For more detailed analysis visit our website: https://www.overlookedalpha.com <br /><br />Sea Limited is a tech company from Singapore, often referred to as the Amazon of South East Asia. <br /><br />Barely a year ago Sea had a market cap near $200 billion. After an 82% drop in share price, the company now has an enterprise value of 28.7 billion with 7.3 billion of cash and 4.15 billion of debt. <br /><br />Sea makes money in 3 main ways; <br /><br />Its digital entertainment arm (Garena) distributes games like Fifa Online 3 and should see profits in the range of 1.5 billion dollars in 2022. <br /><br />Its ecommerce platform Shopee is not profitable but is driving around 7 billion in revenue. <br /><br />And its financial arm SeaMoney provides services like payment processing and mobile wallet products. Revenues should hit 1.2 billion or so this year.<br /><br />A 7 or 8 times multiple on the games segment gets the valuation here to around $10-12 billion. <br /><br />Ecommerce, meanwhile, did roughly 40% of the gross merchandise value of Shopify. Give ecommerce half the multiple of Shopify and the segment is worth around $8 billion. <br /><br />The financial arm is growing at an impressive rate with 147% growth in Q3. If we give that business a multiple of 5 times revenue we get a valuation of $6 billion. <br /><br />Add it all up, plus 3 billion in net cash, and we get a sum of the parts valuation of around 28 billion against the current valuation of 29bn. <br /><br />In other words, Sea Limited is beginning to look a lot more reasonable at these price levels. And SEA revenue continues to grow strongly clocking over 20% a year.<br /><br />On the other hand, the company still isn’t profitable. When you add back stock based compensation, the company has lost almost 3 billion dollars over the last 12 months. <br /><br />And it’s SEA’s only profitable division (gaming) that is performing the worst. Adjusted ebitda for games dropped 59% in q3 and user numbers also fell by 8% The announcement by League of Legends creator Riot Games that it will no longer publish major titles through Garena is another blow.<br /><br />With these questions over digital entertainment, we’d like to see a lower share price before investing in SEA. If the stock moves back below $50 it would start to look like a tempting long term trade. <br /><br />But these are my personal opinions, not financial advice and I hold no position in this stock. For more detailed analysis, visit our website. <br /><br />#investing #stocks #stockstobuy #stockstowatch #overlookedalpha #stockmarket #bloomberg #finance
