The billion dollar story behind Sea's first net profit

Opening Bell 🔔 is Tech in Asia’s free newsletter that brings you the biggest news and latest trends around Asia’s publicly listed tech companies. [Read from your browser]( Opening Bell 🔔 Welcome to the Opening Bell! Delivered every Monday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and latest trends on Asia’s publicly listed tech companies. If you’re not a subscriber, get access by [registering here](. --------------------------------------------------------------- Written by Simon Huang Journalist Hello {NAME} Having listened to a number of earnings calls, I’ve become quite jaded with the whole process. Does it really matter if a firm’s revenue beat expectations by a few percentage points? Does a slightly higher take rate from one quarter to the next really mean anything for a company’s long-term value? Companies can also be reluctant to engage with the questions asked by analysts during the Q&A sessions that follow since they don’t want to give up too much information to competitors. Having said that, Sea’s most recent fourth-quarter and full-year 2022 results were important and a milestone for the company. Q4 was the first time the tech giant turned a net profit, which required a turnaround of almost US$1 billion to the bottom line from the previous quarter. In [this week’s premium story]( I break down the factors that contributed to Sea’s achievement. While trimming sales and marketing expenses played a big role, this wasn’t the only lever that Sea pulled - in fact, a combination of revenue growth and cost cuts in areas like general and administrative spending also contributed to a stronger bottom line. The story further goes on to consider what’s next for all three of the company’s divisions: its digital entertainment (Garena), ecommerce (Shopee), and financial services (SeaMoney) arms. With this unique combination of assets, Sea offers investors both diversification and different growth drivers. -- Simon  ---------------------------------------------------------------  THE BIG STORY [Sea Group’s triple win: how it pulled off a stunning reversal]( The tech company’s turnaround in its fourth quarter results was about more than just cuts to its sales and marketing budget ---------------------------------------------------------------  3 TRENDS TO KEEP EYE ON Hot stocks, earnings reports, restructuring, activist investor pressure, and more. 1️⃣ Don’t put all your Apples in one basket: US tech giant Apple (AAPL, NDAQ) is overhauling its sales team to [focus more on India](. This comes after Foxconn (2354, TPE), a major Apple supplier, invested US$700 million in building a new plant in India. The iPhone maker, long criticized for being [too concentrated in China]( has been making efforts to diversify its supply chain. While still a long way from being able to match China, India has a big part to play in this initiative. It also has the advantage of what will soon become - or may already be - the largest population in the world, overtaking its northern neighbor, which faces a crippling population decline. Contingency planning is like buying insurance - it may seem like a pain, without any tangible benefit, but you’ll be glad you did if and when misfortune strikes. 2️⃣ JD.com kicks off discount campaign: Chinese ecommerce major JD.com (9618, HKG) officially kicked off a [US$1.4 billion campaign]( to offer discounts on products like iPhones and Dyson hair dryers. It seems like a counterintuitive strategy in this era of tighter money and investor aversion to burning cash. Perhaps, JD.com spots an opportunity to capitalize on China’s reopening and snatch a larger share of the market from its competitors, who may not be willing to follow its lead at the moment. The company, which [missed fourth-quarter revenue estimates]( last week, is looking for ways to boost user growth and sales. JD.com has built a reputation as a purveyor of higher-end goods for consumers living in Tier 1 cities - the people who can afford iPhones and Dysons. Discounts today may attract those consumers - the affluent surely wouldn’t say no to bargains too! But it’s other factors - such as ease of navigation, availability of products, and customer service - that will keep them coming back. 3️⃣ Higher for longer: The US Federal Reserve chairman’s remarks to the US Congress last week [shook stock markets](. Apparently, central banks will not blink in their fight against inflation. Interest rates will likely have to go higher - and stay there for longer - to battle persistently strong inflation. After previously slowing interest rate hikes to 0.25%, the Fed may now hike rates by 0.5% in March. Rate cuts before the end of the year appear as likely as snow in the tropics. Powell has been fairly consistent in his messaging: the Fed must defeat inflation and will do what it takes to get the job done, even if it results in a recession. Markets may be having a hard time adjusting to a different paradigm after over 10 years of dovish monetary policy. But the sooner they face reality, the better. 2 EYE-POPPING NUMBERS Tech in Asia scours the internet to bring you head-turning numbers from the world of business. - [200]( The number of employees reportedly laid off by Shopee, Sea’s ecommerce unit, in Indonesia - mostly from its customer services team. - [US$600m]( The amount of outstanding debt set to mature in 2026 that Grab (GRAB, NDAQ) paid early. THE ONE YOU DIDN'T SEE COMING We spotlight the story that had everyone talking and social media buzzing during the past week. IPO-bound Vietnam fintech firm under police investigation: F88, a Vietnam-based lender gearing up for a domestic IPO in 2024, had its [headquarters raided]( by police, under investigation for alleged extortion of users. Not a good look in the run-up to selling shares to the public! Just earlier this month, F88 raised a series B round of US$50 million - a record for Vietnam startups so far this year. This was on top of the US$83 million it raised in debt funding last November. Does this raid change the business model or prospects of F88? It’s a reminder that in emerging markets, political risk is something investors overlook at their peril. That’s it for this edition - we hope you liked it! Not your cup of tea? You can unsubscribe from this newsletter by going to our preference center at the bottom of this email. Happy investing and see you next week! Disclaimer: This content is for informational purposes only. Kindly do not construe any such information as legal, tax, investment, financial, or other advice. [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. 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