For those of us looking towards the end-of-year holiday season, there’s still one more big event that shoppers in Singapore, and investors alike, will be focusing on before then.
That’s the annual 11.11 online bonanza – in reference to the 11th of November each year (or “Singles’ Day”) which was traditionally for those not in relationships to celebrate.
Seen as a rebuff to Valentines’ Day, it has morphed into a mega shopping season in China and around the rest of Asia.
For example, during last year’s 11.11 sale, Alibaba Group Holding Ltd (SEHK: 9988) (NYSE: BABA) and JD.com Inc (SEHK: 9618) (NASDAQ: JD) – the two leading e-commerce companies in China – saw a whopping US$115 billion in sales across their platforms.
Yet for long-term investors that might want to tap into the e-commerce theme in Asia, there are plenty of other names both within China, and outside, that can give you exposure to this growth story.
So, before the 11.11 sales kick off this Thursday, here are three e-commerce stocks investors can buy and hold for the long term.
1. Sea Ltd
It’s no surprise for anyone that lives in Southeast Asia that Sea Ltd (NYSE: SE) has become such a giant.
That’s because the group consists of three fast-growing segments; online gaming (Garena), e-commerce (Shopee) and digital payments (Sea Money).
But it’s Shopee that has excited investors the most over the past few years. That’s because it’s been growing like a weed – turbocharged by the Covid-19 pandemic.
For example, in 2020, GAAP revenue for Shopee totalled US$2.2 billion, up 159.8% year-on-year. That kind of blistering growth has continued in 2021, with second-quarter 2021 revenue for Shopee up 161% year-on-year to US$1.2 billion (see below).
Source: Sea Ltd Q2 2021 earnings presentation
In the second quarter of this year alone, Sea generated around 50% of the sales it raked in during the whole of 2020 (US$4.4 billion)
With under 10% of all retail sales in Southeast Asia being done online in 2020, the runway for growth is still enormous.
Sea reports its third-quarter 2021 earnings next Wednesday (16 November).
Coupang Inc (NYSE: CPNG) is South Korea’s largest e-commerce firm. When it went earlier this year in New York, it was the largest IPO by an Asian company on Wall Street since Alibaba went public in 2014.
There’s good reason for investor optimism around the company. Founded in 2010, the company currently has a market cap of US$51 billion.
Initially starting off a group-based buying platform, it has transformed itself into a heavyweight e-commerce player by building fulfillment centres and investing extensively in its own fleet of delivery trucks.
Operating in a country that has one of the world’s highest Internet penetration rates, Coupang has been able to take a dominant lead in a fiercely-competitive market.
In Coupang’s latest second-quarter 2021 earnings, net revenues increased by 71% year-on-year (in local currency terms) to US$4.48 billion while the quarter was also the 15th consecutive quarter of over-50% year-on-year growth on a constant-currency basis.
As is the case in China, Coupang is tapping into a huge local online grocery market. Its “Rocket Fresh” grocery division saw revenue explode 100% year-on-year.
Coupang is set to reports it latest quarterly number after the market close this Thursday (11 November).
While Tencent Holdings Ltd (SEHK: 700) might be associated more with online gaming and its WeChat “super app”, the company is actually deeply entrenched in e-commerce.
That’s because brands, both local and international, have digital storefronts on WeChat’s platform. Not only that but the means of paying for those goods involves using WeChat Pay – one of the two biggest digital wallet and mobile payments platforms.
That also plays out in digital ads on its WeChat platform as companies gear up for 11.11.
In fact, in 2020 its Fintech and Business Services division (that WeChat Pay falls under) was the second-fastest-growing of its three main arms.
During the year, Fintech and Business Services saw 26% year-on-year growth to RMB 128.1 billion (US$20 billion).
That figure was RMB 80.9 billion in the first half of 2021, up 43% year-on-year. As the offering has scaled, gross profit has also improved.
For the first six months of 2021, the gross profit of Tencent’s Fintech and Business Services division rose by 62% year-on-year to RMB 26 billion.
Tencent reports its latest third-quarter results this Wednesday (10 November), one day before the big 11.11 sale.
Long growth runway
For e-commerce companies going into this week, the offerings for consumers are sure to be plentiful.
However, if you’re thinking of “splashing the cash” on a few stocks that tap into this huge growth trend in Asia, then Sea, Coupang and Tencent look like solid options for long-term investors.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Sea Ltd.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be.
In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.