(MENAFN- ProactiveInvestors)
ASX listed venture investment firm () has issued a prospectus to spin-off its Southeast Asian mobile games assets via the listing of iCandy Interactive Ltd (Proposed code ).
iCandy intends to raise up to $3.5M through a non-underwritten IPO of 17.5M shares at $0.20 each together with 1 free Option for every 1 Share subscribed with a minimum subscription of $2.5M and oversubscription for an additional $1.0M for a maximum raising of $4.5M.
Closing date of the IPO is 11 September 2015 dispatch of holding statements is 16 September 2015 and expected date for quotation on the ASX is 21 September 2015.
Fatfish holds 187.5M shares (93.1%) of which 93.75M will be distributed “in specie” to shareholders within 6 months of listing.
Funds raised by iCandy will be utilised to purchase mobile game studios and develop existing mobile game assets that have an active pipeline of cash generating games with $0.5M already generated from more than 10 million downloads.
Southeast Asia is the world’s fastest growing mobile games market that is driven by enormous underlying online connectivity and economic growth with sales expected to increase from US$1.1 to US$2.2 billion from 2013 – 2017.
iCandy’s business model is built around: distribution of “freemium” games that generate revenues through sale of virtual items or currencies sale of game merchandise and third party advertising.
Highest “localised” annualised spend rate is generated by 1.1M Singapore gamers with US$189.30 per gamer and lowest are 19.9M Indonesia gamers with US$9.12 per gamer represent a massive and developing profit opportunity for iCandy.
Recent sector M&A transactions include Entertainment’s (owner of Candy Crush) acquisition of Singapore based Nonstop Games owner of newly developed “Heroes of Honor” for up to US$64 million.
Proactive Investors values iCandy Interactive at $0.34 per share.
Recommendation: Speculative Buy
12 month price target: $0.34
Sector: IPO Pending
ASX Code: ICI
Share Price: $0.20
52 Week -
High: N/A
Low: N/A
Issued Ordinary Shares: 224.3M
Options: 27.3M
Market Cap: $44.9M
Major Shareholders:
Fatfish holds 93.1% pre IPO
Directors:
Chairman: Kin Wai Lau
Executive Director: Ivan Perry Wu
Non-Executive Director: Donald Han Low
Non-Executive Director: Robert Kolodziej
BACKGROUND
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iCandy Interactive Limited () is an investment holding company that designs develops and publishes mobile interactive entertainment across various mobile operating system platforms primarily in Asia Pacific.
The Company develops proprietary action based mobile games and licenses intellectual property of existing video and online games for re-development on Android and iOS platforms.
iCandy Interactive was incorporated on the 20 March 2015 (as a subsidiary of publicly listed “incubator” Ltd) and maintains dual headquarters in Perth and Singapore. It has subsidiary offices in Kuala Lumpur Malaysia and Jakarta Indonesia.
Fatfish serves as an incubator that enabled iCandy Interactive operations in Singapore and Malaysia to take advantage of very generous tax concessions and government investment to fund technology start-ups that are not available in Australia.
iCandy Interactive’s vision is to become a world class interactive entertainment studio for the mobile gaming industry.
The Company’s mission is to continuously develop quality and fun mobile games that offer unique gaming experiences to drive player engagement through multi challenges and achievements.
MANAGEMENT TEAM
Kin Wai Lau serves as Non-Executive Director and Chairman is an experienced investor in the technology space in Southeast Asia and is also a director of Ltd.
Donald Han Low serves as Non-Executive Director has worked in corporate advisory and finance sectors that cover start-ups business creation and exits via initial public offerings reverse takeovers trade sales and mergers and acquisitions; and is also a director of Ltd.
Robert Kolodziej serves as Non-Executive Director and is an advisor at Patersons Securities with over 20 years of experience in technology and renewables sectors.
Ivan Perry Wu serves as Executive Director and has over 20 years of commercial and corporate experience in the utility technology and resource industries.
