Performance outlook: For the consolidated fiscal year ending December 2024, the initial forecast remains unchanged with an expected operating revenue of 1.28 billion yen (+12.0% YoY), operating profit of 740 million yen (-8.2% YoY), pre-tax profit of 820 million yen (-16.1% YoY), and net income attributable to the parent company of 640 million yen (-60.8% YoY). The initial performance forecast for J-Trust (8508) has a very conservative inclination. The operating revenue is planning to hit past record highs due to factors such as the expectation of stable earnings in the Japanese financial business, the increase in lending money for banks in Southeast Asia's financial business leading to an increase in interest income, and the strengthening of earnings foundations brought about by previous M&A activities. Regarding operating profit, there is no extreme reduction in earnings expected, despite the implementation of a reduction in the standard interest rate being somewhat unclear in the South Korean, Mongolian, and Southeast Asian financial businesses. Furthermore, the performance is expected to recover due to preparing for an increase in loan-loss reserves in anticipation of becoming non-performing loans as a result of the deterioration of the management environment, among other things, while also expecting a decline due to the peeling off of negative goodwill arising from the absorption merger with Mirai Innovate in the real estate business accounted for in the fiscal year ending December 2023. In terms of operating profit, based on the real strength without negative goodwill arising, the company has planned for an increase in profit for the fiscal year ending December 2024. For the net income attributable to the parent company, despite the return of deferred tax liabilities due to the absorption merger of Nexus Bank in the fiscal year ending December 2023, a significant decline is expected for the fiscal year ending December 2024 due to the further increase in corporate income tax expenses.

In addition, the operating revenue for the first quarter of the fiscal year ending December 2024 was 3.1554 billion yen, smooth at 24.7% of the full-year forecast. On the other hand, the operating loss for the first quarter was 281 million yen, largely deviating from the full-year forecast. However, we believe that it is an achievable performance forecast considering the robust Japanese financial business, the strong Southeast Asian financial business, and the South Korean and Mongolian financial businesses expected to return to profitability from the third quarter, among others. In fact, the first quarter results exceeded the target figures.

Regarding the operating profit forecast by business segment, the South Korean and Mongolian financial businesses are expected to increase profits by 837 million yen (up by 4,171 million yen), the Southeast Asian financial business is expected to increase profits by 1,732 million yen (up by 2,751 million yen), and the investment business is expected to turn to profit of 153 million yen (up by 2,225 million yen), and the Japanese financial business is expected to see steady expansion with an operating profit of 5,722 million yen (up by 1,066 million yen). On the other hand, while the real estate business is expected to account for a negative goodwill arising from the decline in the peeling off of negative goodwill, it plans to book stable profits along with the expansion of business scale.

Looking at the progress rate of the actual operating profit for the first quarter of the fiscal year ending December 2024 compared to the full-year forecast, the Southeast Asian financial business has reached 59.3%, demonstrating a remarkable improvement trend. Additionally, the Japanese financial business is also making steady progress at 25.6%. On the other hand, the South Korean and Mongolian financial businesses have posted operating losses, and there is a significant deviation from the full-year forecast. However, the actual results for the first quarter were as planned, and we expect profitability to turn black from the third quarter onwards. In the real estate business, operating losses were posted, and there is also a significant deviation from the full-year forecast. However, this was also due to the delay in sales timing after the second quarter. Furthermore, in the investment business, the plan is to book a profit of 847 million yen in the second quarter based on the judgment of the Singapore High Court.

Performance forecast progress rate for actual operating profit in the first quarter of the fiscal year ending December 2024: The Southeast Asian financial business has reached 59.3%, demonstrating a remarkable improvement trend. The Japanese financial business is also making steady progress at 25.6%. On the other hand, the South Korean and Mongolian financial businesses have posted operating losses, and there is a significant deviation from the full-year forecast. However, the actual results for the first quarter were as planned, and we expect profitability to turn black from the third quarter onwards. In the real estate business, operating losses were posted, and there is also a significant deviation from the full-year forecast. However, this was also due to the delay in sales timing after the second quarter. Furthermore, in the investment business, the plan is to book a profit of 847 million yen in the second quarter based on the judgment of the Singapore High Court.

(Written by FISCO guest analyst Nozomi Kokushige).