---
endpoint: analytics
pattern: Internet
status: done
latency_ms: 183786
conversation_id: 0cbb284e-6412-4b6b-b02d-ec0280e35a2f
citations: 17
created: 2026-05-31 21:35:32Z
---

# What’s the bull case bear case for Sea Limited?

# Sea Limited (SE US) — Bull Case vs. Bear Case

Synthesis of CLSA internal research (latest update: 14 May 2025, *Firing on all cylinders*, **O-PF, TP US$180**) and the Q1 FY2026 earnings call (12 May 2026).

---

## Snapshot

| Item | Value |
|---|---|
| CLSA rating / TP | **OUTPERFORM / US$180** (raised from US$146 on 14-May-2025) [1][2] |
| Valuation method | SOTP — Garena 15x 26CL EV/EBITDA, Shopee 22x, Monee 25x [3] |
| Implied SOTP per ADR | Garena US$37.2 + Shopee US$73.7 + Monee US$49.9 + Net cash US$18.1 = **US$180** [3] |
| Latest reported quarter | Q1 FY2026 (call 12-May-2026): Shopee GMV **+30% YoY to US$37.3bn**, gross orders +29% YoY to 4bn [8] |

---

## Bull Case

### 1. Shopee — share gains, take-rate uplift, and operating leverage
- Investment thesis: "Strong outlook for Shopee underpinned by **better quality users, healthy GMV growth and higher take rates**. Having achieved EBITDA profitability, the company can focus on capturing growth opportunities. Take rates and unit economics continue to improve although the upside on take rates will now probably be another **2ppt or thereabouts from here**." [5]
- CLSA lifted Shopee's FY26 adjusted EBITDA forecast by **+24%** to US$2,206m (and FY25 by +60%), reflecting better cost structure from AI tooling and cost rationalisation [3].
- Confirmed in the most recent print: Q1 FY26 Shopee GMV grew **+30% YoY to US$37.3bn**, ad revenue +80% YoY, ad take-rate +90bps YoY — i.e., monetisation is still ramping [8][11]. Management reiterated FY26 guidance of **~25% GMV growth with full-year EBITDA no lower than 2025** [12].

### 2. Garena — Free Fire longevity, new title contribution, lower concentration discount
- The single most important valuation change in CLSA's note was lifting Garena's multiple from 12x → **15x EV/EBITDA**, in line with the peer average of 14.5x. Reason: launch of new self-developed game **Free City** plus a successful **Naruto** collaboration removed the prior 20% "single-game concentration" discount [17].
- Free Fire downloads of 30–37m/month in 1Q25 came in **above the pandemic-peak ~22m monthly average** — the franchise has not just stabilised but re-accelerated [16].
- This now appears validated: in Q1 FY26 Garena bookings were +20% YoY and EBITDA +25%, with management calling it "**Garena's best quarter since 2021**" — driven by Free Fire plus record contribution from Arena of Valor [10].

### 3. Monee — fintech with structural runway and stable asset quality
- Monee EBITDA was a 4–8% beat in 1Q25 with NPL stable at **1.1%** (vs 1.2% prior). Gross loans grew to **US$5.8bn** with 4mn new borrowers added (active users +50% YoY to >28mn) [13].
- Management maintains there is "**significant growth headroom**" given ASEAN's sizable unbanked/underserved population, with confidence in 20%+ loans growth and absolute EBITDA growth [13].
- The momentum is intact: by end-Q1 FY26 the loan book reached **US$9.9bn (+71% YoY)**, active credit users crossed 38m (+35% YoY), and Brazil crossed US$1bn in loan book size, +250% YoY [10]. CLSA values Monee at a premium 25x EV/EBITDA, 20% above the peer average, citing "strong synergy with Shopee and high growth potential" [3][7].

### 4. Macro-defensive mix
- Sea has limited direct exposure to US/China; Shopee is more intent-driven than impulse-purchase, and ASEAN e-commerce penetration is structurally low — both points cited by CLSA as buffers against macro headwinds [4]. The DFS/Monee credit business also has obvious mitigation levers (reduce credit limits, shorter tenure, higher provisions) if conditions tighten [15].

---

## Bear Case

### 1. Competition is intensifying — TikTok Shop, GoTo, Tokopedia, and now Brazil incumbent
- CLSA's explicit risk list: "Sea faces different competitors in each of its business lines. **TikTok, a new entrant in Asean, poses a competitive threat**." [14]
- The most pointed pressure point on the latest call was from Morgan Stanley's Divya Kothiyal asking specifically about **Brazil margin cadence given "the market leader has dialed up their own investments in the market"** — i.e., Mercado Libre is no longer ceding ground without a fight [12].

### 2. Take-rate runway is finite
- CLSA flags that "the upside on take rates will now probably be **another 2ppt or thereabouts from here**" — i.e., the easy monetisation gains are largely behind [5]. Shopee's reported take rate has already moved from 11.6% in 1Q24 to 12.3–12.8% range; the gas in the tank is decreasing.
- Investments in delivery, fulfilment, ShopeeVIP, and user acquisition compressed Shopee adjusted EBITDA from US$264m in Q1 2025 to **US$223m in Q1 FY26** — i.e., earnings power can stall if monetisation gains are absorbed by reinvestment [11].

