SoftBank lives the high life on yard sales

The $129bln group returned to profit in the last quarter following a dismal three months in the red, buoyed by the sale of T-Mobile shares and other investment gains

  
Image used for illustrative purpose. The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017.

Image used for illustrative purpose. The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017.

REUTERS/Issei Kato

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

HONG KONG  - SoftBank boss Masayoshi Son’s giant yard sale is buying him time to relax. The $129 billion group returned to profit in the last quarter following a dismal three months in the red, buoyed by the sale of T-Mobile shares and other investment gains. Asset sales fuelled a jumbo share buyback plan that narrowed a wide conglomerate discount, and there are large exits to come from its Vision funds. They should carry Son over the current soft spot, provided equity markets stay buoyant.

SoftBank surprised the market on Tuesday with a 1.3 trillion yen ($12.3 billion) net profit for the three months ending June 30, 60% higher than an average of analyst forecasts compiled by Refinitiv. The haul was partly due to an expected 736 billion yen pre-tax gain on the loss of its controlling interest in Sprint, following its April merger with T-Mobile US, and 422 billion yen booked from the sale of T-Mobile stock. The Vision Fund and other SoftBank-managed funds contributed another 297 billion yen in gains. More promisingly, 111 billion yen of those were generated from the sale of shares in four portfolio companies, as rebounding equity markets facilitated exits.

There are more to come. Vision fund managers will be eagerly watching the initial public offering of Chinese online real-estate services provider KE, which is attempting to raise $2 billion in New York this week. SoftBank owns a 10% stake in the company, which could be valued at $22 billion from the IPO. The sale of TikTok could be a boon for ByteDance and its backers, including SoftBank, although the deal is riddled with political risk. But a mooted float of ByteDance’s mainland operations, which could be valued at over $100 billion, is almost certain to deliver a big paycheck. South Korea’s $9 billion e-commerce giant Coupang, backed by the Vision Fund, is reported to be preparing for an IPO next year. Chip designer Arm could soon float, too.

Some of SoftBank’s spoils were ploughed into a jumbo share buyback programme, which has helped its market value more than double since March, far outpacing Japan’s benchmark Topix index. While the climate for dealmaking remains challenging, healthy markets will let Son keep coasting for now.

CONTEXT NEWS

- Japan’s SoftBank Group on Aug. 11 reported a net profit of 1.3 trillion yen ($12.3 billion) for the three months ending June 30, up 11.8% from the same period a year earlier.

- The figure was 60% higher than the 815 billion yen net profit that analysts had expected, according to an average of forecasts compiled by Refinitiv.

- SoftBank’s shares closed at 6,361 yen on Aug. 11, 2.5% lower than the previous trading day’s closing price.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Pete Sweeney and Sharon Lam) ((alec.macfarlane@thomsonreuters.com; Reuters Messaging: alec.macfarlane.thomsonreuters.com@reuters.net))

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