SoftBank expected to book 287 billion yen profit on IPOs

JAPANESE technology investor SoftBank Group is expected to report a 287 billion yen (S$2.5 billion) quarterly profit on Tuesday (Nov 12), boosted by successful portfolio company listings and a stronger yen.

Analysts are also looking out for signs of new investment momentum driven by SoftBank’s robust balance sheet and management’s bullish stance on artificial intelligence (AI).

The net profit forecast for July-to-September quarter is based on the average of four analyst estimates compiled by the London Stock Exchange Group, and compares with a loss of 931 billion yen in the same period last year.

MST analyst David Gibson estimates an investment gain of US$3.9 billion for the quarter, with the IPOs of two Indian companies – Brainbees Solutions and Ola Electric – seen generating income of US$0.9 billion and US$1 billion, respectively.

A drop of around 10 per cent in the value of the US dollar versus the yen over the period is expected to boost SoftBank’s bottom line.

Analysts are eagerly awaiting SoftBank’s investment plans, after Founder and chief executive officer Masayoshi Son told an investment summit in Saudi Arabia last month that he was saving tens of billion US dollars for the next big move.

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The pace of SoftBank’s new investments is already trending upward, reaching US$1.9 billion in the April-to-June quarter, up from US$0.3 billion in January-to-March quarter. In early October, SoftBank also joined in the latest funding round for ChatGPT operator OpenAI.

Analysts are particularly interested in SoftBank’s reported efforts to manufacture AI chips to rival market leader Nvidia, potentially through a collaboration between chip designer Arm, in which it holds a 90 per cent stake, and recently acquired chip manufacturer Graphcore.

They note that SoftBank made a deal with Arm to licence its intellectual property in the most recent quarter, worth US$43.2 million in revenue, which may be related.

In addition, SoftBank’s sound financial position makes a large-scale investment possible.

It’s balance sheet is “near the strongest it has been over the past five years”, wrote Morningstar analyst Dan Baker in a note, adding that both S&P Global Ratings and Japan Credit Rating Agency upgraded their SoftBank credit ratings earlier this year.

Although SoftBank announced a US$3.4 billion share buyback three months ago, this was substantially below what some analysts had called for and leaves ample room for further investment, they added. REUTERS