Alvin1975
2021-12-21
Gg
Sea Limited: Beware The Illusions Of Growth<blockquote>Sea Limited：谨防增长的幻想</blockquote>
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Both of its two engines - ","content":"<p>Summary</p><p><blockquote>总结</blockquote></p><p> <ul> <li>Sea Limited has been one of the top sought-after pandemic plays. Both of its two engines - gaming and e-commerce - are key beneficiaries of the COVID-19 measures.</li> <li>The uniqueness of SE, the ability to leverage its cash cow gaming unit to grow new businesses, has seen investors flocking to it. But these dynamics have changed.</li> <li>The e-commerce unit's EBITDA is getting more negative by the quarter amid a shrinking GMV per order trend.</li> <li>The profit from Garena is already unable to cover the losses from the other units in the past quarters. If Garena falters, the ability to \"subsidize\" the e-commerce and fintech arms would diminish further.</li> <li>Analysts are projecting a persistent revenue growth slowdown in the coming quarters and years.</li> </ul> Investment thesis</p><p><blockquote><ul><li>Sea Limited一直是最受欢迎的流行病剧之一。它的两个引擎——游戏和电子商务——都是COVID-19措施的主要受益者。</li><li>SE的独特性，即利用其摇钱树游戏部门发展新业务的能力，吸引了投资者蜂拥而至。但这些动态已经发生了变化。</li><li>由于每笔订单的GMV趋势萎缩，该电子商务部门的EBITDA在本季度变得更加负。</li><li>Garena的利润已经无法弥补过去几个季度其他部门的损失。如果Garena步履蹒跚，“补贴”电子商务和金融科技部门的能力将进一步减弱。</li><li>分析师预计未来几个季度和几年的收入增长将持续放缓。</li></ul>投资论文</blockquote></p><p> Sea Limited(NYSE:SE)has been one of the top sought-after pandemic plays. Both of its two engines - gaming and e-commerce - are key beneficiaries of the COVID-19 measures such as study/work-from-home. SE stock was already a solid performer pre-COVID, with gains surpassing that of its Chinese peer, Tencent Holdings (OTCPK:TCEHY) (OTCPK:TCTZF), and Latin American peer, MercadoLibre Inc. (MELI).</p><p><blockquote>Sea Limited（纽约证券交易所股票代码：SE）一直是最受欢迎的流行病公司之一。它的两个引擎——游戏和电子商务——都是在家学习/工作等COVID-19措施的主要受益者。SE股票在新冠疫情爆发前就已经表现稳健，涨幅超过了中国同行腾讯控股控股(OTCPK：TCEHY)(OTCPK：TCTZF)和拉丁美洲同行MercadoLibre Inc.(MELI)。</blockquote></p><p> Over the past three years, Sea Ltd. has seen its share price soar more than 3000 percent. After recent declines, SE stock is still up over 17 times from late December 2018. In the same period MELI stock is up 2.8 times while TCEHY stock is up only 47 percent.</p><p><blockquote>在过去的三年里，Sea Ltd.的股价飙升了3000%以上。经过近期下跌后，SE股价仍较2018年12月底上涨超过17倍。同期，MELI股票上涨了2.8倍，而TCEHY股票仅上涨了47%。</blockquote></p><p> Strictly speaking, Sea Limited doesn't have an equivalent among the large internet companies. Its gaming business is highly profitable, enabling it to fund its heavily loss-making e-commerce and fintech units. MercadoLibre hosts the largest online commerce and payments ecosystem in Latin America and it doesn't count gaming as a core business.</p><p><blockquote>严格来说，Sea Limited在大型互联网公司中没有对等的公司。其游戏业务利润丰厚，使其能够为严重亏损的电子商务和金融科技部门提供资金。MercadoLibre拥有拉丁美洲最大的在线商务和支付生态系统，它不将游戏视为核心业务。</blockquote></p><p> Tencent is big in gaming and fintech but its e-commerce ambitions are mostly manifested through its investments in related companies. Alibaba Group Holding (BABA) is huge in e-commerce and fintech but gaming is not a meaningful division on its own.</p><p><blockquote>腾讯控股在游戏和金融科技领域实力雄厚，但其电子商务雄心主要体现在对相关公司的投资上。阿里巴巴-SW集团控股公司（BABA）在电子商务和金融科技领域规模巨大，但游戏本身并不是一个有意义的部门。</blockquote></p><p> Sea Limited's peers in Southeast Asia are also having different backgrounds. Grab Holdings Limited (GRAB) started as a ride-hailing platform and subsequently branched into fintech and on-demand delivery including groceries. Indonesia's GoTo Group (GOTO) is formed from the merger of the two largest startups in the country - ride-hailing giant Gojek and e-commerce company Tokopedia.</p><p><blockquote>Sea Limited在东南亚的同行也有着不同的背景。Grab Holdings Limited(GRAB)最初是一个叫车平台，随后涉足金融科技和包括杂货在内的按需配送领域。印度尼西亚的GoTo集团（GoTo）由该国最大的两家初创公司——网约车巨头Gojek和电子商务公司Tokopedia合并而成。</blockquote></p><p> Thus, the uniqueness of Sea Limited, particularly the ability to leverage its cash cow gaming unit to grow new businesses, has seen investors flocking to this tech firm halfway around the globe from the U.S. However, the growth at its gaming unit, Garena, which the company categorizes as Digital Entertainment, registered a dramatic slowdown in the third quarter of 2021.</p><p><blockquote>因此，Sea Limited的独特性，特别是利用其摇钱树游戏部门发展新业务的能力，让投资者从美国远道而来，涌向这家科技公司。然而，其游戏部门Garena（该公司将其归类为数字娱乐）的增长在2021年第三季度急剧放缓。</blockquote></p><p> Although the gross orders and GMV metrics are still showing healthy growth, the e-commerce unit's EBITDA is getting more negative by the quarter. The total adjusted EBITDA for Sea Limited has flipped to negative this year. In other words, the profitable gaming business is no longer able to offset the escalating losses from the e-commerce and digital financial services divisions.</p><p><blockquote>尽管总订单和GMV指标仍显示出健康增长，但电子商务部门的EBITDA到本季度将变得更加负值。Sea Limited的调整后EBITDA总额今年已转为负值。换句话说，盈利的游戏业务已经无法抵消电子商务和数字金融服务部门不断升级的亏损。</blockquote></p><p> At the same time, share-based compensation continues to rise steadily. Competition in the region is also heating up, with GRAB coming to public view following its merger with a SPAC, and GoTo Group eager to show solid growth figures in the prelude to its IPO.</p><p><blockquote>与此同时，股份薪酬继续稳步上升。该地区的竞争也在加剧，GRAB在与SPAC合并后进入公众视野，GoTo Group渴望在IPO前奏中展示稳健的增长数据。</blockquote></p><p> Hence, while I'm late to the warning party, with the SE stock down 42 percent from its recent peak, the steepest fall since it became publicly traded, I believe there could be further downside over the months ahead.</p><p><blockquote>因此，虽然我的警告迟到了，SE股票较近期峰值下跌了42%，这是自上市以来的最大跌幅，但我相信未来几个月可能会进一步下跌。</blockquote></p><p> Thus, the motivation of this article is to delve deeper into the seemingly incomplete picture provided by the results presentations to understand the health of Sea Limited's e-commerce business. I will also highlight the ballooning losses as the divisions named E-Commerce and Digital Financial Services scale up.</p><p><blockquote>因此，本文的目的是更深入地研究结果演示所提供的看似不完整的情况，以了解Sea Limited电子商务业务的健康状况。我还将强调随着电子商务和数字金融服务部门规模的扩大，亏损不断扩大。