Singapore Maritime Group is turning profitable for the first time

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Sea Limited’s e-commerce arm, Shopee, turned adjusted EBITDA positive for the first time in the fourth quarter of 2022. The group also posted its first positive quarterly revenue.

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Based in Singapore Sea Limited It closed more than 20% higher on Tuesday after the tech giant posted its first positive earnings since its founding in 2009.

Total net income for the fourth quarter of 2022 came to $422.8 million, up from a negative $616.3 million in the same period a year ago.

That’s partly due to a $746 million reduction in sales and marketing expenses, as management promised to reduce costs during the previous quarter’s earnings report. Cost of revenue was also down $157 million in the quarter.

Shares of Sea closed 21.78% higher on the New York Stock Exchange on Tuesday.

“Recent cost-cutting measures such as frozen salaries and headcount [have] giving some help to the East stock. Additionally, the positive surprise in fourth-quarter 2022 earnings should provide continued momentum for Sea – especially with the path to profitability a bit clearer,” said Jonathan Woo, senior research analyst at Phillip Securities. .

We expect Garena’s growth to continue to decline moving forward, given the lack of a strong pipeline for games, and the continued ban on downloads on Free Fire in India.

Jonathan Woo

Senior research analyst, Phillip Securities

“However, there are still some macro headwinds and declining gross merchandise value (GMV) trends that could further delay the path to profitability,” said Woo. GMV refers to the total dollar value of goods and services sold during a given period.

Sea’s core businesses are in digital entertainment (Garena), e-commerce (Shopee), as well as digital payments and financial services (SeaMoney).

The chairman and CEO of the Sea Limited group said on Tuesday that 2022 will be “another year of evolution for us”.

“Given the macro uncertainties, we decided at the end of last year to focus on efficiency and profitability,” Forrest Li said during the earnings call. “As a result, we started to see meaningful improvements at the bottom.”

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“First, we sharpened our focus on the areas with the greatest potential across our businesses. We outsourced or reduced operations in non-core markets, streamlined our game pipeline with project transfers and closures, and eliminated non-core initiatives,” said the CEO.

Garena: Digital entertainment

Revenue from the Garena gaming unit slipped 32.9% to $948.8 million in the quarter, compared to $1.41 billion in the same period a year ago.

Given the macro uncertainty and our recent strong pivot, we are closely monitoring the market environment and will continue to adjust our pace and fine-tune our operations accordingly.

Forrest Lee

chairman and CEO of the group, Sea Limited

“We expect Garena’s growth to continue to decline moving forward, given the lack of a strong pipeline, and the ongoing download ban on Free Fire in India,” said Phillip Securities’ Woo, adding that seasonal active users and paying users have been falling for the last five quarters.

Shopee and SeaMoney

Meanwhile, Shopee’s e-commerce business and digital payments arm SeaMoney continued to see strong growth in 2022.

Shopee’s adjusted EBITDA turned positive for the first time at $196.1 million in the fourth quarter, with improvements in revenue and operating costs. Positive EBITDA, or earnings before interest, taxes, depreciation and amortization, refers to the company operating at a profitable level.

“In our Asia markets, we will work to strengthen our leading position and our profitability. In Brazil, we will focus on driving the business towards profitability in order to seize the important opportunity in the market this new,” said Li during the earnings call.

Shopee succeeded in Brazil after several trials and exits in European markets. Recently, they announced that they would be expanding their presence in Malaysia, according to Malaysia’s international trade and industry minister, Tengku Zafrul Aziz.

Woo expects Shopee to remain a key revenue driver moving forward.

“Continued leadership in many of its mature markets should allow the company to continue to increase its adoption rate even as GMV and total orders slow,” Woo said.

SeaMoney’s adjusted EBITDA also turned positive for the first time to $75.6 million for the fourth quarter, driven by improvements in revenue and sales and marketing expenses.

SeaMoney is making great strides in improving its product offerings, as well as the quality of its loan book, both of which are good signs for a business that is still in its infancy, Woo said.

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Sea Ltd stock price history

CEO Li said that the Sea mobile wallet has reduced transaction costs for Shopee users, adding that Shopee’s large user base has, in turn, allowed the mobile wallet and lending industry to expand their load bases. -use growth.

He expects the continued collaboration of Sea’s core businesses to drive efficiency and profitability moving forward.

“Given the macro uncertainty and our recent strong pivot, we are closely monitoring the market environment and will continue to adjust our pace and adjust our operations accordingly,” Li said.

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