Notes on Sea Ltd

There are a few e-commerce plays that are going strong - SHOP, MELI, SE and ETSY.

Of them, I have a small position in SE, a bit under 5%. It’s very out of my wheel house, but I’ve found several great deep dives and a few folks on Twitter that follow it closely. I like it more than the e-commerce marketplace pure-plays (SHOP, ETSY) given how gaming division is funding the rest of the companies strategies. As for MELI, I have owned them before and it is obviously also a strong company with well-honed divisions that extend the marketplace (payments, shipping). But with SE, gaming is having incredibly strong execution, and has become a great way to fund their other strategies.

It is vital to understand how their 3 divisions tie together. Gaming success funds the e-commerce and e-wallet/payment services. Both gaming and e-commerce use the payments. They are spreading internationally first by gaming, then going after highly localized e-commerce. All divisions are mobile-first, and all focus on increasing engagement.

They are not based in or operating in China. This is a Singapore-based company focused on SE Asia [SEA] countries (Singapore, Vietnam, Philippines, Malaysia, Indonesia, Taiwan, and Thailand), but is also expanding into Latin America (mostly Brazil, with gaming and e-commerce) and now also India (with gaming).

An easy comparison is Tencent, which had a very similar cross-focus (where early successes funded other directions). In fact, Tencent owns 20% of the company - which is something to watch (the SE Asia regulators have warned that they don’t want Chinese companies running e-commerce/e-wallet services).

If you want to know more, dig into these links.

Sea Ltd

Twitter follows:

Julie Young deep dive:

  • Tencent of SE Asia
  • started 2009 by Forrest Li as comm tool for gamers
  • Gaming funds the e-commerce and e-wallet spread

Garena: digital entertainment and gaming
Shopee: mobile e-commerce
SeaMoney: e-wallet, digital payments, financial services

Started licensing League of Legends in 2010, released Free Fire in 2017 (battle royale, similar to PUBG and Fortnite). Most downloaded mobile game in 2019. May 2020 set record with 80M users in a day. [Later in summer had 100M daily user record.]

Launched in 2015, mobile shopping platform w/ integrated payment, distrib/logistics and fulfillment services. Social features like in-line mobile games, live streaming and ability to follow other users. Makes money from tx fees and ads.

Major competitor in SE Asia is Lazada (Alibaba funded). Shopee kept asset light, only have marketplace, not inventory. Focus on high margin products purchased frequently (not computers, electronics). Shopee App ranks #1 in most of SE Asia by downloads, MAUs and time spent. Have expanded into Latin America esp Brazil, where main competitor is Mercado Libre (MELI).

SeaMoney: E-wallet, credit services and payment processing. Integrated into Shopee but also standalone.

SE Asia is very underbanked. Indonesia has <50% w/ bank. Very few <10% have credit cards. Competitors exist but China-based (AliPay and Wechat Pay), which are having issues due to reluctance w/ Chinese cos.

Seifel deep dive:…
Twitter recap:…

  • 3 business verticals that create virtuous cycle, gaming funds the e-commerce spread, both use SeaMoney
  • all verticals focus on mobile-first & increasing engagement
  • FreeFire game in Q220 has >1B revenue, 100M peak DAU, 3rd most downloaded game; can increase monetization of it more
  • e-commerce is seller/buyer marketplace, enhanced with Shopee Games (in-line games), Shopee Coins (virtual coins for engagement, for discounts), Shopee Live (video streaming), Shopee Web Chat (live chat with sellers)
  • has becoming largest and fastest growing e-commerce platform in just 5 years
  • SEAsia population 670M people, undergoing massive shift to digital
  • presence in Singapore, Vietnam, Philippines, Malaysia, Indonesia, Taiwan, and Thailand
  • recent expansion into Latin America (Brazil) with Garena (FreeFire) and Shopee
  • India had PUBG ban, Garena having huge sudden success there

James Booth view:…

  • #1 download and engagement metrics
  • look at improvement in unit economics - EBITDA per order
  • EBITDA positive in Taiwan, other countries getting there one by one
  • Indonesia is largest market atm, bullish if it goes pos

SE overview thread:

  • Mostly in SE Asia but Garena big in Latin American and India, and Shopee appearing in Brazil.
  • Modelling after Tencent, who is 20% investor.

