Rakuten: New Roaming Agreement and New Shares Issuance Mitigate Immediate Financial Risk

Rakuten’s March quarter operating loss of JPY 76 billion was a significant improvement from the JPY 113 billion loss in the previous year, thanks to Rakuten Mobile’s cost reduction and subscriber growth. What caught our attention more were the series of actions announced in recent weeks to improve the company’s financial position, which had deteriorated due to massive investments in the mobile business. In addition to Rakuten Bank’s listing in April, reduction of capital expenditures through the extension of the roaming agreement with KDDI and the issuance of new shares announced on May 16 will help alleviate concerns about Rakuten’s cash management. However, we revise our fair value estimate to JPY 620 from JPY 840, considering the dilution from the issuance.