■ The performance outlook of T.K.P. <3479>

1. Consolidated performance outlook for the fiscal year ending February 2025

Regarding the consolidated performance for the fiscal year ending February 2025, the initial forecast has been revised upward considering the consolidation of Lirical from the third quarter. Revenue is projected to increase by 69.7% year-on-year to 62,000 million yen (revision: increase of 17,000 million yen), operating profit by 77.5% to 8,200 million yen (revision: increase of 850 million yen), ordinary profit by 83.5% to 8,300 million yen (revision: increase of 800 million yen), and net profit is expected to decrease by 21.2% to 5,500 million yen (revision: increase of 400 million yen), projecting significant growth in revenue and profit, thus anticipating the highest performance in history (excluding net profit). It should be noted that the decline in net profit is due to temporary factors from the previous term (such as tax effect accounting).

Revenue is expected to benefit from the overall recovery and expansion of demand for conference rooms and lodging, as well as continued efforts in new openings, expansion of existing facilities, responding to social gathering demands, and capturing inbound demand. In particular, similar to the first half, the growth of 'revenue per tsubo' through enhanced food and beverage services and high-value-added event production, along with the expansion of the hotel business, is expected to drive earnings.

In terms of profits, although upfront costs for building a system towards business expansion (such as new openings, recruitment activities, and increase in personnel) are anticipated, significant profit growth is expected due to increased revenue and enhanced profitability, with the operating margin projected to improve to 13.2% (up from 12.6% in the previous term).

2. Our Perspective

To achieve the revised performance forecast, sales of 41,720 million yen and operating profit of 5,467 million yen are necessary for the second half. To determine the feasibility, it will be necessary to examine both 1) the organic increase in performance and 2) the additional contribution from the consolidation of Lirical, etc. Regarding 1), although this is an ambitious premise, given that the demand for conference rooms is performing well, there is also a trend of bias toward the second half (due to seasonal factors such as demand for social gatherings at the end of the year and exam venue demand starting from the New Year), and the performance contribution from the three newly opened hotels is expected, so the key point will be how close the assumptions can be to challenging ones. On the other hand, regarding 2), although the order environment (space solution business) is good, it cannot be denied that it is currently under pressure, particularly on profit due to rising material prices. Therefore, it can be viewed that the extent to which the deterioration of cost rates can be covered by upward orders from quick wins created in partnership with APAMAN is crucial. In any case, monitoring the accumulation of quarterly performance from both organic and inorganic (including synergy) perspectives will be important decision-making material for predicting performance growth in the next term and beyond. Attention should also be paid to the impact of the sale of APAMAN stocks on the financial results and the use of the sale funds. Of course, progress on new openings (purchases) for the next term as well as additional M&A movements will also need to be followed.

(Written by Fisco Guest Analyst Ikuo Shibata)