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Bangkok Post
Bangkok Post
Business

Shopee parent posts first-ever profit

A man passes in front of a video wall showing advertisements for Shopee, the e-commerce arm of Sea Ltd, at its office in Singapore. (Photo: Reuters)

SIGNAPORE: Sea Ltd has reported its first-ever profit, a milestone in its turnaround effort as the Southeast Asian gaming and e-commerce giant seeks to convince investors of its money-making potential.

Net income in the fourth quarter of 2022 was US$426.8 million, the Singapore-based parent of Shopee and the gaming firm Garena said in a statement. Analysts had expected a loss of $434 million on average. Revenue growth slowed dramatically but sales still exceeded estimates, rising 7.1% to $3.5 billion.

Sea, the largest of Southeast Asia’s internet companies and briefly the world’s best-performing stock, is emerging from a painful 2022. The company, which grew at triple-digit percentage rates just two years ago, has all but stopped expanding after rising interest rates and elevated inflation left online shoppers and gamers with less to spend.

The company took drastic measures last year to convince investors of its profit-making ability, including cutting thousands of jobs and freezing salaries. Sea made a stark shift from its previous stance of spending for global expansion, shuttering operations in India and some European and Latin American markets in a bid to trim costs and reach positive cash flows.

Sea investors have endured one of the most brutal years since the company was founded in 2009. The gaming and e-commerce giant lost about $166 billion of its value since a peak in October 2021 amid rising inflation and concerns about a potential recession.

Among Sea’s efforts to curb costs is a potential disposal of its Phoenix Labs unit. Acquired by Garena for more than $150 million in 2020, the Vancouver-based developer of the monster-hunting title Dauntless is getting bought out by its management, GamesBeat reported.

While the most recent quarterly results are heartening, Sea still faces a challenging year ahead, say analysts.

“Interest rates will likely stay higher for longer as inflationary pressures persist, creating a challenging year for the internet sector” in Southeast Asia, said Ju Ye Lee, an economist at Maybank Investment Banking Group in Singapore.

For now, investors will be gauging how well Garena and Shopee rein in costs. But longer-term, they will want to hear solid plans to recapture some of the heady growth that made Sea a stock market darling in years past.


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