$SE The word "efficiency" was mentioned 27 times during the call. Management talked repeatedly about the cultural changes that are now permeating all aspects of the business and decision making. As a result, we now seem to have line of sight on profitability by end of next year On Shopee. Right now the battle is just to generate any growth in GMV given repeoning+macro+reining in of S&M spend. However the monetisation levers are being pressed hard – according to my calcs this was just about the largest quarterly increase in take-rate recorded.

Michael Mauboussin's 2014 paper "What Does a P/E Multiple Mean" is a great guide to understanding the link between valuation, multiples and business economics (ROIC).
Here are some of my notes from reading it: Multiples are a shorthand for valuation, not the valuation itself. Valuation should be driven by earnings and CFs
The value of a firm can be thought of in two parts:
- steady state value where NOPAT is held constant into perpetuity
- future value creation (growth opportunities)

Updated market share data of public cloud GPU and CPU deployments

TLDR: $NVDA and $AMD continue to take share. Strong month for Nvidia with them supposedly claiming 100% of all incremental accelerator deployments in July, accounting for 84% total share (up from 82% I had in my deep dive).

Michael Mauboussin's 2014 paper on Calculating ROIC is an excellent guide to just about everything you need to know about this important metric and how to make sense of it. Here are my summary notes from reading it: ROIC is a key indicator of a company's ability to create value, its competitive advantages and capital efficiency. What's important is:
1) the absolute spread between the ROIC and the WACC, and
2) how much capital can be deployed at that spread (reinvestment rate)

Very interesting data from Jefferies showing CPU and GPU instance share in the top cloud providers. Haven't come across this level of granularity before $NVDA $AMD $INTC

CPUs - clear trend of AMD taking share from Intel, but also AWS's Graviton being pushed strongly as well Nvidia unsurprisingly dominates accelerator instances with over 80% share across all cloud providers, however interesting how much AWS is pushing its inferentia chip for inferencing workloads

$SE Overall a decent result given all the headwinds and tough comps. Some updated charts and KPIs that I track below along with some commentary: Shopee GMV sequential decline was well expected by now but still 38% growth yoy and 64% rev yoy was a bit better than I expected. Take-rates flat qoq but these should see a nice increase next quarter as commissions have been raised across the board in the last few months

Nvidia deep dive part 2 on the all-important Data Center segment.

AI training. AI inferencing. Data center-scale computing. All good fun. Check it out 👇 $NVDA

punchcardinvestor.substack.com/p/nvidia-part-… The TLDR for those who want to cut straight to the summary at the end.

$SE In my Garena deep dive last yr I used data from activeplayer.io to look at the popularity of FF & its peers. It estimates live players by scraping various sources. Here is the updated data on a time series basis. Interesting how well it correlates to bookings Active players generally grew well over 1H'21 and then started falling, which ties to the slowdown/decline in bookings we saw in the Q3/Q4 results. Player numbers kept falling in the first 3m of this yr. PUBG and Fortnite are also down from their peaks but not to the same extent

An excellent report from Bernstein on $SE addressing the key issues weighing on the stock right now - pathway to profitability, post-COVID slowdown, Free Fire, games pipeline, Tencent, and Krafton lawsuit. I am copying extracts in this thread as the detail is worth reading A great breakdown of unit economics for Shopee showing the pathway to profitability
1) take rates increasing but importantly the high margin items of comms+ads - currently v. low but if that can increase to 50% of take rate in the outer years, GP % may go from c.10% today to 50%

"Alchemy" by @rorysutherland is a fantastic, thought-provoking book about the human psyche, summoning brilliant ideas in marketing and business, and viewing the world from a different, less logical, viewpoint.

Here are a couple of my favorite takeaways: @rorysutherland Most of the biggest, most successful business ideas in the world initially defied conventional logic.

Imagine proposing some of these ideas to a group of skeptical investors:

Richer, Wiser, Happier by @williamgreen72 is a cracker of a book which distills investment and life wisdom from many of the world's most iconic investors, as well as some lesser known ones

Below are some of my notes with my favourite quotes and lessons, organised by investor @williamgreen72 1⃣ Nick Sleep and Qais Zakaria - my favourite chapter of the book, profiling their focus on the long game, destination analysis and what they believe is the most powerful business model of all - scale economies shared

