Text | Dolphin Investment Research Before the U.S. stock market opened on the evening of November 12th, Beijing time, Southeast Asia’s small Tencent $Sea.US announced its financial report for the third quarter of 2024. This time, all indicators were better than expected. It can b

2024-11-13 19:38:04 entertainment 8282℃

Text | Dolphin Investment Research

Before the U.S. stock market opened on the evening of November 12th, Beijing time, Southeast Asia's small Tencent $sea.us announced its financial report for the third quarter of 2024. This time, all indicators were better than expected, and it can be said to have performed well. The core points are as follows:

1, , the key shopee e-commerce sector, this quarter gmv reached 241 billion, a year-on-year growth of nearly 25%, significantly better than the market expectation of 22% year-on-year growth . And in terms of trend, the growth rate dropped by about 4pc from the previous quarter. Considering the impact of the higher base number, it can basically be regarded as not slowing down. Combined with the company's guidance for the "mid-twenties" of full-year GMV growth in 24, we set an upper limit of 27%. implies that the GMV growth rate in 4Q is about 20%. Considering that the GMV growth in 4Q last year has been significantly restored, the guidance is not bad. .

In terms of revenue, , Shopee’s revenue growth rate this quarter was as high as 43% year-on-year, significantly outperforming GMV’s growth rate. And compared with the previous quarter, revenue growth accelerated by a full 9pct, can be said to be very strong compared to . Shopee's recent (for the second time this year) extensive improvement in monetization rates in various markets is an important contributing factor. It is estimated that the monetization rate of shopee this quarter has increased by about 0.6pct month-on-month to 11.6%. The month-on-month increase of has reached a new high in 23 years. Fundamentally, the current e-commerce competition in Southeast Asia is becoming more rational, and players are working together to monetize and make profits, creating favorable conditions.

2 and seamoney sectors are the biggest highlights of this quarter’s performance . The revenue of and surged 38% year-on-year to nearly $620 million. The growth rate of increased by a full 17% month-on-month. The actual revenue exceeded expectations by nearly 13%. According to the company's disclosure, behind the strong performance is the fact that the outstanding loan balance of this quarter reached $4.6 billion, a year-on-year increase of 73% ( grew less than 40% year-on-year in the last quarter), of which bnpl (buy now, pay later) There should be no small contribution to the promotion of business. At the same time, the company's proportion of bad debts that are overdue for more than 90 days continued to fall by 0.1pct to 1.2% quarter-on-quarter this quarter (1.6% in the same period last year). While the loan volume has increased significantly, the quality of the loans has actually improved.

3 and Compared with the other two major sectors, the performance of garena's game business is slightly inferior. The main reason is that has approximately 630 million active users and 50 million paying users this quarter, which is slightly lower than the previous quarter, and both are slightly lower than the previous quarter. market expectations. However, the number of users of this quarter has still increased significantly year-on-year, and the single-paying user contribution has also stopped falling year-on-year. Therefore, the most important game revenue of has increased by 24% year-on-year this quarter, 3pct faster than the previous quarter, but slightly higher than market expected.

Overall, although the unexpected decline in the number of users is a possible negative signal, at least the performance of the game sector is still relatively stable this quarter. Regarding the profits of

4 and segments, the most watched e-commerce segment lost $037 million this quarter. The loss narrowed as expected and was less than the $48 million expected by the market. Although is not very eye-catching, at least has verified the trend of shopee's business gradually turning losses into profits.

The profit of the game segment this quarter was $260 million, an increase of nearly 25% from the previous quarter. The profit margin of the game business increased this quarter (from 48% in the previous quarter to nearly 53%), which should be the expense Investments have shrunk significantly.

dfs The financial sector maintains a relatively stable profit margin (28.3% this quarter vs. 29.1% last quarter), achieving operating profits of $170 million, and continues to hit new highs.

5. Overall, has performed well in all sectors. has achieved an overall revenue of 3.81 billion this quarter, a year-on-year increase of 31%. The growth rate is about 8pc higher than the previous quarter, which is about 6.4% higher than expected. In terms of gross profit for

, the gross profit margin of increased from less than 42% to 43% this quarter. The gross profit margins of each segment of and increased slightly from the previous quarter. Due to the slight increase in gross profit margin of , the actual gross profit of was higher than expected by 7.9%. At the expense level of

, the total expenditure of the four operating expenses was nearly $1.7 billion, a year-on-year increase of approximately 5%. ’s expense ratio continued to be passively diluted under the higher revenue growth rate. Looking at , the total rate of the four fees dropped from 40.6% to 39.3%.

It is worth noting that the marketing expenses of shopee business in this quarter (accounting for about 87% of the total marketing expenses) did not increase but fell by about 4%.

