Japan's SoftBank funds power Q1 results

The company's Vision Fund and Delta Fund contributed ¥397.6bn to profit in the quarter, accounting for more than half of the total

Japan's SoftBank Group founder and CEO Masayoshi Son. Earnings easily topped estimates. Reuters

SoftBank reported first-quarter profit that beat the highest analyst estimate thanks to valuation gains from Vision Fund investments such as Slack Technologies.

Operating income in the three months ended June slipped 3.7 per cent to ¥688.8 billion (Dh23.8bn), the Japanese company said on Wednesday. That is more than the ¥345.3bn average of analyst estimates compiled by Bloomberg.

Founder Masayoshi Son has been remaking SoftBank from primarily a telecommunications operator into a technology investment company, and his $100bn (Dh367,25bn) Vision Fund has emerged as a major contributor to earnings. The pending sale of SoftBank’s US wireless unit Sprint to T-Mobile USA would accelerate the transition. Last month, Mr Son announced he aims to raise a total of $108bn for a second enormous fund.

“The Vision Fund has become a major contributor to profit, but it’s also difficult to predict on quarterly basis,” Anthea Lai, a Bloomberg Intelligence analyst, said ahead of the release. “Even more than the earnings themselves, investors will be looking to hear what Son has to say at the briefing. There is a lot of interest in Vision Fund 2.”

The Vision Fund and SoftBank’s own Delta Fund contributed ¥397.6bn to profit in the quarter, accounting for more than half of the total. SoftBank booked valuation gains on its stakes in Slack, which went public in June, Indian hotel chain Oyo Rooms and food-delivery app DoorDash. The gains were offset by a ¥195.3bn decline in the fair value of holdings including Uber Technologies. Additional investments in the quarter totalled $6.2bn.

SoftBank said the fund held 81 investments worth about $66.3bn. The portfolio added $15.9bn in value relative to the cost at which SoftBank acquired the stakes. The Japanese company also rolled over its earlier investments in Ola and WeWork for $950 million, or about 37 per cent more than the acquisition cost.

Investors await details on just how Mr Son intends to expand his investment empire.

Last month, the billionaire said he aims to raise $108bn for a second Vision Fund. SoftBank is committing $38bn in capital itself and expects to collect money from Apple, Microsoft, Foxconn Technology and the sovereign wealth fund of Kazakhstan. He also won broad support from Japanese financial institutions, with seven of them identified as signing memorandums of understanding to participate.

SoftBank Corp, the conglomerate’s domestic telecoms unit, this week reported operating profit gained 3.7 per cent in the quarter as sales grew 5.8 per cent. The company, which has 35 million mobile subscribers, is bracing for increased competition as e-commerce giant Rakuten plans to enter the Japanese wireless market in October. SoftBank kept its full-year profit and revenue forecasts unchanged.