Thailand Technology Internet - GS Research - 20180706

6 July 2018 | 12:23AM SGT
Thailand Technology: Internet
A ‘blue ocean’ for Ecommerce; Sea (Buy) well placed to

succeed
Thailand presents a sizable opportunity for internet companies due to its: 1) Miang Chuen Koh, CFA
+65-6889-2465 |
Low gaming, ecommerce and emoney penetration; 2) large addressable market of miangchuen.koh@gs.com
Goldman Sachs (Singapore) Pte
69mn population; 3) conducive conditions for growth given its logistics and
Piyush Mubayi
payments network; 4) rapid e-money adoption; and 5) geographical advantage as a +852-2978-1677 |
piyush.mubayi@gs.com
gateway to the growing Cambodia, Laos, Myanmar and Vietnam (CLMV) markets. If Goldman Sachs (Asia) L.L.C.
Indonesia is the key ASEAN battleground for internet companies given its enormous Pang Vittayaamnuaykoon
+65-6654-5437 | pang.vit@gs.com
domestic potential (see ID Internet - Playing differently, buying more – how Sea (Buy) Goldman Sachs (Singapore) Pte
is navigating changing trends), we believe Thailand offers a smaller but relative

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‘blue ocean’ ecommerce market with lower competition vs. Indonesia. We

forecast gaming revenue CAGR of 15%, ecommerce GMV CAGR of 24% and
emoney GTV CAGR of 82% through FY17-22E.
In this report, we undertake an in-depth analysis into Thailand’s gaming,

ecommerce and emoney markets through reassessing the market size, recent
changes in competition, key industry trends, the major companies in this space and
the potential for companies to expand into neighboring high growth markets. While
large players like Alibaba/Lazada have made significant investments and are strong
competitors in Thailand, we believe Sea ltd (Buy, with a 39% upside potential) is
well placed to keep growing given: 1) its strong position in ecommerce, especially
with female shoppers, which is a growing online category; and 2) its dominant PC
and mobile gaming position, with scope to gain incremental mobile share.
Thailand’s gaming, ecommerce and epayment growth to benefit Sea
Gaming, ecommerce, and emoney TAM

(US$ mn)
2017 2022E
19,890
11,599
1,184 4,006 1.006
599
Gaming Ecommerce Emoney
Source: Company data, Goldman Sachs Global Investment Research
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Goldman Sachs Thailand Technology: Internet
Table of Contents
Executive Summary 3
Thailand - Key numbers 5
Thailand gaming - Highly competitive but offers better revenue opportunity for Sea 6
Introduction to Thailand’s PC gaming market - Garena remains a dominant player on “play at home”
penetration 9
Introduction to Thailand’s mobile gaming market - Garena well positioned to leverage legacy user base 13
Thailand’s Ecommerce Industry - C2C to remain key for Shopee 18
CLMV opportunity - Population of 172mn, waiting to be connected 32
Thailand’s E-Payments Industry - Banks continue to have the upper hand 34
Sea remains well positioned; reiterate Buy with 39% upside potential 45
Disclosure Appendix 47
6 July 2018 2
Executive Summary
In 2017, Thailand was the largest revenue contributor (32% of GAAP revenues) for Sea,
and essentially the only market where Sea derived revenues from for all its three
verticals: Gaming (Garena), ecommerce (Shopee), and epayments (Airpay). While we
believe larger markets like Indonesia may be more important in the longer term, success
in Thailand is critical for Sea’s near-to-medium term valuation outlook.
We turn incrementally positive on its ecommerce business because of a

larger-than-expected GMV potential and lesser competition. While, we become more
cautious on its e-money business due to a higher-than-expected competition and
weakening industry economics, even as the GTV potential remains massive. Post our
analysis of these individual businesses in Thailand, we slightly increase our 2018-20E
Net loss from US$ -672/-495/-125 to US$-681/-532/-171, while incorporating higher
interest expense from its recent US$575mn convertible note issuance. Our SOTP-based
12-month target price of US$21 remains unchanged. Reiterate Buy (with 39% upside
potential).
Our key conclusions for the Thailand market and Sea’s position are:
1) PC game revenue poised for growth - Based on our industry checks, the PC
revenue decline in the Thailand gaming industry has slowed this year. We believe this is
owing to new content like Battle Royale games reviving consumer interest, a large
legacy PC gamer base and a much higher ‘play at home’ gamer base (which is not
dependent on growth of cybercafes, and will quickly benefit from continually rising fixed
broadband penetration). We expect PC revenues to pick-up in the near-term with an
influx of new content, which should benefit Garena’s (Sea’s gaming division) strong PC
gaming business.
2) Garena can gain incremental mobile share - Garena made tremendous headway
last year with ROV/AOV, and we see the current progress for Free Fire as encouraging.
Garena has a few more games lined up for release (DD Tank / Contra: Return), which, we
believe, should allow Garena to gain more mobile market share (currently 700bps below
its PC market share).
3) eSports is more important in Thailand vs. Indonesia - The ‘play at home’ PC

phenomenon has gained more traction in Thailand. In addition, we highlight Garena’s key
mobile game ROV/AOV is now one of the six eSports titles for the 2018 Asian games,
and as a result should see a rise in its gaming base.
4) eCommerce GMV larger than expected; female categories to grow faster - Our
analysis suggests that our previous Shopee (Sea’s ecommerce unit) GMV forecasts
appear low, considering the larger than initially forecasted market size, lower C2C
competition and strong supporting logistic/payment network in Thailand. Shopee’s
market momentum also remains strong, judging from data from AppAnnie,
SensorTower and SimilarWeb. Our analysis of the online penetration by categories
suggests that female categories like apparel/footwear and beauty/personal care have
6 July 2018 3
significantly more scope for growth, benefitting Shopee as it is viewed as a leading

marketplace for female shoppers.
5) B2C and cross border may flourish faster - We believe ecommerce companies in
Thailand should be able to procure and store inventory affordably (either on a 1P or 3P
model) given the strong support from the government, the country’s position as a
transport hub and its solid domestic logistics infrastructure. We believe this should
significantly lower the cost/efficiency of Shopee’s B2C business, which focuses more on
branded products that can appeal well to the Thai consumer, given a higher per capita
spend vs. Indonesia. We believe cross border ecommerce is also easier to execute for
Thailand, compared to Indonesia. However, we highlight Shopee is not as well
positioned in this segment and would need to build capabilities either on its own or
through partnerships.
6) Payments market has become more difficult - We now hold a more negative view
on Airpay (Sea’s payments unit) in Thailand given the aggressive competition from banks
in particular, even as we expect e-money growth to be very strong. We do not expect
non-banks to gain a large market share in the e-money business, and see Airpay likely
becoming a 3rd largest player among the non-banks in the medium-term.
Overall, we slightly increase our 2018-20E Net loss from US$ -672/-495/-125 to
US$-681/-532/-171 to factor in higher ecommerce GMV (which we expect to drive higher
cash burn), weaker payments business outlook and higher interest expense from Sea’s
recent convertible note issuance. However, we keep our SOTP-based 12-month target
price of US$21 unchanged, and reiterate our Buy rating on the stock. We view Sea as a
leading gaming and ecommerce company in ASEAN and Taiwan markets, and believe
that the market continues to underestimate the growth potential of its ecommerce
business, in particular.
6 July 2018 4
Thailand - Key numbers

Thailand Internet in numbers
as of December 2017
Thailand in numbers
69mn Population
52% Population below
age of 40
GDP per capita vs. Percentage of

$6,594 Asia average of
$7,109
53% population living in
urban area
78% Have a bank

account 80% Unique Mobile
Penetration
65% Internet Penetration

70% Cash % of Online
Consumer Payment
Average internet
13% Fixed BB Penetration
13.9mbps speed via mobile
connections
of Smartphone
69% Mobile traffic as % of
total web traffic 82% users are on
Android
Source: Goldman Sachs Global Investment Research, Euromonitor, World Bank, GSMA, NBTC, iPrice, Ookla, Statscounter, We are social
6 July 2018 5
Thailand gaming - Highly competitive but offers better revenue opportunity

for Sea
HOW BIG IS THE MARKET?

$550- The top down analysis from Niko
#20
Partners / Newzoo suggest industry
Thailand is one of the largest
revenue of $599mn while our bottom
599mn
gaming markets in the world
up analysis suggests ~$550mn with
15% CAGR over the next 5 years
WHAT'S POPULAR?
MMORPG
MMORPG Games is the Garena's implied market
27% most popular genre for share. Garena's AOV, HoN
& MOBA
mobile while MOBA is the and Free Fire are amongst the
most popular genre for PC most popular titles
WHO ARE THE GAMERS?

M10-20 M21-35 M36-50
F10-20 F21-35 F36-50
10% 16%
25%
26%
12% 11%
as of December 2017; MOBA refers to Multiplayer Online Battle Arena, MMORPG refers to Massively Multiplayer Online Role Playing Games
Source: Goldman Sachs Global Investment Research, Newzoo, Niko Partners
6 July 2018 6
In 2017, the games business was 88% of Sea’s GAAP revenues, with Thailand
contributing 32% of the total. We conduct a bottom up analysis of the Thailand
gaming market to assess Garena’s addressable market size and its growth potential vs.
competition, complementing our previous top down analysis.
Based on Newzoo and Niko Partners data and using a “top down” approach, we
previously forecasted Thailand’s 2017 gaming revenues to be US$599mn - 3rd largest in
ASEAN and 4th largest if we include Taiwan. This is 0.13%/0.23% of nominal GDP/gross
consumer expenditure. We forecast the revenues to rise to US$1,128mn (18% CAGR)
by 2021E, making up 0.19%/0.36% of nominal GDP/gross consumer expenditure, still
much lower vs. China at 0.22%/0.59% in 2017. We now conduct a bottom-up analysis to
assess the gaming market in Indonesia relying on our industry checks, alongside data
from AppAnnie and Sensor Tower. Our key takeaways from the analysis are:
1) Using a bottom-up approach, the Thailand gaming market revenue appears to be

US$465mn - lower than our “top down” approach - similar to our findings in Indonesia,
however, with the variance closer in Thailand.
2) PC and mobile growth outlook has been diverging, however, PC growth is set to
improve in Thailand, with new games from the Battle Royale genre being launched, and
with a larger PC gamer base and the “play at home” phenomenon (i.e. not dependent
on growth of cybercafes, and positioned to quickly benefit from continually rising fixed
broadband penetration). We also highlight that Battle Royale genre games are taking off
better in Thailand vs. Indonesia, which we believe highlights higher acceptance of
newer content by Thai gamers.
3) Competition is more intense in Thailand given the attractive revenue opportunity,

significant number of foreign players that have local operations and better infrastructure
(i.e. broadband/4G connection, payment options etc.) that lowers the barriers to entry.
4) Garena has a stronger position in Thailand than Indonesia, as apparent by its

market share for both PC/mobile (40%/33%), and its ability to overcome a first mover
advantage (Mobile Legends was launched first in Thailand, but Garena quickly
estabiished itself with its ROV launch, AOV’s Thai version). However, we believe there is
a key need for Garena to have a strong Battle Royale PC game (they have Tencent’s
Europa, which they renamed as Ring of Elysium) to compete versus PUBG, which we
believe has taken away some revenue share from Garena’s HON/Pointblank.
5) eSports is a more critical factor in driving gamer acquisition/retention in Thailand

compared to Indonesia, partly due to the higher “play at home” PC phenomenon.
Garena’s AOV is now one of the six eSports titles for 2018 Asian games and seem well
positioned for growth ahead.
6) Looking ahead - we expect Garena’s Thailand cash revenues to grow from US$187mn
in 2017 (38% of Garena cash revenues) to US$312mn by 2020E (30% of Garena’s cash
revenues). We expect this incremental cash revenue of US$125mnn to come from its
new game Free Fire (US$30mn), continual growth of AOV/ROV (US$20mn) and other
games (US$75mn) e.g. Ring of Elysium/DD Tank.
6 July 2018 7
Gaming Demographics - Key differences vs. Indonesia

According to Newzoo, Thailand has 18.3mn gamers - 27% of population vs
China/US/SEA&T average of 41%/49%/26%. This is higher than Indonesia’s 17%, given
Thailand’s better mobile/fixed broadband infrastructure, higher capacity and willingness
to spend, and more localized content/pricing given the large number of foreign game
developers/publishers with local operations.
We highlight the key trends defining Thailand gaming market below:
1) Average male vs female gamer ratio is 53% vs 47% - which is more balanced than
Indonesia. The ratio is higher for PC than for mobile; PC gamers are also usually older on
average than mobile gamers.
2) Geographically, 70% of gamers in Thailand are located in Bangkok. PC gamers are

largely concentrated in the capital/most affluent cities, while mobile is significantly more
dispersed across the country (50% in BKK, 50% outside);
3) Gaming preferences differ from Indonesia - MMORPG is the most popular genre in
Thailand, followed by MOBA and then RTS/Battle Royale. For Indonesia - MOBA remains
the most popular game, followed by RTS/MMORPG (evenly matched), and Battle
Royale.
4) Industry wide pay ratio is 8-10% for PC and 1-5% for mobile - on average. Different
game genres have different pay ratios, with MMORPG having the highest pay ratio, and
casual games with the lowest. ARPU ranges from US$10-30/mth, significantly higher
than Indonesia, with PC significantly higher than mobile.
5) Historically, top mobile games have had a revenue of US$25-50mn per year, while top
PC games at US$10-30mn p.a. However, mobile games traditionally have a more
exaggerated and shorter revenue lifecycle, while PC games have remained significantly
more stable/consistent.
6) Agreements for publishers and developers are similar to other regions, with a range
of revenue sharing ratios, depending on the value add from the publishers if there are
any upfront payments.
Exhibit 1: Online Gaming % Consumer Expenditure Exhibit 2: Gaming expenditure to increase to ~0.20% of total
consumer expenditure
Online Gaming % Consumer Expenditure Online Gaming % Consumer Expenditure

