Sea Limited (SE) holds a special place in my portfolio. The central thesis has always been a three-headed technology company growing more heads, leveraging the growing scale and data richness. When I first bought the company for my daughters (Sleep Well Portfolio), it had just risen (posting $1.5B in free cash flow) from the crushing depths of post-COVID. The group was burning $2B a year, the e-commerce arm, Shopee, was still loss-making; the gaming arm, Garena, was not seen as evergreen; and Monee (SeaMoney at the time) was still a ‘promising’ fintech venture.

Today, three years later, the company generated ~3.5B in free cash flow. Impressively, across the ~700M people in Southeast Asia (and +200M in Brazil), ~400M unique buyers and ~20M sellers are on Shopee, ~37M take credit (BNPL, personal loans, SME loans) on Monee, and ~100M play games daily on Garena. Half of the sellers were reported to earn their main income on Shopee (per Q1’25). And, 20% of total GMV was generated by just ~2% of buyers (VIPs). Incredible. Ah, then the current loan book is just $9B (growing at 80% rate), or <10% of a typical bank's loan book in Southeast Asia. Finally, only 10% of quarterly active gamers pay on Garena.

When you internalize the sheer impact of Shopee on sellers’ lives, the sheer purchasing power of VIP members (similar to Amazon Prime members), and the number of gamers spending time on the platform. I don’t see any issue with Sea's decision to invest in increasing the wallet share and penetration. Of course, it depends, but we will see what they have invested in (FY2025) and what they are going to focus on, which makes a stronger company.

To me, this is a multi-year, decade-long story, as the business's lifecycle is still in its early stages.

At the helm, Forest Li, CEO and founder, is a rare breed. I admire him for the ability to pivot (2015) to a platform, grow the company at the speed of light (2016-2021), then brake hard to rebalance and change course as soon as things didn’t work out (2022-2023). Every quarter, I listen to his call and see a humble, eager-to-improve CEO. So when he said that AI would help Sea become a $1 trillion company (15x its current size). I tend to believe in the story.

So, that’s the lens I use when I read the quarterly results. With shares declining to ~$88/share after the Q4’25 announcement, the road I am walking may not be shared with the majority of the market, but I am totally ok, as my additions will be more meaningful at these levels.

But let’s get one thing out of the way: why were shares down by -16%?

Shopee's Adj.EBITDA margin was guided to be

• FY2027: ~0.55%, compared to

• FY2025: 0.7% in 2025, and

• FY2024: 0.2% in 2024.

Further away from the 2-3% long-term goals.

But that’s not what I am focused on. There is an enormous underserved community in Southeast Asia and Brazil that Shopee monetizes on, but the time isn’t now.

Let’s go through

• 1. Brief FY2025 results

• 2. Shopee - where are the investments?

  • SPX Express

  • VIP program

  • Shopee Live + Youtube + Meta

• 3. Monee

• 4. Garena

SWI’s SE coverage: [deep dive, 4th buy, 3rd buy, 2nd buy, 1st buy, AI risks, Sum-of-parts Valuation, tariff review, Q3’25, Q2’25, Q1’25, Q4’24, Q3’24, Q2’24 update]

**Links to thesis updates, buy-and-sell, and deep dives—all in the Sleep Well Portfolio spreadsheet above.

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Build your Sleep Well Portfolio today

Hi sleep well investors,

As long-term owners, I get excited when there are indiscriminate sell-offs. This is when good deals are found. Last year, I conducted a tariff risk review across all holdings and, as a result, cut MIPS from the portfolio.

This time, I see a lot of AI-related disruptions across all businesses. And with the rapidly changing context, I need to act quickly and decisively. I found one in which one of twelve holdings is highly disrupted (a Sell candidate) and two that require close observation; the rest are highly insulated.

Before we dig into the analysis, I’ll present the framework and the context.

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Absolutely—founder Richard White’s power grabs, sex scandal, and share-trading probes, in my view, not only caused the 2nd most significant stock decline after the 2020 crash but, fundamentally, (i) caused significant key product delays and (ii) eroded shareholder trust.

Today, the market cap stands at AUD $21B ($13.6B), and the stock hovers in the AUD $60s.

You could say the moderating top-line growth since Q4’2024 caused the fall.

So, we’ll dig in to see why and if this situation is permanent. And if the multiple contraction to P/FCF of 41x? And 37x Proforma EV/FCF (with E2Open) attractive?

We are going to ask the same questions we asked when we deep dived in the company in January 2024, including:

• Who are the customers? How do customers use CargoWise? Why do they choose it over alternatives?

• Have the moats eroded or widened?

• How does CargoWise + E2Open extend product and market penetration?

• What free cash flow growth can we expect from here vs. what the market is expecting?

• What are direct peers and top businesses trading at?

To understand the context, read my deep dive, buy alert 2, buy alert 1, FY24 update, H1 FY25 update, CEO shake-up, and E2Open acquisition.

First principle thinking

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Garena’s cash and mobile UX / UI built Shopee, an online marketplace for merchants and customers to exchange goods. Monee facilitates payments and adds credit to build more trust and enable more transactions. Logistics further improve convenience and trust. Emerging subsegments, such as advertising and VIP programs, add value to power-sellers and buyers.

Garena is perhaps the odd one out, but it provides stability for management to build Shopee and lay the foundation. Hence, if you remove any segment, the Sea’s ecosystem suffers.

As a result, this valuation is merely an estimate of the value of each segment if sold as a whole. I don’t think the value is worth as much if they are sold separately.

Let’s start

Sea Limited, a 55% position in my PA and 21% of the Sleep Well Portfolio, continued to perform, yet shares dipped 30% from their peak for reasons not aligned with my time horizon and thesis. As a result, I have given extra time to look into valuation to help me and SW investors know why they should be adding shares.

SWI’s SE coverage: [deep dive, 4th buy, 3rd buy, 2nd buy, 1st buy, tariff review, Q3’25, Q2’25, Q1’25, Q4’24, Q3’24, Q2’24 update]

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Hedgeye analyst Felix Wang’s short call at $190/share in September is correct in this time frame, and I am thankful to him, as I can add more shares at a 25% discount today.

Why am I bullish on the business long-term? I’ll go through:

1. KPIs (operations, financials, peers, market share)

2. Other highlights (Brazil, Argentina)

3. Why is it the largest position of SWI

4. Valuation - $145/share, market expectations vs. SWI’s expectations

SE coverage: [deep dive, 4th buy, 3rd buy, 2nd buy, 1st buy, tariff review, Q2’25, Q1’25, Q4’24, Q3’24, Q2’24 update]

I use all my financial data and charts on Fiscal.ai. Get a 15% discount while supporting SWI, the following affiliate link should work.

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KPIs (operations, financials, market share)

As a group, this was a blowout reacceleration of growth.

Management’s focus remains the same:

“continuing to deliver high and profitable growth across all three of our businesses. With e-commerce and digital finance penetration in our markets still low but increasing, strong growth lays the best foundation to maximize our long-term profitability,” - Forrest Li, Sea’s Chairman and Chief Executive Officer.

Q3 saw 38% growth as a group, with Monee growing the fastest again at 60% YoY.

All still profitable with Monee investing heavily in increasing the loan size (marketing up 140% to $157M and provision for credit loss up 76% to $373M)

Let’s dive into all the segments. I’ll focus on the long-term trajectory.

Garena - back to hyper growth, best Q since 2021

Garena, once a hyper-growth cash cow pre-COVID, then a struggling division post-COVID, is back in hyper-growth mode, posting 31% revenue growth and 51% bookings growth.

