Sea Limited is the preeminent Internet company headquartered in Singapore. It has posted gangbusters growth over the past couple of years.
The company continues to sharpen its edge in mobile gaming. It has also penetrated more markets beyond Southeast Asia.
We discuss whether Sea stock still presents a reasonable opportunity to add for investors now.
This idea was discussed in more depth with members of my private investing community, Ultimate Growth Investing. Learn More »
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Sea Limited ( SE ) is one of the highest conviction holdings in our growth portfolio. SE stock is one of those stocks that we have consistently added on significant dips previously. It has been a phenomenal outperformer for us over the last couple of years. We have never pared down our holdings and also added the stock at appropriate times.
We have also covered the stock extensively. For investors who are new to Sea Limited, you can refer to our recent articles for a deeper dive:
Without a doubt, Sea Limited does not qualify as a stock for value investors. The stock is trading at a premium valuation. It still reports negative last-twelve-months (LTM) GAAP EBITDA margins despite its massive growth. Some investors can argue that much of its valuation is predicated on its ability to execute its revenue growth excellently.
Recently, its e-commerce arm, Shopee, expanded further on its penetration into LatAm. We also discussed previously how Shopee’s penetration into MercadoLibre’s ( MELI ) home ground has been shaping up. We thought its recent $6.3B capital raise was to help drive its aggressive growth into LatAm mainly. However, the company has other ideas. Shopee recently announced its forays into several key e-commerce markets. These include India, France, Spain, and Poland. These have also been important markets for Amazon ( AMZN ) and Alibaba ( BABA ). But, Sea Limited is never afraid of competing against strong incumbents. It unseated Lazada (BABA) on its way to claiming the throne in Southeast Asia. It has also been driving hard against MELI in LatAm.
We discuss whether SE stock is a buy as it spreads its dominance across the world. SE Stock YTD Performance
SE stock YTD performance (as of 22 October 21).
SE stock has been on a phenomenal run in 2021 so far. It also suffered from the growth-to-value rotation earlier in the year. However, those dips proved to be transitory, as its upward momentum recovered swiftly. Ever since its last significant dip in May, the stock’s momentum has been on a tear. The other minor dips have also proven to be opportunities for investors to add its stock. At the moment, its YTD return has reached 78.5%. It also easily outperformed its peers and the market. SE stock has proven to be an incredible winner against its more prominent peers. Taking Account of Shopee’s Aggressive Expansion
Shopee quarterly GMV. Data source: Company filings Shopee LTM GMV. Data source: Company filings
Shopee has grown its gross merchandise value (GMV) very aggressively over the past year. At the end of 2020, it posted a GMV of $35.4B. By the end of H1’21, Shopee’s LTM GMV reached $48.8B. Thus, its LTM GMV increased by an incredible 37.9% over 2 quarters. However, in our previous article (published on 13 August), we noted that Southeast Asia’s top-6 countries’ e-commerce GMV for 2020 was estimated at $62B. We also explained that even though the region is estimated to grow by a CAGR of 22.6% by 2025, its largest market, Indonesia, is estimated to experience slower growth. Indonesia’s e-commerce market is estimated to grow by a CAGR of 19.1% through 2024.
In contrast, LatAm is still expected to experience tremendous growth. Its e-commerce market is expected to grow by a CAGR of 28.1% through 2024, with Brazil and Mexico as the region’s most important growth markets. MELI LTM GMV. Data source: Company filings
MercadoLibre, Inc. has also been expanding rapidly. Its LTM GMV in H1’21 grew by 22% from the end of FY20. It seems to be slower than SE’s gangbusters growth momentum. Notwithstanding, its quarterly YoY GMV growth in FQ2’21 reached 39.2%. Hence, MELI’s incredible growth momentum doesn’t seem to be slowing down. It demonstrates the massive growth opportunities in LatAm’s e-commerce market. Sea Limited Understands Its Markets Well Through Garena
Sea Limited understands LatAm very well through its Garena gaming segment. Its Free Fire (FF) mobile battle-royale game has benefited tremendously from the removal of Fortnite from both the App Store ( AAPL ) […]