Property sales in the investment banking business will determine whether the plan is achieved from the third quarter onward

For the six months ended September, the investment banking business reported revenue of ¥9,507 million and operating profit of ¥3,163 million, up 116.6% and 147.6% year on year, respectively. The company said it had actively acquired and sold properties from the beginning of the fiscal year and recorded gains on the sale of multiple properties. It is worth confirming that sales had already progressed from the first quarter, representing a different pattern from the company’s previous earnings structure, which was dependent on the timing of sales.

On a consolidated basis, revenue of ¥10,499 million for the six months ended September represented 59.2% of the full-year plan of ¥17,730 million, while operating profit of ¥2,735 million represented 65.9% of the ¥4,150 million plan. On a simple calculation, the plan would be achieved if the company adds ¥7,231 million in revenue and ¥1,415 million in operating profit in the second half. However, the company has repeatedly explained that quarterly results fluctuate significantly depending on the timing of property acquisitions and sales, so it would not be appropriate to assess this remaining amount based solely on normal seasonality.

In the third quarter, it will be necessary to confirm not only whether gains on sales continue to be recorded, but also the scale and profit margins of the properties sold. Previous disclosures showed that multiple properties had been sold, but did not provide a sufficient breakdown of sale proceeds, cost of sales, gross profit on sales, the balance of contracted transactions not yet recorded, or the scheduled timing of sales by property. It is important whether the third-quarter financial results release discloses the number and value of properties sold and whether the presentation materials update the breakdown of gross profit on sales.

Revenue in the investment banking business also combines rental income and property sale revenue. For the six months ended September, gross profit in the business was ¥3,758 million and gross profit from real estate leasing was ¥1,602 million, suggesting a structure in which the remaining profit depends on property sales and other sources. In the third quarter, it will be necessary to confirm whether additional gains on property sales and a decline in rental income after the sales are occurring at the same time.