Sea Ltd SE (former Garena)

[behappyalways]

Sea to shut Shopee India unit after political headwinds
https://www.theedgesingapore.com/news/t ... -headwinds

[winston]

not vested

Shopee to pull out of India

Shopee announced it will exit from India, citing global market uncertainties.
This does not come as a surprise, in view of SE’s latest developments there.

Given India’s huge market size and challenging competitive landscape,
Shopee’s exit could put SE on a firmer footing in its path to profitability.

Reiterate Add with unchanged SOP-based TP of US$202.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 6a765773cf

[winston]

not vested

Sea Limited (SE)

After touching highs of $372, Sea Limited (NYSE:SE) stock was on a sustained downtrend. However, the stock has bounced back by 47% from recent lows of $85. I believe that the positive momentum is likely to sustain with the company focusing on profitability.

Recently, Sea Limited’s e-commerce unit, Shopee, exited India. Morgan Stanley analyst Mark Goodridge believes that it’s a good decision with the company having struggled to “make the underlying unit economics work in the India market.” Also, with a focus on few core markets, Sea Limited is likely to reduce the cash burn.

It’s worth noting that for 2021, the Digital Entertainment segment reported revenue of $4.3 billion and an adjusted EBITDA of $2.8 billion.

While the e-commerce segment revenue was $5.1 billion, the adjusted EBITDA loss from the business was $2.6 billion. Once there is a turnaround in the e-commerce segment at the EBITDA level, I expect SE stock to trend higher.

Sea Limited reported cash and short-term investments of $10.2 billion as of December 2021. There is ample cash buffer to cover for the medium-term cash burn.

The markets will however focus on how the company plans to achieve operating level profitability in the e-commerce segment. The exit from India seems to be one step in the right direction.

Source: Investor Place

[winston]

not vested

From October 2021 highs of $372, the stock has collapsed to current levels of $93.

There are few reasons for the sharp correction.

First and foremost, the markets have discounted growth deceleration. Furthermore, Sea Limited continues to report significant EBITDA level loss from the e-commerce sector. Even as the gaming segment EBITDA remains healthy.

If EBITDA margin in the e-commerce segment improves, SE stock is poised for a sharp reversal rally.

For 2022, Sea Limited expects e-commerce revenue of $9.0 billion. On a y-o-y basis, revenue is expected to increase by 75.7%. The digital financial services growth is expected at 155.4% on a y-o-y basis. Clearly, it seems that top-line growth is not a major concern. It’s profitability concerns that have resulted in a sustained correction.

28 analysts have a median 12-month forward price forecast of $200 for the stock. This would imply more than 100% upside from current levels.

Source: Investor Place

[winston]

not vested

Another digital bank licence in the bag

Consortium led by SE and YTL was awarded a digital bank licence in Malaysia today. This is the fourth digital bank licence secured by SE to date.

Digital bank licence will enhance SE’s ability to roll out more financial offerings and better monetise its DFS segment.

SE’s first digital bank rollout in Indonesia has seen strong initial traction; it is currently leading in terms of loans and deposits. Reiterate Add. TP US$202.

This represents the fourth digital bank licence secured by SE to date (after Singapore,
Indonesia and Philippines).

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 64336BCE86

[winston]

not vested

Sea Limited (SEA US) - Leveraged to secular growth trends, but near-term headwinds not trivial

Sea’s key business streams operate across a number of secular growth verticals, including mobile gaming, e-commerce, and fintech/digital banking.

On e-commerce, we believe that Shopee is particularly well-placed to maintain its favourable position across Southeast Asian markets. Also, its recent exit from India is testament to the group’s focus on capital conservation and on markets with more visible opportunities. Management notes that Shopee is on track to achieve positive adjusted EBITDA before headquarters’ costs allocation in Southeast Asia and Taiwan by this year.

Separately, we view Sea’s Fintech business as a credible growth engine for the overall group moving forward, and that management will likely focus on ramping up non-payment verticals. We understand that SeaMoney is also on track to become cashflow positive by next year.

