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Omega Investment Co., Ltd.

Sansei Landic (Company note – 3Q update)

Coverage
Share price (12/13) ￥981Dividend Yield (24/12 CE)4.2 %
52weeks high/low￥834/1,172ROE(23/12 act)10.2 %
Avg Vol (3 month) 12.2 thou shrsOperating margin (23/12 act)9.3 %
Market Cap ￥8.42 bnBeta (5Y Monthly)0.43
Enterprise Value ￥19.3 bnShares Outstanding 8.584 mn shrs
PER (24/12 CE)8.1 XListed market TSE Standard
PBR (23/12 act)0.6 X
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The July-September period was fine. The Company looks more likely to achieve its full-year earnings targets.

◇ FY12/2024 3Q financial highlights: The sales for the year’s second half are progressing ahead of schedule.

Sansei Landic’s (hereafter referred to as ‘the Company’) financial results for 3Q FY12/2024, announced on 12 November, 2024, showed a YoY revenue increase and decreased profits. However, since earnings are growing ahead of the Company’s financial forecasts for the year’s second half, the financial results give a sense of security about the full-year results.

Specifically, sales were 21.35 billion yen (+ 9% YoY), operating income was 1.81 billion yen (- 22% YoY), ordinary income was 1.58 billion yen (- 21% YoY), and net profit attributable to owner of parent was 1.05 billion yen (- 20% YoY). In the same period of the previous year, sales and profits increased sharply, and this year’s targets are a high hurdle to clear. However, actual results are progressing ahead of the sales schedule for the year’s second half, and revenue has increased. In addition, the level of profits is also high compared to the previous period. This is taken as a positive sign.

Looking at the breakdown of sales results, the proportion of the Leasehold land segment increased YoY, which has contributed positively to gross profit. However, due to some low-profitability projects involving Old unutilized properties in the first half, gross profit decreased despite the increase in revenue, and operating income declined.

Cumulative purchases totaled 13.07 billion yen (down 4% YoY) and are on track to meet the annual purchase plan of 15.8 billion yen. The efforts to strengthen systematic sales to major suppliers are paying off. Looking at the composition of purchases, while there was a significant increase in purchases of Old unutilized properties and Freehold, there was a significant YoY decrease in purchases of Leasehold land, but purchases of approximately 2 billion yen are expected in the 4Q. As a result, the Company has stated that the total purchases for FY12/2024 will likely approach the actual results for FY12/2023 (18.6 billion yen). Furthermore, the Company has mentioned that it will not change its cautious stance on purchases and will not make any unreasonable purchases.

On the balance sheet, the sales of Old unutilized properties has progressed, and the balance of property for sale has decreased compared to the end of the previous fiscal year. In response to this, borrowings have also been reduced.

◇ Full-year financial forecast : No change from the initial plan

There are no changes to the full-year financial forecasts or dividends. Sales are 23.7 billion yen (+ 1% YoY), operating income is 1.8 billion yen (- 16%), ordinary income is 1.5 billion yen (- 15%), and net profit attributable to owner of parent is 1 billion yen (- 15%). The dividend per share is 41 yen (an increase of 8 yen; the 11th consecutive year of an increase). The acquisition of treasury stock is scheduled to be carried out in stages from 2025 onwards.

The progress ratio against the full-year plan shows that the Company has already achieved its profit targets. As mentioned earlier, this is because the progress in the year’s second half has been faster than expected. It is somewhat disappointing that the Company has not revised its full-year forecast upwards this time, but there is no need to view this negatively, as it is expected that sales in the 4Q will be more subdued than in the 3Q, and profits will also level off.

◇Share price trend and future highlights

The share price has been hovering from 950 to 1,000 yen since the announcement of the 2Q results and the new medium-term plan on August 9. The share price is not overheated, with a forecast PER of around 8 times, a PBR of 0.64 times, and a forecast dividend yield of around 4.2%. As the Company’s stable growth trajectory becomes clearer and management becomes more conscious of the cost of capital and the share price, we believe the share price will realize an upside.

From this perspective, the points to watch for in the near term are whether the total amount of purchases for the full year of FY12/2024 will steadily increase and approach the FY12/2023 result (18.6 billion yen), whether the content of these purchases will generally be high-quality projects, whether the Company will further strengthen its foundations in the core existing businesses, i.e., Leasehold land and Old unutilized properties, when and how will the business potential of derivative businesses and regional revitalization businesses be visualized, and how the Company will implement the acquisition of treasury stock and strengthen its shareholder return measures. We look forward to the announcement of the FY12/2024 financial results.

Company profile

Sansei Landic Co., Ltd. operates a real estate rights adjustment business. The Company makes a profit by adjusting the rights to properties it has purchased, mainly leasehold land and old unutilized properties, and then reselling them. It has captured stable profit opportunities in niche markets. In August 2024, the Company announced a new medium-term plan covering the period from August 2024 to fiscal 2027. ROE and PBR are expected to improve due to the growth strategy and improved capital efficiency.

