter going forward.

In addition, the company will start paying an interim dividend from this financial year. This should be understood as confidence that the company has laid the foundations to generate profit each quarter. It will be interesting to see whether this will increase the number of new shareholders who are willing to hold the shares for the long term.

【Financial forecasts】

Source: Omega Investment from company materials

【Dividend per share】

Source: Omega Investment from company materials

◇ Share price trend: announcement of new medium-term plan awaited

Since autumn 2023, the company’s share price has fluctuated between 950 yen and 1,100 yen. PER and PBR are not overdone, and the start of the interim dividend suggests that the business base has been strengthened. Therefore, as long as the earnings remain steady, the share price is unlikely to fall significantly below the above range.

However, the company forecasts net income to decline (partly due to the absence of the particularly solid earnings of the previous year), so there is a lack of positive share price catalysts.

For the share price to move upwards again, on top of steady quarterly results for the current financial year in terms of both purchases and profit and loss, the forthcoming new medium-term plan must present a growth strategy that fully demonstrates the company’s strengths. With domestic interest rates likely to rise, the property market could face headwinds. As per the company, investors’ attention will likely dium-term plan to see whether it will use its business platform and wealth of knowledge to strengthen its position in the industry firmly.

According to the company, a new medium-term plan may be announced sooner rather than waiting until the end of FY12/2024. We would await it with great interest.

Financial data (quarterly)

 
2022/12
      
2023/12
      
2024/12
      
 
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
[Sales by segment]
                        
Net sales
4,444
3,721
3,094
4,272
6,486
5,494
7,484
3,805
7,206
      
　Year-on-year basis
-17.2%
-0.6%
-24.3%
17.4%
45.9%
47.6%
141.9%
-10.9%
11.1%
      
　Real estate sales business
4,222
3,721
3,094
4,272
6,486
5,493
7,484
3,806
7,206
      
　　Year-on-year basis
-18.3%
8.3%
-15.9%
31.7%
53.6%
47.6%
141.8%
-10.9%
11.1%
      
　　Sales composition ratio
95.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
      
　  Leasehold land
1,793
1,794
1,284
832
2,707
2,259
1,674
1,613
2,120
      
　　  Year-on-year basis
-48.2%
41.6%
-35.9%
-43.6%
51.0%
25.9%
30.4%
93.9%
-21.7%
      
　　  Sales composition ratio
40.3%
48.2%
41.5%
19.5%
41.7%
41.1%
22.4%
42.4%
29.4%
      
　  Old unutilized properties
2,024
1,556
1,649
3,170
3,571
2,633
5,113
1,821
4,891
      
　　  Year-on-year basis
42.6%
-23.2%
10.8%
175.4%
76.4%
69.2%
210.1%
-42.6%
37.0%
      
　　  Sales composition ratio
45.5%
41.8%
53.3%
74.2%
55.1%
47.9%
68.3%
47.9%
67.8%
      
　  Freehold
315
266
49
157
101
504
603
279
93
      
　　  Year-on-year basis
64.9%
478.3%
-51.5%
-70.2%
-67.9%
89.5%
1140.8%
77.7%
-7.7%
      
　　  Sales composition ratio
7.1%
7.1%
1.6%
3.7%
1.6%
9.2%
8.1%
7.3%
1.2%
      
　  Others
89
105
112
114
105
97
90
96
101
      
　　  Year-on-year basis
-7.3%
10.5%
27.3%
21.3%
19.1%
-8.6%
-19.6%
-15.8%
-4.9%
      
　　  Sales composition ratio
2.0%
2.8%
3.6%
2.7%
1.6%
1.7%
1.2%
2.5%
1.4%
      
　Construction business
222
–
–
–
–
–
–
–
–
      
　　Year-on-year basis
14.0%
–
–
–
–
–
–
  
–
      
　　Sales composition ratio
5.0%
–
–
–
–
–
–
  
–
      
                         
[Statements of income]
                        
Net sales
4,444
3,721
3,096
4,272
6,486
5,494
7,484
3,805
7,206
      
Cost of sales
3,146
2,310
1,963
3,066
4,320
3,859
5,681
3,067
5,520
      
Gross profit
1,297
1,411
1,132
1,206
2,166
1,636
1,803
737
1,685
      
SG&A expenses
850
946
845
937
1,084
1,097
1,127
879
1,115
      
Operating profit
447
466
287
269
1,118
538
675
-176
570
      
Non-operating profit
7
7
6
7
8
6
20
-6
10
      
Non-operating expenses
39
55
54
64
80
165
88
86
88
      
Ordinary income
415
417
239
212
1,045
378
595
-253
492
      
Extraordinary income
19
0
0
1
0
0
0
0
0
      
Extraordinary expenses
    
8
7
0
0
8
1
0
      
Loss before income taxes
435
399
231
205
1,045
378
586
-253
492
      
Total income taxes
59
60
36
54
361
122
199
-109
164
      
Net income
375
338
196
151
683
255
387
-142
328
      
                         
[Balance Sheets]
                        
