Stock Deep-Dive: Sea Limited (NYSE: SE)

Business Overview & Competitive Advantage

Sea Limited is a diversified consumer internet company with operations across e-commerce, digital financial services, and digital entertainment. Its three core businesses are Shopee, SeaMoney, and Garena, each tailored to meet the unique cultural and economic characteristics of its Southeast Asian and Latin American markets.

• Revenue Sources:
  Sea Limited generates revenue through a multi-pronged approach:

  • Shopee, the largest e-commerce platform in Southeast Asia and Taiwan, earns from seller advertising, transaction fees, logistics services, and first-party product sales.

  • SeaMoney monetizes through digital financial services, including mobile wallets, consumer and SME credit, and insurtech solutions.

  • Garena, Sea’s digital entertainment arm, makes money by developing, licensing, and publishing games, and drives additional monetization through in-game purchases and esports events.

• Key Growth Drivers:

  • The rapid digitization of Southeast Asian and Latin American economies

  • Rising mobile and internet penetration among underserved populations

  • Expansion into digital financial services to capture the underbanked segment

  • Ongoing growth of online gaming and esports engagement

Financial Analysis - Fundamentals

Key Financial Metrics

_{Prices as of 04/04/2025}

Revenue & Profitability Trends

Sea Limited has demonstrated strong revenue growth, significantly outpacing the industry.

• Revenue Growth: The company’s sales have grown +29% YoY, nearly doubling the industry’s 15% growth. Over the past five years, Sea Limited has expanded at an impressive 51% CAGR, compared to the industry’s 18%.

• Margins: Despite strong top-line growth, profitability remains a challenge. Over the past five years, the company has maintained a gross margin of 40%, which falls short of the industry average of 60%, while its operating margin (-10%) and net profit margin (-13%) reflect continued unprofitability.

• Cash Flow: Sea Limited has recently improved its cash flow position, with a free cash flow yield of 5%, though it has declined from 8% in the previous year.

Sea Limited shows moderate financial stability, with some areas of strength and others still recovering.

• The current ratio of 1.49 suggests adequate short-term liquidity, though slightly below the industry average of 1.92.

• The company has a debt-to-equity ratio of 48%, which is lower than the industry average of 62%, indicating a more conservative use of leverage.

• On the profitability side, Sea has faced historical challenges. Its 5-year average return on equity (ROE) is -25%, and return on assets (ROA) stands at -4%, both well below industry norms. However, the company has recently improved, with a positive ROE of 6% on a trailing twelve-month basis.

Full-Year 2024 Highlights

Sea Limited delivered strong results in 2024, with broad-based growth across all business segments and a notable improvement in profitability.

Group-Level Performance

• Revenue: $16.8 billion, up +28.8% YoY

• Gross Profit: $7.2 billion, up +23.5% YoY

• Net Income: $447.8 million (vs. $162.7 million in 2023)

• Adjusted EBITDA: $2.0 billion (vs. $1.2 billion in 2023)

E-Commerce (Shopee)

• Gross Orders: 10.9 billion, up +33% YoY

• GMV: $100.5 billion, up +28% YoY

• Revenue: $12.4 billion, up +37.9% YoY

  • Marketplace revenue: $10.9 billion, up +37.8% YoY

• Adjusted EBITDA: $155.8 million (vs. –$213.8 million in 2023)

Digital Financial Services (SeaMoney)

• Revenue: $2.4 billion, up +34.6% YoY

• Adjusted EBITDA: $712.2 million, up +29.5% YoY

Digital Entertainment (Garena)

• Bookings: $2.1 billion, up +18.7% YoY

• Revenue: $1.9 billion (vs. $2.2 billion in 2023)

• Adjusted EBITDA: $1.2 billion, up +30.2% YoY

  • EBITDA margin: 55.8% of bookings (vs. 50.9% in 2023)

Sea Limited closed out 2024 with strong revenue growth, and margin expansion across key segments. Shopee notably turned EBITDA-positive, SeaMoney continued scaling efficiently, and Garena remained a cash-generating engine despite slightly lower revenue.

Valuation Analysis

Sea’s valuation metrics, such as a high P/E ratio and moderate price-to-sales ratio, suggest the company continues to trade on future growth expectations. These figures may reflect investor sentiment on scalability and market leadership in emerging economies.

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