Wangchen Technology Holdings Limited (hereinafter referred to as 'Wangchen Technology') successfully listed on January 16, 2023. The company plans to issue 12,420,000 H shares, of which 30% will be issued in Hong Kong and 70% internationally. The offering price is HK$6.50 per share. Both the Hong Kong public offering and international offering have seen slight oversubscription, with a net raise of approximately HK$11 million.
During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), facilitating communication between the issuer and the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.
Investment highlights
The company is a mobile game developer and operator located in China, focusing on sports simulation games;
The company has established valuable strategic partnerships with intellectual property holders (including well-known sports leagues, associations, and clubs) to create engaging game content;
The company's R&D and data analysis capabilities enable it to develop attractive mobile sports games and increase user engagement;
The company can implement effective profit strategies, retain loyal and paying core user groups, maximize their spending within the game, and master cost-effective advertising marketing capabilities to attract new users;
The company is led by an experienced and dedicated management team.
According to the Frost & Sullivan report, in terms of gaming revenue for 2021, the company:
Ranked third in the online sports game market in China;
Ranked second in the Chinese mobile game market for sports games;
Ranked second in the Chinese mobile game sports simulation market.
Overview of Online Game Market
The global online gaming market has achieved stable growth over the past few years, increasing from $77 billion in 2016 to $1541 billion in 2021, with a compound annual growth rate of 14.9%. With the development of advanced technology and upgraded devices (such as VR/AR and 3D motion-sensing technologies), online gaming experiences continue to improve, and it is expected that the global online gaming market size will maintain an upward trend, reaching $2230 billion by 2026, with a compound annual growth rate of 7.7% from 2021 to 2026.
In addition, the mobile game market has seen significant growth, with a compound annual growth rate of 18.6% from 2016 to 2021. This is mainly due to the increasing popularity of mobile phones and the continuous improvement in the penetration rate of mobile internet, especially in developing regions such as Southeast Asia and China.
Due to the relaxation of epidemic prevention measures around the world, it is expected that consumers in major markets such as the United States, Japan, and China will reduce their spending on apps due to economic recession. Coupled with increased advertising costs, the global mobile gaming market may face downward pressure in the short term. However, considering: (i) the gradual recovery of the global economy from the COVID-19 pandemic, which may increase the overall disposable income of the global population; (ii) the increasing number of global online gamers, and the habit of playing online games developed during the pandemic will continue; and (iii) continuous technological innovation and the deployment of 5G internet, artificial intelligence, and 3D technology can enhance the attractiveness of online games, stimulating long-term growth in the global online gaming market. Considering the above short-term and long-term positive and negative factors, it is expected that the global mobile gaming market size will continue to grow, reaching $177.3 billion by 2026, with a compound annual growth rate of 8.3% from 2021 to 2026.
Source: Frost & Sullivan report
The total scale of the Chinese online game market increased from 151 billion yuan in 2016 to 3151 billion yuan in 2021, with a compound annual growth rate of 15.8%. The market growth was mainly due to the popularization of mobile phones and technological advancements in software, hardware facilities such as displays, processing, storage, and operating systems. Especially the mobile game market, which grew rapidly at a compound annual growth rate of 22.1%, from 972 billion yuan (accounting for 64.4% of the entire online game market) in 2016 to 2639 billion yuan (accounting for 83.8% of the entire online game market) in 2021.
Consistent with the trend of the global mobile game market, China's mobile game market may face downward pressure in the short term due to economic recession leading to reduced spending on in-app purchases and rising advertising costs. However, there are several positive factors in the market, including but not limited to: (i) Expanding internet coverage, with the number of 5G base stations reaching 1.43 million in 2021 and expected to increase to 4.62 million by 2026; (ii) The online gaming habits formed during the pandemic are expected to continue after the relaxation of epidemic control measures; and (iii) Continuous technological innovation and the introduction of more advanced artificial intelligence and 3D technology can enhance the attractiveness of online games, which will contribute to the long-term growth of China's mobile game market. Considering the above short-term and long-term positive and negative factors, it is expected that China's mobile game market will continue to grow, reaching 385.4 billion yuan by 2026, with a compound annual growth rate of 7.9%.
Source: Frost & Sullivan report
Online Sports Game Market Overview
As a type of online game, sports games account for about 4% to 6% of the global online game market's total scale. In 2021, the online sports game market accounted for only about 2.7% of China's overall online game market. Between 2016 and 2021, both online sports simulation games and online competitive sports games in the Chinese market have grown.
Specifically, the revenue of China's online sports simulation game market increased from 1.6 billion yuan in 2016 to 4.3 billion yuan in 2021, with a compound annual growth rate of 21.9%. The revenue of online competitive sports games increased from 1.8 billion yuan in 2016 to 4.1 billion yuan in 2021, with a compound annual growth rate of 17.9%. Driven by the increase in mobile internet users and the improvement in mobile game technology and user experience, it is expected that the revenue of China's online sports game market will maintain a good upward trend from 2021 to 2026.
Source: Frost & Sullivan report
Overview of Mobile Sports Games Market
Thanks to the rapid development of the internet industry and the popularization of smartphones, many sports games have shifted from personal computers and gaming consoles to smartphones or tablets for convenient play. Currently, most mobile sports simulation games are themed around football and basketball, while other sports games (such as baseball and rugby) are beginning to gain popularity and have a large number of fans.
