China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>We expect Shopee's competitive landscape deteriorated in 2Q23, due to increased pressure from TikTok/Lazada in ASEAN, Coupang in Taiwan, and Shein in Brazil. Temu is a large swing factor.</li>
<li>Shopee has been pushing live streaming and its full-management (or consignment) mode. In our view, these will drag down its profit margins and may not be effective in gaining share.</li>
<li>We estimate 2Q23 revenue and non-GAAP net income are 2.5% and (24%) vs cons. We have revised down Shopee's growth expectations for the next 3 years.</li>
</ul>


We expect Shopee's competitive landscape deteriorated in 2Q23, due to increased pressure from TikTok/Lazada in ASEAN, Coupang in Taiwan, and Shein in Brazil. Temu is a large swing factor.
Shopee has been pushing live streaming and its full-management (or consignment) mode. In our view, these will drag down its profit margins and may not be effective in gaining share.
We estimate 2Q23 revenue and non-GAAP net income are 2.5% and (24%) vs cons. We have revised down Shopee's growth expectations for the next 3 years.


[Sea (SE US, SELL, TP US$51) TP Change]: Competitive Landscape Intensifying… Cut TP to $51

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea (SE US)</a> may achieve around $3.0 billion in 1Q23 revenue, in line with consensus, but is likely to miss the consensus OP estimate of $309 million by approximately 10%.</li>
<li>Shopee's profitability is at risk without sustained revenue growth. If the cost-cutting strategy persists, losses are expected by 3Q23 or possibly sooner with a strategy shift.</li>
<li>Amid Free Fire's decline and Shopee's potential losses, the fintech business stands as the sole bright spot.</li>
</ul>



Sea (SE US) may achieve around $3.0 billion in 1Q23 revenue, in line with consensus, but is likely to miss the consensus OP estimate of $309 million by approximately 10%.
Shopee's profitability is at risk without sustained revenue growth. If the cost-cutting strategy persists, losses are expected by 3Q23 or possibly sooner with a strategy shift.
Amid Free Fire's decline and Shopee's potential losses, the fintech business stands as the sole bright spot.


Sea Ltd: Facing an Uphill Battle for Sustainable Profits

<ul>
<li>Trading <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> shares this year may not be as straightforward as the previous year.</li>
<li>With the share price at pre-COVID levels, swing highs could be difficult to swallow for those of us who would like to remain short Sea Ltd in 2023.</li>
<li>Nonetheless, we would be short Sea-Ltd at the turn of the year as we think valuation multiples could fall to a new all-time low with all segments facing stiff challenges.</li>
</ul>


Trading Sea Ltd (SE US) shares this year may not be as straightforward as the previous year.
With the share price at pre-COVID levels, swing highs could be difficult to swallow for those of us who would like to remain short Sea Ltd in 2023.
Nonetheless, we would be short Sea-Ltd at the turn of the year as we think valuation multiples could fall to a new all-time low with all segments facing stiff challenges.


Trading Sea Ltd in 2023: It Is Still The Same Beast

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> shares were up 36% yesterday following a relatively small top-line beat of 4.8% and a narrower-than-expected operating loss of $495.6m (consensus: $581.9) through rigorous cost-cutting.</li>
<li>The share price move sets-up nicely to make gains on the short-side, as e-commerce and fintech remain unprofitable after cutting-down necessary expenses such as logistics and senior management cash compensation.</li>
<li>We estimate the fair value of Sea Ltd at around $10.0bn EV compared to the current EV of $33.1bn, which implies a downside of 66% to Sea’s post-3Q22 price.</li>
</ul>



Sea Ltd (SE US) shares were up 36% yesterday following a relatively small top-line beat of 4.8% and a narrower-than-expected operating loss of $495.6m (consensus: $581.9) through rigorous cost-cutting.
The share price move sets-up nicely to make gains on the short-side, as e-commerce and fintech remain unprofitable after cutting-down necessary expenses such as logistics and senior management cash compensation.
We estimate the fair value of Sea Ltd at around $10.0bn EV compared to the current EV of $33.1bn, which implies a downside of 66% to Sea’s post-3Q22 price.


Sea Ltd 3Q22 Results - Set up Nicely To Make Big Gains On The Short Side

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>Multiple new agencies have been reporting that <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> plans to trim its investment portfolio over the remainder of the year. </li>
<li>The reports have been coming in since the second half of the year and the company has been duly denying these rumors.</li>
<li>In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.</li>
</ul>


Multiple new agencies have been reporting that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year. 
The reports have been coming in since the second half of the year and the company has been duly denying these rumors.
In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.


Tencent Investee Selldown - The US$120bn Global Overhang

Singapore

Sea Limited offers information technology services. The Company provides online personal computer and mobile digital content, e-commerce, and payment platforms. Sea serves customers worldwide.

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Sea (SE US)

[Sea (SE US, SELL, TP US$51) TP Change]: Competitive Landscape Intensifying… Cut TP to $51

We expect Shopee's competitive landscape further deteriorated in 2Q23, due to increased pressure from TikTok and Lazada in ASEAN, Coupang in...

Blue Lotus Research Institute

Sea Ltd: Facing an Uphill Battle for Sustainable Profits

Shopee's profitability is at risk without sustained revenue growth. If the cost-cutting strategy persists, losses are expected by 3Q23 or possibly...

Oshadhi Kumarasiri

Trading Sea Ltd in 2023: It Is Still The Same Beast

Trading Sea Ltd shares this year may not be as straightforward as the previous year. With the share price at pre-COVID levels, swing highs could be...

Oshadhi Kumarasiri

Sea Ltd 3Q22 Results - Set up Nicely To Make Big Gains On The Short Side

We think shares are set up nicely to make gains on the short-side as e-commerce and fintech remain unprofitable after cutting down necessary...

Oshadhi Kumarasiri

Tencent Investee Selldown - The US$120bn Global Overhang

There have been multiple reports that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year. We look at Tencent's...

Sumeet Singh

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