Why SEA Ltd might be the Alibaba of South East Asia
$Alibaba (BABA.US)$
$Sea (SE.US)$
We have all heard of Alibaba (BABA), the pride and joy of China. It is company spanning across e-commerce, financial payments and in recent times gaming! Yet, there is a market that Alibaba has yet to lead in and that is in southeast asia! The main reason for this is due to one of the biggest competitors in this space and that is SEA Ltd (SE)! For those of you who don’t already know who SEA Ltd (SE) is, it is a technology conglomerate headquartered in Singapore. It has 3 main segments in its business:
1) Digital Entertainment (Garena)
2) E-Commerce (Shopee)
3) Digital Payments (SeaMoney)
Performance of SEA Ltd (SE)
To say that SEA Ltd’s (SE) stock has performed well is an understatement. Like any other company SEA Ltd (SE) has experienced a few dips in its historical rise. It has not however, made much of a dent in the rise of price. The stock is currently trading between $350 - $400.
Based on SEA Ltd’s (SE) Q2’21 results, total gross profit has increased by 364%. Furthermore, Total GAAP Revenue has increased by 159% YOY. These are spectacular numbers for a growth company, much less any company. It is worth noting that most of SEA Ltd’s revenue comes from its digital entertainment arm, Garena. Garena is a gaming platform that houses some of the biggest games like Call of Duty Mobile or League of Legends. It is worth noting that SEA Ltd is still operating at a loss with Shopee and SeaMoney.
Garena has accounted for most of SEA Ltd’s income. It is no surprise here from the increase in quarterly paying users. An 85% YOY increase is a fantastic growth rate and it is worth noting that this does not include users who use services for free which have the potential of eventually converting to paying users.
Shopee, the E-commerce arm of SEA Ltd (SE) while yet to be profitable is having spectacular growth YOY for its gross orders at 127%. Alibaba (BABA) earlier introduced Lazada as competition to Shopee. However, consumers are gravitating more towards Shopee rather than Lazada. Based on google trends, it is clear that there is a diverging interest in Shopee and Lazada. Consumer searches are a great way to gauge sentiment on a product or service besides just looking at the numbers
The segment of SEA Ltd (SE) would be SeaMoney. I believe that this is still a growing segment in its infancy even in Southeast Asia. Many countries in Southeast Asia still use physical currency and it is a relatively untouched market. That being said, there are several other competitors looking to challenge SeaMoney. Grabpay is one of the biggest competitiors in Southeast Asia and it is looking to compete with SeaMoney. That being said, there has been growth for SeaMoney. There has been a 150% increase in payment volume over the last year. Furthermore, quarterly paying users have also increased by 109% over the past year. It is also worth noting that SEA Ltd (SE) received a full bank license in Singapore, one of the financial hubs in Southeast Asia.
Analysis of SEA Ltd (SE)
SEA Ltd’s business model is not a new one. It can be said to have modelled after Alibaba (BABA). That being said, it seems to have a decent moat within its geographical region. There are no big competitors and even the ones which Alibaba (BABA) introduced have failed to contend with SEA Ltd (SE). I do see SEA Ltd (SE) going on a very similar trajectory to Alibaba (BABA) due to their similarities.
Moving forward I would like to see increased profitability. SEA Ltd (SE) only beat 2 out of 4 of its earnings over the last 4 quarters. It is understandable as SEA Ltd has aggressively added more money to its marketing spend and expansion plans. I would at least like to see the company having a lowered operating loss on its path to profitability. Sales of working capital of SEA Ltd (SE) has also dropped from 1.06 in 2019 to 1.02 in 2020. This is a marginal decrease but a figure worth looking at. With such a huge increase in revenue, it is important that we see an efficient use of capital moving forward. For now, this does not seem to be much of an issue.
SEA Ltd (SE) is also slightly overvalued compared to its closest competitor Alibaba (BABA). Its price to sales ratio is hovering at 26.22 compared to 3.87 of Alibaba (BABA). Hopefully we get a better entry price should the stock price dip.
I believe that SeaMoney is a huge opportunity for SEA Ltd (SE) to capitalise on. If they can get widespread adoption like Alibaba (BABA) in china, I believe that it will be one of their most lucrative revenue streams. It has also obtained the necessary licenses so all that is left is execution.
Summary
SEA Ltd (SE) has not has the most stellar numbers in terms of profitability. However, its exponential growth rates and wide moat in its geographical region serves as a good springboard for future growth. I do expect SEA Ltd (SE) to grow into its current valuations although the price is still slightly high right now. I do not currently hold an position in SEA Ltd (SE) but I do hope to enter a position if the valuations fall slightly.
