Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

<ul>
<li>Softbank’s exposure to WeWork continues to haunt it beyond the close of 2QFY23, due to its credit support agreements</li>
<li>Aside from WeWork, we continue to see risks to valuations supporting the NAV; in particular, Arm Holdings and SVF2 which accounted for 45% of group equity value</li>
<li>Softbank shares trade at a 45% discount to the stated NAV yet there is downside risk to Arm’s valuation along with questions over private company valuations at SVF1 and SVF2</li>
</ul>


Softbank’s exposure to WeWork continues to haunt it beyond the close of 2QFY23, due to its credit support agreements
Aside from WeWork, we continue to see risks to valuations supporting the NAV; in particular, Arm Holdings and SVF2 which accounted for 45% of group equity value
Softbank shares trade at a 45% discount to the stated NAV yet there is downside risk to Arm’s valuation along with questions over private company valuations at SVF1 and SVF2


Softbank (9984 JP): WeWork Hangover and Other Challenges

<ul>
<li>WeWork appears to be approaching bankruptcy; we expect SoftBank’s exposure to be at least USD1.4bn including credit lines</li>
<li>Arm Holdings post-IPO performance has been lacklustre, but we continue to believe that it remains dangerously over-valued against peers – and Arm provides 30% of the group’s equity value</li>
<li>We believe that JPY depreciation has supported SoftBank Group’s share price (given the high share of USD-denominated portfolio assets); in addition, we still see risks to current private company valuations</li>
</ul>


WeWork appears to be approaching bankruptcy; we expect SoftBank’s exposure to be at least USD1.4bn including credit lines
Arm Holdings post-IPO performance has been lacklustre, but we continue to believe that it remains dangerously over-valued against peers – and Arm provides 30% of the group’s equity value
We believe that JPY depreciation has supported SoftBank Group’s share price (given the high share of USD-denominated portfolio assets); in addition, we still see risks to current private company valuations


SoftBank Group (9984 JP): Results Preview, Key Topics

<ul>
<li>Softbank and the Vision Fund’s exposure to WeWork – estimated at USD1.8bn – look increasingly to be at risk of being written off</li>
<li>Masa’s debts to SoftBank stand at USD5.1bn at 1QFY23 end and we believe that private company valuations are vulnerable, especially in the light of the recent Union Square Ventures write-downs</li>
<li>Softbank shares trade at a 36% discount to the stated NAV; with Alibaba gone, the potential Arm IPO valuation is critical but SVF1 and 2 private company valuations remain questionable</li>
</ul>


Softbank and the Vision Fund’s exposure to WeWork – estimated at USD1.8bn – look increasingly to be at risk of being written off
Masa’s debts to SoftBank stand at USD5.1bn at 1QFY23 end and we believe that private company valuations are vulnerable, especially in the light of the recent Union Square Ventures write-downs
Softbank shares trade at a 36% discount to the stated NAV; with Alibaba gone, the potential Arm IPO valuation is critical but SVF1 and 2 private company valuations remain questionable


Softbank (9984 JP): WeWork on the Brink and Other Factors

<ul>
<li>4QFY22 saw the best result for the Vision Funds since 3QFY21; SVF private companies saw minimal valuation write-downs last quarter, and we suspect valuations may still be too optimistically marked</li>
<li>Masa’s debts to SoftBank stand at USD5.2bn in 4QFY22; in addition, the group’s credit risk exposure to troubled company WeWork was over USD1.1bn at fiscal year end and going higher</li>
<li>Softbank shares trade at a 46% discount to the stated NAV; with the Alibaba valuation “cushion” largely consumed, the potential Arm IPO is critical but private company valuations remain questionable</li>
</ul>


4QFY22 saw the best result for the Vision Funds since 3QFY21; SVF private companies saw minimal valuation write-downs last quarter, and we suspect valuations may still be too optimistically marked
Masa’s debts to SoftBank stand at USD5.2bn in 4QFY22; in addition, the group’s credit risk exposure to troubled company WeWork was over USD1.1bn at fiscal year end and going higher
Softbank shares trade at a 46% discount to the stated NAV; with the Alibaba valuation “cushion” largely consumed, the potential Arm IPO is critical but private company valuations remain questionable


