SEA Ltd: E-commerce margins to dictate share price
Rising e-commerce take rates and improving fintech profitability to drive 2025 growth
Group adj. EBITDA in 4Q24 was slightly ahead of consensus expectations. Sea Ltd (SE) reported a group adj. EBITDA of USD591mn (+366% y/y, +13.3% q/q) in 4Q24 (Dec YE), slightly above consensus expectations of USD585mn, led by e-commerce surprise. E-commerce adj. EBITDA came in at USD152mn, 62% above consensus of USD94mn. Both Asia and Brazil recorded positive adj. EBITDA in 4Q24. E-commerce Gross Merchandise Value (GMV) stood at USD28.6bn (+24% y/y, +14% q/q), 4% above the consensus estimate of USD27.4bn. E-commerce GAAP take rate in 4Q24 was 12.8% (12.7% in 3Q24 and 11.2% in 4Q23) vs. consensus’ 12.7%. Gaming adj. EBITDA in 4Q24 stood at USD290mn (+33% y/y, -7.9% q/q), ~10% below consensus of USD320mn. Gaming bookings in 4Q24 stood at USD543mn (+19% y/y, -2.4% q/q) vs. consensus of USD547mn, and recording gaming adj. EBITDA (as a % of bookings) margin was 53% (57% in 3Q24 and 48% in 4Q23) vs. consensus of 59%. Fintech adj. EBITDA stood at USD211mn (+42% y/y, +12% q/q), 6% above consensus of USD199mn. Fintech adj. EBITDA margin was 29% in 4Q24 (31% in 3Q24 and 4Q23) vs. consensus of 31%.
Guides for FY25F e-commerce GMV to grow by ~20% y/y; consensus raised estimates from 16% to 21% growth post-4Q24 results. In the e-commerce segment, Shopee is expected to generate a GMV growth of ~20% y/y in FY25F (+28% y/y in FY24) compared to the consensus estimate of USD121.4bn (+21% y/y). Improving e-commerce profitability is seen as a positive. Consensus has room to raise e-commerce adj. EBITDA from the current USD801mn in FY25F, while our estimate is at USD1,124mn. expects gaming to grow double-digits in FY25F for both user-base and bookings ahead of the consensus growth of 7.7% and 11% respectively. It also expects fintech loan-book size to grow faster than GMV growth of 20%, implying significant room for growth in FY25F.
SE growing rapidly in live commerce. Live streaming contributed ~15% of Southeast Asia’s physical goods order volume in 4Q24, with average daily unique streamers growing >40% y/y and viewers growing >30% y/y. Shopee Malaysia saw a 116% surge in livestream shoppers during Chinese New Year. Shopee Affiliates capitalised this trend by launching 160% more livestreams and driving a 240% surge in orders for local businesses. Searches for festive treats jumped over 3,000%, home decorations by 1,700%, fashion and beauty by 1,600%, and beauty products by 1,900%. Shoppers also redeemed over 620mn vouchers and made nearly two million purchases under the “lowest price guaranteed” programme.
SE to collaborate with OpenAI to launch an AI agent. In February 2025, SE announced a collaboration with OpenAI to enhance online shopping, making it “more intuitive, personalised, and responsive”. As part of this initiative, Shopee plans to launch Operator, an AI agent capable of autonomously interacting with the internet to perform various tasks, including shopping on e-commerce platforms. The rollout is targeted for Southeast Asia and Brazil, with OpenAI serving as the key collaborator.
Free Fire rebounded with an annual bookings growth of 34% y/y in FY24 after post-pandemic headwinds in 2022 and 2023. According to Sensor Tower, Free Fire was the world’s largest mobile game by average DAU (+28% y/y) of above 100mn, and the most downloaded title. In addition to increasing presence in Asia and the Americas, Africa has become one of Free Fire’s fastest-growing regions, with Nigeria having 90% y/y growth in December due to improved connection speeds. FY25 started with a Free Fire and NARUTO SHIPPUDEN IP collaboration, getting an extremely positive response.
SE adopts localisation to bring each market’s local trends and elements into the game. This includes thematic in-game elements for the Day of the Dead in Mexico, Tet in Vietnam, and the Ramadan campaign in Indonesia that enables users to donate in-game currency to renovate an orphanage in West Java. TikTok and YouTube have accumulated >1tn views to date for Free Fire. SE’s flagship annual esports event Free Fire World Series Global Finals returned to Brazil in November 2024 and generated massive excitement, which increased viewership hours by 43% y/y.
YTL and SE launch Malaysia’s first AI-powered digital bank. In late December 2024, YTL Digital Bank Berhad – a joint venture between SE and YTL Digital Capital – secured approval from Malaysia’s Ministry of Finance to operate Ryt Bank, a next-generation digital bank. Using AI, the bank aims to optimise operating processes, improve customer experience, and implement advanced security measures such as encryption, biometric verification, and real-time fraud monitoring. Ryt Bank will also offer deposit protection of up to MYR250,000 (USD55,000) under Perbadanan Insurans Deposit Malaysia (PIDM). Its primary focus is to Malaysia’s underserved and underbanked population, which accounts for c.15% of the country.
Our group adj. EBITDA forecast revised up 15%/15% in FY25F/26F, led primarily by changes in e-commerce. Shopee achieved adj. EBITDA breakeven in 3Q24, which improved to USD152mn in 4Q24. The improvement was led by benign competition outside Indonesia as there is a notable rise in take rates. Both Shopee Asia and Brazil recorded positive adj. EBITDA in 4Q24 after Brazil achieved positive EBITDA margin for the first time in 3Q24. Since competition is benign, we continue to project GMV growth of 20% y/y in FY25F in line with the management guidance of 20% and consensus’ 21%. We project a 20% GMV growth rate in FY25F, with take rates rising gradually to 13.3% and 13.7% in FY25F and FY26F from 12.4% in FY24. We raised e-commerce adj. EBITDA in FY25F/26F by +40%/+24% owing to rising take rates and GMV. On gaming, we revised FY25F/26F adj. EBITDA by +3%/+9% well supported by management guidance of double-digit expected growth in user base and bookings in FY25F. On fintech, adj. EBITDA is revised upwards by +4%/+4% in FY25F/26F as management expects loan book size to grow meaningfully faster than Shopee's GMV annual growth rate in FY25F.
Maintain BUY with a higher TP of USD181 (prev. USD157). The upward revision in TP is due to i) 5%/9% upward revisions in FY25F and FY26F group adj. EBITDA excluding e-commerce, ii) 4%/2% upward revisions in FY25F and FY26F e-commerce revenue. We value combined gaming plus fintech at a 15x EV/EBITDA (unchanged), based peer average multiple of 15.5x (prev. 17x). FY25F e-commerce revenue is valued at a 4.5x EV/revenue (prev. 3.8x), a 45% premium to peer average of 3.1x, considering consensus expects SE e-commerce revenue CAGR of 16% over FY25F-27F vs. peer CAGR of 11%. We have factored in USD4.1bn (unchanged) net cash.
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