usdtor05 Posted December 2, 2014 Share Posted December 2, 2014 no because 33B of that is sprint so if you just add the equity value of sprint then you are already accounting for that $33b. the rest is in japan and is basically coverd by wireless/telephony and then yahoo japan. Link to comment Share on other sites More sharing options...
no_free_lunch Posted December 3, 2014 Share Posted December 3, 2014 Leeway, So yeah, trying to figure out the balance sheet is a bit of a nightmare on this one. However, and I think I am just rehashing what usdtor said, the debt is for the subs. A significant chunk of it is for Sprint but there is still a significant $30B for softbank itself. However there are numerous functioning "softbank" companies that are 100% owned to which the debt can be attributed. Things like Softbank mobile, Softbank telecom, Softbank america, Softbank korea, and so on. Since they are 100% owned by Softbank aren't their debts included on the softbank parent's balance sheet, just like Sprint's are? So if the debts are attributable to the subs and if industry peers have similar debt loads then you can value the subs based on interest-adjusted earnings and then the debt is cleared out. Link to comment Share on other sites More sharing options...
no_free_lunch Posted December 3, 2014 Share Posted December 3, 2014 It is also worth noting that the majority of the $30B debt attributable to Softbank is denominated in Yen and is financed at rates of 1-1.5%. Link to comment Share on other sites More sharing options...
no_free_lunch Posted December 3, 2014 Share Posted December 3, 2014 Found this Jefferies commentary on Softbank: Jefferies also estimates that, for every 10% change in Alibaba’s stock, Softbank would move by 4.5% if you include 20% holding company discount. .. How much is Softbank worth? At Alibaba’s $68 per share IPO price, Jefferies reckons it is worth 11,400 yen, or $56.5. If Alibaba trades at $95.2, Softbank would have another 13.9% upside, or 12,984 yen, or $64.35. Softbank closed at 8,207 yen today and its over-the-counter ADR closed at $40.1 on Friday. Even at the $68 IPO price, Softbank’s fair value – according to Jefferies – offers a 40% upside. Now that is some conglomerate discount. Note that Jefferies is on the bullish side of the street, whose average price target for Softbank is 9,931.82 yen. Alibaba is currently trading for $110, so softbank could possibly be worth more than $64 per share? However you also have to consider that Sprint has lost about $4B in market value since the article. By my math the 2 roughly cancel out, so it should still have a roughly $64 per share value. At currently prices it looks like that is 100% upside. ??? http://blogs.barrons.com/asiastocks/2014/09/22/jefferies-alibaba-drives-softbank-but-its-just-one-of-the-gems/ Link to comment Share on other sites More sharing options...
usdtor05 Posted December 3, 2014 Share Posted December 3, 2014 @nofreelunch, it is interesting in that softbank trades based on Sprint and the movement of the JPY more than based on Alibaba. Yahoo has moved up and Softbank has moved down as Alibaba moved higher. All indications were that a price war was coming and it did...Marcelo basically came out and said it and then you saw the announcement yesterday. We decreased our Softbank sizing somewhat until that noise is cluttered as still not 100% sure if Verizon and AT&T can come down and fight the unlimited and the lower pricing. What I am basically saying is that we are not totally sure how Sprint gets the billions it needs for the next few years and then the billions it needs for the 2016 auction. Hempton thinks he sells off part of Alibaba to pay for it. If that is the case need to bake in tax implications which lowers our value of Alibaba in Softbank. We are fine dealing with general noise, question is can we see through it...not 100% sure we can with Sprint. Japan's devaluation is bad for the implications around funding Sprint but at least right now, it isn't catastrophic as they generate around $10BUSD of EBITDA, capex is coming down, and the interest on the $50B or so in Japan is negligible (right now) although the debt is massive. It seems like everyone is quite happy with Yahoo's stake because there is some sort of visibility for how they exit whereas with Softbank that visibility does not exist...and we know it isn't going to exist any time soon. With these sum of the parts, it's very hard to know when this turns but the fact that they have Masa Son is all we could ask for. To be honest though, Alibaba is scary for us. Link to comment Share on other sites More sharing options...
