Sea Ltd: Firing on Multiple Cylinders – Raise SoTP to USD174 (Maybank Research, March 6, 2025)

E-commerce – Sharp Execution; AI Could Expand the TAM

[[Page 1]] Sea expects Shopee GMV to grow 20% YoY, with improved profitability helped by both new users and frequency of orders. Maybank estimates ASEAN e-commerce GMV growth in the mid-teens as Shopee lifts its market share. Its key competitors – TikTok Shop and Lazada – are relatively rational while Temu is yet to make a mark. With ASEAN seller take rates of ~8% already at the lower end of global peers and ad take rates still at 2-3% of GMV (averaging ~5% in evolved markets), Maybank sees both areas have room to expand in 2025. However, they only expect a 48bps improvement in Adj. EBITDA/GMV margin in 2025 as Shopee is likely to invest back in growth and keep its services competitive to fend off competition. AI tools can help improve product discovery and visual effects which in turn can help to tap a bigger TAM from offline. Shopee’s robust logistics infrastructure can also help to grow relatively untapped segments such as FMCG which aides to expand the TAM.

Garena – Strong 2025 with More Upside Potential

[[Page 1]] Garena bookings are expected to grow at double-digit levels. While Free Fire (FF) remains the key driver, its game localization efforts and FF’s ability to run on low-end devices have kept engagement level high and competition confined. While the double-digit growth guidance is a wide range, the company has not factored in the potential contribution from new games. Maybank remains hopeful of its in-house developed game Free City which is still in the soft launch phase. It’s a game similar to highly popular GTA but tailored to run on mobile devices which enhances its potential for success. Still early days but its 4.3 rating on Uptodown is encouraging.

DFS – Long Runway for Growth and a Potential Monetisation Avenue

[[Page 2]] Sea’s Digital Financial Services (DFS) is a fast-growing, profitable business, contributing significantly to overall business (revenue of USD2.4Bb and EBITDA of USD712m in 2024), with over 30% YoY growth. The business spans consumer and SME credit, digital payments, digital banking, and insurance tech in Southeast Asia and Brazil, with credit as the main revenue driver.
In 2024, the loan book grew 60% YoY to exceed USD5m, adding 5m new borrowers and reaching 26m active users, while maintaining a 1.2% NPL ratio. The strategy focuses on sustainable, risk-managed growth, leveraging Shopee’s ecosystem to assess and price risk efficiently.
Credit operates two financial service pillars: On-Shopee BNPL, which benefits from Shopee’s growing GMV, and off-Shopee cash loans, meeting demand in cash-heavy markets. BNPL serves as a virtual credit card, with untapped opportunities in low-credit-card-penetration regions. ShopeePay expands through national QR codes, aiming for broader merchant adoption, similar to Alipay.
Geographically, Indonesia holds half of the loan book, while Thailand and Brazil are growing fast despite lower interest rates. Expansion follows a prudent, data-driven approach, scaling only in strong Shopee markets.
Looking ahead, loan book growth is expected to outpace Shopee GMV growth in 2025, deepening penetration on and off Shopee while maintaining financial discipline.
Long term, Maybank views Sea’s digital financial services as well-placed given e-com-driven BNPL user growth which also gives a platform/data insights to deepen digital lending. Sea is also aggressive in penetrating outside its ecosystem (off-Shopee) which should provide superior LT growth but comes with credit risk.

Earnings Revision

[[Page 3]] Maybank has revised their estimates for Sea Ltd, raising their Adj. EBITDA estimates by 2-3% and lifting their SoTP-based target price to USD174 on the back of roll forward of their target multiples to 2026. They have also raised their target multiple for Ecom & Garena in light of superior growth. They reiterate their BUY on SE as the company benefits from multiple tailwinds in all segments which could be further boosted by leveraging AI. While the stock has risen 4x since start of 2024, they see valuations at lower-inline with its peers while growth remains at the higher end, offering attractive valuations.

Valuation and Recommendation

[[Page 4]] Maybank’s new SoTP-based target price for Sea Ltd is USD174, up from the previous USD125. This is based on: – Ecommerce valued at 3.3x FY26E revenue – Digital Entertainment valued at 10.0x FY26E EBITDA – Digital Financial Services valued at 10.0x FY26E EBITDA – Plus net cash of USD8.84b as of 4Q24
Maybank maintains their BUY recommendation on Sea Ltd, seeing the company benefiting from multiple tailwinds across its business segments that could be further boosted by leveraging AI technologies.