Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: valueinvestor on May 14, 2020, 04:10:56 PM

Title: SE - Sea Limited ADR
Post by: valueinvestor on May 14, 2020, 04:10:56 PM
This is my flight to quality.

Sea Limited is a Tencent/Alibaba for all of South East Asia. A combination of Paypal/Venmo, Epic Games/Activision/EA, Amazon business in relatively stable economies growing at twice the rate of US.

It's expensive, trading at 50x earnings not factoring the cash on hand and their 100%+ revenue y-o-y growth.

I've spoken to people about the product, and they are really entrenched. The only competitors are backed by Alibaba, but essentially it's an oligopoly. Hopefully, I do not need to go through the economics of the business, because it's really a playbook straight from Tencent.

The reason, why I wanted to share, is because this investment is predicated that I do not want to be invested in cruise, airlines, hotels, subprime lenders and essentially the travel industry. Although I believe the long term they will be great investments, the recent ballooning from March lows made me want to trim those positions and not have them be a large part of my portfolio. 

In my eyes,

Downside - market tanks, values rerate, but business grows at a phenomenal rate into the valuation.

or

Upside - Market is released from all overhangs, and business grows at a ludicrous rate. 


Why invest now, as opposed to when they were $10-$15? There was a lot of uncertainty with their gaming platform and growth was plateauing, and there were execution risks. However, they are essentially at an inflection point, where mobile games are a new part of their business and they are migrating towards in-house titles, which will contribute nicely to their growth.

I think they are at a point, where they just need to literally bag the money being printed by their businesses.

Update:

Feel free to ask questions, if there are any parts of the business you do not understand, I'm at your service. I've been looking at the name for quite a while and decided to pull the trigger considering how well it performed during the dips and rallies. Earnings date will be on May 18, 2020 - and I do not think markets are fully appreciating the growth they will experience, considering COVID is not much of an issue as it is in the West.
Title: Re: SE - Sea Limited ADR
Post by: jhcap on May 14, 2020, 05:07:41 PM
Recently heard about this company in the Aquirers Podcast about Esports with Will Hershey. Their online gaming platform is growing tremendously. Interview here: https://www.youtube.com/watch?v=oSxqf4j3Xm4
Title: Re: SE - Sea Limited ADR
Post by: keerthiprasad on May 14, 2020, 07:23:23 PM
Great company, Tencent's proxy in their SE asia battle. How do you decide what a fair price for this business is?  I keep watching the price go up...
Title: Re: SE - Sea Limited ADR
Post by: Xerxes on May 14, 2020, 07:26:27 PM
i have Tencent + Alibaba and need to add SEA + Mercadolibre + Grab to complete my non-U.S. e-commerce/gaming/ride-hailing portfolio.

I got Grab through Uber.
SEA + Mercadolibre keep escaping me.
Both are at around $30B, with plenty room to grow to +$200B powerhouses.

Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on May 14, 2020, 08:06:18 PM
Great company, Tencent's proxy in their SE asia battle. How do you decide what a fair price for this business is?  I keep watching the price go up...

I've basically run several DCF and thought this was an attractive entry point from a risk-reward standpoint. As mentioned they are at an inflection point, where they fixed most of the issues that made them not solid, and therefore at the stage to print money.

Assumed growth rates at 25%, 50%, 100%, which is all lower than what they are currently growing at and everyone is discounting that COVID-19 is a plus in their business. Not to mention, COVID-19 is less of an issue in that part of the world, where their GDP is growing at twice the rate.

However, if I had to make a bet, I would bet on SEA.


Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on May 14, 2020, 08:07:11 PM
i have Tencent + Alibaba and need to add SEA + Mercadolibre + Grab to complete my non-U.S. e-commerce/gaming/ride-hailing portfolio.

I got Grab through Uber.
SEA + Mercadolibre keep escaping me.
Both are at around $30B, with plenty room to grow to +$200B powerhouses.

Maybe take some SHOP? Kidding.

I feel Mercadolibre is a well-run company but the upside relative to SEA is lower, and the geographies covered are less solid than the countries SEA serves.
Title: Re: SE - Sea Limited ADR
Post by: rogermunibond on May 15, 2020, 08:18:41 AM
Thoughts on Prosus? 
Title: Re: SE - Sea Limited ADR
Post by: thepupil on May 15, 2020, 08:33:41 AM
Thoughts on Prosus?

this is a helpful intro to Prosus / discount reasons

https://seekingalpha.com/article/4336263-why-prosus-is-selling-hefty-discount

I like to buy it when the discount blows out AND 700HK is selling off. Prosus is a nice backdoor into 700HK and I think wearing the discount/capital allocation risk is positively skewed when the discount is very high (many stock pickers hate this though and go straight to the pure company). Naspers is usually cheaper but when I looked at it last Prosus was like 35-45% discount and Naspers was 50-60%. I'll take the lower but still ginormous discount without the South African overlay.

right now $140 billion of Prosus buys you $160 billion of 700HK (both in USD) if my quick calc is right. like a CEF the discount tends to be pro cyclical (this is an anecdote not backed by data) so when 700HK/market go down PRX goes down more and vice versa.

