Last month, the Financial Times dedicated a half page story to SoftBank (OTC:OTCPK:SFTBY)(OTC:OTCPK:SFTBF) and its quest to become one of the biggest players in the US technology market. The story followed Softbank’s CEO Masayoshi Son and his decision to invest either in Uber (Private:UBER) or Lyft (Private:LYFT) and the possibility of the company to create more shareholder value by improving the performance of its already existing US-based portfolio. Then, last Wednesday, TechCrunch announced that SoftBank is currently in talks with American investment fund Dragoneer and Chinese ride-sharing company Didi to make a joint investment into Uber and acquire up to 22% of the car transportation company.
Besides that, SoftBank continues to search for a new deal in the wireless communication market, considering the fact that it owns more than 70% of Sprint (NYSE:S), as talks about the merger with its rivals are still on the table, although Masayoshi Son didn’t disclosed the competitor's name. In addition, earlier last week, Softbank along with Sprint announced the creation of the new blockchain consortium to make mobile payments more secure and to work on a number of promising IoT projects. The consortium includes one of the largest Taiwanese carriers FarEasTone along with a telecommunications startup TBCASoft and will help SoftBank strengthen its position in the wireless and internet services market and become one of the leaders of the blockchain revolution.
All of those initiatives are showing the seriousness of SoftBank and its CEO Masayoshi Son to establish a stronger presence in the US market and ramp up investments in the tech sector. Last October, SoftBank unveiled its plan to raise up to $100 billion for its newly created war chest fund Vision Fund. According to recent reports, SoftBank raised more than $90 billion to date and already is using some of its cash to face the competition. In August, SoftBank used Vision funds to invest in Indian e-commerce giant Flipkart (Private:FPKT) to compete with Amazon (NASDAQ:AMZN) and recently acquired shares in the coworking and office space startup WeWork to help it to expand and go internationally.
Considering SoftBank’s aggressive strategy in investing into different tech companies, which proved to be successful in the past, I believe that it is not too late to invest in SoftBank itself. First of all, the company had a great fiscal year, as net sales for FY16 were ¥8.901B, up 0.2% Y/Y, while net income was ¥1.426B, up an astonishing 201% Y/Y. In addition, the increase of the operating cash flow and the strong performance of its US portfolio will continue to help the company make those excessive returns in the long run.
The recent earnings report for Q1 showed that SoftBank continues to grow on a quarterly basis as net sales were up 3% Y/Y and earnings before interest and taxes were up 50% Y/Y. As for the net income, the company hasn't made any profit due to the derivative loss of $2.2B mainly in Alibaba Holdings. However, last year SoftBank announced that it is slowly liquidating its position in the Chinese e-commerce giant and we could suggest that there shouldn’t be such a loss in the upcoming quarters as the overall portfolio continues to grow excessively, while the Alibaba’s impact on it is decreasing.
Source: SoftBank Presentation
Taking everything that I wrote here in consideration, I believe that SoftBank continues to be an attractive investment for value investors, as its overall portfolio, which includes a great amount of US companies, continues to create shareholder value and make excessive returns. Despite trading on the OTC market, I consider SoftBank to be a conservative tech play with the minimal amount of risk due to its diversification and a great amount of resources that will help it to stay afloat, pay its debts and expand in the long-term.
Disclosure: I am/we are long SFTBY.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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