SoftBank's second-quarter earnings more than quintupled in the second quarter thanks to solid revenues from the $ 100 billion Saudi-funded Vision Fund.
Monday's results were released amid uncertainty over the future of the world's largest technology fund following the cruel murder of Saudi columnist Jamal Khashoggi and the associated publicity over the involvement of Saudi Arabian government officials.
Japanese telecommunications and technology group stocks, which include US mobile operator Sprint and British chipmaker Arm, have fallen 22 percent since the disappearance of Mr. Khashoggi, a critic of the Saudi regime, in early October.
Saudi Arabia is the largest investor in the Vision Fund, with a $ 45 billion commitment from the UK's public investment fund for large-scale operations at companies ranging from Uber to WeWork to Slack.
Some of the Vision Fund's investments have paid off for the second quarter. SoftBank reported net income of $ 526.4 billion ($ 4.6 billion) compared to a profit of $ 97.1 billion a year earlier. According to S & P Global Market Intelligence, analysts had forecast a profit of JPY 211.8bn.
The increase was caused by a 60% return on the Vision Fund's investment in Flipkart, India's largest online retailer, which sold SoftBank to Walmart for $ 4 billion after investing $ 2.5 billion last August ,
SoftBank also reported book gains on an unusual derivative transaction that the company had signed to sell its stake in Chinese e-commerce group Alibaba to finance Arm's acquisition in 2016. As part of the transaction, the company recognizes profits when the Alibaba shares fall. The stock fell 20 percent in the three months to September.
Issues surrounding Saudi investment coincided with a deterioration in the outlook for SoftBank's Japanese telecommunications business, which was traditionally the largest cash cow.
According to analysts, Mr. Son's $ 30 billion plan to acquire SoftBank Mobile's IPO during the year may be disrupted after Japan's largest mobile operator NTT DoCoMo announced it could reduce its fees by as much as 40 percent, after the government had charged interest rates were too high in Japan.
"There is a possibility that the price for the IPO that SoftBank was considering will receive a discount," said Naoki Fujiwara, Fund Manager at Shinkin Asset Management. "The growth story of SoftBank's mobile business has been impacted and the competitive environment is becoming more brutal."
Some investors say that Mr. Son's vision for growth through technology investment is unlikely to be changed by recent developments in Saudi Arabia.
For the six months to September, the Vision Fund and its sister fund generated an operating profit of 632 billion yen, mainly due to unrealized gains from investments in chip maker Nvidia, Indian hotel startup Oyo Rooms, and others was. This represented 45 percent of SoftBank's operating income and outperformed domestic telecom revenues by ¥ 447 billion.
Last week, two start-ups also revealed new investments from the Vision Fund, suggesting that the technology sector is not resisting the Saudi money.
Richard Kaye, a portfolio manager for French asset manager Comgest, a shareholder of SoftBank, is optimistic that Uber's IPO will be a catalyst for a revaluation of SoftBank's stock price.
The people who knew about the deal said the US Appell Hailing App was preparing for an IPO over the next six months, with a target valuation of more than $ 100 billion.
"The [SoftBank] The stock price does not currently reflect an upward trend in Vision Fund investment, "said Kaye. "But more investors will begin to understand the potential benefits of the Vision Fund if good numbers continue to come out," and Uber's IPO could be an important catalyst, he added.