700HK is 10% off all time highs and appears to be doing well. with volatile opaque chinese internet companies, I take the approach of having a small position and trading around it. in my 5+ years of hearing people talk about 700HK/BABA/whatever sentiment as to who is winning whatever the topic of the day changes a lot and i don't really pretend to have a view beyond "China! The Internet! Social Media! Gaming!"

I've always counted everything else Prosus does at $0 and just prefer to view it as a 700HK trading vehicle; others think their investments will destroy value.
Title: Re: SE - Sea Limited ADR
Post by: Xerxes on May 15, 2020, 08:52:27 AM
My view is that if you want exposure to Tencent, than just buy Tencent.
Don't buy Prosus to get Tencent, or Nasper before it.
Don't buy SoftBank to get AliBaba.

i understand the large discount, but unless your bet is specifically aimed on the discount narrowing, in which case the trade should be long SoftBank / short Alibaba or long prosus / short Tencent, than don't bother.

Just buying Prosus or just buying SoftBank (as Alibaba proxy) would mean in my opinion a double bet, one on the underlying business and also on the narrowing discount. The reality is that the discount is there for a reason and unlikely to close for tax reasons and whatever.

just my opinion

 
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on May 15, 2020, 10:54:51 AM
My view is that if you want exposure to Tencent, than just buy Tencent.
Don't buy Prosus to get Tencent, or Nasper before it.
Don't buy SoftBank to get AliBaba.

i understand the large discount, but unless your bet is specifically aimed on the discount narrowing, in which case the trade should be long SoftBank / short Alibaba or long prosus / short Tencent, than don't bother.

Just buying Prosus or just buying SoftBank (as Alibaba proxy) would mean in my opinion a double bet, one on the underlying business and also on the narrowing discount. The reality is that the discount is there for a reason and unlikely to close for tax reasons and whatever.

just my opinion

+1
Title: Re: SE - Sea Limited ADR
Post by: thepupil on May 15, 2020, 11:15:24 AM
I don't want to muck up the Sea thread any more than I already have, but another strategy is to go long $100 of say the Prosus ADR in an IRA and then short $20-$100 of 700HK in your taxable (depending on your desired exposure). I've done this to be net long the company while using the general growth in value of the company to generate tax losses from a highly correlated (but importantly, not substantially identical) security.

Example:
Long $100 of PROSY in IRA
Short $40 of 700HK in taxable.

both stocks go up 30%, you have $30 gain in IRA (ideally a roth) and $12 loss in taxable and you're now $130 / $52, you can then collapse the trade and gain $30 in your tax advantaged, lose $12 in your taxable, then sell something else with $12 of gains in your taxable and re-buy it. the result is no taxable gains and a higher basis in the re-bought security.

in general being long something in your IRA and short highly correlated similar things in the taxable is a good way to generate losses in an up market. you obviously want to do it with actual investing in mind.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on May 15, 2020, 11:53:23 AM
I don't want to muck up the Sea thread any more than I already have, but another strategy is to go long $100 of say the Prosus ADR in an IRA and then short $20-$100 of 700HK in your taxable (depending on your desired exposure). I've done this to be net long the company while using the general growth in value of the company to generate tax losses from a highly correlated (but importantly, not substantially identical) security.

Example:
Long $100 of PROSY in IRA
Short $40 of 700HK in taxable.

both stocks go up 30%, you have $30 gain in IRA (ideally a roth) and $12 loss in taxable and you're now $130 / $52, you can then collapse the trade and gain $30 in your tax advantaged, lose $12 in your taxable, then sell something else with $12 of gains in your taxable and re-buy it. the result is no taxable gains and a higher basis in the re-bought security.

in general being long something in your IRA and short highly correlated similar things in the taxable is a good way to generate losses in an up market. you obviously want to do it with actual investing in mind.

Hey if your posts are like this - muck it up more.
Title: Re: SE - Sea Limited ADR
Post by: henrysalt on May 16, 2020, 09:36:04 AM
Earnings come out Monday morning before market opens. Any guesses?
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on May 16, 2020, 01:07:44 PM
Don’t have any - but do you have a guess?

The most I could venture is Sea Limited was not affected as bad as people think with COVID-19.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on May 18, 2020, 04:26:29 AM
First Quarter 2020 Highlights

Total adjusted revenue was US$913.9 million, up 57.9% year-on-year from US$578.8 million for the first quarter of 2019.
Total gross profit was US$206.8 million, up 424.1% year-on-year from US$39.5 million for the first quarter of 2019.
Total adjusted EBITDA was US$(69.9) million compared to US$(32.0) million for the first quarter of 2019.

