The first Metaverse HK IPO, Flowing Cloud Technology Ltd(6610.HK), officially launched on 29 Sep with the fundraising amount around US$ 100 million.
The deal was widely sought after by the market in HK and overseas. One the first day of book building, the HK public offering tranche was 5 times oversubscribed, which is the largest HK IPO with such multiples of oversubscribe on the book open day this year.
The international placement tranche was also multiple times covered across the price range on the first day. And it has attracted a good mix of investors, including overseas and Chinese long-only funds, hedge funds, family offices, strategic corporates, etc., believing Flowing Cloud Tech might be the next Unity (U.US) in China.
It is worth nothing that the deal had introduced well-known cornerstone investors including SenseTime, the best AI company in China; state-owned investment arm of Anji, one of the development engines beside Hangzhou in Zhejiang province; Tradego, the widely used fintech platform for securities houses in Hong Kong.
Flowing Cloud is a leading AR/VR software technology service company in China, ranking 1st in China's AR/VR service market in 2021, accounting for 13.5% of the market share.
From 2019 to 2021, Flowing Cloud’s revenue was RMB 251, 339, and 595 million respectively, and the compound annual growth rate of revenue in the past three years was 54.02%. The revenue in the first quarter of 2022 was RMB 228 million, a year-on-year increase of 65.0%.
The company achieved adjusted net profit in 2021 around RMB 105 million and 315.9% year-on-year rate of increase in the first quarter of 2022.
The AR/VR market in China is showing great momentum, both hardware and software. Developing tools will be the critical building blocks in the prosperity of a new world. Flowing Cloud is one of the best players in the software market to provide development service and kits for Chinese business clients. The company maintains good collaboration with Chinese tech giants, such as Baidu, Huawei, Tencent, JD.com, etc.
Flowing Cloud Tech’s valuation is ranged from HK$ 4 to 5 billion, forward P/E around 15x-20x. The reasonable pricing leaves profits on the table for potential investors. Book continues to grow in size and quality with further conversions from management deal roadshow, and will close on 10 Oct.