Garena has high growth & margins/profits, and is moving into other geographies. Top game is Free Fire, a battle royale mobile game. Also acts as SE Asia distributor of other games like Call of Duty Mobile and FIFA Online. Feeds the other businesses (flywheel, some call it metaverse).

eCommerce and Payments in developing SE Asia countries w/ high # of underbanked but strong currencies & economies (Indonesia, Malaysia, Taiwan, Thailand, Singapore, Philippines).

Shopee moving into Brazil, is in top 10 app downloads for iOS/Android.

30% of Shopee tx paid via SeaMoney.

Lots of competition in payments, including Lazada (Ali Pay).
Ecommerce unprofitable (but greatly improving).
Tencent is 20% owner which gives shades of China, make sure it doesn’t grow (causing countries to get leery).

Market penetration stats for Shopee:…

Shopee vs Lazada take:…

  • Lazada has logistics, Shopee has better mgmt
  • Lazada better at electronics, Shopee fashion, health, cosmetics
  • Shopee better at localization

Shopee vs Lazada take:…

  • Shopee focuses deeply on localization, culture
  • Self-funding its own growth from Garana (gaming)
  • Entering Latin America, Shopee now 20% market share in Brazil

Google e-Conomy SE Asia 2020 Report:

  • Pandemic boosted long term GMV projections from 150B to 172B by 2025

Earnings from last 2Q next.

long SE



Slide deck:…
CC transcript:…

Market share increasing:…
Roach take:
Twitter takes:……

Adj Revenue 1.29B +93.4%, +40.8% seq !!
- Digital Ent 716.2M +61.6%
- E-commerce 510.6M +187.7% !!
-- Marketplace Rev 378.7M +174.8% 
-- Product Rev 131.9M +232.5% !!
- Digital Finance 11.9M +327.7%

Gross Profit 200.8M +106% !!
Adj EBITDA 7.7M (vs -11.0M) swung pos
- Digital Ent 436.2M +65.4% !!
- E-commerce -305.5M (vs -248.2M)
... margin -59.8% (vs -140%) !!
- Digital Finance -110.1M (vs -18.1M)

Opex 573.6M +72.8%
- R&D +115%
- S&M +95%
Cash 3.4B

Digital Entertainment (Gaming):

QAUs 499.8M +61%
QPUs 49.9M +91% !!
ARPU 1.40

  • Free Fire >100M peak DAUs
  • highest grossing mobile game in LatAm and SEAsia, 3rd globally


GMV 8.0B +109.9% !!
Gross Orders 615.9M +150.1%, +3890bps seq !!
- Shopee Mall +210%
- Indonesia 260M +130%
GMV 8.0B +109.9% !!, +3560bps seq !!

  • top 3 worldwide in Shopping

Digital Finance:

TPV 1.6B
QPUs 15M

  • 45% of Indonesia Gross Orders used it

11.11 shop day:…

  • 200M items sold +186%
  • 20M hrs of livestreams on Shopee Live
  • 2.5B in-game games played
  • Charity concerts on Shopee Live watched 1.2M times

Thread on Brazil strategy.…

  • Launched 14th mo ago (Aug 2019) as 8th market
  • Phase 1: Local team and marketing, social media blitz w/ influencers, cross-sell with FreeFire, target young and underserved in T2 cities, free shipping.
  • Phase 2: Now target Brazil sellers w/ no commission, launch in-app games in Shopee. Streaming to come.
  • Search, downloads & social media trending up. No details yet on #s.
  • If works, can spread into other countries w/ young gaming segment


Slide deck:…
CC transcript:…

Mads video CC walkthru:

Julie Young recap:

Revenue 1.2B +98.7%, +37% seq !!
- Digital Ent 569.0M +72.9%
- E-commerce 618.7M +173.3% !!
-- Marketplace Rev 467.1M +163.5%
-- Product Rev 151.6M +208.4%
- Digital Finance 14.4M +747% !!

Gross Profit 407.6M +100.6%
Adj EBITDA 120.4M (vs -30.8M) swung pos
... margin 10% (vs -5%)
- Digital Ent 584.5M +119.8% !!
- E-commerce -$301.6M (vs -253.7M)
... margin -48.7% (vs -112%) !!
- Digital Finance -149.3M (vs -33.6M)

Opex 772M +95%
- R&D +139%
- S&M +87%
Cash 3.5B

Digital Entertainment (Gaming):

Bookings 944.7M +109.5%
QAUs 572.4M +78.3%
QPUs 65.3M +124% ^^ !!!!
... 11.4% of ttl (vs 9.1%) +230bps

  • 50% derived outside SE Asia !!