Softbank (9984 JP): Private Company Valuations Still in Question

Event-Driven

<ul>
<li>Softbank Vision Funds 1 and 2 were the biggest combined holdings at December 2022, accounting for 30% of group equity value; SVF private companies accounted for 73% of equity value</li>
<li>To December-end 2022, public companies in SVF2 were marked down by 52% versus investment cost, whereas SVF2 private companies were marked down by a more modest 33% versus investment cost</li>
<li>We believe that SVF2 private company valuations are at risk of further markdowns in 4QFY22 results, with many of these investments made close to the period of peak pandemic valuations</li>
</ul>


Softbank Vision Funds 1 and 2 were the biggest combined holdings at December 2022, accounting for 30% of group equity value; SVF private companies accounted for 73% of equity value
To December-end 2022, public companies in SVF2 were marked down by 52% versus investment cost, whereas SVF2 private companies were marked down by a more modest 33% versus investment cost
We believe that SVF2 private company valuations are at risk of further markdowns in 4QFY22 results, with many of these investments made close to the period of peak pandemic valuations


Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?

United States

WeWork Inc. provides co-working spaces for individuals and entrepreneurs. The Company offers private offices, office suites, headquarters, and custom build out options to fit a variety of office needs, as well as desk spaces and conference rooms. WeWork serves customers worldwide.

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WeWork (WEWKQ US)

Softbank (9984 JP): WeWork Hangover and Other Challenges

Softbank's exposure to WeWork is well chronicled, but other investments - namely Arm and SVF2's portfolio - pose risks to its asset value and...

Victor Galliano

SoftBank Group (9984 JP): Results Preview, Key Topics

WeWork bankruptcy looms, SBG's exposure at $1.4bn. Arm Holdings overvalued, providing 30% of group's equity. JPY depreciation boosts SoftBank's...

Victor Galliano

Softbank (9984 JP): WeWork on the Brink and Other Factors

Despite the Arm IPO potential, we continue to be cautious on Softbank due to its WeWork exposure, the risk of over-valuation of private companies...

Victor Galliano

Softbank (9984 JP): Private Company Valuations Still in Question

The key challenges for SoftBank; the Alibaba valuation “cushion” has been largely consumed, the group has big exposure to WeWork and the spectre of...

Victor Galliano

Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?

The NAV could be 10%-15% lower than stated now at the mid-May results release, due to a further squeeze in private company valuations; this would...

Victor Galliano

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Softbank (9984 JP): WeWork Hangover and Other Challenges

​Softbank's exposure to WeWork is well chronicled, but other investments - namely Arm and SVF2's portfolio - pose risks to its asset value and...

Victor Galliano

SoftBank Group (9984 JP): Results Preview, Key Topics

​WeWork bankruptcy looms, SBG's exposure at $1.4bn. Arm Holdings overvalued, providing 30% of group's equity. JPY depreciation boosts SoftBank's...

Victor Galliano

Softbank (9984 JP): WeWork on the Brink and Other Factors

Despite the Arm IPO potential, we continue to be cautious on Softbank due to its WeWork exposure, the risk of over-valuation of private companies...

Victor Galliano

Softbank (9984 JP): Private Company Valuations Still in Question

The key challenges for SoftBank; the Alibaba valuation “cushion” has been largely consumed, the group has big exposure to WeWork and the spectre of...

Victor Galliano

Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?

The NAV could be 10%-15% lower than stated now at the mid-May results release, due to a further squeeze in private company valuations; this would...

Victor Galliano

Softbank's exposure to WeWork is well chronicled, but other investments - namely Arm and SVF2's portfolio - pose risks to its asset value and...

WeWork bankruptcy looms, SBG's exposure at $1.4bn. Arm Holdings overvalued, providing 30% of group's equity. JPY depreciation boosts SoftBank's...