Beyond Alibaba
The e-commerce industry in Asia has become a hotbed of innovation and growth, but often, the conversation is dominated by giants like Alibaba and JD.com. While these companies have undoubtedly led the charge, the Asian market is teeming with undervalued e-commerce stocks that many investors overlook. In this article, I aim to dig deeper and identify promising e-commerce companies that are flying under the radar. These stocks, though less prominent, offer significant investment potential for those willing to look beyond the obvious names.
A Shifting E-commerce Landscape
The rapid expansion of internet penetration, mobile commerce, and digital payments has driven tremendous growth in the Asian e-commerce sector. Asia’s population of over 4.5 billion people, combined with increasing smartphone adoption and improved logistics infrastructure, has created an ideal environment for online retail. Yet, despite this immense opportunity, not all companies have achieved the same level of visibility or investor enthusiasm.
Alibaba, for example, is synonymous with Chinese e-commerce, but its dominance overshadows other worthy contenders. In a market as diverse as Asia, it’s important to explore smaller players that offer distinct advantages in niche markets. These companies may be undervalued because they don’t have the same market capitalisation or name recognition, but they often demonstrate solid fundamentals, innovative business models, and untapped growth potential.
The Mispricing of Smaller E-commerce Companies
One of the key reasons some Asian e-commerce companies remain undervalued is that they operate in markets perceived to be riskier. While Alibaba has weathered regulatory scrutiny and geopolitical tensions, smaller firms often struggle to gain investor confidence. However, the current economic climate presents unique opportunities to buy into companies that may have been unfairly punished by market volatility or broader economic concerns.
From my perspective, the mispricing of these stocks is due largely to a lack of market understanding and analyst coverage. Many of these companies operate in second-tier cities or regional markets, which receive less attention than the more glamorous sectors in Tokyo, Shanghai, or Singapore. But as I will demonstrate, some of these undervalued stocks are strategically positioned to outperform in the coming years, driven by local market dynamics and innovative strategies.
Promising Undervalued E-commerce Companies in Asia
1. Sea Limited (NYSE: SE) – Southeast Asia’s Hidden Gem
While many investors are familiar with Alibaba’s dominance in China, Sea Limited is a standout in Southeast Asia. Sea’s e-commerce platform, Shopee, has rapidly expanded across the region, gaining ground in markets like Indonesia, Vietnam, and the Philippines. The company’s dual focus on gaming through its Garena platform and e-commerce through Shopee provides a diversified revenue base, which helps mitigate risks associated with a single business model.
Sea’s stock has been highly volatile in the past year, driven by broader concerns about growth stocks, rising interest rates, and competition from regional players. However, despite the stock’s fluctuations, Sea’s fundamentals remain strong. The company’s revenue growth has been nothing short of impressive, and Shopee continues to gain market share in highly competitive environments.
In 2023, Sea reported a year-over-year revenue growth of 40%, with e-commerce making up a significant portion of this figure. The company’s ability to weather economic headwinds and maintain high levels of engagement on its platform suggests that it is undervalued by the market. From an investment perspective, Sea offers exposure to both e-commerce and gaming, two industries with massive growth potential in Southeast Asia.
According to Yahoo Finance, Sea’s forward price-to-earnings (P/E) ratio of around 15.5 is significantly lower than other tech giants, making it a compelling buy for long-term investors.
2. Coupang (NYSE: CPNG) – The Amazon of South Korea
Coupang is often referred to as the “Amazon of South Korea,” but despite its success, the company is still undervalued in comparison to its Western peers. With a market cap of $36 billion, Coupang dominates the South Korean e-commerce market, boasting a 40% market share. What sets Coupang apart is its hyper-efficient logistics network, which enables same-day or next-day delivery for over 70% of the country’s population.
In 2023, Coupang saw its gross merchandise value (GMV) grow by 28%, demonstrating its resilience even as global e-commerce markets faced slowing growth. However, despite this strong performance, Coupang’s stock remains underappreciated by investors, who have been spooked by macroeconomic concerns and the threat of increased competition.
