When Keyword Studios floated on Aim in 2013, the business was valued at £49 million and shares were changing hands at £1.23 each. Two months ago, Keyword was acquired for £2.1 billion, equivalent to £24.50 a share.
Providing services for video games – from music and art production to translation into dozens of languages – Keyword grew 40-fold during its 11 years on Aim and shareholders were richly rewarded.
Winking Studios is hoping to deliver similar sparkle. Based in Asia, Winking helps games firms with art production – developing ideas, creating characters, building 3D monsters and buildings and ensuring images look tickety-boo. The firm joined Aim last month at a price of 15p, the shares have risen to 18p and should continue in that vein, as founder Johnny Jan expands and develops the business.
A gaming enthusiast from childhood, Jan, now 48, founded his first business in 1997, spawning Winking Studios in 2004. The company has increased sales and profits steadily over the past two decades, working on top games such as Assassin’s Creed, Fifa, Call Of Duty and Genshin Impact, one of the world’s most popular mobile games.
Producers of these titles are drawn to Winking on two counts. First, the quality of its artwork and second, the prices charged relative to competitors.
Headquartered in Singapore with offices in Taiwan, Malaysia and China, the company employs more than 800 people. Most are highly educated but they command far lower salaries than their Western counterparts. That means Jan can offer artwork services at prices that are two or three times lower than European or US operators – an increasingly attractive proposition as games firms try to pare down costs.
Screen hotshots: Winking Studios works on hit computer games such as Call Of Duty
Video gaming is a huge industry, valued at almost £200 billion, around twice the size of the film and music sectors combined. Once confined primarily to teenage boys, gaming is now enjoyed by young and old, men and women.
Demographics are not the only change affecting this industry. In the past, enthusiasts would buy a game, pop it in their computer or console and play until they grew bored. Today, games are downloaded electronically and producers provide regular updates, creating a steady stream of work for Winking Studios, with almost half the group revenues generated by existing titles.
Winking also specialises in games for mobile phones, the fastest growing part of the market.
Already accounting for more than a quarter of all sales, revenues from the mobile sector are expected to deliver annual growth of ten per cent or more between now and 2028.
Outsourcing is another significant trend in this business, with games publishers using external specialists to drive down costs and gain competitive advantage.
Jan is highly ambitious. Revenues are expected to increase by around 15 per cent to $38 million (around £30 million) between now and 2026, while profits are forecast to soar from $700,000 to nearly $4 million, with more to follow in later years. He is keen to pay dividends too, starting small at one per cent next year but rising steadily as the business grows.
Like Keyword, acquisitions will play a key role in Winking’s development and here Jan has an ace up his sleeve, in the form of Taiwanese computer giant Acer. Keen to expand into the entertainment market, this multi-billion dollar business took a major stake in Winking two years ago and now owns 62 per cent of it. Although this leaves fewer shares for other investors, Acer is deep-pocketed and keen to back Jan’s growth strategy with hard cash.
Two acquisitions have been completed over the past year and several more are likely, expanding Winking’s customer base and its range of services. Jan is also developing AI kit to speed up delivery and cut costs further.
Midas verdict: Winking may be headquartered in Asia but Jan chose to list on Aim because he is keen to expand in Western markets. The UK is home to some of the most talented people in the business too, making London a natural choice for this fast-growing firm. At 18p, the shares are a buy.
Traded on: Aim Ticker: WKS Contact: winkingworks.com
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