Date: October 21, 2024
Broker: CGS International Securities

Company Overview

SEA Ltd is a Singapore-based technology conglomerate known for its diverse operations in digital entertainment, e-commerce, and digital financial services. The company’s e-commerce arm, Shopee, is a leading platform across Southeast Asia and Taiwan.

Q3 2024 Performance Outlook

The report highlights that SEA Ltd is expected to deliver a positive set of results for the third quarter of 2024, surpassing market consensus. The growth is primarily driven by Shopee’s robust performance, with significant growth in Gross Merchandise Value (GMV) and an expanding take rate.

E-commerce Market Dynamics

SEA Ltd’s e-commerce segment, Shopee, has been a key driver of the company’s growth. The competitive landscape in ASEAN e-commerce is showing signs of stabilization, with major players adjusting their fees across various markets in Q3 2024. This rationalization of competition is seen as a favorable trend for Shopee, potentially leading to stronger margins and profitability in the coming fiscal year.

Revenue and Growth Strategy

• Topline Growth: SEA Ltd continues to prioritize topline growth for the second half of 2024. The company is focusing on maintaining its market leadership and expanding its revenue base.
• Margin Improvements: The stabilization of competitive pressures is likely to help improve Shopee’s margins, with further rationalization expected to boost profitability into fiscal year 2025.

Target Price and Recommendation

• Analyst Recommendation: The report maintains a positive outlook on SEA Ltd, with an “Add” recommendation.
• Target Price: The target price for SEA Ltd has been raised to USD 118, reflecting confidence in the company’s continued growth and strategic execution.

Summary

SEA Ltd is set to outperform expectations for Q3 2024, bolstered by strong performance from its e-commerce platform, Shopee. The company’s strategic focus on revenue growth and improving margins, combined with a more rational competitive environment, is driving positive sentiment and increased target pricing. Investors may find SEA Ltd a compelling opportunity given its strong market positioning and growth trajectory.