0.19%
0.18%
0.59%
0.16%
0.15%
0.48% 0.47%
0.13%
0.40%
0.23% 0.22%
0.19%
0.17%
0.14% 0.13%
0.05%
CN TW JP VN TH MY US SG PH ID IN 2017 2018E 2019E 2020E 2021E
Source: Euromonitor, Goldman Sachs Global Investment Research Source: Euromonitor, Goldman Sachs Global Investment Research
6 July 2018 8
According to Newzoo/Niko Partners, Thailand’s 2017 PC/Mobile revenue mix was

50%/50% of the total gaming revenues, fairly close to the SEA&T average of 45%/55%,
but quite different from Indonesia at 29%/71%. We believe PC gaming has been able to
gain a much larger foothold in Thailand due to a higher fixed broadband penetration and
consumer affordability in the country.
Based on PC revenue size alone, Thailand is the second largest country in ASEAN
(behind Vietnam) and third if we include Taiwan. By mobile revenues, Thailand is the
third largest in ASEAN (behind Indonesia and Malaysia) and fourth largest if we include
Taiwan. We estimate Mobile/PC revenue CAGR to grow by 26%/6% CAGR over
2017-21, expecting Thailand’s PC/Mobile mix to shift towards 33%/67% by 2021.
Gaming content is largely from foreign developers, with a handful of local game
developers that largely focus on casual games like Sanook Games, Siamgame Mobile,
Sandbox Global, True Digital and Game Square Interactive. In recent years, publishers
like Extreme Electronics have also partnered/acquired companies to gain a greater share
in game development.
Introduction to Thailand’s PC gaming market - Garena remains a dominant

player on “play at home” penetration
According to our channel checks with Thailand gaming companies, the PC gamer base
is currently at c.10-11mn, pay ratio is at c.8-10%, while ARPU is at US$10-30.
Assuming an ARPU of US$20 (at the mid point), this implies gaming revenues of
US$190-260mn p.a. (i.e. ~2.5X of Indonesia). We highlight this is lower than our
previous “top down” estimate of US$300mn. According to our industry checks, PC
revenues have been declining 5-6% p.a. over last 5-6 years, which we believe is due to
the rise in mobile gaming, lack of new PC content and the worsening economics for PC
only publishers, which has affected their ability to bid for new game titles. Hence, we
believe that PC game revenues in Thailand may be closer to the revenue estimate from
our bottom-up approach, i.e. US$225mn.
Below are the key takeaways for Thailand’s PC gaming market:
1) Higher “Play at home” penetration in Thailand means the decline in cybercafes is

less concerning and that eSports is more critical to drive popularity and stickiness of
games in Thailand than Indonesia. Localization is a key factor with many foreign game
developers having a local office.
2) PC market is larger and deeper than Indonesia, though has been declining in
recent years. But we believe the rise in Battle Royale games is likely to kickstart a new
wave of growth, alongside the growth in fixed broadband availability and affordability
with telcos competing aggressively on prices.
3) Garena is a dominant player with a balanced portfolio - Our analysis shows that
Garena has a significantly higher PC market share in Thailand compared to Indonesia -
which is impressive given more intense competition. We believe its position should also
6 July 2018 9
allow it higher success with its newer releases in Thailand compared to Indonesia, while
its balanced portfolio of games (HON, FIFA Online, PointBlank, LOL) should act as a
buffer against competition.
PC Gaming revenue potential

Based on checks with games publishers, top PC games are likely generating
revenues of c.US$10-30mn p.a. on average. In terms of ARPU - casual games
generate the lowest revenues at c.US$10-12/user, while MMORPG games generate the
highest at c.US$30-50/user. Pay ratio varies widely across games as well, with
MMORPG having 10-40% pay ratio. The lifespan for PC games tend to be longer, with
some IPs lasting beyond 10 years (e.g. Maplestory), which, in our view, makes it
worthwhile for companies to invest heavily in user acquisition. However, the cost of
licensing/publishing a game has increased dramatically over time, with several millions
of dollars required for top global games, making the hurdle very high for publishers to
get top notch IPs.
According to our checks with game companies, PC revenue for the industry has been
declining in recent years by 5-6% p.a. due to the shift to mobile and lack of good PC IP.
However, PC revenue growth seems to have stabilized this year, due to new content
(e.g. more Battle Royale games), and is showing signs of potential growth again. Hence,
we believe our “top down” 2018-21E PC revenue growth estimate of 6% p.a. is
achievable, as more new content is launched in the market, and as fixed broadband
penetration continues to rise (for e.g. the largest Thai telco, AIS, is a key new fixed
broadband player and is rolling out coverage aggressively).
Home gaming more popular vs. Indonesia

Thailand, unlike Indonesia, has a high proportion of play-at-home PC gamers
(70-75%). The number of cybercafes have been declining over time (8-9K now, vs 15K in
its peak years). We believe this is likely due to increasing number of people owning PCs
at home (e.g. cost of gaming laptops has fallen from > Bt30K to below Bt25K last year,
according to Lenovo Thailand consumer business group), a rise in fixed broadband
penetration and higher home affordability, and increasing land rental costs for
cybercafes. Additionally, we highlight the temporary but exponential increase in graphic
card prices, due to the recent rise in popularity of cryptocurrency mining in Thailand, has
put increased cost pressures on cyber cafes. In fact, according to our observation,
cybercafes, with a minimal charge of US$0.3-0.5/hour for a PC, make more money from
selling food and drinks.
Gaming preferences
Top PC games in Thailand include HON (Heroes of Newerth), FIFA Online,
Pointblank, Ragnarok and PUBG. We highlight that HON (same genre as LOL and
Dota2) is as not popular elsewhere except Thailand, which we believe is due to the
aggressive/successful push from Garena. In recent years, Steam (distributing Dota 2, CS
etc.) has localized games for Thailand and has gained significant traction with PUBG.
Meanwhile, Epic games (distributor for Fortnite) - which has been a big hit globally - has
6 July 2018 10
not released a localized version of the game yet, but we do not rule out the possibility in
the future.
In this respect, we believe the ability to localize has been critical to driving the larger
revenue size as publishers can: 1) Better understand local tastes/trends and offer better
price in relation to affordability; 2) have closer relationship with a broader ecosystem of
enablers e.g. payment providers; 3) offer better gaming experience - local servers
(especially for more high tech PC games) can reduce latency issues and a local tech
team can resolve IT hiccups faster.
Exhibit 3: Fixed broadband penetration is better vs. most ASEAN Exhibit 4: Thailand has 1 cyber cafe per 8,100 people
peers
Fixed broadband penetraion per 100 population Population per cyber cafØ (’000)
33 87.3
26
24
23
13
10 9
8.1 7.1
5 3.1
2
Indonesia Thailand Philippines Vietnam
SG TW TH VN MY PH ID US CN
Source: ITU Source: Mineski, data compiled by Goldman Sachs Global Investment Research
Exhibit 5: Thailand ranks better than Philippines and Indonesia on Exhibit 6: Smartphone penetration is below some peers...
ITU ICT development index
ITU ICT Development Rank Smartphone Penetration

2017
85% 85%
134 74%
69%
111
101 63%
57%
54% 52%
78 49%
63
46%
16 18
10 12
2 6
Thailand
Philippines
HK
Japan
Germany
US
Singapore
India
Malaysia
Indonesia
Korea
SG TW MY TH PH VN ID SEA&T US CN
Source: ITU Source: Frost & Sullivan
6 July 2018 11
Exhibit 7: ...and expected to reach 90% of the population by 2020.. Exhibit 8: .. with Fixed BB penetration expected to reach 44%
Smartphone Users (mn) Penetration Fixed BB Subscribers (mn) Penetration (% of households)
92% 44%
85% 41% 43%
79% 38%
72% 34% 10,364.6 10,749.6
63.9 9,929.6
57% 58.9 9,094.6
54.4 8,004.4
50.1
39.3
2016 2017 2018 2019 2020 2016 2017 2018E 2019E 2020E
Source: Frost & Sullivan Source: Goldman Sachs Global Investment Research, Euromonitor, NBTC
Garena’s Thailand PC revenue and market share

In Thailand, Garena has a 70-80% market share in cybercafes, which are integrated
with their POS systems (much higher than in Indonesia) where gamers can also make
payments in cash, which is - in turn - credited to their online gaming account. For home
gamers, payments can be made through credit cards, prepaid cards, ewallets or cash
payments through convenience stores.
Key competitors for Garena include local players such as Asiasoft, True Digital,
Electronics Extreme and Ini3 and also foreign players like Siamgames and Nexon
Thailand. We view the space as more competitive vs. Indonesia. This is likely due to the
larger Thai PC market revenue, and also the easier foreign shareholding structure (49%
limit but a company can reach 100% if it acquires special license on account of
technology transfer etc.). In addition, some companies have used a tiered shareholding
structure to acquire more than 49% stake, as the Thai laws do not require any “look
through” calculation to determine foreign ownership status.
In 2016/2017, Sea’s Thailand GAAP revenues were US$120mn/134mn. We strip out the
epayments and mobile games revenue to isolate its PC games revenues.
Key assumptions:
1) We assume 80% of its digital financial service revenues are from Thailand, and
assume that its “Others” revenues is evenly split across its core markets - Thailand,
Taiwan, Indonesia and Vietnam. This implies Garena’s 2016/2017 Thailand game revenues
at US$112mn/115mn.
2) We assume Garena’s key mobile game AOV likely had no revenue contribution in 2016
(launch 4Q 2016) - 2016 Garena revenues should be (nearly all) PC only.
3) For 2017 - we estimate AOV’s cash revenues at US$190mn, if we assume: i) 40% of

AOV’s cash revenue (mostly Taiwan and Thailand, and to a much lesser extent Vietnam)
is from Thailand; ii) AOV’s GAAP to cash revenue ratio is c.30% (majority of cash
revenues are not recognized as GAAP revenues immediately, due to the longer revenue
amortization period for this game), and iii) that “Other” mobile games (e.g. Headshot,
Breakout, FIFA 3 mobile) contributed US$3mn - PC revenues should be c.US$90mn. We
6 July 2018 12
believe this implies that Garena’s PC revenues have declined yoy - likely due to
cannibalization from AOV (players shifting from PC MOBA games like HON) and
competition from PUBG.
Considering the above, we estimate the breakdown of Garena’s PC game revenue as: i)
HON and FIFA 3 - US$25-30mn each; ii) Pointblank - US$20mn; iii) LOL - US$10mn; iv)
Other Garena PC games (e.g. Blade & Soul and Vindictus) - US$5mn. This gets us to
c.US$90mn p.a. PC revenues, placing Garena’s PC market share at around 40% (i.e.
~US$90mn based on our “bottom up” industry revenues of US$225mn) - significantly
above our estimate of Garena’s PC market share in Indonesia of c.25%.
Introduction to Thailand’s mobile gaming market - Garena well positioned

to leverage legacy user base
For mobile, users/revenues data is more readily available through sources like AppAnnie
and Sensor Tower - hence, there is higher accuracy in constructing an industry revenue
pool than for PC. We construct a game by game bottom up revenue estimate of the
market. Using Sensor Tower grossing stats - top 20 games had monthly revenues of
c.US$6.5mn (April 2018). However, we note that there are other channels of payments,
likely putting the revenues much higher.
Hence, in our analysis for Garena, we have grossed up revenues to adjust for this. We
conduct this analysis selectively across countries assuming that US/Europe/South Korea
gaming companies are much more strict on how they collect revenues (i.e. credit card or
direct carrier billing through Google/Apple) and not using 3rd party channels (prepaid
cards, ewallets, payments at top up counters/convenience stores).
For other gaming companies, our industry checks suggest that most do use alternate
forms of payments, and that actual revenues can be c.3X higher. If so - we estimate that
top 20 games combined can total to a monthly revenue of US$16mn p.a., implying a
total revenue of US$192mn p.a. According to our checks with games publishers, top 20
games contribute to nearly 80% of the total market revenues, implying the total mobile
market revenues of ~US$240mn - moderately below our US$300mn “top down”
estimate.
Below are our key takeaways for Thailand’s Mobile gaming market:
1) Mobile revenues have just started to exceed PC revenues in Thailand, and we expect
it to grow significantly faster going forward;
2) Consumer tastes are different from Indonesia - the preference is more towards
MMORPG, and for Korea content;
3) Presence of a large legacy PC gamer base - and the success of certain games - can
allow legacy PC titles to easily be “hits” in the mobile gaming segment too, giving
more predictability to new game success, than what Indonesia would offer;
6 July 2018 13
4) Garena may be able to raise market share for mobile (currently 700bps below PC)
with the success of Free Fire, and leveraging off its AOV momentum and strong PC
gamer base;
5) Payment options are more varied and available than in Indonesia, due to higher
penetration of the “play at home” phenomenon for PC.
Key differences vs. Indonesia

More diversified - Using April 2018 SensorTower data (and not re-grossing), the Thailand
mobile market appears more diversified than Indonesia, with top 3/5 games contributing
45%/59% of top 20 games revenues (Indonesia: 55%/68%). We highlight there is less
of a “feast or famine” phenomenon compared to Indonesia. Even if we re-gross our
numbers - the concentration of the top 3/5 games are higher for both countries, with
Indonesia still more concentrated than Thailand.
MMORPG over MOBA - Using the same SensorTower data (and not re-grossing), the
gamer preferences appears different from Indonesia. MMORPG is the most popular
genre in Thailand, followed by MOBA and then RTS/Battle Royale. For Indonesia - MOBA
is more popular, followed by RTS/MMORPG (evenly matched) and Battle Royale. There
are many highly popular MMORPG games in Thailand e.g. Yulgang Mobile, Lineage 2
that are not popular in Indonesia, which we believe is due to these games being already
popular on PC, translating well across the mobile platform and through providing higher
localization (several Korean companies have local operations and offer better
customization/pricing etc).
Interestingly, the most popular game within a certain genre can differ too e.g. Mobile
Legends is the top MOBA game in Indonesia, while ROV (known as AOV in other parts
of ASEAN and HOK in China) leads in Thailand. This is likely due simply to the significant
first mover advantage that Mobile Legends had over AOV in Indonesia. There are also
similarities e.g. Lords Mobile leads all RTS games in both market.
Similar to Indonesia - MOBA appears a “winner takes all” segment in Thailand, whereas
for MMORPG, many games seem to co-exist profitably. Interestingly, there are three
Battle Royale games that are in the top 10 grossing in Thailand, unlike in Indonesia
where there is only one. This accounts for the higher revenue mix of Battle Royale
games in Thailand than Indonesia, perhaps showing a greater acceptance for new
content by the Thailand market. Interestingly, Free Fire is monetizing already in Thailand,
and is #2 grossing game on Google Playstore (82% of handsets in Thailand are Android
based, and hence Google play store rankings matter more).
6 July 2018 14
Exhibit 9: Appstore/Google Playstore Ranks details

