Cramer has not heard of SE, so I bought

This incredibly well led Singapore based multi line Internet hyper growth stock has been on my watch list for several months. Most conscious reason for not pulling the trigger was that this story stock was too obvious, too well known, and bid up. When a caller into Mad Money Lightning Round yesterday stumped Jim Cramer, the encyclopedia of stocks, i executed the trade.

I think it has massive growth potential led by a founder CEO with the ambition and wisdom to make it happen.

I like to have a little edge and when a company is both well known and hot, i usually look elsewhere.
Thinking too much, i guess, as I had ample opportunity to buy $10-20 cheaper.

Anyway, that’s Sea Limited, symbol SE. Pretty sure i have seen others discuss that stock here.

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For those not familiar with Sea Limited, it is based in Singapore. Its target market is Southeast Asia (Indonesia, the Philippines, Taiwan, Vietnam, etc.) Its roots are as an online gaming company (called Garena), which is still the biggest segment of the company and the source of the bulk of its profits. It has since expanded into an online marketplace with a heavy social media aspect (Shopee) and SE has its own electronic payment system (SeaMoney).

SE can be likened to Tencent in some respects (gaming and commerce) and Tencent is a major stockholder. Mercadolibre can be also considered as an analog (ecommerce and electronic payments in a specific high growth region).

SE’s stock has been on an absolute tear since mid March, up more than 50%. This is after a more than 255% rise in 2019.

There is a recent Seeking Alpha article on the company that is ultimately bullish. Since I am link challenged, I will just give the title for purposes of a Google search: “Sea Limited: In All The Hot Sectors, But Need To Be Cautious” This article estimates SE’s P/S ratio in the 10-12x range, which is not nosebleed for the readers of this board.

Here is the summary from the last earnings release on March 2:

Q4 GAAP EPS of -$0.53 beats by $0.05. Revenue of $909.1M (+133.5% Y/Y) beats by $35.36M.

Fourth Quarter 2019 Highlights

Group

Total adjusted revenue was US$909.1 million, up 133.5% year-on-year from US$389.3 million for the fourth quarter of 2018.

Total gross profit was US$264.9 million, compared to US$(8.0) million for the fourth quarter of 2018.

Total adjusted EBITDA was US$(104.9) million compared to US$(203.6) million for the fourth quarter of 2018.

Digital Entertainment

Adjusted revenue was US$479.9 million, up 107.4% year-on-year from US$231.4 million for the fourth quarter of 2018.

Adjusted EBITDA was US$266.4 million, up 153.2% year-on-year from US$105.2 million for the fourth quarter of 2018.

Adjusted EBITDA margin increased to 55.5% for the fourth quarter of 2019 from 45.5% for the fourth quarter of 2018.

Quarterly active users (“QAUs”) reached 354.7 million, an increase of 64.1% year-on-year from 216.2 million for the fourth quarter of 2018.

Quarterly paying users continued to grow, accounting for 9.4% of QAUs for the fourth quarter of 2019, increasing from 5.5% for the same period in 2018.

Average revenue per user was US$1.4 compared to US$1.1 for the fourth quarter of 2018.

E-commerce

Adjusted revenue was US$358.3 million, up 182.3% year-on-year from US$126.9 million for the fourth quarter of 2018.

Adjusted revenue included US$283.5 million of marketplace revenue3, up 223.6% year-on-year from US$87.6 million for the fourth quarter of 2018, and US$74.7 million of product revenue4, up 90.2% year-on-year from US$39.3 million for the fourth quarter of 2018.

Gross orders for the quarter totaled 440.5 million, an increase of 112.9% year-on-year from 206.9 million for the fourth quarter of 2018.

Gross merchandise value (“GMV”) was US$5.6 billion, an increase of 64.8% year-on-year from US$3.4 billion for the fourth quarter of 2018.

Do note that the earnings release was in early March, so the full effect of the Pandemic was not yet apparent, although as a Southeast Asian oriented business the pandemic would have been affecting their business at that time. The next earnings are due in early June.

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Congrats, looks like this is the week to own $SE. Going up like a rocket. I was just about to put it on my watch list, wish I had done so sooner.

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I glad to see SE brought up on Saul’s board. I do not post much here because it is such an active board and I am always a couple days late to read and post anything. (just like this post). But I own many of the actively discussed stocks on this board. Like some I thought in my retirement I would be owning conservative dividend generating safe stocks. But with a HiTech background I just seem to easily do 20-30%+ gains per year and am having too much fun. Even at the bottom of the March crash, I was still well ahead since mid 2019. Now I am up YTD.

OK why are people not talking about Sea limited. Is it because it is based in Singapore? This stock IMHO is the MELI of South East Asia. I started buying SE in March and as of last week I have a full position. I kept wondering why SE was not being noticed on this board or even on the MF Premium stock board. Total silence. Hmmm lonely I am.

SE is focusing on mobile-first offerings, which is affordable in Southeast Asian culture. The cash flow from Garena gaming is used to build its mobile-first eCommerce Shopee. Shopee is now the dominant mobile e-commerce app in this region. Yes Alibaba backed Lazada is already there as a strong e-commerce competitor. But I think SE is in this market early enough with the cash to make this successful.

Sea Limited last year signed a 5-year exclusive deal with Tencent for their games. So we are not just gambling of the game success of SE Garena developed games.

So we have 100%+ growth with a strong cash flow and a growing TAM. I would like to hear some others chime in on their thoughts.

-zane
long SE

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