SoftBank's Vision Fund posts $2 bln profit, share weakness casts shadow - Reuters

• Didi, Full Truck Alliance listed during Q1
• China regulatory action has hit valuations
• SoftBank to wait and see on China -Son
• China remains compelling opportunity -executive
• Further upside from India investments listing -executive

TOKYO, Aug 10 (Reuters) - SoftBank Group Corp's (9984.T) Vision Fund unit posted on Tuesday a first-quarter profit of 236 billion yen ($2.14 billion) as gains from listing portfolio companies were offset by falling shares in firms like e-retailer Coupang Inc .

The Japanese conglomerate posted record annual profit in May with executives pointing to further upside from Vision Fund investments such as Chinese ride-hailing firm Didi Global Inc (DIDI.N) and "Uber for trucks" startup Full Truck Alliance Co Ltd (YMM.N).

Those companies listed in New York during the quarter but Chinese regulatory action has subsequently hammered valuations, underscoring SoftBank's China risk even as the group seeks to reduce dependence on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd (9988.HK).

The shift has cast a chill on SoftBank's investing in China, which makes up about a quarter of its funds' portfolio.

"Until the situation is clearer we want to wait and see," said SoftBank Chief Executive Masayoshi Son.

"In a year or two I believe new rules will create a new situation."

While the crackdown has affected returns expectations, "Our broader thesis in China is unchanged: It's still a large, growing and compelling economic opportunity," said Navneet Govil, the chief financial officer of Vision Fund.

The turmoil is clouding the outlook for the group, whose shares have slipped a third from two-decade highs in March amid the completion of a record 2.5 trillion yen buyback. Shares closed up 0.9% ahead of earnings.

"Having a large public portfolio introduces volatility but at the same time it allows us to continue to monetise in a very disciplined manner," said Govil.

Share price weakness and sell-side analyst speculation have driven expectation that a buyback may be imminent.

"Until now we have sold assets and announced a buyback. This time there was no event like that," Son said.

Japan's SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, Nov. 5, 2018. REUTERS/Kim Kyung-Hoon/File Photo

Given the gap between the group's share price and the value of its assets, he added, "I guess we will do a buyback sometime. The timing and size is something we consider daily."

VISION FUND UPSIDE

More than two-thirds of the portfolio of the first $100 billion Vision Fund is listed or exited. SoftBank has distributed $27 billion to its limited partners since inception.

Further upside will come from listings by Indian payments firm Paytm and insurance aggregator Policybazaar as well as southeast Asian ridehailer Grab, which is due go public via a blank-cheque company merger, Govil said.

SoftBank is also ramping up investing through Vision Fund 2, to which it has committed $40 billion of capital, with the unit making 47 new investments worth $14.2 billion in the April-June quarter alone.

Son said he would invest in the second fund through a scheme using his SoftBank shares as collateral.

In the first quarter, Vision Fund unit gains included 310 billion yen from selling shares in investments such as delivery firm DoorDash Inc (DASH.N) and ridehailer Uber Technologies Inc (UBER.N).

However, first-quarter group net profit fell 39% to 762 billion yen.

SoftBank has also been betting on publicly listed shares through its SB Northstar trading unit.

It held stakes in firms worth $13.6 billion at the end of June with the portfolio no longer including Microsoft Corp (MSFT.O) or Facebook Inc (FB.O) listed three months earlier.

The unit will shrink as SoftBank prioritises the Vision Fund, Son said.

($1=110.3900 yen)

Reporting by Sam Nussey; Editing by Christopher Cushing and Clarence Fernandez

Our Standards: The Thomson Reuters Trust Principles.

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