Current assets
19.018
21,579
26,379
27,929
28,392
29,382
29,233
29,522
28,172
      
  Property for sale
13,304
15,152
20,775
23,657
24,404
24,623
23,490
25,365
23,202
      
Non-current assets
1,124
1,099
1,129
1,047
1,233
1,394
1,399
1,455
2,314
      
   Tangible assets
317
313
314
299
312
529
520
516
1,357
      
   Investments and other assets
761
743
769
701
873
817
836
891
902
      
Total assets
20,134
22,678
27,508
28,976
29,626
30,777
30,632
30,976
30,487
      
Current liabilities
8,153
8,871
11,168
12,606
13,658
16,133
16,375
15,746
15,394
      
   Short-term borrowings
7,170
5,058
7,603
11,366
11,968
13,975
14,470
13,973
14,121
      
Non-current liabilities
1,525
3,114
5,453
5,314
4,405
2,810
2,035
3,153
2,959
      
    Long-Term Borrowings
1,260
2,828
5,153
5,033
4,093
2,545
1,791
2,905
2,665
      
Total liabilities
10
11,968
16,622
17,920
18,064
18,943
18,411
18,899
18,354
      
Total net assets
10,463
10,692
10,886
11,056
11,561
11,833
12,220
12,077
12,133
      
Total shareholders’ equity
10,459
10,688
10,882
11,052
11,562
11,833
12,220
12,077
12,133
      
  Capital stock
821
822
824
833
860
860
860
861
860
      
  Legal capital reserve
782
785
786
796
823
824
824
825
824
      
  Retained earnings
9,023
9,362
9,557
9,708
10,164
10,419
10,807
10,664
10,719
      
  Stock acquisition right
4
3
3
3
–
–
–
–
–
      
Total liabilities and net assets
20,134
22,678
27,508
28,976
29,626
30,777
30,632
30,976
30,487
      
                         
[Statements of cash flows]
                        
Cash flow from operating activities
  
1,184
  
-9,267
  
911
  
-12
        
  Loss before income taxes
  
833
  
1,269
  
1,423
  
1,756
        
Cash flow from investing  activities
  
-205
  
-266
  
-655
  
-766
        
Cash flow from financing activities
  
-559
  
7,971
  
-56
  
303
        
Net increase in cash and cash equiv.
  
420
  
-1,563
  
200
  
0
        
Cash and cash equiv. at beginning of period
  
4,752
  
4,752
  
3,188
  
-475
        
Cash and cash equiv. at end of period
  
5,173
  
3,188
  
3,839
  
3,189
        

Financial data (Full year)

