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Summary

  • DSKY, a Chinese mobile game publishing platform with principal offices in Shenzhen, China, plans to raise $100.1 million in its upcoming IPO.
  • DSKY's business model of importing well-regarded games from international developers for a Chinese audience makes good sense.
  • The firm has attained profitability and a massive monthly active user base.
  • With strong receptivity to Chinese IPOs recently, we are positive on DSKY.

iDreamSky Technology Ltd (NASDAQ:DSKY), a Chinese mobile game publishing platform with principal offices in Shenzhen, China, plans to raise $100.1 million in its upcoming IPO.

The firm will offer 7.7 million shares at an expected price range of $12-$14 per share. If the IPO reaches the midpoint of that range at $13 per share, DSKY will command a market value of $602 million.

Filing, Underwriting

DSKY filed on July 3, 2014.

Lead Underwriters: Credit Suisse Securities; J.P. Morgan Securities LLC; Stifel Nicolaus & Company, Incorporated

Underwriters: Piper Jaffray & Co.

Business Summary

DSKY is a Chinese independent mobile game publishing platform that topped the Chinese platforms in terms of active users for 2013; the firm boasted 98.3 million monthly average users for the first quarter of 2014. The firm redesigns games from popular international developers for delivery through its own platform and for the Chinese mobile market in general, also marketing the games through device pre-installs and in app stores. DSKY began to design its own games as well in 2014.

DSKY partners with major Chinese third parties in order to reach the broadest possible audience. Major partners include the Tencent App Store, 91 Wireless, Qihoo 360 Mobile, Lenovo, and Huawei.

A sampling of DSKY's popular games are depicted below. DSKY also boasts a very accessible website for international users.

(click to enlarge)

(http://idreamsky.com/en/games)

DSKY currently offers 40 diverse games to mobile users, including many very popular international games revamped for Chinese launch, such as Temple Run, Subway Surfers, and Fruit Ninja, all three of which were among the top ten casual games in China in terms of active users for the first quarter of 2014. DSKY provides an attractive option for international developers by massively simplifying the process of importing games to China and providing a large built-in audience.

Valuation

DSKY offers the following figures in its F-1 for the three months ended March 31, 2014:

Revenue: $28,007,000.00

Net Income: $5,335,000.00

Chinese and International Competitors

DSKY must compete both with domestic Chinese game development firms including China Mobile Games and Entertainment (NASDAQ:CMGE), Chukong Holdings Limited, Shanda Interactive Entertainment Limited, and FL Mobile Inc., as well as with international mobile game firms who may seek to operate directly in China, such as Electronic Arts (NASDAQ:EA), GREE International, and DeNa Co. Some of these competitors may have access to greater financial or technical resources than DSKY.

Management

Co-founder Michael Xiangyu Chen serves as DSKY's Chairman and CEO and has over a decade's experience in the telecommunications, Internet and mobile games industries. Mr. Chen previously worked in the overseas projects division of Achievo Information Technology (Shenzhen) Co., Ltd. and as a technology director at Shenzhen Guoxin Communication Technology Co., Ltd. He also served as a software engineer at Huawei Technologies Co., Ltd.

Mr. Chen holds a bachelor's degree in computer science and technology from Central South University in China.

Conclusion: Dream Big for DSKY IPO

We are optimistic on this IPO in the proposed range. DSKY's business model of importing well-regarded games from international developers for a Chinese audience makes a great deal of sense in terms of consistently putting forward successful products.

The firm has attained profitability, and its massive monthly active user base should position it to continue to reach a broad market.

American investors have proven highly receptive to Chinese IPOs in the recent past, and we see no reason why DSKY's offering would buck the trend.

Of course, there are always risks inherent in investing in Chinese technology companies - as standards for products and content differ between China and the US - however, these do not appear worrisome in this case.

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Source: Our Top IPO Pick Of The Week: China's iDreamSky IPO