Date: 30 September 2024
Broker: UOB Kay Hian
Company Overview
Sea Limited (Ticker: SE US) operates an integrated platform with three main segments: digital entertainment, e-commerce, and digital financial services. The company’s focus is on localizing its services to meet the needs of various markets, which has resulted in significant growth in these areas.
Share Information
- Share Price: US$94.83
- Target Price: US$112.54
- Upside Potential: +18.7%
- Market Cap: US$54.3 billion
- Shares Issued: 526.8 million
Major Shareholders
- Forrest Li: 25.2%
- Tencent: 18.6%
Stock Performance
- 52-Week High/Low: US$96.09 / US$34.35
- YTD Performance: +134.1%
Key Developments
- Shopee Partnership with YouTube: Shopee has partnered with YouTube to launch YouTube Shopping in Indonesia, followed by Thailand and Vietnam. This collaboration allows consumers to buy products directly from YouTube via Shopee. Indonesia, with its 139 million YouTube users, is expected to provide a significant boost to Shopee’s seller visibility and sales.
- Take Rate Hikes: Shopee raised its seller fees in multiple markets (Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, and Brazil) from July to September 2024. Despite these hikes, Shopee maintained GMV growth, proving its competitive advantage in the market.
- Thailand Virtual Bank License Application: Sea has formed a consortium with four prominent Thai companies, including BTS Group Holdings and Bangkok Bank, to apply for a virtual banking license. If successful, this could significantly expand SeaMoney’s ecosystem in Thailand, targeting the country’s unbanked population.
Strategic Initiatives
- Shopee’s Competitive Edge: The company continues to benefit from Shopee’s key strategies such as free shipping, flash sales, and double-date promotions, which have widened the competitive gap with rivals. For example, the Shopee Live 9.9 campaign in Thailand saw an eightfold increase in sales.
- Take Rates vs Competitors: Shopee’s take rates are now higher than those of competitors Lazada and TikTok Shop in most markets, underscoring its strong market position.
Financial Performance
- Revenue (2024F): US$13.25 billion
- EBITDA (2024F): US$866 million
- Net Profit (2024F): US$361 million
- Net Profit Margin (2024F): 2.7%
- Net Cash/Share (2024F): US$2.18
Valuation and Recommendation
- Valuation Base Year: 2025
- Price-to-Sales Multiple: 3.0x, compared to peers’ average of 3.5x
- Maintain BUY: With Shopee’s successful strategic initiatives and strong growth trajectory, UOB Kay Hian maintains its BUY recommendation, increasing the target price to US$112.54, up from the previous US$88.21.
Risks and Catalysts
- Potential Upside: Shopee could outperform with the release of self-developed games or by gaining more market share in its operating regions.
- Key Risk: The outcome of the virtual banking license in Thailand is crucial to expanding SeaMoney’s financial services.
Source: UOB Kay Hian, 30 September 2024
