Sea Limited. Equity Research! Part 1/3
The Story of Sea, Business Model, Garena, Shopee, and Monee
In Europe and the US, e-commerce has been a significant part of people’s shopping habits since the late 1990s. Broad internet access, easy-to-use financial services, and a developed logistics infrastructure have supported a steady adoption of this new commerce method.
However, on the other side of the world, in Southeast Asia, the environment was not as conducive for the development of E-commerce!
Internet access was low, more than 70% of people were underbanked, and there was a dire need for new infrastructure.
This is both a challenge and an opportunity!
Sea Limited saw it as an opportunity, so they began aggressively investing to build a mobile-first, fintech, e-commerce, logistics, and gaming technology company.
They were absolutely right, and thus their business exploded.
From 2017 to 2021, SEA’s revenues almost 30X’ed from $346M to $10B!
On the backs of this astronomical growth, SEA’s stock price jumped over 2,000% from its IPO levels, peaking in October 2021, at a market cap of $197B.
However, after the bursting of the 2021 technology bubble, SE 0.00%↑ collapsed 90%, but has since recovered somewhat, trading 57% below the peak. Despite the stock performance, the company has never been stronger.
In this 3-part Deep Dive, I will explain everything there is to know about the company.
In this article, I will tell you their founding story and expansion from Garena to Shopee and Monee!
Part 2 will tackle challenges and competition and explain their competitive advantages.
I will close out this Deep Dive in Part 3 by taking a look at their opportunities, financials, and valuation!
Let’s go.
1. The Story of Sea Limited
2. Business Model
3. Garena
4. Shopee
5. Monee (SeaMoney)
6. Parts 2 and 3
1. The Story of Sea Limited
Forrest Li founded the company in 2009 as Garena Interactive, a digital entertainment business primarily focused on the development and distribution of mobile video games.
The company started small, but significantly accelerated in 2010 after receiving investment from the Chinese technology and video game conglomerate Tencent.
The affiliation with Tencent was instrumental in Garena receiving the regional distribution rights for the highly popular League of Legends (LoL) video game, as Tencent was an important investor in LoL developer Riot Games.
LoL put Garena on the map, enabling it to quickly gain millions of users and secure other gaming partnerships.
The video game business was not enough for Forrest Li, so in 2014, he started AirPay, a financial services business aiming to capitalize on the massive opportunity to serve the close to 300M large underbanked population of Southeast Asia.
Additionally, the mobile and internet penetrations were growing rapidly, but the region was lacking a comprehensive e-commerce player, alike to Amazon in the US. So, in 2015, they started Shopee, a mobile-first, dedicated e-commerce platform.
As their financial services and e-commerce businesses grew, it became clear they had much more potential than the gaming business.
So in 2017, in preparation for the IPO, the name of the company was changed to SEA Limited.
The name Sea was chosen because it is an acronym for Southeast Asia, the home region of the company.
Southeast Asia
The fact that Sea was picked as the name of the company really underscores how important it is to fully grasp the regional dynamics to understand the company. Their business model, past, future, and present are linked with the destiny of the region.
Earlier in the year, I wrote a report on Grab, in which I gave a brief intro to the region.
“Southeast Asia is a region of 11 countries geographically located between the Indian and Pacific oceans. Home to 700M people, scattered across a vast region of over 32,000 islands and the mainland that borders China. The region is renowned for huge urban cities, such as Bangkok, Singapore, Kuala Lumpur, and Saigon, which mix with the natural beauty of waterfalls, jungles, beaches, and tropical islands that inspired fauna in the movie The Avatar.
Historically, Southeast Asia has been one of the poorest regions of the world, however, things have been changing rapidly. Thanks to industries such as tourism, natural resource extraction, and manufacturing, the region has experienced absolutely stunning growth, especially in the last 2 decades.
The average GDP per capita of the Association of Southeast Asian Nations (ASEAN) countries increased from $1,135 in 1999 to $4,021 in 2016. Additionally, the poverty rate decreased to 14% from 38%. Whilst, the number of paved roads grew threefold from 2000 to 2020, with 95% of the population having access to electricity, up from 60%.
Grab has benefited massively from the development of the region and has become the first app all tourists download. Today, Grab’s bright green color is a mainstay of the region’s megacities. However, as Grab has mostly cornered large towns, it is increasingly focusing on smaller towns and islands.” Grab. The Makings of a SuperApp! Equity Research! Ray Myers from Global Equity Briefing.
2. Business Model
Shopee operates 3 distinct but somewhat linked businesses.
Garena – Video game platform.
Shopee – E-commerce, logistics, and food delivery business.
Monee – Financial services.
3. Garena
Garena is a video gaming platform launched in 2009 that enables gamers to download and play popular mobile and PC games. While Garena is especially strong in Southeast Asia, it has a growing presence in other regions such as Mexico, India, Brazil, and Taiwan.
Their gaming platform is multifaceted.