As of July 2, 2018
App Store (iOS)
Downloads Grossing
Rank
Game Publisher Genre Country Game Publisher Genre Country
1 PUBG MOBILE Tencent Battle Royale China Garena RoV Garena Online MOBA Singapore
2 Darkness Rises NEXON RPG Korea PUBG MOBILE Tencent Battle Royale China
3 Garena RoV Garena Online MOBA Singapore Yulgang Mobile Longtu Game RPG China
4 Bonus Fishing-ѯдєѕѧкюјѥзѥѝѧ
ѱь WanTing Hong Casino China Dragon Nest M - SEA MooliDigital RPG China
5 Divine Ruler Yong Feng RPG China Darkness Rises NEXON RPG Korea
6 Fatal Contract Qin Ye RTS China Rules of Survival NetEase/VNG Battle Royale China / Vietnam
7 Eternal Realm - ѝкзіѥєѳіјѧ
Җєш
ѧ Qin Ye RPG China Lineage2 Revolution Netmarble RPG Korea
8 Garena Free Fire Garena Online Battle Royale Singapore Knights Chronicle Netmarble RPG Korea
9 Battlelands Royale Futureplay Battle Royale Finland Garena Free Fire Garena Online Battle Royale Battle Royale
10 Helix Jump Voodoo Casual France Lords Mobile: War Kingdom IGG RTS Finland
Google Play Store
Downloads Grossing
Rank
Game Publisher Genre Country Game Publisher Genre Country
1 Helix Jump Voodoo Casual France Garena RoV: Mobile MOBA Garena Online MOBA Singapore
2 Garena Free Fire Garena Online Battle Royale Singapore Garena Free Fire Garena Online Battle Royale Singapore
3 Darkness Rises NEXON RPG Korea Yulgang Mobile Longtu Game RPG China
4 Garena RoV: Mobile MOBA Garena Online MOBA Singapore Darkness Rises NEXON RPG Korea
5 Granny DVloper Arcade Sweden Knights Chronicle Netmarble RPG Korea
6 PUBG MOBILE Tencent Battle Royale China PUBG MOBILE Tencent Battle Royale China
7 Mini World: Block Art Miniwan Casual China Lords Mobile: Battle of the empires -IGG
Strategy RPG RTS Finland
8 Subway Surfers Kiloo Casual Denmark Dragon Nest M - SEA Siamgame RPG China
9 Kick the Buddy Playgendary Casual Germany Lineage2 Revolution Netmarble RPG Korea
10 Tank Stars Playgendary Casual Germany Rules of Survival NetEase Battle Royale China
Source: AppAnnie
Exhibit 10: Top 20 Games breakdown by genre

Thailand Revenue Download
Sum % total Sum % total
MOBA 2,400 37% 800 11%
MMORPG 2,392 37% 2,500 34%
RTS 475 7% 253 3%
Battle Royale 680 10% 3,110 43%
Casual 523 8% 505 7%
FPS 82 1% 119 2%
Source: AppAnnie, Sensor Tower
Overseas gaming content - Korean content is much more popular in Thailand than
Indonesia, due to the legacy effect from the PC era and the localization effect, whereas
Western content is slightly more popular in Indonesia than Thailand. Chinese content is
more popular in Indonesia than Thailand, but generally has an overwhelming market
share in both regions.
Many foreign developers/publishers (largely Koreans and Chinese e.g. COM2US,

Funplus, Siamgame, GMThai) publish games directly in Thailand. But unlike in Indonesia,
some foreign players have local offices (e.g. IGG, LINE), which clearly allow better
localization. Even Tencent has a legacy Thailand entity that also published games
recently, but only games (e.g. web games like Naruto Online) that Garena did not
publish.
Strong local PC publishers (e.g. Asiasoft) however are not able to transition to mobile, as
the ability to engage users is difficult (e.g. PC publishers use community leaders to drive
discussions on forum etc, while mobile may be using social media like Facebook more),
6 July 2018 15
and that most PC publishers find mobile user acquisition cost too high to justify their
investment (mobile games lifespan is much shorter usually).
What is Garena’s mobile revenue size?

For 2018, most local game publishers, based on our checks, see 10-15% mobile
revenue growth as realistic. This is significantly lower than our “top down” estimate of
26% CAGR over 2017-21E, and may reflect the lack of visibility of new game launches,
as mobile games often bypass local publishers and are published directly by the
developers. We take a more optimistic approach, seeing many new games being
launched that can likely be revenue drivers for the industry e.g. Garena’s Free Fire,
Tencent’s PUBG Mobile, and Nexon’s Darkness Rises, alongside rapidly growing
smartphone/4G penetration.
For Garena - we estimate its 2017 Thailand mobile cash revenues to be c.US$79mn
(US$76mn from AOV; US$3mn from others), which implies a 33% market share
(assuming a US$240mn “bottom up” market size). Unlike Indonesia, Garena has a lower
mobile market share than for its PC business, as AOV/ROV was the first “hit” mobile
game (Break Out, Headshot etc. had limited success), while it has many hit PC games.
Thus far, we have seen strong momentum for its new mobile game Free Fire, and
highlight that the company expects to launch additional new games like DD Tank and
Contra: Return soon.
eSports in Thailand
Thailand was among the last countries in ASEAN (Philippines and Malaysia first) to
experience a growth in eSports, but interest has grown fast, with Thailand already
having 1.3mn eSports enthusiasts, which is a higher percentage of total
population than Philippines/Indonesia, though lower than in Vietnam. According to
Niko Partners, Thailand has “more hardcore gamers (playing more than 21 hours per
week) than all other countries in Southeast Asia” - making it a significant opportunity for
eSports. Our checks with gaming companies highlight Thailand emerging as possibly a
hub for future eSports competitions in ASEAN, given the rapidly growing base of users.
Interestingly, Thailand’s total cumulative eSports winnings (according to

www.esportsearnings.com) is US$1.3mn (aggregated from 369 players) ranking behind
Malaysia, Philippines, Singapore and Vietnam, and is ahead only of Indonesia currently.
But we believe this is likely due to the late takeoff of the eSports trend in Thailand, and
given that there are many locally held tournaments, whose prize pools are not recorded.
There are many notable eSports Thai teams like Ascension Gaming, a LOL team, are
considered top tier eSports teams. Key eSports tournaments that Thai players get
winnings from are Dota 2, LOL, HON and Fifa Online 3.
Indeed, there appears to be many supporters for eSports in Thailand, far beyond what
other ASEAN nations have seen e.g. Youtube/Twitch mainly broadcast Thai eSports
events, while traditional Thai TV stations like Thairath / True TV / PPTV also showcases
eSports frequently. There are also universities such as Dhurakij Pundit University,
Mahidol University and Sripatum University that have offered game related courses for
some years, offering support for the industry, while large local conglomerates like the
6 July 2018 16
CP group have also invested into the business. Recently, the Tourism Authority of
Thailand has also organized the “City of Games” event. Garena has a sizable presence
in the eSports space, and had organized an annual regional esport competition in
Bangkok that attracted more than 200k visitors and has sponsored AOV competitions on
satellite TV in Thailand.
The age group which eSports appealed most to were the university students. HON is a
popular esports game, but Dota2 is rising in popularity in the MOBA genre. Garena is a
large player in Thailand (and the region) organizing LOL events, but has recently shifted
focus to AOV/ROV.
Exhibit 11: Thailand’s Gaming Landscape

Company Names Developer/Publisher Games Description
Local players
One of the pioneer publishers of Thai online games, benefitting from the popularity of "Ragnarok Online"
- Audition (MMORPG, licensed from South Korea) in 2003 and Audition (casual) in 2006 in Thailand, before entering
- Luna X other Southeast Asia markets. Today they compete in all of Garena’s markets with the exception of Taiwan
Asiasoft Publisher only
- Dragon Nest R but have been in steady decline (in terms of revenue / market share) since 2012; currently, they only remain
- Yulgang OC competitive in Malaysia and Singapore, while in Thailand their market share has been reduced to half the size
of Garena (based on PC market share as of 2016- disclosed by Asiasoft). PC-focused.
Online games publisher founded in May of 2014, headquartered in Thailand. Total capital raised Bt13mn.
Electronics Extreme Publisher only Ragnarok Expanded to Thailand in Southeast Asia in 2017- for example, launched Ragnarok in the Philippines June
2017 (currently publish Ragnarok Online in Thailand, Malaysia and Singapore as well). PC-focused.
- Seal Online Games developer and publisher, focusing mainly on mobile games. Operating only in Thailand, and thus
Siam Games Publisher only - Dragon Nest M specialize on developing more localized games (in terms of language and content) themselves while they
also publish games from other developers as well.
Online games publisher focusing on web games and mobile games. They feature both Korean and Chinese
GMThai Publisher only - Ragnarok (Web) games, and largely focus on the RPG (including ARPG and MMORPG) genre - including the Ragnarok web
version.
Foreign players
One of the largest internet companies in Vietnam - games publisher and developer, while they also own a
- Rules of Survival chat app called Zalo which has more than 70mn users in Vietnam and countries including Myanmar, Japan,
VNG Both
- Crossfire South Korea, Malaysia and Taiwan (Bloomberg, May 30 2017) ; expect 2017 revenues of $180mn,
representing a 70% yoy increase (Bloomberg, May 30 2017)
- Seven Knight Netmarble is a subsidiary of CJ Corporation (a korean conglomerate) first entered Thailand in 2012 under
Netmarble Both
- mstar Stand Best Tech limited. It publishes Mstar, Seven Knight and Let’s Get Rich
- Maple Story 1 / NOVA
Nexon is one the leading online game developer from South Korea (headquartered and listed in Japan) which
- Point Blank
Nexon Both gained popularity from Maple Story Online. It currently operates over 100 tiltles in more than 190 countries.
- Trees of Savior
Nexon entered Thailand in 2016 by acquiring I-Digital connect.
-HIT
Source: Company data, Goldman Sachs Global Investment Research
6 July 2018 17
Thailand’s Ecommerce Industry - C2C to remain key for Shopee

Exhibit 12:
HOW BIG IS THE MARKET?

Frost & Sullivan expect 2017
$4-5bn market size to be in $4bn while
our bottom-up approach 4% % online penetration of Total retail
market
suggests US$4-5bn
GEOGRAPHICAL INDICATORS
Logistics performance index rank
#46 (World Bank) indicates better than

Indonesia's but worse than China's
logistics
53% % of population living in urban
area
E-COMMERCE ACTIVITIES
12m 71%
% of sample size (age 16 - 64)
Number of people purchasing
searched online for a product
goods online
to buy
52% Made an online purchase on

PC 52% Made an online purchase vis
Mobile
51m Number of active social

media user in Thailand 51% Of consumers survey buy
goods through social media
as of December 2017
Source: Frost & Sullivan, WeAreSocial, World Bank
Sea’s ecommerce business was only 2% of its 2017 GAAP revenues, but is 42% of
our SOTP value as we expect it to grow sizeably in the next few years. Within its
ecommerce business, Thailand is small at c.8% of its total ecommerce orders last year.
In 2017, Thailand’s total retail spending amounted to US$102bn, which is 40% of
consumer spending and 22%/24% of nominal/real GDP. Within that, according to data
from Statista and Frost & Sullivan, Thailand’s ecommerce GMV was estimated to be
c.US$3-4bn in 2017, highest in ASEAN alongside Indonesia. Assuming the mid-point of
US$3.5bn, this implies 3.9%/0.9% of total retail spending/nominal GDP. Our forecast
using a “top down” approach projects the ecommerce GMV at US$4bn. According to
Statista, there were 12.1mn ecommerce users in Thailand in 2017, spending US$243 per
6 July 2018 18
year. This is expected to grow to 13.9mn users by 2021, with spending growing to
US$382 by 2021.
Below we highlight the key takeaways from our analysis on Thailand’s ecommerce
market:
1) GMV may be larger than expected - We believe our current ecommerce market
size estimates may be too low. Considering the size of the social media ecommerce
market and lesser players in the market (even accounting for JD’s entry), we believe that
Shopee’s chance of gaining more market share is high. Based on 2017 data, our analysis
confirms that Thailand’s ecommerce market size is not at all smaller than Indonesia.
2) Low barriers and lower competition - There are much lower barriers to entry in
Thailand, than Indonesia, as technology, logistics and payments are all more advanced.
This suggests lower barriers to entry for ecommerce companies. The advantages would
be that ecommerce companies do not have to spend as much capital to resolve
bottlenecks and can enjoy lower cost structure. The disadvantage would be the higher
likelihood of increasing competition, which could cap the ecommerce profit opportunity
at a lower level. Competition is however lower than Indonesia - although Lazada has
been more aggressive this year and JD has entered the market, we have also seen the
exit or scaling down of many other ecommerce companies like Weloveshopping etc. We
expect the C2C marketplace to have limited competition, and we expect it to continue
taking share away from social media ecommerce (we do not count online classifieds as
competitors in our analysis).
3) B2C and cross border may flourish faster - Considering strong government support,
the country’s position as a transport hub and its solid domestic logistic infrastructure,
ecommerce companies should be able to procure and store inventory affordably (either
on a 1P or 3P model) in the country, and potentially distribute it towards the CLMV
markets too. This should significantly lower the cost/efficiency of B2C business, allowing
it to flourish very quickly. Cross border ecommerce is also likely to be easier to execute
for Thailand, than for countries like Indonesia.
4) Shopee’s strategy - Shopee continues to have strong momentum (judging from