</blockquote></p><p> GMV growth tells only a partial (and possibly erroneous) story</p><p><blockquote>GMV增长仅讲述了部分（且可能是错误的）故事</blockquote></p><p></p><p> Sea Limited's e-commerce arm, Shopee, has successfully increased its gross orders from 0.6 billion in 2Q 2020 to 1.7 billion in 3Q 2021, nearly tripling during the interval. Shopee's gross merchandise value (GMV) more than doubled from US$8.0 billion in 2Q 2020 to US$16.8 billion in 3Q 2021.<img src=\"https://static.tigerbbs.com/c762afa3d2ab4131c56afe6ee34fdb07\" tg-width=\"652\" tg-height=\"328\" width=\"100%\" height=\"auto\">While the growth figures look all fantastic, we need to understand the gross order numbers have been increasing at a faster pace than the GMV. In other words, the value per transaction has been declining steadily. The GMV per gross order has fallen from $13.3 in Q3 2020 to $9.9 in Q3 2021. I estimated this to reduce further to around $9.3 for the final quarter of 2021 if the trend continues.<img src=\"https://static.tigerbbs.com/aac28723c01b836c9673b49744926e09\" tg-width=\"652\" tg-height=\"391\" width=\"100%\" height=\"auto\">A smaller value per order may help Shopee gain from transaction-based fees. However, it's hard to see how the rising prevalence of lower value items helps with monetizing value-added services and advertising revenue over the long run.</p><p><blockquote>Sea Limited的电子商务部门Shopee已成功将其总订单量从2020年第二季度的6亿份增加到2021年第三季度的17亿份，在此期间几乎增加了两倍。Shopee的商品总值(GMV)从2020年第二季度的80亿美元增加到2021年第三季度的168亿美元，增长了一倍多。虽然增长数字看起来很棒，但我们需要了解总订单数量的增长速度快于GMV。换句话说，每笔交易的价值一直在稳步下降。每笔总订单的GMV已从2020年第三季度的13.3美元降至2021年第三季度的9.9美元。我估计，如果这一趋势持续下去，2021年最后一个季度这一数字将进一步降至9.3美元左右。每个订单的较小价值可能有助于Shopee从基于交易的费用中获利。然而，从长远来看，很难看出低价值商品的日益普及如何有助于增值服务和广告收入的货币化。</blockquote></p><p> For now, Shopee is still reporting healthy monetization, with GAAP revenue as a percentage of total GMV rising to 8.6 percent from 6.7 percent in the third quarter of 2020. GAAP e-commerce revenue grew 134 percent from last year to reach $1.5 billion.</p><p><blockquote>目前，Shopee仍在报告健康的变现，美国通用会计准则收入占GMV的比例从2020年第三季度的6.7%上升至8.6%。美国通用会计准则电子商务收入同比增长134%，达到15亿美元。</blockquote></p><p> To reverse the shrinking GMV per order trend, Shopee would need to sell larger ticket items like luxury products. Shopee recognizes this and it launched Shopee Premium, a delicate section on Shopee for select brand partners in the luxury segment, a year ago.</p><p><blockquote>为了扭转每笔订单GMV萎缩的趋势，Shopee需要销售奢侈品等更大的商品。Shopee认识到了这一点，并于一年前推出了Shopee Premium，这是Shopee上为奢侈品领域的精选品牌合作伙伴提供的一个微妙部分。</blockquote></p><p> It remains to be seen if Shopee can improve the user experience sufficiently to entice users to shop luxury items on its app. In its present form, based on my experience and the feedback I gathered from friends, navigation on the Shopee app can be frustrating at times and the product information page leaves much to be desired.</p><p><blockquote>Shopee能否充分改善用户体验，以吸引用户在其应用程序上购买奢侈品，还有待观察。根据我的经验和我从朋友那里收集的反馈，Shopee应用程序上的导航有时会令人沮丧，产品信息页面还有很多不足之处。</blockquote></p><p> Nonetheless, we are flocking to Shopee for the great bargains offered on the platform. There are plenty of deeply discounted items during \"flash sales\" periods, which have become increasingly prevalent. Would users return to Shopee when it stops being aggressive on promotions and if competing platforms turn on their respective campaigns?</p><p><blockquote>尽管如此，我们还是涌向Shopee，寻找该平台上提供的超值优惠。在“闪购”期间，有很多大幅打折的商品，这已经变得越来越普遍。当Shopee不再积极促销时，如果竞争平台开始各自的活动，用户会回到Shopee吗？</blockquote></p><p> Unless the luxury products are heavily discounted, I question why users would buy on Shopee otherwise, at least based on the current interface. Then again, luxury brands wouldn't want to sully their image with steep offers on Shopee, or Shopee Premium, for that matter.</p><p><blockquote>除非奢侈品大幅打折，否则我质疑为什么用户会在Shopee上购买，至少根据当前的界面。话又说回来，奢侈品牌不想在Shopee或Shopee Premium上提供高额优惠来玷污自己的形象。</blockquote></p><p> A lower GMV per transaction would also imply that Shopee's operating cost could be rising, considering the larger bandwidth and processing efforts required in handling the growing orders.</p><p><blockquote>考虑到处理不断增长的订单所需的更大带宽和处理工作量，每笔交易的GMV较低也意味着Shopee的运营成本可能会上升。</blockquote></p><p> Losses keep ballooning, share-based compensation keeps rising</p><p><blockquote>亏损不断膨胀，股权激励不断上涨</blockquote></p><p> GAAP e-commerce revenue growth is healthy and even outpacing the GMV growth. That means Sea Limited's Shopee is increasing its monetization. However, is all well and good?</p><p><blockquote>GAAP电子商务收入增长健康，甚至超过了GMV的增长。这意味着Sea Limited的Shopee正在增加其货币化。然而，一切都好吗？</blockquote></p><p> Sea Limited's total revenues have risen rapidly over the past years, but so have its losses. Just looking at the cost of revenues and total operating expenses, these have soared, growing exponentially in recent years. If we just obsess with growing sales at all costs, then we can ignore the escalating losses.</p><p><blockquote>Sea Limited的总收入在过去几年中迅速增长，但其亏损也在增加。仅从收入成本和总运营费用来看，这些成本都在飙升，近年来呈指数级增长。如果我们只是痴迷于不惜一切代价增加销售额，那么我们就可以忽略不断升级的损失。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/7ef17a9a9a279c55673ba39f1dd74577\" tg-width=\"625\" tg-height=\"418\" width=\"100%\" height=\"auto\">However, can shareholders be comfortable with the skyrocketing losses over another few years? Sea Limited looks set to end 2021 with a larger loss than last year, which already saw a substantially higher loss than 2019. One major driver of this is the inability of the Digital Entertainment division to offset the losses from the other two core business units - E-Commerce and Digital Financial Services. This resulted in the total adjusted EBITDA sinking to a negative $165.5 million in the third quarter of 2021 compared to a $120.4 billion gain in the same period last year.</p><p><blockquote>然而，股东们能对未来几年的暴涨亏损感到满意吗？Sea Limited预计到2021年底的亏损将比去年更大，而去年的亏损已经大大高于2019年。造成这种情况的一个主要驱动因素是数字娱乐部门无法抵消其他两个核心业务部门——电子商务和数字金融服务——的损失。这导致2021年第三季度调整后EBITDA总额降至负1.655亿美元，而去年同期为1204亿美元。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/7613c5f9692fd8549e9da2f931ab3a68\" tg-width=\"613\" tg-height=\"509\" width=\"100%\" height=\"auto\">We often hear the bear case saying that if these pandemic beneficiaries cannot turn their economies of scale into profitability with this massive tailwind, when will they ever? Despite ever-rising revenues, Sea Ltd. has been posting a downtrend in its operating income and net income. Sea Ltd.'s net income reached a staggering $1.95 billion on a trailing twelve-month basis as of the third quarter of 2021.