• 1Q22 revenue was in line, at 21% our FY22e forecasts. Net loss slightly underperformed, at 30% of our FY22e forecasts due to higher operating expenses and tax rate. EPS of -US$0.80 beat consensus estimates of -US$1.15 by 31%.
• Revenue growth led by 64%/360% YoY growth in Shopee and SeaMoney.
• FY22e revenue guidance for e-commerce widened on the bottom-end by US$0.4bn
• We maintain a BUY recommendation with a lowered DCF target price of US$150.00 (previous US$196.00), with a WACC of 6.9%, and a lowered terminal growth rate of 3.0%.

The Positives

+ 1Q22 revenue in line with our forecasts, EPS of -US$0.80 in line with our estimates. SE recorded 1Q22 revenue of US$2.9bn, beating consensus estimates for its top line by 5%, and was in line with our estimates. Revenue grew 38% YoY, driven by a 64% growth in Shopee, and a 360% growth in SeaMoney, as these segments continued riding digitalization tailwinds in Southeast Asia. SE also posted EPS of -US$0.80 for 1Q22, comfortably beating estimates of -US$1.15 by 31%.

+ Shopee closer to profitability in mature markets. SE’s e-commerce business, Shopee, saw YoY improvement in its gross profit margin, led by strong growth of higher margin services like advertising and transaction-based fees. Shopee is also on track for a positive adjusted EBITDA before HQ costs in Southeast Asia and Taiwan, with this number at -US$0.04 for 1Q22, compared to -US$0.12 in 1Q21. Globally, Shopee continues its top rank in its Shopping category on the Google Play Store for most downloads and total time spent in app, and ranked 2^nd for average monthly active users.

+ Rapid growth of SeaMoney due to increased adoption of digital payments in Southeast Asia. SE’s digital financial services business, SeaMoney, posted 1Q22 revenue of US$236mn, a YoY increase of 360%, led by increasing consumer adoption of digital payments in Southeast Asia – particularly in Indonesia, as well as the company’s expansion of credit products into more markets. Quarterly active users (QPU) grew 78% YoY, while total payment volume (TPV) was up 49% YoY.

The Negative

– Reduced its bottom-end range for Shopee FY22e revenue guidance. SE adjusted its FY22e revenue guidance for its e-commerce business, Shopee, from US$8.9-9.1bn, to US$8.5-9.1bn. A more uncertain macroeconomic environment was the main reason with this change. Taking the midpoint of US$8.7bn would represent a 72% YoY increase, compared to 76% previously.