Sea Limited SE

The business

Sea runs three businesses across Southeast Asia, Taiwan and Brazil. Shopee is the marketplace, Monee is the credit and payments arm (point-of-sale credit under SPayLater plus cash loans), and Garena is the game publisher anchored by Free Fire. Shopee is the revenue engine at 72% of Q2 revenue, $5.6B of $7.8B, with Monee at 18% and Garena at 10%. Garena carries the profit: that 10% of revenue produced 44% of segment adjusted EBITDA in the quarter, $429.8M of $973.2M before unallocated costs, while Shopee's 72% of revenue produced 26%. The moat, named here and left for deeper work, is ecosystem scale: shopping, payment and repayment behavior on one graph, plus an owned logistics network competitors rent.

What the statements do not show is who now owns the credit risk. Of the $11.1B of consumer and small-business loans outstanding at June 30, $10.0B sits on Sea's own balance sheet, up from $5.9B a year earlier, while the off-book portion moved only from $0.9B to $1.1B. Management named the mix pushing provisions up: off-Shopee SPayLater, now above 20% of that portfolio and as high as 35% in some markets, and Brazil, which the CFO described on the August call as "a high interest, high risk market." Working the other way, the underwriting stack was rebuilt on transformer models trained on ecosystem behavior, which management says raised approval rates around 10% at similar risk. On the competitive board, Shopee became the first e-commerce platform across Southeast Asia and Latin America integrated natively into ChatGPT, under a partnership widened with OpenAI in June.