</p><p><blockquote>我们经常听到熊市的说法，如果这些大流行受益者不能利用这种巨大的顺风将其规模经济转化为盈利能力，那么他们什么时候才能实现呢？尽管收入不断增长，Sea Ltd.的营业收入和净利润一直呈下降趋势。截至2021年第三季度，Sea Ltd.过去12个月的净利润达到了惊人的19.5亿美元。</blockquote></p><p></p><p> The bull camp can defend Sea Limited saying it is still investing in user growth and new businesses. That's fair. However, are shareholders aware that Wall Street analysts have projected a significant slowdown in Sea Ltd.'s revenue growth? On a consensus basis, its Q4 2021 revenue would slow further to 93.5 percent and the subsequent quarters will continue the deceleration to post 16.1 percent year-on-year growth by the fourth quarter of 2023.</p><p><blockquote>多头阵营可以为Sea Limited辩护，称其仍在投资用户增长和新业务。很公平。然而，股东们是否知道华尔街分析师预计Sea Ltd.的收入增长将大幅放缓？根据共识，其2021年第四季度的收入将进一步放缓至93.5%，随后几个季度将继续减速，到2023年第四季度同比增长16.1%。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/547ca89e5de6c8d087dfbd50dd92c0d7\" tg-width=\"593\" tg-height=\"371\" width=\"100%\" height=\"auto\">Looking further out, Sea Limited's revenue growth on a year-on-year basis is estimated to shrink from 114.6 percent in 2021 to 50.1 percent next year and a mere 8.8 percent by the end of 2025.<img src=\"https://static.tigerbbs.com/61d4ffb56269c34a8a17dfcd097375cc\" tg-width=\"612\" tg-height=\"249\" width=\"100%\" height=\"auto\">The bulls could argue that Sea Limited has a strong track record of surpassing the consensus revenue estimates. In the 16 quarters of posting earnings as a public company, it has only one miss (Q1 2021) and that was a very minor one. This suggests that analysts have been conservative in their forecasts on Sea Limited and there is room for upward adjustments in the coming quarters.<img src=\"https://static.tigerbbs.com/77fd8b53015b510bb1e02139cd50a625\" tg-width=\"615\" tg-height=\"325\" width=\"100%\" height=\"auto\">However, if Sea Limited maintains its breakneck revenue growth while its profitability doesn't improve to a positive in the coming years, analysts and shareholders would be hard-pressed to find a convincing reason to keep their faith in the company. According to the consensus estimates, Sea Limited wouldn't see a positive profit before 2024.<img src=\"https://static.tigerbbs.com/f88fc46a02603196127dcef0701f4529\" tg-width=\"620\" tg-height=\"186\" width=\"100%\" height=\"auto\">The projection showing an improving EPS trend is comforting. However, in contrast with its revenue beats, Sea Limited has long been challenged in meeting analysts' expectations of its earnings. Except for one lone quarter, Sea Limited has delivered negative surprises for all its reported quarterly EPS. In the last reported quarter, Sea Limited missed by a whopping 37.4 percent.</p><p><blockquote>展望未来，Sea Limited的收入同比增长预计将从2021年的114.6%萎缩至明年的50.1%，到2025年底仅为8.8%。看多者可能会辩称，Sea Limited拥有超过普遍收入预期的良好记录。在作为一家上市公司公布收益的16个季度中，它只有一次失误（Q1 2021），而且是一次非常小的失误。这表明分析师对Sea Limited的预测一直较为保守，未来几个季度还有上调空间。然而，如果Sea Limited保持其极快的收入增长，而其盈利能力在未来几年没有改善为正值，分析师和股东将很难找到令人信服的理由来保持对该公司的信心。根据普遍预测，Sea Limited在2024年之前不会实现正利润。显示每股收益趋势改善的预测令人欣慰。然而，与收入增长相反，Sea Limited长期以来在满足分析师对其盈利预期方面一直面临挑战。除了一个季度外，Sea Limited所有报告的季度每股收益都出现了负面意外。在上一季度的报告中，Sea Limited的跌幅高达37.4%。</blockquote></p><p> The largest-ever miss was in March 2020 where the reported EPS was 78.9 percent lower than the consensus. This meant that the above analyst estimates for its EPS could be optimistic and Sea Limited may not see a positive profit even in 2024 or 2025.</p><p><blockquote>有史以来最大的失误发生在2020年3月，当时报告的每股收益比市场预期低78.9%。这意味着上述分析师对其每股收益的预测可能是乐观的，Sea Limited即使在2024年或2025年也可能无法实现正利润。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/373d1efa57c3058f0cb2d6628368087f\" tg-width=\"627\" tg-height=\"322\" width=\"100%\" height=\"auto\">Hedgeye recently named Sea Limited as its best idea short. The research firm called Sea Limited's flagship game Garena Free Fire a \"one-hit wonder whose performance has peaked.\" The profit from Garena is already unable to cover the losses from the other units in the past quarters. If Garena falters, the ability to 'subsidize' the e-commerce and fintech arms would diminish further. Constraining the freewheeling 'spending' for the latter two units may result in slower growth that reverses the bull camp's thesis.</p><p><blockquote>Hedgeye最近将Sea Limited评为其最佳创意短片。该研究公司称Sea Limited的旗舰游戏Garena Free Fire是“性能达到顶峰的一次性奇迹”。Garena的利润已经无法弥补过去几个季度其他部门的损失。如果Garena步履蹒跚，“补贴”电子商务和金融科技部门的能力将进一步减弱。限制后两个单位的随心所欲的“支出”可能会导致增长放缓，从而推翻多头阵营的论点。</blockquote></p><p> Never mind the widening losses, shareholders can wait, the management might have reasoned. Meanwhile, Sea Limited remains generous with its share-based compensation [SBC]. The SBC is projected to rise to $133.4 million for the final quarter of 2021. This is a sharp rise from the mere $34.9 million given out in 2019 4Q.</p><p><blockquote>管理层可能会推理，不要介意不断扩大的亏损，股东可以等待。与此同时，Sea Limited仍然慷慨地提供基于股份的薪酬[SBC]。预计2021年最后一个季度SBC将增至1.334亿美元。这比2019年第四季度仅发放的3490万美元大幅上升。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/de99388fbd2c5d34db0aa558e6665dbe\" tg-width=\"633\" tg-height=\"416\" width=\"100%\" height=\"auto\">It may be worthwhile to note that the outstanding shares count of Sea Limited has doubled from 2017. In September, the company made a direct public offering of 11 million American Depositary Shares and 0.25 percent convertible senior unsecured notes with an aggregate principal of US$2.5 billion.</p><p><blockquote>值得注意的是，Sea Limited的流通股数量较2017年增加了一倍。9月，该公司直接公开发行了1100万股美国存托股票和0.25%的可转换高级无担保票据，本金总额为25亿美元。</blockquote></p><p> Sea Limited said then that it planned \"to use the net proceeds from the Offerings for business expansion and other general corporate purposes, including potential strategic investments and acquisitions.\" Could its international expansion endeavors support Sea Limited in perpetuating its high-growth story? At the expense of escalating costs amid a reckoning of pandemic stocks?</p><p><blockquote>Sea Limited当时表示，计划“将此次发行的净收益用于业务扩张和其他一般企业用途，包括潜在的战略投资和收购。”其国际扩张努力能否支持Sea Limited延续其高增长故事？在大流行库存的清算中以成本不断上升为代价？