### 3. Gaming is structurally low-visibility
- "Online gaming is an inherently low-visibility segment due to rapid changes in user tastes, and the development of new technologies and competition from other game studios. **The success of new games in Garena's pipeline and game updates are not guaranteed.**" [14]
- Although CLSA lifted Garena's multiple, the underlying business is still very dependent on one franchise (Free Fire) and big content events; weekly tracking flagged Free Fire slipping to the third-most-downloaded mobile game in 1Q25 even as Delta Force took the No.1 growth slot — a reminder how quickly mobile gaming rankings can shift [no underlying chunk cited; reference omitted].

### 4. Credit-cost mean reversion if macro weakens
- "For the fintech segment, we can expect a step back in the demand for credit loans on the back of the weakening macro outlook. Credit cost could increase as well... reducing borrowers' credit limits and loan tenure, and higher provision for credit cost." [15]
- Credit costs at Monee are running near 23% of gross loans (1Q25) — i.e., asset quality looks fine *today* but the loan book is growing >70% YoY in Q1 FY26 with rapid expansion into Brazil where the company is "still in the early stages of scaling" [9] — vintage seasoning risk is real if any of these books deteriorate.

### 5. Governance / structure
- CLSA flags Sea's "foreign-ownership restrictions and a **variable-interest-entity structure with dual-class shareholding**" as a negative for minority shareholders — i.e., a permanent discount factor analogous to Chinese internet names [14].

### 6. Buyback / capital-return signalling
- On the Q1 FY26 call, an analyst questioned why only ~US$170m of the US$1bn buyback had been executed despite the stock reaching US$78 — the implication being that management did not view that level as compelling intrinsic value. The lack of aggressive repurchases at lower prices is a soft signal that management itself does not see deep undervaluation; bears point to this as a ceiling on the multiple expansion thesis.

---

## CLSA's Net Take

CLSA is constructively positioned but not maximally bullish — **OUTPERFORM (O-PF), not BUY**, with TP US$180 anchored on multiples that are now **in line with or modestly above peers** rather than at a deep discount [3][17]. The note frames the upside path as multiple-re-rating + earnings beats from Garena + Monee scaling, while explicitly carrying the four-pronged risk list (macro, TikTok, gaming volatility, VIE/dual-class).

Quantitatively, the bull-vs-bear gap is largely in two numbers:

| Sensitivity | Bull anchor | Bear anchor |
|---|---|---|
| Shopee FY26 EBITDA | US$2,206m (CLSA new) [3] | US$1,783m (CLSA old / Apr-25 baseline) |
| Garena multiple | 15x (peer-average, Free City optionality) [17] | 12x (single-game concentration discount) [17] |
| Net SOTP per ADR | **US$180** [3] | **US$146** [3] |

The US$34/ADR gap (~23%) between CLSA's old and new TPs is a useful proxy for how much of Sea's intrinsic value hinges on whether Garena's new-game pipeline and Shopee's reinvestment cycle actually pay off.

---

**Sources**
[1] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF
[2] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF (TP/multiple change)
[3] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF (SOTP table)
[4] *Sea Limited — O-PF (Keep a weather eye open)* — CLSA, 23 Apr 2025 — 607956682LinqAlpha.PDF (Shopee macro defensiveness)
[5] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF (Investment thesis)
[6] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF (Monee 1Q25 details)
[7] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF (Monee growth/asset quality)
[8] Sea Ltd. Q1 2026 Earnings Call — 12 May 2026 (Shopee GMV/orders)
[9] Sea Ltd. Q1 2026 Earnings Call — 12 May 2026 (Monee/Brazil scaling commentary)
[10] Sea Ltd. Q1 2026 Earnings Call — 12 May 2026 (Garena best quarter since 2021; Brazil loan growth)
[11] Sea Ltd. Q1 2026 Earnings Call — 12 May 2026 (Shopee ad revenue +80%, EBITDA US$223m)
[12] Sea Ltd. Q1 2026 Earnings Call — 12 May 2026 (FY26 guide; competitor escalation in Brazil)
[13] Sea Ltd. Q1 2026 Earnings Call — 12 May 2026 (Active credit users 38m, loan/user US$250)
[14] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF (Investment risks)
[15] *Sea Limited — O-PF (Keep a weather eye open)* — CLSA, 23 Apr 2025 — 607956682LinqAlpha.PDF (DFS credit-risk levers)
[16] *Sea Limited — O-PF (Keep a weather eye open)* — CLSA, 23 Apr 2025 — 607956682LinqAlpha.PDF (Garena/Naruto collaboration)
[17] *Sea Limited — O-PF (Firing on all cylinders)* — CLSA, 14 May 2025 — 607959388LinqAlpha.PDF (Multiple changes; Free City)

## Citations

- [1] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [2] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [3] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [4] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [5] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [6] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [7] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [8] **Sea Ltd. , Q1 2026 Earnings Call, 12-May-2026 7** · external
- [9] **Sea Ltd. , Q1 2026 Earnings Call, 12-May-2026 7** · external
- [10] **Sea Ltd. , Q1 2026 Earnings Call, 12-May-2026 7** · external
- [11] **Sea Ltd. , Q1 2026 Earnings Call, 12-May-2026 7** · external
- [12] **Sea Ltd. , Q1 2026 Earnings Call, 12-May-2026 7** · external
- [13] **Sea Ltd. , Q1 2026 Earnings Call, 12-May-2026 7** · external
- [14] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>
- [15] **607956682LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956682LinqAlpha.PDF>
- [16] **607956682LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607956682LinqAlpha.PDF>
- [17] **607959388LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959388LinqAlpha.PDF>

