Deep dive: Why Sea’s new numbers are impressive, and a few things to watch out for

Sea’s Q4 2020 financial results did not disappoint.

The company reported group revenue and gross profits for 2020 of US$4.4 billion and US$1.3 billion respectively, more than doubling those from 2019.

Group EBITDA was US$107 million for 2020, the first year Sea has enjoyed positive EBITDA as a listed company.

The tech giant’s forecast for 2021 stands out in particular: It expects group revenue to more than double yet again, with the digital entertainment and ecommerce segments alone expected to generate a combined revenue of around US$9 billion.

If a company of this size can double its revenue while capping its sales and marketing spending, it would truly be an achievement.

Photo credit: Shopee

As to where this growth is likely to come from, management revealed that Latin America now contributes the largest share of its digital entertainment arm Garena’s Free Fire revenues.

The region may be expected to continue driving growth in Sea’s digital entertainment business, while Southeast Asia continues to drive its ecommerce revenue.

But while the market is rightly excited about Sea’s prospects, some of its numbers warrant a pause.

Its growing net loss, caused by an accounting quirk, is not one of them, however. We maintain that it’s more useful to keep an eye on its group EBITDA as well as its cash flow from operating activities.

Sea has done well in both regards and has earned the right to investors’ trust. The company also claims that Shopee can break even if it wants to. However, the high share price also means the company may be priced for perfection.

With that, we take a deeper dive into its numbers.

On a company-wide level, total revenue and gross profit continued to scale new heights, even as EBITDA remained positive, albeit declining from the previous quarter.

Garena’s top line growth slowed in Q4

Shopee rises yet again

Digital financial services are the one to watch

Paying for growth

The next Tencent?