You may not have heard of the third-most-valued Internet company in Asia. What is the origin?

The myth of making wealth in technology stocks has always been a topic of interest.

​If you spent 10,000 yuan to buy Tencent shares (2702 shares) issued at 3.7 Hong Kong dollars in 2008, you will have 1.25 million worth of shares today. At the peak of Tencent's stock price, this number may even be close to 2 million.

As China's technology companies become increasingly difficult to become independent giants in a short period of time, there are fewer and fewer people who hold Tencent stocks and then "get rich." However, when the structure of Chinese technology companies is difficult to change, Singapore Internet company Sea has become a star company that investors are reluctant to ignore.

▲ Sea listed

Asia's third-largest Internet company by market value

If you ask someone on the street at random, which companies have the highest market capitalization in Asian Internet companies, most people will probably be able to answer the names of Tencent and Alibaba. So third, besides Tencent Ali, which Internet company do you think is the most valuable Internet company?

People around me gave different answers, such as Meituan, ByteDance, Didi, Baidu… But in the end, the answer was Sea Limited, a listed company in Singapore, which we can also call Donghai Group.

If you also bought Sea shares, then you can also experience some of the joy of a roller coaster of stock prices in the past three years. It needs to be pointed out that since August 2018, this kind of happiness has almost always been related to the rise of stock prices. . The stock has soared by 2200%+, and its main business has maintained a rapid growth of more than 100%.

▲ Sea's stock changes, rising all the way

The surge in Sea's stock price is reminiscent of Tencent in previous years. Coupled with Sea's special business model, many people indeed call it "small Tencent in Southeast Asia." The reason why the stock has risen so fast and the name "Little Tencent" is not known to most people is that Sea's services are more in Taiwan, Southeast Asia, and South America.

The reason why it is called the "Small Tencent in Southeast Asia" is largely because Sea started to make money with the game business. Until the 2019 financial report, Sixty percent of Sea's income was earned from games, and it was still the hottest "chicken-eating" mobile game at the time.

But it's not just Tencent. After all, Tencent has not been able to do e-commerce, but Sea has done it. In 2021, Sea's e-commerce app Shopee ranked first in the number of downloads and monthly active users of shopping apps in Southeast Asia. They find spokespersons and launch different apps according to different markets, which perfectly adapt to this mobile Internet era.

There is even a shadow of Meituan. The parent company of Vietnam's leading food delivery platform Now is Sea.

▲ Now, the top food delivery platform in Vietnam

There are games, e-commerce, and takeaways. It is not strange that Sea has a payment application. AirPay is such a payment application, which was initially just a convenient online payment method for users "Krypton". With Shopee's success in the Southeast Asian market, Sea has also begun to launch specific payment applications in different markets and different application scenarios, such as ShopeePay and Shopee PayLater.

Of course, for this large company that is close and in the beginning of development, Chinese Internet companies have not let go of the truth. They have a different intersection with it.

The game platform that Sea started is Garena. Garena's predecessor is GGgame. The founder of GGgame is Chen Ou, who is known to most Chinese users. That's right, it is Chen Ou, the founder of Jumei Youpin who "speaks for myself." It's just that the relationship between Garena and Chen Ou was not so close.

In March 2008, Li Xiaodong changed the company's name to Garena, and Chen Ou, who went to study in the United States two months later, also sold his equity and withdrew from the company. Since then, the biggest relationship between Sea and Chinese Internet companies is the agency. It has cooperated with Tencent, Changyou and other game companies for localized operations in the local market.

Perhaps the game started to make Tencent feel close, or perhaps the founding team of Tencent saw the potential of Sea. In 2010, Tencent invested in Sea. Since then, it has participated in multiple rounds of investment and still holds 22.9% of the shares.

Tencent's investment vision is good, and the old impression that Ali's investment "will do badly" seems to be fulfilled in markets outside of China. At least from the perspective of e-commerce. Shopee, an e-commerce app owned by Tencent invested by Sea, is a latecomer, with growth and the number of merchants gradually surpassing Lazada, a company invested by Alibaba. During the epidemic, the number of monthly active users of the two e-commerce platforms has been several times different.

Even in some parts of South America, Shopee’s rival is no longer the Lazada invested by Ali, and has become the e-commerce of Ali, which has gone overseas, and the Shein app, which is very popular in Europe and the United States.

Almost all of them are the Chinese leadership, Tencent Investment, and the platform invested by Ali, this is the Internet company Sea, which is currently the third most valuable Internet company in Asia.

What are Sea's products?

In its current form, Sea, a developing Internet giant, also has a troika-games, e-commerce, and payment.

Garena is a well-deserved "cash cow" of the group. As a gaming platform, Garena+ is available in multiple languages ​​and also supports instant messaging and social networking. It is one of the battle platforms of DotA and Age of Empires. They are also very concerned about the development of e-sports and have created Garena, the largest e-sports event in Southeast Asia.

At the same time, benefiting from the good relationship with Tencent, the early Garena obtained the agency rights of blockbuster games such as "League of Legends". In 2018, Garena even received a five-year priority to release Tencent's mobile and PC games in multiple regions.

But Garena is not satisfied to be a game agent. The launch of Free Fire, a self-developed chicken-eating mobile game, is the best proof of its ambition.

