Sea Loss Widens on Investment in Shopee E-Commerce Platform

(Bloomberg) -- Sea Ltd., operator of Southeast Asia’s biggest gaming platform, posted a wider quarterly loss as it invests in building up e-commerce platform Shopee.

The net loss was $250.8 million in the three months ended June compared with a loss of $92.1 million a year earlier, Singapore-based Sea said in an emailed statement. Total revenue at the company rose to $183.8 million from $101.5 million.

Sea, which counts Chinese giant Tencent Holdings Ltd. as its biggest shareholder, has struggled with losses since an initial public offering in October amid widening losses. The company has invested heavily to expand beyond games into payments and e-commerce, where Shopee takes on Tokopedia and Lazada, both of which are backed by Alibaba Group Holding Ltd.

Both of the Alibaba-backed companies led Shopee in Indonesia in the June quarter, according to iPrice Group. Lazada was the largest e-commerce operator in Malaysia, Vietnam, Thailand and the Philippines, based on average monthly web visits. In Singapore, Qoo10 topped the list, followed by Lazada and Shopee.

Revenue at digital entertainment unit Garena grew 18 percent to $108 million during the quarter, aided by game development and efforts to move to mobile titles. In June, 73 percent of its adjusted revenue from digital entertainment came from mobile games, while 13 percent was generated by self-developed games such as Free Fire.

“New titles such as Free Fire are off to a strong start and should contribute more in the rest of the year,” said Bloomberg Intelligence analyst Matthew Kanterman.

As for digital financial services, the company obtained an e-money license in Indonesia earlier this month, Chief Strategy Officer Alan Hellawell said during a conference call. The license typically allows companies to carry out e-wallet services in Indonesia and could open up options for its AirPay financial services business.

“We are still in the early stages of planning for the types of services that AirPay will provide with the license,” Hellawell said. “We see this as a significant opportunity to further strengthen our digital financial services infrastructure to support both Shopee and Garena in Indonesia.”

Shares of Sea rose 3 percent Tuesday in New York to $14.26, compared with the IPO price of $15.

Adjusted revenue, which considers changes in deferred revenue at digital entertainment unit and other factors, rose 71 percent to $219.6 million. That compares with analyst estimates of $195.5 million.

In June, the company raised $575 million in convertible notes to bolster its balance sheet and support the growth of Shopee. Shopee’s second-quarter GMV was $2.2 billion, compared with $821.2 million a year earlier.

Sea in May raised its 2018 forecast for e-commerce gross merchandise value to between $8.2 billion and $8.7 billion from an earlier projection of as much as $8 billion. It also raised its 2018 forecast for total adjusted revenue to be between $780 million and $820 million.

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