The trend is well supported by the 670M Quarterly Active Users and 66M Quarterly Paying Users. Numbers are yet to hit peak Covid, but it doesn’t have to. I view this segment as a cash cow and expect little growth onwards.

Booking per paying user was at ~$13/user, an increase of ~20% from the bottom two years ago.

As such, EBIT has remained strong at ~$300M and Adj.EBITDA at $456M (operating cash flow). Annualized, this is almost a $2B operating cash flow segment!

Why the strong performance may continue.

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Intellego, a position acquired in September, just before the storm of bearish reports, is down 50%. Am I wrong? Yes, it’s not a sleep well pick (I admitted my mistake on 10th October here), but am I wrong about the business? I am not sure!

I need at least another quarter to know.

Before you read my Intellego’s Q3’25 review, please read the 29-page report first.

I am biased. But in my opinion, the disclosure has improved significantly.

Content:

• Q3’25: Expectations

• What was delivered?

• Q3’25: results, including EKN and Moveomed

• Future expectations

SWI’ writeups on INT: [mistake, deep dive, 1st buy, 2nd buy, 3rd buy, risk management, 1st live event, mispriced]

If you are new, read more about us here, our latest portfolio review here, and best buys here.

Q3’25: Expectations pre result.

I wanted better disclosure. Details:

i) sales composition, including from subsidiaries, and payment terms

ii) more information on the business model

iii) cash flow conversion from operating income (EBIT),

iv) working capital needs, and capex.

v) progress of the partnership with Henkel and Likang.

vi) capital allocation from recent cash build-up.

What was delivered?

i) sales composition, including from subsidiaries (Yuvio & Daro) - YES - page 10 and more, the top 10 customers composition was provided

ii) more information on the business model - YES - page 5, prior quarters focused more on the ‘What are the technologies’, this one explained the ‘Why it matters to customers’. It also clearly shows that the strategy is to sell/lease disinfection devices at minimal profit to up-sell the dosimeters, which are high-margin and recurring.

iii) cash flow conversion from operating income - YES - page 22-24, page 8 (EKN)

iv) working capital, including a breakdown of day sales outstanding (DSO) - YES - page 10

v) partnership with Henkel and Likang. YES, but limited—pages 3 and 6 show how and why the dosimeter is essential in the curing process. Page 3 also discloses what to expect in 2026 when all hospitals in China must use products like Intellego to validate their disinfection runs.

vi) capital allocation from recent cash build-up. YES

Q3’25 Results

Let’s skim through the income statements and cash flow statements.

• Sales was ~300M SEK increased ~300%, 87% from existing customers (recurring). To date, the Group has sold hundreds of devices globally. It has 331 active customers (who bought once in the last 12 months). Millions of dosimeters were sold and could double in 2026. Dosimeters are becoming an integral part of daily routines across the healthcare sector. It helps to improve workflow efficiency and disinfection results for users.

  Below are the top 10 customers. There is a high concentration, but it’s common in hyper-growth companies. Likely the 13% from China was from Likang? The 1.5% from a medical device is likely HAI Solutions, which is very interesting. Do check it out.

  Importantly, the top customer is likely to be Moveomed’s €22M deal announced on 4th October. I find this one a little strange, as the deal was announced just after the Q3 cut-off dates. Smarter investors can shed light here, but as long as the orders were delivered and ‘in the customer’s control’, Intellego is allowed to recognize the sales in full under IFRS 15. I would argue that would be for Q4. Why was it recognized in Q3? I don’t know.

  

  Below is the sales broken down by country, with the US and Europe accounting for the majority.

  

  Disinfection is still 98% of sales in Q3 and 93% YTD.

  

  In disinfection, the company expects a significant tailwind in 2026 when the national regulations take effect. Likang’s connections to 30,000+ hospitals MUST use products like Intellego. Given the development, it’s now likely that it’s just a matter of time before the EU, the US, and other markets implement the same regulations.

• EBIT was 171 SEK, increased by ~700%.

• Cash flow from operations was SEK 37M, increased from a cash burning position of SEK -5 M. So, the conversion from EBIT to cash is just 22%, low but not out of the ordinary for a hyper-growth company.

The key thing to see here is the reduction in accounts receivable, indicating customers have paid more of their invoices.

However, it will still be a slow grind, as day sales outstanding were 142 days, so the company still has to wait over 6 months to receive cash from customers. The good news is that the DSO has improved from 173 last year.

Below is the company's context.

Since 2023, Intellego has offered extended payment terms as part of a deliberate strategy to increase market share. Over the past year, we have gradually begun shortening these terms to improve cash flow and strengthen the company’s financial position. The transition is taking longer than expected, as customers have become accustomed to longer payment periods and the associated liquidity benefits.

The other core thing to understand is also the following disclosure:

The extended collaboration with The Swedish Export Credit Agency (Exportkreditnämnden, EKN) has enabled the Group to receive SEK 52 313 thousand in financing, after deductions for transaction costs, during the third quarter. Leading to totally received funds during January to September 2025 of SEK 128 645 thousand, after deductions for EKN and financing partner transaction costs. The financed invoices are not considered in the accounts receivable per 30 September 2025 as they are financed without recourse. The total EKN guaranteed invoices per 30 September 2025 conclude to SEK 132 996 thousand (0) when EURO is converted to SEK currency.

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Better, it’s a leader for the last 60 years in an incredibly slow-changing, highly regulated LNG industry, making it difficult to disrupt.

Today, I’ll discuss the its excellent 9M 2025 results, revenue (up 29%), 67% EBITDA margin, and guidance upgrade. Best of all, it was hiding growth opportunities in plain sight.

No. 18th Sleep Well readings: deep dive, 1st buy alert, H1’25

First, let’s be reminded why it was chosen as the 18th Sleep Well Pick and why it has entered the portfolio since March 2025.

The company provides me ownership in the green energy megatrend and also an European business: importantly, it offers a top-of-class, resilient quality, and AI proofing business, that my Sleep Well Portfolio requires.

It has been the gold standard in membrane containment technology for LNG transportation for over half a century. In the past 5 years, 90% of new builds have used this technology, i.e., a 90% market share. Its best sleep-well qualities:

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However, the stock felt red hot into the earnings.

In this report, I dive straight into four underlying growth drivers that require owners’ attention.

On Q3’25. I invite you to skim the overall headlines (Q3’25 presentation here) — I won’t discuss the obvious. Then focus on:

• Drivers and customers’ incentives

• Financial services growth is not so remarkable

• $5.5B cash position, $250M wasted.

• Velocity of product release, and advertising’s growth.

Then we’ll revisit why Sleep Well owns Grab and whether a ~24x free cash flow valuation is attractive/unattractive for the Sleep Well Portfolio.

Read our previous write-up on Grab for more context.

• Q1’25 - Tariff Review, Q1 Update

• Q4’24 - Update, New Risks, TopSWI

• Q3’24 - Update

• Q2’24 - Deep Dive, 1st BUY

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We review the latest quarterly report to see how the business has performed amidst rising competition, namely Shopee (extensively covered here), Amazon, Temu, TikTok, and even OpenAI.

1. Why do I own it?

2. KPIs (Operations, Financials, Market share)

3. Other highlights (Argentina, OpenAI, TikTok, Advertising)

4. Valuation

To understand the discussion, read my Meli’s writeups: CEO transition, Q2’25, Q1’25, The Most Sleep Well Investment Of LATAM, Top pick for 2025, Q4’24, Q3’24, and Buy Alert.

Don’t miss out on the first Best Buy list. The next one will come in a week.

