Sea's Q3 loss widens, but revenue on rise

A US$34.3 million investment gain from the disposal of an investment in Vietnam, as well as a net gain on the remeasurement of investments from other holdings, helped improve Sea's net loss figure.
A US$34.3 million investment gain from the disposal of an investment in Vietnam, as well as a net gain on the remeasurement of investments from other holdings, helped improve Sea's net loss figure.PHOTO: SEA LIMITED

Gaming and e-commerce firm's takings broadly match street estimates on cash revenue basis

Gaming and e-commerce firm Sea pretty much hit market expectations when it delivered its first earnings report since its rocky public debut last month.

Although Tencent-backed Sea's net loss doubled to US$132.7 million (S$179 million) in the third quarter from US$64.9 million in the same period a year earlier, revenue grew 3.9 per cent to US$94.1 million.

A US$34.3 million investment gain from the disposal of an investment in Vietnam, as well as a net gain on the remeasurement of investments from other holdings, also helped improve the net loss figure.

Most analysts that cover Sea had been bullish on the firm, calling it a key beneficiary of the Internet wave in South-east Asia and Taiwan.

Sea has not disappointed, with takings in the three months to Sept 30 broadly matching street estimates on a cash revenue basis.

Cash revenue was US$151.7 million, up 73 per cent from the third quarter last year. This is the sum of GAAP (generally accepted accounting principles) revenue plus the change in digital entertainment deferred revenue and e-commerce commission income.

Unlike GAAP revenue, cash revenue is more aligned with Sea's actual cash flows, it said. For example, the group's revenue recognition policy requires turnover from the recently launched Arena Of Valor game to be recognised over a long period although cost is expensed immediately.

Sea's gaming platform, Garena, saw digital entertainment gross billings grow to US$134.5 million, up 62 per cent from the third quarter last year.

Shopee, its mobile e-commerce portal that went online in 2015, reported a gross merchandise value of US$1.06 billion, up 219 per cent from a year earlier and in line with consensus forecasts.

  • AT A GLANCE

  • REVENUE: 

    US$94.1 million (+3.9%)

    NET LOSS: 

    US$132.7 million (+104.5%)

Shopee has 1.9 million monthly active sellers and 5.9 million monthly active buyers, up from 1.7 million in the third quarter last year. Sea attributed buyer growth to word of mouth and social media outreach. It has 3.7 monthly orders per active buyer and an average order value of US$16.20.

Shopee said its buyer base is "disproportionately female", and that repurchase rates are higher for this group. It aims to be a market leader in the female-centric categories of fashion, beauty and baby products, which it said offer better margins than computers, mobile phones and cameras.

Sea's American depository receipts fell 71 US cents, or 4.58 per cent, to US$14.78 on Monday in New York before results were announced after trading hours. The IPO price was US$15.

A version of this article appeared in the print edition of The Straits Times on November 23, 2017, with the headline 'Sea's Q3 loss widens, but revenue on rise'. Print Edition | Subscribe