3Q24 slightly ahead of consensus; Brazil achieves breakeven
- SE recorded 3Q24 group adj EBITDA of USD521mn (+1378% y/y, +16% q/q) 3% ahead of consensus; Brazil Ecommerce achieved adj EBITDA breakeven finally
- Gross Merchandise Value (GMV) rose to USD25.1bn (+25% y-o-y, 8% q-o-q) despite rising take rates, 3% ahead of consensus All major players have raised take-rates in Sep 2024, highlighting continued focus on profitability.
- Maintain BUY with a higher TP of USD126 (prev USD99)
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Guides for E-Commerce GMV to rise by mid-20% y/y compared to our 27% and consensus’ 24%. In the E-Commerce segment, Shopee is expected to generate a GMV growth of mid-20% y/y in FY24F (+7% y/y in FY23) compared to our projection of 27% y/y growth and consensus’ 24% y/y. Improving visibility on E-commerce profitability will likely be seen as a positive, and Shopee is expected to remain profitable going forward. Additionally, Free Fire is expected to grow its bookings by >30% y/y in FY24F..
Gaming segment recorded healthy growth in Bookings. In 3Q24, Gaming segment recorded Bookings (a relevant metric) of USD557mn, rising by 24% y/y (up 3.7% q/q) which was ~6% above consensus of USD524mn (+17% y/y, - 2.5% q/q). The Quarterly Paying Users (QPU) reached 50mn in 3Q24 and Quarterly Active Users (QAU) in 3Q24 stood at 629mn (net deduction of 20mn q/q). This translated to a QPU as a % of QAU of 8.0% (8.1% in 2Q24 and 7.4% in 3Q23).
Fintech segment record strong growth in revenue and adj EBITDA on loan book growth. Fintech’s revenue rose by 38% y/y (up 19% q/q) to USD616mn, ~13% above consensus USD546mn (+22% y/y, +5.1% q/q) while its adj EBITDA stood at USD188mn (+13% y/y, +14% q/q), ~10% above consensus. Fintech segment’s gross loans were USD4.6bn (+92% y/y, +31 % q/q). The Non-Performing Loan (NPL) ratio in 3Q24 was 1.2%, improving from 1.3% in 2Q24.
All e-commerce players in Indonesia have raised their mandatory merchant fees in Sep 2024
Shopee, Tokopedia, and Lazada all increased merchant fees in Indonesia in September 2024. In September 2024, Shopee, Tokopedia, and Lazada raised their merchant fees in Indonesia. Tokopedia increased its commission fees to as much as 8%, up from a previous maximum of 6.5%, depending on the product category and seller type. At the same time, Shopee raised fees for certain sellers in Indonesia to a range of 4.25% to 8%, compared to the previous range of 3.5% to 6.5%. Lazada had already implemented a fee increase on July 1, with marketplace seller fees now between 5% and 8%, and LazMall fees ranging from 6% to 10%, based on the product category. Although the higher fees might drive merchants to explore alternative platforms, the consistent fee increases across major platforms limit their choices. Consequently, these platforms must enhance services, expand their reach, and improve logistics to remain competitive and retain merchants.
YouTube partners with Shopee in September 2024. YouTube has teamed up with Shopee, Southeast Asia’s leading e-commerce platform, to expand its shopping features in Indonesia, Bloomberg reported. This strategic partnership reportedly aims to attract more shoppers and strengthen Shopee’s position in the competitive Indonesian market. Under the agreement, content creators on YouTube can now promote and tag products from Shopee directly in their videos. Viewers can then click on the link to purchase the item on Shopee’s platform. This feature will not only benefit content creators through commissions but also provide a seamless shopping experience for viewers.
Temu was blocked from entering Indonesia in October 2024. Indonesia's Ministry of Communication and Information has blocked the Chinese e-commerce app Temu, citing its failure to comply with local regulations. The ministry expressed concerns about predatory pricing and price dumping, which could harm Indonesia's MSMEs by driving consumers toward cheaper foreign products. Additionally, Temu was not registered as an electronic system operator (ESO), making its operations illegal in Indonesia, and it failed to meet local tax requirements.
We changed our group adj EBITDA forecast by -2%/+8% in FY24F/25F led primarily by changes in E-commerce. Shopee achieved adj EBITDA breakeven in 3Q24, meeting our earlier expectations. This is led by benign competition outside Indonesia, as there is a notable rise in take rates. Shopee Brazil achieved positive EBITDA margin for the first time in 3Q24, which is likely to continue. Since the competition is benign, we project GMV growth of 27% y/y in FY24F (prev 27 y/y) compared to management guidance of mid-20s and consensus’ 24% . We project 20% GMV growth rate in FY25F (no change) with take rates rising gradually to 13% in FY25F from 12.4% in FY24F. We have raised e-commerce revenue in FY24F/25F by 4%/7%. On gaming, we have revised FY24F/25F adj EBITDA by -2%/+3% on weaker 3Q24 performance. On fintech, the adj EBITDA is revised upwards by 7%14/% in FY24F/25F stemming from lower cost of funding for its lending businesses as SE is becoming a preferred lending platform.
We changed our group adj EBITDA by -2%/+8% in FY24F/25F led by changes in E-commerce
| FY Dec | 3Q2023 | 2Q2024 | 3Q2024 | % chg yoy | % chg qoq |
|---|---|---|---|---|---|
| Revenue | 3,310 | 3,807 | 4,328 | 30.8 | 13.7 |
| Cost of Goods Sold | (1,869) | (2,222) | (2,467) | 32.0 | 11.0 |
| Gross Profit | 1,441 | 1,585 | 1,861 | 29.1 | 17.4 |
| Other Oper. (Exp)/Inc | (1,569) | (1,502) | (1,659) | 5.7 | 10.4 |
| Operating Profit | (128) | 82.9 | 202 | (258.5) | 144.2 |
| Other Non Opg (Exp)/Inc | (32.0) | (25.3) | (34.1) | (6.5) | 34.7 |
| Associates & JV Inc | (0.44) | 1.22 | (6.03) | (1,279.6) | (596.2) |
| Net Interest (Exp)/Inc | 77.9 | 81.7 | 83.7 | 7.5 | 2.4 |
| Exceptional Gain/(Loss) | 0.00 | 0.00 | 0.00 | nm | |
| Pre-tax Profit | (82.3) | 141 | 246 | nm | 75.1 |
| Tax | (61.7) | (60.6) | (92.6) | 50.1 | 52.8 |
| Minority Interest | (5.24) | 1.95 | (4.51) | 13.8 | (331.0) |
| Net Profit | (149) | 81.9 | 149 | nm | 81.9 |
| Net profit bef Except. | (149) | 81.9 | 149 | nm | 81.9 |
| EBITDA | (20.6) | 181 | 295 | nm | 63.1 |
| Margins | |||||
| Gross Margins (%) | 43.5 | 41.6 | 43.0 | ||
| Opg Profit Margins (%) | (3.9) | 2.2 | 4.7 | ||
| Net Profit Margins (%) | (4.5) | 2.2 | 3.4 |
Source: DBS, Company
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