CGS-CIMB Research analysts Ong Kang Chuen and Darren Ong have maintained their “buy” rating and target price of US$315 ($424.13) on Sea Limited after its 4QFY2020 results came in ahead of expectations. 

Sea’s adjusted revenue of US$2 billion was 20% higher q-o-q,  and a massive 120% higher y-o-y, which were “led by stronger bookings in its digital entertainment (Garena) and better monetisation of its e-commerce (Shopee) units,” noted the analysts.

Due to heavier marketing efforts for Shopee’s major e-commerce events in 4QFY2020, adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) of US$49 million was weaker q-o-q, but this was an improvement over 4QFY2019’s adjusted EBITDA figure of US$105 million.


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Specifically for Garena, its Free Fire game continues to maintain its position as the highest-grossing mobile game in Latin America and Southeast Asia in 4QFY2020 for the sixth consecutive quarter, according to App Annie, also achieving the same leading position in India for the first time during the quarter.

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The analysts say that operating metrics remain positive, with quarterly active users (QAU) reaching 611 million, a 72% y-o-y increase while paying ratio also rose by 2.6% to 12% in 4Q20. 

They expect sustained player base growth in 2021F, especially from India, where key competitor PUBG has been banned since Sep 2020. 

“Sea guided for digital entertainment segment bookings to grow to between US$4.3billion and US$4.5 billion in FY2021, in line with our expectations of US$4.35 billion,” the analysts say. 

As for ecommerce platform Shopee, they highlight that it continues to retain its pole position as Southeast Asia’s top ecommerce platform in 4QFY2020, as the shift to purchasing online continues its momentum. 

Gross merchandise value (GMV) rose 113% y-o-y to US$11.9 billion in 4QFY2020, underpinned by a 135% jump in gross orders of US$1 billion . 

They add that Shopee’s take rate continued to improve, helped by stronger monetisation efforts, and Shopee managed to narrow its EBITDA loss per order to US$0.4, 41% lower y-o-y. 


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“We expect Covid-19-related restrictions to remain a sector tailwind in 2021, and Sea’s guidance for e-commerce Generally Accepted Accounting Principles (GAAP) revenue of between US$4.5 billlion-US$4.7 billion in FY2021 is higher than our current forecast of US$4.2bn.”

The analyst concludes by saying they continue to like Sea for its solid execution across all three key segments, and see further share price re-rating, supported by strong 4QFY2020 results and solid FY2021 guidance.

As at March 9 in New York, shares of Sea closed at US$228.47, with a FY2021 price to book ratio of 43.49 and dividend yield of 0%.