no_free_lunch Posted December 3, 2014 Share Posted December 3, 2014 Thanks for the feedback usdtor. Regarding Sprint, it is only an $18.5B market cap, 80% of which is Softbank, so $15B to softbank. Would it be so bad if they left Sprint to it's own devices and worst case write it off? If the stock is moving up and down based on Sprint, and sprint is only about 10% of the company, well that seems strange. It seems the biggest risk with Sprint is that more money gets thrown at it. I agree though that AliBaba is a risk. Still, the company is growing like mad and is getting some significant economies of scale. I am sure it will get hammered if there is a market correction but the underlying value of the company seems fairly solid. Link to comment Share on other sites More sharing options...
usdtor05 Posted December 3, 2014 Share Posted December 3, 2014 That's not going to happen. Reputation here is far too important. He wants to be global. Plus if he can make this work that $18/$15B will be forth far far more. Just a question of making the value good enough for people to switch which means having the network in place which means of course...cash. He already did this once although he had the iPhone to help in Japan. Also I am not sure what the legal implications are in terms of the debt, etc. Remember he paid for the Sprint shares in almost all debt too although it is very very cheap so he would have to still service that. There are a lot of ifs here...but importantly you have someone who has done incredibly well historically. Link to comment Share on other sites More sharing options...
innerscorecard Posted January 12, 2015 Share Posted January 12, 2015 Anyone seen the December 2014 VIC writeup? Link to comment Share on other sites More sharing options...
usdtor05 Posted January 12, 2015 Share Posted January 12, 2015 Yes it was basically that things will work themselves out and give it time. Made the point that BABA shares are held in Sinagpore and therefore technically no capital gains taxes although company has said they would have to pay 20% taxes if they sold. Link to comment Share on other sites More sharing options...
jeffmori7 Posted January 22, 2015 Share Posted January 22, 2015 For those invested in Softbank, you own it through SFTBF, SFTBY, 9984? Link to comment Share on other sites More sharing options...
simplefocus Posted January 22, 2015 Share Posted January 22, 2015 I don't own SoftBank but if I was going to buy, I would buy 9984 because I don't like ADRs. The fees that you have to pay every year to own the stock are ridiculous. Link to comment Share on other sites More sharing options...
plato1976 Posted January 22, 2015 Share Posted January 22, 2015 this fee will generally range from $0.01 - $0.03 per share any idea what is the exact fee for SFTBY ? I don't own SoftBank but if I was going to buy, I would buy 9984 because I don't like ADRs. The fees that you have to pay every year to own the stock are ridiculous. Link to comment Share on other sites More sharing options...
luck Posted January 22, 2015 Share Posted January 22, 2015 I own SFTBY. Also, here's an interesting article (published yesterday) on Softbank's potential and undervaluation by Vitaliy Katsenelson: http://www.institutionalinvestor.com/blogarticle/3419649/blog/buying-warren-buffett-richard-branson-and-steve-jobs-at-a-discount.html#.VMEo5VZ4XwI Link to comment Share on other sites More sharing options...
berkshire101 Posted January 22, 2015 Share Posted January 22, 2015 I own SFTBY. Also, here's an interesting article (published yesterday) on Softbank's potential and undervaluation by Vitaliy Katsenelson: http://www.institutionalinvestor.com/blogarticle/3419649/blog/buying-warren-buffett-richard-branson-and-steve-jobs-at-a-discount.html#.VMEo5VZ4XwI I'm tempted to start a position here. Can anyone chime in on their debt situation? Link to comment Share on other sites More sharing options...
usdtor05 Posted January 22, 2015 Share Posted January 22, 2015 Sure regarding their debt. About 90% of the non-Sprint debt is in JPY which basically gives you a hedge against the deteriorating Yen. Most of the corp bonds and the short/long term borrowings (at 1-2%) are Yen. The lease payments that are capitalized are also majority yen as far as I can tell. If you figure the Wireless/Telephony business is worth $50B and the net debt is $40B then you have a negative impact with a depreciating Yen but not as bad as most people would think. Sprint after capex doesn't really cover their interest, Wireless/Telephony easily covers all non-Sprint debt. So, we know they are going to have to fund Sprint somehow, just a matter of how Son does it. Or maybe this google deal will be really transformational and bring in some significant cash flow...you got me. Link to comment Share on other sites More sharing options...
