Executive Overview
SEA Ltd has delivered a remarkable fourth-quarter result in 2024, backed by strong revenue and adjusted EBITDA performance across all business segments. The company not only exceeded both internal and external consensus earnings estimates but also provided robust FY25 guidance, underpinning key growth drivers across its ecommerce, digital entertainment and fintech platforms. With a target price raised to US\$155 and a reiterated “Add” recommendation, SEA Ltd’s outlook is promising with improved profitability and attractive future growth prospects.
Detailed Segment Analysis
A. E-commerce – Shopee
Shopee, the central growth engine for SEA Ltd’s ecommerce business, delivered an impressive performance in 4Q24. The segment posted a gross merchandise value (GMV) of US\$28.6 billion, representing a quarterly increase of 14% and a year-over-year rise of 24%. This surge was driven by accelerated user and order frequency growth. In addition, Shopee recorded a positive momentum in adjusted EBITDA, with margin expansion noted as the EBITDA-to-GMV ratio increased by approximately 40 basis points quarter-over-quarter to 0.53%.
The company’s guidance for FY25 remains robust with expectations for Shopee’s GMV to grow by roughly 20% on a year-over-year basis (above market consensus) and improved profitability through focused initiatives that include:
- Enhancing marketplace take rates gradually.
- Lowering cost per order via increased scale and operational efficiency.
- A ramp-up in high-margin advertising contributions.
- Optimized marketing spend within a stable competitive landscape.
This performance has boosted the valuation model, supporting an estimated FY25 adjusted EBITDA growth of around 50% year-over-year and re-rating catalysts that include strong GMV expansion and accelerated margin growth. As a result, the research team has reiterated the “Add” rating, raising the target to US\$155.0 from a previous target of US\$136.0.
B. Digital Entertainment – Garena
Garena, SEA Ltd’s digital entertainment arm, delivered mixed yet notable results in 4Q24. The segment’s bookings reached US\$543 million, showing a modest 2% decline quarter-over-quarter but an impressive 19% year-over-year increase. Garena’s adjusted EBITDA registered at US\$290 million, a slight contraction of 8% sequentially, though demonstrating strong year-over-year growth of 33%.
User engagement in Garena remains a key metric, with quarterly active users (QAUs) experiencing a slight 2% decline compared to the prior quarter while quarterly paying users (QPUs) remained flat. The paying ratio edged up modestly to 8.2%. Free Fire, Garena’s flagship mobile title, continues to be a standout, with annual bookings up 34% and maintaining its position as the leading mobile game worldwide based on average daily active users. Importantly, the company is focusing on strategic initiatives such as improving connection quality in emerging markets like Africa, notably Nigeria, to fuel further growth.
C. Digital Financial Services – SeaMoney
The digital financial services segment, commonly referred to as SeaMoney, has outperformed expectations in 4Q24 with revenue climbing to US\$733 million, marking a quarterly growth of 19% and a substantial 55% increase year-over-year. Adjusted EBITDA for the segment reached US\$211 million, registering a sequential increase of 12% as well as a 42% year-over-year surge.
A critical component of SeaMoney’s expansion is the strong growth in its loan book, which hit a record high of US\$5.1 billion in 4Q24. This achievement is largely attributable to increased penetration of both on-platform and off-platform lending with an impressive maintainable level of asset quality – non-performing loans remaining low at 1.2%. In light of the extensive credit data being generated from Shopee’s user base, SEA Ltd is well-positioned to cautiously scale its loan offerings. The management’s conservative approach to determining loan tenures and amounts instils further confidence in sustained loan book expansion projected at around 27% year-over-year in FY25, thereby underpinning an anticipated segment revenue growth of approximately 32%.
Financial Performance and Key Metrics
The report details comprehensive financial numbers for SEA Ltd, underlining the company’s robust operating performance and attractive growth prospects:
- Revenue: Growth from US\$13,064 million in Dec-2023 to projected US\$21,150 million in FY25, with continued incremental increases in subsequent years.
- Operating EBITDA: A significant uplift from US\$666 million in Dec-2023 to an estimated US\$2,048 million in FY25, reflecting improved operational efficiencies and higher margins.
- Net Profit and EPS: Net profit showcased a leap from US\$151 million in Dec-2023 to a forecasted US\$1,536 million in FY25, with core EPS growth maintaining healthy acceleration.
- Valuation Ratios: The FD Core P/E is projected to decline from 477.0 times in Dec-2023 to 48.3 times in FY25, while EV/EBITDA shows a similar compression, underlining an attractive entry valuation as scale improves.
The overall financial performance of SEA Ltd is underpinned by consistent revenue growth, margin improvements, and an increasingly attractive valuation profile. The strong free cash flow generation and commitment to operational precision bolster the company’s long-term investment thesis.
