Singapore’s Sea Limited posts first profitable year

MariBank, Singapore tech giant Sea Group’s digital bank, has launched in Singapore to select members of the public as it rolls out its services progressively.

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Southeast Asian tech giant Sea Limited on Monday posted its first profitable year amid efforts to defend market share against Alibaba-owned Lazada and TikTok.

Net income in 2023 was $162.7 million, as compared to a net loss of $1.7 billion in 2022. There was a net loss of $111.6 million in the fourth quarter of 2023, as compared to net income of $422.8 million in the same period a year ago.

“In 2023, we achieved profitability, strengthened our market leadership for our e-commerce business, grew our digital financial services business, and stabilized the performance of our digital entertainment business,” said Forrest Li, chairman and CEO of Sea, on Monday. Before that, Sea was largely unprofitable, amassing billions of dollars in losses since its inception in 2009.

Sea operates in Southeast Asian markets and has businesses in e-commerce (Shopee), financial services (SeaMoney) and gaming (Garena).

“We have emerged with a much stronger balance sheet with our cash position increasing to 8.5 billion dollars as of the end of 2023, demonstrating the discipline and prudence we have applied in our investments over the past year,” said Li.

Sea’s New York-listed shares closed 5.58% higher on Monday. Li said the firm expects 2024 to be a profitable year as well.

Sea’s e-commerce arm Shopee made a “meaningful gain in market share” in 2023 despite “intensified competition in Southeast Asia,” the firm said on Monday. Sea also said Shopee’s market share in the region has “solidified” and the firm intends to “maintain our market share in 2024.”

Shopee faces stiff competition from players like Alibaba-owned Lazada and Indonesia’s Tokopedia in the region. Tokopedia merged with TikTok Shop in Indonesia to form an enlarged Tokopedia entity, in which TikTok will take a controlling stake of 75.01%.

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In August, Sea said it would focus on growth over profits — a reversal from recent cost-cutting measures in the face of economic uncertainty. Analysts said the pivot was a move to defend market share.

SeaMoney reported its first year of profit in 2023. The firm also expects its flagship game Free Fire “to grow double-digits year-on-year for both user base and bookings in 2024.”

“We are pleased to see positive trends in both growth and profitability for all three of our businesses. Looking ahead, we will continue to invest for the future with discipline and focus,” Sea said in a press statement on Monday.

“Guidance was quite positive and surprising,” said Sachin Mittal of DBS Bank. The bank upgraded Sea from “hold” to “buy” with a target price of $75 after the earnings report.

“It has got to do with TikTok being not so aggressive in Indonesia. They achieved what they wanted [with] Tokopedia and is now dealing with regulatory compliance,” Mittal told CNBC on Tuesday.

CGS-CIMB Securities analyst Khang Chuen Ong on Tuesday upgraded Sea to “add” from “hold” with a price target increase to $74 per share from $46, representing 37% upside.

Wedbush on Monday raised their target price for Sea to $72 from $45, maintaining an “outperform” rating.

“We are increasingly constructive on shares given the growth and margin trajectory implied by management’s outlook, and we believe Sea is in the early stages of a successful turnaround as competitive pressures ease and investments in live streaming, user acquisition, and fulfillment begin to bear fruit,” said Wedbush analysts.

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