MAYBANK Securities reinitiated coverage on Sea with a “buy” call and a target price of US$90, after projecting healthy revenue growth for the internet company.
The research house estimates Sea’s revenue to expand at 16 per cent compound annual growth rate (CAGR) over FY2023 to FY2026 amid its growth tailwinds.
This is on top of its scale advantages and monetisation strategies that drove 24 per cent earnings before interest, taxes, depreciation and amortisation CAGR expectations, based on a report on Tuesday (Jun 18).
Maybank analyst Hussaini Saifee noted that Sea is emerging strong in the post “post-Covid phase”, given its scale and competitiveness in terms of the logistics and livestreaming sectors. This is on top of a 15 per cent CAGR expectation of gross merchandise value (GMV) in the Asean market over 2023 to 2026.
“Our consumer survey reflects Shopee is (the) favourite and cheapest even in Indonesia, where TikTok Shop had led an aggressive growth strategy till last year,” Saifee noted.
He added that having its own logistics was the key source of differentiator for players such as Amazon and Mercado Libre.
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More than half of Sea’s GMV is supported by its own logistics, which allows for superior unit economics and customer experience, said Saifee.
On Sea’s digital entertainment arm, he sees potential for a sustained gaming franchise. He estimates Garena bookings to grow 12 per cent in 2024 and by 2 per cent CAGR over 2024 to 2026 with stable margins.
This could be led by management’s “credible” strategy on top of Free Fire’s dominant position in less crowded emerging markets, budget-conscious emerging-market gamers, as well as frequent new content and feature upgrades.
Saifee added that Sea’s trading price of US$74.42 implies a 0.4 multiple of enterprise value to GMV. Its values are a 25 to 30 per cent discount to competitor Mercado Libre.
