Sunday 04 Jun 2023
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(March 8): Sea Ltd’s stunning 22% pop tacked on more than US$900 million (RM4.07 billion) to the personal wealth of founder Forrest Li, a vindication for the Chinese-born internet tycoon who presided over the worst year in his company’s history.

Southeast Asia’s largest internet firm racked up its biggest single-day gain in months after reporting a surprise profit on Tuesday (March 7) — energising investors who’d hoped the gaming and e-commerce giant would pull off one of the biggest turnaround efforts the region’s fledgling tech sector has ever witnessed. 

That means Li is now worth about US$5.3 billion, according to the Bloomberg Billionaires Index, putting him back on par with peers such as Kakao Corp’s Brian Kim and Shein impresario Gu Xiaoqing. The entrepreneur has grown US$1.8 billion wealthier this year after Sea fired thousands, froze salaries and pledged to rein in spending.

The initial optimism belies the scale of the task ahead for Li, a gaming enthusiast who in 2009 founded a company that’s come to symbolise Southeast Asia’s internet ascendancy. Despite Tuesday’s surge, growth has all but evaporated from just two years ago, when it was regularly notching triple-digit revenue gains during a pandemic-era online boom.

At the time, investors piled into the company, which is backed by Chinese internet giant Tencent Holdings Ltd, briefly making it the world’s best-performing stock. Then came a post-Covid hangover, when fears of a global recession wiped out more than US$160 billion of its value from a 2021 peak of more than US$200 billion.

Much of the profit reported on Tuesday came from brutal cost cuts — a more than US$700 million reduction in marketing expenses alone — and on-paper gains from the way it accounted for debt and certain types of expenses. During a post-release conference call, several analysts questioned whether the company had a plan to rejuvenate growth — suggesting concerns about whether a pullback in spending might jeopardise the top line in the future.

Sea still faces deep-pocketed competitors in all of its main businesses, from Alibaba Group Holding Ltd’s Lazada to TikTok Shop in e-commerce and a slew of up-and-comers in digital finance. Revenue at Sea’s gaming unit fell 33% for the fourth quarter, suggesting consumers remain unwilling to spend on entertainment while basic living costs are soaring. And while its e-commerce division, underpinned by regional mall Shopee, grew revenue 32%, gross merchandise value climbed just over 7% on a constant currency basis.

For now, investors are celebrating Sea’s getting into the black — something it would have achieved even after stripping out the one-time gains. 

Li, who’s vowed to forsake his salary until his company stabilises, warned on Tuesday the macroeconomic environment remained murky and Sea was ready to adjust its approach if needed. But the billionaire — who years ago named himself after the eternally optimistic iconic movie character played by Tom Hanks — also expressed confidence of a turnabout in 2023 because of growing internet penetration across the region.

“It has not been an easy journey,” Li told analysts on Tuesday’s call. “We took the hard path, but we believe this is the right path to achieve long-term success.”

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