</blockquote></p><p></p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Sea Limited: Beware The Illusions Of Growth<blockquote>Sea Limited：谨防增长的幻想</blockquote></title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 12.5px; color: #7E829C; margin: 0;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSea Limited: Beware The Illusions Of Growth<blockquote>Sea Limited：谨防增长的幻想</blockquote>\n</h2>\n<h4 class=\"meta\">\n<p class=\"head\">\n<strong class=\"h-name small\">Seeking Alpha</strong><span class=\"h-time small\">2021-12-21 13:15</span>\n</p>\n</h4>\n</header>\n<article>\n<p>Summary</p><p><blockquote>总结</blockquote></p><p> <ul> <li>Sea Limited has been one of the top sought-after pandemic plays. Both of its two engines - gaming and e-commerce - are key beneficiaries of the COVID-19 measures.</li> <li>The uniqueness of SE, the ability to leverage its cash cow gaming unit to grow new businesses, has seen investors flocking to it. But these dynamics have changed.</li> <li>The e-commerce unit's EBITDA is getting more negative by the quarter amid a shrinking GMV per order trend.</li> <li>The profit from Garena is already unable to cover the losses from the other units in the past quarters. If Garena falters, the ability to \"subsidize\" the e-commerce and fintech arms would diminish further.</li> <li>Analysts are projecting a persistent revenue growth slowdown in the coming quarters and years.</li> </ul> Investment thesis</p><p><blockquote><ul><li>Sea Limited一直是最受欢迎的流行病剧之一。它的两个引擎——游戏和电子商务——都是COVID-19措施的主要受益者。</li><li>SE的独特性，即利用其摇钱树游戏部门发展新业务的能力，吸引了投资者蜂拥而至。但这些动态已经发生了变化。</li><li>由于每笔订单的GMV趋势萎缩，该电子商务部门的EBITDA在本季度变得更加负。</li><li>Garena的利润已经无法弥补过去几个季度其他部门的损失。如果Garena步履蹒跚，“补贴”电子商务和金融科技部门的能力将进一步减弱。</li><li>分析师预计未来几个季度和几年的收入增长将持续放缓。</li></ul>投资论文</blockquote></p><p> Sea Limited(NYSE:SE)has been one of the top sought-after pandemic plays. Both of its two engines - gaming and e-commerce - are key beneficiaries of the COVID-19 measures such as study/work-from-home. SE stock was already a solid performer pre-COVID, with gains surpassing that of its Chinese peer, Tencent Holdings (OTCPK:TCEHY) (OTCPK:TCTZF), and Latin American peer, MercadoLibre Inc. (MELI).</p><p><blockquote>Sea Limited（纽约证券交易所股票代码：SE）一直是最受欢迎的流行病公司之一。它的两个引擎——游戏和电子商务——都是在家学习/工作等COVID-19措施的主要受益者。SE股票在新冠疫情爆发前就已经表现稳健，涨幅超过了中国同行腾讯控股控股(OTCPK：TCEHY)(OTCPK：TCTZF)和拉丁美洲同行MercadoLibre Inc.(MELI)。</blockquote></p><p> Over the past three years, Sea Ltd. has seen its share price soar more than 3000 percent. After recent declines, SE stock is still up over 17 times from late December 2018. In the same period MELI stock is up 2.8 times while TCEHY stock is up only 47 percent.</p><p><blockquote>在过去的三年里，Sea Ltd.的股价飙升了3000%以上。经过近期下跌后，SE股价仍较2018年12月底上涨超过17倍。同期，MELI股票上涨了2.8倍，而TCEHY股票仅上涨了47%。</blockquote></p><p> Strictly speaking, Sea Limited doesn't have an equivalent among the large internet companies. Its gaming business is highly profitable, enabling it to fund its heavily loss-making e-commerce and fintech units. MercadoLibre hosts the largest online commerce and payments ecosystem in Latin America and it doesn't count gaming as a core business.</p><p><blockquote>严格来说，Sea Limited在大型互联网公司中没有对等的公司。其游戏业务利润丰厚，使其能够为严重亏损的电子商务和金融科技部门提供资金。MercadoLibre拥有拉丁美洲最大的在线商务和支付生态系统，它不将游戏视为核心业务。</blockquote></p><p> Tencent is big in gaming and fintech but its e-commerce ambitions are mostly manifested through its investments in related companies. Alibaba Group Holding (BABA) is huge in e-commerce and fintech but gaming is not a meaningful division on its own.</p><p><blockquote>腾讯控股在游戏和金融科技领域实力雄厚，但其电子商务雄心主要体现在对相关公司的投资上。阿里巴巴-SW集团控股公司（BABA）在电子商务和金融科技领域规模巨大，但游戏本身并不是一个有意义的部门。</blockquote></p><p> Sea Limited's peers in Southeast Asia are also having different backgrounds. Grab Holdings Limited (GRAB) started as a ride-hailing platform and subsequently branched into fintech and on-demand delivery including groceries. Indonesia's GoTo Group (GOTO) is formed from the merger of the two largest startups in the country - ride-hailing giant Gojek and e-commerce company Tokopedia.</p><p><blockquote>Sea Limited在东南亚的同行也有着不同的背景。Grab Holdings Limited(GRAB)最初是一个叫车平台，随后涉足金融科技和包括杂货在内的按需配送领域。印度尼西亚的GoTo集团（GoTo）由该国最大的两家初创公司——网约车巨头Gojek和电子商务公司Tokopedia合并而成。</blockquote></p><p> Thus, the uniqueness of Sea Limited, particularly the ability to leverage its cash cow gaming unit to grow new businesses, has seen investors flocking to this tech firm halfway around the globe from the U.S. However, the growth at its gaming unit, Garena, which the company categorizes as Digital Entertainment, registered a dramatic slowdown in the third quarter of 2021.</p><p><blockquote>因此，Sea Limited的独特性，特别是利用其摇钱树游戏部门发展新业务的能力，让投资者从美国远道而来，涌向这家科技公司。然而，其游戏部门Garena（该公司将其归类为数字娱乐）的增长在2021年第三季度急剧放缓。</blockquote></p><p> Although the gross orders and GMV metrics are still showing healthy growth, the e-commerce unit's EBITDA is getting more negative by the quarter. The total adjusted EBITDA for Sea Limited has flipped to negative this year. In other words, the profitable gaming business is no longer able to offset the escalating losses from the e-commerce and digital financial services divisions.</p><p><blockquote>尽管总订单和GMV指标仍显示出健康增长，但电子商务部门的EBITDA到本季度将变得更加负值。Sea Limited的调整后EBITDA总额今年已转为负值。换句话说，盈利的游戏业务已经无法抵消电子商务和数字金融服务部门不断升级的亏损。</blockquote></p><p> At the same time, share-based compensation continues to rise steadily. Competition in the region is also heating up, with GRAB coming to public view following its merger with a SPAC, and GoTo Group eager to show solid growth figures in the prelude to its IPO.</p><p><blockquote>与此同时，股份薪酬继续稳步上升。该地区的竞争也在加剧，GRAB在与SPAC合并后进入公众视野，GoTo Group渴望在IPO前奏中展示稳健的增长数据。</blockquote></p><p> Hence, while I'm late to the warning party, with the SE stock down 42 percent from its recent peak, the steepest fall since it became publicly traded, I believe there could be further downside over the months ahead.</p><p><blockquote>因此，虽然我的警告迟到了，SE股票较近期峰值下跌了42%，这是自上市以来的最大跌幅，但我相信未来几个月可能会进一步下跌。</blockquote></p><p> Thus, the motivation of this article is to delve deeper into the seemingly incomplete picture provided by the results presentations to understand the health of Sea Limited's e-commerce business. I will also highlight the ballooning losses as the divisions named E-Commerce and Digital Financial Services scale up.</p><p><blockquote>因此，本文的目的是更深入地研究结果演示所提供的看似不完整的情况，以了解Sea Limited电子商务业务的健康状况。