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Vettelpole

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- VettelpoleVettelpole
  ·2023-10-18
  I feel a P/S SOTP should be more valid than P/E,given it just turn profitable
  Sea Limited: Pivoting To Reinvestment Mode
  Management announces pivot to reinvestment mode in Shopee, leading to a decline in e-commerce profitability.Digital Entertainment sees recovery in quarterly active users and paying users, but revenue
  Sea Limited: Pivoting To Reinvestment Mode
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- VettelpoleVettelpole
  ·2023-06-22
  I thought the guidance EP mS was 3.43 instead of 5?
  PayPal: Underappreciated Growth
  bennymartyThe market can be a perplexing place due to valuations being highly subjective and driven mainly by confounding financial metrics. A prime example of this issue is the depressed value of Pay
  PayPal: Underappreciated Growth
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- VettelpoleVettelpole
  ·2021-09-18
  Really brilliant article for equity analysis
  Sea Limited: It's All About Expectations And Discount Rate
  Summary Since our first valuation of the stock, the price has gone up more than 20%. At that time,
  Sea Limited: It's All About Expectations And Discount Rate
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- VettelpoleVettelpole
  ·2021-09-01
  $NIO Inc.(NIO)$Li can deliver close to 10k, this shot which I was the most bullish amongst the 3 only deliver 5.8k?! This is really worrying
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E-commerce EBITDA fell sequentially during the quarter and is expected to continue in the coming quarters, contributing largely to the drawdown we have seen in recent weeks.</p><p>Digital Entertainment’s (“DE”) quarterly active users (“QAU”) and quarterly paying users (“QPU”) recovered QoQ, but revenue declined due to lower monetization. Digital Financial Services (“DFS”) reported increasing revenue and EBITDA, although modest growth in sequential growth and loan receivable implies growth is slowing.</p><p>Overall, the drawdown was warranted given the expected impact on the firm&#39;s future profitability as the E-commerce shifts back to growth. On a positive note, the share price decline has created a reasonable upside to the valuation. You may also check out my previous coverage of the firm.</p><h2 id=\"id_2035641705\">Digital Entertainment</h2><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/4ca9d688a2872257cb714502785d5fec\" tg-width=\"1280\" tg-height=\"582\"/></p><p>Author’s Image of Digital Entertainment’s Top-Line &amp; Operational Metrics</p><p>DE’s QAU and QPU grew 10.8% and 14.6% QoQ, respectively, after several quarters of decline over the past 12 months. However, both ARPU and ARPPU declined QoQ, indicating lower monetization from the gaming segment, and revenue and bookings declined 4.2% and 2% QoQ, respectively. As this is the first full quarter of recovery in both QAU and QPU, it is still unclear if the user base could stabilize moving forward. Adjusted EBITDA did however grow moderately at 4% QoQ, after 7 consecutive quarters of sequential decline.</p><h2 id=\"id_3802891400\">E-commerce</h2><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/742ac78ba56bdb4a188f23b2f124c4dc\" alt=\"Author’s Image of E-Commerce Revenue Breakdown\" title=\"Author’s Image of E-Commerce Revenue Breakdown\" tg-width=\"1280\" tg-height=\"462\"/><span>Author’s Image of E-Commerce Revenue Breakdown</span></p><p>Core marketplace revenue grew 7.4% QoQ as increased monetization continues in Brazil and SEA via uptake in commission rates, and value-added service (“VAS”) revenue declined 6.6% QoQ due to shipping subsidies as management pivoted to reinvestment mode. During the earnings call, management had also cited investment into livestreaming (a.k.a. Shopee Live) and short-form videos. Based on my personal experience with Shopee’s app, I have seen a noticeable uptick in the promotion of Shopee Live and the offering of discount vouchers. Overall e-commerce revenue increased 2.4% QoQ while overall adjusted EBITDA fell 28% QoQ. In terms of geographic markets, Asia market EBITDA fell 26% QoQ, while other markets (including Brazil) EBITDA loss improved 21% QoQ.</p><p>I believe this is partially in response to the increased competitive pressure from the social media platform, TikTok, and to defend market share given regional peers (a.k.a. Alibaba’s Lazada) have raised funds. In recent weeks, however, Indonesia’s government, Jokowi, imposed a ban on TikTok from facilitating transactions and payments. This benefits pure online marketplaces, including Shopee, as the threat of TikTok has now significantly diminished, but not completely. There remain several potential scenarios for the unfolding of this situation, including the possibility of TikTok introducing a separate e-commerce platform or current TikTok sellers or governmental bodies jointly petitioning against the ban, therefore, resulting in the ban being lifted.</p><h2 id=\"id_2896580718\">Digital Financial Services</h2><p></p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6de6cfea20e7c94b549dd9736f67c286\" tg-width=\"1280\" tg-height=\"114\"/></p><p>Digital Finance Service Revenue</p><p>While DFS revenue grew 53.4% YoY, DFS QoQ growth was modest at 3.7%, and loan receivables were stable QoQ at $2 billion, even though reported SeaBank Indonesia’s deposits are growing (Indonesia is its largest market). This implies that user bases might be stabilizing, and any growth moving forward will have to come from the scalability of the user base, and the expansion into other financial products. DFS’s adjusted EBITDA increased 38% QoQ, which is contributed by a sequential decline in S&amp;M expenses that offset the EBITDA decline in Shopee.</p><h2 id=\"id_1845480007\">Overview of Balance Sheet &amp; Cash Flow Statement</h2><p>Cash and cash equivalents, restricted cash, and short-term investments amounted to $7.1 billion as of 2Q23. The debt-to-equity ratio has steadily declined from 0.85 in 3Q22 to 0.58 as of 2Q23. Operating cash flow (“OCF”) for the quarter came in at $595 million, marking the third consecutive quarter of positive OCF.</p><p>In comparison to a year ago, the firm’s current ability to enter a reinvestment phase has improved due to a stronger balance sheet and positive cash flows. This situation also underscores the adeptness of the management in steering through the crisis.</p><h2 id=\"id_313993639\">Valuation</h2><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/34d27d2119e2989a5672105b8d9caa09\" tg-width=\"1128\" tg-height=\"834\"/></p><p>Author’s FY23E Valuation</p><p>My price target for the firm is $49.9 as of FY23E. For DE, my EBIT estimate is $1,171.4 million, and an 8x P/E multiple, due to the segment’s reliance on a single game. For E-commerce, sales are estimated to come in at $8,417.2 million, and the applied P/S multiple is 1.2x, compared to the industry average of 1.6x. DFS estimated EBIT is $452.9 million, with a P/E multiple of 15x, vs. an industry average of 22x due to its lower growth profile. In total, after accounting for net cash, and the number of shares outstanding, this produces an equity per share of $49.9, which is an upside of 15% from the current share price of $43.