SEA Ltd: Headwinds from TikTok Shop are priced in
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- Shopee’s adj 1Q26F EBITDA could be 3-4% lower than consensus due to rapid growth of TikTok shop in Southeast Asia as evidenced by 80% y/y & 14% q/q growth in the parcel volume of J&T Express in 1Q26F
- A potential strategic shift by TikTok Shop to focus on customer retention in late 2026/ early 2027 could act as a catalyst for Sea Ltd.
- Maintain BUY with a lower TP of USD138 (previous USD151); SE trades at 13.3x 12M forward EV/Adj EBITDA, at a 7% discount to GRAB’s 14.4x (versus 2-year average discount of 23%). While we like Sea Ltd, GRAB is our preferred near-term pick.
We expect Shopee’s 1Q26F adjusted EBITDA to be 3-4% below consensus expectation of USD199mn. We expect 1Q26 e-commerce (Shopee) adj EBITDA to be 3-4% below the consensus expectation of USD199mn (-2% q/q), as the recently released parcel volume metrics of J&T Express in 1Q26 suggests that TikTok Shop has continued its rapid growth in Southeast Asia in 1Q26. Data from J&T Express’ 1Q26 showed parcel volumes up 80% y/y and 14% q/q (J&T’s Southeast Asia parcel volumes 1Q26: 2.77bn, 4Q25: 2.44bn) points to strong momentum in Southeast Asia’s social commerce ecosystem, which we view as a proxy for accelerating TikTok Shop activity. Further, data disclosed by Digital in Asia states that TikTok Shop’s GMV in 1Q26 in Southeast Asia was USD22.6bn, from which we can estimate that the average order value (AOV) of TikTok Shop in Southeast Asia was ~USD8 vs its AOV of USD4.5-6 in 2025. As such, Shopee might to be forced to offer more promotions to grow its GMV in our view.
SE’s Group Adjusted EBITDA (USD mn) – 1Q26F refers to consensus projections
| 1Q25 | 2Q25 | 3Q25 | 4Q25 | 1Q26F | |
| Digital Entertainment | 458 | 368 | 466 | 364 | 427 |
| E-commerce | 264 | 228 | 186 | 203 | 199 |
| Digital Financial Services | 241 | 255 | 258 | 263 | 280 |
| Total Adjusted EBITDA | 947 | 829 | 874 | 787 | 904 |
Source: Company, Visible Alpha, DBS
Downside risk for consensus expected FY26F e-commerce adj EBITDA led by intense competition from TikTok Shop. We see downside risk to consensus expected Shopee’s FY26F adj EBITDA of USD929mn, with a 5% y/y growth vs our expectation of 2% growth in FY26F. Data from J&T Express’ 1Q26 showing parcel volumes up 80% y/y and 14% q/q (J&T’s Southeast Asia parcel volumes 1Q26: 2.77bn, 4Q25: 2.44bn) points to strong momentum in Southeast Asia’s social commerce ecosystem, which we view as a proxy for accelerating TikTok Shop activity. This suggests intensifying competitive pressure on Shopee, likely requiring higher incentives, marketing spend, and logistics subsidies to defend market share. As a result, we continue to expect margin expansion to be constrained, reinforcing our more cautious outlook relative to consensus.
Market share Gap between Shopee and TikTok Shop in Southeast Asia was ~18% in 2025 (vs ~26% gap in 2024)
| GMV (USDbn) | 2023 | Market Share | 2024 | Market Share | 2025 | Market Share |
| Shopee | 55.1 | 48% | 68.8 | 54% | 83.2 | 53% |
| TikTok Shop + Tokopedia | 32.6 | 28% | 35.4 | 28% | 54.6 | 35% |
| Lazada | 18.8 | 16% | 18 | 14% | 18 | 11% |
| Others | 8.1 | 7% | 6.2 | 5% | 1.8 | 1% |
| Total | 114.6 | 128.4 | 157.6 |
Source: Momentum Works, DBS
A potential strategic shift by TikTok Shop to focus on customer retention in late 2026/2027 could act as a catalyst for Sea Ltd in 2H26. We believe a key catalyst for 2H26 will be a potential shift in strategy at TikTok Shop, as it narrows its market share gap with Shopee from ~18% in 2025 to ~10%. Having rapidly gained share through aggressive subsidies and promotions despite lacking in-house logistics capabilities and relying on third-party providers, TikTok Shop may increasingly pivot toward customer retention and monetization from late 2026 into 2027, rather than sustaining hyper-growth.
