Vettelpole
2021-09-18
Really brilliant article for equity analysis
Sea Limited: It's All About Expectations And Discount Rate<blockquote>Sea Limited：一切都取决于预期和贴现率</blockquote>
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At that time, ","content":"<p><b>Summary</b></p><p><blockquote><b>总结</b></blockquote></p><p> <ul> <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> <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> <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> <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> </ul> <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><p><blockquote><ul><li>自我们首次对该股进行估值以来，价格上涨了 20% 以上。当时，我们认为该公司在最佳情况下的估值是合理的。</li><li>我们现在的方法是相似的，但我们不是扩大共识，而是依靠它并检查实现当前股价的隐含贴现率。</li><li>我们已尝试评估最合适的贴现率，且我们相信有足够证据显示当前估值与适当贴现率之间存在不匹配。</li><li>我们看到的主要风险是围绕 Garena 及其嵌入估值的预期，以及其市场的监管风险，这可能会导致 SE 市场征收新的税收。</li></ul><p class=\"t-img-caption\"><span>黄芪/iStock 来自 Getty Images</span></p></blockquote></p><p> <b>Investment thesis</b></p><p><blockquote><b>投资论文</b></blockquote></p><p> When 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.</p><p><blockquote>当我们在 2021 年 4 月第一次关注 Sea Limited (SE) 时，该股的交易价格为每股 274 美元，我们认为在所有可能情况下，该股的估值几乎是合理的。此后，该股又上涨了 20%，交易价格超过每股 330 美元。我们现在正在审查我们的估值方法，该方法在 4 月份是基于强调共识，以检查应该在多大程度上扩展以匹配当时的市值。我们现在的方法是类似的，但我们不是扩大共识，而是依靠它并检查提供当前股价的隐含贴现率。我们不是研究估算，而是研究贴现率。</blockquote></p><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><p><blockquote>我们已尝试评估最合适的贴现率，且我们相信有足够证据显示当前估值与适当贴现率之间存在不匹配。我们认为，证明当前股价合理的贴现率远低于最合适的贴现率。我们看到的主要风险是围绕 Garena 及其嵌入估值的预期以及其市场的监管风险，这可能会导致东南欧市场征收新的税收。</blockquote></p><p> <b>Revenue guidance for 2021 was raised after Q2.</b></p><p><blockquote><b>2021 年收入指引在第二季度后上调。</b></blockquote></p><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><p><blockquote>第一季度，管理层对 Garena 的收入指导在 43 亿至 45 亿美元之间（假设指导中点，同比增长 38%）。Q2 后，指引已上调至 45 亿美元和 47 亿美元（假设指引中点，同比增长 44%）。</blockquote></p><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><p><blockquote>Shopee 第一季度收入预计在 45 亿美元至 47 亿美元之间（假设指导中点，同比增长 112%）。第二季度之后，指引已上调至 47 亿美元和 49 亿美元（假设指引中点，同比增长 121%）。</blockquote></p><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><p><blockquote>值得注意的是，下表中显示，虽然共识相当考虑到了 Garena 和 Shopee 较高的 21 财年收入指引，但与 2021 年 4 月相比，EBITDA 不仅在 2021 年已在综合水平上向下修正。EBITDA已从2021年削减至2026年。</blockquote></p><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><p><blockquote>换句话说，收入增长会导致未来五年营业利润率下降，但股权价值却在增长。2026年以后的EBITDA高于之前的预期（2030年为8.66亿美元），因此终端价值推动股本价值走高。</blockquote></p><p> Basically, the consensus is shifting towards terminal value, which carries higher risk, but market valuation is increasing.</p><p><blockquote>基本上，共识正在转向终端价值，这承担了更高的风险，但市场估值正在增加。</blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：彭博社数据截至2021年9月13日</span></p></blockquote></p><p> <b>Valuation approach (Sea – USD 330 per share as of September 13, 2021)Trying to assess the discount rate</b></p><p><blockquote><b>估值方法（Sea – 截至2021年9月13日每股330美元）尝试评估贴现率</b></blockquote></p><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><p><blockquote>SE估值背后的关键问题是试图评估适当的贴现率。由于公司的净财务状况为现金正（总金融债务-现金和现金等价物），WACC等于股权成本。