SEA (formerly known as Garena)

[ksir]

So the only feasible option is for Shopee & Lazada to merge to combine the 2 guns into a bazooka to fight TikTok bazooka.
Alibaba is focusing back on its core businesses in China and trying to cut (or spin) off their other businesses.
I reckon Ali Express is more aligned with Alibaba strategy than Lazada.
So they might be willing to take a minority stake in the combined Shopee & Lazada entity.
From their latest webcast, it seems they want to focus on expanding Ali Express Select, trying to catch up with PDD Temu.
In any case, that monster Temu is there as an upcoming threat to any e-commerce players.
So they better consolidate, buck up and get ready for next war.

[CY09]

If Lazada is to merge with Shopee, how much will Alibaba want? For now, Alibaba has injected US$4 billion cash for about a 90% stake in Lazada. In a sense, Alibaba is likely not to walk with a sale valuation of less than US$5 billion for Lazada.

How much is Shopee worth as well? A hypothetical marriage between shopee and lazada would mean Sea Group takes a majority stake while injecting cash so as to meet Alibaba's approx $5 billion valuation. I do not think Sea Group will be able to use its entire warchest to finance an outright purchase of Lazada so it will be some sort of arrangement where Alibaba becomes a minority holder while Sea Group will commit a few billion in cash to finance the enlarged entreprise. Similar to Bytedance and Go-to arrangement (in this case, it will be Sea Group and Alibaba)

[ksir]

Shopee & Lazada merging will be an eCommerce behemoth in SEA region.

Below data I gotten from Bard, so take it with a pinch of salt.
Country-specific data (based on recent reports and estimates):
Malaysia:
Shopee: 71%
Lazada: 18%

Thailand:
Shopee: 45%
Lazada: 38%

Vietnam:
Shopee: 40%
Lazada: 35%

Indonesia:
Tokopedia: 42% (strong local competitor)
Shopee: 27%
Lazada: 16%

Philippines:
Shopee: 55%
Lazada: 25%

IMO, the main challenge is whether the regulators would allow them to merge considering the already dominant market share they have. Only argument they can make is to prepare for TikTok and that coming-soon Temu.

[Big Toe]

Much like the on-going war between Russia and Ukraine, there is no end in sight.
How much have Alibaba burnt since 2016? (in USD) source: Tech in Asia/Inside Retail

Apr 2016 1B
Jun 2017 1B
Mar 2018 2B
May 2022 0.378B
Sept 2022 0.9125B
Dec 2022 0.342B
Apr 2023 0.353B
Jul 2023 0.8454B
Dec 2023 0.634B

Total approx USD 7.5B

Chances of Shopee taking a stake/acquiring Lazada and vice versa is remote.
Much like a war, so long as both sides think there is a chance of winning, the war continues.
Until one side runs out of resources and is unable to continue.

Shoppers/ Sellers rejoice, enjoy your subsidized purchases. It looks set to continue. It reminds me of the same dynamics played out in the brick and motar shops with a few shops clustered together selling the exact same products.

[CY09]

To start a war for a market of 670 mil with 3 cash rich players, I wonder if the fruits is worth the labour. Eventually one is likely to fall to resume the story of the top 2 maintaing its market share and become cash flow generative again.

With Bytedance's cash warchest, I am not sure if Sea or Alibaba can keep fighting. For Sea, forrest Li has stressed the word self-sufficient but with Shopee becoming cash burning, Forrest Li's goal seems to be a stretch. And Sea's warchest is not sufficient to swallow Lazada and finance the expanded empire. Realsitically, being the smaller "ATM", Sea Group could consider a "Go-to" and cede to Alibaba and get Alibaba to become the majority and inject a few billions.

But Sea Group, excluding Shopee, lacks the story of a growth stock and this brings down market expectations of Sea's prospects. Shopers we are rejoicing, but shareholders of Sea are now thinking what lies ahead and how much is this conglomerate worth. I would love to buy popcorn to watch this war, let me accumulate more shopee coins to buy discounted Garrett popcorns then.

For those playing shopee coins, Shopee game called "Shopee pets" has a buy a 3 star pets for 40 coins (40 cents), feeding the pet the maximum 3 times a day for 14 days will yield you 65 coins. Sorry I am cheapo but thats how I reduce my cost of living admist the cost of living crisis

PS: Shopee Coins can be used for payment as SGQR in many hawkers under the payment method of "Shopeepay", tried and tested and am appreciative shopee subsidizes me about $5 per month with $0 spent in a month on its e commerce

[Big Toe]

It will take time to the fog to clear. I dont like investing blind, when there is no certainty over anything except cash burning for an unknown time line.