我还将强调随着电子商务和数字金融服务部门规模的扩大，亏损不断扩大。</blockquote></p><p> GMV growth tells only a partial (and possibly erroneous) story</p><p><blockquote>GMV增长仅讲述了部分（且可能是错误的）故事</blockquote></p><p></p><p> Sea Limited's e-commerce arm, Shopee, has successfully increased its gross orders from 0.6 billion in 2Q 2020 to 1.7 billion in 3Q 2021, nearly tripling during the interval. Shopee's gross merchandise value (GMV) more than doubled from US$8.0 billion in 2Q 2020 to US$16.8 billion in 3Q 2021.<img src=\"https://static.tigerbbs.com/c762afa3d2ab4131c56afe6ee34fdb07\" tg-width=\"652\" tg-height=\"328\" width=\"100%\" height=\"auto\">While the growth figures look all fantastic, we need to understand the gross order numbers have been increasing at a faster pace than the GMV. In other words, the value per transaction has been declining steadily. The GMV per gross order has fallen from $13.3 in Q3 2020 to $9.9 in Q3 2021. I estimated this to reduce further to around $9.3 for the final quarter of 2021 if the trend continues.<img src=\"https://static.tigerbbs.com/aac28723c01b836c9673b49744926e09\" tg-width=\"652\" tg-height=\"391\" width=\"100%\" height=\"auto\">A smaller value per order may help Shopee gain from transaction-based fees. However, it's hard to see how the rising prevalence of lower value items helps with monetizing value-added services and advertising revenue over the long run.</p><p><blockquote>Sea Limited的电子商务部门Shopee已成功将其总订单量从2020年第二季度的6亿份增加到2021年第三季度的17亿份，在此期间几乎增加了两倍。Shopee的商品总值(GMV)从2020年第二季度的80亿美元增加到2021年第三季度的168亿美元，增长了一倍多。虽然增长数字看起来很棒，但我们需要了解总订单数量的增长速度快于GMV。换句话说，每笔交易的价值一直在稳步下降。每笔总订单的GMV已从2020年第三季度的13.3美元降至2021年第三季度的9.9美元。我估计，如果这一趋势持续下去，2021年最后一个季度这一数字将进一步降至9.3美元左右。每个订单的较小价值可能有助于Shopee从基于交易的费用中获利。然而，从长远来看，很难看出低价值商品的日益普及如何有助于增值服务和广告收入的货币化。</blockquote></p><p> For now, Shopee is still reporting healthy monetization, with GAAP revenue as a percentage of total GMV rising to 8.6 percent from 6.7 percent in the third quarter of 2020. GAAP e-commerce revenue grew 134 percent from last year to reach $1.5 billion.</p><p><blockquote>目前，Shopee仍在报告健康的变现，美国通用会计准则收入占GMV的比例从2020年第三季度的6.7%上升至8.6%。美国通用会计准则电子商务收入同比增长134%，达到15亿美元。</blockquote></p><p> To reverse the shrinking GMV per order trend, Shopee would need to sell larger ticket items like luxury products. Shopee recognizes this and it launched Shopee Premium, a delicate section on Shopee for select brand partners in the luxury segment, a year ago.</p><p><blockquote>为了扭转每笔订单GMV萎缩的趋势，Shopee需要销售奢侈品等更大的商品。Shopee认识到了这一点，并于一年前推出了Shopee Premium，这是Shopee上为奢侈品领域的精选品牌合作伙伴提供的一个微妙部分。</blockquote></p><p> It remains to be seen if Shopee can improve the user experience sufficiently to entice users to shop luxury items on its app. In its present form, based on my experience and the feedback I gathered from friends, navigation on the Shopee app can be frustrating at times and the product information page leaves much to be desired.</p><p><blockquote>Shopee能否充分改善用户体验，以吸引用户在其应用程序上购买奢侈品，还有待观察。根据我的经验和我从朋友那里收集的反馈，Shopee应用程序上的导航有时会令人沮丧，产品信息页面还有很多不足之处。</blockquote></p><p> Nonetheless, we are flocking to Shopee for the great bargains offered on the platform. There are plenty of deeply discounted items during \"flash sales\" periods, which have become increasingly prevalent. Would users return to Shopee when it stops being aggressive on promotions and if competing platforms turn on their respective campaigns?</p><p><blockquote>尽管如此，我们还是涌向Shopee，寻找该平台上提供的超值优惠。在“闪购”期间，有很多大幅打折的商品，这已经变得越来越普遍。当Shopee不再积极促销时，如果竞争平台开始各自的活动，用户会回到Shopee吗？</blockquote></p><p> Unless the luxury products are heavily discounted, I question why users would buy on Shopee otherwise, at least based on the current interface. Then again, luxury brands wouldn't want to sully their image with steep offers on Shopee, or Shopee Premium, for that matter.</p><p><blockquote>除非奢侈品大幅打折，否则我质疑为什么用户会在Shopee上购买，至少根据当前的界面。话又说回来，奢侈品牌不想在Shopee或Shopee Premium上提供高额优惠来玷污自己的形象。</blockquote></p><p> A lower GMV per transaction would also imply that Shopee's operating cost could be rising, considering the larger bandwidth and processing efforts required in handling the growing orders.</p><p><blockquote>考虑到处理不断增长的订单所需的更大带宽和处理工作量，每笔交易的GMV较低也意味着Shopee的运营成本可能会上升。</blockquote></p><p> Losses keep ballooning, share-based compensation keeps rising</p><p><blockquote>亏损不断膨胀，股权激励不断上涨</blockquote></p><p> GAAP e-commerce revenue growth is healthy and even outpacing the GMV growth. That means Sea Limited's Shopee is increasing its monetization. However, is all well and good?</p><p><blockquote>GAAP电子商务收入增长健康，甚至超过了GMV的增长。这意味着Sea Limited的Shopee正在增加其货币化。然而，一切都好吗？</blockquote></p><p> Sea Limited's total revenues have risen rapidly over the past years, but so have its losses. Just looking at the cost of revenues and total operating expenses, these have soared, growing exponentially in recent years. If we just obsess with growing sales at all costs, then we can ignore the escalating losses.</p><p><blockquote>Sea Limited的总收入在过去几年中迅速增长，但其亏损也在增加。仅从收入成本和总运营费用来看，这些成本都在飙升，近年来呈指数级增长。如果我们只是痴迷于不惜一切代价增加销售额，那么我们就可以忽略不断升级的损失。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/7ef17a9a9a279c55673ba39f1dd74577\" tg-width=\"625\" tg-height=\"418\" width=\"100%\" height=\"auto\">However, can shareholders be comfortable with the skyrocketing losses over another few years? Sea Limited looks set to end 2021 with a larger loss than last year, which already saw a substantially higher loss than 2019. One major driver of this is the inability of the Digital Entertainment division to offset the losses from the other two core business units - E-Commerce and Digital Financial Services. This resulted in the total adjusted EBITDA sinking to a negative $165.5 million in the third quarter of 2021 compared to a $120.4 billion gain in the same period last year.</p><p><blockquote>然而，股东们能对未来几年的暴涨亏损感到满意吗？Sea Limited预计到2021年底的亏损将比去年更大，而去年的亏损已经大大高于2019年。造成这种情况的一个主要驱动因素是数字娱乐部门无法抵消其他两个核心业务部门——电子商务和数字金融服务——的损失。这导致2021年第三季度调整后EBITDA总额降至负1.655亿美元，而去年同期为1204亿美元。