A certain CFA recently wrote a commentary for Tech in Asia arguing that “Sea should just sell it while it’s ahead to someone else such as Tencent. Then it can refocus on Garena, the business that gives the strongest long-term opportunity for Sea shareholders.”
I have seen many commentaries that are uninformed and/or naive and/or boring – but I have not seen many that are downright ridiculous.
Why the valuation
SEA is valued by investors precisely because of Shopee – decoupling it will cause shopee to lose the cash cushion, but worse, it will result in Garena (or Sea) being worth much less.
Shopee has a real chance to beat Lazada in SEA and AliExpress in Brazil. Its move into fintech and digital banking is also quite coherent compared to many global players.
For those who dream of copying Pinduoduo in Southeast Asia, you should really take a look at Shopee, which is already copying many of the gamification elements of Pinduoduo quite well. (and yes anyone who still believes Pinduoduo is social ecommerce should not invest in ecommerce – too risky).
If you are on the ground and speaking regularly to employees, sellers, logistic partners and consumers – you will get a sense of how it is like.
Being contrarian is good – people need fresh perspectives. However, that commentary just shows plain ignorance of the author. This is 100% armchair general.
Analyzing emerging market companies purely by reports without any on the ground understanding was the exact reason why Jumia’s share price surged to $49 while it’s real value should be zero.
I am glad that I am not the only one pointing this out. Under the original article there is this comment:
Of course I might be wrong – happy to chat if you think that is the case.