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1. Why do I own it?

This is Meli’s Q3’25 results. Revenue grew ~40%! – the 27th consecutive quarter of growth above 30% YoY.

More impressively, it’s an acceleration from the 37% CAGR since 2012.

Before we dive in, why do I own it?

2. KPIs (Operations, Financials, Market share)

Meli is the largest and fastest-growing octopus in Latin America, extending its tentacle across Latin America yet avoiding all the political landmines since 1999.

There are lots of stats to digest. Everything in my original deep dive is going well. But since it’s nearly a ~20% position, I’ll try to cover as much as possible.

The core takeaway is that Meli is expertly balancing growth, investment, and profitability. The runway is incredibly long, so if you own shares, do remember that Meli’s goal is to build an ecosystem that enables ordinary people to engage in trade, online and offline, as seamlessly and cost-effectively as possible. This will take time and investment into a proper foundation. Competition will come, but the population is young, digitally versed, and served by traditional commerce and banks, so there is room for multiple winners. Meli would be one of those.

In 10 years, Marcos Galperín quantified a goal to triple Meli’s customer base, serving 300M active buyers (100M today). That’s roughly half of the region’s population. To get there, you need an ultra-long-term mindset… so quarterly fluctuations mean very little here.

This is what he said last year.

“Every time we have invested in enhancing our customer experience, in the past, we have been rewarded with strong growth and improvements in our market position.”

Marcos Galperín, CEO

The above refers to the logistic investment (and free shipping) in 2017.

And what’s special is that despite the high investments, we don’t have to trade it for negative free cash flow or disrupted growth.

You will see what I mean. Let’s dive in.

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Kinsale (KNSL), a business acquired in May 2024, is a leader in Excess and Surplus (E&S) insurance.

We review the latest quarterly report to see how the business has performed amidst rising competition.

1. Why do I own it?

2. KPIs (Operations, Financials, Market share)

3. Other highlights

4. Valuation

To understand the discussion, read my deep dive, the Q4’24, Q3’24, and Q2’24 updates, and the 1st Buy alert.

Don’t miss out on the first Best Buy list.

Links to all other writeups here. Please use the FAQ alongside the SWI Manual to get the most out of your subscription.

1. Why do we own KSNL?

I own Kinsale because of (i) its disciplined and exclusive focus on just one line of insurance - E&S (a $100B TAM of hard-to-place small business and personal lines risks), (ii) the lowest-cost provider (technology-driven, one location), and (iii) total control of its underwriting and claim management processes (no middle man), which together allows it to underwrite risks at ‘high speed, accuracy, and efficiency’. [link]

The focus and advantages above explain why Kinsale has been the most efficient and fastest-growing player. It boasts an industry-leading combined ratio (loss and expense ratio) of ~75% vs. peers’ 90%+, which has contributed to an impressive 28% CAGR in free cash flow per share since 2015. The founder-CEO, Michael Kehoe, also owns 5% of the business, so we have a well-incentivized capital allocator to protect and grow our investment.

Having said the above, I have been monitoring risks, including unpredictable weather catastrophes, float allocation, and increased competition since Q3’24 (and initiated coverage since Q1’24).

Let’s review whether the business remains on the right track despite these risks, and whether the current valuation is fair.

2. KPIs (operations, financials, market share)

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Intellego is an easy pass, if you invest to profit next year, focus on the stock volatility, and don’t look beyond its past issues.

SWI’s approach is different.

We take into account the (i) context the business is running—country/industry/life cycle. We assess the investment by its (ii) future value creation.

And through that lens, we see the issues as temporary. As such, the stock is highly mispriced at 8x FY2025 EBIT.

As the current Sleep Well Portfolio primarily consists of proven businesses with a high degree of certainty, Intellego can enhance the return profile if our assessment is correct.

But investing is not simple. There is an admission price. No success comes without learning. And no high return comes without understanding risks.

The good news is:

Risk is inversely correlated with knowledge. Risk can be lowered if you extend your time horizon, leave emotion out of your investment process and allocate capital with discipline. - Understanding Risk

If you can do the above, in my opinion, Intellego is a low-risk, high-return investment.

Let me expand:

• Know the business better than the average market participant. With the material provided [deep dive, 1st buy, 2nd buy, risk management, 1st live event], you and I have done more work than 99% of investors, both on the negative and positive sides, and have gained sufficient insight to engage constructively with the CEO [details].

• Focus on facts - I have shut off the stock screen and spent more time speaking with early investors (including a family office who invested at SEK 10/share), exchanging questions and answers with the CEO, digging into third-party sources on the product, the current deal with Henkel and Likang (interesting link), as well as academic research papers and local knowledge of the management team (CEO, Claes has grit but is inexperience at this scale), the stage of the company (either take more sales for lower cash flow or higher cash flow for slower growth), and the ‘logum’ context (be good but not too good) around running a successful business in Sweden.

  Facts with local contexts are key, in my opinion, which explains why Intellego has temporary flaws and was an easy target for ‘bears’.

• Extend your investing horizon - A key factor in becoming an owner of businesses, rather than holding paper shares, is to extend your time preference. A nice byproduct is that you also become immune to the volatility of the stock price (Mr. Market is a maniac).

  My time horizon is 12 years. In 2037, my daughters will start using the fund for their university (or whatever they choose). I don’t need to set short-term targets for any of my ownership. The business doesn’t need to revolutionize the industry or drastically transform the structure by 2026.

  The market doesn’t have patience for mistakes, miscommunications, or incremental changes.

  Let’s use it to our advantage.

  Facts have shown that Claes has already achieved a miracle in bringing Intellego to an MSEK 700 business, despite failures after failures in his many start-up attempts. Now, running a company at a new scale, serving industrial giants, in the public eye, and achieving triple-digit growth requires a very different skill set and business structure.

  The most significant misunderstanding around Intellego is its high receivables. If you were the CEO, would you accept more sales with longer payment terms now, or would you negotiate to receive cash quicker but with smaller sales orders?

  Extending my time horizon enables me to see how this dynamic unfolds. As Intellego earns more trust from customers, customers will be more willing to accept shorter payment terms. Additionally, I will have more time to witness the improvement that Claes and co will make, or even see a more appropriate leadership to take over the day-to-day operation. Whatever it is, Intellego has a good foundation to change positively. And allowing more time, I will collect higher rewards.

• Allocate with discipline - risk is lowered with the level of knowledge and time I have allocated for Intellego. With the initial 5% allocation, I am positioned to lose less than 5% if I am wrong, but I win multiple times my capital if I am right. There is a triple-digit fundamental improvement [100% free cash flow per share growth] + multiple expansion opportunity [8x EBIT] on offer here. The more I search for reasons and the likelihood Intellego could be overstating its sales, the more I see that the product is genuine, and customers are getting value from it. How durable is the positive trajectory? A more intelligent investor prompted me to consider this question.

  “As Henkel reports higher production quality while reducing costs from integrating Intellego’s technology, how long will Henkel’s competitors stand on the sidelines before they ‘google’ the name?

  So, either I am wrong and cause limited damage, or I am right and rewarded with outsized returns.

Why is Intellego not fraudulent?

Everything is predicated on determining the likelihood that Intellego is not fraudulent. My arguments are, in order of importance:

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Intellego just hosted its first live video presentation in response to questions about the company and potential business risks summarized in the previous write-up.

I will summarise the event in this post and wait until Q3 to reassess my 5% (now 3% after the share decline) position in the company.

Before you proceed, here are the Intellego’s required readings [deep dive, 1st buy, 2nd buy, risk management].