In the end, sea’s operating profit this quarter reached $200 million, far exceeding the expected $160 million, and the operating profit margin reached 5%. According to the adj.ebitda indicator that the company is more concerned about, this quarter was 520 million, which was about 8% higher than expected. The beat range was slightly larger than the gross profit again.

Dolphin Investment Research’s opinion:

From the perspective of sea’s performance this quarter, it is undoubtedly quite good. Except for the slightly higher month-on-month decline in the number of users in the game sector, all other indicators are better than expected, and there is basically nothing to criticize.

goes beyond the numbers. Judging from the development of each sector, the financial sector, with the help of the promotion of bnpl business, seems to have ushered in another period of explosive performance, with revenue and profits increasing again. Moreover, financial lending business naturally has the characteristics of “low cost, high leverage, and high profit”. Although it is not yet clear which new monetization channels/businesses the company will expand, at least the room for imagination is undoubtedly considerable. Although the

game business still relies heavily on free fire single game, there is currently nothing to see more of, but at least with the stabilization of revenue and user numbers, this sector will no longer hold back the group as a whole.

As for the most critical e-commerce business, although from a long-term perspective, we believe that Southeast Asian e-commerce will one day decide the winner, and the truce will be temporary rather than permanent. But looking at the current situation, in the past few quarters, shopee, lazada, and tiktok have worked together to improve monetization, and the profits of each company have significantly improved. This proves that the current Southeast Asian e-commerce industry is indeed in a "sweet period" where competition is rationalized and everyone who has money can make money. The Indonesian government recently announced a ban on cross-border e-commerce businesses such as temu and shein, which has also created a temporary protection period for existing players (temu entering Indonesia through cooperation with local platforms should also be a high probability event).

From a valuation perspective, since the shopee sector is still on the verge of breaking even, there is a considerable gap in the market’s judgment of its subsequent profit prospects. Using the most common PE valuation indicator, the pre-market market value of Sea corresponds to a PE valuation of 26 years of net profit of about 22+~30+ times. It's clear that current valuations already reflect a fair amount of expectations for future growth. However, precisely because the market does not have an accurate grasp of the company's mid- to long-term profit prospects, the short-term stock price trend of sea still depends more on the direction of marginal changes in performance.

The following is a detailed interpretation of the financial report:

1. Increased monetization without losing growth. Is Southeast Asia e-commerce returning to its sweet period?

First of all, the most critical shopee e-commerce sector, this quarter gmv reached 24.1 billion, a year-on-year increase of nearly 25%, which was significantly better than the market expectation of 22% year-on-year growth. And in terms of trend, the growth rate only dropped by about 4pct from the previous quarter. Taking into account the impact of the higher base, it can be said that growth shows basically no signs of slowing down. Combined with the company's guidance for the "mid-twenties" of full-year GMV growth in 2024, we set the upper limit of 27%, then implies that the GMV growth rate of 4Q is about 20%. Considering that the 4Q base has been significantly increased last year, it is still considered good. Growth guidance.

In terms of price and volume, the year-on-year growth rate of order volume this quarter is 24%, which is actually a significant slowdown from the 40% growth rate in the previous quarter. But fortunately, the downward trend of unit price due to live streaming e-commerce and price subsidies has completely ended this quarter. Instead, it increased by 1% (-8% in the previous quarter). Therefore, although the sales growth of has slowed down significantly, gmv growth remains strong.

In terms of revenue, , shopee’s revenue growth rate this quarter was as high as 43% year-on-year, significantly outperforming gmv’s growth rate. And compared with the previous quarter, revenue growth accelerated by a full 9pct, can be said to be strong compared to .

It is understood that it is still one of the consensuses of Southeast Asian e-commerce platforms to improve the monetization rate with . Since 2024, shopee has twice comprehensively improved the performance rate in each market, once at the beginning of the year and the other between July and September. between. Theoretically, the platform's continuous improvement in monetization rate will increase the costs for merchants or consumers, which is not conducive to the growth of the platform's transaction scale.

However, as can be seen from the table below, even after repeatedly raising the monetization rate, the current take rate of shopee is roughly the same as compared to competitor Lazada, and will not cause a competitive disadvantage. According to research, while Shopee has increased the liquidity rate in the Singapore market by about 150bps, it has also lowered the service fee for coin cashback by 200bps and increased its efforts to issue free shipping coupons. It can be seen that shopee is not unilaterally increasing the monetization level of the platform, but is reinvesting part of the incremental revenue into improving consumer experience or merchant operating costs.

Due to the above adjustments, it is estimated that the monetization rate of the shopee platform business has increased by approximately 0.6pct to 11.6% from the previous quarter. The sequential increase is a new high in 23 years. And when looking at the breakdown, the improvement in ’s monetization rate is almost entirely due to marketplace services (high profit margins) , rather than lower profit margin charges such as VAS (such as delivery fees). So the quality of the realization rate has also improved.

