Johannes Salim, CFA

Equity Bottom-Up

<ul>
<li>The biggest positive surprise from <a href="https://www.smartkarma.com/entities/8509" target="_blank" data-smartkarma-citation="entities:8509:1">Sea Ltd's (SE US)</a> conference call is strong 2019 adjusted sales guidance: 82%-97% YoY growth for Garena (digital entertainment division) and 117-127% YoY growth for Shopee (e-commerce arm).</li>
<li>Management expects first positive quarterly EBITDA for Shopee Taiwan operations in 1Q19, indicating there is a path to profitability for Shopee's business model.</li>
<li>Another great news: management expresses high confidence that Shopee's S&amp;M expenses in terms of absolute dollars would trend down in 2019, vs. 2018.</li>
<li>After a 35% daily share gain on 27 Feb, SE trades at 4.1x 2019E P/adjusted revenue excl. 1P sales, yet still a whopping 49% discount to <a href="https://www.smartkarma.com/entities/27250" target="_blank" data-smartkarma-citation="entities:27250:1">Pinduoduo's (PDD US)</a> 8.1x P/S.</li>
</ul>


The biggest positive surprise from Sea Ltd's (SE US) conference call is strong 2019 adjusted sales guidance: 82%-97% YoY growth for Garena (digital entertainment division) and 117-127% YoY growth for Shopee (e-commerce arm).
Management expects first positive quarterly EBITDA for Shopee Taiwan operations in 1Q19, indicating there is a path to profitability for Shopee's business model.
Another great news: management expresses high confidence that Shopee's S&amp;M expenses in terms of absolute dollars would trend down in 2019, vs. 2018.
After a 35% daily share gain on 27 Feb, SE trades at 4.1x 2019E P/adjusted revenue excl. 1P sales, yet still a whopping 49% discount to Pinduoduo's (PDD US) 8.1x P/S.


Sea Ltd: Further Share Re-Rating After a 35% Daily Gain? Why Not?