Key points

1. Business application of Intellego’s color indicators remains extremely valuable and promising. Claes elaborated on how cities are disinfecting their main water supply using UV, and how companies also disinfect food products.

2. 3-5year guidance remains the same: SEK 2 billion in revenue and SEK 600 million in EBIT, or €200 million in revenue and €60 million in EBIT. This aligns with the guidance from the Q3’24 report (old guidance). Claes hinted it will be revised on the Q3’25 results day.

3. Market size & growth remain the same: UV Disinfection is valued at ~€1.6B annually (~1.6B disinfections × 1 dosimeter/run). Curing at ~€5B, growing at ~19%. Horticulture at ~€4B, growing at ~22%

4. Improvements mentioned: (i) Stronger corporate governance, more detailed information in the reports (better revenue segmentation in the future) & potentially more regular earnings calls. A potential uplisting will naturally force the change. (ii) Hiring of a PR person to help with the communications.

5. Cost efficiency & offices: The company's DNA is to be cost-efficient. Claes provided an example showing that, in the first 10 years, the company raised just around €1 million. And that there is no need for an office, given that the potential cost of €25,000 could be allocated more productively to R&D. It would also save time for Claes and Hans (the new CFO), who live outside of Stockholm and need to travel 45 minutes to an office in the city.

6. Recent team changes: The two layoffs have no material effect, and that was ‘business as usual’. A Daro (UK subsidiary) replacement has already been found. They aim to have new hirings across R&D, finance, and sales, in addition to the mentioned new Head of PR.

7. Henkel & Likang partnerships are moving in the right direction. Order sizes are improving, but timing is not in the company’s control. In the past, big orders came once every six months and have now been reduced to every quarter, and can now arrive monthly. As a result, quarterly results could be lumpy.

8. Customer base: Intellego has hundreds of customers, with more customers inbound organically, thanks to the reputation boost from the Henkel/Likang deals. Additionally, ~60% of customers are recurring, buying more than once. A returns policy is not provided to customers unless there are quality issues.

9. A new professional app has been developed to convert color to a number for a more precise indication. It is in the early roll-out phase and was built based on customer feedback. A small number of customers are already paying, and can be available for general customer use (in app stores) in the future.

10. Long-term SEK 10B revenue ($1B revenue), not an official target, is possible given the right investments & new UV-curing use cases (printing, coating, etc.)

11. Regulations: China is the front-runner; the US & Canada are relatively new. Claes provided more context, stating that ~20 billion medical devices are disinfected each year, indicating a strong revenue potential for Intellego’s dosimeter.

12. Yuvio requires some additional documentation to satisfy the new regulatory pathway, but it is not seen as a new hurdle.

13. Conservative reporting: Last year, the company's share price suffered a significant decline due to the missed guidance, so they have adopted an ‘under promise over deliver’ approach. However, it was also said that large orders can shift timing materially. Hence, the guidance will be updated in the third quarter. [This seems to be the key point that upset/confused the market the most—but nothing has changed since Q2’25 report]

14. Short-term margin: The ~70% EBIT margin from Q2 is expected to decline slightly, but the 3-5 year EBIT margin was projected to decrease to 30% (as per the old guidance, the new target should be around 50% EBIT).

15. Payment terms: The company is working to shorten payment days (as indicated in a direct email from Claes, a 30-60 day target was mentioned, compared to the previously stated 60-90 day period, which was publicly announced). The company is prepared to utilize more factoring if needed.

16. Revenue by region is volatile due to bulk orders, as shipping may be to one area (where revenue is then recognized) with subsequent global redistribution.

17. Operating cash flow for Q2 was €6 million, and the cash position remains strong at €9 million (approximately SEK 100 million, improving fast). The 12-month operating cash flow run rate would equate to €24 million ($28 million). The current market capitalization of approximately $400 million implies a valuation of 15 times operating cash flow.

18. Capital allocation: Claes mentioned the board is in discussion about what to do with the SEK 100 million. Buybacks, dividends, and even acquisitions are considered.

My impression

Intellego required readings [deep dive, 1st buy, 2nd buy]

To learn more about SWI, check out our Owner Manual and FAQ.

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My latest pick, Intellego [deep dive, 1st buy, 2nd buy], a high-flying niche pioneer (20x since 2021) and current unchallenged leader in UV light disinfection validation, has gone through a roller-coaster. Shares dived 30% from the peak in the last few weeks, and this is the first time I have experienced a significant drawdown since sharing my investing journey here (but many times throughout my 15 years of investing).

So, this is a quick update for Sleep Well members to understand the context and thought process when a decline in the stock price happens.

As a long-term owner, I am keen to challenge my own research and find out:

What and why did it happen, and what are we doing about it?

P/S: I reached out to , and for additional insights. They may or may not hold shares of the company today.

To learn more about SWI, check out our Owner Manual and FAQ.

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*Note: To understand the updates, please read the Deep Dives write-up first to get an in-depth understanding of the business and industry in which it operates.

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Updates

[Pick 1] CrowdStrike - CRWD

• Q3’25 - Trimming

• Q1'25 - Tariff Review

• Q4'24 - Update

• Q3'24 - F+C partnership, Q3'25

• Q2'24 - TRIM & BUY & Q2

• Q1'24 - Update

• Q4'23 - Update

• Q2'23 - Update

• CY2021 - Deep Dive, Update

*Note that CRWD’s fiscal year end is 31st Jan 2025.

