Winking Studios, a leading game art outsourcing and development firm, is leveraging its successful listing on the Catalist board of the Singapore Exchange S68 (SGX) to prepare for a dual listing on the London Stock Exchange’s (LSE) Alternative Investment Market (AIM). This strategy aims to enhance the company’s global presence, especially in Europe and the US, where demand for high-quality game development and art services is increasing.
Winking Studios’ listing on SGX is one of the few successful IPOs in the past few years. The company went public in November 2023 at a placement price of 20 cents per share, raising about $8 million.
Despite the cautious investor environment, the listing was well received, reflecting the strong prospects of the gaming industry and Winking Studios’ solid track record as a service provider for major gaming companies, including EA, Ubisoft and Tencent. Winking Studios’ successful listing in Singapore also highlighted its attractiveness to international investors. The company is 55% owned by Acer Gaming, the e-sports arm of Taiwan-based computer manufacturer Acer, which has provided significant financial and operational backing. Acer chairman, Jason Chen Chun-Shen, played a cornerstone role in Winking Studios’ Catalist listing, subscribing to a large portion of shares.
As of Sept 24, shares in Winking Studios have risen some 38.1% since IPO to trade at 29 cents, giving it a market capitalisation of $110.6 million. In comparison, most of the recent IPOs are trading way below their IPO price.
The dual listing in London is part of the company’s broader strategy to gain a stronger foothold in the international market, especially in Europe. Winking Studios’ management believes that listing in London will enhance the company’s visibility among European investors and gaming studios, supporting its plans to grow through mergers and acquisitions (M&A). Executive chairman and CEO Johnny Jan has emphasised that this dual listing will provide more exposure and allow the company to access deeper capital markets.
The company has since demonstrated steady performance, underpinned by the robust demand for outsourced game art and development services globally. According to a commissioned Independent Market Report, the game art outsourcing market is projected to grow at a CAGR of 13.4% from 2022 to 2027. Jan believes that Winking Studios, as the third-largest player in Asia and fourth globally, is well positioned to benefit from this growth.
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Jan shares that several gaming companies currently have plans to combat rising costs. After a bout of layoffs in the industry last year amid a slowdown and reduced budgets, these companies are increasingly looking to hire external firms such as Winking Studios to save cost. “Today, the gaming industry is still growing, but the trend has shifted towards outsourcing [game art and development],” says Jan.
Aiming for London’s AIM
With the SGX listing firmly established, Winking Studios has set its sights on London, with plans to list on the AIM by the end of 2024. The AIM, known for hosting smaller, high-growth companies, is an ideal platform for Winking Studios as it seeks to further raise capital and expand its presence in Europe.
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According to Jan, the European market offers significant growth potential, particularly as the gaming industry in the region continues to thrive. “We believe that listing on AIM will allow us to build stronger relationships with European gaming companies and position ourselves as a leading player in the region,” he says.
The London listing is also part of a broader strategy to fuel Winking Studios’ ambitious acquisition plans. The company has already made significant headway, acquiring Malaysia-based Pixelline Production earlier this year to enhance its capabilities and market presence. Jan believes that a London listing will provide the necessary resources to fund further acquisitions in these markets.
Furthermore, Jan references other game-development outsourcing companies listed in London, which see higher P/E valuations ranging from 50 to 100 times, as the market there is more familiar with the gaming industry. For reference, Winking Studios is trading at 15 times P/E after factoring in its IPO expenses from last year.
Earlier in July, peer Keywords Studios, which was listed on the LSE, had agreed to a bid worth GBP2.2 billion ($3.8 billion) from European private equity firm EQT. The offer of GBP24.50 is priced at a 66.7% premium to the last traded price on May 17, when the company first announced that they were in bid talks.
“The London market is already educated about the industry and they are familiar with the business model. With the London listing, we can explore a larger customer base in Europe and (eventually) establish a new business development team there,” says Jan.
Although Jan notes that the dual listing will result in a dilution of shares, he is upbeat on the group’s future prospects, as he believes the group can consolidate more profits and benefit shareholders in the longer term. Proceeds from the London listing will also fund long-term growth.
For the London listing, Winking Studios has issued a placement to raise about $27 million in July. Of this, 65% will be used to fund the listing, and the rest will be used to fund acquisitions. This new capital will allow the company to continue its aggressive M&A strategy, with a particular focus on acquiring studios that offer complementary services such as game development and animation. The company’s management has indicated that it is particularly interested in studios that have strong relationships with global gaming giants.
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The acquisitions will also enable Winking Studios to scale up its operations and cater to the growing demand for outsourced game art and development services. The global gaming market is projected to hit US$317.6 billion ($410 billion) by 2027, and the art outsourcing segment is expected to grow even faster. With a strong track record and a rapidly expanding portfolio, Winking Studios is well-positioned to capture a significant share of this market.
Acquisitions have become a key pillar of Winking Studios’ growth strategy. Following its acquisition of Pixelline Production in early 2024, the company has identified several targets in the UK and Europe that could further bolster its development capabilities and customer base. These acquisitions are intended to complement Winking Studios’ existing studios in China and Taiwan, giving it a stronger international footprint.
Future growth
Jan believes that the company’s focus on innovation and quality has been a key factor in its success. “Our clients trust us because we deliver high-quality products on time, and we continue to innovate to meet the evolving needs of the gaming industry,” he says. This focus on delivering premium services has allowed Winking Studios to establish long-term relationships with some of the biggest names in gaming, including Tencent and miHoYo.
Winking Studios’ financial results for the latest 1HFY2024 ended June saw earnings decline by 28.0% y-o-y to US$909,000 from US$1.26 million a year ago. This is mainly due to its listing expenses and increased marketing and promotional expenses during the period. The group also saw lower gross margins of 27.9% from 30.7% a year ago, amid the group completing its acquisitions and the integration process, which reduced efficiency. Several projects have also been deferred to 2HFY2024 on the request of customers.
However, revenue saw 7.1% y-o-y growth to US$15.2 million, mainly due to increased revenue from the art outsourcing and game development segments and increased orders from new and existing clients.
Jan highlighted that the delays in game launches, particularly in China, were temporary and linked to regulatory challenges. The Chinese government’s restrictions on game releases have since been lifted, and Winking Studios is now well positioned to capitalise on the recovery of the gaming industry.
Winking Studios aims to expand its operations in North Asia, Southeast Asia and Europe. The company plans to open new studios in Malaysia, Indonesia and the Philippines, utilising local talent to maintain competitive costs while upholding its high-quality standards.
Winking Studios is also investing in AI to enhance its game development processes as part of its expansion plans. The company has allocated $1.2 million from its Catalist listing proceeds to develop AI technologies to streamline production and improve game art and animation quality.
On the outlook, Jan remains optimistic about the future, noting that the gaming industry is resilient, even in challenging economic times. “Gaming has proven to be one of the most resilient industries and we believe that our focus on delivering high-quality products and services will continue to drive our success,” he says.
