Reports of Sea Shutting Operations in Some Latin Countries a Positive – Morgan Stanley
2022.09.10 14:00
Reports of Sea (SE) Shutting Operations in Some Latin Countries a Positive – Morgan Stanley
By Sam Boughedda
Reuters said on Friday that Shopee is closing its operations in Chile, Colombia, and Mexico, leaving only cross-border operations available, and exiting Argentina.
While the report is not yet confirmed, a Morgan Stanley analyst said the firm remains Overweight on Sea Ltd (NYSE:SE) and is keeping its $123 price target on the stock as they view the news as positive as the company refocuses on its core markets.
“We estimate the combined GMV of these countries for 8 months of 2022 was ~US$1.1bn (~3% market share), small vs. our 2022e Shopee GMV of US$79bn. Assuming an average order value of US$7 in these markets, and 50% of GMV is local with a loss per order of ~US$1.50 (our estimates), this implies a saving of ~US$180m per annum by exiting these markets. We forecast Shopee to lose US$1.9bn in Adjusted EBITDA in 2023e vs. US$2.6bn 2022e, and closing these operations could improve this further,” stated the analyst.
The analyst added that given MercadoLibre ‘s (NASDAQ:MELI) pan-regional scope, they “see a positive read-through for it from Shopee’s potential Argentina exit and shift to solely cross-border operations in Mexico/Chile/Colombia.”
“While Shopee’s ramp-up in these countries was earlier-stage than in Brazil, we see the pullback as helping to remove a longer-term competitive risk for MELI,” the analyst added.