$Sea (SE.US)$
We have all heard of Alibaba (BABA), the pride and joy of China. It is company spanning across e-commerce, financial payments and in recent times gaming! Yet, there is a market that Alibaba has yet to lead in and that is in southeast asia! The main reason for this is due to one of the biggest competitors in this space and that is SEA Ltd (SE)! For those of you who don’t already know who SEA Ltd (SE) is, it is a technology conglomerate headquartered in Singapore. It has 3 main segments in its business:
1) Digital Entertainment (Garena)
2) E-Commerce (Shopee)
3) Digital Payments (SeaMoney)
Performance of SEA Ltd (SE)
To say that SEA Ltd’s (SE) stock has performed well is an understatement. Like any other company SEA Ltd (SE) has experienced a few dips in its historical rise. It has not however, made much of a dent in the rise of price. The stock is currently trading between $350 - $400.
Based on SEA Ltd’s (SE) Q2’21 results, total gross profit has increased by 364%. Furthermore, Total GAAP Revenue has increased by 159% YOY. These are spectacular numbers for a growth company, much less any company. It is worth noting that most of SEA Ltd’s revenue comes from its digital entertainment arm, Garena. Garena is a gaming platform that houses some of the biggest games like Call of Duty Mobile or League of Legends. It is worth noting that SEA Ltd is still operating at a loss with Shopee and SeaMoney.
Garena has accounted for most of SEA Ltd’s income. It is no surprise here from the increase in quarterly paying users. An 85% YOY increase is a fantastic growth rate and it is worth noting that this does not include users who use services for free which have the potential of eventually converting to paying users.
Shopee, the E-commerce arm of SEA Ltd (SE) while yet to be profitable is having spectacular growth YOY for its gross orders at 127%. Alibaba (BABA) earlier introduced Lazada as competition to Shopee. However, consumers are gravitating more towards Shopee rather than Lazada. Based on google trends, it is clear that there is a diverging interest in Shopee and Lazada. Consumer searches are a great way to gauge sentiment on a product or service besides just looking at the numbers
The segment of SEA Ltd (SE) would be SeaMoney. I believe that this is still a growing segment in its infancy even in Southeast Asia. Many countries in Southeast Asia still use physical currency and it is a relatively untouched market. That being said, there are several other competitors looking to challenge SeaMoney. Grabpay is one of the biggest competitiors in Southeast Asia and it is looking to compete with SeaMoney. That being said, there has been growth for SeaMoney. There has been a 150% increase in payment volume over the last year. Furthermore, quarterly paying users have also increased by 109% over the past year. It is also worth noting that SEA Ltd (SE) received a full bank license in Singapore, one of the financial hubs in Southeast Asia.
Analysis of SEA Ltd (SE)
SEA Ltd’s business model is not a new one. It can be said to have modelled after Alibaba (BABA). That being said, it seems to have a decent moat within its geographical region. There are no big competitors and even the ones which Alibaba (BABA) introduced have failed to contend with SEA Ltd (SE). I do see SEA Ltd (SE) going on a very similar trajectory to Alibaba (BABA) due to their similarities.
Moving forward I would like to see increased profitability. SEA Ltd (SE) only beat 2 out of 4 of its earnings over the last 4 quarters. It is understandable as SEA Ltd has aggressively added more money to its marketing spend and expansion plans. I would at least like to see the company having a lowered operating loss on its path to profitability. Sales of working capital of SEA Ltd (SE) has also dropped from 1.06 in 2019 to 1.02 in 2020. This is a marginal decrease but a figure worth looking at. With such a huge increase in revenue, it is important that we see an efficient use of capital moving forward. For now, this does not seem to be much of an issue.
SEA Ltd (SE) is also slightly overvalued compared to its closest competitor Alibaba (BABA). Its price to sales ratio is hovering at 26.22 compared to 3.87 of Alibaba (BABA). Hopefully we get a better entry price should the stock price dip.
I believe that SeaMoney is a huge opportunity for SEA Ltd (SE) to capitalise on. If they can get widespread adoption like Alibaba (BABA) in china, I believe that it will be one of their most lucrative revenue streams. It has also obtained the necessary licenses so all that is left is execution.
Summary
SEA Ltd (SE) has not has the most stellar numbers in terms of profitability. However, its exponential growth rates and wide moat in its geographical region serves as a good springboard for future growth. I do expect SEA Ltd (SE) to grow into its current valuations although the price is still slightly high right now. I do not currently hold an position in SEA Ltd (SE) but I do hope to enter a position if the valuations fall slightly.
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momomoomoo : The govt is supportive of their business unlike baba
theschoolofmoneysg OP momomoomoo : Wouldn’t say that all the measures are bad for BABA. While some of them could be heavy handed a lot of it might actually benefit them in the long run. Of course all this remains to be seen![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
momomoomoo onglai88 : you are spokesperson for baba?
dandan_4896 : piak piak
102872488 momomoomoo : how?