SoftBank Group Earnings: Cautiously Increasing New Investment; Valuation Up on Weaker Yen

SoftBank 9984 showed signs of cautiously increasing new investments in first-quarter fiscal 2023 (quarter-ended June 2023) with total investments from the parent company, Vision Funds and LatAm funds of USD 1.8 billion in the quarter, a lift from the USD 0.5 billion per quarter over the previous three quarters. The company reported a net loss of JPY 477.6 billion in the first quarter, mainly due to a net loss on investments of JPY 699 billion. A weaker Japanese yen increased SoftBank’s net asset value by JPY 1.3 trillion in the first quarter, which was the main reason for the increase in NAV to JPY 15.5 trillion at the end of June 2023 from JPY 14.1 trillion at the end of March 2023.

We increase our SoftBank fair value estimate to JPY 7,100 from JPY 7,000 previously due a weaker Japanese yen. This valuation includes zero value for WeWork and our 35% holding company discount on the SoftBank portfolio. Our no-moat rating is retained, as we rate SoftBank as an investment holding company rather than an operating company.

SoftBank’s leverage decreased over the first quarter with loan/value, or LTV, ratio (under the firm’s calculation method, which excludes asset backed finance) moving from 11% at the end of March 2023 to 8% at the end of June 2023. This is well below the company’s self-imposed ceiling of 25% in normal times.