Singaporean tech firm Sea Ltd missed first-quarter profit estimates on Tuesday (May 16), as its digital entertainment revenue halved and it took a one-time charge of more than US$100 million (S$134 million).
Sea shares dropped 12.5 per cent to US$77.05 and headed for their worst day in six months, dulling this year's strong gains booked on a cost-cutting plan involving thousands of job cuts, the closure of some operations and a lower marketing budget.
The company's operating expenses fell by more than a fifth in the quarter ended March 31, with marketing spends down 60.2 per cent. It helped Singapore-based Sea report a profit of US$87.3 million, compared with a loss of US$580.1 million a year ago.
But its per-share profit of 15 cents missed analysts' estimates of 40 cents, according to Refinitiv, because of an impairment charge of US$117.9 million for a prior undisclosed acquisition.
Sea also doubled the funds it set aside for potentially sour loans in its SeaMoney financial services business to US$177.44 million, as the unit's loan book grew.
Rising interest rates have in recent months pressured digital finance firms that were operating in a loose monetary policy environment until last year.
Sea is also facing a slowdown in gaming and online shopping demand, after a pandemic-led boom that had helped it hit a peak market value of over US$200 billion in late 2021. Its shares are down 76 per cent from their record high.
Revenue rose 4.9 per cent to US$3.04 billion in the quarter, lower than the seven per cent growth recorded in the December quarter and 64 per cent rise seen a year earlier. It also missed estimates of US$3.07 billion.
Digital entertainment revenue tanked 52.5 per cent on a slump in the company's gaming arm. Sea has, however, started seeing some recovery, CEO Forrest Li said.
"In the quarter and into April, we started to see some initial signs of recovery in the active user base of our largest game, Free Fire," he said.