Nomura Real Estate: Positive FY 25 performance across segments

Nomura Real Estate reported its FY 25 results on April 24, 2025, posting 3.1% y/y operating revenue growth to JPY757.6bn, driven by an increase in average house sales prices. As a result, EBITDA rose by 5.5% to JPY139.8bn, with margins expanding by 136bps to 18.5%. Net profit grew by 9.8% to JPY74.8bn, with margins expanding by 60bp to 9.9%.

Nomura Real Estate Holdings, Inc., established in 2004 and headquartered in Tokyo, Japan, is a real estate holding company. The company develops and sells residential properties, senior housing, and office buildings, offers asset management and brokerage services, manages properties, and trades and leases land and buildings. With 7,650 employees, Nomura Real Estate is publicly traded on the Tokyo Stock Exchange.

Segment-wise operations are broadly categorized into Development and Service & Management businesses, which made up 76% and 24% of the FY 25 operating revenue-mix, respectively. Development further comprises of Residential Development, Commercial Real Estate, and Overseas. Service & Management include Investment Management, Property Brokerage & CRE and Property & Facility Management.

Strategic investments over long term

The company's long-term management policy has set ambitious financial targets over FY 25-28, aiming for an 8% CAGR for business profits. Over the next three years, Nomura Real Estate expects to record an annual average business volume of around 3,500 to 4,000 units, reinforcing its leadership in the Japanese market. Nomura Real Estate intends to allocate approximately JPY100bn over the next three years to rental housing and senior housing projects.

In addition, the company is planning a similar investment of JPY100bn in the hotel business, reflecting its commitment to diversifying its portfolio. The logistics sector will see the biggest investment, with around JPY300bn earmarked for logistics facilities over the same period. Nomura Real Estate's growth strategy also includes expanding into international markets. The company aims to achieve stable profit expansion through a balanced approach, targeting emerging countries like Vietnam and the Philippines, as well as developed nations such as the UK and the US.

Operational efficiencies boost margins

Nomura Real Estate reported modest performance over FY 22-25, posting a revenue CAGR of 5.5% to reach JPY757.6bn. EBITDA grew at a CAGR of 8.2% to JPY139.8bn in FY 25, with margins expanding by 136bp to 18.5%, driven by operational efficiencies. Net income rose at a CAGR of 10.6% to JPY74.8bn in FY 25, with margins expanding by 131bp to 9.9%.

Despite growth in revenue, cash and cash equivalent decreased from JPY67.8bn in FY 22 to JPY35.9bn as end-FY 25. Moreover, total debt increased from JPY1,023bn in FY 22 to JPY1,545bn in FY 25, leading to an increase in total debt-to-EBITDA, from 9.4x in FY 22 to 11x in FY 25. However, ROA improved steadily from 4.7x to 5.1x in FY 25.

In comparison, Mitsubishi Estate Co., Ltd., a local peer, posted a higher revenue CAGR of 7.6% over the past three years, reaching JPY1,504.7bn in FY 24. EBITDA surged at a CAGR of 5.9% to JPY376.9bn in FY 24. Net income surged at a CAGR of 7.5% to JPY168.4bn in FY 24.

Progressive dividend policy

Over the past year, the company's stock has been almost flat, with a slight negative return of 0.9%. However, in comparison, Mitsubishi’s stock declined by approximately 10% over the same period. Management announced a dividend of JPY34 per share in FY 25, reflecting a high yield of 3.9%. Moreover, management expects to pay an increased dividend of JPY36 per share in FY26, signaling the company’s focus on rewarding its shareholders.

Nomura Real Estate is currently trading at a P/E of 10.1x, based on the FY 26 estimated EPS of JPY88.2, which is in-line with its 3-year historical average but lower than Mitsubishi’s 18.2x. The stock is currently trading at an EV/EBITDA multiple of 14.5x, based on the FY 26 estimated EBITDA of JPY149.2bn, which is slightly higher than its 3-year historical average of 14.1x but lower than Mitsubishi’s valuation of 15.6x.

Nomura Real Estate is generally liked by nine analysts, with three having ‘Buy’ ratings, four having ‘Outperform’ rating, and two having ‘Hold’ ratings for an average target price of JPY952.7, implying 12% upside potential from its  current level. Their views are further supported by an anticipated EBITDA CAGR of 6.8% over FY 25-27, reaching JPY159.6bn, with margins of 17.1% in FY 27. In addition, analysts estimate a net profit CAGR of 6.3%, reaching JPY84.6bn with margins of 9.1% in FY 27, with EPS expected to increase to JPY99.6 in FY 27 from JPY86.8 in FY 25.

Overall, Nomura Real Estate reported strong FY 25 results with revenue and profit growth driven by higher housing sales prices. The company plans significant investments in rental housing, hotels, and logistics facilities, aiming for stable profit expansion. Analysts have a positive outlook, forecasting growth in EBITDA and net profit. However, the group is prone to a few risks, including geopolitical risks, foreign exchange risks, interest rate risks, credit risks and rising construction costs.