Softbank Seen Posting Modest Profit in Q1, Buyback Potential in Focus
Japan's SoftBank Group is expected to report a modest first-quarter profit on Wednesday but investors are set to hone in on whether the tech investment giant will either announce a major share buyback or flag its willingness to embark on one.
SoftBank Group is expected to report a modest profit for Q1 but investors are keenly watching for any major share buyback announcements. With shares down nearly 20% recently and a significant discount to asset value, calls for a $15 billion buyback from Elliott Management are growing.
The results come amid much market turmoil, particularly for large-cap Japanese stocks and major tech companies - of which SoftBank is both - hurt by a massive unwinding of yen carry trades and U.S. recession fears. Its shares slumped almost 20 per cent on Monday but regained nearly half those losses as of Tuesday afternoon.
SoftBank CEO Masayoshi Son has faced renewed investor clamour this year for the company to buy back shares given that its market capitalisation trades at a large discount to the combined value of its assets - a discount that continues to grow.
Most analysts estimate the discount at around 60 per cent compared to 53 per cent at end-March and 36 per cent as of end-June 2023.
They also note SoftBank had $26 billion of cash on hand as of end-March.
"We think they're in a very comfortable situation with the balance sheet," said Rolf Bulk of New Street Research, who believes SoftBank should embark on a buyback programme worth more than $10 billion.
SoftBank's net profit likely came in at 109 billion yen ($748 million) in April-June, according to an average of five analyst estimates collated by LSEG and Reuters. That would mark its third quarter in a row of profit and compares to a loss of 316.2 billion yen in the same period a year prior.
The investment behemoth, whose biggest holding is its 90 per cent stake in chip designer Arm, has been cautiously rebuilding its finances after the failure of high-flying office-sharing startup WeWork and SoftBank's portfolio of tech firms in its two Vision Funds fell out of favour in a high-interest rate environment.
It only invested some $4 billion in each of the last two financial years.
More recently, SoftBank led a $1 billion funding round in British self-driving car startup Wayve and bought British artificial intelligence chipmaker Graphcore for an undisclosed sum in July.
It invested $200 million in Tempus AI, which works in artificial intelligence-enabled precision medicine, in April before the startup listed on the Nasdaq in June. SoftBank and Tempus announced a Japan-based joint venture the same month.
Source: www.channelnewsasia.com