</p><h2 id=\"id_2155709437\">Risks</h2><p>Some of the key risks, while not exhaustive, include:</p><ul style=\"\"><li><p>Digital Entertainment: Concern around the stabilization of DE’s QAU and QPU</p></li><li><p>E-commerce: Future decline in segment’s profitability as it shifts back to growth; increased competition; weaker-than-expected consumer spending due to inflation;</p></li><li><p>Digital Finance Services: Higher than expected credit losses</p></li></ul><h2 id=\"id_2491138827\">Conclusion</h2><p>The drawdown was warranted given the lack of stabilization in DE’s QAU base, and the increasing concerns surrounding the E-commerce’s future earnings as it shifts back to growth in response to intensifying competition. However, on a positive note, the firm has come out of the crisis with an improved balance sheet and positive operating cash flow, positioning them more favorably to compete and invest in further growth from a year ago. The share price decline in share price has also created a reasonable upside to the firm’s valuation. All things considered, I rate it as a hold.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Sea Limited: Pivoting To Reinvestment Mode</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSea Limited: Pivoting To Reinvestment Mode\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-10-02 23:42 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4638291-sea-limited-stock-pivoting-to-reinvestment-mode><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Management announces pivot to reinvestment mode in Shopee, leading to a decline in e-commerce profitability.Digital Entertainment sees recovery in quarterly active users and paying users, but revenue ...</p>\n\n<a href=\"https://seekingalpha.com/article/4638291-sea-limited-stock-pivoting-to-reinvestment-mode\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"SE":"Sea Ltd"},"source_url":"https://seekingalpha.com/article/4638291-sea-limited-stock-pivoting-to-reinvestment-mode","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2372304071","content_text":"Management announces pivot to reinvestment mode in Shopee, leading to a decline in e-commerce profitability.Digital Entertainment sees recovery in quarterly active users and paying users, but revenue declines due to lower monetization.Digital Financial Services reports modest growth in revenue and EBITDA, implying stabilization of user base and potential for future growth.While the ban on TikTok has favored SE, its threat is not completely eradicated.My FY23E equity per share is $49.9, a 15% upside from the current share price.OverviewAfter 5 consecutive quarters of cost-cutting and attaining profitability in 4Q22, management announced their decision to pivot to reinvestment mode in Shopee in 2Q23. E-commerce EBITDA fell sequentially during the quarter and is expected to continue in the coming quarters, contributing largely to the drawdown we have seen in recent weeks.Digital Entertainment’s (“DE”) quarterly active users (“QAU”) and quarterly paying users (“QPU”) recovered QoQ, but revenue declined due to lower monetization. Digital Financial Services (“DFS”) reported increasing revenue and EBITDA, although modest growth in sequential growth and loan receivable implies growth is slowing.Overall, the drawdown was warranted given the expected impact on the firm's future profitability as the E-commerce shifts back to growth. On a positive note, the share price decline has created a reasonable upside to the valuation. You may also check out my previous coverage of the firm.Digital EntertainmentAuthor’s Image of Digital Entertainment’s Top-Line & Operational MetricsDE’s QAU and QPU grew 10.8% and 14.6% QoQ, respectively, after several quarters of decline over the past 12 months. However, both ARPU and ARPPU declined QoQ, indicating lower monetization from the gaming segment, and revenue and bookings declined 4.2% and 2% QoQ, respectively. As this is the first full quarter of recovery in both QAU and QPU, it is still unclear if the user base could stabilize moving forward. Adjusted EBITDA did however grow moderately at 4% QoQ, after 7 consecutive quarters of sequential decline.E-commerceAuthor’s Image of E-Commerce Revenue BreakdownCore marketplace revenue grew 7.4% QoQ as increased monetization continues in Brazil and SEA via uptake in commission rates, and value-added service (“VAS”) revenue declined 6.6% QoQ due to shipping subsidies as management pivoted to reinvestment mode. During the earnings call, management had also cited investment into livestreaming (a.k.a. Shopee Live) and short-form videos. Based on my personal experience with Shopee’s app, I have seen a noticeable uptick in the promotion of Shopee Live and the offering of discount vouchers. Overall e-commerce revenue increased 2.4% QoQ while overall adjusted EBITDA fell 28% QoQ. In terms of geographic markets, Asia market EBITDA fell 26% QoQ, while other markets (including Brazil) EBITDA loss improved 21% QoQ.I believe this is partially in response to the increased competitive pressure from the social media platform, TikTok, and to defend market share given regional peers (a.k.a. Alibaba’s Lazada) have raised funds. In recent weeks, however, Indonesia’s government, Jokowi, imposed a ban on TikTok from facilitating transactions and payments. This benefits pure online marketplaces, including Shopee, as the threat of TikTok has now significantly diminished, but not completely. There remain several potential scenarios for the unfolding of this situation, including the possibility of TikTok introducing a separate e-commerce platform or current TikTok sellers or governmental bodies jointly petitioning against the ban, therefore, resulting in the ban being lifted.Digital Financial ServicesDigital Finance Service RevenueWhile DFS revenue grew 53.4% YoY, DFS QoQ growth was modest at 3.7%, and loan receivables were stable QoQ at $2 billion, even though reported SeaBank Indonesia’s deposits are growing (Indonesia is its largest market). This implies that user bases might be stabilizing, and any growth moving forward will have to come from the scalability of the user base, and the expansion into other financial products. DFS’s adjusted EBITDA increased 38% QoQ, which is contributed by a sequential decline in S&M expenses that offset the EBITDA decline in Shopee.Overview of Balance Sheet & Cash Flow StatementCash and cash equivalents, restricted cash, and short-term investments amounted to $7.1 billion as of 2Q23. The debt-to-equity ratio has steadily declined from 0.85 in 3Q22 to 0.58 as of 2Q23. Operating cash flow (“OCF”) for the quarter came in at $595 