Overview of ASEAN Internet Companies
As the ASEAN internet sector continues to flourish, leaders like Sea Ltd and Grab are showcasing robust growth and resilience. The latest Maybank Research report offers a deep dive into their performance, growth metrics, and strategic directions for Q4 2024. Key themes include Gross Merchandise Value (GMV) growth, margin dynamics, and evolving competition landscapes.
Sea Ltd (Shopee and Garena) – Strong GMV Growth with Tactical Margin Pressures
Shopee: Driving E-Commerce Growth
Shopee’s GMV is projected to grow by 18% YoY and 9% QoQ in Q4 2024. This growth is fueled by stable forex, rational competition, and healthy consumer spending. Additionally, the company’s strategic initiatives, such as increasing seller take-rates and higher ad contributions, have positioned it for sustained revenue growth. Shopee’s revenues are expected to rise by 35% YoY and 10% QoQ, driven by these monetization efforts.
Digital Financial Services (DFS), a complementary part of Shopee’s ecosystem, is expected to mirror this momentum with a revenue increase of 42% YoY and 9% QoQ. However, a slight contraction in loans outstanding due to forex fluctuations is anticipated. Shopee’s focus on deepening logistics infrastructure, especially in Tier 4 and Tier 5 cities, alongside consumer-centric policies like faster deliveries and improved return mechanisms, continues to strengthen its market position.
Garena: Navigating Seasonal Challenges
Garena is expected to see an 18% YoY growth in bookings but a 3% QoQ decline due to seasonal factors. Despite this, the soft launch of its new game, Free City, has garnered an impressive 4.3 rating on Uptodown, similar to Free Fire Max. Early feedback highlights some technical issues, but Garena’s proven track record in addressing these challenges signals potential upside for the game’s success.
Marketing expenses tied to new launches like Delta Force and Need for Speed (NFS) are expected to weigh on Garena’s margins. Additionally, there’s a risk of goodwill impairments in Q4 2024. However, the company’s commitment to growth through new game launches and strategic marketing investments underscores its long-term vision.
Analyst Recommendation for Sea Ltd
Maybank Research reiterates a BUY recommendation for Sea Ltd with a target price (TP) of USD 130. Key catalysts include stable competition, increasing ad penetration, and DFS growth opportunities driven by Buy Now Pay Later (BNPL) services. Free City, while not factored into the current model, represents a potential game-changing opportunity for Garena.
Grab – Balancing Growth with Strategic Margin Adjustments
Robust GMV Growth Across Services
Grab’s GMV is projected to grow by 17% YoY and 5% QoQ in Q4 2024, surpassing its Q3 growth of 15% YoY. This growth is driven by a 20% YoY increase in mobility GMV and a 16% YoY rise in food delivery GMV. The company’s strategic focus on affordability, evidenced by narrowing pricing gaps with competitors like Gojek and Tada, has enhanced its competitive positioning in key markets like Singapore and Indonesia.
Grab’s efforts to address affordability concerns, particularly in Indonesia, have included offering discounts relative to Gojek. This strategy has helped maintain growth momentum while stabilizing margins despite seasonal challenges like the rainy season and increased driver incentives.
Fintech Momentum and Challenges
Grab’s fintech revenues are expected to grow by 33% YoY and 12% QoQ, driven by expanding services like long-tenured loans. However, upfront provisioning costs are anticipated to slightly widen losses in the fintech segment. This reflects Grab’s commitment to scaling its financial services while managing associated risks.
Analyst Recommendation for Grab
Maybank Research maintains a BUY recommendation for Grab with a target price (TP) of USD 6.24. The company’s ability to align affordability with growth, coupled with its strong mobility and delivery segments, positions it as a resilient player in the ASEAN internet sector.
Other Companies Mentioned
GoTo
GoTo, Indonesia’s tech giant, also garners a BUY recommendation from Maybank Research with a target price of IDR 95.0. The company’s GMV is expected to grow consistently, aided by strategic initiatives in e-commerce and ride-hailing.
Blue Bird and Xanh SM
While not rated, Blue Bird (BIRD IJ) and Xanh SM (a subsidiary of Vin Group Vietnam) are noted as significant players in their respective markets, contributing to the broader ASEAN internet ecosystem.
Forex Dynamics and Regional Insights
Unlike previous quarters, forex fluctuations have had a minimal impact on ASEAN internet companies, except for Brazil. For Shopee, the 18% YoY depreciation of the BRL against the USD is expected to exert a 2% drag on its GMV and revenue growth in Q4 2024. Grab’s operations, primarily centered in ASEAN, remain largely insulated from forex-related challenges.
Tourism Boost for Grab Mobility
Grab’s mobility segment benefits from a resurgence in tourism, particularly in Singapore and Thailand. Premium services like airport rides have seen increased demand, contributing to robust GMV growth.
Conclusion
Maybank Research’s analysis highlights the resilience and growth potential of ASEAN internet leaders like Sea Ltd and Grab. With strategic initiatives in place and a focus on monetization, these companies are well-positioned for sustained performance in 2025. Investors are encouraged to closely monitor these companies as they continue to shape the region’s digital economy.
