Sea Ltd SE (former Garena)

[winston]

not vested

Cost savings improve earnings
3Q22 earnings within expectation

Sea’s 9M22 USD9b (+33.6% YoY, -0.3% QoQ) revenue was marginally below our/consensus’ full-year expectation, but gross profit of USD3.5b (+35% YoY) met our/consensus estimates (77%/75%), stemming from better unit economics for Shopee and increased traction for DFS.

Our forecast has not been adjusted as we expect further headwinds for the digital
entertainment business in 4Q22.

Our lower SOTP-based target price of USD98 (from USD105) indicates 54% upside as we have adjusted our valuation multiple to better reflect profitability metrics for Shopee and DE.

Maintain BUY.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/289425.pdf

[winston]

not vested

Sea Limited (SE US) - Aggressive cost optimisation efforts

Sea Limited (Sea) continues to report weak business trends, with both gaming and e-commerce business normalising from the high base during the pandemic in FY21.

The company has pivoted quickly in 3Q22 to slash costs aggressively and enter cash conservation mode, which should be viewed favourably by investors.

In our view, the e-commerce business has a clearer path to profitability, but the gaming business remains uncertain going forward.

The company has launched Blockman Go, Moonlight Blade, and Primitive Era in 2022 and is looking to launch Fae Farm on Nintendo Switch in 2023.

Despite marking a near-term bottom with cost optimisation efforts, we caution that revenue trends for Sea remain uncertain over the longer term, and the macro environment remains tough on companies that continue to be loss making.

We would prefer to see a clear bottoming of gaming business revenues before turning more positive on the company.

Therefore, we nudge our FV slightly higher from USD80 to USD84. The FV incorporates our existing ESG discount of 5%. BUY.

Source: OCBC

[winston]

not vested

1 Red-Hot Growth Stock to Buy Hand Over Fist

by Anthony Di Pizio

Quarterly active users declined by 22% during Q3 on a year-over-year basis, and bookings (which usually convert to revenue later) shrank by a whopping 45%.

Its e-commerce business came in with $1.9 billion in Q3 revenue, a 32% jump year over year.

Price-to-Sales ratio of just 2.8.

Source: The Motley Fool

https://tradesoftheday.com/2022/11/18/1 ... over-fist/

[winston]

not vested

INITIATE COVERAGE HOLD
Share Price US$60.65
Target Price US$58.77
Upside -3.1%

COMPANY DESCRIPTION

Major Shareholders %
Forrest Li 25.2
Tencent 18.6

FY22 NAV/Share (US$) 9.03
FY22 Net Cash/Share (US$) 9.38

Testing Times For Key Segments

Share price has recovered about 50% after a narrower net loss in 3Q22 but we are
doubtful that huge profitability could be attained with slower growth from the digital
entertainment and e-commerce segments.

We are also cautious on the risks of potential divestment by major shareholder Tencent and the huge amount of convertible notes in 2025-26.

However, Shopee’s dominant market share in ASEAN could allow it to leverage
on higher growth opportunities.

Initiate coverage with HOLD. Target price: US$58.77.

Huge amount of convertible notes due in 2025-26 puts Sea’s financial strength at risk.

By end-25, Sea would have US$1.1b worth of convertible notes due (at a convertible price of US$90.46/share). In the following year, another US$2.9b would be due (convertible price of US$477.01/share).

With these two convertible notes totalling US$4.0b being way out of the money, Sea’s adjusted net cash position as of 3Q22 is only around US$3.1b, after deducting
US$4.2b from its total cash position of US$7.3b. To recap, Sea’s net cash outflow for 9M22 alone already reached US$3.2b. Even at a reduced burn rate from 2023 onwards, Sea’s financial strength is weaker than it appears.