The company’s focus on customer experience and operational efficiency gives it a competitive edge in a highly saturated market. Additionally, Coupang has been diversifying its business, expanding into food delivery and fintech services, further solidifying its position as a key player in the region.
Coupang’s valuation metrics suggest that the stock is still trading at a discount. With a price-to-sales (P/S) ratio of 1.5, compared to Amazon’s 3.3, Coupang offers investors a rare opportunity to buy into a dominant e-commerce player at a relatively cheap price.
Indonesia is one of the most exciting e-commerce markets in the world, thanks to its large population and growing middle class. While Tokopedia and Shopee have garnered much attention, Bukalapak is an emerging player that deserves a closer look. Bukalapak went public in 2021, and since then, its stock has been under pressure due to concerns about profitability. However, I believe Bukalapak is undervalued based on its long-term growth prospects.
One of Bukalapak’s key advantages is its focus on small and medium-sized enterprises (SMEs) in Indonesia. The company provides a platform for these businesses to sell products online, which is a niche that remains underserved by larger competitors. Additionally, Bukalapak has been investing in expanding its logistics and digital payments infrastructure, both of which are critical to supporting its growth in Indonesia’s e-commerce ecosystem.
In 2023, Bukalapak’s GMV grew by 22%, driven by increased merchant participation and improved logistics capabilities. The company’s revenue is expected to grow by 25% in 2024, making it one of the fastest-growing e-commerce platforms in Southeast Asia. Despite these positive developments, Bukalapak’s stock has been trading at a depressed valuation, with a forward P/E ratio of 12.2, which is well below the industry average.
Given Indonesia’s potential to become the largest e-commerce market in Southeast Asia, Bukalapak represents a compelling investment opportunity for those willing to take a longer-term view.
The Importance of Diversification in Asian E-commerce Investments
When investing in the Asian e-commerce sector, it’s important to recognise the diversity of the region. From the highly developed markets of South Korea and Japan to the fast-growing economies of Southeast Asia, there is no one-size-fits-all approach. Each market presents its own set of challenges and opportunities, which is why I believe that diversification is key.
While Alibaba and JD.com dominate China, markets like Indonesia, Vietnam, and the Philippines offer significant growth potential for smaller players like Bukalapak and Shopee. Furthermore, companies like Coupang are showing that there is still room for innovation in more mature markets like South Korea.
For investors, the key takeaway is that while the giants of the e-commerce industry often grab the headlines, there is tremendous value to be found in the smaller, more agile companies that are shaping the future of online retail in Asia. By focusing on these undervalued stocks, investors can potentially capture outsized returns as these companies continue to grow and evolve.
Conclusion: A Long-Term Perspective on E-commerce Investment
It is clear that while Alibaba and JD.com remain dominant, there are several undervalued companies that present significant investment opportunities. Sea Limited, Coupang, and Bukalapak are just a few examples of e-commerce players that are well-positioned to benefit from the region’s growth. These companies offer unique business models, strong fundamentals, and exposure to markets that are still in the early stages of digital transformation.
For investors looking to diversify their portfolios and gain exposure to Asia’s booming e-commerce sector, these stocks represent compelling long-term opportunities. While the market may be volatile in the short term, I believe that the growth potential of these companies far outweighs the risks. With careful analysis and a long-term perspective, investors can uncover hidden gems in the world of Asian e-commerce that are poised for substantial growth in the years to come.
References:
Yahoo Finance, Sea Limited (SE) Historical Data (2023-2024).
Industry Reports on Southeast Asia’s E-commerce Growth, 2023.
Yahoo Finance, Sea Limited (SE) Forward Price-to-Earnings Ratio, 2024.
Yahoo Finance, Coupang (CPNG) Company Profile, 2023.
Coupang Logistics and Market Share Analysis, 2023.
Yahoo Finance, Coupang (CPNG) Gross Merchandise Value Growth, 2023.
Market Analysis, South Korean E-commerce Market Trends, 2023.
Yahoo Finance, Price-to-Sales Comparison between Coupang and Amazon, 2024.
Bukalapak IPO Performance Report, 2021-2024.
Bukalapak’s Merchant and Logistics Expansion, 2023.
Comments