Sea Ltd SE (former Garena)

[winston]

not vested

SEA LIMITED (SE US)

Recommendation : HOLD
Fair Value : USD 80.00

E-COMMERCE OUTLOOK JUST GOT CLOUDIER.

Some gaming QAU stabilisation observed but bookings were soft; e-commerce in ASEAN + Taiwan likely to breakeven on EBITDA basis (pre-HQ costs) by this year

Suspension of e-commerce GAAP revenue guidance for 2022 key negative development; market likely to remain concerned over near-term GMV and monetisation outlook

FV of USD80

Sea Limited (Sea) reported total GAAP revenue growth of 29% year-on-year (YoY) to USD2.9b, which was a touch below consensus.

E-commerce total gross merchandise value (GMV) growth of 27% YoY to USD19b was broadly in-line with consensus, while adjusted EBITDA loss per order in Southeast Asia and Taiwan (before headquarter (HQ) costs) was less than 1 cent during the quarter.

While gaming quarterly active users (QAU) grew 1% quarter-on-quarter (QoQ) to 619.3m which suggests signs of stabilisation, bookings were soft at USD717m (vs USD1.2b in 2Q21).

All-considered, group adjusted EBITDA loss of USD506m came in below the consensus of -USD550m.

In our view, the key negative development was the suspension of the e-commerce GAAP revenue guidance for 2022.

While HQ costs have increased QoQ, the pace has slowed and the increase is related to increase in R&D staff and server hosting costs.

Turning to games: while Free Fire has shown some early signs of active user stabilisation, management is not extrapolating this into future trends, given headwinds from inflation, reopening pressures and tough YoY comparisons.

Management noted that they do have games in the pipeline that could be published later this year, but also cautioned that we are unlikely to see any immediate/significant impact like Free Fire given the need to focus on user engagement initially.

Following adjustments (while keeping our existing ESG discount of 5%), our fair value (FV) moves down from USD88 to USD80.

Source: OCBC

[winston]

not vested

Not out of the woods yet

2Q revenue missed expectations; SE surprised the market by suspending its FY22F revenue guidance for Shopee.

SE cited the need to remain nimble in navigating macro challenges, and plans to prioritise profitability and cashflow management.

Downgrade to Hold as we think the suspended guidance signals a weaker GMV outlook for Shopee over the near term.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 8DD092C13E

[winston]

not vested

SEA LTD – Growth drivers still performing

TP: US$110

We lower our FY22e revenue slightly to reflect weaker e-commerce growth and we increase our net loss forecasts by 43% to reflect higher expenses.

We maintain a BUY recommendation with a lowered DCF target price of US$110.00 (prev US$150.00), with an increased WACC of 7.6%, lower EBITDA and a terminal growth rate of 3.0%.

Shopee revenue guidance suspended for FY22e

Source: Phillips

https://www.stocksbnb.com/reports/sea-l ... erforming/

[winston]

vested

Aug 22, 2022

Don't Panic Over Sea Limited Stock

By Justin Pope

KEY POINTS
Growth is slowing now that the pandemic is easing.
Sea's aggressive spending is causing huge cash losses.
A strong balance sheet can support Sea, which still can have a bright future.

Garena: Active users fell 15% year over year and paying users fell 39%
Shopee: Sales and Marketing expenses - US$4.2b, a third of total revenue
Cash: US$7.8b
Cash Burn: US$1.4b

Source: TMF

https://www.fool.com/investing/2022/08/ ... yptr=yahoo

[winston]

vested

Singapore's Sea cuts some Garena unit jobs, shuts projects, sources say

By Josh Ye and Fanny Potkin

Sept 1 (Reuters) - Gaming and e-commerce company Sea is putting the brakes on its game livestream platform and shutting projects at its development unit after reporting an almost $1 billion quarterly loss, two sources familiar with the matter told Reuters.

Employees were told staff numbers at its gaming live stream business and its development arm would be cut, sources said.

Staff at Booyah!, a gaming livestream and community app, which is part of Sea?s gaming unit Garena, were told they would be let go and the app would no longer be updated, the sources said. One source said it meant making 30 to 40 people redundant.

Sea Labs, the tech conglomerate's development arm, was shutting some of its biggest experimental projects and cutting staff, including blockchain and public cloud projects, the source said.

After a rally in its fortunes during the pandemic, Sea has suffered setbacks that have led to more than a 72% drop in its share price so far this year. In March, Sea warned that Garena was taking a hit from government bans in India.

In June, Sea cut jobs across its e-commerce division Shopee, according to media reports, not just in Southeast Asia but also at its Mexico and Latin American operations.

Quarterly paying users for Garena dropped 39% in thequarter.

Source: Reuters

[winston]

Singapore's Sea shuts ops in some Latam countries, cuts Free Fire staff in Shanghai

by Fanny Potkin & Josh Ye

Shopee will exit Argentina and shut local operations in Chile, Colombia and Mexico while Garena will lay off hundreds of staff in Shanghai.

Reported nearly US$1 billion quarterly loss in the April-June quarter.

15% of employees at the Shanghai office were let go this week, with the third source confirming the number was in the "low several hundreds".

Free Fire raked in more than US$4 billion by 2021 since its release in 2017.

Source: Reuters

https://www.theedgemarkets.com/article/ ... f-shanghai

[winston]

vested

Every cent counts

Shopee scaled back its presence in Latin America; Brazil as a core market
remains unaffected. Poland is currently Shopee’s last test market standing.

Shopee entered the four Latam test markets back in 2021; we estimate they
contribute LSD of Shopee’s GMV. The move could save SE US$40m a year.

The move is aligned with SE’s latest focus on prioritising profitability. Maintain
Hold as sentiment likely to remain negative near-term on further cost-cutting.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... C0BA3BB040

[winston]

vested

SEA’s top management will forgo their salaries and tighten company expense policies

The leadership team has decided that we will not take any cash compensation until the company reaches self-sufficiency.

“We can now see that this is not a quickly passing storm: these negative conditions will likely persist into the medium term.”

In his 1000-word missive, seen by Bloomberg News, the billionaire addressed head-on the struggle for Sea in an era of rising interest rates, accelerating inflation and a volatile market.

The company has lost about US$170 billion of market value since an October high on questions about its money-making prospects and a global decline in tech stocks.

“With investors fleeing for ‘safe haven’ investments, we do not anticipate being able to raise funds in the market,” Li said, reiterating that the company’s primary objective for the next 12 to 18 months is to achieve positive cash flow as soon as possible.

Source: Phillips

[winston]

vested

Sea Ltd (SE US): <Alert> Targets earlier breakeven than our estimates [BUY, TP US$126]

Top management decide to forgo salaries and targets earlier EBITDA breakeven compared to our estimates

Recent pullback from key Latin American markets might lead to ~US$300m reduction in EBITDA losses in 2023

Maintain BUY with an unchanged TP of US$126, as SE’s strategic shift towards profitability seems to be on track

Source: DBS

[winston]

not vested

Is there an end in sight to Shopee’s current woes?

The firm’s cash balance at the group level would be enough to sustain the company for more than three years based on its levels of cash burn for Q2 2022.

Sea is obliged to set aside S$1.5 billion as paid-in capital for MariBank, its Singapore digital bank. It will also have to invest in MariBank and its other digital banks in the region.

Source: Tech In Asia