How Sea 30X'ed revenue in 4 years!
Sea Limited. Equity Research! Part 1/3
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.
