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$SE: A Monster Born in SE Asia ("SEA")
Sea Ltd. ($SE) is the leading internet company in SEA. It dominates the region’s gaming, e-commerce, and digital payments markets.
Its effective management team and industry tailwinds provide for a long growth runway.
Time for a thread
Sea Ltd. ($SE) is the leading internet company in SEA. It dominates the region’s gaming, e-commerce, and digital payments markets.
Its effective management team and industry tailwinds provide for a long growth runway.
Time for a thread
1/ The Basics
Business Verticals:
1. Garena: Digital entertainment ("DE") and gaming
2. Shopee: Mobile e-commerce ("EC") - already fastest growing & largest e-comm entity in region
3. SeaMoney: E-wallet/financial services ("DFS")
All three segments are growing rapidly
Business Verticals:
1. Garena: Digital entertainment ("DE") and gaming
2. Shopee: Mobile e-commerce ("EC") - already fastest growing & largest e-comm entity in region
3. SeaMoney: E-wallet/financial services ("DFS")
All three segments are growing rapidly
2/ SEA PC/Mobile Gaming Market
Size: $5.1B in 2019; $8.3B in 2023 (13.2% CAGR)
82% of urban pop are gamers: 80% Mobile, 69% PC
- More than 50% spend money
# of Gamers:
- Mobile: 227MM to 290.2MM in 2023 (6.3% CAGR)
- PC: 154.3MM to 186.8MM in 2023 (4.9% CAGR)
Size: $5.1B in 2019; $8.3B in 2023 (13.2% CAGR)
82% of urban pop are gamers: 80% Mobile, 69% PC
- More than 50% spend money
# of Gamers:
- Mobile: 227MM to 290.2MM in 2023 (6.3% CAGR)
- PC: 154.3MM to 186.8MM in 2023 (4.9% CAGR)
3/ SEA E-Commerce Market
GMV: $5.5B in 2015; $38.2B in 2019 (62.3% CAGR)
Forecast: $153B by 2025 (26% CAGR)
Revenue: $37.9B in 2019; $88.1B in 2024E (18.4% CAGR)
Indonesia to lead: $20.9B GMV in 2019; $82B in 2025E (25.6% CAGR)
Long runway: Only 6.2% e-commerce penetration
GMV: $5.5B in 2015; $38.2B in 2019 (62.3% CAGR)
Forecast: $153B by 2025 (26% CAGR)
Revenue: $37.9B in 2019; $88.1B in 2024E (18.4% CAGR)
Indonesia to lead: $20.9B GMV in 2019; $82B in 2025E (25.6% CAGR)
Long runway: Only 6.2% e-commerce penetration
4/ SEA Digital Payments Market
+70% un/underbanked adult pop
Digital Fin Svcs Revenue: $11B in 2019; $38B 2025E (23% CAGR)
TPV: $0.6T in 2019; $1T 2025E (8.9% CAGR)
2019 Credit Card ("CC") per Capita: SEA: 0.1; US: 2.1
2019 CC penetration rate: SEA: 13.4%; US: 212.2%
+70% un/underbanked adult pop
Digital Fin Svcs Revenue: $11B in 2019; $38B 2025E (23% CAGR)
TPV: $0.6T in 2019; $1T 2025E (8.9% CAGR)
2019 Credit Card ("CC") per Capita: SEA: 0.1; US: 2.1
2019 CC penetration rate: SEA: 13.4%; US: 212.2%
5/ Garena: DES
Market leader
Producer of popular games including Free Fire (self-developed) & Call of Duty: Mobile
Primary revenue source: Sale of in-game virtual items & season passes
Esports growth creates flywheel effect
Q2 2020 Revenue: $716.2MM vs. $443.2MM (+61.6% YoY)
Market leader
Producer of popular games including Free Fire (self-developed) & Call of Duty: Mobile
Primary revenue source: Sale of in-game virtual items & season passes
Esports growth creates flywheel effect
Q2 2020 Revenue: $716.2MM vs. $443.2MM (+61.6% YoY)
6/ Shoppe: EC
Launched in 2015: #1 shopping app in region
GMV Growth: $1.2bn in 2016; $17.6B in FY19 (499% CAGR)
Innovative features drive user engagement
Rapidly growing take rate: 0.4% in 2017; 5.4% in 2019
Q2 2020 Revenue: $510.6MM vs. $177.4MM (+187.7% YoY)
Launched in 2015: #1 shopping app in region
GMV Growth: $1.2bn in 2016; $17.6B in FY19 (499% CAGR)
Innovative features drive user engagement
Rapidly growing take rate: 0.4% in 2017; 5.4% in 2019
Q2 2020 Revenue: $510.6MM vs. $177.4MM (+187.7% YoY)