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/7613c5f9692fd8549e9da2f931ab3a68\" tg-width=\"613\" tg-height=\"509\" width=\"100%\" height=\"auto\">We often hear the bear case saying that if these pandemic beneficiaries cannot turn their economies of scale into profitability with this massive tailwind, when will they ever? Despite ever-rising revenues, Sea Ltd. has been posting a downtrend in its operating income and net income. Sea Ltd.'s net income reached a staggering $1.95 billion on a trailing twelve-month basis as of the third quarter of 2021.</p><p><blockquote>我们经常听到熊市的说法，如果这些大流行受益者不能利用这种巨大的顺风将其规模经济转化为盈利能力，那么他们什么时候才能实现呢？尽管收入不断增长，Sea Ltd.的营业收入和净利润一直呈下降趋势。截至2021年第三季度，Sea Ltd.过去12个月的净利润达到了惊人的19.5亿美元。</blockquote></p><p></p><p> The bull camp can defend Sea Limited saying it is still investing in user growth and new businesses. That's fair. However, are shareholders aware that Wall Street analysts have projected a significant slowdown in Sea Ltd.'s revenue growth? On a consensus basis, its Q4 2021 revenue would slow further to 93.5 percent and the subsequent quarters will continue the deceleration to post 16.1 percent year-on-year growth by the fourth quarter of 2023.</p><p><blockquote>多头阵营可以为Sea Limited辩护，称其仍在投资用户增长和新业务。很公平。然而，股东们是否知道华尔街分析师预计Sea Ltd.的收入增长将大幅放缓？根据共识，其2021年第四季度的收入将进一步放缓至93.5%，随后几个季度将继续减速，到2023年第四季度同比增长16.1%。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/547ca89e5de6c8d087dfbd50dd92c0d7\" tg-width=\"593\" tg-height=\"371\" width=\"100%\" height=\"auto\">Looking further out, Sea Limited's revenue growth on a year-on-year basis is estimated to shrink from 114.6 percent in 2021 to 50.1 percent next year and a mere 8.8 percent by the end of 2025.<img src=\"https://static.tigerbbs.com/61d4ffb56269c34a8a17dfcd097375cc\" tg-width=\"612\" tg-height=\"249\" width=\"100%\" height=\"auto\">The bulls could argue that Sea Limited has a strong track record of surpassing the consensus revenue estimates. In the 16 quarters of posting earnings as a public company, it has only one miss (Q1 2021) and that was a very minor one. This suggests that analysts have been conservative in their forecasts on Sea Limited and there is room for upward adjustments in the coming quarters.<img src=\"https://static.tigerbbs.com/77fd8b53015b510bb1e02139cd50a625\" tg-width=\"615\" tg-height=\"325\" width=\"100%\" height=\"auto\">However, if Sea Limited maintains its breakneck revenue growth while its profitability doesn't improve to a positive in the coming years, analysts and shareholders would be hard-pressed to find a convincing reason to keep their faith in the company. According to the consensus estimates, Sea Limited wouldn't see a positive profit before 2024.<img src=\"https://static.tigerbbs.com/f88fc46a02603196127dcef0701f4529\" tg-width=\"620\" tg-height=\"186\" width=\"100%\" height=\"auto\">The projection showing an improving EPS trend is comforting. However, in contrast with its revenue beats, Sea Limited has long been challenged in meeting analysts' expectations of its earnings. Except for one lone quarter, Sea Limited has delivered negative surprises for all its reported quarterly EPS. In the last reported quarter, Sea Limited missed by a whopping 37.4 percent.</p><p><blockquote>展望未来，Sea Limited的收入同比增长预计将从2021年的114.6%萎缩至明年的50.1%，到2025年底仅为8.8%。看多者可能会辩称，Sea Limited拥有超过普遍收入预期的良好记录。在作为一家上市公司公布收益的16个季度中，它只有一次失误（Q1 2021），而且是一次非常小的失误。这表明分析师对Sea Limited的预测一直较为保守，未来几个季度还有上调空间。然而，如果Sea Limited保持其极快的收入增长，而其盈利能力在未来几年没有改善为正值，分析师和股东将很难找到令人信服的理由来保持对该公司的信心。根据普遍预测，Sea Limited在2024年之前不会实现正利润。显示每股收益趋势改善的预测令人欣慰。然而，与收入增长相反，Sea Limited长期以来在满足分析师对其盈利预期方面一直面临挑战。除了一个季度外，Sea Limited所有报告的季度每股收益都出现了负面意外。在上一季度的报告中，Sea Limited的跌幅高达37.4%。</blockquote></p><p> The largest-ever miss was in March 2020 where the reported EPS was 78.9 percent lower than the consensus. This meant that the above analyst estimates for its EPS could be optimistic and Sea Limited may not see a positive profit even in 2024 or 2025.</p><p><blockquote>有史以来最大的失误发生在2020年3月，当时报告的每股收益比市场预期低78.9%。这意味着上述分析师对其每股收益的预测可能是乐观的，Sea Limited即使在2024年或2025年也可能无法实现正利润。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/373d1efa57c3058f0cb2d6628368087f\" tg-width=\"627\" tg-height=\"322\" width=\"100%\" height=\"auto\">Hedgeye recently named Sea Limited as its best idea short. The research firm called Sea Limited's flagship game Garena Free Fire a \"one-hit wonder whose performance has peaked.\" The profit from Garena is already unable to cover the losses from the other units in the past quarters. If Garena falters, the ability to 'subsidize' the e-commerce and fintech arms would diminish further. Constraining the freewheeling 'spending' for the latter two units may result in slower growth that reverses the bull camp's thesis.</p><p><blockquote>Hedgeye最近将Sea Limited评为其最佳创意短片。该研究公司称Sea Limited的旗舰游戏Garena Free Fire是“性能达到顶峰的一次性奇迹”。Garena的利润已经无法弥补过去几个季度其他部门的损失。如果Garena步履蹒跚，“补贴”电子商务和金融科技部门的能力将进一步减弱。限制后两个单位的随心所欲的“支出”可能会导致增长放缓，从而推翻多头阵营的论点。</blockquote></p><p> Never mind the widening losses, shareholders can wait, the management might have reasoned. Meanwhile, Sea Limited remains generous with its share-based compensation [SBC]. The SBC is projected to rise to $133.4 million for the final quarter of 2021. This is a sharp rise from the mere $34.9 million given out in 2019 4Q.</p><p><blockquote>管理层可能会推理，不要介意不断扩大的亏损，股东可以等待。与此同时，Sea Limited仍然慷慨地提供基于股份的薪酬[SBC]。预计2021年最后一个季度SBC将增至1.334亿美元。这比2019年第四季度仅发放的3490万美元大幅上升。</blockquote></p><p> <img src=\"https://static.tigerbbs.com/de99388fbd2c5d34db0aa558e6665dbe\" tg-width=\"633\" tg-height=\"416\" width=\"100%\" height=\"auto\">It may be worthwhile to note that the outstanding shares count of Sea Limited has doubled from 2017. In September, the company made a direct public offering of 11 million American Depositary Shares and 0.25 percent convertible senior unsecured notes with an aggregate principal of US$2.5 billion.</p><p><blockquote>值得注意的是，Sea Limited的流通股数量较2017年增加了一倍。9月，该公司直接公开发行了1100万股美国存托股票和0.25%的可转换高级无担保票据，本金总额为25亿美元。</blockquote></p><p> Sea Limited said then that it planned \"to use the net proceeds from the Offerings for business expansion and other general corporate purposes, including potential strategic investments and acquisitions.\" Could its international expansion endeavors support Sea Limited in perpetuating its high-growth story? At the expense of escalating costs amid a reckoning of pandemic stocks?</p><p><blockquote>Sea Limited当时表示，计划“将此次发行的净收益用于业务扩张和其他一般企业用途，包括潜在的战略投资和收购。”