John Yetimoglu pitches Sea Ltd at Sohn 2025

Today I’m presenting Sea Limited, ticker SE. Sea is a Southeast Asian tech conglomerate with 3 dominant category leaders across e-commerce, gaming, and fintech. Shopee, its e-commerce business, is doing a $120 billion GMV run rate with accelerating growth. Its video gaming segment, Garena, is around a $1.5 billion EBITDA run-rate business with reaccelerating growth, and its fintech business, SeaMoney, is growing the fastest among the group and is expected to do $1 billion of EBITDA this year.

You can think about Sea as the Amazon of Southeast Asia, plus the world’s most popular game, plus a fintech business that’s very synergistic with the e-commerce business. All 3 segments have historically been some of the fastest-growing businesses. Shopee grew GMV at a 100% CAGR over the last 10 years. Garena Free Fire, its hit game, grew users at a 40% CAGR over the last 10 years. SeaMoney is the fastest-growing segment within the business and the ecosystem.

1. Sea Serves A Massive Market

Sea is the backbone of the Southeast Asian economy. Its e-commerce and digital financial services segments touch nearly 850 million people’s lives daily: more than 600 million in Southeast Asia and more than 200 million in Brazil. When you think about these countries, think Indonesia, Malaysia, Vietnam, Thailand, and the Philippines. Consumer demographics in these regions are some of the most attractive end markets in the world. The middle class is young, with growing incomes, and e-commerce is in the early stages of penetration. We believe the end e-commerce market will grow at a mid-teens CAGR over the next 5 to 10 years, with Shopee driving overall market growth.

Some regional macro trends—GDP growth, inflation, and interest rates—have been pretty stable across Southeast Asia, even relative to the United States. Given that tariffs and geopolitical tensions between the U.S. and China are a front-and-center focus right now, we actually think Southeast Asia and Sea Limited are uniquely positioned to be beneficiaries of supply-chain moves out of China into Southeast Asia. It doesn’t even matter if the U.S. and China end up reaching a trade deal, because large multinational enterprises have no choice but to hedge their supply-chain risks by doing this. If you use Trump’s first term as a barometer, the shift resulted in a major tailwind and boom for the economies of these Southeast Asian nations. Apple, for example, has already indicated recently that it’s going to move its entire iPhone production out of China into India.

2. Shopee Owns Southeast Asian Commerce

I’ll spend a little time talking about each segment. Shopee is the most dominant e-commerce business in Southeast Asia. It has 55% market share and continues to take share quite rapidly. It has a significant logistics advantage in terms of service quality and cost to serve versus other platforms, which predominantly rely on third-party logistics. Shopee is also growing really fast in Brazil and taking market share from Mercado Libre. It was about a third of the size of Mercado Libre in 2023, and now it’s a little more than 40% of Mercado Libre’s size in terms of GMV. It also passed Mercado Libre in total users and web traffic a few years ago. Mercado Libre now just has higher average order values.

The remote, hyper-localized approach, first-party logistics, and network effects have all expanded Sea’s moat. These countries are very protectionist toward their small and medium-sized merchants, or MSMEs, because they’re the backbones of the economy. That makes it difficult for Chinese exporters to come in. Sea is the lowest-cost operator because of its logistics advantages in terms of cost to serve. Average order values are $10 across these regions, so every penny you save on logistics makes a big difference for consumers who have limited wallet share.

Shopee launched its live-shopping business about 18 months ago. Live shopping is the equivalent of QVC online and is wildly popular in Asia. Shopee grew that business to beat out TikTok and become the most popular live-shopping platform in Indonesia, and arguably in Southeast Asia as well. Lastly, there’s advertising. Given its scale—and the fact that e-commerce is a scale game—Sea can pull levers like advertising to subsidize other parts of the business. It revamped its ad platform about a year and a half ago, significantly increased its return on ad spend, and that business exploded. It’s now around 2% of GMV in ad revenue. We think ad revenue will grow to 5% of GMV over time. If you look at marketplaces of similar scale, like Pinduoduo, JD.com, and Alibaba, they typically max out at 7%. This is a 50% margin business, so it’s a pretty big contributor.

This is Shopee’s geographical diversification. Indonesia is its largest market, with 29% of GMV, and it’s fairly well diversified across the other countries.

