Mizuho’s fintech punt would overdo optimism
06/10/2022 05:39
(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
MELBOURNE, Oct 6 (Reuters Breakingviews) - Always look
on the bright side of life, says Monty Python. As handy a mantra
as that is, Mizuho Financial 8411.T may be taking it too far.
The Japanese banking group is set to pay roughly 80 billion yen
($553 million) for a 20% stake in e-commerce giant Rakuten’s
4755.T online brokerage unit, according to the Nikkei. That
would be overly generous on two counts.
First, it values Rakuten Securities at an eye-popping 52
times earnings, based on annualised net profit for the six
months to end of June. Listed rival Monex 8698.T only trades
at around 13 times earnings, despite sporting a 22% operating
margin, better than Rakuten Securities’ 13%.
Second, Mizuho’s largesse will benefit parent Rakuten, the
Japanese word for optimism. The struggling $7 billion
conglomerate has been burning cash — $1.8 billion in the first
six months of this year alone — thanks to its mobile network
business. That should begin to improve, but even so Mizuho’s
potential investment would only cover some six months of pain
next year, according to Kirk Boodry, who writes for Smartkarma.
Sure, Rakuten Securities has rarity value, not least for
banks with less of an online presence. But Mizuho could drive a
harder bargain. (By Antony Currie)
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(Editing by Robyn Mak and Thomas Shum)
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