Garena is a video game developer. In the last few years, they have invested heavily in building an in-house game development team.
They are most known for their global mobile sensation, Free Fire.
Free Fire is a battle royale online mobile multiplayer game. With 54M MAUs, it’s one of the most popular mobile games in the world. Udonis, a mobile marketing company, estimates that Free Fire has been downloaded 1.3B times, generating $2.6B in lifetime revenues for Garena.
Additionally, Garena is a gaming co-developer and distributor. They partner with gaming studios by providing funding and handling marketing, distribution, localization, and most importantly, monetization. By partnering with studios early, Garena can provide actionable insights and advice to improve the game and make it more successful.
For instance, Garena partnered with a South Korean gaming studio to co-develop and release Black Clover M: Rise of the Wizard King. This mobile game based on Anime was downloaded 5M times in the first 10 days.
Furthermore, Garena is a regional gaming distributor and localizer for large global video game companies. US and European gaming studios often struggle to gain traction in Asia. Garena can tailor games to the preferences and nuances of the Southeast Asian market, potentially incorporating culturally relevant themes or gameplay mechanics that resonate with local players.
Garena primarily operates a freemium business model. Games can be downloaded for free, but users must pay for various premium features, upgrades, and in-game items. Additionally, some games have in-game advertisements.
As of Q1 of 2025, Garena has 662M users!
In the graph above, we see that from 2017 to 2021, Garena experienced enormous growth, with active users exploding from 88M to 654M.
The release of Free Fire and Covid lockdowns were the primary drivers of this expansion.
Unfortunately, Garena wasn’t been able to retain users, as Free Fire was banned in India and its popularity fell in other regions as well. Active users decreased by 26% in 2022 to 486M. However, Garena has experienced incredible recovery, reaching a new all-time high of 662M active users in Q1 2025.
Paying users also peaked in 2021 at 77M, around 12% of active users. The share of paying users has plateaued at around 9%.
Falling active users and a decrease in the share of paying users led to revenue declining 56% from $4.3B in 2021 to $1.9B in 2024.
This is a much steeper decline than the 6% decrease in active users Garena suffered in the same period.
The discrepancy can be explained by worsening user economics.
In 2021, when Garena’s revenues peaked, they generated $6.61 and $55.96 from each active and paying user. When active users fell the next year, revenue per paying user increased by 59% to $88.93, likely due to Garena more aggressively pushing monetization features to counteract the revenue decline.
This was unsustainable, and revenue per paying user has fallen 66% from 2022 to $30.15.
Garena’s rollercoaster is a clear example of the main pitfall of the video game business.
Video games are fundamentally hit-driven businesses!
The majority of the industry’s revenue is generated by a few blockbuster games. Additionally, video game trends are constantly shifting, with new brands emerging and old brands dying. We will explore this aspect of the video game industry in the risk section of this report.
4. Shopee
The development of the Southeast Asian e-commerce market is many years behind China, the US, and the EU, but in 2013, the difference was even starker.
In 2013, less than 1% of Southeast Asian retail sales were done online, compared to 7.8% in Europe and 7.2% in China. The one regional outlier is Singapore, whose e-commerce penetration was 5.1%, almost on par with the US.
As a Singaporean, Forrest Li saw the progress in Singapore and realized that there is a huge opportunity to tackle this market elsewhere in the region.
Thus, in 2015, Garena Interactive founded Shopee, a dedicated, mobile-first e-commerce marketplace.
From those humble beginnings, Shopee has become the largest e-commerce marketplace in the region, facilitating $105.6B in commerce!
Since 2017, Shopee GMV has grown with an amazing 57% CAGR!
Growth has slowed down since those early years, but it still remains strong. In the last 3.25 years, the GMV has increased by 69%, an average of 17.5% per year.
Let’s look at the slide from Sea’s 2018 Investor Presentation to understand how Shopee operates.
Shopee operates an e-commerce platform similar to Amazon and Mercado Libre. Customers can find thousands of various items sold by thousands of different merchants. The platform is available in Singapore, Malaysia, Indonesia, Thailand, Vietnam, the Philippines, Taiwan, and Brazil.
Shopee enables efficient discovery of items, manages the payment process through its own in-house payment infrastructure, and facilitates quick and affordable delivery of packages through 3rd party and in-house logistics operations.
Additionally, Shopee operates a food delivery service in Thailand, Vietnam, Malaysia, and Indonesia. While it initially was small, as of 2025, Shopee Food has grown to be the 3rd largest food delivery platform in Southeast Asia.
In the LTM Q1 2025, 11.4M orders were made on Shopee, with the average check being $9.26.
In the graph above, we see that the number of orders has exploded, growing with a 70% CAGR since 2017!
This is quite noticeably faster than the 57% GMV CAGR, resulting in the average order size falling by 45%, from $16.75 to $9.26. A smaller average order size is logical, as Shopee has shifted its focus from higher ticket items towards all items.
