At the start of this year, I made plans to play tennis again.
I Googled tennis racket reviews, checked out the permit rules of New York courts, and looked forward to the smell of opening tennis ball cans.
Then COVID-19 hit America’s largest city, and that plan got shelved.
I’ve read 30 books in 2020, but Open by tennis legend Andre Agassi is still to-do.
Despite not having read a page, there’s one quote from Andre that people have repeatedly shared through blogs and newsletters and podcasts:
“A win doesn’t feel as good as a loss feels bad, and the good feeling doesn’t last as long as the bad. Not even close.”
That pretty much sums up my experience with the company Sea Limited ($SE).
I missed out on a fantastic opportunity to buy the stock months ago and, despite significant wins this quarter, now it’s the only thing on my mind.
Here’s the Robinhood company description:
The firm engages in the provision of online gaming services. It operates through the following segments: Digital Entertainment, E-Commerce and Digital Financial Services. The Digital Entertainment segment offers access to game-related content through game forums, group voice chat, live streaming, and other user socializing functions on the Garena mobile app and desktop application. The E-Commerce segment manages third-party marketplace through Shopee mobile app and websites that connects buyers and sellers. The Digital Financial Services segment includes financial services to individuals and businesses, including e-wallet and payment services through the AirPay mobile app and AirPay counter applications on mobile phones or computers. The company was founded by Xiao Dong Li, Gang Ye and Jing Ye Chen on May 8, 2009 and is headquartered in Singapore.
All right, that sounds boring to read.
Here’s what Aaron Bush of The Motley Fool wrote on his Substack, Master the Meta:
Remember The Path to Titan? The general idea is that the most successful gaming companies will be the ones who turn their biggest games into services and platforms… and then reinvest those winnings into building more competitive, multi-pronged ecosystems. Sea Limited is one of a handful of gaming companies in the world on the “path to titan,” so to speak. Garena, the company’s gaming arm, is well-positioned since its Tencent’s key partner in Southeast Asia (for example, it publishes League of Legends in the region). And Garena’s success jumped stratospherically with the massive success of Free Fire, which hit 80 million DAUs and was the highest-grossing mobile game of the quarter in both Latin America and SE Asia. Importantly, the winnings from Garena are being entirely reinvested into Shopee, Sea’s e-commerce arm, which is blitzscaling and rapidly stealing market share across the region.
The quarter itself was mostly impressive. In the gaming division, quarterly active users hit 402 million (+48%), revenue rose 30%, and margins slightly expanded. In the e-commerce division, GMV grew 74% (an acceleration), revenue rose 110%, and the average loss per order continued to improve. These are the questions that matter most:
Will Garena find new growth opportunities before it becomes the victim of its own success? (probably, but there’s nothing specifically to point to yet)
Are Sea’s heavy reinvestments enough to ensure Shopee comes out on top in the region’s winner-take-most e-commerce market? (signs are positive)
Once greater scale is reached, will Shopee be able to flip its unit economics? (hard to tell from public info)
Whatever the outcome, Sea / Garena is easily one of the most interesting companies to follow. Link
If you remember one thing about Sea, know this about its chairman and group CEO:
When a college tutor couldn’t pronounce his Chinese name Xiaodong, Li adopted the name Forrest after watching the movie Forrest Gump.
Yes, count me oddly optimistic about the prospect of Asia + Internet + video games.
Sadly, too much commitment to esports, even professionally, can take a toll:
Imagine seeing your career end at the age of 23 through injury. While it’s not uncommon to see esports stars retire at such a young age, Uzi is no ordinary gamer. He’s China’s biggest esports star, an icon in his own right – as shown by the outpouring of reaction on Weibo, where Uzi’s retirement quickly became the top trending topic. Link
While I wish I could have retired at age 23, I’m guessing Uzi (real name Jian Zihao) will find a way to get back in the game.
Meanwhile, yes, I did finally buy some shares of Sea a couple of weeks ago.
But it doesn’t make up for losing what would’ve been a +200% gain.
I’m not a smart man, but I know Forrest Li is a good leader.
The rest of the tech in Asia might be a box of chocolates.