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Sea's Q4 revenue surges on Garena, Shopee growth

Shopee - Reuters.jpg
Growth of the Shopee e-commerce marketplace led to revenue more than doubling for Sea's e-commerce and other services segment.

REVENUE nearly tripled in the fourth quarter last year for Singapore digital bank hopeful Sea Ltd - which owns e-commerce platform Shopee and game developer Garena - although the Internet company remained in the red.

The New York-listed, Singapore-based group saw its Q4 top line climb to US$777.2 million, from US$283.2 million a year ago, on the back of growth in the digital entertainment (Garena) and e-commerce (Shopee) segments as well as sales of goods, according to results released on Tuesday night.

The digital entertainment segment - one of Sea's three core businesses - accounted for more than half of group revenue for the quarter and raked in US$404.1 million, three times that of US$131.3 million a year ago.

This was thanks to a larger active user base, deepened paying user penetration and the "continued success" of Sea's self-developed game Free Fire, the group said. Free Fire was the most downloaded mobile game globally for 2019, according to App Annie data compiled from the Google Play and iOS App Stores.

Meanwhile, the e-commerce and other services segment contributed US$296.5 million, more than double its year-ago revenue of US$112.4 million. This was mainly driven by the growth of the Shopee e-commerce marketplace and "positive development" in the marketplace revenue streams of transaction-based fees, value-added services and advertising, Sea said.

Sales of goods saw revenue jump by 93.4 per cent to US$76.6 million, after the group increased its product offerings.

Despite the surge in its top line, Sea still reported a net loss of US$281.9 million for the fourth quarter last year, widening slightly from a net loss of US$276.1 million a year ago.

Excluding share-based compensation and changes in fair value of its 2017 convertible notes, Q4 net loss narrowed to US$240.2 million, from US$321.2 million a year ago. This translated to loss per share of 0.53 US cent for the quarter, compared with loss per share of 0.95 cent a year ago.

In line with the revenue growth, the group's total cost of revenue increased 76 per cent to S$512.4 million for the quarter, from US$291.2 million a year ago.

Total operating expenses grew 56.1 per cent on the year to US$494.9 million, from US$317 million previously.

For the full year ended Dec 31, 2019, the group's net loss widened to US$1.46 billion from US$961 million the year prior. Excluding share-based compensation and changes in fair value of the notes, net loss was US$867.8 million last year, narrowing from US$944.2 million in 2018.

Full-year revenue more than doubled to US$2.18 billion, from US$827 million a year ago.

Aside from Garena and Shopee, Sea has a third core business - SeaMoney - which it introduced in the fourth quarter of 2019. SeaMoney is the overall brand for its digital financial services business, which covers e-wallet services, payment processing, credit-related digital financial offerings and other financial products.

Chris Feng, chief executive officer (CEO) of Shopee, also serves as CEO of SeaMoney. The group said that during 2019 it had been working on integrating the e-wallet services of SeaMoney with the Shopee platform across different markets.

In January this year, Sea confirmed that it is going solo in its bid for a digital full bank licence in Singapore, with a focus on millennials and small and medium-sized enterprises in the Republic. It was the fourth applicant to confirm that it is gunning for one of two digital full bank licences up for grabs.

Sea shares on the New York Stock Exchange closed at US$48.95 on Tuesday, up US$0.91 or 1.9 per cent.