其国际扩张努力能否支持Sea Limited延续其高增长故事？在大流行库存的清算中以成本不断上升为代价？</blockquote></p><p></p>\n<div class=\"bt-text\">\n\n\n<p> 来源：<a href=\"https://seekingalpha.com/article/4475916-sea-limited-se-stock-beware-growth-illusions\">Seeking Alpha</a></p>\n<p>为提升您的阅读体验，我们对本页面进行了排版优化</p>\n\n\n</div>\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"SE":"Sea Ltd"},"source_url":"https://seekingalpha.com/article/4475916-sea-limited-se-stock-beware-growth-illusions","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1181908837","content_text":"Summary\n\nSea Limited has been one of the top sought-after pandemic plays. Both of its two engines - gaming and e-commerce - are key beneficiaries of the COVID-19 measures.\nThe uniqueness of SE, the ability to leverage its cash cow gaming unit to grow new businesses, has seen investors flocking to it. But these dynamics have changed.\nThe e-commerce unit's EBITDA is getting more negative by the quarter amid a shrinking GMV per order trend.\nThe profit from Garena is already unable to cover the losses from the other units in the past quarters. If Garena falters, the ability to \"subsidize\" the e-commerce and fintech arms would diminish further.\nAnalysts are projecting a persistent revenue growth slowdown in the coming quarters and years.\n\nInvestment thesis\nSea Limited(NYSE:SE)has been one of the top sought-after pandemic plays. Both of its two engines - gaming and e-commerce - are key beneficiaries of the COVID-19 measures such as study/work-from-home. SE stock was already a solid performer pre-COVID, with gains surpassing that of its Chinese peer, Tencent Holdings (OTCPK:TCEHY) (OTCPK:TCTZF), and Latin American peer, MercadoLibre Inc. (MELI).\nOver the past three years, Sea Ltd. has seen its share price soar more than 3000 percent. After recent declines, SE stock is still up over 17 times from late December 2018. In the same period MELI stock is up 2.8 times while TCEHY stock is up only 47 percent.\nStrictly speaking, Sea Limited doesn't have an equivalent among the large internet companies. Its gaming business is highly profitable, enabling it to fund its heavily loss-making e-commerce and fintech units. MercadoLibre hosts the largest online commerce and payments ecosystem in Latin America and it doesn't count gaming as a core business.\nTencent is big in gaming and fintech but its e-commerce ambitions are mostly manifested through its investments in related companies. Alibaba Group Holding (BABA) is huge in e-commerce and fintech but gaming is not a meaningful division on its own.\nSea Limited's peers in Southeast Asia are also having different backgrounds. Grab Holdings Limited (GRAB) started as a ride-hailing platform and subsequently branched into fintech and on-demand delivery including groceries. Indonesia's GoTo Group (GOTO) is formed from the merger of the two largest startups in the country - ride-hailing giant Gojek and e-commerce company Tokopedia.\nThus, the uniqueness of Sea Limited, particularly the ability to leverage its cash cow gaming unit to grow new businesses, has seen investors flocking to this tech firm halfway around the globe from the U.S. However, the growth at its gaming unit, Garena, which the company categorizes as Digital Entertainment, registered a dramatic slowdown in the third quarter of 2021.\nAlthough the gross orders and GMV metrics are still showing healthy growth, the e-commerce unit's EBITDA is getting more negative by the quarter. The total adjusted EBITDA for Sea Limited has flipped to negative this year. In other words, the profitable gaming business is no longer able to offset the escalating losses from the e-commerce and digital financial services divisions.\nAt the same time, share-based compensation continues to rise steadily. Competition in the region is also heating up, with GRAB coming to public view following its merger with a SPAC, and GoTo Group eager to show solid growth figures in the prelude to its IPO.\nHence, while I'm late to the warning party, with the SE stock down 42 percent from its recent peak, the steepest fall since it became publicly traded, I believe there could be further downside over the months ahead.\nThus, the motivation of this article is to delve deeper into the seemingly incomplete picture provided by the results presentations to understand the health of Sea Limited's e-commerce business. I will also highlight the ballooning losses as the divisions named E-Commerce and Digital Financial Services scale up.\nGMV growth tells only a partial (and possibly erroneous) story\nSea Limited's e-commerce arm, Shopee, has successfully increased its gross orders from 0.6 billion in 2Q 2020 to 1.7 billion in 3Q 2021, nearly tripling during the interval. Shopee's gross merchandise value (GMV) more than doubled from US$8.0 billion in 2Q 2020 to US$16.8 billion in 3Q 2021.While the growth figures look all fantastic, we need to understand the gross order numbers have been increasing at a faster pace than the GMV. In other words, the value per transaction has been declining steadily. The GMV per gross order has fallen from $13.3 in Q3 2020 to $9.9 in Q3 2021. I estimated this to reduce further to around $9.3 for the final quarter of 2021 if the trend continues.A smaller value per order may help Shopee gain from transaction-based fees. However, it's hard to see how the rising prevalence of lower value items helps with monetizing value-added services and advertising revenue over the long run.\nFor now, Shopee is still reporting healthy monetization, with GAAP revenue as a percentage of total GMV rising to 8.6 percent from 6.7 percent in the third quarter of 2020. GAAP e-commerce revenue grew 134 percent from last year to reach $1.5 billion.\nTo reverse the shrinking GMV per order trend, Shopee would need to sell larger ticket items like luxury products. Shopee recognizes this and it launched Shopee Premium, a delicate section on Shopee for select brand partners in the luxury segment, a year ago.\nIt remains to be seen if Shopee can improve the user experience sufficiently to entice users to shop luxury items on its app. In its present form, based on my experience and the feedback I gathered from friends, navigation on the Shopee app can be frustrating at times and the product information page leaves much to be desired.