In today’s briefing:
- Sea Ltd’s (SE US) – Through the Looking Glass
- Sea Ltd 4Q22 Results: Can Profits Hold When Growth Stall?
- Sabana REIT (SSREIT SP): Volare’s Partial Offer Unconditional
- [Sea Limited (SE US) Target Price Change]: Expect Weak Growth Trend into 2023
Sea Ltd’s (SE US) – Through the Looking Glass
- Sea Ltd’s 4Q2022 results were nothing short of spectacular, with the company booking a net profit more than a year ahead of expectations, underlining management’s ability to thrive in adversity.
- The company cut costs and most notably A&P spend on e-commerce but it still managed to grow GMV and booked positive adjust EBITDA for all its core Asian markets.
- Sea Ltd (SE US) now stands out well ahead of its peers on profitability and should trade at a premium but it will have to continue to execute.
Sea Ltd 4Q22 Results: Can Profits Hold When Growth Stall?
- Sea Ltd (SE US) shares went up by 22% yesterday as the company’s top-line beat consensus by 13% and recorded its first-ever operating profit of $342.9m (consensus: -$344m).
- Main growth drivers such as GMV, orders, Gaming active users and Gross-Bookings indicate that growth could stall. Meanwhile, competition is heating up, sidelining the importance of cost discipline in e-commerce.
- Turning unprofitable yet-again could be a hard thing to swallow, even for those firmly believing in Shopee. Therefore, Sea could fall a lot more than the previous-bottom next-time it falls.
Sabana REIT (SSREIT SP): Volare’s Partial Offer Unconditional
- Sabana Industrial REIT (SSREIT SP)’s partial offer from Volare of S$0.4504 per unit (S$0.465 in cash – S$0.0146 2H2022 distribution) is now unconditional. The final closing date is 24 March.
- On the assumption that ESR Cayman and Quarz Capital did not tender, acceptances representing 16.16% of outstanding units imply current proration is 61.87%.
- Based on the current proration of 61.87% and at the last close price of S$0.420 per unit, the breakeven price is S$0.373 per unit.
[Sea Limited (SE US) Target Price Change]: Expect Weak Growth Trend into 2023
- SE reported C4Q22 total revenue 10% and 14% higher than our est. and cons., thanks to the improvement in monetization rate of eCommerce segment.
- We expect the weak trend to continue into 2023, with intensified competition from eCommerce competitors and weak performance of Free Fire.
- We raise our TP to US$62, which implies 2.5X PS/6X PE/4X PS for eCommerce/gaming/fintech in 2023. Maintain SELL rating due to challenging growth outlook.
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