Sahm Adrangi of Kerrisdale Capital Management presented his in-depth investment thesis on Sea Limited (US: SE) at Best Ideas 2019.
Sea Limited is an internet company based in Singapore and focused on the Southeast Asian market (“Sea” stands for South East Asia). It has three verticals: (i) a gaming distribution business (called Garena), (ii) an e-commerce business (called Shopee) and (iii) an electronic payments business.
The gaming business, which Sahm estimates to be worth ~$4 billion, generates substantial FCF and is the dominant distributor of video games from publishers such as Tencent, Riot Games, and Electronic Arts.
The investment thesis, however, revolves around the e-commerce business, which is aggressively expanding and vying to become the dominant e-commerce platform (similar to Alibaba, Amazon) in Southeast Asia, focusing on the markets of Indonesia, Taiwan, Malaysia, Vietnam, Thailand, and Philippines. Backed by Tencent (which owns 33% of the company), SEA’s Shopee business is a #1 or #2 player in Indonesia and a top player in the other markets as well, rapidly gaining market share from incumbents.
The market recently valued Shopee at only $1-2 billion, but given the large addressable market, Shopee should be worth multiples of that. Shopee and/or Sea may soon get an investment from a strategic investor with global e-commerce ambitions (such as Walmart, Amazon, Alibaba), which will likely value the Shopee business at a premium.
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About the instructor:
Sahm Adrangi is the chief investment officer of Kerrisdale Capital Management, a private investment manager that focuses on value and special situations investments. Prior to founding Kerrisdale Capital Management, Sahm was an investment analyst at Longacre Fund Management, a distressed debt credit fund. Prior to Longacre, Sahm worked in the bankruptcy restructuring group at Chanin Capital Partners and the leveraged finance group of Deutsche Bank Securities. Sahm holds a Bachelor of Arts in Economics from Yale University.