$SE Q3 Report

This morning Sea Limited reported its Q3 earnings. I know it has been brought up at least a few times on this board as it certianly checks the box of being a hypergrowth company. It is one of my largest holdings at close to 10% of my portfolio. Here were the highlights, bolding is mine -

Third Quarter 2020 Highlights

? Group
o Total GAAP revenue was US$1.2 billion, up 98.7% year-on-year.
o Total gross profit was US$407.6 million, up 100.6% year-on-year.
o Total adjusted EBITDA was US$120.4 million compared to US$(30.8) million for the third quarter of 2019.

? Digital Entertainment
o Bookings were US$944.7 million, up 109.5% year-on-year.
o Adjusted EBITDA was US$584.5 million, up 119.8% year-on-year.
o GAAP Revenue was US$569.0 million, up 72.9% year-on-year from US$329.1 million for the third quarter of 2019.
o Our self-developed global hit game, Free Fire, continued to be the highest grossing mobile game in Latin America and in Southeast Asia in the third quarter, according to App Annie

? E-commerce
o GAAP Revenue was US$618.7 million, up 173.3% year-on-year.
o Gross orders totaled 741.6 million, an increase of 130.7% year-on-year.
o Gross merchandise value (“GMV”) was US$9.3 billion, an increase of 102.7% year on-year.
o Adjusted EBITDA was US$(301.6) million compared to US$(253.7) million for the third quarter of 2019. Adjusted EBITDA loss per order decreased by 48.1% year-on-year to US$0.41, compared to US$0.79 for the third quarter of 2019.
o Shopee was also the second most downloaded app globally in the Shopping category in the third quarter, according to App Annie

? Digital Financial Services Update
o Mobile wallet total payment volume for the quarter exceeded US$2.1 billion
o Quarterly paying users for our mobile wallet services surpassed 17.8 million

? Guidance
o In digital entertainment, we expect bookings for digital entertainment to exceed US$3.1 billion, representing over 75.4% growth from 2019. The revised guidance represents an increase of more than 59.0% from the midpoint of the previously disclosed guidance of between US$1.9 billion and US$2.0 billion
o In e-commerce, we expect GAAP revenue plus sales incentives net-off for e-commerce to exceed US$2.3 billion. The revised guidance represents a more than 144.1% increase from 2019, and a more than 31.4% increase from the midpoint of the previously disclosed guidance of between US$1.7 billion and US$1.8 billion

Me here - I thought this was a great quarter as we see revenues are continuing to grow 100% which is pretty impressive at this scale. The most impressive part for me is the continued hyper growth of Shopee. Revenues were less than $9M in 2017 and will likely be over $2B this year. That is absolutely unreal growth. All the while, the loss per order (calculated by dividing adjusted EBITDA by gross orders) has shrunk from $(1.61) to $(0.41). This was also the first quarter Sea has ever posted a significant positive number for adjusted EBITDA (thanks Garena). Overall, it was another strong quarter which I am quite pleased with. This company, along with MELI, I think deserve a spot in most portfolios.



To MajorFool: Thanks for your summary of SE earning report.

SE is also occupied my biggest position around 30%
As a Taiwanese I want to share the actual E-Commerce situation in Taiwan now.
1)Due to the big event ,Double 11 sell which SE subsidized all cargo’s shipping fee, the cargo shipments make Taiwan’s pick-up store stuck until now. Although it happened last year, but I feel it even more crazy this year.

2)Taiwan government approve SE’s Digital wallet service licence on Nov. 17th. Since Taiwan is strict on controlling bank related business to avoid system collapse, SE is the only one get the licence with 100% foreign capital.



Thank you Rex.

Note they are reporting overall revenue in GAAP, not straight-up revenue. That is why some publications are saying they had an earnings miss. In reality, they had a beat. As Rex posted above, there is almost 400M in difference just in the digital entertainment space.