million, marking the third consecutive quarter of positive OCF.In comparison to a year ago, the firm’s current ability to enter a reinvestment phase has improved due to a stronger balance sheet and positive cash flows. This situation also underscores the adeptness of the management in steering through the crisis.ValuationAuthor’s FY23E ValuationMy price target for the firm is $49.9 as of FY23E. For DE, my EBIT estimate is $1,171.4 million, and an 8x P/E multiple, due to the segment’s reliance on a single game. For E-commerce, sales are estimated to come in at $8,417.2 million, and the applied P/S multiple is 1.2x, compared to the industry average of 1.6x. DFS estimated EBIT is $452.9 million, with a P/E multiple of 15x, vs. an industry average of 22x due to its lower growth profile. In total, after accounting for net cash, and the number of shares outstanding, this produces an equity per share of $49.9, which is an upside of 15% from the current share price of $43.RisksSome of the key risks, while not exhaustive, include:Digital Entertainment: Concern around the stabilization of DE’s QAU and QPUE-commerce: Future decline in segment’s profitability as it shifts back to growth; increased competition; weaker-than-expected consumer spending due to inflation;Digital Finance Services: Higher than expected credit lossesConclusionThe drawdown was warranted given the lack of stabilization in DE’s QAU base, and the increasing concerns surrounding the E-commerce’s future earnings as it shifts back to growth in response to intensifying competition. However, on a positive note, the firm has come out of the crisis with an improved balance sheet and positive operating cash flow, positioning them more favorably to compete and invest in further growth from a year ago. The share price decline in share price has also created a reasonable upside to the firm’s valuation. All things considered, I rate it as a hold.","news_type":1},"isVote":1,"tweetType":1,"viewCount":131,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":189926722093104,"gmtCreate":1687394529951,"gmtModify":1687394534281,"author":{"id":"3577363982359186","authorId":"3577363982359186","name":"Vettelpole","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3577363982359186","authorIdStr":"3577363982359186"},"themes":[],"htmlText":"I thought the guidance EP mS was 3.43 instead of 5?","listText":"I thought the guidance EP mS was 3.43 instead of 5?","text":"I thought the guidance EP mS was 3.43 instead of 5?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/189926722093104","repostId":"2344539732","repostType":2,"repost":{"id":"2344539732","kind":"highlight","pubTimestamp":1687331700,"share":"https://ttm.financial/m/news/2344539732?lang=&edition=fundamental","pubTime":"2023-06-21 15:15","market":"us","language":"en","title":"PayPal: Underappreciated Growth","url":"https://stock-news.laohu8.com/highlight/detail?id=2344539732","media":"Seeking Alpha","summary":"bennymartyThe market can be a perplexing place due to valuations being highly subjective and driven mainly by confounding financial metrics. A prime example of this issue is the depressed value of Pay","content":"<html><head></head><body><h2 style=\"text-align: left;\">Summary</h2><ul><li><p>PayPal has seen its stock fall below pre-Covid levels despite the company continuing to generate solid growth rates.</p></li><li><p>The market doesn&#39;t appreciate the level of innovation taking place at the digital payment company with a massive TAM.</p></li><li><p>PYPL stock trades at a massive discount at only 12x forward EPS estimates due to oddly low investor confidence.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/885abf6aaa1141a8602f5fd14943afac\" alt=\"bennymarty\" title=\"bennymarty\" tg-width=\"750\" tg-height=\"500\"/><span>bennymarty</span></p><p>The market can be a perplexing place due to valuations being highly subjective and driven mainly by confounding financial metrics. A prime example of this issue is the depressed value of <strong><a href=\"https://laohu8.com/S/PYPL\">PayPal</a> Holdings</strong> (NASDAQ:PYPL) despite knowledge of tough Covid era comps while some tech giants have limited growth and off the charts investor confidence. My investment thesis is ultra Bullish on the stock of the digital payments company trading below pre-Covid levels.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/faab132dd939a857577ab6dc9949804b\" alt=\"Source: Finviz\" title=\"Source: Finviz\" tg-width=\"991\" tg-height=\"422\"/><span>Source: Finviz</span></p><h2>Below Pre-Covid Levels</h2><p>PayPal focuses on digital payments, so investors need to factor in financial results based on a giant pull forward in demand. The company entered the year expecting e-commerce sales to be flat for the year and now the guidance is for a slight single digit increase in sales in a sign of the limited tailwinds.</p><p>A prime example of where PayPal hit a wall due to Covid pull-forwards were the active account totals. The company hit 305 million active accounts at the end of 2019 and the figure has soared to 433 million now.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/1f16d818dfa0830e557af9b769a462b4\" alt=\"Source: PayPal Q1&#39;23 presentation\" title=\"Source: PayPal Q1&#39;23 presentation\" tg-width=\"640\" tg-height=\"353\"/><span>Source: PayPal Q1&#39;23 presentation</span></p><p>The market is concerned due to the lack of current active account growth, but a lot of users had to sign up for accounts to make digital payments during Covid lockdowns. The company has to absorb all this growth before taking the next step forward.</p><p>What will ultimately matter is the increase in total transactions and the transactions per active account, or TPA. PayPay entered 2020 with only 40.6 TPAs and the company ended Q1&#39;23 with 53.1 transactions. The digital payments company was growing at a 10% clip and the growth rate has actually accelerated to 13% in the current quarter even with e-commerce sales generally flat.</p><p>PayPal continues adding more utility with improved checkout functions along with a focus on unbranded transactions. The company is regularly innovating including turning the Buy Now, Pay Later product into a market leader with proactive communication to 110 million global users tied into existing account spending limits.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/aef2ef2ef05f06e2a7747334cc6eb06f\" alt=\"Source: PayPal Q1&#39;23 presentation\" title=\"Source: PayPal Q1&#39;23 presentation\" tg-width=\"640\" tg-height=\"355\"/><span>Source: PayPal Q1&#39;23 presentation</span></p><p>Investors don&#39;t really have a reasonable reason to expect PayPal to see growth slow here with most accounts still not using PayPal as a primary payment tool. The company is turning back into a fintech with the amount of experiments on the platform doubling in the last few months leading to a major increase in new cohort numbers as follows per the CEO on the Q1&#39;23 earnings call:</p><blockquote>...our March cohort of new accounts had 24% higher TPA and 40% higher ARPA than in March of last year. These results strongly reinforce our decision to focus our resources on engagement and driving high-value accounts.