</blockquote></p><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><p><blockquote>依靠CAPM（资本资产定价模型）来估算股权成本引起了一些担忧。根据CAPM，Ke=无风险+贝塔x市场风险溢价。</blockquote></p><p> Here the main concerns are:</p><p><blockquote>主要关注点是：</blockquote></p><p> <b>1. What is the beta for SE?</b></p><p><blockquote><b>1.什么是SE的测试版？</b></blockquote></p><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&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.</p><p><blockquote>我们试图评估 SE beta 并检查 SE 与市场的相关性（表 2、3、4 和 5）。相关性最高的是标准普尔500指数，但线性贝塔、贝塔+/-和非参数都显示R^2在0.4左右，这表明SE与标普500指数解相关（其他指数也是类似的情况）。因此，就我们的分析而言，贝塔是无用的。</blockquote></p><p> Source: Moat Investing elaboration on Bloomberg data</p><p><blockquote>资料来源：Moat Investing 对彭博数据的阐述</blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p> <b>2. What is the Market Risk Premium?</b></p><p><blockquote><b>2、什么是市场风险溢价？</b></blockquote></p><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><p><blockquote>这是CAPM中最具争议的元素。风险溢价应反映股权持有人在无风险溢价之外要求的“溢价”。</blockquote></p><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><p><blockquote>我们必须牢记，SE 的主要市场是南亚。因此，在我们看来，我们应该增加一个国家风险调整来考虑。如果我们使用美国市场风险溢价，我们会低估与SE经营地理区域相关的风险。</blockquote></p><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><p><blockquote>因此，我们已将市场风险溢价计入国家风险溢价，该国家风险溢价是通过考虑印尼和美国国债之间的10年期利差计算得出的。</blockquote></p><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><p><blockquote>经国家溢价调整后，SE 的适当股权成本为 15.3%（见图 6）。假设适当的贝塔值会更高。</blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p> <b>3. What is the appropriate terminal growth rate?</b></p><p><blockquote><b>3、合适的终端增速是多少？</b></blockquote></p><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><p><blockquote>我们通过计算再投资率（作为资本支出再投资的自由现金流的百分比）和可持续投资回报率来估计最终增长。我们相信，我们 3.5% 的最终增长是相当可持续的，因为该公司将超过 20% 的自由现金流进行再投资，并且可持续投资回报率约为 20%。</blockquote></p><p> <b>DCF valuation and sensitivity analysis</b></p><p><blockquote><b>DCF估值和敏感性分析</b></blockquote></p><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><p><blockquote>我们完全基于2021年至2030年的共识估计运行了DCF。这一分析背后的想法是检查贴现率（Ke=WACC），它提供的股本价值与当前市值一致。</blockquote></p><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><p><blockquote>考虑到3.5%的最终增长率和完全稀释的股票数量，折现率为7.7%，市值约为1800亿美元!</blockquote></p><p> <b>DCF</b></p><p><blockquote><b>DCF</b></blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：护城河投资</span></p></blockquote></p><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><p><blockquote>因此，我们通过简单地改变贴现率进行了敏感性分析，因为我们认为SE的权益成本应该根据一个国家的风险溢价进行调整。</blockquote></p><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><p><blockquote>如果我们把贴现率提高到15%左右会发生什么？SE 股权价值约为 400 亿美元，比当前价值低约 70%。</blockquote></p><p> <b>Sensitivity</b></p><p><blockquote><b>灵敏度</b></blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：护城河投资</span></p></blockquote></p><p> The fallacy of valuation through multiples and peer analysis</p><p><blockquote>通过倍数和同行分析进行估值的谬误</blockquote></p><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><p><blockquote>我们看到一些卖方股票研究，其中目标价计算为三个业务（Garena、Shopee 和 Sea Money）部分的总和，其中：</blockquote></p><p> <ol> <li>Garena is valued using a P/E of 20x its foreseeable earnings in 2023.</li> <li>Shopee is valued using a DCF with a discount rate of around 8% and a terminal growth rate above 3.5%.