AppAnnie, SensorTower and SimilarWeb data), leveraging its free shipping strategy and
wide assortment of various female category products. Given Lazada’s advantage in B2C
and cross border ecommerce business (leaning on Alibaba), and considering the low
C2C competition (unlike Indonesia), we believe Shopee needs to continue to focus its
efforts on the C2C business, while looking to partner with other players to develop its
B2C business. Even as B2C may flourish faster in Thailand, we believe C2C remains the
key battleground for the next 2-3 years, before B2C takes off in a bigger way.
Our Top-down vs. bottom-up analysis on Thailand’s ecommerce market

Our “top down” forecasts assume that ecommerce penetration in Thailand will rise
to 8.7% of total retail by 2021E, from 3.9% today. We expect ecommerce penetration
to be lower than Indonesia (12.4% by 2021E), given the more prevalent offline retail
footprint, which should put a lower cap on ecommerce uptake. Based on the GDP per
capita vs ecommerce penetration scatter plot, this increase appears highly reasonable
6 July 2018 19
(exhibit 13). There are however some risks to forecasts, as Thailand’s demographic
outlook is not as positive as Indonesia and most other countries in ASEAN, given the
declining population growth and an increasing aging population, that will likely act as
potential constraint to long term growth.
In Thailand, offline commerce remains dominant, and has grown at 4.2% CAGR in the
past 10 years, vs real/nominal GDP CAGR of 3.0%/5.6% over the same period. B2C
ecommerce sales (Euromonitor) meanwhile grew at 17% CAGR over last 5 years to
reach US$1.8bn in 2017. If we assume the total ecommerce revenue at US$3.5bn
(average of Statista and Frost & Sullivan), this would suggest that B2C is c.50% of the
total ecommerce market. Our industry checks however suggests that C2C is c.80% of
the market and B2C is at c.20%. The difference is likely because these forecasts are not
capturing C2C sales from social commerce (e.g. Instagram/Facebook/Line), and we
believe that the “all-in” ecommerce market size should be a lot higher than
US$3-4bn.
Based on industry checks, it appears that c.40% of ecommerce merchants are likely
based in Bangkok and c.60% outside. However, by sales volumes, c.80% are from
Bangkok (merchants in Bangkok are larger and have warehousing capabilities) and
c.20% from outside Bangkok. In terms of demand, c.30% is from Bangkok and c.70% is
from outside. Cross-border remains very small though, but appears to be growing fast.
Using Shopee’s ecommerce sales volume disclosure last year, we estimate that Shopee
generated c.US$330mn gross GMV in 2017. Our industry checks suggest that Lazada is
likely at least > 3X larger. Lazada generated c.US$55mn revenues last year, which if we
assume a c.3-5% take rate (roughly the merchant rates range it indicate on its app) does
suggest US$1.1-1.8bn GMV (i.e. 3-5X larger than Shopee). We believe these two
companies are the leaders in the market, and likely capture nearly 70-80% of the
marketplace GMV (judging from their combined share of marketplace apps
downloads).
Considering the above (and discounting Shopee’s gross GMV by 30% to get to net
GMV), we believe the net marketplace only GMV for Thailand may be at
US$2.2-2.5bn GMV. We also believe social media ecommerce GMV is highly significant
in Thailand, at c.50% of the total ecommerce market, based on our checks with
merchants and logistic companies. Hence the “real” total ecommerce GMV for
Thailand in 2017 may be US$4.4-5.0bn - higher than our “top down” ecommerce
GMV forecast of US$4bn.
Looking ahead - our ASEAN economics team projects nominal/real GDP growth of
8.2%/3.9% through 2021E. If we assume the same historical GDP to retail growth
multiplier ratio, retail spending may grow at 5.6%-6.3% during this period. Additionally,
we believe ecommerce should continue to gain share. According to Frost & Sullivan, the
Thailand GMV growth last year was 29% and is projected to grow at a 26% CAGR over
2017-21E. Meanwhile, according to Tech in Asia, a study from Google and Temasek
Holdings projects Thai ecommerce market to grow at 29% CAGR through 2025.
According our checks with ecommerce companies, expectations for growth varies
6 July 2018 20
widely, with some expecting 20-25% p.a. and others looking at 50-100% growth p.a.
over the next 2-3 years.
Exhibit 13: Online retail penetration vs GDP per capita

2017
Online retail penetration - 2017

14%
SG
12%
TW
10%
8%
6%
PH MY
4% TH
VN
2%
ID
0%
0 10,000 20,000 30,000 40,000 50,000 60,000
Source: Euromonitor, Goldman Sachs Global Investment Research

Exhibit 14: Consumer Expenditure breakdown (categories defined by our Asia consumer team)
Category TH MY PH SG TW VN ID CN IN JP US
Eating Drinking and Smoking 28.50% 23.36% 43.03% 8.89% 17.42% 41.13% 37.91% 24.49% 32.19% 17.50% 8.16%
Food 21.74% 20.24% 39.27% 6.40% 14.92% 37.51% 29.38% 21.37% 29.35% 14.17% 5.51%
Non-alcoholic beverage 3.40% 1.28% 2.37% 0.44% 0.29% 1.25% 1.84% 0.91% 0.45% 1.17% 0.70%
Alcoholic beverage 2.28% 0.38% 0.62% 0.61% 0.84% 1.09% 0.18% 0.83% 0.63% 1.57% 1.09%
Tobacco 1.08% 1.47% 0.77% 1.44% 1.39% 1.28% 6.52% 1.39% 1.76% 0.59% 0.86%
Looking Better 8.79% 9.69% 9.09% 6.78% 9.91% 5.18% 5.24% 8.66% 9.28% 8.65% 6.34%
Clothes and footwear 4.27% 2.97% 1.26% 2.78% 4.50% 3.62% 3.70% 7.20% 7.12% 3.93% 3.18%
Personal Care (incl. beauty products) 2.11% 5.44% 5.03% 3.27% 4.79% 1.21% 1.32% 1.07% 1.23% 3.72% 2.23%
Jewelry 2.41% 1.27% 2.80% 0.73% 0.62% 0.35% 0.22% 0.40% 0.93% 1.01% 0.94%
Home 17.69% 21.03% 18.14% 22.54% 25.57% 15.62% 13.77% 27.92% 21.86% 30.20% 27.83%
Housing 4.84% 11.57% 7.64% 14.52% 13.16% 5.62% 6.72% 17.54% 9.52% 19.22% 16.11%
Utility 3.14% 3.10% 4.14% 2.81% 3.66% 4.26% 3.79% 3.71% 4.33% 4.58% 2.67%
Home Furniture and improvement 1.31% 1.60% 1.38% 1.33% 1.76% 1.87% 0.44% 1.47% 1.90% 1.73% 2.31%
Home Appliances 1.47% 0.83% 1.19% 0.71% 1.44% 1.49% 0.63% 0.90% 0.08% 1.10% 0.45%
other household goods and services 2.31% 3.12% 1.29% 3.16% 2.56% 1.33% 1.88% 1.50% 2.68% 2.88% 1.48%
Financial services 4.63% 0.80% 2.51% 0.01% 2.99% 1.04% 0.30% 2.80% 3.35% 0.70% 4.82%
Mobility/connectivity 15.02% 20.18% 14.38% 16.78% 15.83% 9.40% 23.57% 13.43% 16.19% 13.87% 11.17%
Automobiles 3.72% 2.25% 2.60% 5.08% 2.31% 2.63% 5.32% 2.43% 1.32% 2.59% 3.26%
Trasport services 4.60% 0.83% 5.67% 3.28% 1.87% 2.84% 3.75% 4.35% 7.34% 2.78% 0.82%
operations of transport 4.75% 9.21% 3.05% 6.19% 8.17% 2.48% 8.87% 4.44% 5.32% 4.79% 4.69%
Telecom Equipment 0.21% 0.73% 0.01% 0.10% 0.48% 0.19% 0.62% 0.75% 0.64% 0.08% 0.15%
Telecom Services 1.68% 6.99% 3.04% 2.13% 2.99% 1.23% 5.00% 1.29% 1.27% 3.52% 2.16%
Postal Services 0.07% 0.19% 0.00% 0.02% 0.01% 0.03% 0.01% 0.16% 0.30% 0.11% 0.08%
Having fun 21.80% 16.55% 5.97% 20.27% 17.25% 16.75% 12.40% 11.12% 2.88% 15.59% 16.09%
Food services 11.83% 9.79% 2.95% 7.00% 7.77% 13.29% 8.73% 4.97% 1.85% 6.95% 5.86%
Travel 5.84% 0.69% 1.41% 6.84% 5.43% 2.78% 1.13% 0.74% 0.16% 1.96% 1.09%
Hotel 4.90% 0.44% 1.11% 2.66% 1.17% 2.60% 0.94% 0.60% 0.12% 0.94% 1.00%
Packaged Holidays 0.94% 0.24% 0.30% 4.18% 4.26% 0.18% 0.19% 0.14% 0.04% 1.03% 0.09%
Gaming and online games 0.23% 0.22% 0.14% 0.17% 0.48% 0.40% 0.13% 0.59% 0.05% 0.47% 0.19%
Media 1.11% 1.16% 0.39% 0.96% 1.07% 0.27% 1.38% 1.11% 0.18% 0.22% 2.70%
Other recreational goods and services 2.79% 4.69% 1.09% 5.31% 2.49% 0.01% 1.03% 3.71% 0.64% 5.98% 6.25%
Well being 6.87% 8.44% 9.33% 22.57% 13.27% 11.83% 7.01% 11.77% 10.10% 12.21% 28.86%
Healthcare 4.52% 2.60% 2.77% 7.74% 4.17% 4.82% 2.83% 4.72% 4.48% 3.75% 22.20%
Education 1.26% 2.08% 4.26% 4.33% 3.83% 5.75% 3.92% 4.99% 3.91% 2.02% 2.31%
Insurance and social protection 1.09% 3.76% 2.30% 10.50% 5.27% 1.26% 0.26% 2.06% 1.71% 6.45% 4.35%
Others 1.34% 0.75% 0.07% 2.16% 0.75% 0.09% 0.09% 2.61% 7.51% 1.98% 1.55%
Source: Euromonitor, Goldman Sachs Global Investment Research
6 July 2018 21
Exhibit 15: Consumer expenditure - Thailand (categories defined by our Asia consumer team)
Category 2017 2018E 2019E 2020E 2021E
Eating Drinking and Smoking 28.50% 28.59% 28.64% 28.67% 28.71%
Food 21.74% 21.83% 21.88% 21.92% 21.96%
Non-alcoholic beverage 3.40% 3.41% 3.41% 3.42% 3.43%
Alcoholic beverage 2.28% 2.27% 2.27% 2.26% 2.26%
Tobacco 1.08% 1.07% 1.07% 1.07% 1.06%
Looking Better 8.79% 8.77% 8.74% 8.71% 8.67%
Clothes and footwear 4.27% 4.24% 4.21% 4.17% 4.13%
Personal Care (incl. beauty products) 2.11% 2.11% 2.13% 2.13% 2.13%
Jewelry 2.41% 2.41% 2.41% 2.41% 2.41%
Home 17.69% 17.66% 17.63% 17.62% 17.61%
Housing 4.84% 4.84% 4.84% 4.84% 4.84%
Utility 3.14% 3.13% 3.13% 3.12% 3.12%
Home Furniture and improvement 1.31% 1.29% 1.28% 1.27% 1.26%
Home Appliances 1.47% 1.47% 1.47% 1.47% 1.47%
other household goods and services 2.31% 2.31% 2.30% 2.30% 2.30%
Financial services 4.63% 4.62% 4.61% 4.61% 4.62%
Mobility/connectivity 15.02% 14.96% 14.95% 14.95% 14.94%
Automobiles 3.72% 3.67% 3.64% 3.62% 3.60%
Trasport services 4.60% 4.60% 4.60% 4.60% 4.58%
operations of transport 4.75% 4.73% 4.72% 4.73% 4.74%
Telecom Equipment 0.21% 0.21% 0.21% 0.21% 0.22%
Telecom Services 1.68% 1.69% 1.70% 1.72% 1.73%
Postal Services 0.07% 0.07% 0.07% 0.07% 0.07%
Having fun 21.80% 21.84% 21.86% 21.89% 21.92%
Food services 11.83% 11.85% 11.87% 11.87% 11.88%
Travel 5.84% 5.88% 5.91% 5.95% 5.99%
Hotel 4.90% 4.94% 4.97% 5.00% 5.03%

Packaged Holidays 0.94% 0.94% 0.94% 0.95% 0.96%
Gaming and online games 0.23% 0.31% 0.33% 0.34% 0.36%
Media 1.11% 1.09% 1.08% 1.07% 1.06%
Other recreational goods and services 2.79% 2.71% 2.68% 2.65% 2.63%
Well being 6.87% 6.87% 6.87% 6.88% 6.89%
Healthcare 4.52% 4.52% 4.53% 4.54% 4.55%
Education 1.26% 1.26% 1.27% 1.27% 1.27%
Insurance and social protection 1.09% 1.08% 1.08% 1.08% 1.08%
Others 1.34% 1.32% 1.30% 1.29% 1.27%
Source: Goldman Sachs Global Investment Research, Euromonitor
The consumer profile

