According to the Hong Kong Stock Exchange, on January 13, Yunyong Holdings Limited (hereinafter referred to as "Yunyong Holdings") once again submitted listing application materials to the main board of the Hong Kong Stock Exchange, with Fude Financial as the sole sponsor. Previously, in June 2021, it also went to Hong Kong for an IPO.
Yunyong Holdings' history dates back to 2004, and before the IPO, Zeng Lixing and his mother Xu Mengxia became the controlling shareholders of Yunyong Holdings by controlling 86% of SakaLimited. In addition, Zhuang Jingshu and his sister Zhuang Yawen and his father Zhuang Fulai held 14% of the shares with Katsukase through Justdan Holding.
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High concentration of suppliers
Yunyong Holdings is a company specializing in the distribution of trading card games, game consoles and console games, mainly engaged in wholesale, retail and distribution businesses, including Yunyong Games and its wholly-owned acquisition of Jessden in 2020. From the perspective of product types, during the reporting period, Yunyong Holdings' products were mainly trading card games and related accessories, game consoles and related accessories, and video games.
Trading card games, also known as collectible card games (CCGs) or custom card games, combine the collection elements of trading cards with the elements of building strategic decks and playing games.
Since its establishment, the company has obtained the distribution rights of multiple brands and products in the game and collectibles industry. As of the latest practicable date, Yunyong Holdings has 18 major brands in its brand portfolio, including bushido brands, magic clubs, Nintendo Switch, Pokémon and King of Games.
Yunyong Holdings' performance has grown steadily thanks to the company's new distribution license for trading card games in fiscal 2019 and its portfolio of game consoles and video games through the acquisition of Jessden in 2020, which enriched its product offerings. From FY2018 to FY2020, its realized revenue was HK$123 million, HK$227 million and HK$1.012 billion respectively, while profit for the period was HK$14.145 million, HK$37.882 million and HK$98.775 million, respectively.
It is worth mentioning that the company's gross profit margin showed a fluctuating downward trend, from fiscal 2018 to fiscal 2020, 23.8%, 27.4%, 14.6%, respectively. Among them, the increase in gross profit margin in FY2019 was mainly due to the increase in sales revenue and sales gross profit of the retail business, which increased from HK$34.53 million to HK$43.46 million from FY2018 to FY2019, and the gross profit margin of the business increased from 23.3% to 50.1% in the same period. In fiscal 2020, the gross profit margin of Yunyong Holdings decreased due to the acquisition of Jesden, which increased the sales of the company's game consoles and related accessories, as well as video games, but the gross profit margin of these products was lower, and in fiscal 2020, the gross profit margin of game consoles and related accessories and video games was 1.0% and 10.8%, respectively.
It is also interesting to note that by business distribution, the company's revenue from the wholesale business segment increased from 72.0% in fiscal 2018 to 94.3% in fiscal 2020, and further rose to 95.4% in the first nine months of 2021. In the future, if there are adverse changes in the game wholesale business market, resulting in a lack of development of the wholesale business, yunyong holdings revenue will decline.
In addition, because the trading card game market is dominated by three games, Magic Storm, Pokémon and King of Games, console games are dominated by two major game brands, Nintendo Switch and Sony PlayStation. From fiscal 2018 to fiscal 2020, yunyong Holdings' procurement ratio to the top five suppliers was 72.0%, 79.7% and 94.8%, respectively, accounting for a relatively high proportion, and the company's top five suppliers were concentrated. Among them, the proportion of its procurement from the largest supplier G increased from 36.3% in fiscal 2018 to 59.4% in fiscal 2020, and Yunyong Holdings' business operations have formed a certain dependence on supplier G.
In the future, if the company cannot maintain a good cooperative relationship with the above major suppliers, so that the major suppliers reduce the supply of game products, the business activities of Yunyong Holdings may have an adverse impact.
2
The industry is highly competitive
In recent years, benefiting from the increase in per capita disposable income of residents and the expansion of people's demand for diversified entertainment activities, the size of the game and collectibles market in the Asia-Pacific region has continued to expand, and its market size has increased from HK$49 billion to HK$149.2 billion from 2015 to 2020 at a compound annual growth rate of 24.9%. In the future, with the increase in the number of new popular toys and new games, the number of players will increase, and it is expected to reach HK$424.2 billion in 2025.
Because of its unique design and aesthetics, trading card games usually derive from licensed IP, so in addition to entertainment, but also have collectible value, many players also buy used rare cards through online B2C platforms and C2C platforms, so trading card games have a huge second-hand market in the world, between 2015 and 2020, its market size increased from HK$12.6 billion to HK$27 billion, with a compound annual growth rate of 16.5%.
In terms of trading card game distribution revenue in 2020, Yunyong Holdings ranked first among all trading card game wholesalers in Asia, with a market share of 24.3%
It is worth mentioning that due to the relative concentration of the wholesale market for trading card games in Asia, the market concentration rate of the top 5 participants in 2020 is about 46.7%, with 25,000 participants, and Yunyong is facing fierce market competition. In addition, the exchange card game relies on IP authorization, and in the future, if the game manufacturer fails to develop a new original IP to retain game customers, or attract new game customers to enter, the exchange card game market faces the hidden worry of losing game customers, which will lead to a decline in the operating performance of Yunyong Holdings.
According to the 2020 game console distribution revenue, Yunyong Holdings also ranked first among all game console manufacturers in Taiwan due to the acquisition of Jieshideng, with a market share of 23.6%.
From the perspective of the game console market, due to the advancement of Internet technology to make the game form and content more diversified, the epidemic led to residents' preference for indoor activities, etc., the size of the game console market in the Asia-Pacific region is also expanding, reaching 36.5 billion Hong Kong dollars in 2020, with the gradual integration of AR/VR into the game, the sense of game experience is enhanced, and it is expected that the game console market will increase to 108.3 billion Hong Kong dollars in 2025.
However, according to the division of platforms, the game console market is mainly dominated by sony PlayStation, Xbox and Nintendo.
In addition, although Yunyong Holdings has a high market share in Taiwan, the current Taiwan game console wholesale market is highly concentrated, and the market concentration rate of the top five participants is 82.5%, and Yunyong Holdings is also facing fierce market competition. In the future, if Yunyong Holdings does not enrich the game product portfolio through various ways, the company faces the risk of market share erosion as the industry competition becomes increasingly fierce.
3
brief summary
Yunyong Holdings has a competitive advantage in the industry with its advantageous market position. However, due to the increasingly fierce competition in the game industry, the company only relies on a single wholesale business, and the top five suppliers are still concentrated, in this case, whether Yunyong Holdings can successfully list in Hong Kong this time, there are still variables.