Japan’s troubled SoftBank Group is likely to report a return to profit in its first-quarter earnings after posting two consecutive years of loss on the slumping value of its Vision Fund.
The development follows a rebound in the investment group’s portfolio of technology stocks, and its move to sell down its crown-jewel stake in Chinese e-commerce firm Alibaba Group.
A return to profit could ease pressure on SoftBank founder and CEO Masayoshi Son, who shook up the tech investing world with aggressive bets on late-stage startups but suffered a series of high-profile stumbles as investments underpeformed.
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The tech investor is likely to report its results on Tuesday.
Apart from the group’s balance sheet, investors will also be looking for updates on the potential blockbuster listing of SoftBank’s portfolio chip designer Arm.
If successful, the listing would provide a further cash injection for the group and burnish Son’s credentials as a farsighted tech investor.
“It’s a major catalyst for the company and a very important event for tech as a whole, considering Arm’s important position in semiconductors,” said analyst Rolf Bulk at New Street Research.
Tech stocks in uptrend
SoftBank is set to post net profit of 75 billion yen ($525 million) for April-June, the average of four analyst estimates compiled by Refinitiv showed.
Its Vision Fund unit has booked five consecutive quarters of investment loss after backing high-growth firms which fell out of favour with the market, forcing the conglomerate into a defensive stance to preserve cash.
“Public valuations in tech are trending up again and I would expect private valuations to follow suit,” said Bulk.
Listed gainers during the quarter included food delivery company DoorDash and ride hailing business Grab.
Analysts expect a return to profit could herald an uptick in new deals. Son in June said he plans to shift to “offence mode” amid excitement over advances in artificial intelligence (AI).
Arm’s $31.4 billion potential
Recent activity by SoftBank includes its creation of a joint venture to build automated warehouses and investment in insurance tech company Tractable.
Analysts have also expressed enthusiasm over Arm’s prospects for expansion in data centres and in the automotive sector. Already, expectation that investment in AI will drive industry growth has boosted the market capitalisation of chipmaker Nvidia – a former Arm suitor – above $1 trillion.
Given elevated valuations of industry peers, Macquarie analyst Paul Golding said he sees a potential upside of $31.4 billion for Arm from its current book value.
“SoftBank mandated Arm to reinvest all of its profit to enter new markets,” New Street Research’s Bulk said. “Arm is now in a phase where they can reap the benefits of that investment.”
- Reuters, with additional editing by Vishakha Saxena
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