Singapore’s Sea Limited reported its first profitable year

A tech giant from Southeast Asia Sea Limited on Monday reported its first profitable year amid efforts to defend market share against Ali Babaowns Lazada and TikTok.

Net income in 2023 is $162.7 million compared to a net loss of $1.7 billion in 2022. There is a net loss of $111.6 million in the fourth quarter of 2023 compared to net income of 422 .8 million in the same period a year ago.

“In 2023, we achieved profitability, strengthened our market leadership for our e-commerce business, grew our digital financial services business and stabilized the performance of our digital entertainment business,” said Forrest Li, Chairman and CEO of Sea, in Monday. Sea had previously been largely unprofitable, racking up billions of dollars in losses since its inception in 2009.

Sea operates in Southeast Asian markets and has businesses in e-commerce (Shopee), financial services (SeaMoney) and gaming (Garena).

“We emerged with a much stronger balance sheet, with our cash position increasing to $8.5 billion by the end of 2023, demonstrating the discipline and prudence we have applied to our investments over the past year,” Li said.

New York-listed shares of Sea closed up 5.58% on Monday. Li said the firm expects 2024 to also be a profitable year.

Sea’s e-commerce unit Shopee achieved a “significant increase in market share” in 2023 despite “intensified competition in Southeast Asia”, the firm said on Monday. Sea also said that Shopee’s market share in the region has “solidified” and the firm intends to “maintain our market share in 2024.”

Shopee is facing strong competition from players like Ali Baba-owned by Lazada and Indonesia’s Tokopedia in the region. Tokopedia has merged with Indonesia’s TikTok Shop to form an enlarged Tokopedia entity, in which TikTok will take a controlling stake of 75.01%.

In August, Sea said it would focus on growth over earnings – reversing recent cost-cutting measures in the face of economic uncertainty. Analysts said the pivot was a move to protect market share.

SeaMoney reported its first year of profit in 2023. The firm also expects its flagship game Free Fire to “grow double-digit year-over-year in both user base and bookings in 2024.”

“We are pleased to see positive trends in both the growth and profitability of all three of our businesses. Looking ahead, we will continue to invest for the future with discipline and focus,” said Seay press release on Monday.

“The guidance was quite positive and surprising,” said DBS Bank’s Sachin Mittal. The bank upgraded Sea from “hold” to “buy” with a price target of $75 after the earnings report.

“It has to do with TikTok not being as aggressive in Indonesia. They achieved what they wanted [with] Tokopedia is also now dealing with regulatory compliance,” Mittal told CNBC on Tuesday.

CGS-CIMB Securities analyst Khang Chuen Ong on Tuesday upgraded Sea to “add” from “hold” with a price target increase to $74 per share from $46, representing 37% upside.

Wedbush on Monday raised its price target on Sea to $72 from $45, maintaining an “outperform” rating.

“We are increasingly constructive on the stock given the growth and margin trajectory implied by management’s outlook and believe Sea is in the early stages of a successful turnaround as competitive pressures ease and investment in live streaming, user acquisition and execution are starting to bear fruit,” Wedbush analysts said.