FBT (Fulfilled by TikTok) Incentive Program. The company has started focused promotion from April to September 2026. TikTok is offering up to 10% fulfilment fee rebates to encourage sellers to move inventory into official FBT warehouses, granting them higher platform search rankings. The company has allocated billions of dollars for AI infrastructure in Southeast Asia. By the end of 2026, TikTok wants to achieve over 75% AI and robotic automation in major fulfilment centres across Thailand and Vietnam.
In contrast, Shopee’s more established in-house logistics network provides greater control over fulfilment costs and service quality, positioning it to benefit if competitive intensity moderates. As such, any reduction in subsidy-driven competition could ease pressure on Shopee’s margins and support improved operating leverage at Sea Ltd in 2H26.
We see little risk to Garena from Google’s Genie, which should aid efficiency rather than disrupt its core model. The recent sharp sell-offs in gaming studios, user generated content and platform names reflects a mispricing of long-term risk versus near-term reality. We see limited risk of negative impact to Garena from Google’s Genie, as the technology remains far from capable of supporting the scale, persistence, and gameplay depth required for successful live-service titles. Key limitations such as short-form generation, lack of persistent world logic, and minimal control over gameplay mechanics restrict its applicability to complex gaming ecosystems. Instead, we view Genie as a productivity tool that can enhance development efficiency by accelerating asset creation and iteration within existing workflows. However, Garena’s competitive advantage lies in its ability to operate and continuously refine live games through content updates, player engagement, and monetisation strategies capabilities that AI tools are unlikely to replicate in the foreseeable future.
We revise our group adj EBITDA for FY26F/27F by -0.5%-1% led by -2%/-2% cut in e-commerce adj EBITDA
| USDmn | FY25 | DBS Previous | DBS Revised | Change % | |||
| FY26F | FY27F | FY26F | FY27F | FY26F | FY27F | ||
| Digital Entertainment | 2,409 | 2,359 | 2,599 | 2,359 | 2,599 | 0% | 0% |
| E-commerce | 16,565 | 20,870 | 26,665 | 20,870 | 26,665 | 0% | 0% |
| Digital Financial Services | 3,792 | 5,232 | 6,645 | 5,232 | 6,645 | 0% | 0% |
| Other Services | 173 | 191 | 206 | 191 | 206 | 0% | 0% |
| Total GAAP Revenue | 22,938 | 28,652 | 36,115 | 28,652 | 36,115 | 0% | 0% |
| Digital Entertainment | 1,656 | 1,655 | 1,657 | 1,655 | 1,657 | 0% | 0% |
| E-commerce | 881 | 897 | 1,413 | 881 | 1,387 | -2% | -2% |
| Digital Financial Services | 1,018 | 1,203 | 1,528 | 1,203 | 1,528 | 0% | 0% |
| Other Services | (81) | (29) | (31) | (29) | (31) | 0% | 0% |
| Unallocated expenses + Share based compensation | (37) | (77) | (63) | (77) | (63) | 0% | 0% |
| Total Adjusted EBITDA | 3,437 | 3,650 | 4,505 | 3,634 | 4,479 | -0.5% | -1% |
| Total Adjusted EBITDA ex E-commerce losses | 2,557 | 2,753 | 3,092 | 2,753 | 3,092 | 0% | 0% |
Source: Company, DBS
Our group adj EBITDA of SE for FY26F/27F are -3%/-7% below consensus due to our expectations of intense competition for Shopee from TikTok Shop