3. Garena Reclaims Its Growth

Moving on to gaming, Garena is Sea’s game studio and publisher. It has a hit game called Free Fire. Free Fire is an evergreen game with more than 600 million users. It’s the largest mobile game in the world. Over the last year, we’ve seen a pretty big inflection in Garena. It has diversified into other games, such as Arena of Valor, Call of Duty: Mobile, Delta Force, and Free City, some of which were co-developed with Tencent. In the short term, Free Fire is relaunching in India. It has about 100 million preregistered users, up from 70 million. Free City, a spin-off of Free Fire that’s more similar to a Grand Theft Auto-like game, had a fantastic launch in Argentina. We expect it to be a meaningful contributor this year as well.

4. SeaMoney Turns Data Into Credit

Finally, SeaMoney is the leading digital financial services provider in Southeast Asia. It solves a real problem and meets a real need. Half of Southeast Asia is unbanked. Compare that to 7% in the U.S. and 20% in China. There’s a long runway for growth, and there are tremendous synergies between SeaMoney and Shopee. Because they touch so many consumers and users on the Shopee platform, they have all this consumer data and are much better able to underwrite creditworthiness than anyone else. That’s reflected in their nonperforming-loan ratio, which is stable at 1.2% and has improved sequentially over the last year.

5. Management Aligns With Shareholders

Lastly, it’s a founder-led management team with extreme alignment with shareholders. Forrest Li is the founder. He owns almost 20% of the company and 60% of the voting rights, so he has control over the company and the board. Chris Feng, who is the president of Sea and the CEO of Shopee, also owns a significant share. Insiders and management own more than 40% of the company, which includes Tencent, which owns 17% of the company.

One thing to note that’s quite important is their actions in 2022. When the stock went down, the management team basically removed all cash compensation for themselves. There were 30 million fully vested RSU grants worth $3 billion that they canceled as the stock went down, which they restructured as PSUs with a $120 share strike price. In my investment career, I’ve never seen a management team do something like this in the United States, let alone in Asia. So, great alignment and a fantastic team.

6. Sea Targets A 3x Return

On setup and valuation, we think the stock has 30% upside. I wish I’d pitched this a week ago—the stock has done nothing but go up. In the short term, over 6 to 12 months, we think the stock has 30% upside to $200 a share, which would bring it in line with the multiples of its comps. More importantly, over a 3- to 5-year period, we think EBITDA flexes from $4 billion this year to $12.5 billion. We think the stock will be a steady compounder at a 25% CAGR and be a 3x-plus. We’re just going to see a continued beat-and-raise cadence of high growth and market-share gains, with improving unit economics and margins over time. Thank you.

Thank you, John. Bringing people together is hard. I build investment firms for a living, and at the start I’m trying to bring 10 to 20 people together, and it’s like herding cats. So imagine bringing all of you here together. I think part of the reason is that we throw a great conference. We’re better than the competition. But if there’s anything we can do to make it better, grab me or anyone on the host committee and give us some ideas.

Now, talking about competition, I’m curious: What was it about Sea that gave you the conviction that the competitive dynamics are such that it’ll be the winner?

7. Shopee Wins The Logistics War

Yeah, there are a few moving parts that all coincided together. The logistics advantages that they have are important. All their competitors rely predominantly on 3PLs, or third-party logistics, which are much higher cost—mainly J&T Express, which charges $0.75 per parcel and makes about $0.07 of EBIT per package, and has fixed costs in Southeast Asia.

Shopee Express, its first-party logistics business, has a much lower cost to serve and much better service quality. That, coupled with demographics in a region where average order values are $10—low AOVs relative to developed markets, where every penny matters—gives Sea a massive price advantage on its end product. The same product will sell on multiple platforms, but Shopee will always be the lowest price.

Initially, they had given their merchants the ability to use 3PLs, but over time they’ve migrated back to Shopee Express. That differential in cost to serve widened because, as J&T lost order volume, it needed to raise prices in order to maintain the same ROE.

ROE is an important metric for logistics companies. When their competitors saw that they were burning tons of cash, it was a highly competitive environment in Southeast Asia for many years. But they couldn’t compete on price, and they were burning tons of cash trying to do more discounting and promotional activity. Shopee’s scale and the levers they could pull to continue subsidizing were too great.

Over the last couple of years, the water kind of just overflowed, and take rates all went up across the board. Everyone moved to improve unit economics at the same time, and you had a situation where the scale player was able to take more market share and beat out everyone else.

Yeah. Thanks. Thanks.