Key financial data

Unit: million yen 2019/12 2020/12 2021/12 2022/12 2023/12 2024/12
CE
Sales 18,020 17,775 16,836 15,533 23,269 23,700
EBIT (Operating Income) 1,861 847 1,118 1,469 2,155 1,800
Pretax Income 1,759 712 1,004 1,270 1,756 1,500
Net Profit Attributable to Owner of Parent 1,159 358 609 1,060 1,183 1,000
Cash & Short-Term Investments 4,134 4,330 5,361 3,837 3,770  
Total assets 19,294 20,071 20,051 28,977 30,976  
Total Debt 7,203 8,342 8,108 16,399 16,879  
Net Debt 3,069 4,012 2,747 12,562 13,109  
Total liabilities 9,399 10,004 9,749 17,921 18,899  
Total Shareholders’ Equity 9,895 10,067 10,302 11,056 12,077  
Net Operating Cash Flow -420 -917 1,705 -9,268 -12  
Capital Expenditure 304 304 304 304 304  
Net Investing Cash Flow -71 -288 -51 -267 -766  
Net Financing Cash Flow 984 953 -608 7,971 303  
Free Cash Flow -446 -923 1,682 -9,282 -291  
ROA (%) 6.42 1.82 3.04 4.32 3.95  
ROE (%) 12.32 3.58 5.98 9.93 10.23  
EPS (Yen) 137.1 42.3 73.6 129.6 143.8 121.4
BPS (Yen) 1,170.2 1,192.9 1,249.5 1,356.8 1,465.5  
Dividend per Share (Yen) 23.00 25.00 26.00 28.00 33.00 41.00
Shares Outstanding (Million Shares) 8.46 8.47 8.47 8.49 8.58  

Source: Omega Investment from company data, rounded to the nearest whole number.

　

Share price

　

FY12/24 3Q financial result

As mentioned above, profits decreased while revenue increased YoY in the 3Q of FY12/2024. However, profits were higher than the level of the year before last. Please check the following.

Source: Company materials

Source: Company materials

Source: Company materials

Source: Company materials

Financial data (quarterly basis)

Unit: million yen 2022/12 2023/12 2024/12　
  3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
(Income Statement)                  
Sales 3,096 4,272 6,486 5,494 7,485 3,804 7,207 5,785 8,358
Year-on-year -24.3% 17.4% 45.9% 47.6% 141.8% -11.0% 11.1% 5.3% 11.7%
Cost of Goods Sold (COGS) 1,964 3,065 4,320 3,858 5,681 3,067 5,521 4,228 6,448
Gross Income 1,132 1,207 2,166 1,635 1,803 737 1,686 1,558 1,910
Gross Income Margin 36.6% 28.2% 33.4% 29.8% 24.1% 19.4% 23.4% 26.9% 22.9%
SG&A Expense 845 938 1,048 1,097 1,128 914 1,115 1,102 1,125
EBIT (Operating Income) 287 269 1,118 539 676 -177 571 455 785
Year-on-year -15.1% 197.7% 150.0% 15.6% 135.5% -165.8% -49.0% -15.5% 16.2%
Operating Income Margin 9.3% 6.3% 17.2% 9.8% 9.0% -4.7% 7.9% 7.9% 9.4%
EBITDA 297 286 1,145 559 692 -161 587 476 806
Pretax Income 231 205 1,046 378 587 -254 493 369 728
Consolidated Net Income 196 151 684 256 387 -144 328 245 485
Minority Interest 0 0 0 0 0 0 0 0 0
Net Income ATOP 196 151 684 256 387 -144 328 245 485
Year-on-year 34.7% 145.2% 82.2% -24.4% 97.9% -195.1% -52.0% -4.0% 25.2%
Net Income Margin 6.3% 3.5% 10.5% 4.7% 5.2% -3.8% 4.6% 4.2% 5.8%
                   
(Balance Sheet)                  
Cash & Short-Term Investments 4,979 3,837 3,569 4,266 5,388 3,770 4,479 4,988 4,728
Total assets 27,509 28,977 29,627 30,777 30,632 30,976 30,487 30,561 29,940
Total Debt 12,757 16,399 16,061 16,520 16,262 16,879 16,787 16,211 15,595
Net Debt 7,778 12,562 12,493 12,254 10,874 13,109 12,308 11,223 10,867
Total liabilities 16,622 17,921 18,064 18,944 18,412 18,899 18,354 18,163 17,173
Total Shareholders’ Equity 10,886 11,056 11,563 11,833 12,220 12,077 12,133 12,398 12,768
                   
(Profitability %)                  
ROA 4.10 4.32 5.50 4.81 5.08 3.95 2.75 2.66 3.02
ROE 9.19 9.93 12.43 11.42 12.79 10.23 6.98 6.74 7.32
(Per-share) Unit: JPY                  
EPS 24.1 18.6 83.5 31.0 47.0 -17.4 39.8 29.7 58.6
BPS 1,340.3 1,356.8 1,406.1 1,435.9 1,482.9 1,465.5 1,472.3 1,501.2 1,542.9
Dividend per Share 26.00 28.00 28.00 28.00 28.00 33.00 33.00 33.00 33.00
Shares Outstanding(Million shares) 8.48 8.49 8.58 8.58 8.58 8.58 8.58 8.58 8.58

