He writes in his Sept 10 report: “Our Asean survey shows limited volume impact, as only 13% of consumers cut spending, as most view online as cheaper, and two-thirds of sellers are neutral/positive on fee hikes.”
“Those behavioural responses help explain why platforms can raise take rates without large gross merchandise value (GMV) downside in the near term,” adds the analyst.
With this, Saifee lifts his adjusted earnings before interests, taxes, depreciation and amortisation (ebitda)/ GMV multiple on Shopee by 0.1 ppts 0.2 ppts for FY2026 to FY2027.
“Bigger monetisation could accrue in the form of a bigger and faster offline-to-online transition, thereby expanding total addressable market (TAM) and across its fintech business through services like buy now pay later (BNPL) etc which offers higher take rates. Asean take rates remain below global peers, leaving headroom,” writes Saifee.
Meanwhile, Sea’s gaming platform Garena has “long faced” investor concerns over its high reliance on the eight-year-old Free Fire mobile game franchise, raising risks should user interest wane.
Saifee notes: “Free Fire was one of the most downloaded mobile games globally while we estimate it contributes around 60% of Garena revenues, underscoring both its value and the exposure should engagement slip.”
“Yet the company has kept Free Fire evergreen through creative localisation and high-profile collaborations like Squid Game and Naruto, sustaining engagement and growth,” he adds.
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With other Sea business segments now “self-funding”, he sees that Garena is re-investing in expansion, as evidenced by its increased game release cadence and new titles like Free City.
He adds: “Meanwhile, broader adoption of artificial intelligence (AI) in game development is driving faster content iteration and healthier long-term margins.” With this, he lifts his Garena adjusted ebitda estimates by 15% to 25% for FY2025 to FY2027.
Overall, Sea’s mix of e-commerce, fintech, and gaming “complicates” peer comparisons.
Excluding gaming, Sea trades at 2.9 times FY2026 EV/ sales multiple, 24.1 times EV/ebitda multiple — which Saifee notes is broadly in-line with global e-commerce peers. He adds: “On a growth-adjusted basis, however, the stock trades at 13% to 35% discount, highlighting latent upside.”
Factoring in a higher seller commission, he has raised his Shopee adjusted ebitda by 6% to 8% for FY2026 to FY2027. On the other hand, he has also raised his Garena adjusted ebitda by 15% to 25% for FY2025 to FY2027, assuming superior growth and lower costs, helped by AI-related initiatives.
At the same time, analyst Sachin Mittal of DBS Group Research (DBS) sees gaming to be the key driver for the group.
Mittal notes that Sea’s management expects bookings to grow over 30% in the FY2025, with him forecasting a booking growth of 35% in the FY2025 and 7% in the FY2026, supported by AI and collaborations.
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“Turning to fintech, Sea expects its loan book to grow by much faster than 20% after reporting an impressive 94% y-o-y growth in 1HFY2025. We project fintech revenue growth of 60 and 38% in the FY2025 and FY2026 respectively, driven by improved credit penetration both on and off Shopee platform,” he writes.
On e-commerce arm Shopee’s plans to gradually raise take-rates, Mittal projects 20% and 15% GMV growth for the FY2025 and FY2026 respectively.
He writes: “E-commerce achieved a positive ebitda as a percentage of GMV in FY2024, a figure we project will reach 1.0% and 1.4% in the FY2025 and FY2026 respectively. Furthermore, the take-rate reached an all-time high of 12.4% in FY24, which we project will inch up to 13.3% and 13.7% in the FY2025 and FY2026 respectively.”
With this, Mittal keeps “buy” on the stock, raising his US$204 target price by 18% to US$241 on the back of an 8% and 11% revision to his respective FY2025 and FY2026 combined gaming and fintech ebitda, while also rolling forward his valuation by three months.
His combined value for Sea’s gaming and fintech businesses stands at 18 times 12-month EV/ebitda, similar to the peer average of 18 times.
He adds that e-commerce revenue is valued at 4.8 times 12-month EV/revenue, a 40% premium to the peer average of 3.4 times, considering Sea’s e-commerce revenue compound annual growth rate (CAGR) of 17% over the FY2025 to FY2027, versus the peer average of 11%. He has also factored in US$4.1 billion in net cash.
With regards to risk, Mittal’s bear-case target price of US$164 assumes “irrational” e-commerce competition and a gaming slowdown in the FY2025.
He concludes: “Assuming slower growth, we assign 3.5 times FY2025 EV/revenue for e-commerce, and 10.5x FY2025 EV/ebitda for the rest of the company, with US$4.1 billion in net cash.”
Shares in Sea Limited closed 37 US cents higher or 0.19% up at US$193.04 on Sept 11 on the New York Stock Exchange.