</blockquote><h2>Low Investor Confidence</h2><p>The prime issue facing PayPal is low investor confidence. The company just guided to a $5 EPS for the year and investors aren&#39;t sure they want the stock in the $60s. In comparison, <strong>Apple</strong> (AAPL) is forecast to earn a $6 EPS this year and investors are willing to pay over $180 for the stock.</p><p>Sure, the tech giant has strong brand awareness, but PayPal is very strong in digital payments. Both companies saw Covid boost revenues leading to current weakness, but PayPal has far better growth rates.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/95aeca4287454075f5457cdd93366fdb\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"466\"/><span>Data by YCharts</span></p><p>The amazing difference here is that PayPal benefits from far more consistent growth rates. The payments company is forecast to maintain growth rates of nearly 10%.</p><p>Apple hasn&#39;t been so lucky. The company forecasts sales to dip again in the June quarter with sales dipping up to 2% again.</p><p>The main question investors have to ask is why PayPal obtains far less investor confidence. Going into Covid and coming out of it, the digital payments company has generated far better growth rates than the tech giant.</p><p>While Apple probably warrants a premium valuation for their growth rates, the tech giant shouldn&#39;t trade at a premium multiple to PayPal. At these stock prices, Apple actually trades at far in excess of double the forward PE multiple of 12x for PayPal.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/db9fbea1a2648ba190dfb84fea212a15\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"466\"/><span>Data by YCharts</span></p><p>In essence, investors have to construe that Apple actually far outgrows PayPal over the next few years to justify this valuation discrepancy. The tech giant has a potential promising new AR/VR product in the Vision Pro headset, but the item is unlikely to drive sales until FY25, if at all.</p><p>PayPal is now doing $355 billion in quarterly payment volume leading to ~$7 billion in quarterly revenues. McKinsey estimates global payment revenue alone would reach $3 trillion by 2026 while PayPal only produces $30 billion in annual revenue now.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/86b569a1e8f58a606dab2960f5732d7a\" alt=\"Source: McKinsey &amp; Company\" title=\"Source: McKinsey &amp; Company\" tg-width=\"640\" tg-height=\"441\"/><span>Source: McKinsey &amp; Company</span></p><p>PayPal is only forecast to capture ~1.3% of global payment revenue by 2026 with revenue targets just below $40 billion. Analysts forecast CAGR rates closer to 9%, which fails to gain much in the way of market share over this period.</p><h2>Takeaway</h2><p>The key investor takeaway is that PayPal is far too cheap here. Investor confidence has fallen too low providing a great opportunity to buy a premium digital payments brand at a discount.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>PayPal: Underappreciated Growth</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPayPal: Underappreciated Growth\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-21 15:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4612521-paypal-underappreciated-growth><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryPayPal has seen its stock fall below pre-Covid levels despite the company continuing to generate solid growth rates.The market doesn't appreciate the level of innovation taking place at the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4612521-paypal-underappreciated-growth\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","LU0149725797.USD":"汇丰美国股市经济规模基金","BK4170":"电脑硬件、储存设备及电脑周边","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","BK4554":"元宇宙及AR概念","BK4106":"数据处理与外包服务","IE00BLSP4239.USD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis USD Plus","IE00B775SV38.USD":"NEUBERGER BERMAN US MULTICAP OPPORTUNITIES \"A\" (USD) ACC","BK4532":"文艺复兴科技持仓","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","LU0109391861.USD":"富兰克林美国机遇基金A Acc","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","BK4534":"瑞士信贷持仓","LU2023251221.USD":"ALLIANZ GLOBAL SUSTAINABILITY \"AM\" (USD) INC","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","BK4227":"交易和支付处理服务","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0082616367.USD":"摩根大通美国科技A（dist）","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","BK4524":"宅经济概念","LU2089284900.SGD":"Allianz Global Sustainability Cl AM Dis H2-SGD","BK4535":"淡马锡持仓","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","BK4527":"明星科技股","BK4501":"段永平概念","BK4579":"人工智能","BK4588":"碎股","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","LU0011850046.USD":"贝莱德全球长线股票 A2 USD","BK4574":"无人驾驶","PYPL":"PayPal","BK4573":"虚拟现实","LU0097036916.USD":"贝莱德美国增长A2 USD","LU0511384066.AUD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (AUDHDG) ACC","BK4505":"高瓴资本持仓","BK4581":"高盛持仓","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","LU2089283258.USD":"安联环球可持续基金Cl AM Dis"},"source_url":"https://seekingalpha.com/article/4612521-paypal-underappreciated-growth","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2344539732","content_text":"SummaryPayPal has seen its stock fall below pre-Covid levels despite the company continuing to generate solid growth rates.The market doesn't appreciate the level of innovation taking place at the digital payment company with a massive TAM.PYPL stock trades at a massive discount at only 12x forward EPS estimates due to oddly low investor confidence.bennymartyThe market can be a perplexing place due to valuations being highly subjective and driven mainly by confounding financial metrics. A prime example of this issue is the depressed value of PayPal Holdings (NASDAQ:PYPL) despite knowledge of tough Covid era comps while some tech giants have limited growth and off the charts investor confidence. My investment thesis is ultra Bullish on the stock of the digital payments company trading below pre-Covid levels.Source: FinvizBelow Pre-Covid LevelsPayPal focuses on digital payments, so investors need to factor in financial results based on a giant pull forward in demand. The company entered the year expecting e-commerce sales to be flat for the year and now the guidance is for a slight single digit increase in sales in a sign of the limited tailwinds.A prime example of where PayPal hit a wall due to Covid pull-forwards were the active account totals. The company hit 305 million active accounts at the end of 2019 and the figure has soared to 433 million now.Source: PayPal Q1'23 presentationThe market is concerned due to the lack of current active account growth, but a lot of users had to sign