Digital Entertainment
Adjusted revenue was US$512.4 million, up 30.3% year-on-year from US$393.3 million for the first quarter of 2019.
Adjusted EBITDA was US$298.4 million, up 32.2% year-on-year from US$225.8 million for the first quarter of 2019.
Adjusted EBITDA margin increased to 58.2% for the first quarter of 2020 from 57.4% for the first quarter of 2019.
Quarterly active users (“QAUs”) reached 402.1 million, an increase of 48.0% year-on-year from 271.6 million for the first quarter of 2019.
Quarterly paying users grew by 72.5% year-on-year to 35.7 million, accounting for 8.9% of QAUs for the first quarter of 2020, increasing from 7.6% for the same period in 2019.
Average revenue per user was US$1.3 compared to US$1.4 for the first quarter of 2019.
Our self-developed global hit game, Free Fire, recently hit a new record high of over 80 million peak daily active users and, according to App Annie1, was the highest grossing mobile game in Latin America and in Southeast Asia in the first quarter of 2020. Free Fire was also ranked third globally by downloads for Google Play in the mobile games category in the first quarter of 2020, according to App Annie1.
In April 2020, Free Fire hit another record high in monthly paying users, which more than doubled year-on-year, and in India, monthly paying users already accounted for over 10% of monthly active users.
We continue to focus on esports and community building activities to engage with our rapidly expanding user base. In the first quarter of 2020, we organized more than double the number of esports tournaments online for Free Fire compared to the first quarter of 2019, with these tournaments accumulating over 90 million views.

E-commerce
Gross merchandise value (“GMV”) growth accelerated to 74.3% year-on-year to reach US$6.2 billion for the first quarter, compared to 64.8% year-on-year in the fourth quarter of 2019.
Gross orders totaled 429.8 million, an increase of 111.2% year-on-year from 203.5 million for the first quarter of 2019.
Gross orders growth further accelerated to more than 140% year-on-year in April 2020.
Adjusted revenue was US$314.0 million, up 110.5% year-on-year from US$149.2 million for the first quarter of 2019.
Adjusted revenue included US$236.7 million of marketplace revenue2, up 132.1% year-on-year from US$102.0 million for the first quarter of 2019, and US$77.3 million of product revenue3, up 63.6% year-on-year from US$47.2 million for the first quarter of 2019.
Adjusted revenue as a percentage of total GMV increased to 5.1% in the first quarter of 2020, up from 4.2% for the same period a year ago. Adjusted marketplace revenue as a percentage of total GMV was 3.8 % in the first quarter of 2020.
Sales and marketing expenses were US$206.0 million, compared to US$147.9 million for the first quarter of 2019.
Adjusted EBITDA was US$(260.0) million compared to US$(235.3) million for the first quarter of 2019. Adjusted EBITDA loss per order decreased by 48.3% to US$0.60, compared to US$1.16 for the first quarter of 2019.
In Indonesia, where Shopee is the largest e-commerce platform by orders, it registered over 185 million orders for the market in the first quarter, or a daily average of over 2 million orders, an increase of 122.6% year-on-year. Shopee also ranked first in Indonesia by average monthly active users, downloads, and total time spent in app on Android, in the Shopping category in the first quarter of 2020, according to App Annie1.
Both in Southeast Asia and in Taiwan, Shopee ranked number one in the Shopping category by average monthly active users, and total time spent in app on Android, for first quarter of 2020, according to App Annie1.
Shopee also ranked number one in the Shopping category by downloads in Southeast Asia, and was among the top three worldwide by downloads in the same category for first quarter of 2020, according to App Annie1.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on May 23, 2020, 09:19:33 PM
Sea Limited Prices Offering of US$1 Billion Convertible Notes

https://www.businesswire.com/news/home/20200520005381/en/%C2%A0Sea-Limited-Prices-Offering-US1-Billion-Convertible

Considering we’re in a recession and possible depression, I find this raise quite positive. Don’t think others can’t get terms like this at their size.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on June 17, 2020, 02:59:25 PM
Any reason why SE is up 8%? Due to the run-up, it's hard not to escape the thought of trimming, but I don't really have any better ideas.

It doesn't seem fundamental, as many "Chinese" stocks are up today, such as Kingsoft Cloud, maybe investors are more comfortable owning these securities.
Title: Re: SE - Sea Limited ADR
Post by: arcube on June 17, 2020, 03:35:54 PM
SE is not Chinese.

Any reason why SE is up 8%? Due to the run-up, it's hard not to escape the thought of trimming, but I don't really have any better ideas.

