Here’s quite an interesting very high risk stock discovered on my recent screen. Saul prefers I not post on that thread so I create this new one. The company Sea Ltd, a Singapore company, which has seen its stock price more than triple from January 3rd to today - $10.96 to today’s $36.08. It’s doing well recently at just 50? ($0.50) under its all-time high despite the recent general downturn in Asian stocks. It’s been trading since October 2017.
The company is primarily a gaming and e-commerce company. TMF wrote in April (https://www.fool.com/investing/2019/04/08/top-video-game-sto…)
“While the video game sector has proven to be a somewhat volatile one, investors who bought its top stocks at opportune times – and held on to their positions – have seen tremendous gains. The industry has experienced incredible growth over the past few decades, powered by expanding global demand, new technologies, and digital trends. And despite this impressive history, these may still be early days overall. The interactive entertainment industry is a large, fast-growing market that still has lots of potential. Companies that can continue adapting to – and shaping – the demands of that industry are poised to deliver great returns for shareholders.”
A Mar. 11 public TMF article illuminates (https://www.fool.com/investing/2019/03/11/why-sea-limited-st…
“Sea’s two main segments, digital entertainment and e-commerce, each posted encouraging results in the fourth quarter. The company’s digtal entertainment segment saw revenues climb roughly 63% to reach $241.3 million thanks to strong performance from its software lineup. Sea’s internally developed game Free Fire was the fourth-most-downloaded game of 2018 on both the Apple App Store and the Google Play Store, powering the company’s gaming segment to better-than-expected performance.” The stock rose more than 50% since that article.
A May 22 public Seeking Alpha article earnings report shows revenues keep growing: https://seekingalpha.com/news/3466144-sea-limited-plus-23-pe…
Adjusted service revenue breakout: Digital Entertainment, $393.3M (up 169.3%); E-commerce, $149.2M (up 342.1%); Digital Financial Services, $2.8M (down 27.7%); Other, $33.5M (up 151%).
That same Seeking Alpha article raises a cautionary flag:
Net losses multiplied as well – to $689.6M from $216.2M – mainly due to a fair value loss of $436.1M from accounting treatment of convertible notes issued before the company’s IPO.
Sounds as if the added $216.2M loss is accounting treatment loss due primarily due to fair value loss of 436.1 million dollars on the 2017 convertible notes as the share prices during the quarter significantly exceeded the conversion prices of these notes. Cash in the first quarter of 2019 rose to $2,362.5B from $1,002B at the end of 2018. https://cdngarenanow-a.akamaihd.net/webmain/static/resource/…
Margins look good and are rising. Adjusted EBITDA margin increased to 57.4% for the first quarter of 2019, from 37.7% for the first quarter of 2018 and 45.5% for the fourth quarter of 2018. https://cdngarenanow-a.akamaihd.net/webmain/static/resource/…
Cash flow is negative but improving:
3/31/2019 12/31/2018 9/30/2018 6/30/2018 -17,815 -138,191 -73,916 -188,753
Forrest Xiaodong Li is the founder, chairman and CEO serving since inception in May 2009. He retains a large interest in the company - over 30% of classes A & B stock and 44% voting power. He previously held positions in multinational corporations Viacom Media Networks, Corning Inc. and Motorola. Li holds an M.B.A. degree from Stanford University’s Graduate School of Business and a bachelor’s degree in Engineering from Shanghai Jiaotong University.