up for accounts to make digital payments during Covid lockdowns. The company has to absorb all this growth before taking the next step forward.What will ultimately matter is the increase in total transactions and the transactions per active account, or TPA. PayPay entered 2020 with only 40.6 TPAs and the company ended Q1'23 with 53.1 transactions. The digital payments company was growing at a 10% clip and the growth rate has actually accelerated to 13% in the current quarter even with e-commerce sales generally flat.PayPal continues adding more utility with improved checkout functions along with a focus on unbranded transactions. The company is regularly innovating including turning the Buy Now, Pay Later product into a market leader with proactive communication to 110 million global users tied into existing account spending limits.Source: PayPal Q1'23 presentationInvestors don't really have a reasonable reason to expect PayPal to see growth slow here with most accounts still not using PayPal as a primary payment tool. The company is turning back into a fintech with the amount of experiments on the platform doubling in the last few months leading to a major increase in new cohort numbers as follows per the CEO on the Q1'23 earnings call:...our March cohort of new accounts had 24% higher TPA and 40% higher ARPA than in March of last year. These results strongly reinforce our decision to focus our resources on engagement and driving high-value accounts.Low Investor ConfidenceThe prime issue facing PayPal is low investor confidence. The company just guided to a $5 EPS for the year and investors aren't sure they want the stock in the $60s. In comparison, Apple (AAPL) is forecast to earn a $6 EPS this year and investors are willing to pay over $180 for the stock.Sure, the tech giant has strong brand awareness, but PayPal is very strong in digital payments. Both companies saw Covid boost revenues leading to current weakness, but PayPal has far better growth rates.Data by YChartsThe amazing difference here is that PayPal benefits from far more consistent growth rates. The payments company is forecast to maintain growth rates of nearly 10%.Apple hasn't been so lucky. The company forecasts sales to dip again in the June quarter with sales dipping up to 2% again.The main question investors have to ask is why PayPal obtains far less investor confidence. Going into Covid and coming out of it, the digital payments company has generated far better growth rates than the tech giant.While Apple probably warrants a premium valuation for their growth rates, the tech giant shouldn't trade at a premium multiple to PayPal. At these stock prices, Apple actually trades at far in excess of double the forward PE multiple of 12x for PayPal.Data by YChartsIn essence, investors have to construe that Apple actually far outgrows PayPal over the next few years to justify this valuation discrepancy. The tech giant has a potential promising new AR/VR product in the Vision Pro headset, but the item is unlikely to drive sales until FY25, if at all.PayPal is now doing $355 billion in quarterly payment volume leading to ~$7 billion in quarterly revenues. McKinsey estimates global payment revenue alone would reach $3 trillion by 2026 while PayPal only produces $30 billion in annual revenue now.Source: McKinsey & CompanyPayPal is only forecast to capture ~1.3% of global payment revenue by 2026 with revenue targets just below $40 billion. Analysts forecast CAGR rates closer to 9%, which fails to gain much in the way of market share over this period.TakeawayThe key investor takeaway is that PayPal is far too cheap here. Investor confidence has fallen too low providing a great opportunity to buy a premium digital payments brand at a discount.","news_type":1},"isVote":1,"tweetType":1,"viewCount":64,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":884245860,"gmtCreate":1631900367150,"gmtModify":1676530666166,"author":{"id":"3577363982359186","authorId":"3577363982359186","name":"Vettelpole","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3577363982359186","authorIdStr":"3577363982359186"},"themes":[],"htmlText":"Really brilliant article for equity analysis","listText":"Really brilliant article for equity analysis","text":"Really brilliant article for equity analysis","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/884245860","repostId":"1102595384","repostType":4,"repost":{"id":"1102595384","kind":"news","pubTimestamp":1631879657,"share":"https://ttm.financial/m/news/1102595384?lang=&edition=fundamental","pubTime":"2021-09-17 19:54","market":"us","language":"en","title":"Sea Limited: It's All About Expectations And Discount Rate","url":"https://stock-news.laohu8.com/highlight/detail?id=1102595384","media":"Seeking Alpha","summary":"Summary\n\nSince our first valuation of the stock, the price has gone up more than 20%. At that time, ","content":"<p><b>Summary</b></p>\n<ul>\n <li>Since our first valuation of the stock, the price has gone up more than 20%. At that time, we considered the company to be fairly valued in the best scenario.</li>\n <li>Our approach now is similar but instead of stretching consensus, we rely on it and check what is the implied discount rate which delivers the current share price.</li>\n <li>We have tried to assess the most appropriate discount rate and we believe there is enough evidence of a current mismatch between current valuation and the appropriate discount rate.</li>\n <li>The main risks we see are the expectations around Garena and its embedded valuation and the regulatory risks on its marketplace which might lead to new taxes in SE markets.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/573f2b1b0d40da30f023491c4ab630f4\" tg-width=\"1536\" tg-height=\"1024\" width=\"100%\" height=\"auto\"><span>Astragal/iStock via Getty Images</span></p>\n<p><b>Investment thesis</b></p>\n<p>When we first looked at Sea Limited (SE)&nbsp;in April 2021, the stock was trading at USD 274 per share, and we considered the stock almost fairly valued in the best of all possible scenarios. Since then, the stock has raised a further 20% and is trading at more than USD 330 per share. We are now reviewing our valuation approach, which in April was based on stressing consensus to check to which extent it should have been stretched to match the market cap at that time. Our approach now is similar, but instead of stretching consensus, we rely on it and check the implied discount rate that delivers the current share price. Instead of working on estimates, we are working on the discount rate.</p>\n<p>We have tried to assess the most appropriate discount rate, and we believe there is enough evidence of a current mismatch between the current valuation and the appropriate discount rate. In our view, the discount rate which justifies the current share price is far lower than the most appropriate one. The main risks we see are the expectations around Garena and its embedded valuation and the regulatory risks on its marketplace, which might lead to new taxes in SE markets.