The average Thai consumer is highly digital savvy, judging from the high internet and
social media penetration (65% internet penetration). For e.g. Thai people have highest
interaction per 1000 fans on Facebook among all ASEAN markets ( > 2X of Malaysia)
according to iPrice, and spend 4.2 hours per day on average on mobile internet (highest
in world) according to Google-Temasek (source: Tech in Asia). This is partly due to
relatively high mobile/4G handset penetration at 80%/52% , and decent fixed/next
generation broadband penetration at 38%/8% of households. Indeed, Thailand has the
2nd highest mobile ecommerce web traffic (79%) in ASEAN, just behind Indonesia
(87%), according to iPrice (2018 report). A PWC report (2016) also states that Thailand
has a higher proportion of respondents using mobile phones to make purchases
compared to Singapore/Malaysia.
Based on the above statistics, it is not surprising that acquiring customers through
digital mobile means can be highly effective. That said, digital advertising is only 12% of
total media advertising spend, suggesting that a lot of the spending remains offline, and
we believe this could eventually shift. The means to acquire traffic online is also largely
limited to Facebook and Google (c.60% of total Thailand digital advertising spend,
Source: Digital Advertising Association of Thailand), though we see a chance for the likes
of traffic aggregators like Priceza, Shopback etc. to channel some traffic as well.
6 July 2018 22
According to iPrice, Thai consumers have the lowest conversion rate (20% below
average) in ASEAN, along with Philippines, and with a desktop conversion rate higher
than mobile - contrary to the other ASEAN countries. iPrice also states that the Thai
consumer basket size (US$42) is fourth in ASEAN, above Indonesia and Vietnam, but
below Singapore, Malaysia and Philippines. Interestingly, only 37% of Thai consumers
compare prices and actively seek out deals, lower than Malaysians/Vietnamese as an
example. Key mode of payment is cash on delivery, follow by bank transfers.
In terms of wallet spend - we see categories such as Eating, drinking and smoking and
Having fun (categories defined by our Asia consumer team) as top offline categories for
Thai consumers. Compared with other markets, Thailand appears to be “overspending”
on Having fun, and “underspending” on Health and Beauty and Home.
In terms of categories, Euromonitor data suggests that consumer electronics/consumer

appliances have high online penetration, while apparel/footwear and beauty/personal
care have lower online penetration compared to the average, and is likely to see
significant more scope for online growth. This is consistent with data from
eshopworld which suggests electronics as the largest category for ecommerce thus far
at 2.5X of fashion. However, it expects this gap to close significantly in 5 years to 1.4X,
as fashion outgrows electronics. We believe this should benefit Shopee, which is well
positioned in the female buyers space.
Based on our industry checks, average order value for B2C is c.Bt600-700, and
Bt700-800 for C2C. This is unusual as C2C basket sizes are usually smaller, we believe
this is likely due to Lazada aggressively trying to gain GMV, offering more attractive
shipping terms while dropping take rates. In addition, we believe that Thai consumers
have now higher trust in ecommerce, and have started moving from higher value items
to more mass market produced items, as demand is spreading to blue collar/rural
population.
6 July 2018 23
Exhibit 16: Thailand e-Commerce landscape
Thailand e-Commerce landscape

35%
Consumer Health
30%
Beauty and
25% Personal Care
Apparel and
2017-2022 CAGR
Footwear
20% Traditional Pet Care
Toys
Home Care
15%
Personal Consumer
Accessories Appliances
10%
Home
Furnishings Home Consumer
5% Improvement Electronics
0%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
% Online Penetration
Source: Euromonitor
Competition landscape
The landscape has changed significantly in the last year, with key names like 11th
Street, Tarad, Zalora, Central.co.th and Weloveshopping no longer seen as key players
(and in some cases, no longer existing) in the market (according to App Annie and
Similarweb).
The market today is largely dominated by Lazada followed by Shopee and, based on
Similarweb data, the gap is closing. Looking ahead, JD-Central which also has an
ecommerce partnership (Central also acquired Zalora) with a recent capital investment
from Google, we believe it could be a key competitor at some point. The TCC Group
(local conglomerate owning F&B businesses like Thai Beverage) has also recently
acquired 54% of Tarad for US$8mn, and while the investment size was small, we cannot
rule out aggressive investment from the TCC Group at some point. There are also niche
ecommerce platforms like Zilingo which focus only on fashion.
That said, overall, we believe the Thai ecommerce space has become less
crowded, though top ecommerce players are still aggressive on promotions e.g.
Lazada Thailand has significantly dropped merchant take rates for certain categories this
year, while Shopee continues to offer aggressive free shipping in the market.
We also note that Thai consumers (compared to Indonesians) have many other avenues
to buy online: 1) Social media (Instagram/Line) is an important medium for transactions
to occur; 2) Online classifieds like Kaidee is also highly popular, with Kaidee offering
1.5mn SKUs and having sold 1.85mn items since inception; 3) Etailers like Tesco, BigC
and Homepro; and 4) cross border through Aliexpress and Amazon.
6 July 2018 24
Logistics
According to a World Bank study in 2014, Thailand was ranked 35 in terms of logistical
infrastructure - below only Singapore and Malaysia in ASEAN, with 50% of its population
residing in urban areas, making product deliveries easier.
For delivery, our industry checks suggest that mega warehouses/sorting hubs can be
largely located in Bangkok (sandwiched between the airport and seaports) and then
trucking can be done even deep into upcountry (10 hours or so), before using a network
of distribution centers to do the last mile. Longer term, there would be a need to have
larger warehouses across the country, to increase efficiency and lower transport costs,
but this is not anywhere as pressing as in Indonesia. Logistic costs to deliver a parcel in
Bangkok is c.US$2 and in the up country c.US$3 on average - a far more reasonable
cost (i.e. rural Thailand vs Bangkok) compared to Indonesia (can be easily 4X higher, if
we compare Jakarta to distant parts of Indonesia, due to air freight etc).
Last mile is the most challenging, as in many cases, but there are many providers
of such services. There are also providers offering multiple service points (e.g. kiosks
within familymart, BigC etc) for pick up as well. Cold chain delivery is starting as well -
with 30-40% of fruits and vegetables in Thailand shipped through cold chain logistics,
compared to 80% in developed markets. Japan’s Konoike Transport has set up facilities
and warehouses in Thailand, while DHL/UPS are also providing temperature controlled
freight forwarding services.
Key logistic players are Thai Post, DHL, Kerry Logistics and Acommerce, while
Lineman/Lalamove/Grab are focusing more on the last mile same day deliveries. Key
industry estates/warehouse providers are WHA and Ticon Industries. For B2C, which is
only expected to grow, Thailand’s status as a transport hub, especially with its proximity
to China and emerging manufacturing hubs (and also end demand points) like Vietnam
and Myanmar, will help, especially with China’s One Belt One Road initiative and the
Greater Mekong Subregion Economic Cooperation Program.
Cross border has been a challenge in many markets, but Thailand custom process has
been simplified significantly with the “e-customs” procedure - paperless and more
integrated custom environment for traders, custom brokers and shipping companies.
The government also offers various tax and non-tax incentives to foreign companies.
Hence, we believe logistics overall is not a critical bottleneck in Thailand.
“Heat check” suggests Shopee still leads in beauty products, though competition has
increased in fashion category
Based on the latest data from AppAnnie/Sensor Tower, Shopee remains number 1
shopping app in terms of downloads on Appstore but fell to number 2 on Google
Playstore among various e-commerce apps compared to early 2018. We believe this is
still highly impressive, considering that Shopee was well behind Lazada in early 2017.
There is always a lagged effect between downloads/visits and GMV/sales, and we
expect that Lazada’s GMV gap with Shopee to have narrowed significantly this year,
from Lazada having 3-5X larger GMV than Shopee last year.
6 July 2018 25
We also look at our proprietary e-commerce tracker which tracks how well Shopee
is doing vs. competitors (we add JD Central in this report). See “SE: Sunrise for
e-commerce; sunset for traditional retail – reiterate Buy”, published on Jan 28, 2018). In
Thailand, Shopee continues to receive higher ratings than peers on application review
(JD Central is higher but it is from a tiny sample size and we believe should be ignored
for now). Shopee continues to be above peers in both number of SKUs and prices in the
Beauty category, though Lazada now seems to have more fashion products after adding
more listings from taobao collections (i.e. cross border from Alibaba). 11Street.co.th
continues to underperform peers; its May 2018 websites traffic is 1/5 of Jan 2018 traffic
while its application is no longer ranked in the top 20 on either Apple Store or Playstore.
Interestingly, JD Central, which focuses on smartphones and electrical appliances,

offers higher prices than peers and has lesser SKUs available, though this may be
because it has just launched operations. In term of last mile deliveries, Lazada has
reduced its main partners down to 10 from 12 while the rest maintained the same
numbers.
Shopee also introduced Shopee Celebrity Shop, where users can easily access a
product branded by top celebrities in Thailand. It has also launched ‘fulfilled by Shopee’,
where buyers can expect to receive their purchase within 24 hours if they place an order
before 3PM.
6 July 2018 26
Exhibit 17: E-commerce “head-to-head” tracker

as of July 3, 2018
Thailand
Shopee Lazada 11Street JD Central
Overall
Company Specific
Model 3P 1P 3P 1P
Beauty / Electronics Electronics Electronics
Popular products
Clothings / Beauty / Home / FMCG
Payment
Bank Transfer
Debit / Credit Card
Cash on Delivery
Installment
Through Minimart
Guarantee (Pay only when receive)
Total 4 3 4 1
Logistics
In-App Tracking
Cross Border
Number of Logistic Partners 7 8 4 4

User’s Review
Apple Store (Rating / no. of rating) 4.5 / 46,213 4.0 / 13,281 2.0 / 142 5.0 / 16
Google Play (Rating / no. of rating) 4.3 / 88,932 4.2 / 84,287 4.3 / 5,621 4.7 / 23
Others
Depth of Search Filter* 3 4 2 4
Case Study: How many options to choose for each keyword?
Matte Lipstick (Beauty) 10,136 6,401 1,105 9
Maxi Dress (Women’s Fashion) 35,775 92,656 8,685 19
Mobilephone 33,651 14,282 2,162 74
Vacuum Cleaner (Home Appliances) 13,074 5,193 NA 70
Watch (Accessories) 241,735 1,974,669 24,971 280
Diapers (Baby) 14,573 2,815 1,583 160
Case Study: How much for each item?
Price of NYX lipstick 170 280 265 NA
Price of ZanZea floral maxi dress 301 343 NA NA
Price of Samsung J7 core (Bt) 4,197 5,490 5,199 5,990
Price of Dyson V8 Absolute+ 27,882 24,210 NA NA
Price of Daniel Wellington watch 1,458 1,350 4,320 NA
Price of Mamypoko Disney 409 379 599 399
Source: data compiled by Goldman Sachs Global Investment Research
6 July 2018 27
Exhibit 18: E-commerce “head-to-head” tracker

as of Jan 28, 2018
Thailand
Shopee Lazada 11Street
Overall
Company Specific
Model 3P 1P 3P
Beauty / Electronics Electronics
Popular products
Clothings / Beauty / Home
Payment
Bank Transfer
Debit / Credit Card
Cash on Delivery
Installment
Through Minimart
Guarantee (Pay only when receive)
Total 3 3 4
Logistics
In-App Tracking
Cross Border
Number of Logistic Partners 7 8 4
User’s Review
Apple Store (Rating / no. of rating) 4.5 / 25,668 4.0 / 8,339 2.0 / 110
Google Play (Rating / no. of rating) 4.3 / 66,343 NA 4.3 / 5,038
Others
Depth of Search Filter* 3 4 2
Case Study: How many options to choose for each keyword?

Matte Lipstick (Beauty) 15,637 5,229 1,738
Maxi Dress (Women’s Fashion) 23,450 20,811 22,988
Vacuum Cleaner (Home Appliances) 2,834 9,770 4,280
Watch (Accessories) 56,588 570,949 26,593
Diapers (Baby) 9,163 9,147 5,362
Case Study: How much for each item?
Price of NYX lipstick 179 295 220
Price of floral maxi dress 328 383 1,007
Price of Dyson V8 Absolute+ 38,200 28,900 42,330
Price of Daniel Wellington watch 2,890 2,990 4,320
Price of Mamypoko Disney 409 399 599
Exhibit 19: Shopee is catching up with Lazada

Download Ranks Similarweb Sensor Tower Shopback
Google Apple Monthly Monthly Monthly Monthly Popularity
Playstore Appstore visits (mn) visits (mn) Download (’000) Download (’000) Ranks
Jun-18 Jan-17 Jun-18 Jan-17 May-18 Dec-17 May-18 Jan-17 Jun-18
Shopee 2 2 1 2 15.19 9.2 670 230 2
Lazada 1 1 2 1 40.96 57.48 800 620 1
Kaidee 6 4 7 3 14.33 11.62 70 130 NA
11 street 38 7 46 10 1.27 3.87 9 130 NA
Source: Sensor Tower, Similarweb, AppAnnie, Shopback
Key enablers to drive growth