IMAGE ONE: APPXPLORE MOBILE GAME DEVELOPMENT TEAM LED BY DESMOND LEE AND LIM JENN JU
SUBSIDIARY COMPANIES
Appxplore was incorporated in Malaysia in May 2011 and is involved in the design development commercialisation and publishing of mobile interactive entertainment for multiple mobile operating system “OS” platforms such as iOS (Apple platform for iPhone iPod and iPad) Android Windows and .
Appxplore is led by founders Desmond Lee and Lim Jenn Yu who have extensive expertise experience and involvement in multimedia design 3D animation and artwork game design and development for the online and mobile gaming industry.
Keng Lou Lee serves as Chief Technology Officer and senior programmer has 5 years of experience in the game development industry.
They lead a team of talented game developers that are capable of producing fun and engaging mobile games that enhance the gaming experience and player “stickiness” that foster longer term player retention and generation of sales.
In 2012 Appxplore granted special “MSC Status” by the Malaysian Government that allows the Company a 100% tax exemption until the end of 2022 along with access to research and development grants and applications for unlimited work visas to attract foreign talent and skilled labour.
The Company has already received numerous awards that include “Best Art Character” for Alien Hive and “most Innovative Mobile Game” for Lightopos awarded by Casual Connect Asia in 2012 and 2013; and “Best Mobile Application Content and Service” for Lightopos awarded by GoMobile innovation Malaysia Awards in 2012.
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Kensington Ventures was incorporated in Singapore in May of 2009 and is involved in the development of proprietary action based mobile games and licensing intellectual property of exiting video and online games for re-development on Android and iOS platforms.
Kensington Ventures has received funding from the Media Development Authority of Singapore via the i.jam Reload scheme to develop its mobile games engine.
Kensington Ventures has a mobile games studio that is based in Indonesia and operates under the “Blazable” brand.
The Company currently holds the license to re-develop Xbox game Carneyvale for the Android and iOS platforms and is working on action title Skywing which are both targeted to launch at the end of 2015.
Carneyvale is an award winning console-games title licensed from the Game Lab of the Singapore University of Technology and Design which is a joint venture between the Massachusetts Institute of Technology and the Singapore Government.
APPXPLORE GAMES
Mobfish Hunter is set in 2020 when greedy autocrats have stripped the world of global elements and turned the world’s fish population into dangerous Mobfish that need to be hunted down and destroyed.
Mobfish Hunter is an endless fishing action game with 60 Power-Chip variations and over 50000 combinations of playing style that is available on the iOS platform through the Apple App Store and as an Android app through Google Play.
Caveboy Escape is an innovative puzzle game that allows the player to match tiles that help Caveboy escape through an exit.
Caveboy Escape is available on the iOS platform through the Apple App Store as an Android App through Google Play and from World.
Alien Hive is a sophisticated Candy Crush style of game where you swipe a sliding tile puzzle to make matches that hatch baby aliens and then help them to evolve into Supreme Aliens.
Alien Hive is available on the iOS platform through the Apple App Store as an Android App through Google Play Amazon Apps and World.
Sporos is challenging puzzle game where the objective is to light up the cells in each level with a special seed known as the Sporos.
Sporos is available through on the iOS platform through the Apple App Store as an Android App through Google Play and Amazon Play.
Lightopus allows you to collect stars from different monster zones that allow you to unlock the monster’s hive where you will get a chance to exact revenge and destroy as many monsters as possible before they hatch and come after you.
Lightopus is available on the iOS platform through the Apple App Store as an Android App on Google Play Amazon Play and at World.
Alien Path will be available soon and feature on the iOS platform through the Apple App Store and as an Android App through Google Play.
PROSPECTUS DETAILS
iCandy Interactive has issued a Prospectus with an offer of up to 17.5 million shares at an issue price of $0.20 per share to raise up to $3.5 million together with 1 free attaching option for each share purchased.
Oversubscriptions of up to 5.0 million shares to raise a further $1 million with attached options could be accepted.
The Company has issued 206.8 million at the date of the Prospectus and will total 224.3 million on completion of the offer for a market capitalisation of $44.9 million.
Options on issue at the date of the prospectus are 8.0 million and will total 27.3 million on completion of the offer.
