The Tencent of South-east Asia isn’t really like Tencent at all

Screengrab of the Sea online  portal at www.seagroup.com
Screengrab of the Sea online portal at www.seagroup.com

SINGAPORE, Feb 27 — South-east Asia’s digital economy is projected to reach US$350 billion (RM1.37 trillion) by 2026, a forecast that some analysts cite as underpinning Sea’s long-term potential. They also focus on Garena’s games pipeline and the company’s ability to continuously release new games in order to fund heavy investments on e-commerce division Shopee and payments service AirPay.

Sea is counting on growth at Garena to remain strong and fund investment in e-commerce and payments. The Garena games business accounts for about 90 per cent of total revenue.

The Arena of Valor title continues to do well in Taiwan, Thailand and Vietnam, and Garena has also launched its self-developed survivor shooting game Free Fall — Battleground, according to Nomura Securities Co. Onmyoji, a role-playing game, has become one of the five highest grossing titles in Thailand after its release in November, according to Nomura.

Johannes Salim, an analyst who writes for online research aggregator Smartkarma, said he’s monitoring Sea’s progress in Shopee and AirPay before deciding on a 12-month target price. Despite a rapid rise in Shopee’s gross merchandise value and heavy marketing spending, only about 2 per cent of Sea’s sales came from Shopee in the first nine months of 2017.

“Execution risk for Sea, especially in terms of monetization, remains high and there is no guarantee of rapid progress in monetisation,” he said.

The company is losing more money as it grows. In 2015, Sea lost 37 US cents for each dollar of revenue and that rose to 65 US cents in 2016. According to analyst estimates, the company lost 96 cents for every dollar of revenue last year.

But the analysts are betting on growth. They project revenue rose 59 per cent last year, up from 18 percent growth the year before. — Bloomberg

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