The deal is in line with iCandy’s partnership-based regional growth strategy as it takes advantage of a strong balance sheet.

Games development company iCandy Interactive (ASX:ICI) is expanding its footprint in the Australian market, after announcing a new strategic investment this morning.

The company has taken a 7.78% stake in local game developer Mighty Kingdom (ASX:MKL), as it executes on a regional growth strategy following its launch of two successful game titles in the last 12 months.

Speaking with Stockhead recently, iCandy chairman Lau Kin Wai flagged the company’s intention to explore growth through M&A, as it reaps the benefits from a strong balance sheet and its existing advantage in the south-east Asian market.

And looking ahead, iCandy said it will continue to explore additional M&A and partnership opportunities, while also launching new releases in the fast growing instant-gaming segment.


My kingdom for a Mighty Kingdom

Headquartered in Adelaide, Mighty Kingdom became the latest Australian games development company to join the ASX when it successfully IPO’d in April this year.

Since it was founded in 2010, the company has released over 50 games that have been played by over 50 million players globally.

In its rationale for the strategic stake, iCandy said MKL’s valuation looks “attractive when compared to regional peers, given that only a handful of gaming companies are listed on the ASX”.

iCandy acquired its 7.78% stake in the business via the acquisition of 11,781,362 shares at 13.5c per share, a discount to MKL’s current trading price of 17.5c.

The $1.59m consideration was funded from iCandy’s existing cash reserves.

Along with MKL’s attractive valuation, iCandy said the investment gives it more channels for growth in the broader Asia-Pacific market where it can benefit from strategic partnerships.

In line with that partnership approach, ICI said the two companies can now explore potential synergies — both in intellectual property around games development as well as distribution, leveraging iCandy’s existing strength in Asian market.

“We see the acquisition of a significant stake in Mighty Kingdom as a potential starting point of various opportunities to drive value for both companies,” Kin said.

As well as M&A opportunities, iCandy is also focused on its growing product pipeline with the pending launch of Sky Candy, its first title as part of a 50/50 joint venture with Malaysia-based Lemon Sky Studios.

A leading arts and animation studio, Lemon Sky has worked on multiple tier-one gaming titles including StarCraft: Remastered, Command & Conquer Remastered, and Marvel’s Avengers.

This article was developed in collaboration with iCandy Interactive, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.