| USDmn | FY25 | DBS Revised | Consensus | DBS vs Consensus | |||
| FY26F | FY27F | FY26F | FY27F | FY26F | FY27F | ||
| Digital Entertainment | 2,409 | 2,359 | 2,599 | 2,741 | 3,011 | -14% | -14% |
| E-commerce | 16,565 | 20,870 | 26,665 | 21,239 | 25,686 | -2% | 4% |
| Digital Financial Services | 3,792 | 5,232 | 6,645 | 5,259 | 6,744 | -1% | -1% |
| Other Services | 173 | 191 | 206 | 193 | 218 | -1% | -5% |
| Total GAAP Revenue | 22,938 | 28,652 | 36,115 | 29,340 | 35,469 | -2% | 2% |
| Digital Entertainment | 1,656 | 1,655 | 1,657 | 1,726 | 1,842 | -4% | -10% |
| E-commerce | 881 | 881 | 1,387 | 929 | 1,459 | -5% | -5% |
| Digital Financial Services | 1,018 | 1,203 | 1,528 | 1,275 | 1,639 | -6% | -7% |
| Other Services | (81) | (29) | (31) | (85) | (85) | -66% | -64% |
| Unallocated expenses + Share based compensation | (37) | (37) | (37) | (79) | (67) | -3% | -6% |
| Total Adjusted EBITDA | 3,437 | 3,634 | 4,479 | 3,762 | 4,825 | -3% | -7% |
| Total Adjusted EBITDA ex E-commerce losses | 2,557 | 2,753 | 3,092 | 2,834 | 3,367 | -3% | -8% |
Source: Company, Visible Alpha, DBS
Maintain BUY with a lower TP of USD138 (previous USD151). (i) We value E-commerce business is at 2.0x 12-month EV/revenue (unchanged) 22% below the peer average of 2.6x (previous 2.4) due to its lower profitability despite a revenue CAGR of 27% over FY25-27F, much higher than its peer average of 13%. Higher discount to peers is due to the intense competition by TikTok Shop in Southeast Asia as shown by high growth in parcel volumes of J&T Express (ii) We value SE’s Gaming business (Garena) at a lower 12-month forward EV/EBITDA of 12x (previous 15x) at a 10% premium to its peer average of 11x, due to de-rating of the gaming peers after the release of Google Genie. (iii) We continue to value SE’s Fintech segment at 15x 12-month forward EV/EBITDA. We factored in USD4.1bn in net cash.
SOTP valuation
| SOTP Valuation | 12-months Adj EBITDA (USDmn) | EV/EBITDA (x) | 12-month ecommerce Adj Revenue (USDmn) (x) | EV/Revenue | Enterprise Value (USDmn) |
| Fintech | 1,285 | 15.0 | 19,270 | ||
| Gaming | 1,655 | 12.0 (prev 15.0x) | 19,865 | ||
| E-commerce | 22,318 | 2.0 | 44,637 | ||
| Total Enterprise Value | 83,772 | ||||
| Net cash/(debt) | 4,100 | ||||
| Equity Value | 87,872 | ||||
| Number of shares (m) | 638 (prev 605) | ||||
| Target Price (USD) | 138 |
Source: Visible Alpha, DBS
SE’s e-commerce peers
| E-commerce peers | 12-month forward EV/Sales (x) |
| eBay Inc | 4.1 |
| ETSY Inc | 2.6 |
| Allegro.eu SA | 2.4 |
| PDD Holdings | 1.2 |
| Average | 2.6 |
Source: Visible Alpha, DBS
SE’s Gaming and Fintech peers
| Gaming Developers and Publishers | 12-month forward EV/EBITDA (x) |
| Nintendo Co Ltd | 14.6 |
| Take Two Interactive Software | 19.3 |
| NetEase Inc | 8.3 |
| Tencent Holdings Ltd | 10.9 |
| Square Enix | 12.0 |
| NCSoft | 7.7 |
| Nexon | 8.3 |
| Netmarble | 8.3 |
| Average | 11 |
| Digital Financial Services | |
| PayPal Holdings Inc | 6.7 |
| Mastercard Inc | 19.4 |
| Visa Inc | 18.3 |
| Sofi Technolgies Inc | 12.2 |
| Average | 14 |
Source: Visible Alpha, DBS
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