The IPO market has been on one of its best runs in quite some time as yet another IPO prices above expectations. This time, Singapore-based Sea Limited (SE) saw its 50.0 million ADS IPO price at $15, better than the $12-$14 expected price range. Its strong pricing follows MongoDB (MDB) and Qudian (QD) from earlier this week, both of which priced above expectations and both of which opened for trading with sizable pops (38% &43% respectively). SEA, underwritten by Goldman Sachs, Morgan Stanley, and Credit Suisse, will open for trading later this morning on the NYSE.
Sea Limited (SE) is a Singapore-based internet company consisting of digital entertainment (mostly online games), e-commerce, and digital financial services. It focuses on the regions of Indonesia, Taiwan, Vietnam, Thailand, Phillipines, Malaysia, and Singapore -- collectively known as "Greater Southeast Asia (GSEA)".
The company operating three key platforms: Garena, Shopee, and AirPay. Here's a closer look at each:
- Garena -- With this platform, users can access mobile and PC online games that SE curates and localizes for each market. With 64.2 million Quarterly Active Users in 2Q17, the Garena platform was number one in terms of market share, measured by revenue in GSEA.
- Shopee: This is its e-commerce platform which also was number one in market share in GSEA in terms of gross merchandise volume and total orders. In fact, Shopee had about 2.2x the number of total orders than its closest competitor in 1H17. Shopee is a third-party marketplace that connects buyers and sellers. During 2Q17, Shopee had on average 9.8 million MAUs.
- AirPay: A platform that provides digital financial services. Through its AirPay e-wallet, consumers can use the AirPay app or one of its partner-operated service counters, to make payments to a wide variety of product and service providers. During 2016, gross transaction volume and transactions for AirPay e-wallet totaled $501.2 million and 133.6 million, respectively.
SE has forged long-term collaborative relationships with global industry leaders as well as local partners that have supported its success and growth. For example, Tencent Holdings and its affiliates, is one of its key game developer-partners and also a shareholder. This long-term relationship is based on aligned interests, and allows SE to benefit from Tencent’s experience as a leading global industry player. In addition, many of GSEA’s most respected and established family investors and sovereign wealth funds are our shareholders.
Taking a look at its results for the six months ended June 30, 2017, revenue was up 17% to $195.5 million. Breaking it down by segment, digital entertainment revenue climbed by 12% to $159.4 million (82% of revenue) due to an increase in its user base from 46.4 million QAUs in 2Q16 to 64.2 million in 2Q17.
"Other" revenue surged by 126% to $16.4 million, primarily due to the growth of its digital financial services business. MAUs on its AirPay App increased from 290K in June 2016 to 909.6K in June 2017 as it added use cases and further deepened its market penetration.
Moving down the balance sheet, total operating expenses spiked by 62% to $203.4 million, representing 104% of revenue. The biggest increase came from sales and marketing, up 86% to $74.1 million. This was attributable to significant marketing efforts to grow its e-commerce business through promotions, including subsidies for shipping, in order to increase its user base.
The end results is that its operating losses worsened to ($150.5) million compared to ($69.3) million in the year ago period.