Sea Predicts Sales Doubling as Online Shopping Boom Persists

(Bloomberg) -- Sea Ltd. expects e-commerce revenue to double in 2021, sustaining its torrid pace of growth as Southeast Asia’s most valuable company counts on regional online shopping demand to persist after the pandemic.

Revenue rose to $1.6 billion in the last three months of 2020 from $777.2 million a year earlier, Singapore-based Sea said Tuesday in a statement. Net loss widened to $523.6 million from $283.8 million.

Sea, backed by Tencent Holdings Ltd., has emerged as a stock-market sensation since its initial public offering in New York in 2017, as investors bet the company can establish itself as a leader in e-commerce and gaming in Southeast Asia. Among companies valued at $100 billion or more, the stock is the No. 1 performer in Asia since the start of last year and only trails Tesla Inc. globally.

It’s also trying to establish fintech as a third growth driver. Sea said Tuesday it’s acquired Composite Capital Management, a Hong Kong-licensed global investment management firm. The company will deploy $1 billion toward Sea Capital, a newly established platform to manage its overall investments. Composite Capital founder David Ma -- a former partner at Chinese private equity giant Hillhouse -- becomes Sea Capital’s chief investment officer, reporting to Sea Chief Executive Officer Forrest Li.

“Sea’s growth prospects remain promising, riding on the growing digital economy in the region,” Citigroup analysts led by Alicia Yap wrote. “Guidance could prove conservative.”

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Key Insights

The pandemic is helping to spur demand at Sea’s e-commerce business Shopee, with fourth-quarter sales increasing 178% to $842.2 million. Sea forecast 2021 revenue at Shopee of $4.5 billion to $4.7 billion, up from $2.2 billion in 2020.Hit mobile game Free Fire is fueling growth at Sea’s digital entertainment service Garena, whose sales last quarter rose 71.6% to $693.4 million. Sea forecast Garena’s annual bookings -- sales plus changes in deferred revenue -- will increase to $4.3 billion to $4.5 billion in 2021.Its e-wallet service gained traction, with payment volume exceeding $2.9 billion for the quarter and $7.8 billion for the full year. Sea is trying to build financial services into its third growth pillar.

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Sea Ltd 4Q Adjusted Ebitda Misses EstimatesFourth-quarter sales and marketing expenses climbed 95% to $665.2 million, led by digital financial services.For 2020, Sea posted total digital entertainment bookings of $3.2 billion.Annual revenue at Garena rose 77.5% to $2 billion.

Market Reaction

Sea’s American depositary receipts ended mostly unchanged after surging as much as 11% Tuesday.

(Updates with fund’s chief and analyst’s comment from the fifth paragraph)

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