Sea shares climb after spending to fight TikTok
Singapore: Sea Ltd gained its most in more than a month after reporting an adjusted quarterly profit and a better-than-expected 2024 outlook, suggesting it’s making headway in fending off hard-charging rivals including TikTok and Alibaba’s Lazada.

Its US shares leapt as much as 14% before closing about 5.6% up, its highest since August.

Ecommerce gross merchandise volume (GMV), or the value of goods sold, climbed a better-than-expected 29%. Sea now predicts GMV will increase in the “high teens” this year, helping it report a profit before interest, taxes, depreciation and amortisation.

The results alleviate some concerns about the prospects for online retail arm Shopee, which is vying with ByteDance Ltd’s TikTok, Alibaba Group Holding Ltd’s Lazada and newer entrants like Temu in a slowing South-East Asian arena.

In December, TikTok restarted its hit shopping app in Indonesia after signing a pact with GoTo Group’s eCommerce unit Tokopedia, creating a partnership that threatens Shopee’s dominance.

“This indicates management’s confidence in maintaining market share while continuing to spend wisely,” said Alicia Yap, a Citigroup analyst.

“Besides gradually scaling down the shipping subsidies, improving monetisation rate through higher commission rate and growing ad dollars contribute to the swift turnaround of earnings before interest, taxes, depreciation and amortisation.”

South-East Asia’s largest Internet firm posted US$126.7mil in adjusted earnings before interest, taxes, depreciation and amortisation for the fourth quarter through December.

While that’s a decline of 74% from a year earlier, as a result of marketing spending – it’s still higher than the US$88mil analysts predicted. Sales rose 4.8%, also topping estimates.

But marketing costs remain high, Nathan Naidu, an analyst at Bloomberg Intelligence, said. Aggressive promotions from TikTok Shop, Shein and PDD Holdings Inc’s Temu prompted Sea to invest, particularly in live shopping, Naidu wrote in a note.

While significantly lower than growth rates a few years ago, the results show Shopee is still attracting buyers as online shopping gains popularity in the region of more than 650 million people.

“We have seen a more stable competitive landscape in the past quarters,” chief financial officer Tony Hou said on a conference call. “Even with the most intensive competition during the past few quarters, we were able to gain market share while improving our unique economics.”

Sea’s other big business, the gaming arm Garena, is benefiting from sustained demand for its hit title Free Fire.

Last month, Free Fire achieved more than 100 million peak daily active users, and Sea said the users and bookings of the game will grow “double-digits” this year.

Still, without a new blockbuster hit, the gaming division’s fourth-quarter revenue fell 46.2% to US$510.8mil.

To cope with the intense competition, Sea chief executive officer Forrest Li said in August he intends to ramp up investments into Shopee. He is stepping up efforts to build out its live-streaming arm, an offensive move that could erode margins and trigger a price war with TikTok and Alibaba. — Bloomberg
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Sea Ltd gained its most in more than a month after reporting an adjusted quarterly profit and a better-than-expected 2024 outlook, suggesting it’s making headway in fending off hard-charging rivals including TikTok and Alibaba’s Lazada.