Sea Logistics

Will Sea Limited Continue to Beat the Market?

Companies that beat the market consistently and deliver multibagger returns accomplish these successes by being able to innovate and reinvent themselves over the years. Sea Limited (NYSE:SE) has been doing this since its founding in 2009. Founder-CEO Forrest Li and his teams have created multiple business segments that integrate with one another. Sea Limited is focused on capturing leading positions in Southeast Asia and Latin America for mobile gaming, eSports, e-commerce, digital payments and banking, food delivery services, and artificial intelligence. In the past few years some of these segments have generated triple-digit revenue growth, growing margins, and the stock has delivered multibagger returns to shareholders. 

A woman in a headscarf uses a laptop at her small business to prepare to ship boxes of goods.

Image source: Getty Images.

Solving problems, gaining ground

Li realized that social media users want better ways to connect with people. They flock to mobile gaming and eSports to compete with friends without weathering the negativity of other social sites. Combining this insight with his love of video games, in 2012 Li created Garena+, a mobile game and social platform with an interface similar to instant messaging platforms. Garena+ allows gamers to create friend groups, chat with friends online, see in-game achievements, and make in-game purchases with its virtual currency, Shells. Players are also able to form groups or clans, and chat with multiple players simultaneously through public or private channels within Garena+. 

Garena Digital Entertainment also published local-language editions of the popular mobile games like Fifa Online, League of Legends, Speed Drifters, and Arenas of Valor. Garena took this ambition to another level when it started developing its own games; in 2017, it created Garena Free Fire, which became the most played mobile game globally in 2019 and 2020;.

Investors regard any stock that produces 30% or more annual revenue growth a high performer. For several years now, SEA Limited has nearly tripled that figure. Here are the astounding results for Garena in Q4 2020:

  • Bookings for Q4 grew to $1.03 billion, up 111% year over year. 
  • The number of quarterly users grew 72% year over year to 610 million, while quarterly paying users grew 120% in the same period to 73 million. 

Branching out beyond gaming

Sea Limited’s second business arm, Shopee, enables companies and shoppers to buy and sell goods online, making purchases faster and more convenient — especially since the COVID-19 pandemic hit. Shopee operates in all seven major regions in Southeast Asia, with locale-specific branding and communications that resonate with customers locally. This specific regional approach to products and marketing has kept Shopee’s customer base growing while preventing and other big players from gaining a foothold in its native markets. 

Even before COVID, a report by 99 Firms Statistics predicted that some 95% of all commerce will take place online by 2040 . Shopee has created a logistics system that delivers products quickly at a lower cost. Garena’s mobile gaming market helps to introduce customers to Shopee, but the service’s great execution in sales and marketing keeps them coming back. 

As of Sea Limited’s most recent quarter, more customers than ever are using the Shopee platform to meet their e-commerce needs. Shopee saw one of it’s best quarters in Q4 2020, with 178% year-over- year GAAP revenue growth to $842 million. For the first time ever, its quarterly gross order volume reached $1.0 billion with a gross market value of $11.9 billion. 

Sea started its third core business arm, Sea Money, because a large portion of Southeast Asia and Latin America is underbanked and underserved financially. Forrest Li understood that mobile digital wallets help people in those regions transfer money to each other and give people the ability to make online and offline purchases, which can help grow Sea Limited’s other businesses. Sea…

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