The market scale of mobile sports simulation games in China has rapidly increased from 800 million yuan in 2016 to 3.7 billion yuan in 2021, with a compound annual growth rate of 35.8%. Affected by favorable factors such as the gradual recovery of the Chinese economy, continuous expansion of internet coverage, ongoing technological innovation, and the introduction of more advanced artificial intelligence and 3D technology, the market for mobile sports simulation games in China is expected to maintain long-term growth, reaching 73 billion yuan in 2026, with a compound annual growth rate of 14.6%. Meanwhile, the market scale of mobile battle sports games in China will also continue to grow, reaching 31 billion yuan in 2026, with a compound annual growth rate of 8.1%.
Source: Frost & Sullivan report
North America, Western Europe, and Japan are the three major overseas markets for mobile sports simulation games. With the rapid development of internet infrastructure and the increasing penetration rate of mobile devices, the market scale of mobile sports simulation games in emerging overseas markets (such as Southeast Asia, the Middle East, and Latin America) is expected to maintain double-digit compound annual growth rates from 2021 to 2026.
Source: Frost & Sullivan report
The competitive landscape of the Chinese game market
In 2021, there were approximately 480 market players in China's online sports game market, with a fragmented market and fierce competition. According to a Frost & Sullivan report, the top five operators in terms of gaming revenue accounted for 40.6% of the market share in 2021. Among them, Wangchen Technology had a market share of 5.5%, ranking third in the market.
Source: Frost & Sullivan report
According to a Frost & Sullivan report, in terms of gaming revenue, the top five operators in China's mobile sports game market accounted for 51.5% of the market share in 2021. Among them, Wangchen Technology had a market share of 7.9%, ranking second in the market.
Source: Frost & Sullivan report
According to a Frost & Sullivan report, in terms of gaming revenue, the top five players in China's mobile sports simulation game market accounted for 68.0% of the market share in 2021. Among them, Wangchen Technology had a market share of 12.4%, ranking second in the market.
Source: Frost & Sullivan report
Key market drivers in the mobile sports game market
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The ever-changing technological landscape
Technological progress has enhanced digital interaction, allowing mobile games to capture more realistic scenarios from sports events. Looking ahead, mobile sports games will incorporate more attractive artificial intelligence and 3D elements, immersing gamers in dynamic challenges brought about by AI technology. Other advanced technologies such as VR/AR also provide gamers with a higher level of interactive experience.
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E-sports development boom
The esports boom is growing day by day, and it is expected to further increase the overall interest around the world in various types of sports and leagues. This will expand the potential market size for global sports goods and services industries (including online and mobile sports games), as well as increase the penetration rate of online sports games in the global market. For example, the EA Champions Cup (EACC) is one successful esports event that promoted online sports games, proving that a co-developed ecosystem is beneficial for the development of all sectors within the esports value chain, including game developers, gamers, sports leagues, television networks, and live streaming platforms. Although esports originated from computer games, they have evolved to include mobile games. Mobile esports games provide gamers with more opportunities to compete against other users in competitive gaming experiences and offer them a powerful gaming participation experience. Therefore, promoting the accessibility and development of esports events will drive the growth of mobile sports games. As more esports types are promoted (including baseball, rugby, and tennis), especially in emerging markets such as Japan, China, and other Asia-Pacific regions, game developers have significant room to seize the opportunity to develop online sports games in markets where sports originated and in growing markets.
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Long lifecycle of mobile sports games
Considering that the online sports games that users participate in may be a lifelong interest, with the continuous support and love from existing and loyal fans of sports, the average lifespan of online sports games is considered longer than that of other types of online games.
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Enabling policies to foster national enthusiasm for sports and cultural development
In July 2022, the Ministry of Commerce and 27 other government departments issued the 'Opinions on Promoting the High-Quality Development of Foreign Cultural Trade', aiming to (including) deepen the reform and development of cultural fields such as online games and simplify their approval procedures, and encourage cultural enterprises including game companies to build brands in international markets.
Frost & Sullivan has extensive research experience in the culture and entertainment industry, assisting well-known enterprises in successfully listing on capital markets. Successful listings include: Starlink Culture (6698.HK), Grindr Inc. (GRND.NYSE), Ning Meng Pictures (9857.HK), Bovvy Smart (1204.HK), Deying Holdings (2250.HK), Qingci Games (6633.HK), Pop Culture (CPOP.NASDAQ), The Haystack (2125.HK), Kook Music (KUKE.NYSE), Changxin Media (XJB.SGX), Brilliance Tomorrow (1351.HK), Yala Technology (YALA.NYSE), Lexiang Interactive (6988.HK), Zurong Entertainment (9990.HK), Blue City Brothers (BLCT.NASDAQ), Litian Pictures (9958.HK), Nine Dragons Digital Entertainment (1961.HK), Yusheng Culture (1859.HK), Donkey Trail Technology (1745.HK), New Stone Culture (1740.HK), Heartbeat Company (2400.HK), Travel Orange Culture (8627.HK), Friend Times (6820.HK), Wanda Sports (WSG.NASDAQ), Tuyi Holdings (1701.HK), Hometown Interactive (3798.HK), Flying Group (1901.HK), Huoyan Holdings (1909.HK), Lingbang Group (2230.HK), Haitian Tianyue Tourism (1832.HK), Zen Travel Technology (2660.HK), Ruhuan Holdings (RUHN.NASDAQ), Fosun Tourism Culture (1992.HK), Dream World (1119.HK), IMVU Interactive (3700.HK), Huya (HUYA.NYSE), Razer (1337.HK), Readworks Group (0772.HK), Meitu (1357.HK), China Digital Video (8280.HK), Yashiwai (1993.HK), Wald Animation (1566.HK).
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