Thread by @santiagohunt

1) Lately I’ve been asked a lot about Sea Ltd.
So here’s a thread with thoughts.

I won’t go into financial forensics (not much I can add) – instead I’ll try to distill bull/bear/mega bull cases.

Not financial advice, DYOR. I’m long $SE.
@MadsC007 @EMparadigmshift @juliey4

2) $SE in a nutshell: Garena (Videogames) + Shopee (eComm) + SeaMoney (payments + etc). Some other optionality (eg. streaming) but that’s down the road.

Geographically focused in SEA although Garena is big in India & LatAm and Shopee is (slowly) creeping into BR.

3) Only 1 other company globally that combines eComm + payments + games at scale: Tencent (which are investors in $SE). We’ll come back to this later.

4) Macro context: SEA is the region of the world with highest growth fcst for the next 10yrs.

I’m very bullish. The region marries the dynamism & work ethic of the East with (some) more regulatory freedom than CN/IN.

5) $SE Bull Case:

eComm + fintech flywheel in a D&E part of the world with high amount of underbanked but strong fx and economic outlook.

On top of that a highly successful Free Fire franchise (top grossing app in multiple markets).

6) $SE Bull Case:

Garena is at high GM%, highly profitable. Accelerating QAU and pQAUs.

eComm potential proven during COVID. Just getting started.

Payments undervalued given growth (~+100% mobile wallet TPV in 6months). Already more users than MP in wallet (17.8m vs 13.6m).

7) $SE Bear Case:

-Competition: Lots. Lazada + plenty of Fintech rivals. (But Shopee overtaking Lazada as #1 is a huge feat).

-eComm GM% improving but very low. Landgrab mode makes this logical, but watchout.

-Tencent is a liability in a geopolitically charged US/CN.

8) $SE Mega Bull Case:

What if Videogames + eComm/Fintech is a (huge) flywheel?

Lots of people call it “Metaverse”. I I don’t like the term (we're still far from it).

But think gamification of commerce, think seamless discovery of product via gaming, think think think!

9) $SE Mega Bull Case (cont):

…If so, who has the talent and know how and culture to exploit this?

$AMZN, $MELI, etc… were born as commerce first.

$SE was gaming first. It seems hard to replicate without betraying incumbent business models (counterpositioning).

10) Garena:

People say “Gaming is volatile, users will grow bored”.
Yet top franchise names have been very stable: COD, LOL, Fortnite, CS…

And Free Fire is the only one built to perform in lower end mobile. INDO/IN/BR/MX… Even (why not?) parts of the US? Not easy to copy.

11) Shopee:

GM% is the key watchout here. Number is (very) low but trajectory is correct and there’s a rationale for this (reinvest capital into landgrab).

Would be encouraging to see a more visible roadmap on logistical/fulfillment capability.

12) SeaMoney:

In my view, still under the radar.

Long run the game in fintech needs investing and mainly lending for unit economics to work. But speed of growth of TPV shows the have ambition and traction.

13) Leadership & Talent:

Forrest Li is the CEO and founder. Strong vision + clearly in this for the long run.

One question I have is developer talent pipeline: SEA as a region is not (I believe) as strong as ROW, will need to source and build (IN being a good talent pool).

14)Anecdotes:

- 2/3+ of my FF friends played in the last day. Imagine if that DAU/QAU ratio holds…
- Shopee is in top10 app downloads for iOS and Android in BR (still a x-border CN goods play …).
- 30% of Shopee tx done via SeaMoney
- Booyah (streams) already in ~2M DAU

15)Closing:

Very bullish. Believe this can be a 150/200Bn mkt cap in ~3 years. But it might get bumpy and if you buy be prepared to stomach steep drawdowns.

Once again: Not financial advice. IANAFA. Do your own research.