It doesn't seem fundamental, as many "Chinese" stocks are up today, such as Kingsoft Cloud, maybe investors are more comfortable owning these securities.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on June 17, 2020, 03:50:04 PM
SE is not Chinese.

Any reason why SE is up 8%? Due to the run-up, it's hard not to escape the thought of trimming, but I don't really have any better ideas.

It doesn't seem fundamental, as many "Chinese" stocks are up today, such as Kingsoft Cloud, maybe investors are more comfortable owning these securities.

Hence “Chinese” in quotes.

Tencent backs Sea
Title: Re: SE - Sea Limited ADR
Post by: arcube on June 17, 2020, 08:30:34 PM
True - As a diversification play for SE Asia.

Glad to see some positive action on KC as well.

SE is not Chinese.

Any reason why SE is up 8%? Due to the run-up, it's hard not to escape the thought of trimming, but I don't really have any better ideas.

It doesn't seem fundamental, as many "Chinese" stocks are up today, such as Kingsoft Cloud, maybe investors are more comfortable owning these securities.

Hence “Chinese” in quotes.

Tencent backs Sea
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on June 17, 2020, 09:50:26 PM
Any reason why? What’s your insight on Kingsoft? I understand the business, but I don’t understand their competitive advantages.
Title: Re: SE - Sea Limited ADR
Post by: arcube on June 18, 2020, 07:44:45 AM
Sorry Bud. No insight on KC at all. I just bought a tiny tracker position. On SE, I believe a GS upgrade might be coming as well as a digital banking license. Will dig more.

Any reason why? What’s your insight on Kingsoft? I understand the business, but I don’t understand their competitive advantages.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on June 18, 2020, 06:38:36 PM
No worries! If I find out anything, I’ll be sure to give you a pm.
Title: Re: SE - Sea Limited ADR
Post by: arcube on June 23, 2020, 10:42:02 AM
KC reported, street likes.

First Quarter 2020 Financial Highlights

    Total revenues were RMB1,391.0 million (US$1196.4 million) in the first quarter of 2020, representing an increase of 64.5 % year-over-year.

    Gross profit was RMB70.8 million (US$10.0 million) or 5.1% gross margin in the first quarter of 2020, compared with gross loss of RMB45.1million or -5.3% gross margin in the first quarter of 2019.

    Non-GAAP gross profit2, was RMB74.2 million (US$10.5 million) or 5.3% Non-GAAP gross margin in the first quarter of 2020, compared with Non-GAAP gross loss of RMB44.6 million or -5.3% Non-GAAP gross margin in the first quarter of 2019.

    Net loss was RMB331.6 million (US$46.8 million) or -23.8% net margin in the first quarter of 2020, compared with net loss of RMB201.4 million or net margin of -23.8% in the first quarter of 2019.

    Non-GAAP EBITDA3, was RMB-39.4 million (US$-5.6 million) or -2.8% Non-GAAP EBITDA margin, compared with RMB-108.8million or -12.9% Non-GAAP EBITDA margin in the first quarter of 2019.

No worries! If I find out anything, I’ll be sure to give you a pm.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on November 11, 2020, 01:21:46 PM
SEA downgraded by BofA today to $164 and yet up 9%?

Just an unfounded guess, but they'll have a breakout quarter, stock rises and they will raise unsecured capital cheaply to invest in their moat, even though they are cash-flow positive, but optically cash-flow negative.

Valuation is quite frothy and bubble-worthy, but comparing it to other bubble stocks in countries with low GDP growth - it still cheap (i.e. Shopify).

Absolute terms, it makes me super skittish. The downside is high from here.

Here's the napkin math:

Market Cap: 83B

Free Fire, if using Fornite as a comparable is worth $22B. In fact, I believe Free Fire has more active users than Fortnite.

Shopee - $2B at 5x (althought some are at 10x) multiple = $10B

Cash around $1.5B

Remaining value for the company such as Digital Bank/Payments? $50B

Downside -40%+
Title: Re: SE - Sea Limited ADR
Post by: Simba on November 11, 2020, 01:38:30 PM
valueinvestor:

Shopee - multiple at 5x looks low for the growth it has. Unless growth slows down materially in 2021... always a possibility. Also I have $631.3M revenue for 1H2020 for e-Commerce, if they grow at 100% for 2H20 they'll be at about $1.6B for FY2020.

Digital Finance services - Revenue of $16M, $13M and $11M of revenue in 2017, 2018, 2019 respectively. 1H2020 was $22.6M revenue ($45M annualized).. As for quick dirty valuation- $SQ is 10x trailing sales.... $STNE is 77x TTM sales. Pick your poison on the multiple. (Using 77x of $STNE nets you $3.4B for digital payments for $45M annualized 1H2020 revenue). I know I know Back of the envelope math here.