</li> <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> </ol> 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><p><blockquote><ol><li>Garena 的估值采用 2023 年可预见收益的 20 倍市盈率。</li><li>Shopee 使用 DCF 进行估值，贴现率约为 8%，终端增长率超过 3.5%。</li><li>Sea Money 的估值使用完全虚构的未来 GTV 0.20 倍倍数，其中 GTV 与股权价值之间的相关性值得怀疑。</li></ol>一些分析师将 Garena 与<i>腾讯控股</i>（OTCPK:TCEHY）（OTCPK:TCTZF），海上资金<i>签证</i>（纽约证券交易所代码：V）<i>万事达卡</i>（纽约证券交易所代码：MA）<i>和Adyen</i>, Shopee 到<i>亚马逊</i>（纳斯达克代码：AMZN）<i>和阿里巴巴-SW</i>（纽约证券交易所代码：BABA）（OTCPK：BABAF）。</blockquote></p><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><p><blockquote>我们认为这种估值方法不起作用，并且在大多数情况下会导致误导性结果。Garena 是一家相当新的参与者，将其与一家市值超过 5000 亿美元、业务稳定的公司进行比较听起来像是无稽之谈。与拥有完全不同商业模式的玩家相比，Sea Money 的情况也是如此。</blockquote></p><p> What could drive value creation for SEUpward revision of current estimates led by new acquisitions</p><p><blockquote>什么可以推动新收购导致当前估计向下修正的价值创造</blockquote></p><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><p><blockquote>SE最近宣布，打算通过股票发行（约39亿美元）和可转换票据发行（约29亿美元）筹集68亿美元资金。融资完成后，SE将依靠约128亿美元来支持Shopee在欧洲和印度的进一步扩张。</blockquote></p><p> Leverage of the balance sheet</p><p><blockquote>资产负债表杠杆</blockquote></p><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><p><blockquote>SE 可能会决定通过注入债务来杠杆化资产负债表，从而降低整体资本成本。我们相信这将是一个可行的策略，尽管可能要到 3 到 5 年后公司的现金流才会足够强劲，足以支持巨大的杠杆。</blockquote></p><p> <b>Main risks</b></p><p><blockquote><b>主要风险</b></blockquote></p><p> We believe the main risks for the SE equity case are:</p><p><blockquote>我们认为SE股权案的主要风险是：</blockquote></p><p></p><p> <ol> <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> <li>The regulatory risks on its marketplace, which might lead to new taxes in SE markets.</li> </ol> <b>Conclusion</b></p><p><blockquote><ol><li>围绕 Garena 及其内在估值的期望。Garena 的估值约为 600 亿美元。如果它无法推出新的成功游戏，如Free Fire，其价值将大幅下降，和/或由于从内部游戏开发转向第三方授权游戏，其利润率将下降。</li><li>其市场的监管风险，这可能会导致东南欧市场征收新的税收。</li></ol><b>结论</b></blockquote></p><p> At this stage, investors have these viable options:</p><p><blockquote>现阶段，投资者有以下可行的选择：</blockquote></p><p> <ol> <li>Believe that market estimates will be upward revised in the future as SE would continue to deliver significant growth.</li> <li>Believe that in the future as SE would command a more balanced D/E structure.</li> <li>Investing in SE assuming 7.7% potential return if 1) and/or 2) (or a mix of) would not happen.</li> </ol> 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><p><blockquote><ol><li>相信随着SE将继续实现显着增长，未来市场预期将被上调。</li><li>相信未来作为SE将指挥一个更加平衡的D/E结构。</li><li>如果1）和/或2）（或两者的组合）没有发生，投资SE假设7.7%的潜在回报。</li></ol>我们认为有足够的证据相信，尽管 SE 拥有坚实的商业模式，但其市值已经走得太远了。考虑到当前的估计，适当的门槛率可能会导致低得多的估值证据。</blockquote></p><p></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<blockquote>Sea Limited：一切都取决于预期和贴现率</blockquote></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: 12.5px; color: #7E829C; margin: 0;}\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<blockquote>Sea Limited：一切都取决于预期和贴现率</blockquote>\n</h2>\n<h4 class=\"meta\">\n<p class=\"head\">\n<strong class=\"h-name small\">Seeking Alpha</strong><span class=\"h-time small\">2021-09-17 19:54</span>\n</p>\n</h4>\n</header>\n<article>\n<p><b>Summary</b></p><p><blockquote><b>总结</b></blockquote></p><p> <ul> <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> <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> <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> <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> </ul> <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><p><blockquote><ul><li>自我们首次对该股进行估值以来，价格上涨了 20% 以上。