  2013/12 2014/12 2015/12 2016/12 2017/12 2018/12 2019/12 2020/12 2021/12 2022/12 2023/12 2024/12
(forecast)
[Statements of income]                        
Net sales 9,187 10,443 11,567 12,300 13,098 16,833 18,020 17,774 16,836 15,533 23,269 23,700
　YoY change (%) -3.0 13.7 10.8 6.3 6.5 28.5 7.1 -1.4 -5.3 -7.7 49.8 1.9
Cost of sales 6,254 7,055 7,798 8,344 8,566 12,028 12,902 13,788 12,467 10,485 16,927  
Gross profit 2,934 3,389 3,769 3,957 4,532 4,805 5,119 3,986 4,368 5,047 6,342  
SG&A expenses 2,014 2,184 2,470 2,510 2,770 3,039 3,258 3,139 3,250 3,578 4,187  
Operating profit 920 1,205 1,300 1,446 1,762 1,766 1,861 847 1,117 1,469 2,155 1,800
　YoY change (%) 77.9 30.9 7.9 11.3 21.9 0.2 5.4 -54.5 31.9 31.5 46.7 -16.5
　Operating income margin (%) 10.0 11.5 11.2 11.8 13.5 10.5 10.3 4.8 6.6 9.5 9.3 7.6
Non-operating profit 12 14 15 15 12 28 42 88 34 26 28  
Non-operating expenses 122 174 118 133 106 150 144 226 152 212 419  
Ordinary income                   166 272  
Extraordinary income 810 1,044 1,196 1,329 1,669 1,643 1,759 709 999 1,283 1,765 1,500
Extraordinary expenses 85.4 28.9 14.6 11.1 25.6 -1.6 7.1 -59.7 40.9 28.4 37.6 -15.0
Loss before income taxes 8.8 10.0 10.3 10.8 12.7 9.8 9.8 4.0 5.9 8.3 7.6 6.3
Total income taxes         97     32 3 20 0  
Net income attributable to owner of parent         94 104   29   33 9  
　YoY change (%) 810 1,044 1,196 1,329 1,672 1,539 1,759 712 1,003 1,269 1,756  
　Net income margin (%) 354 418 472 475 561 533 600 355 394 209 573  
  456 626 724 854 1,111 1,007 1,159 358 609 1,060 1,183 1,000
[Balance Sheets] 95.4 37.5 15.6 17.9 30.2 -9.4 15.1 -69.1 70.5 73.9 11.6 -15.5
Current assets 5.0 6.0 6.3 6.9 8.5 6.0 6.4 2.0 3.6 6.8 5.1 4.2
  Property for sale                        
Non-current assets                        
   Tangible assets 8,023 7,836 10,366 9,749 15,874 15,745 18,094 19,040 18,968 27,929 29,522  
   Investments and other assets 6,346 5,166 7,699 6,877 11,863 11,678 13,493 14,424 13,301 23,657 25,365  
Total assets 895 957 1,031 1,083 1,042 1,032 1,199 1,030 1,082 1,047 1,455  
Current liabilities 569 603 572 591 467 458 456 306 301 299 516  
   Short-term borrowings 226 258 383 405 494 505 669 655 730 701 891  
Non-current liabilities 8,919 8,793 11,398 10,833 16,916 16,777 19,294 20,071 20,050 28,976 30,976  
    Long-Term Borrowings 4,587 3,165 4,910 3,751 8,430 6,160 9,047 5,772 8,731 12,606 15,746  
Total liabilities 3,362 2,093 3,776 2,622 7,074 4,726 7,203 4,463 7,368 11,366 13,973  
Total net assets 465 367 453 226 479 1,710 351 4,232 1,017 5,314 3,153  
Total shareholders’ equity 419 316 175 84 362 1,320 0 3,879 740 5,033 2,905  
  Capital stock 5,051 3,531 5,363 3,977 8,909 7,869 9,399 10,004 9,748 17,920 18,899  
  Legal capital reserve 3,868 5,262 6,034 6,856 8,006 8,908 9,894 10,066 10,301 11,056 12,077  
  Retained earnings 3,868 5,262 6,034 6,852 8,002 8,904 9,890 10,062 10,297 11,052 12,077  
  Stock acquisition right 257 661 710 720 788 811 814 818 820 834 861  
Total liabilities and net assets 218 622 671 681 749 772 775 779 781 796 825  
Equity ratio (%) 3,393 3,978 4,654 5,451 6,464 7,320 8,302 8,465 8,863 9,709 10,664  
        4 4 4 4 4 4 3 0  
[Statements of cash flows] 8,919 8,793 11,398 10,833 16,916 16,777 19,294 20,071 20,050 28,976 30,976  
Cash flow from operating activities 43.4 59.8 52.9 63.3 47.3 53.1 51.3 50.1 51.4 38.1 39.0  
  Loss before income taxes                        
Cash flow from investing  activities                        
Cash flow from financing activities -664 1,761 -1,451 1,611 -3,666 1,617 -420 -917 1,704 -9,267 -12  
　Issuance of shares 810 1,044 1,196 1,329 1,672 1,539 1,759 712 1,003 1,269 1,756  
Net increase in cash and cash equiv. -175 -111 -116 -184 107 -64 -71 -288 -51 -266 -766  
Cash and cash equiv. at beginning of period 1,136 -612 1,588 -1,278 4,667 -1,495 984 953 -608 7,971 303  
Cash and cash equiv. at end of period   800 97 21 37 45 6 9        
Free cash flow 296 1,039 22 150 1,108 58 493 -251 1,045 -1,563 -475  
[Statements of income] 793 1,089 2,128 2,150 2,299 3,407 3,465 3,959 3,707 4,752 3,189  
Net sales 1,089 2,128 2,150 2,299 3,407 3,465 3,959 3,707 4,752 3,188 2,714  
　YoY change (%) -839 1,650 -1,567 1,427 -3,559 1,553 -491 -1,205 1,653 -9,533 -777  

Source: Omega Investment from company materials

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