Garena - How did you compare Fortnite to Freefire? On the P/S Multiple? Also if you look at other gaming companies ($ATVI 7.6x ttm sales, $TTWO 5x ttm sales, $EA 6x ttm sales, $ZNGA 5x ttm sales) they are not trading like relatively crazy "tech" multiples. So I'm not sure why Mr. Market is applying a premium to Garena (T12M revenue was $1.5B so at your $22B valuation your assuming 14.6x ttm sales)
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on November 11, 2020, 01:47:09 PM
Free Fire is a different beast and comparables should be towards Fortnite and Epic Games.

Economics of the business is different from Call of Duty and other console/PC games, hence $220 per user.

As for Shoppe  revenue, I just rounded. It’s “only” a 2B dollar difference.

Either way we slice it, we have a tens of billions in excess in overvaluation. 

Title: Re: SE - Sea Limited ADR
Post by: Gregmal on November 11, 2020, 03:05:08 PM
Yea, agree on the above. Grossly expensive but in the sweet spot in an area I love the outlook of and rather than be another dork with a calculator griping about the euphoria, I'll take a small flyer here, ~$170, and if were get a 50% drawdown I'll play ball. Wouldn't be the first time. If it keeps ripping, I like that too. These are the types of companies you either have to buy at horrible valuations or come to terms with never owning.
Title: Re: SE - Sea Limited ADR
Post by: Xerxes on November 11, 2020, 03:31:08 PM
Gregmal
How about light speed LSPD at $5 billion market cap than Sea at $83 billion.

If I am going to go with a high market cap on an absolute basis it would be Mercaodolibre, given its entrenchment.
Title: Re: SE - Sea Limited ADR
Post by: Gregmal on November 11, 2020, 03:35:03 PM
I dont know much at all about LSPD. MELI I was a dork with a calculator for too long and missed it. Its a gem though.
Title: Re: SE - Sea Limited ADR
Post by: Xerxes on November 11, 2020, 03:42:23 PM
I was a dork with a calculator on Amazon till early 2017.
Been happy since. Pay up ! And average up.
Title: Re: SE - Sea Limited ADR
Post by: Simba on November 11, 2020, 05:46:46 PM
I was a dork with a calculator on Amazon till early 2017.
Been happy since. Pay up ! And average up.

But what are you paying up for? Paying up because price is up? Multiple expansion has obviously trounced fundamentals.

Also I'm not sure if you know but here is how Amazon traded in 2017. It looks cheap with just running a Bloomberg Screen

Jan-1-2017
Amazon:
Price / Sales Ratio 2.2x
EV / EBITDA 19x (NTM)
Revenue grew 27% and 30% in 2016 and 2017 respectively

Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on November 11, 2020, 05:50:12 PM
Gregmal
How about light speed LSPD at $5 billion market cap than Sea at $83 billion.

If I am going to go with a high market cap on an absolute basis it would be Mercaodolibre, given its entrenchment.

I still don’t understand LightSpeed - granted I didn’t do a deep dive. Funny enough I think I have the CEO phone number in my contacts. Any chance Xerxes you can pm or post your thesis here? I can take a look and get back to you, if you find that valuable.

As for Meli - it’s definitely more entrenched but I like Sea is in more “stable” low corruption economies with high GDP growth that’s sustainable imho.

Also Sea for me is almost like a mini-tencent with tencent backing. Hence they can leverage tencent’s operational expertise to NOT make the same mistakes as tencent to grow, as opposed to Meli who are doesn’t really have strategic shareholders.

What kind of nailed it for me this year is that they are cash flow positive. All they need to do is dial down the growth and take out the cash. Although if that’s the case, then stock is wildly expensive but it’s a huge plus as opposed to building infrastructure from outside capital or dilution. When my napkin math said that I had a more than fair value at 50-60, I went “all-in” as they say.

I just hope they can keep on getting capital at reasonable rates and try to dominate South East Asia.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on November 11, 2020, 05:59:37 PM
Also Lightspeed seems to be a beneficiary of Canadian Tech ETF/mutual fund flows, just like Shopify - where there are very little tech companies in Canada and yet tonnes of etf money.