当时，我们认为该公司在最佳情况下的估值是合理的。</li><li>我们现在的方法是相似的，但我们不是扩大共识，而是依靠它并检查实现当前股价的隐含贴现率。</li><li>我们已尝试评估最合适的贴现率，且我们相信有足够证据显示当前估值与适当贴现率之间存在不匹配。</li><li>我们看到的主要风险是围绕 Garena 及其嵌入估值的预期，以及其市场的监管风险，这可能会导致 SE 市场征收新的税收。</li></ul><p class=\"t-img-caption\"><span>黄芪/iStock 来自 Getty Images</span></p></blockquote></p><p> <b>Investment thesis</b></p><p><blockquote><b>投资论文</b></blockquote></p><p> When 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.</p><p><blockquote>当我们在 2021 年 4 月第一次关注 Sea Limited (SE) 时，该股的交易价格为每股 274 美元，我们认为在所有可能情况下，该股的估值几乎是合理的。此后，该股又上涨了 20%，交易价格超过每股 330 美元。我们现在正在审查我们的估值方法，该方法在 4 月份是基于强调共识，以检查应该在多大程度上扩展以匹配当时的市值。我们现在的方法是类似的，但我们不是扩大共识，而是依靠它并检查提供当前股价的隐含贴现率。我们不是研究估算，而是研究贴现率。</blockquote></p><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><p><blockquote>我们已尝试评估最合适的贴现率，且我们相信有足够证据显示当前估值与适当贴现率之间存在不匹配。我们认为，证明当前股价合理的贴现率远低于最合适的贴现率。我们看到的主要风险是围绕 Garena 及其嵌入估值的预期以及其市场的监管风险，这可能会导致东南欧市场征收新的税收。</blockquote></p><p> <b>Revenue guidance for 2021 was raised after Q2.</b></p><p><blockquote><b>2021 年收入指引在第二季度后上调。</b></blockquote></p><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><p><blockquote>第一季度，管理层对 Garena 的收入指导在 43 亿至 45 亿美元之间（假设指导中点，同比增长 38%）。Q2 后，指引已上调至 45 亿美元和 47 亿美元（假设指引中点，同比增长 44%）。</blockquote></p><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><p><blockquote>Shopee 第一季度收入预计在 45 亿美元至 47 亿美元之间（假设指导中点，同比增长 112%）。第二季度之后，指引已上调至 47 亿美元和 49 亿美元（假设指引中点，同比增长 121%）。</blockquote></p><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><p><blockquote>值得注意的是，下表中显示，虽然共识相当考虑到了 Garena 和 Shopee 较高的 21 财年收入指引，但与 2021 年 4 月相比，EBITDA 不仅在 2021 年已在综合水平上向下修正。EBITDA已从2021年削减至2026年。</blockquote></p><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><p><blockquote>换句话说，收入增长会导致未来五年营业利润率下降，但股权价值却在增长。2026年以后的EBITDA高于之前的预期（2030年为8.66亿美元），因此终端价值推动股本价值走高。</blockquote></p><p> Basically, the consensus is shifting towards terminal value, which carries higher risk, but market valuation is increasing.</p><p><blockquote>基本上，共识正在转向终端价值，这承担了更高的风险，但市场估值正在增加。</blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：彭博社数据截至2021年9月13日</span></p></blockquote></p><p> <b>Valuation approach (Sea – USD 330 per share as of September 13, 2021)Trying to assess the discount rate</b></p><p><blockquote><b>估值方法（Sea – 截至2021年9月13日每股330美元）尝试评估贴现率</b></blockquote></p><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><p><blockquote>SE估值背后的关键问题是试图评估适当的贴现率。由于公司的净财务状况为现金正（总金融债务-现金和现金等价物），WACC等于股权成本。</blockquote></p><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><p><blockquote>依靠CAPM（资本资产定价模型）来估算股权成本引起了一些担忧。根据CAPM，Ke=无风险+贝塔x市场风险溢价。</blockquote></p><p> Here the main concerns are:</p><p><blockquote>主要关注点是：</blockquote></p><p> <b>1. What is the beta for SE?