Sea Limited Analysis – March 2022

Sea limited (NYSE:SE) is a publicly listed company  based in Singapore that operates in mainly in Southeast Asia. It is currently trading around $93, down from a peak of $372. Is it a buying opportunity?

They have 3 running segments: gaming, e-commerce and fintech.

Gaming is its powerhouse, the only segment generating a profit. Called Garena, it operates Free Fire, the world’s most popular mobile game. Recent news which affected Sea’s stock price was that Free Fire was effectively banned in India in February as the government there thought it was sending user information to China. Their evidence? That Tencent, a Chinese gaming giant, owns a 19% stake in Sea. According to the Motley Fool: “management guided Garena for $2.9 billion to $3.1 billion in bookings for 2022. Bookings are essentially funds that have been purchased but not spent on the game platform, so they indicate the momentum of the gaming business. Garena’s total 2021 bookings were $4.6 billion, so this is a massive decline that suggests the gaming business could be about to slow down dramatically.” According to the Economist: “Some analysts believe that Indian sales may for around a tenth of the Sea’s digital-entertainment revenue.” Reuters says “India made up just 2.6% of Sea’s mobile-game net sales in 2021.” Although it is banned, people who have downloaded it can still play it and the higher-graphics version of the game is still available on app stores. So there are some conflicting signals going on. India’s prime minister isn’t going away any time soon so a regime change won’t solve the problem. Garena could always ditch India and try to penetrate the Chinese market with their games. A further expansion into America could be worthwhile.

Meanwhile its other two segments are growing at a very fast pace. It’s mobile-focused e-commerce segment is still blowing through loads of money but it’s expanding rapidly, 89% year-on-year. The digital financial services segment, similar to Alibaba’s ant group, grew in revenue by 711% year-on-year. Sea limited recently acquired a digital banking license in Singapore and has bought an Indonesian bank.

All segments are positioned for exponential growth. Rising incomes, increases in Smartphone Penetration, expansion into banking and fintech, expansion into new/current markets as well as an attractive price valuation compared to its historical one. Sea had a price to sales ratio of 5.2 on March 4th, the lowest level since they went public, down from more than 24 at its peak. Sea also has $10.2 billion in cash and cash equivalents and short-term investments. At this price, I think it is a buying opportunity, though its up to you. Cathie Wood also recently bought Sea shares in one of her Ark funds.


I do not own any shares of any stock mentioned in this article.

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