SINGAPORE – Sea Limited is set to benefit from “sharp” growth across its e-commerce and fintech businesses, DBS Group Research said on Monday in an Internet sector report.

The research team said it expects Sea to register an earnings before interest, taxes, depreciation and amortisation (Ebitda) compound annual growth rate of 27 per cent between 2022 and 2025.

It noted that live e-commerce from the likes of TikTok Shop, which has emerged as a threat to Sea, comprised less than 5 per cent of total e-commerce gross merchandise value in South-east Asia, compared with 20 per cent in China.

When compared with Amazon’s 21 per cent and Alibaba’s 8 per cent, Sea offers the highest growth. Sea and Amazon are the preferred choices for DBS for their better growth potential. It noted that Sea is trading at a discount to Amazon despite having higher Ebitda growth prospects.

Meanwhile, DBS expects Alibaba to have the slowest growth due to competition from Douyin in an already mature Chinese e-commerce market. However, Alibaba has the cheapest valuations compared with Sea and Amazon. Alibaba is currently trading at a forward enterprise value that is seven times its Ebitda, compared with Sea and Amazon, which are trading at 13.3 times and 13.6 times respectively.

When it comes to immunity to growth risks, DBS said Amazon is the safest, followed by Sea and Alibaba. This comes as the American e-commerce giant transitions from a national fulfilment network to a more regionalised network structure.

DBS projects operating income from Amazon’s retail segment to be a key driver of its share price from 2023, outpacing operating income from its Amazon Web Services (AWS) segment. The company is set to benefit from a recovery in its North America retail business margins, which fell during the pandemic.

That said, the AWS segment is expected to get a boost from artificial intelligence adoption in 2024. THE BUSINESS TIMES