Here's ishares holdings:

CSU   CONSTELLATION SOFTWARE INC   Information Technology   CAD 109,512,360.32   25.19   
SHOP   SHOPIFY SUBORDINATE VOTING INC CLA   Information Technology   CAD 104,453,176.86   24.03   
GIB.A   CGI INC   Information Technology   CAD 78,773,391.00   18.12   
OTEX   OPEN TEXT CORP   Information Technology   CAD 55,296,757.08   12.72   
DSG   DESCARTES SYSTEMS GROUP INC   Information Technology   CAD 22,256,587.74   5.12
KXS   KINAXIS INC   Information Technology   CAD 17,406,300.00   4.00   
BB   BLACKBERRY LTD   Information Technology   CAD 12,791,003.75   2.94   
LSPD   LIGHTSPEED POS SUBORDINATE VOTING   Information Technology   CAD 12,356,506.80   2.84   
ENGH   ENGHOUSE SYSTEMS LTD   Information Technology   CAD 9,916,306.56   2.28   9
CLS   CELESTICA INC   Information Technology   CAD 3,712,560.43   0.85   

Imagine having 10 tech etf with the same allocation. They are desperate for more tech companies if they included Celestica.
Title: Re: SE - Sea Limited ADR
Post by: Xerxes on November 12, 2020, 01:10:37 PM
Valueinvestor,

Within my TFSA, i am holding half a dozen names. I call it the portfolio of long shots. Within that I hold Spotify, Uber, IAC, Mercado-Liber and Lightspeed.
I also have BB there but will remove it as soon it gets close to $10 CAD.

That basket of names all have nose-bleed valuation (with the exception of perhaps IAC) and make up less than ~30% of the entire financial assets and is meant to hedge against 'my other side' which is more about looking in depth in some of the names. So, what I have in there is not based on deep conviction (they are not Berkshire size bet for me on absolute and relative terms), but rather bets on general themes. I am not even looking at earnings. Only market opportunity and the fact that all of them with the exception of Uber are ran by founder-owners. Specifically on LSPD, it is a home city name, Canadian and the market cap is low enough to have enough runway. That is good enough for the intent of that portfolio to cover a fintech type names, without dishing out top dollar for Square.

On the other hand, I hold Amazon, Tencent, Alibaba and Alphabet, each with much larger position size in my retirement account along with the old economy stalwart names that I have (Walt Disney, Berkshire, BAM, Couche Tard, RTX, FFH, General Motors etc). I spent my time mostly on these names, rather the portfolio of long shots. It works for me.

Title: Re: SE - Sea Limited ADR
Post by: Xerxes on November 12, 2020, 01:15:42 PM
I was a dork with a calculator on Amazon till early 2017.
Been happy since. Pay up ! And average up.

But what are you paying up for? Paying up because price is up? Multiple expansion has obviously trounced fundamentals.

Also I'm not sure if you know but here is how Amazon traded in 2017. It looks cheap with just running a Bloomberg Screen

Jan-1-2017
Amazon:
Price / Sales Ratio 2.2x
EV / EBITDA 19x (NTM)
Revenue grew 27% and 30% in 2016 and 2017 respectively

Actually i didn't. But good to know it has a very low p/s ratio.
Back in the day i was looking only multiple on earnings and not on sales.
Very high multiples on earnings on Amazon for me was a company that chose to have depressed earnings (indication that it was re-investing).
of course, the re-investment thesis above is not mine, everyone was saying that about Amazon at the time.

My value add was simply to take action and lock-in some shares instead of looking at it. Bought in between $800-$1100. My mistake since 2017 was not adding to it. The highest I bought was at $1100 USD.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on November 13, 2020, 11:33:21 AM
Valueinvestor,

Within my TFSA, i am holding half a dozen names. I call it the portfolio of long shots. Within that I hold Spotify, Uber, IAC, Mercado-Liber and Lightspeed.
I also have BB there but will remove it as soon it gets close to $10 CAD.

That basket of names all have nose-bleed valuation (with the exception of perhaps IAC) and make up less than ~30% of the entire financial assets and is meant to hedge against 'my other side' which is more about looking in depth in some of the names. So, what I have in there is not based on deep conviction (they are not Berkshire size bet for me on absolute and relative terms), but rather bets on general themes. I am not even looking at earnings. Only market opportunity and the fact that all of them with the exception of Uber are ran by founder-owners. Specifically on LSPD, it is a home city name, Canadian and the market cap is low enough to have enough runway. That is good enough for the intent of that portfolio to cover a fintech type names, without dishing out top dollar for Square.

On the other hand, I hold Amazon, Tencent, Alibaba and Alphabet, each with much larger position size in my retirement account along with the old economy stalwart names that I have (Walt Disney, Berkshire, BAM, Couche Tard, RTX, FFH, General Motors etc). I spent my time mostly on these names, rather the portfolio of long shots. It works for me.

Awesome! I think that's a good balance. I feel that there will be a time where Sea will be unpopular but the business is firing on all cylinders. Microsoft, Apple went through the same thing.

I'll wait for the pendulum swing towards value - which I see cracks off now but still not enough to think we're at a tipping point.
Title: Re: SE - Sea Limited ADR
Post by: arcube on November 14, 2020, 07:01:06 AM
+1.

