Why Scottish Mortgage Investment Trust invests in Sea Ltd

Lawrence Burns, deputy manager of Scottish Mortgage Investment Trust, discusses the rise of Sea Ltd, a successful technology company.

Disclaimer: As with any investment, your capital is at risk.

On Shopee Live in Indonesia, owned by Singaporean tech giant Sea Ltd, shopping feels like a game show with a community crowd.

One evening in Central Java, Indonesian merchant Zarah balances her phone on shoeboxes and starts a Shopee Live broadcast. She greets the viewers, then asks them to choose: floral or plain?

Hearts float past as she wraps a floral scarf and answers questions about its size, color, and fit. Suddenly, confetti fills the broadcast. A wheel spins, and viewers scramble for vouchers that vanish within seconds.

Customers place orders directly in the chat, never leaving the stream. Payment happens upfront or through instalments, with approval arriving almost immediately.

Logistics and operations

Once the orders are in, Sea's logistics arm takes over. Its network links an archipelago extending more than 5,000km from the Indian Ocean to the Pacific Ocean.

A moped courier picks up Zarah's parcels before a truck carries them across Java. Between islands, they travel by plane or boat, then another rider completes the delivery. The hard part is reaching the right place cheaply - not simply moving fast.

That is Sea's edge. Southeast Asia's complexity gives the company something to build on, not a problem to overcome.

Founder Forrest Li is pushing that advantage further.

The three acts of Sea

Scottish Mortgage Investment Trust made its first investment in Sea in early 2024. The company operates across Southeast Asia, Taiwan and Brazil.

Sea stands out because its markets have grown - and because management has built several large businesses at the same time. Three major operations now span the continent.

Gaming came first. Sea initially published games before developing its own titles for basic Android phones and unreliable internet connections.

File sizes, game modes, and artwork are designed to run on devices with limited processing power and memory. Local teams adapt the content closely, giving skins, emotes, and events a familiar feel in Jakarta, Manila, Hanoi, and Kuala Lumpur.

Music partnerships, football tie-ins, and seasonal promotions have helped keep games such as Free Fire fresh. The game became the world's most downloaded, generating cash that funded Sea's other businesses.

The second case is Shopee. It took a different route from rivals built in Amazon's image.

The app was designed for phones and shaped around entertainment from the start. Livestreams, chat, mini-games, and a tailored feed give it the feel of a bustling bazaar rather than a product catalogue.

Discovery and advertising sit inside the shopping experience, while the platform largely targets price-sensitive buyers with inexpensive products.

Shopee gradually took control of its logistics. Delivery became cheaper and faster, and the company gained an infrastructure edge.

That approach has helped Shopee secure about 50% of Southeast Asia's market and rank second in Brazil, behind MercadoLibre. E-commerce still reaches far fewer consumers in Southeast Asian markets than in China, though, so the region has considerable room to expand.

The third business is financial services. Sea has built a payments network around the digital wallets customers use on Shopee. It has expanded that network with buy-now-pay-later credit, cash loans for consumers outside the platform, and working-capital financing for merchants.

Many people in the region still lack full access to banking. Sea's services are helping the company become one of Southeast Asia's most valuable financial-services platforms.

The competitive advantage

Scottish Mortgage Investment Trust sees Sea's strength in the way its businesses support one another. Gaming brings in cash and keeps users engaged; Shopee turns that engagement into regular purchasing habits.

These transactions produce the records lenders need, while access to credit gives people more spending power. As the platform grows, its logistics become more efficient, drawing in more users and capital in turn.

A fourth act may still emerge. Even without it, Sea already resembles an exceptional company: several businesses connected in a way that helps each one grow.

Important information

This article is not independent research and does not receive the protections that apply to it. Baillie Gifford and its staff may have traded in the investments mentioned. The opinions expressed are not factual statements, nor should they be taken as advice or a recommendation to buy, sell, or hold any investment. Investments exposed to overseas securities may lose value as stock markets and currency exchange rates change. Scottish Mortgage invests in emerging markets, where problems with trading, settlement, or custody may occur and reduce the value of your investment. Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited's investment trusts are listed on the London Stock Exchange, but they are not authorised or regulated by the FCA. The Key Information Document can be found at bailliegifford.com.