■Summary

LeTech (Retech) ＜3497＞ is an independent comprehensive real estate developer listed on the Tokyo Stock Exchange (hereafter, Tokyo Stock Exchange) growth market. We develop everything from brokerage and consulting to land purchase/development, and provide optimal solutions for land utilization. The low-rise rental condominium “LEGALAND” (LEGALAND) for the wealthy developed in the Tokyo/Osaka area is positioned as the main real estate development center, and it has achieved a track record of 123 buildings (including properties under development as of the end of 2024/7). “LEGALAND,” which is a major strength of the company, has achieved advantages in terms of ease of use for tenants and in terms of construction period and cost by adopting a wall-type structure suitable for small areas. In addition to this, the company is also a characteristic of the company due to its familiarity with both the Osaka and Tokyo markets and the fact that it has excelled at rights adjustment projects since its ancestral business.

1. The fiscal year ended 2024/7 had surpluses for 2 consecutive terms, and both finance and operations were normalized

The company's financial results for the fiscal year ended 2024/7 were sales of 14795 million yen (down 7.5% from the previous fiscal year), operating income of 1530 million yen (up 9.9% from the same period), ordinary income of 1109 million yen (up 35.1% from the same period), and net income of 1079 million yen (down 7.1% from the same period), which was a significant increase in profit on an ordinary income basis. Residence development, starting with “LEGALAND,” showed a strong trend, and from a drastic loss in the 2022/7 fiscal year, there was a surplus for the second consecutive term, and normalization in terms of finance and business became clear. Although sales declined slightly, ordinary profit, which is the main KPI, achieved a level comparable to the highest profit since listing due to successful high-profit development projects and a decrease in financial costs, etc.

2. Ordinary profit is expected to increase 10.0% to exceed 1.2 billion yen for the fiscal year ending 2025/7

The earnings forecast for the fiscal year ending 2025/7 anticipates an increase in sales of 21630 million yen (up 46.2% from the previous fiscal year), operating income of 1896 million yen (up 23.9% from the same period), ordinary income of 1221 million yen (up 10.0% from the same period), and net income of 1256 million yen (up 16.3% from the same period). The company is currently in the second year of its three-year medium-term management plan (2024/7 to 2026/7). For the fiscal year ending 2025/7, performance targets for operating income, ordinary income, and net income were revised upward based on good performance in the first year (first quarter). In terms of ordinary income, the initial planned value was 1100 million yen, but it was 1221 million yen (121 million yen increase from the initial plan). As a strategy, we will develop various types of properties such as private lodging condominiums according to their land characteristics, centering on residence development such as “LEGALAND” and “LEGALAND+” (LEGALAND Plus), which are the main forces.

3. The impact of rising interest rates is minor. The funding situation has improved, and purchases are strong

The company is also maintaining financial soundness as purchases are progressing smoothly. The level of real estate for sale (including workpieces) at the end of the 2024/7 fiscal year ended was 20027 million yen (up 3619 million yen from the end of the previous fiscal year), and sufficient advance investment was made. As a background to this, a surplus was achieved for 2 consecutive years due to a V-shaped recovery in business performance, and in addition to increased trust from financial institutions, projects began to be actively brought in from various brokerage companies due to the recovery in business performance. In terms of borrowing conditions, the average borrowing interest rate for total loans at the end of the 2023/7 fiscal year was 2.57%, while the average borrowing interest rate for new loans for the 2024/7 fiscal year improved by 0.27 points to 2.30%. Also, from the 2022/7 fiscal year, which was a drastic loss, the number of borrowed financial institutions, including megabanks, increased by 6, and the fact that the transaction attitude of financial institutions became aggressive can be said to be a major improvement.

Although interest-bearing debt increased by 1243 million yen compared to the end of the previous fiscal year, financial soundness has been maintained. The cash balance at the end of the fiscal year will be 2572 million yen, securing more than double monthly sales (1232 million yen for the 2024/7 fiscal year). The capital adequacy ratio improved steadily to 21.3% (up 1.8 points from the end of the previous fiscal year) at the end of the 2024/7 fiscal year.

■Key Points

・In the fiscal year ending 2024/7, residence development was strong, and ordinary profit increased drastically. Both finance and operations normalized due to sharp losses from 3 periods ago and surpluses for 2 consecutive terms

・While making growth investments, the sound financial base is progressing mainly due to the recovery in profitability. The capital adequacy ratio improved to over 20% of the target

・The profit plan of the medium-term management plan was revised upward for the fiscal year ending 2025/7. Ordinary income expected to exceed 1.2 billion yen

・The impact of rising interest rates is currently minor, and properties in good locations are carefully selected through careful simulations. In addition to improvements in funding conditions, project information increased against the backdrop of a recovery in business performance, and purchases were strong

(Written by FISCO Visiting Analyst Hideo Kakuta)