Management has also expressed their expectation that by 2025, cash generated by Shopee and SeaMoney collectively will enable both businesses to substantially self-fund their own long-term growth.

As for Garena’s self-developed global hit, Free Fire, this has continued to maintain top global rankings in user and grossing metrics. However, we understand that the reopening of economies has resulted in some moderation in online activities and fluctuations in user engagement, while Free Fire has run into regulatory headwinds in India.

These have contributed to soft Digital Entertainment bookings guidance of USD2.9-3.1b in 2022, which represents a decline of 33-37% year-on-year (YoY).

We believe that this has led to notable investor concern over Garena, and in particular on its reliance on a single IP.

All considered, despite the opportunities arising from the positive structural trends that Sea is leveraged to, there are a number of near-term headwinds to navigate, such as the reopening and regulatory challenges facing Garena, potential missteps as it focuses more on profitability, as well as a backdrop of rising yields that is likely to be less accommodative towards high growth stocks with minimal/no earnings.

We employ a multiples-based SOTP approach in valuing Sea’s various business segments, and after applying an ESG discount of 10% (to account for governance risk), we derive a fair value (FV) of USD93. HOLD.

Source: OCBC

[winston]

not vested

Singapore’s richest man loses $25b in tech wipeout

by Yoojung Lee and Yoolim Lee

Scheduled to report first-quarter earnings later on Tuesday, is expected to post a record loss of more than $US740 million.

The company’s e-commerce sales, its main source of revenue, could come short of its annual guidance of $US8.9 billion to $US9.1 billion as it faced intensifying competition from rivals including Alibaba and as consumers returned to offline stores with the easing of COVID-19 restrictions.

Of the 38 analysts tracked by Bloomberg covering it, 34 recommend buying it.

Source: Bloomberg

https://www.afr.com/world/asia/singapor ... 517-p5alx7

[winston]

not vested

1Q22: Strong execution

We remain positive on SE with 1Q results showing operating leverage gains for Shopee and SeaMoney, while maintaining strong growth trends.

Shopee continues to scale well in Brazil. E-commerce growth relatively intact
(midpoint of revised FY22F guidance: 72% yoy) despite macro challenges.

Garena saw weakness as expected but early signs of stabilisation were seen
towards end-1Q.

DFS the bright spot as SE focuses on driving monetisation.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 0BEC51524A

[winston]

not vested

Free Fire showing signs of stabilizing

1Q22 net loss narrower than street had expected

1Q22 net loss of USD580m (+37% YoY) was less than consensus and what
we had expected.

We trim our FY22E e-commerce GAAP revenue by 6% to USD8.5b, at the lower end of revised guidance as we take a more conservative view amid macro uncertainties.

Free Fire is showing signs of stabilizing.

Our SOTP-based TP is cut 13% to USD140 as we tweak multiples for the respective businesses. But retain BUY as we believe Sea is a proxy to ASEAN digitisation via e-commerce and digital financial services growth.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/262423.pdf

[winston]

not vested

Shares of Southeast Asia’s e-commerce and gaming firm Sea Group popped after its first-quarter revenue beat analysts’ expectations on Tuesday.

Sea’s U.S.-listed shares rose 14% to close at $80.21 after the of Singapore-based internet firm reported revenue that exceeded analysts’ expectations in the first quarter this year.

Sea’s revenue rose by 64.4% from the same period a year earlier, but fell around 9.5% from the $3.2 billion it made in revenue in the previous quarter, a sign that after two years of pandemic-driven sales, growth is starting to plateau.

It’s online shopping platform Shopee and gaming arm Garena grew more slowly as countries opened up.

The company warned that inflation and supply chain disruptions could affect business, even as it continues to be loss-making.

Both Shopee and Garena, Sea’s two main money-making divisions, faced lower revenues compared to the previous quarter.

Source: Phillips