7/ SeaMoney: DFS
Integrated with Garena & Shopee; reduces payment channel costs
Services include: E-wallet, payment processing, micro-lending, & more
Fragmented market ripe for consolidation; led by GrabPay, WeChat Pay, and $PYPL
Q2 2020 Revenue: $11.9MM vs. $2.8MM (+325%)
Integrated with Garena & Shopee; reduces payment channel costs
Services include: E-wallet, payment processing, micro-lending, & more
Fragmented market ripe for consolidation; led by GrabPay, WeChat Pay, and $PYPL
Q2 2020 Revenue: $11.9MM vs. $2.8MM (+325%)
8/ Q2 2020 Financials
Total Adj. Revenue: $1.3B vs. $665MM (+93.4% YoY)
Total Gross Profit: $200.8MM (22.8% Margin) vs. $97.4MM (22.3%) (+106.1% YoY)
Total Adj. EBITDA: $7.7MM vs. -$11.0MM
EC Path to Profits: Adj. EBITDA Loss per Order: $0.50 vs. $1.01 (51% YoY improvement)
Total Adj. Revenue: $1.3B vs. $665MM (+93.4% YoY)
Total Gross Profit: $200.8MM (22.8% Margin) vs. $97.4MM (22.3%) (+106.1% YoY)
Total Adj. EBITDA: $7.7MM vs. -$11.0MM
EC Path to Profits: Adj. EBITDA Loss per Order: $0.50 vs. $1.01 (51% YoY improvement)
9/ Investment Thesis: Gaming
$TCEHY holds ~25% stake in $SE; strategic partnership fuels Garena success
2017 launch of Free Fire marked transition to game developer
^Catalyst for Quarterly Paying & Active User Growth (QPU/QUA)
Robust game pipeline will drive growth
$TCEHY holds ~25% stake in $SE; strategic partnership fuels Garena success
2017 launch of Free Fire marked transition to game developer
^Catalyst for Quarterly Paying & Active User Growth (QPU/QUA)
Robust game pipeline will drive growth
10/ Investment Thesis: E-Commerce
Mobile-first approach benefits from rapid smartphone growth (14.5% T5-Yr CAGR)
Young population: 70% of pop < 40 years old
Two tailwinds:
1. Expected 99% internet penetration rate by 2023
2. Grow e-commerce penetration (27% China vs. 6.2% SEA)
Mobile-first approach benefits from rapid smartphone growth (14.5% T5-Yr CAGR)
Young population: 70% of pop < 40 years old
Two tailwinds:
1. Expected 99% internet penetration rate by 2023
2. Grow e-commerce penetration (27% China vs. 6.2% SEA)
11/ Investment Thesis: DFS
Payment solution creates network effects in the ecosystem (similar to $MELI)
Approval of Digital Banking License in Singapore will accelerate growth
Increased CC penetration --> economic growth
Marginal increases in market share will accelerate TPV
Payment solution creates network effects in the ecosystem (similar to $MELI)
Approval of Digital Banking License in Singapore will accelerate growth
Increased CC penetration --> economic growth
Marginal increases in market share will accelerate TPV
12/ Risks
1. Increased competition (especially in e-commerce and payments)
2. Slower e-commerce and e-wallet penetration rates
3. Continued high cash burn in EC and DFS businesses
4. Inability to execute on gaming pipeline
5. U.S. / China trade relations
1. Increased competition (especially in e-commerce and payments)
2. Slower e-commerce and e-wallet penetration rates
3. Continued high cash burn in EC and DFS businesses
4. Inability to execute on gaming pipeline
5. U.S. / China trade relations
Conclusion
Macro tailwinds will fuel future growth: SEA internet GMV forecast: $100B in 2019; $300B by 2025 (20% CAGR)
Excellent business model: Scalable, asset-light, network effects
Rapid and accelerating revenue growth
$SE can 10x from here - I'm waiting for an entry point
Macro tailwinds will fuel future growth: SEA internet GMV forecast: $100B in 2019; $300B by 2025 (20% CAGR)
Excellent business model: Scalable, asset-light, network effects
Rapid and accelerating revenue growth
$SE can 10x from here - I'm waiting for an entry point
