Singapore’s Sea lifts outlook as it fends off TikTok, Lazada
Sign up now: Get ST's newsletters delivered to your inbox
Investors are watching closely whether Shopee’s higher merchant fees can boost its margins without hurting its lead against its deep-pocketed rivals.
PHOTO: ST FILE
Follow topic:
SINGAPORE – Sea raised the outlook for its main online retailing arm, signalling the South-east Asia e-commerce leader is effectively countering intense competition from the likes of TikTok and Lazada.
The company’s US stock rose almost 12 per cent on Aug 13 after it forecast the value of goods sold by the Shopee division will rise in the “mid-20 per cent” range in 2024, Sea said on Aug 13, rather than the “high teens” pace predicted in March.
Singapore-based Sea also posted second-quarter profit and sales that topped analysts’ estimates.
The forecast alleviates some concerns about the prospects for Shopee, which is trying to fend off competition from ByteDance’s TikTok and Alibaba Group Holding’s Lazada.
Investors are watching closely whether Shopee’s higher merchant fees can boost its margins without hurting its lead against the deep-pocketed tech conglomerates. Newer contenders like Shein and PDD Holdings’s Temu are also targeting South-east Asia, a region of about 675 million people where more shoppers are moving online.
In a show of its dominance, Shopee has raised the commissions it charges merchants in many core markets by about a third since the start of the year. The hikes, which bring Shopee’s fees far above its rivals’, show that Sea feels secure in its own efforts to become a crucial partner to merchants, helped by the e-commerce pioneer’s broad user base and well-established delivery services.
After plunging over the past two years, Sea’s stock had gained about 65 per cent in 2024 as investors have assessed the company’s chances against tough competition. Still, the shares remain far below their historic highs.
Sea swung back into the black in the three months to June with a net income of about US$80 million (S$105 million), after losses in the preceding three quarters. Analysts estimated US$60 million on average. Sales rose 23 per cent to US$3.8 billion.
Shopee’s gross merchandise volume, or the value of goods sold, climbed a higher-than-estimated 29 per cent to US$23.3 billion in the second quarter.
Sea also said it expects Shopee to post earnings before interest, taxes, depreciation and amortisation in the third quarter of 2024 – it previously expected Shopee to reach that milestone within the second half. The company as a whole is targeting its second straight annual profit this year.
Investors have also focused on Sea’s efforts to improve its profitability in the cut-throat market, after it slashed thousands of jobs in a brutal cost-cutting drive in recent years. Second-quarter sales and marketing expense rose to US$774.8 million, and the company has also boosted research and development spending to add live-streaming and artificial intelligence features.
The company’s gaming arm Garena, known for its hit Free Fire, has helped Sea’s profit margins. Yet it has struggled to come up with new titles to increase sales. Revenue at the unit fell 18 per cent to US$435.6 million, missing estimates. Bookings, which measure the amount of products and services sold during the period, climbed 21 per cent to US$536.8 million.
Sea’s digital banking division has become one of its key pillars of expansion. Revenue at its financial services arm grew 21 per cent, as it battles the region’s incumbents and new entrants, including Standard Chartered’s Trust Bank and a venture owned by Grab Holdings and Singtel called GXS Bank. In July, it appointed a new chief to steer its budding Singapore bank. BLOOMBERG
