Internet company Sea Group has caught the attention of analysts following its 3Q2021 revenue of US$2.7 billion ($3.7 billion). 

“This is 6.5% ahead of our expectations [and is] mainly due to stronger take-rate expansion of its e-commerce unit,” notes CGS-CIMB analysts Ong Khang Chuen and Kenneth Tan.

The e-commerce segment – which captures the performance of Shopee – saw a 134% y-o-y jump in revenue to US$1.45 billion, thanks to an 81% rise in gross merchandise value growth and a 7.1% increase in take-rate.

In line with this, mobile app tracking platform App Annie ranked Shopee first in the Shopping category, based on its average monthly active users and the total time spent on the app in Southeast Asia and Taiwan in 3Q2021.


See: Sea Group gets a 'buy' from MKE thanks to launch of Free Fire Max


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While Shopee maintains its focus on Asean, Taiwan and Brazil, Maybank Kim Eng (MKE) analyst Lai Gene Lih notes that it is looking for opportunities in Poland, Spain, France and India.

Meanwhile, SeaMoney – the group’s financial services arm – is working towards the roll out of new initiatives such as buy now pay later, digital bank and insurtech, mainly for the underserved segments that Sea operates in.

Over at Garena – Sea’s gaming segment – things seem to be slowing down, with implied bookings for 4Q2021 down 3% to 19% q-o-q to US$985million to US$1.19 billion.

This is no thanks to the “difficult y-o-y comps as we enter a normalised environment post Covid-19,” reasons Lai, adding that this could cap sentiment on the stock in the near term.

Even so, Lai remains optimistic of the growth prospects of Free Fire, especially through Free Fire Max, which is en route to reaching now and more affluent markets. His view comes as the game maintained its top positions in Asean, Latin America, India and the US in 3Q2021.

CGS-CIMB’s Ong and Tan predict that Sea’s management will sustain the Free Fire user base in the existing markets by introducing more game modes, in-game features and social aspects. 

They are also expecting the group to look more into content creation (to build it IP) and foster deeper engagement through offline experiences.

Garena already seems to be building its game pipeline through self-development capabilities and investment/strategic partnership with other game studios.

An optimism on Sea Group’s prospects has pushed both CGS-CIMB’s Ong and Tan and MKE’s Lai to post “add” or “buy’ calls on the counter.

Ong and Tan have posted a target price of US$425, a 23.9% upside from the counter’s current US$343 price.

“We continue to like the group for its solid execution across core businesses, as well as rapidly expanding total addressable market through 1) new e-commerce market launches, and 2) growing verticals within the Shopee ecosystem,” they explain.


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Lai, meanwhile, has a price target of US$379, on the back of 9% to 12% rise in its FY21 to FY23 revenue forecast.

“In our view, areas of positive surprise could be from Shopee and SeaMoney’s adoption and take rates, while key downside risks is if we have overestimated Garena’s growth,” he says.

Shares in Sea Group closed down US$10.86 US or 3.5% at US$299.13 on Nov 22.

Cover image: file photo