2. seamoney’s financial business has exploded in growth, the biggest highlight of this quarter

The biggest highlight of company’s performance this quarter comes from seamoney segment . Revenue surged 38% year-on-year to nearly $620 million. The growth rate of increased by a full 17% month-on-month. The actual revenue was nearly 13% higher than expected. is obviously the sector with the largest beat this season. According to the company's disclosure, the reason behind the strong performance of the financial business this quarter is that the outstanding loan balance of this quarter reached $4.6 billion, a sharp increase of 73% year-on-year (the year-on-year growth of last quarter was less than 40%). combined with the company's explanation of , bnpl (buy now, pay later) should make a considerable contribution to the promotion of business.

In addition, the proportion of 's outstanding bad debts that are overdue for more than 90 days continued to fall by 0.1pct from the previous quarter to 1.2% this quarter (1.6% in the same period last year). It can be seen that while the volume of 's loans has increased significantly, the quality of the loans has not declined but has increased. .

3. Although the garena game segment is not eye-catching, it is not outstanding.

Although the performance of the garena game business is slightly inferior to the other two major segments, it is still good compared to expectations. The key operating indicators of

are . This quarter, there were approximately 630 million active users and 50 million paying users, which was slightly lower than the previous quarter, and both were slightly lower than market expectations of 637 million and 52 million.

But beyond expectations, the number of users this quarter still increased significantly year-on-year, and the single-paying user contribution also stopped falling year-on-year, stabilizing at $11.1. Therefore, the key game revenue of increased by 24% year-on-year this quarter, an increase of 3pct from the previous quarter, which was slightly higher than market expectations.

Due to the accelerated growth of game revenue, garena's gaap revenue fell 16% year-on-year this quarter, narrowing 2pct from the previous quarter, and actual revenue was about 5% higher than expected. The main reason for the year-on-year decline in revenue under and gaap standards is that game delays have increased again. Overall, although the unexpected decline in the number of users is a possible negative signal, the performance of the gaming sector is still improving at the margin during this quarter.

4. The losses of the e-commerce sector narrowed as expected, and the profits of each sector exceeded expectations.

Summary As can be seen from the above, the financial sector performed the strongest, and the e-commerce and gaming sectors were also good, all better than expected. So how is the performance of each business in terms of profitability?

The most watched e-commerce sector suffered a loss of $037 million this quarter. The loss narrowed as expected and was less than the $48 million expected by the market. Although is not very eye-catching, the key point is that has verified the trend of shopee's business gradually turning losses into profits.

The profit of the game segment this quarter was $260 million, a month-on-month increase of nearly 25% (gaap revenue increased by 14% month-on-month). It can be seen that the profit margin of game business has increased this quarter ( from 48% in the last quarter to nearly 53% in this quarter). Dolphin Investment Research predicts that there will be a significant contraction in cost investment.

dfs The financial sector maintains a relatively stable profit margin (28.3% this quarter vs. 29.1% last quarter), achieving operating profits of $170 million, and continues to hit new highs.

From the perspective of expectations, except for the e-commerce sector, which is incomparable due to negative profits, the actual profits of the gaming and financial sectors are about 8% to 9% higher than expected.

5. Revenue, gross profit, profit, the beat amplitude is enlarged layer by layer

The revenue of the three major e-commerce, finance, and game sectors are better than expected, especially with the contribution of the obvious accelerated growth of the financial sector, sea's overall revenue this quarter 3.81 billion, a year-on-year increase of 31%, and the growth rate increased by approximately 8% month-on-month, which was approximately 6.4% higher than expected.

In terms of gross profit, company achieved an overall gross profit of 1.86 billion this quarter, and the gross profit margin increased from less than 42% to 43% month-on-month. Looking at and breakdown, the gross profit margin of each segment of increased slightly month-on-month. Based on the good revenue growth of and the slight increase in gross profit margin, the actual gross profit of was higher than expected by 7.9%.

In terms of expenses, the total expenditure of the four operating expenses was nearly $1.7 billion, a year-on-year increase of about 5%. underperformed the revenue growth rate, so the expense rate continued to be diluted and reduced. Looking at , the total rate of the four fees dropped from 40.6% to 39.3%.

It is worth noting that the marketing expenses of shopee business in this quarter (accounting for about 87% of the total proportion) did not increase but fell by about 4%. Combined with the price per customer stopping falling and rebounding, it can be speculated that the competitive pressure faced by the company has indeed been reduced. and reduced subsidies.

As expenses were also passively diluted due to higher revenue growth, sea’s operating profit for the quarter finally reached $200 million, far exceeding the expected $160 million, and the operating profit margin reached 5%.

However, according to the adj.ebitda indicator that the company is more concerned about, this quarter was 520 million, which was about 8% higher than expected. The beat range is roughly close to the gross profit, but slightly higher.

Text | Dolphin Investment Research