$SE Up until 3 months ago it seemed like nothing could go wrong for Sea. However ever since the Q3 results where Garena's QAU slowed considerably, the narrative has completely flipped, and with today's Tencent trimming news it feels like nothing could go right.
A few thoughts: Biggest change that seems to have happened is insto valn of Garena has gone from that of a normal gaming co (15-18x EBITDA as per broker SOTPs) to that of a 'melting ice cube', around 8-10x
To me it seems a bit premature to call the death of FF but the next few qrtrs will be key

The final part of my $SE series, which ties together all my earlier deep dives into the overall valuation and returns for the stock. I also cover Sea Capital, AI Labs, management, culture, and Q3 results.
punchcardinvestor.substack.com/p/sea-ltd-part…

Key takeaways: Overall I believe the risk-return is favourable at current prices: 10%+ IRRs over the next 4-5yrs should be achievable under a conservative set of assumptions. Of course the bull case could be much greater than that. The downside I believe is somewhat limited for LT holders

$SE. Revenue of $2.7bn (vs. consensus of $2.5bn), strong 122% growth on what was already a huge quarter last year.
Chris Feng promoted to Group President (effectively 2IC to Forrest). A great move given how critical he is to the business Slowdown in Garena is somewhat concerning - broadly flat q-on-q. Something ill need to look into. Free Fire Max will hopefully lift Q4 results

Started a position in $MELI this week after developing a greater appreciation for the strength of the biz from my work on $SE. I think Shopee has a realistic chance of becoming #2 regional player, but MELI's lead seems unassailable. Summary of my thesis and what I like about it: LATAM has a broadly similar online penetration of retail as SEA (<10%), which should provide a tailwind for many years to come. Ecomm TAM (currently at ~$70bn) is expected to grow at ~20% over the next 5 years. MELI has dominant mkt share at ~30% which I expect it will maintain

Part 3 of my $SE deep dive, focusing on SeaMoney. I think this has become the most interesting part of SE for me. It not only creates significant value for the core biz but has the potential to become a v valuable franchise in its own right
punchcardinvestor.substack.com/p/sea-ltd-part…
Summary thread: With almost 2/3rd of SEA pop'n unbanked/underbanked and v. low penetration cashless payments, there is a large opportunity for tech players to provide these services more efficiently than traditional banks and build scalable payment/fintech verticals with annuity-like cashflows

$MELi's MercadoPago provides an almost perfect case study of what a scaled up SeaMoney could look like, leveraging the strong growth of its ecomm business to build out a full online-to-offline ecosystem of financial services. Summary thread below 👇👇 $SE Its evolution was a classic fintech playbook: begin as a closed loop network serving only the MELI marketplace, open up to off-platform merchants, introduced mPOS devices for offline transactions, launch credit lending, e-wallets, bill payments and asset mgmt most recently

Part 2 of my $SE deep dive, focusing on Shopee. Here I cover Shopee's blueprint for success, the competitive landscape, an assessment of Shopee's moat (does it have one?), TAM, pathway to profitability, and valuation.

punchcardinvestor.substack.com/p/sea-ltd-part…

Some key snippets below: 1/ This may well be my favourite chart of the piece. The superapp landscape of SEA showing the key competitors and the ever evolving convergence between them. Competition is dynamic and its likely that this will look different even a year from now (eg. could Grab enter ecomm?)

$SE. Been doing a bit of work on marketplace take rates as part of my upcoming Shopee deep dive. I realised there is quite a bit nuance to this topic which has important implications on how profitable Shopee can get in the future.
Sharing some thoughts below for feedback: 1/ Everyone is familiar with the below chart - as GMV has increased Shopee has been able to raise its take rates as it generates more value for its merchants and the whole ecosystem. This is the pricing power that comes from having scale

Very excited to drop Part 1 of a 4 part deep dive on $SE, a company I first invested in 2018 and have been following very closely since. This part focuses on Garena - its moat, sustainability of FF, TAM, M&A strategy, & valuation
punchcardinvestor.substack.com/p/sea-ltd-part…
Some key snippets below: Free Fire looks to become one of the key winners of the battle royale genre and an enduring franchise with staying power. Most of the current most popular online games are 4yrs+, some older than 10yrs, which suggests FF can have an extended lifecycle if Garena keeps executing

1/ I've been doing quite a bit of work on the gaming space lately, and one thing that really surprised is just how capital efficient $GRVY is. Despite not having the highest margins, it's got practically the highest returns on capital of any gaming company. ~40%; insanely high. 2/this is interesting to me as one of the common criticisms of $GRVY is that it has poor capital allocation/hoards cash etc, but despite its huge unused cash pile it's still more efficient than any of its peers. A large part of that is to do with the fact that other companies