Today I would like to introduce you to the only company that I cover as an individual stock on a monthly basis and can describe in a single word: Growth
We are talking about Sea Limited. I consider the company to be very future-oriented and cannot weight it enough through my Etfs.
Sea Limited $SE (-2.34%) is a Singapore-based company that is tradable for us as an ADR under ISIN US81141R1005.
Quick Facts:
Current market capitalization: $100 Billion
Current share price: 153€
All time high share price: 308€ (November 2021)
Number of employees: Over 33,000
Industries: E-commerce, gaming and fintech
Sea ltd is a holding company founded on May 8, 2009 by Forrest Li, who is now the richest man in Singapore. In the first picture you can see the 10 largest shareholders of the company.
E-commerce:
Shopee comprises a marketplace for consumers to consumers, but also businesses to consumers. Comparable with Amazon or Alibaba or AliExpress.
Active in Malaysia, Indonesia, Taiwan, Thailand, Vietnam, Mexico, Colombia, Brazil, Chile, Poland, Spain, France, India and Singapore. In Q3 2021, Shopee accounted for 71% of e-commerce traffic in Malaysia, 57% in Vietnam, and 57% in Thailand.
Revenues increased by 10% compared to Q3 2020 ($0,6 billion) to Q3 2021 by $0,9 billion and thus stood at $1,5 billion. This corresponds to an increase of 134.4%.
The number of orders also increased by 123.2% from 0.7 billion in Q3 2020 to 1.7 billion in Q3 2021.
The gross volume of goods in Q3 2021 was $16,8 billion and is therefore also 80.6% higher than in Q3 2020 ($9,3 billion).
Direct competitor: Lazada is considered a direct competitor of Shopee. In Figure 2, you can see the active users in Southeast Asia and Taiwan. The chart clearly shows that Shopee stands out from its direct competitor due to massive growth.
The Shopee app holds first place for the most time users spend in it, as well as second place for the most downloaded app, among monthly active users in Southeast Asia, Indonesia, and Taiwan. In Brazil, the first place even belongs to Shopee in both categories.
Fintech:
Directly with e-commerce comes Sea ltd's own payment and financing division. So customers can pay with ShopeePay or AirPay. They also cover the "Buy now pay later" function with 4 of their own service providers (SPayLater, SPinjam, Dana Cepat and SPinjam Untuk Penjual).
Running the payment and financing process themselves seems to be paying off. In Q3 2021, the payment volume within their fintech segment was $4,6 billion (In Q3 2020 $2,1 billion) and the number of users at 39.3 million (In Q3 2020 at 17.8 million).
Customers are retained through convenient use and compatibility of each service provider once they are engaged in this ecosystem.
Gaming or entertainment industry:
In the gaming sector, they are known as Garena. Through its cooperation with Tencent, Garena distributes one of the most popular games in the world: "League of Legends". The free online multiplayer game enjoys great popularity with 115 million players every month. Through distribution, Garena is also involving more and more younger customers in the Sea ltd network. In addition, Garena has its own game, which has conquered the mobile gaming world.
Garena Free Fire is a mobile game (that is, a game for cell phones or tablets) that falls into the classic "Battle Royal" division. If you don't know what Battle Royal is, you might know what Fortnite is. Battle Royal means that many players (50 of them in Garena Free Fire) are released into a limited-sized world at the same time, have to find weapons and equipment, and whoever survives last is the winner. This type of games has gained a lot of popularity in the last 2 years. The 2021 Garena Free Fire World Championship was the most watched e-sports event in history so far, with over 5.4 million viewers watching simultaneously at its peak.
As you can see in Figure 3, the viewership numbers are also reflected in the active user numbers. Once again, Sea leaves the competition far behind.
Besides Garena Free Fire, Garena also offers other mobile games. Even though these games are free per se, 93.2 million users paid for extra content in the game in Q3 2021. In Q3 2020, that number was 65.3 million. Active users increased from 572.4 million in Q3 2020 to 729 million in Q3 2021.
Even though Sea ltd is almost non-existent in Europe, they have already built a huge ecosystem in Southeast Asia and parts of South America. Meanwhile, they also own their own football club that plays in Singapore's top league and thus runs commercials for Sea, Garena and Shopee every weekend.
Due to the fact that the Sea ltd share has lost so much value in recent months, its valuation is also becoming more and more interesting.
KUV: 11
KCV: 135
Piotroski F-Score: 7/9
Why no price-earnings ratio (P/E ratio) ?
Sea ltd is still fully in the growth phase and is relentlessly investing in expanding their ecosystem. Even though revenue has grown 1164% in the last 5 years, they have ended every year at a loss. However, Sea ltd has $12 Billions of net cash and there is no financial debt!
Revenue is generated as follows:
13% merchandise sales
41% e-commerce
46% Gaming
Regional distribution of sales:
64% Southeast Asia
18% Latin America
15% Rest of Asia
3% Rest of World
Summary: In my opinion, Sea ltd has created a huge ecosystem that spans three divisions and has the ability to retain a huge customer base for the long term or introduce new products to them. The company is doing everything it can to grow in the current industries and keep digging the moat that is already there further and further.
In addition to that, I see growth potential in entering new industries, e.g. the music industry like Tencent Music or entering new regions like they are slowly trying to do in Europe and have already done in South America. Personally, I like the idea of a holding company, as it offers good opportunities especially in terms of growth and can combine many different companies into one AG. The price of the Sea ltd share has dropped 25% in the last 30 days. Since I assume that the interest rate hikes will go straight to the growth stocks, especially those that do not yield a profit, the entry or post-purchase price is becoming more attractive. That is why I decided to start a savings plan. 2% of my monthly savings rate is now invested in Sea ltd.
Sources:https://cdn.sea.com/webmain/static/resource/seagroup/website/investornews/3Q2021/8cedKv6Ir8rbcPLPT91S/2021.11.16%20Sea%20Third%20Quarter%202021%20Results%20Deck.pdf
https://www.computerbild.de/artikel/cb-eSports-Riot-Games-Geschichte-30968301.html
https://money.cnn.com/quote/shareholders/shareholders.html?symb=SE&subView=institutional
https://thedlf.de/sea-limited-die-eroberung-der-welt-in-echtzeit/
The Youtube video of "Investflow" (if I post the link, the video is pasted into the post and there is no one up for it😂)