For me, investing in SE is all about E-Commerce.
Is this the first quarter that E-Commerce GAAP was higher than the Digital GAAP? This is the most exciting part. This tells me to expect revenue ACCELERATION in the future as the E-Commerce is growing much faster than Digital Entertainment.

THIS IS THE KEY. 618M growing at 173% v the 569M growing at 73%.



Sorry for the repost. Wanted to point one other thing out.

SEQUENTIAL revenue growth is 37% from 882M to 1.2 B. TOTAL revenue was 882M in Q2. E-COMMERCE revenue in Q3 was 618M.

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Thanks MajorFool20 for reopening the discussion on SE.

I have been looking into the Company over the past few days. SE certainly seems to be the darling of Fintwit at the moment. Besides reading the previous threads on SE which are on this forum, two other sources of information which I found useful when looking into the company were these:

  1. https://www.youtube.com/watch?v=w1xqcwgjNbo
  2. https://seifelcapital.substack.com/p/sea-limited-nyse-se-sum…

I really hope that this thread opens up to a more detailed discussion on the company and that the other members of the board (who are far more experienced that I am) will share their views on SE.

Currently I do not hold a position in SE; but I am considering taking a starter position.


Thanks MajorFool20. In addition to the links provided by Moneyspin in his reply to your post (which I found very helpful), I suggest the following link to those invested in, or interested in, Sea Limited and specifically their e-commerce platform Shopee:


Jeff Towson seems to have a solid understanding of Asian tech trends. He also brings the lens of a venture capitalist. The podcast is part of an online course that he teaches, so you’ll hear occasional comments to “modules” etc., but this does not detract from his presentation. The “Lazada faster horse, Shopee better jockey” podcast (July 2020) is good if you want to better understand how Shopee is successfully competing with Lazada. This is my summary:

• This is a “platform competition” between the 2 biggest SE Asia e-commerce platforms (ECP’s).
• It’s all been done before in other parts of the world, so it’s mainly about execution: operational performance and management over time.
• Starting out, ECP’s want to establish and increase “demand side scale”. The 3 main ECP intangibles are Users, Activity/Participation, and Data.
• Attracting consumers, merchants, and brands across the seven very different SE Asia countries, cultures, and regulatory environments is difficult.
• Concepts: 1) Multihoming, 2) Management Track Record and Incentives
• Multihoming is when users can easily switch to a rival ECP if there’s a price or service advantage. To minimize it, it’s critical to make things easy for customers (e.g. how to pay) but the big must-have for ECP’s is logistics. This increasingly is “smart warehouses” etc. driven by IT. It’s really hard to do logistics with such a dispersed geography (so many islands) and so many small businesses.
• Lazada uses in-house resources because AliBaba is very good at logistics (“faster horse”). It will take longer to establish, but it could be formidable when it’s mature, and it might offset their management weaknesses (more on this below).
• Shopee uses third party resources, has no history in logistics (and their partner Tencent doesn’t do it) but has better management (“better jockey”).
• ECP’s need to make merchant and consumer user experiences great, especially getting the consumers onside, and Shopee is better at this. E.g. constant promotions and discounts and “gamification” with rewards that can be spent online (for this, their Garena online gaming background helps).
#1 consumer priority is value for money. Shopee is better here.
#2 is selection and quality. Lazada is better for electronics. Shopee is better for fashion, health, cosmetics, and he notes that 60-70% of consumer purchases are by women.
#3 is an easy, seamless experience (for which Shopee is better) but Lazada is better at delivery.
• Shopee localizes better (i.e. it addresses local wants/needs/preferences) and builds bottom-up, whereas Lazada has more of a top-down approach which does not localize as well.
• 30:00 Management Track Record and Incentives: Lazada has had 3 CEO’s in 2 years. This is bad. He also talks about general management issues important in any firm. Management should have demonstrated commitment to the region. Avoid parachuting in short-term non-local managers. Shopee is better here.
Lastly, incentive. For Shopee there is no Plan B, no other sewn-up market to retreat to if things don’t go well. They are all-in, they must succeed, and so far they are.

