SoftBank Group in Defense Mode; Fair Value Estimate to JPY 7,300 on Currency Weakness

SoftBank’s first-half fiscal-year 2022 (half-year ending September 2022) result was broadly as expected with the company reporting JPY 4.4 trillion investment losses in the Vision Funds but partially offsetting this with JPY 3.5 trillion of gains relating to monetization of assets, including selling some of its Alibaba stake. The company has drastically lowered new investment in the Vision Funds over the past nine months and has also reduced its leverage with some of the Alibaba sale proceeds. We increase our SoftBank fair value estimate to JPY 7,300 from JPY 7,000 previously due to the much weaker yen more than offsetting reduced valuation of the Vision Funds. This valuation includes zero value for WeWork, our assumption of 30% capital gains tax on the Alibaba stake, 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. The stock price is now below our fair value estimate with the main difference likely due to our valuation of Alibaba that is around 155% above the current stock price.