Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Softbank Group has revised its guidance for FY19 net losses higher by ¥150bn ($1.4bn) on additional provisions for the parent’s stake in WeWork. The downgrade is not particularly surprising as we think that asset is worthless, so the closer Softbank gets to that level, the more realistic we think they are being.  It does appear that the latest write-down takes the carrying value negative which Softbank attributes to higher losses for loan commitments and guarantees. Markets appears unconcerned as we expect most investors wrote WeWork off already whilst impairments are thick on the ground for all companies so an incremental change from Softbank probably does not move the needle.

Softbank Group has revised its guidance for FY19 net losses higher by ¥150bn ($1.4bn) on additional provisions for the parent’s stake in WeWork. The downgrade is not particularly surprising as we think that asset is worthless, so the closer Softbank gets to that level, the more realistic we think they are being.  It does appear that the latest write-down takes the carrying value negative which Softbank attributes to higher losses for loan commitments and guarantees. Markets appears unconcerned as we expect most investors wrote WeWork off already whilst impairments are thick on the ground for all companies so an incremental change from Softbank probably does not move the needle. 

Softbank Group Revises Forecasts Down Again on Higher Valuation Losses for WeWork

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-433'>Fosun International</a></li><li><a href='#lucror-entity-26799'>Future Retail</a></li><li><a href='#lucror-entity-19717'>Gcl New Energy Holdings</a></li><li><a href='#lucror-entity-810'>Melco Resorts & Entertainment</a></li><li><a href='#lucror-entity-315'>Softbank Group</a></li><li><a href='#lucror-entity-6100'>Sunshine 100 China</a></li><li><a href='#lucror-entity-10646'>Tahps Group Bhd</a></li><li><a href='#lucror-entity-19341'>Television Broadcasts</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Fosun InternationalFuture RetailGcl New Energy HoldingsMelco Resorts & EntertainmentSoftbank GroupSunshine 100 ChinaTahps Group BhdTelevision Broadcasts

Morning Views Asia: Fosun International, Future Retail, Gcl New Energy Holdings

The Asia HY Trade Recommendations report for the month of April includes a summary of our recommendations. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Recommendations report for the month of April includes a summary of our recommendations. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Recommendations - April 2020 - Lucror Analytics

With restructuring plans and FY19 operating losses already announced, the volatility around Softbank Group has eased but concerns on Vision Fund portfolio companies could continue to rise. In the week since we discussed potential write-down candidates at Vision Fund, Oyo Hotels has expanded its cost reduction measures whilst another portfolio company, Automation Anywhere, is laying off 10% of employees.  On the plus side, Vision Fund's 8th largest holding Paytm appears close to securing a $100mn investment from Microsoft.  Meanwhile, there is some evidence that buybacks have started as Softbank shares are up 9% from two weeks ago when it pre-announced FY19 operating losses. The shares still trade at a 50% discount to fair value, however,  and are likely to remain around this level until details on the asset sale/buyback timing are released.

With restructuring plans and FY19 operating losses already announced, the volatility around Softbank Group has eased but concerns on Vision Fund portfolio companies could continue to rise. In the week since we discussed potential write-down candidates at Vision Fund, Oyo Hotels has expanded its cost reduction measures whilst another portfolio company, Automation Anywhere, is laying off 10% of employees.  On the plus side, Vision Fund's 8th largest holding Paytm appears close to securing a $100mn investment from Microsoft.  Meanwhile, there is some evidence that buybacks have started as Softbank shares are up 9% from two weeks ago when it pre-announced FY19 operating losses. The shares still trade at a 50% discount to fair value, however,  and are likely to remain around this level until details on the asset sale/buyback timing are released. 

Softbank Group: An Update on Vision Fund Companies and Trading Volumes

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Mitsubishi UFJ Financial (MUFG) / Equity Bottom-Up

* ACOM’s Chronic Kaburai Underestimation: After the market close on April 24th, Mitsubishi UFJ Financial Holdings Group’s (8306.JP) [MUFG] subsidiary ACOM (8572.JP) announced a revisions to its FY (March) 2020 earnings forecasts, lowering its operating profit by JPY 12 bn (13.7%) reflecting a JPY 19.7 bn in kaburai interest repayment provisions; and* Pig Piling At MUFG: ACOM is far from the only headache at MUFG: post-COVID-19, we calculate that MUFG America’s will have a regulatory capital shortfall of up to USD 6.5 bn or 40% of MUFG America’s stated equity; impairments on subsidiaries; significant Softbank (9984.JP) exposure; and Morgan Stanley’s (MS.US) MUFG dilutive E*Trade (ETFC.US) transaction.

* ACOM’s Chronic Kaburai Underestimation: After the market close on April 24th, Mitsubishi UFJ Financial Holdings Group’s (8306.JP) [MUFG] subsidiary ACOM (8572.JP) announced a revisions to its FY (March) 2020 earnings forecasts, lowering its operating profit by JPY 12 bn (13.7%) reflecting a JPY 19.7 bn in kaburai interest repayment provisions; and* Pig Piling At MUFG: ACOM is far from the only headache at MUFG: post-COVID-19, we calculate that MUFG America’s will have a regulatory capital shortfall of up to USD 6.5 bn or 40% of MUFG America’s stated equity; impairments on subsidiaries; significant Softbank (9984.JP) exposure; and Morgan Stanley’s (MS.US) MUFG dilutive E*Trade (ETFC.US) transaction.

Japan

SoftBank Group Corp. provides telecommunication services. The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (9984 JP)

Softbank Group Revises Forecasts Down Again on Higher Valuation Losses for WeWork

Softbank Group has revised its guidance for FY19 net losses higher by ¥150bn ($1.4bn) on additional provisions for the parent’s stake in WeWork....

Kirk Boodry

Morning Views Asia: Fosun International, Future Retail, Gcl New Energy Holdings

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Asia HY Trade Recommendations - April 2020 - Lucror Analytics

The Asia HY Trade Recommendations report for the month of April includes a summary of our recommendations. The report also features relative-value...

Lucror Analytics

Softbank Group: An Update on Vision Fund Companies and Trading Volumes

With restructuring plans and FY19 operating losses already announced, the volatility around Softbank Group has eased but concerns on Vision Fund...

Kirk Boodry

MUFG – When It Rains, It Pours

* ACOM’s Chronic Kaburai Underestimation: After the market close on April 24th, Mitsubishi UFJ Financial Holdings Group’s (8306.JP) [MUFG]...

Thomas J. Monaco

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