On 4 May 2015 iCandy Interactive entered into an agreement with Fatfish and two other co-founders to acquire 100% of High Joyful (which owns 100% of Appxplore) for $15.0 million paid entirely in iCandy shares.
iCandy Interactive issued 142.5 million shares to Fatfish and 7.5 million shares to the co-founders at an issue price of $0.10 per share.
On the same date iCandy Interactive entered into an agreement with Fatfish and Fatfish Medialab to acquire 100% of Kensington Ventures for $5.0 million and issued 45.0 million shares to Fatfish and 5.0 million shares to Medialab at an issue price of $0.10 per share.
At the date of the prospectus Fatfish holds 93.1% of the undiluted issued capital of iCandy Interactive which totals 187.5 million shares.
As announced Fatfish intends to complete an in-specie distribution of 93.75 million shares (within 6 months of listing) to Fatfish shareholders (as a dividend) following completion of the offering.
BUSINESS MODEL
The Company’s business model is to develop and publish “freemium” games for smartphones which are free to download and play.
Revenue will be generated via in game purchases to improve or enhance the play experience mobile advertising of third party products and services and sale of game related merchandise.
The Group’s games have achieved over 10 million downloads worldwide with the majority occurring within the Asia Pacific region.
In the 2014 calendar year sales were $184000 and total $511000 over the last 3 years.
Growth strategy will focus on further development of existing and new games that will drive organic growth of downloads and sales while also considering synergistic acquisitions within Asia Pacific and globally.
The IPO will fund ICandy Interactive development and allow the Company continuous access to capital for further acquisitions.
GLOBAL AND ASIA PACIFIC MOBILE GAMES MARKET
According to International Data Corporation the global mobile games industry is expected to be generate more than $34 billion in sales by 2016.
Newzoo is even more bullish in its 2015 Global Games Report that forecasts the worldwide games market will reach sales of US$113.3 billion by 2018 and represents a 2014 - 2018 compound annual growth rate “CAGR” of +7.9%.
In 2018 the personal screen (smartphone and smartwatches) will account for sales of US$30.2 billion and floating screen (tablets and handhelds) will reach US$14.6 billion for a total of US$44.8 billion.
In 2015 US smartphone and floating screen mobile games sales growth on a Year on Year “YoY” basis will increase by +13.4% and +17.8% respectively.
In China tablet games will see YoY growth of +39.0% while smartphone game growth will be +50% and exhibit a CAGR of +16.1% to reach US$32.8 billion in 2018.
SOUTHEAST ASIA KEY BATTLEGROUND FOR GLOBAL PLAYERS IN THE MOBILE GAME SPACE
Southeast Asia is the world’s fastest growing mobile games region that is driven by enormous underlying online connectivity and economic growth.
The Southeast Asian mobile games market for the period 2013 to 2017 is forecast to double sales from US$1.1 billion to US$2.2 billion.
Southeast Asia has a population of 626 million of which 30% or 188 million people have an online presence and 126 million are gamers via PC tablet or smartphone platforms.
In 2014 a breakdown of national mobile gamers and revenues included:
- Indonesia had 34M gamers with 19.9M paying US$9.12 per year for a total of US$181.0M.
- Malaysia had 14.3M gamers with 6.6M paying US$32.61 per year for a total of US$214.2M.
- Philippines had 27.2M gamers with 11.0M paying US$8.76 for a total of US$96.8M.
- Singapore has 2.8M gamers with 1.1M paying US$189.30 per year for a total of US$201.6M.
- Thailand had 14.7M gamers with 8.3M paying US$27.76 per year for a total of US$230.3M.
- Vietnam had 31.4M gamers with 12.3M paying US$12.67 per year for a total of US$155.8M.
During 2013 -2017 Indonesia is forecast to report a CAGR of +37.3% Malaysia +27.0% Philippines +14.4% Singapore +30.9% Thailand +27.2% and Vietnam +27.2%.
Proactive Investors notes that each 1% annualised sales penetration into this market forecast in 2017 will result in annualised conceptual revenues of US$22.0M / A$30.1M.