</p>\n<p><b>Revenue guidance for 2021 was raised after Q2.</b></p>\n<p>In Q1, management guided Garena’s revenues between USD 4.3 bln and USD 4.5 bln (38% YoY growth assuming guidance midpoint). After Q2, the guidance has been lifted to USD 4.5 bln and USD 4.7 bln (44% YoY growth assuming guidance midpoint).</p>\n<p>Shopee revenues in Q1 were guided between $4.5 bln and $4.7 bln (112% YoY growth assuming guidance midpoint). After Q2, the guidance has been lifted to $4.7 bln and $4.9 bln (121% YoY growth assuming guidance midpoint).</p>\n<p>It is worth noting in the table below that, while consensus has fairly factored higher FY21 revenues guidance on both Garena and Shopee, EBITDA compared to April 2021 has been downward revised at a consolidated level not only in 2021. EBITDA has been cut from 2021 to 2026.</p>\n<p>In other words, revenue growth leads to lower operating margins over the next five years, but the equity value is growing. EBITDA from 2026 onward is higher than previously expected (USD 866 mln in 2030), and thus Terminal Value is driving equity value higher.</p>\n<p>Basically, the consensus is shifting towards terminal value, which carries higher risk, but market valuation is increasing.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c1e95c9ddadd6d8ff7bd0ebb8b595bdf\" tg-width=\"640\" tg-height=\"105\" width=\"100%\" height=\"auto\"><span>Source: Bloomberg data as of September 13, 2021</span></p>\n<p><b>Valuation approach (Sea – USD 330 per share as of September 13, 2021)Trying to assess the discount rate</b></p>\n<p>The key issue behind SE valuation is trying to assess an appropriate discount rate. Since the company's net financial position is cash positive (total financial debt – cash and cash equivalent), the WACC is equal to the Cost of Equity.</p>\n<p>Relying on CAPM (Capital Asset Pricing Model) to estimate the cost of equity raises some concerns. According to CAPM, Ke = Risk-free + Beta x Market Risk Premium.</p>\n<p>Here the main concerns are:</p>\n<p><b>1. What is the beta for SE?</b></p>\n<p>We have tried to assess SE beta and checked SE correlation to the market (table 2, 3, 4, and 5). The highest correlation is toward S&amp;P500, but linear Beta, Beta +/-, and non-parametric all show an R^2 around 0.4, which indicates that SE is decorrelated from the S&amp;P 500 Index (a similar story for other indexes). Beta is thus not useful to the extent of our analysis.</p>\n<p>Source: Moat Investing elaboration on Bloomberg data</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c592c8312acabe90c741a507a038bf8b\" tg-width=\"640\" tg-height=\"250\" width=\"100%\" height=\"auto\"><span>Source: Moat Investing elaboration on Bloomberg data</span></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/704203388ec2befc8cd12672b1cee669\" tg-width=\"640\" tg-height=\"250\" width=\"100%\" height=\"auto\"><span>Source: Moat Investing elaboration on Bloomberg data</span></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8144b2df488ed4dad74084b63cece566\" tg-width=\"605\" tg-height=\"236\" width=\"100%\" height=\"auto\"><span>Source: Moat Investing elaboration on Bloomberg data</span></p>\n<p><b>2. What is the Market Risk Premium?</b></p>\n<p>This is the most controversial element in the CAPM. The risk premium should reflect the “premium” required by equity holders on top of the risk-free.</p>\n<p>We must keep present that SE's key market is South Asia. Thus, in our view, we should add a country risk adjustment to consider it. If we were using US Market Risk Premium, we would underestimate the risk related to the geographical areas where SE operates.</p>\n<p>We have thus adjusted the Market Risk Premium factoring in Country Risk Premium calculated by considering the spread between Indonesian and US treasuries at 10y.</p>\n<p>Adjusting for country premium, the appropriate cost of equity for SE would be 15.3% (see chart 6). Assuming an appropriate Beta would be even higher.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/33df371ce03f740a6a6b0ffcaa5b8680\" tg-width=\"640\" tg-height=\"129\" width=\"100%\" height=\"auto\"><span>Source: Moat Investing elaboration on Bloomberg data</span></p>\n<p><b>3. What is the appropriate terminal growth rate?</b></p>\n<p>We estimate the terminal growth by calculating the reinvestment rate (% of FCFF reinvested as CAPEX) and the sustainable ROI. We believe our 3.5% terminal growth is rather sustainable as the company is reinvesting over 20% of its free cash flows and has a sustainable ROI of around 20%.</p>\n<p><b>DCF valuation and sensitivity analysis</b></p>\n<p>We have run a DCF totally based on consensus estimates from 2021 to 2030. The idea behind this analysis is to check the discount rate (Ke = WACC), which delivers an equity value in line with the current market cap.</p>\n<p>Factoring a 3.5% terminal growth rate and the fully diluted number of shares, the discount rate, which delivers around USD 180 bn market cap, is 7.7%!</p>\n<p><b>DCF</b></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/eca0d9f0aea2257f2693e119fff4d735\" tg-width=\"640\" tg-height=\"321\" width=\"100%\" height=\"auto\"><span>Source: Moat Investing</span></p>\n<p>We have thus run a sensitivity analysis by simply changing the discount rate as we believe that the cost of equity for SE should be adjusted for a country's risk premium.</p>\n<p>What happens if we increase the discount rate to around 15%? SE equity would be worth around USD 40 bn, some 70% less than the current value.</p>\n<p><b>Sensitivity</b></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/4e6789c9d7c55fcf1c2cceb6a8a66446\" tg-width=\"640\" tg-height=\"253\" width=\"100%\" height=\"auto\"><span>Source: Moat Investing</span></p>\n<p>The fallacy of valuation through multiples and peer analysis</p>\n<p>We have seen some sell-side equity researches where the target price is calculated as a sum of the parts of the three businesses (Garena, Shopee, and Sea Money) where:</p>\n<ol>\n <li>Garena is valued using a P/E of 20x its foreseeable earnings in 2023.</li>\n <li>Shopee is valued using a DCF with a discount rate of around 8% and a terminal growth rate above 3.5%.</li>\n <li>Sea Money is valued using a totally invented multiple on its future GTV of 0.20x, where the correlation between GTV and equity value is questionable.</li>\n</ol>\n<p>Some analysts compare Garena to<i>Tencent</i>(OTCPK:TCEHY)(OTCPK:TCTZF), Sea Money to<i>Visa</i>(NYSE:V)<i>, Mastercard</i>(NYSE:MA)<i>and Adyen</i>, Shopee to<i>Amazon</i>(NASDAQ:AMZN)<i>, and Alibaba</i>(NYSE:BABA)(OTCPK:BABAF).</p>\n<p>We believe this valuation approach does not work and, in most cases, leads to misleading results. Garena is a rather new player, and comparing it to an over USD 500 bn market cap company with stable business sounds like nonsense. The same story for Sea Money compared to players who have a completely different business model.