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Sea: Leading Digital Economy Player In Southeast Asia's Fragmented Market

Mar. 03, 2021 6:35 AM ETSea Limited (SE)22 Comments
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  • Southeast Asia’s digital economy is on the rise, but navigating this fragmented market of various cultures, languages, and rules is relatively tricky.
  • Sea has successfully tackled the market through a localization strategy.
  • E-commerce, games, and digital financial business are the three main businesses, and all three are firing on all cylinders.
  • Growth is expected to continue. E-commerce is still underpenetrated, mobile games is expanding into e-sports, and financial businesses is just getting off the ground.

Sea Ltd (NYSE:SE) has grown tremendously over the past few quarters, and its stock price has jumped six-fold in 2020. Yet, for this Southeast Asian internet company which can be described as Amazon (AMZN), Activision Blizzard (ATVI), and PayPal (PYPL) rolled into one, the growth story is just beginning with all three of its core businesses, namely gaming, e-commerce, and fintech poised to benefit from structural uptrends in Southeast Asia; Southeast Asia has a youthful tech-savvy population with the median age being 30 years, and of the region’s 649 million population, four hundred million are online, 90% of them mobile-first which plays very well into Sea’s highly popular mobile game - Free Fire, and its e-commerce platform - Shopee, both of which were developed with a mobile-first approach from the get-go.

Source: The Straits Times

Southeast Asians are also avid internet users; of the top 10 countries in APAC region by average daily time spent using the internet, six are in Southeast Asia namely Philippines, Malaysia, Indonesia, Thailand, Singapore, and Vietnam. These countries beat out developed nations such as Australia, South Korea, and New Zealand.

Consumer spending in the region is also on a growth path; by 2030, two-thirds of Southeast Asia’s consumption growth is expected to come from increased per capita spending, and the rest from population growth according to McKinsey.

Covid has accelerated Southeast Asians’ shift to digital for both businesses and consumers alike, with more than one in three consumers of digital services using a new online service due to Covid.

With 94% of them intending to continue using the online service post-pandemic, this Covid-induced digital transition is likely to outlast the pandemic, signaling a long-term behavioral evolution rather than a temporary adjustment.

Southeast Asia therefore has several ingredients to support its nascent digital economy. The region’s digital

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Long only, focused on high quality businesses with economic moats and solid business fundamentals. Sector and geography agnostic. Long term investment horizon. None of the articles constitute investment advice.

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