• Winking Studios, Asia’s third-largest and world’s fourth-largest game art outsourcing studio in terms of global revenue of game art outsourcing in 2022, made its trading debut on Catalist on 20 November. It has over 25 years of experience of 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.
   
• Winking Studios has collaborated with 19 of the world’s 25 largest game developers, including Tencent, Netease, NCSoft, Square Enix, Ubisoft and EA – and established partnerships with major game publishing platforms Sony, Microsoft and Nintendo.
   
• The company’s three primary business segments are art outsourcing segment, game development segment, and global publishing and other services segment.
   
• Its 1Q2023 Revenue rose 6% yoy to US$6.4 million mainly due to an increase in revenue contribution from the Game Development Segment from a rise in existing and new projects completed in the quarter.

Overview & Business Segments

Winking Studios is an art outsourcing and game development studio with over 25 years of experience 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.

Headquartered in Singapore, Winking Studios has seven studios across Nanjing, Shanghai and Taipei with over 700 employees including 600 designers and artists serving a global customer base. The company is majority owned by Acer Gaming, which is a part of the Acer Group and which has an extensive network of relationships in the art outsourcing and game development industries, as well as an in-depth understanding of the gaming industry in Asia.

Winking Studios has collaborated with 19 of the world’s 25 largest game developers, including Tencent, Netease, NCSoft, Square Enix, Ubisoft and EA – and established partnerships with major game publishing platforms Sony, Microsoft and Nintendo.

Winking Studios’ three primary business segments are art outsourcing segment, game development segment, and global publishing & other services segment.

• Art outsourcing: Displays its capabilities to provide design services that include 2D concept art, 3D modelling, 2D animation, 3D animation and visual effects alongside environment design and game character design.
• Game development: Includes programming, development, design and script writing of games.
• Global publishing segment and other services: Includes releasing game products developed by Winking Studios or third-party developers onto global platforms, as well as selling in-house developed video games and peripheral gaming products.

Industry Trends & Prospects (refer to page 198-203 of Offer Document for more)

 Winking Studios believes that the company’s prospects are encouraging due to:

• The rise in expenditure of game development companies on game art resulting from higher requirements in respect of game graphics.
• The increasing number of artistic talents.
• Leveraging and integrating artificial intelligence (AI) for game art creation.
• Growing demands of Asian game development companies for art outsourcing services.
• Shorter development cycles by game developers for launch of new games.

The total global development expenditure in the gaming industry is expected to increase to S$50.8 billion in 2027, according to analysis conducted by China Insights Industry Consultancy (CIC) – registering a CAGR of 8.9% between 2022 and 2027. By 2027, the global game development expenditure relating to game programming and game art is expected to reach US$17.2 billion and US$16 billion respectively, the CIC study showed.

The gaming sector is one of the powerhouses of the global Entertainment and Media (E&M) industry, PWC estimates in its Global Entertainment and Media Outlook 2023-2027. Total gaming revenue is expected to rise from US$227 billion in 2023 to US$312 billion in 2027, representing a 7.9% CAGR, it predicts. With confidence in the gaming sector rising, advertising revenue is projected to nearly double between 2022 and 2027 and will reach US$100 billion in 2025.

Competitive Strengths(refer to page 187 of Offer Document for more)

• Proven capabilities in art outsourcing and game development underpinned by its comprehensive game development knowledge and expertise and strong data security management system.
• Established multi-market presence with a far-reaching network and a steady relationship with customers.
• Committed and strong management team with sector expertise, guided by an experienced board of directors and supported by skilled and experienced staff.
• Effective human resources management system and structure.

In addition, Winking Studios has completed more than 1,400 and 25 art outsourcing projects and game development projects respectively as at 15 September 2023. It is also one of the few studios that utilize 5G technology when developing Virtual Reality (VR) games. Its VR title Unearthing Mars received weeks of top sales in Japan and North America, while other titles like Unearthing Mars 2 and I'm Hungry also received honorable recognition. It’s also worked on the VR version of the nominee for the Nebula Award for Best Novel, The Three-Body Problem.

See Winking Studios’ list of its projects here

Key Risks (refer to page 48-82 of Offer Document for more)

• Winking Studios operates in a competitive environment
• It is dependent on its key personnel for continued success
• It is dependent on the goodwill of its “Winking” brand
• The company could be implicated by the leakage or misappropriation of its customers’ information and/or any improper use or disclosure of its customers’ intellectual property, which could harm its reputation and/or expose the company to potential lawsuits

Business Strategy and Future Plans (refer to page 204 of Offer Document for more)

• Enhance global presence for market opportunities.
  • Winking Studios intends to expand into overseas markets, including developed and emerging markets.
  • The company will increase business development and marketing efforts in regions including the U.S. and Europe.
  • It expects to enhance its presence through leveraging existing relationships as well as Acer’s network.
• Pursue strategic acquisitions, joint ventures, and strategic alliance to expand scale and capabilities.
  • Winking Studios will consider acquiring businesses to broaden its customer base, market penetration and/or service lines.
  • It may also consider entering joint ventures with industry leaders to develop technical competencies.
  • The company has yet to identify any target for strategic growth for mergers and acquisitions.
• Monitor and explore the usage of AI and/or invest in AI-related companies or businesses to improve and expand art outsourcing capabilities.
  • Winking Studios will explore the incorporation of AI-driven tools into its existing processes for efficiency and cost-reduction.
  • The company is also cognizant of potential risks that may arise, including possible infringement or misappropriation of intellectual property rights.

 Financials

• Revenue increased by US$0.3 million or 6.0% from US$6.1 million in 1Q2022 to US$6.4 million in 1Q2023 – mainly due to an increase in revenue contribution from the Game Development Segment from a rise in existing and new projects completed in 1Q2023.
• Cost of sales rose by US$0.2 million or 4.1% from US$4.4 million in 1Q2022 to US$4.6 million in 1Q2023 – mainly due to a rise in salaries and wages from an increase in employee headcount in Taiwan and the People’s Republic of China in 1Q2023.
• Gross Profit increased by US$0.2 million or 11% from US$1.7 million in 1Q2022 to US$1.9 million in 1Q2023. The increase in gross profit margin from 27.9% in 1Q2022 to 29.2% in 1Q2023 is due to an overall increase in completed projects under the Game Development Segment, and such projects that commanded a higher margin compared to projects and contracts of other business segments.

IPO Details (Highlights from Offer Document)

• Issue Price at S$0.20
• Total number of Shares to be offered: 40 million new shares
  • Placement shares: 27,200,000 shares
  • Cornerstone Tranche: 12,800,000 cornerstone shares
• Note: After the completion of the placement and the issuance of the cornerstone shares, controlling shareholder Acer Gaming, the gaming arm of Taiwan-listed electronics company Acer, will hold roughly 51% of the issued and paid-up share capital of the company. Acer holds an aggregate direct and indirect shareholding interest of 70.03% in Acer Gaming.
• The estimated net proceeds of S$5.1 million’s usage breakdown is as follows:

Did you know?

The total number of gamers globally is expected to reach 4.4 billion by 2027, representing a CAGR of 6.4% between 2022 and 2027. Post-lockdown increase of gamers is expected to arise mainly from the affordability of gaming as a pastime due to the free-to-play model, the growing number of mobile game players and the increasing penetration of gaming culture in growth regions such as Latin America and the Middle East and Africa.

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