Valuation Insights and Sum-of-Parts Analysis
An in-depth sum-of-parts (SOP) valuation of SEA Ltd reflects the strength of its three core segments:
- Gaming (Garena): The Garena segment is valued using a FY26F P/E multiple of 12.0, reflecting a valuation at a 40% discount to sector averages. This discount is largely driven by heavy reliance on the Free Fire title.
- Ecommerce (Shopee): Valued with a FY26F EV/Sales multiple of 3.0, the Shopee business commands an attractive valuation relative to its peers including Alibaba, PDD, and MercadoLibre.
- Digital Financial Services (SeaMoney): The fintech arm is assigned a FY26F EV/EBITDA multiple of 13.0, in line with industry medians, with a strong emphasis on prudent credit expansion and risk management.
The overall equity value per share has been re-affirmed as US\$155, further substantiating the “Add” recommendation driven by strong underlying growth and re-rating catalysts.
Peer Comparisons and Market Positioning
The report offers a broad peer comparison across three categories – gaming, ecommerce, and financial services – underlining the competitive advantages of SEA Ltd:
- Gaming: SEA Ltd’s position is compared with major players such as Bandai Namco, Electronic Arts, NCSoft, NetEase, Netmarble, Nexon, Square Enix, and Take-Two Interactive. Despite intense competition, SEA’s focus on its marquee title Free Fire provides stability and market differentiation.
- Ecommerce: In the ecommerce domain, SEA Ltd is benchmarked against Alibaba, Amazon, eBay, Etsy, JD.com, MercadoLibre, PDD Holdings, Shopify, and Vipshop. Shopee’s market share gains, improved margins and aggressive growth strategy set it apart from rivals.
- Digital Financial Services: Within the fintech space, SEA’s SeaMoney is evaluated alongside global players such as Adyen, Affirm, Block, Global Payments, Kakaopay, Mastercard, Pagseguro, PayPal, Q2 Holdings, and Visa. The consistent loan book expansion and risk management measures reinforce its competitive positioning.
These peer comparisons not only validate the attractive multiples assigned to SEA Ltd but also highlight its capability to sustain high growth relative to its global peers.
ESG and Corporate Strategy
SEA Ltd is committed to delivering positive social impact along with solid financial results. The group actively supports numerous UN Sustainable Development Goals through its CSR initiatives, particularly focusing on:
- Enhancing education and promoting decent work and economic growth
- Reducing inequalities by creating significant employment opportunities, especially in rural and emerging ASEAN regions
- Improving local community incomes and driving broader financial inclusion through its digital financial services
With a strong emphasis on hyperlocalisation, SEA Ltd adapts its offerings to meet the needs of diverse markets across ASEAN. The company’s efforts in improving employee diversity—a near even gender mix across more than 70 nationalities—and initiating carbon emissions disclosures underscore its commitment to sustainable growth and responsible business practices.
Technical and Financial Highlights
The report meticulously details the following key financial figures:
- 4Q24 consolidated revenue of US\$4.95 billion, outperforming forecasts and consensus estimates.
- Adjusted EBITDA at the group level improved to US\$591 million, with a sequential and annual acceleration.
- Robust guidance for FY25 indicates significant expansion in Shopee’s GMV, enhanced profitability, and a fast-growing fintech loan book.
- Projected financial metrics for the upcoming years include a steady rise in revenue, EBITDA margins, and EPS growth, supporting the company’s high-growth narrative.
These technical metrics, alongside detailed balance sheet analysis, cash flow projections, and working capital management, provide investors with a comprehensive view of SEA Ltd’s financial health and operational excellence.
Conclusion and Recommendation
The extensive analysis confirms that SEA Ltd has delivered strong performance in 4Q24 and possesses robust growth drivers across its three key segments – ecommerce, digital entertainment, and digital financial services. With significant improvements in operating margins, a compelling sum-of-parts valuation, and attractive risk management practices, the stock is well-positioned for future re-rating.
Based on solid earnings performance, attractive forward guidance, and strategic initiatives across segments, the research maintains an “Add” recommendation with an elevated target price of US\$155. Investors seeking exposure to high-growth digital platforms in ASEAN should take note of SEA Ltd’s strong market position, disciplined approach to growth and leading ESG initiatives.
About the Report
This detailed research report by CGS International, dated March 5, 2025, provides a comprehensive assessment of SEA Ltd’s performance and future prospects. The analysis spans multiple segments—including ecommerce via Shopee, digital entertainment via Garena, and digital financial services via SeaMoney—offering deep insights for sophisticated investors. The “Add” recommendation and raised target price substantiate the company’s strong outlook in an increasingly competitive digital landscape.
