Zholdings - 21st century tech Berkshire in Japan
Zholdings is a large Japanese Tech company with a wide array of services and a good growth track record.
Search and web portal leader (Yahoo Japan)
Messaging leader (Line)
Payments leader (PayPay)
E-commerce challenger (Various)
Capital allocation is rational for once in Tech
Is the valuation attractive?
Management and introduction.
This chart is a good introduction.
Zholdings is controlled by Softbank and Naver (Korea). Yes, Softbank, the Masa Son conglomerate, the crazy holding company doing risky and overvalued investments with the Vision Funds. There is a CEO, but Masa Son pulls the strings. Naver seems more passive.
can will overpay for things, but three things about Softbank and Masa Son:
He is a visionary. Alibaba, Yahoo Japan, Vodafone Japan, ARM, those are visionary moves.
He is an excellent operator. The way he managed Sprint, the way he turned Vodafone Japan and started Yahoo Japan were excellent.
The ambition of Masa Son and his management is always very high:
We are linking the Group’s wide range of services to form our own ecosystem for providing new value to society that will establish us as the world’s third mega-digital platform operator group, alongside GAFAM*1 and BATH*2. (FAANG and KWEB)
In the pursuit of this goal, ZHoldings benefits from the Softbank portfolio of companies network for technical help.
Softbank is busy doing their crazy investments in their Vision funds, while Zholdings is an operating company focusing on growing EBITDA mostly organically.
In Japan, Zholdings is the result of a merger between Yahoo Japan and Line.
This combines a search engine/Portal and a Chat service. Both dominant in Japan. So it while Google is important in Japan, Yahoo Japan, which uses google technology for search, has many portals that the Japanese still love and is not just a search engine. Here is some background information I found.
These are the main user bases of Z-holdings.
The company divides the business in three segments:
1-Media (ads) - There are a lot of properties here, the Search portal, something like Quora, finance, weather, news, but also including some revenue related to shopping ads on PayPay Mall (named after Alibaba Malls probably) or on Yahoo Japan shopping.
This now includes Line advertising. Line is the leading messaging App in Japan, Thailand and Taiwan (84 million users ex Japan), like WhatsApp but probably more complete with many services. The company aims to merge the data between the two services to provide advertising optimised based on the user profile. Targeting based on what we like and who we are is what is good about Meta advertising. The goal is to do the same here.
2-Commerce. It is three times smaller as the Media business in terms of operating profit: Yahoo Shopping, PayPay Mall, Zozotown, Askul, Line Gift, Line Livebuy, etc.
3-Strategic (Fintech): PayPay Card, PayPay Bank, Line Fintech (PayPay until now was not in this segment, so these are other PayPay branded services). Zholdings was already running these fintechs under various names and they all got a PayPay branding in 2020). This segment is Currently loss making and experiencing fast growth, but the company aims for profitability in a few years.