</p>\n<p>What could drive value creation for SEUpward revision of current estimates led by new acquisitions</p>\n<p>SE has recently announced it intends to raise USD 6.8 bn funds through an equity offering (some USD 3.9 bn) and convertible note issuance (some USD 2.9 bn). After the fundraising, SE would rely upon around USD 12.8 bn to support further Shopee expansion in Europe and India.</p>\n<p>Leverage of the balance sheet</p>\n<p>SE might decide to leverage the balance sheet by injecting debt which would lower the overall cost of capital. We believe this would be a viable strategy, although it might not come before 3 to 5 years when the company's cash flows would be robust enough to support massive leverage.</p>\n<p><b>Main risks</b></p>\n<p>We believe the main risks for the SE equity case are:</p>\n<ol>\n <li>The expectations around Garena and its embedded valuation. Garena is valued at around USD 60bn. Its value would drop significantly if it is unable to launch new successful games like Free Fire, and/or its margins would be lower as a result of a shift from in-house game development to third parties licensed games.</li>\n <li>The regulatory risks on its marketplace, which might lead to new taxes in SE markets.</li>\n</ol>\n<p><b>Conclusion</b></p>\n<p>At this stage, investors have these viable options:</p>\n<ol>\n <li>Believe that market estimates will be upward revised in the future as SE would continue to deliver significant growth.</li>\n <li>Believe that in the future as SE would command a more balanced D/E structure.</li>\n <li>Investing in SE assuming 7.7% potential return if 1) and/or 2) (or a mix of) would not happen.</li>\n</ol>\n<p>We think there is enough evidence to believe that the SE market cap has gone too far despite its solid business model. Factoring into current estimates, the appropriate hurdle rate might lead to far lower valuation evidence.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Sea Limited: It's All About Expectations And Discount Rate</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSea Limited: It's All About Expectations And Discount Rate\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-09-17 19:54 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4455687-sea-limited-its-all-about-expectations-and-discount-rate><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nSince our first valuation of the stock, the price has gone up more than 20%. At that time, we considered the company to be fairly valued in the best scenario.\nOur approach now is similar but ...</p>\n\n<a href=\"https://seekingalpha.com/article/4455687-sea-limited-its-all-about-expectations-and-discount-rate\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"SE":"Sea Ltd"},"source_url":"https://seekingalpha.com/article/4455687-sea-limited-its-all-about-expectations-and-discount-rate","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1102595384","content_text":"Summary\n\nSince our first valuation of the stock, the price has gone up more than 20%. At that time, we considered the company to be fairly valued in the best scenario.\nOur approach now is similar but instead of stretching consensus, we rely on it and check what is the implied discount rate which delivers the current share price.\nWe have tried to assess the most appropriate discount rate and we believe there is enough evidence of a current mismatch between current valuation and the appropriate discount rate.\nThe main risks we see are the expectations around Garena and its embedded valuation and the regulatory risks on its marketplace which might lead to new taxes in SE markets.\n\nAstragal/iStock via Getty Images\nInvestment thesis\nWhen we first looked at Sea Limited (SE) in April 2021, the stock was trading at USD 274 per share, and we considered the stock almost fairly valued in the best of all possible scenarios. Since then, the stock has raised a further 20% and is trading at more than USD 330 per share. We are now reviewing our valuation approach, which in April was based on stressing consensus to check to which extent it should have been stretched to match the market cap at that time. Our approach now is similar, but instead of stretching consensus, we rely on it and check the implied discount rate that delivers the current share price. Instead of working on estimates, we are working on the discount rate.\nWe have tried to assess the most appropriate discount rate, and we believe there is enough evidence of a current mismatch between the current valuation and the appropriate discount rate. In our view, the discount rate which justifies the current share price is far lower than the most appropriate one. The main risks we see are the expectations around Garena and its embedded valuation and the regulatory risks on its marketplace, which might lead to new taxes in SE markets.\nRevenue guidance for 2021 was raised after Q2.\nIn Q1, management guided Garena’s revenues between USD 4.3 bln and USD 4.5 bln (38% YoY growth assuming guidance midpoint). After Q2, the guidance has been lifted to USD 4.5 bln and USD 4.7 bln (44% YoY growth assuming guidance midpoint).\nShopee revenues in Q1 were guided between $4.5 bln and $4.7 bln (112% YoY growth assuming guidance midpoint). After Q2, the guidance has been lifted to $4.7 bln and $4.9 bln (121% YoY growth assuming guidance midpoint).\nIt is worth noting in the table below that, while consensus has fairly factored higher FY21 revenues guidance on both Garena and Shopee, EBITDA compared to April 2021 has been downward revised at a consolidated level not only in 2021. EBITDA has been cut from 2021 to 2026.\nIn other words, revenue growth leads to lower operating margins over the next five years, but the equity value is growing. EBITDA from 2026 onward is higher than previously expected (USD 866 mln in 2030), and thus Terminal Value is driving equity value higher.\nBasically, the consensus is shifting towards terminal value, which carries higher risk, but market valuation is increasing.\nSource: Bloomberg data as of September 13, 2021\nValuation approach (Sea – USD 330 per share as of September 13, 2021)Trying to assess the discount rate\nThe key issue behind SE valuation is trying to assess an appropriate discount rate. Since the company's net financial position is cash positive (total financial debt – cash and cash equivalent), the WACC is equal to the Cost of Equity.\nRelying on CAPM (Capital Asset Pricing Model) to estimate the cost of equity raises some concerns. According to CAPM, Ke = Risk-free + Beta x Market Risk Premium.\nHere the main concerns are:\n1. What is the beta for SE?\nWe have tried to assess SE beta and checked SE correlation to the market (table 2, 3, 4, and 5). The highest correlation is toward S&P500, but linear Beta, Beta +/-, and non-parametric all show an R^2 around 0.4, which indicates that SE is decorrelated from the S&P 500 Index (a similar story for other indexes). Beta is thus not useful to the extent of our analysis.