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Hi readers,
Sea Group’s share price peaked at US$358 in November 2021. As of the close of trading last Wednesday, it was around US$37, marking a nearly 90% decline.
Back then, Sea seemed invincible, with gaming unit Garena serving as a cash cow, and ecommerce arm Shopee expanding to reach Latin America and Europe. There was also the prospect of more riches from financial services after the group was awarded a digital bank license in Singapore and acquired a bank in Indonesia.
However, much of what has happened in the past two years is beyond the company’s control.
Rising interest rates meant that capital became more expensive, with investors demanding profitability. Sea dutifully cut expenses, with multiple rounds of layoffs. This seemed to pay off when the company finally managed to post positive operating income in the fourth quarter of 2022.
However, investors were recently spooked by the company’s Q2 2023 results, with the prospect of higher expenses – and renewed losses – at Shopee, which is battling to maintain its dominant position in Southeast Asia, its core market, as TikTok Shop surges in popularity.
This was the main reason investors sent Sea’s shares crashing by a historic 29%, following the release of the results.
Sea’s gaming and financial businesses, however, are profitable and look likely to continue being so. Investors with a longer-term horizon may want to consider whether the recent carnage has been overdone, and give Sea a look-over.
— Simon Huang, journalist at Tech in Asia
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