1) Consumer education - Heavily subsidized shipping strategy is not as prevalent in
Thailand vs Indonesia, with only Shopee being very aggressive in utilizing this approach
for consumers, while Lazada provides free pick-up for merchants and is cutting take
rates on certain categories to attract more merchants on board to increase assortment.
Advertising spending has been very effective as well and bulk of spending remains on
TV (analog and then digital), followed by newspapers and outdoors. Digital advertising is
small, but we expect it to grow significantly in the medium-term.
6 July 2018 28
2) Technology - Rise in smartphone/4G and fixed broadband penetration has been

significantly higher compared to its emerging ASEAN markets peers, partly due to
aggressive free handset promotions from the telcos, which is unique in ASEAN.
3) Assortment - We expect apparel/footwear and beauty/personal care to outgrow other

categories, closer to the offline retail mix. We also expect B2C business to grow faster
than C2C in due course, as the Thai government has been supportive of having bonded
warehouses in the Free Trade Zone areas in Eastern Economic Corridor area, which
should allow marketplaces to be able to take inventory and provide more B2C business.
Lazada has the advantage over Shopee, as they can tap on Alibaba’s assortment in
China.
4) Logistics - We believe that quality of the logistics network in Thailand is high, due to
its transportation hub status, and its easier geography compared to Indonesia. Thailand
is a single land mass and connected with 13 highways. There are also highways linking
Thailand to other countries through the GMS (Greater Mekong Subregion) corridor
development program (e.g. Cambodia, Laos, Myanmar, Vietnam and China’s Kunming).
5) Payments - cash on delivery is still 60-70% of total transactions, with multiple

service points being available for consumers to pay and pick up the products. Bank
transfer is also popular, and given the introduction of PromptPay (see our payments
section below for details) that has essentially removed all costs for fund transfer, and
the availability of e-wallets from LinePay, Truemoney and Airpay, we see limited friction
around payments.
6) Capital availability - Almost non-existent vs Indonesia, other than for Lazada and
Shopee/Sea. This is a key reason why many ecommerce companies have more or less
exited the market.
Exhibit 20: Disclosed VC backed deal in 2017- June 2018
Total
Amount
Company Sector Lead Round investors Round Date Funding
(US$ mn)
(US$ mn)
Sea Internet NA Convertible notes Jun-18 375 1,981
Lazada Ecommerce Alibaba Secondary Market Mar-18 2,000 4,700
Sea Internet NA IPO Oct-17 884 1,606
Tarad Ecommerce TCC Acquiring Mar-18 8 NA
Pomelo Ecommerce Start Today, Central Group, JD.com Series B Aug-17 19 30
Acommerce Logistics Emerald Media, MDI Ventures, DKSH Series B Nov-17 65 95
Ookbee Entertainment Tencent NA Jan-17 19 NA
Deliveree Logistics Gobi Partners, Asia Summit Capital Series A Oct-17 15 17
Omise Fintech NA ICO Jul-17 25 45
Sanook Entertainment Tencent Acquiring Dec-16 NA NA
* Amount refers to this particular round funding; Total funding refers to total disclosed funding to date
Source: Tech in Asia
7) Talent - Skilled workforce remains limited, with average literacy levels lower than
peers. Companies that can tap on a strong parent company for overseas access of
talent would be better placed to grow e.g. Lazada.
6 July 2018 29
Exhibit 21: Thailand literacy rate is low compared to peers
Adult Literacy Rate (%)
99.9 99.9
97.1
96.7 96.7
95.6
94.9 94.7
92.9
TW US SG CN PH ID MY VN TH
Source: Euromonitor
8) Government support - Good support from the government e.g. allowing ecommerce
players to have bonded warehouses in the Free Trade Zone and initiatives to improve
logistics (e.g. high speed rail in collaboration with China and its neighbours). Meanwhile,
the Department of Business Development (DBD) also plans to promote etailing and are
working with key ecommerce players to improve standards of online shopping.
6 July 2018 30
Exhibit 22: e-Commerce industry landscape

Companies Description
Local players
Thailand’s largest online classified advertising market for second-hand items; as of 2015 they had 1mn sellers, up from 600k in 2014 while in 2016 they aimed
Kaidee to double this to 2mn; in 2015, had 8.6mn online classified postings, and 650k visitors (March 29, 2016; Bangkok Post). In 2014, OLX TH merged with Kaidee,
and officially was re-branded in 2015 as kaidee.com
Thailand’s leading auction site, modeled over after eBay - launched in 2013; currently presence in a number of countries including Thailand, China, Malaysia
Chilindo and Vietnam. Founder and CEO is Caspar Bo Jensen. Strategy is to combine e-commerce with "gamification" via a pure auction model where all products start
from just Bt1, with no reserve price
E-commerce C2C marketplace - wholly owned by the Ascend Commerce (under CP all); currently undergoing changes in strategy - shifting from online to
Weloveshopping offline, and synchronising online channels with True Corp / CP (major shareholder of True); most recently, reported they have 50,000 merchants and records
average spending of Bt700 per user with beauty and spa products being the highest-selling categories (January 8 2018, Bangkok Post)
Announced last year, JD central is a joint venture between the largest retailer in Thailand Central Group and Chinese leading ecommerce platform. They are
Central - JD
scheduled to launch in 2Q2018. They would include lifestyle, digital accessories and fast-moving consumer goods initially.
Founded in 1997, and one of the earliest (if not the earliest) e-commerce players in Thailand; call themselves a "B2B2C" i.e. a marketplace enabler, helping
their sellers through programs and training etc. In 2009, Rakuten purchased a 67% stake in the company for US$3.35mn but later exited in early 2016 (along
Tarad
with all other ASEAN markets). On March 27, 2018, TCC Group (Thai Beverage) recently announced a purchase of 51% stake in Tarad for a total valuation of
US$8mn (Source: dealstreetasia).
Foreign players
One of the largest e-commerce players in Southeast Asia. Owned by China e-commerce giant Alibaba (83% stake as of June 2017), Lazada is one of the most
formidable competitors in this space given the wealth of resources and expertise which comes along with having BABA as a parentco. Lazada is a B2C
Lazada
marketplace, and operates on both a 1P and 3P model with its own logistics network in a number of markets, which is one of its key advantages versus peers.
FY18E (March end) in overall Southeast Asia: GMV US$30bn / Revenue c.US$1.3bn (estimates part of GS Alibaba model)
E-commerce B2C marketplace; originally established in Korea since 2008 and now operates in a wide range of markets including Turkey, Indonesia, Malaysia
11street and Thailand. Latest reported statistics include: 20k sellers, 690k buyers, GMV US$50bn (Bt1.65bn) from 6.5mn SKUs; 50/50 transactions from mobile
phones/PC, although 70% of visitors are on mobile (Nov 2 2017, Nation)
E-commerce platform headquartered in the U.S, formed by programmers who were previously at Google and Yahoo. They are one of the largest e-commerce
Wish players globally, with more than US$1 billion in funding. Currently, they claim to have 300mn users (2/3 of which are reportedly female), while they charge a
take rate of 15% (Sept 20 2017, Forbes). Based on latest fundraising round in 2017, implied pre-market valuation is now US$8.5bn (Sept 20 2017, Forbes).
Konvy Online beauty retailer based in Thailand; launched in 2012 with over 1,000 beauty brands and 10,000 SKUs.
AliExpress Alibaba’s international e-commerce marketplace, launched in 2010.
Sephora French chain of cosmetic stores with strong presence both online and offline, with operations all across the world. Part of the LVMH group.
6 July 2018 31
CLMV opportunity - Population of 172mn, waiting to be connected
We believe part of the opportunity for ecommerce players is using Thailand as a

gateway to enter into the CLMV markets, given Thailand’s attractive geographical
position (i.e. the centre-point of the ASEAN bloc). There is already significant trade
between these countries (and China as well) given the Greater Mekong Subregion
Economic Cooperation that has been around for decades. Logistically, there are
highways connecting these countries, and with China’s One Road One Belt initiative, we
expect better logistical linkages (e.g. high speed railway).
Considering the sizeable and young population, fast growing mobile/internet penetration
and rising purchasing power, we believe CLMV markets will remain attractive for
ecommerce players to gain exposure. Vietnam, due to its size, may require customised
services while other markets can be leverage through a presence in Thailand to
complement the local operations.
n Internet industry is most developed in Vietnam amongst the CLMV market. Vietnam
is home to VNG, a Unicorn entertainment company. VNG has its flagship Zalo chat
application that attracts more than 30 mn users. VNG began as Vinagame in 2004
and rose to popularity from publishing Swordsman Online (China’s Kingsoft game).
Its main focus is Vietnam market but has now expanded to nearby regions by
publishing Rules of Survival (Free Fire’s main competitor) in Thailand, Indonesia and
Vietnam. Gaming in Vietnam is mainly dominated by Garena and VNG while
ecommerce in Vietnam faces three-way competition from Shopee, Lazada and Tiki.
n In Cambodia, ecommerce and gaming are relatively underdeveloped given the
inadequate internet infrastructure and low debit/credit card penetration. However,
internet penetration is growing fast - 6x from 4.94% in 2012 to 32.4% in 2016.
Ecommerce is still in infancy with no international players existing. There are local
online shopping sites like Glad Market, Shop168 and MALL855. In gaming, there are
local publishers like Sabay who import game from China and localize it for the
market.
n In Laos, there are no established online gaming publishers. However, based on our
research, given most Laotians can read and write Thai, gamers in Laos can play
games that publish in Thailand. Laos doesn’t have a law to regulate online
transactions yet, but the Ministry of Post and Telecommunications has highlighted
the development of e-commerce as one of its core strategic goals over the next 10
years and plans to finalize the legal documents supporting e-commerce by 2025.
There’s no online marketplace available in Laos yet but Yula.la is the leading online
classified site in Laos.
n In Myanmar, after the mobile revolution in 2014, mobile penetration has gone from
13% in 2013 to 96% in 2016. As a results, online shopping has gained popularity
with Shop.com.mm, which now claims to be the largest shopping website in
Myanmar. In online gaming, games like Dota and World of Warcraft are popular, with
a growing numbers of game developers.
6 July 2018 32
Exhibit 23: CLMV Key Statistics

as of 2017
nominal Adult
Population
Population % below GDP Internet Mobile
GDP (US$ Literacy
(mn) CAGR age 30 CAGR Penetration Penetration
bn) Rate
Cambodia 16.0 1.4% 59.0% 22.2 10.2% 32.4% 126.3% 77.4%
Laos 6.9 1.4% 63.0% 17.0 10.0% 21.9% 58.6% 80.3%
Myanmar 53.4 0.9% 53.0% 63.0 13.2% 25.1% 95.7% 93.2%
Vietnam 95.5 1.0% 48.0% 223.9 10.5% 46.5% 127.5% 94.7%
* CAGR refers to 2017 - 2022 CAGR
Source: Euromonitor
Exhibit 24: Current addressable market
(US$ mn) Cambodia Laos Myanmar Vietnam Total

Gaming Market
Nominal GDP 22,204 16,978 63,039 223,880 326,101
Gaming market size 29 NA 108 622 NA
% of GDP 0.13% 0.10% 0.17% 0.28% NA
E-Commerce Market
Retailing market 5,906 1,295 8,831 100,455 116,487
Internet retailing market 6.4 4.1 8.5 2967.96 2,987

% penetration 0.1% 0.3% 0.1% 3.0% 2.6%
Source: Euromonitor, Newzoo
Exhibit 25: Sensitivity analysis for market size

Sensitivity Analysis
Gaming market (US$ mn) Cambodia Laos Myanmar Vietnam Total
at 0.10% penetration 22 17 63 224 326
at 0.13% penetration 29 22 82 291 424
at 0.15% penetration 33 25 95 336 489
at 0.18% penetration 40 31 113 403 587
at 0.20% penetration 44 34 126 448 652
Ecommerce market (US$ mn) Cambodia Laos Myanmar Vietnam Total
at 3% penetration 177 39 265 3,014 3,495
at 5% penetration 295 65 442 5,023 5,824
at 10% penetration 591 129 883 10,046 11,649
at 15% penetration 886 194 1,325 15,068 17,473
at 20% penetration 1,181 259 1,766 20,091 23,297
Source: Goldman Sachs Global Investment Research
6 July 2018 33
Thailand’s E-Payments Industry - Banks continue to have the upper hand
Payment in Thailand
6,784 Bank Branches 64,115 Number of ATMs
53.1 Debit Cards

8.8 ATM cards
20.3 Credits cards

53.1 E-money accounts
as of December 2017
Source: Bank of Thailand
Payments is the third and smallest vertical for Sea. In 2017, Sea derived 15% of its
GAAP revenues from its payments business (Airpay), however, it provides no
breakdown on what Thailand specifically generated for the company. That said, we
believe Airpay has a relatively sizeable opportunity in Thailand as an e-wallet (or
e-money) provider, as it can also be used to pay for Sea’s games and ecommerce
businesses and has significant 3rd party payment linkages (e.g. bill payments, movie
tickets, vouchers and deals for restaurants and beauty parlours). In addition, Airpay is
increasing its payment processing business (essentially taking, reconciliating and
making payments for buyers and sellers, whether it is by cash, credit/debit card or
e-wallets) by integrating deeper with Sea’s ecommerce business, which we expect to
have significantly boosted its GTV growth from 3Q17 onwards.
Our analysis into the Thailand e-money market shows that there is a very high
transactional growth potential ahead but limited means to monetize (lack of any
take rates). Indeed, competition from banks is intense, and non-banks have limited room
to differentiate. We believe Airpay can survive and carve out a niche, but would not likely
be the top non-bank player in the market. Our previous Airpay GTV and take rate
forecasts hence appear somewhat too optimistic in light of the new outlook.
As a potential 3rd largest non-bank player, Airpay’s potential market size may only be
10-20% of the non-banks addressable market, implying US$150-900mn of GTV. There
are really no take-rates at this point, though there could be a chance to monetize these
GTVs eventually through cross-selling. That said, even laying a 1-2% take rate suggests
low revenue opportunity.
However, the clearer growth opportunity should still be its payment processing
business, which while provides low margins, can leverage its ecommerce platform to
grow sizeably, helping driving down Airpay’s payments business cost structure. We
6 July 2018 34
forecast Shopee’s Thailand ecommerce net GMV to grow to US$2.4bn by 2021E, which
could dwarf its e-wallet business. That said, this is an internal payment processing
business and is unlikely to get any sizeable 3rd party business, and hence revenues are
limited to inter-company transactions.
How large is the addressable market?

