Sea is known for its Shopee e-commerce app and the Garena gaming platform. Sea also expanded into SeaMoney, its digital bank with a full banking license. Sea disclosed that the Garena platform has more than 650 million users while Shopee likely has a user base of at least 300 million. SeaMoney, being its youngest venture, has more than 50 million users. Altogether, these contributes to Sea achieving $3.8 billion revenue in the most recent quarter.
Grab, a super app, provides ride hailing, deliveries, and a range of financial services such as Insurance, and has approximately 41 million users contributing to its $664 million revenue in the latest quarter.
Grab also has a digital bank, known as GXS (Grab X Singtel), with a full banking license through a joint venture with Singtel. Originally, Grab held a 60% stake, with Singtel holding the remaining 40%. However, in subsequent rounds of capital injection, Grab acquired a larger proportion of the share issuance and has seen their stake risen.
In the last 12 months, Sea’s share price has risen 132%, while Grab’s share price is up 32%. Sea IPO was priced at $15 while Grab listed through a SPAC at $10 per share which means that Sea is up ~6.5x while Grab is down 60% from their initial price points.
Financial Performance – Sea
2Q Revenue was $3.8 billion, up 23% YoY, while gross profit increased 9.2% YoY to $1.6 billion, a slight rise from $1.5 billion. However, operating income and net income fell largely as the business started spending on sales and marketing. As we mentioned here in 2Q23, Sea had reached a point where it could no longer tighten its belt.
E-commerce revenue increased by 33.7% to $2.8 billion in 2Q24, up from $2.1 billion in 2Q23, primarily driven by Gross Merchandise Value (GMV) growth.
Digital Entertainment revenue was $435.6 million in 2Q24, down from US$529.4 million in the second quarter of 2023. The decrease in revenue was primarily due to lower recognition of accumulated deferred revenue due to lower bookings in previous quarters. However, there was a substantial increase in bookings during 2Q24 to $536.8 million, up from $443.1 million a year ago. It is safe to say that this segment has bottomed and is now tracking a recovery path.
Financial Performance – Grab
Revenue grew 17% YoY to $664 million in 2Q24, driven by revenue growth across all segments.
On-Demand GMV grew 13% YoY, underpinned by growth in average user frequency and total transactions, with On-Demand metrics growing by 19% YoY.
Total incentives amounted to $452 million in 2Q24, with incentives primarily attributable to the On-Demand segments. On-Demand incentives as a proportion of On-Demand GMV declined to 10.1% in the second quarter, compared to 10.5% in 2Q23, reflecting focus on reducing cost to serve while improving the health of the marketplace.
Operating loss in the second quarter was $56 million, an improvement of $121 million YoY, primarily attributable to improvements in revenue and lower restructuring expenses.
GXS’s growth is on a tear, with deposits increasing 52% QoQ and 22x YoY (albeit from a low base of $33 million) to $730 million. Loan disbursements also increased to an annualised run rate of $2 billion based on a disbursement of $500 million in the latest quarter. At the end of the last quarter, GXS’s loan portfolio stood at nearly $400 million. In comparison, SeaMoney’s loan book is at $3.6 billion.
In its latest financials, GXS reported a wider loss of $208.2 million for the year ended Dec 2023, up from a loss of $132.5 million a year prior. Its full-year revenue increased to $16.1 million, up from $5.1 million a year ago.
Sea vs Grab – who is larger
Sea is a considerable larger than Grab, just by comparing the size of their key businesses. In addition, Sea has a large Digital Entertainment platform arising from its exposure in both South East Asia and India.
In terms of valuation, Sea is trading at 3.7x Price to sales while Grab is at nearly 6x. Looking at GMV metrics, Sea’s e-commerce segment has a 12 month run rate of about $90 billion while Grab’s run rate is at about $18 billion, of which the deliveries segment contributes 60% while the mobility or ride hailing segment contributes 40%.
SeaMoney’s loan book is also 9x larger than GXS’s and it also leaves investors wondering how much larger GXS can grow given the size of its ecosystem as well as the saturation of the market.
Naturally any expansion into adjacent segments is reliant on the size of its core platform ecosystem. The e-commerce ecosystem is just naturally larger than the ride hailing/food deliveries segment. Additionally, Sea has a Digital Entertainment segment which most investors would view as a different segment with less overlaps.
Looking at the dominant players in China, this significant difference in the opportunity of the market size is similar to Alibaba and Didi in where Alibaba last generated RMB 941 billion in revenue while Didi clocked RMB 192 billion. Alibaba also has more than 1.2 billion users using its services globally while Didi claims 550 million users.
Alibaba last disclosed GMV figures in FY22 was RMB 8.3 trillion, and with growth since then, could now exceed RMB 9 Trillion.
Didi’s Platform Gross Transaction Value (GTV) for FY23 reached RMB341.4 billion, an increase of 44.6% from the full year of 2022. GTV from the China Mobility segment for the full year of 2023 reached RMB270.7 billion, an increase of 45.4% from the full year of 2022. GTV from the International segment for the full year of 2023 reached RMB70.6 billion, an increase of 41.8% from the full year of 2022.
Sea vs Grab – which is the better buy?
Investors have been wondering whether Sea, with its size, is a better long-term buy, or if Grab, as a relatively undervalued play, offers more upside potential. We like Sea better because of its scale and its exposure to the Digital Entertainment Segment, a somewhat unrelated business.
In Indonesia, Tokopedia, one of the dominant customer to customer e-commerce company merged with Gojek, the Grab/Didi equivalent merged. This was a partnership of an e-commerce platform and an on-demand platform. For the layman, one of the easily understandable benefits is using Gojek drivers to provide delivery for Tokopedia products during off peak hours.
Tokopedia had previously tried to build its own ecosystem by investing in logistics companies and cooperating with payment service providers. By merging with Gojek, Tokopedia gains access to Gojek’s logistics pool, payment function as well as its platform app. On the other hand, Gojek is able to benefit from Tokopedia’s ecosystem. The larger it gets, the more consumer data and insights it develops.
Perhaps for Sea & Grab, a similar merger would remove the need for an answer to this question.
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