CATALYST AND TIMELINE FOR 2015 AND BEYOND
- Completion of Initial Public Offering in Q3 – Q4 of calendar 2015.
- In specie distribution of iCandy shares held by Fatfish to shareholders in Q3 –Q4 of calendar 2015.
- Launch of Carneyvale and Skywing by end of calendar 2015.
- Ongoing organic growth downloads and sales in 2015 and beyond.
- New game development in 2015 and beyond.
- Potential acquisitions in 2015 and beyond.
ANALYSIS AND VALUATION
The iCandy Interactive IPO capitalises the business at $44.9 million of which $3.5 million will be cash and be deployed for game development and business expansion within Southeast Asia and beyond.
Group global peer leaders in the pure gaming space include Electronic Arts (NASDAQ; AE) which is capitalised at US$22.4 billion reported annualised sales of US$4.52 billion and Activision Blizzard (NASDAQ: ATVI) is capitalised at US$18.9 billion reported annualised sales of US$4.6 billion.
Valuation of the business is best served by a review of Korean mobile game developers who are excellent proxies for longer term valuation of the potential of emerging Southeast Asian peers.
Korean mobile game developers include a number of mature entities that have successfully transitioned and developed mobile games and include Com2uS (KOSDAQ: 078340) capitalised at AS$1.6 billion NCsoft (KSE: 036570) at A$5.5 billion and Nexon (KOSDAQ: 041140) A$6.6 billion.
Kakao and Line are two of the biggest mobile game distribution platforms in Korea and are both worth over US$9 billion and are indicative of valuations that apply in the mobile space of an advanced Asian economy that is both wealthy and very connected to foreign cultures and languages.
Smaller Korean mobile game developers include Devsisters (KOSDAQ: 194480) which is a recent 2014 Korean listing that launched hit mobile title “Cookie Run” across Japan Thailand Taiwan and South Korea and is developing additional markets and products.
Devsisters is valued at 344.9 billion Korean Won / A$403.3 million and attracted Blackrock Fidelity and Wellington as investors.
SundayToz Corp (KOSDAQ: 123420) is another recent listing that had similar success with “Anipang” and is currently valued at 548.3 billion Korean Won / A$639.7 million.
Recent sector transaction (June 2015) include Korean publisher Netmarble Games that announced a US$130 million cash injection into US mobile game publisher Social Gaming Network that will use the cash to build a major presence in the lucrative Asian market.
The valuation of early stage start-ups with revenues includes the recent acquisition by King of Candy Crush fame for Singapore based Nonstop Games the developer of “Heroes of Honor”. Nonstop launched Heroes of Honor in January of 2014 after completing a capital raising of $2.9 million to develop the game. It reported over 500000 global players within 5 months of launch achieving early profitability.
King made a down payment of US$6 million along with US$10 million to retain employees and could pay up to US$64 million over the next 4 years if revenue targets are met.
Proactive Investors notes that:
- King has made a minimum “down payment” commitment of US$16 million / A$21.92 million for a company with one small development studio built around one game.
- iCandy Interactive is a multi-national developer with up to 7 games with revenues and independent mobile game development studios in both Singapore and Malaysia.
- iCandy Interactive has reported over 10 million downloads that that have already generated over $0.5 million in revenues.
- iCandy Interactive is involved in a sector within the fastest growing mobile games market in the world where sales are expected to double by 2017 to US$2.2 billion.
- iCandy Interactive intends to acquire additional mobile game developers.
The iCandy Interactive IPO is valued at $44.9 million (US$32.8 million). Based on the recent sector transactions and game growth rates in vibrant Asian markets including Nonstop Proactive has calculated a 12 month price target of $0.34 for iCandy Interactive.
This valuation may prove conservative given new game releases and new acquisitions. In addition we note the M&A activity in the sector at multiples that far exceed iCandy Interactive.
Proactive Investors Australia is the market leader in producing news articles and research reports on ASX emerging companies with distribution in Australia UK North America and Hong Kong / China.
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