[Pick 2] The VAT Group - VACN.SW

• Q2'25 - Update

• Q1'25 - Tariff Review, Q1

• Q4'24 - TopSWI

• Q1’23 - SELL

• Q2'22 - Deep Dive

[Pick 3] Shimano - 7309.T

• Q1'24 - Update

• Q4'22 - Update

• Q3'22 - Deep Dive

[Pick 4] Floor and Decor - FND

• Q4'24 - SELL for WTC

• Q3'24 - Update

• Q1'24 - Update

• Q2'23 - Update

• Q1'23 - Update

• Q4'22 - Update

• Q3'22 - Deep Dive

[Pick 5] MIPS AB - MIPS

• Q1'25 - Tariff Review, SELL for SE, Q1

• Q4'24 - Update

• Q3'24 - Update

• Q2'24 - Update

• Q1'24 - Update

• Q4'23 - Update & BUY

• Q3'23 - Update

• Q2'23 - Update

• Q1'23 - Update

• Q4'22 - Deep Dive

[Pick 6] Thor Industries - THO

• Q1'24 - Update

• Q1'23 - Deep Dive

[Pick 7] Medistim ASA - MEDI

• Q2'24 - SELL for FTNT

• Q1'24 - Update

• Q3'23 - Update & BUY

• Q1'23 - Deep Dive

[Pick 8] NVR Inc. - NVR

• Q4'24 - TopSWI

• Q2'23 - Deep Dive

[Pick 9] WillScott MM - WSC

• Q3'24 - Update

• Q2'24 - SELL for GRAB

• Q1'24 - BUY & Update

• Q4'23 - Update

• Q3'23 - Deep Dive

[Pick 10] Veeva Systems - VEEV

• Q1'25 - Tariff Review

• Q4'24 - TopSWI, Update

• Q3'24 - Update

• Q1'24 - Update

• Q4'23 - BUY

• Q3'23 - Deep Dive

[Pick 11] Wisetech - WTC

• Q3’25 - Products, 3rd BUY

• Q1'25 - Tariff Review, E2open, 2nd BUY

• Q4'24 - Update, 1st BUY

• Q3'24 - Update

• Q2'24 - Update

• Q4'23 - Deep Dive

[Pick 12] Fortinet - FTNT

• Q1'25 - Tariff Review

• Q4'24 - TopSWI

• Q3'24 - F+C, Q3'24

• Q2'24 - 2nd BUY, Update

• Q1'24 - 1st BUY & Update

• Q4'23 - Deep Dive

[Pick 13] Dino Polska

• Q1'25 - Tariff Review

• Q3'24 - Update

• Q2'24 - Update

• Q1'24 - Update

• Q4'23 - Deep Dive & 1st BUY

[Pick 14] Kinsale Capital - KNSL

• Q3’25 - Update

• Q1'25 - Tariff Review, Q1

• Q4'24 - TopSWI, Update

• Q3'24 - Update

• Q2'24 - Update

• Q1'24 - Deep Dive & 1st BUY

[Pick 15] Sea Limited - SE

• Nov’25 - Valuation Update

• Q3’25 - Update

• Q2'25 - Q2, 4th BUY

• Q1'25 - Tariff Review, 3rd BUY, Q1

• Q4'24 - TopSWI, 2nd BUY, Update

• Q3'24 - Update

• Q2'24 - 1st BUY, Update, SPX

• Q1'24 - Deep Dive

From Pick 16 onwards - Premium members only ($)

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That’s my dilemma with owning Mercado Libre, the elder, and Sea Limited, the younger one. Both have performed exceptionally well in their respective regions and for the portfolio (Sleep Well Portfolio updates here), but are now competing head-to-head in Brazil.

Yes, Sea is just 5 years old, and Meli is 20 years older, but Sea is no pushover.

I have reviewed Sea’s Q2’25 here. I was very impressed by its profitable growth in Brazil, given the ‘muscle mass’ difference.

Mercado Envios, Meli’s logistics network, plans to open 21 distribution centers in the country by the end of 2025. It delivers more than 95% of items sold, and processes 60% of items through its fulfillment network.

But Shopee in Q2’25 revealed how it has been outgrowing Meli in the past few quarters. And it has been reported to have become the largest e-commerce website in terms of the number of items sold.

In response, Meli had to slash the free shipping threshold to just 19 rais in Q2 (previously 39 and 79).

In this Meli’s business update, I will focus on the comparison of these two siblings.

As a reminder, the long-term development of my sleep well picks is much more important than quarterly fluctuation.

Mercado Libre remains the most consistent performer in a highly uncertain geopolitical environment. It is still growing at the same rate as 25years ago! Only Pinduoduo and Nvidia have outgrown Meli in the past 5 years.

There's still so much to do, there's still so many opportunities, and the fact that we're willing to take risks and make big bets to continue growing and the fact that we're growing at the same rates that we were growing 25 years ago is amazing.

- Marcos Galperin, founder and CEO, added in his 25th anniversary podcast

However, Shopee’s speed and efficient execution are becoming a more significant issue and a challenge to Meli’s leadership.

Meli’s writeups: CEO transition, Q1’25, The Most Sleep Well Investment Of LATAM, Top pick for 2025, Q4’24, Q3’24 update, and Buy Alert.

Sea’s writeups: deep dive, 4th Buy, 3rd buy, 2nd buy, 1st buy, tariff review, Q2’25, Q1’25, Q4’24, Q3’24, Q2’24 update

For everything else, start here.

Shopee vs Mercado Libre

Shopee has been growing profitably in the past few quarters, driven by above-market GMV growth and consistently improving logistic service quality (lower cost in faster time).

• GMV: 25% growth, accelerated from 21% in Q1’25 (trend to continue to Q3), driven by expanding higher-valued items (added 100 brands), and strong growth in the number of sellers. Reportedly, the number one e-commerce site by items sold.

• Number of sellers: 8 million (30% of active sellers sold online for the first time on Shopee, and 50% generate their primary income on Shopee)

• Number of buyers: unknown (undisclosed, but should be >300M, ~70M in Brazil and 50M in Vietnam alone)

• Logistics: 13 distribution centers, all leased (low-capex), and most investments focused on sorting machines. Cost per order down by 15% (16% in Q1) and delivery time down by 2 days YoY. Additionally, in the Greater São Paulo region, 25% were delivered the next day and 40% within 2 days, up from single-digit percentages in the same period last year.

In the meantime, on the surface, Mercado Libre underperformed compared to Shopee in Brazil.

• GMV grew 18% YoY in Brazil, with revenue growing 25%. From a higher base at ~$2B per quarter. But growth is meaningfully slower than Shopee’s 25% rate in Q2.

• Number of sellers: 100M as of 2024

• Number of buyers: 70M

• Logistics: the fastest and most extensive in LATAM. It is not known whether some lands and trucks are owned, but same-day and next-day shipment rates reached 52% (even with slow shipping), and 30 fulfillment centers delivered 57% of parcels (~50% in Q1'25 and 49% in Q4). In Brazil, I believe they have 10 fulfillment centers, with a target of opening 11 more by the end of 2025.

It looks like Shopee outperformed in Q2 and Q1 in Brazil in terms of growth numbers.

But the truth is not as straightforward.

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This is the first paid post in my new ‘HQ’. Below is where patience and discipline will be forged. I moved here for my family, but I hope it will also enhance my focus and independent thinking.

I am excited about the future of Sleep Well Investments' no-losers track record. Currently at a 93% successful rate — 26/28 transactions are green (appendix 1), and with a 52% annualized return per pick (appendix 2).

No Wall Street noise.

No complicated DCFs.

No Twitter’s ‘100x’ thesis.

Before we start reviewing the 21st first update, here is the link to the 21st pick’s deep dive, 1st buy, and the buying plan I have set out.

The purpose of this business update is to decide whether to proceed with the planned purchase. What I look for in the Q2’25 updates is clarity on:

• The CEO position.

• The latest acquisition’s value accretion.

• Timing of contract delays with the US government.

All factors above have contributed to a lower-than-peer multiple (24x EV/FCF vs 30x-50x) and the market’s expectation of just 8% free cash flow per share CAGR vs. 15% that it can deliver by 2037.

By being patient and knowing what’s essential for the business (not the stock), I believe we are owning a high-quality business that is improving, hence a twin engine of value creation at play:

twin engine = multiple expansion + FCF growth

And I firmly believe the 21st pick can outperform the S&P 500 handsomely in the long run.

Thesis brief and Q2’25 key focus

The 21st business was chosen because of its mission-critical nature to governments and public authorities around the world. Most of my Sleep Well Portfolio ownerships are B2B; this business provides added diversity and enhanced ‘predictability’, particularly as these authorities don’t tend to switch solutions as they are slow to change and are non-profit, so cutting costs is less critical than improving public service. Best of all, it’s becoming a platform of multiple solutions, and the market is only focused on the CEO (cleared as of today) and a few contract uncertainties (a tailwind for 2026).

To continue learning, consider joining Sleep Well Investments. My current 93% success rate track record is updated monthly here.

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** A favour to ask: Substack is becoming increasingly competitive and more of a ‘marketing’ platform with catchy posts and clickbait. I have now assigned a number to each of my picks to preserve my IP and unique picks. Please help Sleep Well Investments by discussing picks by numbers assigned and sharing my work only with long-term investors.

Let’s continue.

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After another solid quarter, I still see myself adding on the way up!

Sea Limited is clutch!

A tennis saying for high performance under pressure.

I first recommended Sea when it was in the middle of a challenging reorganization after the post-COVID hangover. Its cash cow gaming division saw bookings contract to $1.8B from $4.6B. Its hyper-growth e-commerce division, Shopee, saw GMV growth slow from 85% in 2021 to 28% YoY, and the promising financial services segment, now ‘Monee’, also slowed growth to ~40% from triple digits.

