KGI: Winking Studios Limited (revised target price of S$0.35)

We reiterate our OUTPERFORM recommendation and a revised target price of S$0.35 based on a DCF valuation method.

Growth through acquisition

• Continued M&A strategy to drive inorganic growth. Since its IPO, Winking Studios has strategically expanded its presence in Asia through the acquisition of two art outsourcing studios in Taiwan and Malaysia. This aligns with the company’s broader strategy of utilizing mergers and acquisitions to strengthen its position as a market leader in the art outsourcing industry. Its successful placement of new shares further supports its ongoing efforts to grow its market position through strategic acquisitions.

• Organic growth in the Japanese market. 1H24 revenue grew 7.1% YoY to US15.2mn from US$14.2mn in 1H23, driven by a surge in orders from both its Art Outsourcing and Game Development segments. Notably, the company’s business development efforts in Japan have yielded significant results, with revenue from this region increasing nearly threefold to US$1.5mn in the Art Outsourcing segment. This growth has contributed to a more balanced geographical revenue mix, strengthening the company’s resilience against potential economic fluctuations.

• Strategic dual-listing on the London Stock Exchange (LSE). Winking Studios is currently pursuing a dual-listing on LSE, which would provide several advantages. Fungible share transfers between the Singapore Exchange (SGX) and LSE would offer greater flexibility for shareholders in both markets. This could potentially increase trading volume and enhance market liquidity.

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