Note that the discussion did not include Amazon, which has entered SE Asia. For that I recommend TMF Jeremy Bowman’s October article:


15% SE position


Thanks so much MajorFool20, RollerCoaster and others who have provided such an excellent curated reading list for SE.

Question about SE vs. Alibaba (Shopee vs. Lazada):

Given the potential future growth of eCommerce and online payments in SE Asia does the success of SE as an investment depend on them winning the battle with Alibaba outright? Or is there enough business that both of these companies will still do quite well for some time until one of them is determined to be the top choice of consumers?

In other words is this a winner take all battle between Shopee and Lazada?

In the US amazon is said to have 49% of ecommerce mkt vs. Walmart at 3.7% (if you count eBay that’s next at 6.6% (Source:bigcommerce.com). I’m sure Mercadolibre has a similar lead in LATAM.

Thanks for your consideration.

SE = 4% of holdings.

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In other words is this a winner take all battle between Shopee and Lazada?

I don’t think so. SE Asia is 2x the size of US or LatAm or Europe. It has the capacity to handle multiple platforms.

Asians and in particular Singaporeans can also be very cautious and sceptical. Whilst they will take a cautious approach to gaining confidence in an eCommerce platform, even once adopted they will want to spread their business around to not rely too much on any one platform. Indeed users might also want to “game” the system in various ways resulting in users of any on platform consuming under a certain circumstance whilst using another for a different circumstance.

They are early adopters in mobile Smart phone and broadband penetration rates and usage shows this.

Platform traffic and leadership might swap between players as new functionality and features and introduced.

Local champions and restrictions might oscillate across the region leading to pockets of differences.

Alliances and eco systems tend to emerge and form different user blocks.

As an anecdote for this type of co-existence of competing platforms, when Uber was taken out of the ride hailing market in Asia by Grab (the local competitor), immediately GoJek in Indonesia expanded across SE Asia in order to fill the competitive space.



I’m connected to the PE space within Asia and would like to share some info on the Sea vs Alibaba (Shopee vs Lazada) debate.

  1. Lazada was founded by Europeans and subsequently sold a controlling stake to Alibaba. There is a strong culture clash within the company where European management and Chinese ownership struggle to work together. This is one reason why Lazada has been losing ground to Shopee.

  2. An ex-classmate of mine interviewed management of both Sea and Lazada a couple years back. He asked management how many times they take a break from work in a year. Lazada CEO: Twice for holiday, once during summer and another during the winter break. SEA COO, Gang Ye: He checks into a health institution twice a year to check his mental wellbeing. That’s how hard they work in SEA.

  3. Chris Feng (Shopee CEO) led the company’s entry into the Indonesian market 5 years back. Now he speaks fluent Behasa (Indonesian national language). He gives instructions in Behasa, and gives 1-hr speeches in Behasa. Sea’s executives work extremely hard to localize themselves in each Southeast Asian country. Shopee is now the top e-commerce platform in Indonesia.

  4. Shopee is growing extremely rapidly in Latin America. From a standing start in Brazil a couple years back (where MELI had almost 100% market share), Shopee now has roughly 20% market share in the country (mainly cross border e-commerce).

  5. E-commerce requires heavy investments. Not many companies have the resources to compete with SEA. SEA generates huge amounts of FCF from Garena (its gaming arm) and uses that to invest in building up Shopee. Lazada, on the other hand, has to depend on the largesse of Alibaba to continue finding its cash burn.

From SEA’s Q2 earnings transcript:
"In terms of competitive landscape, I think we’re in a very strong position that we were growing “fast and faster” even. And we are also further strengthening our market leadership position. And we have demonstrated we are self-funding our growth in e-commerce.

Now, if you look at certain other competitors who are both losing money and therefore, dependent on external funding for it and losing market share. I can see why it could be very difficult to fundraise. So I think this has put us in an even stronger competitive position."