Yea, agree on the above. Grossly expensive but in the sweet spot in an area I love the outlook of and rather than be another dork with a calculator griping about the euphoria, I'll take a small flyer here, ~$170, and if were get a 50% drawdown I'll play ball. Wouldn't be the first time. If it keeps ripping, I like that too. These are the types of companies you either have to buy at horrible valuations or come to terms with never owning.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on November 17, 2020, 05:42:35 AM
Group
o Total GAAP revenue was US$1.2 billion, up 98.7% year-on-year.
o Total gross profit was US$407.6 million, up 100.6% year-on-year.
o Total adjusted EBITDA1 was US$120.4 million compared to US$-30.8 million for
the third quarter of 2019.

Raised guidance by 59%.

Title: Re: SE - Sea Limited ADR
Post by: Gregmal on December 04, 2020, 07:42:40 AM
Approved for digital banking license in Singapore. Stock back to tiger by the tail mode.
Title: Re: SE - Sea Limited ADR
Post by: rohitc99 on December 04, 2020, 09:18:42 AM
Approved for digital banking license in Singapore. Stock back to tiger by the tail mode.

can you expand more on what you mean by 'stock back to tiger by the tail mode' ?
Title: Re: SE - Sea Limited ADR
Post by: rkbabang on December 04, 2020, 09:21:25 AM
Approved for digital banking license in Singapore. Stock back to tiger by the tail mode.

can you expand more on what you mean by 'stock back to tiger by the tail mode' ?

I assume he means that it is up almost 10% just today and is hard to catch a good price.
Title: Re: SE - Sea Limited ADR
Post by: Gregmal on December 04, 2020, 09:22:46 AM
Yea. Very volatile and not as liquid as you'd expect a $100B company to be.
Title: Re: SE - Sea Limited ADR
Post by: rohitc99 on December 04, 2020, 09:23:59 AM
Yea. Very volatile and not as liquid as you'd expect a $100B company to be.

thanks
Title: Re: SE - Sea Limited ADR
Post by: formthirteen on December 04, 2020, 09:28:45 AM
P/S 23.98. This is one of those stocks that I've forced myself to buy multiple times :-[ I call this a bubble. When will the music stop?
Title: Re: SE - Sea Limited ADR
Post by: Gregmal on December 04, 2020, 09:59:05 AM
Not advice, but simply what I try to do; trade your way into a bit of a cushion. Everyone is always worried about the bubble bursting. The earlier you get in, the better, then just manage it and derisk as you go. Bubble could burst today and in something like CRSP for instance, I could lose everything Ive got currently in the name and still have nearly 7x my initial investment. Take the initial stake(ideally a smallish sized position), trim aggressively until you recoup your capital, and buy the dips with discipline. Worst thing that happens is you lose your allocation if it goes to 0. SE aint going to 0.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on December 06, 2020, 02:18:07 PM
P/S 23.98. This is one of those stocks that I've forced myself to buy multiple times :-[ I call this a bubble. When will the music stop?

Just to cherry-pick your post.

Other than regulation - Singapore and South East Asia countries are much more swift with policy changes for the people. I find P/S almost as useless as SSS - as it's an oversimplification.

Ironically, let me explain via oversimplification  -

Consider a 20B company generating 1B in revenues - 20x sales.

If it's highly innovative and has great economics that becomes greater over time, then I think we can say it's net margin could be 60%. Especially considering large tech sporting 20-30% net margins.

Only a 33x P/E. At 40% net margins - 50x earnings. At 20% net margins - 100x earnings. For a business that's growing 100% y-o-y, you can decide what's fair. Of course, they're buying their sales but they are paid back in full within months.

Here's an interesting take from a local.

https://seekingalpha.com/article/4391750-shopee-perspective-from-indonesia
 (https://seekingalpha.com/article/4391750-shopee-perspective-from-indonesia)





Title: Re: SE - Sea Limited ADR
Post by: arcube on December 06, 2020, 07:51:30 PM
Excellent piece.

P/S 23.98. This is one of those stocks that I've forced myself to buy multiple times :-[ I call this a bubble. When will the music stop?

Just to cherry-pick your post.

Other than regulation - Singapore and South East Asia countries are much more swift with policy changes for the people. I find P/S almost as useless as SSS - as it's an oversimplification.

Ironically, let me explain via oversimplification  -

Consider a 20B company generating 1B in revenues - 20x sales.

If it's highly innovative and has great economics that becomes greater over time, then I think we can say it's net margin could be 60%. Especially considering large tech sporting 20-30% net margins.

Only a 33x P/E. At 40% net margins - 50x earnings. At 20% net margins - 100x earnings. For a business that's growing 100% y-o-y, you can decide what's fair. Of course, they're buying their sales but they are paid back in full within months.

