Skip to content
Alpha Edge Investing

Alpha Edge Investing

"Investors operate with limited funds and limited intelligence, they don’t need to know everything. As long as they understand better than others, they have an edge.” – George Soros

  • Home
  • Earnings Updates/ Corporate Actions
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trust/ ETF
  • News
  • My Opinions/ Views
  • Others
  • About Me
  • Contact
  • Disclaimer
  • Community and Support Forums
  • Toggle search form

Maybank: Sea Ltd – Buy Target Price US$105.00 (Previous US$140.00)

Posted on July 26, 2022July 26, 2022 By alanyeo No Comments on Maybank: Sea Ltd – Buy Target Price US$105.00 (Previous US$140.00)
Cut TP to USD105; oversold on negative news

After media reports of jobs cuts following its exit from France, Spain and India, Sea’s share price has continued to fall, bringing its decline to 78% below its peak in October 2022. Our new SOTP-based target price of USD105 (from USD140) still indicates 36% upside even after deep cuts to Shopee’s EV/S from 3.0x to 1.5x on supply chain risks and after rolling forward Garena’s EV/EBIT from 15.0x (FY22E) to 13.7x (FY23E). Sea is testing our bedrock valuation of USD73.30/share and could become a deep-value buy and a strong play on normalisation of supply chains once interest rates peak. Transferring coverage to Samuel Tan.

China supply chain issues look to be easing

With a more flexible ‘Dynamic Zero-COVID-19’ policy in place and progress in development of China’s AWcorna mRNA vaccine, a conclusion to supply chain issues could be on the horizon. Data indicates that supply chain issues are mostly centred around container and trucking capacity in Chinese ports and manufacturing is picking up (China PMI – Jun-22: 50.2, May-22: 49.6). Freight rates, based on WCI Composite, look to have peaked, falling from a high of USD9,567/FEU (3Q21) to USD7,051/FEU (3Q22), but still higher than the sub-USD2,000/FEU levels pre-COVID.

Well-placed to reduce China dependence if needed

Sea said direct cross-border sales from China make up high single-digit to low-teens of its GMV, but we note that China-sourced items, which make up merchant partner inventories, are likely to account for more. However, Sea’s retention of Poland, despite its retreat from the EU, and expansion into Mexico – both emerging manufacturing hubs – positions it well to adapt to the ‘regionalization’ trend. Sea appears to be consolidating LATAM logistics networks with investments in 5 distribution centres in Brazil. Shopee’s ASEAN dominance, also a potential substitute for China manufacturing, should also help it pivot with shifts in supply chains.

Consumer sentiment strong despite inflation

Consumer indices across 6 of the 10 markets under our study where Shopee is present are showing upticks in consumer confidence. The potential unbuckling of China’s supply chain, one source of inflation, is likely to lead to a trampoline effect. Key risks include further geopolitical events affecting supply chains and FX effects from dollar appreciation.

SEAClick here to Download Full Report in PDF

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Telegram (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)
Research - Equities Tags:SEA Ltd

Post navigation

Previous Post: UOBKH: Aztech Global – Buy Target Price $1.46 (Previous $1.55)
Next Post: PhillipCapital: Fuyao Glass – Upgraded to Buy Target Price HK$49.00

Related Posts

CIMB: SEA Ltd – Add Target Price US$75.00 (Previous US$61.00) Research - Equities
DBS: ASEAN Internet & Consumer Sectors Research - Equities
DBS: SEA Ltd – Buy Target Price US$100.00 (Previous US$126.00) Research - Equities
DBS: SEA Ltd – Buy Target Price US$126.00 Research - Equities
CIMB: SEA Ltd – Hold Target Price US$92.00 Research - Equities
DBS: SEA Ltd – Buy Target Price US$126.00 Research - Equities
CIMB: SEA Ltd – Hold Target Price US$92 (Previous US$150) Research - Equities
Broker’s Digest: ARAHT, SGX, Pan-United Corp, SIA, Credit Bureau Asia News
Sea cuts jobs in shopping, food in first major downsizing News
Sea Cuts Jobs in Shopping, Food in First Major Downsizing Earnings Updates/ Corporate Actions
DBS: ASEAN Internet – SEA Ltd, Grab Research - Equities
DBS: SEA Ltd – BUY TP US$126.00 Research - Equities

Leave a Reply

You must be logged in to post a comment.

Login

Log In
Register Lost Password
Get new posts by email
Chat on WhatsApp
  • Earnings Updates/ Corporate Actions
  • My Opinions/ Views
  • News
  • Others
  • Research – Equities
  • Research – Fixed Income/ Bonds
  • Research – Unit Trusts/ ETF

Copyright © 2023 Alpha Edge Investing.

Powered by PressBook Grid Blogs theme