Sea Ltd SE (former Garena)

[winston]

not vested

Sea misses profit estimates, showing turnaround still fragile

By Olivia Poh

Sea Ltd’s earnings missed estimates after gaming revenue plunged 43% and it swallowed a one-time charge of more than US$100 million (RM449.65 million).

Despite posting its second consecutive quarterly profit, revenue grew just 5% and a goodwill impairment charge slashed net income to US$88.1 million, missing the US$224.4 million analysts expected.

Source: Bloomberg

https://theedgemalaysia.com/node/667242

[winston]

vested

Sea posted its second profitable quarter in a row, with US$87.3 million in net profit for Q1 ended March 31, a reversal of the US$580.1 million net loss in the year-ago period.

But jittery investors sent Sea shares down 13.1 per cent to US$76.58 as of 9.43 pm (Singapore time) on Tuesday (May 16).

This came amid a weaker showing in gaming division Garena, which dragged on the New York-listed company’s topline.

Sea’s revenue for the quarter was up 4.9 per cent to US$3 billion. This growth was thanks to its e-commerce arm Shopee and other services, for which revenue surged 50.7 per cent to US$2.3 billion.

Sea’s latest performance comes after the company posted a surprise US$422.8 million net profit in Q4 last year – its first-ever quarterly profit following aggressive cost cuts and layoffs.

Source: Phillips

[winston]

vested

May 15, 2023

Sea’s path to profit paved with layoffs, single-ply toilet paper

In March, Sea reported the first quarterly profit in its 14-year history, US$427 million in Gaap-sanctioned net income. Its stock soared 22 per cent.

It lost more than US$8 billion since its founding to pay for growth in its e-commerce, games and finance operations.

In February 2022, India abruptly banned Free Fire, along with dozens of Chinese apps, amid rising tensions between the two countries.

In addition to layoffs and salary freezes, Sea pulled out of Europe and most countries in Latin America.

He believes AI will play a big role in replacing much of the repetitive work for Sea’s e-commerce, gaming and fintech businesses.

Gaming, in particular, is probably ahead of online shopping in terms of how people use AI to develop and play games by making it more interactive and immersive.

Source: Bloomberg

https://www.businesstimes.com.sg/startu ... ilet-paper

[winston]

vested

SEA (SE US)
1Q23: Another Good Set Of Results; Focus Remains On Profitability

SEA reported its second consecutive quarter of positive earnings in 1Q23. This is well
within our expectations with a lower digital entertainment contribution.

We expect 2Q23 earnings to remain healthy with:
a) management guiding that the active users for of Free Fire had reached its peak in Apr 23 over the last eight months,
b) the e-commerce segment remaining resilient with stable margins, and
c) increasing loan base for DFS segment.

Maintain BUY with a target price of US$94.34.

Source: UOBKH

https://research.uobkayhian.com/content ... 69f27f4c6f

[winston]

vested

SEA Ltd
Balancing growth and profitability

1Q results were mixed – while adj. EBITDA beat consensus expectations, GAAP net profit disappointed on impairment loss and gaming segment woes.

Shopee and SeaMoney grew EBITDA qoq. Nimble execution is key given macro challenges; focus remains on user experience and lowering cost.

Garena still faces challenges but we see green shoots with positive user trends for Free Fire in Apr and new game launches in 1H23F. Reiterate Add.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... D06B0FD0DD

[winston]

not vested

Sea Limited (SE US) - Mixed quarter, awaiting clearer operating trends in coming quarters

Sea Limited (Sea) turned in a relatively mixed quarter with both positives and negatives.

The company maintained positive GAAP earnings in 1Q23 but financial numbers turned weaker – likely due to seasonal weakness.

Gaming operating trends seemed to have bottomed, while e-commerce operating trends have flattened out.

New game launches in the coming quarters could support gaming revenues, but monetisation could remain an issue.

Given the uncertain operating trends, investors are likely to wait for clearer signs of growth before turning bullish on the company. BUY.

Source: OCBC

[winston]

not vested

Driving sustainable profits
1Q23 missed estimates; mixed performance

Sea’s 1Q23 net profit of USD88m was below our and the consensus FY23 estimates (11%/9%), largely due to a USD118m goodwill impairment charge from previous acquisitions, excluding this charge net profit would be in line/missed with our/consensus forecast.

Shopee’s and SeaMoney’s 1Q23 adj. EBITDA improved by 6% and 31% QoQ, respectively, offsetting Garena’s weaker performance (-11% QoQ).

We think Sea should be able to generate a net profit in FY23E due to faster-than-expected cost cuts, more sustainable reinvestment to defend its regional e-commerce market leadership and the broadening of its digital bank offerings across Southeast Asia.

