It's been about a year since COVID-19 flipped the world on its head...
And in that time, we've noted multiple trends that have accelerated because of the pandemic...
These include teleworking, e-commerce, video games, and at-home cooking, to name a few. You'll notice most of these trends are based in the technology sector. With people stuck at home throughout the pandemic, we've seen an incredible "digitization" of the global economy.
When COVID hit, businesses needed to invest in the types of technologies that would help them run seamlessly when employees aren't in the office. And those people needed to find ways to get the products they need without leaving their homes. All the while, they needed to keep themselves entertained in order to stave off cabin fever.
These are all trends that should carry on long after life returns back to "normal"...
Today's company, Sea Limited (NYSE: SE), finds itself at the intersection of two of these powerful trends...
Sea Limited is a $141 billion Southeastern Asian technology company. It has two distinct business lines...
The first is e-commerce. You see, Sea Limited is the "Alibaba of Southeast Asia." This region consists of 11 countries, including Singapore, Indonesia, Thailand, and the Philippines. Altogether, Southeast Asia has a combined population of 655 million. That's double the population of the U.S., and half the population of China.
Its Shopee e-commerce platform is the leader in this market.
Shopee's quarterly gross merchandise value ("GMV") – a measure of sales – has rocketed from $648 million at the start of 2017 to $9.3 billion as of the third quarter of 2020.
This is a great market to be in. Growth is exploding in the region...
E-commerce sales in Southeast Asia are expected to grow from $38 billion in 2019 to $150 billion by 2025. That works out to a compound annual growth rate of 26% per year.
That kind of growth might seem crazy, but it makes sense. Southeast Asia remains one of the least-developed e-commerce markets in the world. Even by 2023, its e-commerce penetration rate is only expected to reach 6.5%.
That means only 65 out of 1,000 people will be purchasing things online. So if you're looking for growth, this is the place to be... for years to come.
The other powerful trend boosting Sea Limited is gaming...
Sea Limited, through its subsidiary Garena, has a diamond in its portfolio of games. It has the exclusive rights to distribute the popular Call of Duty: Mobile in the region. It distributes the game in Taiwan, too – another large market with 14.5 million online gamers.
Garena has these exclusive rights because the company is 34% owned by Tencent. And Tencent owns TiMi Studios – the company that developed Call of Duty: Mobile. Sea Limited is effectively Tencent's gaming arm for the Southeast Asian market. This ensures Sea Limited has access to Tencent's steady stream of online games and content development.
That's a big reason Sea Limited, through its gaming division Garena, has 572 million quarterly active users ("QAUs") as of its most recent earnings report. And user growth was up an incredible 78% year over year.
This growth is not new to Sea Limited. The company's gaming business had just 44.9 million QAUs in the third quarter of 2016. So users have grown by more than 10-fold in just five years.
When you consider Sea Limited's Alibaba-like e-commerce prowess and its Tencent-like gaming dominance, it's easy to see how much growth is taking place. And investors are enjoying the ride, too...
Sea Limited's stock has soared as its business grows. Since going public in October 2017, the stock has returned more than 1,500%. That includes a nearly 500% gain in the past 12 months. And its shares currently sit at an all-time high. But the gains aren't done yet...
Sea Limited is still growing like a weed. In the most recent quarter, revenue more than doubled. And it's a force to be reckoned with in both the growing e-commerce and mobile-gaming trends. That should support a move higher in SE shares going forward.
Our colleague Brian Tycangco recommended Sea Limited shares in the December 2019 issue of True Wealth Opportunities: China. And he recommended selling half a position for a 169% gain last June. Including the closed half, the combined position is up around 388%. If you'd like to learn more about a subscription to True Wealth Opportunities: China, click here.