Maybank cuts Sea target price with ‘hold’ call on softer Shopee margins, HSBC maintains ‘buy’ call
Tech company’s prioritisation of growth and building of competitive moats could ‘slow near-term monetisation gains’, says Maybank Research
[SINGAPORE] Maybank Research slashed its target price for Internet company Sea by 9.3 per cent to US$156 from US$172 with a “hold” rating, citing softer margins of its e-commerce arm Shopee.
This comes although Singapore-based Sea reported on Tuesday (Nov 11) that it doubled its third-quarter earnings to US$375 million – a 144.6 per cent increase from US$153.3 million in the year-ago period. It also posted adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) growth of 68 per cent year on year, beating the research house’s and street’s expectations by 4 to 5 per cent.
Shopee’s adjusted Ebitda of US$186 million “marked a second straight quarterly decline”, said Maybank Research analyst Hussaini Saifee on Wednesday.
This “missed our and street expectations by 15 to 16 per cent, despite solid gross merchandise value (GMV) growth of 28 per cent year on year and 8 per cent quarter on quarter”, he noted.
After factoring in Sea’s Q3 delivery numbers, the research house has raised Sea’s adjusted Ebitda estimates by 2 to 3 per cent for the FY2025 to FY2027 period.
Meanwhile, HSBC has reiterated its “buy” call on Sea, as it believes that investments in Shopee will support robust GMV growth and strengthen its competitive moat, while its scale will build cost leadership.
HSBC analysts Piyush Choudhary and Rishabh Dhancholia forecast Sea’s 2024 to 2026 adjusted Ebitda compound annual growth rate to come in at 40 per cent, driven by improvement in Shopee’s unit economics as well as higher Ebitda from Monee, Sea’s digital financial services arm.
Saifee, however, believes that Sea’s prioritsation of growth and building of competitive moats could “slow near-term monetisation gains”.
He pointed to management’s guidance that projected Shopee’s margins rising in FY2026 though “not linearly, as resources are reinvested to prioritise ecosystem depth and scale to sustain GMV growth”.
These areas of investment include fulfilment infrastructure, pre-shipping orders in its warehouses, growth in rural areas and the expansion of its VIP programme.
Shopee has started offering warehouse fulfilment services in some markets to optimise end-to-end logistics, as Sea chairman and chief executive officer Forrest Li believes that its logistics arm SPX Express is key for long-term growth.
The HSBC analysts added that Shopee’s Ebitda margin is expected to expand year on year in 2026, but noted that “quarterly trends can fluctuate based on seasonality and investments”.
Monee faces margin pressures
While Monee is “growing rapidly”, Saifee predicts that its margins may dip in FY2026. This comes as near-term margin pressures may persist due to “ongoing user and merchant onboarding, product diversification and marketing investments”, he said.
The business’ Q3 revenue surged 60.8 per cent to US$989.9 million, fuelled by user growth and product expansion across markets.
Saifee noted that Monee’s absolute Ebitda is expected to grow in FY2026, according to management’s projections.
However, he sees “potential margin compression from higher (sales and marketing) spending and aggressive expansion into markets with lower interest rates and higher upfront provisioning”.
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