CGS-CIMB optimistic on Sea’s Q4 earnings; expects Ebitda breakeven in FY2023
Chelsea Ong
CGS-CIMB expects Sea to achieve better-than-expected earnings before interest, taxes, depreciation and amortisation (Ebitda) for the fourth quarter of fiscal 2022, with the group likely to report an Ebitda breakeven by the second quarter of FY2023.
This will allow the gaming and e-commerce group to return to a focus on reaccelerating topline growth in FY2024, the research team said on Friday (Mar 3).
The optimism comes as the research team anticipates improvements in the group’s e-commerce and digital financial services segments, which will more than offset lower Ebitda from the gaming segment.
CGS-CIMB expects Sea to post narrower adjusted losses before interest, taxes, depreciation and amortisation (Lbitda) of US$238 million for Q4, supported by “significantly narrower losses” at e-commerce subsidiary Shopee and fintech subsidiary SeaMoney.
That being said, the research team expects weaker topline growth in the quarter, due to continued weakness for Garena amid an economic slowdown, and slower gross merchandise value growth for Shopee as a result of lower incentive levels, despite Q4 typically being a seasonally strong quarter, the analysts said.
For the fourth quarter, they are forecasting an adjusted revenue growth of 3 per cent year on year to US$3 billion, after factoring in some foreign exchange losses following an appreciation of the US dollar against South-east Asian currencies.
BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.
For the year ahead, CGS-CIMB expects the group to achieve Ebitda breakeven by the second quarter, and non-GAAP (generally accepted accounting principles) profitability by the fourth quarter of FY2023.
Particularly, it projects a “steady” narrowing of losses for Shopee and SeaMoney in the upcoming quarters, and that they will turn Ebitda-positive by the third and fourth quarters respectively.
The analysts expect the subsidiaries to continue narrowing losses on sustained efforts to improve unit economics, such as raising commission rates; a moderation of user incentives such as coin cashback and free shipping subsidies; as well as streamlining of corporate costs.
Sea is also actively managing costs to maintain a healthy profit margin for its gaming segment despite further expected booking declines for mobile game Free Fire, the analysts added.
The group achieving its breakeven targets will allow it to turn its focus back on reaccelerating revenue growth in FY2024, by reinvesting in a sustainable manner to expand SeaMoney’s financial services across the region, and enhance its digital bank presence in the Philippines in FY2023.
CGS-CIMB has reiterated its “add” call on Sea. It has raised its target price on the counter to US$85 from US$75, and is positive on the group’s long-term potential given its strong regional market leadership in e-commerce.
It views Sea as the “best digital proxy” for the Asean region due to its strong regional market leadership in e-commerce, and ability to cross-sell high-margin digital financial services.
“While we think its share price may remain volatile in the near term on the recent shift in rate expectations and slower topline growth in FY2023 (strong monetisation push and looming fears of an economic slowdown in the region), we believe the risk-reward is attractive at the current valuation,” the research team said.
Sea is expected to report its Q4 earnings on Mar 7. The counter closed 2.4 per cent or US$1.49 higher at US$63.56 on Thursday.
Copyright SPH Media. All rights reserved.