SESeaNeutralSea

Yesterday on

Is Sea Ltd’s credit quality already deteriorating, and is the low 1.3% 90-day NPL ratio being masked by fast credit portfolio growth? $SE Cost of Risk (CoR) is useful for forecasting the future direction of non-performing loans. It shows how much a lender is spending on provisions for expected credit losses. A higher CoR reduces net income and can act as an early warning indicator before deterioration appears in the 90-day NPL ratio. Cost of Risk increased to 5.8% in Q3, but it in manageable territory. A good level can generally be considered below 10%-15%, or below roughly 30% annualized. I use average Cost of Risk because Sea’s credit portfolio is still growing very fast at +60.9% YoY.

SESeaNeutralSea

Yesterday on

Sea Limited $SE Q3'26 Results: ↗️$8,582.3M rev+43.4% YoY, +10.2% QoQ) beat est by 6.4% ↗️GM (45.9%, +2.4 PPs YoY) ↘️Operating Margin (7.7%, -0.2 PPs YoY)🟡 ↘️Operating Cash Flow Margin (17.5%, -13.9 PPs YoY)🟡 ↘️Net Margin (5.9%, -0.4 PPs YoY)🟡 ↘️EPS $0.78 missed est by -1.3%🟢 Revenue By Type Shopee Revenue ➡️$6,070.2M rev (+41.3% YoY, 70.7% of Rev) 🟡 ↘️Operating Margin (2.6%, -0.0 PPs YoY) Monee Revenue ➡️$1,621.9M rev (+63.8% YoY, 18.9% of Rev) 🟢 ↘️Operating Margin (17.8%, -7.3 PPs YoY) Garena Revenue ➡️$840.1M rev (+28.7% YoY, 9.8% of Rev) 🟡 ↗️Operating Margin (53.9%, +6.5 PPs YoY) Other Services ➡️$50.1M rev (+3.5% YoY, 0.7% of Rev) 🟡 ↘️Operating Margin (-180.5%, -124.7 PPs YoY) Key Metrics Garena ↗️Online Games Bookings $890M (+5.9% YoY)🟡 ➡️671.7M QAUs (+0.1% YoY, +5.4 QoQ) Shopee ➡️GMV $39,700M (+23.3% YoY)🟡 ➡️E-Commerce Orders $4,500M (+7.1% YoY)🟡 ↗️Commerce Take Rate (15.3%, +0.7 PPs QoQ, +2.0 PPs YoY)🟢 Credit Portfolio ↗️Loans Principal Outstanding $12.6B (+59.5% YoY)🟡 ↗️Provision for credit losses $681.5M (+82.3% YoY)🟡 ↗️NPL90+ Ratio (1.3%, +0.3 PPs QoQ)🟡 ↗️Cost of Risk (CoR) (Period-Average) (5.8%, +0.5 PPs QoQ)🟡 Operating expenses ↗️S&M/Revenue 22.0% (+2.8 PPs YoY) ↘️R&D/Revenue 3.5% (-1.3 PPs YoY) ↘️G&A/Revenue 5.0% (-0.7 PPs YoY) Dilution ↘️SBC/rev 2%, -0.2 PPs QoQ ↘️Basic shares up 3.0% YoY, -0.3 PPs QoQ ↘️Diluted shares down -0.8% YoY, -0.5 PPs QoQ🟢 Pros Revenue growth accelerated to 43.4% YoY. Gross margin expanded 2.4 PPs to 45.9%. Shopee take rate expanded 2.0 PPs YoY to 15.3%. Shopee advertising revenue increased over 55% YoY. Monee revenue increased 63.8% YoY. Garena operating margin expanded 6.5 PPs to 53.9%. Cons Operating cash flow margin fell 13.9 PPs YoY. Operating margin contracted 0.2 PPs to 7.7%. Monee operating margin contracted 7.3 PPs YoY. Credit loss provisions increased 82.3% YoY. NPL90+ ratio increased 0.3 PPs QoQ to 1.3%. S&M intensity rose 2.8 PPs YoY.

SESeaNeutralSea

Yesterday on

Sea Limited $SE Q3'26 Earnings Preview Consensus Estimates: Revenue $8,064M (+34.7% YoY) EPS $0.79 (+33.9% YoY) If $SE beat estimates by 9.8% (same as last quarter) Q3'26 Revenue Growth will be +47.9% YoY https://t.co/rtQ2s4UKpT