There are two addressable GTV markets for Airpay. The first is its e-wallet business,
where the addressable market is the combination of offline e-money (i.e. e-wallet)
transactions at points of sale (i.e. retail) and online e-money transactions through
ecommerce. The second is the payment processing platform for its ecommerce
business, which is a captive business but with low margins and revenues eliminated at
the consolidated level as it is an inter-company transaction.
To figure out Airpay’s e-wallet addressable market size or GTV (Gross transaction
value), we considered both offline and online e-payments (which e-money/e-wallets
is a subset) for consumer/retail spending only (e-wallets typically used only for smaller
ticket size items). According to BOT (Bank of Thailand), the total payments value for
offline points of sale was Bt7.8 trillion (c.US$221bn; +3.1% yoy) in 2016. Cash remained
king at 85.1% of total, while epayments were 14.9% (14.4% in 2015). Within
epayments, credit card was 87.2% of total (89.2% in 2015), debit card was 10% (8.6%
in 2015) and e-money was at 2.7% (2.2% in 2015). We believe the e-money portion
would be the “right” addressable offline GTV for Airpay.
For ecommerce (c.3% of total retail in Thailand in 2016) - Cash on delivery made up
60-70% of total transactions (declining over time), with e-payments, especially bank
transfers, based on our industry checks. There is no breakdown for e-money from
ecommerce, but according to our checks with ecommerce players, we can make an
educated guess of the percentage (which we set at 2% of all ecommerce transactions
in 2016). Adding the offline and ecommerce e-money GTV together will get us to
Airpay’s addressable market, though this may be understating the potential as there
would be other ways to cross-sell (e.g. insurance/financial products).
Interestingly, while Thailand has high financial inclusion (e.g. 78% of people above 15
years of age having a bank account, according to World Bank and 54mn debit cards and
20mn credit cards in a population of 66mn people, according to BOT), cash remains the
primary medium of transactions, possibly due to lack of EDC machines (high rental of
US$30/mth and high merchant discount rates of 2.5% for credit cards, though it has
been reduced to 0.55% for debit cards now, from 1.5-2.5% previously) and lack of
knowledge/trust on using online payments.
However, we believe this is gradually changing, as Thailand’s total e-payments (include

P2P interbank transfer, buying of financial products etc.) amounted to 3.2bn transactions
in 2016, growing 19% p.a. over 2012-16, taking share away from cash and cheque
payments. Within the total e-payments category, mobile banking grew the fastest at
97% p.a. over this period, while debit cards, internet banking and e-money grew by
around 22-24% p.a..
6 July 2018 35
Exhibit 26: Growth in Online Payments Exhibit 27: Thailand has relatively high population with bank
accounts
Growth in Online Payment in 2016 % of population with bank account

Internet Banking Credit Card Debit Card Mobile Banking
96% 94%
123% 91%
115%
81% 79% 78%
60%
48% 36%
42% 31% 31%
36%
28%
14%
Volume Value SG US TW MY CN TH ID PH VN
Source: Bank of Thailand Source: World Bank
Epayments outlook
To forecast its outlook, we look at past growth, market developments and BOT’s
target. Historically, offline payments at points of sale (i.e. retail/consumer related) have
appeared to grow at a slightly lower pace to GDP growth (e.g. 2016 offline payments
grew 3.1% vs GDP growth of 3.3% in US$ terms). E-payments meanwhile appeared to
grow at 1.8X the pace, while e-money grew at 2X the pace of offline payments growth.
Considering market developments and BOT’s target, we expect

e-payments/e-money growth to accelerate given:
(i) BOT’s national e-payments initiatives from 2016 onwards on: (a) Promptpay
(alternative payment service developed where transferrer will need to only specify
national ID or mobile phone number; cost of transaction is very low relative to credit
/debit fees of 0.5-2.5%); and (b) card usage expansion project (provides merchant’s
incentives to install EDC at points of sale to take advantage of the prevalence of debit
cards e.g. no purchases/rental fee for first EDC installation and merchant discount rate
would only be 0.55% vs traditional cost of 1.5-2.5%), which banks adopted from Jan-17
onwards;
(ii) Aggressive steps from banks to disseminate a standardized QR code (each bank is
rolling out a similar QR code, which allows inter-operability) to offline points of sale and
scrapping all merchant fees (approval from BOT for banks to start using QR code over
Promptpay system from Nov-17 onwards). Currently, we already notice significant
availability of QR codes across various types of merchants in Bangkok. According to
MasterCard Thailand, their research shows that 50% of young consumers across
Southeast Asia will use the QR code straightaway and see Thailand as being similar;
(iii) Collaboration by non-banks to drive e-wallets (e.g. AIS’s mPay investing and merging
its B2C e-wallet business with Line Rabbit Pay; Truemoney has tied up with Alipay), and
according to mPay (leading telco AIS’s e-wallet unit) - non-banks already have their own
QR code, but plans are in the works for them to also be able to use the standardized QR
code from banks.
6 July 2018 36
(iv) BOT targets 150X e-transactions per person per year by 2020, from 56X in 2016
(comprising of e-money at 16X, follow by mobile banking at 9X and credit card at 7X).
The 2020 BOT target however is well below developed markets in the region like South
Korea and Singapore at > 400X per person per year.
We benchmark offline payments value to grow a touch below the GDP growth forecast
for Thailand from our Asia Economics team i.e. around 3-4% p.a. We expect
e-payments/e-money penetration to rise exponentially from 2018 onwards, in particular
as QR code payment system, introduced this year, leverages off the Promptpay platform
launched in 2H16.
In discussion with our Thai banks team, and considering precedence in markets like
China, we believe that e-payments should grow very rapidly, easily to 20-30% of total
offline payments by 2021E, from 15% now. We believe E-money (as QR code
payments would likely be classified under this) would be the largest beneficiary.
For ecommerce related epayments growth, we use our Thailand industry ecommerce
GMV forecasts to work down towards a net GMV and then assume the percentage of
e-payments (c.30% in 2016) to rise to 40% of total ecommerce payments by 2021E.

Within that, we also project the e-money’s market share to grow significantly over the
same period.
6 July 2018 37
What is PromptPay?
PromptPay is a new alternative payment service that is developed to increase convenience in receiving
and transferring funds. Transferrer needs to specify the national ID card number, corporate tax ID number,
or mobile phone number of the transferee instead of the bank account number. To use PromptPay,
transferees must register to link their bank accounts with their ID/mobile numbers.
Exhibit 28: PromptPay Service Fees

between Individuals between juristic persons
Amount / Transaction Service Fee Amount / Transaction Service Fee
5,000 baht or less Free
>5,000 - 30,000 baht 2 baht or less 100,000 baht or less 10 baht or less
> 30,000 - 100,000 baht 5 baht or less
Over 100,000 baht* 10 baht or less Over 100,000 baht* 15 baht or less
Exhibit 29: PromptPay

$ $
Transferrer Transferee
6 July 2018 38
What is EDC?
To promote the use of debit card and credit card, the government initiated Card Usage Expansion Project
by having selected commercial banks distribute EDC installation to merchants in an effort to drive Thailand
into a cashless society.
Exhibit 30: EDC Technology
EDC Technology
EDC (Electronic Data Capture) ũ Suitable for general

1 2 3
4 5 6
7 8 9
merchants; required LAN connection
* 0 #
Mobile EDC ũ Suitable for off-site merchants; required LAN SIM

1 2 3
4 5 6
7 8 9
card (mobile connection)
* 0 #
Dongleũ allows mobile phones/tablets to function as portable

EDC; suitable for small merchants
6 July 2018 39
Exhibit 31: e-Money forecast

US$ mn 2016 2017E 2018E 2019E 2020E 2021E
OFFLINE E-Money
Total offline payments 221,514 229,267 239,010 246,181 253,566 261,173
% growth 3.1% 3.5% 4.3% 3.0% 3.0% 3.0%
GDP growth 3.3% 3.9% 4.8% 3.4% 3.4% 3.4%
Multipler vs GDP growth (X) 0.9X 0.9X 0.9X 0.9X 0.9X 0.9X
E-payments 33,006 35,316 39,730 44,697 50,284 56,569
% growth 5.7% 7.0% 12.5% 12.5% 12.5% 12.5%
E-payments % Total offline 14.9% 15.4% 17.9% 20.4% 22.9% 25.4%
Mkt shr in incremental offline pay (%) 27.3% 29.8% 45.3% 69.3% 75.7% 82.6%
E-money 886 953 3,973 6,705 10,057 14,142
% growth 6.2% 7.5% 317.1% 68.8% 50.0% 40.6%
E-money % E-payments 2.7% 2.7% 10.0% 15.0% 20.0% 25.0%
Mkt shr in incremental e-pay value (%) 2.9% 2.9% 68.4% 55.0% 60.0% 65.0%
ONLINE E-money
Ecommerce penetration % retail 3.6% 4.4% 5.5% 6.7% 7.8% 9.6%
Industry ecommerce GMV (gross) 3,100 4,006 5,248 6,625 8,104 10,287
Net to gross % 70% 70% 70% 70% 70% 70%
Industry ecommmerce GMV (net) 2,170 2,804 3,673 4,637 5,673 7,201
E-payments 651 897 1,249 1,669 2,156 2,880

% growth NA 37.8% 39.2% 33.7% 29.1% 33.6%
E-payments % 30% 32% 34% 36% 38% 40%
COD % 70% 68% 66% 64% 62% 60%
E-money 13 54 150 300 517 864
% growth NA 313.5% 178.4% 100.5% 72.2% 67.0%
Mkt shr in incremental e-pay value (%) NA 16.6% 27.3% 35.8% 44.6% 47.8%
E-money % E-payments 2.0% 6.0% 12.0% 18.0% 24.0% 30.0%
TOTAL E-money
Total E-payments GTV 33,657 36,213 40,979 46,366 52,439 59,450
% growth NA 7.6% 13.2% 13.1% 13.1% 13.4%
Total E-money GTV 899 1,006 4,123 7,005 10,574 15,006
% growth NA 11.9% 309.7% 69.9% 51.0% 41.9%
Mkt shr in incremental e-pay val (%) NA 4.2% 65.4% 53.5% 58.8% 63.2%
E-money % Total E-payments 2.7% 2.8% 10.1% 15.1% 20.2% 25.2%
Source: Goldman Sachs Global Investment Research, Bank of Thailand
6 July 2018 40
Exhibit 32: Payment Flow Chart
Consumer pays Bt100 $ Merchant receives Bt 97.5

Bt97.5
$
1 2 3
4 5 6
7 8 9
* 0 #
Consumer Merchants
2.5%
Merchant
Acquiring bank pays merchant
Merchant sends card data

Discount Rate
0.55% - 2.50%
Consumer pays bill
issuer sends bill
Network and data

processing (small portion of
Merchant fee)
Network authorizes card at issuer Acquiring bank sends request to authorize

$ $
Clearing and settlement Clearing and settlement
Issuing Bank Card Network Merchant Acquirer
Source: Goldman Sachs Global Investment Research, Bank of Thailand
6 July 2018 41
Competitive landscape
Within the e-money space, banks compete with QR code payments, while
non-banks compete in the e-wallet and prepaid cards space. According to BOT,
there were 39mn accounts from 30 service providers in 2016 for the e-money space,
which should be mainly non-banks (using either e-wallets - topped up through physical
counters, credit/debit cards or internet banking - and prepaid cards e.g. Rabbit card for
subway transportation). Banks started competing in this segment through their QR code
banking apps (payment directly debit from their bank accounts) in 2017, but have been
very aggressive in disseminating QR codes offline (not just in malls, but also in low end
retail points like Chatuchak weekend market) through aggressive promotions/marketing
(especially SCB and Kbank).
For merchants, we view the preferred solution would be the cheapest and the most
prevalent one. Currently, there are essentially no charges for all QR code payments
(since value transacted is usually small and fall below the minimum threshold) - hence it
could likely be preferred over credit or debit cards, which charge a fee. QR code
payments also removes the need for an EDC machine, which is costly.
Given that it is standardized, QR codes from Bank A can also be used for Bank B, and
we believe it could eventually be opened up for e-wallet players too (i.e. non-banks
players to use). All parties (receiving and issuing bank) would receive the transaction
data. In the case where there is a fee paid (if the transaction value crosses the minimum
threshold), the fee would be borne by the merchant and split between the various
parties involved in the transaction - similar to the structure for a credit card payment.
All the apps today - bank or non-bank - are easy to use, and the decision to use
one over the other is often based on promotions (which appears equally aggressive
from banks and non-banks) and the number of use cases (which banks is aggressively
and successfully growing). E-wallets have a maximum top-up value of Bt50K, which
would likely be less convenient for users in some instances (as it requires frequent top
up, unlike banking apps linked to the user’s bank account), but does offer better security
as customers may only be at the risk of losing the e-wallet cash amount, rather than a
risk to the entire banking balance, if they lose their phones enabled with the payment
apps.
Cost wise - banks have the advantage as non-banks are also charged a fee from the
banks whenever users top up on their e-wallets from the banking accounts or through
banks debit/credit cards. This is absorbed by the non-banks and appears free to the
consumer. However, under the Promptpay initiative, all inter-bank fund transfers have no
cost to both banks and consumers alike.
Prospective market share for non-banks

Given the high banking penetration, banks already have the majority of the population as
their customers and converting them to use their apps to transact is easier than in many
other countries. More importantly, incumbents are usually not aggressive in
pushing for QR code payments given their reluctance to disrupt their legacy business.
This is not the case for Thailand, with the government encouraging the population
6 July 2018 42
towards online payments, and banks being willing/aggressive to self-disrupt their

lucrative credit/debit card businesses (credit card c.2.5% and debit card 0.55%
transaction cost) with QR code payments (currently no charges).
The opportunity for non-banks would be more around the unbanked population,
which is around 22% of the population above 15 years old, according to World Bank
(2014). There is also an opportunity for non-banks to penetrate some of the banking
population, as the high financial inclusion statistics overstates the practical difficulties to
truly engage the rural population. While most of the rural population may be bank
customers, they do not interact much with the banks e.g. many of the rural people get
their income on a cash basis, and in order to use the banking app to transact, they have
to first deposit the cash first into the bank, which has only 7K branches collectively in
Thailand and are often difficult to reach. According to the World Bank, Thailand has 12.4
branches per 100,000 people, in-line with global average (12.5), but well below US (32.7)
and Euro area (21.5). This is quite opposed to the presence of telcos (e.g. AIS for
LinePay or True Corp for Truemoney) who have 250K distribution points in aggregate to
offer top ups, or the 43mn subs that Line actively already engages on a day to day basis.
We also see opportunity for e-wallets to be used by youngsters/kids, below the
minimum age to open a bank account.
We believe non-banks would need to offer high value-add to reach the mass
market (e.g. having more use cases, more attractive promotions, multiple touch points,
lower user acquisition, and/or potentially partner banks), or be content with being niche
players focusing on the unbanked segment (c.20% of people above 15 years old, but
likely very low income providers).
Based on inputs from our Thai banks team, we believe that non-banks’ “natural” target
market is the unbanked population, which is around 20% by numbers (according to 2014
World Bank’s data), but likely only 5% by transaction value (considering how skewed
wealth levels are in Thailand i.e. top 1.5% accounts in Thailand account for 77% of total
deposits). This is the segment where the banks have no access to, and where
non-banks, through their other businesses (e.g. LinePay through its Line app, or
Truemoney through its retail footprint) can gain access.
There is certainly a segment of banked population that is logistically harder for banks to
monetize, and where non-banks may be able to tap or even partner with banks to
monetize, and share the benefits. We also see non-banks being generally more
aggressive in promotions/marketing than banks, as they are likely more innovative and
flexible to monetize the data elsewhere e.g. advertising.
Considering the above, we think that non-banks may eventually have a 10-30%
market share in the e-money space. Based on our calculations, this may be a
US$1.5-4.5bn industry GTV for non-banks to target in 2021E.
6 July 2018 43
Exhibit 33: non-bank e-Money

US$ mn 2016 2017E 2018E 2019E 2020E 2021E
Non-Banks E-money GTV Market Share
Scenario 1 - 10% 90 101 412 701 1,057 1,501
Scenario 2 - 15% 135 151 618 1,051 1,586 2,251
Scenario 3 - 20% 180 201 825 1,401 2,115 3,001
Scenario 4 - 25% 225 252 1,031 1,751 2,644 3,752
Scenario 5 - 30% 270 302 1,237 2,102 3,172 4,502
How is Airpay positioned vs competitors?