Source: Omega Investment from company materials

Financial data (full-year basis)

Unit: million yen 2013/12 2014/12 2015/12 2016/12 2017/12 2018/12 2019/12 2020/12 2021/12 2022/12 2023/12
(Income Statement)                      
Sales 9,189 10,446 11,569 12,300 13,099 16,833 18,020 17,775 16,836 15,533 23,269
Year-on-year -3.0% 13.7% 10.8% 6.3% 6.5% 28.5% 7.1% -1.4% -5.3% -7.7% 49.8%
Cost of Goods Sold 6,254 7,055 7,798 8,344 8,566 12,028 12,902 13,788 12,468 10,486 16,927
Gross Income 2,935 3,391 3,770 3,957 4,532 4,805 5,119 3,986 4,368 5,047 6,342
Gross Income Margin 31.9% 32.5% 32.6% 32.2% 34.6% 28.5% 28.4% 22.4% 25.9% 32.5% 27.3%
SG&A Expense 2,034 2,204 2,216 2,295 2,434 2,702 2,891 2,750 2,877 3,031 3,569
EBIT (Operating Income) 902 1,187 1,300 1,446 1,762 1,766 1,861 847 1,118 1,469 2,155
Year-on-year 74.3% 31.6% 9.6% 11.2% 21.9% 0.2% 5.4% -54.5% 31.9% 31.5% 46.7%
Operating Income Margin 9.8% 11.4% 11.2% 11.8% 13.5% 10.5% 10.3% 4.8% 6.6% 9.5% 9.3%
EBITDA 968 1,260 1,406 1,532 1,833 1,822 1,912 896 1,161 1,517 2,236
Pretax Income 810 1,044 1,196 1,329 1,672 1,539 1,759 712 1,004 1,270 1,756
Consolidated Net Income 456 626 724 854 1,111 1,007 1,159 358 609 1,060 1,183
Minority Interest 0 0 0 0 0 0 0 0 0 0 0
Net Income ATOP 456 626 724 854 1,111 1,007 1,159 358 609 1,060 1,183
Year-on-year 95.4% 37.5% 15.6% 17.9% 30.2% -9.4% 15.1% -69.1% 70.5% 73.9% 11.6%
Net Income Margin 5.0% 6.0% 6.3% 6.9% 8.5% 6.0% 6.4% 2.0% 3.6% 6.8% 5.1%
                       
(Balance Sheet)                      
Cash & Short-Term Investments 1,186 2,276 2,254 2,435 3,558 3,594 4,134 4,330 5,361 3,837 3,770
Total assets 8,919 8,793 11,398 10,833 16,916 16,777 19,294 20,071 20,051 28,977 30,976
Total Debt 3,780 2,414 3,958 2,712 7,439 6,048 7,203 8,342 8,108 16,399 16,879
Net Debt 2,594 139 1,704 277 3,881 2,454 3,069 4,012 2,747 12,562 13,109
Total liabilities 5,051 3,531 5,363 3,977 8,909 7,869 9,399 10,004 9,749 17,921 18,899
Total Shareholders’ Equity 3,868 5,262 6,034 6,856 8,006 8,908 9,895 10,067 10,302 11,056 12,077
                       
(Cash Flow)                      
Net Operating Cash Flow -664 1,761 -1,451 1,611 -3,666 1,617 -420 -917 1,705 -9,268 -12
Capital Expenditure 97 91 58 111 57 66 61 21 40 28 304
Net Investing Cash Flow -175 -111 -116 -184 107 -64 -71 -288 -51 -267 -766
Net Financing Cash Flow 1,136 -612 1,588 -1,278 4,667 -1,495 984 953 -608 7,971 303
Free Cash Flow -714 1,697 -1,491 1,536 -3,692 1,572 -446 -923 1,682 -9,282 -291
                       
(Profitability %)                      
ROA 5.69 7.07 7.17 7.68 8.01 5.98 6.42 1.82 3.04 4.32 3.95
ROE 12.48 13.72 12.82 13.24 14.96 11.90 12.32 3.58 5.98 9.93 10.23
(Per-share) Unit: JPY                      
EPS 66.0 90.2 90.1 104.9 134.4 119.6 137.1 42.3 73.6 129.6 143.8
BPS 560.5 664.8 744.2 841.3 958.0 1,054.5 1,170.2 1,192.9 1,249.5 1,356.8 1,465.5
Dividend per Share 3.00 6.00 10.00 12.00 18.00 21.00 23.00 25.00 26.00 28.00 33.00
Shares Outstanding (Million shares) 6.90 7.91 8.11 8.15 8.35 8.45 8.46 8.47 8.47 8.49 8.58

Source: Omega Investment from company materials

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