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(Bloomberg) -- Southeast Asia e-commerce leader Sea Ltd. predicted sales volumes for this year above analysts’ estimates, a signal it’s succeeding in fending off hard-charging rivals including TikTok and Lazada.
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The company’s American depositary receipts jumped as much as 7.1% in New York after Sea said gross merchandise volume, or the value of goods sold, will rise about 20% at online retail arm Shopee. That suggests GMV of $120.6 billion, topping the $116.6 billion average analyst estimate. Singapore-based Sea’s fourth-quarter revenue of $4.95 billion also exceeded estimates.
After years of spending to gain market share and ward off competition, Sea is emerging as a leader ahead of rivals like ByteDance Ltd.’s TikTok, Alibaba Group Holding Ltd.’s Lazada and newer entrants like Temu in a region of more than 675 million people where more shoppers are moving online. Meanwhile, a brutal cost-cutting drive has helped Chief Executive Officer Forrest Li bring the company to profitability.
In a display of strength, Shopee has been steadily raising the commissions it charges merchants in many core markets by about a third since the start of last year. The hikes, which bring Shopee’s fees far above its rivals, show that Sea is confident it can attract and retain merchants, helped by a broad user base and well-established delivery services. Shopee’s fourth-quarter revenue rose 41% to $3.7 billion, reflecting the impact of these changes.
What Bloomberg Intelligence Says
Sea’s profit is set to expand further as recovery in its game-publishing business adds to bottom-line improvement at its e-commerce unit Shopee, which met expectations by breaking even in 3Q on an adjusted Ebitda basis. A strong player base in its Free Fire game, which drives about 70% of mobile game revenue, according to Sensor Tower, might push digital entertainment segment bookings 20%-30% higher sequentially in 4Q vs. 3Q’s 3.7%, along with growth in active players, based on Sensor Tower data.
-Nathan Naidu, analyst
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Sea is also betting on new initiatives in areas from digital finance to logistics to convince investors of its long-term earnings potential. Its finance arm, SeaMoney, has overtaken gaming unit Garena to be the second-biggest revenue contributor in the company.