There are a lot of chicken-eating mobile games, and the reason Free Fire can stand out is localization. They are equipped with different language versions for different regions, and even take into account the user's mobile phone memory problem, specifically reducing the capacity and lowering the picture quality. Not only can it satisfy game users in Southeast Asia, Free Fire also performed well in North America, surpassing PUBG in the first quarter of this year, becoming the most popular tactical competitive mobile game.

▲Free Fire

In the entire group, Garena represented by Free Fire is also one of the few profitable existences of Sea. In the 2021 Q2 financial report, Garena's business contract value increased by 65% ​​to US$1.2 billion, confirmed revenue was approximately US$1 billion, and adjusted earnings before interest and taxes (EBITDA) increased by 70% to US$7.41.

Too much profit, so that Sea can also develop in the direction of giants-invest in some of the Internet businesses that they are optimistic about.

If it is Garena who is gaining and gaining profit, then the brother is gaining and gaining and losing. Shopee's growth momentum in various markets is gratifying, but it still has to rely on Garena to make money to support the family.

It's just that in the entire Southeast Asian market, Shopee is usually the image that is more flexible and willing to make changes.

▲ Shopee specifically found a star endorsement

Shopee has a lower barrier to entry and can directly help sellers solve the needs of finding suitable KOLs. It will even take the initiative to find new small and medium-sized sellers on social applications such as Facebook and Twitter. Even though Lazada entered the game earlier and brought live e-commerce into Southeast Asia faster, Shopee, which is a late-comer, has also achieved cornering surpassing by starting from a small place.

When going to the sea in Latin America, Shopee started to gain a foothold by relying on a rake rate that was half lower than that of other platforms. Free shipping subsidies and low commissions are all good ways for the platform to attract merchants. Since Free Fire is more popular in Latin America, Shopee has also received special care when entering the South American market, by providing users with game skins and props to stimulate new growth.

▲ Games and e-commerce can also complement each other

But e-commerce is much more complicated than games, warehousing, marketing, logistics… Because of this, Shopee grows fast and loses a lot. It can only be expected that Shopee's losses will gradually narrow as the scale effect expands.

Most companies will launch payment platforms after doing e-commerce, Sea is not like that. As early as 2014, when Shopee did not appear, AirPay appeared. At that time, its function was only to help users buy game props. Later, its payment platform was further improved, with ShopeePay, which supports QR code payment and cash on delivery, and ShopeePayLater, which is more like Huabei.

These financial services with certain differences are collectively referred to as SeaMoney, and their main income is the commission income of platform settlement. Compared with Alipay's commission rate of 0.047% in 2019, SeaMoney's commission rate of 1%-3% per transaction is not so attractive. Fortunately, in the Southeast Asian and South American markets, this commission rate is still more "sweet" than PayPal.

▲ SeaMoney

In the recent Q2 financial report, SeaMoney processed more than 4.1 billion US dollars, a year-on-year increase of 150%. It is worth mentioning that this high growth will continue for a long time. After all, the proportion of non-cash payments in areas where SeaMoney is relatively strong is much lower than in China. As e-commerce, gaming, and payment advance together, the entire company is likely to become stronger.

Believe in unlimited potential?

As of press time, the market value of Sea has reached 178.489 billion US dollars (approximately 1.154 trillion yuan). There is a certain gap compared with Tencent's about 3.737 trillion yuan and Ali's 2.881 trillion yuan in market value. However, in fact, the profitability of several companies is different. It's still big.

Judging from the most recent financial report, whether it is in terms of revenue or net profit, Asia's third-largest Internet company by market value demonstrated less than 1/9 of Alibaba's Tencent, but its market value is more than 1/3 of Alibaba's. , Which is also 3/10 of Tencent.

▲ We made a comparison table ourselves

Are the capital markets overestimating Sea a bit? Although it has many businesses covering Asia and Latin America, it seems that it has not yet reached the third place in Asia.

If it is the current Sea, it may indeed not be worth so much money, but behind the rise in the stock price is the market's optimistic view of Sea's growth. In addition to the good development momentum of the global game business, Sea's efforts in Latin America in the past few years have also paid off-in two years, Shopee has become the most downloaded shopping app in Brazil.

In Southeast Asia, Sea also faintly has the momentum of a small overlord. Multi-line development such as payment, food delivery, e-commerce, games, etc., will attract each other and bring more and more giants at this stage of growth. What is important is that there is still a lot of potential to be tapped in the Southeast Asian market, where Sea has already had an advantage in the competition.

Southeast Asia currently has a population of 583 million, but only 69% of people have access to the Internet. With the increase in mobile network coverage, the growth of Sea-related services is also worth looking forward to. At the same time, Southeast Asia itself is a very promising market. Google research shows that the total GMV in Southeast Asia is expected to grow at an annual rate of 25%, which is still good news for Sea.

The gaming business is very profitable, the e-commerce business has an advantage, and the payment business continues to grow. When Sea's gaming, e-commerce, and payment businesses are sailing at a speed close to or exceeding 100%, who can say that Sea is not worth the price?

Not too interesting, not too optimistic.

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Ai Faner | Original link · View comments · Sina Weibo