Sea’s earnings growth is expected to face pressure from higher investment spending, rising credit costs at its financial services business and a more moderate growth outlook for e-commerce platform Shopee, despite continued expansion across its three core businesses, Maybank Investment Bank Research said on Wednesday.
The research house said in a note that the Singapore-based technology group delivered mixed third-quarter results for 2026, with revenue exceeding market expectations by 6 percent, while adjusted earnings before interest, tax, depreciation and amortization (EBITDA) missed estimates by 6 percent amid higher reinvestment in Shopee and rising artificial intelligence (AI)-related costs.
Revenue increased 43 percent year on year, while adjusted EBITDA rose 29 percent, with Shopee, digital entertainment arm Garena and financial services platform Monee all remaining profitable.
However, Maybank sees macroeconomic weakness and adverse foreign exchange movements could weigh on Shopee’s growth, while higher credit provisions and investment in new products are likely to constrain Monee’s margins.
It maintained its “buy” recommendation on Sea but lowered its target price by 16 percent to $126, reflecting reduced earnings forecasts, higher capital expenditure and lower valuation multiples for its e-commerce and financial services businesses.
It also cut its FY2027 and FY2028 revenue forecasts by about 2 percent, adjusted EBITDA estimates by 3 percent to 4 percent, and net profit after tax forecasts by 7 percent.
Shopee growth to moderate as investment continues
Shopee’s gross merchandise value (GMV) increased 23 percent year on year in the third quarter, indicating that adverse foreign exchange movements reduced reported growth by three to four percentage points.
The increase was supported by 20 percent growth in average monthly active buyers and a 5 percent rise in purchase frequency.
However, Maybank opined that softer consumer spending, currency pressures and tougher comparisons are expected to moderate growth.
The research house lowered its Shopee GMV forecasts by 1 percent to 2 percent for FY2026 to FY2028, projecting growth to ease to about 18 percent in FY2027 and 16 percent in FY2028.
It is noted that Shopee continues to expand into higher-frequency categories, including groceries and pharmaceuticals, through its instant delivery services.
Its extensive product assortment, seller relationships and integrated logistics infrastructure are also expected to support its competitive position.
Advertising has become an increasingly important revenue source, with advertising revenue growing more than 55% year on year in the third quarter and the advertising take rate increasing by more than 80 basis points.
However, much of the additional revenue is being reinvested in competitive pricing, fulfilment, shipping subsidies, its Shopee VIP membership program and content, said Maybank.
Sales and marketing expenses reached 3.6 percent of GMV, while management has not established a firm limit on reinvestment, it added.
Consequently, improvements in profitability are expected to be gradual.
Maybank forecasts Shopee’s adjusted EBITDA as a proportion of GMV to increase from 0.7 percent in FY2026 to 1 percent in FY2027 and 1.3 percent in FY2028.
It lowered its Shopee adjusted EBITDA forecasts to $1.1 billion, $1.8 billion and $2.9 billion for FY2026, FY2027 and FY2028, respectively, reflecting a slower conversion of higher advertising revenue into earnings.
The research house highlighted that competition remains another area to monitor.
Although management reported no material impact from TikTok Shop’s standalone application, promotional activity by China’s Temu and its parent PDD Holdings could add pressure, it said.
Nevertheless, it sees Shopee’s long-tail product assortment, seller relationships and logistics network provide some protection.
Monee faces higher credit costs
At Monee, loan growth remained strong, but the business is shifting its focus towards credit quality and risk-adjusted returns rather than rapid expansion, said Maybank.
It is noted that the segment’s loans outstanding rose 60 percent year on year to $12.6 billion in the third quarter, supported by nearly 44 million active credit users, an increase of 28 percent from a year earlier.
The business is also diversifying beyond Shopee. Personal cash loans and off-Shopee loans accounted for about half of its loan book, while off-Shopee SPayLater loans more than doubled to nearly 25 percent of the portfolio.
However, its 90-day non-performing loan ratio increased to 1.3 percent in the third quarter from 1 percent in the second quarter, reflecting weaker credit conditions and changes in its product and geographical mix, said Maybank.
In Brazil, repayment behavior also weakened ahead of the country’s election amid expectations of potential debt relief, alongside inflation and consumption pressures.
Thailand is also experiencing tighter credit conditions, prompting Monee to strengthen lending requirements and slow loan growth.
Conditions in Indonesia, Malaysia and the Philippines remained relatively stable, although the company continues to monitor macroeconomic risks.
The research house said Monee’s expansion beyond Shopee could expose it to greater credit risks because it has less proprietary transaction data on customers outside the platform.
Higher provisions are also being compounded by investments in lower-yielding prime customers, including zero-interest SPayLater products, as well as off-Shopee customer acquisition, offline lending and standalone payment and banking applications.
Maybank therefore lowered its adjusted EBITDA forecasts for Monee by 3 percent to 8 percent to $1.2 billion, $1.5 billion and $1.7 billion for FY2026, FY2027 and FY2028, respectively.
Its projected margins were reduced to about 21 percent from 23 percent previously, although revenue forecasts were largely unchanged.
A potential Monee listing is not expected to be an immediate catalyst for Sea’s valuation, it said.
It is noted that the management has indicated a possible timeframe of one to three years, subject to market, economic and regulatory conditions.
Garena bookings remain resilient
Garena’s performance, on the other hand, remained relatively stable, supported by its Free Fire and Arena of Valor games.
Its bookings increased 6 percent year on year to $890 million in the third quarter, despite a high comparative base, helped by the return of its Naruto collaboration and continued momentum in Arena of Valor.
Maybank raised its FY2026 to FY2028 bookings forecasts by 4 percent, although bookings and margins are expected to ease quarter on quarter in the fourth quarter due to seasonality, anniversary and esports events, and marketing for new titles such as Monster Hunter Outlanders.
The research house, however, lowered adjusted EBITDA forecasts for Garena by 4 percent to 14 percent over FY2026 to FY2028, mainly due to an accounting presentation change following a review by the US Securities and Exchange Commission.
It is noted that Garena’s adjusted EBITDA stood at $458 million in the third quarter under the revised treatment.
Sea Cloud adds to investment considerations
Meanwhile, Sea Cloud, the group’s proposed enterprise AI business, aims to commercialize technology developed internally across Shopee, Monee and Garena over the past two years.
Rather than competing directly with major cloud providers on computing infrastructure, Sea intends to focus on helping businesses deploy AI models, integrate proprietary data and manage AI applications.
However, Maybank noted that the commercial model remains at an early stage.
It is noted that Sea has yet to secure an external enterprise contract, while its target customers, product priorities and business model have not been fully established.
Overall, Maybank does not expect Sea Cloud itself to trigger a large-scale investment cycle similar to major hyperscale cloud providers.
However, the pace of internal AI and infrastructure spending remains a key consideration, as higher capital expenditure could weigh on free cash flow before Sea Cloud generates meaningful revenue.
Despite the lower earnings forecasts and higher investment requirements, the research house retained its buy recommendation, saying the recent share price correction had sufficiently reflected the more moderate growth outlook and higher spending.
It lowered its sum-of-the-parts valuation-based target price to $126, reflecting weaker earnings projections and lower valuation multiples for Shopee and Monee.
It said Sea’s three core businesses continued to generate profitable growth, while its strong balance sheet and cash generation provided capacity to fund investments in AI and infrastructure.
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