Source: UOBKH

https://research.uobkayhian.com/content ... 34957cfbd5

[winston]

not vested

Singapore’s Sea Freezes Salaries, Cuts Bonuses as Tougher 2023 Looms

by Olivia Poh and Yoolim Lee

Sea cut about 7,000 jobs, or roughly 10% of its workforce. It’s also shuttered e-commerce operations in some European and Latin American markets

Source: Bloomberg

https://www.bnnbloomberg.ca/singapore-s ... -1.1862562

[winston]

not vested

Sea Limited: Implied upside in 2023 of 219%

Goldman Sachs analyst Pang Vittayaamnuaykoon foresees shares hitting $159, which would imply upside of 219%.

Sea’s sustained double-digit growth rate is powered by its three unique operating segments.

The only one generating positive earnings before interest, taxes, depreciation, and amortization (EBITDA) at the moment is Garena, the company’s gaming division. Sea’s popular mobile game Free Fire has benefited from having 9.1% of its 568.2 million quarterly active users paying to play.

There’s also the company’s digital financial services segment, which is powered by its mobile wallet solutions. Sea operates in a number of chronically underbanked emerging markets where mobile wallets can improve access to basic financial services.

But the segment driving the most investor interest for Sea is e-commerce platform Shopee. During the third quarter, Shopee processed 2 billion orders and over $19 billion in gross merchandise volume (GMV). Its annual GMV run-rate of more than $76 billion is up over 660% from 2018.

Though Sea’s growth is intriguing, the company’s losses have been unsightly. Even with cost-cutting measures put in place for 2023, I wouldn’t expect shares to approach $159 anytime soon.

Source: Daily Trade Alert

[winston]

not vested

SEA Ltd
Shopee to exit its last test market, Poland

Shopee is pulling out of Poland, its last-standing e-commerce test market, in line with its strategic focus to improve profitability and limit cash burn.

After a slew of cost-cutting measures in 2022, we think SEA Ltd is at the tail end of corporate changes. We forecast adj. EBITDA breakeven by 2Q23F.

Reiterate Add with TP of US$75 on attractive risk-reward at current valuation

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 110E86BBE2

[winston]

not vested

FY23F: Hitting profitability milestones

We think SE could report better-than-expected EBITDA for 4Q22F, helped by narrower losses at Shopee (e-commerce) and SeaMoney (fintech).

We expect SE to achieve EBITDA breakeven at the group level by 2Q23F; SeaMoney/Shopee may turn segment EBITDA positive by 3Q/4Q23F.

We believe SE will revert its focus to reaccelerating topline growth in FY24F after it has achieved its breakeven targets. Reiterate Add. TP US$85.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 65D4B30327

[winston]

not vested

Sea’s growth evaporates along with Southeast Asia’s mobile boom

by Yoolim Lee & Olivia Poh

Likely to post a 5.8% year-on-year decline in sales for the December quarter when it reveals results on Tuesday (March 7).

Retreat from markets in India, Latin America and Europe,

Potential disposal of Garena’s Phoenix Labs unit. Acquired for more than US$150 million in 2020, the Vancouver-based indie developer of monster-hunting title Dauntless is getting bought out by its management, GamesBeat reported.

Source: Bloomberg

https://www.theedgemarkets.com/node/657968

[winston]

not vested

Singapore’s Sea Posts First Profit After E-Commerce Holds Up

by Olivia Poh and Yoolim Lee

Net income was $426.8 million in the fourth quarter.

Analysts expected a loss of $434 million on average.

Sea’s revenue growth slowed dramatically but sales still exceeded estimates, rising 7.1% to $3.5 billion.

Fourth-quarter revenue from Shopee, Sea’s e-commerce unit, gained 32% to about $2.1 billion. Sales at gaming arm Garena slumped, while revenue from SeaMoney, the digital financial services business, almost doubled.

Potential disposal of its Phoenix Labs unit. Acquired for more than $150 million in 2020, the Vancouver-based indie developer of monster-hunting title Dauntless is getting bought out by its management, GamesBeat

Source: Bloomberg

https://finance.yahoo.com/news/singapor ... 32637.html