CGS-CIMB Research analysts Ong Khang Chuen and Darren Ong foresee Sea Limited having a good kick-off to the year when it reports its 1QFY2021 ended March results.

The analysts forecast Sea to report adjusted revenue of US$2.1 billion ($2.78 billion) for the 1QFY2021, translating to 5% q-o-q growth and 131% y-o-y growth. They believe the higher revene will be underpinned by continued momentum across all three of its business segments.

For its gaming arm Garena, Khang Chuen and Darren anticipate record bookings of US$1.05 billion, 105% higher y-o-y, on the back of Free Fire’s popularity as it remains the top grossing game in key markets.

For more stories about where the money flows, click here for our Capital section

“We estimate Garena achieved quarterly paying user (QPU) growth of 107% y-o-y in 1QFY2021, driven by 53% y-o-y active user growth and expansion in paying ratio to 12.1% (from 8.9% in 1QFY2020),” they write in a May 10 research note.

Want our latest Singapore corporate news stories for FREE

Follow our Telegram, Facebook for the latest updates round the clock

The analysts expect Shopee to report 5% q-o-q growth in adjusted revenue to US$1 billion, in the 1QFY2021, up 220% y-o-y. While they note that Shopee will continue booking losses for the year, Khang Chuen and Darren are optimistic that Sea will drive monetisation for Shopee in FY2021, with marketplace commissions being hiked in Indonesia since April 21 and in Malaysia from June 21. 

To that end, they estimate ebitda loss per order for Shopee to narrow to 30 US cents in the 1QFY2021, down from 60 US cents per order the previous year.

SEE:Sea Limited goes deeper into the red with FY20 net loss of US$1.62 bil despite 101.1% surge in total revenue

Pursuant to the growth in Shopee’s take rate and lower sales and marketing spend, the analysts forecast Sea to report higher adjusted EBITDA of US$185 million for the period, up 279% q-o-q.

The analysts have retained their ‘add’ rating for Sea, with an unchanged target price of US$315.

“With the recent resurgence in Covid-19 cases in the ASEAN region, we see continued tailwinds for accelerated digital demand growth in the region, which could benefit Sea,” they note.

As at 3.05pm (SGT), shares in Sea are down US$17.73 or 7.38% lower at US$222.55.