\nSource: Moat Investing elaboration on Bloomberg data\nSource: Moat Investing elaboration on Bloomberg data\nSource: Moat Investing elaboration on Bloomberg data\nSource: Moat Investing elaboration on Bloomberg data\n2. What is the Market Risk Premium?\nThis is the most controversial element in the CAPM. The risk premium should reflect the “premium” required by equity holders on top of the risk-free.\nWe must keep present that SE's key market is South Asia. Thus, in our view, we should add a country risk adjustment to consider it. If we were using US Market Risk Premium, we would underestimate the risk related to the geographical areas where SE operates.\nWe have thus adjusted the Market Risk Premium factoring in Country Risk Premium calculated by considering the spread between Indonesian and US treasuries at 10y.\nAdjusting for country premium, the appropriate cost of equity for SE would be 15.3% (see chart 6). Assuming an appropriate Beta would be even higher.\nSource: Moat Investing elaboration on Bloomberg data\n3. What is the appropriate terminal growth rate?\nWe estimate the terminal growth by calculating the reinvestment rate (% of FCFF reinvested as CAPEX) and the sustainable ROI. We believe our 3.5% terminal growth is rather sustainable as the company is reinvesting over 20% of its free cash flows and has a sustainable ROI of around 20%.\nDCF valuation and sensitivity analysis\nWe have run a DCF totally based on consensus estimates from 2021 to 2030. The idea behind this analysis is to check the discount rate (Ke = WACC), which delivers an equity value in line with the current market cap.\nFactoring a 3.5% terminal growth rate and the fully diluted number of shares, the discount rate, which delivers around USD 180 bn market cap, is 7.7%!\nDCF\nSource: Moat Investing\nWe have thus run a sensitivity analysis by simply changing the discount rate as we believe that the cost of equity for SE should be adjusted for a country's risk premium.\nWhat happens if we increase the discount rate to around 15%? SE equity would be worth around USD 40 bn, some 70% less than the current value.\nSensitivity\nSource: Moat Investing\nThe fallacy of valuation through multiples and peer analysis\nWe have seen some sell-side equity researches where the target price is calculated as a sum of the parts of the three businesses (Garena, Shopee, and Sea Money) where:\n\nGarena is valued using a P/E of 20x its foreseeable earnings in 2023.\nShopee is valued using a DCF with a discount rate of around 8% and a terminal growth rate above 3.5%.\nSea Money is valued using a totally invented multiple on its future GTV of 0.20x, where the correlation between GTV and equity value is questionable.\n\nSome analysts compare Garena toTencent(OTCPK:TCEHY)(OTCPK:TCTZF), Sea Money toVisa(NYSE:V), Mastercard(NYSE:MA)and Adyen, Shopee toAmazon(NASDAQ:AMZN), and Alibaba(NYSE:BABA)(OTCPK:BABAF).\nWe believe this valuation approach does not work and, in most cases, leads to misleading results. Garena is a rather new player, and comparing it to an over USD 500 bn market cap company with stable business sounds like nonsense. The same story for Sea Money compared to players who have a completely different business model.\nWhat could drive value creation for SEUpward revision of current estimates led by new acquisitions\nSE has recently announced it intends to raise USD 6.8 bn funds through an equity offering (some USD 3.9 bn) and convertible note issuance (some USD 2.9 bn). After the fundraising, SE would rely upon around USD 12.8 bn to support further Shopee expansion in Europe and India.\nLeverage of the balance sheet\nSE might decide to leverage the balance sheet by injecting debt which would lower the overall cost of capital. We believe this would be a viable strategy, although it might not come before 3 to 5 years when the company's cash flows would be robust enough to support massive leverage.\nMain risks\nWe believe the main risks for the SE equity case are:\n\nThe expectations around Garena and its embedded valuation. Garena is valued at around USD 60bn. Its value would drop significantly if it is unable to launch new successful games like Free Fire, and/or its margins would be lower as a result of a shift from in-house game development to third parties licensed games.\nThe regulatory risks on its marketplace, which might lead to new taxes in SE markets.\n\nConclusion\nAt this stage, investors have these viable options:\n\nBelieve that market estimates will be upward revised in the future as SE would continue to deliver significant growth.\nBelieve that in the future as SE would command a more balanced D/E structure.\nInvesting in SE assuming 7.7% potential return if 1) and/or 2) (or a mix of) would not happen.\n\nWe think there is enough evidence to believe that the SE market cap has gone too far despite its solid business model. Factoring into current estimates, the appropriate hurdle rate might lead to far lower valuation evidence.","news_type":1},"isVote":1,"tweetType":1,"viewCount":79,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":816825041,"gmtCreate":1630488689383,"gmtModify":1676530317775,"author":{"id":"3577363982359186","authorId":"3577363982359186","name":"Vettelpole","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":1,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3577363982359186","authorIdStr":"3577363982359186"},"themes":[],"htmlText":"<a href=\"https://laohu8.com/S/NIO\">$NIO Inc.(NIO)$</a>Li can deliver close to 10k, this shot which I was the most bullish amongst the 3 only deliver 5.8k?! This is really worrying","listText":"<a href=\"https://laohu8.com/S/NIO\">$NIO Inc.(NIO)$</a>Li can deliver close to 10k, this shot which I was the most bullish amongst the 3 only deliver 5.8k?! This is really worrying","text":"$NIO Inc.(NIO)$Li can deliver close to 10k, this shot which I was the most bullish amongst the 3 only deliver 5.8k?! This is really worrying","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":5,"repostSize":0,"link":"https://ttm.financial/post/816825041","isVote":1,"tweetType":1,"viewCount":262,"authorTweetTopStatus":1,"verified":2,"comments":[{"author":{"id":"9000000000000220","authorId":"9000000000000220","name":"揭人不揭短","avatar":"https://static.tigerbbs.com/0d1d522df7fd034a47b809b1a57d7176","crmLevel":1,"crmLevelSwitch":0,"idStr":"9000000000000220","authorIdStr":"9000000000000220"},"content":"Don't worry too much, NIO Inc. is definitely the shoulder of the Big Three, and NIO Inc. is leading in both technology precipitation and car-building technology.","text":"Don't worry too much, NIO Inc. is definitely the shoulder of the Big Three, and NIO Inc. is leading in both technology precipitation and car-building technology.","html":"Don't worry too much, NIO Inc. is definitely the shoulder of the Big Three, and NIO Inc. is leading in both technology precipitation and car-building technology."}],"imageCount":0,"langContent":"EN","totalScore":0}],"defaultTab":"posts","isTTM":true}