Sugar Dragon Limited

Cash in on Candy Crush mania

FLOAT WATCH


SIMON HERMANN
Sugar Dragon Limited
ASX code: SDC Shares on offer: 16 million Listing price: 20c Market capitalisation: $5.7 million Listing date: March 21
One of the best known and most addictive games on Facebook is King.comcom’s Candy Crush Saga, which is estimated to make more than $US600,000 per day. While the game is played around the world, it is particularly popular in Asian countries: a recent survey found that every seventh person in Hong Kong regularly plays the smartphone game.
The Candy Crush Saga was released on Facebook in April 2012 and as a mobile application for smartphones in November 2012 by King Digital Entertainment. King Digital went public in 2014 to list on the NYSE in a $US7 billion initial public offering, only to be recently acquired by Activision Blizzard for $US5.9bn
As with every successful franchise, the sale of the primary product is usually accompanied by complementary merchandising. Hong Kong-based Okmno Asia Limited has a licensing agreement with King.com to manufacture and distribute Candy Crush-branded confectionary in Asia. Okmno is a confectionary wholesaling business with manufacturers in China and Germany and Okmno has sold over 26 tonnes of Candy Crush-branded confectionary in South Korea and Taiwan to date. The licence also covers Hong Kong, Macau and mainland China.
The coming listing of Sugar Dragon Limited provides investors with speculative exposure to demand for the Candy Crush-branded confectionary products in Asia as the company holds a 72.5 per cent interest in Okmno. Sugar Dragon seeks to raise $3.2m to fast-track production and marketing of its confectionary products. The funds will be used to undertake further product designs, increase production, develop marketing channel partnerships but also to explore new opportunities.
Even though the licensing agreement is non-exclusive, Okmno is currently the only licensee in the region, resulting in a competitive advantage for being the “first mover”.
However, IPO investors need to be aware that the listing is speculative in nature as Sugar Dragon has a limited operating history. The Company is expected to remain reliant on external capital to fund its daily operations.
The company is highly dependent on its licence agreement with needs to be renewed by the end of 2017.
Simon Hermann is an analyst at wise-owl.com .

Have we still got 15% of these guys?