The key non-bank players are Truemoney, Rabbit LinePay and Airpay, whereas all
the banks (especially SCB and Kbank) have moved in this space too. As a background,
Truemoney largely belongs to the Ascend group, though Alipay has a minority 20%
stake in it. Truemoney leverages the Ascend group’s multiple retail businesses including
> 10K 7-Eleven outlets in Thailand, where Truemoney can be used, and its telco
business True Corp, which has 27mn subs. Truemoney has around 4mn active users
now, among 8mn registered users.
LinePay meanwhile is owned by Line (Japan), Rabbit (part of the BTS/VGI group in
Thailand), mPay (part of it leading telco AIS) and Kerry group (largest last mile
ecommerce provider and a regional logistics giant). LinePay’s strength lies in the
popularity of Line, which has 43mn users in Thailand and multiple use cases. LinePay
has 2.9mn users, but this could likely increase going forward, as 9.2mn Rabbit card
users (card issued by BTS group to be used for their subway system, alongside some
offline merchants) are set to migrate over to online platform, and also 2mn registered
users and 0.5mn active users from mPay (AIS has 40mn subs base, which can be
tapped as well).
Airpay wholly belongs to Sea Limited, which in turn has Tencent as its largest
shareholder, and is the leading games publisher and the 2nd largest ecommerce
platform in Thailand. Airpay has 388 use cases and 178K physical counters in ASEAN,
along with 3.8mn users in ASEAN, of which we estimate at least 50% should be from
Thailand - hence possibly 2mn users.
We think Linepay appears to have the greatest differentiation, followed by

Truemoney and then finally Airpay. That said, Airpay’s ability to tap on its high growth
games/ecommerce businesses is a unique advantage and the parent-Sea Limited does
have a strong balance sheet and should be able to spend to acquire more use
cases/users and drive further adoption of their platform.
Grabpay is present in Thailand too, but is only a closed loop service currently. Given the
success of its ride hailing app in other countries, it can present formidable competition
in due course. If it gets the necessary license to operate as a full-fledged e-wallet it may
push Airpay further down in terms of market ranking to the 4th spot. There are also
other smaller players in the market like Bluepay, which are peripheral players at this
point.
6 July 2018 44
Exhibit 34: e-Wallets Application download
e-Wallet Download
Download % of top 10
(Jan 2016 - May 2018)
20 21% 25%
19%
18 20%
15%
16
15%
11% 10%
14
7% 6% 10%
12 4% 4% 3% 5%
10
0%
8
-5%
6
-10%
4
2 -15%
0 -20%
K PLUS TrueMoney SCB EASY KTB Bualuang AirPay MyMo by TMB Touch KMA BluePay
Wallet netbank mBanking GSB Wallet
Navy Blue indicates bank, Grey indicates non-bank
Source: Sensor Tower
Sea remains well positioned; reiterate Buy with 39% upside potential
We believe our analysis supports our positive view on Sea’s gaming and ecommerce
divisions. Although the industry gaming revenue size appears smaller than our “top
down” estimates for the market, we have made no changes to Garena’s revenue
forecasts as we continue see stable revenues from ROV/AOV, good uptake of its new
game Free Fire and the pipeline of new games to help achieve our forecasts. Based on
our analysis, we have a higher degree of confidence on Garena’s execution capabilities
for its games business.
Meanwhile, we see Thailand ecommerce GMV size to be larger than our “top down”
estimates with lower competition than we initially assessed, especially for the C2C
marketplace sector. Hence, we slightly raise our GMV estimate for Shopee, as we turn
more positive on its ecommerce potential in Thailand.
However, we turn more cautious on Sea’s payments business as we believe that it

would be difficult for the company to be a very large player in the market given the
intense competition. In addition, take rates are non-existent and it would be hard to
monetize this business in Thailand. That said, Sea is yet to explore the epayments space
in most of its ASEAN markets, and there could be significant opportunity in some of
these markets. Nonetheless, we adjust down our payments revenue forecasts.
Overall, our 2018-20E Net loss estimates increase slightly from US$ -672/-495/-125 to
US$-681/-532/-171. Our 12-month SOTP-based target price of US$21 remains
unchanged as the slight uplift in ecommerce valuation offset the decline in payments
valuation. We also include a higher interest expense from its recent US$575mn
6 July 2018 45
convertible note offering. Our SOTP value also assumes share count dilution from the
convertible note (conversion price is US$19.80, which is lower than our target price) and
as such, we count the convertible note as cash and not debt. We reiterate Buy on the
stock, with 39% upside potential.
Key Risks: 1) Competition from global peers; 2) Geopolitical risks and exchange rate
volatility; 3) Heavy dependence on developers for games; 4) Inability to derive synergies
from all three businesses.
Exhibit 35: Sea - SOTP Summary

SOTP Value
(US$ mn) Methodology Comments
Gaming 5,455 25X 2019E P/E Similar to Tencent Gaming in Tencent SOTP
25X 2021E P/E Wide range depending on geography/maturity; this is similar to BABA
E-Commerce 4,118
(Discounted to 2019E) which uses 25X FY19E
5X 2021E Price/Sales Low range of payment peer comps - square, Paypal, Master Card and
Payments 153
(Discounted to 2019E) Visa (Paypal 2019E Price/Sales at 4.7X)
2021E net debt to capture the next few years of cash burn for e-
2021E net debt
Net Cash 192 Commerce business; We assume convertible notes to be converted into
(Discounted to 2019E)
shares and include the raising as cash here.
Hold co. discount (992) 10% In-line with China internet coverage
NAV
8,927
(US$ mn)
Total # of shares Includes greenshoe and assumes conversion of options, RSU and
428
(mn) convertible notes
NAV / share 21.0 12m Target Price
6 July 2018 46
Disclosure Appendix
Reg AC
We, Miang Chuen Koh, CFA and Piyush Mubayi, hereby certify that all of the views expressed in this report accurately reflect our personal views about
the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly,
related to the specific recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.
M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.
Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.
GS SUSTAIN
GS SUSTAIN is a global investment strategy focused on the generation of long-term alpha through identifying high quality industry leaders. The GS
SUSTAIN 50 list includes leaders we believe to be well positioned to deliver long-term outperformance through superior returns on capital, sustainable
competitive advantage and effective management of ESG risks vs. global industry peers. Candidates are selected largely on a combination of
quantifiable analysis of these three aspects of corporate performance.
Disclosures
Coverage group(s) of stocks by primary analyst(s)
Miang Chuen Koh, CFA: Asia Internet, Asia Pacific Telecoms. Piyush Mubayi: Asia Internet.
Asia Internet: 58.com Inc., Alibaba Group, Baidu.com Inc., Ctrip.com International, Gridsum, iQIYI Inc., JD.com Inc., Jianpu Technology Inc.,
MakeMyTrip Ltd., NetEase Inc., New Oriental Education & Technology, Sea ltd., SINA Corp., Sogou Inc., Sunlands Online Education Group, TAL
Education Group, Tarena International Inc., Tencent Holdings, Vipshop Holdings, Weibo Corp., YY Inc..
Asia Pacific Telecoms: Advanced Info Service PCL, Axiata Group, Indosat, Intouch Holdings, M1 Ltd., Maxis Bhd, Netlink NBN Trust, PT Link Net Tbk, PT
Sarana Menara Nusantara, PT XL Axiata, Singapore Telecommunications, StarHub, Telekom Malaysia, Telekomunikasi Indonesia, Total Access
Communications, Tower Bersama Infrastructure Tbk, True Corp..
Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by the Global Investment Research Division of Goldman Sachs and referred to in this research.
Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be
aggregated under US securities law) as of the second most recent month end: Sea ltd. ($15.60)
Goldman Sachs has received compensation for investment banking services in the past 12 months: Sea ltd. ($15.60)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Sea ltd. ($15.60)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Sea ltd. ($15.60)
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Sea ltd. ($15.60)
Goldman Sachs has managed or co-managed a public or Rule 144A offering in the past 12 months: Sea ltd. ($15.60)
Goldman Sachs makes a market in the securities or derivatives thereof: Sea ltd. ($15.60)
6 July 2018 47
Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 35% 53% 12% 63% 57% 51%
As of April 1, 2018, Goldman Sachs Global Investment Research had investment ratings on 2,896 equity securities. Goldman Sachs assigns stocks as
Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage groups and views and related definitions’ below. The
Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has
provided investment banking services within the previous twelve months.
Price target and rating history chart(s)

Regulatory disclosures
Disclosures required by United States laws and regulations
See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or
co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed
public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as a
principal in debt securities (or in related derivatives) of issuers discussed in this report.
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6 July 2018 | 12:23AM SGT

Thailand Technology: Internet

A ‘blue ocean’ for Ecommerce; Sea (Buy) well placed to

is navigating changing trends), we believe Thailand offers a smaller but relative

‘blue ocean’ ecommerce market with lower competition vs. Indonesia. We

In this report, we undertake an in-depth analysis into Thailand’s gaming,

Thailand’s gaming, ecommerce and epayment growth to benefit Sea

Gaming, ecommerce, and emoney TAM

Gaming Ecommerce Emoney

Source: Company data, Goldman Sachs Global Investment Research

Thailand - Key numbers 5

Thailand’s Ecommerce Industry - C2C to remain key for Shopee 18

CLMV opportunity - Population of 172mn, waiting to be connected 32

Thailand’s E-Payments Industry - Banks continue to have the upper hand 34

We turn incrementally positive on its ecommerce business because of a

3) eSports is more important in Thailand vs. Indonesia - The ‘play at home’ PC

significantly more scope for growth, benefitting Shopee as it is viewed as a leading

becoming a 3rd largest player among the non-banks in the medium-term.

Thailand - Key numbers

GDP per capita vs. Percentage of

78% Have a bank

65% Internet Penetration

Thailand gaming - Highly competitive but offers better revenue opportunity

HOW BIG IS THE MARKET?

MMORPG Games is the Garena's implied market

27% most popular genre for share. Garena's AOV, HoN

WHO ARE THE GAMERS?

Source: Goldman Sachs Global Investment Research, Newzoo, Niko Partners

1) Using a bottom-up approach, the Thailand gaming market revenue appears to be

3) Competition is more intense in Thailand given the attractive revenue opportunity,

4) Garena has a stronger position in Thailand than Indonesia, as apparent by its

5) eSports is a more critical factor in driving gamer acquisition/retention in Thailand

Gaming Demographics - Key differences vs. Indonesia

We highlight the key trends defining Thailand gaming market below:

2) Geographically, 70% of gamers in Thailand are located in Bangkok. PC gamers are

Online Gaming % Consumer Expenditure Online Gaming % Consumer Expenditure

CN TW JP VN TH MY US SG PH ID IN 2017 2018E 2019E 2020E 2021E

According to Newzoo/Niko Partners, Thailand’s 2017 PC/Mobile revenue mix was

Introduction to Thailand’s PC gaming market - Garena remains a dominant

Below are the key takeaways for Thailand’s PC gaming market:

1) Higher “Play at home” penetration in Thailand means the decline in cybercafes is

PC Gaming revenue potential

Home gaming more popular vs. Indonesia

ITU ICT Development Rank Smartphone Penetration

Source: ITU Source: Frost & Sullivan

Smartphone Users (mn) Penetration Fixed BB Subscribers (mn) Penetration (% of households)

Garena’s Thailand PC revenue and market share

3) For 2017 - we estimate AOV’s cash revenues at US$190mn, if we assume: i) 40% of

Introduction to Thailand’s mobile gaming market - Garena well positioned

Key differences vs. Indonesia

Exhibit 9: Appstore/Google Playstore Ranks details

Exhibit 10: Top 20 Games breakdown by genre

Many foreign developers/publishers (largely Koreans and Chinese e.g. COM2US,

What is Garena’s mobile revenue size?

Interestingly, Thailand’s total cumulative eSports winnings (according to

Exhibit 11: Thailand’s Gaming Landscape

Source: Company data, Goldman Sachs Global Investment Research

Thailand’s Ecommerce Industry - C2C to remain key for Shopee

HOW BIG IS THE MARKET?

#46 (World Bank) indicates better than

52% Made an online purchase on

51m Number of active social

Source: Frost & Sullivan, WeAreSocial, World Bank