On top of that, new competition was making headlines (TikTok Shop and Temu).

But the investment thesis, when picked in Q1 2024, was that Sea Limited was performing despite pressures both inside and outside.

Recall, Sea was already in the 6th quarter of its ‘balanced growth’ plan (rallied by the founder-CEO, Forest Li, in September 2022).

Positive signs were apparent to me.

• Core markets (Southeast Asia and Brazil) have stabilized Shopee’s market leadership share at ~50%.

• The home-grown logistics arm, SPX Express, saw continued investments and rapid growth in the background. It became the 3rd largest logistics provider in Southeast Asia after just 4 years of operation (today 2nd largest). It remained competitive even in Brazil with its low capex strategy.

• No peer matched Shopee’s advantages in low-cost wide-coverage logistics, broader SKUs, and somewhat cleaner UI/UX. Sea’s take rates increased despite competition buying market shares (promotions and acquisitions).

• The scale and dominance also provided Sea’s first-party data advantage, which led to my higher conviction in a fourth pillar of growth - advertising.

Today, external pressure remains intense, particularly from Mercado Libre and TikTok Shop. This is perhaps why Sea Limited is still trading at ~25x free cash flow (and that’s good for long-term investors), despite the 140% rise in the stock.

To begin the Q2’25 review, I'd like to walk you through the progress of each division from Q4 2022 to Q2 2025, highlighting the impressive execution.

Then I’ll discuss a few key points.

• Monee vs Grab vs Meli

• Shopee in Brazil vs Meli

• Logistics

• Advertising - the fourth pillar of growth

Sea limited reading: deep dive, 4th Buy, 3rd buy, 2nd buy, 1st buy, tariff review, Q1’25, Q4’24, Q3’24, Q2’24 update

Master Execution since 2022

Gaming - Garena is back to sustainable growth.

In the past, Free Fire, a first-person shooting team game, played by over 600M people quarterly, was everything to Sea Limited as a whole.

Post-COVID, as gamers took a hike, investors were rightly concerned about whether it would come back to print money for investments in Shopee and Monee reliably. In my deep dive and subsequent updates, we saw that Free Fire, after 8 years, still had multiple levers for growth.

Today, the game remained at the top of the download charts, and those growth levers materialized. We saw faster development of new maps, features, and successful partnerships with global names Naruto, and Squid Game. Operationally, AI helped Free Fire to generate arts / maps quicker, customize experience quicker, engage solo players, and retain them better. Meanwhile, other promising games are starting to surface (Delta Force and Free City).

So, to me, the question mark on the durability of Garena is sufficiently answered.

Above, if you take the COVID period out, bookings and quarterly paying users have both grown by 5% and 11% CAGR.

Zooming in from post-COVID between December 2022 and Q2’25, everything looks to be back to steady growth between 8-15%.

In 2025, management expects bookings to grow by 30% driven by sustained success in Free Fire, a huge inversion from a 50% drop back in 2022, and much faster than the 8% CAGR in the past 3 years.

Quarterly active, daily active, and paying users were 660M, 100M, and 62M. Many of whom are Shopee and Monee users, so sustaining Garena is a massive advantage to Sea Limited as a whole, explicitly, the first-party data goldmine over its peers (hence the prudent risk management metric of 1% non-performing loan despite growing the loan book at 90%).

On promising new games, Free City—a GTA light version for lower-performing phones — has passed the initial demo phase, and reviews from professional gamers were good. The timing is excellent as the newest GTA 6 game release has been delayed until May 2026. We also haven’t heard much about the relaunch of Fire Fire in India.

Overall, this segment is contributing $1.2B EBITDA annualized, and I’d be happy with a 5-10% growth going forward.

E-commerce - Shopee is starting to contribute

Shopee is now 10 and a half years old (inception date: Feb 2015). Taking out the peak Covid period, Q2’25 marked the 3rd consecutive quarter of positive GAAP income! For almost 10 years, it was a cash-burning segment.

The current streak is going to change how the market views Sea Limited. Previously, Sea Limited relied on the gaming division to fund Shopee and Monee. Now, Shopee has everything set up, all the while successfully countered the pressures from TikTok shop (YouTube partnership and Shopee Live) and Temu (better cost structure, UX/UI, and broader assortments.

Above is why I remain excited about Sea Limited, despite the current price of $175/share, up from $73/share last year. As Shopee now contributes positively to the bottom line, there is no reason why Sea Limited can’t deliver bottom-line growth rates much higher than the 20% rate that I penciled down.

For Q2’25, what I like about Shopee are:

• Revenue was growing faster, at 34%, than GMV at 28% YoY.

• Sellers still flocked to Shopee despite the heightened take rate.

• Advertising revenue was contributing more significantly and has lots of room to grow (number of sellers x revenue per seller, more on this later).

• Sales and marketing continued to grow more slowly than revenue, despite operating in an intensely competitive environment. Now at 25% and 35% of Shopee’s revenue and the Group’s revenue.

• Hint of a Prime / Costco membership program in the future.

Shopee shared that they had 2 million VIP members (mainly in Indonesia, and started in June 2025 in Thailand, and Vietnam), where VIP members spent 30% more and were 20% more likely to stay (retention rate).

Total GMV from VIP members there grew nearly 50% quarter-on-quarter and VIP members bought a monthly average of around 30% more after subscribing. VIP members have also shown a roughly 20% higher retention rate compared to nonmembers.

I am unsure how much VIP members were charged monthly/yearly to have exclusive benefits (gifts and rewards for spending more), but commentary points toward a pathway to a subscription service? Such as Prime at Amazon or Costco's premium tiers, enhancing customer value and loyalty.

Our Shopee VIP membership program, a paid subscription service giving buyers exclusive benefits has shown very good momentum in Indonesia.

For Q2’25, Adj. EBITDA (~free cash flow) was $227M or ~$1B annualized. GMV grew by 28%, 6% faster than the last 3-year CAGR of 22% and revenue grew by 34%, 8% faster than the previous 3-year CAGR.

Financial services - Monee will be magical to Sea Limited

Without Shopee and Garena, Monee would not have grown to be so successful. Imagine building a digital bank from scratch.

Since generating the first million in revenue in FY2016, quarterly revenue has now reached $882M, or a CAGR of 177%.

Q2’25 also marks the 11th consecutive quarter of positive GAAP operating income. Annualized Adj. EBITDA (~free cash flow) reached ~$1B. Revenue just grew by 70% in Q2’25.

For dreamers out there, Mercado Pago of Mercado Libre was still growing at 32% YoY after more than 20 years of operation. Its quarterly revenue was ~$3B in Q2’25.

We are witnessing a carbon copy of Pago in Southeast Asia!

Selective impressive stats in Q2’25 are:

• Monee’s loan book was ~$7B, grew 90% with an impressive non-performing loan % of just 1%!

• 3 countries had surpassed the $1B loan book: Malaysia, Indonesia, and Thailand.

• Active loan users reached 30 million and grew 45%.

What that means above is that Monee is serving 30 million borrowers with an incredibly low fail rate (NPL of 1% vs. 2% average in the US in the past 25 years).

Key Q2’25 business discussion

Firstly, altogether, the three segments, annualized, were generating ~$3B free cash flow (Q2’25 Adj.EBITDA ~$830M). The following discussion on Monee, Shopee in Brazil, Logistics, and Advertising suggests that the business should continue to grow free cash flow by at least 20% for 5-10 years. All my other picks will have a tough time taking capital from Sea, even at a 23% SWI and a 55% PA allocation.