Here's an interesting take from a local.

https://seekingalpha.com/article/4391750-shopee-perspective-from-indonesia
 (https://seekingalpha.com/article/4391750-shopee-perspective-from-indonesia)
Title: Re: SE - Sea Limited ADR
Post by: Gregmal on December 09, 2020, 02:50:54 PM
52 Week high and they tap the equity markets.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on December 09, 2020, 06:05:18 PM
and the flywheel continues
Title: Re: SE - Sea Limited ADR
Post by: villainx on December 10, 2020, 01:01:51 PM
you forgot eternal regret.

+1.

Yea, agree on the above. Grossly expensive but in the sweet spot in an area I love the outlook of and rather than be another dork with a calculator griping about the euphoria, I'll take a small flyer here, ~$170, and if were get a 50% drawdown I'll play ball. Wouldn't be the first time. If it keeps ripping, I like that too. These are the types of companies you either have to buy at horrible valuations or come to terms with never owning.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on December 13, 2020, 05:19:58 PM
2.6B unencumberedwith for 2% dilution is pretty good. Especially considering the digital bank licence.

Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on January 13, 2021, 10:26:02 AM
https://www.businesstimes.com.sg/garage/sea-acquires-indonesian-bank-to-gain-foothold-in-financial-tech (https://www.businesstimes.com.sg/garage/sea-acquires-indonesian-bank-to-gain-foothold-in-financial-tech)
Title: Re: SE - Sea Limited ADR
Post by: arcube on January 13, 2021, 11:35:53 AM
Beast mode today!
https://www.businesstimes.com.sg/garage/sea-acquires-indonesian-bank-to-gain-foothold-in-financial-tech (https://www.businesstimes.com.sg/garage/sea-acquires-indonesian-bank-to-gain-foothold-in-financial-tech)
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on January 13, 2021, 12:51:11 PM
Beast mode today!
https://www.businesstimes.com.sg/garage/sea-acquires-indonesian-bank-to-gain-foothold-in-financial-tech (https://www.businesstimes.com.sg/garage/sea-acquires-indonesian-bank-to-gain-foothold-in-financial-tech)

+1
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on January 21, 2021, 12:05:08 PM
Thought it would be prudent to add. I hold a considerable allocation towards SE and haven't sold a share. Although I saw some are trying to build a full position, and if I was them, I would not be inclined to build a large position at these prices with certain caveats.

The key risk is that SE is literally purchasing revenues and the digital bank is going to most likely swallow more cash flow. Optically they are cash-flow negative, but cash-flow positive due to Free Fire and breaking-even of Shopee. They are heavily reliant on Free Fire to catch fire for eons to come to fund these investments. Multiple spinning plates and a lot of execution risk. With the digital bank - they may be back to being cash-flow negative and rely on share issuance.

The reason why I haven't sold a share is that if SE goes down 50%, I'm still sitting on a 100%+ gain. Secondly, I always have more capital coming in and I'm young. That's the caveat - if SE goes down 50% - it's just a case for me to purchase more of the digital back-bone of South East Asia at a discounted rate.

Nothing negative at the moment, but with every business that obsessive with the customer experience and long-term, things can go very badly in the short-term and translate to really bad drawdowns.

This is a 10+ year investment for me.
Title: Re: SE - Sea Limited ADR
Post by: villainx on January 21, 2021, 06:57:19 PM
Thought it would be prudent to add. I hold a considerable allocation towards SE and haven't sold a share. Although I saw some are trying to build a full position, and if I was them, I would not be inclined to build a large position at these prices with certain caveats.

The key risk is that SE is literally purchasing revenues and the digital bank is going to most likely swallow more cash flow. Optically they are cash-flow negative, but cash-flow positive due to Free Fire and breaking-even of Shopee. They are heavily reliant on Free Fire to catch fire for eons to come to fund these investments. Multiple spinning plates and a lot of execution risk. With the digital bank - they may be back to being cash-flow negative and rely on share issuance.

The reason why I haven't sold a share is that if SE goes down 50%, I'm still sitting on a 100%+ gain. Secondly, I always have more capital coming in and I'm young. That's the caveat - if SE goes down 50% - it's just a case for me to purchase more of the digital back-bone of South East Asia at a discounted rate.

Nothing negative at the moment, but with every business that obsessive with the customer experience and long-term, things can go very badly in the short-term and translate to really bad drawdowns.

This is a 10+ year investment for me.


Interesting and thanks!
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on January 22, 2021, 08:17:18 AM
My pleasure!  ;D
Title: Re: SE - Sea Limited ADR
Post by: Simba on January 22, 2021, 07:20:06 PM
Arg. Total regret selling.
Title: Re: SE - Sea Limited ADR
Post by: valueinvestor on January 23, 2021, 01:18:46 PM
Maybe it's the right time - you never know.