Maintain BUY with a SOTP-based TP of USD105

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/318416.pdf

[winston]

not vested

Sea Ltd - Stock Analyst Research
Target Price* 100.00
Recommendation BUY

Sea Ltd. - Shopee picking up the slack

1Q23 revenue missed expectations marginally due to decline in gaming revenue.

Earnings were above our expectations, but negatively impacted by a 121% YoY increase in loan provisions.

1Q23 revenue was at 21% our FY22e forecasts, with PATMI ~US$670mn better than our FY23e forecasts due to better monetization and lower marketing spend.

Shopee growth is re-accelerating on better monetization and resilient GMV trends in Southeast Asia. Expenses continued to decline, increasing operating profitability across all business segments.

We cut our FY23e/FY24e revenue by 9%/12% respectively to reflect slower growth as Garena continues to drag, while increasing FY23e PATMI/EBITDA by US$940mn/US$838mn on profitability across all segments.

We maintain BUY with a reduced DCF target price of US$100.00 (prev. US$120.00), using a WACC of 7.6%, and a terminal growth rate of 3.0%.

Source: Phillips

https://www.poems.com.sg/stock-research/SE/

[winston]

not vested

Negatives in the price, catalyst in 2Q23F
Factoring the threat from TikTok Shop pro-actively

Shopee’s GMV decline amid a rising take rate has concerned investors. SE’s share price dropped from US$88 on 18 May to US$57 on 31 May (35% drop) on concerns that Shopee is losing market share, based on second consecutive quarter of sequential decline in GMV.

1Q tends to be weaker than preceding 4Q due to the seasonality. However, market is still concerned that TikTok Shop, has penetrated all six key regions in Southeast Asia.

How big of a threat is TikTok Shop in Southeast Asia? The live-ecommerce sector in Southeast Asia is growing rapidly. According to a joint study by TikTok Shop and Boston Consultancy Group (BCG), Southeast Asia’s shoppertainment GMV is expected to grow at a CAGR of over 60% during 2022-2025, driven by Indonesia which is projected to contribute to 30% of the region’s Shoppertainment GMV.

After launching only in Indonesia in 2021, TikTok Shop expanded to five more countries in Southeast Asia in 2022. In 2022, the GMV of TikTok Shop quadrupled to US$4.4bn, accounting for 6.4% of Shopee’s GMV, excluding Brazil.

TikTok Shop is battling the dominant players in the e-commerce landscape, especially Shopee and Lazada. The major threat comes from the massive user base TikTok has amassed in Southeast Asia of an estimated figure of 266m, according to Influencer Marketing Hub. In our estimate, TikTok Shop could achieve a GMV of US$15.0bn and account for 19% of Shopee’s GMV in 2024.

Shopee to see at least 9% CAGR in GMV over FY22-25 despite the threat from TikTok Shop in Southeast Asia. According to Google Temasek and Bain, e-commerce GMV in Southeast Asia in 2022 stood at US$131bn and this is expected to rise at a CAGR of 17% over 2022-2025. TikTok Shop is expected to achieve a CAGR of 60% in Southeast Asia, according to Accenture.

TikTok Shop could achieve an incremental GMV value of US$3.5bn in 2023 and the industry is expected to gain a GMV of US$22.3bn, based on Google Temasek and Bain’s projections, implying that the rest of the players will be left with US$18.8bn in GMV in 2023.

Shopee can indeed gain a portion of this GMV growth only from Southeast Asia, in our view. In addition, based on SE’s 4Q21 results, it was reported that Brazil’s 140m gross orders accounted for 7% of Shopee’s total orders in 4Q21.

As the Brazilian market is aggressively expanding, we can assume this contribution will rise to 10% of Shopee’s GMV. Shopee will also experience GMV growth from Brazil. Hence, we don’t expect a decline in GMV from 2023 onwards for Shopee, and instead we see slower growth in GMV.

Source: DBS

https://www.dbs.com/insightsdirect/comp ... ecid=14631

[winston]

not vested

Balancing margins and growth
2Q23E preview: margins likely improved

Sea would announce its 2Q23 results in mid-Aug23.

We believe SE will turn a profit for FY23, as it’s rapidly improving its cost structure.

Margins are likely to have improved further in 2Q23, driven by sharp growth across both its e-commerce (Shopee) and fintech (MariBank) businesses, which we think more than offset weakness in Garena (digital entertainment).

While near-term GMV growth could be hamstrung by various cost-cutting measures, we estimate 2Q23E revenue of USD3.57b (+21% YoY) as we assume a higher take rate, with improvement in adjusted EBITDA to USD475m (+6.7% QoQ) and a net profit of USD436m (+73% QoQ).

Reiterate BUY and SOTP-based TP of USD105.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/329669.pdf