Monee vs GrabFin vs Meli’s Pago

It’s worth comparing Monee with the key rivals, GrabFin (Grab) and more distant rival Pago (Meli), for some context of how impressive Monee is executing.

Please note that they are not the same, but they are still worth comparing.

• GrabFin’s quarterly revenue was $84M for Q2’25, about 1/10 of Monee’s.

• Grab’s loan portfolio was at $700M, or also 1/10 of Monee’s. Growth was at 78%, lower than Monee’s loan book growth of 90%.

It was still making a loss, but expected to break even in the second half of 2026.

Next, Mercado Pago of Meli serves as the blueprint for Monee in Southeast Asia.

In Q2’25, revenue was ~$3B, and grew by 40%, impressive compared to the 43% CAGR growth since 2012.

What’s more intriguing is that 70% of Latin America is still underbanked and unbanked, and 85% of retail is still offline.

With fairly similar banking and e-commerce penetration rates, I see Monee following Pago’s footsteps and perhaps even surpassing its achievements.

Shopee is more dominant in Southeast Asia (50% market share) than Mercado Libre in Latin America (~25-30% market share). Shopee also has unique advantages over all its peers in the region, as Monee can draw user information from both Garena and Shopee. Forest Li shared:

First, deep and seamless integration with our shopping ecosystem.

Second, a very large base of users who are growing their credit track record with us over the years.

Third, our increasing use of AI to improve our credit models.

Together, these advantages uniquely enhance our underwriting capabilities in each market, enabling us to very effectively push for growth across our 3 credit product lines. On-Shopee SPayLater, Off-Shopee SPayLater and cash loan products.

Shopee in Brazil vs Meli

Two months ago, in June, Mercado Libre lowered the free shipping threshold to 19 reais (~$3.4) from 79 reais.

Mercado Libre's action to aggressively reduce the free shipping threshold means only one thing.

Shopee has been causing issues!

Sea Limited founder-CEO, Forest Li, shared that Shopee has become the largest in terms of order volume, all the while maintaining profitability.

This quarter, we celebrated Shopee's 5-year anniversary in Brazil, and I'm very proud of what our team has achieved in this relatively short time. We have become the market leader by order volume, we continue to grow fast, and we are operating profitably. I'm especially happy with the role we have played in promoting digital entrepreneurship to over 8 million Brazilians. 30% of our active sellers said Shopee as their first experience selling online and more than half of our active sellers say they rely on Shopee as their primary source of income.

Shopee has continued to deliver exceptional growth while maintaining its positive adjusted EBITDA. Average monthly active buyers rose by over 30% year-on-year in the second quarter, much faster than the industry average growth rate. Our strong growth in Brazil is built on solid fundamentals, especially logistics improvements and product category expansion.

I find it so impressive given that Shopee is operating in a foreign land, and has a less mature logistics network in Brazil than Meli’s.

We have brought logistics cost per order down by 16%, while also reducing our average delivery time by more than 2 days year-on-year. In the Greater Sao Paulo region, about 1 in 4 Shopee parcels were delivered the next day and 40% within 2 days, up from single-digit percentages in the same period last year.

On Monee in Brazil

Brazil also delivered robust growth in the second quarter, driven by strong adoption of SPayLater and personal cash loan products.

Our active user for loans grew 2x year-to-year. Our outstanding in Brazil also grew more than 2x year-to-year.

We also integrate more external data to our risk assessment system compared to Asia. And this is because in Brazil, there are more external data available compared to Asia in the market.

On logistics in Brazil

We didn't see any observed impact to our growth as far as we can see for now. I think the key thing, if you look at Brazil for us is, number one, to make sure that we operate in a best cost structure, especially on the logistics side, even with the improved speed of delivery, as far as sharing the opening that we are 2 days faster than last year. We still see the costs are coming down.

Even compared with that slow shipping, our cost structure is still very competitive and our speed is a lot faster than the slow shipping. So we believe that we are in a pretty good position on that. I think that's number one.

We are less CapEx heavy. So we don't buy land. We don't buy our own trucks even in Brazil. So the majority of the investment in terms of CapEx is, number one, our sorting machines, our automated sorting machines in our sorting center.

Number two is just setting up the delivery hubs across the countries. So it will not give us a big, I guess, profitability burden in general. And in fact, as we're expanding more and more SPX coverage and improving the efficiency more and more, this will help us on the EBITDA in Brazil. Actually, this trend has been ongoing for a period of time if you track our past.

We have been profitable in Brazil since a few quarters ago, and we are still profitable in Brazil even with growth in such high speed for the market.

On pricing in Brazil

On the price competitiveness. […] our pricing is still very competitive in the market if you -- across all price categories, even with the adjustment from the other side. I think number three is, if you look at our brand seller side, we're expanding our seller base to a better -- to a higher ticket items, especially in the past few quarters. We believe that trend will continue as well and will be not impacted much by the competitor movement. Just all in all, we believe that in Brazil, we are still well positioned. Our growth trend will continue, especially with our core segment group, given the strong focus that we have on the fundamental cost structure, our price competitiveness and also the growth of our seller side.

Logistics

Logistics is the backbone of Amazon's US and European domination. Shopee builds and localizes earlier and better to what we know now as SPX Express. It's the unsung hero for Shopee improving service quality.

On service quality, our logistics capabilities continue to be an important differentiator for us. In the second quarter, we reduced logistics cost per order and improved delivery speed across Asia and Brazil year-on-year in both urban and rural areas. We continue to roll out new initiatives to address specific customer needs such as instant delivery options in dense urban areas. This lets some buyers receive their orders within as little as 4 hours of order placement, our fastest shipping channel yet. We piloted it in Indonesia, and it proved so successful that we have now rolled it out to Vietnam and Thailand as well.

Value-added services revenue, mainly consisting of revenues related to logistic services, was $0.7B ($2.8B annualized), up 3% year-on-year.

Direct comparison isn’t as simple as SPX Express has all sorts of free shipping discounts and those vary quarterly. However, let’s be content with the information provided by J&T Express below.

SPX Express is now in 2nd place behind the pure logistics provider J&T Express with roughly $3B revenue in the SEA region.

Not bad for a seemingly disjointed company (gaming / e-commerce / fintech).

Advertising - the fourth pillar of growth

Advertising is buried under core market place revenue and correlates with the health of buyers and sellers. Revenue growth was at 46%, so that’s very healthy.

Core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was up 46.2% year-on-year to US$2.6 billion.

Currently, it’s around 2% of GMV, and management targets around 4-5% long-term.

How will they get there?

Number of sellers x revenue per seller (Q2 saw 40% increase), driven by

1. Better traffic algorithms that will improve the conversion rate of the ad placement

On the ad side, there are 2 main drivers for the ad take rate. One is we have a better traffic allocation algorithms between the ad and organic. We had -- we are able to mix the ad slot and the organic slot in a more efficient way, which will improve how much we can essentially improve the conversion rate of the ad placement, which will improve the return on investment from the sellers, so we can essentially cater for more seller demand on the ads.

2. Self-service allocation for sellers, akin to The Trade Desk (TTD) demand-side platform.

Number two is we have a better seller-facing product. We rolled out GMV Max, which helps the seller to automatic allocate their ad spend more efficiently and maximize their ROI. And we also simplify a lot more ad setup UIs to more and more sellers. I think all this helps to achieve essentially the better take rate. As you can see that we increased both how many sellers are involved in the ad products. We have 20% increase in the active ad sellers.