Shopee wants customers to use the platform for everyday purchases, not just for infrequent, higher-ticket items. The average order size doesn’t really matter, as long as the total GMV keeps growing.
Shopee makes money in a few key ways:
Shopee doesn’t charge a listing fee, but it does charge a 2.12% transaction fee and a 2.12% marketplace fee.
Shopee Mall is a premium offering that comes with better visibility and features official brands and authorized resellers. For Shopee Mall, sellers pay between 4.24% to 6.36% of each sale, depending on the product category.
A 3.18% fee is charged to participate in the 10% Shopee coin cashback program. Buyers receive 10% of their purchase price back in Shopee coins, which can later be redeemed on the platform. This increases conversions for sellers and drives Shopee customer loyalty.
Participants in the Rebate NOW offering pay a 4.24% fee. This program gives better visibility to Rebate NOW placements and an instant discount to the shopper, increasing conversions. Discounts are often less than what is charged to the merchant.
To enable free shipping, sellers pay a 5.3% fee for items above RM15 ($3.51) and 3.18% for items above RM40 ($9.37).
This is the fee structure in Malaysia, in other regions, it might be different.
Additionally, Shopee charges various other advertising fees for more visibility in search, banner ads, and more.
The company continues to innovate and come up with new ways to serve its merchants, increasing revenues and GMV take-rate.
In LTM Q1 2025, Shopee made $13.2B in revenues, up from just $9M in 2017!
Since 2017, Shopee’s revenues have grown with a CAGR of 173%, much faster than the 57% GMV CAGR.
This is due to Shopee growing its take rate from essentially 0% in 2017 to 12.5%!
Shopee is well-positioned to keep growing the take rate for years to come.
5. Monee (SeaMoney)
In 2014, around 50% of adults in Southeast Asia didn’t have access to a bank account, and an additional 20% had access to only limited banking services, close to 300M people in total.
This was a problem for Garena Interactive and other digital businesses.
How do you monetize your video games without collecting online payments?
How do you grow an e-commerce business if most customers don’t have credit cards?
The answer is simple, create a Fintech division and revolutionize financial services in the whole region!
Thus, in 2014, Garena Interactive started AirPay, a digital payments platform.
The fintech business started slowly, originally just facilitating monetization of Garena, though cash top-ups from a few partner retailers. Later, as Shopee began e-commerce operations, it became instrumental in making the shopping experience better.
Today, the division is known as Monee and offers a full suite of financial services.
A mobile wallet that is fully integrated with the Shopee e-commerce store and food delivery to streamline the payment process and make purchasing as easy as possible.
Additionally, through various partnerships, the wallet can be used to pay bills, purchase movie tickets, buy insurance, and more. The company earns various transaction and processing fees from these merchants and from others who accept the ShopeePay wallet.
For the insurance business, Monee mostly acts as an agent. Meaning they don’t hold the risk of paying out the insurance, instead Monee collects a processing and management fee from the insurance underwriter.
Additionally, apart from processing payments on their own platforms, Monee provides payment processing services for other digital businesses, collecting a transaction fee.
But the largest and most important revenue source for Monee is lending!
Monee offers buy-now-pay-later loans to Shopee customers, allowing shoppers to purchase goods and pay for them in a few instalments, interest-free. This increases average basket sizes, driving GMV growth.
Additionally, customers can get short-term 3–12-month cash loans that can be used outside Sea’s platforms on anything the borrower wants. Even so, it is quite likely that a large share of this loan is spent in Sea’s ecosystem. This deepens customer relationships, supporting customer loyalty and increasing the overall spend on Sea’s platforms.
Furthermore, to support Shopee merchants and increase the supply of goods on the marketplace, Shopee offers them loans. Merchant loans solidify their relationship with Shopee, making it less likely that a merchant would use another commerce platform, such as Shopify, Lazada, Tokopedia, or others.
To facilitate this lending business, Monee has full banking licenses in Singapore, Indonesia, and the Philippines.
And facilitated they did, as Monee continues to issue loans at an outstanding pace.
As of Q1 2025, the principal of outstanding loans reached $5.8B, an increase of 13.7% Q/Q and 75.8% Y/Y!
As a result of outstanding loan origination and synergies with Sea’s other platforms, Monee’s revenue has just exploded.
As of LTM Q1 2025, Monee’s revenue was $2.66B, more than doubling in just 2 years!
In 2017, this segment was irrelevant, making just $16M. That means that Sea has been able to grow the financial services business with a CAGR of 102%, an absolutely outstanding growth!
6. Parts 2 and 3
Thank you for reading so far.
In Part 2 of this report, we will look at:
Competitive advantages (Logistics?)
Competitors (TikTok Shop?)
Operational risks (Gaming is a hit-driven business?)
The Deep Dive will conclude with a look at opportunities (Advertising and Lending), financial analysis, and valuation in Part 3!
Thank you for reading Global Equity Briefing!
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