Here's the thing about market size. The market is sizable and growing no doubt. But what can be extracted from this market no one knows. The players at this point is already forgoing long term profitability. Alibaba bought Lazada in 2016, instead of showing a profit, the cash burn seems to be accelerating the past 2 years. So when can we see Lazada standing on its own 2 feet and breaking even? Do we even have the slighest clue? 10 years seems unrealistic now given that they are already 7-8 years into the game since Alibaba took over(even longer if you factor pre take-over period.)

And here is the scary part, Shopee is looking to return to its cash burning ways to fend off competition and keep its leading position. So we can safely asssume that when competition heats up, Shopee will burn cash to stay ahead. Will bytedance
be the last strong competitor or will there be new entrants somewhere down the road? Sure there are new entrants to all industries but some are certainly more intense/insane than others. Which is why it is somewhat better to choose a boring and unexciting industry to invest in.

Reminds me of the airlines industry. Comeptition is so stiff, fixed costs so high, that under normal cicumstances, it is generally not a profitable business. Right now ticket prices are relatively high due to pent up demand and limited capacity. Given time, we are likely to see much higher capacity and lower ticket prices and back to unfavorable dynamics again...as it usually is.

[dzwm87]

It's a different profile to our typical value play, with a different return and risk profile. By the time it is earning a steady profit stream, it will be valued differently. But we can now recognize that despite the high platform profitability, moat seems to be limited, barriers to entry is particularly low and switching cost (merchants & customers) is low.

[Bibi]

For those playing shopee coins, Shopee game called "Shopee pets" has a buy a 3 star pets for 40 coins (40 cents), feeding the pet the maximum 3 times a day for 14 days will yield you 65 coins. Sorry I am cheapo but thats how I reduce my cost of living admist the cost of living crisis

PS: Shopee Coins can be used for payment as SGQR in many hawkers under the payment method of "Shopeepay", tried and tested and am appreciative shopee subsidizes me about $5 per month with $0 spent in a month on its e commerce

Wow. I am impressed by yr knowledge to extract much value frm Shopee. A few weeks ago, i tried hard to claim shopee coin daily for 6 days only to end up getting a mere 3 coins on the 7th day. I gave up totally after that.

[weijian]

It's a different profile to our typical value play, with a different return and risk profile. By the time it is earning a steady profit stream, it will be valued differently. But we can now recognize that despite the high platform profitability, moat seems to be limited, barriers to entry is particularly low and switching cost (merchants & customers) is low.

IMHO, little has changed for the platform business. It still has high barriers to entry due to network effects moats. Switching costs are still relevant due to customer ratings and reward points.

Dot.com produced certain platform giants like Amazon and Taobao and they themselves are still going strong. The textbook examples of the platform giants are well known now - so everyone is gunning for that "promised land".

Ironically, because everyone knows the textbook examples, everyone knows the promised land is attractive. So it attracts participants with deep resources. If the platform business wasn't so attractive, it probably would have attracted players with lesser resources (and more sanity) creating eventual oligopolies.

In the earlier consolidation of cab hailing, it should be noted that both Didi and Uber were still unlisted entities, ie. they had private equity providing the disciplinary oversight. But less so for listed entities which are more readily able to raise capital via more diverse sources like debt/equity fund raising. And due to the non-equal voting shares, it is much harder to discipline them as well.

[CY09]

Hi Weijian,

"In the earlier consolidation of cab hailing, it should be noted that both Didi and Uber were still unlisted entities, ie. they had private equity providing the disciplinary oversight. But less so for listed entities which are more readily able to raise capital via more diverse sources like debt/equity fund raising. And due to the non-equal voting shares, it is much harder to discipline them as well."

The reverse seems to be happening in the e commerce space for south East Asia. Both Sea Group and Alibaba are being scrutinised for their actions in the e commerce space by the market. Sea Group has stressed the need to be self sufficient and when CEO Forrest Li talked about restarting loss making ways in shopee, the share price was voted and shot down to currently 50% of what it was pre-announcement. Sea Group is now especially aware that the era of low cost financing with convertible bonds is gone because the market knows Forrest Li past market talk was mostly hot air and reality is that Sea has difficulty reaching its targets due to competitiion

For where we are now, it seems the unlisted Bytedance is the most reckless. In fact throughout their years of operations, their amount of losses is eye watering.

To bibi:

Shopee has many avenues to extract value and I consider playing the games as part of my leisure time while earning money. Its better than the other app games where we download, play and only have a level to boot. Shopee games are free to play and pays you!

The e commerce is a terrible business to be honest. Only the North Asia region has profitable e commerce companies. Even in USA, the reigning number 1 amazon recorded US$2 billion loss in last FY ; with Shein and Temu entering USA market, this year's gain may soon be narrowing out. Many companies point to China and Japan as what happens in steady state; but the chinese are branching out to eat their lunch while they are unable to break into China