Daily Brief TMT/Internet: Softbank Group, NTT (Nippon Telegraph & Telephone) and more

In today’s briefing:

Can Son-San Take Over Softbank Group Through Buybacks?
2023 High Conviction: NTT (Buy) – Surging DoCoMo Underappreciated as Markets Step Back from Value
Softbank Group – China Rebound Has Helped After End-Of-Buyback Hangover

Can Son-San Take Over Softbank Group Through Buybacks?

On Thursday 8 December, an article showed up in Bloomberg suggesting Son-san had “increased his stake” as the company bought back shares, giving him more rights, “edging towards a buyout.”
That is a stretch. He went from below one-third to above one-third, giving him an explicit veto on shareholder super-majority resolutions, but it’s minor. He now has 34.2%.
The suggestion: if he got two-thirds, he could squeeze out minorities without a Tender Offer. Technically true, but not easy. I dig deeper and propose how it could be done.

We have tweaked our numbers after Q2 results and catching up with the company. In particular, we come away with more confidence in wireless / fintech growth
NTT looks cheap at 11x FY22e EPS v 12x for KDDI even as relative growth is expected to be better with ~9% EPS growth
Shares have outperformed TOPIX (+18% YTD v -3%) and this should continue in 2023 as solid financial performance and an attractive shareholder returns story provide support

Alibaba is up 20% QTD and the public Vision Fund portfolio is on track for its first positive quarter in almost two years thanks to China upside, mostly for Didi
That has kept the share price elevated even as the discount to fair value has expanded since buybacks ended at Q2 results
At 34% now, there is room for the discount to expand further as the range before the buyback surge was generally closer to 40%

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