After 14 years, the parent company Shopee knew the smell of profit for the first time, surprising Wall Street

Tram Ho

At the close of trading on Tuesday, Singapore-based Sea Group’s shares rose 20% after the company posted a profit for the first time since its founding in 2009.

Specifically, net profit in the fourth quarter of 2022 reached 422.8 million USD, up from negative 616.3 million USD in the same period the previous year.

This positive result was partly due to the fact that Sea’s sales and marketing expenses decreased by $746 million when the company’s management committed to reducing expenses in the previous quarter’s financial report.

“Cost-cutting measures such as hiring and wage freezes have helped relieve some of the strain on Sea stock. Furthermore, the surprising earnings results in the fourth quarter of 2022 should give Sea a boost – especially as it helps to illustrate a clearer path to profitability ahead,” said Jonathan Woo, a research fellow at Phillips. Securities.

“However, there are still some macro difficulties and a decline in the gross merchandise value (GMV) index could cause delays to the path to profitability,” Mr. Woo added.

Sau 14 năm, công ty mẹ Shopee lần đầu biết đến mùi lãi, khiến cả phố Wall ngỡ ngàng - Ảnh 1.

Sea’s core businesses are digital entertainment (Garena), e-commerce (Shopee) as well as digital payments and financial services (SeaMoney).

Sea’s chairman and CEO said on Tuesday that 2022 is “a revolutionary year”.

“Given the uncertainties about macro conditions, we decisively turned around late last year and focused on efficiency and profitability. As a result, we started to see significant improvements in business results,” said CEO Forrest Li.

“First, we focus more strongly on areas of great potential across business segments. We’ve moved away or downsized our operations in non-core markets, streamlined our gaming business with divestments and project closures, and de-prioritized non-core initiatives “.

Garena

Garena games revenue fell 32.9% to $948.8 million in the quarter, down from $1.41 billion in the same period a year earlier.

“We expect Garena’s growth rate to continue to decline in the future, due to the lack of attractive titles and the continued ban on Free Fire games in India.”

Shopee and SeaMoney

Meanwhile, Shopee e-commerce and SeaMoney digital payments continue to witness strong growth in 2022.

Shopee’s EBITDA (earnings before taxes, depreciation and interest) hit its first positive at $196.1 million in Q4 with improvements in revenue and operating expenses. “In the Asian markets, we still strengthen our leadership position and strive to be profitable. In Brazil, we will focus on moving the business towards profitability to capture the significant opportunities in this new market,” said CEO Li.

Shopee found success in Brazil after trial and error in many European markets. Most recently, it announced it would expand its presence in Malaysia.

Woo expects Shopee to continue to become Sea’s main revenue engine in the future.

“Shopee’s dominance in multiple markets also allows the company to earn more commissions despite the decline in GMV and total orders,” Woo said.

EBITDA of SeaMoney segment was also positive for the first time, reaching USD 75.6 million in Q4 thanks to improvement in revenue and selling and marketing expenses.

SeaMoney is taking strong steps to improve product as well as quality.

“Due to macro uncertainties and the recent strong pivot, we are closely monitoring market developments and will continue to adjust our pace and refine our operations accordingly.” CEO Li emphasized.

Source: CNBC

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