Daily BriefsSingapore

Singapore: Sea Ltd, TDCX and more

In today’s briefing:

  • Sea Ltd (SE US) – The Runway Just Got Longer
  • SEA Ltd Placement -Momentum Is Very Strong but Last Deal Didn’t Do Well and It Doesn’t Need the Cash
  • Sea Ltd Follow-On Offering: Asking Permission From Investors to Burn $4.0bn Per Year
  • TDCX IPO Initiation: Good Service

Sea Ltd (SE US) – The Runway Just Got Longer

By Angus Mackintosh

Sea Ltd (SE US), South-East Asia’s largest market cap company, has announced that it aims to raise US$6.3bn in the largest equity offering of 2021. The deal will allow the company to accelerate its global expansion and give the company the financial firepower for potential acquisitions.

The company will offer 11m shares or a stake worth about US$3.8bn at the close on 8th September plus it intends to issue US$2.5bn in equity-linked debt to bring the total funds raised to circa US$6.8bn. 

Apart from continuing to grow its business in South-East Asia, the company is now expanding its e-commerce presence in South America, with a focus on Brazil, Mexico, Chile, and Colombia. 

According to local press reports, Shopee may also look to enter Eastern Europe, with Poland as its first target market.  Shopee has also launched a recruitment campaign for vendors to sell on what it called “Shopee India” and is ramping up hiring in the country. It has also been looking for office space in the country.

Sea Ltd (SE US) continues to grow its ShopeeFood business both in Indonesia and Vietnam and has seen a very strong performance and positive reception from users as well as driver communities in both markets. There has also been some talk of the company expanding food delivery into Malaysia, as it has already been advertising for drivers.

Assuming the completion of this fundraising goes smoothly Sea Ltd (SE US) will have a war chest of around US$13bn at its disposal to finance its ongoing expansion, though it is not yet clear what it needs this money for.

This may be seen as opportunistic fundraising in some camps but given its aspiration to expand globally into other emerging markets plus growing its digital finance and food delivery arms quite aggressively, this will certainly give the company the financial firepower to do so. 

We continue to take a positive view on Sea Ltd (SE US) which currently trades on 16x FY21E EV/Sales, 10.4x FY22E EV/Sales, and 7.8x FY23E EV/Sales, justified by sales growth of +105% YoY in FY2021, +47% YoY in FY22E, and +32.8% YoY growth in FY2023. 


SEA Ltd Placement -Momentum Is Very Strong but Last Deal Didn’t Do Well and It Doesn’t Need the Cash

By Sumeet Singh

Sea Ltd (SE US) plans to raise around US$3.5bn via an equity offering, along with another US$2.5bn via a convertible offering. The company last raised US$2.5bn in Dec 2020, which we covered in SEA Ltd Placement – New Business Needs New Money.

While the stock’s momentum and earnings growth is very strong, the last deal didn’t do particularly well in the near term.

In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Links to our prior SEA coverage:


Sea Ltd Follow-On Offering: Asking Permission From Investors to Burn $4.0bn Per Year

By Oshadhi Kumarasiri

  • Singapore-based Internet company Sea Ltd (SE US), announced today that the company would offer 11.0m new ADSs (1.65m overallotment option) and convertible notes for a principal sum of $2.5bn ($375.0m overallotment option) via an underwritten public offering in New York.
  • Sea’s unprofitable businesses are growing at breakneck speeds. This puts immense pressure on the Gaming business to generate sufficient cash flows to facilitate the geographic expansion of Shopee and fintech growth in South East Asia.
  • Even though the Gaming business cash flows were somewhat enough to support Shopee’s growth in South East Asia, it is insufficient to maintain Sea’s unprofitable business growth in multiple businesses and multiple geographies.
  • This is Sea’s second follow-on equity offering in just 10 months and we think this is unlikely to be the last of such offers.

TDCX IPO Initiation: Good Service

By Arun George

TDCX (TDCX US), which is headquartered in Singapore, is a digital customer experience (CX) solutions provider for innovative technology and other blue-chip companies. TDCX has filed for an NYSE IPO to raise proceeds of $400 million, according to press reports. The IPO proceeds will be used to repay US$188.0 million of the Credit Suisse facility (related to the acquisition of the founder’s interests in TDCX KY) and to expand into new markets.

The business Support Services (BSS) industry has moved from a focus on cost arbitrage solutions to driving business outcomes and creating value for customers. There remains a significant portion of higher value-added workstreams that remain reliant on human expertise as businesses continue to deal with customers who request more engaging experiences. CX services, which is a subset of the BSS industry, is forecasted to grow 6.6% CAGR from 2021 to 2025 to reach US$100.4 billion in 2025, according to Frost & Sullivan. 

In a competitive market, TDCX’s differentiated value-added services are reflected in market share gains, high growth and sector-leading margin. The key risk is the high dependence on two customers, Facebook Inc A (FB US) and Airbnb Inc (ABNB US). This customer risk is partly mitigated by long-standing relationships. Overall, we believe that TDCX’s fundamentals are attractive.


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