</b></p><p><blockquote><b>1.什么是SE的测试版？</b></blockquote></p><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&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.</p><p><blockquote>我们试图评估 SE beta 并检查 SE 与市场的相关性（表 2、3、4 和 5）。相关性最高的是标准普尔500指数，但线性贝塔、贝塔+/-和非参数都显示R^2在0.4左右，这表明SE与标普500指数解相关（其他指数也是类似的情况）。因此，就我们的分析而言，贝塔是无用的。</blockquote></p><p> Source: Moat Investing elaboration on Bloomberg data</p><p><blockquote>资料来源：Moat Investing 对彭博数据的阐述</blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p> <b>2. What is the Market Risk Premium?</b></p><p><blockquote><b>2、什么是市场风险溢价？</b></blockquote></p><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><p><blockquote>这是CAPM中最具争议的元素。风险溢价应反映股权持有人在无风险溢价之外要求的“溢价”。</blockquote></p><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><p><blockquote>我们必须牢记，SE 的主要市场是南亚。因此，在我们看来，我们应该增加一个国家风险调整来考虑。如果我们使用美国市场风险溢价，我们会低估与SE经营地理区域相关的风险。</blockquote></p><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><p><blockquote>因此，我们已将市场风险溢价计入国家风险溢价，该国家风险溢价是通过考虑印尼和美国国债之间的10年期利差计算得出的。</blockquote></p><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><p><blockquote>经国家溢价调整后，SE 的适当股权成本为 15.3%（见图 6）。假设适当的贝塔值会更高。</blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：Moat Investing 对彭博数据的阐述</span></p></blockquote></p><p> <b>3. What is the appropriate terminal growth rate?</b></p><p><blockquote><b>3、合适的终端增速是多少？</b></blockquote></p><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><p><blockquote>我们通过计算再投资率（作为资本支出再投资的自由现金流的百分比）和可持续投资回报率来估计最终增长。我们相信，我们 3.5% 的最终增长是相当可持续的，因为该公司将超过 20% 的自由现金流进行再投资，并且可持续投资回报率约为 20%。</blockquote></p><p> <b>DCF valuation and sensitivity analysis</b></p><p><blockquote><b>DCF估值和敏感性分析</b></blockquote></p><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><p><blockquote>我们完全基于2021年至2030年的共识估计运行了DCF。这一分析背后的想法是检查贴现率（Ke=WACC），它提供的股本价值与当前市值一致。</blockquote></p><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><p><blockquote>考虑到3.5%的最终增长率和完全稀释的股票数量，折现率为7.7%，市值约为1800亿美元!</blockquote></p><p> <b>DCF</b></p><p><blockquote><b>DCF</b></blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：护城河投资</span></p></blockquote></p><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><p><blockquote>因此，我们通过简单地改变贴现率进行了敏感性分析，因为我们认为SE的权益成本应该根据一个国家的风险溢价进行调整。</blockquote></p><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><p><blockquote>如果我们把贴现率提高到15%左右会发生什么？SE 股权价值约为 400 亿美元，比当前价值低约 70%。</blockquote></p><p> <b>Sensitivity</b></p><p><blockquote><b>灵敏度</b></blockquote></p><p> <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><p><blockquote><p class=\"t-img-caption\"><span>资料来源：护城河投资</span></p></blockquote></p><p> The fallacy of valuation through multiples and peer analysis</p><p><blockquote>通过倍数和同行分析进行估值的谬误</blockquote></p><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><p><blockquote>我们看到一些卖方股票研究，其中目标价计算为三个业务（Garena、Shopee 和 Sea Money）部分的总和，其中：</blockquote></p><p> <ol> <li>Garena is valued using a P/E of 20x its foreseeable earnings in 2023.</li> <li>Shopee is valued using a DCF with a discount rate of around 8% and a terminal growth rate above 3.5%.