Daito Trust Construction released its FY 25 results on May 2, 2025, posting higher sales and profits. Orders received increased by 1.1% y/y to JPY597bn, and occupancy rate remained robust at 97.8%. As a result, ROE rose 3.1% to 21.5%. The stock remained very volatile during the same day, rebounding from a low of JPY15,245 to reach JPY16,350 till date, reflecting returns of 7.2%.
Daito Trust Construction Co. Ltd., established in 1974 and headquartered in Tokyo, Japan, is a real estate company primarily involved in the design and construction of building leasing business, tenant recruitment and rental housing management.
Segment wise the Real Estate Leasing Business contributed to bulk of the sales in FY 25 with a share of 63%; Construction business, 29%; Real Estate Development Business, 3%; and Other businesses, 5%.
Solid FY 25 results
The company posted an y/y increase of 6.4% in net sales to JPY1,842.3bn in FY 25, driven by solid sales in the Construction business and Other businesses. Operating income rose by 13.4% to JPY118.8bn, with margins expanding by 40bp to 6.4%, supported by margin expansion in Construction business, and Real Estate development business. Net income surged 25.7% to JPY93.8bn.
Cash and equivalent decreased slightly to JPY223.5bn as of end-FY 25 from JPY229bn as of end-FY 24, owing to acquisition of subsidiary, Ascot Corp., and other assets, as well asl cash outflow from financing activities on account of cash outflow from repayment of long-term loans and dividend payments.
Rise in key metrics performance
Orders in hand stood at JPY802.4bn as of end-FY 25, compared to JPY787bn as of end-FY 24. There was a marked improvement in amount of order received per sales representative to JPY17.2m in FY 25 from JPY17m in FY 24. In addition, mid-rise ratio (Number of orders received for APT house with 3 or more stories / Total number of orders received) increased to 19.9% from 16.4% over the same time. Likewise, rebuild ratio (Number of orders received for rebuilding APT / Total number of orders received) rose to 36.5% from 30.1%. At the same time, Daito APT rebuild ratio increased to 8.6% from 6.2%.
Daito Trust Construction reported a modest increase of JPY4.3m y/y in average price of orders received to JPY140.9m in FY 25, along with a drop in cancellation ratio to 12.7% from 13.3%. Notably, 71.2% of the orders received in FY 25 are ‘Repeat’ orders, with the balance being ‘New’ orders.
Tenancy recruitment in Residential use increased 2.2% y/y to 342,933, while Commercial use saw a decrease of 2.1% to 1,922 in FY 25. However, the occupancy level continued to remain robust with Residential use at 97.8% and Commercial use at 99.4%.
Top-line growth intact
The company plans to sustain its topline growth momentum in FY 26 and anticipates net sales to rise by 6.9% to JPY1,970bn. Operating income is expected to increase by 5.2% to JPY125bn. However, net income is anticipated to decrease by 4.1% to JPY90bn. Further, Daito Trust Construction plans to continue with dividend payout of at least 50% and declare dividends of JPY685 per share in FY 26.
Moderation in leverage
Daito Trust Construction posted a modest revenue CAGR of 5.2% over FY 21-24 to reach JPY1,731bn. Operating income outpaced revenue growth, posting a CAGR of 6.6% to JPY105bn in FY 24, with margins expanding by 23bp to 6.1%. Net income therefore rose at a CAGR of 6.2% to JPY74.7bn in FY 24.
Steady rise in earnings helped the cash position of the company to strengthen to JPY246bn as of end-FY 24 from JPY199bn as of end-FY 21. Cash reserves were also bolstered through consistent cash flow from operating activities. At the same time, the total debt decreased from JPY97.3bn to JPY80bn, along with a decline in leverage levels with debt-to-equity decreasing from 31.6% to 19.7%.
In comparison, Mitsui Fudosan, a local peer, posted similar revenue CAGR of 5.9% over the same period, reaching JPY2,383bn in FY 24. However, operating income surged at a CAGR of 18.6% to JPY340bn in FY 24.
Attractive dividend yields
Over the past 12 months, the company’s stock has remained almost flat with returns of about negative 0.9%. In comparison, Mitsui Fudosan’s stock witnessed a similar trajectory with returns of negative 1.6%.
Encouraged by the positive financial trajectory, the company paid an annual dividend of JPY714 in FY 25, resulting in an attractive dividend yield of 4.4%, and JPY159 y/y increase. Moreover, analysts expect an average dividend yield of 4.4% over the next three years.
The company is trading lower compared to its historical average and Mitsui Fudosan. Daito Trust Construction is currently trading at a P/E of 12.2x, which is lower than its 3-year historical average of 13.1x and that Mitsui Fudosan (15.8x).
Likewise, in terms of EV/EBITDA, the company is currently trading at 6.6x, which is marginally lower than its 3-year historical average of 6.7x and Mitsui Fudosan’s valuation of 16.3x.
Daito Trust Construction is monitored by eight analysts, two of whom have ‘Buy’ ratings and five with ‘Hold’ ratings for an average target price of JPY17,390, implying upside potential of 7.3% from the current price. Their views are further supported by an anticipated EBITDA CAGR of 6.7% over FY 25-27, reaching JPY155.1bn, with margins of 7.8% in FY 27. In addition, analysts estimate a net profit CAGR of 1.2%, reaching JPY96.1bn with margins of 4.8% in FY 27, with EPS expected to increase to JPY1,490 in FY 27 from JPY1,428 in FY 25. Likewise, analysts estimate an EBITDA CAGR of 4.3% and net profit CAGR of 6.4% for Mitsui Fudosan.
Overall, Daito Trust Construction appears to be set to post growth over the long term, helped by solid fundamentals, rise in orders, high occupancy levels, and encouraging outlook. In addition, a high dividend yield adds to the investment thesis for the company and might appear to be attractive for value hunting investors. However, the company is prone to few risks including, project execution risk, lower occupancy levels, and project cancellation risks.
