To The Moon

$Sea Ltd(SE)$

Sea you?

Sea Limited (Sea) reported total GAAP revenue growth of 29% year-on-year (YoY) to USD2.9b, which was a touch below consensus. E-commerce total gross merchandise value (GMV) growth of 27% YoY to USD19b was broadly in-line with consensus, while adjusted EBITDA loss per order in Southeast Asia and Taiwan (before headquarter (HQ) costs) was less than 1 cent during the quarter. While gaming quarterly active users (QAU) grew 1% quarter-on-quarter (QoQ) to 619.3m which suggests signs of stabilisation, bookings were soft at USD717m (vs USD1.2b in 2Q21). All-considered, group adjusted EBITDA loss of USD506m came in below the consensus of -USD550m. In our view, the key negative development was the suspension of the e-commerce GAAP revenue guidance for 2022. While HQ costs have increased QoQ, the pace has slowed and the increase is related to increase in R&D staff and server hosting costs. Turning to games: while Free Fire has shown some early signs of active user stabilisation, management is not extrapolating this into future trends, given headwinds from inflation, reopening pressures and tough YoY comparisons. Management noted that they do have games in the pipeline that could be published later this year, but also cautioned that we are unlikely to see any immediate/significant impact like Free Fire given the need to focus on user engagement initially. Following adjustments (while keeping our existing ESG discount of 5%), my fair value (FV) moves down from USD88 to USD80. 

I would suggest selling it as more selling pressures will come as the Fed looks to be increasingly hawkish.

DYODD

@TigerStars