muscleman Posted January 22, 2015 Share Posted January 22, 2015 What do you guys think about BABA's corp structure and Jack Ma's attempt to steal Alipay back in 2011? http://www.forbes.com/sites/ericsavitz/2011/05/11/yahoo-discloses-jack-ma-takes-control-of-alipay-from-alibaba/ http://www.ft.com/intl/cms/s/2/40a66dd2-b9ec-11e0-8171-00144feabdc0.html#axzz3PZi6lWqf Link to comment Share on other sites More sharing options...
usdtor05 Posted January 22, 2015 Share Posted January 22, 2015 Personally I think if you are going to buy into Softbank you need to accept these type of things as part of the game. Not a great answer for you but it's the honest truth from my perspective. BABA is also public now so hopefully that helps with the chicanery. Link to comment Share on other sites More sharing options...
Picasso Posted January 22, 2015 Share Posted January 22, 2015 If you're worried about BABA, go short BABA against Softbank. If you're worried about Sprint, go short S against Softbank. I take the position that Masa is an excellent capital allocator and will make those decisions for me. Softbank can borrow between 1-2% going out several years in an overvalued currency. I think debt worries should take that into account and also realize that a lot of the debt comes in the form of non-recourse from Sprint since it consolidates on the parent company financials. My only worry with Softbank is the currency translation as a US investor. Anytime I try to hedge the currency I screw something up so I'm plaing the dice a bit and letting the currency help/hurt in its entirety. Link to comment Share on other sites More sharing options...
usdtor05 Posted January 22, 2015 Share Posted January 22, 2015 Picasso, i agree with the currency issues but there is an offset in that the majority of the debt is JPY (ex Sprint). The value of Wireless/Telephony at 5x eBITDA is 50B, the value of the net debt is $40B so net net it is negative as it depreciates but it's not one for one decrease. Now will the market react that way...not sure. But at least the actual numbers are favorable. Link to comment Share on other sites More sharing options...
usdtor05 Posted January 22, 2015 Share Posted January 22, 2015 Also if you are really worried about S I would make it an outsized short. At 12B it is 1/5 of the value. Including it's debt it is say $45B of EV plus the amount of debt he used to buy the shares..say $20B. Personally I am liking what Marcelo done thus far. I think in the next year we are going to see massive restructuring (been announced) and a sale of the wireline business (last CC they were open to it). In terms of what S does to capture customers we will have to wait and see. At least we have a guy in there who knows there are real issues now. Link to comment Share on other sites More sharing options...
innerscorecard Posted January 23, 2015 Share Posted January 23, 2015 What do you guys think about BABA's corp structure and Jack Ma's attempt to steal Alipay back in 2011? http://www.forbes.com/sites/ericsavitz/2011/05/11/yahoo-discloses-jack-ma-takes-control-of-alipay-from-alibaba/ http://www.ft.com/intl/cms/s/2/40a66dd2-b9ec-11e0-8171-00144feabdc0.html#axzz3PZi6lWqf I don't think that for BABA this presents an uninvestable risk, for reasons I articulated in my most recent Seeking Alpha article. Link to comment Share on other sites More sharing options...
innerscorecard Posted January 23, 2015 Share Posted January 23, 2015 I own SFTBY. Also, here's an interesting article (published yesterday) on Softbank's potential and undervaluation by Vitaliy Katsenelson: http://www.institutionalinvestor.com/blogarticle/3419649/blog/buying-warren-buffett-richard-branson-and-steve-jobs-at-a-discount.html#.VMEo5VZ4XwI Funny that this article came out at the exact time that the new Softbank idea on VIC became public. This was better written. Long blocks or quotes from English-language interviews and articles, to me, added zero value to the VIC article. Link to comment Share on other sites More sharing options...
usdtor05 Posted January 23, 2015 Share Posted January 23, 2015 Pretty sure that they are both VIC members. I enjoyed the VIC write-up. A lot of this comes down to Son's ability and that's what the VIC article was getting at. Link to comment Share on other sites More sharing options...
muscleman Posted January 26, 2015 Share Posted January 26, 2015 Does anyone know if Softbank is classified as a PFIC for US investors? Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 29, 2015 Share Posted January 29, 2015 Mayer’s Yahoo Plan Could Affect Softbank Interests http://blogs.wsj.com/japanrealtime/2015/01/26/mayers-yahoo-plan-could-affect-softbank-interests/ Link to comment Share on other sites More sharing options...
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