Acer-backed Winking Studios aims to grow global reach with Singapore IPO

GAMING-RELATED company Winking Studios has drawn up plans to boost its international reach and drive its regional expansion. And at the centre of these plans is a listing on the Singapore Exchange (SGX).

The art outsourcing and game development studio, whose operations are largely in mainland China and Taiwan, believes the Singapore listing could improve the company’s standing globally.

“Given Singapore’s strong reputation for regulation, listing here can allow our global clients to have greater trust in us,” said Johnny Jan, chairman and chief executive of Winking, in an interview with The Business Times.

On Nov 8, Winking said it would raise S$8 million through an initial public offering (IPO) on the SGX Catalist board.

It will issue 40 million shares at S$0.20 each, comprising 27.2 million placement shares, with the remaining issued through a cornerstone investment by Acer Gaming and Acer’s chairman and CEO Jason Chen.

Acer Gaming is Winking’s majority shareholder, and the gaming arm of Taiwan-listed electronics company Acer.

Winking counts 19 of the world’s 25 largest game developers – including China’s Tencent and Netease, South Korea’s NCSoft, Japan’s Square Enix, France’s Ubisoft and the United States’ EA – among its customers.

The company has also undertaken projects in major game titles such as MiHoYo’s Genshin Impact, Maxis’ The Sims 4 and Activision’s Call of Duty: Mobile.

Slow IPO scene, but gaming market stays strong

The company will be Singapore’s sixth Catalist IPO in 2023 – in a year that saw no mainboard primary listings.

Despite the muted IPO market, Jan said it remains the best option to execute his growth strategy of building new studios in the region and acquiring companies.

He noted that the SGX has encouraged merger and acquisition (M&A) activities.

“We have a very good relationship with many good studios in Asia. After the IPO, we can discuss mergers with them, to grow together in the future,” he said.

He is also hopeful of Winking’s visibility on the SGX, given that it is the first Acer subsidiary to list in Singapore, as well as the first gaming-related company to list on the SGX.

In fact, Jan noted that he has received interest from various investors globally, although many said they were unable to make an entry due to the small size of the placement.

He expects to appeal to these investors again, if the company were to issue more shares to fund future M&As.

Meanwhile, Jan does not see the lower market valuations as a negative factor. “This is a good chance to introduce my company to the market, because if they invest in us, there is that potential to grow,” he said.

Furthermore, while capital markets may be doing poorly globally, the gaming industry is booming.

Tina Li, general manager of the art outsourcing group at Winking, said that by 2027, the global gaming industry is expected to grow at a compound annual growth rate of 8.9 per cent, while the number of gamers globally is projected to reach 4.4 billion.

Li noted that the gaming industry is often resilient in recessions.

Jan added: “Despite fluctuations in the economic environment, it’s as if the number of gamers were unaffected – there is still a growing number of gamers.”

Regional growth plans 

Part of Winking’s IPO proceeds will go to setting up new studios in Malaysia, Indonesia and the Philippines. Jan noted that manpower is generally more affordable in these countries.

He added that the number of gamers in the region is still growing. “We can hire more young gamers who want to be involved in making games – a little like China 25 years ago,” he said.

Singapore will be a prime location for the company’s headquarters, given that it sits in a central spot to manage these regional studios.

It is a good business venue that customers in both the East and West frequently visit, said Jan, who moved from Taiwan to the Republic in 2022 to set up the company’s headquarters.

He also expects that Singapore can supply talent who are bilingual – or even trilingual – to better manage the business in the South-east Asian region and globally.

Strong customer base

In the financial year ended December 2022, Winking generated revenue of US$24.5 million, up from US$23.7 million the year before.

Net profit fell to US$1 million from US$3.1 million a year earlier, however, after the Chinese government temporarily suspended the issue of new publication licences to game developers in late 2021.

The company’s business has recovered some momentum since the suspension lifted, Jan said. In Q1 this year, revenue reached US$6.4 million, and net profit rose to US$0.6 million.

Jan said his customers have continued to engage with the company as they liked its corporate governance and the way it manages its operations.

Furthermore, it has established a track record of keeping most of its customers with the company for many years. And Jan is confident that they will continue to stay on.

For example, Winking has had Tencent and Netease as clients for more than 10 years; it has also animated for MiHoYo’s Genshin Impact since its launch.

Winking hopes to further grow its footprint in the US, Europe and Japan.

By geography, 51.6 per cent of Winking’s net profit were from mainland China and Hong Kong. This is followed by 19.6 per cent from South Korea; 15.3 per cent from Taiwan; 9.7 per cent from the US and 3.8 per cent from other markets.

The company will start by increasing its visibility at global events, Li said.

Jan added that the company will make use of local staff in these regions, with help from Acer’s several global offices, to spread the brand.

Internally, the company is looking to set up a research team to grow its artificial intelligence (AI) capabilities.

“With 20 years of experience in game development, we have a good understanding of how to use AI to improve our efficiency,” he said.

Jan said other business opportunities within its ecosystem of customers include getting new contracts with other art studios that its existing customers engage with.

He is also eyeing projects with other big players such as Amazon and Netflix, that are expanding into the gaming industry.

While the gaming industry is set for strong growth, Jan expects only the largest companies in the space to profit.

Given that Winking services many of the top 25 companies in the space, he expects the company to benefit from their growth as well.

“Only the largest companies can profit from that growth – and most of them are our clients. As long as they stay as our clients, we expect to grow at the same rate too.”