  • FreeFire is highest growing mobile game in LatinAm and SEAsia
  • localized content & experiences
  • adding more social/community features (migrating to platform?), like hang-out spaces
  • avg 1/4 users per day used new hang-out spaces
  • launched Fantasy Town farming sim w/ local content (Indonesian landmarks)
  • Esports tournaments for Free Fire have had 150M views online so far


Gross Orders 741.6M +130.7% !!
Gross Merch Value 9.3B +102.7% !!
Adj EBITDA/GO -0.41 (vs -.79) !!

  • Shopee was 2nd most d/l app globally in Shopping category
  • #1 in SE Asia in downloads, MAU & time spent
  • Double 11 (11/11) Sale - Shopee subsidized all shipping
  • 48M hours watched of Shopee Live streaming
  • Indonesia 310M orders, daily avg 3.4M 124%

Digital Finance:

TPV 2.1B
QPUs 17.8M of mobile wallet

  • 30% of Shopee tx paid by mobile wallet in Oct’20

  • Taiwan approved license for e-payments on 11/17/20 (only foreign co to)…
  • w/in 6 months can apply for add’l license for P2P payments
  • was approved as Tencent only owns 20% (30% makes it “Chinese owned” in Taiwan’s eyes)

long SE


If Sea’s e-commerce business is “asset-light” and they don’t own the inventory, how can they have negative gross margin in the e-commerce segment? Does anyone here understands the drivers?


From the latest FS e-commerce had around 600m in quarterly revenues and 1/4 of it is 1P and 3/4 is 3P (platform).

1P will never have high gross margin by definition. The positive here is that most of their merchandise is female oriented - clothes etc and this segment has higher margins compared to some other categories where Lazada is stronger - e.g. electronics which have lower gross margin by definition. But if their e-commerce will be dominated by 1P and not 3P the margins will be low even in mature state.

I haven’t seen their business plan on e-commerce 1P vs 3P, perhaps someone has more details on how they are planning to grow e-commerce aside from general comment that they will dominate e-commerce in SEA?

And agree that even 3p margins now are very low and I don’t have an answer on that.

And by the way, am I the only one who is somewhat frustrated with their earnings call, where only a corporate officer replies to the questions of analysts and neither CEO nor CFO do not do it? Seems unnatural and weird to me.

1 Like

Just to help address:-

If Sea’s e-commerce business is “asset-light” and they don’t own the inventory, how can they have negative gross margin in the e-commerce segment? Does anyone here understands the drivers?

And agree that even 3p margins now are very low and I don’t have an answer on that.

They don’t have negative gross margin but wafer thin positivegross margin. What they do have is massive negative net margins - this is driven by the $400m+ spend in sale and marketing each quarter.

I think that I’ve mentioned this before… they have the most enormous online/offline, print and on air advertising budget I have seen in the 12 years in Singapore - Lazada is non-existent by comparison. Having Christiano Ronaldo as their brand ambassador across their campaigns undoubtedly costs them a fortune too.

We have all seen what Amazon and Shopify is prepared to do to invest in growth and forsake profitability - Shopee takes this to another level that I have never seen before.



the market SE serves now is indeed growing and it has a bright future serving the geographical markets it now serves.

But is there any intention or avenue to go into China as well? or is that pretty much have to be left to the AliBaba’s? It is definitely interesting that Tencent has a stake in Sea.


Ant, no one would ever question negative operating and net margins for a company in this stage of growth. But gross margin in 3p/platform business is 7% in their last reported quarter and 1p/direct sales gross margin is close to 0 (which is normal).

I’ve never seen such gross margins for platform e-commerce business. For example, a comparable company Meli has GM around 50, Etsy has in 70s.

My take is that they’re either

  1. have super low take rate or
  2. they put some additional expenses into cost of sales

I hope it’s 1 rather than 2 because accounting flag would be worrisome. If I’m not mistaken they used to report adjusted revenues and SEC forced them recently report GAAP revenues. In any case such a low gross margin is strange and worrisome.

It’s 80b+ company today. Considering that SE’s gaming business could have hit a peak now (possibly), their future returns most likely will be driven by

  1. Ecommerce business
  2. Fintech / payments

Ecommerce business raises questions which need to be answered and fintech is at the moment negligible but provides nice optionality to the bull thesis.

