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Considering $SE has already more than quintupled over the past year, bear case of the argument deserves more consideration and why there might be a correction due in the medium run
Some thoughts on the valuation
Some thoughts on the valuation
- Straightforwardly, we love the equity story, but we wouldn't buy it at current prices because it is too expensive and already factors in the best of all possible scenarios.
-Pandemic-fueled growth in the gaming division is showing signs of slowing and the company is completely subsidized by its gaming division atm.
-We have run a bull case valuation making assumptions above consensus to check whether under a bull case scenario,. $SE current market valuation is sustainable.
- Assuming higher-than-consensus EBITDA by on average USD 3.7 bln each year, we hardly reach the current valuation.
- Assuming higher-than-consensus EBITDA by on average USD 3.7 bln each year, we hardly reach the current valuation.
-We have run a sensitivity analysis by testing how each division equity value is impacted by changing the discount rate and long-term growth rate (g).
-Assuming a discount rate between 10% and 12% and a g between 3.3% and 3.8% value per share ranges between USD 177 and USD 252
-Assuming a discount rate between 10% and 12% and a g between 3.3% and 3.8% value per share ranges between USD 177 and USD 252
Peer analysis
-Even though we have plugged in the above consensus estimates for Sea Limited, it is currently trading in line with MELI in terms of EV to FCFF but MELI is far ahead in the deployment of its strategy in LatAm.
-Even though we have plugged in the above consensus estimates for Sea Limited, it is currently trading in line with MELI in terms of EV to FCFF but MELI is far ahead in the deployment of its strategy in LatAm.
-Sea is trading at a substantial premium vs OZON in terms of EV/Sales.
-the growth embedded in current prices is far higher for Sea limited as compared to others. Garena might partially justify such a premium if and only if it can keep up current operating margins in the LR
-the growth embedded in current prices is far higher for Sea limited as compared to others. Garena might partially justify such a premium if and only if it can keep up current operating margins in the LR
Conclusion
We are impressed with what SE has done so far. If you look at the valuation - it's priced for perfection. Given the R/R, we prefer owning $MELI.
We will revisit the $SE if it dips below $170, allows a better entry point/RR.
Detailed DD https://seekingalpha.com/article/4421990-sea-limited-in-best-scenario-fairly-valued
We are impressed with what SE has done so far. If you look at the valuation - it's priced for perfection. Given the R/R, we prefer owning $MELI.
We will revisit the $SE if it dips below $170, allows a better entry point/RR.
Detailed DD
https://seekingalpha.com/article/4421990-sea-limited-in-best-scenario-fairly-valued
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We will post the video on $SE shortly and DD on $MELI and $OZON is already there.
https://www.youtube.com/c/MOATInvesting/videos
We would appreciate an RT if you would like to keep seeing more of these DD
We will post the video on $SE shortly and DD on $MELI and $OZON is already there.
https://www.youtube.com/c/MOATInvesting/videos
We would appreciate an RT if you would like to keep seeing more of these DD
If you are looking for an investor community to discuss equity, macro, crypto, and all things market - you can join our discord free of charge https://discord.com/invite/6FFudZvdhk
Let us know what you think and what we have missed.
@DennisHong17 @plantmath1 @MaxTheComrade @fatbabyfunds @IrnestKaplan @GetBenchmarkCo @alexeliasson @EugeneNg_VCap @wolfofharcourt @BackpackerFI @Innovestor_
@DennisHong17 @plantmath1 @MaxTheComrade @fatbabyfunds @IrnestKaplan @GetBenchmarkCo @alexeliasson @EugeneNg_VCap @wolfofharcourt @BackpackerFI @Innovestor_
