Maybank Investment Bank said Friday that it sees Singapore technology firm Sea as its top pick within ASEAN internet sector.

Following a stellar fourth quarter of 2024 delivery and strong 2025 guidance, the research house raised Sea adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates by 2 percent to 3 percent.

“We see the company benefits from multiple tailwinds in all segments which could be further boosted by leveraging artificial intelligence (AI),” it said.

According to the note, Sea expects its e-commerce arm Shopee gross merchandise value (GMV) to grow 20 percent year on year, with improved profitability helped by both new users and frequency of orders.

Maybank estimated ASEAN ecommerce GMV growth in the mid-teens as Shopee lifts its market share.

Its key competitors – TikTok Shop and Lazada – are relatively rational while Temu is yet to make a mark, it added.

“With ASEAN seller take rates of about 8 percent already at the lower end of global peers and ad take rates still at 2 percent to 3 percent of GMV (averaging about 5 percent in evolved markets), we see both areas have room to expand in 2025,

“However, we only expect a 48 basis points improvement in adjusted EBITDA/GMV margin in 2025 as we think Shopee is likely to invest back in growth and keep its services competitive to fend off competition,” said the research house.

It noted AI tools can help improve product discovery and visual effects which in turn can help to tap a bigger total addressable market (TAM) from offline.

On the other hand, it opined that its robust logistics infrastructure can help to grow relatively untapped segments such as fast-moving consumer goods (FMCG) which aides to expand the TAM.

As for Sea’s online gaming arm Garena, Maybank expects its bookings are expected to grow at double-digit levels.

“While Free Fire (FF) remains the key driver, its game localization efforts and FF’s ability to run on low-end devices have kept engagement level high and competition confined,” it said.

While the double-digit growth guidance is a wide range, it noted the company has not factored in the potential contribution from new games.

“We remain hopeful of its in-house developed game Free City which is still in the soft launch phase,

“It’s a game similar to highly popular GTA but tailored to run on mobile devices which enhances its potential for success. Still early days but its 4.3 rating on Uptodown is encouraging,” it added.

As for Sea’s digital financial services (DFS) business, Maybank says that its loan book growth is expected to outpace Shopee GMV growth in 2025, deepening penetration on and off Shopee while maintaining financial discipline.

“Long term, we view SE’s digital financial services as well-placed given ecom-driven Buy Now Pay Later (BNPL) user growth which also gives a platform/data insights to deepen digital lending,” it said.

It said that Sea is also aggressive in penetrating outside its ecosystem (off-Shopee) which should provide superior long term growth but comes with credit risk.

It is noted that Sea’s DFS is a fast-growing, profitable business, contributing significantly to Sea’s overall business (revenue of $2.4 billion and EBITDA of $712 million in 2024), with over 30 percent year on year growth.

The business spans consumer and small and medium-sized enterprise (SME) credit, digital payments, digital banking, and insurance tech in Southeast Asia and Brazil, with credit as the main revenue driver.

In 2024, Sea’s DFS loan book grew 60 percent year on year to exceed $5 million, adding 5 million new borrowers and reaching 26 million active users, while maintaining a 1.2 percent non-performing loan (NPL) ratio.

Its strategy focuses on sustainable, risk-managed growth, leveraging Shopee’s ecosystem to assess and price risk efficiently.

Credit operates two financial service pillars: On-Shopee BNPL, which benefits from Shopee’s growing GMV, and off-Shopee cash loans, meeting demand in cash-heavy markets.

BNPL serves as a virtual credit card, with untapped opportunities in low-credit-card-penetration regions.

ShopeePay expands through national QR codes, aiming for broader merchant adoption, similar to Alipay.

Geographically, Indonesia holds half of the loan book, while Thailand and Brazil are growing fast despite lower interest rates.

Sea’s expansion follows a prudent, data-driven approach, scaling only in strong Shopee markets, said Maybank.

Sea’s revenue rises 36.9 percent year on year to $5B in fourth quarter on strong e-commerce