Winking Studios on Nov 8 registered its initial public offering (IPO) on the Catalist board of the Singapore Exchange S68 (SGX).
The company is Asia’s third-largest game art outsourcing studio and the fourth-largest globally, based on global revenue derived from game art outsourcing in 2022. It is also the first gaming-related company to be listed in Singapore.
In an interview with The Edge Singapore, executive chairman and CEO of Winking Studios Johnny Jan says: “There is no best timing to list, but we see that the gaming industry is doing well despite the economic uncertainties. We want to leverage on that and list now, so that we can grow faster.”
“The IPO market now may be muted, but listing now might give our investors further upside as we too ride on the economic recovery in the following years,” adds Jan.
Winking Studios is currently 55% owned by Acer Gaming, the e-sports arm of Acer Incorporated. Both Acer Incorporated and Acer Gaming are listed on the Taiwan Stock Exchange. Post-IPO, Acer Gaming is expected to still hold a majority 51% stake in Winking Studios.
PrimePartners Corporate Finance is the sponsor, issue manager and placement agent for the IPO.
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Separately from the placement, each of Acer Gaming and an individual Jason Chen Chun-Shen, who is the chairman and CEO of Acer Incorporated, has entered into a cornerstone subscription agreement with Winking Studios to subscribe an aggregate 12.8 million cornerstone shares.
The new shares and the shareholding of existing public shareholders represent about 14.3% and 20.3% of the issued and paid-up share capital of about 279.7 million shares of Winking Studios after the completion of the placement and the issuance of the cornerstone shares respectively. Post-IPO, the free float will come up to approximately 15%.
Based on the placement price and post-placement and cornerstone tranche share capital of 279.7 million shares, the group’s market capitalisation will be around $55.9 million. There is no public tranche for this IPO.
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The IPO is expected to raise gross proceeds of about $8.0 million. Net proceeds are expected to be about $5.1 million, of which $1.0 million will be used for the group’s expansion plans, $2.24 million for M&A purposes, $1.2 million to invest in artificial intelligence (AI) capabilities and $0.64 million for general working capital.
The group does not have a formal dividend policy, as it has plans for rapid expansions and prefers the flexibility of cash deployment. Nonetheless, the group will consider the circumstances and understands the benfits of declaring dividends to shareholders.
The placement will close at 12.00pm on Nov 16, while the listing and trading of shares in Winking Studios are expected to commence on a ready basis at 9.00am on Nov 20.
Winking Studios has over 25 years of experience in providing complete end-to-end art outsourcing and game development services across various platforms such as console, PC, online and handheld content for the video games industry. The Group is headquartered in Singapore and has seven studios across Nanjing, Shanghai and Taipei. It employs more than 700 employees including 600 designers and artists serving a global customer base.
Winking Studios has three business segments. The largest is its Art Outsourcing Segment, which involves the creation and development of digital art assets. This segment represents 90% of the group’s FY2022 ended Dec 31, 2022, revenue.
The second segment, Game Development Segment, where the group provides game development services, represents 9% of the group’s FY2022 revenue. The third segment that represents 1% of the group’s FY2022 revenue is its Global Publishing and Other Services Segment, where the group releases its in-house produced games and sells the products related to its in-house games.
In FY2022, the group’s revenue came in at US$24.5 million, 3.4% higher than the previous year. However, gross profit for the period declined by 16.6% y-o-y to US$6.4 million, due to lower revenue from its Game Development Segment, whose contracts and projects commanded higher margins, as a result of delays customers’ development and release of games, as well as an increase in headcount in the group’s Art Outsourcing Segment.
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Jan elaborated the delays in game release is not common. In 2022, the Chinese government restricted game launches for about eight months, slowing down the entire gaming industry in the country. While this did affect the group’s financials, Jan says that this has since been lifted in early 2023 and business is as usual.
The group has collaborations with 19 out of the top 25 global game companies, including NetEase, Tencent, miHoYo, Nexon, NCSOFT and Ubisoft.
According to Jan, the group has framework agreements with its partner gaming companies, where these contracts will last for up to two years. Although this may sound like a short time, Jan explains that the group has healthy relationships with its partners and has thus far seen no difficulties in renewing these contracts, with some agreements lasting for over 10 years. Instead, he sees this as an upside, as it allows the group to have better flexibility on contract value.
