Residential properties in Tokyo with high price points drive growth, centered on the buy-to-resell business. Mugen Estate (3299)

Market capitalization 49.2 billion yen, PER 7.3x, PBR 1.42x, dividend yield 5.55%

Latest Financial Results

Second Quarter of Fiscal Year Ending December 2025 (August 8)

During this interim consolidated accounting period (January to June 2025), the real estate industry saw steady overseas investment and inbound demand against the backdrop of a weak yen, and the National Tax Agency's roadside land prices rose for the fourth consecutive year. Price increases were particularly notable in resort areas and areas catering to visitors to Japan. On the other hand, factors of uncertainty remained, such as U.S. tariff policies, concerns about a global economic slowdown, and the Bank of Japan's interest rate hike trends. In the Tokyo metropolitan area used condominium market, both the number of contracts and unit prices remained strong, and the upward price trend continued.

Under these circumstances, the company expanded its business, focusing on real estate buy-to-resell. It concentrated on strengthening procurement and sales with an emphasis on profitability. As a result, for the interim period, the company achieved increased revenue and profit, with net sales of 32.943 billion yen (up 4.6% year-on-year), operating profit of 5.479 billion yen (up 9.0% year-on-year), ordinary profit of 4.932 billion yen (up 6.2% year-on-year), and net profit of 3.32 billion yen (up 8.4% year-on-year).

Trends by Segment

• Real Estate Trading Business

  • Investment real estate sales totaled 96 units (up 4 units year-on-year). However, due to the reaction from large-scale projects in the same period of the previous year, the average unit price was 128 million yen (down 22.2%), and net sales were 12.314 billion yen (down 18.8%).

  • Residential real estate sales totaled 210 units (down 28 units year-on-year). Although the number of units decreased, high-priced properties grew, with an average unit price of 90 million yen (up 76.8%) and net sales of 19.005 billion yen (up 56.0%).

  • In the real estate specified joint enterprise business, the Sapporo project was sold out, with net sales of 205 million yen (down 47.5%). The Shinkoiwa and Ogikubo projects are currently in progress.

  • Overall, net sales were 31.576 billion yen (up 4.2%) and operating profit was 6.328 billion yen (up 9.1%).

• Leasing and Other Businesses

  • Leasing income was steady at 1.27 billion yen (up 16.2%).

  • Segment net sales were 1.366 billion yen (up 14.6%), and operating profit was 374 million yen (down 1.1%).

Summary

The core residential real estate business was supported by strong sales of high-priced properties, absorbing the reactionary decline in investment real estate. The profitability of the buy-to-resell business was strengthened, and overall, the company secured increased revenue and profit. On the other hand, the decline in unit sales prices for investment properties and the decrease in joint business projects remain challenges, and going forward, the company will need to stabilize project formation and respond to risks associated with market environment fluctuations.
Net cash (29.907 billion yen), net cash ratio (0.6).