</li> <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> </ol> 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><p><blockquote><ol><li>Garena 的估值采用 2023 年可预见收益的 20 倍市盈率。</li><li>Shopee 使用 DCF 进行估值，贴现率约为 8%，终端增长率超过 3.5%。</li><li>Sea Money 的估值使用完全虚构的未来 GTV 0.20 倍倍数，其中 GTV 与股权价值之间的相关性值得怀疑。</li></ol>一些分析师将 Garena 与<i>腾讯控股</i>（OTCPK:TCEHY）（OTCPK:TCTZF），海上资金<i>签证</i>（纽约证券交易所代码：V）<i>万事达卡</i>（纽约证券交易所代码：MA）<i>和Adyen</i>, Shopee 到<i>亚马逊</i>（纳斯达克代码：AMZN）<i>和阿里巴巴-SW</i>（纽约证券交易所代码：BABA）（OTCPK：BABAF）。</blockquote></p><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><p><blockquote>我们认为这种估值方法不起作用，并且在大多数情况下会导致误导性结果。Garena 是一家相当新的参与者，将其与一家市值超过 5000 亿美元、业务稳定的公司进行比较听起来像是无稽之谈。与拥有完全不同商业模式的玩家相比，Sea Money 的情况也是如此。</blockquote></p><p> What could drive value creation for SEUpward revision of current estimates led by new acquisitions</p><p><blockquote>什么可以推动新收购导致当前估计向下修正的价值创造</blockquote></p><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><p><blockquote>SE最近宣布，打算通过股票发行（约39亿美元）和可转换票据发行（约29亿美元）筹集68亿美元资金。融资完成后，SE将依靠约128亿美元来支持Shopee在欧洲和印度的进一步扩张。</blockquote></p><p> Leverage of the balance sheet</p><p><blockquote>资产负债表杠杆</blockquote></p><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><p><blockquote>SE 可能会决定通过注入债务来杠杆化资产负债表，从而降低整体资本成本。我们相信这将是一个可行的策略，尽管可能要到 3 到 5 年后公司的现金流才会足够强劲，足以支持巨大的杠杆。</blockquote></p><p> <b>Main risks</b></p><p><blockquote><b>主要风险</b></blockquote></p><p> We believe the main risks for the SE equity case are:</p><p><blockquote>我们认为SE股权案的主要风险是：</blockquote></p><p></p><p> <ol> <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> <li>The regulatory risks on its marketplace, which might lead to new taxes in SE markets.</li> </ol> <b>Conclusion</b></p><p><blockquote><ol><li>围绕 Garena 及其内在估值的期望。Garena 的估值约为 600 亿美元。如果它无法推出新的成功游戏，如Free Fire，其价值将大幅下降，和/或由于从内部游戏开发转向第三方授权游戏，其利润率将下降。</li><li>其市场的监管风险，这可能会导致东南欧市场征收新的税收。</li></ol><b>结论</b></blockquote></p><p> At this stage, investors have these viable options:</p><p><blockquote>现阶段，投资者有以下可行的选择：</blockquote></p><p> <ol> <li>Believe that market estimates will be upward revised in the future as SE would continue to deliver significant growth.</li> <li>Believe that in the future as SE would command a more balanced D/E structure.</li> <li>Investing in SE assuming 7.7% potential return if 1) and/or 2) (or a mix of) would not happen.</li> </ol> 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><p><blockquote><ol><li>相信随着SE将继续实现显着增长，未来市场预期将被上调。</li><li>相信未来作为SE将指挥一个更加平衡的D/E结构。</li><li>如果1）和/或2）（或两者的组合）没有发生，投资SE假设7.7%的潜在回报。</li></ol>我们认为有足够的证据相信，尽管 SE 拥有坚实的商业模式，但其市值已经走得太远了。考虑到当前的估计，适当的门槛率可能会导致低得多的估值证据。</blockquote></p><p></p>\n<div class=\"bt-text\">\n\n\n<p> 来源：<a href=\"https://seekingalpha.com/article/4455687-sea-limited-its-all-about-expectations-and-discount-rate\">Seeking Alpha</a></p>\n<p>为提升您的阅读体验，我们对本页面进行了排版优化</p>\n\n\n</div>\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,"symbols_score_info":{"SE":0.9}},"isVote":1,"tweetType":1,"viewCount":686,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":39,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/884245860"}
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