\nNonetheless, we are flocking to Shopee for the great bargains offered on the platform. There are plenty of deeply discounted items during \"flash sales\" periods, which have become increasingly prevalent. Would users return to Shopee when it stops being aggressive on promotions and if competing platforms turn on their respective campaigns?\nUnless the luxury products are heavily discounted, I question why users would buy on Shopee otherwise, at least based on the current interface. Then again, luxury brands wouldn't want to sully their image with steep offers on Shopee, or Shopee Premium, for that matter.\nA lower GMV per transaction would also imply that Shopee's operating cost could be rising, considering the larger bandwidth and processing efforts required in handling the growing orders.\nLosses keep ballooning, share-based compensation keeps rising\nGAAP e-commerce revenue growth is healthy and even outpacing the GMV growth. That means Sea Limited's Shopee is increasing its monetization. However, is all well and good?\nSea Limited's total revenues have risen rapidly over the past years, but so have its losses. Just looking at the cost of revenues and total operating expenses, these have soared, growing exponentially in recent years. If we just obsess with growing sales at all costs, then we can ignore the escalating losses.\nHowever, can shareholders be comfortable with the skyrocketing losses over another few years? Sea Limited looks set to end 2021 with a larger loss than last year, which already saw a substantially higher loss than 2019. One major driver of this is the inability of the Digital Entertainment division to offset the losses from the other two core business units - E-Commerce and Digital Financial Services. This resulted in the total adjusted EBITDA sinking to a negative $165.5 million in the third quarter of 2021 compared to a $120.4 billion gain in the same period last year.\nWe often hear the bear case saying that if these pandemic beneficiaries cannot turn their economies of scale into profitability with this massive tailwind, when will they ever? Despite ever-rising revenues, Sea Ltd. has been posting a downtrend in its operating income and net income. Sea Ltd.'s net income reached a staggering $1.95 billion on a trailing twelve-month basis as of the third quarter of 2021.\nThe bull camp can defend Sea Limited saying it is still investing in user growth and new businesses. That's fair. However, are shareholders aware that Wall Street analysts have projected a significant slowdown in Sea Ltd.'s revenue growth? On a consensus basis, its Q4 2021 revenue would slow further to 93.5 percent and the subsequent quarters will continue the deceleration to post 16.1 percent year-on-year growth by the fourth quarter of 2023.\nLooking further out, Sea Limited's revenue growth on a year-on-year basis is estimated to shrink from 114.6 percent in 2021 to 50.1 percent next year and a mere 8.8 percent by the end of 2025.The bulls could argue that Sea Limited has a strong track record of surpassing the consensus revenue estimates. In the 16 quarters of posting earnings as a public company, it has only one miss (Q1 2021) and that was a very minor one. This suggests that analysts have been conservative in their forecasts on Sea Limited and there is room for upward adjustments in the coming quarters.However, if Sea Limited maintains its breakneck revenue growth while its profitability doesn't improve to a positive in the coming years, analysts and shareholders would be hard-pressed to find a convincing reason to keep their faith in the company. According to the consensus estimates, Sea Limited wouldn't see a positive profit before 2024.The projection showing an improving EPS trend is comforting. However, in contrast with its revenue beats, Sea Limited has long been challenged in meeting analysts' expectations of its earnings. Except for one lone quarter, Sea Limited has delivered negative surprises for all its reported quarterly EPS. In the last reported quarter, Sea Limited missed by a whopping 37.4 percent.\nThe largest-ever miss was in March 2020 where the reported EPS was 78.9 percent lower than the consensus. This meant that the above analyst estimates for its EPS could be optimistic and Sea Limited may not see a positive profit even in 2024 or 2025.\nHedgeye recently named Sea Limited as its best idea short. The research firm called Sea Limited's flagship game Garena Free Fire a \"one-hit wonder whose performance has peaked.\" The profit from Garena is already unable to cover the losses from the other units in the past quarters. If Garena falters, the ability to 'subsidize' the e-commerce and fintech arms would diminish further. Constraining the freewheeling 'spending' for the latter two units may result in slower growth that reverses the bull camp's thesis.\nNever mind the widening losses, shareholders can wait, the management might have reasoned. Meanwhile, Sea Limited remains generous with its share-based compensation [SBC]. The SBC is projected to rise to $133.4 million for the final quarter of 2021. This is a sharp rise from the mere $34.9 million given out in 2019 4Q.\nIt may be worthwhile to note that the outstanding shares count of Sea Limited has doubled from 2017. In September, the company made a direct public offering of 11 million American Depositary Shares and 0.25 percent convertible senior unsecured notes with an aggregate principal of US$2.5 billion.\nSea Limited said then that it planned \"to use the net proceeds from the Offerings for business expansion and other general corporate purposes, including potential strategic investments and acquisitions.\" Could its international expansion endeavors support Sea Limited in perpetuating its high-growth story? At the expense of escalating costs amid a reckoning of pandemic stocks?","news_type":1,"symbols_score_info":{"SE":0.9}},"isVote":1,"tweetType":1,"viewCount":1126,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":2,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/693799882"}
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