TOKYO (REUTERS, AFP) - Investment giant SoftBank Group on Wednesday (May 12) reported an annual net profit of US$45.8 billion (S$61 billion), the best for a Japanese company, reaping the rewards of tech share rallies to recover from last year's record loss.
The telecoms firm turned investment behemoth has poured money into some of Silicon Valley's biggest names and hottest new ventures, from AI to biotech, through its US$100-billion Vision Fund.
SoftBank reported a 4.027 trillion yen (S$49 billion) fourth-quarter profit at its Vision Fund unit after booking a gain on investment in Coupang, underscoring its recovery a year after a record loss.
"It's clearly validation of Masa's thesis," Mr Navneet Govil, Vision Fund's chief financial officer, told Reuters in an interview, referring to Mr Masayoshi Son, the company founder and CEO.
"The technology sector, where the company focuses its investment strategies, has been positively impacted by the accelerated adoption of digital services to address the pandemic," SoftBank said in a statement.
"However, there is no guarantee that the current positive impact will be sustained in light of uncertainties associated with the pandemic."
At 4.99 trillion yen, SoftBank's annual net profit exceeded its target, putting it in the ranks of the world's most profitable companies.
In the previous fiscal year, SoftBank reported a net loss of 961.6 billion yen, a record loss for the company, as the start of the pandemic compounded woes caused by its investment in troubled office-sharing start-up WeWork.
But it quickly returned to profit as the impact of Covid-19 lockdowns worked largely in SoftBank's favour, with rising valuations for firms in its portfolio suited to the era.
South Korean e-commerce giant Coupang in March raised more than US$4 billion in its initial public offering (IPO) - making it the biggest listing in the US so far this year as people flocked to shop online during lockdowns.
The value of the Vision Fund's stake in US food delivery app DoorDash also rose massively following its IPO in December.
Mr Son, Japan's richest person according to Forbes, in February hailed the Vision Fund as a "goose that produces golden eggs".
Having transformed SoftBank into an investment giant, Mr Son has battled critics of his commitment to sometimes-troubled start-ups, and brushed aside doubts over a massive asset sale programme.
Investors have expressed concern over whether the Vision Fund can replicate the fourth-quarter performance.
Yet-to-list portfolio companies like ride-hailing firm Didi, TikTok owner Bytedance and truck service platform Full Truck Alliance have strong revenue growth, healthy market share and a clear path to profitability, Mr Govil said.
These companies are "sizeable investments with significant value to be unlocked", he said.
Much of Vision Fund's gain is on paper with the value of the portfolio locked up in the stock market amid concern over frothy valuations and a boom in special purpose acquisition vehicles (Spacs) which has drawn regulatory scrutiny.
Two of SoftBank's highest profile bets, WeWork and ride-hailing firm Grab, have outlined plans to list via Spac mergers, with Vision Fund reportedly in talks to use its own such vehicle to list portfolio company Mapbox.
The Grab deal offers further upside for the Vision Fund should the transaction go through, Govil said.
The group's trading arm, SB Northstar, is expanding dealmaking this week leading a US$1 billion investment in acquisitive e-commerce firm THG.
SB Northstar and the broader group recorded a US$233 billion loss on investments in listed stocks and derivatives as efforts to work cash reserves outside the Vision Fund sputter.
SoftBank has exhausted much of the US$2.5 trillion buyback programme launched last year, with shares hitting two-decade highs in March before slipping in line with weakness in US tech stocks.