Sea Limited Q3'24 - Self-Sufficient with Reaccelerating Growth
SE shares up 150% since Forest Li's rallying letter in Q3'22. Q3'24, Shopee was firmly profitable, Garena returned to growth, SeaMoney and Advertising show tremendous upside.
Hi, I am Trung. I deep-dive into niche market leaders that passed my sleep-well checklist. I follow up on their performance with my Thesis Tracker updates, and when the right price comes, I buy them for the Sleep Well Portfolio, which I am building for my daughters to redeem in 2037. Reasoning for all BUY and SELL (ideally never). All content is here.
Hi, sleep well, friends,
This write-up reviews Sea Limited's excellent Q3’24 results.
Sea Limited readings - deep dive, buy alert, Q2’24 update
Looking at the Sea Limited (SE) 5-year stock chart below, you could quickly judge the business as a ‘fallen angel’ or a ‘dead cat bounce.’
But if you have followed Sea Limited's transformation since 2022, I argue that the recovery is here, and the market is about to feel optimistic and going all in soon.
As an owner of the business for nearly five years, it’s hard to imagine that around Q3’22, Shopee, the e-commerce arm of Sea Limited, was still losing $500M per quarter. All the while, Garena, the gaming arm from where the cash came, was shrinking as the world reopened, and TikTok and Temu were all in. Shares were $40/share after falling 80%+ from the Covid peak. Forest Li, the CEO and founder, sent a letter rallying for self-sufficiency within 18 months (Sea Change).
Today, in Q3 ’24, Shopee is profitable. It cut all the fat in non-South East Asian markets, leaving Brazil, which has also broken even today! Temu turned out to be a non-issue, and in Shopee Live and Shopee+Youtube partnership, management has found a solution to counter TikTok. Garena is back to sequential growth, with 50M quarterly paying users (628M quarterly active users) and still the number one downloaded mobile game globally, proving an evergreen enterprise. SeaMoney continues to leverage the scale and data from Garena and Shopee successfully to grow its loan book by 70% to $4.6B prudently with just 1.2% non-performing loans (with caveats). Lastly, Advertising is taking shape - I project this will be just as big of an enterprise as SeaMoney or the current Sea Limited market cap in 10 years. Why? Garena has over 628M quarterly active users, Shopee has 300M+ monthly active, and SeaMoney has 24M active loan users. Retail media is the new pink. Traditional advertising is dead.
Sea Limited Q3’24 results review - November 12th
As a reminder, I focus on the long-term story/execution of the business, not the quarterly Wall Street beat/miss quarterly records. So, my thesis tracker primarily checks how my picks build their value propositions, cope with adversity, and maintain/grow moats and market share.