With a market capitalization of 1367 per cent in 20 months, the company, known as Southeast Asia's Tencent + BABA and backed by Tencent (with a stake of nearly 40 per cent) and Chinese resources, has taken the lead in gaming and ecommerce in Southeast Asia and now has a market capitalisation of $68 billion.

This is SEA (US stock code SE), which yesterday released a better-than-expected earnings report and gave strong guidance and confidence (games and e-commerce are growing faster than Q2), so the share price rose 8.71% on the day.

I. the eye-catching data behind the financial report

The epidemic has really fueled the mobile Internet.

COVID-19 wreaked havoc all over the world in the second quarter of this year, and most industries will inevitably suffer. However, the online economy has benefited from misfortune, and the penetration rates of e-commerce, games, video, and cloud computing have further increased.

2020Q2 SEA's revenue was $1.287 billion, up 93.4% from a year earlier, gross profit jumped 106% to $200 million, and gross profit margin further rose to 15.60%.

Its three businesses of gaming, e-commerce and payment all benefited from the epidemic.

1. Games: the game business grew by 61.6% in July, and the number of paying users increased by 91.2% compared with the same period last year.

GARENA game business, benefiting from the home economy after the epidemic, the number of users and revenue and other key indicators continue to maintain rapid growth. 2020Q2's revenue was $726 million, up 61.6% year-on-year, and the adjusted EBITDA was $436 million, up 65.4% year-on-year and 1.4% year-on-year (2019Q2 was 59.5%).

In terms of users, quarterly active users QAU 499 million, up 61% from the same period last year, up 189 million from 310 million in the same period last year; quarterly paid users QPU surged 91.2% to 49.9 million (2019Q2 26.1 million), and quarterly paid users continued to account for 10% of active users (2020Q18.96%).

In the second quarter of this year, FREE FIRE reached a record high of 100 million daily active users. According to APP ANNIE, FF is the fastest growing mobile game in Latin America and Southeast Asia and the third most downloaded mobile game in the world in the second quarter of 2020. In addition, GARENA's monthly revenue hit an all-time high in July, and the number of FF monthly fee-paying households reached a new monthly high, doubling from a year earlier.

2. E-commerce: after the end of the epidemic, dau, order volume, arpu, and user usage time continued to grow, and the growth trend did not slow down: benefiting from the improvement of e-commerce rate and leading position (market concentration further increased)

SHOPEE's e-commerce business has performed so well this quarter that key indicators such as GMV and the number of users have far outpaced competitors such as LAZADA.

2020Q2 GMV US $8 billion, up 110% year-on-year, orders 616 million, up 150% year-on-year, adjusted revenue of US $511 million, 188% year-on-year increase of 188% Take RATE 6.4% year-on-year increase of 1.8% (2019 Q24.6%).

On the user side, following APP ANNIE statistics, 2020Q2 shopee is the Android shopping APP with the highest average monthly active user MAU and total time spending in Southeast Asia and Taiwan. At the same time, shopee is also the largest downloading shopping APP for 2020Q2 in Southeast Asia, and also ranks among the top three downloads in the world.

3. Payment: the growth rate of SEA MONEY is very fast, and it is a big jewel in the future.

SEA MONEY digital finance business, transaction volume further rapid growth, the proportion of shopee GMV rose to 20% (2019Q2 is 16%). The total payment volume of 2020Q2 mobile wallet is US $1.6 billion, and the growth rate of Q0Q is 50%. The number of quarterly payment households of 2020Q2 mobile wallet is QPU 15 million (an increase of 50% month on month). It is really not easy for the payment wallet launched in the fourth quarter of last year to become popular so quickly.

With the mobile penetration of the Southeast Asian market and the potential of regional economic growth in the future, the transaction value of SEA MONEY will grow rapidly in the next few years, and SEA MONEY may become the Square, INC. of Southeast Asia.

To sum up, SEA's e-commerce game payment performance skyrocketed this quarter, the total revenue nearly doubled, but at the same time, the stock price has also increased significantly, the market capitalization is close to 70 billion, so does SEA still have room to rise?

Second, does the company have any room for further growth?

SEA's business model is very healthy, games generate stable cash flow, support the development of e-commerce business, e-commerce orders continue to grow to drive the payment wallet financial business.

In the long run, the ceiling of SEA's market capitalization depends on Southeast Asia's demographics and mobile economic dividends.

The rapid growth of Shopee is mainly due to the low penetration of Southeast Asian e-commerce market and the enviable demographics and dividends of owners.

The total e-commerce market in Southeast Asia in 2018 is US $23.2 billion, which is expected to exceed 100 billion in 25 years, with a CAGR of 24% in 19-25. In 17 years, e-commerce in Southeast Asia accounted for 2% of total retail sales, while Singapore, the region's most developed country, accounted for only 5%, far less than the more mature e-commerce markets, such as China (20%) and the United States (12%). The per capita retail store area in Pan-Southeast Asia is only 46 of that in the United States and 4.8 in China. At the same time, 80.6% of the population in Pan-Southeast Asia lives in small and medium-sized cities or rural areas. The lack of offline retail and the inconvenience caused by superimposed geographical location provide opportunities for the development of online e-commerce.

Therefore, the Internet market environment in Southeast Asia tends to be mature, and the future market demand has great potential. compared with Europe and the United States, the market stage is in a relatively early stage, so the current market stage in Southeast Asia is a bit like the rise of Taobao ten years ago.

From the stage of the market, SEA is far from reaching the ceiling.

Can SEA reach 100 billion US dollars?

From the above analysis, we can see that the investment logic of SEA is actually very simple-demographic dividend and economic growth, market penetration is increasing rapidly, so both e-commerce and game tracks are very attractive compared to domestic ones.

Population of Southeast Asia: 600-700 million, with a median age of 29 years (37 years in China)

GDP growth rate: 6.9%

E-commerce penetration rate of 2% is much less than 20% in China.

Both gaming and e-commerce are growing at more than 100%.

This is simply a replica of BABA and Tencent who just started in China many years ago, which naturally attracted the attention of many investment institutions.

As Sea continues to grow in terms of user size, it will also help it further promote the development of its business in Southeast Asia. As more and more users get used to using Sea's e-commerce, games, electronic payment and other services, Sea will earn more from each user, which will naturally have great potential to increase its market capitalization growth.

SEA's market capitalization target: $100 billion.

In China, the moat is deep enough and has become a leading platform Internet company with a large imagination, and basically all start with a market capitalization of hundreds of billions of dollars, such as BABA 698 billion, Tencent 625.6 billion, Meituan 175.2 billion, Pinduoduo 111.3 billion, JD.com 110.4 billion.

Conclusion

Overall, SEA is still in a period of rapid growth, with a market capitalization of hundreds of billions of dollars.

By comparison, with a population of 700 million in Southeast Asia and 1.4 billion in China, SEA's game + e-commerce business (BABA + Tencent model) is expected to be the next BABA or Tencent.

At present, Lazada is a competitor to its e-commerce platform, but from various trends, Shopee occupies an advantage, as long as SEA can establish a leading position in the industry, then do not hesitate to increase several times in the past, think of BABA and Tencent, even after a firm foothold in the Chinese market, still continue to usher in the long bull for many years.

So maybe buying SEA means buying the future of Southeast Asia.