We should also keep in mind that SEA region is 9 countries - yes, 600m people, but 9 different legal systems, cultures etc. I’m pretty sure the business plan to become a kind of Alibaba+Tencent+JD of the region will be less smooth for SE compared to BABA’s path in China for example. SE will always have local competitors from Indonesia or Thailand but most likely no other pan-region competitors aside from Lazada.


If Sea’s e-commerce business is “asset-light” and they don’t own the inventory, how can they have negative gross margin in the e-commerce segment? Does anyone here understands the drivers?

1)Sea paid a lot of money on advertisement.

2)Taiwan is SE’s first place to develop its e-commerce. For first 2 years,it is free of commission charge to any seller in platform. 2 Years later the commission fee is 3-7% of the item price with maximum ~$6-$7/per-item to SE.

3)SE subsidized for free shipment in first 2 years and successfully gain more than 10M members in Taiwan,you can imagine how much money SE had paid for the shipping fee. After 2 Years subsidy, buyers have to pay $2-$4/per-shipment.(SE can earn $0.5~$2/per shipment others to delivery company)

SE started their Taiwan E-commerce in 2015 until 2019 SE reported that they has positive gross margin in Taiwan market. Although SE has biggest market share, local companies such as Momo and Pchome try to find their way to compete with SE after subsidy ended.In 2020, SE still occupy the biggest e-commerce market share but the competition remains.


For those interested in SEA, Mercadolibre, Shopify, Amazon, Tencent or Ali Baba or even Etsy I guess, this just happen to come across my desk…

I don’t have a Fitch account and haven’t accessed the report but it looks like an interesting series of findings.


(The following statement was released by the rating agency)
Related Fitch Ratings Content: China on the Cutting Edge of E-tailing: Intense
Competition Promotes New Sales Models

Fitch Ratings-Shanghai-27 November 2020: Intense competition in China’s
e-tailing sector has prompted major players to develop new sales models to
boost growth, says Fitch Ratings. These frontiers include: new retail, social
retail, live video broadcast retail, community group-buy retail, and
consumer-to-manufacturer retail. There are opportunities in these new
frontiers for start-ups, but we expect most of them to eventually fold, or be
acquired by e-tailing competitors or other tech giants eyeing the enormous
e-tailing market. The new models share common features, such as
consumer-centric promotion to lower marketing costs, fewer intermediary
processes to reduce expenses, and digitalisation of consumers’ behaviours and
preferences for product design and manufacturing. Their success is based on
China’s large urban population and high urban population density, which give
e-tailing operators economies of scale Continued urbanisation and the steady
rise in internet and online shopping penetration are likely to continue to
spur new retail trends. The special report, “China on the Cutting Edge of
E-tailing”, is the fourth and final report in Fitch’s series on the Chinese
e-tailing sector, and is available at or by clicking the
link above. The previous reports, China’s Structural Shift Towards Online
Retail (, E-tailing Awareness
Boosts Corporate Growth (, and
China’s E-tailing Operators Evolve to Prosper
(, and related research, China’s
E-tail Boom Raises Risks for Offline Retail Sector
(, are available by clicking the
titles or at


This article from Bloomberg ,something seems vey positive for SE…

1 Like

Follow the “Stack” as it relates to SE. Prepare to look one layer deeper when it comes to SE gaming. In tomorrow’s e-commerce, gaming will not be gaming, gaming will be eyeballs. Eyeballs will be customers, customers will be e-commerce, in-app, one-click purchasing. Eyeballs will be marketed to programmatic advertising and back to e-commerce.

One-Click Purchasing

Listen to ARK and Gary Vaynerchuk address this more clearly than I.


If Sea’s e-commerce business is “asset-light” and they don’t own the inventory, how can they have negative gross margin in the e-commerce segment? Does anyone here understands the drivers?

Other than looking at a snapshot of GM, it’s important to look at the trend as well.

GM for E-commerce
2018: -65.3%
2019: -10.3%
9mo 2020: 5.6%

They incurred huge costs of rev as they built up their e-commerce platform from scratch in June 2015. Over time, we can see the benefits of operating leverage in the business.

In Q3 2020, Shopee’s take rate was ~5% while MELI’s was 12.3%. Seems like there’s room to grow take rates.