To The Moon

The Southeast Asian giant is back in form—but is the valuation racing ahead of fundamentals?

Shopee Reclaims the Crown

If there’s one thing markets love more than growth, it’s a comeback—and $Sea Ltd(SE)$ appears to be staging a compelling one. Revenue surged 30% year-on-year in Q1 2025, with quarterly sales pushing past the $5 billion mark. The lion’s share still comes from Shopee, Sea’s e-commerce engine, which is bouncing back from prior cost-cutting woes with improved monetisation and stable user growth across Southeast Asia and Latin America.

Digital chaos converges into Shopee’s sharp new rhythm

Shopee’s recovery isn’t just skin-deep. Management has reined in logistics expenses and shifted toward high-frequency consumer categories, yielding a healthier gross margin. While competition remains fierce—especially in Indonesia and Brazil—Shopee seems to have rediscovered its operating rhythm. The turnaround isn’t just evident in top-line numbers; operating margins have expanded, nudging Sea’s group-wide margin to 9.4%. For a firm that once bled capital faster than a dotcom darling, that’s no small feat.

Monee’s Momentum: Fintech Takes Flight

Arguably, the breakout star of Sea’s second act is Monee, its digital financial services division. Revenue from fintech jumped 58% year-on-year, driven by surging demand for microloans and mobile wallet transactions. With digital credit disbursement now reaching millions of underserved consumers and small businesses, Monee is shaping up to be the company’s next big engine.

That said, not all growth is created equal. While loan volumes are ballooning, credit risk remains the elephant in the room. Sea hasn’t disclosed non-performing loan ratios in granular detail, which leaves a slight whiff of uncertainty. If underwriting standards slacken in the pursuit of market share, today’s revenue boost could become tomorrow’s write-down. But for now, investors seem content riding the fintech wave—especially as cash flows improve and bad debt provisions appear under control.

Garena’s Survival, Not Supremacy

Garena, once Sea’s crown jewel, is now more of a legacy asset—still profitable, but no longer at the vanguard of growth. Gaming revenue is stabilising after a brutal two-year contraction, and while Free Fire has retained its foothold in emerging markets, the studio lacks a pipeline of blockbuster titles.

To be fair, Garena still throws off a respectable amount of cash and serves as a strategic moat for digital distribution. But its future may rest more on leveraging user data and cross-platform engagement than on outgunning the likes of $Tencent Holding Ltd.(TCEHY)$ and $Activision Blizzard(ATVI)$. This isn’t necessarily bad news—it just means that Sea’s growth baton has firmly passed to Shopee and Monee.

Valuation: Soaring Expectations, Thin Margins for Error

With the stock up a blistering 128% over the past 12 months—and 52% year-to-date—Sea now trades at 41x forward earnings and 5.7x trailing sales. The PEG ratio, at 1.02, suggests fair pricing if growth continues at its current clip. But 'if' is doing a lot of heavy lifting here.

Yes, free cash flow is positive at $1.28 billion, and yes, the company is sitting on a healthy $8.43 billion cash cushion. But when you’re priced for perfection, any stumble in e-commerce growth or a spike in fintech defaults could knock the wind out of the sails. The forward P/E of nearly 65 hints at an investor base willing to believe—but belief, like valuation, can be fickle.

Price momentum reflects belief—but gravity still applies

Should You Buy Sea Limited Now?

$Sea Ltd(SE)$ has come a long way from its early pandemic euphoria and subsequent comedown. The company is growing again, printing cash, and showing disciplined capital management. Shopee has regained its momentum, Monee is building a real fintech moat, and Garena, while no longer sexy, still adds strategic value.

But at a $97 billion market cap and triple-digit trailing P/E, this is not a value play—it’s a confidence play. You’re buying Sea because you believe it can dominate Southeast Asia’s digital ecosystem and execute with near-flawless precision across three disparate businesses.

If you’re the type to back a second act—especially one with solid top-line momentum and improving margins—Sea may still have room to run. But if you're looking for a margin of safety, you won’t find much cushion at these prices.

Conviction glows, but doubt still balances the scale

In short: brilliant company, bold strategy, sky-high expectations. Just keep your parachute handy.

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