Conclusion - High bar for other sleep well picks

I will be adding SE opportunistically, even if it’s just a tiny amount each time. Since last year's recommendation, I have added 3 times. Today, SE remains at ~26x EV/FCF for an increasingly more predictable 20%+growth rate. That’s more than reasonable to me.

Importantly, Sea has overcome the post-COVID hangover and is now countering any external pressures that come its way (TikTok Shop, Temu, even Meli in Brazil).

• Garena is back to growth (~10%) with stable user engagement and eliminating durability concerns.

• Shopee is now on a 3-quarter GAAP profitability streak and growing rapidly (~20% plus long-term penciled), backed by superior cost structure (cost per order) and service quality (product assortment, fast delivery).

• Monee has been profitable for the 11th quarter and is promising to be the core cash generator for the group. Growth could emulate Pago’s 40% 20-year CAGR.

If you find my work useful, please do me a favour and help me grow the newsletter.

Let’s win together.

Start here if you are new to Sleep Well Investments.

Ok, that’s it for today—a quick reminder.

1. Ensure you own resilient businesses with plenty of buffers and redundancies.

2. Don’t panic sell; all businesses will suffer, but unequally!

3. Don’t panic add just because a stock is cheaper!

Sleep well,

Trung

Disclaimer:

As a reader of Sleep Well Investments, you agree to our disclaimer. You can read in full here.

Our ownership plan for the 20th (and 21st) pick was to wait for more clarity before adding to the initial position (acquired in Jun 2025).

Read the ownership plan here for details.

Shares dropped by 16% as of writing, so let’s review whether the commentary gives further clues about the quality of the business to warrant an addition.

Before that, it’s essential to remember why it was chosen as the 20th Sleep Well Business. I pay very little attention to Wall Street’s estimates, as they play a very different game. Quarterly results, then, would be approached with an ownership mindset and not as a betting opportunity.

If you are new to Sleep Well Investments, start here.

Q2’25 results reviewed:

• VAT Group - Shares nearing attractive point

• 18th Sleep Well H1’25 - Hidden growth

I am currently relocating to Asia and will review the results after mid-August, including those from our largest positions: Sea Limited, Mecardo Libre, and Grab. Schedules below:

Why do we own the 20th pick?

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Both European picks operate in industries that change very slowly and are difficult to disrupt, mainly because they have been pioneers and leaders for decades, with multiple advantages (TFF - 110 years, no.18th - 60 years).

Today, I’ll discuss the 18th’s excellent H1’25 results, revenue (up 32%), EBITDA (up 45%), and guidance remains the same. Best of all, it was hiding growth opportunities in plain sight.

First, let’s be reminded why it was chosen as the 18th Sleep Well Pick and why it has entered the portfolio since March 2025.

No. 18th Sleep Well readings: deep dive, 1st buy alert

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Q2’25 earnings have started, and I hope you are enjoying your holiday with family. As I approach my moving date to Asia, I’ll send you a quick report on the VAT Group H1’25 update.

I’ll begin with my usual tracking sheet (full access to annual premium reader on this Google Spreadsheet) so you know what’s in store.

If you are new, start here:

VAT Group Q2’25 - Steady despite uncertainties

Firstly, the VAT Group (VACN.SW) is a ‘pick and shovel’ and the primary beneficiary of the megatrends in cloud computing, smart devices, the Internet of Things, and artificial intelligence.

Thanks to its superior technical know-how and scale, VAT Group owns the vacuum valve industry in multiple sectors (75%+ of the semiconductor market and 50% in others). This is an irreplaceable business with customers who have little incentive to switch to inferior alternatives.

I won’t reharsh VAT’s undisputed quality. You can read them from the links below.

VAT readings - Q1’25, Tariff review, Deep dive, Top pick beyond 2025

I previously owned in my personal account, and I have been watching it from the sidelines to initiate a position in the Sleep Well Portfolio.

Are we there yet? With a near three-year low valuation of 52x EV/FCF and still growing free cash flow per share, it’s getting closer. But I hope 2025 will provide a better opportunity, given the 20th and 21st picks are better positioned for higher returns.

• 20th pick - a supply chain network leader [deep dive, first buy]

• 21st pick - a public safety SaaS leader [deep dive, first buy]

Key Q2’25 results number

The core numbers are, firstly, the spec wins, then the order intake, and the EBITDA margin.

Spec win's 27% growth indicates strong forward demand, with some projects taking 3-5 years to materialize into revenue.

So even with a lumpy order intake growth in the past few half years, I am not concerned. The 10-year CAGR has been around 8% with the last five years rising to 11%.

Notice that the order intake numbers for valves (below) have been lower than sales since 2023, driven by shorter order lead times as the supply chain has substantially stabilized over the last 2 years. However, management does expect a ramp-up.

The EBITDA margin is ~30% and has room to expand to the long-term range of 30-37%, which management aims for in the medium term.

Overall, VAT remains resilient in the face of tariff and geopolitical uncertainties in 2025.

Short-term uncertainties

Geopolitics is making customers more cautious.

The tariff has had a minimal financial impact, but customers have been somewhat cautious due to the geopolitical complexities involved in setting up the supply chain, including where to produce, where to ship, and all of which are outside of VAT’s control. This is partly reflected in the order intake weakness; however, there is a strong growth in spec wins, where customers remain confident of the long-term demand.

FX pressure - lower dollars

VAT reports in Swiss Francs CHF, so the lower dollar has had a material impact. Sales in Q2 were CHF 283 million, up 3% quarter-on-quarter and 13% year-on-year. But it would have been a 22% YoY growth at constant FX, exceeding the midpoint of guidance, and exceeding the ~10% wafer fab equipment (WFE) market growth in 2025.

FX impact will continue to put pressure on reported growth numbers and mask VAT’s quality. This could be a source of pessimism for the stock this year, and I look forward to lower prices.

Adjacent markets are taking a while to materialize.

The adjacent market is roughly 8% of sales. Management had aimed to reach 15%; however, it has been slow to materialize, which on the surface raises questions about the market's ability to grow in that segment. However, in reality, the Vat core has been growing strong with the help of China-based OEMs, which ordered a lot in the past few years in a bid to be self-sufficient, thereby distorting the growth of non-semiconductor and leading-edge components.

our qualified adjacencies did not yet get to the market in the last years with the leading-edge going forward. So we are very positive. I'm confident that the share of these adjacencies in the spec wins [20%] will materialize in the market. This is kind of the mechanics behind it. From a spec win to the high-volume manufacturing, it's typically the 3 to 5 years always depends on what kind of products and what kind of tools.

However, I am not concerned; VAT’s undisputed technical quality will help it cross-sell to other markets. Moreover, the 20% share of H1’25 total spec win shows it is progressing well.

Long-term growth - 2x market growth

The semiconductor industry is firmly on track to reach a USD 1 trillion-plus market by 2030, as the adoption of artificial intelligence continues to require more advanced and energy-efficient chips, driven by the hyperscaler.

Consequently, wafer fab equipment spend is at record levels despite geopolitical and macroeconomic uncertainties, just north of the USD 100 billion mark. Apart from the leading foundries and IDMs, China also contributes significantly to this record wafer fab equipment spending, investing in self-sufficiency in chip manufacturing, and domestic OEMs gain a larger share.

So, demand beyond 2025 remains strong, and management expects VAT to continue growing faster than the wafer fab equipment market rate (8% in 2025), driven by its focus on vacuum and advanced equipment required for new chip technologies (such as GAA, AI-adapted fabs, and advanced memory).

Summary - Ownership game plan

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